THE STAr gLITTErS brIgHT!...out from the crowd. It signifies a standard defying attitude. In the...

Forward-looking StatementSthis report contains forward-looking statements, which may be identified by their use of words like ‘plans’, ‘expects’, ‘will’, ‘anticipates’, ‘believes’, ‘intends’, ‘projects’, ‘estimates’ or other words of similar meaning. all statements that address expectations or projections about the future, including but not limited to statements about the company’s strategy for growth, product development, market position, expenditures, and financial results, are forward-looking statements. Forward-looking statements are based on certain assumptions and expectations of future events. the company cannot guarantee that these assumptions and expectations are accurate or will be realised.

the company’s actual results, performance or achievements could thus differ materially from those projected in any such forward-looking statements. the company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or events.

ContentS Ceo & managing director’s message 02

about Us 04

Board of directors 06

Corporate mission and Core Values 08

key Strengths 09

Shagun Jewels 10

the Star glitters Bright 12

directors’ report 22

management discussion and analysis 26

report on Corporate governance 32

Standalone Financial Statements 41 Financial Statements of asian Star Co. ltd., new York 65 Financial Statments of inter gems dmCC 71 Financial Statements of Jewel art 77 Consolidated Financial Statements 89 Corporate information 104

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A star is a mere speck on the broad expanse of the dark sky. Yet, its silvery sparkle is sought after by everyone as a metaphor of hope, joy and excellence. It is also an example of that which stands out from the crowd. It signifies a standard defying attitude.

In the diamond business, we do something similar. Our attitude of rewriting set canons is reflected in craftsmanship to carve memories out of stones. The perfection to make the connoisseurs speechless. The magic to celebrate life through the best of designs. The passion to offer world-class quality. The vision to excel.

Since inception we have been imbibing the qualities that would make us glitter and not just shine. As a result, we work tirelessly everyday to serve our customers through unmatched product quality, unique designs and the best of service standards. We commenced our journey with cutting and polishing diamonds and today have come all the way to retailing our jewellery through own store. In the process, we have earned the trust of customers, employees and shareholders.

The journey to perfection never ceases to end and so we continue moving ahead. Amidst new challenges and opportunities. Amidst new regions and the old. Amidst the fast-changing world of designs and consumer preferences. We, at Asian Star Company Limited, continue our journey to win more hearts, and dazzle more and more eyes around us.

THE STAr gLITTErS brIgHT!

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CEO & MAnAgIngdIrECTOr’S MESSAgE

We have once again redefined perception through performance, in keeping with our trend at Asian Star. In the wake of global slowdown in consumer spending, it is indeed a challenge to perform and excel. I am indeed pleased to report to you another year of excellent performance and strong strategic strides that we have taken during the year.

For much of 2007-08, we were consolidating our operations and our performance therefore, extended beyond the immediate business horizon. After a difficult 2006-07, the focus was to progressively insulate the business from the slowdown of any specific regional market and to enhance margins through value-addition, better efficiencies and climbing up the value-chain. We responded with the following initiatives:

•Refinedbusinessfocus: We focused on expanding our footprints in the jewellery business during the year. As a result, the share of jewellery in our consolidated topline increased from 6% in 2006-07 to 10% in 2007-08. We are confident that in the coming 3 years, our jewellery business would contribute 20% to our consolidated topline, thereby giving us better margins and at the same time ensuring greater business opportunities.

Dear Shareholders,

“We expect our initiatives to make our business much stronger, focused and at the same time more sustainable to the changing dynamics of the gems and Jewellery industry the world over.”

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•Strategicforwardintegration: The margins in the jewellery business are directly proportional to the proximity to the end user. We used this understanding to extend our long-standing capabilities of producing jewellery into retailing it. We forayed into jewellery retail through the launch of our flagship store – Shagun Jewels. The first store was launched in Hyderabad in May, 2008, but the foundation of the plans were laid and executed during the year under review.

•Deriskinginitiatives: We had a tough 2006-07. In 2007-08, the whole focus was on implementing the learning from the challenges faced in the previous year. As a result, we initiated steps to derisk our business against the external as well as internal risks. One of the major initiatives during the year was to strengthen our position in non-American markets like India, Middle East and China. We expect to see the results soon in the coming years.

The outcome of our endeavours is evident in the results we have reported. Our topline has improved by 12% from rs. 1163.61 cr in 2006-07 to rs.1305.11 cr in 2007-08, where as our PbT and PAT improved by 33% to rs. 54.75 cr and 46% to rs. 40.36 cr respectively, as compared to the figures in the last year. The board of directors has recommended a dividend of rs. 2 per equity share, based on these robust results.

Our business is fast reaching the tipping point, a juncture where all the synergies we have built over the years combine to create wealth that is much beyond the sum of our inputs.

We expect our initiatives to make our business much stronger, focused and at the same time more sustainable to the changing dynamics of the gems and Jewellery industry the world over, in the coming years.

It is that future that we strive to achieve.

And we are committed to sparing no effort needed in reaching it.

Enchanting. Enduring. Eternal.

I leave you with this vision.

Warm regards,

VipulP.ShahCEO & Managing director

“We forayed into jewellery retail through the launch of our flagship store – Shagun Jewels. The first store was launched in Hyderabad in May, 2008, but the foundation of the plans were laid and executed during the year under review.”

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AbOuT uS

ProfileEstablished as a partnership firm in 1971, Asian Star Company became a public limited company in 1995.Today, it has emerged as one of the largest integrated diamantaires in the world. The company has presence across diamond cutting & polishing, jewellery manufacturing and marketing verticals.

The company is the preferred supply partner for diamonds & diamond jewellery for some of the leading retail brands and retail chains across the globe. being a dTC Sightholder, the company is assured of consistent and quality rough supply.

uAEIndIA

CHInA

HOng KOng

THAILAndMALAYSIA

SIngAPOrE

SubsidiariesManufacturing units

Marketing arms

bELgIuM

uSA

CAnAdA

Presence

AsianStarCo.Ltd.

Cutting and polishing of diamonds Jewellery manufacturing

Jewel Art(for international distribution)

A’ Star Jewellery(for domestic distribution)

Jewellery retailing

Shagun Jewels

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LocationsMAnufACtuRingCenteRSWorld class infrastructure at Surat and Mumbai, in India for diamond Processing and Jewellery Manufacturing.

These technologically advanced manufacturing facilities offer the best in class infrastructure including Wide Area network computerisation, on-line manufacturing processes and eco friendly environment.

MARketingPReSenCeSubsidiaries – 2 wholly owned subsidiaries in new York, uSA and dubai, uAE.

Marketing Arms - A strong global presence with 24 marketing arms spread across the continents of Asia, Europe, and America.

Products• PolishedDiamonds–Allpolished1ctandsmallerin

Fine Makes.

• Jewellery-GoldandPlatinumDiamondStuddedJewellery spanning all categories like rings, Earrings, Pendants, bracelets, bangles, necklaces etc for the domestic and international market.

• Power-WindmillsinMaharashtra,Kerala&Tamilnadu.

ListingsThe Company’s shares are listed on the bombay Stock Exchange (scrip code – 531847) in India.

As on 31st March, 2008, Asian Star Co. Ltd. had a market capitalisation of rs. 1259 crore.

ConsolidatedfinancialPerformance

11.5

0

9.72

13.0

520

07-0

8

2006

-07

2005

-06

RONW * (%)

* Return on Net Worth

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Dinesht.ShahThe Chairman of Asian Star Co. Ltd., Mr. Shah started his career as a diamond manufacturer and then ventured into the diamond trade in 1971 as a partner in Asian Star Company. His broad strategic vision, business acumen and professional conduct have contributed significantly in the success story of the company. under his able guidance and leadership, the company has attained the status of being one of the largest Indian exporters (all commodities) as well as India’s leading exporter of Cut & Polished diamonds under dTC category.

VipulP.ShahThe CEO & Managing director of Asian Star Co. Ltd. has created an empire to reckon with through sheer grit and visionary foresight. He began his career in the diamond industry soon after graduation by joining Asian Star at the shop floor level. He then diligently worked his way through the various functions and departments, imbibing the spirit of the industry in his bloodstream.

At present he manages the overseas business, including procurement of rough, and the financial administration of the company. He has been instrumental in establishing the company’s global network, currently one of the best in the industry. He also initiated the extension and development of the jewellery business. He transformed a manufacturing company into a value-added, vertically integrated supply partner.

DharmeshD.ShahThe CFO & Jt. Managing director of Asian Star Co. Ltd. started his career in the diamond business at the young age of 18 years and has been trained in all aspects of the diamond industry in India and abroad. He is well travelled and has thorough knowledge of current trends prevailing worldwide as well as a deep insight of future needs of the diamond market.Presently he oversees the sales and marketing function of the company, and has been instrumental in building and nurturing strategic alliances with business partners.

Arvindt.ShahWith almost 40 years of experience in diamond manufacturing, Arvind Shah - director of Asian Star Co. Ltd., is responsible mainly for the diamond processing activities at all the facilities, management of contractors as well as overall administration. He is also one of the key persons responsible for rough procurement from overseas. He is well versed with all the requisite quality norms and systems related to diamond manufacturing.

bOArd OF dIrECTOrS

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PriyanshuA.ShahThe youngest director of Asian Star Co. Ltd., at 27 years Priyanshu Shah also heads the jewellery operations of the company. He has also successfully completed graduation in diamond grading from g.I.A., new York, and currently manages the production and marketing functions for export as well as the domestic jewellery operations.

His vast knowledge on the latest jewellery trends worldwide and his creative inputs have resulted in the launching of several successful collections and innovative designs.

Bhupendrak.ShroffMr. bhupendra K. Shroff is M.com, LL.b, F.C.S, and C.I.A from uSA. He is a practicing Company Secretary, having experience of more than 35 years. Mr. Shroff commands expertise on matters relating to Company Law Affairs and had been associated with many top companies like reliance Industries Ltd. etc. He is considered to be highly respected professional in his field of Corporate Laws and other legal matters.

k.MohanramPaiMr. K. Mohanram Pai is b.A, C.A.I.I.b. He possesses a rich and varied experience in banking industry. He has held offices as Executive d.g.M. of Overseas Operations dept. with Corporation bank and as general Manager CVO with united bank of India. He is a renowned expert in financial matters.

ApurvaR.ShahMr. Apurva r. Shah is F.C.A, C.W.A, graduate from London School of Economics and Political Sciences. He has also pursued course for International Accounting & Finance from uK. He was a rank holder in Chartered Accountancy Examinations with an award for the highest distinction in Financial Accounting and in direct Tax Laws. He is a partner of rajendra & Co., Chartered Accountants. He has expert knowledge in the areas such as direct Taxation, Foreign Exchange Management Laws, Financial Management and business restructuring.

HasmukhB.gandhiMr. Hasmukh b gandhi is b.A. (Hons.), LL.b. He is advocate in Mumbai High Court since 1955. He has expertise knowledge in drafting and vetting of agreements like collaboration agreements, commercial agreements, Shareholders Agreements, Joint Venture Agreements, deed of Assignments etc.

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With a focused approach, we will maintain leadership and aggressive growth in the diamond & Jewellery industry worldwide through our unique set of capabilities and innovations in processes. Anticipating the needs of our clients and responding quickly, creatively and competitively with products and services to enrich their business initiatives will be our business motto. We will continue to build long-term value through alliances with established global players.

COrPOrATE MISSIOn

COrE VALuESIntegrity

networking

Excellence

responsibility

unity

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An integrated diamond and jewellery player with strong international credentials.

Sightholder status with the dTC and access to other primary sources of rough.

Strong marketing capabilities and well-penetrated distribution network.

Wide product range and strong equity for the ‘Asian Star make’.

Well-established manufacturing capabilities coupled with cutting edge technology.

Proven management expertise and a large pool of experienced and talented human resource.

Strong financial base supporting future growth plans.

KEY STrEngTHS

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InTrOduCIng SHAgun JEWELS

namerationaleIn an Indian context Shagun means ‘an auspicious offering or blessing, given on special occasions’.

Through this store, we wish to present each Shagun Jewels’ customer with the perfect product offering in a truly special environment.

BrandvisionTo be the jewellery retail brand of choice for the affluent, modern Indian women.

thetargetconsumerShagun Jewels caters to the urban Indian women through its products. Like its target consumers, the jewellery is contemporary, classy, and at the same time is rooted to the strong and rich cultural traditions.

ShagunstoreThe first store at Hyderabad was opened in May, 2008. Other stores in the retail chain will be opened during the coming years in a phased manner. The stores, located across the Indian metros will offer diamond and gold jewellery with a world-class shopping experience and environment.

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THE STAr gLITTErS brIgHT!

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Our journey towards brilliance has moved amidst an

unending array of designs. Colours. Forms. Value. Markets.

brands. Occasions. Collections. A journey fuelled by

seemingly unending fount of creativity.

We, at Asian Star have always believed in responding to the

challenges because we believe these challenges bring out

the best in us. As a result, emerging brighter - everytime.

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CReAtingAnARRAyofDAzzLingPRoDuCtSThe brilliance of a star is directly proportional to the expanse of its illumination.

Similarly, a corporate repute is the outcome of a broader business focus.

The star glitters bright by

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When we began operations in cutting and

polishing diamonds, we were a modest value

addition and largely single product company.

Today, we are one of the largest diamantaries

in the world, with unmatched expertise in

cutting and polishing a wide range of diamonds

across colours, purities and cuts. being a dTC

Sightholder enables us to source consistent and

quality supply of roughs, thereby offering the

best in class quality to our customers.

In 2001, we ventured into manufacturing

of jewellery. Our product presence in the

jewellery segment comprises gold and

platinum diamond studded jewellery spanning

all categories like rings, earrings, pendants,

bracelets, bangles, necklaces etc. We emerged

as a preferred supplier to some of the largest

and reputed jewellery brands in India as well as

the world.

In 2008, we completed our integration model

by venturing into retailing through our flagship

store.

Today, we have extensive presence across the

value chain – diamond cutting and polishing,

jewellery manufacturing and now, jewellery

retailing. While on one hand, this integration

will enable us to strengthen our margins, it

will also enable us to customise our product

offerings and quality as per the markets and

consumer preferences.

WHEn WE bEgAn OPErATIOnS In CuTTIng And POLISHIng dIAMOndS, WE WErE A MOdEST VALuE AddITIOn And LArgELY SIngLE PrOduCT COMPAnY. TOdAY, WE ArE OnE OF THE LArgEST dIAMAnTArIES In THE WOrLd.

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SHiningACRoSSContinentSImpact is strongest when it is widespread.


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We are an everywhere corporation. With

procurement of rough from dTC and

other suppliers located across the world, to

manufacturing locations in India, to marketing

and distribution arms across 19 cities world-

wide, we have extended our reach not only

deeper but wider too.

The organisation is built around a core of

meritocracy. We choose the best raw materials,

craftsmanship and managerial talent from a

global pool. Our global presence enables us

to inculcate knowledge relating to diverse

customer tastes and preferences globally. Our

marketing arms enable us to tap the demand

faster in local markets and ensure better

placement of our products. As our products

have universal appeal, our reach enables us

to derisk our dependence in specific markets

of demand and at the same time, limit our

inventory carrying costs.

global partners, global quality, global logistics

and supply chain – these are factors that

impact scalability, sustainability, and of course –

profitability.

gLObAL PArTnErS, gLObAL quALITY, gLObAL LOgISTICS And SuPPLY CHAIn – THESE ArE FACTOrS THAT IMPACT SCALAbILITY, SuSTAInAbILITY, And OF COurSE – PrOFITAbILITY.

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diamonds & Fine Jewellery - now not just forever, but for everybody!

SeRVingAgALAxyofCuStoMeRSThe star glitters bright by

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We believe that a sustainable growth can only

be achieved with a mix of exclusive and the

affordable. As a result, we have honed our

expertise in providing a wide range of products

across consumer preferences and across price-

points throughout the world.

At Asian Star, our business has followed an

aggressive but natural path of integrating

forward in the value chain. From polished

diamonds for corporate clients globally,

we extended our presence in the jewellery

manufacturing segment to augment our extent

of value addition in the product. Our portfolio

of clients including renowned independent

retailers, large retail chains and brands,

exclusive jewellery designers and wholesalers

- both in India, and the rest of the world, is

testimony to our unflinching credibility and

impeccable track record.

To better serve our domestic and international

customers, we created focused jewellery set-

ups – A’ Star Jewellery (for domestic marketing)

and Jewel Art (for international marketing).

These enabled us to customise our product

offerings to meet specific market trends and

consumer preferences.

In a logical extension of our historical expertise,

we have now moved to capture the last mile

in the jewellery value chain – servicing the end

consumer. Our retail initiative, Shagun Jewels

marks the completion of circle and will allow

us to holistically apply and implement, at the

market place, our learning of the last so many

years of being in business.

WE bELIEVE THAT A SuSTAInAbLE grOWTH CAn OnLY bE ACHIEVEd WITH A MIx OF ExCLuSIVE And THE AFFOrdAbLE.

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For a business that is intensely connected to emotions, it is people that spell the greatest key to success.

CReAtingAnoRgAniSAtionofMAnyStARS


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We have always believed in consistently

investing in people through right recruitment.

Through extensive training. Through honing

their skills and through fuelling their aspirations.

To ensure proper handling of talent, our Hr

department ensures mentoring programmes,

career planning and timely feedback to our

employees. We are a young organisation, with

the average age of 35 years, ensuring the right

blend of experience and enthusiasm.

during the year, we also initiated steps to

strengthen systems and processes to limit

wastage and increase efficiency in our

manufacturing locations. We have invested in

world-class technologies and manufacturing

facilities thereby ensuring the best quality

products. Our ErP system enables us to keep

real time communication with our offices

throughout the world. As the same time, we

have maintained small organisation values

and transparency amidst a large organisation

strength and set-up, enabling us to retain the

best talent.

WE ArE A YOung OrgAnISATIOn, WITH THE AVErAgE AgE OF 35 YEArS, EnSurIng THE rIgHT bLEnd OF ExPErIEnCE And EnTHuSIASM.

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dIrECTOrS’rEPOrT

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To the members,ASiAnStARCoMPAnyLiMiteDMumbai

Your directors have pleasure in presenting the Fourteenth Annual report together with the Audited Statement of Accounts for the year ended March 31, 2008.

(rs. in Crore)

financialResults March31,2008 March31,2007

Total Sales 1305.10 1163.61

Add : Other Income 16.31 2.91

Total Income 1321.41 1166.52

Less : Total Expenditure 1234.54 1089.10

Operating Profit (PbdIT) 86.87 77.42

Less : Interest and depreciation 32.14 36.18

Profit before Tax 54.73 41.24

Provision for Tax 11.06 11.46

Provision for deferred Tax 3.19 2.07

Provision for Fringe benefit Tax 0.14 0.16

Profit after Tax 40.34 27.55

Add : balance in Profit and Loss

Account brought forward 92.77 70.52

Add : Prior Year Adjustments 0.02 -

Profit available for appropriation 133.13 98.07

Appropriation

dividend on Preference Shares 0.76 0.76

Proposed dividend on Equity Shares 2.13 2.13

Tax on dividend 0.49 0.41

Transferred to general reserve 2.00 2.00

balance Carried forward to balance Sheet 127.75 92.77

133.13 98.07

PeRfoRMAnCeAnDPRoSPeCtSThe Company, during the year under review, was able to fortify the peak level performance achieved during previous years. It also successfully set new benchmarks in corporate performance, as a result of upswing in sales realisations, and reduction in finance charges.

The Company posted all-time high sales of rs.1305.10 crore during the year as against that of rs.1163.61 crore registering a growth of 12%. EbIdTA has improved by 10% to 83.79 crore. The profit after tax increased by 47% from rs. 27.55 crore to rs. 40.36 crore.

DiViDenDdirectors have recommended dividend of re. 0.30 per share on 3% redeemable Cumulative Preference Shares of rs. 10/- each which will be paid to those preference shareholders whose names appear in the register of Members as on end of day on 28th August, 2008.The directors have recommended a dividend of rs. 2/- per Equity Share on 1,06,71,200 Equity Shares of rs.10/- each for the financial year ended 31st March 2008, which if approved at the forthcoming Annual general Meeting, will be paid to

i) all those Equity Shareholders whose names appear in the register of Members and

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ii) all those beneficial owners whose names are furnished by national Securities depository Limited and Central depository Services (India) Limited as at end of business on 28th August, 2008.

APPRoPRiAtionSYour Company has transferred rs. 2 crore to general reserve and accumulated profit of rs.127.75 crore is carried forward to balance Sheet.

SuBSiDiARieSAs required under Section 212 of the Companies Act, 1956, the Audited Statements of Accounts of overseas subsidiary companies: Asian Star Company Limited, new York,uSA & Inter gems dMCC, dubai, uAE and Jewel Art, an Indian partnership firm where the Company has controlling interest and the Auditors report thereon for the year ended March 31, 2008 are annexed. during the year under report the Company has sold its entire holding in Intergem InC, uSA.

WinDeneRgyIn addition to its windmills at Maharashtra, the company has setup windmill at Tamil nadu & Kerala and started operations thereat.

The company has long term contractual agreement with respective state electricity boards for sale of power generated by wind mills. during the year 2007-08, the company has generated 34,83,770 Kwh. resulting in the sales of rs.127.16 Lac. As a part of its social commitments and endeavor to carry out operations in a more sustainable manner, the company has always been inclined to promote a cleaner and greener environment. As an initiative, it ventured into setting up of power generation facilities using wind energy though the rate of return offered by such facilities is lesser than the other business opportinities. However considering that power generation using renewable resources, including wind energy, leads to reduction of gHg emissions, and the project can be taken up as Clean development Mechanism (CdM) project under the Kyoto Protocol, your company has decided to go ahead with the initiative considering CdM benefits, to part mitigate the barrier of financially less attractive investment proposition, and thus achieving the goals of sustainable development as well as upholding share-holder value.. The company has already committed development of additional 8.1 MW project in Tamil nadu and Kerala.

