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Monday, July 13, 2009

Raymond - 2008-2009 - Annual Report





Your Directors are pleased to present their 84th report on the business and
operations of your Company together with the Audited Statement of Accounts
for the year ended March 31, 2009.


Raymond Limited (hereinafter referred to as your Company/the Company) is
India's leading multi-product conglomerate with interests in textiles,
apparels, retail, brands and engineering (files & tools) having its
corporate headquarters in Mumbai. The Company prepares its financial
statements in compliance with the requirements of the Companies Act, 1956,
and the Generally Accepted Accounting Principles (GAAP) in India. Overall
the financial statements have been prepared on the historical cost basis.


While the first half operating performance of your Company was generally in
line with expectations, the mainstay textile business was adversely
impacted by the drop in consumer sentiment as fallout of the economic
downturn. The second half of the year generally is the main season for
textiles. In addition, due to the restricted credit availability to the
trade, the Company had to carefully monitor despatches.

Consequently your Company has registered only nominal growth in turnover.
During the year, the gross turnover of the Company was Rs.1393.25 crores as
compared to Rs.1337.56 crores in the previous year.

Profit before tax, prior period adjustments, exceptional items and foreign
exchange loss/gain was Rs.30.35 crores as against Rs.69.31 crores in the
previous year. The performance was affected by foreign exchange loss of Rs
89.10 crores.

After factoring in the foreign exchange loss, the loss before tax, prior
period adjustments and exceptional items was Rs.58.75 crores as against the
profit of Rs.86.15 crores in the previous year.

The operations of your Company's denim joint venture - Raymond UCO Denim
Private Limited were restructured by closing down two of its heavily loss
making subsidiaries in Belgium and USA. The Company has assessed the
situation considering the prevailing economic uncertainties and based on a
valuation report of an independent valuer, provided for diminution of
Rs.230.13 crores, in the value of the Company's investments in the joint
venture, as an exceptional item. Your Company has also impaired its
investment in its overseas subsidiary - Regency Texteis Portuguesa Limitada
by Rs. 5.12 crores, as an exceptional item.

Thus, the net loss, after exceptional items, prior year adjustments and
provision for taxes was Rs. 271.55 crores as against a net profit of
Rs.72.42 crores last year.

In order to conserve the resources of the Company and taking into account
the prevailing uncertain economic situation the Board of Directors of the
Company have decided not to recommend dividend for the financial year ended
March 31, 2009.

However, your Company looks beyond immediate challenges to build business
with long-term goals based on your Company's intrinsic strength both in
terms of product quality and also brands and distribution strength, thereby
sustaining growth despite the current turbulent business environment. Your
Company is also focused on bringing down costs and streamlining operations
to improve future profitability.


In the past year, markedly during the second half, the Indian as well as
the global economy witnessed a high degree of uncertainty and rapid
slowdown. The global recession impacted the fortunes of corporates across
geographies. The IMF has estimated that world economic growth will fall its
lowest since World War II. Although the jury is still out on whether the
global recession could potentially turn out to be another great depression
like in the 1930s, there is a strong school of thought which is expecting a
slow and gradual recovery in the year 2010, once there is some stability
achieved during the year 2009.

The Indian economy too has not been isolated from what has been happening
in the global economy; in fact, it only became abundantly clear that the
fortunes of the Indian economy are not decoupled from the rest of the
world. As export demand continued to shrink during the year and external
financing became progressively constrained, the pace of growth in the
Indian economy slowed down.

The good thing though is that the Indian economy is not entirely export
dependent, which has worked to its advantage and its large domestic
consumption demand has helped prop up the GDP growth rates and has
prevented it from slipping into negative territory.

It is expected by many that once the global economy stabilises and shows
some signs of recovery, the Indian economy will be amongst the first few
economies that would lead the world on the path of an economic turnaround.


The key business segments of the Company are Textile and Files & Tools


Industry Conditions:

The Indian textiles and apparels sector is a major contributor to the
Indian economy in terms of gross domestic product (GDP), industrial
production and the country's total export earnings. This sector provides
employment to over 35 million people and has direct linkages to the rural
economy and the agricultural sector.

The Indian textile industry is currently passing through a turbulent phase.
With the global downturn ravaging economies, the textile sector is one of
the worst hit. The effect of demand contraction and credit squeeze resulted
in over 7 lac textile workers losing their jobs (by November 2008).

The drop in the levels of discretionary spending along with the credit
squeeze spreading to the trade also contributed in no small measure.

However there is a slight thaw in the negative trend and it is expected
that the economy may improve from the second half of the Financial Year
2009-10, when the pent up demand of the Indian consumers would come to the
fore and provide further traction to facilitate investment demand.

Opportunities and Challenges:

The present global economic scenario throws up opportunities for
fundamentally strong companies such as your Company. The inherent
strengths, in the form of strong domain expertise, powerful brand
positioning, strength and resilience of the brands, fully integrated state
of the art production facilities, cutting-edge technology and unparalleled
product innovation capabilities combined with the deep retail market
penetration, provide a highly potent platform to seize the opportunities
that are bound to arise during cyclical downturns in the form of newer
markets, new segments of customers, new channels of distribution, etc.

On the other hand, during the Financial Year 2008-09, the volatility
witnessed in the forex markets, credit squeeze, high costs of borrowings,
drop in discretionary spending especially in export markets, disbursements
of Technology Upgradation Fund (TUF) loan subsidies are some of the
challenges facing the textile industry at large.


The Company is the market leader in the textiles sector in India, has a
powerful brand Raymond', state of the art manufacturing facilities and a
strong all India retail presence in the form of The Raymond Shop' (TRS').
While focusing on its vision of being the global leader in fashion and
lifestyle segment, your Company is now also establishing itself as a
preferred supplier of value-added premium fabric in the international
markets. The Company is on the path to becoming a lifestyle solution for
discerning customers with an offering of a range of fabrics, garments and
accessories in a premium shopping environment.

During the year 2008-09, the phase III of the Company's textile Division at
Vapi commenced commercial production.

Performance Highlights:

Despite the severe downturn faced in the year 2008-09, poor consumer
sentiments and the credit squeeze, the Company's net sales from the textile
division registered a nominal growth. Net sales for the year was Rs.1137.85
crores as compared to Rs.1133.85 crores in the previous year.

Market Share and Retail Network:

The Company is the undisputable market leader in India and is considered as
one of the more formidable players in the global market for worsted

The Company continues to focus on the retail sector in a big way and is now
concentrating on penetrating further into the Tier 3, 4 and 5 towns of the
country. Even in existing malls and other locations, the rent
renegotiations are being aggressively pursued by the Company which is
resulting in rental cost savings. The Company's like-to-like own store
sales growth was to the order of 4% which augurs well for the future. The
Company continues to be judicious in its selection of store locations with
profitability as the key criterion.


Textile exports for the Financial Year 2008-09 were Rs.110 crores, as
against Rs.114 crores in the previous year. Quality, design, service to mid
premium and premium customers has resulted in stability of customers
internationally and new customers being attracted to provide an integrated

Raw Material:

Wool prices were lower during the Financial Year 2008-09. Further,
alternate vendors have been developed in other countries like South Africa
to reduce the Company's dependence on traditional sources from Australia.
Polyester fibre prices are presently stable.


The Division is engaged in manufacture and marketing of Steel Files, HSS
Cutting Tools (mainly drills) and Merchandising activities mainly in Hand
Tools. During the year, the Division further consolidated its position in
Cutting Tools and Hand Tools segments.

Industry Outlook:

Globally, the Steel Files business has stagnated and has not registered
growth in demand. However, your Company's Division has been in a position
to improve its market share in the international market with sustained
marketing and business development efforts. Timely action on market
segmentation, price hikes, tight control on liquidity, cost-control, etc.
also contributed. The Cutting Tools business recorded growth in the year
despite stiff competition in the domestic as well as in export market.

Opportunities and Threats:

The challenge before this Division is to sustain growth and profitability
in the background of the recessionary climate. The weakening of currencies
in some of the major markets like Latin America, Africa etc., is leading to
price pressure by buyers. All these factors are going to make the current
financial year very challenging for this Division.


This Division is planning to counter its challenges through focused
marketing, tight control on liquidity and margins, cost effective sourcing
of materials and services, improved productivity through process automation
& up-gradation, shorter leadtime with focus on time in full delivery.

The Division continues to expand and consolidate its presence in
International market continues. The Division has also strengthened its
presence in USA and Latin America.

