Introduction

This Code of Conduct for Members of the Board of PBM POLYTEX LIMITED and Senior Management (the "Code") helps maintain the standards of business conduct for PBM POLYTEX Ltd. (the "Company") and ensures compliance with legal requirements and terms of the listing Agreement. The purpose of the Code is to promote ethical conduct by setting the tone at the Top and deter wrongdoing. The matters covered in this Code are of the utmost importance to the Company, its shareholders and stakeholders and are essential so that it can conduct business in accordance with legal and ethical values to which the Company is strongly committed.
The Code is applicable to the following persons, referred to as "Officers":
1. Members of the board of PBM POLYTEX Ltd
2. Executive Director/s, Managing Director/s including the Chief Executive Officer
3. President, Finance and general managers in the accounting function
4. Heads of businesses and corporate support functions alongwith their direct reportees and those committing resources on behalf of the Company
5. All professionals at corporate serving in the roles of finance, tax, accounting, treasury and internal audit
Ethical business conduct is essential for the business of the Company. Accordingly, Officers are expected to read and understand this Code, uphold these standards in day to day activities and comply with all applicable laws, rules and regulations, (the PBM POLYTEX Code of Conduct and the applicable Policies and procedures that govern the conduct of its employees.*)
Officers should sign an acknowledgement in the format stated at the end of this Code indicating that they have received, read and understood and agree to comply with the Code. Officers will be obligated to submit their signed acknowledgement indicating their continued understanding of and commitment to the Code, each year in March.
Because the principles described in this Code are general in nature, Officers should also review the Company's other applicable Policies and Procedures for more specific instructions. If they have any questions/ clarifications they may contact the Compliance Officer ( President Finance & Company Secretary).
Nothing in this Code, in any Company Policies and Procedures, or in other related communications (verbal or written) creates or implies an employment contract or term of employment.
Honesty and Integrity
All Officers are expected to display professional skills and act in accordance with the highest standards of personal and professional integrity, honesty and ethical approach and conduct in all business dealings while working in the Company's premises, at any location where Company business dealings are being conducted, at Company sponsored business and social events or at any place where Officers are representing the Company.
Honest conduct is conduct which is fair, acted in good faith, responsibly with due care, competence, diligence and which is free from fraud or deception. Ethical conduct is conduct which conforms to the accepted professional standards of the conduct and includes the ethical handling of actual or apparent conflicts of interest between personal and professional relationships.
Conflict Interest

An Officer's duty to the Company makes it obligatory for him/her to avoid a conflict between his/ her personal interests or benefits and the interests or benefits of the Company (PBM POLYTEX Ltd. and its subsidiary and associate companies) in order that an independent and objective judgement on the Company's best interest can be exercised. (Further, an Officer shall not derive any personal and/or business benefit from any Business Associate except with the prior approval of the concerned Division / Unit Head or in case the Officer is a Division / Unit Head then of the MD & CEO*).
Examples of circumstances that may lead to actual or potential conflict of interest are:

1. Employment

Officers are expected to devote their (full*) attention to the business interests of the Company and are prohibited from engaging in any activity that interferes with the performance or responsibilities to the Company or is otherwise in conflict or prejudicial to Company interests. Officers are forbidden from accepting any other employment or from taking part in any activity that enhances or supports a competitors position (simultaneous with the employment with the Company and for a period of three years thereafter*).

Officers must disclose any interest that they have that may conflict with the business of the Company (PBM POLYTEX Ltd. and its subsidiary and associate Companies).
2. Investments

