KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

Contents

S. Page Contents No. No.

1 Company Information 3

2 Directors Details 4

3 Directors' Report & Annexures 5-49

4 Corporate Governance Report 50-71

5 Auditors' Certificate on Corporate Governance 72

6 Independent Auditors' Report 73-78

7 Statement of Assets and Liabilities 79

8 Statement of Profit and Loss 80

9 Cash Flow Statement 81

10 Statement on Accounting Policies 82-83

11 Notes on Accounts 84-103

12 Notice to Shareholders 104-112

13 E-Voting Instructions 113-114

14 Proxy Form 115

15 Financial Highlights 117-118

16 Route Map 119

Contents 2 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

COMPANY INFORMATION

BOARD OF DIRECTORS

Managing Director Joint Managing Director Whole Time Director Sri P.Venkateswara Reddy Sri G.V. Krishna Reddy Sri M.V. Subba Reddy

Nominee Director Independent Director Independent Director Sri V.S.N Murthy Sri M.R. Naik Sri S. Pulla Rao

Independent Director Independent Director Sri A. Krishna Murthy Smt V.Bhargavi

Listed With : Bombay Stock Exchange Ltd

Registered office of : Chowdavaram, Guntur-522019 the Company Phones: 0863-2344010, 2344016 Fax: 0863-2344000

Statutory Auditors : M/s Brahmayya & Co., Chartered Accountants, 10-3-21, Sambasivapet, Guntur-522001

Cost Auditor : P.Srinivas, Cost Accountant 97/2 RT Vijaya Nagar Colony, Besides Masab Tank, Hyderabad-500 057

Secretarial Auditors : K.Srinivasa Rao & Co., Company Secretaries 13/2, Arundelpet, Guntur – 522002

Internal Auditors : M/s Mastanaiah & Co., Chartered Accountants, 11/1, Arundelpet, Guntur – 522002

Bankers : Andhra Bank, Main Branch, Guntur-522001 Indian Bank, Main Branch, Guntur-522001 Bank of Baroda, Near Hindu College, Guntur-522001

Registrars & Share : Big share Services Pvt. Ltd Transfer Agents 306, 3rd Floor, Right Wing, Amrutha Ville, Opp. Yashodha Hospital, Raj Bhavan Road, Somajiguda, Hyderabad – 500 082. Ph No.040-23374967 E-mail : [email protected]

E-mail : [email protected]

Website : www.ksml.in

Company Information 3 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17 Smt. V.Bhargavi (DIN: 06950741) (DIN: 00018719) Sri M.V.Subba Reddy Sri M.V.Subba (Independent Director) (Whole Time Director) Sri M.R.Naik Sri S.Pulla Rao (DIN: 02360239) (DIN : 01628537) (Independent Director) (Independent Director) Sri V.S.N Murthy Sri V.S.N (DIN: 00018713) (DIN: 00021952) Sri G.V.Krishna Reddy Sri G.V.Krishna (Joint Managing Director) (Nominee Director, IREDA) (Nominee Director, (DIN: 00018677) (DIN : 00018725) (Managing Director) Sri A.Krishna Murthy (Independent Director) Sri P. Venkateswara Reddy Venkateswara Sri P. (From Left to Right) (From

Directors Details 4 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

KALLAM SPINNING MILLS LIMITED DIRECTORS’ REPORT TO THE MEMBERS OF THE KALLAM SPINNING MILLS LIMITED, Your directors are pleased to present the Twenty-Fifth Annual Report of the Company together with the Audited Financial Statements for the year ended 31st March 2017. 1. CORPORATE OVERVIEW : Kallam Spinning Mills Limited (“Your Company”) is a leading Textile Company. The Group has its corporate office at Chowdavaram, Guntur - 522019, Andhra Pradesh. 2. FINANCIAL RESULTS : The financial results for the year ended 31st March 2017 are summarized below :

Particulars 2016-2017 (` in Lakhs) 2015-2016 (` in Lakhs) Net Sales 28,682.78 26,913.86 Other income 1,041.23 696.68 Operating Profit (EBIDTA) 5,668.37 5,187.71 Depreciation (1,360.90) (1,294.07) Interest (2,198.67) (2,829.82) Earnings Before Tax (EBT) 2,108.80 1,063.82 Provision for income tax : i) Current year Tax 500.00 230.00 ii) Deferred Tax 339.01 242.46 Earnings after tax (EAT) 1,269.79 591.36 Earnings per share (EPS) 3.71 1.73

3. FINANCIAL PERFORMANCE : The Turnover of the company for the period under review increase to ` 28,682.78 Lakhs as compared to ` 26,913.86 Lakhs registering a growth of 6.57% on annualized basis. The profit before interest and taxes of the company has increased by 10.63% on annualized basis from ` 3,893.64 Lakhs in previous year to ` 4,307.47 Lakhs in the period under review. 4. EXTRACT OF THE ANNUAL RETURN: The details forming part of the extract of the Annual Return as on 31st March, 2017 in Form MGT - 9 in accordance with Section 92(3) of the Companies Act, 2013 read with Companies (Management and Administration) Rules, 2014, are set out herewith as Annexure [A] to this report. 5. DIVIDEND AND RESERVES: Your Directors are pleased to recommend a dividend of 10% i.e. ` 0.20 per equity share of face value of ` 2/- each aggregating to ` 68.511 Lakhs. During the year under review, no amount from profit was transferred to General Reserve. The paid up share capital of the company remained unchanged at ` 685.11 Lakhs. Earnings per share were ` 3.71 6. CORPORATE GOVERNANCE: As per Regulation 34 (3) read with Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a separate section on corporate governance practices followed by the Company, together with a certificate from the Company’s Statutory Auditors confirming compliance forms an integral part of this Report. 7. SUB-DIVISION OF EQUITY SHARES : In order to improve the liquidity of your Company’s shares and with a view to encourage the participation of small investors by making Equity Shares of the Company affordable, your Company sub-divided the Equity

Director's Report & Annexures 5 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

Shares of the Face Value of ` 10/- each to Face Value of ` 2/- each w.e.f. 03rd February, 2017 (“Record Date”). Accordingly, 68,51,100 Equity Shares of ` 10/- each were sub-divided into 3,42,55,500 Equity Shares of ` 2/- each. There was no change in the total issued, subscribed and paid up share capital of the Company. 8. POSTAL BALLOT : The Board of Directors had sought approval of the Shareholders of the Company by Postal Ballot process pursuant to the provisions of Sections 108 & 110 of the Companies Act, 2013 read with Rule 20 & 22 of the Companies (Management and Administration) Rules, 2014 (as amended) and Regulation 44 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, (Listing Regulations) in respect of the Special and Ordinary Resolutions set out in the Postal Ballot Notice dated 30th November, 2016. The detailed voting results are given in the ‘Report on Corporate Governance’ forming part of this Annual Report. 9. NUMBER OF MEETINGS HELD OF THE BOARD: During the year, Six Board Meetings were held, with a gap between not exceeding the period of 120 days as prescribed under the Act. Details of the Board and Board Committee meetings held during the year are given in the Corporate Governance Report. 10. PUBLIC DEPOSITS : During the year under review, your Company has not accepted any deposit within the meaning of Sections 73 and 74 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014 (including any statutory modification(s) or re-enactment(s) for the time being in force). 11. DIRECTORS AND KEY MANAGERIAL PERSONNEL : Retirement by rotation and subsequent re-appointment : Sri P.Venkateswara Reddy, Managing Director retire by rotation at the ensuing AGM pursuant to the provisions of Section 152 of the Companies Act, 2013 read with the Companies (Appointment and Qualification of Directors) Rules, 2014 and the Articles of Association of your Company and being eligible has offered himself for reappointment. Appropriate resolution for his re-appointment is being placed for your approval at the ensuing AGM. The Independent Directors of your Company hold office upto 26th September, 2019 and are not liable to retire by rotation. 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 Regulation 16 (b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Board, at its meeting held on 26th August, 2017 appointed Mr. Ajeya Kallam (DIN : 00278595) as an Additional (Independent) Director of the company with effect from 29th September 2017, subject to approval of Shareholders at the ensuing Annual General Meeting and he is not liable to retire by rotation in terms of Section 149(4), (10) & (11) and 152(6)(e) of the Companies Act, 2013. The Board, at its meeting held on 26th August, 2017 appointed Mr. V.Ramgopal (DIN : 02889497) as an Additional (Independent) Director of the company with effect from 29th September 2017, subject to approval of Shareholders at the ensuing Annual General Meeting and he is not liable to retire by rotation in terms of Section 149(4), (10) & (11) and 152(6)(e) of the Companies Act, 2013. During the year under review, there is no change in the Board of Directors of the Company. Disclosure Relating to Remuneration of Directors, Key Managerial Personnel and particulars of Employees : The remuneration paid to the Directors is in accordance with the Nomination and Remuneration Policy formulated in accordance with Section 178 of the Companies Act, 2013 and Regulation 19 of the Listing Regulations (including any statutory modification(s) or re-enactment(s) for the time being in force). The salient aspects covered in the Nomination and Remuneration Policy has been outlined in the Corporate Governance Report which forms part of this report. The information required under Section 197 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of Directors/ employees of your Company is set out in Annexure [B] to this report

Director's Report & Annexures 6 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

Directors Responsibility Statement: Pursuant to Section 134(3)(c) of the Companies Act, 2013 (including any statutory modification(s) or re- enactment(s) for the time being in force), the Directors of your Company confirm that: (a) in the preparation of the annual accounts for the financial year ended 31st March, 2017, the applicable Accounting Standards and Schedule III of the Companies Act, 2013 (including any statutory modification(s) or re-enactment(s) for the time being in force), have been followed and there are no material departures from the same; (b) for the financial year ended 31st March, 2017, 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 your Company as at 31st March, 2017 and of the profit and loss of the Company for the financial year ended 31st March, 2017; (c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 (including any statutory modification(s) or re-enactment(s) for the time being in force) for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; (d) the annual accounts have been prepared on a ‘going concern’ basis; (e) proper internal financial controls laid down by the Directors were followed by your Company and that such internal financial controls are adequate and operating effectively; and (f) proper systems to ensure compliance with the provisions of all applicable laws were in place and that such systems were adequate and operating effectively. 12. MANAGEMENT DISCUSSION AND ANALYSIS : The Management Discussion and Analysis forms an integral part of Annexure [C] to this report and gives details of the overall industry structure, economic developments, performance and state of affairs of your Company’s various businesses viz., Textiles and power business, internal controls and their adequacy, risk management systems and other material developments during the financial year 2016-17. 13. A STATEMENT ON DECLARATION GIVEN BY INDEPENDENT DIRECTORS : During the year under review, one meeting of Independent Directors was held on 10th November, 2016 in compliance with the requirements of Schedule IV of the Companies Act, 2013. All the Independent Directors of the Company have declared that they meet the criteria of Independence in terms of Section 149(6) of the Companies Act, 2013 and that there is no change in status of Independence. 14. EVALUATION OF BOARD’S PERFORMANCE: Pursuant to the provisions of the Companies Act, 2013 read with the Rules issued thereunder and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (including any statutory modification(s) or re-enactment(s) for the time being in force), the process for evaluation of the annual performance of the Directors/ Board/ Committees was carried out. The criteria applied in the evaluation process are detailed in the Corporate Governance Report which forms part of this report. 15. COMMITTEES OF THE BOARD: The Board of Directors has the following Committees: 1. Audit Committee 2. Nomination and Remuneration Committee 3. Stakeholders’ Relationship Committee 4. Corporate Social Responsibility Committee. 5. Share Transfer Committee The details of the Committees along with their composition, number of meetings and attendance at the meetings are provided in the Corporate Governance Report. 16. STATUTORY AUDITORS AND AUDITORS’ REPORT : M/s. Brahmayya & Co., Chartered Accountants, (Firm Reg No: 000513S), had given notice expressing their desire to retire as auditors of the Company at the ensuing annual general meeting, in order to enable the Company to comply with the provisions of the Companies Act, 2013 governing rotation of auditors. The Board of Directors wishes to place on record their sincere appreciation of the services of the statutory auditors especially in terms of ensuring timely completion and the quality of audit. M/s. Chevuturi Associates., Chartered Accountants (Firm Reg No : 000632S), Vijayawada, had given their consent, if appointed, to hold office as the statutory auditors for a term of five (5) years from the conclusion

Director's Report & Annexures 7 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

of this 25th Annual General Meeting till the conclusion of 30th Annual General Meeting. The said firm has confirmed their eligibility under Sections 139 and 141 of the Companies Act, 2013 and rules framed there under for their appointment as the statutory auditors of the Company. The Audit Committee considered, recommended and the Board of Directors propose the appointment of M/s. Chevuturi Associates., Chartered Accountants (Firm Reg No : 000632S), Vijayawada, as the statutory auditors of the Company. Necessary resolution is being placed before the members for their approval. 17. COST AUDITOR: As per the requirement of Central Government and 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 audit of cost records relating to Textile and Power Divisions every year. The Board of Directors of your Company, on the recommendations made by the Audit Committee at its meeting held on 27th May, 2017 has approved the appointment of Mr. P.Srinivas, Cost Accountant, (Membership No. 21170) as the Cost Auditor of your Company to conduct the audit of cost records for the financial year 2017-18. Your Company has received consent from Mr. P.Srinivas, Cost Accountant, to act as the Cost Auditor for conducting audit of the cost records for the financial year 2017-18. As required under the Companies Act, 2013, a resolution seeking member’s approval for the remuneration payable to the Cost Auditor forms part of the Notice convening the Annual General Meeting for their ratification. 18. SECRETARIAL AUDITORS: In terms of Section 204 of the Companies Act, 2013, read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the Board of Directors of your Company at its meeting held on 27th May, 2017 has appointed M/s. K. Srinivasa Rao & Co, a firm of Company Secretaries in Practice, Guntur (C.P.No: 5178) as Secretarial Auditors to conduct an audit of the secretarial records, for the financial year 2017-18. Your Company has received consent from M/s.K.Srinivasa Rao & Co, to act as the auditor for conducting audit of the Secretarial records for the financial year ending 31st March, 2018. The Secretarial Audit Report for the financial year ended 31st March, 2017 is annexed herewith as Annexure [D] to this report. The Board has made utmost effort for appointment of the Company Secretary as KMP but unable to appoint a Company Secretary due to lack of suitability of the Candidate to the profile of the Company in terms of work location, job profile and remuneration. 19. RELATED PARTY TRANSACTIONS: During the financial year 2016-17, your Company has entered into transactions with related parties as defined under Section 2(76) of the Companies Act, 2013 read with Companies (Specification of Definitions Details) Rules, 2014, all of which were in the ordinary course of business and on arm’s length basis and in accordance with the provisions of Section 188 of the Companies Act, 2013, read with the Rules issued thereunder and the Listing Regulations. Further, there were no transactions with related parties which qualify as material transactions under the Listing Regulations. All Related Party Transactions are placed before the Audit Committee as also to the Board for approval. Prior omnibus approvals are granted by the Audit Committee for related party transactions which are of repetitive nature, entered in the ordinary course of business and are on arm’s length basis in accordance with the provisions of Companies Act, 2013 read with the Rules issued thereunder and the Listing Regulations. The policy on Related Party Transactions as approved by the Board of Directors has been uploaded on the website of the Company. The web-link of the same has been provided in the Corporate Governance Report. The details of the related party transactions as per Accounting Standard 18 are set out in point 31 of the Notes on Accounts to the Financial Statements forming part of this report. The Form AOC - 2 pursuant to Section 134(3)(h) of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014 is set out as Annexure [E]. 20. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS BY THE COMPANY: During the year, There were no Loans, Guarantees, Investments and securities given/made/provided by the Company under the provisions of Section 186 of the Companies Act, 2013. 21. VIGIL MECHANISM / WHISTLE BLOWER POLICY: The Company has a Whistle Blower Policy to report genuine concerns or grievances.Your Company is committed to highest standards of ethical, moral and legal conduct of business operations. Accordingly, the Board of Directors have formulated a Whistle Blower Policy which is in compliance with the provisions of Section 177(10) of the Companies Act, 2013 and Regulation 22 of the Listing Regulations. Employees can raise concerns regarding any discrimination, harassment, victimization, any other unfair practice being

Director's Report & Annexures 8 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

adopted against them or any instances of fraud by or against your Company. Any incidents that are reported are investigated and suitable action taken in line with the whistle blower policy. The Whistle Blower Policy is also available on your Company’s website (www.ksml.in). 22. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS: There are no significant and material orders passed by the Regulators/Courts that would impact the going concern status of the Company and its future operations. 23. CORPORATE SOCIAL RESPONSIBILITY (CSR): The CSR expenditure incurred by your Company during the financial year 2016-17 was` 32.75 Lakhs which was higher than the statutory requirement of 2% of the average net profits for the last three financial years. (Which amounted to ` 28.29 Lakhs) The CSR initiative of your Company was under the area of Social business projects. Your Company’s CSR Policy statement and annual report on the CSR activities undertaken during the financial year ended 31st March, 2017, in accordance with Section 135 of the Companies Act, 2013 and Companies (Corporate Social Responsibility Policy) Rules, 2014 is annexed to this report as Annexure [F]. 24. UNSECURED LOANS RECEIVED FROM DIRECTORS DURING THE YEAR 2016-17 : During the year 2016-17, The Company has received Loans from Three Executive Directors.

S. No Name of the Director Amount Received During the year (Amount in `) 1. Sri.P.Venkateswara Reddy 25,00,000 2. Sri G.V.Krishna Reddy 20,00,000 3. Sri M.V.Subba Reddy 8,00,000 All the Directors were, at the time of giving the money, furnished their declaration in writing to the effect that the amount is not being given out of funds acquired by them by borrowing or accepting loans or deposits from others. 25. RISK MANAGEMENT: The Company has implemented an integrated risk management approach through which it reviews and assesses significant risks on a regular basis to help ensure that there is a robust system of internal controls in place. Your Company believes that managing risks helps in maximizing returns. The Company’s approach to addressing business risks is comprehensive and includes periodic review of such risks and a framework for mitigating controls and reporting mechanism of such risks. The risk management framework is reviewed periodically by the Board and the Audit Committee. Company has put in place response mechanisms that mitigate environmental, operational and business risks and minimise impact on business. 26. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO: The information on conservation of energy, technology absorption and foreign exchange earnings and outgo as stipulated under Section 134 of the Companies Act, 2013 read with Rule 8 (3) of the Companies (Accounts) Rules, 2014, is set out herewith as Annexure [G] to this report. 27. DETAILS ON INTERNAL FINANCIAL CONTROLS RELATED TO FINANCIAL STATEMENTS: Your Company has put in place adequate internal financial controls with reference to the financial statements and the Company has effective risk-mitigation system. Your Company has adopted accounting policies which are in line with the Accounting Standards prescribed in the Companies (Accounting Standards) Rules, 2006 that continue to apply under Section 133 and other applicable provisions, if any, of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 and relevant provisions of the Companies Act, 1956, to the extent applicable. These are in accordance with generally accepted accounting principles in India. Changes in policies, if any, are approved by the Audit Committee in consultation with the Statutory Auditors. The main thrust of internal audit is to test and review controls, appraisal of risks and business processes, besides benchmarking controls with best practices in the industry. The Internal Audit is entrusted to M/s Mastanaiah & Co., (Firm Reg No : 002039S) Chartered Accountants, Guntur, who submit their reports to the Managing Director & CEO and has direct access to the Audit Committee and they participated in the meetings of the Audit Committee of the Board of Directors of your Company.

Director's Report & Annexures 9 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

The Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen the same. The Audit Committee of the Board of Directors and Statutory Auditors are periodically apprised of the internal audit findings and corrective actions taken. Audit plays a key role in providing assurance to the Board of Directors. Significant audit observations and corrective actions taken by the management are presented to the Audit Committee of the Board. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee. 28. ENVIRONMENT AND SAFETY: The Company is conscious of the importance of environmentally clean and safe operations. The Company’s policy requires conduct of operations in such a manner, so as to ensure safety of all concerned, compliances of environmental regulations and preservation of natural resources for future Generations. 29. PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE: As per the requirement of The Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 (‘Act’) and Rules made there under, the Company has formulated and implemented a policy on prevention of sexual harassment at workplace with a mechanism of lodging complaints. For that purpose, Company has constituted Internal Complaints Committees (ICC). The Company has designated the external independent member as a Chairperson for each of the Committees which was beyond the requirements of law. During the year under review, no complaints were received in this regard. 30. REGISTRAR’S AND SHARE TRANSFER AGENTS: Your Registrar and Share Transfer Agents of the Company M/s Big share Services Private Limited, 306, 3rd Floor, Right Wing, Amrutha Ville, Opp. Yashodha Hospital, Raj Bhavan Road, Somajiguda, Hyderabad – 500 082. 31. TRANSFER OF UNPAID AND UNCLAIMED AMOUNT TO IEPF: Pursuant to the provisions of section 124 of the companies Act, 2013, the declared dividends which remained un paid or unclaimed for a period of seven years, have been transferred by the company to the Investor Education and Protection Fund (IEPF) established by the Central Government. During the year 2016-17, Unclaimed Dividend For the year 2008-09 was transferred to Investor Education and Protection Fund (IEPF). Pursuant to the provision of rule 3 of the Investor Education and Protection Fund (Awareness and Protection of Investor) Rules, 2001, necessary e-form (Form 1 INV) which contains the Statement of amounts credited to IEPF was filed to Registrar of Companies (ROC).

The following are the details of dividends paid by the Company and respective due dates for transfer of unclaimed dividend to IEPF. Dividend Year Date of Declaration of Dividend Due date for transfer to IEPF 2009-10 18-09-2010 23-10-2017 2010-11 27-08-2011 01-10-2018 2013-14 27-09-2014 01-11-2021 2014-15 26-09-2015 31-10-2022 2015-16 28-09-2016 02-11-2023

32. APPRECIATIONS AND ACKNOWLEDGEMENTS : Your Directors sincerely convey their appreciation for the unbelievable commitment, support, dedication, hard work, enthusiasm and significant contribution made by employees in ensuring sustained growth of the Company. The Directors also take this opportunity to thank all shareholders, Clients, Vendors, Bankers, Government and Regulatory Authorities and Stock Exchanges for their continued support.

For and on behalf of the Board of Directors P.Venkateswara Reddy Managing Director Place : Chowdavaram, Guntur DIN : 00018677 Date : 26-08-2017 G.V.Krishna Reddy Joint Managing Director DIN : 00018713

Director's Report & Annexures 10 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

ANNEXURE-A TO THE DIRECTORS' REPORT FORM NO. MGT-9 EXTRACT OF ANNUAL RETURN as on financial year ended on 31-03-2017 Pursuant to Section 92 (3) of the Companies Act, 2013 and rule 12(1) of the Company (Management & Administration ) Rules, 2014.

I. REGISTRATION & OTHER DETAILS : i CIN L18100AP1992PLC013860 ii Registration Date 18-02-1992 iii Name of the Company KALLAM SPINNING MILLS LIMITED Category/Sub-category Company Limited by iv of the Company Shares/Indian Non Government Company "Address of the Registered office CHOWDAVARAM, GUNTUR-522019 v & contact details" PH No : 0863-2344016 vi Whether listed company YES Big Share Services Pvt.Ltd., 306, 3rd Floor, Right wing, Amrutha Ville, Name , Address & contact Opp.Yashodha Hospital, vii details of the Registrar & Raj Bhavan Road, Somajiguda, Transfer Agent, if any. Hyderabad-500082. Ph No. 040-23374967

II. PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY : (All the business activities contributing 10% or more of the total turnover of the company shall be stated)

"% to total SL Name & Description of "NIC Code of the turnover of No Main products/services Product /service" the company" 1 Manufacturing of Cotton and Dyed Yarn 13111 37.01 2 Manufacturing of Cotton and Dyed Fabric 13121 62.74

III. PARTICULARS OF HOLDING , SUBSIDIARY & ASSOCIATE COMPANIES :

"HOLDING/ Sl Name & Address "% OF "APPLICABLE CIN / GLN SUBSIDIARY/ No of the Company SHARES HELD" SECTION" ASSOCIATE" 1 Nil 2 Nil

Director's Report & Annexures 11 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

IV. SHAREHOLDING PATTERN : (Equity Share capital Break up as % to total Equity) (i) Category-Wise Shareholding Category of No. of Shares held at No. of Shares held at % Shareholders the beginning of the year* the end of the year # change % of % of during Demat Physical Total Total Demat Physical Total Total the year Shares Shares A. Promoters (1) Indian ------a) Individual 23,97,642 - 23,97,642 34.99 1,20,47,660 - 1,20,47,660 35.17 0.18 /HUF " b) Central Govt. or State ------Govt. " c) Bodies 8,74,057 8,74,057 12.75 43,72,035 - 43,72,035 12.76 0.01 Corporates d) Bank/FI ------e) Any other ------SUB TOTAL : 32,71,699 - 32,71,699 47.74 1,64,19,695 - 1,64,19,695 47.93 0.19 (A) (1) (2) Foreign a) NRI------Individuals b) Other ------Individuals c) Bodies Corp. ------d) Banks/FI ------e) Any other… ------SUB TOTAL ------(A) (2) " Total Shareholding 32,71,699 - 32,71,699 47.74 1,64,19,695 - 1,64,19,695 47.93 0.19 of Promoter (A) = (A)(1) +(A)(2) " B. Public shareholding (1) Institutions a) Mutual Funds - 10,000 10,000 0.15 - 50,000 50,000 0.15 0 b) Banks/FI ------C) Cenntral govt ------d) State Govt. ------e) Venture ------Capital Fund f) Insurance ------Companies g) FIIS ------

Director's Report & Annexures 12 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

Category of No. of Shares held at No. of Shares held at % Shareholders the beginning of the year* the end of the year # change % of % of during Demat Physical Total Total Demat Physical Total Total the year Shares Shares " h) Foreign Venture ------Capital Funds " i) Others (specify) ------SUB TOTAL (B)(1): - 10,000 10,000 0.15 - 50,000 50,000 0.15 0 (2) Non - Institutions a) Bodies 63,790 17,900 81,690 1.19 4,95,836 89,500 5,85,336 1.71 0.52 corporates i) Indian ------ii) Overseas ------b) Individuals ------i) Individual shareholders holding nominal 9,23,527 3,78,430 13,01,957 19.01 60,00,399 18,17,200 78,17,599 22.82 3.81 share capital upto ` 1 lakhs ii) Individuals shareholders holding nominal share 19,99,424 1,67,300 21,66,724 31.63 82,99,573 8,36,500 91,36,073 26.67 -4.96 capital in excess of ` 1 lakhs c) Others (specify) : 1. Clearing 14,754 - 14,754 0.22 1,88,987 - 1,88,987 0.55 0.33 Members 2. Non Resident 4,276 - 4,276 0.06 57,810 - 57,810 0.17 0.11 Indians (NRI's) SUB TOTAL (B)(2): 30,05,771 5,63,630 35,69,401 52.1124 1,50,42,605 27,43,200 1,77,85,805 51.92 -0.19 " Total Public Shareholding 30,05,771 5,73,630 35,79,401 52.2584 1,50,42,605 27,93,200 1,78,35,805 52.07 -0.19 (B)= (B)(1) +(B)(2) " " C. Shares held by Custodian for ------GDRs & ADRs " Grand Total 62,77,470 5,73,630 68,51,100 100 3,14,62,300 27,93,200 3,42,55,500 100.00 0 (A+B+C)

NOTE : The Equity Shares of `10/- each were subdivided into 5 Equity Shares of `2/- each after obtaining approval from Shareholders by way of Postal Ballot and the result for which was declared on 07th January, 2017. * No. of shares are of face value `10/- Each before split of shares # No. of shares are of face value `2/- Each after split of shares

Director's Report & Annexures 13 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

ii) Share holding of promoters Sale : '+' Purchase : '-' % change Sl. Shareholding at the Shareholding at the in share Shareholder's Name No. begginning of the year * end of the year # holding during the year " % of shares % of shares "% of total " % of total pledged pledged No of shares No of shares encumbered encumbered shares of the shares of the to total to total company" company" shares " shares 1 Kallam Agro Products and Oils Ltd. 8,74,057 12.7579 Nil 43,72,035 12.7631 Nil (0.0052) 2 Gurram Venkata Krishna Reddy 5,55,065 8.1018 Nil 27,75,325 8.1018 Nil - 3 Kallam Harinadha Reddy 3,59,300 5.2444 Nil 17,96,500 5.2444 Nil - 4 Kallam Mohan Reddy 3,11,500 4.5467 Nil 15,57,500 4.5467 Nil - 5 Prathyusha Kallam 1,90,100 2.7747 Nil 9,50,500 2.7747 Nil - 6 Poluri Venkateshwara Reddy 1,84,200 2.6886 Nil 9,21,000 2.6886 Nil - 7 Kallam Venkata Subbayamma 1,33,400 1.9471 Nil 6,67,000 1.9471 Nil - 8 Nagireddy Kallam 1,17,800 1.7194 Nil 5,89,000 1.7194 Nil - 9 Umasankara Reddy Movva 1,06,824 1.5592 Nil 5,34,120 1.5592 Nil - 10 Kallam Annapurna 1,03,000 1.5034 Nil 5,15,000 1.5034 Nil - 11 Kallam Harinadha Reddy (HUF) 77,900 1.1370 Nil 3,89,500 1.1370 Nil - 12 Movva Venkata Subba Reddy 68,500 0.9998 Nil 3,42,500 0.9998 Nil - 13 Prabhakara Rao Nalli 32,693 0.4772 Nil 1,38,415 0.4041 Nil 0.0731 14 Nalli Prathibha Rani 30,000 0.4379 Nil 1,50,000 0.4379 Nil - 15 Anumula Ranga Reddy 20,400 0.2978 Nil 1,02,000 0.2978 Nil - 16 N Usha 20,000 0.2919 Nil 1,00,000 0.2919 Nil - 17 N Rajendra Prasad 54,900 0.8013 Nil 2,74,500 0.8013 Nil - 18 Poluri Sivanagendramma 15,000 0.2189 Nil 1,50,000 0.4379 Nil (0.2190) 19 Movva Kavitha 12,400 0.1810 Nil 62,000 0.1810 Nil - 20 Nagendramma Poluri 4,500 0.0657 Nil 32,000 0.0935 Nil (0.0278) 21 Subbayamma Poluri 86 0.0013 Nil 430 0.0013 Nil - 22 Sureddy Malleswari 74 0.0011 Nil 370 0.0011 Nil - Note : The Equity Shares of `10/- each were subdivided into 5 Equity Shares of `2/- each after obtaining approval from Shareholders by way of Postal Ballot and the result for which was declared on 07th January, 2017. * No. of shares are of face value `10/- Each before split of shares # No. of shares are of face value `2/- Each after split of shares

Director's Report & Annexures 14 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

(iii) Change in Promoter's Shareholding (Please Specify, if there is no change)

Sl. Share holding at the Cumulative Share Particulars No. beginning of the Year* holding during the year % of total % of total No. of shares of the No of shares shares of the Shares company company 1 Kallam Agro Products and Oils Ltd At the beginning of the year 43,70,285 12.7579 43,70,285 12.7579 Market Purchase on 30th June, 2016 1,750 0.0255 43,72,035 12.7835 At the end of the year 43,72,035 12.7835 2 Prabhakara Rao Nalli At the beginning of the year 1,63,465 0.4772 1,63,465 0.4772 Market Sale on 28th October,2016 (25,000) (0.0729) 1,38,465 0.4042 Market Sale on 03rd March, 2017 (50) (0.0001) 1,38,415 0.4041 At the end of the year 1,38,415 0.4041 3 Poluri Sivanagendramma At the beginning of the year 75,000 0.2189 75,000 0.2189 Market Purchase on 22nd April, 2016 75,000 0.2189 1,50,000 0.4379 At the end of the year 1,50,000 0.4379 4 Nagendramma Poluri At the beginning of the year 22,500 0.0657 22,500 0.0657 Market Purchase on 08th April, 2016 9,500 0.0277 32,000 0.0935 At the end of the year 32,000 0.0935

* Note 1 : The No. of Equity Share before the Record Date has been adjusted at the face value of `2/- so that shares increased and decreased pre and post Sub-division are comparable. Note 2) : Since the shares of the Company are traded on daily basis, the dates of above sale / purchase have been derived from the Beneficiary Position Statements received from Depositories.

