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Elecon Engineering Company LimitedAnnual Report 2006-07 �

A Journey GeAred with teAmwork, technoloGy & innovAtion

47th Annual Report 2006-07

ELECON ENGINEERING COMPANY LIMITED

2

about the coverNature thrives on teamwork; collaborative

relationships for lasting mutual gain. We at Elecon

take this principle seriously and extend this spirit of

teamwork to our customers and suppliers to make

a huge difference in the quantum of benefits for all.

“ Teamwork is the ability to work together towards

a common vision. The ability to direct individual

accomplishments towards organizational objectives.

It is the fuel that allows common people to

attain uncommon results. ” - Andrew Carnegie

Elecon Engineering Company LimitedAnnual Report 2006-07 �

contents�. Board of Directors

2. Elecon at a Glance

3. Financial Highlights

4. Performance Overview

5. Material Handling Equipment Division

6. Gear Division

7. Directors’ Report

8. Management Discussion & Analysis

9. De-risked Business Model

�0. Elecon Worldwide

��. Financial Results

�2. Notice

2

board of directorsThe Company is managed by the Board of Directors, which formulates strategies, policies and reviews its performance periodically. The Chairman & Managing Director manages the business of the Company under the overall supervision, guidance and control of the Board.

Prayasvin B. PatelChairman & Managing Director

Dr. Amritlal C. Shah

Shri Ashok J. Patel

Shri Chirayu R. Amin

Shri Hasmukhlal S. Parikh

Shri Pradip M. Patel

Shri Upendra M. Patel

Chief Financial OfficerShri Hemendra C. Shah

Company SecretaryShri Nayan M. Adhyaru

AuditorsThakorebhai-Shirish Desai & Butala(Division of Thacker Butala Desai)Chartered AccountantsNavsari

BankersState Bank of India Bank of BarodaState Bank of SaurashtraEXIM BankUTI Bank Limited

Registered OfficeAnand Sojitra RoadVallabh Vidyanagar 388 �20Gujarat, India

Elecon Engineering Company LimitedAnnual Report 2006-07 3

Power Transmission

Equipment

Material Handling

Equipment

Elecon Engineering Company Limited is a leading manufacturer of mission critical Material Handling Equipment and Power Transmission Solutions that are based on innovative industry leading technologies for Defence, Mining, Power, Steel, Plastic, Sugar and Cement amongst other sectors. Elecon designs, manufactures and markets its sophisticated range of products through its network of sales offices spread across India and through foreign equity participating companies in Singapore, Australia, South Africa, China and Dubai in the Middle East.

Our customers choose us for our technology strength, reliability and collaborative approach in creating robust engineering solutions. Working as a team, we are determined to jointly achieve the goals we have set.

elecon at a glance

Social Responsibility

At Elecon, we lay particular emphasis on enhancing quality of life for the community in which we live and work. We maintain a holistic approach to making a difference when engaging social issues of health, education, livelihood and the environment.

• With support of Elecon a Dialysis and Cardiac Centre is being set up in the name of Shri B. I. Patel at Shree Krishna Hospital, Karamsad.

• Helped the civil infrastructure expansion at the I. B. Patel School.

• Provided financial assistance to enhance livelihoods of the hearing and speech impaired children at the P. C. Bhatt Deaf and Dumb School in Sojitra.

• Created a Trust that will provide scholarships to engineering students.

• Built and maintains 3 large public parks including the I. B. Patel Memorial Park and Shanta Ba Park in local community.

• El CARE volunteers supplied food and essentials to 3,200 flood affected people for 5 days in 2006.

• Composite range of all types of bulk material handling equipments for major core sectors such as steel, fertilizer, cement, coal, lignite and iron ore mines, power stations and port mechanisation.

• The scope includes design, engineering, manufacture, eraction & comm- issioning of turnkey contracts for crushing, screening, stacking, blend- ing and reclaiming plants for bulk materials.

• Helical & Spiral Bevel Gears

• Planetary Gears

• Worm Gears

• Flexible, Geared & Fluid Couplings

• Windmill gears, High speed Gears

• Marine gears, Elevator gears

• Customised Gears for core sectors like Power, Steel, Cement, Chemical, Sugar, coal handling plants, Palm oil mills etc.

Elecon values• Customer first• Teamwork• Accountable & reliable• Fairness & trust• Determination & resolve• Future focus

Business Sectors

4

Gear manufacturing shop


We have continued to invest in technologies, plant equipment, machine tools and people, that will, we believe, transform our customers’ businesses, along with their experience in dealing with Elecon.

6

financial highlights PARTICULARS 2006-07 2005-06 2004-05

US$ Mn Rs. Rs. Rs. TURNOVER �66 7,23� 4,424 2,777

TOTAL INCOME �68 7,296 4,507 2,807

EARNING BEFORE INTEREST, DEPRECIATION & TAX 26 �,��7 596 379

DEPRECIATION 3 �22 94 82

PROFIT AFTER TAX �3 549 278 �00

EQUITY DIVIDEND � 46 30 �4

DIVIDEND (%) - 75% 50% 25%

EQUITY SHARE CAPITAL � 6� 57 56

RESERVE & SURPLUS 42 �,8�7 969 676

NET WORTH 43 �,874 �,003 682

GROSS FIXED ASSETS 58 2,5�� 2,�33 �732

NET FIXED ASSETS 29 �,267 952 620

TOTAL ASSETS �7� 7,44� 5,349 3,35�

NUMBER OF EMPLOYEES - 746 680 682

KEY INDICATORS US $

BASIC EARNINGS PER SHARE (Rs.) 0.42 �8.3 9.87 3.56

DEBT EQUITY RATIO (TOTAL DEBT:EQUITY) - �.5� 2.05 �.4�

EBDIT*/ TURNOVER (%) - �5.45 �3.48 �3.65

NET PROFIT MARGIN (%) - 7.59 6.30 3.6�

RETURN ON NET WORTH (%) - 29.29 27.78 �4.70

RETURN ON CAPITAL EMPLOYED (%) - ��.44 8.94 5.00

Exchange Rate: � US $ = Rs. 43.44�7 (as on 3�-03-2007).

*Extraordinary items and other income are not considered for calculating EBIDTA.

Rs. in Mn


performance overview

Another year of record financial performance

Driven by strong market, net sales up

63% to Rs. 7,23� Mn

EBITDA up 87% to Rs. �,��7 Mn

Profit before tax increased �06% to Rs.

844 Mn from Rs. 409 Mn

Profit after tax increased 97% to

Rs. 549 Mn from Rs. 278 Mn

Dividend Recommended 75%

Profit After Tax Market Capitalisation

Dividend & EPS Share Holding Pattern

Face value of share: Rs 2.00

3.56

2004-05 2005-06 2006-07

9.87

�8.3025%

50%

75%

Promotors 42%

Foreign Holdings 5%

Mutual Funds 2�%

Corporate Bodies 5%

Public 27%

970

7,867

�2,050

2004-05 2005-06 2006-072004-05 2005-06 2006-07

�00

278

549

2,777

4,424

7,23�

2004-05 2005-06 2006-07 2005-06 2006-07

596

�,��7

Net Sales EBIDTA

Rs. in Mn Rs. in Mn

Rs. in MnRs. in Mn

Dividend - (%)EPS - (Rs.)

2004-05

379

8

material handling equipment divisionElecon has come a long way from elevators and conveyors to full-fledged material handling solutions. Elecon has supplied hi-tech material handling equipments to core industry sectors such as Steel, Fertilizer, Cement, Power, Coal, Lignite, Iron ore Mines and for Port Mechanization for Indian and overseas clients.

Manufacturing Infrastructure

The division has a manufacturing facility spread over �,�7,000 sq. mtrs., with numerous CNC machine tools, quality control and testing equipment.

Notable achievements in 2006-07

• Order worth Rs. 2,370 Mn from NTPC Ltd. for their NCTPP, Dadri Stage-II (2x490 MW) Thermal Power plant.

• Order for Wagon Tippler Package worth Rs. 70� Mn from NTPC Ltd. for the Kahalgaon Super Thermal Power Project.

• Order for material handling equipment worth Rs. 530 Mn from JSW Steel Limited.

• Order for revamping the Coal Handling Plant worth Rs. 578 Mn from Torrent Power AEC Ltd. for the Sabarmati Thermal Power Station.

• Venturing into the Wind Farms business. Elecon has signed a License Agreement for technology transfer with Turbo Winds NV, Belgium.

Some of our firsts in India

• First Company in India to design, build and erect a Stacker Reclaimer at Santaldih Power Station in �967.

• First Company in India to design, build and erect a Barrel Reclaimer at Bokaro Steel Plant.

Strengths

• Have the technology and experience to design, build and erect robust and reliable Material Handling solutions for diverse industrial segments.

• Manufactured conveying system to handle overburden at the rate of 20,000 tones per hour, which is largest conveying system in the world outside Germany.


Net Sales

Orderbook Industrywise

50% PowerOthers 5%

Port �%Cement 24%

Steel �5%

Mining 5%

Sales Industrywise

59% PowerOthers 2%

Mining �8%

Cement 3%

Spares �2%

Steel 6%

760

2,�06

4,096

2004-05 2005-06 2006-07

Net sales for MHE Division

increased 94% to Rs. 4,096 Mn

in 2006-07 from Rs. 2,�06 Mn

in 2005-06

The burgeoning scenario in the infrastructure

sector and fast paced development initiated

by the Government in Power, Steel, Coal,

Ports and other infrastructure industries has

increased revenue for the MHE Division

Growth Drivers

Mining investments are expected

to pick up in tandem with implementation

of mega power projects in the country,

thus creating a healthy demand for

bulk material handling solutions

The Power sector was the highest contributor with 59% share followed by Mining with �8% share.

Bucket wheel stacker-reclaimer at Chandrapur power station of MSEB.

Rs. in Mn

�0

gear division

gear divisionElecon is Asia’s largest manufacturer of industrial gears and was the first company in India to introduce modular design concept, case hardened and ground gear technology. Elecon is the gear supplier of choice to core sectors like Sugar, Cement, Steel, Fertilizer, Plastic Extrusion and Rubber. Elecon was the first industrial gear manufacturer in India to achieve ISO 900� in �994 and again the first to achieve ISO 900�:2000 in 200�.

Manufacturing Infrastructure

The manufacturing facility spread over �,73,098 sq. mtrs., populated with more than 90% CNC machine tools, quality control and testing equipments, for gear components to DIN/AGMA specifications. The gear grinding facility at Elecon is acknowledged as one of the most modern in the Gear industry.

Notable achievements in 2006-07

• Collaborating with M/s. Renk AG of Germany for manufacturing vertical roller mill gearboxes for Cement and Coal Mills.

• Elecon in technical co-operation with M/s. Renk AG has been awarded the prestigious order from Indian Navy for the COGAG gearboxes for India’s indigenous Aircraft Carrier programme and does the Nation proud.

• Setting up a state-of-the-art facility to manufacture Wind Mill Gearboxes.

• Signed a Technical Collaboration Agreement with Haisung Industrial System Co. Ltd. of South Korea for high speed and capacity Elevator Gearbox design and manufacturing technology.

Industry Firsts in India

• First to manufacture CODOG gearboxes for Stealth Frigates for the Indian Navy

• Introduced case hardened and ground helical modular gearboxes in late �970s.

• Introduced mono block universally adaptable designs for Worm and Helical gearboxes

Strengths

• Have the technology and experience to design and build Planetary Gearboxes for various applications.

• Ability to design, manufacture and successfully test very large gearboxes for defense applications

Elecon Engineering Company LimitedAnnual Report 2006-07 ��

Net Sales

Orderbook Industrywise

Sales Industrywise

22% Material Handling

Rubber 6%

Sponge Iron 6%

Others �0%

Marine �2%

Plastic 2%Process / Fertilizers 2%

Lift Gears �2%

5% Steel

�8% Cement

5% Sugar

20% Material Handling

Rubber 7%

Sponge Iron 4%

Others �4%

Plastic 3 %Process / Fertilizers 4%

Lift Gears �2%

6% Steel �5% Sugar

�5% Cement

2,0�62,3�8

3,�34

2004-05 2005-06 2006-07

Net sales for Gear Division

increased 35% to

Rs. 3,�34 Mn in 2006-07 from

Rs. 2,3�8 Mn in 2005-06

Encouraging indicators in the global

economy, increased investments in base

industries and infrastructure coupled with

investments in industry modernisation,

amplified the Division’s overall performance.

The Material Handling sector was the highest

contributor with 20% share followed by

Cement and Sugar with �5% share each

Growth Drivers

Capacity augmentation and modernisation by

user industries

Growth in Exports & introduction of import

substitute products

Hard cut finished spiral bevel gear wheels

Rs. in Mn

�2

Dear Members,

On behalf of the Board of Directors of your Company, it is my proud privilege to present the 47 th Annual Report and Audited Statement of Accounts for the financial year ended on 3�st March, 2007.

The year 2006-07 was a buoyant year for the Indian economy. With a robust economic growth, the year saw sustained economic activity backed by strong investments. Indian manufacturing industry in particular rose to new heights of performance. More importantly, it has won encomiums from people who matter that Indian manufacturing was not only competitive but also cost conscious.

The superlative performance has its beneficial impact on your Company’s operations. In fact, I feel honoured to share with you that the year 2006-07 has turned out to be a landmark year of performance capped by stunning achievements that will forever be cherished and valued by all of us.

The outstanding and enviable performance of your Company during the year has been embellished by :

• Highest-ever production

• Highest-ever turnover

• Highest-ever profits

• Highest-ever earnings per share

• Highest-ever market capitalisation

What has been accomplished reflects strongly, the dynamic capability of our Company to excel in excellence and demonstrates that our valued shareholders can always expect sustained growth and increased profitability.

directors’ report

Prayasvin B. Patel Chairman & Managing Director

a remarkable growth

63% in turnover

and 97% in net profit

Elecon Engineering Company LimitedAnnual Report 2006-07 �3

Let me now share with you all our remarkable progress:

OPERATIONAL PERFORMANCE | The buoyancy exhibited

by the Indian economy which saw many new green field

projects as well as expansions in core and other sectors

and expansions in the industrial spectrum along with

emphasis on infrastructure provided ample business

opportunities for the Company.

These are exemplified by the unexecuted order book

of about Rs. 8,370 Mn comprising Rs. 6,2�0 Mn for MHE

division and Rs. 2,�60 Mn for Gear Division as on May 3�st,

2007. The Company is having live enquiries of around

Rs. 20,790 Mn as on May 3�st, 2007.

For the year ended on 3�st March, 2007, the Company

has achieved a Turnover of Rs. 7,23� Mn and Net

Profit of Rs. 549 Mn as against the Turnover of

Rs. 4,424 Mn and Net Profit of Rs. 278 Mn during the

previous year, representing a remarkable growth of 63%

in turnover and 97% in Net Profit.

The healthy bottom line of your company, unfolds a significant message : Whether it is supply of equipment to a power project Dadri in India or a mining project in far off Botswana near South Africa, Elecon is a brand

with a credible assurance of Reliability. In other words,

for customers, stakeholders and investors, Elecon is synonymous with Reliability.

Going forward, we firmly believe that Reliability will be our brand equity and the strategic tool for further success in the future. This characteristic quality is deeply instilled in our people, in the products we deliver, in the processes we employ and in the services we render.

As the Indian economy is on a strident growth path, we expect exciting opportunities to forge ahead in the coming years both in our existing business and the new businesses we are foraying into.

DIVIDEND | Your Directors are pleased to recommend dividend of Rs. �.50 per share (previous year Rs. 5 per share of Rs. �0 each on 5,707,783 equity shares) on 30,923,650 equity shares of Rs. 2 each for the year ended on 3�st March, 2007.

BONUS | Your Directors are pleased to recommend to issue 2 (two) Bonus shares of Rs. 2 each fully paid up for every � (One) Equity Share of Rs. 2 each, to which a Member is entitled on the Record Date to be fixed by the Board for the purpose of the Bonus issue.

NEW BUSINESSES | Elecon Engineering since its inception has always been in the forefront of innovations and technology in the manufacturing and has passionately

“ As a corporate we seek to balance the entrepreneurial growth on the one hand with

social and ecological concerns on the other. Achieving this balance isn’t easy, however

we must consistently work towards this endeavor. At Elecon, we have always and will

continue to believe in the value of this philosophy. ” Prayasvin B. Patel

�4

strived to reach new frontiers of technical excellence in order to be in tune with the changing times.

In line with this strategy, your Company has taken two strategic decisions. To capture new markets for ensuring further growth, your company has signed a technical collaboration with Haisung Industrial System Company Limited of Korea to design and manufacture high speed and capacity lift gear boxes. The Company has also signed the Technical Collaboration Agreement with RENK AG, of Germany for availing technology for design and manufacture of Vertical Roller Mill Gear Boxes. This type of Gear boxes is presently imported into India and hence Elecon will be the first company to manufacture these gearboxes in India. This will open the market for the Company’s product to serve major Indian cement manufacturers as well as service the bigger size gear units supplied or being supplied by RENK.

Our Goal is to become a major global player besides earning strong leadership position in the market place by delivering superior world class products based on state-of-the-art-technologies at competitive prices .

DIRECTORS’ RESPONSIBILITY STATEMENT | Pursuant to Section 2�7(2AA) of the Companies Act, �956, with respect to the Directors’ Responsibility Statement, it is hereby confirmed that: • in the preparation of the annual accounts of the Company for the year ended

on March 3�, 2007, the applicable accounting standards have been followed; • the Directors have selected and applied consistently such accounting policies

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 profit of the Company for the year ended on that date;

• the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, �956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

• The accounts have been prepared on a “going concern” basis.

CORPORATE GOVERNANCE | As per Clause 49 of the Listing Agreement, a report on Corporate Governance, together with Management Discussion and Analysis and a certificate from the Company’s Auditors form part of this report.

Your Company, acknowledging its corporate responsibility, has voluntarily obtained a ‘Secretarial Audit Report’ from Shri Ashwin Shah, Company Secretary

Our project plans are well in

tune with market dynamics to

deliver exponential growth.

With our diversification into

Wind Mill Farms and Wind Mill

Gearboxes, we are poised to

deliver even stronger returns to

our shareholders.


in whole-time practice, which is annexed to this Report.

