KITPLY INDUSTRIES LIMITED ANNUAL REPORT 2010-2011 DIRECTOR`S REPORT To the Members of Kitply Industries Limited Your Directors

have pleasure in presenting the 28th Annual Report and Audited Accounts for the financial year ended March 31, 2011. FINANCIAL RESULTS Year ended 31st March, 2011 Turnover during the year Loss Before Depreciation and Taxation Add/Less: Depreciation/Amortisation Loss Before Taxation & Exceptional Items Add/Less: Exceptional Items Expenses Income Loss After Taxation & Prior Period Items Add/Less: Prior Period items Net Loss Loss brought forward from previous year Less: Amount adjusted against Business Reorganisation Reserve Deficit Carried to Balance Sheet Earning Per Share (in Rs.) DIVIDEND In view of the losses, your Directors are unable to recommend any for the financial year ended March 31, 2011. REVIEW OF OPERATIONS : dividend (-) 6524.18 (-) 6524.18 (-) 20781.66 (-) 27305.84 (19.12) (-) 1967.27 333.60 (-) 2300.87 (-) 40345.22 21864.43 (-) 20781.66 (6.74) (-) 4538.22 75.66 (-) 785.29 8531.48 (-) 1918.18 (-)143.44 (-) 2061.62 the

(Rs. in lacs) Year ended 31st March, 2010 8113.02 (-) 1029.15 (-) 152.83 (-) 1181.98

During the year under review, operations did not show much improvement compared to last year as it continued to suffer from inadequate working capital, preventing the optimum capacity utilization in the plywood division. Your Company, has recorded a turnover of Rs. 8531.48 lacs in comparison to that of Rs. 8113.02 lacs in the previous year ended March 31, 2010. The loss before exceptional items increased to Rs. 2061.62 lacs as against Rs.1181.98 lacs in the preceding year mainly due to more trading activities and reduced manufacturing attributable to extreme paucity of working capital. The net loss substantially increased to Rs.6524.18 from Rs. 2300.87 lacs. This is mainly due to an exceptional depletion in the value of agro forestry owing to a severe pest attack resulting in loss of Rs. 4538.22. A fresh valuation is under process. However, it is to be noted that despite the Company`s net worth is negative, no reference is required to the Board of Industrial and Financial Rehabilitation (BIFR). This is because the financial assets of the Company is acquired by an asset reconstruction company (ARCIL), under Section 5 (1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI). Your Company shall continue to focus on implementing best practices in plantation management and has initiated steps to gradually overcome working capital constraint. A strategic business plan for revival of operations has been put in place and the same is being implemented. Your Company is capable of generating higher turnover and profits in buoyant plywood market. MANAGEMENT DISCUSSION AND ANALYSIS The Management Discussion and Analysis Report, forming part of the Directors` Report for the year under review, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges, is discussed in a separate section of this Annual Report. DIRECTORS India Debt Management Private Limited has withdrawn its nominee directors Mr. Anish Kishore Modi and Mr. Navin Sambtani with effect from August 11, 2010. Asset Reconstruction Company (India) Limited has also withdrawn its nominee director Mr. S. V. Venkatakrishnan with effect from August 20, 2010. Mr. Nitin Sahini and Mr. Rajnikant C Dani, resigned from the Board on November 24, respectively. directors 2010 and of the Company April 9, 2011 services Mr. re-

The Board places on record its deep appreciation of the valuable rendered during their tenure as Directors.

Pursuant to Article 107 of the Articles of Association of the Company, Mahesh Shah retires by rotation and being eligible, offers himself for appointment. The Board has recommended his re-election.