Director's Report & Annexures 15 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

(iv) Shareholding Pattern of top ten Shareholders (other than Direcors, Promoters & Holders of GDRs & ADRs) LIST OF SHARE HOLDING OF TOP 10 SHAREHOLDERS

S. " Shareholding at the "Shareholding at the Shareholder's Name No. begginning of the year * " end of the year # " "% of total " % of total No. of shares No. of shares of

shares of the shares the company " company" 1 Lakshminarayanan T $ 8,33,016 12.16 26,56,873 7.75 2 Poluri Govardhan Reddy 1,74,953 2.55 8,74,765 2.55 3 Vecha Sai Naga Padmasree 1,60,195 2.34 8,00,975 2.34 4 Venugopala Reddy Poluri 1,58,652 2.32 7,93,260 2.32 5 Gurram Nitin 1,09,800 1.61 5,49,000 1.61 6 P Kinnera 90,915 1.33 4,54,575 1.33 7 Kallam Hara Mohan Madhur 83,500 1.22 4,17,500 1.22 8 Jyothi Bhukya 72,283 1.06 3,56,415 1.04 9 Jayesh V Parekh $$ - - 3,00,000 0.88 10 Mahendra Girdharilal 45,349 0.66 2,26,745 0.66

Note : The Shareholders of the Company approved the Sub-division of each equity shares of having nominal face value of `10/- (Rupees Ten) per share into 5 (FIVE) Equity Shares having nominal face value of `2/- (Rupees Two) per Equity Share by way of Postal Ballot on 06th January, 2017 and the Result of Postal Ballot was declared on 07th January, 2017. The Record Date of Sub-division of Equity Shares was 03rd February, 2017. * No. of shares are of face value `10/- Each before split of shares # No. of shares are of face value `2/- Each after split of shares $ Shareholding is consolidated based on Permanent Account Number(PAN) of the shareholder $$ Not in the list of Top 10 Shareholders as on 01st April, 2016 but were one of the Top 10 shareholders as on 31st March, 2017

Director's Report & Annexures 16 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

(v) Shareholding of Directors & KMP

No.of No.of Changes Shares at Shares held Sl. Name of the Made during Directorship the Begin- at the end No Director(s) the Year ning of the of the Year 2016-17 Year * # 1 P. Venkateswara Reddy Managing Director 1,84,200 - 9,21,000 2 G.V.Krishna Reddy Joint Managing Director 5,55,065 - 27,75,325 3 M.V.Subba Reddy Whole Time Director & CFO 68,500 - 3,42,500 4 V.S.N.Murthy Nominee Director - - - 5 M.R.Naik Independent Director - - - 6 S.Pulla Rao Independent Director - - - 7 A.Krishna Murthy Independent Director - - - 8 V.Bhargavi Independent Director - - -

* No. of shares are of face value `10/- Each before split of shares # No. of shares are of face value `2/- Each after split of shares

Director's Report & Annexures 17 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

(vi) Shareholding Pattern of top ten Shareholders (other than Direcors, Promoters & Holders of GDRs & ADRs)

Sl. Shareholding at the Cumulative Shareholding

No beginning of the year during the year % of total No.of No of % of total shares For Each of the Top 10 Shareholders shares of the shares shares of the company company 1 Lakshminarayanan T * At the beginning of the year Changes 41,65,080 12.1600 41,65,080 12.1600 Made during the Year 2016-17 13-05-2016 Purchase 1,450 0.0042 41,66,530 12.164 27-05-2016 Purchase 1,250 0.0036 41,67,780 12.168 10-06-2016 Purchase 1,000 0.0029 41,68,780 12.171 15-07-2016 Purchase 500 0.0014 41,69,280 12.172 05-08-2016 Sale -2,500 -0.0073 41,66,780 12.165 19-08-2016 Purchase 5,000 0.0145 41,71,780 12.179 26-08-2016 Purchase 23,965 0.070 41,95,745 12.249 02-09-2016 Purchase 3,195 0.009 41,98,940 12.259 09-09-2016 Purchase 16,605 0.048 42,15,545 12.307 30-09-2016 Purchase 1,625 0.005 42,17,170 12.312 07-10-2016 Sale -1,500 -0.004 42,15,670 12.307 14-10-2016 Sale -2,120 -0.006 42,13,550 12.301 21-10-2016 Sale -30,210 -0.088 41,83,340 12.213 28-10-2016 Sale -1,80,150 -0.526 40,03,190 11.687 04-11-2016 Sale -64,225 -0.187 39,38,965 11.500 11-11-2016 Sale -22,910 -0.067 39,16,055 11.433 18-11-2016 Sale -3,000 -0.009 39,13,055 11.424 25-11-2016 Sale -66,195 -0.193 38,46,860 11.231 02-12-2016 Sale -60,165 -0.176 37,86,695 11.055 09-12-2016 Sale -430 -0.001 37,86,265 11.054 16-12-2016 Sale -31,395 -0.092 37,54,870 10.962 23-12-2016 Sale -7,740 -0.023 37,47,130 10.940 30-12-2016 Sale -1,625 -0.005 37,45,505 10.935 06-01-2017 Sale -62,210 -0.182 36,83,295 10.753 13-01-2017 Sale -2,63,070 -0.768 34,20,225 9.985 20-01-2017 Sale -3,11,425 -0.909 31,08,800 9.076 27-01-2017 Sale -81,900 -0.239 30,26,900 8.837 03-02-2017 Sale -1,20,600 -0.352 29,06,300 8.485 10-02-2017 Purchase 20,900 0.061 29,27,200 8.546 17-02-2017 Sale -58,782 -0.172 28,68,418 8.374

Director's Report & Annexures 18 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

Sl. Shareholding at the Cumulative Shareholding

No beginning of the year during the year % of total No.of No of % of total shares For Each of the Top 10 Shareholders shares of the shares shares of the company company 24-02-2017 Sale -16,475 -0.048 28,51,943 8.326 03-03-2017 Sale -36,142 -0.106 28,15,801 8.221 10-03-2017 Sale -15,275 -0.045 28,00,526 8.176 17-03-2017 Sale -88,216 -0.258 27,12,310 7.919 24-03-2017 Sale -34,421 -0.100 26,77,888 7.818 31-03-2017 Sale -21,015 -0.060 26,56,873 7.758 At the end of the year (or on the date of 26,56,873 7.758 separation, if separated during the year) * Shareholding is consolidated based on Permanent Account Number(PAN) of the shareholder Note 1 : The No. of Equity Share before the Record Date has been adjusted at the face value of Rs 2/- so that shares increased and decreased pre and post Sub-division are comparable. Note 2) : Since the shares of the Company are traded on daily basis, the dates of above sale / purchase have been derived from the Beneficiary Position Statements received from Depositories.

Sl. Shareholding at the Cumulative Shareholding

No beginning of the year during the year % of total No.of No of % of total shares For Each of the Top 10 Shareholders shares of the shares shares of the company company 2 Poluri Govardhan Reddy At the beginning of the year 8,74,765 2.55 8,74,765 2.55 Changes Made during the Year 2016-17 Nil At the end of the year (or on the date of 8,74,765 2.55 separation, if separated during the year)

Sl. Shareholding at the Cumulative Shareholding

No beginning of the year during the year % of total % of total No.of No of For Each of the Top 10 Shareholders shares of the shares of the shares shares company company 3 Vecha Sai Naga Padmasree At the beginning of the year 8,00,975 2.34 8,00,975 2.34 Changes Made during the Year 2016-17 Nil - 0 0 0.00 At the end of the year (or on the date of 8,00,975 2.34 separation, if separated during the year)

Director's Report & Annexures 19 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

Sl. Shareholding at the Cumulative Shareholding

No beginning of the year during the year % of total % of total No.of No of For Each of the Top 10 Shareholders shares of the shares of the shares shares company company 4 Venugopala Reddy Poluri At the beginning of the year 7,93,260 2.32 7,93,260 2.32 Changes Made during the Year 2016-17 Nil At the end of the year (or on the date of 7,93,260 2.32 separation, if separated during the year)

Sl. Shareholding at the Cumulative Shareholding

No beginning of the year during the year % of total % of total No.of No of For Each of the Top 10 Shareholders shares of the shares of the shares shares company company 5 Gurram Nitin At the beginning of the year 5,49,000 1.60 5,49,000 1.60 Changes Made during the year 2016-17 Nil At the end of the year (or on the date of 5,49,000 1.60 separation, if separated during the year)

Sl. Shareholding at the Cumulative Shareholding

No beginning of the year during the year % of total % of total No.of No of For Each of the Top 10 Shareholders shares of the shares of the shares shares company company 6 P Kinnera At the beginning of the year 4,54,575 1.33 4,54,575 1.33 Changes Made during the Year 2016-17 Nil At the end of the year (or on the date of 4,54,575 1.33 separation, if separated during the year)

Sl. Shareholding at the Cumulative Shareholding

No beginning of the year during the year % of total % of total No.of No of For Each of the Top 10 Shareholders shares of the shares of the shares shares company company 7 Kallam Hara Mohan Madhur At the beginning of the year 4,17,500 1.22 4,17,500 1.22 Changes Made during the Year 2016-17 Nil At the end of the year (or on the date of 4,17,500 1.22 separation, if separated during the year)

Director's Report & Annexures 20 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

Sl. Shareholding at the Cumulative Shareholding

No beginning of the year during the year % of total No.of No of % of total shares For Each of the Top 10 Shareholders shares of the shares shares of the company company 8 Jyothi Bhukya At the beginning of the year 3,61,915 1.07 3,61,915 1.07 Changes Made during the Year 2016-17 08-04-2016 Sale (500) (0.01) 3,61,415 1.06 10-06-2016 Sale (5000) (0.02) 3,56,415 1.04 At the end of the year (or on the date of 3,56,415 1.04 separation, if separated during the year)

Sl. Shareholding at the Cumulative Shareholding

No beginning of the year during the year % of total No.of No of % of total shares For Each of the Top 10 Shareholders shares of the shares shares of the company company 9 Jayesh V Parekh At the beginning of the year - 0.00 - 0.00 Changes Made during the Year 2016-17 02-12-2016 Purchase 75,000 0.22 75,000 0.22 03-02-2017 Purchase 2,25,000 0.66 3,00,000 0.88 At the end of the year (or on the date of 3,00,000 0.88 separation, if separated during the year)

Sl. Shareholding at the Cumulative Shareholding

No beginning of the year during the year % of total % of total No.of No of For Each of the Top 10 Shareholders shares of the shares of the shares shares company company 10 Mahendra Girdharilal At the beginning of the year 2,26,745 0.66 2,26,745 0.66 Changes Made during the Year 2016-17 Nil At the end of the year (or on the date of 2,26,745 0.66 separation, if separated during the year)

Director's Report & Annexures 21 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

V. INDEBTEDNESS : `. in Lakhs Indebtedness of the Company including interest outstanding/accrued but not due for payment "Secured Loans "Unsecured "Total excluding depos- Deposits Loans" Indebtedness" its" Indebtedness at the beginning of the financial year i) Principal Amount 30,466.03 166.80 0.00 30,632.83 ii) Interest due but not paid 205.81 0.00 0.00 205.81 iii) Interest accrued but not due 0.00 0.00 0.00 0.00 Total (i+ii+iii) 30,671.84 166.80 0.00 30,838.64

Change in Indebtedness during the financial year Additions 3,982.87 56.00 0 4,038.87 Reduction 1,814.17 19.75 0 1,833.92 Net Change 2,168.70 36.25 0 2,204.95 Indebtedness at the end of the financial year i) Principal Amount 32,687.95 203.05 0 32,891.00 ii) Interest due but not paid 152.59 0 0 152.59 iii) Interest accrued but not due 0 0 0 0.00 Total (i+ii+iii) 32,840.54 203.05 0 33,043.59 VI. REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL : A. Remuneration to Managing Director, Whole time director and/or Manager: `. in Lakhs Sl. No Particulars of Remuneration Name of the MD/WTD/Manager P.Venkateswara G.V.Krishna M.V.Subba Reddy Reddy Reddy Total Managing Joint Managing Whole Time Amount Director Director Director Gross salary (a) Salary as per provisions contained in section 17(1) of 26.03 25.98 7.88 59.89 the Income Tax. 1961. 1 (b) Value of perquisites u/s 17(2) of the Income tax Act, 1961 (c ) Profits in lieu of salary under section 17(3) of the Income Tax Act, 1961 2 Stock option - - - 3 Sweat Equity - - - Commission 22.17 22.17 - 44.34 4 as % of profit 0.01 0.01 - others (specify) - - 0.886 0.886 5 Others, please specify - - - Total (A) 48.21 48.16 8.77 105.14 Ceiling as per the Act

Director's Report & Annexures 22 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

B. Remuneration to Other Directors : Amount in `. Sl. Particulars of Total Name of the MD/WTD/Manager No Remuneration Amount Sri A.Krishna Smt V. Independent Directors Sri S.Pulla Rao Sri M.R. Naik Murthy Bhargavi 1 Fee for attending Board / 80,000 60,000 50,000 80,000 2,70,000 Committee Meetings

Amount in `. Sl. No Particulars of Remuneration Name of the Director Total Amount Nominee Director (IREDA) V.S.N. Murthy 2 Fee for attending Board / 80,000 80,000 Committee Meetings

VII. PENALTIES/PUNISHMENT/COMPOUNDING OF OFFENCES :

Details of Appeal Section of Penalty/ Authority made the Brief Type Punishment/ (RD/NCLT/ if any Companies Description Compounding Court) (give Act fees imposed details)

A. COMPANY

Penalty NIL Punishment

Compounding

B. DIRECTORS

Penalty NIL Punishment

Compounding

C. OTHER OFFICERS IN DEFAULT

Penalty NIL Punishment

Compounding

Director's Report & Annexures 23 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

ANNEXURE - B TO THE DIRECTORS' REPORT DETAILS PERTAINING TO REMUNERATION AS REQUIRED UNDER SECTION 197(12) OF THE COMPANIES ACT, 2013 READ WITH RULE 5(1) OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014 I) The ratio of the remuneration of each Director to the median remuneration of the employees of the Company for the financial year 2016-17 and the comparison of remuneration of each Key Managerial Personnel (KMP) against the performance of the Company are as under: Remuneration of Director Ratio of remuneration of each S. Name of the Director During the F.Y 2016-17 Director/to median remuner- NO / KMP and Designation (Amount In `) ation of employees P. Venkateswara Reddy 1 48,21,068 34.370 Managing Director G.V.Krishna Reddy 2 48,15,593 34.331 Joint Managing Director M.V.Subba Reddy 3 8,77,403 6.255 Whole Time Director S.Pulla Rao 4 80,000 0.570 Non Executive and Independent Director M.R. Naik 5 60,000 0.428 Non Executive and Independent Director V.S.N Murthy 6 80,000 0.570 Non Executive and Nominee Director A. Krishna Murthy 7 50,000 0.357 Non Executive and Independent Director V. Bhargavi 8 80,000 0.570 Non Executive and Independent Director

II) Details of percentage increase in the Remuneration of each Director in the Financial Year 2016-17 is as follows

Remuneration of Remuneration of % Increase/(Decrease) S. Name of the Director / Director During the F.Y Director During the in Remuneration in the No. KMP and Designation 2016-17 (Amount In `) F.Y 2015-16 (Amount In `) Financial Year 2016-17 P. Venkateswara Reddy 1 48,21,068 35,52,466 35.71 Managing Director G.V.Krishna Reddy 2 48,15,593 35,44,876 35.85 Joint Managing Director M.V.Subba Reddy 3 8,77,403 7,93,244 10.61 Whole Time Director S.Pulla Rao 4 80,000 60,000 33.33 Non Executive and Independent Director M.R. Naik 5 60,000 20,000 200.00 Non Executive and Independent Director V.S.N Murthy 6 80,000 60,000 33.33 Non Executive and Nominee Director A. Krishna Murthy 7 50,000 30,000 66.67 Non Executive and Independent Director V. Bhargavi 8 80,000 60,000 33.33 Non Executive and Independent Director

Director's Report & Annexures 24 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

III) Percentage increase in the median remuneration of all employees in the financial year 2016-17

% Increase/(Decrease) Particulars 2016-17 2015-16 in the Financial Year 2016-17 Median Remuneration of all the Employees 1,40,271 1,21,172 15.76

IV) There were 386 permanent employees on the rolls of the Company as on 31st March, 2017. V) Comparison of Remuneration of the Key Managerial Personnel(s) against the performance of the Company : The total remuneration of Key Managerial Personnel increased by 33.78% from 81.21 Lakhs in 2015-16 to 108.64 Lakhs in 2016-17 whereas the Profit before Tax increased by 98.23% to 1063.82 Lakhs in 2015-16 from 2108.80 Lakhs in 2016-17. VI) Details of Share price and market capitalization : The details of variation in the market capitalization and price earnings ratio as at the closing date of the current and previous financial years are as follows:

Particulars 31-03-2017 31-03-2016 Increase/Decrease (%) 1. P.E Ratio 6.09 6.77 102.09 2. Market Captialisation (` in Cr) 77.42 40.04 26.38

VII) There were no employees in the Company as per Rule 5(2) of Chapter XIII, the Companies (Appointment and Remuneration of Managerial Personnel) Rules, VIII) The ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year - Not Applicable : and IX) The key parameters for the variable component of remuneration availed by the directors are considered by the Board of Directors based on the recommendations of the Human Resources, Nomination and Remuneration Committee as per the Remuneration Policy for Directors, Key Managerial Personnel and other Employees. X) It is hereby affirmed that the remuneration paid is as per the as per the Remuneration Policy for Directors, Key Managerial Personnel and other Employees.

Director's Report & Annexures 25 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

ANNEXURE - C TO THE DIRECTOR’S REPORT MANAGEMENT DISCUSSION AND ANALYSIS: A) INDUSTRY STRUCTURE & DEVELOPMENTS i) TEXTILE INDUSTRY OVERVIEW IN INDIA : The textile industry in India traditionally, after agriculture, is the only industry that has generated largest employment for both skilled and unskilled labour. India is first in global jute production and shares 63% of the global textile and garment market. India is second in global textile manufacturing and also second in silk and cotton production. 100% FDI is allowed via automatic route in textile sector. Monti, Bilsar, Benetton and Levi’s are some of the foreign textile companies invested or working in India. The Indian textiles industry is extremely varied, with the hand-spun and hand-woven textiles sectors at one end of the spectrum, while the capital intensive sophisticated mills sector at the other end of the spectrum. The decentralized power looms/hosiery and knitting sector form the largest component of the textile sector. The close linkage of textile industry to agriculture (for raw materials such as cotton) and the ancient culture and traditions of the country in terms of textiles make the Indian textiles sector unique in comparison to the industries of other countries. The Indian textile industry has the capacity to produce a wide variety of products suitable to different market segments, both within India and across the world. The domestic textile and apparel industry in India is estimated to reach ` 6 lakh crores by 2016-17 from ` 4.02 lakh crores in 2013-14. Exports in textiles and apparel from India are expected to increase to ` 3,90,000 crores by 2016-17 from ` 2,40,000 crores in 2013-14. After witnessing a degrowth of 2% in FY-2016, textile exports is expected to grow at 6% to $40 billion in FY-2017, driven by the expectations of growth in the apparel segment and higher fibre prices, says ICRA in its research update on the Indian textile industry. As per ICRA estimates, apart from the Apparel segment, volume growth in textile exports is also expected in other segments like textile made-ups and home furnishings. The average prices for fibre are also likely to stay higher in FY-2017 as compared to the previous year, which will support the growth in value of textile exports. ii) GOVERNMENT INITIATIVES : The textile sector plays a key role in the Indian economy by way of significant contribution to GDP, manufacturing output, employment generation and export earnings. The Central Government has taken a number of steps to attract domestic and foreign investments with strong focus towards promoting “Make in India” policy and building world class infrastructure. Under the Make in India branding, the Government of India aims to promote textiles, apparels and handicrafts under various schemes by providing suitable fiscal incentives by giving tax rebates, interest subvention, capital subsidies and promotion ofskill development. Launch of Indian Handloom Brand for providing brand value for handloom products. Basic Custom Duty Reduced to 2.5% for textile raw materials used in Technical textiles. This measure will help bring down the input cost for several technical textiles manufacturers in the country. B) SWOT ANALYSIS : 1) Strengths :  Abundant raw material availability helps control costs and reduces lead-times across operations.  There is easy availability of low cost and proficient manpower that contributes extensively in the growth of the industry.  The industry has an added advantage of having numerous segments which help in the provision of a huge variety of products.  India is one of the largest exporters of yarn in international market. ii) Weaknesses :  The textile industry of India is one of the highly disintegrated industries.  Fabric Processing is the weakest link in the Indian textile value chain, adversely affecting its ability to compete in exports.  There is a huge dependency of the industry on cotton.  Productivity levels for manufacturing various apparel items are far lower in India in comparison with its competitors.

Director's Report & Annexures 26 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

iii) Opportunities :  More FDI opportunities are available with elimination of quotas and it also contributes immensely in Product Development.  The trade is growing between regional trade blocs due to bilateral agreements between participating countries.  The global needs are being catered with product development.  Information Technology has a crucial role in apparel manufacturing.  The global needs are being catered with product development. iv) Threats :  Competition from China, Vietnam, Cambodia and other countries is increasing  Striking a balance between the quality and price of products.  Fluctuating foreign currencies against Rupee could become a threat to the Industry at large. C) FUTURE OUTLOOK : The future outlook for the Indian textile and apparel industry is promising. The Government of India has launched a National Textile Policy which aims at creating 35 million new jobs by way of increased investments by foreign companies (expected to be 180-200 billion US$). Textiles exports from India will touch US$ 185 billion by the year 2024-25. Technical textiles are among the most promising and fastest growing areas of Indian textiles industry. The sector is expected to show a CAGR of 16% to reach $ 31 billion by 2020-21. D) FUTURE OUTLOOK OF THE COMPANY : The Company is projecting ` 350 Crores to ` 400 Crores turnover during the year 2017-18. The Weaving, Dyeing and Power divisions are expected to add bottom line to the financial performance of the Company. E) TEXTILE INDUSTRY OVERVIEW IN THE STATE OF ANDHRA PRADESH : The state of Andhra Pradesh has well developed spinning and processing sector in the textile industry and is the one of the leading producers of cotton in the country. Guntur, Chittoor, Kadapa and Kurnool districts of Andhra Pradesh have many textile based industries such as ready-made garments, modern textile weaving, cloth weaving, hosiery and spinning mills. Government of Andhra Pradesh accords top priority to industrial development to make Andhra Pradesh a progressive and highly industrialized state, a State that is a centre of technology and innovation and a joyous population confident of its bright future. Andhra Pradesh with its legacy of handlooms and handicrafts has a strong skill base of weaving and textile related skills. Government of Andhra Pradesh (GoAP) aims to promote and develop a robust textile industry that provides sustainable employment to weavers and posits Andhra Pradesh as a destination of choice to global textile majors. The policy aims to modernize textile manufacturing and improve productivity in order to ensure availability of quality fabric at affordable prices to cater to domestic and international demand. F) Financial Performance of Your Company: Textile manufacturing is a major industry. It is based on the conversion of fiber into yarn, yarn into fabric. These are then dyed or printed, fabricated into clothes. The core business of the company is manufacturing and sale of cotton and dyed yarn and cotton and dyed fabrics. The management discussion and analysis given below discusses the key issues of the Spinning, weaving, dyeing and power divisions. The Turnover of the company for the period under review increased to ` 286.83 Crores as compared to ` 269.17 Crores registering a growth of 6.56% on annualized basis. The profit before tax of the company has been increased by 32.50% on annualized basis from ` 10.64 Crores to ` 21.09 Crores in the current financial year. The net profit after tax for the year under report was affected and increased to ` 12.69 Crores from ` 5.91 Crores.

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G. DIVISION WISE REVIEW AND ANALYSIS : I) KSML GINNING DIVISION: Nipha Ginnings :

The Ginning Division has 28 high production Ginning Machines. The Division has most modernized Automatic bale pressing unit and auto seed booster compressor to seed storage tank. This is one of the best and most modern TMC units in entire Guntur district. In near future, we are going to expand the Ginning Division by improving the storage capacity of Raw Cotton. Machinery Infrastructure: Roller Ginning : Nipha Auto Seed Boosting & Collection : Auditya Quality Automatic Bale Press : Karunanand Online Cody Cleaner : Global Engineers Pvt Ltd Lint Pre Cleaner : Govind & sons Raw Cotton Storage hot box : Rank one company The Ginning Division has capacity to press 200 bales /day and 50,000 bales in a year. BCI (Better Cotton Initiative) Your Company has been BCI (Known as “Better Cotton Initiative”) certified in December, 2015 for procuring of Better Cotton from the farmers who have been certified by the BCI as a Registered Farmers. The Better Cotton Initiative exists to make global cotton production better for the people who produce it, better for the environment it grows in and better for the sector’s future. BCI aims to transform cotton production worldwide by developing Better Cotton as a sustainable mainstream commodity. BCI brings together farmers, ginners, spinners, weavers, processors, garments, cut & sew, manufacturers, retailers, brands and grassroots organisations in a unique global community committed to developing Better Cotton as a sustainable mainstream commodity. The farmers are educated to grow cotton by conserving water and soil. The farmers are then BCI certified. We procure these kappas from them and gin in our ginning unit and then spin the yarn from these kappas in our spinning unit. We also weave the fabric and sold. Advantages of procuring of BCI Cotton :  Yarn produced from BCI Cotton has high market demand when compare to yarn produced from other cotton.  By 2017, few brands will buy only BCI fabric  Your company trying to be on Higgs international  Your company is processing for organic cotton certification

Director's Report & Annexures 28 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

Obtain Certificate from Organic Content Standard 100 : The Company has received a Certificate of Compliance for the Organic Control Standard (OCS) from the International Organic Accreditation Series (IOAS) for Exporting Open End Spinning, Sizing, Spinning, Storing, Trading, Warping, Weaving, Yarn dyeing products. II) KSML SPINNING DIVISION: Financial Performance of Spinning Division During the Year: The Turnover of the Spinning Division for the period 2016-17 has been decreased to ` 222.67 Crores as compared to ` 207.09 Crores in the previous financial year. The profit before tax of the Division for the period 2016-17 has been increased to ` 13.75 Crores as compared to ` 10.99 Crores in the previous financial year. Spinning is a major part of the textile industry. In simple words, spinning is a process in which we convert fibers by passing through certain processes like Blow room, Carding, Drawing, Combing, Simplex, Ring Frame and finally winding into yarns. These yarns are then wound onto the cones. The OE plant and new Automatic Ginning and Pressing Unit had commenced its operation during the financial year 2010-11. During the year 2016-17, your company had manufactured the dyed yarn, which enabled the company to enter into new market. Your Company has made balanced approach towards export and domestic market. In domestic market most of the buyers are corporate entities. We see that maximum product value is accrued to the Company. The company relies on consistent supply of international standard quality yarn. The company had clear vision and mission, well placed systems, team comprises with expertise professionals and strategic management expertise to diversify its qualitative products. i) RING SPINNING DIVISION: The ring spinning machine will continue to be the most widely used spinning process in short staple spinning, since it has considerable advantages over the new spinning processes:  it can be used universally, i.e. any material and any yarn count can be spun on it  it produces yarn with optimum properties (especially as regards structure and tenacity)  it is uncomplicated and easy to control  knowhow for handling the machine is old, well established and accessible to everyone  it is flexible with regard to volume (blend and batch sizes). Your Company started its Commercial production on 22nd March 1995 with 12096 spindles. Your Company is an ISO 9001-2008 Certified Company by TUV NORD since 2010. The Company today operates 59,280 spindles of Ring Spinning out of which 34,416 compact & 24,864 Non-Compact. We are mainly focused on production of Premium quality of cotton and dyed yarn. The premium quality yarn is exported to number of customers across the world. The company relies on consistent supply of international standard quality yarn. Having clear vision, well placed systems, guided by a team of professionals & steered by an enterprising management, your company always tries to diversify its range of products in order to reach the large number of customers across the globe. Product Range : Ring Spinning Yarn : Ne.30s to Ne.80s combed warp / compact. TFO Yarn : Ne.30/2 to Ne.80/2 combed warp / compact. Production per Month : Ring Spinning Yarn, 420 tons. ii) MAINTENANCE OF MACHINES: The company strictly follows all scheduled activities which are routine and preventive activities are followed as per its documented plans in quality manual. On regular basis internal system audits as well as machine audits are carried out to ensure the effectiveness of the preventive maintenance. The mill follows machines maintenance as per SITRA recommendation and as per its own experience. The maintenance activity is given at most priority. All the spares are replaced as per machine manufacturer’s suggestions and are purchased directly from the Machine manufacturers to get quality parts. The mill replaces capital machines on regular basis with the latest and advanced technology.

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iii) QUALITY CONTROL MEASURES : Quality is of prime importance in any aspect of business. As the quality product depends on the raw material quality, so we must be provided with the best quality raw material with an economical consideration. Raw material inspection will be carried out on Uster HVI Spectrum and Uster Afis Pro -2 for 2.5% SL, uniformity, MIC, Strength, Short fiber content % and neps /grm. Bale management system is followed for consistent superior yarn quality, and for this, cotton stock required for minimum 5 – 6 months is maintained. Carding and combing process optimized for NRE of 75% to 85% and 65% to 70% respectively. RIETER D35 / D40 / D45 draw frames are maintained for a% less than 0.50. In ring frame breakages are maintained below 5 to 6 breaks per 100 spindle hour. In auto coner utmost care is taken for achieving 85% splice strength with defect-free packages. Apart from in process inspection system, mill has adopted very stringent final inspection procedure before dispatching yarn to its customers. We maintain regional quality test center, do extensive testing of cotton yarn for mills in and around Guntur. The quality testing department is a profit center on its own.