Performance and Review of Operations:

The Division continues to remain the market leader in the files segment in
the domestic market and is amongst the largest producer of Steel Files in
the world. For the first time, the Export Sales of the Division have
crossed the milestone of Rs.100 crores and recorded all time high export
sales of Rs.108 crores. The Division reported net sales of Rs. 222 crores
(Previous Year: Rs. 177 crores).


The observations made by the Auditors in their Report have been clarified
in the relevant notes forming part of the Accounts, which are self



Raymond Apparel Limited:

The gross turnover of the Company was higher by 20.31% at Rs. 421.02 crores
(Previous Year: Rs. 349.96 crores). Profit after tax was lower at Rs. 4.67
crores (Previous Year: Rs. 7.84 crores).

The second half of the Financial Year 2008-09 was challenging due to fall
in consumer sentiments. Though the Company's performance was impacted, the
strength of its brands enabled it to maintain a leading position in the
apparel industry. The 'Park Avenue' brand of the Company was adjudged the
'Most Admired Menswear Brand' of the year in Images Fashion Forum. In the
coming years, the Company is gearing to consolidate and retain the
leadership position of its various brands and improve profitability,
through continued focus on product innovation, appropriate product-price
matrix and operating efficiencies, especially in retail.

The Company is in the process of implementing an ERP system which will help
it to improve its service levels further.

Colorplus Fashions Limited:

The gross turnover of the Company for the year ended March 31, 2009 was
marginally higher at Rs.148.32 crores (Previous Year: Rs.147.89 crores).
Profit before tax and exceptional items was lower at Rs.5.72 crores
(Previous Year: Rs.14.68 crores). During the year, the Company has provided
for diminution in respect of its long term investments in Gas Apparel Ltd.
The net loss for the year, after providing for diminution and after taxes,
was Rs. 15.05 crores (Previous Year: net profit Rs. 6.71 crores).

The performance of the Company was affected by adverse consumer sentiments.
The Company is focusing its efforts on quality collections, operational
efficiencies and market serviceability and will continue its focus on
offering more innovative products and styles to retain its market
leadership in the premium casual segment.

Silver Spark Apparel Limited:

The gross turnover of the Company was Rs. 86.83 crores (Previous Year:
Rs.88.07 crores).

The Company had a profit after tax of Rs.1.81 crores (Previous Year:
Rs.7.39 crores) during the Financial Year 2008-09, after foreign exchange
loss of Rs 9.07 crores.

The Company continues to export its products to reputed international
brands, who have shown their acceptance of quality and service levels by
placing repeat orders. The Company has been imparting continuous training
to the operators to improve the efficiencies as well as standards of

Celebrations Apparel Limited:

The gross turnover of the Company was Rs.14.29 crores (Previous Year: Rs.
8.97 crores). The Company incurred a loss of Rs. 0.04 crores (Previous
Year: loss of Rs. 0.10 crores).

During the year, the Company focused on imparting training to operators,
obtaining manufacturing consistency and operational efficiencies. The
Company has met the quality standards set by reputed national brands.
During the year, the Company has increased its shirts manufacturing
capacity from 4000 shirts to 5000 shirts per day. The Company is receiving
encouraging inquiries for export of high quality shirts.

Everblue Apparel Limited:

The Company earned a profit after tax of Rs 1.32 crores (Previous Year: Rs
1.50 crores).

Raymond Woollen Outerwear Limited (formerly known as Raymond Fedora Private

The gross turnover of the Company, net of returns and discounts was Rs
45.72 crores (Previous Year: Rs. 35.33 crores). The Company incurred a loss
before prior period adjustments of Rs.1.45 crores (Previous Year: loss of
Rs. 11.85 crores).

During the year, the shares of Lanificio Fedora S.p.A., were forfeited by
the Company due to non payment of call money and the Joint Venture
agreement between Raymond Limited and Lanificio Fedora S.p.A., was
terminated. Hence, the Company subsequently became a subsidiary of Raymond
Limited and a Public Company pursuant to Section 3(1)(iv)(c) of the
Companies Act, 1956. The Company's name has since been changed as above.

Inspite of the global economic downturn severely impacting apparel business
worldwide, the Company managed to increase its fabric exports during the
year by 75% to Rs. 33.40 crores through sustained efforts of its Marketing
and Operations team.

With continued focus on product and design development and exploring
opportunities in new markets and customers, the Company expects to sustain
its performance in the face of continuing challenging conditions in the
global market place.

Hindustan Files Limited:

The gross turnover of the Company (including sales & services) was higher
at Rs.45.01 crores (Previous Year: Rs. 37.98 crores). Profit after Tax was
at Rs.1.31 crores (Previous Year: Rs. 2.15 crores). The control measures,
monitoring and process improvement strategy applied has helped the Company
to remain profitable during the Financial Year 2008-09.

JK Talabot Limited:

The Company manufactures files and rasps at its plant located at Chiplun in
Ratnagiri District, in the State of Maharashtra. During the year gross
turnover of the Company was at Rs.18.85 crores (Previous Year: Rs. 13.94
crores). The Company recorded profit after tax of Rs.2.74 crores (Previous
Year: Rs.0.09 crores) during the Financial Year 2008-09.

The performance of the Company during the year was good, due to improved
capacity utilisation, initiatives on improvement in productivity and
quality in addition to effective management of working capital.

Scissors Engineering Products Limited:

The Company incurred a loss of Rs.26,000/- (Previous Year: loss of
Rs.36,000/-) during the Financial Year 2008-09.

Ring Plus Aqua Limited:

The gross turnover of the Company was at Rs.84.56 crores (Previous Year:
Rs. 83.39 crores). Profit after tax was at Rs. 2.94 crores (Previous Year:
Rs. 7.27 crores).

Gear sales during the year were Rs. 54.74 crores as compared to Rs.49.30
crores in the previous year. Despite recessionary trend in the market,
export sale of gears grew by more than 17% and was at Rs. 32.24 crores as
against Rs.27.51 crores in the previous year. The Company continued making
major in-roads into European market during the year. The sales of gears in
Domestic OEM market is increasing steadily. The Gear capacity expansion is
in process and enhancement in capacity and capability will help the Company
to extend its OEM customer base, particularly in Western Europe.

Shaft Bearings sales were lower during the year at Rs.18.56 crores as
against Rs.20.53 crores in the previous year. USA continued to be the major
market for Bearing exports.

Pashmina Holdings Limited:

The Company made a loss of Rs 0.08 crores in the Financial Year ended March
31, 2009 as compared to a loss of Rs.0.09 crores in the previous year.

Overseas Companies:

Jaykayorg AG incurred a loss of CHF 883,975 (equivalent to Rs.3.70 crores)
[Previous Year: loss CHF 394,277 (equivalent to Rs.1.65 crores)] for the
year ended December 31, 2008.

J.K. (England) Limited recorded a profit of Pound Sterling 4,084
(equivalent to Rs.0.03 crores) [Previous Year: profit Pound Sterling 21,648
(equivalent to Rs.0.17 crores)] for the year ended December 31, 2008.

Regency Texteis Portuguesa Limitada, Portugal incurred a loss of Euros
366,953.95 (equivalent to Rs.2.40 crores) [Previous Year: profit Euros
44,897.98 (equivalent to Rs.0.29 crores)] for the year ended December 31,

Raymond Europe S.R.L., incurred a loss of Euro 28,486 (equivalent to
Rs.0.19 crores) [Previous Year: profit Euro 4,258 (equivalent to Rs.0.03
crores)] for the year ended December 31, 2008. The operations of the
Company, which ran a design studio in Italy, has been closed down.

R & A Logistics INC., USA, a subsidiary of Ring Plus Aqua Limited set up in
the USA to provide better service to US based customers, earned a profit US
$ 1,430 (equivalent to Rs.0.01 crores) (Previous Year: profit US $ 10,787
(equivalent to Rs.0.05 crores)] for the year ended March 31, 2009.


Raymond UCO Denim Private Limited:

During the year, the consolidated sales (including services and export
incentives) is Rs.713.13 crores (unaudited) as compared to Rs.784.71 crores
for the previous year ended March 31, 2008. The loss for the year after tax
and exceptional items is Rs. 330.74 crores (unaudited) as compared to
Rs.120.93 crores for the previous year ended March 31, 2008.

Foreign exchange loss during the year is Rs.45.72 crores as against the
gain of Rs.11.54 crores in the previous year ended March 31, 2008.

In view of the restructuring exercise including closure of unviable
operations carried out in the Company's overseas subsidiaries (in Belgium
and USA), the Company based on its assessment and independent valuation
report, has provided for diminution in the value of its investments and
outstanding from its overseas subsidiaries, resulting in an exceptional
charge of Rs.349.16 crores.

The figures for the year are subject to audit.

