Pratibha Industries - Annual Report - 2007 - 2008

PRATIBHA INDUSTRIES LIMITED

ANNUAL REPORT 2007-2008

DIRECTOR'S REPORT

To,The Members

Your Directors have great pleasure in presenting the 13th Annual Report together with the Statement of Accounts for the financial year ended 31st March, 2008.

The performance of the Company for the financial year ended 31st March, 2008, is summarised below:

FINANCIAL RESULTS: (Rupees in Millions) Consolidated 31.03.2008 31.03.2007

Income 5651.07 3007.77

EBIDTA 662.75 370.28

Less: Interest & Finance Charges 225.05 123.40

Less: Depreciation & Amortisation 35.99 11.26

Profit Before Tax 401.71 235.62

Provision for Tax 59.10 31.33

Profit After Tax (PAT) 342.61 204.29

Earning Per Share- Basic & Diluted (in Rs.) 22.88 14.30

PERFORMANCE REVIEW:

The performance of the Company was robust during the last year and company has clocked a record turnover of Rs.565 Crores, which has increased by phenomenal 85% compared to Rs.301 cores in the previous year. The order book position of the company has also seen a substainal growth. The order book has surged to a record level and crossed the psychological land mark of Rs. 2000 Crores and stood at Rs. 2050 Crores. The execution period of these orders ranges from one year to four years. Your company is very confident and bullish on getting more big size orders, which will have substantial positive impact on the working, profitability and standing of the company in the industry.

Traditionally, the water segment plays an important and crucial role in the performance of the company and contributes substantially towards the turnover and profitability of the company. It constitutes approximately 60- 70% of total turnover of the Company and the order book also consists of substainal projects from the water segment. During the financial year the company has successfully commissioned the crucial and sizeable first phase of the New Mumbai Municipal Corporation (NMMC) water pipeline project. In addition to water projects, roads, tunnelling, airports, urban infrastructure etc. are also contributing towards the encouraging performance of the company.

In a conscious deviation move, your company is exploring various options to expand the base of activities. Accordingly, in recent past, the company has aggressively and consciously ventured into relatively new segments viz. building and modernisation of airports, tunnelling, construction of high rises, shopping malls, development of urban infrastructure etc. In pursuit of this, the Company is executing two major airport projects viz., Amritsar Airport and Ahmedabad Airport, two tunnel projects for the Brihanmumbai Municipal Corporation, Mumbai. The Company's foray into relatively new fields is an indication of the Company's desire to diversify itself and play a role of full fledged infrastructure development Company. The efforts for diversifying activities will enable company to execute more extreme engineering projects in future. The Company, despite increasing its base and diversifying activities, has maintained its edge and efficiency in niche water segments. Your Company further wishes to diversify and embark upon lucrative and complex highway construction projects of NHAI, Hydrocarbon, civil work for power generation and waste water treatment in near future.

The Company has been awarded the following contracts during the year under review.

Sr. Name of work

1. Construction of a Tunnel and allied works from Malabar Hill to Cross Maidan for transportation of water in joint venture with Patel Engineering Limited. The project involves construction of a 3.5 k.m. Tunnel of 2800 mm diameter with shafts and allied works from Malabar Hill to Cross maidan

Department

Municipal Corporation of Brihanmumbai Mumbai Maharashtra

Value of Contract in INR

1,566,803,000.00

Sr. Name of work

2. Construction of a tunnel and allied works at Modak Sagar for transportation of water in joint venture with Ostu- Stettin Hoch u. Tiefbau GmbH and Austrian company. The project involves construction of a 7.5 km Tunnel of 4100 mm diameter with allied work.