In line with global practices, your Company is committed to maintain the highest standards of Corporate Governance, reinforcing the relationship between the Company and its Shareholders.

FIXED DEPOSITS | There are no unclaimed deposits as on 3�st March 2007.

PARTICULARS OF EMPLOYEES | As required by the provisions of Section 2�7(2A) of the Companies’ Act, �956 read with the Companies (particulars of employees) Rules, �975 as amended, the names and other particulars of employees are set out in Annexure – A, forming part of this Report.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION

AND FOREIGN EXCHANGE EARNINGS AND OUTGO | The particulars required to be furnished under Section 2�7(�) (e) read with the Companies (Disclosure of particulars in the report of Board of Directors) Rules, �988 are given in Annexure – B, forming part of this Report.

DIRECTORS | In accordance with the provisions of the Companies Act, �956 and the Articles of Association of the Company, Shri Upendrabhai M. Patel and Shri Ashok J. Patel Directors retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment.

During the year under review, Shri Nanalal D. Shah, Nominee Director of ICICI Bank Limited had ceased to be Director of the Company consequent upon full repayment of Corporate Loan availed by the Company from ICICI Bank Limited with effect from �2th September, 2006.

AUDITORS | The Company’s Auditors M/s. Thakorebhai - Shirish Desai & Butala, Division of Thacker Butala Desai, Chartered Accountants, Navsari, retire as Statutory Auditors at the ensuing Annual General Meeting of the Company and being eligible, offer themselves for reappointment.

FOREIGN CURRENCY CONVERTIBLE BONDS | The 8,900

FCCBs of US $ �,000 each aggregating to US $ 8.9 Mn have been converted into equity shares of the Company till the end of financial year 2006-2007, of which 7,900 FCCBs of US $ �,000 each aggregating to US $ 7.9 Mn have been converted during the financial year 2006 – 2007.

As on the date of this Report, �00 FCCBs of US $ �,000 each aggregating to US $ 0.� Mn are outstanding for conversion.

OVERSEAS INVESTMENTS | Your Company has invested in 49,943 Shares of US $ � each aggregating to US $ 49,943 in Elecon Engineering (Suzhou) Company Limited at China, which represents 50% of paid up capital of the investee Company.

STATUTORY DISCLOSURES | None of the Directors of your Company is disqualified as per provisions of Section 274(�) (g) of the Companies Act, �956. Your Directors have made necessary disclosures, as required under various provisions of the Act and Clause 49 of the Listing Agreement.

INSURANCE | The Company has taken adequate insurance cover for all movable & immovable assets of the Company for various types of risks.

INDUSTRIAL RELATIONS | During the year, harmonious Industrial Relations were maintained in the Company and no man-days were lost.

ACKNOWLEDGEMENT | Your Directors recognize the very valuable and dynamic support extended by all shareowners, business partners and members of Elecon family, which has helped the Company to attain sustained growth. Your Directors would like to place on record their appreciation for the support received from the Company’s Bankers, Financial Institutions, other Lenders, Auditors, Customers, Vendors and Government Authorities.

For and on behalf of Board of Directors

Prayasvin B. Patel

Chairman & Managing Director

Date: �5-06-2007 Place: Mumbai

�6

INDUSTRY STRUCTURE AND DEVELOPMENT | The Company has decided to manufacture the windmills and is expecting to commence its production during the current financial year. Presently about 45,000 MW of power is expected to come from Wind energy over the next five years. This will add lots in the growth journey of the Company.

The key demand driver for this industry is the rate of economic growth and it is affected by the macro-economic environment and the changes in the overall economy. Positive macro-economic factors such as increases in GDP translate into additional investments in the economy and infrastructure, modernisation of plants and increased repairs and maintenance work. Such investment in the economy benefits both of our material handling equipment division and gear division as its products form an essential part of most manufacturing facilities.

The material handling equipment industry manufactures and supplies equipment to core industries such as coal, steel, cement, fertilisers, mining, ports, power, petrochemicals and civil construction.

OPPORTUNITIES AND THREATS | In order to understand track of the global movement of industry, the Company has during the year under review, opened a foreign equity participating Company at China.

The Company has also taken measures to cut cost, increase productivity and limit manpower to turn more competitive. It is also considering diversifying its business by entering into new product line in conjunction with existing production line.

SEGMENTWISE PERFORMANCE | During the financial year 2006 – 2007, the Company has achieved a Turnover of Rs. 7,23� Mn as against Rs. 4,424 Mn in the previous year, which shows a growth of 63% over the previous year.

management discussion & analysis

Our mission is to create a world

class engineering enterprise

and generate strong financial

returns.


The turnover of Gear Division has increased to Rs. 3,�34

Mn from Rs. 2,3�8 Mn in the previous year, which is an

increase of 35%.

The turnover of MHE Division has increased to Rs. 4,096

Mn as against Rs. 2,�06 Mn in the previous year, which is

an increase of 94%.

The Profit Before Tax has increased to Rs. 844 Mn from Rs.

409 Mn in the previous year, which is an increase of �06%.

The Profit After Tax has increased to Rs. 549 Mn from Rs.

278 Mn in the previous year, which is an increase of 97% .

CAPEX Rs. in Mn

OUTLOOK | The upturn in the economy and rapid

industrial growth have been encouraging for the growth

of the Company. The several upcoming and ongoing

infrastructure projects have created good opportunity for

the material handling equipment division.

Looking to the entry into the new sectors like defence,

your Directors feel that Company will be in a position to

achieve more new/repetitive orders from this sector. The

Company has also decided to manufacture and market

the Vertical Roller Mill gear boxes, which is the import

substitute. The Company has availed technology for design

and manufacturing of Lift gear Boxes. The Comapny will

be the first Indian Company to manufacture lift gear boxes

of such high speed and capacity.

The Company will be setting up a project for manufacturing of gear boxes for wind mills in the range of � MW to 2 MW. It will substitute the import market for the product and Elecon will be the first Company to manufacture such sizes of gear boxes.

RISKS AND CONCERNS | Since your Company is catering the needs of almost all sectors of economy, if there is a recession in one industry, the other sector industry will continue to generate the revenue for the Company.

Apart from the normal business risk, no major risks are foreseen.

INTERNAL CONTROL SYSTEM | The Company has adequate internal control procedures commensurate with its size and nature of its business. The objectives of these procedures are to ensure efficient use and protection of the Company’s resources, accuracy in financial statements and due compliance of statutes and Company’s policies and procedures.

DEVELOPMENT IN HUMAN RESOURCES / INDUSTRIAL FRONT | Industrial relations in the Company continue to be healthy and cordial. The number of employees as on 3�st March, 2007 are 746.

CAUTIONARY STATEMENT | Statement made in the Management Discussion and Analysis report as regards the expectations and/or predictions may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results could differ substantially from those expressed or implied. Important factors that would make a difference to the Company’s operations include demand & supply conditions, raw material prices, changes in government regulations, tax regimes, economic developments within the country and other factors.

240

329

5�0

2004-05 2005-06 2006-07

�8

Reliable and robust power transmission technology from Elecon & Renk, will power the main propulsion systems for aircraft carriers. These complicated gear boxes are custom built assemblies that will operate at reduced noise levels and will be virtually fault free. Elecon is the first company in India and Asia to supply such gearboxes to the defense sector.


Three stage planetary gear box under assembly

20

de-risked business modelOur de-risked business strategy provides new opportunities for increase in revenue by balancing risk, encouraging innovation and expanding the business portfolio. Our multi-product, multi-industry segment strategy is designed to balance all-round growth with risk mitigation.

MULTI-PRODUCT & MULTI-INDUSTRY SEGMENTS | Diverse industries demand diverse solutions. Elecon offers a range of products and solutions for various industries including Power, Chemicals, Steel, Plastic, Elevators, Palm Oil, Marine Engineering, Cement, Sugar, Mining, Petroleum, Coal Handling and Fertilizers. This underlines our policy of distributing the risk across a wide spectrum of industries.

STRATEGIC PARTNERSHIPS | Elecon’s strong emphasis in partnering with the best at international levels has enhanced our product portfolio, reduced costs and expanded our manufacturing capacities.

Elecon has signed a collaboration agreement with M/s. Renk AG of Germany for manufacturing Vertical Roller Mill Gearboxes for Cement and Coal Mills. Elecon and Renk will jointly execute orders for supplying main propulsion system gearboxes for India’s indigenous aircraft carrier.

Elecon has signed a technical collaboration agreement with Haisung Industrial Systems Company Limited of South Korea for design and manufacturing technology for high speed and capacity Elevator Gearboxes.

ENHANCE BUSINESS PORTFOLIO | Elecon has entered the Wind Farms and Wind Mill Gearbox businesses. We have signed a License Agreement for technology transfer with Turbo Winds NV, Belgium for Wind Farms.

elecon worldwide

South Africa

UAE

China

Singapore

Australia

Elecon Head Office Elecon Global Sales Network

Countries serviced by Global Sales Network. Other regions are managed by HO.

21

ANNEXURE – A TO DIRECTORS’ REPORT

a. Information pursuant to Section 217 (2A)(a)(i) of the Companies Act, 1956 read with the Companies (particulars of

employees) Rules, 1975 and forming part of this Directors Report for the financial year ended on 31st March, 2007.

Name Age Qualification Date of Designation Gross Experience Last

Joining (Nature of Remuneration in years Employment

duty) (Rs. in Crores)

Shri P. B. Patel 49 years B. E. (Mech.) 1/7/83 Chairman and 3.74 32 Director

M.B.A. Managing Prayas

(U.S.A.) Director Castings

Private

Limited

b. Names of employee employed for part of the year and were in receipt of remuneration at a rate of not less than

Rs. 2 Lacs p. m. in terms of Section 217 (2A) (a) (ii) of the Companies Act, 1956.

NIL

Notes :

1. The appointment is contractual.

2. The gross remuneration received includes Salary, Housing Allowance, Medical Allowance, Commission, and Company’s

Contribution to Provident Fund, Superannuation and Gratuity Fund. Monetary value of perquisites in accordance with

provision of Income Tax Act, 1961.

3. Experience includes number of years of service elsewhere, wherever applicable.

4. Shri Prayasvin B. Patel, Chairman and Managing Director of the Company is relative of Mr. P. M. Patel, Director of the

Company.

22

ANNEXURE – B TO DIRECTORS’ REPORT

Information required under Section 217 (1) (e) of the

Companies Act, 1956 read with the Companies (Disclosure of

Particulars in the Report of Board of Directors) Rules, 1988.

1. CONSERVATION OF ENERGY

(a) Energy Conservation measures taken

(i) The Company has installed 75 Nos. of 250w

metal halide lamps in heavy machine building

shops to replace 67 Nos. of 400w sodium vapor

lamps.

(ii) 45 Nos. of 14w x 2ft. long fl. tubes with elect-

ronic ballast were installed replacing 40w x 2 ft.

long fl. tube lights with conventional ballast in the

rest rooms of the work shops.

(iii) 30 Nos. of 28w x 4 ft. long fl. tubes with elect-

ronic ballast were installed replacing 40w x 4 ft.

long fl. tube lights with conventional ballast in the

rest rooms of grinding room.

(iv) 8 Nos. x 1.5 kw of low wattage YDM air coolers

were installed in the worm assembly area to

provide pressurized & controlled climatic

environment. This has resulted in saving of

electrical energy besides providing comfort

cooling by drastically reducing the ambient

temperature in that area.

(v) 10 Nos. of inverter drives of different ratings were

installed in the gear testing area and EOT cranes.

(vi) 12 Nos. x 125w metal halide lamps were installed

in the roller shop to replace 12 Nos. x 250w sodium

vapor lamps.

(vii) 200 Nos. x 28 w fl. tube lights with electronic ballast

were installed replacing 200 Nos. x 40W fl. tube

lights with conventional ballast in the office area.

(viii) 12 Nos. of inverter drives of different ratings were

installed in the EOT cranes in HMBS area.

(ix) In the old office building 40 TR x 2 Nos. old and

inefficient central AC units were replaced with

power efficient split units and packaged units to

save considerable amount of electrical energy.

(b) Additional investments and proposal if any, being

implemented for reduction of consumption of energy

(i) Continuous efforts are made to find out, how the

consumption of energy can be reduced by the

Company.

(c) Impact of measures at (a) and (b) above for reduction

of energy consumption and consequent impact on the

cost of production of goods

Implementation of above referred measures have

resulted in conservation of energy and cost reduction.

2. TECHNOLOGY ABSORPTION

(a) Research and Development

(i) Specified areas in which R & D carried out by the

Company: Continuous research and development

being done to update all our products. However,

separate research and development cell is not

formed in the organization.

(ii) Benefits derived as a result of R & D: It results into

the improvement of quality of the products of the

Company on continuous basis.

(iii) Future plan of action: The Company is con-sidering

to establish the efforts on R & D.

(iv) Expenditure on R & D: Not applicable

(b) Technology absorption, adaptation and innovation

(i) The Company has signed a Technical Collaboration

Agreement for availing the technology to design

and manufacture the Lift Gear Boxes with Haisung

Industrial System Company Limited of Korea.

The Company has also signed the Technical

Collaboration Agreement with RENK AG, of

Germany for availing technology for design and

manufacture of Vertical Roller Mill Gear Boxes for

Cement & Coal mills.

(ii) Benefits derived as a result of the above efforts:

Presently, the Vertical Roller Mill Gearboxes are

being imported by the Indian manufacturers and

hence, it will substitute the import market and

create new market for the Company for this

segment.

(iii) Technologies imported during the last five years:

Technologies Imported Year of import

Wind electric generators 2001

Continuous Surface Miner 2002

Ship Loader with Slewing Boom 2003

NIL 2004

LHD8118 & LHD912 Axles & its spares 2005

Wind Electric Generators 2005

NIL 2006

3. FOREIGN EXCHANGE EARNINGS AND OUTGO

Foreign Exchange earned and spent by the Company

during the year amounts to Rs. 2430.70 Lacs and Rs.

7223.12 Lacs respectively. Please refer Notes to the

Accounts, Schedule – 17.

23

SECRETARIAL AUDIT REPORT

To

The Board of Directors


� Based on my examination and verification of the

records for the year ended on 31st March 2007

produced before me and according of the information

and explanations given to me by the Company, I report

that the Company has, in my opinion, complied with

the provisions of the companies Act, 1956 (the Act)

and the rules made under the Act and Memorandum

and Articles of Association of the Company, with

regard to:

• Maintenance of various statutory registers and

documents and making necessary entries therein.

• Closure of Register of Members.

• Forms, returns, documents and resolutions

required to be filed with the Registrar of

companies.

• Service of documents by the Company on its

Members.

• Notice of Board Meetings and Committee

Meetings of Directors.

• The Meetings of Directors and Committees of

Directors including passing of resolutions by

circulation.

• The Annual General Meeting held on September

12, 2006.

• Minutes of proceedings of General Meeting and

of Board and other Meetings.

• Allotment of Securities

• Approvals of Shareholders, the Board of Directors,

the Committee of Directors and Government

Authorities, wherever required.

• Constitution of the Board of Directors and

appointment, retirement and re-appointment of

Directors.

• Remuneration paid to the Directors other than

Managing and Wholetime Directors.

• Appointment and remuneration of Auditors.

• Declaration and payment of dividend.

• Transfer of certain amounts as required under the

Act to the Investor Education and Protection Fund.

• Borrowing and registration, modification and

satisfaction of charges.

• Investment of Company’s fund including inter

corporate loans and investments and loans to

Directors and others.

• Generally, all other applicable provisions of the

Act and the rules made under that Act.

� I further report that:

• The Company’s Directors have complied with the

requirements as to Disclosure of interest and

concern in contracts and arrangements,

shareholding and directorships in other com-

panies and interests in other entities.

• There was no prosecution initiated against or

show cause notice received by the Company and

no fines or penalties were imposed on the

Company under the Act against the Company, its

Directors and Officers.

� I further report that the Company has complied with

the provisions of the Depositories Act, 1996 and Bye-

laws framed thereunder by the Depositories with

regard to dematerialisation / rematerialisation of

securities and reconciliation of records of

dematerialized securities with all securities issued by

the Company.

� I further report that;

• The Company has complied with the require-

ment under the Listing Agreements entered into

with The Bombay Stock Exchange Limited and

The National Stock Exchange of India Limited.

• The Company has complied with the provisions

of the Securities and Exchange Board of India

(Substantial Acquisition of Shares and Takeover)

Regulation, 1997 with regard to the disclosures

and maintenance of records required under the

Regulations.

• The Company has complied with the provisions

of the Securities and Exchange Board of India

(Insider Trading) Regulation 1992 with regard to

the disclosure and maintenance of records

required under the Regulations.

ASHWIN SHAH

Place : Mumbai COMPANY SECRETARY

Date : 15-06-2007 C. P. NO. 1640

24

CORPORATE GOVERNANCE REPORT

(I) Company’s Philosophy on the code of Governance

ELECON recognizes the ideals and importance of corporate Governance and acknowledges its responsibilities towards

all stakeholders including Government, employees, customers, suppliers, regulatory authorities and the shareholders.

ELECON Philosophy on Corporate Governance is to bestow high standard of transparency, fairness and accountability

for performance at all levels and to ensure best performance through professionalism, social responsiveness, business

practices and maximization of operational efficiency. The Company’s Corporate Governance is based on the values of

integrity, transparency and accountability. The Company endeavours to maximize the shareholders’ value and to protect

the interest of stakeholders by strengthening the best practices, professionalism and empowerment of employees.

(II) Board of Directors

The Company is managed by the Board of Directors, which formulates strategies, policies and reviews its performance

periodically. The Chairman & Managing Director manages the business of the Company under the overall supervision,

guidance and control of the Board.

Composition

The Company has an Executive Chairman and the number of Non-Executive Independent Directors is more than 50%

of the total number of Directors. The Board of Directors consists of 7 Directors (earlier 8 Directors) including one

Chairman & Managing Director, One non-independent non-executive and Five independent non-executive Directors.

The Board of Directors thus, has an adequate combination of executive and non-executive Directors.

None of the Directors on the Board is a Member of more than 10 Committees and Chairman of more than 5

Committees (as per Clause 49 (D)(ii) of Listing Agreement) across all the companies in which he is a Director. Necessary

disclosures have been made by the Directors.