In the domestic market, with continuous focus on differentiated products,
wider and better product range, the Company continues to maintain
significant share of the premium brands operating in India.

The Company has been constantly developing new and innovative products
catering to the higher end of the European and US markets.

The Romanian operation which was operating as a manufacturing support to
the operations in Belgium for most of the year, has now been ramped up to
cater to the European market directly and take advantage of being present
in a low cost environment while catering to the European market.

As a result of the above restructuring, the pressures on the bottom line
are expected to ease with low cost operations (India and Romania) and
strong equity on product differentiation, value addition and customer

Raymond Zambaiti Private Limited:

The gross turnover of the Company was Rs.131.45 crores (Previous Year: Rs.
103.58 crores). The Company had a profit after tax of Rs. 8.58 crores
(Previous Year: Rs. 6.04 crore) during the year.

The Company during the year has reached benchmark levels in weaving
efficiency and warping productivity; grade realisation has also increased
during the year.

Gas Apparel Limited:

The turnover of the Company for the current financial year March 31, 2009
is Rs. 11.98 crores (unaudited) as against the turnover of the previous
year ended March 31, 2008 which was at Rs. 15.67 crores.

The Company launched the GAS' fashion brand of premium apparel in April
2007. Though the brand was well received among its target youth audience
the Company has been incurring steep loss due to brand building expenses,
high cost of imported merchandise and very high rentals and other operating
costs for its stores. During the year, with a view to stop the continuing
cash drain, a number of actions were taken to close down stores, clear off
inventory and reduce overheads. As a consequence of the costs incurred to
restructure as above, the Company's loss is Rs. 50.46 crores (unaudited) as
compared to previous year's loss of Rs.19.33 crores and its networth is
fully eroded.

The figures for the year are subject to audit.

Discussions are ongoing with Grotto S.p.A., Italy, the joint venture
partner regarding the way forward. In the meantime the Company was
converted into Public Company' with effect from March 27, 2009, and
Company will be henceforth known as Gas Apparel Limited'. Further, your
Company has acquired the entire share holding held by Colorplus Fashions
Limited in Gas Apparel Limited on April 1, 2009.


At Raymond there is an on-going quest for Excellence, Quality, Leadership
and Trust in the products and services provided to its customers and is a
continuous journey that is undertaken with a commitment to improve
processes, and deliver superior products. Every effort is made to provide
products and services that consistently meet or exceed customers'
expectations. Your Company continues to win awards year-on-year, some
notable awards during the Financial Year 2008-09 are;

* The Readers Digest Platinum Award for the most Trusted Brand;

* The Ninth Annual Images Fashion Awards 2009 for 'The Most Admired
Menswear Brand of the Year';

* JK Files & Tools has for 28 consecutive years been awarded the All India
Export Award by Engineering Export Promotion Council (EEPC) of India for
being the Star Performer Award as Large Enterprise' of 2006-07 in the Hand
Tools Category;

* Your Company's Jalgaon Plant has been certified OHSAS 18001:2007 for the
conformance of Occupational Health & Safety Management System.


In accordance with the requirements of Accounting Standard AS-21 prescribed
by The Institute of Chartered Accountants of India, the Consolidated
Accounts of the Company and its subsidiaries (including the Joint Ventures)
is annexed to this Report.


Your Company continues to be committed to good Corporate Governance aligned
with the best-of-breed practices. Your Company complies with the standards
set out by Clause 49 of the Listing Agreement with the Stock Exchanges. A
separate Report on Corporate Governance along with the Auditors'
certificate on compliance with the Corporate Governance as stipulated in
Clause 49 is provided in this Annual Report.


Shri B.K. Kedia, resigned from the Board of Directors of the Company with
effect from May 22, 2008. The Board places on record the great zeal and
dedication with which Shri Kedia served the Company during his long
association of over five decades. The Board is deeply grateful for the
mature and professional advise and guidance of Shri Kedia, from which the
Company had immensely benefited. The Board gratefully acknowledges the
stellar role of Shri B.K. Kedia in building up Raymond Group to its present
enviable stature.

Shri B.V. Bhargava and Shri Nana Chudasama retire by rotation at this
Annual General Meeting and are eligible for reappointment. However, they
have informed the Board that they do not seek re-appointment. The Board
does not propose to fill the vacancies at this meeting or any adjournment
thereof. Hence, as required under Section 256 of the Companies Act, 1956,
resolution at item Nos. 2 and 3 are proposed not to fill up the vacancies
caused by the retirement of Shri B.V. Bhargava and Shri Nana Chudasama.

Shri Bhargava is a Director of the Company since August 16, 1996, and is
also Member of the Audit Committee, Member of the Finance Committee and the
Chairman of the Remuneration Committee of the Board of Directors. The Board
places on record its deep gratitude and appreciation for the precious time
and very valuable guidance provided to the Raymond Group by Shri B. V.
Bhargava during his tenure.

Shri Nana Chudasama is a Director of the Company since August 1, 1986, and
is also the Chairman of the Committee of Directors and a Member of the
Remuneration Committee of the Board of Directors. The Board places on
record its deep gratitude and appreciation for the precious time and very
valuable guidance provided to the Raymond Group by Shri Nana Chudasama
during his tenure.

At the 84th Annual General Meeting two special resolutions are commended
for your approval. The resolution at item No. 5 is for the payment of the
remuneration to the Chairman and Managing Director of the Company for the
period April 1, 2008 to June 30, 2009 as earlier approved by the
remuneration committee and the shareholders at the Annual General Meeting
of the Company held on June 23, 2006 and the resolution at item No. 6 is
for the payment of the remuneration to Shri P. K.Bhandari for the period
April 1, 2008 to April 23, 2008, as earlier approved by the remuneration
committee and the shareholders of the Company at the Annual General Meeting
of the Company held on June 23, 2006.


Pursuant to sub-section (2AA) of Section 217 of the Companies Act, 1956,
the Board of Directors of the Company hereby state and confirm that:

(i) in the preparation of the Annual Accounts, the applicable accounting
standards have been followed along with proper explanation relating to
material departures;

(ii) 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 at the end of the financial year and of the loss of the Company for
that period;

(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;

(iv) the Directors have prepared the annual accounts on a going concern

13. AUDIT:

Messrs. Dalal & Shah, Chartered Accountants, who are Statutory Auditors of
the Company hold office up to the forthcoming Annual General Meeting and
are recommended for re-appointment to audit the accounts of the Company for
the Financial Year 2009-10. As required under the provisions of the Section
224(1B) of the Companies Act, 1956, the Company has obtained written
confirmation from Messrs. Dalal & Shah that their appointment, if made,
would be in conformity with the limits specified in the Section.

As per the requirement of Central Government and pursuant to Section 233B
of the Companies Act, 1956 your Company carries out an audit of cost
records relating to textile division every year. Subject to the approval of
the Central Government, the Company has appointed Messrs. Nanabhoy & Co.,
cost accountants, as auditors to audit the cost accounts of the Company for
the Financial Year 2009-10.


Your Company believes in formulating adequate and effective internal
control systems and implementing the same strictly to ensure that assets
and interest of the Company are safeguarded and reliability of accounting
data and accuracy are ensured with proper checks and balances. The Internal
control system is improved and modified continuously to meet the changes in
business conditions, statutory and accounting requirements.

The Company has engaged a competent firm of Chartered Accountants to
conduct internal audit, examine and evaluate the adequacy and effectiveness
of the Internal Control System. The internal audit ensures that the systems
designed and implemented, provides adequate internal control commensurate
with the size and operations of the Company.

The Audit Committee of the Board of Directors, Statutory Auditors and the
Business Heads are periodically apprised of the internal audit findings and
the corrective actions taken.

The Audit Committee of the Board of Directors actively reviews the adequacy
and effectiveness of internal controls systems and suggests improvements
for strengthening them. The Company has a strong Management Information
System which is an integral part of the control mechanism.


The Company is exposed to risks from market fluctuations of foreign
exchange, interest rates and commodity prices and business risk.

Foreign Exchange Risk:

The Company's policy is to systematically hedge its long term foreign
exchange risk as well as short term exposures risk considering prevalent
conditions. Your Company has opted not to follow notification number GSR
225(E) dated March 31, 2009 issued by Government of India in relation to
accounting of exchange differences arising on reporting of long term
foreign currency items due to currency rate fluctuations, in order to be
consistent in application of accounting policies both current and in

Interest rate risk:

Given the interest rate fluctuations, the Company has adopted a prudent and
conservative risk mitigating strategy to minimise the interest costs.