‘SHAgunJeWeLS’-RetAiLoutLetAtHyDeRABADThe company has launched its first retail Jewellery showroom named “Shagun Jewels” at Hyderabad in May 2008. The stores will be located across metros in India and would offer diamond and gold jewellery with a wide range of designs.

ConSoLiDAteDfinAnCiALStAteMentSIn accordance with the Accounting Standard 21, issued by The Institute of Chartered Accountants of India, your directors have pleasure in attaching the Audited Consolidated Financial Statements for the year ended March 31, 2008.

DiReCtoRS’ReSPonSiBiLityStAteMentOn the basis of compliance certificates received from the executives of the company, subject to disclosures in Annual Accounts, and also on the basis of discussion with the Statutory Auditors of the Company from time to time, we state as under:

- That in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

- That the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March 2008 and of the Profit and Loss account of the Company for the year ended on that date;

- That the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

- That the directors have prepared the annual accounts of the company on a going concern basis.

- Your Company has received certificate under section 274(1) (g) of the Companies Act, 1956 and none of the directors are disqualified to act as director.

CoRPoRAtegoVeRnAnCePursuant to Clause 49 of the listing agreement with the bombay Stock Exchange Limited, a report on Corporate governance, along with the Auditors’ certificate regarding compliance of conditions of Corporate governance and Management discussion and Analysis is separately given in this report.

LiStingARRAngeMentSThe Equity Shares of the Company are listed on bombay Stock Exchange Limited. The Company has paid listing fees for the year 2008-09.

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DeMAteRiALiSAtionofSHAReSIn terms of the listing agreement the company has tripartite agreements with the rTA i.e. bigshare Services Private Limited and national Securities depository Limited and Central depository Services (India) Limited respectively.

DiReCtoRSPursuant to the provisions of Section 256 of the Companies Act, 1956 and article 154(a) of the Articles of Association of the Company Shri Arvind T Shah, Shri dharmesh d Shah and Shri bhupendra K Shroff retires by rotation and being eligible offer themselves for reappointment.

finAnCeThe Company is availing working capital requirements from the Consortium of bankers and has obtained adequate finance during the year under review. The debt is secured by stock-in-trade, book debts, premises, fixed deposits and personal guarantee of some directors.

DePoSitThe Company has not accepted any deposits within the meaning of Section 58 - A of the Companies Act, 1956 and the Companies (Acceptance of deposit) rules, 1975. There are no deposits which are outstanding and/or which is claimed and not paid or unclaimed for which information is required to be given in the report.

inSuRAnCeThe Properties and Assets of the Company are adequately insured.

CASHfLoWAnALySiSIn conformity with the provision of Clause 32 of the Listing Agreement, the Cash Flow Statement for the year ended 31st March, 2008 is annexed hereto.

PARtiCuLARSofeMPLoyeeSIn terms of provision of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) rules,1975 as amended the name and other particulars of the employees are required to be set out in Annexure to the director’s report. However as per the provision of Section 219(1) (b) (iv) of the said Act, the Annual report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. Member who is interested in obtaining such particulars may write to the Company Secretary at the registered Office of the Company.

noteSonACCountSnotes forming part of Accounts are self-explanatory.

PARtiCuLARSunDeRCoMPAnieS(DiSCLoSuReofPARtiCuLARStotHeRePoRtofBoARDofDiReCtoRS)RuLeS,1988:-

ConSeRVAtionofeneRgyThe activity of the company does not require large-scale consumption of energy and the company is not covered in the list of industries required to furnish information in Form - A relating to conservation of energy.

teCHnoLogyABSoRPtionThe directors are in constant touch with ongoing research in the World to upgrade and absorb improved technology for better line of products and to yield better quality, cost reduction and worldwide acceptability of its range of products.

foReignexCHAngeeARningSAnDoutgoThe Company has earned rs.102,208.78 Lac in foreign exchange by way of exports, dividend and goods inspection charges and has spent rs.64,942.99 Lac in foreign exchange, for the imports of materials & consumables, foreign traveling, value added services fees, export sales expenses and repairs and maintenance. The directors are making their best endeavors to earn foreign exchange.

AuDitoRSV. A. Parikh & Associates, Chartered Accountants, the retiring Auditors of the Company, hold office up to the conclusion of the ensuing Annual general Meeting. The Company has received a certificate from the said firm to the effect that their appointment if made at Annual general Meeting would be within the limits mentioned under Section 224 (1b) of the Companies Act, 1956. You are requested to appoint the Auditors and fix their remuneration.

APPReCiAtionThe directors thank the Company’s Customers, Contractors, Shareholders, bankers, Financial Institutions and Central & State governments for their consistent support to the Company. The directors also sincerely acknowledge the significant contributions made by all the employees for their dedicated services to the Company.

For and on behalf of the board

Place: Mumbaidated: June 17, 2008

Dinesht.ShahChairman

VipulPShahCEO & Managing director

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MAnAgEMEnT dISCuSSIOn And AnALYSIS

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gLoBALgeMS&JeWeLLeRyinDuStRyoVeRVieWThe size of the global gems and Jewellery industry is estimated at uSd 146 billion at retail prices. diamond-studded jewellery is the largest segment of this industry at uSd 69 billion.PrOduCT-WISE dISTrIbuTIOn

PRoCeSSing(CuttingAnDPoLiSHing)ofDiAMonDSProcessing of diamonds refers to cutting and polishing of rough diamonds. In 2007, the global output of cut and polished diamonds stood at uSd 19.86 billion. In the recent years, the diamond processing industry has faced significant changes due to the emergence of newer processing centers and the diminishing output from the older traditional centers. This segment has witnessed an increased fragmentation of rough diamond supply, emergence of new mines and local beneficiation movement in mining countries. Competition and overcapacity in polishing has placed financial pressure on small players in traditional processing centers. India continues to be the largest diamond processing centre on account of being the lowest cost destination in diamond processing in the world.

JeWeLLeRyfABRiCAtionJewellery manufacturing or fabrication is one of the most important stages in the gems and Jewellery value chain. dynamic fashion cycles, relative factor costs between manufacturing and consuming nations and volatile metal prices, have fuelled a drive towards moving fabrication to low cost countries. India is the biggest fabrication centre in terms of volume of gold used for jewellery fabrication.

JeWeLLeRyRetAiLThe u.S. continues to be the world’s largest market for jewellery and accounted for 31% of all jewellery sales in 2007.

Japan faced a steady decline in the jewellery sales. during this period, China has steadily increased its share in the market.

StuDDeDDiAMonDJeWeLLeRyuSA is the largest consumer of diamond jewellery, accounting for nearly 50% of the global diamond jewellery sales in 2007. However the recent credit crisis, coupled with slower economic growth has resulted in lower spend by the American nationals, resulting in less than expected growth in the segment. On the other hand, India and China are fast emerging to be the choicest destinations for demand of diamond studded jewellery. These markets combined together are expected to take over uSA in the next five to seven years.

outLookA global jewellery sale is expected to touch uSd 185 billion in 2010 and uSd 230 billion in 2015. gold and diamond jewellery will continue to dominate the market together, accounting for about 82%. China and India together will emerge as a market equivalent to the u.S. market by 2015. The Middle East will surface as another large market, accounting for close to 9% of the global jewellery sales in 2015.

The diamond processing segment of the value chain will see changes in rough allocation to countries, emergence of strong players and weaker ones exiting the market.

inDiAngeMS&JeWeLLeRyinDuStRyoVeRVieW

PRoCeSSingofDiAMonDSIndia is considered as the largest player in the diamond processing industry and it processes over 58% of the world’s rough diamonds, by value. India’s exports of cut and polished diamonds stood at uSd 14.18 billion in 2007 -08, which is a significant portion of the total export.VALuE OF POLISHEd FrOM LOCAL PrOduCTIOn

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JeWeLLeRyfABRiCAtionIndia is also a large producer and exporter of various forms of jewellery. India is one of the fastest growing markets for jewellery, growing at a rate of 10.20% per annum over the last five years. Export revenues from jewellery were uSd 5.62 in 2007-08 and India is expected to touch up to uSd 15.5 billion within five years from now. India is the largest consumer of gold jewellery in the world and the third largest consumer of polished diamonds, after the uSA and Japan.

inDiAnJeWeLLeRyRetAiLIndia’s gems and Jewellery industry has been allowed 51% foreign direct investments by the government in single brand retail stores attracting both global and domestic players to this sector. The burgeoning retail industry in India is instrumental in innovatively marketing and branding diamonds and traditional jewellery, making inroads in this sector and contributing to the nation’s economy.

The domestic jewellery market is approx. uSd 16 billion, of which almost 80% is gold jewellery. The balance comprises studded jewellery that includes diamond studded as well as gemstone studded jewellery.

The gold jewellery market is growing at 12-15% per annum and the diamond jewellery market, at 25-27% per annum.

Experts believe that by 2013, India will become the biggest consumer of jewellery.

PRoSPeCtSoftHeinDiAngeMS&JeWeLLeRyinDuStRyWith Indian gems and Jewellery export expected to clock uSd 25 billion by 2010, the sector is likely to see more outsourcing activities from the country. While most of the export till now has been of polished diamonds there is an increasing trend towards outsourcing designing and manufacturing of jewellery from India. Several of the world’s leading retailers like Wal-mart and JC Penney have increased outsourcing of designer jewellery from India.

The increasing levels of disposable household income have resulted in record consumption levels in the domestic market. The domestic Indian jewellery market estimated to be about uSd 16 billion today will grow rapidly at about 20% a year to reach uSd 20-22 billion by 2010. giving a necessary fillip to this industry will be the growth of the branded jewellery retailing, with the entry of big corporate players.

CoMPAnyoVeRVieWAsian Star Company Limited is one of the world’s leading diamantaires and a diamond Trading Company Sightholder. It was listed on the bombay Stock Exchange in 1996.

The Company is fully integrated with presence across

the businesses of diamond manufacturing, jewellery manufacturing and retailing.

AWARDSAnDReCognition

- Jewel Art, the Company’s jewellery arm, bagged the CnbC - TV18’s ‘Emerging India Awards London 2008’ for SMEs (Small & Medium Enterprises) in the gems and Jewellery sector.

- Has the prestigious Four Star Trading House Status.

- Has ISO 9001:2000 certification from rWTuV, germany.

- Has the prestigious status of being a dTC Sightholder.

- no. 1 Exporter in dTC Category for 4 consecutive years since 2001.

- ‘A’ rating by CArE, the highest benchmark for the Indian gems and Jewellery industry.

- ranked 236th in dun & bradstreet’s 2007 edition of ‘India’s Top 500 Companies’.

PRoCuReMentThe Company is a dTC Sightholder and procures a major portion of its total diamond requirements from dTC. The remaining part is purchased from other international suppliers. It procures rough diamonds through the Kimberly Process which ensures conflict-free natural diamonds for all its uses.

MAnufACtuRing

dIAMOnd CuTTIng And POLISHIngWith over four decades of experience in diamond processing, the Company has mastered the art of customised cuts, calibrated sizes, product styling, production techniques and pricing activities for its products. The Company’s core expertise lies in manufacturing of polished diamonds in various shapes, sizes, colours and purities.

JEWELLErY MAnuFACTurIngThe Company produces best in class jewellery for catering to major retailers and retail chains throughout the world and in India. More than 200 new styles created by the design team every month using advanced CAd/CAM systems, capture the essence of contemporary and traditional designs.

MArKETIng (b2b And rETAILIng)The Company has emerged as a preferred supplier of diamonds and diamond jewellery to major jewellers around the world. This stems from the ability of providing innovative and quality products coupled with efficient and timely

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delivery for all its orders. besides, the Company has also forayed into retailing with Shagun Jewels during the year under review, thereby completing its presence across the value-chain.

finAnCiALoVeRVieWThe Company registered 12% increase in the total sales, from rs. 1163.61 crore in 2006-07 to rs. 1305.10 crore in 2007-08. Earnings before interest, depreciation and taxation allowance (EbIdTA) increased by 10% from rs. 76.02 crore in 2006-07 to rs. 83.79 crore in 2007-08. The Company registered a Profit after tax of rs. 40.36 crore in 2007-08, up by 47% against rs. 27.55 crore in 2006-07. The Company has done exceedingly well though the margins were under pressure on account of increased prices of rough and other precious metals, mainly gold. The same was countered by better price realisation and saving in interest cost on account of efficient working capital management. As a result, the Company was able to retain its margins. The PAT margin also improved by 0.72 bps from 2.37% in 2006-07 to 3.09% in 2007-08. EPS has improved to rs. 37 in 2007-08 from rs. 25 in 2006-07.

HuMAnReSouRCeSAsian Star Company Limited’s human resources philosophy is based on dignity of work, fostering a culture of learning, meritocracy sans bias of any kind and commitment to highest standards of safety at the workplace.

The Company invests in people and believes in creating an environment where people are valued as individuals and are given equal opportunities for achieving professional and personal goals. Consistent and clear Hr practices, participative management, excellent welfare activities have made the Company one of the most preferred employers.

inteRnALContRoLSThe Company has an adequate system of internal controls to safeguard and protect from loss, unauthorised use or disposition of its assets. The Company has also implemented suitable controls to ensure that all the resources are utilised optimally, all the transactions are properly authorised, recorded and reported to the management. The Company complies with all the applicable Accounting Standards, laws and regulations. The Company has an Internal Audit department which examines the compliances with the policies, plans and statutory requirements and reviews the internal control system. The top management and the Audit Committee of the board review the findings and recommendation of the internal auditor.

BuSineSSStRAtegyThe Company’s strategic objective is to continue to build on its position as a leading integrated diamond and jewellery manufacturing and retailing company. Asian Star intends to achieve this by implementing the following strategies:

grEATEr FOCuS On VALuE-AddEd PrOduCTSThe jewellery business commands higher margins as compared to diamond processing business. The Company has been undergoing a transformation, thereby ensuring a shift from a volume-lead business to primarily a value-lead one and from a lower margin activity to a brand-led higher margin business. The Company has even ventured into retailing of its jewellery, thereby completing its presence across the value chain.

InCrEASE MArKET SHArE In IndIA And TArgET OTHEr STrOng EMErgIng InTErnATIOnAL MArKETSWhile India continues to be a very important market for the Company, it is also aiming at tapping better opportunities across the emerging markets like russia, China and the Middle East.

COnTInuE TO grOW rETAIL OPErATIOnSretail, being the last leg of the product delivery chain, is also considered to be the most profitable as well. The Company has initiated its foray in jewellery retail with the launch of Shagun Jewels. The flagship store has been opened at Hyderabad and the Company intends to open showrooms in other metros soon. While on one hand, the retail operation is a natural transition for the Company given its product and design strengths and at the same time, it will enable the Company to further understand, analyse and deliver trends based on first hand consumer knowledge.

PurSuE STrATEgIC ACquISITIOnS And ALLIAnCESThe Company is pursuing strategic acquisition and alliance opportunities to enhance its capabilities, address specific industry opportunities, develop technical expertise, expand operations geographically and price products more competitively. The acquisition strategy of the Company is closely intertwined with its strategy to grow and develop large international markets, and particularly, its retail operations in these markets.

InCrEASE EFFICIEnCY OF THE dISTrIbuTIOn PIPELInEbesides its own retailing activities, the Company would also focus on tie-ups with customers such as large retailers, who can add value to diamonds through downstream activities.

InnOVATIOn IS THE KEY dELIVErAbLEThe Company provides exclusive products and superior services to its customers, to ensure long-term relationships and frequent business opportunities with them. The key of innovation is to attune the Company’s ability to manufacture and design with the global preferences and tastes.

30

RiSkMAnAgeMent

rISK OF ECOnOMIC SLOWdOWnEconomic slowdown in the uS and other parts of the world has affected the demand. This is compensated by growth in various emerging markets in Asia and Middle East. India and China are the emerging centers of diamond jewellery manufacturing and consumption. The rise in disposable income has increased the consumer spending on jewellery and together they will emerge as a market equivalent to the uS market in the next five to seven years. Further, because of our widespread marketing setup the Company is not dependent on any particular market/client for a majority of its business and thus is able to absorb the effects of volatile market conditions.

rISK OF SuPPLY COnSTrAInTSupply of rough diamonds is under pressure due to declining production in existing mines and policy of the mining countries to allocate more roughs to local manufacturers. The Company is a dTC Sightholder and enjoys three years contract for assured supply of rough diamonds. beside this, it also has long term relationship with other suppliers from where it procures its balance requirements.

rISK OF ExCHAngE rATE FLuCTuATIOnThe industry is exposed to foreign currency fluctuation both in respect of export as well import transactions. To some extent, the import centric nature of the trade acts as natural hedge against the currency fluctuation. Asian Star always has a policy of hedging its open interest in foreign currency by booking forward contracts to safeguard its interest from fluctuations in the currency rates. This is closely monitored and controlled by experienced and professional staff.

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[ 31 ]Asian Star Company Limited

32

rEPOrT On COrPOrATE gOVErnAnCE

33

i CoMPAny’SPHiLoSoPHyThe company believes that good corporate governance practices should be enshrined in all activities of the Company. This would ensure efficient conduct of the affairs of the Company and help the Company to serve the best interests of all the stakeholders, viz., employees, shareholders, customers, the government and the society at large. The Company strives towards excellence through adoption of best governance and disclosure practices. The Company has complied with the requirements of the revised guidelines on corporate governance stipulated under clause 49 of the Listing Agreement with the bombay Stock Exchange Ltd.. With the adoption of a Code of Conduct for board of directors and Senior Management personnel and the implementation of a Whistle blower Policy, the Company has moved further in its pursuit of excellence in corporate governance.

ii BoARDofDiReCtoRS (a) The Company has 9 directors on the board. The

Company has a Promoter non-Executive Chairman and 4 Independent directors i.e. more than one-third of the total number of directors on its board. Composition of the board of directors includes 4 Executive directors and 5 non-Executive directors. board has also formed the following committees in terms of Clause 49 of the Listing Agreement. none of the directors is a member on the board committees of more than ten companies or acting as Chairman of more than five companies in which he is a director.

during the year 2007-08, the board of directors met 7 times (12.04.2007, 30.04.2007, 29.06.2007, 30.07.2007, 25.10.2007, 26.12.2007 and 12.01.2008) with clearly defined agenda of the meetings sent in advance with suitable notes to the directors.

The details of the directors on the board of your Company for the year 2007-2008 are:

name Category / designationboard meetings attended

Last AgM attendance

no. of outside directorship held in public companies

no. of board Committee(s) of which he is a member

no. of board Committee(s) of which he is a Chairperson

Other than Asian Star Company Ltd.

dinesh T. Shah Promoter –non Executive Chairman

7 YES - - -

Arvind T. Shah Promoter- Executive director

7 YES - - -

dharmesh d. Shah Promoter – CFO & Jt. Managing director

7 YES - - -

Vipul P. Shah Promoter – CEO & Managing director

7 YES - - -

K. Mohanram Pai non-Executive Independent director

7 YES 1 - -

bhupendra K . Shroff @ non-Executive Independent director

7 YES 2 1 2

Apurva r. Shah non-Executive Independent director

7 YES 6 5 1*

Hasmukh b. gandhi non-Executive Independent director

7 YES 3 - -

Priyanshu A. Shah Promoter -Executive director

7 YES - - -

@ Shri bhupendra K. Shroff, non-Executive Independent director of the Company holds 300 Equity Shares of the company as on 31st March 2008 * Shri Apurva r. Shah, non-Executive Independent director is Alternate Chairman of Audit Committee of Shantivijay Jewels Ltd.

34

(b) non-Executive directors are paid sitting fees for attending the board Meeting or Committee Meetings. non-Executive directors are not paid any commission. none of non-Executive directors has any material financial interest in the Company.

(c) Code of Conduct: The Company has framed a Code of Conduct for the members and Executive officers. The same is complied with.

iii AuDitCoMMitteeThe board of your Company has constituted a very qualified audit committee which promotes relationship of accountability between the board, Management and Statutory Auditors. The Composition of the Committee and the attendance of each member of the Committee are given below:

name designation Category of directorship Profession

Committee Meetings Attendance

bhupendra K Shroff

Chairman non-Executive director

Company Law Advisor

5

Apurva r Shah Member non-Executive director

Chartered Accountant

5

K Mohanram Pai

Member non-Executive director

banking Professional

5

Arvind T Shah Member Executive director

business 5

during the year 2007-08, the Audit Committee met 5 times (12.04.2007, 29.06.2007, 30.07.2007, 25.10.2007 and 12.01.2008) with clearly defined agenda of the meetings.

The role and terms of reference of the Audit Committee cover the matters specified for Audit Committee under Clause 49 of the Listing Agreement with the bombay Stock Exchange Ltd. read with Section 292A of the Companies Act, 1956.

The previous Annual general Meeting of the Company was held on September 03, 2007 and Shri bhupendra K. Shroff, the Chairman of the Audit Committee, attended the said meeting.

iV ReMuneRAtionCoMMittee(non-MAnDAtoRy)The following are the Committee Members:

1) Hasmukh b. gandhi (Chairman)2) bhupendra K. Shroff3) Apurva r. Shah

Payment of remuneration to Managing director, Jt. Managing director and Executive directors are recommended by the remuneration Committee reviewing the abilities and contribution of the individual directors. non-Executive directors were paid sitting fees within the limits prescribed under the Act.

The details of actual payments made during the financial year 2007-08 to the Executive directors of the Company are given below:

name designation gross Salary (rs. In lacs)

Arvind T Shah Executive director 11.65

dharmesh d Shah CFO & Jt. Managing director

11.65

Vipul P Shah CEO & Managing director 6.25

Priyanshu A Shah Executive director 7.50

V SHAReHoLDeRSCoMMitteeThe following are the Committee Members:

1) bhupendra K Shroff (Chairman)2) Apurva r Shah3) K Mohanram Pai4) Arvind T Shah

The committee reviews redressing of shareholders & investors complaints like non-receipt of balance Sheet, non-receipt of declared dividend, etc. The committee also reviews the functioning and activities of registrar & Transfer Agent and related investor grievances. The Company obtained and filed with bombay Stock Exchange Ltd., Secretarial Audit report required under SEbI for each quarter as to reconciliation of total shares held in depository and physical form from a Practicing Chartered Accountant or Practicing Company Secretary.

no. of queries/complaints received redressed unresolved

Letters from Shareholders nil nil nil

Compliance Officer and Address for Correspondence

name & designation

Telephone number Email - Id Fax no.

