directors’ report · 5 directors’ report to the members, your directors have pleasure in...

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DIRECTORS’ REPORT

TO THE MEMBERS,

Your Directors have pleasure in submitting their 31st Annual Report and the audited Statement of Accounts for the year ended31 March, 2006.

FINANCIAL RESULTS

(Rs. in ‘000)

Year ended Year ended31 March, 2006 31 March, 2005

Net Sales 1,414,080 838,098

Other Income 24,690 29,765

Total Income 1,438,770 867,863

Gross profit before interest and depreciation / amortisation 87,283 45,055

Interest and finance charges (Net) 6,014 19,849

Depreciation / Amortisation 7,441 4,778

Profit before tax 73,828 20,428

Provision for taxation 15,089 9,261

Tax adjustments for earlier years (6,001) _

Profit after taxation 64,740 11,167

Balance brought forward from previous year 86,489 83,062

Balance available for appropriation 151,229 94,229

Appropriations

Proposed dividend for the financial year at the rate of 11,601 5,077Rs. 0.40 per share

Corporate Dividend Tax 1,627 663

Transfer to General Reserve 20,000 2,000

Retained profits carried forward to Balance Sheet 118,001 86,489

PERFORMANCE

The Company achieved net sales of Rs.1,414,080 thousands for the year ended 31 March, 2006 as against the net sales ofRs. 838,098 thousands achieved in the previous year recording a growth rate of 69%. With close monitoring on costs andexpenses, the year ended with a gross profit of Rs. 87,283 thousands (previous year Rs.45,055 thousands) and a pre-tax profitof Rs. 73,828 thousands (previous year Rs. 20,428 thousands).

The improvement in performance is mainly attributable to initiatives undertaken by the Company which helped secure increasedorder volume from esteemed customers. Further, the reduced cost of finance and savings in interest due to equity infused havecontributed to improved results.

DIVIDEND

Your Directors are pleased to recommend a dividend of Rs. 0.40/- per Equity share of Rs. 2/- for the year ended 31 March, 2006.The consequent outflow will be Rs. 11,601 thousands. Your Board further proposes to transfer to General Reserve an amount ofRs. 20,000 thousands out of the profits.

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BONUS SHARES

In view of the commendable performance made by your company as explained above, your Directors are pleased to recommendissue of Bonus shares in the ratio of 1:5 (One Equity share of Rs. 2/- each as Bonus Share for every Five fully paid-up equityshares of Rs. 2/- each held on the record date)

CHANGE IN MANAGEMENT

During the year under report the Company’s major shareholder, viz. Jumbo World Holdings Ltd. (“JWHL”) along with itsassociates sold its controlling interest to the extent of 70% to IVRCL Infrastructures & Projects Ltd. (“IVRCL”) effective midSeptember, 2005. IVRCL made an open offer under the SEBI (Substantial Acquisition of Shares and Takeover) Regulations,1997.Consequent to preferential allotment of 1,570,000 equity shares by the Company, IVRCL now holds 51.15% of the paid up sharecapital of your Company. The project execution skills of IVRCL are expected to be of great avail to your company complementingits technical strengths for achieving higher volumes of business.

FUTURE PROSPECTS

The Company continues to address a broad spectrum of industries where its technological prowess is of relevance. With recentboom in Indian manufacturing sector, most of the Industries, where Company has strong presence like Mineral Beneficiation, Pulp& Paper and Phosphate fertiliser are going in for new projects or major expansions. In Alumina and Steel Industries, projects withhuge investments are presently on the drawing board or in an advanced stage of finalisation. Environmental Engineering sectoris witnessing phenomenal growth, due to increased spending in Water & Waste Water treatment by Central and StateGovernments and funding by external agencies like World Bank and Asian Development Bank.

Your Company is in the process of signing Collaboration Agreements with Global manufacturers for meeting their requirements ofequipments and design and engineering services.

Your Company has almost executed the prestigious orders valuing more than Rs. 100 crores from Vedanta Alumina Ltd. (a SterliteGroup Company) during the current year and a fresh order has been received from them for Causticizing Settler and OxalateRemoval System.

The company’s negotiations with multinationals for their requirements of design, engineering, procurement and manufacturingare in an advanced stage and a long term contract to meet their requirements in the said areas is expected to be signed in thenear future.

The Knowledge Process Outsourcing (KPO) business has already been initiated and it has been decided to have an engineeringcenter at Chennai to support the Mumbai team and the above center will be operational by September, 2006.

