DIRECTORS' REPORT

Your Directors are pleased to present the Directors' Report of your Company together with the Audited Statement of Accounts and the Auditors' Report for the Financial Year ended 31st December, 2014. The summarized financial results for the Financial Year are as under:

IMPLEMENTATION OF COMPANIES ACT 2013

As per General Circular No. 08/2014 of Ministry of Corporate Affairs dated 04.04.2014 clarifies that, the financial statements (and documents required to be attached thereto), auditor's report and Board's report in respect of financial years that commenced earlier than 1st April, 2014 shall be governed by the relevant provisions/ Schedules/ rules of the Companies Act, 1956. However, as good corporate governance few important aspects are covered below:

a) DEVELOPMENT AND IMPLEMENTATION OF A RISK MANAGEMENT POLICY:

The main objective of Risk Management is risk reduction and avoidance as also to help the Company identify the risks faced by the business and optimize the risk management strategies. The Company has a defined risk management framework. The company has laid down procedures to inform Board members about the risk assessment and minimization procedures and is responsible for framing, implementing and monitoring the risk management plan for the company.

The company has constituted a risk management committee, whose constitution is as below. It assists the Board in functioning of framing, implementing, monitoring and reviewing the Risk Management Plan, lays down procedures to inform the Board on the Risk Assessment and Minimization Procedures, review the said procedures periodically and to see whether the Executive Management controls the risks through properly defined framework, and such other functions as it may deem fit.

b) INTERNAL FINANCIAL CONTROL

Your Company has well defined and adequate internal controls and procedures, commensurate with its size and nature of its operations. This is further strengthened by the Internal Audit done concurrently.

Your Company has appointed M/s. Ernst & Young LLP, Major international accounting and consulting firm as the Internal Auditors of the Company. The Internal Auditors directly and periodically report to the Audit Committee as required by the Clause 49 of the Listing Agreement.

Besides, the Company has an Audit Committee, comprising Non-Executive Directors, to monitor its financial management, operations and systems.

The Audit committee at its meeting held on 14.11.2014 has evaluated the internal financial controls and risk management system accordingly.

c) EXTRACT OF THE ANNUAL RETURN:

The extract of Annual Return as provided under sub­section (3) of section 92 of the Act is covered in the Corporate Governance Report of this Annual Report.

d) NUMBER OF BOARD MEETINGS HELD DURING THE YEAR ALONG WITH THE DATES OF THE MEETINGS

The details of number of Board Meetings held during the year along with the dates of the meetings are covered in the Corporate Governance Report of this Annual Report.

e) AUDIT COMMITTEE

The Audit Committee composition under provisions of section 177 of the Act and Clause 49(III) of the Listing agreement are covered in the Corporate Governance Report of this Annual Report.

f) CORPORATE SOCIAL RESPONSIBILITY (CSR):

Corporate Social Responsibility provisions are not applicable to your Company as your Company did not qualify the rules provided in Section 135 of the Companies Act, 2013.

PERFORMANCE

The Company's total Income is Rs.73.42 crores during the financial year 2013-14 as against Rs.69.13 crores in the previous year 2012-13 and the Earnings before Interest, Depreciation and Tax (EBIDT) is Rs. 14.21 crores during the financial year 2013-14 as against Rs. 12.83 crores in the previous year 2012-13. The Profit after tax (PAT) for the financial year is Rs. 1.29 crores compared to previous year profit of Rs.1.67 crores. On consolidated basis, the total income of your Company and its subsidiaries and Joint venture stands at Rs.101.02 crores and consolidated loss after tax stood at Rs. 16.31 crores as compared to the previous year consolidated loss after at Rs. 18.56. The earnings per Share (EPS) basic and diluted stands at Rs. 1.50 considering the total equity capital of Rs.8.60 crores (86,00,000 equity shares of Rs.10/- each) as on 31st December, 2014.

This decrease in profit is primarily due to onetime settlement scheme entered into by the Company with the HUDCO and made a full and final settlement for the long pending claim filed against the Company by HUDCO before the Debt Recovery Tribunal (DRT), whereby the DRT vide its order dated 26/08/2011 ordered for payment of interest of 9% p.a. on Rs. 15,48,54,845/- with interest pendent lite and future thereon from 1.7.2004. Your Company has successfully settled a claim pending against it since 2004. This has significantly brought down the profits of the Company for the year under review. The other reasons for decrease include economic slowdown, depressed markets, increase in interest costs and cost of raw materials. A more detailed discussion and analysis on the performance of the Company in retrospect as well as the outlook is detailed in the Management Discussion and Analysis Report.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Management Discussion and Analysis Report as required under clause 49 of the Listing Agreement with the Stock Exchanges is presented in a separate section forming part of the Annual Report.

PROJECTS

During the year under review, the Company has executed and handed over 2 residential projects covering an area of 4.19 Lakh square feet. The Company's Project managers are guided by policy and principle in the successful implementation and completion of various projects.

DIVIDEND

Your directors do not declare any Dividend for the financial year ended, 31st December 2014 due to inadequate profit and to Conserve reserves.

DEPOSITS

During the year under review, the Company did not raise funds by way of fixed deposits from the public.