Mr. Jaykant rathod, Compliance Officer

2282 1886 [email protected]

2204 3747

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Vi CoRPoRAtegoVeRnAnCeCoMMitteeThe following are the Committee Members:

1) bhupendra K. Shroff (Chairman)2) Hasmukh b. gandhi3) K. Mohanram Pai4) Arvind T. Shah

The Committee looks after the due compliance with the Corporate governance norms. All board members and the members of senior management have complied with the Code of Conduct for board of directors and Prevention of Insider Trading (Code).

The Company has obtained a certificate from the Auditors of the company regarding compliance of conditions of corporate governance as stipulated in clause 49 of the listing agreement of the bombay Stock Exchange Ltd. and the same has been annexed to director’s report.

ViifinAnCeCoMMitteeThe members of Finance Committee met 8 times (25.04.2007, 25.07.2007, 29.08.2007, 30.10.2007, 20.11.2007, 17.12.2007, 02.01.2008 and 12.03.2008). This committee sits regularly to decide on matters pertaining to banking, finance and working capital requirements. The following are the committee members:

1. dinesh T Shah (Chairman)2. Arvind T Shah3. Vipul P Shah4. dharmesh d Shah5. Priyanshu A. Shah

ViiigeneRALBoDyMeetingS i) Annual general Meeting to be held on date : 4th September 2008 Time : 4.00 p.m. Venue : green room, garware Club House, Wankhede Stadium,

‘d’ road, Churchgate, Mumbai – 400 020.

book Closure date : 29.08.2008 to 04.09.2008(both the days inclusive)

dividend date : 09.09.2008

ii) details on Annual general Meetings (AgM) :Location and time, where last three AgMs were held:

2004-05 garware Club, Mumbai

September 19, 2005

4.00 pm

2005-06 utsav banquet Hall, Mumbai

September 12, 2006

4.00 pm

2006-07 garware Club, Mumbai

September 03, 2007

4.00 pm

iii) Whether any special resolutions passed in the previous 3 AgMs? Yes

details thereof are as given below:

Financial Year

13th AgM -2006-07

no resolution requiring Postal ballot was passed at AgM

12th AgM -2005-06

no resolution requiring Postal ballot was passed at AgM

11th AgM -2004-05

resolution for alteration of Object clause of Memorandum of Association of the Company u/s 17 of the Companies Act, 1956 passed at AgM.

iv) Whether special resolutions were put through postal ballot last year? Yes

details of voting pattern of Postal ballot is as mentioned below:

Subject Matter of resolution

u/s of the Companies Act, 1956

Votes in favour & % of total Equity Shares

Votes against & % of total Equity Shares

Invalid votes

For issuing Foreign Currency Convertible bonds or allied securities.

81 (1A) 8144438 76.3216%

nil nil

For raising borrowing Limit

293 (1) (d)

814442576.3215%

130.0001%

nil

For creating charge/ security

293 (1) (a)

814442576.3215%

130.0001%

nil

For amending Articles of Association for administration of transfer of bonds.

31 8144438 76.3216%

nil nil

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v) Person who conducted postal ballot: Ms.Ena Choksi, Practising Chartered Accountant.

vi) There is no special resolution proposed to be conducted through postal ballot.

ix DiSCLoSuReS i) All materially significant related party transactions

are detailed out in note no.4 of Schedule L attached to the balance Sheet.

ii) details of non-compliance by the company, penalties, and strictures imposed on the company by the bombay Stock Exchange Limited or SEbI or any statutory authority, on any matter related to capital markets, during the last three years? none.

iii) Whistle blower Policy :

The Company has formulated a mechanism for employees to report about unethical behaviour, actual or suspected fraud or violation of the company’s code of conduct or ethics policy. The Compliance Officer and Audit Committee acts upon any reporting under whistle blower policy.

x MeAnSofCoMMuniCAtionquarterly results are taken on record by the board of directors and submitted to the bombay Stock Exchange Limited in terms of the requirements of Clause 41 of the Listing Agreement. quarterly results are published in The Financial Express and Mumbai Lakshadeep. The Company posts its financial results on SEbI website and also on company’s website i.e.www.asianstarco.com.

xi geneRALSHAReHoLDeRSinfoRMAtionThe Company has entered into an agreement with M/s. bigshare Services Pvt. Ltd. for processing of dematerialisation (physical form) and transfer of equity shares.

Sr. no. Information

1 Annual general Meeting- date & Time- Venue

4th September, 2008 at 4.00 p.m.green room, garware Club House, Wankhede Stadium, ‘d’road, Churchgate, Mumbai – 400 020.

2 Financial Calendar- Financial reporting for the first quarter

- Financial reporting for the second quarter

- Financial reporting for the third quarter

- Financial reporting for the fourth quarter

(Tentative Schedule)Second fortnight of Jul. 2008

Second fortnight of Oct. 2008

Second fortnight of Jan. 2009

Second fortnight of Apr.2009

3 book Closure date (both days inclusive)

29.08.2008 to 04.09.2008

4 dividend Payment date dividend as recommended by the board of directors, if declared at the meeting, will be paid within prescribed time, subject to deduction of tax, if any.

5 Listing on Stock Exchange at bombay Stock Exchange LimitedPhiroze Jeejeebhoy Towers, dalal Street, Mumbai-400 023.

6 Stock Code ASAn.bO / 531847bombay Stock Exchange Limited

37

8. Registrar & Share Transfer Agents:

Bigshare Services Pvt. Ltd.E-2/3, Ansa Indl. Estate, Saki Vihar Road, Saki Naka,Andheri (East), Mumbai-400 072.Tel : 2847 3474 Fax : 2847 5207

9. Share Transfer System:The share transfer are approved by Shareholders Committee. Share transfers are registered within a period of 15 days from the date of receipt, if the documents are complete in all respect. During the year under review, the company has followed the guidelines issued by SEBI for dematerialisation of shares sent for transfer by the investors.

10. Distribution of equity shareholding as on March 31, 2008:

Category No. of shareholders Percentage No. of

shares Percentage

1-500 515 95.194 23633 0.22

501-1000 4 0.740 3000 0.03

1001-2000 1 0.184 2000 0.02

2001-3000 1 0.184 2013 0.02

3001-4000 - - - -

4001-5000 1 0.184 4700 0.04

5001-10000 - - - -

Above 10001 19 3.512 10635854 99.67

Total 541 100.00 10671200 100.00

7 Stock Market Data (closing price):

Month Price in BSEduring each month (Rs.)

High Low

April’07 1370.00 1322.50

May’07 1400.00 1150.00

June’07 1340.00 1129.25

July’07 1399.95 1170.00

Aug’07 1575.00 1295.00

Sep’07 1335.00 1308.00

Oct’07 1335.00 1280.00

Nov’07 1420.00 1280.00

Dec’07 1415.00 1296.00

Jan’08 1575.00 980.00

Feb’08 1374.00 1040.00

Mar’08 1290.00 615.00

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11. Categories of equity shareholding as on March 31, 2008:

Category no. of Shares Percentage of Shareholding

Indian Promoters 8000000 74.97

Private Corporate bodies 1678065 15.73

Indian Public 332406 3.11

nrI & OCbs 660729 6.19

Total 10671200 100.00

12. dematerialisation of Shares and Liquidity:

10661598 equity shares i.e. 99.91 % of equity shares have been dematerialised upto March 31, 2008.

13. Manufacturing Facilities :

Cut&PoLiSHeDDiAMonDSF.P.no. 138 & 151, Plot no.1near Sandesh Paper Press,Purushottam ginning Mill Compund,A K road, Surat, gujarat –395 001.

DiAMonDStuDDeDJeWeLLeRyPlot no.5, F-11/12, WICEL,Opp. SEEPZ, MIdC (Marol),Central road, Andheri (East),Mumbai-400 093.

WinDeneRgySangli, Maharashtra., dindugul and Coimbatore,Tamil nadu Pallakad, Kerala

14. Members can contact us at our registered office:

AsianStarCompanyLimited 114-C, Mittal Court, nariman Point, Mumbai-400 021. Email: [email protected] Tel.: 022- 2282 1886 Fax: 022- 2204 3747

Some of the points referred in non-mandatory requirements under Annexure Id of Clause 49 of the Listing Agreement are being pursued by the company.

39

dECLArATIOn rEgArdIng COMPLIAnCE bY THE bOArd MEMbErS And SEnIOr MAnAgEMEnT PErSOnnEL WITH THE COMPAnY’S COdE OF COnduCT

In accordance with Clause 49 sub clause I (d) of the listing agreement with the bombay Stock Exchange Limited, I confirm that, all the directors and the Senior Management personnel of the Company have affirmed compliance to the company’s Code of Conduct, as applicable to them for the Financial Year ended March 31, 2008.

forAsianStarCompanyLimited

Place: Mumbai VipulP.Shahdate: June 17, 2008 CEO & Managing director

AudITOrS CErTIFICATE On COrPOrATE gOVErnAnCE

To the members,AsianStarCompanyLimited,

We have examined the compliance of conditions of Corporate governance by Asian Star Company Limited, for the year ended on 31st March, 2008 as stipulated in clause 49 of the Listing Agreement of the said Company with the bombay Stock Exchange Ltd.

The compliance of conditions of Corporate governance is the responsibility of the management. Our examination has been limited to review of the procedures and implementation thereof, adopted by the Company for ensuring the compliance with 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 explanations given to us, and based on the representations made by the directors and Management, we certify that the Company has complied with the conditions of Corporate governance as stipulated in Clause 49 of the above mentioned Listing Agreement.

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.

forV.A.Parikh&AssociatesChartered Accountants

Place : Mumbaidate: June 17, 2008

JineshJ.ShahPartner

Membership no. 111155

FINANCIAL SECTION

41Annual Report 2007-08

AUDITORS’ REPORT

To,

The Members of ASIAn STAR COMPAny LIMITED

1. We have audited the attached Balance Sheet of Asian Star Company Limited as at 31st March, 2008, Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto. These Financial Statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these Financial Statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance whether the Financial Statements are free of material misstatements. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures in the Financial Statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall Financial Statements. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003, as amended by Companies ( Auditor’s Report ) (Amendment) Order, 2004 ( together ‘the order ‘), issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of said order.

4. Further to our comments in the Annexure referred to above, we report that:

a) We have 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.

c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of Account.

d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in the sub-section (3C) of Section 211 of the Companies Act, 1956.

e) On the basis of written representations received from the Directors, as on 31st March 2008 and taken on record by the Board of Directors, we report that none of the Directors of the Company is disqualified as on 31st March, 2008 from being appointed as a Director in terms of clause (g) of subsection (1) of section 274 of Companies Act, 1956.

f) In our opinion and to the best of our information and according to the explanation given to us, the said accounts read together with the notes thereon give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

i) in the case of the Balance Sheet, of the state of the affairs of the Company as at 31st March, 2008 ;

ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date ; and

iii) in the case of Cash Flow Statement, of the cash flows for the year ended on that date.

For V. A. Parikh & AssociatesChartered Accountants

Jinesh J .ShahPartner

Place: MumbaiDate: June 17, 2008 Membership No. 111155

Asian Star Company Ltd.

42

AnnEXURE TO AUDITORS’ REPORT

Re: Asian Star Company LimitedReferred to in paragraph 3 of our report of even date:

1. a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

b) As explained to us, all the assets have been physically verified by the Management at the end of the accounting year and no material discrepancies were noticed on physical verification as compared to the book records.

c) The assets disposed off during the year are not significant and therefore do not affect the going concern assumption.

2. a) The stock of finished goods and raw-materials have been physically verified by the management at the end of the accounting year.

b) In our opinion, and according to the information and explanations given to us, the procedures of physical verifications of stocks followed by the management are reasonable and adequate in relation to the size of the Company and nature of its business.

c) In our opinion the Company has maintained proper records of inventory. No material discrepancies were noticed on physical verification as compared to the book records.

3. a) The Company has not granted any loan (secured or unsecured) to companies, firms or other parties covered in the register maintained under Section 301 of the Act. In view of this sub clause (b), (c) and (d) of this clause are not applicable.

e) The Company has not taken any loan (secured or unsecured) from companies, firms or other parties covered in the register maintained under Section 301 of the Act except for unsecured loan of Rs.875 Lacs from 3 directors.

f) These loans are unsecured interest free and unconditional loans.

g) The principal amounts are repayable on demand and there is no repayment schedule.

4. In our opinion and according to the information and explanations given to us, the company has an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of inventory and fixed assets and also for sale of goods and services. During the course of our audit, no major weaknesses were noticed in the internal control system.

5. a) In our opinion and according to the information and explanations given to us, we are of the opinion that the contracts or arrangements that need to be entered into the register maintained under Section 301 have been properly entered in the said register.

b) In our opinion and according to the information and explanations given to us, the transactions entered in the register maintained under Section 301 in respect of each party have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time and as per the Company’s business need and exigencies.

6. In our opinion and according to the information and explanations given to us the Company has not accepted any deposits from the public within the meaning of the directives issued by the Reserve Bank of India and provisions of Section 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and rules framed there under.

7. In our opinion the Company has internal audit system commensurate with the size and nature of it’s business.

8. We have broadly reviewed the books of account maintained by the company pursuant to the Rules made by the Central Government for the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

9. a) According to the records of the Company and as per information and explanation given to us, the Company is generally regular in depositing with appropriate authorities undisputed amount of Provident Fund, Investor Education and Protection Fund, Employee’s State Insurance, Income Tax, Sales Tax, Wealth Tax,


Service Tax, Custom Duty, Excise Duty, cess and other statutory dues applicable to it and there were no undisputed dues outstanding as on 31st March, 2008 for a period of more than six months from the date they become payable.

b) In our opinion and according to the information and explanation given to us, there are no dues in respect of Sales Tax, Income Tax, Custom Duty, Wealth Tax, Service Tax, Excise Duty, and Cess that have not been deposited on account of any dispute.

10. The Company neither has any accumulated losses at the end of the financial year nor it has incurred any cash loss during the financial year or immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us the Company has not defaulted in repayment of dues to any Financial Institution or Bank.

12. In our opinion and according to the information and explanations given to us the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures or other securities.

13. The Company is not a chit/nidhi/mutual benefit fund/society and hence clause (xiii ) of the Order is not applicable.

14. In our opinion, the Company has maintained proper records of transactions and contracts in respect of dealing or trading in shares, securities and other investments and timely entries have been made therein. All shares and other investments have been held by the Company in its own name.

15. In our opinion and according to the information and explanations given to us the Company has not given any guarantee for any loans taken by others from bank or financial institution.

16. According to the information and explanations given to us, the term loan have been applied for the purpose for which they were raised. The term loan have been repaid during the year

17. In our opinion and according to the information and explanations given to us the short term funds raised by the

Company have not been used for long term investment.

18. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act.

19. The Company has not issued any debentures during the financial year.

20. The Company has not raised any money by public issue during the year.

21. In our opinion and according to the information and explanations given to us no fraud on or by the Company has been reported during the year.





44

(Rs.in Lacs)

Sche

dule

31.03.2008 31.03.2007

SOURCES OF FUnDSShareholders’ Fund

Share Capital A 3,587.12 3,587.12Reserves and Surplus B 29,373.02 32,960.14 25,414.78 29,001.90

Loan Funds CSecured Loans 53,389.74 55,514.68Unsecured Loans 875.00 54,264.74 – 55,514.68

Deferred Tax Liability 984.07 684.26

Total 88,208.95 85,200.84

APPLICATIOn OF FUnDSFixed Assets D

Gross Block 11,456.25 5,662.70Less : Depreciation 1,066.90 10,389.35 757.05 4,905.65

Capital Work-in Progress 2,016.69 468.77

Investments E 2,889.98 662.24

Current Assets, Loans and Advances FInventories 28,261.72 25,152.53Sundry Debtors 41,424.55 49,162.89Cash & Bank Balances 8,821.82 6,880.34Loans & Advances 7,902.44 6,834.16

86,410.53 88,029.92

Less: Current Liabilities and Provisions GLiabilities 7,779.44 3,507.60Provisions 5,718.16 5,358.14

13,497.60 8,865.74

net Current Assets 72,912.93 79,164.18

88,208.95 85,200.84

Significant Accounting Policies and Notes forming part of Accounts L

BALAnCE ShEET as at March 31, 2008

As per our report of even date For and on behalf of the Board

For V. A. Parikh & Associates

Chartered Accountants

Jinesh J. Shah Anuradha Banerjee Dinesh T. Shah Vipul P. Shah

Partner Company Secretary Chairman CEO & Managing Director

Place : Mumbai Place : Mumbai

Dated : June 17, 2008 Dated : June 17, 2008


PROFIT & LOSS ACCOUnT for the year ended March 31, 2008

(Rs.in Lacs)

Sche

dule

31.03.2008 31.03.2007

InCOMESales & Services H 130,510.62 116,361.03Other Income I 1,630.76 132,141.38 291.79 116,652.82

EXPEnDITUREMaterial Cost J 111,835.52 98,700.70Manufacturing and Other Expenses K 9,715.21 8,742.34Purchase of Polished Diamonds/Jewellery 1,903.80 1,467.42Interest 2,897.94 3,373.89Depreciation 316.31 126,668.78 244.33 112,528.68

PROFITProfit Before Tax 5,472.60 4,124.14 Provision for Tax 1,106.00 1,146.00 Provision for Deferred Tax 319.23 206.70 Provision for Fringe Benefit Tax 13.50 16.40 Profit After Tax 4,033.87 2,755.04 Prior Year Adjustments 2.23 –Balance Brought forward 9,276.94 7,051.85 Balance Available for Appropriation 13,313.04 9,806.89

APPROPRIATIOnProposed Dividend on Preference Shares 75.60 75.60Proposed Dividend on Equity Shares 213.42 213.42Tax on Dividend 49.12 40.93Transfer to General Reserve 200.00 200.00 Balance Carried to Balance Sheet 12,774.90 9,276.94

13,313.04 9,806.89

Earning Per Share (Basic and Diluted) 36.99 25.01










46

SChEDULES ‘A’ to ‘L’ Annexed to and Forming Part of The Accounts for the year ended March 31, 2008

(Rs.in Lacs)

SChEDULE A - Share Capital 31.03.2008 31.03.2007

Authorised1,50,00,000 ( 1,50,00,000 ) Shares of Rs.10 each 1,500.00 1,500.005,00,00,000 (5,00,00,000) Redeemable Cumulative 5,000.00 5,000.00Preference shares of Rs.10 each

6,500.00 6,500.00

Issued, Subscribed and Paid-up1,06,71,200 ( 1,06,71,200 ) equity shares of Rs. 10 each 1,067.12 1,067.122,52,00,000 (2,52,00,000) 3% Redeemable Cumulative Preference Shares of Rs. 10 each 2,520.00 2,520.00(Redeemable within twenty years from the date of issue-March 2006)

3,587.12 3,587.12

(Rs.in Lacs)

SChEDULE B - Reserves And Surplus 31.03.2008 31.03.2007

Capital ReservesAs per Last Balance Sheet 0.16 0.16Addition during the year * 298.00 298.16 – 0.16

Share PremiumAs per Last Balance Sheet 1,736.28 1,736.28

General ReserveAs per Last Balance Sheet 14,401.40 14,201.40Less:- Charge on account of transitional provisions of Employee Benefits under AS-15 (net of deferred tax) 37.72 –

Add:- Transfer from Profit and Loss Account 200.00 200.0014,563.68 14,401.40

Surplus as per Profit and Loss Account 12,774.90 9,276.94

29,373.02 25,414.78

* Represents share in the self generated goodwill of partenership firm Jewel Art


(Rs.in Lacs)

SChEDULE C - Loan Funds 31.03.2008 31.03.2007

Secured LoansWorking Capital Loan from Banks 53,389.74 54,536.96Secured bya. Hypothecation of Stock in Trade and Book Debtsb. Hypothecation of Premises at Mumbai and Suratc. Guaranteed by some of the Directors in their personal capacity

Term Loan from Banks – 977.72Secured bya. Fixed Depositsb. Guaranteed by some of the Directors in their personal capacity

All loans are repayable within one yearA 53,389.74 55,514.68

Unsecured LoansLoan from Directors 875.00 –

B 875.00 –

A + B 54,264.74 55,514.68

(Rs.in Lacs)

Description of Assets Gross Block (At Cost) Depreciation net Block

SChEDULE D -Fixed Assets

As At 01.04.07 Additions Deduc-

tionsAs At

31.03.08As At

01.04.07For the

YearDeduc-

tionsAs At

31.03.08As At

31.03.08As At

31.03.07

Goodwill 50.00 – – 50.00 – – – – 50.00 50.00Land 634.81 32.00 – 666.81 – – – – 666.81 634.81Office Premises 681.77 2,508.00 – 3,189.77 82.30 22.87 – 105.17 3,084.60 599.47Factory Premises 608.69 0.59 – 609.28 61.68 20.39 – 82.08 527.20 547.00Plant & Machinery 3,231.78 2,937.61 23.51 6,145.88 464.89 225.51 2.39 688.01 5,457.87 2,766.89Vehicles 207.61 86.78 9.55 284.84 61.09 24.77 4.08 81.79 203.05 146.52Furniture & Fixtures 248.04 261.98 0.35 509.67 87.08 22.77 – 109.85 399.82 160.97

CURREnT yEAR 5,662.70 5,826.96 33.41 11,456.25 757.04 316.31 6.47 1,066.90 10,389.35 4,905.66

PREVIOUS yEAR 5,628.36 92.30 57.96 5,662.70 542.34 244.33 29.63 757.04 4,905.66 5,086.02



48

(Rs.in Lacs)

SChEDULE E - Investment 31.03.2008 31.03.2007

In SharesLong Term Investments:Unquoted:

Wholly owned subsidiary- Asian Star Co.Ltd., USA 178.75 178.755(5) Shares of US$ 100000 each.