BOARD MEETINGS PROCEDURES

(A) Scheduling and selection of Agenda items for Board Meetings

(i) The meetings are being convened by giving appropriate advance notice after obtaining the approval of the

Chairman of the Board. Detailed agendas, management reports and other explanatory statements are circulated

in advance amongst the members for facilitating meaningful, informed and focused decisions. To address specific

urgent need, meetings are also being called at shorter notice. The Board is also authorized to pass Resolution by

circulation for all such matters, which are of utmost urgent nature.

(ii) Where it is not practicable to attach any documents or the agenda is of confidential nature, the same is placed

on the table with the approval of the Chairman of the Board. In special and exceptional circumstances, additional

or supplemental items(s) on the agenda are permitted. Sensitive subjects matters are discussed at the meeting

without written materials being circulated.

(iii) The agenda papers are prepared by the officials concerned and submitted to the Chairman and Managing Director

for his approval. Duly approved agenda papers are circulated amongst the Board members by the Company

Secretary.

(iv) As per the convenience of the members of the Board, the Board meetings are usually held at the Company’s

Registered office in Vallabh Vidyanagar, Dist. Anand or at Mumbai.

(v) The members of the Board have complete access to all information of the Company. The Board is also free to

recommend inclusion of any matter in agenda for discussion. Senior management officials are called to provide

additional inputs to the items discussed by the Board as and when necessary.

(B) Recording minutes of proceedings at the Board Meeting

Minutes of the proceedings of each Board meeting is recorded and the same is read in the next Board Meeting. The

minutes of the proceedings of the meetings are entered in the Minutes Books and the same is signed by the Chairman

as prescribed in the Companies Act, 1956.

25

(C) Compliance

The Compliance Officer while preparing the agenda notes is responsible for and is required to ensure adherence to

all the applicable provisions of law, rules, guidelines etc. The Company Secretary has to ensure compliance to all the

applicable provisions of the Companies Act, 1956, SEBI Guidelines, Listing Agreements, and other statutory requirements

pertaining to capital market. The Board of Directors reviews a quarterly Compliance Report confirming adherence to

all applicable laws, rules, and guidelines.

BOARD MEETINGS

During the year 2006-2007, the Board Meetings were held on 28 June, 25 July, 12 September, 31 October, 2006, and

29 January, 2007 and the gap between two Board meetings was well within the limit of four months.

The names and categories of the Directors on the Board, their attendance at Board Meetings held during the year and

at the last Annual General Meeting, as also the number of Directorship and Committee positions, as held by them in

other Public Limited Companies, as on 31st March, 2007 are given below:

* ceased to be Director w. e. f. 12-09-2006

The Company did not have any material pecuniary relationship or transactions with the Non-Executive Directors during the year

2006-2007.

Name of Nature of No. of Board No. of Attendance No. of No. of Committee

Directors Directorship Meetings held Board at AGM other Chairmanship/during the Meetings Director- Membershiptenure of Attended ship Chairman- Member-Directorship ship ship

Shri Prayasvin B. Patel Non- 5 5 Yes 14 — 3(Chairman & IndependentManaging ExecutiveDirector) Director

Shri Pradip M. Patel Non- 5 5 Yes 2 — 1IndependentNon ExecutiveDirector

Shri Upendra M. Patel Independent 5 3 Yes 4 — 1

Non-

Executive

Director

Shri Chirayu R. Amin Independent 5 2 Yes 7 1 —Non-ExecutiveDirector

Shri Ashok J. Patel Independent 5 1 No 5 — 1

Non-Executive

Director

Shri Hasmukhlal Independent 5 5 Yes 3 3 5S. Parikh Non-Executive

Director

Dr. Amritlal C. Shah Independent 5 5 Yes 5 1 4Non-ExecutiveDirector

*Shri Nanalal D. Shah Independent 2 2 No — — —

(ICICI - Nominee) Non- Executive

Director

26

Disclosure regarding Directors retiring by rotation and being re-appointed:

Shri Upendra M. Patel and Shri Ashok J. Patel Directors retire by rotation at the ensuing Annual General Meeting and being

eligible, offer themselves for re-appointment.

(III) Audit Committee

The term of reference of the Audit Committee are in accordance with the Section 292A of the Companies Act, 1956 and

the guidelines set out in the Listing Agreement.

The Committee is headed by Shri Hasmukhlal S. Parikh, an independent non-executive Director as Chairman. He is a Fellow

member of the Institute of Chartered Accountants of India and doing practice since more than 45 years and has varied, vast

and multifarious experience in financial management, corporate affairs, accounting and auditing matters.

The other members of the Committee S/Shri Pradip M. Patel, non-independent non-executive and Dr. Amritlal C. Shah and

Shri Ashok J. Patel both independent non executive Directors, have requisite financial and management experience and have

held or hold senior positions in other reputed organizations.

The Audit Committee met Four times on the following dates during the last financial year:

27-06-2006 25-07-2006 31-10-2006 29-01-2007

Attendance :

Name of Directors No. of Meetings Held No. of Meetings Attended

Shri Hasmukhlal S. Parikh 4 4

Shri Ashok J. Patel 4 1

Shri Pradip M. Patel 4 4

Dr. Amritlal C. Shah 4 4

The Vice President (Commercial), Statutory Auditors, Internal Auditors attended and participated at the meeting of the

Committee. Shri Nayan M. Adhyaru Company Secretary of the Comapny is the Secretary of the Committee.

(IV) Shareholders’/Investors’ Grievance Committee

Terms of Reference : To look into the Investors complaints, if any, and to redress the same expeditiously. Besides that the

Committee also considers and approves the transactions as may be referred to it by the Share Transfer Committee/Committee

of Derectors.

The Shareholders’ Grievance Committee comprises of the following Directors:

Name Designation Category

Shri Ashok J. Patel Chairman Independent & Non-Executive Director

Shri Hasmukhlal S. Parikh Member Independent & Non-Executive Director

Shri Pradip M. Patel Member Non-independent & Non-Executive Director

Shri Nayan M. Adhyaru Company Secretary is the Compliance Officer and Secretary of the Committees.

One Meeting was held, during the financial year 2006 - 07, on 27-06-2006

Attendance :

Name of Directors No. of Meetings Held No. of Meetings Attended

Shri Ashok J. Patel 1 -



27

Report on Communication received from the Investors during the year 2006-2007.

Nature of Queries (Correspondence) Total Total Pending Remark

Received Replied

Inquiry pertaining to non- receipt of shares sent for transfer 14 14 — —

Inquiry on Dematerialization of Shares 9 9 — —

Address correction 121 121 — —

Letter Received from SEBI/ other Statutory Bodies 4 4 — —

Loss of Shares and issue of duplicate share certificates 69 69 — —

Transmission of shares 16 16 — —

(V) Remuneration Committee

The Remuneration Committee has been constituted to recommend the remuneration package of the Managing Director based

on the performance. The members have approved at their meeting held on 15th September, 2006, the re-appointment of Shri

Prayasvin B. Patel, Chairman and Managing Director of the Company on such terms and conditions as recommended by the

Remuneration Committee.

The Remuneration Committee of the Company as on 31st March, 2007 consists of the following Directors:

Name Designation Category

Shri Hasmukhlal S. Parikh Chairman Independent & Non-Executive Director

Shri Ashok J. Patel Member Independent & Non-Executive Director

Shri Pradip M. Patel Member Non-Independent & Non-Executive Director

Dr. Amritlal C. Shah Member Independent & Non-Executive Director

Shri Nayan M. Adhyaru Company Secretary of the Company is the Secretary of the Committee.

One Meeting was held during the financial year 2006-07 on 27-06-2006

Attendance :

Name of Directors No. of Meeting Held No. of Meetings Attended

Shri Ashok J. Patel 1 -



Dr. Amritlal C. Shah 1 1

(VI) Remuneration of Directors

a. Non-Executive Directors

The Non-Executive Directors do not draw any remuneration from the Company other than sitting fees. The sitting fees payable

to non-executive Directors have been increased from Rs. 10,000/- per meeting to Rs. 15,000/- per meeting with effect from 28/

06/2006. The sitting fees paid to Non-Executive Directors for attending Board and Committee Meetings during the year 2006-

07 is as follows:

28

Directors Sitting fees

Amount in Rs.

Shri Pradip M. Patel 1,60,000

Shri Upendra M. Patel 2,70,000

Shri Chirayu R. Amin 30,000

Shri Ashok J. Patel 30,000

Shri Hasmukhlal S. Parikh 1,60,000

Dr. Amritlal C. Shah 1,35,000

* Shri Nanalal D. Shah, (ICICI Nominee) 25,000

* Ceases to be Director with effect from 12-09-2006

b. Executive Directors

The Company pays remuneration by way of salary, perquisites, allowances and Commission to the Chairman and Managing

Director.

The salary paid during the year to the Chairman and Managing Director is within the ceiling prescribed by Section 198, 309

and the Provisions of Schedule XIII of the Companies Act, 1956.

The remuneration paid to the Chairman and Managing Director for the year 2006-07 is as follow :

Rs. in Lacs

Salary Perquisites Commission Total

Shri Prayasvin B. Patel 66.15 0.03 284.00 350.18*

* Does not include the Company’s contribution to Provident Fund, Superannuation Fund to the extent not taxable and Gratuity

and encashment of leave at the end of tenure, as per the rules of the Company.

(VII) Committee of Directors

In addition to the above Committees, the Board has constituted a Committee of Directors comprising of the following Directors

as on 31-03-2007 :

Shri Prayasvin B. Patel Chairman

Shri Upendra M. Patel Member

Shri Ashok J. Patel Member

Attendance :

Name of Member No. of Meetings Held No. of Meetings Attended

Shri Prayasvin B. Patel 17 17

Shri Upendra M. Patel 17 17

Shri Ashok J. Patel 17 —

The Committee met on the following dates during the last financial year:

06-04-2006 08-07-2006 18-10-2006 02-03-2007

27-04-2006 24-07-2006 16-11-2006 31-03-2007

09-05-2006 14-08-2006 14-12-2006

18-05-2006 13-09-2006 05-01-2007

10-06-2006 23-09-2006 03-02-2007

29

(VIII) Details of General Meetings

Location, date and time of Annual General Meetings held during last 3 years:

Year Location AGM/ Date Day Time No. of

EGM Special

Resolution

Passed

2003 Audio Visual Hall AGM 3-9-04 Friday 11.00 a. m 2

2004 Elecon Engineering Co. Ltd.

Anand Sojitra Road

Vallabh Vidyanagar – 388 120

2004 As above AGM 15-9-05 Thursday 11.00 a. m. 3

2005

2005 As above AGM 12-9-06 Tuesday 2.30 p. m. 5

2006

During the year ended on 31st March, 2007, no resolution has been passed by the members through Postal Ballot.

At an ensuring AGM, there is no resolution proposed to be passed through Postal Ballot.

Dividend History

Stock Options

The Company has not issued any Stock options to its Directors/Employees.

Equity Shares held by Directors (as on 31-3-2007)

Name of Directors No. of shares Held

Shri Prayasvin B. Patel 1,97,370

Shri Pradip M. Patel 7,470

Shri Upendra M. Patel 1,280

Shri Chirayu R. Amin —-

Shri Ashok J. Patel —-

Shri Hasmukhlal S. Parikh 2,000

Dr. Amritlal C. Shah —-

(IX) Disclosures on Materially significant related party transactions

Full disclosure of related party transactions as per Accounting Standard - 18 issued by the Institute of Chartered

Accountants of India are given under Note No. 15 of Notes on Annual Accounts forming integral part of Balance

Sheet and the Profit and Loss Account.

Year Rate (%) Per Share (Rs.) Amount (in Rs.)

2003-2004 10% 1.00 56,47,410

2004-2005 25% 2.50 1,41,18,525

2005-2006 50% 5.00 3,06,52,000

30

(X) Details of Non-compliance by the Company, penalties, strictures imposed on the Company by the Stock

Exchange, SEBI or any Statutory Authorities on any matter related to capital markets during the last three

years

The audited accounts for the year ended March 31, 2004 could not be placed before the Board of Directors for their

approval, on or before June 30, 2004, as per the Listing Agreement requirement. The Company had intimated the

Stock Exchange well in advance stating the reasons for delay. However, Company has not received any communication

from any authority in this regard thereafter.

It is certified that Company has complied with applicable rules and regulations prescribed by the Stock Exchange,

SEBI or any other Statutory Authority relating to the capital markets during the year.

All Returns/Reports were filed within stipulated time with Stock Exchanges/other authorities.

(XI) Disclosures on Whistle Blower Policy

Though there is no formal Whistle Blower Policy, the Company takes cognizance of complaints made and suggestions

given by the employees and others. No employee of the Company has been denied access to the Audit Committee.

Means of communication

The Company regularly intimates unaudited and audited financial results to the Stock Exchange, immediately after these

are taken on record/approved. These financial statements are normally published in prominent daily newspapers viz.

Financial Express, The Business Line, Gujarat Samachar, Sandesh, Divya Bhashkar, The Asian Age, Jansatta, Naya Padkar, The

Hindustan Times having wide circulation across the country and also displayed on the website of the Company on

www.elecon.com and simultaneously posted on the Electronic Data Information Filing and retrieval website namely

www.sebiedifar.nic.in the website is also accessible through a hyperlink “EDIFAR” from SEBI’s official website, www.sebi.gov.in.

The official news releases and the presentation made to the investors, financial analyst are also displayed on the Company’s

website. The results are not sent individually to the shareholders except annual accounts.

Management Discussion and Analysis is forming part of the Annual Report.

Compliance Officer

Mr. Nayan M. Adhyaru

Company Secretary

Elecon Engineering Company Limited

Anand-Sojitra Road


Gujarat

Email : [email protected]

(XII) GENERAL SHAREHOLDERS INFORMATION

a) Annual General Meeting

Date and Time : 13th September, 2007 at 11.00 A.M.

Venue : Audio Visual Hall

Near Gear Division


Gujarat

b) Financial Calendar : April 01 to March 31

c) Date of Book Closure : Tuesday, 17th July, 2007 to Tuesday, 24th July, 2007.

(both days inclusive)

d) Dividend Payment date : on or before 12th October, 2007

31

ELECON vs. SENSEX

0

100

200

300

400

500

600

April –2006

May –2006

June –2006

July –2006

August –2006

Sept. –2006

Oct. –2006

Nov. –2006

Dec. –2006

Jan. –2007

Feb. –2007

Mar. -2007

MONTHS

SHA

RE

PRIC

E

0.00

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

SEN

SEX

ELECONSENSEX

e) Listing on Stock Exchange : The Bombay Stock Exchange Limited, Mumbai

The National Stock Exchange of India Limited, Mumbai

The Company has paid the annual Listing fees to the Stock Exchanges

for the financial year 2007-2008.

f) Stock code : The Bombay Stock Exchange Limited

(Physical Segment) : BSE 5700

The Bombay Stock Exchange Limited

(Demat Segment) : BSE 505700

The National Stock Exchange of India Limited

(Demat Segment) : ELECON

Demat ISIN in NSDL and CDSL for Equity Shares : INE 205 B01023

g) Stock Market Price Data :

* Reflects the market price of the shares consequent upon sub-division of face value of equity shares from Rs. 10 per share to

Rs. 2 per share.

Shares traded between 1st April, 2006 to 31st March, 2007 at The Bombay Stock Exchange Limited and The National Stock

Exchange of India Limited are as follow:

Particulars The Bombay Stock #The National Stock Exchange

Exchange Limited, Mumbai of India Limited, Mumbai

No. of Shares traded 12503105 8193904

Highest Share price 1439.00 1299.00

@ Lowest share price 220.05 211.60

# The Equity shares have been listed with the National Stock Exchange of India Limited with effect from 29th September, 2006.

@ Reflects the market price of the shares consequent upon sub-division of face value of equity shares from Rs. 10 per share to

Rs. 2 per share.

32

h) Share Registrar & Transfer Agent :

The Company has appointed following Registrar & Transfer Agent for Physical Transfer & Demat of the Shares:

Intime Spectrum Registry Limited

1st floor, Jaldhara Complex,

Opp. Manisha Society

Off. Old Padra Road,

Vasna Road,

VADODARA - 390 015

Email : [email protected]

Phone : 0265 – 3249857

i) Listing of shares at NSE :

During the year under review, the Equity Shares of the Company have been listed with the National Stock

Exchange of India Limited with effect from 29th September, 2006. The lot for trading is 1 share. The stock code

is ELECON.

j) Share Transfer System :

The Company’s Shares are in compulsory Demat List and are transferable through the Depository system.

Depository transfers as well as physical transfers are handled by Intime Spectrum Registry Limited having their

registered office at 260 A, Shanti Industrial Estate, Sarojini Naidu Road, Mulund (West), MUMBAI - 400 080.

k) Share holdings pattern as on 31-03-2007

l) Distribution of Shareholding as on 31-03-2007

Category No. of Percentage No. of shares Percentage

Shareholders

1-500 18,279 96.5662 56,19,120 13.4211

501-1000 812 1.7257 6,23,448 3.8601

1001-2000 493 0.7539 7,16,768 3.3197

2001-3000 221 0.2533 5,42,974 1.9603

3001-4000 106 0.1414 3,76,023 1.5185

4001-5000 92 0.1001 4,29,589 1.3618

5001-10000 89 0.1826 63,78,025 4.1000

Above 10000 41 0.2768 2,19,77,923 70.4585

Total 20,133 100.0000 3,09,23,650 100.0000

Category No. of Shares held (%) of total

Promoters 1,30,36,865 42.16

Banks, Financial Institutions and Insurance Companies 8,270 0.03

Foreign Institutional Investors 15,46,198 5.00

Mutual Funds and UTI 63,76,060 20.61

N.R. I. / O.C. B. 2,16,513 0.70

Bodies Corporate 14,18,875 4.59

Public 83,20,869 26.91

TOTAL 3,09,23,650 100.00

33

m) Dematerialization of Shares and Liquidity

As on 31st March 2007, 2,82,60,105 Shares were in dematerialized form representing 91.38 % of total shares.

The Company’s shares are traded on the Bombay Stock Exchange Limited, and The National Stock Exchange of India

Limited, Mumbai. The Shares are traded with The National Stock Exchange of India Limited, Mumbai with effect

from 29th September, 2006.

n) Outstanding GDRs/ADRs/Warrants or any other convertible Instruments, conversion date and likely

impact on equity as on 31-03-2007 :

The Company had issued 9,000 Foreign Currency Convertible Bonds of US $ 1,000 each aggregating to US $ 9 mn

at 1% premium. The Conversion is at the option of the Bondholders. Out of 9,000 Foreign Currency Convertible

Bonds, 8,900 Foreign Currency Convertible Bonds were converted into Equity shares till the end of financial year

2006-2007.