SUBSIDIARY COMPANIES AND ITS ACCOUNTS

There are four subsidiaries of your Company as on 31st December, 2014. The financial details of the Subsidiary Companies as well as the extent of holdings therein are provided in a separate section of the Annual Report pursuant to Section 212 of the Companies Act, 1956. Ministry of Corporate Affairs vide its general circular no.2/2011 dated 8th February, 2011 has issued a direction

under Section 212(8) of the Companies Act, 1956 granting general exemption with respect to the provision of section 212 of the Companies Act, 1956. With the consent of the Board and following the aforesaid direction, the annual accounts and other details of Subsidiary Companies are not attached. However the annual accounts of subsidiary companies and the related detailed information shall be made available to shareholders of holding and subsidiary companies seeking such information at any point of time. The annual accounts of the subsidiary companies shall also be kept for inspection by any shareholders in the corporate office and registered office of the holding company and of the subsidiary companies concerned and a note to the above effect will be included in the details of accounts of subsidiaries to any shareholder on demand. No Company ceases to be Subsidiary and no Company has been made Subsidiary during the year under review.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Accounting Standard AS-21 on consolidated financial statements read with Accounting Standard AS-23 on investment in associates, AS-27 on financial reporting of interest in Joint Venture, Auditors Report on the consolidated financial statements, audited consolidated Balance Sheet, Profit and Loss account and Cash flow statements are provided in the Annual Report.

REPORT ON CORPORATE GOVERNANCE

Your Company ensures good corporate governance by implementing and complying with the policies, standards set out by Securities and Exchange Board of India and other regulatory authorities. The requisite certificate issued by Mrs. V. Padmapriya, Practicing Company Secretary, confirming compliance with the conditions of Corporate Governance as stipulated under clause 49 of the Listing Agreement, is attached to this Report.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN -EXCHANGE EARNINGS AND OUTGO.

The necessary details are furnished in Notes to Financial statements no. 33.

PARTICULARS OF EMPLOYEES UNDER SECTION 217(2A)

During the period under review, no employee was in receipt of remuneration in excess of the limits laid down in Subsection (2A) of Section 217 of the Companies Act, 1956.

DIRECTORS

In compliance with the provisions of section 149, 152 and other applicable provisions, if any, of the Act, and listing

agreement Mr. Ravikanth Choudhry (DIN: 00831721), Mr. Damodaran Arumugam (DIN: 00083139), Mr. Karan Bhasin (DIN: 02168581) & Mrs. Ann Gonsalvez (DIN: 07136630), are proposed to be appointed as Independent Directors (Non - Executive) of the Company for a term of five consecutive years from the conclusion of this Annual General Meeting, and shall not be liable to retirement by rotation. The brief resume of directors, who are to be appointed as stipulated under clause 49(II)(B) of the Listing Agreement, are furnished in the Corporate Governance Report forming part of this Annual Report.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the requirements under Section 217 (2AA) of the Companies Act, 1956, the Board of Directors of the Company hereby state and confirm that:

(i) That in the preparation of the Annual Accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(ii) That the Directors had 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 the affairs of the Company at the end of the Financial Year and of the profit of the Company for that period;

(iii) That the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) That the Directors had prepared the Annual Accounts on a going-concern basis;

(v) That the directors, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively;

(vi) That 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

The company has appointed M/s B.P Jain & Co., Chartered Accountants (Firm Registration no.050105S) in the 22nd Annual General Meeting proposed to be held on 30th June, 2015 until the conclusion of the next Annual General Meeting of the Company, on such remuneration as may be fixed by the Board of Directors subject to ratification of members every year.

INVESTOR RELATIONS

Your Company always endeavors to keep the time of response to shareholders' requests/ grievances at the minimum. Priority is accorded to address all the issues raised by the shareholders and provide them a suitable reply at the earliest possible time. The Shareholders' and Investors' Grievance Committee of the Board met to review the redressal of investors grievances. The shares of your Company are continued to be traded in Electronic Form and the ematerialized on arrangement exists with both the depositories, viz., National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). As on 31st December, 2014, 69,01,720 (Sixty Nine lakhs One thousand Seven hundred and Twenty only) shares have been ematerialized, representing 80.25% of the subscribed capital.

LISTING

The shares of your Company are listed in Madras Stock Exchange Limited, Bombay Stock Exchange Limited and National Stock Exchange of India Limited. The Company has paid the listing fees for the Financial Year 2013-2014 to the Stock Exchanges where its securities are listed. The listed capital of the Company with BSE and NSE is 86,00,000 fully paid-up equity shares of Rs.10/- each. The Company had made a request to Madras Stock Exchange Ltd for delisting its entire securities (70,00,000 equity shares of Rs.10/- each) voluntarily after obtaining the approval of shareholders at the 15th Annual General Meeting of the Company held on 28.03.2008. The Exchange informed that it is in the process of voluntary winding up vide circular issued by SEBI dated 22.05.2014.

TRANSFER OF UNPAID DIVIDEND TO IEPF (INVESTOR EDUCATION AND PROTECTION FUND)

The Shareholders are requested to claim their unclaimed dividends before the aforementioned due dates. The unpaid dividend once transferred to IEPF, cannot be claimed by the Shareholders.

THE COMPANIES (COST ACCOUNTING RECORD) RULES, 2011

As per the Companies (Cost Records and Audit) Amendment Rules, 2014 dated 31st December, 2014, cost audit is not applicable to your Company.

PERSONNEL

The Board wishes to place on record its appreciation of all employees of the Company, for their wholehearted efforts and contribution to the performance and growth of the Company.

ACKNOWLEDGEMENTS

Your Directors place on record their gratitude for the support and co- operation received from CMDA, Corporation of Chennai, ELCOT, Banks and Financial Institutions, Customers, Suppliers and Shareholders and for their continued support. The Board also wish to place its sincere appreciation to the dedicated and committed team of employees.

For and on behalf of the Board of Directors ARIHANT FOUNDATIONS & HOUSING LIMITED

S/d. (KAMAL LUNAWATH)

Managing Director

DIN: 00087324

S/d. (VIMAL LUNAWATH)

Cheif Financial Officer

DIN: 00586269

Place: Chennai

Date: 27.02.2015