Officers must take care that investments held or proposed to be held (giving more than 2% of ownership or control of the investee) in any customer, supplier or competitor of the Company do not compromise on their responsibilities to the Company. Factors to be considered in determining whether a conflict of interest exists include, the size and nature of investment, the Officers ability to influence the Company's decision, his or her access to confidential information of the Company or other Company and the nature of relationship between the Company and the other company.
Officers must inform the Compliance Officer on such investments made or proposed to be made.
3. Business Transactions
A conflict of interest, actual or potential may arise when directly or indirectly an Officer is in a position to derive a benefit for himself and/or any of his relatives by making or influencing decisions relating to Company transactions with its Business Associates. Officers should not be personally involved in any business transaction, negotiation or contract with any relative or a business in which the relative is associated in any significant role. Should a transaction, which may potentially result or appear to result in a conflict of interest, be unavoidable for the benefit of the Company, it is mandatory for the Officer to seek written prior approval from the Division /Unit Head or MD&CEO as the case may be.
Relatives include spouse, brothers, sisters, cousins, children, parents, grandparents, grandchildren, in-laws, cousins, aunts, uncles, nieces and nephews. Business Associates includes Suppliers, Customers, Agents, Contractors, Professional Service Providers, Manufacturers, Traders, Distributors, etc.
(Notwithstanding that instances of conflict of interest may have existed due to historical reasons, Officers are now required to disclose to the Company any current and/or potential sources of conflict of interest through a 'Declaration of Business Interest' statement and forward it to the Division/Unit Head (or MD&CEO in case the Officer is the Division/Unit Head) for review and placement in their personal file. As a practice, a revised 'Declaration' has to be submitted by the Officer immediately after changes, if any, since the previous declaration without any prompting by the Company. An Officer is required to preserve and keep on record the acknowledgement issued for the receipt of the 'Declaration of Business Interest'. If an Officer fails to make a disclosure and/or seek prior approval as required and the Management of its own accord becomes aware of an instance of conflict of interest that ought to have been disclosed by the Officer for Management approval, the Management will take a serious view of the matter and consider suitable actions against the Officer*).
(Any direct and/or indirect attempt by an Officer to influence a Company transaction towards his/her business interest; promotion/direction by an Officer of a Company transaction towards the business interest of any other Officer and direct and/or indirect attempt by an Officer to treat a Company transaction with its Business Associate as a means of exercising leverage from that Business Associate towards his/her personal and/or business interests, will be considered as an action devoid of professional integrity, honesty and ethics on the part of the Officer (s) and will invite appropriate actions from the Company. Officers should regard reporting of an influence, promotion, attempt which could cause an actual / potential conflict, as part of their ethical responsibility and written complaints, from any source, will be treated in confidence*).

The Company discourages the employment of relatives of Officers in positions of assignment within the same Business Unit. The Company further prohibits the employment of such individuals in positions that have a financial dependence or influence (i.e. auditing or control relationship, supervisor/ subordinate relationship).
4. Corporate Opportunites
Officers may not exploit for their own personal gain, opportunities that are discovered through the use of Company property, information or position, unless the opportunity is disclosed fully in writing to the Company's Board of Directors and the Board declines to pursue such opportunity.
5. Other Situations

Other situations of conflicts of interest, which would be impractical to list, may arise. If a proposed situation raises any questions or doubts, Officers must consult the Compliance Officer of the Company.

Other Directorships
An Officer serving as a Director of any Company that directly competes with the Company (and its subsidiary and associate Companies) may raise substantial concerns about potential conflict of interest. All relationships as a Director of other bodies corporate shall be reported to the Compliance Officer under the applicable provisions of the Companies Act.
Confidentiality Of Information
Any information concerning the Company's business, its customers, suppliers, etc. which is not in public domain and to which the Officer has access or possesses such information, must be considered confidential and held in confidence, unless authorised to do so and when disclosure is required as a matter of law. No Officer shall provide any information either formally or informally, to the press or any other publicity media, unless specially authorised.
Insider Trading
Non-public information, which might influence the market price of Company shares, should be kept in strict confidence until publicly released in accordance with applicable legal requirements and stock exchange regulations. Officers shall not derive personal benefit or assist others to derive benefit by giving investment advice from the access to and possession of information about the Company not in public domain and which could constitute as insider information.
The Company is committed in complying with SEBI (Insider Trading Prohibition Regulations) 1992. Officers should refer to Circular dated 26th April, 2002 from President - Finance for further information on pre-clearance of Securities, reporting of Securities and matters concerning dealing in Company securities.

