Director s Report : Operations : 2005 2006 : The companys performance was at par with the previous financial year

and has achieved suitable results. Sales and operating income was at Rs.1592 Crores as against Rs.1655 Crores in the previous financial year, a drop of 4%. Reason being drop in demand for Denim in international markets, but the low cost of cotton helped in making up in margins and avoiding more operational cost. 2 patents were filed. The company has registered a profit after tax at Rs.127 Crores, which remains unchanged compared to the previous financial year. 2006 2007 : The company operated at lower utilization levels compared to previous financial year and the impact is visible in the operating profits of the company. The operations of Arvind Brands Limited and its subsidiaries were merged with the Company with effect from 1st April, 2006 and hence the figures of current year are not strictly comparable with the previous financial year. Sales and operating income at Rs.1844.91 Crores here up by 16% compared to Rs.1588.69 Crores in the previous financial year, a growth of 16%. Operational profits dropped by 26% mainly due to addition of Arvind Brands operations which so have not been profitable and a sharp drop in denim and realisations. 2007 2008 : The company continues to operate the denim capacities at lower utilization level and has in fact shut down one of the manufacturing units. Energy cost has been affected due to expiry of gas agreement. Turnover increased by 23% but operational earning increased only by 7%.Registered a net profit after extra ordinary items of Rs.27 crores compared to 120 crores a drop of 77%. 2008 2009 : Operating margins were reduced due to rise in cotton, higher energy cost and due to fluctuations in the exchange rate. Incurred a net loss of Rs.48 crores. Dividends : 2005 2006 : Aggregating to Rs 3.80 crores on 69,50,600 6% cumulative non-convertible preference shares of Rs.100 each 2006 2007 : Aggregating to Rs 3.14 crores on 66,00,600 6% cumulative non-convertible preference shares of Rs.100 each . 2007 2008 : The Aggregating to Rs 2.48 crores on 66,00,000 6% cumulative non-convertible preference shares of Rs.100 each 2008 2009 : Aggregating to Rs 1.68 crores on ,00,000 6% cumulative non-convertible preference shares of Rs.100 each.

Finance : 2005 2006 : Prepaid term loan instalments of 219 crores made from fresh borrowings of 50 crores out of internal accruals. Borrowed fresh 190 crores for funding capital expenditure. Long term debt including lease stands at 1070 crores. 2006 2007 : Repaid instalments of term loans of 142 crores. Made fresh borrowings of 236 crores for capital expenditure and other requirements. Long term debt including lease stands at 1269 crores. 2007 2008 : Paid instalments of term loans of 165 crores. Made fresh borrowings of 81 crores for funding capital expenditures and other requirements. Long term debt including lease stands at 1172 crores. 2008 2009 : Repaid instalments of term loans of 180 crores. Made fresh borrowings of 171 crores for capital expenditure and other requirements. Long term debt including lease stands at 1193 crores.

Directors : 2005 2006 : Mr.Sudhir Mehta appointed director to fill casual vacancy. Mr.Tarun Seth appointed director. ICICI bank nominated Mr.K.M.Jayarao as director. Export-Import bank appointed nominated Mr.S.R.Rao nominated director. Mr. Arvind N. Lalbhai and Mr. Deepak M. Satwalekar Directors of the Company, retire by rotation and being eligible seek re-appointment. 2006 2007 : Repaid instalments of term loans of 142 crores. Made fresh borrowings of 236 crores for capital expenditure and other requirements. Long term debt including lease stands at 1269 crores. 2007 2008 : Paid instalments of term loans of 165 crores. Made fresh borrowings of 81 crores for funding capital expenditures and other requirements. Long term debt including lease stands at 1172 crores. 2008 2009 : Repaid instalments of term loans of 180 crores. Made fresh borrowings of 171 crores for capital expenditure and other requirements. Long term debt including lease stands at 1193 crores.

