DIRECTORS' REPORT

To

The Members,

Your Directors are pleased to present the Twenty-eighth Annual Report along with the audited Financial Statements for the year ended 31st March 2015.

OPEATIONS

During the year under review, the Company has achieved marginally higher top line compared to previous year. The Company has achieved a turnover of Rs. 25,966.75 lakh during the year as compared to Rs. 25,310.42 lakh during the previous year. The Profit after tax for the financial year 2014-15 was Rs. 217.23 lakh as compared to Rs. 292.58 lakh during the previous year.

The measures took by the Company on cost, capacity utilisation and product innovation have started showing results. The Company believes that working on the said purpose would be continuous pursuit.

FUTURE PLANS

The Company plans to strengthen existing business operations by streamlining activities requiring more management thrust for showing improved performance, as per the plan envisaged by the Company. The Company continue its pursuit to reduced operational costs, better utilisation manufacturing facilities and product innovation. The management is expecting these initiatives to result in better profitability in coming years.

DIVIDEND

Your Directors are pleased to recommend a dividend of Rs. 1.50 (i.e.15%) per equity share on the equity capital of the Company for the year under review.

PUBLIC DEPOSIT

The Company has not accepted any deposit from the public during the financial year under review.

CORPORATE GOVERNANCE REPORT

A separate report on Corporate Governance is enclosed as a part of this Annual Report. A Certificate from Auditors of your Company regarding compliance of conditions of Corporate Governance as stipulated in clause 49 of the Listing Agreement with stock exchange is also enclosed along with the Corporate Governance Report.

MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis is presented as a separate section forming part of this Annual Report.

DISCLOSURE REQUIREMENTS

Details of programmes for familiarization of Independent Directors with the Company are available on the website of the Company at the link http://k^lindia.com/wp-content/uploads/2015/08/KFL-ID-Familiarization.pdf

Policy on dealing with related party transactions is available on the website of the Company at the link <http://kflindia.com/wp-content/uploads/2015/08/KFL-RPT-Policy.pdf>.

The Company has formulated and disseminated a Whistle Blower Policy to provide vigil mechanism for employees and Directors of the Company to report genuine concerns that could have serious impact on the operations and performance of the business of the Company. This Policy is in compliance with the provisions of section 177(9) of the Companies Act, 2013 and clause 49 of the Listing Agreement. Policy on Whistle Blower is available on the website of the Company at the link <http://kflindia.com/wp-content/uploads/2015/08/KFL-Vigil-Machanism.pdf>

NUMBER OF BOARD MEETINGS

The Board of Directors met 5 (Five) times during the financial year 2014-15. The details of Board meetings and the attendance of the Directors are provided in the Corporate Governance Report which forms part of this Annual Report.

PERFORMANCE EVALUATION OF BOARD

Pursuant to the provisions of the Companies Act, 2013 and clause 49 of the Listing Agreement, the Board has carried out an annual evaluation of performance of its own, the Committees thereof and the Directors individually. At the meeting of the Board all the relevant factors that are material for evaluating the performance of the Committees and of the Board were discussed in detail.

A separate exercise was carried out to evaluate the performance of individual directors including the Chairman of the Board, who were evaluated on parameters such as level of engagement and contribution, independence of judgment, safeguarding the interest of the Company and its minority shareholders, etc. The performance evaluation of the independent directors was carried out by the entire Board except the independent directors being evaluated.

The performance evaluation of the Chairman and Non-Independent Directors was carried out by the Independent Directors.

POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION

The Company's policy on directors' appointment and remuneration and other matters provided in section 178(3) of the Companies Act, 2013, has been disclosed in the Corporate Governance Report, which forms part of the Annual Report.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

The Directors express their profound grief at the sad demise of Mr. Ashwani Bhatia, Independent Director on 6th June 2015 and place on record the deep sense appreciation for valuable contribution made by him.

During the year under review, Ms. Bindu Shah was appointed as an Additional Director (Independent) with effect from 21st March 2015. As per the provisions of section 161(1) of the Companies Act, 2013 ('the Act'), she holds office upto the date of the ensuing Annual General Meeting. A Notice under section 160(1) of the Act has been received from a Member signifying its intention to propose Ms. Bindu Shah as an Independent Director of the Company. The Board recommended her appointment as an Independent Director for a term of five years at the ensuing Annual General Meeting.

In terms of section 152 of the Act, Mr. Pradip Kumar Goenka retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for re-appointment

The Company has received necessary declarations from all the Independent Directors under section 149(7) of the Act that they meet the criteria of independence laid down in section 149(6) of the Act and Clause 49 of the Listing Agreement.

The Board of Directors, subject to approval of members at the ensuing Annual General Meeting, have approved reappointment of Mr. Pradip Kumar Goenka as Chairman & Managing Director with effect from 26th August 2015 for a period of 3 years. The Board, subject to shareholders' approval, in order to comply with section 203(1) of the Act and to continue the dual position held by Mr. Pradip Kumar Goenka as Chairman & Managing Director and also to realign with the provisions of the Companies Act, 2013, the Company proposes to adopt a new set of Articles of Association as per Table 'F' of Schedule I of the Companies Act, 2013

Mr. Jagdish Prasad Dave, Finance Controller of the Company was appointed as Chief Financial Officer with effect from 12th November, 2014.

Additional information on appointment / reappointment of directors as required under clause 49 of the Listing Agreement is given in the Notice convening the ensuing Annual General Meeting.