Wholly owned subsidiary - Inter Gems DMCC 12.01 –200 ( Nil ) Shares of AED 1,000 each

Krishana Sagar Builders Ltd 100.00 –40,000 ( Nil ) Shares of Rs.10 each.

Wholly owned subsidiary - Intergems Inc., USA – 46.94Nil (1000) Shares of US$ 100 each.

Star Holdings Ltd. – 11.31Nil (250) Shares of US$ 100 each

Carbon Accessories Limited – 200.00Nil (20,00,000) Shares of Rs. 10 each

290.76 437.00

Current Investments:Quoted:In Shares

Classic Diamonds 4.69 0.455000 (100) Shares of Rs. 2 each

Flawless Daimond 0.01 0.0110(10) Shares of Rs. 10 each

Gitanjali Gems Ltd. 2.21 0.211000 (100) Shares of Rs. 10 each

Golddiam International 0.96 0.121000 (100) Shares of Rs. 10 each

Golkunda Diamond 0.01 0.0110 (10) Shares of Rs. 10 each

Parekh Platinum 0.01 0.0110 (10) Shares of Rs. 10 each

Rajesh Exports 0.51 0.02600 (10) Shares of Re. 1 each

S.B. & T Inter Ltd 0.01 0.0110 (10) Shares of Rs. 10 each

Shantivijay Jewels 0.01 0.0110 (10) Shares of Rs. 10 each

Shrenuj & Co Ltd 0.44 0.041000 (100) Shares of Rs. 2 each

Suashish Diamonds Ltd 1.85 0.131000 (100) Shares of Rs. 10 each

Su-Raj Diamonds & Jewellery Ltd 0.57 0.051000 (100) Shares of Rs. 10 each



(Rs.in Lacs)


Vaibhav Gems Ltd 0.03 0.0310 (10) Shares of Rs. 10 each

Zodia JRD MKJ 0.01 0.0110 (10) Shares of Rs. 10 each

A 11.32 1.11

Quoted:In Mutual Funds

JM Agri & Infra Fund 25.00 –250000 (Nil) units of Rs.10 each

JM Basic Fund 25.00 –84555 ( Nil ) units of Rs.10 each

JP Morgan India EQ Fund 25.00 –176267 ( Nil ) units of Rs.10 each

Reliance Diver.Pow.Sec Fund 25.00 –47975 ( Nil ) units of Rs.10 each

Reliance Media & Ent Fund 25.00 –63081 ( Nil ) units of Rs.10 each

Reliance Vision Fund 25.0039708 ( Nil ) units of Rs.10 each

B 150.00 –

A + B 161.32 1.11

Less : Diminution in market value of current investment (44.63) 116.69 – 1.11

Market Value(Current Year Rs.116.69 Lacs)(Previous Year Rs.1.09 Lacs)

In Partnership FirmJewel Art 2,482.53 224.13

2,889.98 662.24

(Rs.in Lacs)

SChEDULE F - Current Assets, Loans And Advances 31.03.2008 31.03.2007

Current AssetsInventories

(As verified, valued and certified by a Director)Raw Materials 17,153.79 16,283.17Work In Progress 756.98 903.81Finished Goods 10,339.36 7,941.45Consumables 3.67 19.93Silver Stock 7.92 4.17

28,261.72 25,152.53



50

(Rs.in Lacs)


Sundry Debtors(Unsecured, Considered Good)For a period more than six months

Considered Good 894.45 3,487.64Considered doubtful – 165.76

894.45 3,653.40

OthersConsidered Good 40,530.10 45,675.25Considered doubtful – –

40,530.10 45,675.25

Less: Provision for doubtful debts – 165.7641,424.55 49,162.89

Cash and Bank BalancesCash on Hand 51.80 27.77

Balances with Scheduled BankIn Current Accounts 2,641.58 742.79In Fixed Deposits 6,128.44 6,109.78

8,821.82 6,880.34

Loans And Advances(Unsecured, Considered good)

Advance Income Tax 5,549.99 5,332.47 Other Advances 2,133.22 1,234.73 Staff Loans 7.20 24.91

7,690.41 6,592.11

DepositsFor Office Premises 153.31 181.86With Others 58.72 60.19

212.03 242.05 7,902.44 6,834.16

86,410.53 88,029.92

(Rs.in Lacs)

SChEDULE G - Current Liabilities 31.03.2008 31.03.2007

Current LiabilitiesCreditors for Goods 4,585.20 2,320.05Creditors for Processing 820.80 842.17Creditors for Others 402.62 344.60

5,808.62 3,506.82Creditors for Capital Goods 1,694.86 –Temparory Overdraft 275.92 0.73Unclaimed Dividend * 0.04 0.05

7,779.44 3,507.60Provision

Proposed Dividend 289.02 289.02Tax on Dividend 49.12 40.93Taxation 5,380.02 5,028.19

5,718.16 5,358.14

13,497.60 8,865.74

* There are no amounts due and oustanding to be credited to Investor Education and Protection Fund.



(Rs.in Lacs)

SChEDULE h - Sales & Services 31.03.2008 31.03.2007

Sales - Diamonds 124,690.25 112,119.26 Sales - Jewellery 5,531.17 3,966.62Sales of Mounting etc. 4.72 6.56Sales of Power -Windmill 127.16 119.09 Jewellery Making Charges 157.32 149.50

130,510.62 116,361.03

(Rs.in Lacs)

SChEDULE I - Other Income 31.03.2008 31.03.2007

Dividend Received 14.18 6.59Profit on Sale of Shares 182.54 59.69Exchange Difference Others 52.01 22.87Compensation Received 11.81 50.87Miscallaneous Receipts 49.81 –Share of Profit from Partnership Firm 1,320.41 151.77

1,630.76 291.79

(Rs.in Lacs)

SChEDULE J - Materials Cost 31.03.2008 31.03.2007

Stock at the Commencement 16,287.34 17,067.40Purchases during the year 114,960.97 96,277.05

131,248.31 113,344.45Less : Stock at the Close 17,161.71 16,287.34

114,086.60 97,057.11Variation in Stock of Work In Progress Stock at the Commencement 903.81 438.76Less: Stock at the Close 756.98 903.81

146.83 (465.05)Variation in Stock of Finished GoodsStock at the Commencement 7,941.45 10,050.09Less: Stock at the Close 10,339.36 7,941.45

(2,397.91) 2,108.64

111,835.52 98,700.70



52

(Rs.in Lacs)

SChEDULE K - Manufacturing & Other Expenses 31.03.2008 31.03.2007

Manufacturing ExpensesProcessing Expenses 6,373.75 5,480.86 Wages 114.04 94.23 Contribution to E.S.I.C. 3.73 2.98 Contribution to Provident Fund 7.44 6.13 Electrical Charges 61.65 40.90 Consumables 293.91 322.70 Factory Expenses 63.01 30.68

6,917.53 5,978.48Employee’s Emoluments

Salary & Bonus 735.15 597.77 Director’s Remuneration 37.05 20.40Gratuity 12.17 22.17Ex Gratia & Leave Encashment 20.67 31.23M. L. W. F. Expenses 0.42 0.37Contribution to Provident Fund 47.38 42.01Group Insurance 12.17 8.72Contribution to E.S.I.C. 9.44 7.84Staff Welfare Expenses 29.94 25.96

904.39 756.47Administrative Expenses

Bank Comission & Charges 112.44 109.59Electrical Charges 81.00 40.10Telephone, Interenet and Fax Charges 51.41 46.44Local Travelling and Conveyance 36.90 34.16Legal & Professional fees 51.24 42.72Audit Fees 3.37 2.19Printing & Stationery 16.46 15.82Repairs & Maintenance (Other) 38.95 31.87Repairs & Maintenance (Building) 1.35 0.99Repairs & Maintenance (Plant & Machinery) 20.12 18.88Postage and Courier 18.51 18.37Motor Car Expenses 20.09 23.65Provision for Doubtful Debts – 165.76Provision for Doubtful Debts written back (165.76) –Bad Debts 165.76 –Insurance Premium 108.79 107.10 Income Tax 7.32 –Rent & Compensation 53.76 34.90 Donation 62.05 89.74Demat Charges 0.62 –Office Canteen Expenses 26.71 24.78 Office Expenses 10.46 5.05Director’s Sitting Fees 1.01 0.56Sundry Expenses 23.89 9.37Secuirty Charges 17.28 13.53Loss on Sale of Assets 10.73 15.28Registration & Filling Charges 3.28 0.19Wealth Tax 0.91 1.25Membership and Subscription 3.13 1.22Diminution in market value of current investment 44.63 –

826.41 853.51

Selling & Distribution ExpensesAdvertisement 38.70 45.57Sales Expenses 512.32 680.01Sales Tax 0.13 –Entertainment Expenses 12.37 3.66Foreign Travelling 112.12 87.23Commission on Sales 141.78 121.35Re-Assortment Charges 33.44 28.74Freight & Clearing Charges 69.36 62.87Agency Charges 10.73 9.81E.C.G.C. Premium 63.99 77.45Diamond Grading Charges 65.75 30.79Packing Expenses 6.19 6.40

1,066.88 1,153.88

9,715.21 8,742.34



SChEDULE LNotes annexed to and forming part of the Balance Sheet as at 31st March, 2008 and Profit & Loss Account for the year ended on that date

I - Significant Accounting Policies

A. Basis for Preparation of Financial Statements

The financial statements have been prepared using mercantile system of accounting under the historical cost convention. It recognises significant items of income and expenditure on accrual basis. The accounts have been prepared to comply in all material aspects with applicable accounting principles in India and the Accounting Standards issued by the Institute of Chartered Accountants of India.

B. Sales

Income from the sale of diamonds / studded jewellery is recognised when the sale has been completed with the passing of the title. Income from sale of wind energy is recognised on its transmission and delivery.

C. Other Income

Interest Interest income is recognised on accrual basis.

Insurance claim Insurance claim on loss by theft is recognised on the basis of

acceptance of claim by the Insurance Company.

Income from Investments Income from investment is accounted in the year in

which the unconditional right to receive such income is established.

D. Depreciation

Depreciation on fixed assets has been provided at the rates and in the manner prescribed in schedule XIV to the Companies Act, 1956 on straight line basis.

E. Impairment of Assets

An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value. An impairment loss is charged to the profit and loss account in the year in which the asset is identified as impaired. The impairment loss recognized in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.

F. Foreign Currency Transactions

F.1 Transactions denominated in foreign currencies are normally recorded at the exchange rate prevailing at the time of the transaction.

F.2 Monetary items denominated in foreign currencies at the year-end are translated at year-end exchange rate.

F.3 In case of forward contracts, the difference between the year end rate and rate on the date of contract is recognised as exchange difference. The proportionate difference between the forward rate and the exchange rate on the date of transaction is recognised over the life of the contract.

F.4 Non monetary foreign currency items are carried at cost.

F.5 Any income or expense on account of exchange difference either on settlement or on translation is adjusted to the profit and loss account except in cases where they relate to acquisition of fixed assets in which case they are adjusted to the carrying cost of such assets.

G. Fixed Assets

Cost of Fixed Assets comprises of purchase price, duties, levies and any cost directly attributable to bringing the asset to its working condition for the intended use. Fixed Assets are stated at cost less accumulated depreciation.

h. Capital Work in Progress

Capital work in progress comprises of cost of acquisition of assets, duties, levies and any cost directly attributable to bringing the asset to its working condition for the intended use Expenditure incurred on project under implementation is treated as incidental expenditure incurred during construction and is pending allocation to the assets which will be allocated/apportioned on completion of the project.

I. Borrowing Costs

All borrowing costs, which are of revenue nature, are charged to Profit and Loss Account.

J. Investment

J.1 Long term investments are valued at cost. Provision for diminution in value is made only if such diminution is otherwise than temporary in the opinion of the management.

J.2 Current Investments -Quoted are valued at cost or market value, whichever is lower.

J.3 Investment in Partnership firm is accounted after including share of profit thereon as per last available audited information.

K. Inventories

K.1 Stock of raw materials is stated at weighted average cost or net realizable value whichever is lower. Stock of polished diamonds (for jewellery operations) is valued at technically evaluated cost or net realizable value whichever is lower. Specific items of cost are allocated and assigned to inventory wherever practicable.

K.2 Work in Process is valued at technically evaluated cost. Finished goods are valued at technically evaluated cost or estimated net realizable value, whichever is lower. Cost includes cost of material and related conversion cost. In view of the nature of variation in the values of individual diamonds and the differential in their processing costs, it is not practicable to compute the cost of polished diamonds using either FIFO or weighted average cost. In view of the numerous grades, it is not practicable to use specific costs. The method of valuation is therefore in compliance with “AS2”issued by the



54

Institute of Chartered Accountants of India to the extent practicable.

K.3 Consumables are valued at cost.

L. Employee Benefits

L.1 Short term Employees benefit Short term employees benefits are recognized in the

period during which the service has been rendered.

L.2 Long Term Employee Benefit

a) Provident Fund Act, Family pension fund & employees State Insurance Scheme.

As per provident fund Act, 1952 all employees of the company are entitled to receive benefits under the provident fund & family pension fund which is a defined contribution plan. These contributions are made to the fund administrated and managed by the Government of India. In addition some employees of the company are covered under Employees State Insurance Scheme Act, 1948, which are also defined contribution Schemes recognized and administered by Government of India.

The company’s contributions to these schemes are recognized as expense in Profit and Loss account during the period in which the employee renders the related services. The company has no further obligation under these plan beyond its monthly contributions.

b) The company provides for gratuity obligation through a Defined Benefit Retirement Plan (‘The Gratuity Plan’) covering it’s employees. The present value of the obligation under such Defined plan is determined based on actuarial valuation. Actuarial gains and losses are recognized in Profit & Loss Account as and when determined. The company makes annual contribution to LIC for the Gratuity plan in respect of employees.

M. Taxation

Current Tax is determined as the amount of tax payable in respect of taxable income for the year after considering various reliefs admissible under provisions of the Income Tax Act, 1961. The deferred tax for timing difference between the book and tax profit for the year is accounted for using tax rates and tax laws that have been enacted or substantially enacted at the Balance Sheet date. Deferred tax asset arising from timing difference are recognised to the extent that there is virtual certainty that sufficient future taxable income will be available.

n. Contingent Liability

The company creates a provision when there is present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources.

II - notes Forming Part Of The Accounts

1. Surplus on account of exchange difference on outstanding forward exchange contracts to be recognised in profit and loss account of subsequent accounting period aggregate to Rs 12.10 lacs. (For F.Y. 2006-07 it was Rs. 391.64 lacs).

2. Derivative Instruments:

a) Derivative contracts entered into by the Company and outstanding as on 31st March, 2008.i) For hedging currency related risk: Normal amount of forward contracts (net) entered into

by the company and outstanding as On 31st March, 2008 amount to Rs. 4 crores (for F.Y.2006-07 it was Rs. 553.68 crores).

ii) For hedging commodity related risk Forward contracts for Gold by the company and

outstanding as on 31st March, 2008 covers 140 Kgs. (For F.Y.2006-2007 it was 35 Kgs.).

b) Foreign currency exposure that are not hedged by the derivative instruments as on 31st March, 2008, amount to Rs. 206.85 crores (for F.Y.2006-07 it was Rs. Nil).

3. There are no Micro and Small Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days as at 31st March, 2008. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the bases of information available with the Company.

4. Related Party Disclosure for the year ended 31st March, 2008.

(A) Particulars of Enterprises controlled by the Company

name of Related Party RelationshipAsian Star Co. Ltd. (U.S.A.) Subsidiary

Intergems Inc. Erstwhile Subsidiary

Inter Gems DMCC. Subsidiary

Jewel Art Associate Concern

(B) Particulars of Key Management Personnel

name of Related Party RelationshipDinesh T. Shah Chairman

Vipul P. ShahCEO & Managing Director

Dharmesh D. ShahCFO & Jt. Managing Director

Arvind T. Shah Executive Director

Priyanshu A. Shah Executive Director



(C) Particulars of Enterprises Under Common control of The Key Management Personnel

Shah EnterprisesShah ManufacturarsRahil AgenciesA’Star ExportsAsian Star Diamonds International Pvt. Ltd.

(D) Particulars of Relatives of Key Management Personnel where There are transactions.

Nirmala D. ShahRasila A. ShahSujata V. ShahPooja P. Shah

(E) Particulars of Transactions with Parties Referred to in (A)

(Rupees in Lacs)

AboveSale of Polished Diamonds 11,348.39Import of Diamonds 270.12Dividend Received 6.00Amount Outstanding Shown under Sundry Debtors 4,625.98

Amount Outstanding Shown under Other Advances 5.10

Capital Introduced in Partnership Firm 938.00

Profit Earned in Partnership Firm 1,320.40Outstanding Capital in Partnership Firm Shown under Investments 2,482.53

Sale of Mountings etc 2.91Jewellery Making Charges 3.12Purchase of Assets 4.47Purchase of Raw Materials 1.45

(F) Particulars of Transactions with Parties Referred to in (B)

(Rupees in Lacs)

AboveDirectors’ Remuneration 37.05Rent Paid 3.60Amount Outstanding shown under Deposits for Office Premises 110.00

Loan Taken 875.00 Amount Outstanding shown under Unsecured loans from Directors 875.00

Purchase of Office Premises 700.00

(G) Particulars of Transactions with Parties Referred to in (C)

(Rupees in Lacs)

AboveRent Payment 1.86Lease Deposit Outstanding shown under Deposits 10.00

Contract for Processing of Diamonds 2,730.14Amount Outstanding shown under Creditors for Processing 392.97

Purchase of Office Premises 606.00

(h) Particulars of Transactions with Parties Referred to in (D)

(Rupees in Lacs)

AbovePurchase of Office Premises 379.00

5. During the year, Company has recognized the following amounts in the financial statements.

a) Defined Contribution Plan

Contribution to Defined Contribution Plan, recognized as expenses for the year are as under:

Particulars (Rupees in Lacs)Employers Contribution to Provident Fund & Family Pension Fund

47.38

Employers Contribution to Employees State Insurance Scheme.

9.44

Employers Contribution to Maharashtra Labour Welfare Fund

0.42

b) Defined Benefit Plan:

Defined benefits plan as per actuarial valuation as on 31st March,2008 and recognized in the financial statement in respect of Employee Benefits Scheme:

Disclosure under AS 15 (Revised) Employees Benefits Scheme:

Gratuity (Funded)(Rupees in Lacs)

I) Change in defined benefits obligation as at 31st March,2008.

a) Present value of the obligation as beginning of the year

140.77

b) Current Service Cost 18.14c) Interest Cost 12.32d) Benefit Paid (9.80)e) Actuarial Gain on obligation (10.11)f) Present value of obligation as at end of

the year151.32

II) Change in fair value of plan assetsa) Present value of the obligation as

beginning of the year83.63

b) Expected actual return on plan Assets 8.31

c) Contribution 25.11d) Benefit Paid (9.80)e) Actuarial gain (0.13)f) Present value of obligation as at end of

the year107.12

III) Component of Employee Cost recognized in Profit & Loss A/c.

a) Interest Cost 12.32b) Current Service Cost 18.14c) Expected return on plan Assets (8.31)d) Actuarial gain (9.98)e) Expenses recognized in Profit & Loss

A/c12.17



56

IV) Reconciliation of Present value of obligation and fair value of Plan assets.

a) Present value of obligation at the end of the year

151.32

b) Fair Value of Plan Assets at the end of the year

107.12

c) Difference (44.20)d) Amount Recognized in the Balance

Sheet(44.20)

(%)V) Actuarial Assumptionsa) Discount Rate 8 %b) Expected rate of return on assets 8 %c) Future salary escalation 5 %d) Attrition rate 2 %

Note: The Company during the year has adopted the AS 15 (revised) “Employee Benefits” issued by the I.C.A.I, in accordance with the stipulation of the Standard, the Company has adjusted Rs.37.72 lacs (net of deferred tax aggregating to Rs.19.43 Lacs) towards the additional liability toward defined benefit obligation in respect of gratuity liability upto 31st March, 2007 against the opening balance of General Reserve as at 1st April, 2007.

6. Details of investment: Particulars of Investment in Partnership Firm: Name of the Firm : Jewel Art Total Capital of the Firm : Rs 6,458.03 lacs

(Rs.in Lacs)

name of the Partner Share of Profit (%) Balance as on 31.3.08

1. Dharmesh D. Shah 1.50 1,199.572. Vipul P. Shah 1.50 1,576.433. Asian Star Co.Ltd. 91.00 2,482.534. Priyanshu A. Shah 1.50 1,136.235. Nirmala D. Shah 1.50 21.096. Rasila A. Shah 1.50 21.097. Sujata V. Shah 1.50 21.09

Particulars of investments purchased and sold during the year:

(Rs.in Lacs)

Scrip name no. of Equity Shares

Face Value Purchase Cost

Gremach Infra. 25,000 10.00 48.29Central Bank of India. 15,387 10.00 15.69ICICI Bank Ltd. 55,920 10.00 525.65Everonn systems Ind.Ltd. 329 10.00 0.46Simplex Project Ltd. 681 10.00 1.26I-Flex 10,000 5.00 192.53India Bulls Ltd. 22,500 2.00 140.48Everest Kanto Cylinder 25,000 2.00 56.74Hotel Leela ventures Ltd. 110,0000 2.00 549.41Power Grid Corporation Ltd. 10,182 10.00 5.29DCW Ltd. 5,00,000 2.00 89.18Sunflag Iron & Steel Co.Ltd. 100,000 10.00 27.03Ispat Industries 130,000 10.00 81.98UTV Software Ltd. 500 10.00 4.14G V Films Ltd. 150,000 10.00 15.87

GRAnD TOTAL 1,754.00



7. Deferred Tax Liability

Break up of Deferred Tax Liability as on 31st March, 2008 is as given below;

(Rs.in Lacs)ParticularsDeferred Tax Liability as on 1.4.2007 684.26

Add:Provision for Deferred Tax made during the year arising on account of timing difference in Depreciation 273.66Gratuity Liability –Current Year 4.40Deferred Tax on Provision for Doubtful Debts 56.34

Deferred Tax liability as on 31.03.2008 1018.66

Less:Deferred Tax Asset as on 1.4.2007 NilProvision for Diminution in Market value of Current investments. 15.17Past Gratuity Liability 19.42

Deferred Tax Assets as on 31.03.2008 34.59

Deferred Tax Liability (Net) as on 31.3.2008 984.07

8. Contingent Liability All known liabilities, wherever material, are provided for. Contingent Liabilities are usually not provided for, unless it is probable

that the future outcome may be materially detrimental to the Company. Asian Star Co. Ltd. has paid Rs 100.52 lacs (For F.Y. 2006-07 Rs. 225.82 lacs) to Income Tax Department against the demands

raised by them on completion of tax assessment. The company is of the opinion that the disallowances made by Income Tax Department are not tenable and has filed appeals against these demands. The same shall be charged to Profit & Loss account, if required, on disposal of appeals.