Department

Municipal Corporation of Brihanmumbai Mumbai Maharashtra

Value of Contract in INR

2,225,237,638.00

Sr. Name of work

3. Improvement of Nishant & Doodhganga Water supply schemes by providing, laying of D.I. pipe lines including allied works at Srinagar in the State of Jammu & Kashmir

Department

Project Manager Project Implementation Unit-Urban Srinagar J&K Economic Reconstruction Agency Shrinagar (J & K)

Value of Contract in INR

196,906,623.00

Sr. Name of work

4. Providing, laying, Jointing, Testing & Commissioning of clear water rising mains and feeder mains at Jabalpur.

Department

The Commissioner, Municipal Corporation, Jabalpur. Madhya Pradesh

Value of Contract in INR

264,380,414.00

Sr. Name of work

5. Supply, laying & jointing of feeders mains and all allied works in Indore city

Department

The Commissioner, Indore Municipal Corporation, P I U MP Urban (ADB) Project Musakhedi, Indore, Madhya Pradesh

Value of Contract in INR

641,697,162.26

Sr. Name of work

6. Supply and laying of pure water pumping main and all allied works from water treatment plant to break pressure tank

Department

The Commissioner, Indore Municipal Corporation, P I Unit MP Urban (ADB) Project Indore, Madhya Pradesh

Value of Contract in INR

336,109,669.90

Sr. Name of work

7. Providing & laying 3000mm Internal diameter M.S. above ground water main including cement mortar lining from inside & allied works, Section-I from Aghai to Jamboli

Department

Municipal Corporation of Brihanmumbai, Mumbai, Maharashtra

Value of Contract in INR

2,737,144,760.04

Sr. Name of work

8. Providing & laying 3000mm Internal diameter M.S. above ground water main including cement mortar lining from inside & allied works, Section- III from Pogon to Gundvali

Department

Municipal Corporation of Brihanmumbai, Mumbai, Maharashtra

Value of Contract in INR

1,611,411,796.18

Sr. Name of work

9. Construction of link road MR-9 (MR- 10 to bye By-pass via Electronic Complex) Indore.

Department

Indore Development Authority, Indore, Madhya Pradesh

Value of Contract in INR

311,800,000.00

Sr. Name of work

10. Construction of Link Road from White Church to Bye Road.

Department Indore Vikas Pradhikari, Indore, Madhya Pradesh

Value of Contract in INR

162,200,000.00

Sr. Name of work

11. Construction of Pilot corridor on A.B. Road, (Niranjanpur to Rajiv Gandhi Square) under BRTS, Indore, M.P.

Department

Indore Development Authority, Indore, Madhya Pradesh

Value of Contract in INR

1,377,014,087.47

Sr. Name of work

12. Construction/Expansion of Domestic Arrival Terminal Building for Delhi International Airport (P) Ltd. Delhi.

Department

Delhi International Airport Pvt. Ltd. , New Delhi

Value of Contract in INR

413,500,000.00

Sr. Name of work

13. Design and construction of storm water pumping station including supply, delivery, erection, commissioning of mechanical, electrical instrumentation and automation works and comprehensive operation and maintenance of pumping plant at Irla, Mumbai

Department

Municipal Corporation of Brihanmumbai, Mumbai, Maharashtra

Value of Contract in INR

770,667,300.00

Sr. Name of work

14. Construction of Imperial Height at Oshiwara embracing podium upto 4th floor above G.L. & 4 towers of 44 floors above podium P1 to P4 & Deck level P5.

Department

Vijay Associate Constructions Pvt. Ltd. ,Mumbai ,Maharashtra

Value of Contract in INR

589,185,798.00

Sr. Name of work

15. Replacement of worn out rising mains and laying of New Rising mains and gravity mains in various part of Jammy City (Strengthening of existing system Phase-III)

Department

Project Manager (Urban), PIU, J&K ERA, 13, C/C Gandhi Nagar, Jammu & Kashmir

Value of Contract in INR

454,873,261.00

Sr. Name of work

16. Civil Mechanical & Electrical works for 900 MLD capacity water pumping station at Bhandup Complex.

Department

Municipal Corporation of Brihanmumbai, Mumbai, Maharashtra

Value of Contract in INR

489,157,832.72

Sr. Name of work

17. Proposed Commercial Tower on plot bearing F.P. No. 616 (PT) OF T.P.S., IV, Mahim Division, on Tulsi Pipe Road, Dadar, (West), Mumbai. (Sunshine Tower)

Department

Sunshine Housing Devl. Pvt. Ltd. , Mumbai , Maharashtra

Value of Contract in INR

370,252,089.00

Value of Contract in INR

TOTAL 14,518,341,431.57

SAW PIPE DIVISION

During the year under review, the Company has commissioned its SAW Pipes Division and commercial production has been started. With commissioning of the plant, the company is in position to manufacture Spirally Welded Mild Steel Pipes H-Saw Pipes). The Saw Pipes division has a capacity of 92000 TPA. The Pipe division also has a coating division viz., 3 LP coating plant, which is on schedule. The commercial productions are likely to be started in second quarter of the next fiscal. The capacity of 3 LP coating plant is 1.7 million sq. mtrs.