Director's Report & Annexures 30 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17 iv) SIMPLEX MACHINE :

v) CARDING MACHINE:

Director's Report & Annexures 31 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

“Carding is known as heart of spinning” High production card designed to deliver superior performance with a comprehensive carding concept – available in two variants TC 5-1 and TC 5-3. Tasks performed by Carding Machine are: 1. Opening to individual fibers 2. Elimination of impurities occurs mainly in the licker-in region 3. Elimination of Dust, which are bound to the fibers Technical Details: Power consumption: 14.63 kW Production: Upto 120 kg/ hr Key Features: Precision knife setting system PMS Multi web clean Direct feed vi) COMBER MACHINE :

Director's Report & Annexures 32 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17 vii) AUTOCONER MACHINE:

III) KSML OPEN END DIVISION : i) BLOW ROOM :

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ii) OPEN END ROTORS :

KSML established its Open End unit in the year 2009-10 with an initial capacity of 1248 Rotors. The total Rotors capacity of Open End Unit was increased to 2912. KSML have proved its OE yarn quality in the international market and have continuous demand in the market. Repeated orders are getting continuously. The premium quality yarn is exported to number of customers across the world. The company relies on consistent supply of international standard quality. Having clear vision, well place systems, guided by a team of professionals and steered by an enterprising management. KSML continuous to diversity its products and extend its customer reach. Product Range: OE Yarn : Ne10s to Ne20s TFO Yarn : Ne OE 20s/2 Production Capacity : 16450 kg / day. Consistent commitment to high quality standards and innovations has been the secret of success. Superior open end unit ensure the supply of consistent quality yarn to manufacture the cloth. IV. KSML WEAVING DIVISION : Financial Performance of Weaving Division during the Year 2016-17: The Turnover of the Weaving Division for the period 2016-17 has been increased to ` 180.12 Crores as compared to ` 156.45 Crores in the previous financial year. The profit before tax of the Division for the period 2016-17 has been increased to ` 9.26 Crores as compared to ` 80.16 Lakhs in the previous financial year. Your Company started the Commercial production of weaving unit on 01st September, 2014 with 248 Looms. Our plant capacity of production is one Lakh meter per day of woven fabric including 70% yarn dyed shirting and 30% of bottom weight fabric. We have the state of art machineries in weaving preparatory, weaving

Director's Report & Annexures 34 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

loom shed and sophisticated testing equipment and instruments aimed at continuing to be a market leader in quality during the future years. We, Kallam Spinning Mills Limited are one of the leading textile manufacturers. Our possibilities of fabrics are boundless, such as Dobby yarn dyed shirting, fabrics with cotton 100% and blended with lycra stretch, polyester, nylon, Linen and viscose fabrics. It does not which fabric or design is concerned. Our name guarantees perfect workmanship at all time. The weaving industry is professionally managed with techno- commercial professionals at the helm of affairs. We have the state of art machines from various leaders of manufacturers around the world. We are procuring from Switzerland, Belgium, Japan, Spain, Germany, Italy and China. - Weaving preparatory, - from Karlmayer - Weaving machines - Picanol, Air-Jet & Rapier looms, Toyota airjet looms - Full equipped testing and research laboratory - Yarn dyeing – Fongs - Automatic dye dispensing system - Tecnorama - Zero discharge effluent treatment plant. – Confident - Humidification system – LUWA.

i) KARLMAYER WARPING MACHINE :

ii) KARLMAYER SIZING MACHINE : Typical features of these sizing machines are their high operator convenience and perfect process control; the sized warp beams ensure maximum efficiency in weaving. Combination size boxes with and without prewetting device ensure short yarn paths. Machines designed as one-box version (floor-type execution) and as double-box version (overhead execution) can be offered in different constructions to meet every requirement. Cylinder driers in various arrangements guarantee a rapid and gentle drying of the yarn.

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iii) STAUBLI AUTO DRAWING MACHINE:

Director's Report & Annexures 36 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

iv) PICANOL AIRJET LOOM :

v) TOYOTA AIRJET LOOM:

Based on the underlying design concept of the JAT Series of “Weaving the highest quality fabric at the lowest possible cost,” the JAT810 boasts a diverse range of original Toyota features, including an Air-Saving System that reduces energy consumption and the new “E-shed” electronic shedding motion. In addition, a newly developed function panel and a factory management system dramatically improve operability. Main specifications : Weft insertion : Single electric drum, 2-, 4-, 6-, 8-color exchange electric drum Nominal reed space : 140cm, 150cm, 170cm, 190cm, 210cm, 230cm, 250cm, 260cm, 280cm, 300cm, 340cm, 360cm, 390cm Shedding : Negative cam, positive cam, crank, dobby, electric shedding, jacquard

Director's Report & Annexures 37 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

vi) FABRIC INSPECTION MACHINE :

vii) PACKING MACHINE :

Director's Report & Annexures 38 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

Our Products Range: Yarn Dyed Shirting Count range - Ring spun Ne 20’s to 80’s Ring spun Blends 2/40’s to 2/120’s Open end – 20’s Blends - 100% Cotton, Polyester Cotton, Organic Cotton Cotton Stretch DowXLA, Cotton Tencel, Cotton Modal Cotton Bamboo, Linen. Weave - Fine Poplins, Chambray, Fil-a-Fil, Checks, Stripes, Oxford Herring Bone Twills, Cavallary Twills, Dobby, Pique Cord Voils, Cambric, Lycra Poplin& many more Fabric Weight - 160 to 450 Grams per Square Meter Finished Width - upto 70 inches Bottom Weight : Count range - Ring spun Ne 20’s to 80’s Ring spun Blends 2/40’s to 2/120’s Open end – 20’s Blends - 100% Cotton, Polyester Cotton, Cotton Stretch DowXLA, Cotton Tencel, Cotton Modal Cotton Bamboo, Linen. Weave - Poplins, Chambray, Fil-a-Fil, Checks, Stripes, Oxford Herring Bone Twills, Cavallary Twills, Dobby, Pique Cord Gabardine, Satin, Matt, Canvas. Fabric Weight - 160 to 450 Grams per Square Meter Finished Width - upto 70 inches V) KSML DYEING DIVISION:

Director's Report & Annexures 39 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

The Company has commenced the Commercial Production of Dyeing unit on 23rd September, 2015. The Company had taken up the dyeing of cotton yarn for production with an extent of 5000 kgs per day.  Financial Performance of Dyeing Division during the Year 2016-17: The Turnover of the Weaving Division for the period 2016-17 has been increased to ` 10.93 Crores as compared to ` 12.61 Lakhs in the previous financial year. The profit before tax of the Division for the period 2016-17 has been increased to ` (23.52) Lakhs as compared to ` (65.65) Lakhs in the previous financial year. Our Products Range: Yarn Dyed Shirting Count range - Ring spun Ne 20’s to 80’s Ring spun Blends 2/40’s to 2/120’s Open end – 20’s Blends - 100% Cotton, Polyester Cotton, Organic Cotton Cotton Stretch DowXLA, Cotton Tencel, Cotton Modal Cotton Bamboo, Linen. i) DATA COLOR :

Director's Report & Annexures 40 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17 ii) DYED CONE REWINDING Subsequent to the R.F. Drying ,the yarn cones are unloaded, weighed, checked for evenness of dyeing are rewound as soft packages on Schlafhorst auto-coners, so that it is ready for warping or for weft insertion in weaving section. We need around 5 machines of 60 spindles each for our capacity and need segregation of each machine, to avoid fluff contamination of one shade onto the other. It is helpful if humidification air changes are provided, so that fluff is going into the return trench and not flying around in the winding area. VI) KSML HYDEL POWER DIVISION : Our company has three hydro electric plants with 4.0 MW capacity at Nelakondapally Mandal, Khammam District of Andhra Pradesh. These plants are on 16th & 17th branch canal of Nagarjuna Sagar project left main canal. The canal flows for 7 to 8 months in a year. Typically the canal is opened in Aug/Sep and closed by end April. The first two projects of 0.8 MW and 1.6 MW were commissioned in Jan 2002 and third hydro electric plant of 1.6 MW was commissioned in March 2011. All the generators produce electricity at 6.6 KV voltage level. The generated voltage is enhanced to 33 KV by a power transformer and fed to the state electricity grid. The hydel power generation solely dependent on the canal water flow. The 0.8 MW hydro electric project is financed by IREDA, New Delhi and remaining two Nos. of 1.6 MW hydro electric projects are financed by Andhra Bank. We have good electrical and mechanical engineering team at the hydro electric plants. They ensure the availability of plant by more than 98% when water is flowing in the canal. During the financial year 2016-17, due to short fall of rains and water flow, we have generated 16,25,900 Units only. Out of the generation, 70% of the units are sold to Sagar Cements Ltd. and 30% of the units are sold to TSNPDCL. H) DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT OPERATIONAL PERFORMANCE The financial statements have been prepared in accordance with the requirement of Companies Act, 2013, and applicable accounting standards issued by the Institute of Chartered Accountants of India. The Management of your Company accepts the integrity and objectivity of these financial statements as well as the various estimates and judgements used therein. The estimates and judgements relating to the financial statements have been made on a prudent and reasonable basis, in order that the financial statements are reflected in a true and fair manner and also reasonably present the Company’s state of affairs and profit for the year.

Sl. 2016-2017 2015-2016 Particulars No (` in Lakhs) (` in Lakhs) 01 Revenue from operation 28,682.78 26,913.86 02 Other income 1,041.23 696.68 03 Increase/(Decrease) in stock 1,181.21 453.61 04 Operating Expenditure 25,236.85 22,876.44 05 Profit before Interest, Depreciation & Tax 5,668.37 5,187.71 06 Depreciation 1,360.90 1,294.07 07 Interest 2,198.67 2,829.82 08 Profit before tax 2,108.80 1,063.82 Provision for income tax 09 i) Current year Tax 500.00 230.00 ii) Deferred Tax 339.01 242.46 10 Profit after tax 1,269.79 591.36 11 Earnings per share (` 2/-) 3.71 1.73

Director's Report & Annexures 41 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

Sl. 2016-2017 2015-2016 Particulars No (` in Lakhs) (` in Lakhs) Transfers & appropriations from the profit are as detailed below : 12 Net Profit after tax 1,269.79 591.36 13 Balance brought forward from previous year 6,452.09 5,943.18 14 Profit for appropriations 7,721.88 6,534.54 APPROPRIATIONS 15 Transfer to General Reserve 0 0 16 Proposed Equity Dividend 68.51 68.51 17 Tax on Proposed Equity Dividend 13.95 13.95 18 Balance carried forward 7,721.88 6,452.08 I) HUMAN RESOURCES AND INDUSTRIAL RELATIONS: The Company takes pride in the commitment, competence and dedication shown by its employees in all areas of business. Your Directors wish to convey their gratitude and place on record their appreciation for all the employees at all levels for their hard work, solidarity, cooperation and dedication during the year. Industrial relations were cordial throughout the year. J) SAFETY, HEALTH AND ENVIRONMENT: Safety, Health and Environment is one of the primary focus areas for your Company. We are conducting our business with respect and care for people and the environment. We have the responsibility towards the utilization of natural resources. Your Company will always set the objectives and targets that result in continuous improvement of our Safety, health and environmental performance. Your company has Complying with agreed corporate requirements that embrace the duty of care, including compliance with applicable laws. K) DISCLOSURE OF ACCOUNTING TREATMENT : Disclosure of Accounting Treatment in the preparation of the financial statements, the Company has followed the Accounting Standards referred to in Section 133 of the Companies Act, 2013. The significant accounting policies which are consistently applied are set out in the Notes to the Financial Statements. L) CAUTIONARY STATEMENT : Statements in the Directors’ Report and Management Discussion and Analysis describing the Companies objectives, projections, estimates, expectations may be “forward looking statements” within the meaning of applicable security laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make difference to the company’s operations include, among others, economic conditions effecting demand / supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws and other statutes and incidental factors.

Director's Report & Annexures 42 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

ANNEXURE - D TO THE DIRECTORS' REPORT FORM No. MR-3 SECRETARIAL AUDIT REPORT FOR THE FINANCIAL YEAR ENDED ON 31ST MARCH, 2017 [Pursuant to section 204(1) of the Companies Act, 2013 and Rule No. 9 of the Companies (Appointment and Remuneration Personnel) Rules, 2014] To The Members, M/s. Kallam Spinning Mills Ltd, Chowdavaram, Guntur We have conducted the secretarial audit of the compliance of applicable statutory provisions and the adherence to good corporate practices by M/s. Kallam Spinning Mills Ltd (CIN : L18100AP1992PLC013860) (hereinafter called the Company). Secretarial Audit was conducted in a manner that provided us a reasonable basis for evaluating the corporate conducts/statutory compliances and expressing our opinion thereon. Based on our verification of the Company’s books, papers, minute books, forms and returns filed andother records maintained by the Company and also the information provided by the Company, its officers, agents and authorized representatives during the conduct of secretarial audit, We hereby report that in our opinion, the company has, during the audit period covering the financial year ended on 31st March, 2017 complied with the statutory provisions listed hereunder and also that the Company has proper Board-processes and compliance- mechanism in place to the extent, in the manner and subject to the reporting made hereinafter: We have examined the books, papers, minute books, forms and returns filed and other records maintained by the Company for the financial year ended on 31st March, 2017 according to the provisions of : (i) The Companies Act, 2013 (the Act) and the rules made thereunder; (ii) The Securities Contracts (Regulation) Act, 1956 (‘SCRA’) and the rules made thereunder; (iii) The Depositories Act, 1996 and the Regulations and Bye-laws framed thereunder; (iv) Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder to the extent of Foreign Direct Investment, Overseas Direct Investment and External Commercial Borrowings; (v) The Following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (‘SEBI Act’) viz.:- (a) The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011; (b) The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015; (c) The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 (Not applicable to the Company during the Audit Period); (d) The Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999/ The Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 – (Not applicable to the Company during the Audit Period); (e) The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008 (Not applicable to the Company during the Audit Period); (f) The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act and dealing with client; (g) The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009; (Not applicable to the Company during the Audit Period) and (h) The Securities and Exchange Board of India (Buyback of Securities) Regulations, 1998 (Not applicable to the Company during the Audit Period); (vi). The Company has identified the following laws as specifically applicable to the Company: 1. The Textiles Committee Act, 1963 and the rules made thereunder; 2. The Textiles (Development and Regulation) Order, 2001 3. The Textiles (Consumer Protection) Regulations, 1988

Director's Report & Annexures 43 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

We have also examined compliance with the applicable clauses of the following: (i) Secretarial Standards with respect to Meetings of Board of Directors (SS-1) and General Meetings (SS-2) issued by the Institute of Company Secretaries of India. (ii) The Listing Agreement entered into by the Company with Bombay Stock Exchange Limited and the Uniform Listing Agreement entered with the said stock exchange pursuant to the provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (applicable with effect from 01st December, 2015). During the period under review the Company has complied with the provisions of the Act, Rules, Regulations, Guidelines, Standards, etc. mentioned above except that the Company has not appointed a Company Secretary as Key Managerial Person (KMP). This is a non-compliance of section 203 of the Companies Act, 2013 and Regulation 6 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. We further report that The Board of Directors of the Company is duly constituted with proper balance of Executive Directors, Non- Executive Directors and Independent Directors. The changes in the composition of the Board of Directors that took place during the period under review were carried out in compliance with the provisions of the Act. Adequate notice is given to all directors to schedule the Board Meetings, agenda and detailed notes on agenda were sent at least seven days in advance and a system exists for seeking and obtaining further information and clarifications on the agenda items before the meeting and for meaningful participation at the meeting. Majority decision is carried through while the dissenting members’views are captured and recorded as part of the minutes. We further report that there are adequate systems and processes in the company commensurate with the size and operations of the company to monitor and ensure compliance with applicable laws, rules, regulations and guidelines. We further report that during the audit period, there are no specific events/ actions having a major bearing on the Company’s affairs in pursuance of the laws, rules, regulations, guidelines, standards, etc, referred to above.

For K. Srinivasa Rao & Co., Company Secretaries., Place : Guntur Date : 26-08-2017 K. Srinivasa Rao, Partner FCS. No. 5599/ C. P. No: 5178

This report is to be read with our letter of even date which is annexed as Annexure-A and forms an integral part of this report.

Director's Report & Annexures 44 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

‘ANNEXURE A’

To The Members M/s. Kallam Spinning Mills Ltd Chowdavaram, Guntur

Our report of even date is to be read along with this letter. 1. Maintenance of secretarial record is the responsibility of the management of the company. Our responsibility is to express an opinion on these secretarial records based on our audit. 2. We have followed the audit practices and processes as were appropriate to obtain reasonable assurance about the correctness of the contents of the Secretarial records. The verification was done on test basis to ensure that correct facts are reflected in secretarial records. We believe that the processes and practices, we followed provide a reasonable basis for our opinion. 3. We have not verified the correctness and appropriateness of financial records and Books of Accounts of the company. 4. Where ever required, we have obtained the Management representation about the compliance of laws, rules and regulations and happening of events etc. 5. The compliance of the provisions of Corporate and other applicable laws, rules, regulations, standards is the responsibility of management. Our examination was limited to the verification of procedures on test basis. 6. The Secretarial Audit report is neither an assurance as to the future viability of the company nor of the efficacy or effectiveness with which the management has conducted the affairs of the company.

For K. Srinivasa Rao & Co., Company Secretaries., Place : Guntur Date : 26-08-2017 K. Srinivasa Rao, Partner FCS. No. 5599/ C. P. No: 5178

Director's Report & Annexures 45 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

ANNEXURE-E TO THE DIRECTORS' REPORT FORM AOC – 2 (Pursuant to Section 134(3)(h) of the Companies Act, 2013 and Rule 8(2) of the Companies (Accounts) Rules, 2014) Form for disclosure of particulars of contracts/arrangements entered into by the Company with related parties referred to in Section 188(1) of the Companies Act, 2013 including certain arm’s length transactions under third proviso thereto 1) There are no contracts/arrangements entered into by the Company with related parties which are not at arms length basis. 2) There are no material contracts/arrangements entered into by the Company with related parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 which are at arms length basis. 3) There were no materially pecuniary relationships or transactions of the non-executive directors' vis-à-vis the Company. 4) Details of non-material contracts/arrangements at arm length basis with related parties for the year ended 31st March, 2017 are as follow :-

Justification Nature of Contracts Salient terms of the contracts or S. Name of the related For entering / arrangements arrangements or transactions No party into Contract / / transactions including the value ; if any Arrangement 10% of Total Turnover of the Kallam Brothers Rendering of ` 3,78,298/- 1 Company or 100 Crores Cottons Pvt Ltd services : Per Annum Which ever is lower Kallam Agro 10% of Total Turnover of the Sale of Goods ` 9,28,95,055/- 2 products and Oils Company or 100 Crores and Services : Per Annum Pvt. Ltd Which ever is lower Commensurate with qualification and P.Govardhan Reddy Appointment to Appointed on a Monthly experience an 3 Son of Managing office or place of remuneration not exceeding amount of Director profit : ` 2,50,000/- Per Month ` 40,500 Per Month is being paid Commensurate with M.Srinivasa qualification and Appointment to Appointed on a Monthly Nagarjuna Reddy experience an 4 office or place of remuneration not exceeding Son of Whole Time amount of profit : ` 2,50,000/- Per Month Director ` 20,000 Per Month is being paid

For and on behalf of Board Place : Chowdavaram, Guntur P.Venkateswara Reddy Date : 26th August, 2017 Managing Director

Director's Report & Annexures 46 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

ANNEXURE - F TO THE DIRECTORS’ REPORT Report on Corporate Social Responsibility (CSR) : 1. CSR policy of the Company is posted on the website of the Company at www.ksml.in. 2. Composition of CSR Committee : Mr. G.V. Krishna Reddy - Chairman Mr. M.R. Naik – Member Mr. M.V. Subba Reddy - Member

3. Average net profit of the Company for last three financial years:` 14.14 Crore 4. Prescribed CSR Expenditure (two per cent of the amount as in item 3 above): The Company is required to spend ` 28.29 Lakhs towards CSR. 5. Details of CSR spent during the financial year 2015-16 : (a) Total amount spent during the financial year:` 32.75 Lakhs (b) Amount unspent, if any: None (c) Manner in which the amount spent during the financial year is detailed below:

Amount S.No CSR Activity Sector Location Spent (`) 1 IMPROVEMENT OF ROADS Social Business projects Addanki, Andhra Pradesh 32,74,929 TOTAL 32,74,929

6. The Corporate Social Responsibility Committee of the Company hereby confirms that the implementation & monitoring of CSR policy, is in compliance with CSR objectives & policy of the Company.

For Kallam Spinning Mills Limited For and on behalf of the Corporate Social Responsibility Committee of Managing Director Kallam Spinning Mills Limited P.Venkateswara Reddy G.V.Krishna Reddy Chairman of the Corporate Social Responsibility Committee

Director's Report & Annexures 47 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

ANNEXURE-G TO THE DIRECTOR’S REPORT Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo The information under 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, 2017 is given below and forms part of the Directors’ Report. A. CONSERVATION OF ENERGY: 1. ENERGY CONSERVATION MEASURES TAKEN DURING THE YEAR: Company continues its efforts to reduce and optimise the energy consumption at all manufacturing facilities, including corporate office at Chowdavaram, Guntur -522019. All the manufacturing units continued their efforts to reduce the specific energy consumption. Specific and total energy consumption is tracked on a daily basis at individual factory / block level and also at consolidated manufacturing level. Energy conservation initiatives are being planned and implemented across manufacturing locations Apart from regular practices and measures for energy conservation, many new initiatives were driven across the units. The measures taken in all the manufacturing units of your Company have been briefly enumerated as below: i) Electricity Consumption reduction by daily monitoring and control ii) Efforts have been put consistently year on year to optimize energy consumption in production processes and operation of utilities. iii) Implemented changes in processing methods which reduced cycle time resulting in lower power consumption. iv) Installation of energy efficient lighting fixtures such as Compact Fluorescent Light Bulbs (CFLs) and Battery Charging Systems at all Manufacturing Divisions.. v) Eliminating the steam leakages in steam generation boiler operation. vi) Optimised usage of Captive compressors. vii) Saving in diesel consumption for steam generation boiler operation. viii) Optimising Plant Power load to match the demand. ix) Employees have been trained in energy conservation measures. x) Implemented RO plant for Recycling & reuse of Water. 2. IMPACT OF ENERGY CONSERVATION MEASURES : The Energy Conservation Measures which were undertaken in the Company have resulted in Quality consistency and product improvement, cost reduction, product development, reduction in power consumption, fuel consumption and improves the overall production performance of the Company. 3. TECHNOLOGY ABSORPTION: Continuous efforts are being made by the Company towards technology absorption. The revision in Standard Operating Procedures resulted in improved yields. The Company has taken effective technical measures to enhance the quality of the products in order to compete with the international quality standards. Aligning the Company’s processes with International Quality & Safety requirements. 4. BENEFITS DERIVED AS A RESULT OF THE ABOVE EFFORTS : Improved quality of the product. Productivity also has been increased. Products are available at more competitive price. 5. PARTICULARS OF IMPORTED TECHNOLOGY IN THE LAST 3 YEARS : a) Technology Imported : Nil b) the year of import; Not Applicable c) whether the technology been fully absorbed; Not Applicable d) if not fully absorbed, areas where absorption has not taken place, and the reasons thereof; Not Applicable. 6. FUTURE PLAN OF ACTION : 1. Development of more specialized grades for specific applications in conjunction with customers. 2. Improved processes for higher yield. 3. More focus on customized grade development aligning strategic business partner's manufacturing and product requirements. 4. Enhancement of innovative facilities for customer development. 5. Improving the process operation, equipment and quality related issues. 6. Increased technical expertise to support customers and market development.

Director's Report & Annexures 48 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

7. TOTAL ENERGY CONSUMPTION AND ENERGY CONSUMPTION PER UNIT OF PRODUCTION : Form A (Form For Disclosure Of Particulars With Respect To Conservation of Energy) a) POWER AND FUEL CONSUMPTION : S. No Particulars 2016-17 2015-16 1. Electricity a) Purchased units (KWH) 6,96,35,948 6,06,96,278 Total amount in ` 40,21,27,841 38,08,05,898 Rate per unit in ` 5.77 6.27 b) Own Generation i) Through Diesel Generator Units generated – KWH 0 0 Total Amount in ` 0 0 Cost per unit in ` 0 0 ii) Through Steam Generation - - iii)Through Hydel Generation Units generated – KWH 16,25,900 3,04,600 Units consumed – KWH 0 0 Total Cost in ` - - Cost per KWH in ` - - 2. Coal - - 3. Furnace Oil - - 4. Other Internal Generation - - b) CONSUMPTION PER UNIT OF PRODUCTION (NO.OF UNITS/KG.) 1. Electricity - - 2. Coal - - 3. Furnace oil - - 4. Hydel - - 8. STEPS TAKEN BY THE COMPANY FOR UTILISING ALTERNATE SOURCES OF ENERGY: None 9. CAPITAL INVESTMENT ON ENERGY CONSERVATION EQUIPMENT: None B. TECHNOLOGY ABSORPTION, ADAPTAION AND INNOVATION : Efforts, in brief made towards technology absorption, adaptation and innovation Continuous efforts are being made towards technology absorption, adaptation and innovation. Quality being the thrust area, the company has taken effective steps to continue to improve quality to compete with international quality standards.LED lights are installed in place of regular tube lights in plant to reduce energy consumption. Installation of Energy Monitoring System for greater accuracy of energy consumption 1. Efforts in brief, made towards Technology absorption, adaptation and innovation: The Company is continuously taking steps to improve the product and process technology in an effort to provide superior quality and cost effective products to consumers 2. Imported Technology : --- Nil --- 3. Expenditure incurred on Research and Development: NIL C. FOREIGN EXCHANGE EARNINGS AND OUTGOINGS : Foreign exchange earnings during the year under review amounted to ` 44.59 Crores. The foreign exchange utilized during the year amounted to ` 60.38 Lakhs.

Director's Report & Annexures 49 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

REPORT ON CORPORATE GOVERNANCE CORPORATE GOVERNANCE REPORT FOR THE PERIOD 01-04-2016 TO 31-03-2017. In compliance with Regulation 34(3) read with Schedule V of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter also referred to as “SEBI (LODR) Regulations”), The Directors’ submit the report containing the details of corporate governance systems and processes at Kallam Spinning Mills Limited is as under : 1. COMPANY’S PHILOSOPHY ON CORPORATE GOVERNANCE : Kallam Spinning Mills Limited (“The Company”) strongly believes in transparency, professionalism and accountability which are the guiding principles of corporate governance. The good corporate governance is an important constituent in enhancing stakeholder value. The good corporate governance generates goodwill amongst all its stakeholders’ including business partners, customers, employees and investors, earns respect from society and brings about a consistent sustainable growth for the Company and its investors. The Company’s philosophy on Corporate Governance revolves around principles of ethical governance and is aimed at conducting business in an efficient and transparent manner and in meeting its obligations to shareholders and other stakeholders. This objective is achieved by adoption corporate practices based on principles of transparency, accountability, fairness and integrity to create long term sustainable value for all its stakeholders in a balanced and accountable manner. GOVERNANCE STRUCTURE The Corporate Governance structure at Kallam Spinning Mills Ltd is as follows: 1. Board of Directors : The Board is entrusted with an ultimate responsibility of the management, directions and performance of the Company. As its primary role is fiduciary in nature, the Board provides leadership, strategic guidance, objective and independent view to the Company’s management while discharging its responsibilities, thus ensuring that the management adheres to ethics, transparency and disclosures. 2. Committees of the Board : The Board has constituted the following Committees viz, Audit Committee, Nomination and Remuneration Committee, Corporate Social Responsibility (CSR) Committee, Stakeholders’ Relationship Committee) and Share Transfer Committee. Each of the said Committee has been mandated to operate within a given framework. 2. BOARD OF DIRECTORS : a) Composition and Category of Directors : The Company has an optimum combination of executive and Non executive Directors in accordance with the provision of Regulation 17(1) of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. As on 31-03-2017 the Board consists of Eight Directors out of which 3 Directors are Executive Directors and 4 Directors are Non – Executive and Independent Directors including a Woman Director and the Remaining one director is a Nominee Director from IREDA. All Directors are competent and experienced personalities in their respective fields. During the year under review, there was no change in the composition of the Board. All the Directors have periodically and regularly informed the Company about their Directorship and Membership on the Board/Committees of the Board of other companies. As per the disclosure received, none of the directors on the board is a member of more than 10 Board level committees or chairperson of more than 5 committees across all the listed and unlisted public companies in which he/she is a director.

Corporate Governance 50 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17 b) The composition of the Board, details of other directorships, committee positions as on 31st March, 2017 and attendance of Directors at the Board Meetings are given in the table below:

The composition of the Board, details of other directorships, committee positions as on 31st March, 2017 and attendance of Directors at the Board Meetings are given in the table below : Annual Number of Committees Board Meetings held During General in Position held in other the year 2016-17 Meeting Limited Companies (##) (AGM) S. Name of the Category of No Director Directorship in other companies (#) Member Chairman Number of Directorships held 28-05-2016 13-08-2016 10-11-2016 30-11-2016 18-01-2017 11-02-2017 28-09-2016

1 P.Venkateswara Executive Nil Nil Nil Reddy Director 2 G.V.Krishna Reddy Executive Nil Nil Nil Director 3 M.V.Subba Reddy Executive Nil Nil Nil Director 4 V.S.N. Murthy Nominee Director, 2 Nil 2 IREDA 5 S.Pulla Rao Independent Nil Nil Nil Director

6 M.R.Naik Independent Nil Nil Nil Director

7 A.Krishna Murthy Independent Nil Nil Nil Director

8 V.Bhargavi Independent Nil Nil Nil Director

- Attended - Not Attended

(#) In pursuance with the Regulation 26(1)(a) of SEBI (LODR) Regulations, 2015, While considering the Limit of Directorships, Directorship in Kallam Spinning Mills Limited was Excluded and also excludes directorship in Private Companies, Foreign Companies, Companies incorporated under Section 8 of the Companies Act, 2013 and alternate directorships. (##) In pursuance with the Regulation 26(1)(b) of SEBI (LODR) Regulations, 2015, While considering the limit of Committee Memberships and Chairmanships of a Director, Audit Committee and Stakeholders Relationship Committee of Public Companies have been considered and also excludes the Memberships & Chairmanships in Kallam Spinning Mills Limited. c) Number of meetings of the Board of Directors held and dates on which held : During the financial year 2016-17, 6 (Six) meetings of the Board of Directors were held and the maximum time gap between two meetings did not exceed one hundred and twenty (120) days. The Board meets at least once in every quarter to review the quarterly financial results and other items on the Agenda.

