Spentex Industries Ltd has informed BSE that in the limited review report of the Company for the quarter ended December 31, 2007, the Auditors of the Company have made the following observations:

“1. Accounting Standard 15 (Revised 2005) on “Employee Benefits” issued by the Institute of Chartered Accountants of India is applicable to the Company with effect from April 01, 2007. The Company has provided for its liabilities on employee benefits based on its best estimates. As required under the standard, the Company is in the process of aggregating necessary information required to estimate the short term compensated absences. Accordingly, the impact, if any, will be assessed upon the conclusion of the above exercise which the management does not expect to be material.

2. Sales Tax Exemption for Butibori unit of the Company had expired on December 31, 2005. The unit has applied for an extension of 3 years with effect from January 01, 2006 to the Development Commissioner (Industries), Government of Maharashtra. Pending approval of such extension, the unit has accrued VAT receivable amounting to Rs 422.76 lacs for the period January 01, 2006 to December 31, 2007 on the basis that the sales Tax Exemption will be extended for a further period of 3 years with effect from January 01, 2006. Further, in case the unit fails to get the exemption from authorities, an amount of Rs 833.83 lacs (including interest) will be payable for the above period including Rs 56.09 lacs for the quarter ended December 31, 2007, which has not been provided in the books. Also refer Note 4 to the unaudited financial results for the quarter ended December 31, 2007.

Accordingly loss before tax for the quarter is lower by Rs 56.09 lacs.”