Commodity Price Risk:

The Company is exposed to the risk of price fluctuation on raw materials as
well as finished goods in all its products. The Company proactively manages
these risks in inputs through forward booking, inventory management,
proactive management of vendor development and relationships. The Company's
strong reputation for quality, product differentiation and service the
existence of a strong brand image and a strong marketing network mitigates
the impact of price risk on finished goods.

Risk Element in Individual Businesses:

Apart from the risks on account of interest rate, foreign exchange and
regulatory changes, various businesses of the Company are exposed to
certain operating business risks, which are managed by regular monitoring
and corrective actions.


The Company is conscious of the importance of environmentally clean and
safe operations. The Company's policy requires the conduct of all
operations in such manner so as to ensure safety of all concerned,
compliance of statutory and industrial requirements for environment
protection and conservation of natural resources to the extent possible.


The Company takes pride in the commitment, competence and dedication shown
by its employees in all areas of business. Various HR initiatives are taken
to align the HR Policies to the growing requirements of the business.

The Company has a structured induction process at all locations and
management development programmes to upgrade skills of managers. Objective
appraisal systems based on KRAs are in place for senior management staff.

Technical and safety training programmes are given periodically to workers.
Industrial relations remained generally cordial.


Information pursuant to sub-section 1 (e) of Section 217 of the Companies
Act, 1956, read with the Companies (Disclosure of Particulars in the Report
of the Board of Directors) Rules, 1988 is given in Annexure 1 to this
Report. During the Financial Year 2008-09, 38 employees employed throughout
the year, were in receipt of remuneration of Rs.24 lakhs per annum or more
and 56 employees employed for part of the Financial Year 2008-09 were in
receipt of remuneration of Rs. 2 lakhs per month or more. The particulars
of employees, as required under Section 217 (2A) of the Companies Act,
1956, are given in a separate Annexure to this Report. This Annexure is not
being sent along with this Report to the members of the Company in line
with the provisions of Section 219 (1) (b) (iv) of the said Act. Members
who are interested in obtaining these particulars may write to the Company
Secretary at the Registered Office of the Company. None of the employees
listed in the said Annexure is a relative of any Director of the Company
except for Shri Gautam Hari Singhania who is related to Dr. Vijaypat
Singhania. None of the employees hold (by himself or along with his spouse
and dependent children) more than two percent of the equity shares of the

The Company has been exempted by the Central Government vide their letter
No. 47/68/2009-CL-III dated March 20, 2009 under Section 212 (8) of the
Companies Act, 1956 from attaching a copy of the Balance Sheet, Profit and
Loss Account, Report of the Board of Directors and the Report of the
Auditors of the subsidiary companies. However, pursuant to Accounting
Standard AS-21 issued by The Institute of Chartered Accountants of India,
Consolidated Financial Statements presented by the Company includes the
financial information of the subsidiaries. A statement containing brief
details of the subsidiaries is included in this Annual Report.

The Company will make available these documents/details upon request by any
member of the Company and members of its subsidiaries interested in
obtaining the same. The annual accounts of the subsidiary companies will
also be kept for inspection by any member at the registered offices of the

The Company has also been exempted by the Central Government vide their
letter No.46/11/2009-CL-III dated April 9, 2009 under sub-section (4) of
Section 211 of the Companies Act, 1956, from disclosing quantitative
details in compliance of para 3(i) (a) of Part II of Schedule VI of the
Companies Act, 1956. However, the Company is disclosing these details in
the enclosed Annual Report.

Fixed Deposits amounting to Rs. 3,46,000/- (Rupees Three Lakhs Forty Six
Thousand only) from 35 depositors, which remained unclaimed by the
depositors as on March 31, 2009 have remained unclaimed upto the date of
this Report.


Statement in this Directors Report & Management Discussion and Analysis
describing the Company's objectives, projections, estimates, expectations
or predictions 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 raw material
availability and prices, cyclical demand and pricing in the Company's
principal markets, changes in Government regulations, tax regimes, economic
developments within India and the countries in which the Company conducts
business and other incidental factors.


Your Directors express their warm appreciation to all the employees at
various Units for their diligence and contribution. Your Directors also
wish to record their appreciation for the support and co-operation received
from the joint venture partners, dealers, agents, suppliers, bankers and
all other stakeholders.

For and on behalf of the Board
Gautam Hari Singhania
Chairman and Managing Director
Place: Mumbai,
Date : April 24, 2009.

Annexure (1) to the Directors' Report:

Information pursuant to Section 217(1)(e) of the Companies Act, 1956 read
with Companies (Disclosure of Particulars in the Report of Board of
Directors) Rules, 1988.

A. Conservation of Energy:

Energy conservation continued to have high prominence as in previous years.
Some of the initiatives taken in the year 2008-09 were as follows:

In Textile Division

At Thane Unit:

1) Utilizing Backwash exit heat for drying of Polyester tops.

2) Installation of electronic chokes and energy efficient light fittings.

3) Rain water harvesting.

At Chhindwara Unit:

1) Conversion from DC to AC system in various machines in Dyeing, Warping
and Finishing.

2) Installation of time lag switch in industrial fans in Dyeing and ETP.

3) Installation of electronic chokes and energy efficient light fittings

At Jalgaon Unit:

1) Installation of electronic chokes and energy efficient light fittings.

2) Use of renewable energy resources by installation of turbo ventilators &
solar water heaters.

At Vapi Unit:

1) Installation of Solenoid Valves in looms for arresting Compressed air
when machine is not running.

In Files & Tools Division

At Chiplun Unit:

1) Introduction of Thyristorised PID Controllers for Annealing Furnaces.

2) Conversion of LDO Annealing furnace to Electrical furnace.

B. Technology Absorption

(a) Research and Development (R&D)

Textile Division

The R&D Department of Textile Division strives to develop and provide
exclusive and innovative products under its brand.

Some of the products developed and introduced during the year under review

1) Super 240s - Finest fabric in the world, made from 11.6 micron wool

2) Saxxon Wool - Jacketing fabrics and Suiting fabrics with properties like
superior comfort and good crease recovery

3) Lamere - Range of fabrics with Luster and softness using Lamere fibres

4) World class jacketing fabric using coarser wool

5) A Range of wool rich fabrics using Chintz finish

Files & Tools Division

In order to maintain its leadership in files business, the Files & Tools
Division developed 10 new SKU's for the Export market for customer specific
engineering and agro applications.

The details of expenditure on Research and Development is given in Schedule
- 16 notes forming part of the Accounts.

The Company has incurred an expenditure of Rs. 18.67 lacs towards Research
and Development which is 0.01% of the total turnover of the Company for the
year 2008-09.

(b) Technology Absorption, Adaptation and Innovation

Textile Division

The Textile Division undertook the following measures towards Technology
absorption, Adaptation and Innovation:

1) As part of its modernization project, installation of new energy
efficient machines in Spinning and Finishing processes at Chhindwara and
Jalgaon plants.

2) Indigenous development of Energy Monitoring System (SCADA) at Vapi plant
by which the power consumption of each department can be monitored,
analysed and report generated.

3) Automatic dispensing of chemicals in Rope Scouring machines at Vapi
plant's Finishing Dept.

4) Implementation of the Weavemaster and Qualimaster for on line monitoring
of various parameters of looms and report generation at Vapi Plant.

5) Indigenous development of cloth roller in Designing Picanol Looms at
Vapi Plant.

6) Regeneration of Steam from Gas Generator at Vapi Plant

7) Circulation of hot water received from Jacket cooling of Gas Generator
in Dyeing Machines at Vapi Plant Files & Tools Division

The Files & Tools Division undertook the following Process Improvement

1) Introduction of rust preventive oil (Castrol Rustilo DWX 32) for final
packaging of files for enhanced corrosion resistance

2) Introduction of File finishing lines for online washing of files at its
Ratnagiri plant

3) Introduction of Single piece flow packing and cartoning of files at its
Ratnagiri plant

4) Introduction of Stand-alone Brine Chillers for the hardening systems at
its Ratnagiri plant to maintain optimum brine temperature in hardening

5) Process stage elimination in Tang punching of Flat files for
productivity improvement

C. Foreign Exchange Earnings and Outgo:

Global recession has severely impacted business in major export markets,
particularly in the apparel sector. Textile Division's exports declined by
3%, in comparison with the previous year, to Rs. 110.77 crores. In adverse
market conditions and facing stiff competition from Indian and overseas
competitors, the Division was able to deliver a sustained performance. This
has been achieved through focused effort on enhancing customer base and
providing value added products.

In spite of unprecedented Global recession particularly in second half of
the financial year, the Files & Tools Division's endeavor to expand and
consolidate its presence in International market continues. During the year
under review the division recorded an all time high sales volume of files
in international market and also crossed a milestone of Rs. 100 crores
export for the first time.