Gifts & Donations
Under no circumstances should Officers accept any offer, payment, favour, special service or treatment, promise to pay or authorisation to pay any money, gift or anything of value from any customer, supplier, agent, contractor, etc. that is perceived as intended, directly or indirectly, to influence any business decision, any act or failure to act, any commitment of fraud, or opportunity for the commitment of any fraud or harm the Company's reputation.
Gifts given by the Company or received from suppliers, customers, agents, contractors, etc. should be appropriate to the circumstances and should never be of a kind that could create an appearance of impropriety. Inexpensive gifts, infrequent business meals, celebratory events and entertainment, provided that they are not excessive or create an appearance of impropriety, do not violate this Code. The nature and cost must always be properly authorised and recorded in the Company's books and records.
Clarifications/ questions whether a particular payment, expense or gift violates this Code should be directed to the Compliance Officer.
Protection Of Assets
Officers are responsible for the proper use, protection and conservation of Company assets and resources. This includes Company properties, assets, proprietary manufacturing processes, engineering designs, process technology, application knowledge, financial data, strategies, trade secrets, corporate information and other Company rights. Company assets are to be used solely to pursue and achieve Company goals and not for personal benefit, unless approved by the Board.
Compliance With Government Laws, Rules And Regulations
Officers must comply with all applicable Governmental laws, rules and regulations. Officers must acquire appropriate knowledge of the legal requirements relating to their duties sufficient to enable them recognise potential danger areas and to know when to seek advice from the Finance Unit and independent experts. Violations of applicable governmental laws, rules and regulations may subject Officers to individual civil or criminal liability as well as disciplinary action by the Company. Such individual violations could also subject the Company to civil and criminal liabilities and/or loss of its business or reputation.
Political Non- Alignment
The Board shall be committed to and shall support a secular democratic constitution and a political system that elects a government with transparent and fair elections in India. The Board shall not support, directly or indirectly, any specific candidate of any political party for political office. The Company shall not offer or give any company funds or property as donations, directly or indirectly, to any specific political party, candidate or campaign if such action violates any law.
Disclosures To SEBI, DCA And The Public
The Policy of the Company is to provide full, fair, true, timely and understandable disclosure in reports and documents that are filed with or submitted to SEBI, the Department of Company Affairs (DCA) and in other public communications. Officers must ensure that they and others in the Company comply with the duty of confidentiality, disclosure controls and procedures and internal controls for financial reporting.
Violations
Officers should be alert to possible violations as it is part of their job and ethical responsibility, to help enforce the Code and also cooperate in any internal and external investigations in this matter. Reprisal, threat, retribution or retaliation against any person who has in good faith, reported a violation or a suspected violation of the Code, or against any person who is assisting in any investigation or process with respect to such violation is prohibited.
The Company shall take appropriate disciplinary action against any Officer whose actions are found to violate the Code or any other Company Policy. Actions may include immediate termination of employment at the Company's sole discretion. In case the Company has suffered losses, it may pursue its remedies against the Officers. Where laws have been violated, the Company will fully cooperate with the appropriate authorities.
Waiver of Code of Business Conduct and Ethics
In any extra-ordinary rare situation where a Director or a Senior Manager feels that
a) The action he/she is expected to take may appear to be violating the Code, but it is truly not violating the Code, or

b) The action is necessary and unavoidable under the circumstances,
he/she must seek a waiver for that specific action.
The Board of Directors will be the only authority to waive compliance with this Code of Business Conduct for any Director, Officer or employee of the Company. The person-seeking waiver of this Code shall make full disclosure of the particular circumstances to the Chairman of the Board well in advance of the proposed action.
Any such waiver of this Code, as permitted by the Board of Directors, must be disclosed to the shareholders of the Company in the AGM and also in the Annual Report.

Acknowledgment Of The Receipt Of The Code

Officers should sign the acknowledgement in the enclosed format. The signed form is to be submitted to the Compliance Officer by non-whole-time Directors on the Board of PBM POLYTEX Ltd. All other Officers are required to submit the form to their respective Division / Unit Head which will, thereafter through HR, be filed in their personal file
Notes:
* = Not applicable to the non-whole-time directors on the Board of PBM POLYTEX Ltd.

CODE OF CONDUCT FOR SENIOR MANAGEMENT PERSONNEL

ANNUAL COMPLIANCE REPORT*

I ............................................................................... do hereby solemnly affirm that to the best of my knowledge and belief, I have fully complied with the provisions of the CODE OF CONDUCT FOR SENIOR MANAGEMENT PERSONNEL during the financial year ending 31st March 200__
Signature ..................................................................
Name ..................................................................
Designation ..................................................................
Date ..................................................................
Place ..................................................................

* To be submitted by 30th April each year.

PBM POLYTEX LIMITED

RISK MANAGEMENT POLICY

The revised clause 49 of the Listing Agreement issued by SEBI vide its circular dated 29th October, 2004 mandates the listed companies to lay down procedures about risk management and minimisation procedures. Accordingly a note has been prepared for the information of the Board Members about various types of risks, the company may face and steps to be taken to minimise the same.