Corporate Governance 51 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

Dates on which Board Meetings Were held :

1) 28th May, 2016 2) 13th August, 2016 3) 10th November, 2016

4) 30th November, 2016 5) 18th January, 2017 6) 11th February, 2017

d) Inter-se relationship among directors : As on 31st March, 2017, there is no inter-se relationship among the Directors. e) Number of Shares and convertible instruments held by Non-Executive Directors: Non-Executive Directors does not have any Shares and convertible instruments of the Company. f) Independent directors: The Independent Directors of your Company have been appointed for a tenure of 5 (five) years upto 26th September, 2019. Their appointment was approved by the shareholders of your Company at their AGM held on 27th September, 2014. The Independent Directors have submitted declarations that they meet the criteria of Independence laid down under Section 149 of the Companies Act, 2013 and Regulation 16(b) of the SEBI (LODR) Regulations, 2015. They have also confirmed that they do not hold directorship in more than seven listed entities as per Regulation 25 (1) of SEBI Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015. Independent Directors’ Meeting: As per the Regulation 25 (3) of SEBI Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015, during the year under review, the Meeting of the Independent Directors was held on 10th November, 2016, without the attendance of Non-Independent Directors and members of the management, inter alia, to discuss on the following :  To review the performance of the Non-Independent Directors and the Board as a whole;  Review the performance of the Chairperson of your Company, taking into account views of Executive / Non- Executive Directors; and  Assess the quality, quantity and timeliness of flow of information between your Company’s management and the Board that was necessary for the Board to effectively and reasonably perform their duties. The Details of Familiarization Programme for Independent Directors were disclosed on the Company’s website www.ksml.in 3) AUDIT COMMITTEE : a) Brief Description of Terms of Reference : The Main objectives of the Audit Committee are monitoring and effective supervision of the financial reporting, audit process, determining the adequacy of internal controls, evaluating and approving the transactions with related parties, ensuring of accurate and timely disclosures of financial reporting with high level of integrity, quality and transparency and recommendation of the appointment of Statutory Auditors. The composition of the Audit Committee is in compliance with provisions of Section 177 of the Companies Act, 2013 and Regulation 18 of SEBI (LODR) Regulations, 2015. The members of the Audit Committee are financially literate and have experience in financial management. The Committee invites the Managing Director, Joint Managing Director, CFO, Statutory Auditor and Chief Internal Auditor to attend the meetings of the Committee. The Audit Committee met the Statutory Auditors and the Chief Internal Auditor independently without the management in all the Audit Committee meetings which were held during the year 2016-17. b) The composition of the Audit Committee of the Company :

Non Executive & S.Pulla Rao Independent Director Chairman Audit V.S.N.Murthy Nominee Director Member Committee Non Executive & V.Bhargavi Independent Director Member

Corporate Governance 52 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

c) Details of the Audit Committee Meetings held and attended during the financial year 2016-17 is detailed below:

S. Name of the Audit Committee Meetings held during the year 2016-17 No Member 28-05-2016 13-08-2016 10-11-2016 11-02-2017 1 S.Pulla Rao

2 V.S.N. Murthy

3 V.Bhargavi

- Attended The Audit Committee is empowered, pursuant to its terms of reference and its role, inter alia, includes the following: 1. Reviewing with the management quarterly, half-yearly, nine months and annual financial statements, standalone as well as consolidated before submission to the Board for approval; 2. Oversight of the Company’s financial reporting process and the disclosure of its information to ensure that the financial statements are correct, sufficient and credible; 3. Reviewing the Management Discussion and Analysis of the financial condition and results of operations; 4. Reviewing, with the management, the annual financial statements and auditor’s report thereon before submission to the Board for approval, with particular reference to: a. Matters required to be included in the Directors’ Responsibility Statement to be included in the Board’s Report as per Sec 134(3)(c) of the Companies Act, 2013; b. Changes in the accounting policies and practices and the reasons for the same; c. Compliance with the Listing Regulations and other legal requirements relating to financial statements; d. Disclosure of any related party transactions. e. Qualifications in the draft audit report, if any; 5. Reviewing and considering the following with respect to appointment of auditors before recommending to the Board: a. Qualifications and experience of the individual / firm proposed to be considered for appointment as auditor; b. Whether such qualifications and experience are commensurate with the size and requirements of the company. 6. Recommending to the Board, the appointment, reappointment and, if required, the replacement or removal of the statutory auditor, fixing of audit fees and approving payments for any other service; 7. Discussion with the statutory auditors before the audit commences, about the nature and scope of audit as well as post-audit discussion to ascertain any area of concern; 8. Reviewing and monitoring the auditor’s independence and performance, and effectiveness of audit process; 9. Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit; 10. Reviewing the appointment, removal and terms of remuneration of the Chief Internal Auditor of the Company; 11. Formulating in consultation with the Internal Auditor, the scope, functioning, periodicity and methodology for conducting the internal audit; 12. Evaluating the internal financial controls and risk management policies system of the Company; 13. Discussion with the internal auditors on internal audit reports relating to internal control weaknesses and any other significant findings and follow-up thereon;

Corporate Governance 53 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

14. Reviewing the internal investigations by the internal auditors into matters where there is a suspected fraud or irregularity or failure of internal control systems of a material nature and reporting the matter to the Board; 15. Review and comment upon the report made by the statutory auditors (before submission to the Central Government) with regard to any offence involving fraud committed against the company by its officers/ employees; 16. Approval or subsequent modification of transactions of the Company with related parties including appointment and revision in remuneration of related parties to an office or place of profit in the Company, its subsidiary company or associate company; 17. Reviewing the statements of significant related party transactions submitted by the management; 18. Review of the Whistle Blower mechanism of the Company as per the Whistle Blower Policy. Overseeing the functioning of the same; 19. Approval of appointment of Chief Financial Officer after assessing the qualifications, experience and background, etc. of the candidate; 20. Approving the auditors (appointed under the Companies Act 2013) to render any service other than consulting and specialised services; 21. Recommending to the Board of Directors, the appointment, remuneration and terms of appointment of Cost Auditor for the Company; 22. Review the cost audit report submitted by the cost auditor on audit of cost records, before submission to the Board for approval; 23. Reviewing, with the management, the statement of uses / application of funds raised through an issue (public issue, rights issue, preferential issue, etc.), the statement of funds utilized for purposes other than those stated in the offer document / prospectus / notice and the report submitted by the monitoring agency monitoring the utilization of proceeds of a public or rights issue, and making appropriate recommendations to the Board to take up steps in this matter; 24. Any other matter specified by the Board of Directors from time to time. The Audit Committee, during the financial year 2016-17, has approved related party transactions along with granting omnibus approval in line with the Policy of dealing with Related Party Transactions and the applicable provisions of Section 188 of the Companies Act, 2013 and the Listing Regulations (including any statutory modification(s) or re-enactment(s) thereof for the time being in force). 4) NOMINATION AND REMUNERATION COMMITTEE : a) Brief Description of Terms of Reference : The Nomination and Remuneration Committee is empowered with the following terms of reference and responsibilities in accordance with the provisions of law and the Nomination and Remuneration Policy: The terms of reference of the Nomination and Remuneration Committee inter alia, includes: 1) Formulate a criteria for determining qualifications, positive attributes and independence ofa director and recommend to the Board of Directors a policy, relating to, the remuneration of the directors, key managerial personnel and other employees; 2) Formulate a criteria for evaluation of performance of independent directors and the board of directors and review the term of appointment of Independent Directors on the basis of the report of performance evaluation of Independent Directors; 3) To recommend to the Board, appointment, removal of Directors, Senior Management Personnel and KMP in accordance with the criteria laid down. 4) Recommendation to the Board on remuneration of Managing Director/Executive Directors/KMP and also revision in remuneration. 5) Devise a policy on Diversity of Board of Directors; 6) Undertake any other matters as the Board may decide from time to time.

Corporate Governance 54 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

b) Composition, Name of members and Chairperson : The composition of Nomination and Remuneration Committee is in compliance with the provisions of Section 178 of the Companies Act, 2013 and Regulation 19 of the SEBI (LODR) Regulations, 2015. The Composition of Committee is as follows :

Non Executive & A.Krishna Murthy Independent Director Chairman Nomination and Non Executive & Remuneration M.R. Naik Independent Director Member Committee V.S.N. Murthy Nominee Director Member

c) Meeting and Attendance during the year : During FY 2016-17, the Nomination and Remuneration Committee met one (1) time i.e. on 26th May, 2016.

Meeting held during the year 2016-17 S. No Name of the Director 26-05-2016

1 A.Krishna Murthy

2 M.R.Naik

3 V.S.N. Murthy

- Attended 5) REMUNERATION OF DIRECTORS :  Policy on Director’s appointment and remuneration: The Nomination and Remuneration Policy provides for appropriate composition of Executive, Non- Executive and Independent Directors on the Board of Directors of your Company along with criteria for appointment and remuneration including determination of qualifications, positive attributes, independence of Directors and other matters as provided under sub-section (3) of Section 178 of the Companies Act, 2013. The remuneration paid to the Directors is as per the terms laid out in the Nomination and Remuneration Policy of your Company.  Remuneration to the Managing Director & Joint Managing Director: The shareholders of your Company at the 23rd AGM held on 26th September, 2015 approved the re- appointment of Sri P.Venkateswara Reddy as Managing Director and Sri G.V.Krishna Reddy as Joint Managing Director of your Company for a period of three (3) years commencing from 29th June, 2015 to 28th June, 2018. The terms and conditions of their appointment including remuneration payable to them was approved which was in accordance with the provisions of Section 197, 203, Schedule V and other applicable provisions, if any, of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (including any statutory modification(s) or re-enactments thereof, for the time being in force). The details of the Remuneration paid to Managing Directors & Joint Managing Director are stated in the Form MGT- 9 – Extract of the Annual Return which forms part of the Board’s Report in this report.  Remuneration to Whole Time Director: The shareholders of your Company at the 22nd AGM held on 27th September, 2014 approved the re- appointment of Sri M.V.Subba Reddy as a Whole Time Director of your Company for a period of three (3) years commencing from 01st June, 2014 to 31st May, 2017. The terms and conditions of his appointment including remuneration payable to him was approved which was in accordance with the provisions of Section 197, 203, Schedule V and other applicable provisions, if any, of the Companies Act, 2013 read with

Corporate Governance 55 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (including any statutory modification(s) or re-enactments thereof, for the time being in force). The details of the Remuneration paid to Whole Time Director are stated in the Form MGT- 9 – Extract of the Annual Return which forms part of the Board’s Report in this report.  Remuneration to Non-Executive and Independent Directors : The Committee has formulated Policy for Remuneration payable to Non Executive and Independent Directors. As per the Policy, remuneration to Non-executive Independent Directors includes : i) Sitting Fees for attending meetings of the Board as well as Committees of the Board has decided by the Board within the limits prescribed under the Companies Act. ii) Travelling and other expenses they incur for attending to the Company’s affairs, including attending Committee and Board Meetings of the Company The Non-Executive Directors are paid remuneration by way of Sitting Fees. Company paid the sitting fees to all the Non-Executive Directors at the rate of ` 10,000/-per each Director for attending each meeting of the Board, and ` 5000/- per each Director for attending each Audit committee meeting, Review of Performance and Compensation to Senior Management : The Nomination and Remuneration Committee reviews the performance of the senior management of your Company. The Committee ensures that the remuneration to the 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 your Company and its goals Details of remuneration paid to Directors during the year 2016-17 as follows :

Name of Directors Salary Benefits Commission Sitting Fees Total Sri.P.Venkateswra Reddy 24,00,000 2,03,625 22,17,443 - 48,21,068 Sri.G.V.Krishna Reddy 24,00,000 1,98,150 22,17,443 - 48,15,593 Sri.M.V.Subba Reddy 6,06,000 1,82,718 88,685 - 8,77,403 Sri.MR.Naik - - - 60,000 60,000 Sri.V.S.N.Murthy - - - 80,000 80,000 Sri.A.Krishna Murthy - - - 50,000 50,000 Sri.S.Pulla Rao - - - 80,000 80,000 Smt.V.Bhargavi - - - 80,000 80,000 Your Company has not granted any stock options to any of its Directors. 6) STAKEHOLDERS’ RELATIONSHIP COMMITTEE : The composition of the Stakeholder Relationship Committee is in compliance with the provisions of Section 178 of the Companies Act, 2013 and Regulation 20 of SEBI (LODR) Regulations, 2015. The terms of reference of the Committee includes enquiring into and redressing complaints of shareholders and to resolve the grievances of the Investors of your Company. The Committee functioning under the Chairmanship of Mr. A. Krishna Murthy, a Non-executive and Independent Director. The other members of the Committee are Mr. G.V.Krishna Reddy and Mr.M.V.Subba Reddy. Details pertaining to the number of complaints received and responded and the status thereof during the financial year 2016-17 are given below :

No. of complaints received during the year 23 No. of complaints resolved during the year 23 No. of complaints pending at the end of the year Nil

Corporate Governance 56 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

Name, Designation and address of the Compliance officer : Mr. P. Venkateswara Reddy, Managing Director, Kallam Spinning Mills Ltd, Chowdavaram, GUNTUR, Andhra Pradesh-522019 7) SHARE TRANSFER COMMITTEE:  Composition of Share Transfer Committee : Sri G.V. Krishna Reddy - Chairman Sri P. Venkateswara Reddy - Member Sri M.V. Subba Reddy - Member  The terms of reference of the Shareholders’ Committee are as follows: v To issue duplicate share certificates as and when the requests are received by the Company; v To approve the register of members as on the record date(s) and/or book closure date(s) for receiving dividends and other corporate benefits; v To review correspondence with the shareholders vis-a-vis legal cases and take appropriate decisions in that regard; and v To authorise affixing of the Common seal of the Company from time to time on any deed or other instrument requiring authentication by or on behalf of the Company. Further, Share Transfers approved by the Committee were placed before the Board of Directors at their meetings from time to time. During the period under review 4,500 shares were transferred. There were no pending Share Transfers as on date of this report. 8) CORPORATE SOCIAL RESPONSIBILITY COMMITTEE : The composition of the CSR Committee is in compliance with the provisions of Section 135 of the Companies Act, 2013. v Composition of Corporate Social Responsibility Committee: Sri G.V.Krishna Reddy - Chairman Sri M.R.Naik - Member Sri M.V.Subba Reddy - Member The Committee met Two times During the Financial year 2016-17. The CSR Committee is empowered, pursuant to its terms of reference, inter alia, to: 1. Specifying the amount of expenditure to be incurred on the CSR activities; 2. Monitoring the CSR Policy of the Company from time to time; 3. Prepare a transparent monitoring mechanism for ensuring implementation of the projects / programmes / activities proposed to be undertaken by the Company; and 4. Such other activities as the Board of Directors may determine from time to time. 9) RELATED PARTY TRANSACTIONS: All transaction entered into by your Company with related parties, during the Financial Year 2016–17, were in ordinary course of business and on arm’s length basis. The details of the related party transactions are set out in the Notes to Financial Statements forming part of this Annual Report. Also, the Related Party Transactions undertaken by your Company were in compliance with the provisions of Section 188 of the Companies Act, 2013 and Regulation 23 of SEBI (LODR) Regulations, 2015. The policy on related party transactions has been placed on the Company’s website and can be accessed through the following link: www.ksml.in Details of Employee(s), who are relatives of the Directors, holding an office or place of profit in the Company pursuant to Section 188 of the Companies Act, 2013 : During the Financial Year 2016-17, Mr. P.Govardhan Reddy, Son of P.Venkateswara Reddy (Managing Director), Received a total Remuneration of ` 4,86,000/- P.A. During the Financial Year 2016-17, Mr. M.Srinivasa Nagarjuna Reddy, Son of M.V.Subba Reddy (Whole Time Director), Received a total Remuneration of ` 1,20,000/- P.A.

Corporate Governance 57 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

In terms, of Sections 177, 188 and other applicable provisions, if any, of the Companies Act, 2013 read with the Rules issued thereunder (including any statutory modification(s) or reenactment( s) thereof for the time being in force) the appointment and remuneration payable to the aforesaid is approved by the Audit Committee and noted by the Board of Directors of the Company and are at arm’s length and in ordinary course of business of your Company. Directors with materially significant, pecuniary or business relationship with oury Company: There is no pecuniary or business relationship between the Non-Executive/Independent Directors and your Company, except for the sitting fees payable to them for attending the Board meetings and Committee meetings which are in accordance with the applicable laws and with the approval of the shareholders. A declaration to this effect is also submitted by all the Directors at the beginning of each financial year. 10) SUBSIDIARY COMPANIES : Your Company does not have any material subsidiary companies in terms of Regulation 16 (1) (c) of SEBI (LODR) Regulations, 2015. The Policy for determining “material” subsidiaries has been placed on the website of your Company and can be accessed through the following link: www.ksml.in 11) GENERAL BODY MEETINGS : a) Details of Last Three Annual General Meetings held : Date of AGM Time Place 27th September, 2014 3.00 P.M Regd. Office at Chowdavaram, GUNTUR - 522 019 26th September, 2015 3.00 P.M Regd. Office at Chowdavaram, GUNTUR - 522 019 28th September, 2016 3.00 P.M Regd. Office at Chowdavaram, GUNTUR - 522 019 b) No Special Resolutions were passed during the previous Three (3) Annual General Meetings. c) Postal Ballot : During the year under review, one postal ballot was conducted and the following resolutions were duly passed by the Shareholders with requisite majority : 1) Approval for Adoption of New Articles of Association of the Company (Special Resolution) 2) Approval for Sub-Division of 1(One) Equity share of the Company of Face Value of ` 10/- each into 5 (Five) Equity shares of Face value of ` 2/- each. (Ordinary Resolution) 3) Approval for Alteration of Capital Clause of Memorandum of Association of the Company. (Ordinary Resolution) d) Details of Postal Ballot Voting results were annexed to this report. e) Person who conducted the Postal Ballot exercise: The Board of Directors of the Company has appointed M/s K.Srinivasa Rao & Co., Company Secretaries in Practice, as Scrutinizer for conducting the Postal Ballot process (including e-voting process). The Postal Ballot and Remote E-voting was commenced on Thursday, 08th December, 2016 at 09:00 A.M (IST) and ended on Friday, 06th January, 2017 at 05:00 P.M (IST) and the results of Postal Ballot & Remote E-voting were declared on Saturday, 07th January, 2017 through the website of the Company. f) Procedure for Postal Ballot : The Notice, Explanatory Statement along with the Postal Ballot Form and self addressed, postage pre- paid envelope, were dispatched to all members of the Company to enable them to vote on the resolutions within a period of 30 days from the date of dispatch of notice. The postal ballot notice along with form was sent through email to those members whose email id were registered with the Company / Depository Participant. Apart from voting through postal ballot form, Pursuant to Section 108 of Companies Act, 2013 and Rule 20 of Companies (Management and Administration) Rules, 2014, a facility of E-voting was also provided to all members of the Company through electronic platform of Central Depository Services (India) Limited (CDSL). After the last date of receipt of Postal Ballots/ completion of E-voting, the Scrutinizer, after due verification, submitted his report to the Executive Chairman of the meeting.

Corporate Governance 58 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

Thereafter, the result of the Postal Ballot was declared and was also filed with BSE Limited and with CDSL. The result was also hosted on the website of the Company at www.ksml.in. g) Whether any special resolution is proposed to be conducted through Postal Ballot At present, there is no proposal to pass any special resolution through postal ballot. 12) MEANS OF COMMUNICATION : a) Quarterly, Half Yearly and Annual results: Pursuant to the Provisions of Regulation 33 of SEBI (LODR) Regulations, 2015, quarterly, half-yearly and annual financial results of the Company were taken on record by the Board of Directors and submitted to the Bombay Stock Exchange, where shares of the Company are listed. Your Company makes timely disclosures of necessary information to BSE Limited in terms of the Listing Regulations and other rules and regulations issued by the SEBI. b) Publication of Results : Pursuant to the Provisions of Regulation 47 of SEBI (LODR) Regulations, 2015, Quarterly, half-yearly and annual financial results of the Company were published in national English newspaper viz., Business Standard (Hyderabad Edition) and vernacular language newspaper, viz., Andhra Bhoomi (Guntur District Edition), within forty-eight hours of approval thereof. Presently the same are not sent to the shareholders separately. c) Website and News Releases: In compliance with Regulation 46 of the SEBI (LODR) Regulations, 2015 All the Details regarding the status of unclaimed dividend, Annual Reports, Quarterly/Half yearly/ Nine-months and Annual financial results along with the applicable policies of the Company and also Company’s official news releases and presentations made to the institutional investors are available on the Company’s website viz., www.ksml.in d) Management Discussion and Analysis forms part of the Annual Report, which is sent to the shareholders of the Company. e) The quarterly results, shareholding pattern for every quarter, quarterly compliances and all other corporate communication are filed to the Bombay Stock Exchange Limited electronically. The Company has complied with filing submissions through Bombay Stock Exchange Listing Centre. f) Designated Exclusive Email ID: The Company has designated Email Id: [email protected] exclusively for redressal of shareholder queries / investor servicing. g) SCORES (SEBI Complaints Redressal System): SEBI has commenced processing of investor complaints in a centralized web based complaints redress system i.e. SCORES. The Company supported SCORES by using it as a platform for communication between SEBI and the Company. 13) GENERAL SHAREHOLDER INFORMATION : v Annual General Meeting for the Financial Year 2016-17 : Date : 29th September, 2017 Time : 03:00 P.M Venue : Registered Office of the Company Chowdavaram, Guntur – 522019. v Financial Year : 01-04-2016 to 31-03-2017 v Tentative Schedule for declaration of results during the financial year 2017-18 First Quarter - On or before 14th August, 2017 Second Quarter and Half Yearly - On or before 14th November, 2017 Third Quarter and Nine Months - On or before 14th February, 2018 Fourth Quarter and Annual - On or before 30th May, 2018 v Dividend Payment Date : Within 30 days from the Date of Declaration (Subject to approval of Shareholders)

Corporate Governance 59 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

DIVIDEND HISTORY : Financial Year % of Dividend Amount Paid (`) 2004-05 7 47,95,770 2005-06 10 68,51,100 2006-07 12 82,21,320 2007-08 12 82,21,320 2008-09 9 61,65,990 2009-10 14 95,91,540 2010-11 18 1,23,31,980 2011-12 Nil Nil 2012-13 Nil Nil 2013-14 12 82,21,320 2014-15 10 68,51,100 2015-16 10 68,51,100 2016-17 10 68,51,100 v The Shares of the Company are Listed on following Stock Exchange Bombay Stock Exchange Limited Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai – 400 001. Ph No : 022- 22721233/34 • Annual Listing Fees for the Year 2016-17 have been paid to BSE Limited • BSE Stock Code : 530201 MARKET PRICE DATA :

Month High (`) Low (`) No.of Shares Traded April 2016 84.4 56.65 58,385 May2016 81.8 70 58,696 June2016 84.5 69.5 41,450 July2016 84 71.05 60,911 Aug.2016 91.5 73.5 89,355 Sept.2016 89 75.7 49,947 Oct 2016 138.9 79.05 3,60,847 Nov 2016 139.9 96.5 1,65,238 Dec 2016 129 106.4 50,572 Jan 2017 135.4 113 3,37,311 Feb 2017 129.45 22.3* 8,86,786 Mar 2017 25.7* 20.4* 5,97,169 * With Effect From 03rd February, 2017, the face value of share was reduced to ` 2/- per share.

Corporate Governance 60 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

Performance in Comparison to broad-based indices : The Chart below shows the comparison of Company’s share price movement on BSE vis-à-vis the movement of the BSE Sensex for the year 2016-17 (based on month end closing):

KSML v/s BSE SENSEX 31000 160

30000 140 120 29000

X 100 E 28000 S L N 80 M E S S

27000 K E

S 60 B 26000 40 25000 20

24000 0 Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- 16 16 16 16 16 16 16 16 16 17 17 17 MONTH

Source: BSE Website

Depository Participation: i) National Securities Depository Ltd, (NSDL) Trade World, 4th Floor, Kamala Mills Compound, Senapati Bapat Marg, Lower Parel, Mumbai – 400 013. Ph. No: 022 - 2499 4200 ii) Central Depository Services (India) Ltd, (CDSL) Phiroze Jeejeebhoy Towers, 17th Floor, Dalal Street, Mumbai- 400 001. Ph. No: 022 - 2272 3333 International Securities Identification Number (ISIN) for equity shares of the Company: ISIN Number for NSDL & CDSL : INE629F01025* * During the year 2016-17, As result of Sub-Division of Shares, New ISIN was allotted to the Company. With effect from 02nd February, 2017 new ISIN for the equity shares of face value of ` 2/- is INE629F01025. (Old ISIN:INE629F01017 for equity shares of face value of ` 10/- has been de-activated w.e.f. 02nd February, 2017).

Corporate Governance 61 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

Depository Fee: Annual custody fee for the financial year 2016-17 paid to National Securities Depository Limited (NSDL) and Central Depository Services India Limited (CDSL). Registrars & Share Transfer Agents: Big share Services Pvt. Ltd., 306, 3rd Floor, Right Wing, Amrutha Ville, Opp. Yashodha Hospital, Raj Bhavan Road, Somajiguda, Hyderabad – 500082 Ph No : 040-23374967 e-mail : [email protected] Website : www.bigshareonline.com Share Transfer System : The Company has appointed M/s. Bigshare Services Private Limited as Registrars & Share Transfer Agents for both electronic and physical transfers. The shares lodged for transfer are processed and share certificates duly endorsed are returned within 15 days from the date of lodgment, subjectto documents being valid and complete in all respects. The Board of Directors of your Company have delegated the authority to approve the transfer of shares, transmission of shares or requests for deletion of name of the shareholder, etc., to the designated officials of your Company. The transactions requiring issuance of new share certificates are approved by the Shareholder’s Committee of the Board of directors of your Company. A summary of approved transfers, transmissions, deletion requests, etc., are placed before the Board of Directors from time to time as per Listing Regulations. • Distribution of Shareholding as on 31st March 2017

Range Shareholders Shareholders (No. of Shares) No.of Shareholders % to Total No.of Shares % to Total

1 - 500 1835 45.7264 6,22,061 1.8159

501 - 1000 851 21.2061 8,10,248 2.3653

1001 - 2000 418 10.4161 6,77,801 1.9787

2001 - 3000 299 7.4508 7,71,051 2.2509

3001 - 4000 74 1.8440 2,66,017 0.7766

4001 - 5000 148 3.6880 7,16,488 2.0916

5001 - 10000 164 4.0867 12,58,528 3.6739

10001 - 50000000 224 5.5819 2,91,33,306 85.0471

4013 100.00 3,42,55,500 100.00

Corporate Governance 62 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

• Categories of Share Holders as on 31st March 2017

No. of % of share Category Shares held holding A Shareholding of Promoters/Promoters Group (a) Individuals/HUFs 1,20,47,660 35.17 (b) Bodies Corporate 43,72,035 12.76 Total Shareholding of Promoter and Promoter Group (A) 1,64,19,695 47.93 B Public shareholding 1. Institutions - - a) Mutual Funds\UTI 50,000 0.15 b) Banks\Financial Institutions - - c) Insurance companies - - d) FIIs - - Sub Total B(1) 50,000 0.15 2. Non-Institutions a) Bodies Corporate 5,85,336 1.71 b) Individuals (i) Individual shareholders holding nominal share capital 86,05,299 25.12 up to ` 2 lakh (ii) Individual shareholders holding nominal share capital in excess of ` 83,48,373 24.37 2 lakh c) Individual (NRI) 57,810 0.17 f) Others (Clearing members) 1,88,987 0.55 Sub Total B(2) Total Public Shareholding B= B(1)+B(2) Total Shareholding = A+B 3,42,55,500 100.00 • Reconciliation of Share Capital Audit Report as per Regulation 55A of SEBI (LODR) Regulations, 2015 and Regulation 40(9) of SEBI(LODR) Regulations, 2015 : As per the Provisions of Regulation 55A of SEBI (LODR) Regulations, 2015, M/s. K. Srinivasa Rao & Co., Company Secretaries in Practice carries out the Secretarial Audit to reconcile the total admitted capital with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) and the total issued and Listed Capital. The audit is carried out every quarter and the report thereon is submitted to the Stock Exchange, where the Shares of the Company are listed. The audit confirms that the total Listed and Issued capital is in agreement with the aggregate of the total number of shares in dematerialized form (held with NSDL and CDSL) and the total number of shares in physical form. During the year 2016-17, In accordance with the Regulation 40(9) of the SEBI (LODR) Regulations,2015, M/s K.Srinivasa Rao & Co., Company Secretaries in Practice, after examined all the share transfer deeds, Memorandum of Transfers, Registers, files and other documents related to Company, gave certificates under Regulation 40(9) of the SEBI (LODR) Regulations,2015,for the Half year 01-04-2016 to 30-09-2016 and For the Half year 01-10-2016 to 31-03-2017.Both the above certificates were submitted to the Bombay Stock Exchange Limited, where the Shares of the Company are Listed, within 24 hours of receipt of the Certificate by the Company.

Corporate Governance 63 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

• Details of your Company’s dematerialized shares as on 31st March, 2017 :

Particulars Physical Record NSDL CDSL Total

Number of Shares 27,93,200 2,61,83,883 52,78,417 3,42,55,500

% of Shares 8.15 76.44 15.41 100.00 • Dematerialization of shares : Shareholders who continue to hold shares in physical form are requested to dematerialize their shares at the earliest and avail of the various benefits of dealing in securities in electronic/dematerialized form. For any clarification, assistance or information, please contact Big share Services Pvt. Ltd., Somajiguda, Hyderabad – 500082 Ph No : 040-233 74 967. • Outstanding GDRs/ADRs/Warrants/Convertible Instruments and their impact on equity : Your Company does not have any outstanding GDRs / ADRs / Warrants / Convertible Instruments as on 31st March, 2017. • Transfer of Unpaid and Unclaimed Amount to IEPF: Pursuant to the provisions of section 124 of the companies Act, 2013, the declared dividends which remained un paid or unclaimed for a period of seven years from the date of transfer to the unpaid dividend account, have been transferred by the company to the Investor Education and Protection Fund (IEPF) established by the Central Government. Shareholders are requested to ensure that they claim the dividend from your Company before transfer of the said amounts to the IEPF. During the year 2016-17, Unclaimed Dividend For the year 2008-09 was transferred to Investor Education and Protection Fund (IEPF). Pursuant to the provision of rule 3 of the Investor Education and Protection Fund (Awareness and Protection of Investor) Rules, 2001, necessary e-form (Form 1 INV) which contains the Statement of amounts credited to IEPF was filed to Registrar of Companies (ROC). The following are the details of dividends paid by the Company and respective due dates for transfer of unclaimed dividend to IEPF.