The appreciation of USD against major global currencies including Indian
Rupee caused lot of imbalance in the flow of orders as well as pressure on
prices. However, the division has strengthened its presence in USA and
Latin America besides further consolidating its position in Asia and

The particulars regarding foreign exchange earnings and outgo are given in
Schedule 16 - notes forming part of the Accounts.

Form A'

[Forming part of Annexure (1)]



Purchased Own generation
(through Diesel
Current Previous Current Previous
Year Year Year Year

1. Electricity

a) Total units (KWH in thousands)

Textiles * 63736 68049 69124 64449
Files & Tools 14665 14621 42 37

b) Total Amount (Rupees in lacs)

Textiles 3198 3015 2123 1808
Files & Tools 708 697 6 5

c) Units/per Liter of Diesel Oil

Textiles - - 2.79 3.14
Files & Tools - - 4.83 4.77

d) Units/per Kg. of Coal

Textile - - 0.90 0.90

e) Units/per Cubic mtr of Gas

Textile - - 3.78 -

f) Cost per unit (Rs.)

Textiles 5.02 4.43 3.07 2.81
Files & Tools 4.83 4.77 13.55 13.82

* 595.46 lac KWH units generated through steam turbine (Previous year
607.23 lac KWH units)

Total Total Cost Average Rate
Quantity Rs. Lacs per Unit (Rs.)

2. Coal (M.T.)

a) Textile Division**
Current Year 74998 1473 1964
Previous Year 76457 1407 1840

3. Furnace Oil (Lac Liters)

a) Textile Division
Current Year 53.72 1557 28.97
Previous Year 60.84 1349 22.18

b) Files & Tools Division
Current Year 3.83 106 27.65
Previous Year 4.79 105 21.94

4. Diesel Oil (Lac Liters)

a) Textile Division
Current Year 3.09 124 40.04
Previous Year 5.61 201 35.87

b) Files & Tools Division
Current Year 0.50 18 35.75
Previous Year 0.54 16 30.31

5. LPG (Kgs.)

a) Textile Division
Current Year 91412 49 53
Previous Year 95909 46 48

b) Files & Tools Division
Current Year 79160 38 47
Previous Year 85543 43 50

6. Natural Gas (Lacs Cubic Mtr.)

a) Textile Division
Current Year 55 695 13
Previous Year 29 289 10

** 66136 MT used for CPP (Previous year 67376 MT)


Unit Standard Current Previous
(if any) Year Year

a) Fabrics KWH/Metre - 4.67 4.87
b) Engineers' Steel Files KWH/Piece - 0.22 0.23

Praj Industries - Annual Report - 2008-2009




The Members of
Praj Industries Limited,

Your Directors are pleased to present the 23rd Annual Report and the
Audited Statements of Accounts for the year ended 31st March, 2009,
together with the notice of Annual General Meeting.

Financial Results:

In the year under review, your Company has recorded a total income of
Rs.7961 million (Rs. 7183 million), Profit before Tax, Rs. 1744 million
(Rs. 1608 million) and net profit of Rs. 1297 million (Rs. 1535 million).
Considering the challenging business environment globally, your Company's
performance can be termed as satisfactory.

(Rs. in million)
2008-09 2007-08

Turnover 7719 7016
Other Income 242 167
Total Income 7961 7183
Total Expenses 6353 5439
PBT 1608 1744
PAT 1297 1535


Your Company declared an Interim Dividend of Rs. 1.30 per share (65%) for
the financial year 2008- 2009. To mark the Silver Jubilee Year a Special
Dividend of Re. 0.50 per share (25%) was also declared and paid out taking
the total dividend up to Rs. 1.80 per share (90%). Your Directors are of
the opinion that the said total Interim Dividend be treated as final
dividend for the financial year 2008 -2009.

Proceeds of Preferential Issue:

Out of the proceeds of earlier years in respect of preferential allotment
of equity shares and warrants pending utilization amounting to Rs.384.500
million, an amount of Rs.369.703 million was deployed towards expansion of
R & D and balance amount was deployed towards expansion of manufacturing
and engineering facilities. Accordingly, the total amount stands fully

Credit Rating:

(a) CRISIL has assigned 'Pl+'rating to Company's short-term banking
facilities which signifies degree of safety regarding timely payment of
instruments is very strong.

(b) CRISIL has also assigned 'AA-/Stable' rating to Company's Cash Credit
facilities. The 'AA' rating signifies high safety with regard to timely
payment of long-term financial obligations.


Pacecon Engineering Projects Ltd. (PEPL), BioCnergy Europa B.V.,
Netherlands, Praj Jaragua Bioenergia S.A. Brazil and Praj Far East Co.
Ltd., Thailand are subsidiaries of your Company and are operating in their
respective areas. During the year under review the legal formalities
regarding closure of Singapore subsidiary viz Praj Far East Pte. Ltd. have
been completed.

Your Company has applied to the Central Government for exemption from
attaching the audited accounts of the subsidiaries to the Annual Accounts
of your Company, for the financial year ended 31st March, 2009. The said
application is being processed and final approval letter is awaited. A
statement containing brief financial details of the Company's subsidiaries
for the year ended 31st March, 2009 is included in the Annual Report. The
annual accounts of these subsidiaries will be made available for inspection
to member of the Company/its subsidiaries upon request at the registered
office of the Company.

Corporate Governance:

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges,
Management Discussion and Analysis Report (Annexure 1), Corporate Social
Responsibility (CSR) Report (Annexure 2) and Report on Corporate Governance
(Annexure 3) are annexed to this Report.


Ms. Parimal Chaudhari retires by rotation in terms of Article 83 of the
Articles of Association of the Company and being eligible offers herself
for re-appointment.

Mr. Daljit Mirchandani retires by rotation in terms of Article 83 of the
Articles of Association of the Company and being eligible offers himself
for re-appointment.


(a) Internal Auditors:

The Internal Auditors, M/s. Khare & Bhide, Chartered Accountants, Pune have
conducted the internal audits periodically and submitted their reports to
Audit Committee. Their reports have been reviewed by Audit Committee and
Statutory Auditors.

(b) Statutory Auditors:

The Statutory Auditors M/s. B. K. Khare & Co., Chartered Accountants,
Mumbai retire at the conclusion of the 23rd Annual General Meeting. They
are eligible for re-appointment and have expressed their willingness to be
appointed as Statutory Auditors of your Company. You are requested to
consider their re-appointment as Statutory Auditors for the ensuing year

Directors' Responsibility Statement:

In accordance with the requirements of Section 217(2AA) of the Companies
Act, 1956, the Board of Directors states that

* In the preparation of the annual accounts, the applicable accounting
standards have been followed along with proper explanation relating to
material departures;

* The accounting policies selected have been applied consistently and
judgments and estimates made are reasonable and prudent so as to give a
true and fair view of the state of affairs of the Company at the end of the
financial year 2008-09 and of the profit of the Company for that period;

* Proper and sufficient care has been taken 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;

* The annual accounts have been prepared on a going concern basis.

Employee Stock Option Plan:

* During the year, your Company allotted 269,272 shares on exercise of
options under the Employee Stock Option Plan 2005 Grant I & II. Consequent
to the above, the Issued, Subscribed and Paid-up Share Capital of your
Company increased from 183,161,810 shares (Rs. 366.324 million) to
183,431,082 shares (Rs. 366.862 million) as of 31st March 2009.

* The information to be disclosed as per SEBI (Employees Stock Option
Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 is annexed to
this Report (Annexure 4).

Particulars of Employees:

The statement of particulars required pursuant to Section 217(2A) of the
Companies Act, 1956 read with the Companies (Particulars of Employees)
(Amendment) Rules, 2002, forms a part of this Report. However, as permitted
by the Companies Act, 1956, the Report and Accounts are being sent to
Members and other entitled persons excluding the above statement. Those
interested in obtaining a copy of the said statement may write to the
Company Secretary at the Registered Office and the same will be sent by
post. The statement is also available for inspection at the Registered
Office, during working hours upto the date of the Annual General meeting.

Energy Conservation, Technology Absorption, Adaptation, Innovation

Conservation of Energy:

The operations of your Company are not energy intensive as the operations
are limited to machining, metal working and finishing of a variety of
equipment. However, your Company has taken energy conservation as a major
agenda. Under the Corporate Social Responsibility charter, it has conducted
audits at two of its major locations and has gained significant savings in
energy consumption. The Company plans to continue auditing all its premises
so as to bring down the impact of energy through its business activities.

