1. As reported earlier, the Board for Industrial & Financial Reconstruction (BIFR) has sanctioned a rehabilitation scheme (SS) for the Company vide their Order dated 30 th October, 2002, issued on 15 th November, 2002. The Company has already taken steps for implementation of this SS on various matters therein.
    
2. The qualifications of the auditors on the financial statements for the year ended 30 th September, 2005, and the management's comments thereon (in brackets) are as follows:
    
   1. regarding, (i) certain reliefs and concessions recommended in the SS and considered in the accounts and (ii) carrying forward of capital work-in-progress. (These are dependent upon successful implementation of the SS, for which steps have already been initiated by the Company);
       
   2. regarding, non-provision for diminution in the value of certain investments. (These investments are strategic and long-term investments and diminution is of a temporary nature);
       
   3. regarding, non-provision for overdue debts, loans and advances, including from companies where the Company's involvement is of a strategic and long-term nature. (The Company has augmented efforts for collecting them and are expected to be recovered in due course. Irrecoverable amounts, if any, are presently not ascertainable);
       
   4. regarding, non-confirmation of balances of debtors, creditors, certain loans taken, bank accounts and loans/ advances given. (The Company is in the process of obtaining them);
       
   5. regarding, non-accounting of rent/ recovery of expenses from certain tenants/ ex-tenants, aggregating to Rs. 2.24 crores. (This has been done on legal advice).
      
      The impact of the quantifiable qualification, viz. 2.e, is that the loss before tax for the quarter ended 31 st March, 2006, would have been Rs. 14.62 crores and for the half year ended 31 st March, 2006, Rs. 29.23 crores.
       
3. Pursuant to the SS aforementioned, the Ahmedabad Unit of the Company has discontinued operations. On 21 st May, 2003, the Company had entered into an ‘Agreement to Sell' with Annapurna Polymers Private Limited (APPL) for this Unit at an aggregate consideration of Rs. 6.77 crores. The sale, after getting all approvals, was to be completed on or before 31 st December, 2003. Pending this, a separate ‘Conducting Agreement' has been entered with APPL effective 1 st June, 2003, under which APPL will operate the Unit on the Company's behalf. It has been mutually agreed to extend this period, till 31 st December, 2006.
    
4. Other income for the quarter ended 31 st March, 2005, include profit arising out of the ‘debt-asset swap' arrangement in terms of the aforementioned SS executed with the ICICI Bank Limited, amounting to Rs. Nil (aggregate to date till 31 st March, 2005, Rs. 16.31 crores) and Rs. Nil (aggregate to date till 31 st March, 2005, Rs. 1.80 crores) being profit on sale/ disposal of fixed assets at the Nadiad and Navsari Units.
    
5. There were no complaints from investors pending at the beginning of the quarter. The Company has received and resolved twelve such complaints during the quarter and consequently, there are no complaints pending at the end of the quarter.
    
6. The Company operates solely in the textile business segment.
    
7. The results for the quarter/ half year ended 31 st March, 2006 have been taken on record by the Board of Directors at its meeting held on 28 th April, 2006 and have been subjected to limited review by the statutory auditors.

For MAFATLAL INDUSTRIES LIMITED

H.A. MAFATLAL
Vice Chairman
MUMBAI
DATED: 28th April' 2006