As on 31st March, 2007, 100 Foreign Currency Convertible Bonds of US $ 1,000 each aggregating to US $ 0.1 mn

were outstanding for conversion into Equity Shares.

Upon conversion, further 30, 186 Equity Shares of Rs. 2 will be issued to the Bondholders. This will increase the paid

up capital of the Company to Rs. 6,19,07,672 divided into 3,09,53,836 Equity Shares of Rs. 2 each fully paid up.

o) Unclaimed Dividend

As per the provisions of Section 205A read with Section 205C of the Companies Act, 1956 the Company is required

to transfer the unpaid dividend remained unclaimed and unpaid for a period of seven years from the due dates to

the Investor Education and Protection Fund (IEPF) set up by the Central Government.

Herebelow are the proposed dates for transfer of the unpaid dividend to IEPF by the Company.

* Indicative dates, actual date may vary.

p) Plant Locations : Works

1. Material Handling Equipment Division (MHE-Div.)

Anand –Sojitra Road,

Vallabh Vidyanagar – 388 120.

Gujarat.

2. Gear Division



Gujarat.

3. Wind Mill Division



Gujarat.

Address of Regd. Office : Anand –Sojitra Road,


Gujarat

Internet Website : www.elecon.com

Financial Year Date of declaration Proposed date for transfer to IEPF*

1999-2000 28-09-2000 27-11-2007

2003-2004 03-09-2004 02-10-2011

2004-2005 15-09-2005 14-10-2012

2005-2006 12-09-2006 11-10-2013

34

DECLARATION

To

The Members


I, Shri Prayasvin B. Patel, Chairman and Managing Director and Chief Executive Officer of the Company, do hereby declare

that the Directors and Senior Officers of the Company have exercised their authorities and powers and discharged their

duties and functions in accordance with the requirement of the Code of Conduct as prescribed by the Company and have

adhered to the provisions of the same.

For Elecon Engineering Company Limited

Prayasvin Patel

Place : Mumbai Chairman and Managing Director

Date : 15-06-2007 and Chief Executive Officer

COMPLIANCE CERTIFICATE

To

The Members


We have examined the compliance of the conditions of Corporate Gevernance by Elecon Engineering Company Limited

for the year ended on 31st March, 2007 as stipulated in Clause 49 of the Listing Agreement of the Company with the Stock

Exchanges in India.

The compliance of the conditions of Corporate Governance is the responsibility of the management. Our examination was

limited to the procedure and implementation thereof, adopted by the Company for ensuring the compliance of the

conditions of the Corporate Governance. It is neither an audit nor an expression of an opinion on the financial statements

of the Company.

In our opinion and to the best of our information and according to the explanation given to us, the Company has complied

with the conditions of the Corporate Governance as stipulated in the above Listing Agreement.

We state that in respect of investor grievance received during the year ended on 31st March, 2007, no investor grievances

are pending against the Company as per records maintained by the Company and presented to the Investors’/Shareholders’

Grievance Committee of the Company.

We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency

or the effectiveness with which the management has conducted the affairs of the Company.

For Thakorebhai – Shirish Desai & Butala

(Division of Thacker Butala Desai)

Chartered Accountants

M. T. Desai

Place : Navsari Partner

Date : 16-06-2007 M. No. : 30911

35

AUDITOR’S REPORT

To

The Shareholders of


Vallabh Vidyanagar

1. We have audited the attached Balance Sheet of

ELECON ENGINEERING COMPANY LIMITED as at

March 31, 2007 and also the Profit and Loss Account

and Cash Flow Statement of the Company for the

year ended on that date annexed thereto. These

financial statements are the responsibility of the

Company’s management. Our responsibility is to

express an opinion on these financial statements

based on our audit.

2. We conducted our audit in accordance with auditing

standards generally accepted in India. Those Standards

require that we plan and perform the audit to

obtain reasonable assurance about whether the

financial statements are free of material misstate-

ment. An audit includes examining, on a test basis,

evidence supporting the amounts and disclosures in

the financial statements. An audit also includes

assessing the accounting principles used and

significant estimates made by the management, as

well as evaluating the overall financial statement

presentation. We believe that our audit provides a

reasonable basis for our opinion.

3. As required by the amended Companies (Auditors’

Report) Order, 2003 issued by the Central

Government of India in terms of sub-section (4A) of

section 227 of the Companies Act, 1956, we annex

hereto a statement on the matters specified in

paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to

in paragraph (3) above, we report that :

(a) We have obtained all the information and

explanations, which to the best of our

knowledge and belief were necessary for the

purposes of our audit;

(b) In our opinion, proper books of account, as

required by the law have been kept by the

Company so far as it appears from our

examination of those books;

(c) The Balance Sheet, Profit and Loss Account and

Cash Flow Statement dealt with by this report

are in agreement with the books of account;

For THAKOREBHAI - SHIRISH DESAI & BUTALA(Division of THACKER BUTALA DESAI)


M. T. DESAI

Place: Navsari Partner

Date : 16-06-2007 Membership No. : 30911

(d) In our opinion, the Balance Sheet, Profit and

Loss Account and Cash Flow statement dealt

with by this report comply with the applicable

Accounting Standards referred to in sub-section

(3C) of section 211 of the Companies Act, 1956;

(e) Based on representations made by all the

Directors of the Company as on 31st March,

2007 and taken on record by the Board of

Directors of the Company and according to the

information and explanations made available to

us by the Company, none of the Directors of

the Company has any disqualification as

referred to in clause (g) of sub-section (1) to

section 274 of the Companies Act, 1956; and

(f ) In our opinion and to the best of our informa-

tion and according to the explanations given to

us, the said accounts read together with the

notes thereon, give the information required by

the Companies Act, 1956, in the manner so

required and give a true and fair view in

conformity with the accounting principles

generally accepted in India;

(i) In the case of the Balance Sheet, of the

state of affairs of the Company as at

March 31, 2007;

(ii) In the case of the Profit and Loss Account,

of the Profit of the Company for the year

ended on that date; and

(iii) In the case of the Cash Flow Statement,

of the cash flows for the year ended on

that date.

36

ANNEXURE TO THE AUDITORS’ REPORT

(Referred to in paragraph 3 of our report of even date)

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation

of its fixed assets.

(b) Certain items of Plant and Machineries were physically verified by the management during the year in

accordance with a programme of verification, which in our opinion provides for physical verification of all the

fixed assets at reasonable intervals. According to the information and explanations given to us, no material

discrepancies were noticed on such verification.

(c) The Company has not disposed off a substantial part of the fixed assets during the year under review. Therefore,

going concern status of the Company has not been affected.

(ii) (a) As explained to us, inventories were physically verified by the management at the end of the year.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical

verification of inventories followed by the management were reasonable and adequate in relation to the size

of the Company and the nature of its business.

(c) In our opinion and according to the information and explanations given to us, the Company has maintained

proper records of its inventories and discrepancies noticed on physical verification have been properly dealt

with in the books of account of the Company.

(iii) (a) According to the information & explanations given to us, the Company has neither granted nor taken any Loan,

secured or unsecured, to or from companies, firms or other parties covered in the register maintained under

section 301 of the Companies Act, 1956.

(b) In view of (iii) (a) above, this clause regarding rate of interest and other terms and conditions of such loans is

not applicable.

(c) The view of (iii) (a) above, this clause regarding recovery and repayment etc. is not applicable.

(d) In view of (iii) (a) above, this clause regarding overdue amounts of such loans is not applicable.

(iv) In our opinion and according to the information and explanations given to us, there is adequate internal control system

commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed

assets and for the sale of goods and services.

(v) (a) According to the information and explanations given to us, transactions with the parties listed in the register

maintained under section 301 of the Companies Act, 1956 have been entered in the register upon ratification

of the same by the Board of Directors of the Company.

(b) We are informed that in case of the transactions with the parties listed in the register maintained under

section 301 of the Companies Act, 1956 no comparison of prices could be made as there was either no

alternate source of supply or that the management preferred the supplier’s products and services on quality

grounds or peculiarity of the products sold or services rendered.

(vi) According to the information and explanations given to us, applicable provisions of the directives issued by the

Reserve Bank of India and the provisions of section 58A, 58AA or other relevant provisions of the Companies Act,

1956 and the rules framed there under have been complied with in respect of the Deposits accepted by the Company.

(vii) The Company has appointed a firm of Chartered Accountants to carry out internal audit work. The said internal audit

system operating in the Company commensurate with the size of the company and nature of its business.

(viii) According to the information and explanations given to us, the Central Government has not prescribed maintenance

of cost records under section 209(1)(d) of the Companies Act, 1956 in respect of any of the products of the company.

(ix) (a) According to the records of the Company undisputed statutory dues including Provident Fund, Investor

Education & Protection Fund, Employees’ State Insurance, Income Tax, Wealth Tax, Sales Tax, Custom Duty, Excise

Duty, Service Tax, Cess and other statutory dues have been regularly deposited during the period with

appropriate authorities. There was no outstanding statutory dues as at the end of the year outstanding for a

period of more than six months from the date they became payable.

(b) According to information and explanations given to us, the Company has not paid the following statutory

dues on account of the demand being disputed by the Company.

37

Sr. Nature of liability Amount Pending Before

No. (Rs. in Lacs)

1. Excise Duty, penalties & interest thereon 108.18 C.E.S.T.A.T.

2. Income Tax, Wealth Tax and interest 3.67 I.T.A.T.

& Penalty thereon

3. Income Tax, Wealth Tax and interest 30.98 C.I.T [Appeal]

& Penalty thereon

4. Sales Tax, Purchase Tax, Works Contract 347.55 Orissa State Sales Tax

Tax and interest & Penalty thereon Appellate Tribunal

5. Sales Tax, Purchase Tax, Works Contract 216.29 Gujarat High Court

Tax and interest & Penalty thereon

(x) According to the records of the Company, it has no accumulated losses. The Company has not incurred cash losses during

the financial year under review or during the immediately preceding financial year.

(xi) According to our audit procedure and on the basis of information and explanations given by the management, the Company

has not defaulted in repayment of dues to any Financial Institution or Bank. The Company has not issued any Debenture.

(xii) According to our audit procedure and on the basis of information & explanations given to us, the Company has not

granted any loan on the basis of security by way of pledge of shares, debentures and other securities. Therefore, the

question of adequacy or otherwise of maintenance of documents and records in respect thereof does not arise.

(xiii) According to our audit procedure and on the basis of information & explanations given to us, the Company has not

indulged in any chit fund activity during the year under review. Therefore, the question of compliance with provisions of

any special statute applicable to chit fund does not arise.

(xiv) According to our audit procedure and on the basis of information & explanations given to us, the Company has not

indulged in dealing or trading in shares, securities, debentures and other investments. In respect of long term investment

made by the Company, according to the information and explanations given to us, all the investments have been held in

the name of the Company only.

(xv) In our opinion and according to the information and explanations given to us, the terms and conditions on which the

company has given guarantee for loans taken by others from banks or financial institutions are not prima-facie prejudicial

to the interest of the Company.

(xvi) In our opinion and according to the information & explanations given to us, the term loans obtained during the year under

review have been applied for the purpose for which they were raised.

(xvii) In our opinion and according to the information & explanations given to us, and on an overall examination of the Balance

Sheet of the company, we report that no funds raised on short-term basis have been used for long-term investment.

(xviii) According to our audit procedure and on the basis of information & explanations given to us, during the year under

review, the Company has not make any preferential allotment of shares to the parties or companies listed in the register

maintained under section 301 of the Companies Act,1956. Therefore, the question of impacts of the prices recovered

in respect of such shares on the interest of the Company does not arise.

(xix) According to our audit procedure and on the basis of information & explanations given to us, during the year under

review, the Company has not issued any secured or unsecured debentures. Therefore, the question of creation of

securities or charge in respect thereof does not arise.

(xx) According to our audit procedure and on the basis of information & explanations given to us, during the year under

review, the Company has not raised money by way of public issue of shares. Therefore, the question of disclosure and

verification of end use of money so raised does not arise.

(xxi) To the best of our knowledge and belief and according to the information and explanations given to us, no material fraud

on or by the Company has been noticed or reported during the year under review.

For THAKOREBHAI - SHIRISH DESAI & BUTALA

(Division of THACKER BUTALA DESAI)Chartered Accountants

M. T. DESAI

Place : Navsari Partner

Date : 16-06-2007 Membership No. : 30911

38

BALANCE SHEET AS AT 31ST MARCH, 2007Rs. in Lacs

Schedules 2006 - 2007 2005 - 2006

SOURCES OF FUNDS

Share Capital 1 618.47 570.78

Reserves and Surplus 2 18,171.91 9,695.60

18,790.38 10,266.38

LOANS

Secured 3 25,662.13 15,061.49

Unsecured 4 2,703.81 5,512.57

28,365.94 20,574.06

Deferred Tax Liability 1,752.51 1,236.76

Deferred Tax Assets (75.56) (26.24)

Net Deferred Tax 1,676.95 1,210.52

TOTAL 48,833.27 32,050.96

APPLICATION OF FUNDS

Fixed Assets 5 12,673.75 9,521.70

Investments 6 803.97 628.66

Current Assets, Loans and Advances 7 60,933.87 43,341.26

Less : Current Liabilities and Provisions 8 25,621.59 21,670.43

Net Current Assets 35,312.28 21,670.83

Miscellaneous Expenditure 9 43.27 229.77

(To the extent not written off )

TOTAL 48,833.27 32,050.96

Notes forming part of Accounts 17

As per our report of even date attached

For and on behalf of For and on behalf of the Board of Directors

THAKOREBHAI-SHIRISH DESAI & BUTALA



P. B. Patel H. S. Parikh

Chairman and Director

Managing Director

M. T. Desai N. M. Adhyaru

Partner Company Secretary

M. No. 30911

Place : Navsari Place : Mumbai

Date : 16-06-2007 Date : 15-06-2007

39

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2007Rs. in Lacs

Schedule 2006 - 2007 2005 - 2006

INCOME

Sales 10 76,241.91 44,735.21Less: Excise Duty (9,349.28) (4,857.62)

Net Sales 66,892.63 39,877.59

Erection and other Charges 5,417.98 4,370.49Other Income 11 655.27 829.30

72,965.88 45,077.38EXPENDITURE

Consumption of Materials, Sub-Contracts, Erection and other charges 12 49,693.64 31,114.93

Power and Fuel 624.28 502.54Employees’ Remuneration and Benefits 13 2,708.61 2,270.65

Administrative, Selling & General Exp. 14 9,080.62 6,153.69

Interest 15 1,936.35 1,398.08Depreciation 1,222.30 943.01

65,265.80 42,382.90

(Increase)/Decrease in Stock 16 (970.44) (1,758.94)

64,295.36 40,623.96

PROFIT BEFORE TAXATION AND EXTRA ORDINARY ITEMS 8,670.52 4,453.42

Extra Ordinary Items (Refer Note 6 in Schedule 17) 229.77 355.64

PROFIT BEFORE TAXATION 8,440.75 4,097.78

Provision for Taxation (including Wealth tax) 2,450.05 1,302.95

Deferred Tax 466.44 (20.70)

Fringe Benefit Tax 33.96 27.17

PROFIT AFTER TAXATION 5,490.30 2,788.36

Prior Period Adjustments (0.74) 3.56

Balance brought forward from previous year 403.71 161.30

PROFIT AVAILABLE FOR APPROPRIATION 5,893.27 2,953.22

APPROPRIATION

Proposed Dividend 463.85 306.52

Tax on Proposed Dividend 78.83 42.99Transfer to General Reserve 3,800.00 2,200.00

Balance Carried Forward 1,550.59 403.71

Earning Per Share

- Before Extra Ordinary Items (i) Basic 19.07 55.67

(ii) Diluted 19.05 54.22

- After Extra Ordinary Items (i) Basic 18.30 49.37

(ii) Diluted 18.29 48.09

Face Value Per Share (Rs.) 2.00 10.00

Notes forming part of Accounts 17


For and on behalf of




M. T. Desai

Partner

M. No. 30911

Place : Navsari

Date : 16-06-2007

For and on behalf of the Board of Directors

P. B. Patel H. S. Parikh


Managing Director

N. M. Adhyaru

Company Secretary

Place : Mumbai

Date : 15-06-2007

40

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2007

Rs. in Lacs

Particulars As on 31-03-2007 As on 31-03-2006

Amount Amount Amount Amount

[A] CASHFLOW FROM OPERATING ACTIVITIES

1. Net Profit before Interest, Tax ,

Extra-ordinary Items & Profit on sale

of Assets & Investments 10,391.86 5,834.56

2. Adjustments for:

[i] Depreciation 1,222.30 943.01

[ii] Interest Income (190.94) (74.27)

[iii] Dividend Income (60.20) (59.11)

971.16 809.63

Operating Profit Before Working

Capital Changes 11,363.02 6,644.19

3. Adjustments for Working Capital changes:

[i] Trade & Other Receivables

Trade receivables (17,380.99) (10,020.84)

Loans and Advances (901.26) (521.80)

[ii] Trade & Other payables

Trade payables 5,114.42 4,911.99

Advances (1,330.94) 923.92

[iii] Inventories (505.14) (4,395.05)

(15,003.91) (9,101.78)

CASH GENERATED FROM OPERATIONS (3,640.89) (2,457.59)

4. Less: Direct Taxes Paid (2,519.40) (1,519.67)

(2,519.40) (1,519.67)

Add: Prior period adjustments (0.74) (0.74) 3.56 3.56

CASHFLOW BEFORE EXTRA-ORDINARY ITEMS (6,161.03) (3,973.70)

5. Extra-ordinary items

[i] Technical Know How Fees (51.92) -

[ii] FCCB Issue Expense - (118.16)

[iii] Premium on Issue of FCCB - 40.65

(51.92) (77.51)

NET CASHFLOW FROM OPERATING ACTIVITIES [A] (6,212.95) (4,051.21)