COMMITTEES OF THE BOARD OF DIRECTORS AUDIT COMMITTEE

During the year review, the Audit Committee of the Company comprised of three Independent Directors viz., Mr. Sanjeev Maheshwari, Mr. Rahul Mehta and Mr. Ashwani Bhatia. Mr. Sanjeev Maheshwari is the Chairman of the Audit Committee. Ms. Bindu Shah, Independent Director has been appointed as a member of the Committee with effect from 11th August 2015 in place of Late Mr. Ashwani Bhatia. There are no instances where the Board did not accept the recommendations of the Audit Committee. The terms of reference, powers and roles of the Committee are disclosed in the Corporate Governance Report, which forms part of the Annual Report.

Details of all the Committees of the Board of the Company along with their terms of reference, composition and meetings held during the year, are provided in the Corporate Governance Report, which forms part of this Annual Report.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirements of section 134(5) 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 inancial year ended 31st March 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

ii. the 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 as at 31st March 2015 and of the proit or loss of the Company for that period;

iii. the Directors have taken proper and suficient care for the maintenance of adequate accounting records in accordance with the provisions 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 accounts for the inancial year ended 31st March, 2015, on a going concern basis.

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

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

AUDITORS AND AUDITORS' REPORT Statutory Auditors

At the Annual General Meeting of the Company held on 26th September 2014, M/s Haribhakti & Co LLP, Chartered Accountants, Mumbai was appointed as statutory auditors of the Company to hold office till the conclusion of the 32nd Annual General Meeting. In terms of the first proviso to section 139 of the Companies Act, 2013 the appointment of the auditors shall be placed for ratification at every Annual General Meeting.

Accordingly, the appointment of M/s. Haribhakti & Co LLP, Chartered Accountants, Mumbai, as statutory auditors of the Company, placed before for ratification by the shareholders.

The Auditors' Report does not contain any disqualification, reservation or adverse mark.

Secretarial Auditor

The Company has appointed M/s. H. S. Associates, Company Secretaries to conduct Secretarial Audit of the Company for the financial year 2014-15 in terms of provisions of section 204 of the Companies Act, 2013. The Secretarial Auditor Report for the year ended 31st March 2015 is annexed to this report as Annexure A.

With regards to the observation made by the Secretarial Auditor in his report, we state that though the Company could not appoint a company secretary during the year, on the date of signing of this report, the Company has appointed a company secretary with effect from 1st September 2015.

Cost Auditor

As per the requirement of Central Government 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, your Company has been carrying out Cost Audit of cost records relating to Textile products every year.

The Board of Directors, on the recommendation of Audit Committee, has appointed Ms. Ketki D. Visariya, Cost Accountant, as Cost Auditor to audit the accounts of the Company for the financial year 2015-16 at a remuneration of Rs. 90,000/- plus service tax as applicable and reimbursement of out of pocket expenses. As required under the Companies Act, 2013, a resolution seeking ratification of members' for the payment of remuneration to Cost Auditor forms part of the Notice convening the Annual General Meeting.

The Cost Audit report for the financial year 2013-14 was filed with the Ministry of Corporate Affairs.

EXTRACT OF ANNUAL RETURN

In terms of provisions of section 92 (3) of the Companies Act, 2013, an extract of Annual Return in prescribed format is annexed to this Report as Annexure B.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

During the year under review, all transactions entered into by the Company with related parties as defined under the Companies Act, 2013 and clause 49 of the Listing Agreement, were in the ordinary course of business and on an arm's length basis. There were no materially signiicant transactions with the related parties during the inancial year which were in conflict with the interest of the Company.

Disclosure of transactions with related parties as required under the Accounting Standard (AS-18) has been made in the notes forming part of the financial statements. Particulars of contract or arrangements with related parties referred to in section 188(1) of the Companies Act, 2013, in the prescribed Form AOC-2, is appended as Annexure C, which forms part of this Report.

PARTICULARS OF LOANS GRANTED, GUARANTEE PROVIDED AND INVESTMENTS MADE PURSUANT TO THE PROVISIONS OF SECTION 186 OF THE COMPANIES ACT, 2013

The Company has not granted any Loans, not provided any Guarantee and not made any Investments which are covered under the provision of section 186 of the Companies Act, 2013.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION & FOREIGN EXCHANGE EARNINGS AND OUTGO AND EXPORT INITIATIVE

Information pursuant to section 134(3)(m) of the Companies Act, 2013 read with Companies (Disclosure of Particulars in Report of Board of Directors) Rules, 1988 is given as Annexure D, Form "A" & "B" is attached and form part of this report. The Company being focusing in Indian market, it has not taken any export initiative.

PARTICULARS OF EMPLOYEES

In terms of provisions of Companies Act, 2013 and disclosure as required under rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 framed there under, the names and other particulars of employees are provided under Annexure E, which is annexed to this Report.

Addition to the above, a statement containing the particulars as required under rule 5(2) and (3) of the Companies (Appointment and Remuneration of managerial Personnel) Rules, 2014 is given as Annexure F

RISK MANAGEMENT POLICY AND INTERNAL ADEQUACY

The Company has in place a mechanism to identify, assess, monitor and mitigate various risks to key business objectives. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. The Company's internal control systems are commensurate with the nature of its business and the size and complexity of its operations. These are routinely tested Statutory as well as Internal Auditors. Significant audit observations and follow up actions thereon are reported to the Audit Committee.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

Your Company has always believed in providing a safe and harassment free workplace for every individual working in Company's premises through various interventions and practices. The Company always endeavours to create and provide an environment that is free from discrimination and harassment including sexual harassment.

During the year under review, there were no cases iled pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

ACKNOWLEDGEMENT

The Board wishes to place on record their sincere appreciation to all the bankers, customers, employees at all levels and stakeholders for the continued support and patronage during the year under review.

By Order of the Board

For Kamadgiri Fashion Limited

Pradip Kumar Goenka

Chairman & Managing Director

Date: 11th August 2015

Place: Mumbai