Foreign Exchange Earnings & Outgo:

Particulars regarding foreign exchange earnings are presented in Schedule
19.19 and outgo are presented in Schedule 19.20 of the Audited Accounts.
Your Company has retained its status as a net forex earner.


Your Directors wish to place on record their appreciation towards all
associates including Customers, Collaborators, Government Agencies,
Financial Institutions, Bankers, Suppliers, Shareholders, Employees and
others who have reposed their confidence in the Company.

For and on behalf of the Board of Directors

DATE : 21ST APRIL, 2009 CEO & MD

Management Discussion & Analysis:

Overall Review:-

The year 2008-09 was full of unprecedented events. It was a year which has
tested the confidence of investors and the reliability of the system in
which Companies conduct their businesses. It has also put to test the true
resilience of organizations. While many a best laid plans by various
industrial houses may have come undone, it has presented an opportunity for
conducting a reality check and for undertaking course corrections, as

The biofuels industry has also undergone structural changes. Food vs. Fuel
issue is not relevant today as food grain production has increased, but
this issue has certainly made biofuels sector far more determined and
motivated to work with second and third generation feedstocks. Some
Governments have even announced funding and positive legislations, like the
RFS-2 and the Renewable Fuels Directive in EU, to accelerate work on non-
food biofuels. Praj has launched its own advanced biofuels programme, which
has recently achieved a milestone.

Financial Review:

Your Company recorded a stable and sustained performance in FY 2008-09.
Gross Margins were up 28% when compared to previous fiscal, though EBIDTA
showed a drop of 11% post exchange loss due to unadjusted advances, over

Margins are tending to more realistic levels. The Company has put in place
a value engineering program which seeks to enhance value to customers,
thereby driving value for the Company.

Operating Environment & Opportunities:

In December 2008, the Company completed its 250 year of operations. Market
conditions have been challenging. Credit allocation is a factor to contend
with. Your Company has been working through this demanding situation to
ensure that viable projects move forward. In some cases, we have been
successful. Return of confidence in the system will further accelerate the
success rate.

The year also saw consolidation in the industry with a number of M&A
activities. This trend may continue for some more time. In a way, the
industry will be stronger and a better model will emerge.

Another trend seen during the year was the advent of energy companies or
oil companies investing into biofuels production facilities. This will
enable mainstreaming of biofuels along with other energy components in
transport fuels. Praj is currently engaged in a project for one such
Company, for their plant in UK.

Over 50 countries have adopted biofuels programmes and many more are
earnestly evaluating adoption of biofuels in the transport fuel mix.
Strategic Focus on Crop Sciences, Farm-to-Fuel Model

In order to strengthen the business of biofuels, knowledge partnership with
the clients is necessary. One part of the essential value chain is the
feedstock. Agriculture is the back-bone of biofuels. Knowledge
dissemination for energy crops was found to be in the interest of the
industry. Praj has already demonstrated its capabilities on sweet sorghum
and safflower where client engagements have been

Praj has invested into agri-services by way of setting up an Energy Agri
Solutions facility which provides proof- of concept. This facility will
concentrate on non-food crops like sweet sorghum, safflower, variety of
grasses, etc. Energy Agri Solutions group will have the facility for
breeding and testing new varieties of energy crops at laboratory scale, GPS
system for global land classification, green houses, seed processing as
well as controlled condition test beds for study of agronomical practices,

Praj is working in this area with national and international

institutes to identify and develop crop varieties suitable for biofuels,
one such global institute being ICRISAT where Praj is a member of the
biofuels steering committee.

Market Dynamics:

Lower crude oil prices have created a negative sentiment around biofuels.
Crude Oil prices and its impact on biofuels is one of the many myths which
surround biofuels. Biofuels are driven more by mandates resulting from
Government policies for climate change mitigation. The fact that global
ethanol consumption grew 38% over 2007 should be a good indicator of the
strong position of biofuels as a renewable fuel within the energy mix.
Course corrections are imminent in a new industry and we are seeing various
relationships emerge as a result of that. Government mandates have been
successfully launched in USA and Europe with specific targets to minimize
GHG emission levels through deployment of biofuels. They are irreversible.
These mandates also force the industry to look for viable answers and in
turn promote breakthrough research.

Ethanol Industry Review Europe:

In January 2009, the EU Parliament passed a package called the Renewable
Energy Directive (RED) which lays down the path for adoption of renewable
energy including biofuels.

The RED is currently under ratification by various member states.
Highlights of the package include a strong reference to sustainability
criteria, accounting for indirect land use, lifecycle GHG emission
reduction of various feedstocks and encouraging blending of biofuels upto
5.75% v/v by 2010 and 10% v/v by 2020.

Praj has the capability to deliver on the standards. With biofuel plants
commissioned across Europe, Praj has gained a strong reference base in


The Indian alcohol producers have always bucked the trend. Beverage alcohol
is the main stay in India. Even though the mandate of 5% for blending
ethanol is not implemented across the country, around 10% of the total
alcohol produced still gets blended. A stronger legislation and tax reforms
are the only answer to successful implementation of the policy.

South East Asia, Australia:

While Thailand continues its blending program, going from 10% to 20%,
Philippines has passed a law to mandate 100lo ethanol blending. Japan is
interested in partnering Thailand largely from the point of view of
imports. This should see build up of capacity. Australia persists with
ethanol plant construction inspite of no firm mandate, on a state-to-state
basis. Praj delivered its second skid mounted plant, of double the earlier
capacity. The earlier plant is working flawlessly, proving that innovation
in engineering can result in higher customer confidence and repeat

South, Central America & Caribbeans:

Sugar is an integral part of South, Central America's business. Some
countries in the region are blessed with long sugarcane cultivation window,
which is conducive to biofuels. Many countries have introduced fuel ethanol
programs. Cost advantage and trade treaties give these countries duty free
access to US and European markets. This creates a double advantage for the


Brazil is the second largest ethanol producer. Ethanol industry, which is
the core of Brazilian development, will see some short term consolidation.
Due to its inherent strength in this area, not just economically, but also
from sustainability point of view, Brazil is capable of pulling through and
getting back on its feet. Biofuels is still at a discount to gasoline.
Besides, Brazil is a leading exporter of biofuels with almost 15% of its
production exported. Brazil is also expected to benefit from the sugar
price increase, which should improve the profitability of mills.

North America: USA, Canada and Mexico:

The market is undergoing re-structuring in USA. A lot of M&A activities are
underway. The way forward is with advance biofuels. Feedstock other than
corn kernel, i.e., Sugarcane, Sorghum and Agri-residues are classified as
advance biofuels.

Opportunities are still developing. The American Reconstruction plan makes
provisions for guarantees for funding of research programs to speed up the

We are already executing an advance biofuels project based on sugarcane to
ethanol in Louisiana.


The African continent is all set to benefit from the sugar deficit as also
the EU mandate. Some African countries have a duty concession or duty free
access to EU. Due to the cost differential, Africa is likely to emerge as a
leading trade partner for biofuels with EU. The region is still in its
infancy as far as biofuels are concerned.

Beer Industry Review:

India is the predominant market for brewery equipment for Praj. India is
also the fastest growing region in consumption growth. Last year, beer
consumption grew by 10% YOY in India. The main driver, apart from economic
activity was longer summer season.

Our value proposition in breweries lies in our ability of integrated
engineering, be it existing or greenfield brewery. This has seen us working
with many top beer producers in the country. Water and Energy are critical
components in the beer production process. We are working towards reducing
the impact of these two components to enable greater competitiveness for
our customers. Our market share continues to be upward of 50%, making us
the most preferred brewery equipment supplier.

Biodiesel Industry Roundup:

Biodiesel Plants is a relatively new business for Praj. Due to the high
feedstock cost, we were aware that biodiesel business would take a while
before we can make our mark. So, we invested our energy into creating
significant differentiators for our biodiesel offering.

Number one challenge was to address the feedstock. Majority of biodiesel is
produced from Edible Veg Oil. In some regions, this is changing. However,
to increase the pace of change, we undertook study of non-food crops,
including Jatropha and Safflower (non-edible variety). While Jatropha will
take a while to catch up, Safflower is immediately of interest due to its
shorter crop cycle and yields. We are presently working with customers on a
Farm- to-Fuel model to demonstrate its viability. We are also working on
various technologies like Heterogenous Catalysis which will improve the
efficiency. For the purpose of showcasing our capabilities, we have set up
a demo plant at our R & D centre.

Awards , Certifications & Recognition:

We have won many accolades for our performance as also our commitment to
the green space. Forbes Magazine once again conferred the Best Under a
Billion Company in Asia award; EEPC conferred the Star Performer in Exports
while DHL - CNBC TV18 bestowed the International Trade Award on us.