41

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2007Rs. in Lacs

Particulars As on 31-03-2007 As on 31-03-2006

Amount Amount Amount Amount

[B] CASHFLOW FROM INVESTING ACTIVITIES

1. Purchase of Fixed Assets (4,431.39) (4,284.50)

2. Sale of Fixed Assets 272.05 41.77

3. Purchase of Investments (175.30) (87.95)

4. Return of Share Application Money 1.11 23.81

5. Interest Income 190.94 74.27

6. Dividend Income 60.20 59.11

NET CASHFLOW FROM INVESTING ACTIVITIES [B] (4,082.39) (4,173.49)

[C] CASHFLOW FROM FINANCING ACTIVITIES

1. Issue of Equity Capital (Including Share Premium) 3,577.10 452.80

2. Proceeds from Long Term borrowings 4,986.10 5,316.13

3. Repayments against Long Term Borrowings (6,667.77) (2,517.60)

4. Proceeds from Other Borrowings 10,176.12 8,453.26

5. Repayments against Other Borrowings (695.01) (312.66)

6 Interest Paid (1,934.44) (1,384.69)

7. Dividends Paid (341.55) (159.02)

NET CASHFLOW FROM FINANCING ACTIVITIES [C] 9,100.55 9,848.21

[D] NET INCR./(DECR.) IN CASH & CASH EQUIVALENTS [A+B+C] (1,194.79) 1,623.51

[E] CASH & CASH EQUIVALENTS AS ON 01-04-2006/ 01-04-2005 2,470.69 847.18

[F] CASH & CASH EQUIVALENTS AS ON 31-03-2007 / 31-03-2006 [D+E] 1,275.90 2,470.69





Chartered Accountants P. B. Patel H. S. Parikh


Managing Director

M. T. Desai N. M. Adhyaru

Partner Company Secretary

M. No. 30911

Place : Navsari Place : Mumbai

Date : 16-06-2007 Date : 15-06-2007

42

SCHEDULES FORMING PART OF BALANCE SHEET AS AT 31ST MARCH, 2007Rs. in Lacs

2006 - 2007 2005 - 2006

SCHEDULE - 1

SHARE CAPITAL

(A) Authorised Share Capital

15,00,00,000 (Previous Year 3,00,00,000) Equity Shares of

Rs. 2 (Previous Year Rs. 10) each 3,000.00 3,000.00

(B) Issued, Subscribed and Paid-up Capital :

3,09,23,650 Equity Shares of Rs. 2 each fully paid up

(Previous Year 57,07,783 shares of Rs.10 each fully paid up) 618.47 570.78

Notes : Of the above

(i) 3,42,100 equity shares of Rs. 2 each in above (originally alloted

68,420 equity Shares of Rs. 10 each) were issued as fully paid-up,

pursuant to a contract without payment being received in cash

(ii) 1,73,38,890 equity shares of Rs. 2 each in above (originally alloted

34,67,778 equity Shares of Rs. 10 each) have been issued as Bonus

Shares by way of capitalisation of Share Premium and Reserves

(iii) 54,98,160 equity shares of Rs. 2 each in above (originally alloted

10,99,632 equity Shares of Rs. 10 each) have been issued as fully

paid-up shares on conversion of debentures

(iv) 24,14,920 equity shares of Rs. 2 each (originally alloted 4,82,984

Equity Shares of Rs 10 each) were issued as fully paid-up shares

on conversion of FCCB of Series ‘A’ 8,000 nos. of US $ 1,000/-

each

( v) 2,71,680 Equity Shares of Rs 2 were alloted as fully paid-up

shares on conversion of FCCB of Series ‘A’ 900 nos. of US $ 1,000/

-each 618.47 570.78

SCHEDULE - 2

RESERVES AND SURPLUS

(A) Capital Reserve

As per Last Balance Sheet 54.79 54.79

(B) Preference Share Capital Redemption Reserve :

As per Last Balance Sheet 24.00 24.00

Less: Transferred to General Reserve (24.00) -

- 24.00

(C) Security Premium Account 40.65 40.65

(D) Share Premium Account

As per Last Balance Sheet 446.76 -

Add : Amount arising on conversion of Foreign

Currency Convertible Bonds into Equity Shares 3,529.41 446.76

(Refer Note 5 in Schedule 17) 3,976.17 446.76

(E) General Reserve

As per Last Balance Sheet 8,725.70 6,525.69

Add : Transferred from Capital Redemption Reserve 24.00

Add : Transferred during the year 3,800.00 2,200.00

12,549.70 8,725.69

(F) Profit and Loss Account 1,550.59 403.71

18,171.91 9,695.60

43

SCHEDULES FORMING PART OF BALANCE SHEET AS AT 31ST MARCH, 2007Rs. in Lacs

2006 - 2007 2005 -2006

SCHEDULE - 3

SECURED LOANS

(See Note 2)

A. Loans and Advances from State Bank of

India/ Bank of Baroda/ State Bank of Saurashtra/

Exim Bank / UTI Bank

(a) Cash Credit / Demand Loan 20,809.61 11,774.93

(b) Term Loan 4,098.04 1,905.00

(Repayable within a year Rs. 898.06 Lacs

Previous year Rs. 1,905.00 Lacs)

B. Other Loans and Advances

(a) ICICI Bank Limited - Rupee Term Loan - 87.50

(Repayble within a year Rs. NIL (Previous year Rs. 87.50 Lacs)

(b) HDFC Bank Limited 224.00 625.00


Previous Year Rs. 625.00 Lacs )

(c) Bharat Overseas Bank Limited (IOB) 403.88 583.46

Term Loan (Repayable within a year Rs. 179.58 Lacs

Previous Year Rs. 179.64 Lacs)

(d) HP from Other Banks 126.60 85.60



25,662.13 15,061.49

SCHEDULE - 4

UNSECURED LOANS

A. Fixed and Loan Deposits 87.05 306.06



B. Foreign Currency Convertible Bonds 45.28 3,622.40

0.5% Series ‘A’ Bonds (Refer Note 5 in Schedule 17)

(100 Bonds of US $ 1000 each)

C. Short Term Loan from Banks : HDFC 432.84 432.84



D. Working Capital Demend Loan : Citi Bank NA 675.00 -

Repayable within a year Rs. 675.00 Lacs

Previous Year Rs. NIL)

E. Packing Credit Foreign Currency Loan : Citi Bank NA 391.45 -


Previous Year Rs. NIL)

F. Loans and Advances from Others : 1,043.70 1,121.49



G. Interest accrued and due on above 28.49 29.78

2,703.81 5,512.57

44

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45

SCHEDULES FORMING PART OF BALANCE SHEET AS AT 31ST MARCH, 2007 Rs. in Lacs

2006 - 2007 2005 - 2006

SCHEDULE - 6

INVESTMENTS (AT COST)

Long Term Investments :

Quoted : (Equity)

(1) Trade Investment 0.10 0.10

1,000 Shares (Previous year 1,000 Shares)

of Rs. 10/- each of VVN Mfg. and Investa Ltd

(Market value Rs. 0.10 Lacs

Previous year Rs. 0.10 Lacs)

(2) Non-Trade Investments 217.29 217.29

9,58,426 Shares (Previous year 9,58,426 Shares)

of Rs. 10 each of Eimco Elecon (India) Ltd.

(Market Value Rs. 2,729.11 Lacs

Previous year Rs. 3,776.20 Lacs)

1,16,880 Shares (Previous year 1,16,880 shares) 67.19 67.19

of Rs. 10 each of HDFC Ltd.

(Market value Rs. 1,776.99 Lacs

Previous year Rs.1,561.52 Lacs)

500 Shares (Previous year 500 Shares) 0.05 0.05

of Rs. 10 each of HDFC Bank Ltd.

(Market Value Rs. 4.75 Lacs

Previous year Rs. 3.87 Lacs)

10,989 Shares (Previous year 10,989 Shares) 21.19 21.19

of Rs. 10 each of Bank of Baroda

(Market Value Rs. 23.67 Lacs

Previous year Rs. 24.81 Lacs

Unquoted :

(1) Non-Trade investments (Equity)

5,70,010 Shares (Previous year 5,70,010

shares) of Rs. 10 each of Power Build Elecon Gears Ltd. 57.00 57.00

2,49,500 Shares (Previous year 2,49,500

shares) of Rs. 10 each of Wizard Fincap Ltd. 24.95 24.95

1,29,965 Shares (Previous year 1,29,965 shares ) of

Rs. 10 each of Ringspann Elecon (India) Ltd. 13.00 13.00

2,00,000 Shares (Previous year 12,000 shares)

of Rs.10 each of Eimco Elecon Electricals Ltd. 20.00 1.20

12,000 Shares (Previous year NIL)

of Rs.10 each of Madhuban Prayas Resorts Ltd. 1.20 -

Share Application Money

for 1,88,000 shares of Eimco Elecon Electricals Ltd. - 18.80


for 12,000 shares of Madhuban Prayas Resorts Ltd. - 1.20

46


2006 - 2007 2005 - 2006

(2) Investments in Foreign Companies

4,48,922 Shares (Previous year 4,48,922 shares)

of S$ 1 each of Elecon Singapore Pte. Ltd. 124.59 124.59

1,09,910 Shares (Previous year 67,500 shares)

of AUS $ 1 each of Elecon Australia Pty. Ltd. 31.45 18.42

2,02,750 Shares (Previous year 2,00,000 shares)

of Rand 1 each of Elecon Africa Pty. Ltd. 12.50 11.94

3 Shares (Previous year 3 Shares)

of AED 1,00,000 each of Elecon Middle East FZCO 36.31 36.31

49,942 Shares (Previous year NIL) of US$ 1

each of Elecon Engineering (Suzhou) Co. Ltd, Chaina 22.08 -


of Aus$ 1 each of Elecon Australia Pty. Ltd. - 13.02


of Rand 1 each of Elecon Africa Pty. Ltd. - 1.11


for shares of Elecon Middle East FZCO - 1.22

(3) Investments in Bonds / Funds

Investment in Reliance Equity Fund - 3,08,572 Units (previous year NIL) 35.00 -

(Market Value as on 31-03-07 Rs. 34.07 Lacs)

Investment in Principal Growth Fund - 3,47,658 Units (previous year NIL) 35.00 -


Investment in Franklin India Flexicap - 1,91,136 Units (previous year NIL) 35.00 -


Investment in Rural Elec. Corp. Bond 50.00 -

(4) Investments in Others

1 Share (Previous year 1 Share) of Rs. 100 each

of Charotar Gramoddhar Sahakari Mandal Limited 0.00 0.00

80 Shares (Previous year 80 Shares) of Rs. 10 each of

Karamsad Urban Co-operative Bank Limited 0.01 0.01

100 Shares (Previous year 100 Shares) of Rs. 10 each of

Anand Auto Vehicle Owners Co-operative Credit Society Ltd. 0.01 0.01

1 Share (Previous year 1 Share) of Rs. 10 each of

Anand Mercantile Co-operative Bank Limited 0.00 0.00

10 Shares (Previous year 10 shares) of Rs. 500 each

of Charotar Gas Sahakari Mandali Limited 0.05 0.05

803.97 628.66

Aggregate value of Quoted Investment Rs. 4,534.62 Lacs (Previous year Rs. 5,366.50 Lacs)

23,000 equity shares of HDFC Ltd. have been pledged as secuirty for availing short term unsecured loan from HDFC Bank.

47


2006 - 2007 2005 - 2006

SCHEDULE - 7

CURRENT ASSETS, LOANS AND ADVANCES

DETAILS OF INVENTORIES & DEBTORS

(A) Current Assets :

(I) Stock of Stores, Loose Tools, Dies

Mechanical, Electrical and Electronic

Spares (At Cost) (as taken, valued

and certified by the Management) 1,185.71 760.21

(II) Stock-in-Trade (as taken, valued and

certified by the Management)

(i) Raw Materials (at lower of

cost or net realisable value) 6,784.72 6,643.15

(ii) Semi-Finished Goods (at lower of

cost or net realisable value) 8,136.52 5,980.13

(iii) Finished Goods (at lower of

cost or net realisable value) 740.80 1,926.75

(iv) Goods-in-Transit (at Cost) 48.00 1,080.36

(III) Sundry Debtors (Unsecured, Considered Good) :

(i) Outstanding for a period exceeding six month 6,312.86 3,714.84

(ii) Others 32,485.74 17,702.75

(IV) Cash and Bank Balances:

(a) Cash on Hand 7.19 7.30

(b) Balance with Scheduled Banks:

(1) In Current Account 532.18 563.10

(2) Bank Deposit 717.00 1,890.00

(3) Unpaid Dividend Bank A/c. 19.53 10.29

(B) Loans and Advances (Unsecured Considered Good) :

(I) Loans to Staff 15.73 14.86

(II) Advances recoverable in Cash or

Kind or for value to be received 3,117.02 2,255.11

(III) Balance with Collector of Custom,

Port Trust, Excise etc. 830.87 792.41

60,933.87 43,341.26

48


2006 - 2007 2005 - 2006

SCHEDULE - 8

CURRENT LIABILITIES AND PROVISIONS

(A) Current Liabilities

Sundry Creditors 20,395.54 15,281.09

Advance from Customers 4,544.00 5,874.94

Dividend Warrants issued but not encashed (Unpaid) 19.53 11.56

Interest accrued but not due on Loans/

on Customers Advances 57.18 55.27

25,016.25 21,222.86

(B) Provisions

Income Tax Provisions (Net of Advance Tax) 62.66 98.06

Proposed Dividend 463.85 306.52

Tax on Proposed Dividend 78.83 42.99

25,621.59 21,670.43

SCHEDULE - 9

MISCELLANEOUS EXPENDITURE

(To the extent not written off )

Balance as per Last Year 229.77 467.25

Add : Addition during the year 51.93 -

281.70 467.25

Less : Written off during the year 238.43 237.48

43.27 229.77

49


2006 - 2007 2005 - 2006

SCHEDULE - 10

SALES

Material Handling Equipments 35,102.13 15,743.86

Gear Sales 28,669.45 21,017.08

WTG Sales & Electricity Generation 123.31 665.00

Export Sales 2,430.70 2,190.08

Miscellaneous Sales 567.04 261.57

66,892.63 39,877.59

SCHEDULE - 11

OTHER INCOME

Dividend Income 60.20 59.11

Interest Income 190.94 74.27

Profit on Sale of Assets 215.01 16.94

Miscellaneous Income 189.12 678.98

655.27 829.30

SCHEDULE - 12

CONSUMPTION OF MATERIALS, SUB-CONTRACTS, ERECTION AND OTHER CHARGES

Raw Materials Consumed 44,584.64 28,289.96

Stores, Tools and Spares Consumption 496.94 77.94

Sub-Contracts 3,805.84 2,032.89

Erection and other charges 198.90 308.15

Other manufacturing expenses 607.32 405.03

Technical Know How and Design Fees - 0.96

49,693.64 31,114.93

50


2006 - 2007 2005 - 2006

SCHEDULE - 13

EMPLOYEES’ REMUNERATION AND BENEFITS

Salaries and Wages (Incl. Manegarial Remuneration) 2,241.32 2,050.87

Contribution to Provident Fund 116.21 101.79

Employees’ Welfare Expenses 199.71 64.09

Employees’ Retirement Benefits 151.37 53.90

2,708.61 2,270.65

SCHEDULE - 14

ADMINISTRATIVE, SELLING AND GENERAL EXPENSES

Rent 8.60 2.88

Computer Software Charges 94.53 102.25

Rates, Taxes and Fees 219.87 122.84

Excise Duty (excluding duty recovered from Customers) 285.86 265.68

Repairs and Maintenance

Office 232.06 56.59

Plant & Machinery 487.05 454.31

Others 97.76 114.40

Insurance (net of recoveries) 109.67 79.89

Travelling Expenses 193.96 161.35

Bank Charges 520.58 422.19

Directors’ Fees 7.85 4.50

Packing, Forwarding & Distribution Expenses -

(Net of Recoveries) 713.13 427.92

Commission & Brokerage 3,246.49 1,947.40

Rectification Expenses 72.63 0.19

Bad Debts Written Off 976.07 329.00

Liquidated Damages 335.97 451.70

Advertisements & Sales Promotion Expenses 459.39 365.61

Audit Fees 7.00 3.93

Donations 71.43 7.07

Lease Rentals 9.28 1.46

Technical Inspection Consultancy Fees 14.72 209.36

Other Professional Consultancy Fees 342.14 187.93

General Administrative Charges 574.58 435.24

9,080.62 6,153.69

51


2006 - 2007 2005 - 2006

SCHEDULE - 15

INTEREST

On Fixed Period Loan 465.57 445.76

On Others 1,470.78 952.32

1,936.35 1,398.08

SCHEDULE - 16

INCREASE/DECREASE IN STOCK

Opening Stock :

Semi-finished Goods (WIP) 5,980.13 5,152.96

Finished Goods 1,926.75 994.97

7,906.88 6,147.93

Closing Stock :

Semi-finished Goods (WIP) 8,136.52 5,980.12

Finished Goods 740.80 1,926.75

8,877.32 7,906.87

(Increase)/Decrease in Stock (970.44) (1,758.94)

52

SCHEDULE FORMING PART OF THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT AS AT 31ST

MARCH 2007.

SCHEDULE – 17

NOTES ON ACCOUNTS

1. ACCOUNTING POLICIES

Significant accounting policies adopted in the preparation and presentation of the accounts are as under:

a) Basis of accounting

The accounts have been prepared on the basis of historical costs. The Company adopts the accrual system of

accounting and the accounts are prepared on a going concern concept.

b) Fixed Assets

Fixed Assets are recorded at cost of acquisition / construction less accumulated depreciation and impairment

losses, if any. Cost comprises of the purchase price any attributable cost of bringing the Assets to its working

condition for its intended use, but excluding CENVAT / Service Tax / VAT credit availed.

c) Borrowing Cost

Financing costs relating to deferred credits or borrowed funds attributable to construction or acquisition of fixed

assets for the period up to the completion of construction or acquisition of fixed assets are included in the cost of

the assets to which they relate.

d) Depreciation

Additions to Plant & Machinery made from the year 1977 are depreciated during the year on Straight Line

Method at the rates specified in Schedule XIV of the Companies Act, 1956.

In respect of all other Fixed Assets, depreciation is provided on Written Down Value Method, at the rates

specified in Schedule XIV of the Companies Act, 1956.