9. Segmentwise reporting Revenue, Result and Capital Employed(Rs.in Lacs)

Particulars 2007-2008 2006-2007Description1. Segment – Revenue

- Diamond 1,27,714.47 1,14,316.22- Jewellery 7,065.92 4,319.94- Others 390.47 213.67

Total 1,35,170.86 1,18,849.83Less: Inter Segment Revenue/ Transfer 3,029.48 2,196.96net Sales / Revenue 1,32,141.38 1,16,652.872. Segment ResultsProfit/(Loss) before Tax andInterest from each segment

- Diamond 6,711.00 6,710.55- Jewellery 1,340.52 635.64- Others 321.25 151.83

Total 8,372.77 7,498.02Less:i) Interest 2,897.94 3,373.89ii) Other un – allocable expenses – –Total Profit before Tax 5,474.83 4,124.133. Capital Employed

- Diamond 28,108.01 26,382.51- Jewellery 3,251.02 975.71- Other 1,601.11 1,643.68- Unallocated net assets – –

Total 32,960.14 29,001.90

The Company now recognizes two reportable business segments viz. cut and polished diamonds and jewellery. The business which is not reportable during the year, has been grouped under ‘Others’ segment, this comprises wind energy generation.



58

Secondary Segment

Details as per Geographic Region

(Rs.in Lacs)

Region Region wiseSales & Services

Direct SegmentAssets (Debtors)

1. ExportsASIA 50,509.22 20,740.41USA 16,977.07 7,450.89EUROPE 28,826.79 6,218.62

2. Local 34,197.54 7,014.62

Total 1,30,510.62 41,424.54

Segment Reporting and Related Information requires that an enterprise report a measure of total assets for each reportable segment. The fixed assets and inventories used in the company’s business are not identifiable to any particular reportable segment and can be used interchangeably among geographical segments. Consequently, management believes that it is not practical to provide segment disclosures relating to total assets since a realistic analysis among the various geographic segments is not possible. Therefore, information has been restricted to direct debtors of each geographical segment.

10. Earning Per Share

Particulars 2007-2008 2006-2007

Profit After Tax (Rs. in lacs) 4,033.88 2,755.04Prior Year Adjustments 2.23 –Dividend on Preference Share & Tax thereon 88.45 86.31Number Of Equity Shares 10,671,200 1,067,1200Nominal Value Per Equity Share (Rs.) 10 10Earning Per Share(Basic) (Rs.) 36.99 25.01

11. Licensed and installed capacity

A. Information in respect of goods manufactured:

Particulars Units 2007-2008 2006-2007

Polished DiamondsLicensed Capacity Carats N.A. N.A.Installed Capacity Carats N.A. N.A.*Production Carats 7,19,166.93 6,55,926.54(*Including Manufactured by others on job work basis)

Studded JewelleryLicensed Capacity Pcs. 2,40,000 60,000Installed Capacity Pcs. 60,000 60,000Production Pcs. *53,210 *50,281(*Including 15,597(P.Y.13,395) Pcs Manufactured for others on job work basis)

WindmillInstalled Capacity KW 4,300 2,500



B. Particulars of Purchase, Sales, Manufacture and Stock of finished goods

2007-2008 2006-2007

Particulars Quantity in carats Rupees in lacs Quantity in

carats Rupees in lacs

Polished DiamondsOpening Stock 79,940.00 6,810.18 71,885.00 9,163.76Purchase 8,745.05 1,622.37 6,968.80 1,410.65Manufactured 7,19,166.93 1,18,737.83 6,55,926.54 1,01,186.79Sales 7,15,146.21 1,21,250.47 6,41,650.33 1,10,304.26Transfer to Jewellery Division 19,200.57 3,029.48 13,032.60 2,196.96Weight Loss 152.31 – 157.41 –Closing Stock 73,352.89 8,827.32 79,940.00 6,810.18

2007-2008 2006-2007

Particulars Quantity in Pcs. Rupees in lacs Quantity in

Pcs. Rupees in lacs

Studded JewelleryOpening Stock 6,169.00 1,131.27 5,632.00 886.63Purchase 3,357.00 281.43 296.00 56.78Manufactured 37,613.00 5,033.70 36,886.00 3,719.88Sales 37,976.00 5,746.16 36,645.00 3,966.62Closing Stock 9,163.00 1,512.00 6,169.00 1,131.27

2007-2008 2006-2007

Particulars Quantity in Kwh Rupees in lacs Quantity in

Kwh Rupees in lacs

WindmillSales of Power 34,83,770.10 127.16 33,99,337.20 119.09

C. Analysis of Material Consumed

2007-2008 2006-2007

Particulars Quantity in carats Rupees in lacs Quantity in

carats Rupees in lacs

Rough DiamondsConsumption 14,77,228.21 1,12,104.63 13,85,023.60 95,447.02Sales 1,40,942.64 3,434.51 88,918.48 1,815.00

2007-2008 2006-2007

Particulars Quantity in Gms. Rupees in lacs Quantity in

Gms. Rupees in lacs

Raw GoldConsumption 1,80,000 1,780.51 1,44,000 1,342.73Sales Nil Nil Nil Nil



60

2007-2008 2006-2007

Particulars Quantity in Cts. Rupees in lacs Quantity in

Cts. Rupees in lacs

Polished Diamonds (for Jewellery Manufacturing)Consumption 18,631.51 2,930.04 14,048.31 2,317.77Sales Nil Nil Nil Nil

12. Value of imported and indigenous consumption (For Polished Diamonds)

(Rs.in Lacs)

2007-2008 2006-2007

l Imported Raw material 63,175.13 76,101.9256.35% 79.73%

l Indigenous Raw material 48,929.50 19,345.1043.65% 20.27%

Total 1,12,104.63 95,447.02

13. Value of imported and indigenous consumption (For Jewellery Manufacturing)

l Imported Raw material 23.21 18.690.48% 0.56%

l Indigenous Raw material 4,767.28 3,323.3299.52% 99.44%

Total 4,790.49 3,342.01

14. Interest Charged to profit & loss account is net of Interest received 555.20 417.26

Tax Deducted at source 120.21 93.14

15. Expenses (Income) in respect of previous years debited / Credited during the year. (2.23) –

16. Value of Import on CIF Basis Raw Materials (Rough Diamonds) 64,167.24 76,281.43

17. Expenditure in Foreign Currency

Foreign Traveling 26.27 33.60Advertisement & Sales Expenses – 37.24Consumables 227.63 283.30Value Added Service fees 462.27 625.24Export Sales Expenses 55.54 37.25Repairs & Maintenance 4.04 –



18. Earning in Foreign exchanges

a. FOB value of Diamonds exported 1,02,198.66 1,05,024.96b. FOB value of Studded Jewellery exported 1.35 6.85c. Dividend Received 6.00 6.54d. Goods Inspection Charges 2.77 –

19. Breakup of remuneration paid to Managing/ Wholetime Directors

a. Salary 37.05 20.40b. Contribution to Provident & other Fund 0.19 0.29

The Company has been advised that the computation of net profit pursuant to section 349 of the Companies Act,1956 need not be enumerated since no commission has been paid to directors.

20. Auditors Remuneration

Audit Fees 3.37 2.19Other matters – 1.40Total 3.37 3.59

21. Estimated amount of contracts remaining to be executed on capital account not provided for (net of advances) 2,538.58 Nil

22. The figures of previous year have been regrouped / reclassified wherever necessary and possible so as to confirm with the figures of the current year.



62

23. ADDITIONAL INFORMATION UNDER PART IV OF THE SCHEDULE VI TO THE COMPANIES ACT, 1956.1 Registration Details

Registration No. 8 6 0 1 7 State Code 1 1

Balance Sheet Date 3 1 0 3 0 8Date Month Year

2 Capital raised during the year (Amount in Rs. 000)

Public Issue N I L Rights Issue N I L

Bonus Issue N I L Private Placement N I L

3 Position of Mobilisation and Deployment of Funds (Amount in Rs. 000)

Total Liabilities 8 8 2 0 8 9 5 Total Assets 8 8 2 0 8 9 5

Sources of Funds

Paid - up Capital 3 5 8 7 1 2 Reserves and Surplus 2 9 3 7 3 0 2

Secured Loans 5 3 3 8 9 7 4 Unsecured Loans 8 7 5 0 0

Deferred Tax Liability 9 8 4 0 7

Application of Funds

Net Fixed Assets 1 2 4 0 6 0 5 Investments 2 8 8 9 9 8

Net Current Assets 7 2 9 1 2 9 2 Miscellaneous Expenditure N I L

Accumulated Losses N I L

4 Performance of Company (Amount in Rs. 000)

Turnover 1 3 2 1 4 1 3 8 Total Expenditure 1 2 6 6 6 8 7 8

Profit Before Tax 5 4 7 2 6 0 Profit After Tax 4 0 3 3 8 8

Earning per Share (Weighted Average)

3 6 . 9 9 Dividend Rate (%) 2 0 . 0 0

5 Generic Names of Principal Products /Services of the Company

Item Code No. 7 1 0 2 3 9 1 0

Product Description C U T & P O L I S H E D D I A M O N D S

Item Code No. 7 1 1 3 1 9 3 0

Product Description D I A M O N D S T U D D E D J E W E L L E R Y

BALAnCE ShEET ABSTRACT AnD COMPAny’S GEnERAL BUSInESS PROFILES

As per our report of even date For and on behalf of the BoardFor V. A. Parikh & AssociatesChartered Accountants

Jinesh J. Shah Anuradha Banerjee Dinesh T. Shah Vipul P. Shah Partner Company Secretary Chairman CEO & Managing DirectorPlace : Mumbai Place : MumbaiDated : June 17, 2008 Dated : June 17, 2008


CASh FLOW STATEMEnT for the year ended on March 31, 2008








(Rs.in Lacs)

31.03.2008 31.03.2007

A. CASh FLOW FROM OPERATInG ACTIVITIESNet Profit before tax & extraordinary items 5,472.60 4,124.14

Adjustment for- Depreciation 316.32 244.33 - Interest 2,897.94 3,373.89- Unrealised Foreign Exchange (Gain) / Loss (542.13) (393.41)- Dividend Received (14.18) (6.59)- Profit From Partnership firm (1,320.41) (151.77)- Gratuity 12.17 22.17- (Profit)/Loss on sale of fixed assets 10.73 15.28- (Profit)/Loss on sale of investments (182.54) (57.07)- Diminution in value of Investment written off 44.63 –Operating profit before working capital changes 6,695.13 7,170.97

Adjustment for- Receivables 8,644.74 (1,732.64)- Inventories (3,109.19) 2,409.99- Loans & Advances (1,068.28) (1,376.32)- Current Liabilities 4,570.16 850.35

Cash generated from / (used in) operations 15,732.56 7,322.35- Taxation (1,119.50) (1,162.40)- Gratuity (12.17) (22.17)- Prior year Adjustments (54.92) –

Cash flow before extraordinary items 14,545.97 6,137.78- Extraordinary items – –

net cash from / (used in) operating activities 14,545.97 6,137.78

B. CASh FLOW FROM InVESTInG ACTIVITIES- Purchase of fixed assets (Includes Capital Work in Progress) (7,374.87) (561.07)- Sale of fixed assets 16.22 13.06- Purchase of Investments (471.43) –- Dividend Received 14.18 6.59- Sale of Investments – 109.99

net Cash from / (used in) investing activities (7,815.90) (431.43)

C. CASh FLOW FROM FInAnCInG ACTIVITIES- Secured Loans (2,427.51) (3,818.86)- Unsecured Loans 875.00 –- Interest (2,897.94) (3,373.89)- Proposed Dividend (289.02) (289.02)- Tax on Dividend (49.12) (40.93)

net cash from / (used in) financing activities (4,788.59) (7,522.70)net increase / (decrease) in cash & cash equivalents 1,941.48 (1,816.35)Cash & cash equivalants as at 1st April (Opening) 6,880.34 8,696.69Cash & cash equivalants as at 31st March (Closing) 8,821.82 6,880.34


64

Statement pursuant to Section 212 of the Companies Act, 1956 relating to Company’s interest in the Subsidiary

A. Name of the Subsidiary Company Asian Star Company Limited (New York)

Inter Gems DMCC. (Dubai)

B. Date from which it became Subsidiary September 27,1996 February 20, 2008

C. Number of Shares held by Asian Star Company Limited with its nominee in the subsidiary as at 31/3/2008

5 Equity Shares of US $100,000 fully paid

200 Equity Shares of AED 1,000 fully paid

D. Extent of interest of Holding Company in the Subsidiary as at 31/03/2008

100% 100%

E. Net aggregate amount of profits/(losses) of the Subsidiary Company as far as it concerns the members of the company

a. Dealt with in the company’s account

i) for the financial year of the subsidiary Nil Nil

ii) for the previous year of the subsidiary since it become the subsidiary of the company

US $ 100,000(Rs. 39.97 lacs)

Nil

b. Not dealt with in the company’s account

i) for the financial year of the subsidiary US $ (176,974)(Rs. -70.74 lacs)

US $ 668,483(Rs. 267.19lacs)

ii) for the previous years of the subsidiary since it became the subsidiary of the company

US $ 258,191(Rs. 103.20 lacs)

US $ (23,902)(Rs. -9.55 lacs)

Net aggregate amount of profits/(losses) of the Subsidiary Company as far as it concerns the members of the company

For and on behalf of the Board

Anuradha Banerjee Dinesh T.Shah Vipul P. Shah

Company Secretary Chairman CEO & Managing Director

Place : Mumbai

Dated : June 17, 2008


AUDITORS’ REPORT

ASIAn STAR COmPAny LImITED, nEw yORk(A Subsidary Company)

The Board of DirectorsASIAn STAR COmPAny LImITED551 Fifth Avenue, Suite # 3502 New York, N.Y. 10176-0001

Gentlemen,

We have examined the Balance Sheet of Asian Star Company Limited, New York, as of March 31, 2008 and Related Statement of Income, Retained Earning, Supporting Schedules and Cash Flow for the year then ended. Our examination was made in accordance with generally accepted auditing standards and accordingly included such tests of the accounting records and such other auditing procedures, as we considered necessary in the circumstances.

In our opinion, the financial statements indicated above present fairly the financial position of Asian Star Company Limited, New York, as at March 31, 2008 and the results of operations for the year then ended, in conformity with generally accepted accounting principles.

For Ervin Friedman, CPANew York

May 15, 2008

Asian Star Company Limited, New York

66

(Amount in US$)

31.03.2008 31.03.2007

ASSETSCurrent Assets

Cash Assets 1,667,652 1,405,787Accounts Receivable 6,303,267 7,953,873 Inventory 1,276,160 1,290,960 Prepaid Taxes 10,800 –Loan Receivable 104,476 9,362,355 104,476 10,755,096

Property and EquipmentsFurniture & Fixtures 82,413 82,413 Less : Accumulated Depreciation 73,376 9,037 69,976 12,437

Other AssetsSecurity Deposits 19,065 18,844

TOTAL ASSETS 9,390,457 10,786,377

LIABILITIESCurrent Liabilities

Accounts Payable 8,781,026 9,946,614 Accrued Expenses & Taxes Payable 5,501 50,268 Loans Payable – 1,304 Advances Payable 7,713 –Cash Dividend Payable 15,000 8,809,240 15,000 10,013,186

Stockholders' EquityCapital Stock 500,000 500,000 Retained Earnings 81,217 273,191 Total Stockholders' Equity 581,217 773,191

Total Liabilities & Stockholders' Equity 9,390,457 10,786,377

BALAnCE ShEET as at March 31, 2008


STATEmEnT OF InCOmE for the year ended March 31, 2008

(Amount in US$)

31.03.2008 31.03.2007

Sales - Operating Revenue - Schedule A 22,983,735 25,919,954 Cost of Sales - Schedule B 22,501,281 25,473,006

Gross Operating Profit 482,454 446,948

General & Administrative Expenses - Schedule C 674,087 397,722 Operating Profit (191,633) 49,226

Other Income - Schedule D 25,432 26,997 Income Before Taxes Based on Income (166,201) 76,223

Federal Corporate Income Tax – 10,356 New York State Corporate Tax 5,225 7,083 New York City Corporate Tax 5,548 7,342 Total Corporate Tax 10,773 24,781 net Income (176,974) 51,442

STATEmEnT OF RETAInED EARnInG for the year ended March 31, 2008

(Amount in US$)

31.03.2008 31.03.2007

Opening Balance 273,191 236,749 Add : Net Income for the year (176,974) 51,442 Total 96,217 288,191 Less : Cash Dividend payable 15,000 15,000 Balance carried forward to Balance Sheet 81,217 273,191


68

(Amount in US$)

SChEDULE A 31.03.2008 31.03.2007

Operating Revenues Sales 22,983,735 25,919,954

Total Operating Revenues 22,983,735 25,919,954

(Amount in US$)

SChEDULE B 31.03.2008 31.03.2007

Cost of SalesInventory at the beginning 1,290,960 1,600,240 Purchases 22,409,209 25,093,442 Freight, Duty & Customs 77,272 70,284 Cost of Goods available for sale 23,777,441 26,763,966 Less : Inventory at the end 1,276,160 1,290,960

Total Cost of Sales 22,501,281 25,473,006

(Amount in US$)

SChEDULE C 31.03.2008 31.03.2007

General & Administrative ExpensesSalaries - Officers 88,333 85,000 Salaries - Others 45,413 35,866 Advertising 10,817 9,719 Alarm 2,558 3,201 Bad Debts 183,979 –Depreciation 3,400 3,400 Contributions 3,311 1,511 Dues & Subscriptions 2,093 2,055 Insurance 91,474 83,640 Interest, Discount & Bank Charges 76,270 20,967 Professional Fees 10,733 6,873 Rent 100,695 97,810 Stationery & Printing 20,286 12,154 Travel 11,138 14,874 Payroll Taxes 9,589 9,445 Telephone 13,998 9,015 Outside Services – 2,192

Total General & Administrative Expenses 674,087 397,722

(Amount in US$)

SChEDULE D 31.03.2008 31.03.2007

Other IncomeInterest Income 12,667 26,997 Discount Received 12,765 –

Total Other Income 25,432 26,997

SUPPORTInG SChEDULES for the year ended March 31, 2008


nOTES TO ThE FInAnCIAL STATEmEnTS for the year ended March 31, 2008

I - Significant Accounting Policies

1. Revenue Recognition Sales of Goods are recorded based on Shipment of Goods.

Inventories Inventories are priced at the lower of Cost or Market

Property and Depreciation The Cost of Property, Furniture, Fixtures and Improvements are recorded at cost and generally the straight line method of

computing depreciation has been applied for both income tax and financial reporting purposes.

2. Purchases include merchandise received from ASIAn STAR COmPAny LImITED, Mumbai, India in the in the amount of US$ 16,596,239

3. Accounts payable includes the amount of US$ 7,903,177 owed to ASIAn STAR COmPAny LImITED, Mumbai, India for merchandise received.

4. Sales include merchandise sold to ASIAn STAR COmPAny LImITED, Mumbai, India in the amount of 257,589 ( of which merchandise invoiced and shipped in the amount of US$ 73,887 were in transit and not received by ASIAN STAR COMPANY LIMITED; Mumbai, India.) Amount due from ASIAN STAR COMPANY LIMITED, Mumbai, India is US$ 73,887


70

CASh FLOwS FROm OPERATInG ACTIVITIES

(Amount in US$)

31.03.2008 31.03.2007

net Income (Deficit) as per Income Statement (176,974) 51,442

Add:Depreciation 3,400 3,400 Increase in Advances Payable 7,713 1,303,517 Increase in Loans Payable-Bank – 129 Decrease in Inventory 14,800 11,079 Decrease in Accounts Receivable 1,650,606 1,676,519 309,280 1,627,405

Total 1,499,545 1,678,847

Deduct:Increase in Prepaid Expenses 10,800 –Increase in Security Deposits 221 –Decrease in Current Liabilities 44,767 –Decrease in Loans Payable-Bank 1,304 –Decrease in Accounts Payable 1,165,588 –Increase in Loans Receivable – 4,549 Increase in Security Deposits – 30 Increase in Accounts Receivable – 949,468

1,222,680 954,047

Cash Flows from Operating Activities 276,865 724,800 Deduct:Cash Dividend Payable 15,000 15,000 Increase in Cash 261,865 709,800 Cash at beginning of the Year 1,405,787 695,987 Cash at the end of the Year 1,667,652 1405787


AUDITORS’ REPORT

INTER GEMS DMCC (Dubai)(A Subsidary Company)

Auditors’ Report to the Shareholder of INTER GEMS DMCC

We have audited the accompanying financial statements of INTER GEMS DMCC for the year ended 31 March 2008.