The Chairman of your Company will once again lead the cause of the Biofuels
Industry as the Chairman of the National Biofuels Committee, CII. The
Committee works with policy makers and other leading thoughtleaders in the
industry and all stakeholders to bring about a prudent biofuels policy in
India. It is a tough call, but the opportunity to put India firmly onto the
biofuels map is much too valuable to let go of.

Pramod Chaudhari has also been elected as the Chairman of CII Maharashtra
Council for 2009-10.

He is also elected to the council of the Association of Biotech Led
Enterprise (ABLE).

American Society of Mechanical Engineers (ASME) has certified Praj for H
stamp till 2012.


Your Company has invested into capacity and capability enhancements. State-
of-the-art machinery have been installed for over-dimensioned equipment and
for better finish as required for breweries and pharma industry.

Special facility for skid mounted units has been created. This has enabled
us to deliver the largest size skids

The Company successfully embraced Kaizen methodology in its manufacturing
workshops. This has resulted in reduction of waste in terms of resources as
well as material. The full impact can be felt over the years.

Health, Safety and Environment Practices have been instituted at all its
locations including in Pune and Kandla, in line with the HSE policy of the

Processes & Systems:

Praj has introduced many value enhancing systems and processes during the
Value Analysis and Value Engineering (VAVE) is one such method employed for
driving down cost while keeping intact or even enhancing the value of the
offering for the customer. The Company will continue to pursue this method.

To increase productivity, the Company has also developed many computer
based applications which assist in design outputs and other automation

SAP R/3 system is now fully implemented, which has helped improve operating

Technology Excellence:

Innovation is integral to the Company's growth strategy. The Company is
involved in upscaling the lab scale development in the area of second
generation biofuels from non-food ingredients. Patents have been filed for
the same.

The Company has jointly worked with a boiler manufacturer to offer its
evaporation system which when operated with the incineration boiler offers
a zero discharge solution to distilleries. This system is successfully
operating at a sugar mills attached distillery in Southern India.

Human Capital:

Human Capital is a key to our success. Praj is considered a knowledge-based
and has created pole position for its technology and systems on the basis
of the talent it is able to deploy. In line with its growth strategy, the
Company continually audits critical profiles required in the future. The
human capital group has charted out a road map for development of talent,
including leadership pipeline, succession planning and career paths which
will make the Company 'Employer of Choice' and in turn the Company will
provide 'Quality workspace and lifespace' to people.

Our manpower count is commensurate with the long term goals of the Company.
have invested into this essential asset by way of training and other
developmental tools. We have undertaken redeployment to ensure that
productivity and efficiency levels are maintained while short term goals
are also addressed.

The Company is also focusing on human resource diversity. Women form a
larger percentage of workforce than before. We have seen the composition of
female employees grow to 10% from the earlier levels.

Future Outlook:

There are some signs of recovery, but the Company expects current trends to
prevail in a large part of FY2009. The Company has prepared itself for this
and is ready with a counter strategy. The Company has formed a Group headed
by Senior Management to review each of these action plans which include
waste elimination to increasing business to improving processes that will
result in hard core savings.

Your Company is also looking at expanding its share of business in a
project (wallet-share). Through its involvement in projects over the past
twenty five years, your Company has acquired knowledge of necessary systems
and services in the entire project. The customers of your Company have
complete faith in your Company's capabilities. Meanwhile, your Company has
undergone a successful learning in order to competently provide solutions
beyond its current scope of work.

Biofuels form around 5% of the transport fuel mix. A one percentage
increase in the transport fuel mix translates into a 20% increase in
biofuels demand over the current levels (80 bln litres of ethanol and 12
bln litres of biodiesel). Renewables are here to stay. Technological
improvements in biofuels production processes will enhance its

Meanwhile, the Company is leveraging its strengths in manufacturing and
engineering to offer solutions to the general process industry. A small
beginning has been made. Biotechnology led solutions are the longer term
plan. The Company will explore other organic and inorganic growth

Risks & Concerns:

Your Company has a well documented Risk Management Policy. The policy is
reviewed periodically by the Management and appropriately modified, as
necessary. Based on the operations of the Company, risks are identified and
steps are taken to mitigate the same.

The concern as regards the negative news emanating largely from USA, is
creating unwarranted adverse opinion worldwide. Countries like Brazil and
those in other part of South, Central America and Asia have a good prospect
of scaling up their programs, as biofuels are sustainable even for first
generation feedstock in these regions.

In these days of credit crunch, allocation has come under a lot of
pressure. Biofuels will have to fight for its share in the funds allocation
by financial institutions. The impact of the slow down may take a while to
return confidence in the sector.

Internal Control Systems:

The Company has instituted adequate internal control procedures
commensurate with the nature of its business and the size of its operations
for smooth conduct of its business.

Internal audit is conducted at regular intervals at all locations and
covers the key areas of operations. It is an independent, objective and
assurance function, responsible for evaluating and improving the
effectiveness of risk management, control and governance processes.

Forward Looking Statement:

Statements in this report, particularly those which relate to Management
Discussion and Analysis, describing the Company's future plans,
projections, estimates and expectations may constitute Forward Looking'
statements within the meaning of applicable laws and regulations. Actual
results might differ materially from those either expressed or implied.

Annexure 2

Corporate Social Responsibility Report:

The Management of your Company is alert to the fact that your Company's
performance is notjust related to the well being of the industry or the
economy the Company operates in, but also to the well being of the society
in which the Company exists. This led to the formation of a Corporate
Social Responsibility (CSR) charter which is facilitated by Praj
Foundation, a trust formed in 2004.

The CSR program of your Company is based on the plank of SMART-Sustainable,
Mobility (transport), Awareness, Reduce-Reuse-Recycle, Tree Plantation.

Environment is the prime agenda, especially mitigation of climate change.
The thought behind this was to build an ideological linkage to our business
(cleantech) while improving the quality of life within the society.

We also decided to move in a phased manner so that the impact could be
larger and it can be measured with greater effectiveness for quick
corrective actions.

The key programs conducted in 2008-09 were:

Employee Engagement in Social Responsibility:-

We encourage sustainable practices amongst our employees to motivate'smart
living and smart working'. To promote the concept of personal
sustainability, a Green Group formed by employees has been operating.

Right from mobility of employees, reducing paper wastage and conserving
energy to tree plantation, many programs have been given shape. Energy
conservation on Praj premises was tackled on priority. Energy Audit was
conducted at Praj House and at the manufacturing units. The Audit
recommendations are being implemented to conserve energy. Employee
awareness is being intensified to supplement the energy conservation
efforts. Significant savings have been recorded.

Extending the concept of personal sustainability to the families of
Prajiites, Green Family contestwas launched. This rewarded savings in
electricity usage through greener options including installation of solar
panels and CFL and visits to wild life sanctuary with the family.

Societal Engagement:

Environmental Initiatives:-

- Learning by Doing:

Praj Foundation has jointly implemented a project of Environment Awareness
& Conservation with a residential school near Pune. A composting unit has
been set up and the students are trained to operatethe composting unit. The
compost from the unit is being used to grow organic vegetables and
medicinal plants. A Green Scholarship has been instituted to recognize
efforts of the most environment friendly student.

- Clean City:

The city of Pune, with its fast growing population faces severe problems in
terms of solid waste management. Praj Foundation & INORA are jointly
implementing a project of Decentralized Waste Management through 8
Satellite centres located in different parts of the city. More than 480
families have started their individual composting projects under this

- Stream of Life:

Praj Foundation & Ecological Society have partnered to undertake Nirmal
Ganga Abhiyan, a project for ecological restoration of existing streams in
three villages near Pune. These villages represent High, Medium and Low
rainfall areas of the region. These streams are being restored with the
help of school children, teachers & villagers. The project will be operated
over the next two years.

- Biodiversity Park:

A Silver Jubilee Biodiversity Park is being planned for which necessary
permissions have been received by the Company. Health Care Praj Foundation
is supporting a project to create awareness about health issues among
school children ,adolescents and women of seven villages in Mulshi Taluka
of Pune District. These villages are in close proximity of your R & D
Centre, Praj Matrix.


- Adoption of Technical Education Institute:

Industrial Training Institutes (ITIs) have been imparting vocational
training throughout the country. Recently, the Government announced a
scheme for upgradation of ITIs under the mentorship of the Industry. Praj
has undertaken mentiorship of an ITI at Velhe, near Pune.