The encouraging response of existing pipe division and long term requirements of high quality pipes, lead the management to contemplate further expansion of pipe division in big way.

CERTIFICATION

Recently, the Company has received prestigious and crucial API certifications from American Petroleum Institute for its SAW Pipe Manufacturing Unit. These certifications will enable Company to supply and undertake work order for lucrative Oil and Gas Industries.

SCHEME OF ARRANGEMENT AND AMALGAMATION

To augment synergies between the group companies and to improve the working of the companies and also to concentrate on two business segments (viz. infrastructure and pipe manufacturing) more judiciously and efficiently, a scheme of amalgamation and reconstruction is proposed.

The Board of Directors of the Company in their meeting held on 17th March, 2008 has approved the Scheme of Amalgamation of Pratibha Shareholding Private Limited (PSPL) and One Metro India Private Limited (OMIPL) with the Company and also to de-merger of Saw Pipes division of the Company to Pratibha Pipes & Structural Limited (PPSL)

On Amalgamation of PSPL and OMIPL with the Company, PPSL will become the wholly owned subsidiary of the Company. Demerger of Saw pipes divisions into PPSL will help the Company to concentrate on infrastructure business and ultimately will substantially enhance the stakeholders! value.

The Company has also received approval from the BSE and NSE in respect of the Composite Scheme of Merger and Demerger.

DIVIDEND

The Board recommends dividend @ 20% on equity shares of Rs. 10 each. The total outgo on this account shall be Rs. 3.90 Crores including dividend distribution tax.

TRANSFER TO RESERVE

Your directors propose to transfer a sum of Rs. 350.00 Lacs to the General Reserve account.

QIP ISSUE

During the year under review, to augment the source and expedite the execution of the various projects, the Company has issued and allotted 24,00,000 equity shares to qualified institutional buyers at a price of Rs.253.00 (Including premium of Rs.243/-) per shares on QIP (Qualified Institutional Placement) basis. The company has raised Rs. 60.72 Crores by the QIP issue. The shares were allotted to Reliance Capital Asset Management Limited and Merrill Lynch Capital Markets Espana S.A.

FIXED DEPOSITS

The Company has not accepted any fixed deposits within the meaning of Section 58A of the Companies Act, 1956, during the period under review.

DIRECTORS

Mrs. Usha B. Kulkarni and Mr. Awinash M. Arondekar retire by rotation at the forthcoming Annual General Meeting and are eligible for reappointment.

The information on the particulars of Directors seeking re-appointment as required under Clause 49 of the Listing Agreement with the Stock Exchanges have been given under Corporate Governance of this Report.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors' Responsibility Statement, it is hereby confirmed that:

(i) In the preparation of the annual accounts, the applicable accounting standards have been followed;

(ii) The Directors have selected such accounting policies and applied them consistently and made judgements 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 March 31, 2008 and of the profit of the Company for the year ended on that date;

(iii) 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; and

(iv) The Directors have prepared the annual accounts of the Company on a going concern basis.

SUBSIDIARY

The Company is having a wholly owned subsidiary Company i.e. Pratibha Infrastructure Private Limited (PIPL). A statement pursuant to Section 212 of the Companies Act, 1956, related to the accounts of the subsidiary is annexed as part of this Annual Report.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Accounting Standard AS-21 on Consolidated Financial Statements read with Accounting Standard AS-27 on Accounting for Investments in Joint Ventures, your Directors provide the audited Consolidated Financial Statements in the Annual Report.