Dividend Declared Year Date of Declaration of Dividend Due date for Transfer to IEPF 2009-10 18th September,2010 23rd October,2017 2010-11 27th August,2011 01st October,2018 2013-14 27th September,2014 01st November,2021 2014-15 26th September,2015 31st October,2022 2015-16 28th September,2016 02nd November, 2023 • National Electronic Clearing System (NECS) for dividend: The Securities and Exchange Board of India (SEBI) has made it mandatory for all companies to use the bank account details furnished by the Depositories for depositing dividends. Dividend will be credited to the Members’ bank account through NECS wherever complete core banking details are available with the Company. In case where the core banking details are not available, dividend warrants will be issued to the Members with bank details printed thereon as available in the Company’s records. This ensures that the dividend warrants, even if lost or stolen, cannot be used for any purpose other than for depositing the money in the accounts specified on the dividend warrants and ensures safety for the investors. The Company complies with the SEBI requirement. • Plant Locations : a) Spinning Division : Chowdavaram, Guntur -522019, Andhra Pradesh b) Weaving and Dyeing Divisions : Kunkupadu Village, Addanki Mandal, Prakasam Dist. Andhra Pradesh. c) Power Division : Kotha Kothur Village, Nelakondapalli Mandal, Khammam Dt. Andhra Pradesh.

Corporate Governance 64 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

• No.of Employees as on 31st March, 2017 : 386 • Address for Correspondence : Company : Kallam Spinning Mills Limited, Chowdavaram, Guntur, A.P – 522019. RTA : Big share services Pvt. Ltd., 306, 3rd Floor, Right Wing, Amrutha Ville, Opp. Yashodha Hospital, Raj Bhavan Road, Somajiguda, Hyderabad – 500 082 Official Website of the Company : www.ksml.in Investors’ E-mail Id : [email protected] 14) OTHER DISCLOSURES : 1. Disclosure of Related Party Transactions : There are no materially significant related party transactions of your Company which have potential conflict with the interests of the Company at large. 2. Disclosure of Compliance by the Listed Entity : The Company has complied with all the requirements of the Stock Exchanges / SEBI / and other statutory authorities on all matters related to the capital markets during the last three years. There were no penalties or strictures imposed on the Company by the Stock Exchanges, SEBI or any statutory authority on matters relating to capital markets during the last three years. 3. Vigil Mechanism and Whistle Blower Policy: In accordance with Regulation 22 of the SEBI (LODR) Regulations, 2015, your Company has adopted a Whistle Blower Policy which has been posted on the Website of the Company (www.ksml.in). The Objective of framing a policy is to provide its employees and Business Associates a framework and to establish a formal mechanism or process whereby concerns can be raised in line with your Company’s commitment to highest standards of ethical, moral and legal business conduct and its commitment to open communication. The Company believes in conducting its business and working with all its stakeholders, including employees, customers, suppliers, shareholders and business associates in an ethical and lawful manner by adopting highest standards of professionalism, honesty, integrity and ethical behaviour; The Company prohibits any kind of discrimination, harassment, victimization or any other unfair practice being adopted against an employee and/or a business associate. In Appropriate or exceptional cases like the matters are of grave nature, all the employees, without any detention, can make Protected Disclosures directly to the Chairperson of the Audit Committee of the Board of Directors of the Company; 4. Disclosure of Accounting Treatment : In the preparation of the financial statements, the Company has followed the Accounting Standards referred to in Section 133 of the Companies Act, 2013. The significant accounting policies which are consistently applied are set out in the Notes to the Financial Statements. 5. Compliance with Mandatory Requirements: The Company has complied with all mandatory requirements of Corporate Governance specified in the Listing Regulations. 6. Non-mandatory requirements: Adoption of non-mandatory requirements of Listing Regulation is being reviewed by the Board from time- to time. 7. Risk Management: Business risk evaluation and management is an ongoing process within the Company. The assessment is periodically examined by the Board. 8. Commodity price risks and Commodity hedging activities: The Company is exposed to the risk of price fluctuation of raw materials as well as finished goods. The Company proactively manages these risks through forward booking Inventory management and proactive vendor development practices. The Company’s reputation for quality, products differentiation and service, coupled with existence of powerful brand image with robust marketing network mitigates the impact of price risk on finished goods.

Corporate Governance 65 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

9. The Company has adopted discretionary requirements specified in Part E of Schedule II of the Listing Regulations as given below : The Company does not have a Non-Executive Chairman. i) Shareholder’s Rights: Quarterly, half- yearly, annual financial results of the Company are published in English (Business Standard) and Telugu (Andhra Bhoomi) newspapers and are also forwarded to BSE, where shares of the Company were listed. The said results are also uploaded on the website of the Company at www.ksml.in. Hence the same are not sent to the Shareholders of the Company. ii) Material Subsidiaries : During the year under review, the Company does not have material subsidiary as per the criteria specified in the Listing Regulations. However, The Policy for determining “material” subsidiaries has been placed on the website of your Company and can be accessed through the following link: www.ksml.in. iii) Policy on dealing with Related Party Transactions : All transaction entered into by your Company with related parties, during the Financial Year 2016– 17, were in ordinary course of business and on arm’s length basis. The policy on related party transactions has been placed on the Company’s website and can be accessed through the following link: http://www.ksml. in/Investor Relations/Policies & Code of Conduct/Policies/KSML RELATED PARTY TRANSACTION POLICY.pdf. 10. Code of Conduct for Business & Ethics : In accordance with the Provisions of Regulation 17 (5) of SEBI (LODR) Regulations, 2015, Your Company has framed a Code of Business Conduct & Ethics which is applicable to the Board of Directors and Senior Management Team (one level below the Board) of the Company. The Code requires Directors and the Employees to act honestly, fairly, ethically and with integrity conduct themselves in professional, courteous and respectful manner. The Code of Conduct has been posted on the website of your Company. All the Board Members and the Senior Management Personnel have affirmed their compliance with the said Code of Conduct for the financial year 2016-17. The declaration to this effect signed by Sri P.Venkateswara Reddy, Managing Director & CEO of the Company forms part of the Report. 11. Audit qualifications: During the year under review, there was no audit qualification on your Company’s financial statements. 12. Reporting of Internal Auditor: The Internal Auditors M/s Mastanaiah & Co., (Firm Reg No : 002039S) Chartered Accountants, Guntur had submit their reports to the Managing Director & CEO and has direct access to the Audit Committee and they participated in the meetings of the Audit Committee of the Board of Directors of your Company and presents their internal audit observations to the Audit Committee. 13. Code of Conduct for Prevention of Insider Trading : The Securities and Exchange Board of India (SEBI) has promulgated the SEBI (Prohibition of Insider Trading) Regulations, 2015 (“The PIT Regulations”). The PIT Regulations has come into effect from 15th May, 2015 and replaced the earlier Regulations. The object of the PIT Regulations is to curb the practice of insider trading in the securities of a listed company. The Company has adopted an ‘Internal Code of Conduct for Regulating, Monitoring and Reporting of Trades by Insiders’ (“the Code”) in accordance with the requirements of the PIT Regulations. The Code is applicable to Promoters and Promoter’s Group, all Directors and such Designated Employees who are expected to have access to unpublished price sensitive information relating to the Company. The Managing Director is the Compliance Officer for monitoring adherence to the said Regulations. The Company has also formulated ‘The Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information (UPSI)’ in compliance with SEBI (Prohibition of Insider Trading) Regulations, 2015. This Code is displayed on the Official website of the Company viz. www.ksml.in 14. Compliance with the requirements of Corporate Governance : All the requirements of Corporate Governance specified in Regulation 17 to 27 of the Listing Regulations and clauses (b) to (i) of sub regulation (2) of regulation 46 of the Listing Regulations have been complied with.

Corporate Governance 66 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

CEO/CFO CERTIFICATION : As required under Regulation 17(8) of SEBI (LODR) Regulations, 2015 the CEO/CFO certificate for the financial year 2016 – 17 signed by Sri P. Venkateswara Reddy, Managing Director/CEO and Sri M.V.Subba Reddy, CFO was placed before the Board of Directors of your Company at their meeting held on 27th May, 2017. Compliance Certificate of the Auditors: The company has complied with the mandatory requirements of the code of corporate Governance as stipulated in Regulation 17 to 27 and clauses (b) to (i) of sub-regulation (2) of Regulation 46 of SEBI (LODR) Regulations, 2015. The company has submitted the compliance report in the prescribed format to the stock exchange for the quarters ended June 30, 2016, September 30, 2016, December 31, 2016, and March 31, 2017 (XBRL Filings as per Regulation 27(2) of SEBI (LODR) Regulations, 2015). The statutory Auditors have certified that the company has complied with the condition of corporate governance as stipulated in Regulaton 27(2) of SEBI (LODR) Regulaions, 2015. The said certificate is annexed to the director’s report and will be forwarded to the stock exchanges along with the Annual report. DECLARATION Compliance with the Code of Business Conduct and Ethics As provided under Regulation 26 (3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, all Board Members and Senior Management Personnel have affirmed compliance with Kallam Spinning Mills Limited Code of Conduct of board of directors and senior management for the year ended 31st March, 2017.

For and on behalf of the Board of Directors Place : Chowdavaram, Guntur P.Venkateswara Reddy Date : 26-08-2017 Managing Director (DIN: 00018677)

Corporate Governance 67 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

DETAILS OF VOTING RESULTS AS PER REGULATION 44 FOR THE YEAR 2015-16 Agenda-Wise IN CASE OF POLL / POSTAL BALLOT / E-VOTING : The Mode of voting for all resolutions was E-voting and poll (Electronically) conducted at the Meeting. Resolution 1 : Consider and Adopt Audited Financial Statements, Reports of the Board of Directors and Au- ditors (Ordinary Resolution) % of votes No.of No.of No.of No.of % of votes in % of Votes polled on shares votes Votes- in Votes- favour on votes against on outstanding Promoters / held polled favour against polled votes polled Public shares (6)=[{4}/ {2}] (1) (2) (3)=[{2}/{1}] 100 (4) (5) (7)=[{5}/{2}] 100 100 Promoter and Promoter 32,88,949 17,05,542 51.86 17,05,542 ---- 100 ---- Group Public Institu------tional Holders Public-Others 35,62,151 3,14,741 8.84 3,14,740 1 99.9997 0.0003 Total 68,51,100 20,20,283 60.7 20,20,282 1 99.9999 0.0001 Resolution 2 : Declaration of Dividend on Equity Shares (Ordinary Resolution) % of votes No.of No.of No.of No.of % of votes in % of Votes polled on shares votes Votes- in Votes- favour on votes against on outstanding Promoters / held polled favour against polled votes polled Public shares (6)=[{4}/ {2}] (1) (2) (3)=[{2}/{1}] 100 (4) (5) (7)=[{5}/{2}] 100 100 Promoter and 32,88,949 17,05,542 51.86 17,05,542 ---- 100 ---- Promoter Group Public Institu------tional Holders Public-Others 35,62,151 3,14,741 8.84 3,14,740 1 99.9997 0.0003 Total 68,51,100 20,20,283 60.7 20,20,282 1 99.9999 0.0001 Resolution 3 : Re-appointment of Sri G.V.Krishna Reddy (DIN: 00018713) who retires by rotation (Ordinary Resolution) % of votes No.of No.of No.of No.of % of votes in % of Votes polled on shares votes Votes- in Votes- favour on votes against on outstanding Promoters / held polled favour against polled votes polled Public shares (6)=[{4}/ {2}] (1) (2) (3)=[{2}/{1}] 100 (4) (5) (7)=[{5}/{2}] 100 100 Promoter and 32,88,949 17,05,542 51.86 17,05,542 ---- 100 ---- Promoter Group Public Institu------tional Holders Public-Others 35,62,151 3,14,741 8.84 3,14,740 1 99.9997 0.0003 Total 68,51,100 20,20,283 60.7 20,20,282 1 99.9999 0.0001

Corporate Governance 68 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

Resolution 4 : Ratification of the appointment of M/s.Brahmayya & Co.(Firm Reg No:000513S) Statutory Auditors and to fix their remuneration for the financial year ending st31 March, 2017 (Ordinary Resolution) % of votes No.of No.of No.of No.of % of votes in % of Votes polled on shares votes Votes- in Votes- favour on votes against on outstanding Promoters / held polled favour against polled votes polled Public shares (6)=[{4}/ {2}] (1) (2) (3)=[{2}/{1}] 100 (4) (5) (7)=[{5}/{2}] 100 100 Promoter and 32,88,949 17,05,542 51.86 16,75,542 30,000 98.2410 1.7590 Promoter Group Public Institu------tional Holders Public-Others 35,62,151 3,14,741 8.84 3,03,040 11,701 96.2823 3.7177 Total 68,51,100 20,20,283 60.7 19,78,582 41,701 97.9359 2.0641

Resolution 5 : Ratification of the remuneration of Mr. P.Srinivas, (M.No: 21170) Cost Accountant for the fi- nancial year ending 31st March, 2017 (Ordinary Resolution) % of votes No.of No.of No.of No.of % of votes in % of Votes polled on shares votes Votes- in Votes- favour on votes against on outstanding Promoters / held polled favour against polled votes polled Public shares (6)=[{4}/ {2}] (1) (2) (3)=[{2}/{1}] 100 (4) (5) (7)=[{5}/{2}] 100 100 Promoter and 32,88,949 17,05,542 51.86 15,39,775 1,65,767 90.2807 9.7193 Promoter Group Public Institu------tional Holders Public-Others 35,62,151 3,14,741 8.84 3,03,040 11,701 96.2823 3.7177 Total 68,51,100 20,20,283 60.7 18,42,815 1,77,468 91.2157 8.7843 Note : All the aforesaid Resolutions were passed with requisite majority.

Corporate Governance 69 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

Kallam Spinning Mills Limited-Postal Ballot –Voting Results Disclosure as per Regulation 44 of SEBI (LODR) Regulations, 2015 Agenda-Wise IN CASE OF POLL / POSTAL BALLOT / E-VOTING: The Mode of voting for all resolutions was E-voting and poll (Electronically) conducted at the Meeting. (Postal Ballot) Resolution 1 : Approval for Adoption of new Articles of Association of the Company (Special Resolution) % of votes No.of No.of No.of No.of % of votes in % of Votes polled on shares votes Votes- in Votes- favour on votes against on outstanding Promoters / held polled favour against polled votes polled Public shares (3)=[{2}/{1}]* (6)=[{4}/ {2}]* (7)=[{5}/{2}]* (1) (2) (4) (5) 100 100 100 Promoter and Promoter 32,83,949 21,58,118 65.72 21,58,118 - 100 - Group Public Institu- 10,000 ------tional Holders Public-Others 35,57,151 6,85,208 19.26 6,85,203 5 99.9999 0.0001 Total 68,51,100 28,43,326 41.50 28,43,321 5 99.9999 0.0001 Resolution 2 : Sub-division of Equity Shares of the Company from the Face Value of ` 10 /- per share to Face Value of ` 2/- per share (Ordinary Resolution) % of votes No.of No.of No.of No.of % of votes in % of Votes polled on shares votes Votes- in Votes- favour on votes against on Promoters / outstanding held polled favour against polled votes polled Public shares (3)=[{2}/{1}]* (6)=[{4}/ {2}]* (7)=[{5}/{2}]* (1) (2) (4) (5) 100 100 100 Promoter and Promoter 32,83,949 21,58,118 65.72 21,58,118 - 100 - Group Public Institu- 10,000 ------tional Holders Public-Others 35,57,151 6,85,208 19.26 6,85,203 5 99.9999 0.0001 Total 68,51,100 28,43,326 41.50 28,43,321 5 99.9999 0.0001 Resolution 3 : Alteration of Capital Clause of Memorandum of Association of the Company (Ordinary Resolution) % of votes No.of No.of No.of No.of % of votes in % of Votes polled on shares votes Votes- in Votes- favour on votes against on Promoters / outstanding held polled favour against polled votes polled Public shares (3)=[{2}/{1}]* (6)=[{4}/ {2}]* (7)=[{5}/{2}]* (1) (2) (4) (5) 100 100 100 Promoter and Promoter 32,83,949 21,58,118 65.72 21,58,118 - 100 - Group Public Institu- 10,000 ------tional Holders Public-Others 35,57,151 6,85,208 19.26 6,85,178 30 99.9956 0.0044 Total 68,51,100 28,43,326 41.50 28,43,296 30 99.9999 0.0001 Note : All the aforesaid resolutions were passed with requisite majority.

Corporate Governance 70 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

Managing Director & Chief Financial Officer Report

The Board of Directors Kallam Spinning Mills Limited We hereby certify that on the basis of the review of the financial statements and the cash flow statement for the financial year ended 31st March, 2017 and that to the best of our knowledge and belief: 1. these statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading; 2. these statements together present a true and fair view of the Company’s affairs and are in compliance with existing accounting standards, applicable laws and regulations; We hereby certify that, to the best of our knowledge and belief, no transactions entered into during the year by the Company are fraudulent, illegal or violative of the Company’s Code of Conduct. We accept responsibility for establishing and maintaining internal controls for financial reporting and have evaluated the effectiveness of internal control systems pertaining to financial reporting and have disclosed to the auditors and the Audit Committee, deficiencies in the design or operation of such internal controls, if any, of which they are aware and the steps they have taken or propose to take to rectify these deficiencies. We have indicated to the Auditors and the Audit Committee 1. significant changes in internal control over financial reporting during the year; 2. significant changes in accounting policies during the year and that the same have been disclosed in the notes to the financial statements; and 3. instances of significant fraud of which they have become aware and the involvement therein, if any, of the management or an employee having a significant role in the internal control system over financial reporting.

For Kallam Spinning Mills Ltd For Kallam Spinning Mills Ltd Date : 27-05-2017 P.Venkateswara Reddy M.V.Subba Reddy Place : Chowdavarm Managing Director Chief Financial Officer

Corporate Governance 71 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

AUDITORS’ CERTIFICATE REGARDING COMPLIANCE OF CONDITIONS OF CORPORATE GOVERNANCE To the Members of Kallam Spinning Mills Limited We have examined the compliance of conditions of Corporate Governance by Kallam Spinning Mills Limited (‘the Company’), for the year ended 31st March, 2017, as per the Regulations 17-27, Clauses (b) to (i) of Regulation 46(2) and paragraphs C, D and E of Schedule V of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015, (‘Listing Regulations’) The compliance of conditions of Corporate Governance is the responsibility of the Company’s management. Our examination was carried out in accordance with the Guidance Note on Certification of Corporate Governance, issued by the Institute of Chartered Accountants of India and was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the SEBI Listing Regulations, 2015. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company.

For Brahmayya & Co., Chartered Accountants, Firm Reg. No : 000513S

KARUMANCHI RAJAJ Partner Membership No: 202309

Auditors' Certificate on Corporate Governance 72 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

INDEPENDENT AUDITORS’ REPORT

To the Members of KALLAM SPINNING MILLS LIMITED Report on the financial statements

We have audited the accompanying financial statements ofKALLAM SPINNING MILLS LIMITED (‘the Company’) which comprise the Balance Sheet as at March 31, 2017, the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information. Management’s responsibility for the financial statements The Company’s board of directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 (‘the Act’) with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including Accounting standards specified under section 133 of the Act, read with relevant rules issued there under. This responsibility includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the company and for prevention and detection of frauds and other irregularities; selection and application of appropriate accounting policies; making judgements and estimates that are reasonable and prudent; design, implementation and maintenance of adequate internal financial controls, that are operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. Auditors’ responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and Rules made there under. We conducted our audit in accordance with the standards on auditing specified under section 143(10) of the Act. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company’s board of directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the financial statements. Opinion In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India : a) In the case of Balance Sheet, of the state of affairs of the Company as at March 31, 2017; b) In the case of Statement of Profit and Loss, of the profit of the Company for the year ended on that date; and c) In the case of Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

Independent Auditors' Report 73 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

Report on other legal and regulatory requirements 1. As required by the Companies (Auditor’s Report) Order, 2016 (‘the Order’), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the Annexure-A, a statement on the matters specified in paragraphs 3 and 4 of the Order. 2. As required by section 143(3) of the Act, we report that: a) We have sought and obtained all the information and explanations which, to the best of our knowledge and belief were necessary for the purposes of our audit; b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books and proper returns adequate for the purposes of the audit have been received from the branches to the extent not visited by us; c) The Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this report are in agreement with the books of account; d) In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the accounting standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. e) On the basis of written representations received from the directors as on March 31, 2017 and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2017 from being appointed as a director in terms of sub-section (2) of section 164 of the Act; f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in Annexure-B and g) With respect to the other matters to be included in the Auditor’s Report in accordance with the Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the basis of our information and according to the explanations given to us: i. The company does not have any pending litigations which would impact its financial position except those which are disclosed in the notes to the financial statements and para no.7 in Annexure to our Audit report. ii. The company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses. iii. There were no amounts which were required to be transferred to the Investor Education Protection Fund by the company and iv. The company has provided requisite disclosures in its financial statements as to holdings as well as dealings in specified bank notes during the period from 8th November 2016 to 30th December 2016 and these are in accordance with the books of accounts maintained by the company. Refer note no.32 to the financial statements.

For Brahmayya&Co Chartered Accountants Firm Registration No. 000513S Place : GUNTUR Date : 27-05-2017 (Karumanchi Rajaj) Partner (Membership No: 202309)

Independent Auditors' Report 74 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

ANNEXURE-A TO THE INDEPENDENT AUDITORS’ REPORT The Annexure referred to in our report to the members of KALLAM SPINNING MILLS LIMITED (“Company”) for the year ended March 31, 2017. We report that: 1. In respect of its fixed assets : a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. b) According to the information and explanations furnished to us, the Company has not physically verified its fixed assets during the year. However, the Company has adopted a phased programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. c) According to the information and explanations given to us and on the basis of our examination of the records of the company, the title deeds of immovable properties are held in the name of the company. 2. In respect of its inventories: a) According to the information and explanations furnished to us, the Company has physically verified its inventories during the year and no discrepancies were noticed on such verification. In our opinion, the frequency of verification is reasonable 3. The Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 189 of the Act. Consequently, clauses (iii)(a),(b) and (c) of paragraph 3 of the Order are not applicable. 4. The company has not advanced any loans or made any investments or provided any guarantees during the year. Hence the reporting requirements in terms of clause (iv) of paragraph 3 of the Order regarding reporting on compliance with the provisions of section 185 and 186 of the Act with respect to the loans, investments and guarantees does not arise. 5. The company has borrowed interest free loans from directors and their relatives in pursuance of the stipulation imposed by Andhra Bank at the time of lending and the amount outstanding against such borrowings on 31st March, 2017 was ` 203.05 lakhs. Apart from the said amounts, the company has not accepted any deposits from the public or members. Hence the question of compliance with the directives issued by Reserve Bank of India and the provisions of sections 73 to 76 or any other relevant provisions of the Act and the rules framed there under does not apply. According to the information furnished to us, no order has been passed on the Company by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal for non-compliance with the provisions of sections 73 to 76 of the Act. 6. We have broadly reviewed the books of account and records maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 148(1) of the Act and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. However, we have not carried out a detailed audit of the same. 7. a) According to the information furnished to us, the Company is regular in depositing with appropriate authorities, the undisputed statutory dues including Provident Fund, Employees’ State Insurance, Income- tax, Value added tax, Wealth tax, Service tax, Customs duty, Excise duty, Cess and any other statutory dues applicable to it. There were no undisputed statutory dues in arrears as at the date of the Balance Sheet under report, for a period of more than six months from the date they became payable. b) According to the information furnished to us and records of the company examined by us, there were no amounts of Income tax, Value added tax, wealth tax, Customs duty, Excise duty and Service tax have been disputed by the Company, and hence were not remitted to the authorities concerned at the date of the Balance Sheet under report except amounts of ` 8,68,630/- and ` 6,48,750/-. being net demands towards Income-tax (after payments made under protest) for the asst. years 2011-12 and 2014-15 respectively which were appealed before Commissioner of Income-tax (Appeals). 8. In our opinion and according to the information and explanations furnished to us by the Company, there were no defaults in repayment of dues to banks or government. However, the company has not borrowed any loans from financial institutions, or raised any funds by way of issue of debentures.

Independent Auditors' Report 75 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

9. The company did not raise any money by way of initial public offer or further public offer (including debt instruments) during the year. In respect of term loans borrowed from banks, the proceeds were applied for the purpose for which the said loans were raised. 10. According to the information and explanations given to us, no fraud by the company or any fraud on the company by its officers or employees has been noticed or reported during the year. 11. According to the information and explanation given to us and based on examination of the records of the company, the company has provided remuneration for managerial personnel in accordance with the requisite approvals mandated by the provisions of section 197 read with schedule V of the Act. 12. The company is not a nidhi company. Accordingly reporting under provisions of para 3(xii) of the Order is not applicable. 13. According to the information and explanations given to us and based on examination of records of the company, transactions with the related parties are in compliance with the provisions of section 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards. 14. According to the information and explanations given to us and based on our examination of the records of the company, the company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures of the company. 15. According to the information and explanations given to us and based on our examination of the records of the company, the company has not entered into non-cash transactions with directors or persons connected with them. Accordingly paragraph 3(xv) of the Order is not applicable. 16. The company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.

For Brahmayya&Co Chartered Accountants Place : GUNTUR Firm Registration No. 000513S Date : 27-05-2017 (Karumanchi Rajaj) Partner (Membership No: 202309)

Independent Auditors' Report 76 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

Annexure – B to Independent Auditors’ Report KALLAM SPINNING MILLS LIMITED Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act") We have audited the internal financial controls over financial reporting ofKALLAM SPINNING MILLS LIMITED ("the Company") as of 31st March 2017 in conjunction with our audit of the financial statements of the Company for the year ended on that date. Management's Responsibility for Internal Financial Controls The Company's management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India ('ICAI'). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company's policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013. Auditors' Responsibility Our responsibility is to express an opinion on the Company's internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the "Guidance Note") and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects. Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company's internal financial controls system over financial reporting. Meaning of Internal Financial Controls over Financial Reporting A company's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal financial control over financial reporting includes those policies and procedures that 1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; 2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and 3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Independent Auditors' Report 77 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

Inherent Limitations of Internal Financial Controls Over Financial Reporting Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Opinion In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31 March 2017, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

For Brahmayya&Co Chartered Accountants Place : GUNTUR Firm Registration No. 000513S Date : 27-05-2017 (Karumanchi Rajaj) Partner (Membership No: 202309)

Independent Auditors' Report 78 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

KALLAM SPINNING MILLS LIMITED BALANCE SHEET AS AT 31st MARCH, 2017 Amount in ` Note Particulars As at 31-03-2017 As at 31-03-2016 No. I. EQUITY AND LIABILITIES (1) Shareholders’ funds (a) Share capital 2 6,85,11,000 6,85,11,000 (b) Reserves and surplus 3 1,41,11,11,114 1,47,96,22,114 67,59,45,441 74,44,56,441 (2) Deferred Government Grants 4 8,06,72,821 8,39,96,836 (3) Non-current liabilities (a) Long-term borrowings 5 1,94,30,40,847 1,84,14,49,995 (b) Deferred tax liabilities(Net) 6 25,96,18,376 18,67,04,371 (c) Long-term provisions 7 1,03,49,650 2,21,30,08,873 71,41,210 2,03,52,95,576 (4) Current liabilities (a) Short-term borrowings 8 1,15,28,17,033 1,06,25,27,641 (b) Trade payables 9 -Total outstanding dues of micro enterprises and small 1,46,363 - enterprises -Total outstanding dues of creditors other than micro 2,78,98,706 5,60,91,310 enterprises and small enter- prises (c) Other current liabilities 10 29,12,07,483 27,47,89,938 (d) Short-term provisions 7 13,82,01,322 1,61,02,70,907 9,64,36,850 1,48,98,45,739 TOTAL 5,38,35,74,715 4,35,35,94,592 II. ASSETS (1) Non-current assets (a) Fixed assets (i) Tangible assets 11 3,56,14,24,713 2,95,67,46,846 (ii) Intangible assets - - (iii)Capital work-in-progress 4,48,31,391 3,60,62,56,104 4,60,36,613 3,00,27,83,459 (b) Long-term loans and advances 12 8,49,63,810 4,99,21,279 (2) Current assets (a) Inventories 13 87,21,84,598 75,70,79,176 (b) Trade receivables 14 31,06,24,716 24,34,57,242 (c) Cash and cash equivalents 15 1,33,43,646 47,51,059 (d) Short-term loans and 12 49,08,00,359 29,13,28,237 advances (e) Other current assets 16 54,01,482 1,69,23,54,801 42,74,140 1,30,08,89,854 TOTAL 5,38,35,74,715 4,35,35,94,592 Significant accounting policies 1 Notes on accounts 25-36 As per our report of even date For and on behalf of the Board of For BRAHMAYYA & CO., Directors Chartered Accountants P.Venkateswara Reddy Firms’ Registration No: 000513S Managing Director DIN : 00018677 KARUMANCHI RAJAJ Partner G.V.Krishna Reddy Membership No: 202309 Joint Managing Director DIN : 00018713 Place : Chowdavaram, Guntur Date : 27-05-2017 M.V.Subba Reddy Chief Financial Officer

Statement of Assets and Liabilities 79 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

KALLAM SPINNING MILLS LIMITED STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED 31st MARCH, 2017 Amount in ` Year ended Year ended Particulars Note No. 31-03-2017 31-03-2016 Continuing Operations I.Revenue: From Operations (a) Sale of products 17 2,86,81,12,822 2,69,00,59,309 (b) Sale of services - - (c) Other operating revenue 1,64,973 16,35,522 2,86,82,77,795 2,69,16,94,831 Less: Excise duty - - 2,86,82,77,795 2,69,16,94,831 Other Income 18 10,41,22,720 6,93,60,070 TOTAL 2,97,24,00,515 2,76,10,54,901 II.Expenses: Cost of materials consumed 19 1,58,01,38,922 1,43,25,54,028 Purchases of Stock-in-Trade 20 - 87,12,000 Changes in Inventories of Finished goods, 21 (11,81,21,634) (4,53,61,171) Work-in-progress and Stock-in-Trade Employee benefits expenses 22 18,07,33,544 15,38,81,997 Finance costs 23 21,98,66,793 28,29,82,527 Depreciation 13,60,90,327 12,94,07,481 Other expenses 24 76,28,12,330 69,24,95,762 TOTAL 2,76,15,20,282 2,65,46,72,624 Profit before tax 21,08,80,233 10,63,82,277 Less: Tax expense: -Short provision of current tax - 17,453 -Current tax 5,00,00,000 2,30,00,000 -Deferred tax liability/(Asset) 7,29,14,005 4,69,32,184 8,79,66,228 3,64,32,640 Add: MAT credit entitlement 3,90,12,843 2,27,03,680 Profit after tax 12,69,79,071 5,91,36,320 Earning per Equity share of `10/- each Basic and diluted 3.71 1.73 Significant accounting policies 1 Notes on accounts 25-36 As per our report of even date For and on behalf of the Board of Directors For BRAHMAYYA & CO., P.Venkateswara Reddy Chartered Accountants Managing Director Firms’ Registration No: 000513S DIN : 00018677

KARUMANCHI RAJAJ G.V.Krishna Reddy Partner Joint Managing Director Membership No: 202309 DIN : 00018713