- Endowment to IIT, Bombay:

Praj has instituted a Chair Professorship for Energy Sciences at IIT,
Bombay in order to promote the subject of Clean Energy. The Company draws a
number of senior staff from IIT, Bombay and recognizes the need to nurture
the spirit of Scientific pursuit in such institutes which will go a long
way in nation building.

- Supportive Education:

Praj Foundation is supporting supplementary education programme for
children in villages in Mulshi Taluka since December 2006 in collaboration
with Sadhana Village. The program is undertaken with a view to improve the
scores of students under formal education system by way of increasing
interest of students in curriculum through interesting teaching methods.

- Ruturang Musical Concert:

Praj Foundation sponsored a musical concert called 'Ruturang' performed by
visually impaired students from Pune Blind Girls' School. The musical
concert will be staged in major cities in India for raising funds for
creating infrastructure at school.

Praj has also participated in Clls Affirmative Action Program which
involves talent building amongst candidates from weaker section of the


* Inception of PRAJ with entry into distillery industry in India.

* Brings Continuous Fermentation Process to India.

* Develops SPRANNIHILATOR, a zero-pollution system for incineration of
distillery effluent. The system was given an award as an innovative


* Receives special venture funding from ICICI Ventures. One of the first
Companies to receive Venture Capital in India.


* Establishes R&D Center.


* Develops multi-feed distillery including starch based process.

* Diversifies into synergistic fields like brewery plants and process
equipment and systems.


* Launches Initial Public Offering (IPO) in 1994. Issue oversubscribed
seven times. Listed on the BSE and NSE India.

* Sets up base in Singapore, as a hub for the ASEAN and the Far East

* Receives first international order from Indonesia for multi-pressure

Incorporates the patented self-cleaning Flubex evaporator.

* Contracts major order from Philippines for multi feed plant contracted.


* Restructures Company's operations to achieve greater focus in its core

* Increases focus on primary lines like ethanol technology and brewery


* Ventures into South America. Sets up office in Bogota, Colombia

* Manufacturing facility awarded ISO 9002 and the prestigious ASME U & H
stamps for pressure vessels and heating boilers.

* Fuel Ethanol gains global recognition as an environment friendly
transport fuel.

* Praj's energy saving multi-pressure distillation system becomes an
industry standard.


* Introduces Vapor Phase Molecular Sieve Dehydration system for Fuel
ethanol production.

* India's first MSDH plant by Praj goes on stream.
* Enters European market.


* Launches Matrix - the innovation center for advanced applied research in
the field of ethanol and brewery process.

* Establishes offices in Johannesburg, Bangkok and Sharjah.

* Commissions South East Asia's first Secondary Juice to Ethanol Plant in

* Participates in the National Planning Commission's Policy on Biofuels in

* Develops Sweet Sorghum to Ethanolprocess.

* Crosses Rs. 1 billion turnover mark.

* Receives six major orders for fuel ethanol from Colombia.

* Receives ICORE award for the leadership in Biofuels.

* Commissions a unique wastewater treatment plant in Colombia, based on in-
house developed technology.

* Announces 2004-05 as The Year of Innovation.


* DSIR honors Praj for exports of in house R&D based technology.

* Praj acquires worldwide rights for Molecular Sieve based dehydration

* ICRA certifies Praj as A1+ Category Company for short term finance.

* ESOP (Employees Stock Option Innovation' Outstanding Award Plan)

* Praj Chairman, Pramod Chaudhari, receives Distinguished Alumnus Award
from IIT Bombay (Mumbai).

* All five large sized ethanol plants in Colombia on stream for commercial

* Breakthrough in European Market. Receives contract from British Sugars.

* Breakthrough in US market. Receives two major contracts to install corn
based ethanol plants.

* Venture Capitalist Vinod Khosla and Marubeni Corporation invest in Praj.

* Inks alliance with Meura for High Performance Brewery Mash Filters.
Expands Brewery Business.

* Skid Mounted Ethanol Plant designed, manufactured and shipped to Australia.


* Chemtech Foundation confers 'Outstanding Innovation' award upon Pramod
Chaudhari, Chairman, Praj.

* Belgian Bioethanol Plant & Equipment Contract for Praj.

* Forms JV Company with Aker Solutions, BioCnergy Europa B.V., in The

* Commissions Manufacturing facility in Kandla (SEZ),India.
* Receives multiple orders for cassava based ethanol plants from Thailand.

* Inauguration of UKs first plant based on Praj process plant.

* Recieves order for first dedicated sweet sorghum to ethanol plant from
Tata Chemicals.

* Receives various awards for Best Value Creator, Best Under A Billion
Company from BCG Business World, Outlook Money, Forbes Asia, etc.

* Establishes a JV in Brazil with Jaragua Equipamentos called Praj Jaragua
Bioenergia SA.

* Inaugurates state-of-the-art R & D facility, Praj Matrix-the innovation
center focusing upon second/third-generation biofuels.

* Files patents for developments in second generation biofuels.

* Recieved PI rating from CRISIL for short term finance.

* Selection of Praj technology for the largest European Plant for the
largest European Plant for Vivergo Biofuels.

* Commissions second plant in western Europe (third in EU) for Anklam
Biofuels (Danisco).

* Receives Star Performer Award from Business Standard for 2006- 07.

* Second time in a row, Forbes Asia selects Praj for Best Under A Billion


* Break through in Lignocellulose to Ethanol process. Upscales to Pilot

* Commissions third plant in western Europe (third in EU) for Biowanze SA
(A Sudzucker Group Company) in Belgium.

* EEPC confers Star Performer in Exports Award.

* CNBC TV-18 DHL bestows the International Trade Award on Praj.

Annexure 4

Disclosures pursuant to the provisions of SEBI (ESOS and ESPS) Guidelines,

Particulars ESOP 2005 ESOP 2005
Grant I Grant II
12th October, 28th December,
2005 2006

1. Details of meeting Annual General
Meeting held on 23rd July, 2005.

2. Options Granted (including impact of 2,759,139 2,311,500

3. Pricing Formula At fair market At fair market
value value

4. Options vested 2,759,139 1,655,812

5. Options exercised 1,133,776 78,407

6. The total number of shares arising
as a result of exercise of option 1,133,776 78,407

7. Options lapsed/cancelled 244,589 288,384

8. Variation of terms of options Nil Nil

9. Money realised by exercise of Rs. 774.69 lakhs Rs. 72.86 lakhs

10. Total number of options in force 1,380,774 1,944,709

11. Details of options granted to
Senior Managerial Personnel -

V.A Datar 60,000 Nil

Berjis Desai 90,000 Nil

S.S Iyer 120,000 Nil

Ajit Lele 25,000 Nil

R.V Chaudhari 30,000 Nil

Arun Tengshe 18,000 8,100

Anil Deshpande 18,000 8,100

12. Any other employee/Non-Executive Director who receives a grant in any
one year of option amounting to 5% or more of option granted during that

Particulars ESOP 2005 ESOP 2005
Grant I Grant II
12th October, 28th December,
2005 2006

Berjis Desai 90,000 Nil
S.S. Iyer 120,000 Nil

13. Identified employee who were granted N.A. N.A.
option during any one year equal to or
exceeding 10l0 of the issued capital
(excluding outstanding warrants and
conversions) of the company at the time
of grant.

14. Proforma adjusted net income and
earning per share:

Particulars Rs.

Net income as reported (in millions) 1297.479

Add : Intrinsic Value Compensation Cost Nil

Less : Fair Value Compensation Cost (in millions) 18.120

Adjusted Proforma Net Income (in millions) 1279.359

Basic Earning Per Share -

As Reported 7.08

Adjusted Proforma 6.98

Diluted Earning Per Share

As Reported 7.02

Adjusted Proforma 6.93

15. Assumptions used to estimate the Fair Value of Options using Black-
Scholes option pricing model

Particulars Date of Grant
12th October, 28th December,
2005 2006

1. Risk-free interest rate 6.23% - 6.54% 7.53% - 7.68%

2. Expected Life 2 - 3 years 2 - 3 years

3. Expected Volatility 60.31% 61.47%

4. Expected Dividend Yield 5.56% 4.07%

5. Price of the underlying share in market Rs. 93.30 Rs. 185.86
at the time of Options grants

16. (i) Weighted-average exercise price of options granted:

Particulars Pre Bonus Post Bonus

1. Exercise price equals market price 138.08 68.99
2. Exercise price is greater than market price NA NA
3. Exercise price is less than market price NA NA

(ii) Weighted-average fair value of options granted during the year:

Particulars Pre Bonus Post Bonus

1. Exercise price equals market price 46.63 46.60
2. Exercise price is greater than market price NA NA
3. Exercise price is less than market price NA NA