PERSONNEL

In accordance with the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, the names and other particulars of employees are set out in the Annexure to the Directors' Report. However, as per the provisions of Section 219(1)(b) (v) of the Companies Act, 1956, the Report and Accounts is being sent to all the shareholders of the Company excluding the aforesaid information.

Any shareholder interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

AUDITORS AND AUDITORS' REPORT

M/s. Jayesh Sanghrajka & Co., Chartered Accountants, Statutory Auditors of the Company, holds office until the conclusion of the ensuing Annual General Meeting and being eligible for re-appointment.

The Company has received letter from them to the effect that their appointment/re-appointment, if made, would be within the prescribed limits under Section 224(1B) of the Companies Act, 1956, and that they are not disqualified for such re-appointment within the meaning of Section 226 of the said Act.

The Notes on Accounts referred to in the Auditors Report are self-explanatory and therefore do not call for any further comments.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Your Company is dedicated for Conservation of Energy for its manufacturing division. Conservation of energy is an on going process in the Company!s construction divisions. The Company has commenced manufacturing activities during the year; therefore, the Company is exploring the various areas for conservation of energy by implementation of various proposals. Your company is confident to get better results for such measures in coming years.

Power and Fuel Consumption

Particular Units Total cost Rs. Per (Rs.) Uniti. Electricity

(a) Purchased - Saw pipes Division 1011540 4,999,664 4.94

(b) Own Generation

Diesel Generator 383675 4,185,540 10.91

ii. Coal Nil Nil Nil

ii. Furnace Oil Nil Nil NilConsumption per unit of Production

Particulars Total Unit Total Unit/MT Production(MT)

Electricity 1395215 26121 53.41

Coal Nil Nil Nil

Furnace Oil Nil Nil Nil

There is no information to be furnished regarding Technology Absorption as your Company has not undertaken any research and development activity in manufacturing activity nor any specific technology is obtained from any external sources which needs to be absorbed or adapted. Innovation is a culture in the Company to achieve cost efficiency in the construction activity to be more and more competitive in the prevailing environment that cannot be quantified.

During the period under review, the Company had incurred Rs. 332,947,178 expenses in Foreign Currency. Out of these INR 1,586,000, is incurred on foreign travel and INR 325,186,820 being the CIF Value of capital goods, materials & stores imported, rest is incurred on professional fees, registration fees and training of staff.

There are no foreign exchange earnings in the period under review.

CORPORATE GOVERNANCE

Being observant and responsible, the company is committed to high standards of the corporate ethics, professionalism and transparency. As per Clause 49 of the Listing Agreement with the stock exchanges, a separate section on Corporate Governance forms part of the Annual Report

A certificate from the Statutory Auditors of the Company confirming the compliance of conditions of corporate governance under Clause 49 of the Listing Agreement is also attached to this Report.

EMPLOYEE RELATIONSHIP

The Company enjoyed very cordial and fruitful relations with the employees during the year under review and the Management wishes to place on record its sincere appreciation of the efforts put in by the Company's workers, staff and executives for achieving excellent results under demanding circumstances.

The company is proud to place on record that the company has very low attrition rate as compared to its peers in the industries.

ACKNOWLEDGMENT

Your Directors would like to express their sincere appreciation and gratitude for the continued support and cooperation received from the Central and State Governments, civic corporations and authorities, Financial Institutions, Banks, Customers, Suppliers, Associates, Vendors, Sub-Contractors and Members during the year under review.

The Directors also wish to thank all the employees for their committed and sincere services and continued cooperation throughout the year.

For and on behalf of the Board of DirectorsDate : 2nd May, 2008 Usha B. KulkarniPlace : Mumbai, Chairperson

MANAGEMENT DISCUSSION AND ANALYSIS

Industry Structure - General

Infrastructure Industry in India has been experiencing a rapid growth in different segments due to the increase in urbanization and ever increasing foreign investments in this sector as a whole. With rapid growth of the economy in recent years, the importance and urgency of putting in place a quality infrastructure has increased. The Indian infrastructure/ construction industry is expected to continue its northward movement in the future as well. As per estimated figure the infrastructure and construction industries will contribute 16.98% to Indian GDP by 2012.