Fixed Deposits : 2005 2006 : The company did not accept any fixed deposits this year out iof unclaimed 0.03 crores the company has repaid deposits of 0.005 crores and the balance 0.02 crores lie unclaimed. 2006 2007 : The company did not accept any fixed deposits this year out iof unclaimed 0.03 crores the company has repaid deposits of 0.004 crores and the balance 0.02 crores lie unclaimed. 2007 2008 : The company did not accept any fixed deposits this year out iof unclaimed 0.02 crores the company has repaid deposits of 0.001 crores and the balance 0.02 crores lie unclaimed. 2008 2009 : The company did not accept any fixed deposits this year out iof unclaimed 0.02 crores the company has repaid deposits of 0.0157crores and the balance 0.0005 crores lie unclaimed. Auditors :
2005 2009 : Over the 4 years considered considered in the report Auditors, Sorab S.Engineer & Co. Were retained.

There has been no change in Corporate Governance policies of the company and is committed to the tenets of corporate governance.

Management Discussion Analysis : Financial performance and review :

2005 2006 : There was a positive growth in denim volumes in the first half of the first year and sudden drop in relaizations in the second half of the year Sales & Operating Income : 2005 2006 : There was a decline of 4% over the last year primarily due to lower volume of denim and drop in prices during second half of the current year. Denim constituted 60% of total revenue 4 million pieces jeans manufacturing capacity in Bangalore becoming operational share of garments in overall shares will go up in coming year. 2006- 2007 : Revenues from all other product groups have remained stable or moved upwards. Further, with the merger of the branded apparel business with your Company, sales to Arvind Brands are now treated as internal sales and knocked off. 2007 2008 : Revenues from the apparel exports business grew by 40% on account of full year operation numbers of the Jeans plant. The revenue of Arvind Brands for the year ended 31 stMarch 2008 was at Rs.483 crores up by 39%. The turnover also includes Rs.106 crores from cotton trading activity which was not present in previous financial year. 2008 2009 : Fabric revenue grew by 10% compared to previous year primarily due to higher sales volume of Shirting fabrics and higher price realization of denim. Revenues from the apparel business grew by 28% on account of growth in Jeans and Knit Garments exports. The revenue of Brands and Retail Business for the year ended 31st March, 2008 was at Rs. 501 crores up by 11%. Raw Materials : 2005 2006 : 19% drop in raw material cost as compared to last year. 2007 2008 : The increase in raw material consumption is mainly because of substantially higher cotton prices in the last quarter of the financial year. The prices for the cotton used in denim remained low for first nine months as your company had bought cotton at bargain prices. Direct Materials : 2005 2006 : stands at 171 crores compared to 145 crores the previous year due to increase in use of dyes, chemicals and other stores items owing to significant raise in the prices of petroleum based dyes and chemicals. 2006 2007 : The direct materials at Rs. 213 crores this year are lower as compared to Rs. 171 crores last year. This is because of the reduction in denim production but inclusion of Arvind Brands figures. 2007 2008 : The direct materials at Rs 242 crores this year are higher as compared to Rs. 213 crores last year. This is because of the prices for petroleum based dyes and chemicals have shot up to new high because of high oil prices. Power and Fuel : 2005 2006 : cost is down by 20% to 144 crores in account of use of natural gas in place of Naptha. 2006 2007 : The anticipated gas supply last year did not meet the full requirement of your Company. At present, it is getting only 70% of its requirement of natural gas. 2007 2008 : The gas supply agreement for the company expired in November 2007. The rates in spot markets are 4-5 times higher than the earlier contracted rate. Hence the power cost for the whole year has gone up by 25% . Salaries and wages : 2005 2006 : costing has gone up 10% due to Bangalore plant becoming operational and further due to rapid expansion in the textile industry. 2006 2007 : expansion of the jeans plant has also resulted in an increase in overall head count. Rapid expansion in the textile industry has resulted in an overall increase in wage and salary rates, driving up staff cost by 10%. Your Company has initiated an organization-wide rationalization exercise with the help of leading consultants in the field. 2007 2008 : The salaries and wages figure for the year is higher by 14% which is in line with the general cost of increase in manpower cost in the country. Operating Margins : 2005 2006 : increased to 26% compared to alst year in spite of drop in realizations.Achieved due to lower cost of cotton and substantial low power and fuel cost.The operating profit went up by 7% to 408 crores. 2006 2007: The operating margin for the year was 17%. The 45% drop from the previous year can be attributed to lower denim volumes and realization.