Place : Chowdavaram, Guntur M.V.Subba Reddy Date : 27-05-2017 Chief Financial Officer

Statement of Profit and Loss 80 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

KALLAM SPINNING MILLS LIMITED CASH FLOW STATEMENT FOR THE YEAR ENDED 31-03-2017 2016 - 17 2015 - 16 Particulars ` ` CASH FLOW FROM OPERATING ACTIVITIES Net Profit before tax and extra-ordinary items 21,08,80,233 10,63,82,277 Add/Less: Adjustments for Depreciation 13,60,90,327 12,94,07,482 Interest expense 21,98,66,793 28,29,82,527 Interest income (32,24,480) (37,97,337) Govt. grants credited (33,24,015) (31,89,268) Profit on sale of assets (1,43,785) (3,864) Loss on sale of assets 3,42,081 1,32,238 Operating profit before working capital changes 56,04,87,154 51,19,14,055 Add/Less: Adjustments for working capital Inventories (11,51,05,422) (17,45,39,312) Trade and other receivables (23,62,87,289) (11,10,37,486) Trade payables (4,82,17,778) 1,42,74,214 Cash generated from operations 16,08,76,665 24,06,11,471 Less: Direct taxes paid 2,75,09,337 2,03,45,760 Net cash from operating activities 13,33,67,328 22,02,65,711 CASH FLOW FROM INVESTING ACTIVITIES Purchase of fixed assets and Capital WIP (13,91,92,436) (16,03,94,975) Proceeds from sale of fixed assets 76,17,770 3,32,000 Interest received 32,24,480 37,97,337 Net cash used in Investing activities (12,83,50,186) (15,62,65,638) CASH FLOW FROM FINANCING ACTIVITIES Proceeds from/(Repayment of) borrowings 22,34,42,238 21,13,01,198 Subsidy from Govt. - - Interest and finance charges (21,98,66,793) (28,29,82,527) Net cash from/(Used in) financing activities 35,75,445 (7,16,81,329)

Net Increase in cash and cash equivalents 85,92,587 (76,81,256)

Cash and cash equivalents at the beginning of the Year 47,51,059 1,24,32,314 Cash and cash equivalents at the end of the Year 1,33,43,646 47,51,059 Net increase in cash and cash equivalents 85,92,587 (76,81,256) As per our report of even date For and on behalf of the Board of For BRAHMAYYA & CO., Directors Chartered Accountants P.Venkateswara Reddy Firms’ Registration No: Managing Director 000513S DIN : 00018677

KARUMANCHI RAJAJ G.V.Krishna Reddy Partner Joint Managing Director Membership No: 202309 DIN : 00018713

Place : Chowdavaram, Guntur M.V.Subba Reddy Date : 27-05-2017 Chief Financial Officer

Cash Flow Statement 81 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

STATEMENT ON ACCOUNTING POLICIES 1. General Note No.1 The financial statements are prepared under historical cost convention on accrual basis of accounting and in accordance with the Generally Accepted Accounting Principles in India. The financial statements are prepared to comply in all material respects with the Accounting Standards as prescribed under Section 133 of the Companies Act, 2013 (‘Act’) read with Rule 7 of Companies (Accounts) Rules, 2014, the pronouncements of the Institute of Chartered Accountants of India, the relevant provisions of the Companies Act, 2013 and Companies Act, 1956 to the extent applicable and guidelines issued by the Securities and Exchange Board of India. The Accounting policies have been consistently applied except where a newly issued Accounting Standard is initially adopted or a revision to an existing Accounting Standard or amendments to the provisions of any statue which requires a change in the accounting policy hitherto in use. 2. Use of Estimates The preparation of the financial statements requires management of the Company to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and disclosures relating to the contingent liabilities and commitments. Examples of such estimates include provisions for provisions for doubtful debts and advances, employee benefit plans, useful lives of fixed assets and provisions for impairment. The management believes that the estimates used in preparation of the financial statements are prudent and reasonable. The judgments, estimates and underlying assumptions are made with the management's best knowledge of the business environment and are reviewed on an ongoing basis. However, future results could differ from these estimates. Any revision to accounting estimates is recognized prospectively in the current and future periods. 3. FIXED ASSETS Fixed Assets are stated at cost less accumulated depreciation. Cost of acquisition of fixed assets is inclusive of directly attributable cost of bringing the assets to their working condition for the intended use. CENVAT/VAT/ Terminal Excise duty availed, if any, on fixed assets is not included in the cost of such fixed assets capitalized. Machinery spares which meet the recognition criteria as given under AS-10 “Fixed Assets” are capitalized and depreciated over the useful life of parent asset or estimated life of spare part which ever is shorter. 4. BORROWING COSTS Borrowing costs incurred in connection with the funds borrowed for acquisition of assets that takes necessarily substantial period of time to get ready for intended use are capitalized as part of cost of such assets. All other borrowing costs are charged to revenue. 5. DEPRECIATION The company has computed depreciation on fixed assets based on the useful lives as specified in Schedule II of Companies Act, 2013 under straight line method. 6. INVENTORIES Inventories are valued as follows : I. Spinning and Weaving Division : a) Finished stocks are valued at cost or net realizable value which ever is lower. b) Cotton Waste is valued at Net realizable Value. c) Work-in-progress, Raw materials, stores and spares are valued at cost except where net realizable value of the finished goods they are used in is less than the cost of finished goods and in such an event,ifthe replacement cost of such materials etc., is less than their book values, they are valued at replacement cost. II. Power Division : a) Stock of power (Banked with APTRANSCO) is valued at cost or net realizable value which ever is lower. b) Tools & Implements are being valued at cost. 7. REVENUE RECOGNITION : Revenue is recognized to the extent that it is probable that the economic benefits will flow to the company and the revenue can be reliably measured. i) Revenue from sale of products is recognised when the risks and rewards of ownership are transferred to the buyer under the terms of the contract which usually coincide on the dispatch of goods to the customer or when they are unconditionally appropriated under the terms of sale. ii) Sales are stated net of trade discounts and sales tax. iii) Incentives such as DEPB/MEIS benefits are recognized as Income only when the entity has reasonable assurance that the conditions attached to it will be complied. iv) Interest on investments and deposits is booked on a time proportion basis taking into account the amounts invested and the rate of interest.

Statement on Accounting Policies 82 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

8. INTER-DIVISIONAL TRANSFERS : Inter-divisional transfer of goods as independent marketable products of separate divisions used for captive consumption are transferred at prevailing market prices. This accounting treatment has no impact on the profit of the company. Such transactions are neither included in turnover nor in consumption of materials, except for valuation purposes. 9. DEFERRED GOVT. GRANTS Grants related to specific depreciable assets are treated as deferred income and recognized in profit and loss account over the useful life of the said asset on which subsidy was received. Such allocation to income is made over the period and in proportion in which depreciation on such related asset is charged. Grants which are given with reference to the total investment in an undertaking are treated as part of shareholders’ funds and grouped under capital reserves. 10. RETIREMENT BENEFITS The company provides retirement benefit in the form of provident fund and group gratuity. Contributions to the Provident Fund, a defined contribution scheme, is made at the prescribed rates to the provident fund commissioner and is charged to the Profit and Loss account. There is no other obligation other than the contribution payable. The Liability for group gratuity, which is unfunded, is provided based on actuarial valuation as per the Projected Unit Credit Method at the end of the each year. The Liability for Leave encashment being short term benefits, is accounted on accrual of said liability. 11. FOREIGN CURRENCY TRANSACTIONS i) Foreign Currency Liability contracted for acquiring Fixed Assets are restated at the Foreign Exchange rates prevailing at the year end and all exchange differences arising as a result of such restatement are charged to the Profit and loss account. ii) Transactions in foreign currency are initially accounted at the exchange rate prevailing on the date of transaction, and adjusted appropriately, with the difference in the rate of exchange arising on actual receipt/payment during the year. iii) At each balance sheet date - Foreign Currency monetary items are reported using the rate of exchange on that date - Foreign Currency non-monetary items are reported using the exchange rate at which they were initially recognized. In respect of forward exchange contracts in the nature of hedges - Premium or discount on the contract is amortized over the term of the contract - Exchange differences on the contract are recognized as profit or loss in the period in which they arise. 12. TAXES ON INCOME Current tax is determined as per provisions of Income Tax Act, 1961 in respect of Taxable Income for the year. Deferred tax liability is recognized, subject to the consideration of prudence on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets arising on account of brought forward losses and unabsorbed depreciation as per Income-tax laws are recognized only when there is virtual certainty supported by convincing evidence that such assets will be realized. Deferred tax assets arising on other temporary differences are recognized only if there is a reasonable certainty of realization 13. SEGMENT REPORTING The accounting polices adopted for segment reporting are in line with the accounting policies of the Company with the following additional policies for segment reporting. Inter Segmental revenue have been accounted for based on the market related price. Revenue and expenses have been identified to segments on the basis of their relationship to the operating activities of the segment. 14. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS Provisions are recognised only when there is a present obligation as a result of past events and when a reliable estimate of the amount of obligation can be made. Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates. Contingent liability is disclosed for (i) Possible obligation which will be confirmed only by future events not wholly within the control of the Company or (ii) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. The company does not recognise contingent liabilities but the same are disclosed in the Notes. Contingent assets are not recognised in the financial statements since this may result in the recognition of income that may never be realised.

Statement on Accounting Policies 83 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

NOTES ON ACCOUNTS SHARE CAPITAL Note No.2

Particulars As at 31-03-2017 As at 31-03-2016 Authorised: 5,00,00,000 (1,00,00,000) Equity Shares of ` 2/-(10/-) each 10,00,00,000 10,00,00,000 Issued, subscribed and paid-up: 3,42,55,500 (68,51,100) Equity Shares of ` 2/-( 10/-) each fully paid-up (Sub-division of Equity shares of ` 10/- each into 5 Equi- 6,85,11,000 6,85,11,000 ty shares of ` 2/- each) Total 6,85,11,000 6,85,11,000

1. The Company has only one class of Equity shares having a par value of ` 2/- each. Each holder of equity share is entitled to one vote per share on poll and have one vote on show of hands. In the event of liquidation, the equity share holders are eligible to receive the remaining assets of the company in proportion to their shareholding after distribution of payments to preferential creditors. 2. Details of share holders more than 5% of total number of shares

Name of the Share Holder As at 31-03-2017# As at 31-03-2016* % out of total % out of total Number Number number of number of of Shares of Shares shares of the shares of the held held company company Kallam Haranadha Reddy (Individual) 17,96,500 5.24 359300 5.24 Gurram Venkata Krishna Reddy 27,75,325 8.10 555065 8.1 Kallam Agro Products and oils Pvt. Ltd 43,72,035 12.7631 874057 12.7579 T.Lakshminarayanan 26,56,873 7.75 833016 12.16 (#) Face value of ` 2/- each; (*) Face value of ` 10/- each 3. The Company is neither a holding company nor a subsidiary company to any other company. 4. Reconciliation of number of Equity Shares :

Name of the Share Holder As at 31-03-2017 As at 31-03-2016 Number Amount in Number Amount in of Shares Rs of Shares Rs Shares outstanding at the beginning of the year 68,51,100 6,85,11,000 68,51,100 6,85,11,000 Add: Shares issued during the year - - - - 68,51,100 6,85,11,000 68,51,100 6,85,11,000 Less: Shares Bought back during the year - - - - Shares outstanding at the end of the year 3,42,55,500 (#) 6,85,11,000 68,51,100(*) 6,85,11,000 (#) Face value of ` 2/- each; (*) Face value of ` 10/- each 5. During the Year 2016-17, Company did the Sub-Division of Shares from Face value of `10/- to ` 2/- each 6. The company has not issued any bonus shares during the last five financial years. 7. None of the shares were allotted in pursuant to contract without payment being received in cash.

Notes on Accounts 84 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

RESERVES AND SURPLUS Note No.3

As at 31-03- As at 31-03- Particulars 2017 2016 Capital Reserve: a) Investment Subsidy Figures as at the end of the current and previous reporting period 1,47,00,000 1,47,00,000 b) Revaluation surplus Figures as at the end of the previous reporting period - - Add: Surplus on revaluation of land at fair value 60,81,86,602 - Figures as at the end of the current reporting period 60,81,86,602 - d) General Reserve Figures as at the end of the previous reporting period 1,60,36,486 1,60,36,486 Additions : Transfer from P&L account - - Deductions: 0 0 Figures as at the end of current reporting period 1,60,36,486 1,60,36,486 Surplus in statement of Profit and loss Figures as at the end of the previous reporting period 64,52,08,955 59,43,18,458 Add: Profit for the year 12,69,79,071 5,91,36,320 Less: Proposed dividend - 68,51,100 Tax on Proposed dividend - 13,94,723 Transfer to Reserves - - Figures as at the end of current reporting period 77,21,88,026 64,52,08,955 Total of Reserves and Surplus 1,41,11,11,114 67,59,45,441

DEFERRED GOVERNMENT GRANTS Note No.4

As at 31-03- As at 31-03- Particulars 2017 2016

Figures as at the end of the previous reporting period 8,39,96,836 8,71,86,104

Additions: Subsidy from Government for specific fixed - - Assets in respect of weaving and dyeing units

8,39,96,836 8,71,86,104

Deductions - Credited to P&L account 33,24,015 31,89,268

Figures as at the end of current reporting period 8,06,72,821 8,39,96,836

Notes on Accounts 85 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

LONG-TERM BORROWINGS Note No.5 Particulars Non-current portion Current maturities As at 31-03-2017 As at 31-03-2016 As at 31-03-2017 As at 31-03-2016 A. Secured Term loans: a)From Financial Institutions: (i) IREDA 48,59,178 53,00,534 16,19,252 23,55,792 b)From banks (i) Andhra Bank 58,18,65,959 42,33,21,663 3,24,45,000 3,48,38,595 (ii) Indian Bank 1,24,97,32,899 1,30,34,38,718 15,54,19,291 12,08,20,000 (iii) Bank of Baroda 8,60,00,000 9,10,00,000 40,00,000 30,00,000 Total (a) 1,92,24,58,036 1,82,30,60,915 19,34,83,543 16,10,14,387 B. Unsecured a) Deferred payment liabilities i) Interest free Sales Tax deferment 2,77,811 17,09,080 14,31,269 23,38,431 b) Other loans: i) Loans from Promoters and 13,10,000 13,10,000 - - their relatives ii) Loans from Directors 1,89,95,000 1,53,70,000 - - Total (b) 2,05,82,811 1,83,89,080 14,31,269 23,38,431 Total (a+b) 1,94,30,40,847 1,84,14,49,995 19,49,14,812 16,33,52,818

I) Hydel Power plant:

i) IREDA : a) Term loan from IREDA is secured by first charge on all the movable and immovable assets of the company’s power division of 0.8 MW small hydro project at 16th & 17th branch canal at mile # 3, Nela kondapalli Village & Mandal, Khammam Dist., Telangana. Further guaranteed by six promoter directors of the company and corporate guarantee of two companies. b) The above loan carry interest @10%. C) The above loan is repayable in following manner. 2018-19 : ` 16,19,252/- ; 2019-20 : ` 16,19,252/-; 2020-21 : ` 16,20,674/-. d) There are no defaults in repayment of above loan. ii) ANDHRA BANK: a) Term loan from Andhra Bank is secured by way of charge on movable and immovable assets of power plant at Nelakondapalli and Bhairavanipalli of Khammam Dist., Telangana., excluding those assets specifically charged to IREDA which are exclusively created out of said loan. The said loan is further guaranteed by two directors in their personal capacities. b) The above loan carry interest @ 12.25% c) The above loan is repayable in following manner. 2018-19: ` 2,23,00,000/- ; 2019-20: ` 3,11,00,000/- d) There are no defaults in repayment of above loan.

Notes on Accounts 86 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

II) SPINNING UNIT : i) ANDHRA BANK : a) Term loans from Andhra Bank are secured on pari passu basis by way of first charge on all the movable and immovable assets of spinning division (all units at Chowdavaram, Guntur Dist.) of the company. Further guaranteed by two directors in their personal capacities. b) The above loans carry interest @ 12.25%, 11.50%, 11.00%, 11.50%, 11.25% and 12.25%. c) The above loans are repayable in following manner. 2018-19 : ` 3,57,00,000/- ; 2019-20 ` 4,68,00,000/- ; 2020-21: ` 9,63,00,000/- ; 2021-22: ` 10,72,67,030/- ; 2022-23: ` 7,59,65,500/- ; 2023-24: ` 8,68,19,805 ; 2024-25 : ` 80,00,000/- ; 2025-26 ` 7,16,13,623/- d) There are no defaults in repayment of above loans. ii) INDIAN BANK : a) Term loans from Indian Bank are secured on pari passu basis by way of first charge on all the movable and immovable assets of spinning division (all units at Chowdavaram, Guntur Dist.) of the company. Further guaranteed by two directors in their personal capacities. b) The above loans carry interest @ 12.50%, 13.50% and 13.50%. c) The above loans are repayable in following manner. 2018-19 : ` 5,22,18,798/- ; 2019-20 ` 5,00,00,000/- ; 2020-21: ` 6,25,00,000/- d) There are no defaults in repayment of above loans. III. WEAVING UNIT : i) INDIAN BANK : a) Term loans from Indian Bank are secured by exclusive charge on all the movable and immovable assets of weaving division at Kunkupadu Village, Addanki Mandal, Prakasam Dist. of the company. Further guaranteed by two directors in their personal capacities. b) The above loans carry interest @11.90%, 11.90%, 11.40% and 12.10%. c) The above loans are repayable in following manner. 2018-19: ` 13,60,00,000/- ; 2019-20: ` 16,80,00,000/- ; 2020-21: ` 21,00,00,000/- ; 2021-22 ` 14,90,00,000/- ; 2022-23: ` 18,00,00,000/- ; 2023-24: ` 20,31,95,900/- and 2024-25: ` 3,88,18,200/- d) There are no defaults in repayment of above loans. IV. DYEING UNIT : i) BANK OF BARODA : a) Term loan from Bank of Baroda is secured by way of first charge on fixed assets of Company’s Dyeing Unit at Kunkupadu Village, Addanki Mandal, Prakasam Dist. of the company. Further guaranteed by two directors in their personal capacities. b) The above loan carry interest @11.50%. c) The above loan is repayable in following manner. 2018-19: ` 60,00,000/- ; 2019-20: ` 2,00,00,000/- ; 2020-21: ` 2,75,00,000/- and 2021-22 ` 3,15,00,000/- d) There are no defaults in repayment of above loan. V) INTEREST FREE SALES TAX LOAN : The Company availed interest free sales tax loan for the period from 1995-96 to 2008-09 aggregating to ` 2,54,75,992/-. The said loan is repayable within a period of 10/14 years from each year of availment. The Company has to pay an amount of ` 17,09,080 /- as on 31-03-2017 of which an amount of ` 14,31,269 /- is due for payment during financial year 2017-18.

Notes on Accounts 87 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

VI) Loans accepted from promoters and their relatives are interest free and are accepted as per the conditions of sanction of term loans from banks and shall not be repayable during the currency of term loans DEFERRED TAX LIABILITIES (Net) Note No.6 Particulars As at 31-03-2017 As at 31-03-2016 a) Liability: - On fixed assets towards depreciation 42,55,90,487 38,84,47,126 b) Assets: - Disallowances under Income-tax 36,28,015 25,21,239 - Unabsorbed depreciation 16,23,44,096 19,92,21,516 Total 25,96,18,376 18,67,04,371 PROVISIONS Note No.7 Long Term Short Term As at As at As at As at Particulars 31-03-2017 31-03-2016 31-03-2017 31-03-2016 Employee benefits - Towards Group gratuity (Unfunded) 1,03,49,650 71,41,210 - - - Towards Leave encashment (Unfunded) - - 41,322 31,027 Provision for Income-Tax - - 13,81,60,000 8,81,60,000 Provision for Proposed dividend - - - 68,51,100 Provision for Tax on distributable profits - - - 13,94,723 Total 1,03,49,650 71,41,210 13,82,01,322 9,64,36,850 a) Disclosure required by the AS - 15 (revised) - Employee benefits I. Defined Benefits Plans Reconcilation for changes in present value of defined benefits obligation Year ended Year ended Particulars March 31, 2017 March 31, 2016 Gratuity Gratuity Present value of obligation at beginning of the year 71,41,210 58,05,695 Current Service cost 24,90,263 21,24,937 Interest cost 4,80,294 4,06,989 Benifts paid - (59,250) Net actuarial (gain)/loss 2,37,883 (8,71,463) Present value of obligation at end of the year 1,03,49,650 74,06,908

Notes on Accounts 88 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

Expenses recognized in the Statement of Profit and Loss Year ended Year ended Particulars March 31, 2017 March 31, 2016 Gratuity Gratuity Current Service Cost 24,90,263 21,24,937 Interest Cost 4,80,294 4,06,989 Expected return - - Net actuarial (gain)/loss 2,37,883 (8,71,463) Net expenses recognized in the Statement of Profit and Loss 32,08,440 16,60,463 Note: The current year charge to P&L a/c comprises of provision towards: Directors 2,25,369 6,38,533 Other employees 29,83,071 10,21,930 32,08,440 16,60,463

Year ended Year ended Actuarial Assumptions March 31, 2017 March 31, 2016 Gratuity Gratuity Discount rate 8.00% 7.90% Attrition rate 5% 5% Salary escalation 12% 10% Expected /Actual return Nil Nil SHORT TERM BORROWINGS Note No.8 Particulars As at 31-03-2017 As at 31-03-2016 Secured Loans repayable on demand : Working Capital Loans: From Banks: i) Cash Credit - Andhra Bank 59,93,83,064 59,37,67,924 - Indian Bank 52,08,30,478 46,87,59,717 ii) Buyers Credit Facilites - Andhra Bank 1,74,19,468 - - Indian Bank 1,51,84,023 - Total 1,15,28,17,033 1,06,25,27,641 TRADE PAYABLES Note No.9 Particulars As at 31-03-2017 As at 31-03-2016 Dues to: Small and Micro Enterprises 1,46,363 - : Others 2,78,98,706 5,60,91,310 Total 2,80,45,069 5,60,91,310 Disclosures required under the Micro, Small and Medium Enterprises Development Act, 2006. Based on and to the extent of information available with the company regarding the status of their creditors under Micro, Small and Medium enterprises development Act, 2006 on which the auditors have relied upon, the disclosure requirement under the said Act,with regard to the payment made/due to Micro, Small and medium enterprises are given below.

Notes on Accounts 89 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

2016-17 2015-16 1) Amount remaining unpaid beyond the appointed/agreed date at the end of the year a) Principal Nil Nil b) Interest due thereon Nil Nil 2) Payments made to suppliers during the year beyond appointed/agreed date a) Principal Nil Nil b) Interest paid on such payments Nil Nil c) Interest remaining unpaid as on date of balance sheet Nil Nil 3) Total amount of interest for the year accrued and remaining unpaid at the end of the year Nil Nil 4) Total amount of interest including that arising in earlier years accrued and remaining unpaid at the end of the year Nil Nil OTHER CURRENT LIABILITIES Note No.10 Particulars As at 31-03-2017 As at 31-03-2016 (Unsecured) Current maturities of long-term debt 19,49,14,812 16,33,52,818 (Refer note no.5) Creditors for capital goods 40,59,245 1,03,21,977 Interest accrued and due on borrowings 1,52,58,972 2,05,80,580 Advances received against sales 19,60,786 18,25,246 Unclaimed dividends* 14,58,929 14,78,252 Others: Teak Plantation Deposits 58,500 58,500 Employee related payments 2,10,00,447 1,97,88,806 Statutory liabilities 41,45,154 36,69,887 Other liabilities** 4,83,50,639 5,37,13,872 Total 29,12,07,483 27,47,89,938

* The Unclaimed Dividends represent those relating to the years 2009-10 to 2015-16 and no part thereof has remained unpaid or unclaimed for a period of 7 years or more from the date they become due for payment requiring transfer to the investor education and protection fund. ** Other liabilities include liablility towards electricity charges, FSA charges etc.,

Notes on Accounts 90 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17 15,76,153 54,67,125 58,36,537 11,53,935 As at 3,17,43,699 37,55,55,619 51,29,16,558 10,58,41,659 31-03-2016 Note No.11 1,91,66,55,561 2,95,67,46,846 2,69,78,35,061 Net Block 9,82,571 14,90,831 85,72,303 63,27,334 As at 9,39,22,887 37,89,64,721 49,29,89,030 64,10,92,626 1,93,70,82,410 31-03-2017 3,56,14,24,713 2,95,67,46,846 0 14,52,553 27,54,397 44,85,041 As at 2,84,70,973 7,05,72,806 1,63,55,524 62,01,09,590 13,36,23,821 87,78,24,705 74,82,83,506 31-03-2017 0 0 0 0 0 0 0 - 6,66,656 2,51,753 58,82,472 65,49,128 tions On deduc 0 Depreciation 5,28,228 1,71,364 77,21,398 25,44,525 13,21,976 Year 8,86,55,173 1,99,27,528 1,52,20,135 For the For 13,60,90,327 12,94,07,481 0 9,24,325 25,83,033 38,29,721 As at 2,07,49,575 5,53,52,671 1,38,10,999 53,73,36,889 11,36,96,293 74,82,83,506 61,91,27,778 31-03-2016 29,43,384 37,36,968 As at 2,26,82,858 1,30,57,344 64,10,92,626 62,66,12,851 40,74,35,694 16,44,95,693 2,55,71,92,000 4,43,92,49,418 3,70,50,30,352 31-03-2017 -

due to 60,81,86,602 Increase 60,81,86,602 Revaluation at fair value 0 0 0 0 0 0 0 7,12,127 12,18,693 1,31,46,501 1,43,65,194 Deductions Gross Block 0 0 4,42,906 33,01,363 11,62,325 30,35,322 49,79,191 1,11,30,500 11,63,46,051 14,03,97,658 38,87,79,640 Additions 25,00,478 37,36,968 92,96,846 As at 3,17,43,699 1,96,47,536 62,66,12,851 39,63,05,194 16,11,94,330 2,45,39,92,450 3,70,50,30,352 3,31,69,62,839 31-03-2016 - - Particulars ment Tangible: Land Factory Build ings Non-Factory Buildings Plant and Equipment Electrical and Electronic Equipment Borewells and pumps Water Office and Other equip Furniture and Fixtures Vehicles Total year Previous FIXED ASSETS

Notes on Accounts 91 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

LOANS AND ADVANCES Note No.12 Particulars Long-term Short-term As at 31-03-2017 As at 31-03-2016 As at 31-03-2017 As at 31-03-2016 Unsecured, Considered Good Advances for capital goods 2,24,60,945 8,02,296 - - Security deposits with Govt. authorities 6,25,02,865 4,91,18,983 - - Advances against supplies - - 1,40,20,430 87,28,087 Employee related advances - - 8,24,637 19,76,945 Other advances: Deposits recoverable - - 17,390 17,390 EPCG Terminal Excise Duty refund receivable - - 95,26,129 67,34,554 Duty draw back refund receivable - - 38,90,645 29,11,727 Excise duty Deposit - - 6 6 Input Tax Credit under VAT - - - 1,21,759 Advance Income Tax/Fringe Benefit Tax/TDS - - 9,70,63,272 6,95,53,935 MAT Credit entitlement - - 10,15,77,552 6,25,64,709 Interest rebate receivable under TUFscheme - - 4,18,01,799 7,52,15,617 Interest subsidy receivable from 8,65,41,396 - AP government Power Subsidy receivable - - 13,44,58,665 6,32,06,459 Other miscellaneous advances - - 10,78,441 2,97,049 Total 8,49,63,810 4,99,21,279 49,08,00,359 29,13,28,237

INVENTORIES Note No.13 Particulars As at 31-03-2017 As at 31-03-2016 Spinning/Power: Raw materials 39,71,75,447 41,55,09,427 Work-in-progress 8,08,05,273 5,13,88,693 Finished goods 10,26,39,629 7,25,09,156 Stores and spares 3,23,12,043 2,69,29,333 Weaving/Dyeing unit: Raw materials 1,33,50,974 96,92,750 Work-in-progress 16,77,73,412 8,71,25,590 Finished goods 6,00,19,583 7,93,32,042 Stores and spares 1,81,08,238 1,45,92,185 Total 87,21,84,599 75,70,79,176

Notes on Accounts 92 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

TRADE RECEIVABLES Note No.14 Particulars As at 31-03-2017 As at 31-03-2016 Unsecured, Considered Good Outstanding for a period exceeding six months 8,69,867 3,52,97,819 Others* 30,97,54,849 20,81,59,423 31,06,24,716 24,34,57,242 Unsecured, Considered Doubtful Outstanding for a period exceeding six months 1,33,519 1,33,519 Others - - 1,33,519 1,33,519 Less: Provision for bad and doubtful debts 1,33,519 1,33,519 Total 31,06,24,716 24,34,57,242

* Includes ` 1,00,15,569/- (Pr. Year ` 87,40,570/-) due from Kallam Agro Products and Oils (P) Limited, a company in which directors of the company are members.