Depreciation is provided on pro-rata basis:

i) From the date of addition, in case of additions to Fixed Assets during the year and

ii) Up to the date of disposal, in case of disposal of Fixed Assets during the year.

e) Inventories

Inventories are valued at lower of cost or estimated net realizable value. The cost of inventories is arrived at

on the following basis:

Raw Materials and stores : Weighted Average Cost

Stock-in-process : Raw Materials at Weighted Average Cost & absorption of Labour and Overheads

Finished Goods : Raw Materials at Weighted Average Cost & absorption of Labour and Overheads

f ) Investments

Long Term Investments are stated at cost unless there is a permanent fall in their value (quoted shares) as at

the date of Balance Sheet.

Investment in foreign companies are stated at cost of acquisition.

53

g) Provisions, Contingent Liabilities and Contingent Assets

Provisions are recognized only when there is a present obligation as a result of past events and when a reliable

estimate of the amount of the obligation can be made. Contingent liability is disclosed for (i) possible obligation

which will be confirmed only by the future event not wholly within the control of the company or (ii) Present

obligations arising from past events where it is not probable that an outflow of resources will be required to settle

the obligation or a reliable estimate of the amount of the obligation can not be made. Contingent Assets are not

recognized in the financial statements.

h) Revenue recognition

i) Sale of goods is generally recognized on dispatch to customers and excludes amounts recovered towards

sales tax.

ii) Income on turnkey contracts is accounted on the basis of billings made on customers against mutually agreed

billing schedules.

Advances received from customers in respect of contracts, which are not in relation to work performed

thereon, are shown as “Advance from Customers”.

Amounts retained by customers until satisfaction of conditions specified in the contract for release of such

amounts are reflected as Sundry Debtors.

Credits are taken for claims in respect of cost escalation and extra work as and when and to the extent

admitted by customers.

Provision is made in full for claims or penalties payable arising out of delays in completion or from any other

causes as and when admitted.

iii) Interest revenues are recognized on a time proportion basis taking into account the amount outstanding and

the rate applicable.

iv) Dividend from investments in Shares are accounted for on the basis of the date of declaration of dividend

falling within the accounting year.

v) Consistent with past practice, export incentives are accounted for as and when the claims there of have been

admitted by the authorities.

i) Foreign Currency Transactions

i) Transactions in foreign currencies are generally recorded by applying to the foreign currency amount, the

exchange rate existing at the time of the transaction. However, where Forward Exchange Contracts are

entered into, the forward rates specified in the related Forward Exchange Contracts have been used as the

basis of measuring and reporting the transactions.

ii) Gains or losses on settlement, in a subsequent period of transactions entered into in an earlier period are

credited or charged to the Profit and Loss Account.

j) Deferred Revenue Expenditure

Expenditure (like VRS Compensation) having benefits of enduring nature are treated as deferred revenue

expenditure to be written off over a period as may be decided by the management.

k) Retirement benefits

Retirement benefits to employees are provided for by payments to Gratuity and Provident Funds.

i) The Gratuity liability is determined as a percentage of the annual wage bill specified by Life Insurance

Corporation of India under the Group Gratuity Scheme based on actuarial calculation. The Company is

providing for the prepaid amount allocable to the period falling in the next accounting year.

54

ii) The liability in respect of Superannuation benefits extended to eligible employees is contributed by the

company to Life Insurance Corporation of India against a Master Policy @ 15% of the basic Salary of all the

employees. The Company is providing for the outstanding Liability amount allocable to the broken period

till the balance sheet date.

iii) Liability in respect of Provident Fund is provided on actual liability basis.

iv) Liability on account of encashment of leave entitlement of employees in accordance with the rules of

the Company is provided on the basis of an actuarial valuation furnished by an independent actuary.

l) As regards Insurance premium and Guarantee commission, the Company is providing for prepaid amount

allocable to period falling in the next accounting year.

m) Impairment of Assets

An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value. An impairment

loss is charged to the profit & loss account in the year in which the asset is identified as impaired. The

impairment loss recognized in prior periods is reversed if there has been a change in the estimate of

recoverable amount.

2. The loans referred to in Schedule 3 are secured as under

i) Fund Based and Non fund based Working Capital Facilities [3A(a)] granted by State Bank of India Consortium

Banks [State Bank of India (SBI), Bank of Baroda (BOB), State Bank of Saurashtra (SBS), Exim Bank (Exim) and

UTI Bank Ltd.] are secured by an equitable mortgage on the immovable properties and hypothecation of

movable plant and machinery and assets of the Company’s Materials Handling Equipment Division excluding

certain assets specifically/ exclusively charged to other banks/ financial institutions but including the whole of

the Company’s Currents Assets, inventories, receivables and book debts ranking pari passu inter se in respect

of working capital facilities and guarantees issued by them in favour of various clients of the Company. This

is further secured by a second pari passu charge over immovable assets of Gear Division.

ii) Short Term Loan obtained from HDFC Bank Ltd. [3B(b)] is secured by way of pledge of 23,000 Equity Shares

of Rs. 10/- each of HDFC Ltd.

iii) Term Loan obtained from Indian Overseas Bank (erstwhile known as Bharat Overseas Bank Ltd.) for import of

machinery [3B(c)] is secured by exclusive charge by way of hypothecation on specific machinery for which

payment were made out of the term loan.

iv) Term Loan obtained from State Bank of India (SBI) , Bank of Baroda (BOB) and Exim Bank for import of

machinery [3A(b)] is secured by exclusive charge by way of Hypothecation on specific machinery for which

payment were made out of the term loan.

v) Capital assets acquired on HP Loans from Banks [3B(d)] are secured by exclusive charge on respective assets

purchased by those loans.

3. Contingent Liabilities

No provision has been made in the accounts in respect of the following:

i) Disputed Excise Duty Rs. 108.18 Lacs (previous year Rs. 145.87 Lacs), against demand notices received so far.

ii) Disputed Sales Tax/ Works Contract Tax Rs. 563.85 Lacs (previous year Rs. 693.24 Lacs).

55

iii) In respect of disputed Income Tax demands:

� Disputed by Company Rs. 34.65 Lacs (previous year Rs. 67.80 Lacs)

� Disputed by Income Tax Authorities NIL (previous year NIL)

iv) Notified Area Tax Rs. NIL (Previous year Rs. 221.68 Lacs). Vitthal Udyognagar Industrial Association had

represented the case on behalf of all member unit to the Government Authorities.

v) Guarantees issued by the Company’s Bankers Rs. 15,307.96 Lacs (previous year Rs. 11,791.02 Lacs)

vi) Liability for export obligation under Export Packing Credit Gurantee Rs. 13,995.99 Lacs (previous year Rs.

14,104.12 Lacs).

vii) Sales Bills discounted under LC with Banks Rs.3,697.97 Lacs (previous year Rs. 1,264.31 Lacs).

viii) Corporate Bank Guarantees given on account of advance received from customers Rs. 118.81 Lacs (Previous

Year Rs. 286.94 Lacs) and on account of performance Rs. 1,195.94 Lacs (Previous Year Rs. 1,131.11 Lacs)

4. Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 1,350.09 Lacs

(previous year Rs. 2,613.29 Lacs).

5. Out of US $ 9 million worth of FCCB (9,000 bonds of US$ 1,000 each) issued during the year 2005-06, a total of

8,900 numbers of bonds of US $ 1,000 each aggregating to US $ 8.9 million (during the year US $ 7.9 million) have

been converted into 89,00,000 equity shares of Rs. 2 each till the end of the financial year 2006-07. The agreed

exchange conversion rate as per terms of issues is Rs. 45.28 = US $ 1.00.

6. Extraordinary items

i) Compensation under Voluntary Retirement Scheme amounting to Rs. 968.76 Lacs paid during the earlier years

was deferred and to be written off over a period of 5 years. Out of this, during the year Rs. 193.77 Lacs as

last Installment (Previous year Rs. 201.48 Lacs) has been charged to Profit & Loss Account.

ii) During the year 2002-03, the Company had made a lump sum payment of Rs. 180 Lacs to LIC on account of

shortfall in the Corpus of Group Gratuity Fund. This was on account of employees opting under Voluntary

Retirement Scheme. The same had been treated as Deferred Revenue Expenditure. Out of this Rs. 36 Lacs

(Previous year Rs. 36 Lacs.) has been charged to Profit & Loss Account being last installment.

iii) Technical Know how fees paid to Overseas Collaborators amounting Rs 51.90 Lacs in pursuance of Technology

Know how Agreement has been treated as Deferred Revenue Expenditure, to be written off over a period of

6 years starting from 2006-07. Out of this Rs 8.65 Lacs (previous year NIL) has been charged to Profit & Loss

Account.

iv) Profit on sale of assets under the head of Other income in Profit & Loss account includes an amount of Rs.

127.68 Lacs being profit on sale of Land & Building at Neyveli.

7. Sundry Debtors more than 6 months include an amount of Rs. 55.05 Crores as retention money with various customers

against big turnkey contracts as per the terms of agreement, and are being received after successful completion of

the respective projects from time to time.

56

8. Sundry Creditors include Rs. 677.53 Lacs (previous year Rs. 223.68 Lacs), being the total outstanding dues of Small Scale

Industrial Undertakings for a period of more than 30 days.

The names of Small Scale Industrial undertakings are as follows:

Name of SSI Suppliers Name of SSI Suppliers

A G System Controls Megha Engg. Works

A Bond Strands Metal Treat Industries

Accumax Engineering Works Micro Engineers

Air Flow Engineers Microfine Products

Akvim Industries Monarch Rubber Industries

Allied Engineering Co. Navin Engg. Works

Amin Panels Nikko Ind. Products Pvt. Ltd.

Anuj Industries Osaka Electronics Pvt. Ltd.

B. R. Electronic Packme Industries

Baroda Cap Liners Patt O Cast

Bhavik Enterprise Perfect Boaring Pvt. Ltd.

Bright Bar Mfg Co. Pima Controls Pvt. Ltd.

Bright Steel Mac Fabrics Positronics Controls Systems

C D Engineers Positronics Pvt. Ltd.

C P Forge Power Grip (I) Fasteners Pvt. Ltd

Control Equipments Mfg. Co. Quality Eng. Works

Deep Engineering Works Raj Engineering Works

Delimon Protos (I) Pvt. Ltd. Ravi Industries

Dipco Engineering Co. Rexspro Industries

Elemech Engineers Ritul Engineering Co.

Fine Cast (Guj.) Pvt. Ltd. Sabari Steel Fabricators

Forging India Iron & Steel Co. Shreenathji Rubber Industries

Gujarat Foundries Samarth Engineers

Gujarat Plug In Devices Pvt. Ltd. Sandesh Engineering Works

Heliflex Hydraulic & Engineering Shayona Industries

Hifa Plastic Sudarshan Gears

Ind-Tech Engineers Sunrise Engineering Co.

JK Springs Sunrise Engineers

Jyoti Pattern Works Swastik Rub Chem

K. C. Industries Techni Aids

Kavil Engineering Works Unique Forgings

Mahavir Casting Vinod Industries

Manji Engineering Co. Vrunda Engineering Co.

Marigold Paints WI Heat Treaters & Consultants

Masta Machinery Stores Well Bore Engineering Co.

Max Engineering & Marketing Co. Windston Springs Pvt. Ltd.

Maxwell Engg. Co. WRC Engineering

57

As per the past practice and considering the terms & conditions with most of the Small & Medium Suppliers, no claim for

Interest has been lodged with the Company and therefore not provided for in the books of account as at the end of the

financial year 2006-07. The payment schedule to such suppliers has been mutually revised from time to time resulting in

no overdue amount and therefore no supplier is eligible for any overdue interest. In the circumstances, the details require

to be furnished under section 22 of Micro, Small and Medium Enterprises Development Act, 2006, has not been compiled

and furnished.

9. Payment to Auditors includes fees paid / adjusted as payable to Auditors as follows:

i) As Auditor - Rs. 7.00 Lacs (previous year Rs. 3.50 Lacs).

ii) As Advisor - For Taxation Matters Rs. 0.28 Lacs (previous year Rs. 0.65 Lacs).

- In any other capacity Rs. 4.15 Lacs (previous year Rs. 3.26 Lacs).

- Re-imbursement of out of pocket exp. Rs. 0.50 Lacs (previous year Rs. 0.67 Lacs).

- For tax audit Rs. 1.40 Lacs (previous year Rs. 0.79 Lacs).

- Besides above an amount of Rs. 0.74 Lacs is paid for handling Income Tax matters

to a firm in which one of the partner is interested.

The above figures do not include Service Tax of Rs. 1.03 Lacs (Previous Year Rs. 0.51 Lacs).

10. i) The sales are shown net of Sales Tax amounting to Rs. 2,532.30 Lacs.

ii) The Sales of MHE division include Deemed Export Sales of Rs 583.78 (previous year Rs. 728.83 Lacs). The Gross

Export Sales for the year is Rs 2,430.70 Lacs (previous year Rs. 2,918.91 Lacs).

11. Managerial Remuneration

i) Managerial Remuneration under Section 198 of the Companies Act, 1956

(Rs. in Lacs)

Sr. Particulars 2006 - 2007 2005 - 2006

No.

i) Remuneration 66.15 72.28

ii) Perquisite 0.03 0.15

iii) Commission on Net Profit 284.00 284.00

iv) Contribution towards PF and Gratuity 24.11 8.85

Total 374.29 365.28

ii) Computation of Net Profits in accordance with Section 309(5) of the Companies Act, 1956:

(Rs. in Lacs)

Particulars 2006 - 2007 2005 - 2006

Profit as per Profit and Loss Account 8,440.75 4097.78

Add : Managerial Remuneration : 374.29 365.28

Compensation for VRS/Gratuity 229.77 237.48

Directors’ Fees 7.85 4.50

Total 9,052.66 4705.04

Less : Capital Profit on Sales of Fixed Assets 215.01 16.94

8,837.65 4688.10

58

12. Information about Business Segment Rs. in Lacs

2006 - 2007 2005 - 2006

Segment Revenue

Material Handling Equipment 44,843.49 22,596.11

Transmission Equipment 31,345.21 23,186.35

Total 76,188.70 45,782.46

Less: Inter Segment Revenue 3,878.08 1,534.38

Net Sales / Income from Operation 72,310.62 44,248.08

Segment Profit & Loss Before Tax & Interest



Total 11,950.83 6,716.31

Less : a) Interest 1,936.35 1,398.08

b) Unallocated Corporate Expenses (net of un-allocable income) 1,573.73 1,220.45

Total Profit Before Tax 8,440.75 4,097.78

Capital Employed



Total 47,986.04 17,144.64

Notes

a. The Company has disclosed Business Segment as primary segment.

b. Segments have been identified and reported taking into account the nature of products and services, the differing

risks and returns, the organization structure and the internal financial reporting systems.

c. The Segment Revenue, Results, Assets and Liability include the respective amounts identifiable to each of the

segment and amounts allocated on a reasonable basis.

d. Inter Segment Transfer Pricing Policy – the Gear supplied to Material Handling Equipment Division is based on

cost.

13. Deferred Taxation

Deferred Tax Assets and Liabilities are recognized as per Accounting Standard AS-22 on Accounting for Taxes on Income,

issued by the Institute of Chartered Accountants of India.

During the year 2006-07, the Deferred tax assets and liabilities comprise of tax effect of following timing differences:

(Rs. in Lacs)

2006 - 2007 2005 - 2006

Def. Tax Def. Tax Def. Tax Def. Tax

Liability Assets Liability Assets

Difference between book & Tax W. D. V. 1,752.51 - 1,236.76 -

Disallowance under the Income Tax Act. - 75.56 - 26.24

1,752.51 75.56 1,236.76 26.24

Net Deferred Tax Liability 1,676.95 1,210.52

59

14. Basic and Diluted Earnings per share (EPS)

(Rs. in Lacs)

2006 - 2007 2005 - 2006

i) Net Profit for Basic Earnings Per Share as per P & L A/c.

- Before Extra Ordinary Items 5,720.07 3,144.00

- After Extra Ordinary Items 5,490.30 2,788.36

Adjustments for the purpose of Diluted EPS

- Interest on FCCB (Net of Tax) 1.15 0.42

Net Profit for Diluted Earnings Per Share

- Before Extra Ordinary Items 5,720.07 3,144.42

- After Extra Ordinary Items 5,491.45 2,788.78

ii) Weighted average number of equity shares :

� No. of Shares at the beginning of the year 2,85,38,915 56,47,410

� No. of Shares issued on conversion of FCCB of 1.0 mn. — 60,373

� No. of Potential Equity Shares issued on conversion of

FCCB of US$ 7.9 mn. 23,84,735 4,82,984

� Weighted average Shares for:

- Basic Earnings Per Share 2,99,97,170 56,48,072

- Diluted Earnings Per Share 3,00,26,861 57,99,252

iii) Earning Per Share

� Before Extra Ordinary Item

- Basic (Rs.) 19.07 55.67

- Diluted (Rs.) 19.05 54.22

� After Extra Ordinary Item

- Basic (Rs.) 18.30 49.37

- Diluted (Rs.) 18.29 48.09

iv) Face Value Per Share (Rs.) 2.00 10.00

15. Related party disclosure

Related Party disclosure as required by AS-18, are given below:

i) Relationship:

a) Subsidiary of the Company :

� NIL

b) Associates and Joint Ventures� Power Build Elecon Gears Limited� PWH Materials Handling Limited� Wizard Fincap Limited� Ringspann Elecon (I) Limited� Eimco Elecon (I) Limited

c) Individual having control/ significant influence� Shri Prayasvin B. Patel

d) Key management Personnel

� Shri Prayasvin B. Patel

60

e) Enterprises over which (c) or (d) above have significant influence

� Bipra Investments & Trusts Private Limited

� Devkishan Investments Private Limited

� K. B. Investments Private Limited

� Elecon Information Technology Limited

� Emtici Engineering Limited

� Prayas Castings Limited

� VVN Mfg. & Investa Limited

� Speciality Wood Pack Private Limited

� Power Build Limited

� Kirloskar Power Build Gears Limited

� Akaaish Mechatronics Limited

� Narmada Travels Limited

� Elecon Engineering Suzhou Co. Limited

� Elecon Australia Pty. Limited

� Elecon Africa Pty. Limited

� Elecon Singapore Pte. Limited

� Elecon Middle East FZCO

ii. The following transactions were carried out with the related parties in the ordinary course of business.

