Dear Members,

The Directors have pleasure in presenting the 3 ^rd Annual Report together with Audited Financial Statements of the Company for the year ended 31^stMarch, 2018.

(In lakhs)

DIVIDEND

Your Directors are glad to recommend payment of dividend of Rs.1.40/- per equity share of Rs. 10/- each to the equity shareholders @14% of the paid up capital. The dividend together with distribution tax will absorb Rs.145.85 lakhs.

IMPLEMENTATION OF INDIAN ACCOUNTING STANDARDS (IndAS)

Financial year 2017-18 is the first year of implementation of Indian Accounting Standard for the year compared. The Financial Statements for the year ended 31.3.2018 have been prepared in accordance with the Indian Accounting Standard (Ind AS) notified under Section 133 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014 and other relevant provisions of the Act. The Financial Statements for the year ended 31.3.2017 have been restated in accordance with Ind AS for compliance purposes. Detailed information on the impact of the transition from previous GAAP to Ind As is provided in the annexed Financial Statements.

REVIEW OF OPERATIONS

The performance of the Spinning unit was affected by the steep decline in prices of yarn in the second and third quarters of the financial year 2017-18 consequent to unwinding of inventory post introduction of Goods & Service Tax (GST) effective from 1^st July 2017. The performance of Windmill units continued to be satisfactory during the year as TANGEDCO was able to evacuate the wind energy generated with minimum back out which helped the Company to reduce its dependence on outside power and also contributed to the Profits of the Company.

During the year under review, the spinning unit produced 7202.19 tonnes (7233.11 tonnes) of yarn, of which 461.80 tonnes (2270.67 tonnes) was used to produce knitted fabrics. The unit sold 6548.66 tonnes (5165.12 tonnes) of yarn and 580.30 tonnes (2327.79 tonnes) of knitted fabrics out of which exports accounted for 662.66 tonnes (1223.97 tonnes). Further, during the year under review, the Company sold 2073.44 tonnes (2275.08 tonnes) of waste cotton, of which exports accounted for 693.12 tonnes (245.16 tonnes).

The Wind Mills with aggregate installed capacity of 10.65 MW generated192.30 lakh units (192.52 lakh units) of Wind Electricity during the year. The entire power generated by the wind mills were utilized for captive consumption at the textile mill.

The overall sales turnover of the Company aggregated to Rs. 17094.35 Lakhs (Rs.16899.84 Lakhs) of which exports including Merchant exports amounted to Rs.1477.41 Lakhs (Rs. 2592.75 Lakhs), the exports contributing 8.64% of the overall sales of the Company.

The performance of the Spinning Unit in terms of profitability was affected by steep decline in prices of yarn due to supply/demand mismatch in the second half of the year. However the significant improvement in Wind Electricity generated for captive use, helped the Company to achieve improved Profits during the year under review.

PROSPECTS FOR THE CURRENT YEAR

The demand for Cotton yarn in both domestic and export markets has started improving and is expected to remain stable in the current year. Though there has been an increase in prices of Cotton and other overheads, the yarn prices are also likely to stay firm due to the expected increase in demand for yarn. Hence the performance of the Spinning unit is set to improve in the current year as compared to the previous year 2017-18. The contribution from Windmills is dependent on availability of Wind of adequate velocity and its evacuation by TANGEDCO.

EVENT SUBSEQUENT TO THE DATE OF FINANCIAL STATEMENTS

There were no material changes and commitments affecting the financial position of the Company subsequent to the end of the financial year.

PUBLIC DEPOSITS

The Company has not accepted any public deposits within the meaning of Section 73 to 76 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014 during the year under review.

SCHEME OF ARRANGEMENT (DEMERGER) - ALLOTMENT OF SHARES

In consideration of Demerger including the transfer and vesting of Demerged Undertaking in the Resulting Company, members of Demerged Company viz., Shiva Texyarn Limited whose name is recorded in the Register of Members on the record date i.e., 6.11.2017, were allotted 86,41,808 equity shares of Rs.10/- each on 23.11.2017 in the ratio of 2 (two) fully paid-up equity share of Rs.10/- each in the Resulting Company viz., Shiva Mills Limited for every 5 (five) equity share of Rs.10/- each fully paid-up, held by such member in the Demerged Company.