In the past few years, the Indian government!s focus has been directed towards improvement of road, housing infrastructure, urban water supply & sanitation and development of airports. As per the estimates of the Planning Commission, about US$ 500 billion needs to be spent over the 11th Five Year Plan period of 2007-08 to 2011- 12 on building India!s infrastructure. The Government has increased allocations for power, road, water etc, which would augur good times for construction companies in terms of healthy order book growth and better revenues. CRISIL Research estimates suggest that these allocations would translate into construction investments of INR 290.86 billion in the segments of roads, urban infrastructure and irrigation [including water].

In Water sector, the prevailing conditions and trends in Urban India indicates that 85 percent of population in general have access to safe water supply, which is even less (65 percent) in slums. Urban Water and Sanitation Services are characterized by inefficiency and poor service quality. So far there is no provision for 24 hour quality water supply in any Indian city. In fact most cities are having intermittent water supply of varying periodicity and quantity. Government of India has created fund for assisting the State Governments and the Urban Local Bodies in the economic reform, with the water and sanitation reforms forming a core of the approach.

In Road sector, substantial development has been taken place. The Government has earmarked about INR 14000 billion for construction and upgradation of various roads. A further investment of INR 31415 billion has been earmarked by the Central Government for the roads and bridges sector during the Eleventh Five Year Plan. Apart from construction of Highways, the Government is also upgrading thousand of kilometers of NHDP under Phase-III.

In recent times, major initiatives have been taken to maximize the role of public-private partnerships (PPPs). The government has provided a large number of incentives to attract private sector investment. This includes creation of Special Purpose Vehicles and a Viability Gap Funding scheme for financing infrastructure projects. Barring aviation, all infrastructure sectors have also been opened up for 100 per cent FDI. There is a growing trend of Public-Private Partnership (PPP) in implementation of infrastructure projects in India.

The Central Government, in 2005-06, has launched a scheme Jawaharlal 'Nehru National Urban Renewal Mission' for urban infrastructure development. This scheme ensures and encourages public-private participation in the areas where it is feasible. Under the scheme, the highest priority has been accorded to sectors namely water supply, sanitation and storm water drainage etc. A total investment of INR 33535 billion has been envisaged for the development of urban services.

Industry Structure - Specific to Pratibha Industries Limited

Pratibha Industries Limited has continued to exhibit its abilities to undertake more challenging and complex project(s) involving serious engineering and executed various project(s) during the year under review. The endeavor to venture into more engineering based projects which currently have lower penetration from competition perspective, ensured that your company was successful in maintaining profitability projections even as the topline grew 80% and despite of huge volatility in the commodity markets.

Pratibha Industries Limited will continue to strive to explore new areas which fall in the ambit of its core competence. The entry into the lucrative hydrocarbons division is well on track. With the commissioning of the HSAW pipe division in 2007-08 and with the coating division slated to start commercial production from August 2008, your Company will be amongst the first to have world class pipe manufacturing and coating facilities to fully back up the piping needs arising from its operations in water and hydro-carbon segments, as also to cater to the ever increasing market which is currently witnessing serious demand supply mismatch. We are convinced that efforts taken over the past two years will put your company well and truly on the road to realize its goal of being a leading player in its area of operation.

In view of the new manufacturing facilities built during the financial year under review, which have already been accorded with ISO/TS 29001 certification for Design and Manufacture of Line Pipe by American Petroleum Institute and owing to the enhanced execution abilities of construction projects, your Company will continue to focus with enhanced vigor and greater determination on the following segments, on both $ EPC and PPP basis;

1. Water Projects including treatment, re-cyclanation, storage & distribution, with special focus on water management projects.

2. Irrigation Projects.

3. Urban Infrastructure

a. Airports,b. Malls and retail infrastructure,c. High Rise buildings,d. Specialty buildings,e. Mass rapid transit systems,f. Car parks,g. Tunneling projects,h. Construction of modern age railway stations.

4. Surface transportation segment - roads and highways.

5. Construction activities in thermal power plants.

6. Hydrocarbons.

Opportunities - Specific to Pratibha Industries Limited

Infrastructure & Construction

The government is committed to improve infrastructure of the country and has earmarked substantial funds for growth of the sector. With the committed efforts and investment, India is likely to witness next two decades of massive infrastructure activities to meet the increasing needs of a developing nation and a growing population.