2007 2008 : The operating margin for the year was 13%. The 23% drop from the previous year is attributed to lower denim volumes and increasing contribution of Apparel and Brands in the turnover.

Net Interest and Finance Cost : 2005 2006 : cost for current year is 130 crores against 116 crores last year.Impact of a loss on account of translation of foreign currency loan was 9 crores as against 8 crores previous year. Company continues to borrow under TUF for all its capital expenditures. 2006 2007 : The net interest and finance cost for the current financial year is Rs.150 crores as against Rs.135 crores for the previous financial year. Conversion of foreign currency loans provided a profit of Rs.8 crores as against a loss of Rs.5 crores in the previous financial year. 2007 2008 : The net interest and finance cost for the current financial year is Rs.131 crores.

Cash Accrual : 2005 2006 : cash generated from operation is 291 crores which 5% higher compared to previous year. Internal accruals proposed to fund new projects,expansions as well as repayment of outstanding debt. 2006 2007 : The cash generated from operations this year is Rs. 171 crores, which is 41% lower than Rs. 291 crores last year. 2007 2008 : The cash generated from operations this year is Rs 172crores, which is 2% higher than Rs171 crores last year. 2008 2009 : The cash generated from operations this year is. Rs 87 crores against 176 crores primarily on account of reduced operating profit and MTM losses on foreign currency short-term borrowings. Depreciation : 2005 2006 : 155 crores as compared to 149 crores previous year.Increase due to capitalization of additional capacities for the denim and garments. 2006 2007 : depreciation charged in the current financial year amounted to Rs. 144 crores this year, as compared to Rs. 155 crores last year. 2007 2008 : The depreciation charged in the current financial year amounted to Rs. 137 crores. 2008 2009 : Depreciation charged in the current financial year amounted to Rs. 122 crores this year, as compared to Rs. 137 crores last year. Profit Before Tax : 2005 2006 : PBT of 136 crores against 129 crores last year rise by 5%. Aided by a one time gain of 351% profit due to sale of company properties. 2006 2007 : The PBT of Rs. 27 crores is 80% lower than the previous year's figure of Rs. 136 crores. 2007 2008 : The PBT of Rs 30 crores is 7% higher than the previous years figure of Rs 28 crores. 2008 2009 : Loss before tax was Rs. 48 crores against PBT of Rs. 30 crores in previous year.The loss is cumulative effect of slow down in core business of denim coupled with substantial increase in cost of cotton and power. Net Profit : 2005 2006 : PAT at 127 crores remains unchanged compared to previous year. Margin maintained at 8% . 2006 2007 : The Profit after Tax and extraordinary items at Rs. 120 crores for the current financial year is lower by 6 %age compared to Rs.127 crores in the previous financial year. 2007 2008 : The Profit after Tax and extraordinary items at Rs 27 crores for the current financial year is lower by 77%age compared to Rs.120 crores in the previous financial year. This is primarily on account of previous year figures include extraordinary incomes of Rs.94 Crores on account of sale of stake in VF Arvind Brands Private Limited. 2008 2009 : The loss after Tax and extraordinary items was Rs. 48 crores for the current financial year compared to PAT of 27 crores in previous year. Debt : 2005 2006 : Debt increased to 136 crores as opposed to 317 crores previous year. 2006 2007 : The debt of the company was Rs. 1934 crores as opposed to Rs. 1841 crores last year. This comprised additional loans taken during the year from banks and FIs, higher utilization of working capital credit facilities and inclusion of Arvind Brands' debt. 2007 2008 : The debt of the company was Rs 1872 crores as opposed to Rs 1934 crores last year. 2008 2009 : The debt of the company was Rs 2024 crores as opposed to Rs 1906 crores last year.

Working capital and liquidity : 2005 2006 : Inventories are at a higher level at the year end due to lower off take and large stock of cotton. 2006 2007 : Inventory at year-end is higher because of lower off take and large stocks of cotton. The year-end push has also increased the level of receivables and is expected to normalize going forward. 2008 2009 : Net Current Assets were Rs. 997 crores against Rs. 1122 crores in previous year on account of provisions of hedge reserves.