These financial statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

Our audit included such test of the accounting records and such other auditing procedures, as we considered necessary in the circumstances.

In our opinion, the financial statements fairly present the financial position of INTER GEMS DMCC as of 31 March 2008 and of the results of its operations and its cash flows for the year then ended in conformity with accounting principles applied.

For KSI SHAH & ASSOCIATESChartered Accountants

DubaiDate: May 21, 2008

Inter Gems DMCC (Dubai)

72

(Amount in US$)

Not

es

31.03.2008 31.03.2007

ASSETSNon current assets

Fixed assets 3 1,222,786 –Investment property 4 – 687,613

1,222,786 687,613

Current assetsInventories 134,678 –Trade receivables 5 3,366,923 –Cash and cash equivalent 6 177 4,473

3,501,778 4,473

Total assets 4,724,564 692,086

EQUITY & LIABILITIESShareholders’ funds

Share capital 7 54,496 54,496Accumulated profits /(losses) 644,581 (23,902)

Equity Fund 699,077 30,594Current account – 95,614Total shareholder’s funds 699,077 126,208

Current liabilitiesTrade and other payables 8 4,025,487 565,878

Total equity & liabilities 4,724,564 692,086

The accompanying notes form an integral part of these financial statements.Approved by the directors on 21st May 2008.

BALANCE SHEET as at March 31, 2008

For Inter Gems DMCC

Manager


INCOME STATEMENT for the year ended March 31, 2008

(Amount in US$)

Not

es

31.03.2008 31.03.2007

SALES 18,811,126 –Cost of sales (18,084,362) –Gross profit 726,764 –

Expenses 9 (58,281) (17,569)

Net profit/(loss) for the year 668,483 (17,569)

The accompanying notes form an integral part of theses financial statements.

STATEMENT OF CHANGES IN EQUITY for the year ended March 31, 2008

(Amount in US$)

Share Capital Accumulated profit/(losses) Total

As at 31 March 2006 54,496 (6,333) 48,163Net loss for the year – (17,569) (17,569)

As at 31 March 2007 54,496 (23,902) 30,594Net profit for the year – 668,483 668,483

As at 31 March 2008 54,496 644,581 699,077

The accompanying notes form an integral part of these financial statements.


74

CASH FLOW STATEMENT For the year ended March 31, 2008

(Amount in US$)

31.03.2008 31.03.2007

A. CASH FLOW FROM OPERATING ACTIvITIESNet profit/(loss) for the year 668,483 (17,569)

Adjustment for- Depreciation 5,116 –

Operating profit/((loss) before working capital changes 673,599 (17,569)(Increase)/decrease in inventories (134,678) –(Increase)/decrease in trade receivables (3,366,922) –Increase/(decrease) in trade and other payables 3,459,608 139,785

Net cash from/(used in) operating activities 631,607 122,216

B. CASH FLOW FROM INvESTING ACTIvITIESPurchase of property (540,289) (135,057)

C. CASH FLOW FROM FINANCING ACTIvITIESFunds introduced/(withdrawn) by the old shareholder(net) (95,614) –

Net cash from/(used in) financing activities (95,614) –

Net increase/(decrease) in cash and cash equivalents (4,296) (12,841)Cash and cash equivalents at beginning of the period 4,473 17,314

Cash and cash equivalents at end of the period 6 177 4,473

The accompanying notes form an integral part of these financial statements.


NOTES TO THE FINANCIAL STATEMENT For The Year Ended March 31, 2008Notes

1. Legal status and business activity

a) INTER GEMS DMCC is a limited liability company incorporated in the Dubai Multi Commodities Centre. The company is operating under the license No. 30030.

b) The company is registered to carry out the business of trading in rough and polished diamond and diamond jewellery.

2. Significant accounting policies

The financial statements are prepared under the historical cost convention and the significant accounting policies adopted are as follows:

a) Depreciation of fixed assets:

The cost of fixed assets is depreciated by equal annual installments over their estimated useful lives as under:

Property 20 years

Depreciation on addition is calculated on a pro-rata basis from the month of addition of the asset.

b) Inventories:

Inventory of polished diamonds are valued at technically evaluated cost or net reliasable value whichever is lower as customary in the diamond industry.

c) Trade receivables:

Provision is made for doubtful debts. Bad debts are written off as they arise.

d) Trade and other payables:

Liabilities are recognized for amounts to be paid for

goods or services received, whether invoiced by the supplier or not.

e) Sales:

Sales represent net amount invoiced for goods delivered during the year. Sales are recognized when the significant risks and rewards of ownership of the goods have passed to the buyer.

f) Foreign currency transactions:

Transactions in foreign currencies are converted into US dollar at the approximate rate of exchange ruling on the date of the transaction.

Assets and liabilities expressed in foreign currencies are translated into US dollar at the rate of exchange ruling at the balance sheet date.

Resulting gain or loss is taken to the income statement.

g) Cash and cash equivalents:

Cash and cash equivalents for the purpose of the cash flow statement comprise of cash on hand, bank current accounts, deposits free of encumbrance with a maturity date of three months or less from the date of deposit and highly liquid investments with a maturity date of three months or less from the date of investment.

h) Impairment:

The carrying amount of the assets, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the assets recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of the asset or its cash-generating unit exceeds its recoverable amount. Impairment losses, if any, are recognised in the income statement.

3. Fixed assets

(Amount in US$)

CostTransferred from investment (refer note 4) 1,227,902As at 31.03.2008 1,227,902

DepreciationCharge for the year 5,116As at 31.03.2008 5,116

Net book valueAs at 31.03.2008 1,222,786

In the opinion of management, there was no impairment in respect of the investment. Hence carrying value of the investment at 31 March 2008 approximates its net book value.

4. Investment property

This amount represents payments made for investment property in AL MAS TOWER in JLT-DMCC. During the year this property is transferred to fixed asset as the management has decided to use this property as office premises. (Refer note 3)


76

(Amount in US$)

31.03.2008 31.03.2007

5. Trade and other receivablesTrade receivables 3,366,923 –

6. Cash and cash equivalentCash balance 163 –Bank balances in:Current accounts 14 4,473

177 4,473

7. Share capitalSubscribed, Issued and Paid up 54,496 54,496200 ordinary shares of AED 1,000 each (converted @ 3.67)

With effect from 20 February 2008 Mr. Hitesh Sanghvi has transferred the shares to M/s Asian Star company Limited.

8. Trade and other payablesTrade payables 2,801,302 –Accruals 4,360 –Short term loan* 1,219,825 565,878

4,025,487 565,878

*This represents interest free short term loan payable on demand to a business associate.

9. ExpensesManagerial remuneration 20,000 –Rent 11,029 10,639Other administrative expenses 22,136 6,930Depreciation 5,116 –

58,281 17,569

10. Comparative figures

Previous year figures have been regrouped/reclassified wherever necessary to confirm to the presentation adopted in the current year.


AUDITORS’ REPORT

JEWEL ART(Partnership Firm - Where the Company has controlling interest)

We have audited the attached Balance Sheet of M/s. JEWEL ART of GJ 16, SDF VII, SEEPZ, Mumbai 400 096, as at 31st March 2008 and also the Profit and Loss Account and Cash Flow statements for the year ended on that date. These financial statements are the responsibility of the firm’s management. Our responsibility is to express an opinion on these financial statements based on our audit

We have conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

During the year, Firm has recognized Goodwill as an Intangible Asset and credited the same to Partners Capital Account. The said treatment is not in accordance with the Accounting

Standard -26 “Intangible Assets” issued by the Institute of Chartered Accountants of India. Consequently Closing Fixed Assets and Partners Capital Account are higher to the extent of Rs.26,82,00,000. Subject to the above, in our opinion and to the best of our information and according to the explanations given to us, the financial statements, read together with the notes thereon give a true and fair view in conformity with the accounting principles generally accepted in India.

i) in so far as It relates to the Balance Sheet of state of affairs of the Firm as at 31st March 2008,

ii) in so far as it relates to the Profit and Loss Account, of the “Profit” of the Firm for the year ended on that date.

iii) In so far as it relates to the Cash Flow Statements of the Cash Flows of the firm for the year ended on that date.

For DKP& ASSOCIATESChartered Accountants

D. K. DoshiPartner


Jewel Art

78

(Rs.in Lacs)

Sche

dule

31.03.2008 31.03.2007

SOURCES OF FUNDSPartners' Capital

Fixed Capital Account A 500.00 Current Account A1 5,958.03 6,458.03 2,867.68

Secured Loans B 2,576.26 709.94

Total 9,034.29 3,577.62

APPLICATION OF FUNDSFixed Assets C

Gross Block 3,975.87 937.99 Less : Depreciation / Amortization 815.04 3,160.83 442.50 495.49

Net Current Assets

Current Assets,Loans And Advances DInventories 3,113.68 2,764.62 Sundry Debtors 5,078.32 2,846.39 Cash & Bank Balances 580.88 92.64 Loans & Advances 83.67 104.85

8,856.55 5,808.50

Less: Current Liabilities and Provisions E 2,983.09 2,726.37 5,873.46 3,082.13

Total 9,034.29 3,577.62

Significant Accounting Policies And Notes To Accounts K

BALANCE ShEET as at March 31, 2008

As per our report of even date

For D.K.P. & Associates For Jewel Art


D K. Doshi Priyanshu Shah

Partner Partner




PROFIT & LOSS ACCOUNT for the year ended March 31, 2008

(Rs.in Lacs)

Sche

dule

31.03.2008 31.03.2007

INCOMESales And Services 15,805.02 10,006.48 Other Income F 1.30 0.05

15,806.32 10,006.53

EXPENDITURERaw Materials Consumed G 12,000.57 7,546.28 Manufacturing Expenses H 677.17 481.27 Administrative And Other Expenses I 344.53 272.21 Finance Charges J 181.46 103.58 Loss On Sale Of Assets – 0.14 Depreciation / Amortization 376.43 81.88

13,580.16 8,485.36

PROFIT BEFORE TAX 2,226.16 1,521.17 Provision For Tax 0.10 1.00 Provision For Fringe Benefit Tax 2.65 1.65 Short Provision For Tax For Earlier Year 0.90 0.82

Net Profit Transferred To Partners' Capital Account 2,222.51 1,517.70

Significant Accounting Policies and Notes To Accounts K





Partner Partner



Jewel Art

80

SChEDULES Forming Part of the Balance Sheet

(Rs.in Lacs)

SChEDULE A - Partners’ Fixed Capital Account

NAME OF THE PARTNERS BALANCE AS ON01.04.2007 ADDITIONS WITHDRAWL TOTAL AS ON

31.03.08

Dharmesh D. Shah – 7.50 – 7.50 Vipul P.Shah – 7.50 – 7.50 Asian Star Co. Ltd. – 455.00 – 455.00 Priyanshu A. Shah – 7.50 – 7.50 Nirmala D. Shah – 7.50 – 7.50 Rasila A. Shah – 7.50 – 7.50 Sujata V. Shah – 7.50 – 7.50

CURRENT YEAR – 500.00 – 500.00

(Rs.in Lacs)

SChEDULE A1 - Partners’ Current Account

NAME OF THE PARTNERS

BALANCE AS ON

01.04.2007

ADDITI-ONS

GOOD-WILL

WITHD-RAWL

ADJUST-MENT

TFR TO FIxED

CAPITAL A/C

PROFITSHARING

RATIO (Upto Sep.)

PROFIT (LOSS)(Upto Sep.)

PROFIT SHARING

RATIO (After Sep.)

PROFIT (LOSS)

(After Sep.)

BALANCE AS ON

31.03.08

Dinesh T. Shah 675.20 – – 675.20 – – – – – –Arvind T.Shah 487.20 – – 487.20 – – – – – –Dharmesh D. Shah 387.21 – 894.00 362.00 7.50 30% 260.03 1.5% 20.33 1,192.07 Vipul P.Shah 867.07 – 894.00 465.00 7.50 30% 260.03 1.5% 20.33 1,568.93 Asian Star Co. Ltd. 224.13 1,750.00 298.00 1,110.00 455.00 10% 86.68 91% 1,233.73 2,027.53 Priyanshu A. Shah 226.87 – 894.00 265.00 7.50 30% 260.03 1.5% 20.33 1,128.73 Nirmala D. Shah – 0.75 – – 7.50 0% – 1.5% 20.34 13.59 Rasila A. Shah – 0.75 – – 7.50 0% – 1.5% 20.34 13.59 Sujata V. Shah – 0.75 – – 7.50 0% – 1.5% 20.34 13.59

CURRENT YEAR 2,867.68 1,752.25 2,980.00 3,364.40 500.00 866.77 1,355.74 5,958.03

PREVIOUS YEAR 1,679.01 – – 329.03 – 1,517.70 2,867.68

(Rs.in Lacs)

SChEDULE B - Secured Loans 31.03.2008 31.03.2007

Working Capital Loan From Banks 2,576.26 709.94 Secured by Hypothication of Stocks in Trade and Book Debts

Repayable within one year

Total 2,576.26 709.94


(Rs.in Lacs)

Particulars Gross Block (At Cost) Depreciation Net Block

SChEDULE C - Fixed Assets


tionsAs At

31.03.08As At

01.04.07For the

YearDeduc-

tionsAs At

31.03.08As At

31.03.08As At

31.03.07

INTANGIBLE ASSETSGoodwill – 2,980.00 – 2,980.00 – 298.00 – 298.00 2,682.00 –

TANGIBLE ASSETSFactory Premises 148.67 0.30 – 148.97 63.42 8.55 – 71.97 77.00 85.25 Computer 78.42 5.63 – 84.05 70.85 7.55 – 78.40 5.65 7.57 Machinery 375.07 31.27 5.52 400.82 193.37 34.58 3.86 224.09 176.73 181.70 Air Conditioners 45.83 4.26 – 50.09 15.87 4.96 – 20.83 29.26 29.96 Vehicles 17.49 12.86 – 30.35 3.75 3.07 – 6.82 23.53 13.74 Office Equipments 38.54 6.14 0.10 44.59 21.79 3.40 0.03 25.16 19.43 16.75 Furniture & Fittings 233.97 3.03 – 237.00 73.45 16.32 – 89.77 147.23 160.52

Total As At 31.03.2008 937.99 3,043.49 5.62 3,975.87 442.50 376.43 3.89 815.04 3,160.83 495.49

Total As At 31.03.2007 884.73 61.53 8.26 938.00 365.72 81.88 5.10 442.50 495.49 –

(Rs.in Lacs)

SChEDULE D - Current Assets, Loans And Advances 31.03.2008 31.03.2007

A) Inventories(As valued,verified and certified by Partner)Raw Materials 1,065.41 1,089.47 Consumables 44.30 56.92 Finish Goods 1,337.46 700.07 Work -In -Process 519.29 821.83 Plastic Models 4.54 0.53 Silver Models 142.68 95.80

3,113.68 2,764.62 B) Sundry Debtors

(Unsecured, Considered Good) 5,078.32 2,846.39

C) Cash and Bank BalancesCash on Hand 2.61 6.75 Balance With Banks 578.27 85.89

580.88 92.64

D) Loans And Advances(Unsecured, Considered good)

Advance Income Tax 16.85 19.11 Advances Recoverable In Cash Or Kind 54.64 73.82 Staff Loans 7.07 6.84Deposit 5.11 5.08

83.67 104.85

Total (A+B+C+D) 8,856.55 5,805.50


Jewel Art

82

(Rs.in Lacs)

SChEDULE E - Current Liabilities & Provisions 31.03.2008 31.03.2007

A) Current LiabilitiesSundry Creditors For Goods 2,600.65 2,434.58 Sundry Creditors For Others 85.54 66.28 Sundry Creditors For Capital Goods 0.99 –Advance From Customer 0.82 –Advance Received Against Sale Of Property 271.00 221.00

2,959.00 2,721.86

B) ProvisionProvision For Income Tax (A.Y. 07-08) 1.00 1.00 Provision For Income Tax (A.Y. 08-09) 0.10 –Provision For Fringe Benefit Tax 6.16 3.51 Retirement Benefit (Net) 16.83 –

Total 2,983.09 2,726.37

(Rs.in Lacs)

SChEDULE F - Other Income 31.03.2008 31.03.2007

Interest Income on Tax Refund 0.09 0.05 Profit on Sale of Fixed Assets 1.16 –Refund from Sales Tax 0.05 –

Total 1.30 0.05



(Rs.in Lacs)

SChEDULE G - Raw Materials Consumed 31.03.2008 31.03.2007

Opening Balance 1,089.47 794.84 Purchases 12,311.36 8,782.61 Less : Closing Stock (1065.41) (1089.47)

(A) 12,335.42 8,487.98

Add: Variation In StockOpening Stock of Finish Goods 700.07 246.10 Less: Closing Stock of Finished Goods 1,337.46 700.07

(637.39) (453.97)

Opening Stock of W.I.P. 821.83 334.10 Less: Closing Stock Of W.I.P. 519.29 821.83

302.54 (487.73)

(B) (334.85) (941.70)

Total (A) + (B) 12,000.57 7,546.28

(Rs.in Lacs)

SChEDULE h - Manufacturing Expenses 31.03.2008 31.03.2007

Manufacturing ExpensesAssaying Charges 4.07 0.71 Consumption of Models 36.81 23.95 Bus Services 7.00 5.72 Electricity Charges 62.71 46.67 Factory Expenses 19.98 11.26 Water Charges 12.70 7.48 Wages 189.29 135.39 Wages - Bonus 18.80 10.42 Wages - E.S.I.C. 5.51 3.91 Wages - Ex-Gratia – 1.36 Wages - P. L. Encashment 6.76 4.60 Labour Charges 120.07 72.46 Wages - M.L.W.F. 0.18 0.13 Wages - Provident Fund 11.98 8.46

495.86 332.52 Consumables

Opening Balance Consumables 56.91 79.00 Add :- Purchase Consumables Stores 168.91 128.04 Less:- Consumable Sales (0.21) (1.38)Less:- Closing Stock Consumable (44.30) (56.91)

181.31 148.75

Total 677.17 481.27

SChEDULES Forming Part of the Profit and Loss Account

Jewel Art

84

(Rs.in Lacs)

SChEDULE I - Administrative And Other Expenses 31.03.2008 31.03.2007

Payment to and Provision for EmployeesCanteen Expenses 8.57 6.78 Salary 71.90 53.96 Salary - Bonus 7.32 4.20 Salary - E.S.I.C. 1.39 0.92 Salary - Ex-Gratia – 0.56 Salary - M.L.W.F. 0.05 0.04 Salary - P. L. Encashment 1.67 0.78 Salary - Provident Fund 4.14 3.26 Gratuity 17.24 2.38 Medical Checkup Expenses 0.31 0.25 Medicine Expenses 0.18 0.22 Staff Uniform Expenses 1.27 0.65 Staff Welfare Expenses 39.19 33.12

153.23 107.12

Administratives ExpensesAppeal Fees – 0.01Application Fees (Trd. Div.) 0.05 –Audit Fees 0.40 0.40 BMC Permit 0.29 –BMC Storage License 0.04 –BMC Tax 1.52 1.52 Car Expenses 2.85 3.16 Conveyance Expenses 1.32 1.13 Custodian Charges (Import) 0.60 0.62 Debonding Expenses – 1.93 Documents Stamps Charges 4.00 0.23 Donation 0.03 0.04 Esic Inspection Charges – 0.02 Factory Inspection Fees 0.18 0.37 Factory License Fees 0.48 0.17 Festival Celebration Expenses 0.92 –Gift 0.05 0.08 Insurance Expenses 14.22 9.80 Internet Services 1.64 2.31 Lease Rent 16.60 15.20 Maintenance Charges – 0.38 Membership And Subscription 0.80 6.62 Miscellaneous Expenses 1.80 0.69 Postage Charges 0.20 0.22 Printing And Stationery Expenses 5.85 8.88 Professional Fees 9.80 6.74 Professional Tax (Self Assessment) – 0.01 Property Tax 2.65 2.64 Provident Fund (Admin.Charges) 2.16 1.57 Repairs And Maintanance 11.77 16.60 Scooter Expenses 0.14 0.08 Security Service Charges 6.22 6.36 Service Charges 0.30 0.31 Software Expenses 0.98 0.91 Studio Expenses 0.17 0.66 Telephone Expenses 8.43 7.16 Vat Disallowable 0.09 96.53 – 96.83



(Rs.in Lacs)SChEDULE I - Administrative And Other Expenses 31.03.2008 31.03.2007

Selling & Distribution ExpensesAgency Chgs.(Export) 3.15 2.66 Commission On Export – 8.78 Clearing And Forwarding Chgs.(Export) 35.89 26.10 Custodian Charges (Export) 2.61 2.47 Customer Reference Exp. (Jbt) 0.41 0.45 Custom Duty 0.13 –Ecgc Premium 2.37 –Entertainment Expenses 11.04 3.43 Export Packing Charges 12.59 5.31 Foreign Travelling Expenses 7.19 6.56 Insurance Policy - Export 7.30 4.43 Local Travelling Expenses 1.28 0.16 Trade Fare / Exhibition Expenses 10.11 7.90 Rebate & Discount 0.03 (0.06)Sales Tax 0.01 0.04 Advertising & Sales Promotion Expenses 0.66 0.03

94.77 68.26

Total 344.53 272.21

(Rs.in Lacs)

SChEDULE J - Finance Charges 31.03.2008 31.03.2007

Interest to Banks 154.63 69.88 (Less) : Interest From Bank 25.35 3.50

(A) 129.28 66.38

Bank Charges 52.18 37.20

Total 181.46 103.58


Jewel Art

86

SCHEDULES Forming Part of The Accounts for the year ended March 31, 2008

SCHEDULE KI - Significant Accounting Policies

A. Basis of preparation of financial statements:

The financial statements have been prepared under the historical cost convention on the basis of a going concern and in accordance with the generally accepted accounting principles as consistently adopted by the firm.