In the field of Environmental Engineering, the Company has bagged orders from various alumina producers and has receivedenquiries from Bhabha Atomic Research Centre for projects related to water and waste water management. The Company isevaluating these business prospects.

Your Company is also planning to have full fledged Research & Development Centre at their Works in Vatva, Ahmedabad.

CHANGES IN CAPITAL STRUCTURE

The following changes in the structure of share capital are in the process of taking place, besides the Bonus Issue referred toearlier:

(i) Preferential allotment of shares

The Company made a Preferential Allotment of 1,570,000 equity shares of Rs. 10/- each at a premium of Rs. 310/- pershare aggregating to Rs. 502,400 thousands. Further the capital reserves of your Company have increased byRs. 486,700 thousands. This reflects the confidence reposed by the investors in the future prospects of the Company.

The Company is awaiting listing permission from Stock Exchanges for crediting the shares to the beneficiary accounts ofthe respective subscribers.

Consequent to sub-division of face value of shares into Rs. 2/- each, the above shares will also stand sub-divided intoRs. 2/- each.

(ii) Preferential allotment of warrants

The Company made Preferential allotment to IVRCL Infrastructures & Projects Ltd., the “Promoters” of the Company forall purposes, as per the amended Articles of Association of the company, of 200,000 warrants carrying an option tosubscribe to the share capital of the Company, within 18 months, upto 200,000 equity shares of Rs.10/- each at apremium of Rs. 310/- per equity share as approved by the Members at the extraordinary general meeting held on14 October, 2005.

Consequent to sub-division of face value of shares into Rs. 2/- each, the above shares willl also stand sub-divided into Rs. 2/- each.

DIRECTORS’ REPORT Contd.

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(iii) Subdivision of shares

In order to create more liquidity for the Company’s shares and also to attract small investors to become shareholders,

each equity share of face value of Rs. 10/- has been sub-divided into 5 shares of Rs. 2/- each. As a consequence of thesplit, the present issued, subscribed and paid-up equity capital will be Rs. 58,004,840 consisting of 29,002,420 equity

shares of Rs. 2/- each.

(iv) Employee Stock Option Scheme

The Company formulated HDO-ESOP:2005 scheme for issue of shares to its permanent employees in order to attract andretain qualified, talented and competent personnel. One lakh options are approved under this Scheme convertible into

100,000 equity shares at an exercise price of Rs.240/- per share. The options are yet to be granted to the employees.

As a result of sub-division of shares, each option shall cary a right of exercise of option for allotment of 5 shares of

Rs. 2/- each at an exercise price of Rs. 48/- per share.

PROMOTION OF A WHOLLY OWNED SUBSIDIARY

Your Company has formed a wholly owned subsidiary by the name ‘HDO Technologies Limited’, which will be a Knowledge

Process Outsourcing Company and will cater to engineering/process industries in the global market by providing engineering

solutions through software technology on continuous basis, operate these plants through software technology and pass on theinformation through systems and ensure continuous operation and monitoring of the same.

PUBLIC DEPOSITS

The Company has discontinued acceptance/renewal of fixed deposits from public/shareholders with effect from

29 September, 2005 and has repaid existing deposits prematurely on 31 March, 2006 to reduce heavy interest burden on the

Company. 54 depositors had not claimed their deposits amounting to Rs. 712 thousands as on 31 March, 2006.

CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, Corporate Governance Report and Auditors’

Certificate regarding compliance of conditions of Corporate Governance are separately given in the Annual Report

The Company has complied with Clause 49 of the listing agreement in respect of the corporate governance requirements except

that in the initial stages of takeover by the new management, there was slight deviation from the prescribed composition of theaudit committee as pointed out by the Auditors in their certification. This was mainly due to the resignations of some directors

related to the earlier management. The new management, which took control of the Company with effect from

9 September, 2005, was in the process of re-constituting the Board as well as Committees by identifying the independentDirectors. The Committee was reconstituted subsequent to the meeting held on 29 October, 2005, to be in tune with Clause 49

of the listing agreement by addition of independent Directors.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

In terms of Clause 49 of the listing Agreement with the Stock Exchanges, Management Discussion & Analysis Report is givenseparately in the Annual Report.

DIRECTORATE

Mr. E.Sunil Reddy, Mr. K.H.K Prasad and Mr. Prabhakar Ram Tripathi were appointed Directors of the Company with effect from 29

October, 2005.

Mr. T. N. Chaturvedi was appointed Director of the Company with effect from 31 December, 2005. Mr. K.H.K. Prasad,

Mr. T. N. Chaturvedi and Mr. Prabhakar Ram Tripathi are independent directors for purposes of and in accordance with Clause 49of the Listing Agreement.