Other Initiatives : 2005 2006 : Merger of Arvind Brands Limited , The company proposes to demerge and transfer the Garments Business Division of its 100% subsidiary Arvind Brands Limited and amalgamate Arvind Fashions Limited (100% Subsidiary of Arvind Brands Limited) with itself, subject to legal and procedural approvals. The merger would be with effect from 1st April 2006. All the branded garment business except for Tommy Hilfiger would become divisions of The Arvind Mills Limited. The business will continue to be independently operated out of Bangalore. Risk Management : 2005 2006 : More than 50% of the revenue of the company is generated from export sales hence the company has consistently been following the policy of hedging its revenues against foreign exchange fluctuation. Based on annual projections the company sells the net dollar (after providing for outflow) forward for the entire financial year. The process has been followed for the next financial year too, hence the earnings in dollar on revenue account are frozen at one rate. The company does not hedge the dollar position on long term debt. The gain or loss booked in the financial statements during the end of every financial quarter is primarily on account of outstanding long term debt of US $ 90 million. Product Concentration : 2005 2006 : The company is in the process of reducing too much dependence on Denim. Shirting, knits and khakis are being given adequate push to increase contribution to product mix. Subsidiaries : 2007 2008 : Arvind Products Limited and Anup Engineering Limited.

FINANCIAL HIGHLIGHTS :

2008 - 2009 SALES EBIT % EBIT TO SALES PAT % PAT TO SALES TOTAL ASSESTS RESERVE AND SURPLUS EARNING PER SHARE 2344.99 106

2007 - 2008 2271.27 184.11

2006 - 2007 1861.16 183.95 9.883621 119.56 6.423951 3787.49 1062.31

2005 2006 1592 231.67 14.55214 127.16 7.987437 3674.54 1253.79

4.520275 8.106037591 47.87 27.36

2.041373 1.204612397 3816.44 806.44 3728.48 1197.05

2.28

1.17

1.04

5.98

RATIO ANALYSIS FOR YEARS 2005 2009

2008 - 2009 RATIOS RETURN ON ASSEST RETURN ON INVESTED CAPITAL RETURN ON NET WORTH TOTAL ASSET TURNOVER RATIO INVESTED CAPITAL TURNOVER RATIO AVERAGE COLLECTION PERIOD INVENTORY TURNOVER RATIO WORKING CAPITAL TURNOVER RATIO DAYS INVENTORY AVERAGE CREDIT PERIOD CURRENT RATIO ACID TEST RATIO DEBT EQUITY RATIO DEBT TO INVESTED CAPITAL INTEREST COVERAGE RATIO EARNING PER SHARE GROSS PROFIT RATIO NET PROFIT RATIO OPERATING PROFIT RATION 0.053285523 0.068600835

2007- 2008 0.032007681 0.035700503

2006 - 2007 0.059337978 0.073307108

2005 - 2006 0.035291492 0.03844284

0.051450989 0.614444351 0.791047797

0.018728822 0.609167811 0.679449326

0.105669716 0.491396677 0.607079484

0.105024943 0.433251509 0.471938624

109.2171822

84.13447102

80.34800877

168.8721106

1.196673947 2.353084611

1.019605798 2.086049651

0.886699431 1.591047813

1.064286609 0.965521424

305.0120719 0.000907702 2.672220824 1.696518164 2.152051634 0.682746314

357.9814872 71.74805263 3.84762652 2.342879561 1.273479104 0.560145506

411.6389243 0.001210679 3.580393973 2.157567335 1.709585046 0.6309398

342.952732 2840.366659 6.71723301 5.055443828 1.201977871 0.545862829

0.505002382 2.28 0.703269524 2.041373311 4.52027514

1.16488453 1.17 0.741721592 1.204612397 8.106037591

1.224211367 1.04 0.692702401 6.423950654 9.883620968

1.671018465 5.98 0.679604271 7.987437186 14.55213568