DIRECTORS` RESPONSIBILITY STATEMENT Pursuant to the provisions of Section 217(2AA) of the Companies Act, 1956, based on the representation received from the operating management, with respect to the Balance Sheet of the Company as at March 31, 2011 and the Profit & Loss Account for the year ended on that date (hereinafter collectively referred to as the `Annual Accounts`) your Directors confirm that (i) in the preparation of the Annual Accounts, the Standards have been followed ; applicable Accounting

(ii) appropriate accounting policies have been selected and applied consistently and judgments and estimates are made prudently and reasonably so as to give a true and fair view of the state of affairs of the Company and of the loss of the Company; (Mi) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the aforesaid Act, for safeguarding the Assets of the Company and for preventing and detecting fraud and other irregularities; and (iv) the Annual Accounts have been prepared on a `going concern` basis. AUDITOR`S OBSERVATION Observations of the Auditors, read together with the relevant Notes to the Accounts and Accounting Policies, are self-explanatory, as such, no further clarifications/explanations are required. AUDITORS M/s. S. R. Batliboi & Co. Chartered Accountants, Statutory Auditors of the Company shall retire at the conclusion of the ensuing Annual General Meeting and are eligible for reappointment. Accordingly, it is proposed to re-appoint them as Statutory Auditors of the Company to hold office until conclusion of the next Annual General Meeting. The retiring auditors have, under section 224(1 B) of the Companies Act, 1956, furnished certificate of their eligibility for the reappointment. The operations of the Company do not require audit of cost accounts, in terms of the provisions of the Companies Act, 1956 read with the Rules made thereunder. CORPORATE GOVERNANCE REPORT Pursuant to Clause 49 of the Listing Agreement, a separate section on Corporate Governance forming part of the Directors` Report and the Certificate from the Company`s Auditors confirming compliance of Corporate Governance norms are included in the Annual Report. LISTING WITH STOCK EXCHANGES Your Company continues to remain listed with National Stock Exchange of India Limited and the Gauhati Stock Exchange Limited and listing fee for the current financial year to both these exchanges has been paid by the Company.

FIXED DEPOSITS Your Company review. DISCLOSURES 1. None of the employees of the Company were in receipt of remuneration during the year ended March 31, 2011 in respect of whom particulars are required to be furnished under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, as amended. 2. Information as prescribed under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, as amended, is annexed hereto and forms part of this report. ACKNOWLEDGEMENT Your Directors wish to convey their gratitude and appreciation to all employees and business associates for their valuable contribution during the year. Your Directors also wish to thanks the members, investors, bankers, government authorities dealers, suppliers for their co-operation and support. For and on behalf of the Board of Directors Place: Kolkata Date : May 30, 2011 (P.K. Goenka) Chairman & Managing Director IN THE has not accepted any fixed deposits during the year under

INFORMATION PURSUANT TO THE COMPANIES (DISCLOSURE OF PARTICULARS REPORT OF BOARD OF DIRECTORS) RULES, 1988 FORM A - FOR PLWOOD UNIT

The Company has already taken and implemented energy conservation measures whenever possible and there are no major areas where further energy conservation measures can be taken. However, efforts to conserve and optimize the use of energy through improved operational methods and other means will continue. FORM -B A. FORM OF DISCLOSURE OF PARTICULARS WITH TECHNOLOGY, RESEARCH AND DEVELOPMENT (R&D). Research and Development (R & D): 1. Specific areas in which R&D carried out by the Company. The R&D efforts of the Company are directed towards quality control, improvement/ upgradation of existing products and development of new products. 2. Benefits derived as a result of the above R&D. Improvement in product quality, cost effectiveness and development of new value added products. 3. Expenditure on R&D 2010-2011 2009-2010 RESPECT OF ABSORPTION OF

(a) Capital (b) Recurring (c) Total (d) Total R&D expenditure as a percentage of total Turnover.

Technology absorption, adaptation and innovation: 1. The Company has introduced slicing process, increased the face yield of raw materials. which has significantly utilize adding years

2. The introduction of slicing process has helped the Company to non-peelable logs resulting in quantitative saving and also decorative texture in the products.