The rapidly growing urban population and the massive existing shortage of modern housing and commercial space have thus created nearly limitless opportunities making it almost a trillion dollar business opportunity in mid term. The commitment for improved infrastructure will ensure all round development of infrastructure facilities, these includes urban infrastructure, highways, roads, mass housing, airports, irrigation projects, drinking water projects etc. With projects of thousands of crores in the infrastructure and construction segment, the company poised to benefit substantially. There are few players to take up jobs in the sector and your company has over a period developed an expertise in executing these projects effectively and efficiently. Further, the company!s adaptability to blend with other company of different culture will certainly help the company to form an alliance for executing specialised projects.

Saw Pipes division

The recently commissioned pipe manufacturing unit of the company will ensure the company to tap the tremendous opportunities lies in pipes segment. There is huge requirement for supply of quality pipes for transportation of oil, gas and water. Many companies including public sector companies are opting for transportation of the Hydro Carbon through pipe lines. These create huge demand of pipes of various diameter and specifications. Considering the current and future prospectus of this business, the company has commissioned its state-of-the-art pipe manufacturing plant. The Company has obtained various certification including prestigious American Petroleum Institute (API) certifications for its manufacturing facilities, these will enable company to meet the qualification criteria of various prospective tenders.

Industry concerns and Company!s perspective

Risk is inherent in every business, whether internal or external. Global slowdown, resultant of which India too could witness some slowdown, though a hypothetical thought at this moment, could translate into a potential risk. Allied risks like inflationary trends in commodity prices, higher interest rates, volatility in forex rates and shortage of skilled human resource are issues which need to be addressed and processes have been formalized for identifying and assessing such business risks. For one, having your own manufacturing base for the commodity substantially used by your infrastructure division, cuts down risk posed by volatility related to this commodity, to a large extent. Similarly, long term contracts with main producers of other commodities [DI Pipes, Valves etc], also helps in addressing the price escalation risks. We now address each concern specific to the industry in which Pratibha operates, followed by your Company!s perspective and subsequent preparedness in respect to such risks;

Concern -1

The prices of commodities [fuel, steel & cement] have risen substantially over the past four months. This will impact the profitability of the Company.

Company's Perspective

There is no denying the fact that the prices of all important commodities consumed in our projects have increased substantially. However, alongside such increase the inflation index, both Wholesale Price Index & Commodity Based Index have also increased likewise. Since, all the projects being currently executed for the public sector utilities / bodies carry escalation clauses [majority being commodity linked], a major part of such increase in bound to be realized. Similarly, for all projects being executed in the Private sector, your Company has pass through clauses, which means that any & all increases in commodities [steel / cement] will be reimbursed in totality by such private sector clients. Inspite of such indemnity by virtue of the existing price escalation clauses, there is bound to be some minor impact, due to which margin expansion in the financial year 2008-09 is not foreseen, inspite of the fact that revenues will grow and direct costs as a percentage to turnover will reduce.

Concern - 2

Interest rates have been increasing, which are not reimbursable in contracts taken up by the Company, This could have adverse impact on the margins.

Company's Perspective

The interest costs have been more or less stable over the past 12-14 months. Owing to the robust growth and better margins the Company as a fact has been able to reduce the commissions on the non fund based limits [bank guarantees & letter of credits]. Further, your Company has been rated as A-/Stable for long term loans and P2 + for short term loans by CRISIL, which will enable it to negotiate better and favorably with banks / financial institutions in respect to the rate of interest being currently charged.

Concern - 3

Prevailing liquidity crunch in the global markets could result in inadequate financial arrangements, resultant of which projects under execution could be delayed and result in cost overruns.

Company's Perspective

The year under consideration [2007-08] saw your company reducing the debt-equity ratio from 1.44:1 to 0.72:1. In view of reduced debt-equity ratio, enhanced net worth, free cash reserves and better margin guidelines for Infrastructure Companies, the balance sheet of your Company is well leveraged to raise substantial funds as required to maintain the CAGR.