(Rs. in Lacs)

Sr. Nature of Transaction (a) (b) (e)

No. 2006 - 2005 - 2006 - 2005 - 2006 - 2005 -

2007 2006 2007 2006 2007 2006

1. Purchase of Material/fin. — — 549.38 162.85 6,389.87 3,350.98

Goods

2. Job work Income from — — 15.15 41.52 46.11 45.61

other Co.

3. Job work Expenses to — — 117.85 44.70 2,311.14 512.01

other Co.

4. Sale of Fin. Goods/ — — 191.10 305.39 — 169.98

Consumable Stores

5. Purchase of Fixed Assets — — 200.00 — — 37.39

6. Sale of Fixed Assets — — 2.83 — 14.78 97.11

7. Expenses Charged to — — 23.03 18.96 162.15 116.53

other Co.

8. Exp. Charged by other Co. — — 43.25 0.14 349.16 127.80

9. Sales Commission — — — — 2,968.17 1,339.74

10. Deposit/ Loan taken — — — — — —

11. Deposit/ Loan given — — — — 95.72 440.97

12. Int. on above Loan/ Deposit — — — 14.67 5.74 —

13. Subscribe to Share Capital. — — — — — —

14. Sale of Shares of Co. — — — — — —

15. Others — — 54.98 21.79 26.87 15.34

Sr. No. Nature of Transaction Transaction with (c) & (d)

2006 - 2007 2005 - 2006

1. Remuneration 374.29 365.28

61

16. BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

I. Registration Details

Registration No. 0 1 0 8 2 State Code 0 4

Balance Sheet Date 3 1 - 0 3 - 2 0 0 7Date Date Month Year

II. Capital raised during the year (Amount in Rs. Thousands)

Public Issue N I L Rights issue N I L

Bonus issue N I L Private placement 4 7 6 9

(Conversion of FCCB into Shares)

III. Position of mobilisation and deployment of funds (Amount in Rs. Thousands)

Total Liabilities 4 8 8 3 3 2 7 Total Assets 4 8 8 3 3 2 7

Sources of Funds

Paid-up Capital 6 1 8 4 7 Reserve & Surplus 1 8 1 7 1 9 1

Secured Loans 2 5 6 6 2 1 3 Un secured Loans 2 7 0 3 8 0

Deferred Tax Liability 1 6 7 7 1 7

Application of Funds

Net Fixed Assets 1 2 6 7 3 7 5 Investments 8 0 3 9 7

Net Current Assets 3 5 3 1 2 2 8 Misc. Expenditure 4 3 2 7

IV. Performance of the Company (Amount in Rs. Thousands)

Turnover 7 2 9 6 5 8 8 Total Expenditure 6 4 2 9 5 3 6

Profit/Loss Profit/Loss

Before Tax + 8 4 4 0 7 5 After Tax + 5 4 9 0 3 0

(Please tick Appropriate box + for Profit – for Loss)

Earning per Dividend

Share in Rs. 1 8 . 3 0 Rate % + 7 5

(Basic after extraordinary item)

V. Generic names of Three Principal Products / Services of the Company (As per monetary terms)

Item Code No. Product Descript

843139.01 ELEVATORS, CONVEYORS & MOVING MACHINERY (Conveying Equipments)

842299.00 GEARS (Reduction Gears)

847420.02 CRUSHERS (Crushers, Screens, Feeders)

62

17. Information pursuant to the provisions of paragraph 3, 4C and 4D of Part II of Schedule VI to the

Companies Act, 1956.2006 - 2007 2005 - 2006

i) Turnover Unit / Value Unit / Value

(Certified by the Management) Quantity Rs. in Lacs Quantity Rs. in Lacs

� Conveying Equipments 1,004 16,690.00 728 2,574.53

Tonnes Tonnes

� Wagon Tippler & Dust Trapping 16 Nos. 5,516.00 12 Nos. 4,623.19

Equipments

� Crushers, Screens & Feeders 352 2,578.00 442 2,126.79

Tonnes Tonnes

� Specialised Conveying Equipment, 1,055 8,963.00 1,428 6,000.96

Stacker Reclaimers, Blender Tonnes Tonnes

Reclaimers, Rotary Disc Loaders

� Reduction Gears & Geared Motors 35,893 31,352.46 27,802 23,035.86

Nos. Nos.

� Wagon Marshalling Equipment 93 916.00 158 619.70

Tonnes Tonnes

� EOT & Goliath Cranes — — — —

� Wind Turbine Generators — — 2 Nos. 5,86.00

� Axles 38 Nos. 82.93 — —

� Others — 794.24 — 310.57

TOTAL 66,892.63 39,877.60

2006 - 2007 2005 - 2006

ii) Raw Materials Consumed Unit / Value Unit / Value

Quantity Rs. in Lacs Quantity Rs. in Lacs

� Iron & Steel 17,690 10,746.96 16,493 7,582.83Tonnes Tonnes

� Pipes & Tubes 1,36,863 1,065.39 76,570 304.29Mtrs. Mtrs.

� Forgings — 4,708.79 — 2,626.00

� Bearings 4,98,966 5,888.98 3,38,264 4,061.69Nos. Nos.

� Beltings 7,363 303.00 5,735 227.74Mtrs. Mtrs.

� Electricals — 1,000.89 — 1,364.06

� Castings 3,253 3,296.24 2,468 2,426.24Tonnes Tonnes

� Other Components — 17,574.39 — 9,697.11

TOTAL 44,584.64 28,289.96

63

iii) Stocks

2006 - 2007 2005 - 2006

Opening stock Closing stock Opening stock Closing stock

Unit Value Unit Value Unit Value Unit Value

Nos. Rs. in Lacs Nos. Rs. in Lacs Nos. Rs. in Lacs Nos. Rs. in Lacs

Reduction Gears & 4,098 1,926.75 1,281 740.80 4,855 9,94.98 4,098 1,926.75

Geared motors

iv) Capacity and Production 2006 - 2007 2005 - 2006

(Certified by the Management) Capacity Capacity

Unit Licensed Installed Actual Licensed Installed Actual

Produc Produc-

tion+ tion +

� Conveying Equipments Tonnes 28,000 15,000 1,004 28,000 15,000 728

� Wagon Tippler & Nos. 16 Sets 16 Sets 16 16 Sets 16 Sets 12

Dust Trapping Equipment each each each each

� Crushers, Screens & Feeders Tonnes 1,500 1,000 352 1,500 1,000 442

� Specialised Conveying

Equipment, Stacker Reclaimers,

Blender Reclaimers,

Rotary Disc Loaders etc. Tonnes 10,000 3,000 1,055 10,000 3,000 1,428

� Reduction Gears and Geared Motors Nos. 55,000 55,000 35,136 34,700 45,000 27,045

� Wagon Marshalling Equipment Tonnes 300 300 93 300 300 158

� EOT Cranes & Goliath Cranes Nos. 230 100 — 230 100 16@

� Wind Turbine Generators Nos. 2,500 50 — 2,500 50 —

� Axles Nos. 1,500 1,500 38 — — —

@ For Captive consumption

+ As per DGTD return.

Rs. in Lacs

v) Value of Imports on C.I.F. basis 2006 - 2007 2005 - 2006

Raw Material 4,673.73 4,417.27

Stores and Spares 212.93 211.79

Capital Goods 1,938.52 2,936.91

vi) Expenditure in Foreign Currency

Interest 188.82 270.53

Technical know how 8.65 35.86

Technical Consultancy Fees — 58.80

Legal and Professional fees 7.95 122.23

Others 192.52 156.02

TOTAL 397.94 643.44

64

vii) Value of Raw Materials consumed

2006 - 2007 2005 - 2006

Value % of Total Value % of Total

Rs. in Lacs Consum. Rs. in Lacs Consum.

Imported 6,484.24 16 5,164.82 18

Indigenous 38,100.40 84 23,125.14 82

TOTAL 44,584.64 100 28,289.96 100

viii) Value of Stores and Spares Consumed

2006 - 2007 2005 - 2006

Value % of Total Value % of Total

Rs. in Lacs Consum. Rs. in Lacs Consum.

Imported 132.81 27 205.24 32

Indigenous 364.13 73 441.42 68

TOTAL 496.94 100 646.66 100

Rs. in Lacs

2006 - 2007 2005 - 2006

ix) Amount remitted during the year in Foreign

Currency on account of Dividend NIL NIL

x) Earnings in Foreign Exchange

Export of goods on FOB Basis

� Reduction Gears 2,334.83 2,015.18

� Conveying Equipments 95.87 169.63

18. Figures of previous year are regrouped and recast wherever necessary.

19. Schedules 1 to 17 form an integral part of Balance Sheet and Profit & Loss Account.

Signature to Notes on Balance Sheet and Profit & Loss Account and Schedules 1 to 17.



THAKOREBHAI-SHIRISH DESAI & BUTALA(Division of Thacker Butala Desai) P. B. Patel H. S. ParikhChartered Accountants Chairman and Director

Managing Director

M. T. Desai N. M. AdhyaruPartner Company SecretaryM. No. 30911

Place : Navsari Place : MumbaiDate : 16-06-2007 Date : 15-06-2007

65

N O T I C E

NOTICE IS HEREBY GIVEN THAT the Forty-Seventh Annual

General Meeting of members of Elecon Engineering

Company Limited will be held in the Audio Visual Hall of the

Company situated near Gear Division of the Company at

Anand Sojitra Road, Vallabh Vidyanagar, Gujarat on Thursday,

the 13th day of September, 2007 at 11.00 a. m. to transact the

following business:

ORDINARY BUSINESS

1. To receive, consider and adopt the Audited Balance Sheet as at

31st

March 2007, Profit & Loss Account for the year ended on

that date and the Report of Board of Directors and Auditors

thereon;

2. To declare Dividend on Equity Shares;

3. To appoint a Director in place of Shri Upendra M. Patel, who

retires by rotation and being eligible, offers himself for re-

appointment;

4. To appoint a Director in place of Shri Ashok J. Patel, who retires

by rotation and being eligible, offers himself for re-

appointment;

5. To consider and if thought fit, to pass with or without

modifications, the following resolution as an Ordinary

Resolution:

“RESOLVED THAT pursuant to the provisions of the Companies

Act, 1956 and other applicable provisions, M/s. Thakorebhai

Shirish Desai & Butala, Division of Thacker Butala Desai,

Chartered Accountants, be and are hereby appointed as

Auditors of the Company to hold office from the conclusion of

this Annual General Meeting until the conclusion of next

Annual General Meeting of the Company at such remuneration

plus Service tax at the applicable rate, from time to time, plus

travelling and out-of-pocket expenses incurred by them for the

purpose of audit of the Company’s accounts, exclusive of any

remuneration, fees or charges payable to them for rendering

any services that may be rendered by them to the Company

from time to time other than in the capacity of Auditors as may

be fixed by the Chairman and Managing Director of the

Company.”

SPECIAL BUSINESS


modification, the following resolution as an Ordinary

Resolution:-

“RESOLVED THAT in accordance with the provision of Section

293(1)(e) and other applicable provisions if any, of the

Companies Act, 1956 the Board of Directors of the Company be

and is hereby authorised to contribute on behalf of the

Company to charitable and other funds not directly relating to

the business of the Company or welfare of its employees, any

amount exceeding 5% of the average net profit of the

Company as determined in accordance with the provisions of

Section 349 and 350 of the Companies Act, 1956 during the

three financial years immediately proceeding or Rs. 10 Crores,

whichever is higher.”


modification, the following resolution as a Special Resolution:-

“RESOLVED THAT :

(a) Pursuant to Provisions of Section 78, 81(1A) and other

applicable provisions, if any, of the Companies Act, 1956 and

Article 181 of the Articles of Association of the Company, and

subject to the Guidelines issued by the Securities and Exchange

Board of India, and other approvals as necessary, consent of the

Members be and is hereby accorded to the Board of Directors

of the Company to capitalize such amount, out of the

Capitalisation of Reserve and Securities Premium Account of

the Company, for issue of fully paid Bonus Shares of the face

value of Rs. 2/- each, to the holders of the existing Equity Shares

of the Company, on such Record Date as may be fixed by the

Board in this regard in the proportion of two new equity shares

for every one equity share to which the shareholder is entitled.

(b) The bonus share shall be subject to the Memorandum and

Articles of Association of the Company and shall rank pari passu

in all respect with and carry the same right as the existing

equity share and shall be entitled to participate in full in any

dividend declared after the allotment of bonus share.

(c) No letter of allotment shall be issued to the allottee to the

bonus share instead, share certificate will be dispatched to the

share holders who holds the existing equity share in physical

form and the respective beneficiary account will be credited

for the bonus share for shareholder who holds the existing

equity shares in dematerialised/electronic form within

reasonable period.

(d) In respect of fraction entitlement, the bonus share shall be

consolidated and allotted to any person appointed by the Board

in trust, on the understanding that such person shall sell the

bonus shares at such price or prices to such persons as they may

deem fit as soon as practicable after the allotment of such

bonus shares and pay to the Company the net sale proceeds

(after deducting all expenses relating to such sell) which

proceeds shall be distributed by the Company pro-rata

amongst the shareholders entitled thereto.

(e) The Board of Directors (which shall include any Committee, the

Board may constitute or any Director/Officer authorised by the

Board for this purpose) be and is hereby authorised to settle all

matters arising out of and incidental to the above mentioned

issue of bonus equity shares and further take all actions as it may

in its absolute discretion deem necessary to give effect to the

resolution.”



“RESOLVED THAT in addition to the resolution passed earlier

under Section 81(1A) if any, pursuant to Section 81(1A) and any

other applicable provisions of the Companies Act, 1956 and

relevant provisions of the Memorandum and Articles of

Association of the Company and the Listing Agreement

entered into by the Company, subject to any necessary

approval, consent, permission and/or sanction of the

Government of India, Reserve Bank of India and any other

appropriate authorities, institutions or bodies, and subject to

such conditions as may be prescribed by any of them in

66

granting any such approval, consent, permission or sanction,

the Board of Directors of the Company and duly authorized

Committee thereof, for the time being exercising the powers

conferred on the Board by this Resolution be and is hereby

authorized on behalf of the Company to issue and allot, in the

course of international offerings in one or more foreign

markets, securities in the form of American/Global Depository

Receipts, Foreign Currency Convertible Bonds, Warrants or any

other permitted securities/instruments convertible into equity

shares at the option of the Company and/or holder of the

security and/or securities linked to equity shares; any

instruments or securities representing either equity Shares or

convertible securities (hereinafter referred to as “Securities”)

subscribed in foreign currency(ies) through prospectus and/or

offer letter and/or offering circular and/or any other

documents as may be required, to Foreign Investors, Foreign

Institutional Investors, Non-Resident Indians, Corporate Bodies,

Trusts, Mutual Funds, Banks, Insurance Companies, Pension

Funds, Individuals and/or Trustees and/or Stabilization Agents

or otherwise (whether institutions and/or incorporated bodies

whether incorporated in india or abroad and/or individuals or

otherwise, and whether or not such investors are promoters/

shareholders/members of the Company), for an aggregate

value of, an amount in foreign currency not exceeding

equivalent Rs. 500 Crores, in addition to the amount for which

approval has already been given earlier by the members, such

issue and allotment to be made at such time or times, in such

tranche or tranches, at such price or prices, through public issue

and/or on private placement or preferential allotment basis or

in such manner as the Board may, in its discretion think fit, in

consultation with the advisors, lead manager and underwriters,

and otherwise on such terms and conditions as may be decided

and deemed appropriate by the Board at the time of issue or

allotment.

RESOLVED FURTHER THAT without prejudice to the

generality of the above, the aforesaid issue of securities may

have all or any terms or combination of terms in accordance

with international practice including but not limited to

conditions in relation to payment of interest, additional

interest, premia or redemption, prepayment and any other

debt service payments whatsoever and all such terms as are

provided in international offerings of this nature including

terms for issue of additional equity shares or variation of the

conversion price of the Security during the duration of the

Security, and that the Company is also entitled to enter into and

execute all such agreements/arrangements with any financial/

legal advisors, lead managers, company lead manager,

underwriters, guarantors, depositories, trustees, custodians and

all such agencies as may be involved or concerned in such

offerings of Securities and to remunerate all such agencies

including the payment of commission, brokerage, fees or the

like and also to seek the listing of such Security or Securities

representing the same in one or more international stock

exchanges.

RESOLVED FURTHER THAT the Company and/or any agency

or body authorized by the Company may issue Global

Certificates representing the bonds with such features and

attributes as are prevalent in international capital markets for

instruments of this nature and to provide for the tradability or

free transferability thereof as per the international practices

and regulations and under the forms and practices prevalent in

the international markets.

RESOLVED FURTHER THAT the Secutities issued as above

shall be deemed to have been made in the foreign market and/

or at the place of issue of the Secutiry in the international

market and shall be governed by such law, as the Board may

decide.

RESOLVED FURTHER THAT the Board be and is hereby

authorized to issue and allot such number of equity shares as

may be required to be issued and allotted upon conversion of

any Securities referred to in above paragraph or as may be

necessary in accordance with the terms of the offering, all such

shares being pari passu with the existing equity shares of the

Company in all respects except such rights as to dividend as may

be provided under the terms of the issue and in the offer

document.

RESOLVED FURTHER THAT such Security may be redeemed in

a manner provided in the terms of the issue.

RESOLVED FURTHER THAT the Borad is empowered to raise

part funds in the overseas market and part funds in the

domestic market pursuant to Resolution 9 below so that the

Company has opportunities of both markets in combination for

raising funds aggregating/equivalent to Rs. 500 Crores, in

addition to the amout for which approval has already been

given earlier by the members.