3. The Company has not imported any technology during the last five and there is no technical collaboration with any party. B. FOREIGN EXCHANGE EARNINGS AND OUTGO The particulars of Foreign Exchange earned/utilized during the been given under the Notes to Accounts. year

have

For and on behalf of the Board of Directors Place: Kolkata Date : May 30, 2011 (P.K. Goenka) Chairman & Managing Director

MANAGEMENT DISCUSSION AND ANALYSIS REPORT INDUSTRY STRUCTURE AND THE DEVELOPMENTS Growing at an average of 8% a year, driven mostly by domestic demand, India is touted as one of the fastest growing emerging economies in the world, offering immense potential across sectors, According to a World Bank report, the country`s economic growth is expected to outpace China in the year 2011. Foreign investors are sensing opportunities in sectors like housing and real estate to invest their funds. During fiscal year 2009-10, the real estate sector was successful in attracting FDI of about $2.8 billion. Demand for residential space is expected to touch 4.25 million residential units, while demand for office space is projected to hit 400 million sq. ft. between 2010 and 2014. The growth of wood, plywood and allied products industry, is also expected to benefit from the booming housing sector. The wood products being used by the construction and building industry are mainly plywood, sawn wood and wood based panels. To meet the changing customer requirement, the domestic plywood industry is constantly innovating its product offerings. The Indian furniture market, which is pegged at $8 billion, is growing at a CAGR of 30% in the organised sector, representing a minimal 15% of the whole industry. Currently there are 10,500 furniture importers in the organised segment importing mainly from Italy, Germany, Spain and Malaysia. The branded furniture market comprising of residential and commercial

furniture, was valued at $1.3 billion in 2008 and expected to billion in 2012, according to KPMG report.

touch

$3.7

Looking at the current industry growth rate, Kitply is well positioned to benefit from the opportunity; but its paucity in working capital has hampered its current year`s production. FUTURE OUTLOOK, OPPORTUNITIES & THREATS In the face of recent political developments round the world, international trade has changed, which has brought about a promising outlook for Indian wood products in the world market. The European countries and the US are on the lookout for alternative suppliers of wood products. India can play a crucial role, in the coming years, in fulfilling the requirements of developed countries particularly in respect of wood products. The industry based on agro-forestry, particularly plywood, is now expecting a robust growth in the wake of the real estate business showing signs of recovery in the year ahead. The Company is expecting to improve its performance and maintain its market standing in the plywood business by leveraging its strong brand. Since plywood is eco-friendly and a substitute for wood, there should be a concerted campaign for its use on both the commercial and domestic fronts. Institutions like the Forest Research Institute (FRI) should conduct research on which new species can be utilised in plywood. The property market is booming once again, firming up the demand for wood and wood products. The Company will continue its focus on (a) high-capacity utilization (b) improving efficiencies levels in raw material sourcing, production and distribution (c) improving the product mix (d) upgradation of products (e) cost rationalisation (f) improving service levels to dealers and customers, and (g) further leveraging on its strong brand recall and competitive edge. But the industry still has a grouse - that the government has not given it any support or preference, despite it being an alternative to precious forest wood in the field of research & development. Competition from both unorganised and other organised players has led to difficulties in improving market share. Moreover the industry is facing a raw material shortage of 30-50% and stringent pollution norms, which may be a big threat in future. RISK AND CONCERNS Periodically risks assessment exercises are being carried out by the Management to take proper steps for minimizing the various risks involved in this business segment. For the better management of working capital the Company follows a credit policy which factors the credentials of dealers/customers and market conditions. Wherever necessary and possible, insurance cover is taken for risk mitigation. The Management does not perceive any major technological or environmental risk to the Company in the near future except for risks emanating from working capital shortage. There is severe working capital constraint in the organization and the Management is exploring options for infusing/raising working capital. The Company continues to follow a

suitable strategy to modify its risk significantly reducing key business risks.

profile

by

eliminating fluctuation

and on

The company is exposed to the risk of scarcity and price raw-material in all its products. The company

proactively manages these risks in inputs through better inventory management, vendor development and relationship. The company mitigates the impact of price risk on its product with its strong reputation for quality, product differentiation and service to customers with better marketing network. SEGMENTS WISE PERFORMANCE The Company mainly operates in the plywood manufacturing business. The Company also has an agro-forestry division wherein it carries out managed plantation activity in a large ongoing agro forestry project covering an area of 1602 acres in the districts of Durg and Raipur in Chhattisgarh. There has been a pest attack on a large number of trees at various sites of the Company`s Agro Forestry which has caused significant damage to the timber plantation. Assessment for impairment to the plantations on account of above pest attack by an external valuer is presently under process. Pending such assessment, loss amounting to Rs. 4538.22 lacs based on management estimates has been provided for in the books of account. While this division currently does not contribute to the Company`s revenues, it is expected to generate cashflows when the plantations mature for optimal harvesting. INTERNAL CONTROL SYSTEM AND ADEQUACY The Company`s internal control system has been designed to provide for: * Accurate reporting recording of transactions with internal checks and prompt