A. BUSINESS RISKS:

1. Competition

The Company being in the cotton spinning sector has to compete with number of spinning units in India as well as in the other countries like Hong Kong, Taiwan, Sri Lanka, U.A.E. Nepal and so on.

The Company tries to minimise this risk by continuous upgradation of its manufacturing activities, producing highest quality of yarns and fabrics and also by supply to niche market segment.

2. Product Substitution

The Company is in cotton yarn production and in this type of industry there is a risk of substitution of cotton yarn by blended yarn or synthetic yarn.

There will always be risk for the company's business, but the company perceives that the demand for cotton yarn will remain high as people want to wear clothes made from natural fibres in place of man made fibres.

3. Dominant Supplier

The cotton is supplied by large number of farmers and traders from all over India and also from all over the world. The Government cotton suppliers are Cotton Corporation of India and Maharashtra Cotton Growers Co-operative Marketing Federation.

The Company purchases cotton from the suppliers spread all over India and also imports whenever it finds price and quality advantage, hence there is no risk of dominant supplier.

4. Dominant Customer

The Company exports its yarns and fabrics all over the world and not to only one part of the globe. Hence there is no risk of any dominant customer.

5. New Entrants

The capital cost of setting up spinning industry being very high, there is not much risk of new entrants. Also the new entrants has to have quality manufacturing and good marketing capability.

6. Price Risk of Raw Materials and Finished Goods

The Company operates in the commodity group which is highly price volatile. The prices of raw material and finished goods move in both the group as per world demand and supply position. The company has to constantly keep a watch on global cotton crop production, quality, availability and also based on finished goods sale position the company takes decision to buy the cotton.

B. FOREX RISK

Most of the Company's product is exported through a reputed export house (Merchant Exporters). Therefore, the Exchange Risk is less.

C) ASSET SAFEGUARDING RISK

Asset safeguarding risk are two types

a. Physical Safety Risk

The Company has got adequate watch and ward staff at all the properties, particularly at the mills at Petlad and Borgaon round the clock for safeguarding the companies properties.

b. Insurance Risk

The Companies' properties are subject to fire, flood, earthquake and all such types of damages risk. To safeguard itself from any such unforeseen events' consequences, the company has got the adequate insurance cover against fire, machinery breakdown, earthquakes, strikes, civil commotion and other such normal risk including loss of profit due to fire.
D) BORROWING RISK

The Company borrows long term loans for its capital expenditure and working capital loans for its day to day operations. With the liberalised economy the interest rates have to be seen with reference to :

i. International interest rates as well as Indian rates.
ii. Prevailing Exchange rate - Indian Rupee versus foreign currency.
iii. Premium / Discounts in the currency rate swap.
iv. Premium / Discounts in the interest rate swap.

The company has got adequate expertise as well as it consults outside experts from Banks and Financial Institutions to ensure that the company's interest rate liability is kept to the minimum level.

E) CREDIT RISK

The Company sells its goods in export and local markets. There is always a risk of default by the buyers in India and abroad and the company takes care of the same as follows:

i. Since most of the export of the company are through merchant exporters, which is an established export house and has very good reputation in the market, there is no problem for getting the payments. In case of exports to Nepal the same are made against confirmed Letters of Credit.

ii. The Company's sale in local market is to selected few customers having very good financial standing. In certain cases wherever the buyer is not having proper financial background, the local sales is made against L/C or advance payment only.

F) LEGAL & STATUTORY COMPLIANCE

The company is having qualified personnel in Head Office as well as factory and it ensures that all the legal compliance with various laws are done on timely basis. Whenever there is a dispute with any party, the Company's interests are well protected by taking suitable legal action in the appropriate law forum. The Company takes the help of very good legal and taxation firms for this purpose.

G) ECONOMIC POLICY RISK

The country's economy being in the evolving phase, lots of changes are happening. The Government is slowly doing away with the exemptions and incentives. The Company keeps constant track of change of Government's economic and fiscal policies and accordingly takes decision to minimise its risk from the adverse policy changes as well as take maximum benefit from any favourable policy.

H) HUMAN RESOURCE MANAGEMENT

The company's industry being labour intensive and the labour law reforms still pending, the Company has to face continuous risk in this field. The Company has got qualified managers to look after the Human Resource portfolio who in consultation with labour law experts and human resource management experts take the decision and ensure that labour and personnel relations are maintained cordially at company's mills and administrative offices.