RESOLVED FURTHER THAT for the purpose of giving effect to

any issue or allotment of equity shares or Securities or

instruments or Securities representing the same, as described

in above paragraph, the Board be and is hereby authorized on

behalf of the Comapny to do all such acts, deeds, matters and

things as it may at its discretion deem necessary or desirable

for such purpose including without limitation the entering into

of underwriting, marketing and depository agreements/

arrangements and with power on behalf of the Company to

settle any questions, difficulties or doubts that may arise in

regard to any such issue or allotment as it may in its absolute

discretion deem fit.


authorized to file the requisite registration application and

other documents with the Stock Exchanges or such other

authorities or institutions in India and/or abroad for this

purpose.


authorized to delegate all or any of its powers herein

conferred to a Committee of the Board and/or the Chairman

and Managing Director along with the aurthority to them to

further delegate all or any of such powers to any one or more

Executives of the Company, in order to give effect to the

aforesaid resolution.“



67

“RESOLVED THAT in addition to the resolution passed under

Section 81(1A) if any, pursuant to Section 81(1A) and any other

applicable provisions of the Companies Act, 1956 and relevant

provisions of the Memorandum and Articles of Association of

the Company and the Listing Agreement entered into by the

Company subject to any necessary approval, consent,

permission and/or sanction of the Government of India,

Reserve Bank of India and any other appropriate authorities,

institutions or bodies, and subject to such conditions as may be

prescribed by any of them in granting any such approval,

consent, permission or sanction, the Board of Directors of the

Company and duly authorized Committee thereof; for the time

being exercising the powers conferred on the Board by this

Resolution be and is hereby authorized on behalf of the

Company to issue and allot, in the course of domestic markets,

equity shares/warrants/preference shares and/or any securities

convertible into equity shares at the option of the Company

and/or holder of the security and/or securities linked to equity

shares any instruments or securities representing either equity

shares or convertible securities (hereinafter referred to as

“Securities”) subscribed in Indian currency(ies) through

prospectus and/or offer letter and/or offering circular and/or

book building scheme or any other documents as may be

required, to Domestic Individuals or to Individuals and/or

Trustees and/or Promoters and/or Stabilization Agents or

otherwise (whether institutions and/or incorporated bodies

whether incorporated in India or abroad and/or individuals or

otherwise, and whether or not such investors are promoters/

shareholders/members of the Company), for an aggregate

amount not exceeding Rs. 500 Crores, in addition to the

amount for which approval has already been given earlier by

the members, such issue and allotment to be made at such time

or times, in such tranche or tranches, at such price or prices, at

a discount or premium to market price or prices, through

public issue, right issue and/or on a private placement and/or

preferential allotment basis and/or in such manner as the Board

may, in its discretion think fit, in consultation with the advisors,

lead manager and Underwriters and otherwise on such terms

and conditions as may be decided and deemed appropriate by

the Board at the time of issue or allotment.

RESOLVED FURTHER THAT without prejudice to the

generality of the above, the aforesaid issue of Securities may

have all or any terms or combination of terms in accordance

with prevalent market practice including but not limited to

conditions in relation to payment of interest, additional

interest, premia or redemption, prepayment and any other

debt service payments whatsoever and all such terms as are

provided in domestic offerings of this nature including terms

for issue of additional equity shares or variation of the Security,

and that the Company is also entitled to enter into and execute

all such agreements with any financial/legal advisors, lead

managers, company lead manager, underwrites, guarantors,

depositories, trustees, custodians and all such agencies as may

be involved or concerned in such offerings of securities and to

remunerate all such agencies including the payment of

commission, brokerage, fees or the like, also to seek the listing

of such Security or Securities representing the same in one or

more domestic/international stock exchanges.

RESOLVED FURTHER THAT the Company and/or any agency

or body authorized by the Company may issue Certificates/

Receipts representing the bond or bonds with such features

and attributes as are prevalent in domestic/international

capital markets for instuments of this nature and to provide for

the tradability or free transferability thereof as per the

domestic practices and regulation and under the forms and

practices prevalent in the domestic/international markets.

RESOLVED FURTHER THAT the Securities issued as above

shall be deemed to have been made in the domestic market

and shall be governed by Indian Laws.


authorized to issue and allot such number of equity shares as

may be required to be issued and allotted upon conversion of

any Securities referred to in above paragraph or as may be

necessary in accordance with the terms of the offering, all such

shares being pari passu with the equity shares of the Company

in all respects, except such rights as to dividend as may be

provided under the terms of the issue and in the offer

dodument.

RESOLVED FURTHER THAT such Security may be redeemed

in a manner provided in the terms of issue.

RESOLVED FURTHER THAT the Board is empowered to raise

part funds in the overseas market and part funds in the

domestic market pursuant to Resolution 8 above so that the

Company has opportunities of both markets in combination for

raising funds aggregating upto Rs. 500 crores, in addition to the

amount for which approval has already been given earlier by

the members.

RESOLVED FURTHER THAT for the purpose of giving effect to

any issue or allotment of Equity Shares or Securities or

instruments or securities representing the same, as described

in above paragraph, the Board be and is hereby authorized on

behalf of the Company to do all such acts, deeds, matters and

things as it may at its discretion deem necessary or desirable

for such purpose including but not limited to the entering into

of underwriting, marketing, lead manager, company lead

manager, brokers, bankers to the issue and depository

arrangements and with power on behalf of the Company to

settle any questions, difficulties or doubts that may arise in

regard to any such issue or allotment as it may in its absolute

discretion deem fit.


authorized to file the requisite registration application and

other documents with the Stock Exchanges or such other

authorities or institutions in India and/or abroad for this

purpose.


authorized to delegate all or any of its powers herein

conferred to a Committee of the Board and/or the Chairman

and Managing Director along with the authority to them to

further delegate all or any of such powers to any one or more

Executives of the Company, in order to give effect to the

aforesaid resolution.”

68

10. To consider and, if thought fit, to pass the following resolution

as an Ordinary Resolution

“RESOLVED THAT pursuant to the provisions of Section 94 and

other applicable provisions, if any, of the Company Act, 1956, the

Authorised Share Capital of the Company be increased and

classified from Rs.30,00,00000 (Rupees Thirty Crores only) divided

in to 15,00,00,000 (fifteen Crores) Equity Shares of Rs.2/- (Rs. Two

each) to Rs. 50,00,00,000 (Rupees Fifty Crores only) divided into

22,50,00,000 (Twenty Two Crores Fifty Lacs) equity shares of Rs

2/- each and 2,50,00,000 (Two Crores Fifty Lacs) Cumulative

Redeemable Preference Shares of Rs. 2/- each.”

11. To consider and, if thought fit, to pass the following resolution as

an Ordinary Resolution ;

“ RESOLVED THAT the existing Clause V of the Memorandum of

Association of the Company be and is hereby substituted by the

following new Clause:-

V. The Authorized Share Capital of the Company is Rs. 50,00,00,000

(Rupees Fifty Crores only) divided into 22,50,00,000 (Twenty Two

Crores Fifty Lacs) equity shares of Rs. 2/- each and 2,50,00,000

(Two Crores Fifty Lacs) Cumulative Redeemable Preference

Shares of Rs. 2/- each with power to increase or reduce the capital

for the time being into several classes and to attached thereto

respectively any preferential, qualified or special rights,

privileges or conditions as may be determined by or in

accordance with the regulations of the Company and to vary,

modify and abrogate any such rights, privileges or conditions in

such manner as may be for the time being approved by the

regulations of the Company and the Statutory provisions of the

Company, if any.”

12. To consider and, if thought fit to pass the following resolution as

an Special Resolution

“RESOLVED THAT the existing Article of 4 of the Articles of

Association of the Company be and is hereby substituted by the

following new Article:-

4. The Authorized Share Capital of the Company is Rs. 50,00,00,000

(Rupees Fifty Crores) divided into 22,50,00000 (Twenty Two

Crores Fifty Lacs) equity shares of Rs. 2/- each and 2,50,00,000

(Two Crores Fifty Lacs) Cumulative Redeemable Preference

Shares of Rs. 2/- each with power to increase or reduce the capital

for the time being into several classes and to attached thereto

respectively any preferential, qualified or special rights,

privileges or conditions as may be determined by or in

accordance with the regulations of the Company and to vary,

modify and abrogate any such rights, privileges or conditions in

such manner as may be for the time being approved by the

regulations of the Company and the Statutory provisions of the

Company, if any. “

By order of Board of Directors

Registered office:

Anand Sojitra Road


Gujarat

Date : 15-06-2007

NOTES

(1) A member entitled to attend and vote at the meeting is also

entitled to appoint a proxy to attend and vote instead of

himself and the proxy need not be a member of the Company.

The Instrument of Proxy should however, be deposited at the

Registered Office of the Company not less than 48 hours before

the time for holding the Annual General Meeting.

(2) Pursuant to the Provisions of Clause 49 of the Listing

Agreement relating to Corporate Governance, relevant

informations in respect of Item No. 3 & 4 set out above and in

respect to Directors retiring by rotation, are annexed

herewith.

(3) The relative Explanatory Statement pursuant to Section 173(2)

of the Companies Act, 1956 in respect of the Special Business

under item No. 6 to 12 as set out above is annexed.

(4) The Register of Members and Share Transfer Books of the

company will remain closed from Tuesday, the 17th day of July,

2007 to Tuesday, the 24th day of July, 2007 (both days

inclusive).

(5) The payment of dividend on equity shares as recommended by

the Directors for the year ended 31st March, 2007 when

declared at the meeting will be paid :

(i) to those members whose name appear in the Register

of Members of the Company on Tuesday, the 17th day of

July, 2007.

(ii) in respect of shares held in electronics form, to those

“deemed members” whose names appear on the

statement of beneficial ownership furnished by

National Securities Depository Limited (NSDL) and

Central Depository Services (India) Ltd, (CDSL) at the end

of business hours on Monday, the 16thday of July, 2007.

(6) The Company has transferred unclaimed dividend for the year

1998-99 to the Investor Education and Protection Fund. The

unclaimed dividend for the year 1999-2000 shall be transferred

to the Investor Education and Protection Fund during

November 2007.

(7) The Company has paid the listing fees for the year 2007-2008

to The Stock Exchange, Mumbai and The National Stock

Exchange of India Limited, Mumbai, where the securities of the

Company continue to be listed.

(8) Shareholders are requested to furnish their e-mail Id’s to enable

the Company forward information in relation to the Company.

(9) The Company has designated an exclusive email ID called

[email protected] for redressal of shareholders’

complaints/grievances. In case you have any query/

complain or grievance, then please write to us at

[email protected]

(10) Members intending to require information about accounts or

any other matter are requested to write to the Company at

least ten days in advance of the Annual General Meeting.

(11) The members are requested to bring the copy of Annual Report

at the time of attending the Annual General Meeting.

By order of Board of DirectorsRegistered Office :

Anand-Sojitra Road

Vallabh Vidyanagar - 388 120

Gujarat

Nayan M. Adhyaru

Date : 15-06-2007 Company Secretary

Nayan M. AdhyaruCompany Secretary

69

Explanatory Statement pursuant to Section 173(2) of

the Companies Act, 1956

Item No. 6

The Company is authorised by its Memorandum of Association to

contribute to charitable and other funds not directly relating to the

business of the Company or the welfare of its employees. By virtue of

Section 293(1)(e) of the Act, however, the maximum limit which can

be so contributed in any financial year is Rs. 50,000 or 5% of the

Company’s average net profits as determined in accordance with

Section 349 and 350 of the Companies Act, 1956, during the three

immediately preceding financial years, whichever is greater. Section

293(1)(e) permits such contributions in excess of these limits if

shareholders approve. As such, your Board seeks sanction to make such

contributions in any financial year up to a limit of Rs. 10 Crores (Rs. Ten

Crores only) or 5% of the Company’s average net profits during the

three immediately preceding financial years, whichever is greater. The

Board recommends this resolution for your approval.

None of the Directors is in any way concerned or interested in the

resolution proposed to be passed.

Item No. 7

In view of the Company’s excellent performance for the past few years

and since the Company’s future sustainability has been firmly

established, the Board of Directors at its meeting held on 15th June,

2007 has recommended two Bonus shares of Rs. 2/- each fully paid up

for every one Equity Share of Rs. 2/- each, to which a Member is

entitled on the Record Date to be fixed by the Board (includes

Committee, if any) for the purpose of the Bonus issue.

The Bonus shares will be issued by utilisation of the Securities

Premium Account, as permitted by Section 78 and other applicable

provisions of the Companies Act, 1956 and in terms of the Guidelines

issued by SEBI on Bonus issues.

The issue of Bonus Shares will increase the floating stock of Equity

Shares in the stock market.

The issue of Bonus Shares and sale of fractional shares pertaining to

Non-resident members will be subject to Regulations prescribed

under the Foreign Exchange Management Act, 1999.

Section 78 of the Companies Act, 1956 and Article 181 of the Articles

of Association of the Company permit Capitalisation of Securities

Premium Account for issue of fully-paid Bonus Shares, only after

approval by the Members in Annual General Meeting by way of a

Special Resolution. Accordingly, the Resolution at item No. 7 seeks the

approval of the Members for issue of Bonus Shares.

The Record Date for the issue of Bonus Shares will be fixed by the Board,

after obtaining Members’ approval.

The Directors are concerned or interested in this Resolution, only to

the limited extent of their respective shareholding, if any, in the

Company.

Item No. 8 and 9

Your Company has drawn modernization and expansion program for its

MHE and GEAR division and enhances the production capacity so as to

cater the future demand of the products of the Company. Your

Company has already commenced the implementation of the

programme and incurred capital expenditures during the previous/

current financial year. The modernization and expansion program is

expected to be implemented/completed during the current financial

year.

To meet the fund requirements, the Company proposes to either :-

1. raise funds in Foreign Currency aggregating upto equivalent INR

500 Crores, in addition to the amount for which approval has

already been given by the members by issue of Foreign Currency

Convertible Bonds or such other Security as the Board may

decide in consultation with advisors, lead manager domestic/

International Investors and/or depending on the advice it

receives from its advisors as deemed fit to Board of Directors;

2. raise funds upto Rs. 500 Crores (inclusive Clause 1 above) in

addition to the amount for which approval has already been

given by the members by issue of Equity Shares/Warrants/

Preference Shares or any Securities cnvertable into equity

shares as the Board may decide in consultation with the

advisors, lead manager, domestic Investors.

The Board therefore, recommends that both the proposed resolutions

at items 8 & 9 be approved by the Members by way of Special

Resolution, to enable the Board to raise the requisite funds either in

the overseas market or in the domestic market or partly in the overseas

market and partly in the domestic market aggregating to Rs. 500

Crores, in addition to the amount for which approval has already been

given by the members.

This will lead to improvement in the net worth, saving in cost of

borrowings and by that the Company will become debt free (long

term debt) in the years to come.

None of the Directors of the Company is concerned or interested

either directly or indirectly in the Resolution under item No. 8 and 9.

Item No. 10 to 12

Consequent upon the recommendation for the issue of bonus shares

and planning for further issue of securities, it has become necessary to

appropriately increase the Authorised share capital of the Company.

The present Authorised Share Capital of the company is

Rs. 30,00,00,000 is proposed to be increased and classified to

Rs. 50,00,00,000. The Ordinary Resolution at item No. 11 and special

Resolution at item No. 12 seek to make corresponding alterations in

the Memorandum and Articles of Association respectively.

None of the Directors of the Company is concerned or interested

either directly or indirectly in the Resolution under item No. 10 to 12.

The Board recommends the resolution for the approval of the

members.

By order of Board of Directors

Registered office:

Anand Sojitra Road


Gujarat

Date : 15-06-2007

Nayan M. Adhyaru

Company Secretary

70

Details of the Directors seeking appointment/re-appointment at the forthcoming Annual General Meeting

(Pursuant to Clause 49 of the Listing Agreement)

Name of Director

Date of Birth

Date of Appointment

Expertise in specific

Functional areas

Shri Upendra M. Patel

13-07-1928

30-09-1980

Associated with Shree Dinesh Mills Limited

since its inception for last 35 years and

instrumental in the progress of the Company

despite of ups and down in the textile

industry. Wide experience as a Director on

the Board of Director of various companies.

Also associated with various Educational

Institute, Business Institutions, Research

Association and Government Bodies.

Shri Ashok J. Patel

06-09-1944

29-06-1998

Director of GMM Pfaudler Limited from 1980,

Managing Director from 1987 and Chairman

and Managing Director of GMM Pfaudler from

1993. Managing Director in Millars India

Limited from 1972 – 1987 and Chairman in

Millars India Limited from 1993. Technical

Director in Millars Machinery Limited from

1970 and Chairman from 1990.

Qualifications

List of Public/Private

Companies in which

outside Directorship held

as on 31st March, 2007.

B. Sc. (Hons.) Mumbai and

M. B. A. (U. S. A.)

• Shree Dinesh Mills Limited

• Gujarat JHM Hotels Limited

• Eimco Elecon (India) Limited

• Dinesh Remedies Limited

B. Sc. (Mechanical Engineering), U. K. and M.

B. A. (U. S. A.)

• GMM Pfaudler Limited

• Karamsad Holdings Limited

• Karamsad Investments Limited

• Millars India Limited

• Millars Machinery Company

Private Limited

• Pedershaab Millars India Private Limited

• Ready Mix Concrete Limited

• Suzhou Pfaudler Glasslined Equipment

Company Limited, China

• Dietrich Engineering Consultants India

Private Limited

Chairman/Member

of the Committee of the

Public Companies on

which he is a Director as

on 31st March, 2007.

• Gujarat JHM Hotels Limited - Member of

Audit Committee

• Millars India Limited – Member of Share

Transfer and Remuneration Committee

• Elecon Engineering Company Limited –

Member of Audit Committee, Remune-

ration Committee and Shareholders/

Investors Grievance Committee

71

Proxy Form


Registered Office : Anand Sojitra Road, Vallabh Vidyanagar 388 120, Gujarat, India

Folio No. DP ID NO. Client ID No.

No. of Shares held

I/We

of member/members of the above

named Company hereby appoint Mr./Mrs.

of or failing

him/her, Mr./Mrs. of

as my/our proxy to vote for me/us and on my/our behalf at 47th Anuual Meeting of the Company to be held on

Thursday, 13th day of September, 2007 at 11.00 a.m. or any adjournment thereof.

Address

This from is to be used in favour of/against* the Resolution. Unless otherwise instructed, the proxy will act as he

thinks fit.

* Please Strike out whichever is not desired.

Note : The proxy form duly signed across the revenue stamp of One Rupee should reach at the Company’s

Registered Office at least 48 hours before the date of the meeting.

affix

Rs. 1

Revenue

Stamp

Signature

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ElEcon EnginEEring coMPAnY liMiTED Post Box #6, Vallabh Vidyanagar 388 120, Gujarat, India.

Phones: +91(2692) 237016, 236521, 236469 • Fax: +91(2692) 236457, 236527

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