B. Fixed Assets and Depreciation / Amortization.i) Fixed assets are stated at cost of acquisition less

accumulated depreciation.ii) Depreciation on fixed assets has been provided on

written down value method at the rates prescribed in the Income Tax Rules, 1962.

iii) Goodwill is amortized over the period of 10 Years.

C. Inventories:i) Raw Materials: Stock of Gold and Silver is valued at weighted average

cost or market value whichever is lower. Stock of platinum, colour stones and gold mounting valued at average cost. Stock of diamonds is valued at cost or net realizable value whichever is lower.

ii) Work in Process and Finished goods are valued at technically evaluated cost or market value whichever is lower. Cost includes cost of materials and related conversion cost.

iii) Consumable are valued at average cost.

D. Foreign Currency Transactions:i) Transactions denominated in foreign currency are

normally recorded at the exchange rate prevailing at the time of the transaction.

ii) Monetary items denominated in foreign currency remaining outstanding at the year end are translated at the year end exchange rate. In case of monetory items,

which are covered by forward exchange contract, the difference between the year end rate and rate on the date of the contract is recognized as exchange difference and the premium paid on forward contract has been recognized over the life of the contract.

iii) Any income or expense on account of exchange difference either on settlement or on translation is recognised in Profit and Loss Account.

E. Sales :

Income from sales is recognised when the sale has been completed with the passing of title.

F. Basis of Accounting :

All items of income and expenditure having material bearing on the Financial Statements are recognised on the Mercantile Basis.

G. Employee Benefits :

Contribution to Provident Fund and Employee State Insurance are charged to Profit and Loss Account. Liability for Gratuity is provided on the basis of acturial valuation.

II - NOTES TO ACCOUNTS:

a. In the opinion of the partners, all the current assets, loans and advance are approximately of the value stated if realized, in the ordinary course of business. The provision for depreciation and all the known liabilities is adequate and not in excess of the amount reasonably necessary.

b. Previous years figures have been regrouped / rearranged wherever necessary.

c. Segment Reporting :

Firm is operating in only one segment i.e. Jewellery Manufacturing, hence there are no separate reportable segment.

d. Related Party Transactions :i) List of the related party and relation with them

Where Control Exist Asian Star Co. Limited

ii) Transaction with Asian Star Co. Ltd.(Rs.)

Particulars 2007-2008 2006-2007

Capital Introduced 64,000,000 (Net) 54,02,749 (Net)Profit for the year attributable 132,040,504 15,177,013Diamonds Purchase 467,890,239 412,042,235Gold Mounting, Rubber Mould,Findings & Colour Stone Purchase 291,197 5,93,216Silver model purchase NIL 113,827Fixed Assets Sold 446,871 1,90,008Sale of Finding, Rubber Mould & Gold Mounting 145,430 31,26,114Job Work Charges 311,986 5,86,887

iii) Sundry Creditors for goods at the year end 145,439,936 192,046,051


e. Net amount of exchange difference of Rs. 37,231,095 Credited to profit and loss account (Previous year Rs. 30,25,717 debited) and adjusted to fixed assets Rs. NIL (Previous Year 8,814).

f. Nominal amount of forward contracts entered into by the company and outstanding as on 31st March 2008 Amount Rs. 20,18,48,500 (US$ 50,50,000).

g. Foreign currency exposure that are not hedged by the derivative instruments as on 31st March 2008 amount Rs. NIL

h. During the year firm has recognized Goodwill as an intangible asset and credited the same to the partner’s capital account. The said treatment is not in accordance with Accounting Standards – 26 “Intangible Assets” issued by the Institute of Chartered Accountants of India. Consequently, closing fixed assets and partner’s capital are higher to the extent of Rs. 26,82,00,000 (Rs. twenty six crores eighty two lacs only)

i. Defined Benefit Plan: Defined benefit plan as per actuarial valuation as on 31st

March, 2008 and recognised in the financial statements in respect of Employee Benefit Scheme:

Disclosure under AS 15 (Revised) Employee Benefit Scheme:

Gratuity (Funded)(Rs.)

I) Changes in defined benefit obligation as at 31st March, 2008.

a) Present value of the obligation as on 31st March, 2007

23,99,981

b) Current Service Cost 4,61,500c) Interest Cost 2,22,468d) Benefit paid 1,61,269e) Actuarial Gain on obligation 1,56,200f) Present value of obligation as on 31st

March, 200827,66,480

II) Changes in fair value of plan assets (Rs.)a) Present value of plan Assets as on 31st

March, 200711,46,994

b) Expected actual return on Plan Assets 85,312

c) Contributions 40d) Benefit Paid 1,61,269e) Actuarial gain 12,669f) Fair value of Plan Assets as on 31st

March, 200810,83,746

III) Component of Employee Cost recognized in P & L A/c.

a) Interest Cost 2,22,468b) Current Service Cost 4,61,500c) Expected return on plan Assets 85,312d) Actuarial Gain 168,869e) Amount recognised in Profit & loss A/c. 429,787

IV) Actual Assumptions %

a) Discount rate 8b) Expected rate of return on assets 8c) Salary escalation rate 5d) Attrition rate 2

Note: (i) The firm has adopted the AS 15 (revised) employee benefits for the first time during the year ended 31.03.2008, consequently, additional charge of gratuity amounting to Rs. 12,52,987 pertaining to earlier years debited to profit and loss account.

SChEDULES Forming Part of The Accounts for the year ended March 31, 2008





Partner Partner



Jewel Art

88

CASh FLOW STATEMENT Annexed to the Balance Sheetfor the year ended March 31, 2008.

(Rs.in Lacs)

31.03.2008 31.03.2007

A. CASh FLOW FROM OPERATING ACTIVITIESNet Profit Before Tax 2,226.16 1,521.17

Adjustment for- Depreciation 376.43 81.88 - (Profit)/Loss on Sale of Fixed Assets (1.16) 0.14 - Exchange Difference on Revaluation 8.71 9.81 - Provision for Gratuity (Retirement Benefit) 16.83 –- Interest Income (25.44) (3.55)- Interest Expenses 154.63 69.88

Operating Profit before Working Capital Changes 2,756.16 1,679.33

Adjustment for- Trade and other receivables (2227.86) (775.70)- Inventories (349.06) (1249.35)- Trade and other payables 187.52 1620.49

Cash generated from operations 366.76 1,274.77 - Payment of Taxes (Net) 6.12 (15.07)

Net Cash Flow from Operating Activities (A) 372.88 1,259.70

B. CASh FLOW FROM INVESTING ACTIVITIES- Purchase of Fixed Assets (62.52) (64.89)- Proceeds from sale of Fixed Assets 2.90 3.02 - Interest Income 20.68 4.64 - Advances From Customer 0.82 –- Advances Received against sale of Property 50.00 221.00

Net Cash from / (used in) investing activities (B) 11.88 163.77

C. CASh FLOW FROM FINANCING ACTIVITIES- Receipts/(Repayment) of Secured Loans 1,879.11 (645.58)- Partner Capital Introduction / (Drawings) (1612.16) (329.03)- Repayment Unsecured Loans – (427.00)- Interest Expenses (154.63) (74.10)- Revaluation of EEFC Bank Account (8.84) (0.18)

Net Cash Flow from Fianacing Activities (C) 103.48 (1475.89)

Net Increase/(Decrease) in Cash & Cash equivalents (A+B+C) 488.24 (52.42)

Opening balance of Cash and Cash Equivalents 92.64 145.06 Closing balance of Cash and Cash Equivalents 580.88 92.64 (Figures in brackets represents cash outflow)





Partner Partner




AUDITORS’ REPORT ON CONSOLIDATED FINANCIAL STATEMENTS

To The Board Of Directors

ASIAN STAR COMPANY LIMITED

We have examined the attached consolidated Balance Sheet of ASIAN STAR COMPANY LIMITED, (“The Company”) and its subsidiaries as at March 31, 2008, the Consolidated Profit and Loss Account and Consolidated Cash Flow Statement for the year ended on that date. These Financial Statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these Financial Statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards in India. These Standards require that we plan and perform the audit to obtain reasonable assurance whether the Financial Statements are free of material misstatements. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures in the Financial Statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall Financial Statements. We believe that our audit provides a reasonable basis for our opinion.

We did not audit the Financial Statements of subsidiaries. These Financial Statements have been audited by other auditors whose reports have been furnished to us, and our opinion, in so far as it relates to the amounts included in respect of the subsidiaries, is based solely on the reports of the other auditors.

We report that the consolidated Financial Statements have been prepared by the Company in accordance with the requirements of Accounting Standard (AS) 21, Consolidated Financial Statements, issued by the Institute of Chartered Accountants of India and on the basis of the separate audited Financial Statements of the company and its subsidiaries included in the consolidated Financial Statements.

On the basis of the information and explanations given to us and on the consideration of the separate audit reports on individual audited Financial Statements of the Company and its subsidiaries, we are of the opinion that the said consolidated Financial Statements give a true and fair view in conformity with the accounting principles generally accepted in India,

i) in the case of the Consolidated Balance Sheet, of the consolidated state of affairs of the Company and its subsidiaries as at March 31, 2008,

ii) in the case of the Consolidated Profit and Loss Account, of the consolidated results of operations of the Company and its subsidiaries for the year ended on that date and

iii) in the case of the Consolidated Cash Flow Statement, of the consolidated cash flows of the Company and its subsidiaries for the year ended on that date.





90

(Rs.in Lacs)

Sche

dule

31.03.2008 31.03.2007

SOURCES OF FUNDSShareholders’ Fund

Share Capital A 3,587.12 3,587.12Reserves and Surplus B 30,320.48 33,907.60 25,478.24 29,065.36

Minority Interest 581.22 –

Loans Funds CSecured Loans 55,965.99 55,514.68Unsecured Loans 1,362.56 57,328.55 – 55,514.68

Deferred Tax Liability 984.07 684.26

92,801.44 85,264.30

APPLICATION OF FUNDSFixed Assets D

Gross Block 13,276.98 5,712.16Less : Depreciation 1,916.05 11,360.93 796.91 4,915.25

Capital Work-in Progress 2,016.69 468.77

Investments E 216.69 323.29

Current Assets, Loans and Advances FInventories 31,882.77 25,887.92Sundry Debtors 45,683.48 49,748.67Cash & Bank Balances 10,069.33 7,524.59Loans & Advances 8,033.81 6,885.55

95,669.39 90,046.73

Less: Current Liabilities and Provisions GLiabilities 10,736.83 5,131.59Provisions 5,725.43 5,358.15

16,462.26 10,489.74

Net Current Assets 79,207.13 79,556.99

92,801.44 85,264.30


CONSOLIDATED BALANCE ShEET as at March 31, 2008


For V. A. Parikh & Associates For and on behalf of the Board







CONSOLIDATED PROFIT & LOSS ACCOUNTfor the year ended March 31, 2008

(Rs.in Lacs)

Sche

dule

31.03.2008 31.03.2007

INCOMESales & Services H 148,617.07 119,914.96Other Income I 381.12 148,998.19 190.16 120,105.12

EXPENDITUREMaterial Cost J 117,547.72 98,803.90Manufacturing and Other Expenses K 10,459.88 9,001.98Purchase of Polished Diamonds/Jewellery 11,641.86 4,589.16Interest 3,008.05 3,371.16Depreciation 661.47 143,318.98 247.45 116,013.65

PROFITProfit Before Tax 5,679.21 4,091.47 Provision for Tax 1,111.32 1,157.20 Provision for Deferred Tax 319.23 206.70 Provision for Fringe Benefit Tax 16.15 16.40 Profit After Tax (before adjustment of minority interest) 4,232.51 2,711.17 Share of Profit Transferred to Minority 122.02 –Profit After Tax (after adjustment of minority interest) 4,110.49 2,711.17 Prior Year Adjustments 2.23 –Balance Brought forward 9,391.58 7,210.36 Balance Available for Appropriation 13,504.30 9,921.53

APPROPRIATIONProposed Dividend on Preference Shares 75.60 75.60 Proposed Dividend on Equity Shares 213.42 213.42 Tax on Dividend 49.12 40.93 Transfer to General Reserve 200.00 200.00 Balance Carried to Balance Sheet 12,966.16 9,391.58

13,504.30 9,921.53

Earning Per Share (Basic and Diluted) 37.71 24.60



For V. A. Parikh & Associates For and on behalf of the Board







92

SChEDULES ’A’ to ‘L’ Annexed to and Forming Part of The Accounts for the year ended March 31, 2008

(Rs.in Lacs)

SChEDULE A - Share Capital 31.03.2008 31.03.2007

Authorised1,50,00,000 ( 1,50,00,000 ) Shares of Rs.10 each 1,500.00 1,500.00 5,00,00,000 (5,00,00,000) Redeemable Cumulative 5,000.00 5,000.00 Preference shares of Rs.10 each

6,500.00 6,500.00

Issued, Subscribed and Paid-up1,06,71,200 ( 1,06,71,200 ) equity shares of Rs. 10 each 1,067.12 1,067.122,52,00,000 (2,52,00,000) 3% Redeemable Cumulative Preference Shares of Rs. 10 each 2,520.00 2,520.00 (Redeemable within twenty years from the date of issue- March 2006)

3,587.12 3,587.12

(Rs.in Lacs)

SChEDULE B - Reserves And Surplus 31.03.2008 31.03.2007

Capital ReservesAs per Last Balance Sheet 0.16 0.16 Add : On Consolidation of Subsidiaries (net) 1,006.62 –

1,006.78 0.16Share Premium

As per Last Balance Sheet 1,736.28 1,736.28

General ReserveAs per Last Balance Sheet 14,401.40 14,201.40 Less:- Charge on account of transitional provision of Employee Benefits under AS-15 (net of Deferred tax) 37.72 –

Add:- Transfer from Profit and Loss Account 200.00 200.00 14,563.68 14,401.40

Surplus as per Profit and Loss Account 12,966.16 9,391.58 Translation Reserve 47.58 (51.08)

30,320.48 25,478.34

(Rs.in Lacs)

SChEDULE C - Loan Funds 31.03.2008 31.03.2007

Secured LoansWorking Capital Loan from Banks 55,965.99 54,536.96 Secured bya. Hypothecation of Stock in Trade and Book Debtsb. Hypothecation of Premises at Mumbai and Suratc. Guaranteed by some of the Directors in their personal capacity

Term Loan from Banks – 977.72 Secured bya. Fixed Depositsb. Guaranteed by some of the Directors in their personal capacity

All loans are repayable within one yearA 55,965.99 55,514.68

Unsecured LoansLoan from Directors 875.00 –Other Loans 487.56 –

B 1,362.56 –

A + B 57,328.55 55,514.68


(Rs.in Lacs)Description of Assets Gross Block (At Cost) Depreciation Net Block

SChEDULE D -Fixed Assets


tionsAs At

31.03.08As At

01.04.07 Addi-tions

For the Year

Deduc-tions

As At 31.03.08

As At 31.03.08

As At 31.03.07

Goodwill 50.00 2,980.00 2,682.00 348.00 – – 298.00 – 298.00 50.00 50.00Land 634.81 32.00 – 666.81 – – – – – 666.81 634.81Office Premises 681.77 2,998.80 – 3,680.57 82.29 – 24.93 – 107.22 3,573.35 599.48 Factory Premises 608.70 149.56 – 758.26 61.68 67.68 24.68 – 154.04 604.22 547.02 Plant & Machinery 3,236.05 3,588.85 33.33 6,791.57 468.99 347.06 256.35 10.46 1,061.94 5,729.63 2,767.06 Vehicles 207.59 117.15 9.55 315.19 61.11 4.82 26.77 9.84 82.86 232.33 146.48 Furniture & Fixtures 293.24 432.83 9.49 716.58 122.84 58.41 30.74 – 211.99 504.59 170.40

CURRENT YEAR 5,712.16 10,299.19 2,734.37 13,276.98 796.91 477.97 661.47 20.30 1,916.05 11,360.93 4,915.25

PREVIOUS YEAR 5,677.84 92.28 57.96 5,712.16 579.06 – 247.45 29.61 796.91 4,915.25 5,098.78

Note : Addition to gross block includes assets amounting to Rs. 3942.39 lacs acquired during the year on acquisition of controling stake in partnership firm Jewel Art. Accumulated depreciation of Rs.477.97 lacs on these assets is shown as addition to accumulated depreciation. Deduction includes Rs.2682.00 lacs being unamortized amount of goodwill recognised during the year in the books of Jewel Art which is netted off against capital reserve generated on acquisition of controling stake in the said firm

(Rs.in Lacs)


In SharesLong Term Investments:Unquoted:

Krishana Sagar Builders Ltd 100.00 –40,000 ( Nil ) Shares of Rs.10 each.

Star Holdings Ltd. – 11.31Nil (250) Shares of US$ 100 each

Carbon Accessories Limited – 86.74 Nil (20,00,000) Shares of Rs. 10 each

100.00 98.05

Current Investments:Quoted:In Shares

Classic Diamonds 4.65 0.45 5000 (100) Shares of Rs. 2 each

Flawless Daimond 0.01 0.0110(10) Shares of Rs. 10 each

Gitanjali Gems Ltd. 2.21 0.211000 (100) Shares of Rs. 10 each

Golddiam International 0.97 0.121000 (100) Shares of Rs. 10 each



94

(Rs.in Lacs)


Golkunda Diamond 0.01 0.0110 (10) Shares of Rs. 10 each

Parekh Platinum 0.01 0.0110 (10) Shares of Rs. 10 each

Rajesh Exports 0.52 0.02600 (10) Shares of Re. 1 each

S.B. & T Inter Ltd 0.01 0.0110 (10) Shares of Rs. 10 each

Shantivijay Jewels 0.01 0.0110 (10) Shares of Rs. 10 each

Shrenuj & Co Ltd 0.45 0.041000 (100) Shares of Rs. 2 each

Suashish Diamonds Ltd 1.86 0.131000 (100) Shares of Rs. 10 each

Su-Raj Diamonds & Jewellery Ltd 0.57 0.051000 (100) Shares of Rs. 10 each

Vaibhav Gems Ltd 0.03 0.0310 (10) Shares of Rs. 10 each

Zodia JRD MKJ 0.01 0.0110 (10) Shares of Rs. 10 each

11.32 1.11

In Mutual Funds

JM Agri & Infra Fund 25.00 –250000 (Nil) units of Rs.10 each

JM Basic Fund 25.00 –84555 ( Nil ) units of Rs.10 each

JP Morgan India EQ Fund 25.00 –176267 ( Nil ) units of Rs.10 each

Reliance Diver.Pow.Sec Fund 25.00 –47975 ( Nil ) units of Rs.10 each

Reliance Media & Ent Fund 25.00 –63081 ( Nil ) units of Rs.10 each

Reliance Vision Fund 25.0039708 ( Nil ) units of Rs.10 each

150.00 –

161.32 1.11

Less : Diminution in market value of current investment (44.63) 116.69 – 1.11

Market Value(Current Year Rs.116.69 Lacs)(Previous Year Rs.1.09 Lacs)

In Partnership FirmJewel Art – 224.13

216.69 323.29



(Rs.in Lacs)


Current AssetsInventories

(As verified, valued and certified by a Director)Raw Materials 18,192.02 16,283.17 Work In Progress 1,266.40 903.81 Finished Goods 12,221.24 8,676.84 Consumables 47.97 19.93 Silver Stock 7.92 4.17 Models 147.22 –

31,882.77 25,887.92 Sundry Debtors

(Unsecured, Considered Good)For a period more than six months

Considered Good 5,996.53 4,073.42 Considered doubtful – 165.76

5,996.53 4,239.18

OthersConsidered Good 39,686.95 45,675.25 Considered doubtful – –

39,686.95 45,675.25

Less: Provision for doubtful debts – 165.76 45,683.48 49,748.67

Cash and Bank BalancesCash on Hand 54.52 27.78

Balances with Scheduled BankIn Current Accounts 3,886.37 1,387.03 In Fixed Deposits 6,128.44 6,109.78

10,069.33 7,524.59

Loans And Advances(Unsecured, Considered good)

Advance Income Tax 5,570.26 5,331.49 Other Advances 2,224.52 1,276.74 Staff Loans 14.27 24.91

7,809.05 6,633.14

DepositsFor Office Premises 153.31 179.06 With Others 71.45 73.35

224.76 252.41 8,033.81 6,885.55

95,669.39 90,046.73



96

(Rs.in Lacs)

SChEDULE G - Current Liabilities 31.03.2008 31.03.2007

Current LiabilitiesCreditors for Goods 7,160.39 3,247.17 Creditors for Processing 820.80 842.17 Creditors for Others 783.83 1,040.90

8,765.02 5,130.24 Creditors for Capital Goods 1,695.85 –Temparory Overdraft 275.92 1.30 Unclaimed Dividend * 0.04 0.05

10,736.83 5,131.59 Provision

Proposed Dividend 289.02 289.02 Tax on Dividend 49.12 40.93 Taxation 5,387.29 5,028.20

5,725.43 5,358.15

16,462.26 10,489.74

* There are no amounts due and oustanding to be credited to Investor Education and Protection Fund.

