DIRECTORS' REPORT

Dear Members,

Your Directors have pleasure in presenting the Thirty fourth Annual Report together with Audited Financial Statements of the Company for the year ended 31st March, 2015

Dividend

Your Directors are glad to recommend payment of Dividend @ Re.1.00 /- per equity share of Rs. 10/- each (at 10% of the paid up capital). (Last year Rs. 1.20 per share of Rs. 10/- each). The Dividend on Equity Shares together with Distribution Tax on Corporate Dividend will absorb Rs. 261.26 lakhs 303.31 lakhs). The Dividend will be free from Income Tax in the hands of Shareholders.

REVIEW OF OPERATIONS

During the year under review, the textile spinning units together in aggregate produced 18756.53 tonnes (18858.80 tonnes) of yarn, of which 2382.88 tonnes (834.40 tonnes) was used to produce knitted fabrics. The textile spinning units, in aggregate sold 16123.67 tonnes (17853.59 tonnes) of yarn and 2369.50 tonnes (846.04 tonnes) as knitted fabrics. Further, during the year under review, the Company sold 5362.98 tonnes (5532.43 tonnes) of waste cotton, of which exports accounted for 1005.15 tonnes (973.40 tonnes).

The Wind Mills, with aggregate installed capacity of 28.795 MW generated 364.21 lakh units of Wind Electricity as against 417.99 lakh units in the last year. The entire power generation by Wind Mills was utilized for captive consumption at the textile mills. As in the previous year, generation from windmills was severely affected due to non-evacuation of Wind power by TANGEDCO during the current year also, resulting in loss of generation of about 56.56 lakh units (101.29 lakh units), depressing the revenue and profits by about Rs. 359.15 lakhs 557.07 lakhs).

Your Directors report that the financial performance of the Spinning Units during the year were affected by volatility in prices of cotton and finished products. The prices of cotton witnessed a down trend from July' 2014 onwards, while the Yarn prices also reacted downward keeping pace with the current prices of cotton. Consequently the yarn and fabric produced by the spinning units out of high priced cotton was sold at reduced prices thereby impacting the Profitability which was felt in the second and third quarters of the financial year.

While the restriction and control measures of Tamil Nadu Generation and Distribution Company Limited (TANGEDCO) continued, TANGEDCO failed to evacuate the power generated by the windmills. In spite of the difficulties encountered as narrated above, the Company could achieve maximum utilization and productivity without curtailing the production in the Spinning Units.

The Company's initiatives on technical textile products such as coated and laminated fabrics, intended for use in the field of defence, medical and other industrial applications has started yielding results. The operations of the processing unit at SIPCOT, Perundurai established in the financial year 2012-13 is yet to stabilise.

The overall sales turnover of the Company from all divisions aggregated to Rs. 45745.71 Lakhs 49244.10 Lakhs) of which exports amounted to Rs. 9248.26 Lakhs 13536.27 Lakhs), the exports contributing 20.22% (27.49%) of the overall sales of the Company.

PROSPECTS FOR THE CURRENT YEAR

With domestic demand likely to pick up due to improvement in economic conditions, the prospects for the spinning units appear to be stable. The contribution from Windmills on overall performance of the textile mills is dependent on availability of Wind of adequate velocity and arrangements by TANGEDCO for evacuation of wind power.

The contribution from Technical Textile products is likely to improve significantly in the coming years. The processing division is also likely to improve its contribution for earnings of the company, in the years ahead. As part of diversification, the Company has started a Bag unit for manufacture of branded travel and school bags, which has large growing demand.

EVENT SUBSEQUENT TO THE DATE OF FINANCIAL STATEMENTS

There are no material changes and commitments affecting the financial position of the Company, subsequent to the end of the F inancial Year.

PUBLIC DEPOSITS

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

CORPORATE GOVERNANCE

In line with requirements of Clause 49 of the Listing Agreement 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 the Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement forms part of this Annual Report.