Further equity share capital for an amount of Rs.5,00,000/- represented by 50,000 equity shares of Rs.10/- each held by Shiva Texyarn Limited, were cancelled and transferred to General Reserve, as per the Scheme of Arrangement (Demerger). Consequently Shiva Texyarn Limited ceased to be the Holding Company of Shiva Mills Limited.

LISTING OF EQUITY SHARES

Stock Exchanges both BSE Limited and National Stock Exchange of India Limited were approved the listing of 86,41,808 Equity shares with effect from 21.2.2018 and the trading commenced w.e.f. 26.2.2018 in both the stock exchanges.

CORPORATEGOVERNANCE

In line with requirements of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 your Company is committed to the principles of good Corporate Governance and continues to adhere good corporate governance practices consistently.

A separate section is given on Corporate Governance, Management Discussion and Analysis along with a certificate from a Practicing Company Secretary regarding compliance of conditions of Corporate Governance as stipulated under Regulation 34(3) read with Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 forms part of this Annual Report.

ANNUAL RETURN

Annual Return as on Financial Year ended on 31^st March, 2018, pursuant to the sub-section (3) of Section 92 of the Companies Act, 2013 is posted on the website of the Company viz., www.shivamills.com.

DIRECTORS

During the period under review there were no change in the Board of Directors.

Sri S V Arumugam, Director (DIN 00002458) is required to retire by rotation at the ensuing Annual General Meeting, he is eligible and seeks re-appointment.

All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149 (6) of the Companies Act, 2013.

KEY MANAGERIAL PERSONNEL

The Company has appointed the following persons as Key Managerial Personnel:

*Resigned w.e.f 31.3.2018

**Appointed w.e.f 1.4.2018

AUDIT COMMITTEE

The Audit Committee comprises of

Sri K N V Ramani - Independent Director/Chairman

Sri S K Sundararaman - Non Executive Non Independent Director

Sri S Palaniswami - Independent Director

The Board has implemented the suggestions made by the Audit Committee from time to time.

EVALUATION OF BOARD OF DIRECTORS

Pursuant to the provisions of the Companies Act, 2013 and Regulation 17 (10) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Independent Directors at their meeting without participation of non-Independent Directors and management considered and evaluated the Boards' performance, performance of the Chairman and Managing Director.

The Board has carried out an annual evaluation of its own performance of the individual Directors as well as the Committees of Directors.

BOARD MEETINGS

During the year under review, 13 Board Meetings were conducted. The details of the same have been given in the Corporate Governance Report under Regulation 17 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, forming part of this Report.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

The Company has not given any loans or guarantees governed under the provisions of Section 186 of the Companies Act, 2013. The details of the investments made by Company are given in the notes to the Financial Statements.

ESTABLISHMENT OF VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company has established a vigil mechanism for Directors and employees to report concerns about unethical behavior, actual or suspected fraud or violation of the Company's code of conduct or ethics. The policy has been posted in the website of the Company: www.shivamills.com.

POLICY ON NOMINATION AND REMUNERATION COMMITTEE

The Board of Directors have framed a policy setting out the framework for payment of Remuneration to Directors, Key Managerial Personnel and Senior Management Personnel of the Company. The policy is explained as part of the Corporate Governance Report. The Committee ensures that

a. The level and composition of remuneration is reasonable and sufficient to attract, retain and motivate Directors of the quality required to run the Company successfully

b. Relationship of remuneration to performance is clear and meets appropriate performance benchmarks and

c. Remuneration to Directors, Key Managerial Personnel and senior management involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the Company and its goals.

RELATED PARTY TRANSACTIONS

All the related party transactions that were entered into during the financial year in the ordinary course of business and the prices were at arm's length basis. Hence, the provisions of Section 188 of the Companies Act, 2013 are not attracted. Further no materially significant related party transactions were made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have potential conflict with interest of the company at large. Hence reporting in AOC-2 is not made. Approval of Audit Committee was obtained for transactions of repetitive nature on annual basis. All related party transactions are placed before the Audit Committee and Board of Directors for their review. The policy on Related Party Transactions is available in the website www.shivamills.com.

SIGNIFICANT/MATERIAL ORDERS PASSED BY THE REGULATORS/COURTS

There are no significant and material orders passed by the Regulators/Courts that would impact the going concern status and the Company's operation in future.