(Rs.in Lacs)

SChEDULE h - Sales & Services 31.03.2008 31.03.2007

Sales - Diamonds 133,124.04 115,672.87 Sales - Jewellery 15,172.32 3,966.95 Sales of Mounting etc. 36.59 6.55 Sales of Power -Windmill 127.16 119.09 Jewellery Making Charges 156.96 149.50

148,617.07 119,914.96

(Rs.in Lacs)

SChEDULE I - Other Income 31.03.2008 31.03.2007

Dividend Received 8.18 0.05 Profit on Sale of Shares 172.63 59.69Exchange Difference Others 52.01 22.87Compensation Received 11.81 50.87Miscellaneous Receipts 49.81 –Share of Profit/(Loss) from Carbon Accessories Ltd. – (95.09)Share of Profit from Partnership Firm 86.68 151.77

381.12 190.16



(Rs.in Lacs)

SChEDULE J - Materials Cost 31.03.2008 31.03.2007

Stock at the Commencement 18,366.65 17,067.40 Purchases during the year 117,732.92 95,303.29

136,099.57 112,370.69

Less : Stock at the Close 18,199.94 117,899.63 16,287.34 96,083.35

Variation in Stock of Work In Progress Stock at the Commencement 2,570.57 438.76 Less: Stock at the Close 1,266.40 903.81

1,304.17 (465.05)Variation in Stock of Finished GoodsStock at the Commencement 10,565.16 11,862.44 Less: Stock at the Close 12,221.24 8,676.84

(1,656.08) 3,185.60

117,547.72 98,803.90

(Rs.in Lacs)


Manufacturing ExpensesProcessing Expenses 6,409.44 5,480.85 Wages 227.78 94.23 Leave Wages 6.72 –Contribution to E.S.I.C. 6.94 2.98 Contribution to Provident Fund 13.60 6.13 Electrical Charges 89.76 40.90 Factory Expenses 121.60 30.68 Consumables 373.47 322.70

7,249.31 5,978.47 Employee’s Emoluments

Salary & Bonus 855.00 685.47 Director’s Remuneration 37.05 20.40 Gratuity 29.04 22.17Ex Gratia & Leave Encashment 22.34 31.23M.L.W.F.Expenses 0.45 0.37Contribution to Provident Fund 50.59 42.01Group Insurance 13.49 8.72Contribution to E.S.I.C. 10.26 7.84Staff Welfare Expenses 51.56 25.97

1,069.78 844.18Administrative Expenses

Bank Comission & Charges 112.50 110.11 Electrical Charges 81.00 40.10Telephone and Fax Charges 63.16 53.51 Local Travelling and Conveyance 42.63 22.22 Legal & Professional fees 67.50 49.55 Audit Fees 4.43 2.19Printing & Stationery 27.26 21.31 Repairs & Maintenance (Other) 39.26 31.87Repairs & Maintenance (Building) 1.35 0.99Repairs & Maintenance (Plant & Machinery) 26.25 18.88Postage and Courier 18.65 18.43



98

(Rs.in Lacs)


Motor Car Expenses 26.36 28.65 Provision for Doubtful Debts – 165.76Provision for Doubtful Debts written back (165.76) –Bad Debts 239.57 –Insurance Premium 149.69 164.26 Income Tax 7.70 –Rent & Compensation 117.65 96.55 Donation 62.07 89.74Demat Charges 0.62 –Office Canteen Expenses 26.71 24.78 Office Expenses 17.55 6.30 Director’s Sitting Fees 1.01 0.56Sundry Expenses 30.52 45.87Secuirty Charges 21.31 15.61Loss on Sale of Assets 9.57 15.28Exchange Loss(Gain) on Consolidation (60.66) (32.89)Registration & Filling Charges 3.28 0.20Wealth Tax 0.91 1.25Membership and Subscription 5.30 3.36 Diminution in market value of current investement 44.63 –

1,022.02 994.44

Selling & Distribution ExpensesAdvertisement 43.16 49.97 Sales Expenses 522.46 680.01Sales Tax 0.15 –Entertainment Expenses 16.08 3.66Foreign / Local Travelling 116.65 110.99 Commission on Sales 144.08 121.35Re-Assortment Charges 33.44 28.74Freight & Clearing Charges 89.61 65.72 Agency Charges 11.99 9.81E.C.G.C. Premium 66.36 77.45Diamond Grading Charges 65.75 30.79Packing Expenses 9.04 6.40

1,118.77 1,184.89

10,459.88 9,001.98



SChEDULE LNOTES annexed to and forming part of the Consolidated Balance Sheet as at 31st March, 2008 and Consolidated Profit & Loss Account for the year ended on that date.

I-Significant Accounting Policies

A. Basis for Preparation of Financial Statements

The financial statements have been prepared using mercantile system of accounting under the historical cost convention. It recognises significant items of income and expenditure on accrual basis. The accounts have been prepared to comply in all material aspects with applicable accounting principles in India and the Accounting Standards issued by the Institute of Chartered Accountants of India.

B. Sales

Income from the sale of diamonds / studded jewellery is recognised when the sale has been completed with the passing of the title. Income from sale of wind energy is recoginsed on its transmission and delivery.

C. Other Income

Interest Interest income is recognised on accrual basis.

Insurance claim Insurance claim on loss by theft is recognised on the basis of

acceptance of claim by the Insurance Company.

Income from Investments Income from investment is accounted in the year in

which the unconditional right to receive such income is established.

D. Depreciation / Amortisation

Depreciation on fixed assets has been provided at the rates and in the manner prescribed in schedule XIV to the Companies Act, 1956 on straight line basis. Depreciation of Asian Star Co. Ltd., New York and Inter Gems DMCC, Dubai has been provided on Straight Line Basis whereas in case of Intergems Inc. it is provided on declining balance method. Depreciation on fixed assets of Jewel Art has been provided on written down value method at the rates prescribed by the Income Tax Rules, 1962.Goodwill in Jewel Art is amortized over the period of 10 Years.

E. Impairment of Assets

An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value. An Impairment loss is charged to the profit and loss account in the year in which the asset is identified as impaired. The impairment loss recognized in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.

F. Foreign Currency Transactions

F.1 Transactions denominated in foreign currencies are normally recorded at the Exchange rate prevailing at the time of the transaction.

F.2 Monetary items denominated in foreign currencies at the

year-end are translated at year-end exchange rate.

F.3 In case of forward contracts, the difference between the year end rate and rate on the date of contract is recognised as exchange difference. The proportionate difference between the forward rate and the exchange rate on the date of transaction is recognised over the life of the contract.

F.4 Non monetary foreign currency items are carried at cost.

F.5 Any income or expense on account of exchange difference either on settlement or on translation is adjusted to the profit and loss account except in cases where they relate to acquisition of fixed assets in which case they are adjusted to the carrying cost of such assets.

G. Fixed Assets

Cost of Fixed Assets comprises of purchase price, duties, levies and any cost directly attributable to bringing the asset to its working condition for the intended use. Fixed Assets are stated at cost less accumulated depreciation.

h. Capital Work in Progress

Capital work in progress comprises of cost of acquisition of assets, duties, levies and any cost directly attributable to bringing the asset to its working condition for the intended use. Expenditure incurred on project under implementation is treated as incidental expenditure incurred during construction period and is pending allocation to the assets which will be allocated / apportioned on completion of the project.

I. Borrowing Costs

All borrowing costs, which are of revenue nature, are charged to Profit and Loss Account.

J. Investment

J.1 Long term investments are valued at cost. Provision for diminution in value is made only if such diminution is otherwise than temporary in the opinion of the management.

J.2 Current Investments -Quoted are valued at cost or market value, whichever is lower.

J.3 Investment in Partnership firm is accounted after including share of profit thereon as per last available audited information

K. Inventories

K.1 Stock of raw materials is stated at weighted average cost or net realizable value whichever is lower except for Stock of platinum, colour stones and gold mounting at Jewel Art is valued at average cost. Stock of polished diamonds (for jewellery operations) is valued at technically evaluated cost or net realizable value



100

whichever is lower. Specific items of cost are allocated and assigned to inventory wherever practicable.

K.2 Work in Process is valued at technically evaluated cost. Finished goods are valued at technically evaluated cost or estimated net realizable value, whichever is lower. Cost includes cost of material and related conversion cost. In view of the nature of variation in the values of individual diamonds and the differential in their processing costs, it is not practicable to compute the cost of polished diamonds using either FIFO or weighted average cost. In view of the numerous grades, it is not practicable to use specific costs. The method of valuation is therefore in compliance with “AS2”issued by the Institute of Chartered Accountants of India to the extent practicable.

K.3 Consumables are valued at cost.

L. Employee Benefits

L.1 Short term Employees benefit Short term employees benefits are recognized in the

period during which the service has been rendered.

L.2 Long Term Employee Benefit

a) Provident Fund Act, Family pension fund & employees State Insurance Scheme.

As per provident fund Act, 1952 all employees of the company are entitled to receive benefits under the provident fund & family pension fund which is a defined contribution plan. These contributions are made to the fund administrated and managed by the Government of India. In addition some employees of the company are covered under Employees State Insurance Scheme Act, 1948, which are also defined contribution Schemes recognized and administered by Government of India.

The company’s contributions to these schemes are recognized as expense in Profit and Loss account during the period in which the employee renders the related services. The company has no further obligation under theses plan beyond its monthly contributions.

b) The company provides for gratuity obligation through a Defined Benefit Retirement Plan (‘The Gratuity Plan’) covering it’s employees. The present value of the obligation under such Defined plan is determined based on actuarial valuation. Actuarial gains and losses are recognized in Profit & Loss Account as and when determined. The company makes annual contribution to LIC for the Gratuity plan in respect of employees.

M. Taxation

Current Tax is determined as the amount of tax payable in respect of taxable income for the year after considering various reliefs admissible under provisions of the Income Tax Act, 1961. The deferred tax for timing difference between the book and tax profit for the year is accounted for using tax rates and tax laws that have been enacted or substantially enacted at the Balance Sheet date. Deferred

tax asset arising from timing difference are recognised to the extent that there is virtual certainty that sufficient future taxable income will be available.

N. Contingent Liability

The company creates a provision when there is present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources.

O. i) In order to comply with Accounting Standard 21 issued by Institute of Chartered Accountants of India, the Company has prepared the accompanying consolidated financial statements, which include the financial statements of the Company along with its subsidiaries. Details of subsidiaries are as under.

Name of SubsidiaryCountry ofIncorpo-ration

Percentage of ownership (Previous Year)

1) Asian Star Co. Ltd. USA 100 (100)

2) Inter Gems DMCC UAE 100 (Nil)

2) Jewel Art (Partnership Firm) India 91 (10)

ii) The consolidated financial statements of the group have been based on a line by line consolidation of Profit & Loss Account and Balance Sheet of the Company and its subsidiaries.

iii) The difference between the cost of investment in the subsidiaries, over the net assets at the time of acquisition of shares in the subsidiaries is recognized in the financial statement as goodwill or Capital Reserve as the case may be.

iv) The effects of inter-company transactions between consolidated companies are eliminated in consolidation.

v) Minority Interest’s share of net profit of consolidated subsidiaries for the year is identified and adjusted against the income of the group in order to arrive at the net income attributable to shareholders of the Company.

vi) Minority Interest’s share of net assets of consolidated subsidies is identified and presented in the consolidated balance sheet separate from liabilities and the equity of the Company’s shareholders.

II - Notes Forming Part Of The Accounts

1. Surplus on account of exchange difference on outstanding forward exchange contracts to be recognised in profit and loss account of subsequent accounting period aggregate to Rs 33.25 lacs.(For F.Y. 2006-07 it was Rs. 391.64 lacs).

2. Derivatives Instrument: a) Derivative contracts entered into and outstanding as on

31st March, 2008.



i) For hedging currency related risk: Nominal amount of forward contracts (net) entered

into and outstanding as on 31st March, 2008 amount to Rs. 24.18 crores (for F.Y.2006-07 it was Rs. 553.68 crores).

ii) For hedging commodity related risk: Forward contracts for Gold by the company and

outstanding as on 31st March,2008 covers 140 Kgs. (For F.Y.2006-2007 it was 35 Kgs.).

b) Foreign currency exposure that are not hedged by the derivative instruments as on 31st March, 2008, amount to Rs. 206.85 crores (for F.Y.2006-07 it was Rs. Nil).

3. There are no Micro and Small Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days as at 31st March, 2008. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the bases of information available with the Company.

4. Capital reserve generated on acquisition of controlling stake in the Jewel Art is net of unamortized amount of goodwill in the books of the said firm.

5. During the year the company has sold its investment in it’s subsidiary – Intergem Inc USA. The difference between the carrying amount of investment in subsidiary and its assets less liabilities is recognized in the consolidated profit and loss account.

6. Deferred Tax Liability Break up of Deferred Tax Liability as on 31st March, 2008 is

as given below;

Particulars Rs. in lacs Rs. in lacs

Deferred Tax Liability as on 1.4.2007 684.26

Add:Provision for Deferred Tax made during the year arising on account of timing difference in Depreciation

273.66

Gratuity Liability –Current Year 4.40Deferred Tax on Provision for Doubtful Debts 56.34

Deferred Tax liability as on 31.03.2008 1018.66

Less:Deferred Tax Asset as on 1.4.2007 Nil

Provision for Diminution in Market value of Current investments. 15.17

Past Gratuity Liability 19.42Deferred Tax Assets as on 31.03.2008 34.59

Deferred Tax Liability (Net) as on 31.3.2008 984.07

7. During the year, Company has recognized the following amounts in the financial statements.

a) Defined Contribution Plan Contribution to Defined Contribution Plan, recognized as

expenses for the year are as under:

Particulars (Rupees in Lacs)Employers Contribution to Provident Fund & Family Pension Fund 63.50

Employers Contribution to Employees State Insurance Scheme. 16.34

Employers Contribution to Maharashtra Labour Welfare Fund 0.65

b) Defined Benefit Plan Defined benefits plan as per actuarial valuation as

on 31st March,2008 and recognized in the financial statement in respect of Employee Benefits Scheme:

Disclosure under AS 15 (Revised) Employees Benefits Scheme:

Gratuity (Funded)(Rupees in Lacs)

I) Change in defined benefits obligation as at 31st March,2008.

a) Present value of the obligation as beginning of the year 164.77

b) Current Service Cost 22.75c) Interest Cost 14.54d) Benefit Paid (11.41)e) Actuarial Gain on obligation (11.67)

f) Present value of obligation as at end of the year 178.98

II) Change in fair value of plan assets

a) Present value of the obligation as beginning of the year 95.10

b) Expected actual return on plan Assets 9.16c) Contribution 25.12d) Benefit Paid (11.41)e) Actuarial gain (0.01)

f) Present value of obligation as at end of the year 117.96

III) Component of Employee Cost recognized in Profit & Loss A/c.

a) Interest Cost 14.54b) Current Service Cost 22.76c) Expected return on plan Assets (9.16)d) Actuarial gain (11.67)

e) Expenses recognized in Profit & Loss A/c 16.47

IV)Reconciliation of Present value of obligation and fair value of Plan assets.

a) Present value of obligation at the end of the year 178.98

b) Fair Value of Plan Assets at the end of the year 117.96

c) Difference (51.03)

d) Amount Recognized in the Balance Sheet (51.03)



102

(%)V) Actuarial Assumptionsa) Discount Rate 8b) Expected rate of return on assets 8c) Future salary escalation 5d) Attrition rate 2

Note: The Company during the year has adopted the AS 15 (revised) “Employee Benefits” issued by the I.C.A.I,

8. Segmentwise reporting Revenue, Result and Capital Employed

(Rs.in Lacs)Particulars 2007-2008 2006-2007Description1. Segment – Revenue

- Diamond 1,36,250.53 1,17,768.52- Jewellery 15,386.67 4,319.94- Others 390.47 213.62

Total 1,52,027.67 1,22,302.08Less: Inter Segment Revenue/ Transfer 3,029.48 2,196.96Net Sales / Revenue 1,48,998.19 1,20,105.122. Segment ResultsProfit/(Loss) before Tax andInterest from each segment

- Diamond 6,905.69 6,710.55- Jewellery 1,462.54 635.64- Others 321.25 151.83

Total 8,689.48 7,462.63Less:i) Interest 3,008.05 3,371.16ii) Other un – allocable expenses – –Total Profit before Tax 5,681.43 4,091.473. Capital Employed

- Diamond 26,429.68 26,445.97- Jewellery 6,458.03 975.71- Other 1,601.11 1,643.68- Unallocated net assets – –

Total Capital Employed 34,488.82 29,065.36

a) As per Accounting Standard on Segment Reporting (AS-17), issued by the Institute of Chartered Accountant of India, the company has reported segments information on consolidated basis including business conducted by its subsidiaries.

b) The Company now recognizes two reportable business segments viz. cut and polished diamonds and Jewellery. The business which is not reportable during the year, has been grouped under ‘Others’ Segment, this comprises wind energy generation.

c) Consolidated Profit before tax and interest for the year ended 31.03.2008 for Jewellery Segment includes minority interest Rs. 122.02 Lacs.

9. Contingent Liability All known liabilities, wherever material, are provided for. Contingent Liabilities are usually not provided for, unless it is probable

that the future outcome may be materially detrimental to the Group. Asian Star Co. Ltd. has paid Rs 100.52 lacs (For F.Y.2006-07 Rs.225.82 lacs) to Income Tax Department against the demands

raised by them on completion of tax assessment. The company is of the opinion that the disallowances made by Income Tax Department are not tenable and has filed appeals against these demands. The same shall be charged to Profit & Loss account, if required, on disposal of appeals.

in accordance with the stipulation of the Standard, the Company has adjusted Rs.37.72 lacs (net of deferred tax aggregating to Rs.19.43 Lacs) towards the additional liability toward defined benefit obligation in respect of gratuity liability upto 31st March, 2007 against the opening balance of General Reserve as at 1st April, 2007. In Jewel Art, the charge of gratuity amounting to Rs. 12.53 Lacs pertaining to earlier years has been debited to profit and loss account.

As per our report of even date For and on behalf of the BoardFor V. A. Parikh & AssociatesChartered Accountants

Jinesh J. Shah Anuradha Banerjee Dinesh T. Shah Vipul P. Shah Partner Company Secretary Chairman CEO & Managing DirectorMembership No.111155Place : Mumbai Place : MumbaiDated : June 17, 2008 Dated : June 17, 2008



CONSOLIDATED CASh FLOW STATEMENTfor the year ended March 31, 2008

As per our report of even dateFor V. A. Parikh & Associates For and on behalf of the BoardChartered Accountants

Jinesh J. Shah Anuradha Banerjee Dinesh T. Shah Vipul P. Shah Partner Company Secretary Chairman CEO & Managing DirectorPlace : Mumbai Place : MumbaiDated : June 17, 2008 Dated : June 17, 2008

(Rs.in Lacs)

31.03.2008 31.03.2007

A. CASh FLOW FROM OPERATING ACTIVITIESNet Profit before tax & extraordinary items 5,679.21 4,091.47

Adjustment for- Depreciation 661.47 247.45 - Interest 3,008.05 3,371.16 - Unrealised Foreign Exchange (Gain) / Loss (542.13) (393.41)- Dividend Received (8.18) (0.05)- (Profit)/Loss from Partnership firm (86.68) (151.77)- (Profit)/Loss from Carbon Accessories Ltd – 95.09 - Gratuity 29.04 22.17- (Profit)/Loss on sale of fixed assets 9.57 15.28- (Profit)/Loss on sale of investments (172.63) (57.07)- Diminution in value of Investment written off / written back 44.63 –- Share of Minority (122.02) –Operating profit before working capital changes 8,500.34 7,240.32

Adjustment for- Receivables 4,971.59 (1,644.96)- Inventories (5,994.85) 3,486.94 - Loans & Advances (1,148.27) (1,377.55)- Current Liabilities 5,910.82 (8.41)

Cash generated from / (used in) operations 12,239.64 7,696.34 - Taxation (1,127.47) (1,173.61)- Gratuity (29.04) (22.17)- Prior year expenses (54.92) –

Cash flow before extraordinary items 11,028.21 6,500.56 - Extraordinary items – –

Net cash from / (used in) operating activities 11,028.21 6,500.56

B. CASh FLOW FROM INVESTING ACTIVITIES- Purchase of fixed assets (11,369.13) (561.07)- Sale of fixed assets 2,704.58 13.06- Purchase of Investments (Net) 1,327.89 –- Share of Minority Interest 581.22 –- Dividend Received 8.18 0.05 - Sale of Investments – 109.99

Net Cash from / (used in) investing activities (6,747.26) (437.97)

C. CASh FLOW FROM FINANCING ACTIVITIES- Secured Loans 148.74 (3,818.86)- Unsecured Loans 1,362.56 –- Interest (3,008.05) (3,371.16)- Proposed Dividend (289.02) (289.02)- Tax on Dividend (49.12) (40.93)

Net cash from / (used in) financing activities (1,834.90) (7,519.97)Exchange Difference on Translation 98.70 (45.50)Net increase / (decrease) in cash & cash equivalents 2,544.76 (1,502.88)Cash & cash equivalants as at 1st April (Opening) 7,524.58 9,027.46 Cash & cash equivalants as at 31st March (Closing) 10,069.34 7,524.58

CORPORATE INFORMATIONBOARD OF DIRECTORSDinesh T. Shah ChairmanVipul P. Shah CEO & Managing DirectorDharmesh D. Shah CFO & Jt. Managing DirectorArvind T. Shah Executive DirectorPriyanshu A. Shah Executive DirectorBhupendra K. Shroff DirectorK. Mohanram Pai DirectorApurva R. Shah DirectorHasmukh B. Gandhi Director

COMPANY SECRETARYAnuradha A. Banerjee

BANKERSBank of India Canara BankCorporation Bank State Bank of HyderabadCentral Bank of India IndusInd Bank Ltd.Syndicate Bank State Bank of PatialaState Bank of Indore ING Vysya Bank Ltd.State Bank of Travancore Andhra BankBank of Baroda Bank of Maharashtra

AUDITORSV. A. Parikh & AssociatesChartered Accountants

REGISTERED OFFICE114-C, Mittal Court,Nariman Point,Mumbai - 400 021, India

REGISTRAR & TRANSFER AGENTSBigshare Services Pvt. Ltd.E-2/3, Ansa Industrial Estate,Sakivihar Road, Sakinaka,Andheri (E), Mumbai - 400 072Tel: 2847 3474 Fax: 2847 5207

SUBSIDIARY COMPANIESASIAN STAR COMPANY LTD. INTER GEMS DMCC JEWEL ART (Partnership Firm)

551, Fifth Avenue,Suite # 3502, New York,N.Y. 10176, U.S.A.

Emirates Towers, Level No.41, Sheikh Zayed Road,Dubai, U.A.E.

Gala No 19/22, G & J Complex 2, 3rd Floor, Seepz, Andheri (East), Mumbai – 400096, India

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