AUDITORS

M/s. Chaturvedi & Partners, Chartered Accountants, the Company’s Auditors will retire at the conclusion of the ensuing Annual

General Meeting and are eligible for reappointment .

The Company has received a confirmation from them to the effect that their appointment, if made, would be within theprescribed limits under Section 224(1B) of the Companies Act, 1956.

INTERNAL AUDITORS


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M/s Aneja & Associates , Chartered Accountants, Mumbai have been appointed as Internal Auditors of the Company to monitor

the internal control system of the Company at its works at Vatva, Ahmedabad and Mumbai office.

CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT, TECHNOLOGY ABSORPTION ETC.

A statement showing particulars required under the Companies (Disclosure of Particulars in the Report of Board of Directors)Rules, 1988, read with Section 217 (1)(e) of the Companies Act, 1956 is annexed to this report marked Annexure I.

PARTICULARS OF EMPLOYEES

A statement showing particulars as required by Section 217(2A) of the Companies Act, 1956, read with the Companies(Particulars of Employees) Rules, 1975, as amended, is annexed to this report marked Annexure II.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to Section 217 (2AA) of the Companies Act, 1956, the Directors confirm that:

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

(ii) the Directors have selected such accounting policies and applied them consistently and made judgements andestimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at theend of the financial year ended 31 March, 2006 and of the profit of the Company for that year;

(iii) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordancewith the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing anddetecting fraud and other irregularities;

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

INDUSTRIAL RELATIONS

The Company continued to have cordial and harmonious relations with its employees.

ACKNOWLEDGEMENTS

The Directors wish to express their appreciation of the support and co-operation received from the holding company, bankers,financial institutions, suppliers, associates and sub-contractors. The Board of Directors also thank all the employees for theircontribution and continued co-operation throughout the year and is confident that new heights can be reached in improving thestakeholder value in the Company.

FOR AND ON BEHALF OF THE BOARD

E. Sudhir Reddy S. C. SekaranVice Chairman & Executive DirectorManaging Director

Hyderabad, July 31, 2006.


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ANNEXURE - I

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

FORM A(See Rule 2)

Form for disclosure of Particulars with respect to conservation of Energy


A. Power and fuel consumption1. Electricity

(a) PurchasedUnit (in ‘000) 714KW 716KWTotal amount (Rs. in ‘000) 3456 3708Rate/unit (Rs.) 4.84 5.18

(b) Own Generation NIL NIL2. Coal (specify quality and where used) NIL NIL3. Furnace oil NIL NIL4. Others/internal generation NIL NIL

B. Consumption per unit of productionElectricity (Per M.T.) 521.32KW 584.82KW(Total Unit/total Production)

FORM B

Research and Development

1. Specific areas in which R & D was carried out by the company.

Pilot scale effluent treatment plant for treating high strength nitrogen waste at BARC, Mumbai has been commissionedand is successfully running.

Basic process evaluation and test work was done in the area of mineral processing for alumina production from specificbauxite ores mined in India and abroad.

Extensive treatability studies on the effluent from a chemical manufacturing company were successfully completed.

Work on application of membrane technology for waste water management is in progress.

2. Benefits derived as a result of above R & D efforts

As a result of R & D efforts, the Company has bagged orders from various alumina producers and has received enquiriesfrom Bhabha Atomic Research Centre for projects related to water and waste water management. Apart from this, smalland large orders have been secured based on tests and technical support of R & D group.

3. Future Plan of action

The company plans to complete on-going projects as well as undertake laboratory and pilot scale studies for pretreatmentof sea water prior to Desalination Plant.

4. Expenditure on R & D

Capital : Nil

Recurring : Rs. 2,623 thousands

Total : Rs. 2,623 thousands

Total R & D expenditure asPercentage of total turnover : 0.19 %

Technology absorption, adaptation and innovation

1. Efforts, in brief, made towards technology absorption, adaptation and innovation.

Apart from in-house R & D efforts, a collaboration has been signed with M/s. Flo Dry, New Zealand for technology ofsludge drying and pelletization in the area of waste water treatment.

2. Benefits as a result of the above efforts

R & D Efforts along with new technology have helped the company to bid for projects in India as well as overseas.


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3. Particulars of imported technology

Technology Imported Year of Import Has technology If not absorbed, areas where thebeen fully same has not taken place, reason

absorbed therefore and future plan of action

Engg. Technologyfor manufacture ofDe-Salter Units 2000-01 Yes N.A.