EXTRACT OF ANNUAL RETURN

An extract of the Annual Return as on Financial Year ended on 31st March, 2015 pursuant to the sub-section (3) of Section 92 of the Companies Act, 2013 and forming part of the report in Form MGT - 9 is enclosed as Annexure - I.

DIRECTORS

Smt A Lalitha (DIN 00003688), was appointed as Additional Director (Woman Director) u/s 149 of the Companies Act, 2013 and Clause 49 of the Listing Agreement with effect from 1.9.2014. She holds office upto the date of ensuing Annual General Meeting, being eligible, offers herself for re-appointment as Director.

Sri S V Alagappan, Managing Director (DIN 00002450) is required to retire by rotation at the ensuing Annual General Meeting, he is eligible and seeks re-appointment.

The term of office of Sri S V Alagappan as Managing Director expires on 26.6.2015. The Board of Directors on the recommendation of Nomination and Remuneration Committee, have appointed him for a further period of 5 years and approved the remuneration payable to him. Such appointment and payment of remuneration are subject to approval of shareholders in the ensuing Annual General Meeting.

Board of Di rectors on the recommendation of Nomination and Remuneration Committee have proposed to increase the remuneration payable to Sri S K Sundararaman, Executive Director, as stated in the Notice of Annual General Meeting with effect from 30.5.2015 for remaining period of h is tenure of office up to 12.8.2017, subject to approval of shareholders in the ensuing Annual General Meeting.

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 and Clause 49 of the Listing Agreement.

KEY MANAGERIAL PERSONNEL

The Company has appointed the following persons as Key Managerial Personnel during the year. Sri S V Alagappan Managing Director Sri S Seshadri Chief Financial Officer

Smt M Shyamala Company Secretary

AUDIT COMMITTEE

The Audit Committee comprises of

1. Sri K N V Ramani - Chairman(Non- Executive Independent Director)

2. Sri C S K Prabhu - Member(Non- Executive Independent Director)

3. Sri S K Sundararaman - Member(Executive Director) and

4. Sri S Palaniswami - Member(Non- Executive 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 Clause 49 of the Listing Agreement, 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, four Board Meetings were conducted. The details of the same have been given in the Corporate Governance Report under Clause 49 of the Listing Agreement, 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 behaviour, 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 viz., www.shivatex.co.in

POLICY ON NOMINATION AND REMUNERATION COMMITTEE

The Board of Di rectors 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 required. 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.shivatex.co.in

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 and loss 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 3 years, pursuant to the resolution passed by the members at the Annual General Meeting held on 25th August, 2014. A resolution ratifying their appointment in terms of Section 139 is also placed before the shareholders for their approval at the ensuing Annual General Meeting.

SECRETARIAL AUDIT

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

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

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, on the recommendation of Audit Committee, has appointed Sri M Nagarajan, Cost Accountant, Coimbatore as Cost Auditor to conduct Cost Audit of the Company for the financial year 2015 - 2016.

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 & Managing Director.

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

Pursuant to Section 134(3) (n) of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Company has constituted a Risk Management Committee. The Committee has developed a Risk Management Policy and implemented the same. The details of the Committee and its terms of reference are set out in the Corporate Governance Report forming part of the Boards Report.

At present the Company has not identified any element of risk which may therat the existence of the Company.

CORPORATE SOCIAL RESPONSIBILITY COMMITTEE

The Company has constituted Corporate Social Responsibility Committee (CSR), 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. The Company has partially spent the amount stipulated under the requirements of the Act. Corporate Social Responsibility Committee constituted with effect from 21.5.2014, consisting of the following Directors.

1. Sri S V Alagappan - Managing Director

2. Sri S K Sundararaman - Executive Director

3. Dr K R Thillainathan - Independent Director

The CSR activities and its related particulars is enclosed as Annexure III

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 31st March, 2015 relating to Conservation of Energy, etc., is enclosed as Annexure IV.

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 31st March, 2015 is provided in Annexure V.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

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

The Company has in place 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.

ACKNOWLEDGEMENT

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

CHAIRMAN AND MANAGING DIRECTOR

Place : Coimbatore

Date : 30th May, 2015