Further, all the public private partnership [PPP] projects will be executed at SPV level, thereby ensuring that the balance sheet of the Company remains well leveraged at all times.

Concern - 4

Complex infrastructures projects are by nature have long gestation periods. While project execution is planned after taking into consideration all possible factors, unexpected events may still cause delays. For instance in the case of Tunnel Projects, which is currently under execution, there could be geological surprises causing the projects to be delayed.

Company's Perspective

Your Company has been executing complex projects successfully for years together and such risks, as mentioned hereinabove, are inherent to the business in which it operates. However, your Company has ensured an order book with geological spread [pan India presence] and clients from both $ public and private sector and orders from practically all segments in which it operates. Further, tunneling projects being executed are in technical joint venture will established global partners, who have more than three decades of experience in similar activities. Moreover, execution of such projects is started only once proper study on geological front is conducted. It is essential to add that projects like tunneling are equipment based / lesser dependent on human skills and your Company has acquired all such critical equipments as necessary to execute such projects involving extreme engineering.

Concern - 5

Shortage of skilled manpower could derail the Company!s expansion plans and result in time & subsequent cost overruns

Company's perspective

Your company has placed serious emphasis on human resource, its training and growth. Lower rates of attrition amongst all level of its employee!s bear testimony of having successfully created an environment conducive to overall growth of the most priced asset of the organization $ its people. The company is and shall remain committed to providing its work force with a setting, which guarantees mutual development. The Company has identified and put in place experience and youth which augur well for the future growth plans of the company. On the basis of the above submission, it can be safely concluded that the Company has requisite human resource to achieve the targeted revenues

Outlook

Your company has shown robust growth over the past five years and will continuously focus to achieve similar growth in future as well. Pratibha believes in increasing the value of all its stakeholders and will endeavor to do so by enhancing qualitative presence in all the segments of infrastructure sector it currently operates in and by adding hydrocarbons to the list in the current fiscal.

With opportunities galore in the construction and infrastructure space, your Company is well equipped to further strengthen its position in the Industry.

Segment Wise Performance

Segment wise performance is indicated hereunder [Amount in million]Sl. Segment Turnover % - Turnover

1. Water & Environmental Engineering 3707.55 65.61%

2. Urban Infrastructure 810.56 14.35%

3. Roads 140.56 2.49%

4. Manufacturing - SAW Pipes 991.83 17.55%

Total 5650.50 100.00%

Adequacy of Internal Control

Your Company has appropriate internal control system for business processes, with regards to efficiency of operations, financial reporting, compliance with applicable laws and regulations. Clearly defined roles and responsibilities down the line for all managerial positions have been institutionalized. All operating parameters are monitored and controlled. Regular internal audits and checks ensure that responsibilities are executed effectively. The audit committee of the Board of Directors actively reviews the adequacy and effectiveness of internal control systems and suggests improvement for strengthening them, from time to time. The ERP program has been partially implemented and some departments have already been linked. The SAW Pipe division will be totally integrated by August 2008.

Financial Performance

Your Company recorded remarkable increase in profits through twin approach of growth in top-line and effective cost management.

The Company has achieved turn over of Rs.565.05 crores during the years ended 31st March, 2008 as compared to Rs.300.39 crores lat years reflecting growth of 88% in turnover. Profit after tax, is Rs. 34.26 crores as compared to Rs. 20.42 crores during the previous year reflecting growth of 67.70%.

Basic earning per shares for the year is Rs. 22.88 as compared to Rs. 14.36 per shares during the previous year.

Conclusion

To conclude, your Company has delivered a healthy performance, particularly viewed in the backdrop of the challenging environment the entire Industry faced during the year under discussion. The outlook appears bright on the back of growth initiatives planned in the pipe manufacturing business and the positive outlook for the Infrastructure business.

Cautionary Statement

Statement in this Management Discussion and Analysis report regarding the Company!s objective, projections about the future, estimates, expectations or predictions including, but not limited to, statements about the Company's strategy for growth, products development, market position and expenditures may be 'forward - looking statements within the meaning of applicable securities laws and regulations.

Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company!s operations include economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws and other statues or other incidental factors. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent development, information or events or otherwise.