CASH AND CASH EQUIVALENTS Note No.15 Particulars As at 31-03-2017 As at 31-03-2016 1. Cash on hand 29,87,195 14,37,290 2. Cash Equivalents i. Balances with banks a. Earmarked balances with banks 14,58,929 14,78,052 (towards unclaimed dividend) b. Balances with banks held as 40,70,196 14,83,462 margin money against LC and guarantees c. In Current accounts 48,27,326 3,52,255 Total 1,33,43,646 47,51,059

OTHER CURRENT ASSETS Note No.16 As at As at Particulars 31-03-2017 31-03-2016 Accrued Interest 29,27,456 32,62,601 Prepaid expenses 24,74,026 10,11,539 Total 54,01,482 42,74,140

Notes on Accounts 93 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

SALE OF PRODUCTS Note No.17 Year ended Year ended Particulars Qty (kgs.) Qty (kgs.) 31-03-2017 31-03-2016 i) Cotton Yarn 59,53,917 1,38,84,78,419 62,08,544 1,30,35,51,920 ii) OE Yarn 56,70,818 65,37,29,286 58,62,984 61,51,76,193 iii) Cotton Waste 22,61,114 13,56,39,075 22,43,608 9,90,54,375 iv) OE Waste 9,25,247 1,43,18,866 8,76,910 98,18,324 v) Cotton Seed 64,90,059 15,13,05,433 68,33,480 13,20,29,743 vi) Cotton Lint 33,43,138 39,08,00,371 34,18,355 33,71,49,417 vii) Sale of Gray Fabric (Mtrs) 2,53,84,238 1,52,64,34,706 2,58,18,404 1,53,56,33,288 viii) Sale of Fabric Waste 1,56,601 42,53,183 1,83,921 44,61,149 ix) Sale of Dyed Fabric (Mtrs) 29,78,595 26,77,59,165 2,53,136 2,31,17,311 x) Sale of Dyed Yarn (Kgs) 2,32,310 7,85,45,173 4,709 12,60,837 xi) Sale of cut pieces cloth and shirts 3,598 5,46,129 - - xii) Sale of Power (KWH) 15,71,728 73,95,506 58,77,925 2,50,88,877 Total 4,61,92,05,312 4,08,63,41,434 Less: Inter divisional transfers Power (KWH) - - - - Cotton Yarn 43,32,211 1,09,07,40,136 38,10,452 89,66,57,770 OE yarn 6,10,460 7,69,20,191 6,71,702 7,49,87,477 Dyed yarn 2,30,561 7,80,75,413 - - Cotton Waste 19,14,779 12,57,97,659 18,39,392 9,03,93,051 Cotton Lint 32,59,444 37,95,59,091 33,83,800 33,42,43,827 1,75,10,92,490 1,39,62,82,125 Total: 2,86,81,12,822 2,69,00,59,309 Other Operating revenue - Job work 1,64,973 16,35,522 charges Total revenue from operations 2,86,82,77,795 2,69,16,94,831

OTHER INCOME Note No.18 Particulars Year ended 31-03-2017 Year ended 31-03-2016 Interest from banks and others 32,24,480 37,97,337 Deferred Govt. grants credited back 33,24,015 31,89,268 Export Incentives - Duty draw back 1,80,39,534 1,25,65,823 Credit Balances Written back 23,847 3,56,194 Profit on Sale of Assets 1,43,785 3,864 Power Subsidy received 7,70,41,274 4,77,66,141 Miscellaneous receipts 23,25,785 16,81,443 Total 10,41,22,720 6,93,60,070

Notes on Accounts 94 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

COST OF MATERIALS CONSUMED Note No.19 Particulars Year ended 31-03-2017 Year ended 31-03-2016 Opening Stock 42,52,02,177 31,24,83,594 Add: Purchase of Raw Material 1,56,54,63,166 1,54,52,72,611 1,99,06,65,343 1,85,77,56,205 Less: Closing Stock 41,05,26,421 42,52,02,177 Total 1,58,01,38,922 1,43,25,54,028

Components of materials consumed: Year ended Qty Year ended Particulars Qty (kgs.) 31-03-2017 (kgs.) 31-03-2016 Cotton Kappas, Lint, Yarn and waste 1,58,01,38,922 2,12,68,166 1,43,25,54,028

PURCHASES OF STOCK-IN-TRADE Note No.20 Particulars Qty (kgs.) Year ended 31-03-2017 Qty (kgs.) Year ended 31-03-2016 OE Yarn - 72,000 87,12,000 Cotton and OE yarn - - 72,000 87,12,000

PURCHASES OF STOCK-IN-TRADE Note No.21 Particulars Qty (kgs.) Year ended 31-03-2017 Qty (kgs.) Year ended 31-03-2016 A. Closing Stock : i) Work-in-Process - Cotton yarn 3,65,629 7,75,01,932 3,05,859 4,79,94,114 - OE yarn 31,216 33,03,341 42,005 33,94,579 - Cotton Yarn(Weaving) 5,33,101 16,40,94,284 3,09,215 8,70,21,460 ii) Finished Goods: - Cotton Yarn 3,04,392 6,96,85,030 3,08,019 5,46,82,429 - Cotton Waste 36,416 1,31,769 25,337 3,80,494 - Banked energy (KWH) 30,094 1,16,163 - - - OE Yarn 2,79,407 3,21,48,070 1,94,977 1,63,51,590 - OE Waste 29,563 99,172 9,666 95,567 - Cotton Lint - - - - Cotton Seed 19,975 4,59,425 42,971 9,99,076 - Gray Fabric(Mtrs) 8,15,717 5,69,98,541 14,31,035 7,89,63,282 - Waste 7,436 2,60,260 10,586 3,68,760 Total (a) 40,47,97,987 29,02,51,351 Stock of Dyeing Division: Work -in-process -Job works under progress - - 31028 1,04,130 -Dyed Fabric - - - Finished Goods -Dyed Yarn 36,79,128 - - -Dyed Fabric - - -

Notes on Accounts 95 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

Particulars Qty (kgs.) Year ended 31-03-2017 Qty (kgs.) Year ended 31-03-2016 Total (b) 36,79,128 1,04,130 Sub Total A=(a+b) 40,84,77,115 29,03,55,481 B. Opening Stock: i) Work-in-Process - Cotton yarn 3,05,859 4,79,94,114 3,16,930 5,02,36,024 - OE yarn 42,005 33,94,579 50,655 45,91,151 ii) Finished Goods: - Cotton Yarn 3,08,019 5,46,82,429 3,04,736 5,63,32,506 - Cotton Waste 25,337 3,80,494 6,114 86,566 - Banked energy (KWH) - - - 82,62,748 - OE Yarn 1,94,977 1,63,51,590 1,55,024 1,53,49,291 - OE Waste 9,666 95,567 8,489 72,041 - Cotton Lint - - - - - Cotton Seed 42,971 9,99,076 14,920 2,08,880 Total (a) 12,38,97,849 13,51,39,207 Weaving Division i) Work-in-Process - Cotton Yarn 3,09,215 8,70,21,460 1,26,080 3,54,33,736 ii) Finished Goods: - Gray Fabric (Mtrs) 14,31,035 7,89,63,282 13,14,131 7,27,41,967 - Waste 10,586 3,68,760 55,908 16,79,400 Total (b) 16,63,53,502 10,98,55,103 Dyeing Division i) Work-in-Process -Job works under progress 31,028 1,04,130 - - Dyed Fabric (Mtrs) - - - - ii) Finished Goods: - Dyed Yarn - - - Dyed Fabric (Mtrs) - - - Total (c) 1,04,130 - Total B=(a+b) 29,03,55,481 24,49,94,310 (Increase)/decrease in (11,81,21,634) (4,53,61,171) inventories Total:B-A

EMPLOYEE BENEFIT EXPENSES Note No.22 Particulars Year ended 31-03-2017 Year ended 31-03-2016 Salaries and Wages 16,93,06,371 14,83,10,961 Contribution to provident and other funds 34,94,173 23,76,637 Staff welfare expenses 49,49,929 21,72,469 Incremental liability for Gratuity 29,83,071 10,21,930 Total 18,07,33,544 15,38,81,997

Notes on Accounts 96 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

FINANCE COSTS Note No.23 Particulars Year ended 31-03-2017 Year ended 31-03-2016 Interest paid to banks and others 36,90,17,259 35,68,45,739 Interest on Income-tax - 6,472 Other borrowing costs 83,89,168 34,64,697 Total Interest (Gross) 37,74,06,427 36,03,16,908 Less: Subsidy under TUF scheme 7,42,35,008 7,73,34,381 Interest subsidy from AP government 8,33,04,626 - Total Interest (Net) 21,98,66,793 28,29,82,527

OTHER EXPENSES Note No.24 Particulars Year ended 31-03-2017 Year ended 31-03-2016 Manufacturing expenses : Stores and spares consumed 19,26,54,365 14,28,80,917 Dyeing Processing Charges paid 2,71,555 19,43,879 Power and fuel 40,52,68,356 38,37,75,242 Repairs to : Buildings 22,01,499 26,73,942 : Machinery 6,83,96,636 6,40,48,297 : Others 41,080 29,540 Insurance 39,64,786 33,51,737 Selling expenses: Loading, Unloading, Transport etc., 2,69,18,797 2,19,01,189 Commission on Sales 2,54,69,693 3,11,54,760 Administration and other expenses: Rent 47,800 45,600 Rates and taxes 47,44,620 24,92,807 Loss on foreign currency exchange fluctuations - 3,19,297 Payments to Auditors towards : - Statutory audit 2,58,750 2,86,250 - Tax audit and taxation matters 64,500 62,440 - Towards certication and other matters - 1,16,460 - Cost audit 34,500 34,350 Directors Sitting fee and travelling expenses 7,05,198 5,06,063 Donations 26,116 30,000 Contribution to CSR expenses 32,74,929 28,29,655 Miscellaneous expenses 2,81,16,206 3,32,76,991 Loss on Sale of Assets 3,42,081 1,32,238 Debit Balances Written Off 10,863 6,04,107 Total 76,28,12,330 69,24,95,762

Notes on Accounts 97 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

NOTES FORMING PART OF THE ACCOUNTS: (Amount in `) Year ended Year ended 25. CIF VALUE OF IMPORTS MADE DURING THE YEAR: 31-03-2017 31-03-2016 i) Stores & Spares 3,21,10,180 2,26,20,999 ii) Capital goods 33,32,545 1,06,89,672

26. COMPARISION BETWEEN CONSUMPTION OF IMPORTED AND INDIGENOUS RAW MATER IALS SPARES AND COMPONENTS DURING THE YEAR: Year ended Year ended % % 31-03-2017 31-03-2016 a) Raw material: Imported 5,73,54,121 3.63 -- Indigenous 152,27,84,801 96.37 143,25,54,028 100.00 Total 158,01,38,922 100.00 143,25,54,028 100.00 b) Spares & Components: Imported 2,75,13,168 14.28 95,53,927 6.69 Indigenous 16,51,41,197 85.72 13,33,26,990 93.31 Total 19,26,54,365 100.00 14,28,80,917 100.00

27. EXPENDITURE INCURRED IN FOREIGN Year ended Year ended CURRENCY DURING THE YEAR: 31-03-2017 31-03-2016 a) Commission On Yarn & Fabric Sales 55,53,580 1,48,29,939 b) Foreign Travel 4,84,590 7,63,489 28. CONTINGENT LIABILITIES NOT PROVIDED FOR: As at 31-03-2017 As at 31-03-2016 a) Estimated amounts of contracts remaining to be 0.00 0. 00 Executed on Capital accounts, and not provided for b) State levies on Electricity 99,67,810 3,32,51,363 c) Income Tax 15,21,758 8,02,988

29. a) Balances in personal accounts of various parties are subject to confirmation yb and reconciliation with the said parties. b) In the opinion of the management, all the amounts stated under Current Assets, Loans and Advances are recoverable at the values at which they are stated. 30. (i) Revenue expenditure capitalized to fixed assets/ Capital works under progress during the year and details of expenses included under unallocated capital expenditure incurred and pending allocation as on the date of balance sheet :

Notes on Accounts 98 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

S. Balance As on Incurred Capitalised Balance as on Nature of Expenditure during the No 31-03-2016 year during the year 31-03-2017 1 Salaries and wages 0 0 0 0 2 Power and Fuel 0 0 0 0 3 Interest on Borrowings 42,411 57,184 0 99,595 4 Miscellaneous expenses 0 0 0 0 5 Bank charges 15,15,700 0 15,15,700 0 6 Depreciation 0 0 0 0 Total 15,58,111 57,184 15,15,700 99,595 Less: Interest received 0 0 0 0 Add: Net Expenditure incurred during Trial run of part of plant 0 0 0 0 and Machinery Net Amount included Under 0 0 0 99,595 capital work-in-progress

31. DISCLOSURE REQUIREMENTS PURSUANT TO “ACCOUNTING STANDARD – 18 RELATED PARTY DIS- CLOSURES”: A) List of Related Parties: 1) Key Management Personnel: 1. P. Venkateswara Reddy, Managing Director 2. G.V. Krishna Reddy, Joint Managing Director 3. M.V. Subba Reddy, Whole Time Director

2) Relatives of Key management Personnel: 1. Kallam Venkata Subbayamma Sister of P. Venkateswara Reddy 2. Poluri Siva Nagendramma Wife of P. Venkateswara Reddy 3. Movva Uma Sankara Reddy Brother of M.V. Subba Reddy 4. Poluri Govardhana Reddy Son of P. Venkateswara Reddy 5. Poluri Venugopal Reddy Son of P. Venkateswara Reddy 6. Gurram Nitin Son of G.V. Krishna Reddy 7. Movva Kavitha Wife of M.V. Subba Reddy 8. M. Srinvivasa Nagarjuna Reddy Son of M.V. Subba Reddy 9. M. Murali Sairam Krishna Reddy Son of M.V. Subba Reddy

3) Companies controlled by Key management personnel/Relative of Key Management Personnel: 1. Kallam Agro products & Oils Private Limited, Guntur 2. Kallam Brothers Cottons Pvt Ltd, Guntur

Notes on Accounts 99 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

B) Transactions with the related parties : (Amount in `)

Companies controlled Key Relative of Key by key Management Nature of Transaction Management Management personnel / Relative of Personnel personnel Key Management personnel I. Details of Transaction: a. Remuneration Paid : 1. P. Venkateswara Reddy, MD 48,21,068 2. G.V.Krishna Reddy, JMD 48,15,593 3. M.V.Subba Reddy,WTD 8,77,403 Total 1,05,14,064 b. Salary paid: P. Govardhan Reddy 4,86,000 M.Srinivasa Nagarjuna Reddy 1,20,000 C. Sale of Goods and Services : 1. Kallam Brothers Cottons Pvt Ltd- Testing Charges & 3,78,298 Job Work 2. Kallam Agro products and Oils Pvt. Ltd 9,28,95,055 II. Balance as at 31-03-2017 : a. Share Capital of the Company held by : 1. P.Venkateswara Reddy, MD 18,42,000 2. G.V.Krishna Reddy, JMD 55, 50 650 3. M.V.Subba Reddy, WTD 6,85,000 Total 80,77,650

Companies controlled by Relative of Key Key key Management Nature of Transaction Management Management personnel/Relative of Key personnel Management personnel 1. K.Venkata Subbayamma 13,34,000 Sister of P.Venkateswara Reddy 2. P.Siva Nagendramma, 3,00,000 W/o P.Venkateswara Reddy 3. P.Govardhan Reddy, 17,49,530 S/o P.Venkateswara Reddy 4. M.Uma Sankar Reddy, 10,68,240 Brother of M.V.Subba Reddy 5. P.Venugopal Reddy, 15,86,520 S/o P.Venkateswara Reddy 6. G.Nitin, S/o G.V.Krishna Reddy 10,98,000 7. Movva Kavitha, W/o M.V.Subba Reddy 1,24,000

Notes on Accounts 100 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

Companies controlled by Relative of Key Key key Management Nature of Transaction Management Management personnel/Relative of Key personnel Management personnel 8. M.Srinvivasa Nagarjuna Reddy 1,75,000 S/o M.V.Subba Reddy 9. M.Murali Sairam Krishna Reddy 1,00,000 S/o M.V.Subba Reddy Total 73,35,290 1. Kallam Agro Products and Oils Pvt Ltd Guntur 87,44,070 b) Loans/ Inter Corporate Deposits For the F.Y 2016-17 From: (Unsecured) 1. P.Venkateswara Reddy, MD 88,05,000 2. G.V.Krishna Reddy, JMD 65,40,000 3. M.V.Subba Reddy, WTD 36,50,000 Total 1,89,95,000 1. P.Siva Nagendramma, 10,000 W/o P.Venkateswara Reddy Total 10,000

Companies controlled Relative of Key Key by key Management Nature of Transaction Management Management personnel /Relative of Key personnel Management personnel c) Amount Due to: 1. P.Venkateswara Reddy, MD 22,26,621 2. G.V.Krishna Reddy, JMD 22,67,498 3. M.V.Subba Reddy, WTD 1,45,635 Total 46,39,754 d) Trade dues from: 1. Kallam Brothers cottons pvt Ltd., Guntur 52,478 2. Kallam Agro Products and Oils pvt Ltd., Guntur 1,00,15,569 32) Details of Specified Bank Notes (SBN) held and transacted during the period from 08-11-2016 to 30-12-2016 SBN Other Denominations Particulars Total Denomination Amount Closing Cash Balance on hand 32,05,000 12,10,661 44,15,661 as on 08-11-2016 Add : Withdrawal from bank accounts 0 21,22,000 21,22,000 Add: Receipts for permitted transactions 0 38,31,413 38,31,413 Add : Receipts for non permitted transactions 0 0 0 Less: Paid for permitted transactions 0 69,53,384 69,53,384 Less: Paid for non permitted transactions 32,05,000 0 32,05,000 Less : Deposited in bank accounts 0 0 0 Closing Balance as at 30th December 2016 0 2,10,690 2,10,690

Notes on Accounts 101 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

33. SEGMENTAL RESULTS AS PER ACCOUNTING STANDARD –17 ON “SEGMENT REPORTING”. Segment wise Revenue Results and Capital employed under Regulation 33 of Listing Agreement: (Amount in Lacs) Particulars Year 2016-17 Year 2015-16 Segment Revenue : 1. Spinning 22,266.72 20,708.56 2. Weaving 18,012.36 15,644.98 3. Dyeing 1,092.83 63.86 3. Power 73.95 250.89 41,445.86 36,668.29 Less: Inter segment Revenue 12,763.08 9,751.35 Net Revenue from Operation 28,682.78 26,916.94 Segment Results (Profit before Tax and Interest) 1. Spinning 2,852.02 2,447.29 2. Weaving 1,498.99 1,404.52 3. Dyeing 17.87 (25.46) 3. Power (61.41) 67.29 4,307.47 3,893.64 Less: Interest (net) 2,198.67 2,829.82 Net Profit before Tax 2,108.80 1,063.82 Capital Employed: (Segment Assets-Segment Liabilities) 1. Spinning 22,908.89 14,925.61 2. Weaving 12,324.79 11,270.80 3. Dyeing 852.04 9,28.82 4. Power 1,647.31 1,594.71 Total 37,733.03 28,719.14 Capital Expenditure: 1. Spinning 661.07 1,768.96 2. Weaving 738.73 404.36 3. Power 2.46 93.77 4. Dyeing 1.71 1,620.71 Depreciation: 1. Spinning 583.35 577.84 2. Weaving 640.46 610.69 3. Dyeing 61.97 32.52 4. Power 75.12 73.02

Notes on Accounts 102 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

34. Dividend : The Board of directors at its meeting held on 27.05.2017 have recommended a dividend ` 0.20/- share of face value of ` 2/- each (ie 10% dividend) for the financial year ended 31.03.2017. The above subject to approval at the ensuing Annual general meeting of the company and hence not required as a liability. 35. Corporate Social Responsibilities:

Particulars 31.03.2017 31.03.2016 Amount required to spent during the year 28,28,957 27,58,911 Amount actually spent 32,74,929 28,29,655 Short Fall NIL NIL 36. General: Previous year figures have been regrouped where ever necessary. Paise have been rounded off to the nearest rupee.

As per our report of even date For and on behalf of Board of Directors For BRAHMAYYA & CO., P.VENKATESWARA REDDY Chartered Accountants Managing Director Firm Regn no.000513S KARUMANCHI RAJAJ G.V. KRISHNA REDDY Partner Joint Managing Director Membership No: 202309 M.V.Subba Reddy Place : Chowdavaram, Guntur Chief Financial Officer Date : 27-05-2017

Notes on Accounts 103 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

NOTICE TO SHAREHOLDERS Members of Kallam Spinning Mills Limited are hereby given notice for the 25th Annual General Meeting of the Company, the schedule of which and the business to be transacted therein, are given below:

Date : 29-09-2017 Day : Friday Time : 03:00 P.M

Venue : Registered Office of the Company, Chowdavaram, Guntur - 522019. Ordinary Business 1. To receive, consider and adopt the audited standalone Financial Statements of the company for the year ended 31st March, 2017, together with the Reports of Directors’ and Auditors’ thereon. 2. To declare a dividend on equity shares for the financial year 2016-17. 3. To appoint a Director in place of Sri P.Venkateswara Reddy (DIN: 00018677), liable to retire by rotation in terms of Section 152(6) of the Companies Act, 2013 and, being eligible, offers himself for re-appointment. 4. To appoint statutory auditors and fix their remuneration and in this regard to consider, and if thought fit, to pass, with or without modification(s), the following resolution, as an ordinary resolution: “RESOLVED THAT pursuant to the provisions of Sections 139, 142 and other applicable provisions, if any, of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014 (including any statutory modification or re-enactment thereof for the time being in force), M/s. Chevuturi Associates., Chartered Accountants (Firm Registration No. 000632S), be and are hereby appointed as Statutory Auditors of the Company, in place of retiring auditors, M/s. Brahmayya & Co., Chartered Accountants (Firm Reg No : 000513S) for a term of five years to hold office from the conclusion of the th25 Annual General Meeting till the conclusion of the 30th Annual General Meeting of the Company, subject to ratification by the members at every Annual General Meeting, at such remuneration plus applicable taxes and out of pocket expenses as may be decided by the Board of Directors of the Company based on the recommendation of Audit Committee.” Special Business : 5. To consider and if thought fit to pass with or without modification the following resolution as an Ordinary Resolution : “RESOLVED THAT in accordance with the provisions of Sections 196, 197 and 203 read with Schedule V and all other applicable provisions of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (including any statutory modification(s) or re-enactment thereof for the time being in force), Sri M.V. Subba Reddy (DIN-00018719) be and is hereby re-appointed as Whole-time Director of the Company, for a period of 5 years with effect from and including 01st June, 2017 on such remuneration and terms and conditions as may be agreed between the Board of Directors and Sri. M.V Subba Reddy. 6. To consider and, if thought fit, to pass the following resolution as an Ordinary Resolution : “RESOLVED THAT pursuant to the provisions of Section 148(3) and other applicable provisions, if any, of the Companies Act, 2013 and the Rules made thereunder, the remuneration payable to P.Srinivas, Cost Accountant (Membership No. 21170), appointed by the Board of Directors as Cost Auditor to conduct the audit of the cost records of the Company for the financial year ending 31st March, 2018, amounting to ` 30,000/- (Rupees Thirty Thousand only) as also the payment of service tax as applicable and re-imbursement of out of pocket expenses incurred in connection with the aforesaid audit, be and is hereby ratified and confirmed.” 7. To Approve the issue of bonus shares : To consider and if thought fit, to pass, with or without modification(s), the following Resolution as anOrdinary Resolution. “RESOLVED THAT, in accordance with Section 63 and other applicable provisions of the Companies Act, 2013, read with Rule 14 of the Companies (Share Capital & Debentures) Rules, 2014 (including any statutory modification(s) or re-enactment thereof for the time being in force), the relevant provisions of the Memorandum and Articles of Association of the Company and the recommendation of the Board of Directors (hereinafter referred to as 'The Board', which expression shall be deemed to include a Committee of Directors duly authorized in this behalf) of the Company and subject to the regulations and guidelines issued by the Securities

Notice to Shareholders 104 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

and Exchange Board of India (SEBI), including the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 (as amended from time to time), SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and applicable Regulatory Authorities, and such permissions, sanctions and approvals as may be required in this regard, consent and approval of the Members be and is hereby accorded to the Board for the capitalization of ` 1,71,27,750/- out of Reserves and Surplus (P&L Account) and transferred to Share Capital account towards issue and allotment of Equity Shares not exceeding 85,63,875 Equity Shares of ` 2/- each, as Bonus shares credited as fully Paid-up, to members of the company, whose name(s) appear in the Register of Members maintained by the Company and the List of Beneficial Owners as received from National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) on Record date as may be fixed in this regard by the Board in accordance with law and to apply the said sum in paying up in full a maximum of 85,63,875 equity shares (the bonus shares) of the Company of ` 2/- each (Rupees Two Only) at par, to be allotted, distributed and credited as fully paid up to and among the members in the proportion of 1 bonus equity share for every 4 existing fully paid up equity shares held by them respectively as on record date and that the Bonus shares so distributed, for all purposes, be treated as an increase in the nominal amount in the capital of the Company by each members and not as income.." RESOLVED FURTHER THAT, the Bonus Shares so allotted shall rank pari-passu in all respects with the fully paid-up equity shares of the Company as existing on the ‘Record Date’ as determined by the Board or a Committee thereof for the purpose of issue of Bonus Shares save and except that they shall not be entitled to any dividend that may be declared before such Record Date and shall always be subject to the terms and conditions contained in the Memorandum and Articles of Association of the Company. RESOVED FURTHER THAT incase of fractional shares, if any arising out of the issue and allotment of the Bonus Shares, the Company shall not issue any certificate or coupon in respect thereof but all such fractional entitlements, if any, shall be consolidated and the Bonus Shares, in lieu thereof, shall be allotted by the Board to one of the Directors of the Company, to be nominated by the Board for this purpose, who shall hold the same as trustee(s) for the members entitled thereto, and sell the said shares so arising at the prevailing market rate and pay to the Company the net sale proceeds thereof, after adjusting there from the Cost and expenses in respect of such sale, for distribution to Members in proportion to their fractional entitlements. RESOLVED FURTHER THAT the allotment and issue of the said new Equity Shares in favor of non-resident members, Persons of Indian Origin/Overseas Corporate Bodies and other foreign investors of the Company, shall be subject to the approval of the Reserve Bank of India or any other regulatory authority as may be necessary. RESOLVED FURTHER THAT no letter of allotment shall be issued in respect of Bonus Shares and in case of Members who hold Shares or opt to receive the Shares in dematerialized form, the Bonus Shares shall be credited to the respective beneficiary accounts of the Members with their respective Depository Participants and in case of Members who hold Equity Shares in certificate form, the share certificates in respect of the Bonus Shares shall be dispatched, within such time as prescribed by law and the relevant authorities: RESOLVED FURTHER THAT, the Board be and is hereby authorized to take all other steps as may be necessary to give effect to the aforesaid resolution and determine all other terms and conditions of the issue of bonus shares as the Board may in its absolute discretion deem fit.” 8) Determination of fees for delivery of any document through a particular mode of delivery to a member. To consider and if thought fit, to pass, with or without modification(s), the following resolution as anOrdinary Resolution: “RESOLVED THAT pursuant to section 20 and other applicable provisions, if any, of the Companies Act, 2013 and the rules made thereunder, the consent of the Company be and is hereby accorded to charge from a member in advance, a sum equivalent to the estimated actual expenses for delivery of the document(s) through a particular mode upon receipt of such request from a member.” “RESOLVED FURTHER THAT the estimated fees for delivery of the document(s) shall be paid atleast one week in advance to the Company, before dispatch of such document(s). “RESOLVED FURTHER THAT for the purpose of giving effect to this resolution, the Board of Directors of the Company (includes a Committee thereof authorized for the purpose) be and is hereby authorized to take all such steps and actions and give such directions as may be in absolute discretion deem necessary, proper, desirable or expedient and to settle any question, difficulty or doubt that may arise in respect of the matter aforesaid, including determination of the estimated fees, from time to time, for delivery of the document(s) to be paid in advance.”

Notice to Shareholders 105 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

9) Appointment of Mr. Ajeya Kallam (DIN: 00278595) as an Independent Director To consider and if thought fit, to pass the following resolution with or without modification as an Ordinary Resolution. “RESOLVED THAT pursuant to Sections 160 & 161 of the Companies act, 2013 and any other applicable provisions if any, Mr. Ajeya Kallam (DIN : 00278595), who was appointed as an Additional Director of the Company by the Board of Directors at its meeting held on 26th August, 2017 be and is hereby appointed as an Independent Director of the Company, not liable to retire by rotation in terms of Section 149(4), (10) & (11) and 152(6)(e) of the Companies Act, 2013 to hold office for a term of five years w.e.f th29 September 2017”. RESOLVED FURTHER THAT Mr. P.Venkateswara Reddy, Managing Director or/and Mr. G.V.Krishna Reddy, Joint Managing Director of the Company, be and is/are hereby severally authorised to file relevant forms with the Registrar of companies, for Andhra Pradesh & Telangana at Hyderabad and to do such other acts, deeds and things as may be considered necessary in connection with the above appointment” 10) Appointment of Mr. V.Ramgopal (DIN: 02889497) as an Independent Director To consider and if thought fit, to pass the following resolution with or without modification as an Ordinary Resolution. “RESOLVED THAT pursuant to Sections 160 & 161 of the Companies act, 2013 and any other applicable provisions if any, Mr. V.Ramgopal (DIN: 02889497), who was appointed as an Additional Director of the Company by the Board of Directors at its meeting held on 26th August, 2017 be and is hereby appointed as an Independent Director of the Company, not liable to retire by rotation in terms of Section 149(4), (10) & (11) and 152(6)(e) of the Companies Act, 2013 to hold office for a term of five years w.e.f th29 September 2017”. RESOLVED FURTHER THAT Mr. P.Venkateswara Reddy, Managing Director or/and Mr. G.V.Krishna Reddy, Joint Managing Director of the Company, be and is/are hereby severally authorised to file relevant forms with the Registrar of companies, for Andhra Pradesh & Telangana at Hyderabad and to do such other acts, deeds and things as may be considered necessary in connection with the above appointment” NOTES : 1. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote instead of him/herself and the proxy need not be a member of the company. A person can act as proxy on behalf of members not exceeding 50 (fifty) and holding in the aggregate not more than 10% of the total share capital of the Company carrying voting rights. A member holding more than 10% of the total share capital of the Company carrying voting rights may appoint a single person as proxy and such person cannot act as a proxy for any other person or shareholder. 2. The proxy form in order to be effective must be deposited at the registered office of the Company not less than 48 hours before the commencement of the meeting. 3. Corporate Members intending to send their authorized representative to attend the Annual General Meeting, pursuant to Section 113 of the Companies Act, 2013, are requested to send to the Company, a certified copy of the relevant Board Resolution together with the respective specimen signatures of those representative(s) authorized under the said resolution to attend and vote on their behalf at the Meeting. 4. Members, Proxies and Authorised representatives are requested to bring to the Meeting, the attendance slips enclosed herewith duly completed and signed mentioning therein details of their DP ID and Client ID/Folio No. 5. Members are informed that in case of joint holders attending the AGM, only such joint holder who is first in the order of names will be entitled to vote. 6. An Explanatory statement pursuant to Section 102(1) of the Companies Act, 2013, in respect of item nos. 4 to 10 of the Notice set out above, is annexed hereto. 7. M/s Big Share Service Private Limited is the Registrar and Share Transfer Agent of the Company. 8. a) The Company has notified closure of Register of Members and Share Transfer Books from 23rd September, 2017 to 29th September, 2017 (both days inclusive) for determining the names of members eligible for dividend on Equity Shares, if declared at the Meeting. b) The dividend as recommended by the Board of Directors, if approved by the Shareholders at the 25th Annual General Meeting, will be paid within 30 days from the date of declaration to those members whose names stand on the Register of Members of the Company as on the closing hours of business on 22nd September, 2017 and the dividend in respect of shares held in dematerialized form in the depository system