* Adhere to Applicable Accounting standards and Policies * Review of capital investments and long term business plans. * Periodic review meetings to manage effective implementation of system. * Compliance with applicable statutes, policies, listing requirements operating guidelines of the company. * Effective use of resources and safeguarding of assets. * IT systems with in built controls to facilitate all of the above. * All assets are safeguarded and protected against loss from unauthorized use or disposition, and that the transactions are authorized, recorded and reported correctly. The Company has a budgetary control system and actual performance is reviewed with reference to budget by the management from time to time. The and

Company has a well-defined organization structure, authority levels internal guidelines and rules for conducting business transactions. The Audit Committee members review the Internal Audit Report quarterly key observations are discussed for implementation and correction. FINANCIAL PERFORMANCE

and and

During the Financial Year ended March 31, 2011, the Company achieved Sales of Rs. 8531.48 lacs as against Rs. 8113.02 lacs for the previous year ended March 31, 2010. The loss before taxation and Prior Period Items was Rs. 6524.18 lacs as against Rs. 1967.27 lacs in the previous year. MATERIAL DEVELOPMENT IN HUMAN RESOURCE/ INDUSTRIAL RELATION The Company is committed to human resource management & development as the employees are one of the most important stakeholders of the Company. The Human Resource Department is managed by qualified professionals and there is a continuing endeavor to improve the knowledge, skills and attitude of employees. Moreover, the Company also continues to focus on the safety, training and development of employees. Industrial Relations remained harmonious and cordial during the period. CAUTIONARY STATEMENT Statements in the Management Discussion and Analysis, describing the Company`s objectives, outlook and expectations, may constitute "forwardlooking statements" within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed or implied. Several factors make a significant difference to the Company`s operations, including climatic conditions, economic scenario affecting demand and supply, Government regulations, taxation, natural calamity and such other factors over which the Company does not have any direct control.

Management Discussions
INDUSTRY STRUCTURE AND THE DEVELOPMENTS With the realty sector limping back to normalcy, after a phase of slowdown last year,the Indian plywood industry has also been a natural beneficiary. The plywood business,which derives its growth from the real estate sector, is optimistic of a stable year aheadas the overall economy shows signs of strong recovery. Despite the downturn in FY-2009, the Indian organized furniture Industry registered ahealthy growth of about 13-15%, and is expected to grow around 25-30% over the next fiveyears, fueled by real estate, tourism and hospitality growth, rising per capita income andthe increasing consumption of lifestyle products, including furniture. The India furnitureindustry is estimated to be about Rs. 36,000 crore, out of which, 85% comes under theunorganized sector. However, with consumers shifting from unbranded to branded products,the organized sector is expected to grow at a faster rate than the overall industry. Looking at the current scenario of the industry, Kitply is well positioned to benefitfrom the opportunity. FUTURE OUTLOOK, OPPORTUNITIES & THREATS Going forward the Company is expecting to improve its performance and maintain itsmarket standing in the plywood business by leveraging its strong brand. Recent trendssuggest that the domestic economy has recovered well from the slowdown and this isreflected in demand for new housing projects. The property market is booming once again,firming up the demand for wood and wood products. The Company will continue its focus on (a) high-capacity utilization, (b) improvingefficiencies levels in raw material sourcing, production and distribution, (c) improvingthe product mix, (d) upgradation of products, (e) cost rationalisation, (f) improvingservice levels to dealers and customers- and (g) further leveraging on its strong brandrecall and competitive edge. The Indian plywood industry is highly fragmented, with over 80% constituted of theunorganised sector, from which the Company might face intense competition. Competitivepricing from the unorganized sector is another major concern, which might impact company'ssales volumes and growth prospects. The company can also face tough competition from theorganized sector in the future, which could exert pressure on its growth. Global timber plantation is not keeping up with the demand for timber and hence timberprice have been firm both globally and domestically. Very few Corporate have invested inforestry in India which has led to strengthening of domestic timber price and resulted inhigh dependence on imports of timber. The market demand for teak and other plantationtimber continues to be robust. Myanmar has put restrictions on export of teak which augurswell for us as most of our plantations are white teak-khamar.