DIRECTORS’ RESPONSIBILITY STATEMENT

As stipulated in Section 134 (5) of the Companies Act, 2013 your Directors confirm that:

a) Your Directors have followed in the preparation of the annual accounts, the applicable accounting standards with proper explanation relating to material departures;

b) Your Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are 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 that period;

c) Your Directors have 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;

d) Your Directors have prepared the annual accounts on a going concern basis;

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

f) Your Directors have devised proper system to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

AUDITORS

The present Auditors of the Company M/s V K S Aiyer & Co, Chartered Accountants, Coimbatore, were appointed for a term of 5 years, pursuant to the resolution passed by the members at the Annual General Meeting held on 28^th September, 2016. Pursuant to Section 40 of the Companies (Amendment) Act, 2017, the proviso to Section 139 (1) relating to ratification of appointment of Auditors every year has been omitted. Accordingly, the term of office of present Auditors viz., M/s V K S Aiyer & Co., Chartered Accountants, Coimbatore (Firm Registration No: 000066S) will be continued without ratification. A resolution for this purpose is also placed before the shareholders for their approval at the ensuing Annual General Meeting.

There is no audit qualification for the year under review.

SECRETARIAL AUDIT

Pursuant to provisions of section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 the Company has appointed Mr R Dhanasekaran, Practicing Company Secretary to undertake the Secretarial Audit of the Company. The report is annexed herewith as Annexure -

No adverse qualifications/comments have been made in the said report by the Practicing Company Secretary.

COMPLIANCE OF SECRETARIAL STANDARDS

The Company has complied with all applicable Secretarial Standards issued by the Institute of Company Secretaries of India from time to time.

COST AUDITOR

Pursuant to section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014, as amended from time to time, the Board of Directors, have appointed Sri M Nagarajan, Cost Accountant, Coimbatore as Cost Auditor to conduct Cost Audit of the Company for the financial year 2018 - 2019 with remuneration. As required under the Companies Act, 2013, a resolution seeking members' approval for the remuneration payable to the Cost Auditor forms part of the Notice convening Annual General Meeting.

JOINT VENTURE, ASSOCIATE AND SUBSIDIARIES

The Company does not have Joint Venture, Associate and Subsidiaries as per Rule 6 of the Companies (Accounts) Rules, 2014. Hence, no reporting of the same in Form AOC -1 has been made.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations.

The Company has an Internal Audit Department, which monitors and evaluates the efficiency and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. The scope and authority of the Internal Audit function is defined in the Internal Audit Manual. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee and to the Chairman and Managing Director of the Company.

Based on the report of internal audit function, corrective actions are taken in the respective areas and thereby strengthen the controls. Significant audit observations and recommendations along with corrective actions thereon are presented to the Audit Committee of the Board.

STATEMENT ON RISK MANAGEMENT POLICY

The Company has developed a Risk Management Policy and implemented the same. At present the Company has not identified any element of risk which may threat the existence of the Company.

CORPORATE SOCIAL RESPONSIBILITY

According to Section 135(5) of the Companies Act, 2013, the Company has to discharge its obligation towards Corporate Social Responsibility during the Financial Year 2018-19.

The Company has constituted Corporate Social Responsibility Committee which shall recommend to the Board, the activities to be undertaken by the Company as specified in schedule VII, recommend the amount of expenditure to be incurred on such activities and monitor the CSR policy of the Company. Corporate Social Responsibility Committee constituted consisting of the following Directors:

1. Sri S V Alagappan - Managing Director

2. Smt A Lalitha - Joint Managing Director

3. Sri S Palaniswami - Independent Director

The CSR policy of the Company is available in the weblink: www.shivamills.com

STATUTORY DISCLOSURES

I. Conservation of Energy and others - The particulars required to be included in terms of Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 for the year ended 31^stMarch 2018 relating to Conservation of Energy, etc., is enclosed as Annexure II.

II. Remuneration of Directors and other details - The information required under Section 197(12) of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and forming part of the Directors' Report for the year ended 31^st March, 2018 is provided in Annexure III.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

During the year under review the human relations continued to be very cordial. The Company wishes to acknowledge the contribution of the employees at all levels of the organisation.

The Company has placed an Anti Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints for sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy. The Company has not received any complaints for disposal off during the year.

ACKNOWLEDGMENT

Your Directors acknowledge with gratitude the timely assistance and help extended by the Bankers for having provided the required bank facilities. Your Directors wish to place on record their appreciation of the contributions made by the employees at all levels for the excellent performance of your company.

By Order of the Board

S V ALAGAPPAN

Coimbatore CHAIRMAN AND MANAGING DIRECTOR

28^th May, 2018 DIN 00002450