Notice to Shareholders 106 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

will be paid to the beneficial owners of the shares as on the closing hours of business on 22nd September, 2017 as per the details furnished by the National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). 9. Pursuant to the provisions of Sections 124 and 125 of the Companies Act, 2013 [erstwhile Section 205A(5) and 205C of the Companies Act, 1956], the dividends for the Financial Year 2009-10 and thereafter, which remain unpaid /unclaimed for a period of seven years will be transferred to the Investor Education and Protection Fund (“IEPF”) constituted by the Central Government. Members, who have not encashed their dividend warrant for the Financial Year 2009-10 or any subsequent financial year, are requested to claim such amount from the Secretarial Department of the Company / Share Transfer Agent. The due date for transfer of the unclaimed dividend amount for the financial year 2009-10 to the Investor Education and Protection Fund of the Central Government is 23rd October, 2017. 10. Pursuant to the provisions of Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 [erstwhile Investor Education and Protection Fund (Uploading of information regarding unpaid and unclaimed amounts lying with Companies) Rules, 2012], the Company has uploaded the details of unpaid and unclaimed amounts lying with the Company as on 28th September, 2016 (date of last Annual General Meeting) on the website of the Company (www.ksml.in), as also on the website of the Ministry of Corporate Affairs. 11. The members / claimants whose unclaimed dividend has been transferred to the Fund may apply for refund by making an application to the IEPF Authority in form IEPF-5 (available on iepf.gov.in) along with the requisite fees. The member / claimant can file only one consolidated claim in a financial year as per the IEPF Rules. 12. The Register of Directors and Key Managerial Personnel and their shareholding, maintained under Section 170 of the Companies Act, 2013, will be available for inspection by the members at the AGM. 13. The Register of Contracts or Arrangements in which the Directors are interested, maintained under Section 189 of the Companies Act, 2013, will be available for inspection by the members at the AGM. 14. Additional information pursuant to Regulation 36(3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 in respect of the directors seeking appointment/re-appointment at the ensuing Annual General Meeting is furnished and forms part of the Notice. The Directors have furnished the requisite declarations for their appointment/re-appointment. 15. Members desiring to seek any information on the Annual Accounts, the reports and all other documents to be explained at the meeting are requested to send their queries in writing to the Company at the Registered Office of the Company so as to reach at least 7 days before the date of the meeting to provide the required information. 16. Copy of the Annual Report 2016-17 including the Notice of the 25th AGM of the Company inter alia indicating the process and manner of e-voting along with the Attendance Slip, Proxy Form are being sent by electronic mode to the members whose email addresses are registered with the Company/ Depository Participant(s), unless any member has requested for a hard copy of the same. For members who have not registered their email addresses, physical copy of the Annual Report 2016-17 including the Notice of the AGM are being sent by the permitted mode. 17. The accounts, the reports and all other documents required under the law to be annexed thereto will be available for inspection between 10.00 A.M to 01.00 P.M at the Registered Office of the Company on any working day prior to the date of the Annual General Meeting. 18. Pursuant to Section 72 of Companies Act, 2013, member(s) of the Company may nominate a person in whom the shares held by him/her/them shall vest in the event of his/her/their unfortunate death. Member(s) holding shares in physical form may file nomination in the prescribed Form SH-13 and any variation / cancellation thereof can be made by giving notice in Form SH-14, as prescribed under the Companies (Share Capital and Debentures) Rules, 2014 with the Share Transfer Agent of the Company. The Forms can be obtained from the Share Transfer Agent of the company or from the Website of the Ministry of Corporate Affairs at www.mca.gov.in. In respect of shares held in dematerialized form, the nomination form may be filed with the respective Depository Participant. 19. Members holding shares in physical form are requested to notify/send the following to the Company’s Registrar and Transfer Agent at: Bigshare Services Private Limited, 306, 3rd Floor, Right Wing, Amrutha Ville, Opp. Yashodha Hospital, Raj Bhavan Road, Somajiguda, Hyderabad – 500 082 at the earliest not later than 22-09-2017. -Any change in their address/mandate/Bank details; and -Particular of their Bank Account, in case the same has not been sent earlier. In order to update their Bank details already registered with Bigshare Services Pvt Ltd or register their bank details

Notice to Shareholders 107 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

by submitting the duly completed Electronic Clearing Services (ECS) mandate form duly attached with this annual report and fill the required fields and forward the same to the above mentioned address of Companys’ Registrar and Share Transfer Agent in order to enable the company to remit the Dividend amount through ECS. 20. Members holding shares in the electronic form are advised to inform change in address/bank mandate directly to their respective Depository Participants. The address/bank mandate as furnished to the Company by the respective Depositories viz. NSDL and CDSL will be printed on the dividend warrant. 21. SEBI has mandated the submission of Permanent Account Number (PAN) by every participant in securities market. In view thereof, members who have not furnished PAN are requested to furnish the same as under : • Members holding shares in Physical form are submit their PAN details to the Registrar and Transfer Agents • Members holding shares in Electronic form are submit their PAN details to their Depository Participants with whom they are maintaining their demat accounts. and for securities market transactions and off market transactions involving transfer of shares in physical form of listed companies, it shall be mandatory for transferee(s) to furnish a copy of PAN Card to the Share Transfer Agent for registration of such transfer of shares. 22. As a part of "green initiative in the corporate governance", the ministry of corporate affairs vide its circular no's.17/2011 and 1/2011 dated 21.04.2011 respectively, has permitted the companies to serve the documents, namely, notice of the general meeting, balance sheet, profit and loss account, auditors' report, directors' report, etc. to the members through E-mail. The shareholders holding shares in physical form are requested to register their E-mail address with the Registrar and share transfer agents (Big Share Services Pvt. Ltd.,) by sending duly signed requested letter quoting their Registered folio no., name, address and E-mail ID to be registered in the E-MAIL REGISTRATION FORM, which is attached along with this Report and in case of shares held in demat form, the shareholders may register their E-mail addresses with their DPs (Depository Participants). EXPLANATORY STATEMENT PURSUANT TO THE PROVISIONS OF SECTION 102(1) OF THE COMPANIES ACT, 2013 ITEM No : 4 Though not mandatory, this statement is provided for your reference. M/s. Brahmayya & Co., Chartered Accountants (Firm Reg No : 000513S) were appointed as the Statutory Auditors of the Company from the conclusion of the 22nd Annual General Meeting (“AGM”) held on 27th September, 2014 till the conclusion of the 25th AGM. In terms of the said appointment, M/s. Brahmayya & Co., Chartered Accountants retire as Statutory Auditors of the Company at the conclusion of this Annual General Meeting. As per the provisions of Section 139 of the Companies Act, 2013 (“the Act”), no listed Company can appoint or re-appoint an audit firm as auditor for more than two terms of five consecutive years. A transit period of three years from the date of commencement of the Act was given to comply with the requirement. In view of the above provisions and pursuant to the recommendation of the Audit Committee, the Board of Directors of the Company at their meeting held on 26th August, 2017 proposed the appointment of M/s. Chevuturi Associates., Chartered Accountants (Firm Registration No. 000632S), as the Statutory Auditors of the Company for a period of 5 years, to hold office from the conclusion of this 25th AGM till the conclusion of the 30th AGM of the Company, subject to ratification by the members at every AGM. M/s. Chevuturi Associates., Chartered Accountants (Firm Registration No. 000632S), have consented to their appointment as the Statutory Auditors and have confirmed that if appointed, their appointment will be in accordance with the provisions of Section 139 read with Section 141 of the Act. None of the Directors or Key Managerial Personnel of the Company and their relatives are in any way concerned or interested, financially or otherwise, in the resolution set out at Item No. 4 of the notice. The Board recommends the resolution set forth in Item No. 4 of the notice for approval of the members of the Company. BRIEF PROFILE OF PARTNERS of M/s. CHEVUTURI ASSOCIATES & Co., Name of the Partner Raghunadha Rao Balineni Srinivasa Rao Cherukuri Educational Qualifications B.Com, FCA B.Com, FCA Membership Number 028105 209237 Professional Experience 26 years of Post Qualification experience 15 years of Post Qualification experience

Notice to Shareholders 108 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

ITEM No : 5 Mr M.V.Subba Reddy is aged about 59 years and has Post Graduate Degree in Commerce from Andhra University, Vizag, Andhra Pradesh. He is associated with the Company since its inception as purchase in- charge (Raw Material). He gained excellent knowledge in procurement of raw materials. He is also having experience in Accounts and looks after day to day administration of office and Accounts Department. Pursuant to Section 196, 197, 203 and other applicable provisions of the Companies Act, 2013 read with Schedule V to the said Act, the shareholders at their 22nd Annual General Meeting held on 27th September, 2014, appointed Sri M.V. Subba Reddy as Whole Time Director of the Company for a period of Three years with effect from 01-06-2014. The term of his appointment would come to an end on 31st May 2017. It is necessary to re-appointment him for another period of Five years. Hence the Board at their meeting held on 27-05-2017 decides to reappointment him as a Whole Time Director for another period of Five years on the recommendation of the Nomination and Remuneration Committee. “RESOLVED THAT in accordance with the provisions of Sections 196, 197 and 203 read with Schedule V and all other applicable provisions of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (including any statutory modification(s) or re-enactment thereof for the time being in force), approval of the Company be and is hereby accorded to the re-appointment of Sri M.V.Subba Reddy as Whole Time Director of the Company for a period of 5 (Five) years from 01st June, 2017 to 31st May, 2022, on the remuneration and on such terms and conditions as set out below with liberty and authority to the Board of Directors to alter and vary the terms and conditions of the said appointment from time to time within the scope of Schedule V of the Companies Act, 2013, or any amendments thereto or any re-enactment thereof as may be agreed to between the Board of Directors and Sri M.V.Subba Reddy.” Remuneration as per the details given below : I. Remuneration: a) Salary : Including dearness and other allowances ` 60,000/- p.m with a yearly increment of ` 4,000/-P.A. b) Perquisites : i) House Rent Allowance ` 10,000/- p.m ii) The Company will pay Residential Telephone Bill and Mobile Phone Bill iii) Incentive: In order to encourage in-house ginning, a incentive of ` 5/- (Five) for each pressed bale in the ginning unit. c) Insurance Premium : The Company agrees to bear health insurance premium for self and Spouse of such amount determined for sum of assured of ` 10,00,000/- for self and Spouse. d) The company also agrees to reimburse the additional medical expenditure upto maximum of ` 2,00,000/- lakhs if any incurred in excess of the insurance claim or claim not payable. e) Accidental insurance premium : The Company agrees to bear the premium to the extent of ` 4000/- p.a f) Payment of Gratuity at the end of the tenure shall not exceed 15 days salary for each completed year of service or at the rate as may be notified by the government from time to time. g) Reimbursement of leave travel concession for self and Spouse once in a year subject to a maximum of one month salary. II Minimum Remuneration : RESOLVED FURTHER THAT notwithstanding anything to the contrary herein contained, where in any financial year during the currency of the tenure of Sri M.V.Subba Reddy, the Company has no profits or its profits are inadequate, the Company will pay remuneration by way of salary, incentive, remuneration, benefits, perquisites and allowances as specifies above. FURTHER RESOLVED THAT the Board of Directors of the Company be and is hereby authorized to take such steps as may be necessary, desirable or expedient to give effect to this resolution. ITEM No : 6 The Board of Directors of the Company, on the recommendation of the Audit Committee, approved the appointment and remuneration of Mr. P.Srinivas, Cost Accountant (Membership No: 21170), Hyderabad, to conduct the audit of the cost records of the Company for the financial year ending 31st March, 2018. In terms of the Provisions of Section 148(3) of the Companies Act, 2013 read with Rule 14(a) (ii) of the Companies (Audit and Auditors) Rules, 2014, the remuneration, amounting to ` 30,000/- (Rupees Thirty Thousand only) as also

Notice to Shareholders 109 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

the payment of service tax as applicable and re-imbursement of out of pocket expenses incurred in connection with the aforesaid audit, payable to the Cost Auditor is required to be ratified by the Members of the Company. Accordingly, consent of the Members is sought to ratify the remuneration payable to the Cost Auditors. None of the Directors or Key Managerial Personnel and their relatives, are concerned or interested (financially or otherwise) in this Resolution. The Board commends the Ordinary Resolution set out at Item No. 6 for the approval of Members of the Company. ITEM NO : 7 The Equity shares of the Company are listed and actively traded on Bombay Stock Exchange. The members are aware that the operations and performance of the Company Has gone significantly over the past few years which has generated considerable interest in the Company’s equity shares in the market. The market price of the Company’s shares has also increased significantly. In order to improve the liquidity of the company shares in the stock market, the Board of Directors of the company at its meeting held on 26th August, 2017, subject to the approval of the shareholders, has recommended the issue of bonus shares to the holders of equity shares of the Company in the ratio of 1 equity share for every 4 fully paid up equity shares of ` 2/- each (i.e 1:4) The issue of bonus shares, by way of capitalizing reserves, is authorized by the Company’s Articles of Association. The paid-up capital as on aforesaid Board meeting date is ` 6,85,11,000 (Rupees Six Crores Eighty Five Lakhs Eleven Thousand Only). An amount of ` 1,71,27,750 (Rupees One Crore Seventy One Lakhs Twenty Seven Thousand Seven Hundred and Fifty Only) from the Reserves and Surplus (Excluding Revaluation Reserves) is required to be capitalized for the issue of bonus shares in the ratio of 1:4. After the bonus issue, the paid-up share capital would increase to ` 8,56,38,750 (Rupees Eight Crores Fifty Six Lakhs Thirty Eight Thousand Seven Hundred and Fifty Only). The proposal for capitalization of the said reserves and issue of bonus shares is now placed for consideration and approval of the members. The fully paid-up Bonus Shares shall be distributed to the Members of your Company, whose names shall appear on its Register of Members on the Record Date to be determined by the Board of Directors of your Company (which term shall be deemed to include any Committee thereof) for the purpose of issue of Bonus Shares, in the proportion of 1 (One) Bonus Share of ` 2/- each for every 4 (Four) Equity Shares of ` 2/- each held by them on the Record Date. The Bonus Shares so allotted shall rank pari-passu in all respects with the fully paid-up Equity Shares of the Company as existing on the Record Date fixed for the purpose of issue of such Bonus shares, save and except that they shall not participate in any dividend that may be declared before the ‘Record Date’. The Directors of the Company may be deemed to be concerned or interested in this item of business to the extent of their shareholdings in the company or to the extent of securities that may be allotted to them as Bonus shares. Save as aforesaid none of the directors of the company is in any way concerned or interested in this item of business. ITEM No : 8 As per the provisions of Section 20 of the Companies Act, 2013 a document may be served on any member by sending it to him by Post or by Registered post or by Speed post or by Courier or by delivering at his office address or by such electronic or other mode as may be prescribed. It further provides that a member can request for delivery of any document to him through a particular mode for which he shall pay such fees as may be determined by the Company in its General Meeting. Therefore, to enable the members to avail this facility, it is necessary for the Company to determine the fees to be charged for delivery of a document in a particular mode, as mentioned in the resolution. Hence it is proposed that the board of directors may authorised to determine the fees, from time to time, to be charged for delivery of a document in a particular mode, as mentioned in the resolution. Since the Companies Act, 2013 requires the fees to be determined in the General Meeting, the Directors accordingly commend the Ordinary Resolution at item no.8 of the accompanying notice, for the approval of the members of the Company. None of the Directors and Key Managerial Personnel of the Company and their relatives is concerned or interested, financial or otherwise, in the resolution set out at Item No.8. ITEM No : 9 The Board, at its meeting held on 26th August, 2017 appointed Mr. Ajeya Kallam (DIN : 00278595) as an additional director of the company with effect from such Board Meeting, pursuant to section 161 of the Companies Act, 2013. Hence he will hold office up to the date of the ensuing Annual General Meeting. The Company has received consent in writing to act as director in Form DIR-2 and intimation in Form DIR-8

Notice to Shareholders 110 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

pursuant to Rule 8 of the Companies (Appointment and Qualifications of Directors) Rules, 2014, to the effect that he is not disqualified under sub- section (2) of section 164 of the Companies Act, 2013. The Board based on the experience/expertise declared by Mr.Ajeya Kallam, is of the opinion that Mr.Ajeya kallam has the requisite qualification to act as an Independent Director of the Company. Accordingly, the Board recommends the resolution no 9, in relation to appointment of Mr.Ajeya Kallam as an Independent Director, respectively, for the approval by the shareholders of the Company. None of the Directors and Key Managerial Personnel of the Company and their relatives is concerned or interested, financial or otherwise, in this resolution except Mr. Ajeya Kallam. BRIEF PROFILE OF Mr AJEYA KALLAM : Mr.Ajeya Kallam, IAS (Rtd), 1983 Batch, a post graduate in Agriculture with a Masters in Business Administration from Australia had put in 34 years in Indian Administrative service. Mr Kallam had handled many important assignments in his career both in State and Union governments. He worked as Sub collector and PO, ITDA in Nalgonda and Khammam Districts. Later he was given responsibility of managing West Godavari and Vizag Districts as District Collector. He spent nearly 7 years in Agriculture sector as Head of the departments of Horticulture and Agriculture besides working as principal secretary, Agriculture. He was instrumental in building horticulture department as its first HOD. He gave a new direction to Agriculture extension with farming situation specific strategies. He was also Vice-chancellor of the Agriculture university for a short while. As commissioner, Endowments and EO, TTD, he brought in significant reforms. In the infrastructural sector, he worked as CMD, Transco as well as Chairman, Vizag port trust On specific invitation, he joined as principal secretary to the then Chief Minister, Sri Kiran Kumar reddy. Subsequently, he handled the State's Finance and Revenue departments as Special Chief Secretary. Finally, he retired as Chief Secretary to Government of AP during 2017. ITEM No : 10 The Board, at its meeting held on 26th August, 2017 appointed Mr. V.Ramgopal (DIN: 02889497) as an additional director of the company with effect from such Board Meeting, pursuant to section 161 of the Companies Act, 2013. Hence he will hold office up to the date of the ensuring Annual General Meeting. The Company has received consent in writing to act as director in Form DIR-2 and intimation in Form DIR-8 pursuant to Rule 8 of the Companies (Appointment and Qualifications of Directors) Rules, 2014, to the effect that he is not disqualified under sub- section (2) of section 164 of the Companies Act, 2013. The Board based on the experience/expertise declared by Mr.V.Ramgopal, is of the opinion that Mr.V.Ramgopal has the requisite qualification to act as an Independent Director of the Company. Accordingly, the Board recommends the resolution no 10, in relation to appointment of Mr.V.Ramgopal as an Independent Director, respectively, for the approval by the shareholders of the Company. None of the Directors and Key Managerial Personnel of the Company and their relatives is concerned or interested, financial or otherwise, in this resolution except Mr. V.Ramgopal. BRIEF PROFILE OF Mr.V.RAMGOPAL : Mr. V.Ramgopal is aged 65 years. He has a Masters Degree in Bio-Chemistry. He joined as Probationary Officer in Indian bank in 1973, before moving to Andhra Bank in 1976. In senior positions he served as Zonal Manager (DGM) in Zonal Office, Kolkata and Guntur besides other assignments in Andhra Bank. On promotion to General Manager, he was General Manager in- charge of Investments and International Banking Division in Andhra Bank. He also served as General Manager in Head office, Andhra Bank. Mr. Ramgopal was appointed as Executive Director of Indian Bank and served from December 7, 2009 to December 31, 2011. He was Nominated as Chairman and Director of Indian Bank Housing Ltd., and Indian Bank Merchant Banking Services Ltd., subsidiaries of Indian Bank during his tenure as ED in the years 2010 and 2011. During 2011, he was Nominee Director by Indian Bank on the Board of Reliance Asset Management Company Ltd. Mr.Ramgopal was nominated as member of Risk Management Committee of Indian Banks Association during 2010 and 2011. Brief Note on the Directors seeking appointment/re-appointment at the 25th Annual General Meeting : Pursuant to Secretarial Standards-2 and Regulation 36(3) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, brief particulars of the directors proposed for re-appointment/ appointment at the Annual General Meeting are given below (Item No.3 & 5 to the notice of the shareholders)

Notice to Shareholders 111 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

Name of the Director Poluri Venkateswara Reddy

DIN 00018677

Date of Birth 16-04-1951

No.of Shares held in the Company 9,21,000

Mr P. Venkateswara Reddy is aged about 66 years and hailing from Agricultural Family. He is a much disciplined personality with lot of commitment, hard work and dedication. He is having Expertise in Specific functional areas over 43 years of experience in Ginning and Spinning Industry. He handles the procurement of Raw cotton and looks after all the Civil construction activities of the company.

Directorships in other Listed Companies Nil

Name of the Director Movva Venkata Subba Reddy

DIN 00018719

Date of Birth 09-08-1957

No.of Shares held in the Company 3,42,500

Mr M.V.Subba Reddy is aged about 59 years and has a Post Graduate Degree in Commerce from Andhra University, Vizag, Andhra Pradesh. He is associated with the Company since its Expertise in Specific functional areas inception as purchase in-charge (Raw Material). He gained excellent knowledge in procurement of raw materials. He is also having experience in Accounts and looks after day to day administration of office and Accounts Department.

Directorships in other Listed Companies Nil

By the order of Board of Directors Place : Chowdavaram, Guntur P.Venkateswara Reddy Date : 26-08-2017 Managing Director DIN : 00018677

Notice to Shareholders 112 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

SHAREHOLDER INSTRUCTIONS FOR E-VOTING E-Voting instructions Pursuant to the Provisions of Section 108 of the Companies Act, 2013 and Rule 20 of Companies (Management and Administration) Rules, 2014, the Company is pleased to offer e-voting facility to the members to cast their votes electronically on all resolutions set forth in the Notice convening the 25th Annual General Meeting to be held on Friday, 29th September, 2017, at 03.00 PM IST. The Company has engaged the services of Central Depository Services Limited (CDSL) to provide the E-Voting facility. The instructions for shareholders voting electronically are as under : The E-Voting Event Number and period of E-Voting are set out below : EVEN (E-VOTING EVENT NUMBER) : 170829013 COMMENCEMENT OF E-VOTING : 26th September, 2017 at 09.00 A.M END OF E-VOTING : 28th September, 2017 at 05.00 P.M STEPS & INSTRUCTIONS FOR E-VOTING : The instructions for shareholders voting electronically are as under : (i) The voting period begins on 26th September, 2017 at 09.00 A.M and ends on 28th September, 2017 at 05.00 P.M. During this period shareholders’ of the Company, holding shares either in physical form or in dematerialized form, as on the cut-off date (record date) of 22nd September, 2017 may cast their vote electronically. The e-voting module shall be disabled by CDSL for voting thereafter. (ii) The shareholders should log on to the e-voting website www.evotingindia.com. (iii) Click on Shareholders. (iv) Now Enter your User ID a. For CDSL: 16 digits beneficiary ID, b. For NSDL: 8 Character DP ID followed by 8 Digits Client ID, c. Members holding shares in Physical Form should enter Folio Number registered with the Company. (v) Next enter the Image Verification as displayed and Click on Login.

For Members holding shares in Demat Form and Physical Form Enter your 10 digit alpha-numeric *PAN issued by Income Tax Department (Applicable for both demat shareholders as well as physical shareholders) v Members who have not updated their PAN with the Company/Depository Participant are requested PAN to use the first two letters of their name and the 8 digits of the sequence number in the PAN field. v In case the sequence number is less than 8 digits enter the applicable number of 0’s before the number after the first two characters of the name in CAPITAL letters. Eg. If your name is Ramesh Kumar with sequence number 1 then enter RA00000001 in the PAN field. Enter the Date of Birth as recorded in your demat account or in the company records for the said DOB demat account or folio in dd/mm/yyyy format. Enter the Dividend Bank Details as recorded in your demat account or in the company records Dividend for the said demat account or folio. Bank v Please enter the DOB or Dividend Bank Details in order to login. If the details are not recorded Details with the depository or company please enter the member id / folio number in the Dividend Bank details field as mentioned in instruction (iv).

(vi) If you are holding shares in demat form and had logged on to www.evotingindia.com and voted on an earlier voting of any company, then your existing password is to be used. (vii) If you are a first time user follow the steps given below:

E-Voting Instructions 113 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

(viii) After entering these details appropriately, click on “SUBMIT” tab. (ix) Members holding shares in physical form will then directly reach the Company selection screen. However, members holding shares in demat form will now reach ‘Password Creation’ menu wherein they are required to mandatorily enter their login password in the new password field. Kindly note that this password is to be also used by the demat holders for voting for resolutions of any other company on which they are eligible to vote, provided that company opts for e-voting through CDSL platform. It is strongly recommended not to share your password with any other person and take utmost care to keep your password confidential. (x) For Members holding shares in physical form, the details can be used only for e-voting on the resolutions contained in this Notice. (xi) Now select the Electronic Voting Sequence Number (EVSN) along with “Kallam Spinning Mills Limited” from the drop down menu and click on “SUMBIT”. (xii) On the voting page, you will see “RESOLUTION DESCRIPTION” and against the same the option “YES/NO” for voting. Select the option YES or NO as desired. The option YES implies that you assent to the Resolution and option NO implies that you dissent to the Resolution. (xiii) Click on the “RESOLUTIONS FILE LINK” if you wish to view the entire Resolution details. (xiv) After selecting the resolution you have decided to vote on, click on “SUBMIT”. A confirmation box will be displayed. If you wish to confirm your vote, click on “OK”, else to change your vote, click on “CANCEL” and accordingly modify your vote. (xv) Once you “CONFIRM” your vote on the resolution, you will not be allowed to modify your vote. (xvi) You can also take out print of the voting done by you by clicking on “Click here to print” option on the Voting page. (xvii) If Demat account holder has forgotten the same password then Enter the User ID and the image verification code and click on Forgot Password & enter the details as prompted by the system. (xviii) Shareholders can also cast their vote using CDSL'S mobile app m-voting available for android based mobiles. The m-voting app can be downloaded from Google play store. Please follow the instructions as prompted by the mobile app while voting on your mobile. (xix) Note for Non – Individual Shareholders and Custodians v Non-Individual shareholders (i.e. other than Individuals, HUF, NRI etc.) and Custodian are required to log on to www.evotingindia.com and register themselves as Corporates. v A scanned copy of the Registration Form bearing the stamp and sign of the entity should be emailed to [email protected]. v After receiving the login details a compliance user should be created using the admin login and password. The Compliance user would be able to link the account(s) for which they wish to vote on. v The list of accounts should be mailed to [email protected] and on approval of the accounts they would be able to cast their vote. v A scanned copy of the Board Resolution and Power of Attorney (POA) which they have issued in favour of the Custodian, if any, should be uploaded in PDF format in the system for the scrutinizer to verify the same. (xx) In case you have any queries or issues regarding e-voting, you may refer the Frequently Asked Questions (“FAQs”) and e-voting manual available at www.evotingindia.com, under help section or write an email to [email protected]. (xxi) M/s K.Srinivasa Rao & Co., Company Secretaries, Guntur (Entity ID : 34721) has been appointed as the Scrutinizer to Scrutinize the e-voting process in a fair and transparent manner.

E-Voting Instructions 114 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

KALLAM SPINNING MILLS LIMITED KALLAM CIN : L18100AP1992PLC013860 Chowdavaram, Guntur-522019, AP, INDIA. Ph: 0863-2344016 - Fax : 0863-2344000 Email : [email protected] PROXY FORM (Pursuant to section 105(6) of the Companies Act, 2013 and rule 19(3) of the Companies (Management and Administration) Rules, 2014)

E-mail Id : Name of the Member(s) : Folio No/ Client ID : Registered Address : DP ID :

I/We, being member of ……………………………..shares of Kallam Spinning Mills Limited, hereby appoint 1)…………………………………of …………………………..having email ID …………...... ………….. or failing him 2)……………………… ………...of …… …………………….having email ID ……………………...... or failing him 3)………………………………....of … ……………………….having email ID …………………...... …………………. and whose signature(s) are appended below as my/our proxy to attend and vote (on a poll) for me/us and on my /our behalf at the 25th ANNUAL GENERAL MEETING of the company to be held at Chowdavaram, Guntur -522019, Andhra Pradesh, India, on 29th September, 2017 at 3.00 pm and at any adjournment(s) thereof in respect of such resolutions as are indicated below. Resolutions For Against 1. Consider and Adopt: Audited Financial Statements, Reports of the Board of Directors and Auditors 2. Declaration of Dividend on Equity Shares 3. Re-appointment of Sri P.Venkateswara Reddy who retires by rotation 4. Appointment of M/s. Chevuturi Associates., Chartered Accountants (Firm Registration No. 000632S) as Statutory Auditors and fix their remuneration 5. Re-appointment of Sri M.V. Subba Reddy as a Whole Time Director of the Company 6. Ratification of the remuneration of Mr. P.Srinivas, Cost Accountant for the financial year ending 31st March, 2018 7. Issue of Bonus Shares 8. Determination of Fees for Delivery of Documents through a particular mode 9. Appointment of Mr. Ajeya Kallam (DIN: 00278595) as an Independent Director 10. Appointment of Mr. V.Ramgopal (DIN: 02889497) as an Independent Director

Signed this...... day of …………….2017 ……...... Affix /Signature of the member Revenue Stamp

Signature of the first proxy holder Signature of the Second proxy holder Signature of the Third proxy holder Note: this form, in order to be effective should be duly stamped, completed, signed and deposited at the Registered Office of the Company, Not Less than 48 hours before the meeting $ $ $ KALLAM SPINNING MILLS LIMITED KALLAM CIN : L18100AP1992PLC013860 Chowdavaram, Guntur-522019, AP, INDIA. Ph: 0863-2344016 - Fax : 0863-2344000 Email : [email protected] ATTENDANCE SLIP DP Id Folio No.

Client Id No. of Shares NAME AND ADDRESS OF THE SHAREHOLDER

I hereby record my presence at the 25th ANNUAL GENERAL MEETING of the Company held on Friday, The 29th September, 2017 at 3.00 P.M. at Chowdavaram, Guntur- 522019,Andhra Pradesh, India.

Name of the member/Proxy (IN BLOCK LETTERS) Signature of the member/Proxy Note: Please full up this attendance slip and hand it over at the entrance of the meeting hall, Members are requested to bring their copies of the Annual Report to the meeting.

Proxy Form 115 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

116 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

FIXED ASSETS

40000 36063 35000 29723 30028 27947 30000 25000 20000 14815 13121 15000 9872 11422

` in Lakhs 8300 10000 5807 6551 5000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

RESERVE AND SURPLUS

9000 8029 8000 6759 7000 6333 6000 5417 5000 4047 4000 3238 3299 Year 3000 1983 1488 2000 941 1215 1000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

` in Lakhs

TURNOVER

28681 26901 30000 24413 21464 25000 18303 15197 20000 13577

15000 8306 6724 ` in Lakhs 10000 4986 6037 5000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year

Financial Highlights 117 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

NET WORTH

9000 8567 8000 7298 7000 6788 6102 6000 5000 4732 4000 3925 3985 3000 2670 2176 ` in Lakhs 1903 2000 1630 1000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year

BOOK VALUE

140 125 120 106 102 100 89

80 69 58 60 57 38.98 40 31.76 23.79 27.77 ` Per Share ` Per 20 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year

MARKET PRICE

131.1 140 126.95 125 118.35 115.05 120 113 100 81.95 81.95 76 76.75 80 72.35 73.3 60 40 ` Closing Share Price ` Closing Share 20 0 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17

Month

Financial Highlights 118 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

ROUTE MAP For the Venue of the 25th Annual General Meeting of Kallam Spinning Mills Limited

Route Map 119 KALLAM KALLAM SPINNING MILLS LIMITED 25th ANNUAL REPORT 2016-17

120