RISK AND CONCERNS Periodically risks assessment exercises are being carried out by the Management to takeproper steps for minimizing the various risks involved in this business segment. For thebetter management of working capital the Company follows a credit policy which factors thecredentials of dealers/customers and market conditions. Wherever necessary and possible, insurance cover is taken for risk mitigation. TheManagement does not perceive any major technological or environmental risk to the Companyin the near future except for risks emanating from working capital shortage. There issevere working capital constraint in the organization and the Management is exploringoptions for infusing/raising working capital. The Company continues to follow a suitablestrategy to modify its risk profile by eliminating and significantly reducing key businessrisks. SEGMENTS-WISE PERFORMANCE The Company mainly operates in the plywood manufacturing business. The Company also has an agro-forestry division wherein it carries out managedplantation activity in a large ongoing agro forestry project covering an area of 1602acres in the districts of Durg and Raipur in Chattisgarh. The Company is carrying outintensive maintenance activities and implementing best practices in plantation management.While this division currently does not contribute to the Company's revenues, it isexpected to generate cashflows when the plantations mature for optimal harvesting. INTERNAL CONTROL SYSTEM AND ADEQUACY The Company has a proper and adequate system of internal controls to ensure that allassets are safeguarded and protected against loss from unauthorized use or disposition,and that the transactions are authorized, recorded and reported correctly. The Company hasa budgetary control system and actual performance is reviewed with reference to budget bythe management from time to time. The Company has a well-defined organization structure,authority levels and internal guidelines and rules for conducting business transactions.The internal auditors of the Company conduct regular audits to ensure the adequacy ofinternal control systems, adherence to management instructions and policies, andcompliances with the relevant laws and regulations. The Audit Committee members review theInternal/Concurrent Audit Reports quarterly and key observations are discussed forimplementation and correction. FINANCIAL PERFORMANCE During the Financial Year ended March 31, 2010, the Company achieved Sales ofRs.8113.02 lacs as against Rs. 9112.58 lacs for the previous eighteen months period endedMarch 31, 2009. The loss before taxation and Prior Period Items was Rs. 1967.27 lacs asagainst Rs. 3786.79 lacs in the previous eighteen months period ended March 31, 2009.

MATERIAL DEVELOPMENT IN HUMAN RESOURCE/ INDUSTRIAL RELATION The Company is committed to human resource management & development as theemployees are one of the most important stakeholders of the Company. The Human ResourceDepartment is managed by qualified professionals and there is a continuing endeavor toimprove the knowledge, skills and attitude of employees. Moreover, the Company alsocontinues to focus on the safety, training and development of employees. IndustrialRelations remained harmonious and cordial during the year. CAUTIONARY STATEMENT Statements in the Management Discussion and Analysis, describing the Company'sobjectives, outlook and expectations, may constitute "forward-lookingstatements" within the meaning of applicable laws and regulations. Actual results maydiffer materially from those expressed or implied. Several factors make a significantdifference to the Company's operations, including climatic conditions, economic scenarioaffecting demand and supply, Government regulations, taxation, natural calamity and suchother factors over which the Company does not have any direct contr

Kitply Industries reports net loss of Rs. 65.24 crore in the year ended March 2011
Capital Market / 12:48 , May 31, 2011

Sales rise 5.15% to Rs. 85.31 crore

Kitply Industries reported net loss of Rs. 65.24 crore in the year ended March 2011 as against net loss of Rs. 23.01 crore during the previous year ended March 2010. Sales rose 5.15% to Rs. 85.31 crore in the year ended March 2011 as against Rs. 81.13 crore during the previous year ended March 2010.