Advanced Technologyfor waste water treatment 2001-02 Yes N.A.

Solid/Liquid Separationequipment. 2001-02 Yes N.A.

Pulping technologyLignin Precipitation andRecovery Technology. 2001-02 Yes N.A.

Sludge pelletisation anddrying technology. 2005-06 In progress N.A.

Foreing Exchange Earnings and Outgo(Rs. in ‘000)

2005-06 2004-05

(i) Foreign Exchange earned 92,622 20,648

(ii) Foreign Exchange used 163,540 50,611


E. Sudhir Reddy S. C. SekaranVice Chairman & Executive Director

Hyderabad, July 31, 2006. Managing Director

ANNEXURE II

Information as per Section 217(2A) read with the Companies (Particulars of Employees) Rules, 1975 andforming part of Directors’ Report for the year 1 April, 2005 to 31 March, 2006

Name Age Qualifications Experience Date of Description & Gross Last(In Years) (In Years) Joining nature of Remuneration Employment

duties (Rs.) Held

Mr. Suresh 55 B.E. (Hons.), 35 22.06.2000 Managing 1,597,053 GreavesDadlani D.M.S. Director Limited-

A.M.P. (Ceased to be President &(Harvard, U.S.A.) Managing Director Chief Operating

with effect from Officer21 June, 2005)

Notes:

(1) Gross remuneration as shown above includes Salary, Performance Incentive, House Rent Allowance and otherAllowances, Company’s contribution to Provident Fund and Superannuation Scheme, Leave Travel Assistance, MedicalExpenses reimbursed as per Contract.

(2) Other terms and conditions of employment including health and accident insurance benefits are as per agreement ofservice and rules of the Company.

(3) The nature of employment was contractual.

(4) Mr. Suresh Dadlani was not a relative of any Director of the Company.


E. Sudhir Reddy S. C. SekaranVice Chairman & Executive Director

Hyderabad, July 31, 2006. Managing Director


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MANAGEMENT DISCUSSION

OVERVIEW

Continuing the trend of growing economy, 2004-2005 witnessed 8% growth in Indian economy. Following the similar trend,2005-2006 continued to be a year of quantum growth for your company. Manufacturing, Mining and Infrastructure were themajor contributing segments for the overall growth of your company. The robust economic performance of past three years inthe global manufacturing sector is leading to rebound in investment that will further sustain the growth of your company. Thegrowing demand of processed minerals and metals, such as Aluminum and Steel has led to increased investment plans in thissector, and your company benefited the most and recorded its highest turnover.

The outlook of your company continues to be bright. It is expected that growth in Mining, Mineral Processing, Pulp and Paper,and Environmental Infrastructure Projects will continue to contribute towards growth of your company in terms of volume andprofitability.

With the growing demand for Metals like Aluminum and Steel, etc., there has been a significant increase in Mineral Processactivities in respect of various Metals. Several new grass root projects are envisaged for production of aluminum, steel, coal etc.

In order to enhance Indian Environmental Infrastructure, various State Governments have been granted loans from AsianDevelopment Bank, World Bank and Japanese Bank of International Commerce. Your company, being one of the leadingtechnology and turnkey supplier in this area, stands bright prospects to receive its share of business from this huge marketsector.

The growing need of improved quality paper has led to capacity expansions and quality enhancement for all the pulp and paperindustries in India.

Your company, being a pioneer in providing the associated technologies expects niche business from the above sectors, farexceeding its expectations in terms of its own manufacturing. To meet this demand, your company has upgraded itsmanufacturing facility at Ahmedabad and has procured latest machinery to enhance the productivity and operational excellence.

The global manufacturing shift to Asia (China and India) heralds new opportunity for your company. Your company havingrefurbished its manufacturing facility is in discussion with various global manufacturing companies to outsource theirmanufacturing requirements from your company.

Currently, your company is engaged in an In-House transformation initiative to change the way it is doing business. Substantialresources are being invested in attaining operational excellence, focusing on cost, quality and on-time performance. This agendaof your company is being driven by independent project monitoring cell and MIS Reporting System. This is helping your companyto come up with quicker decision making, increasing throughput, dispatch and commissioning schedules to match the changingrequirements of the customer. Several proprietary products are being redesigned on the principle of “Value Engineering”. Thecompany is also adopting the root of global sourcing of raw materials and components.

Your company has recently launched its “Knowledge Process Outsourcing” Center in Mumbai, which is duly registered underSTPI. This Center will be focusing on Design and Engineering Outsourcing work from various global companies. Your companyhas tied up with leading international consultants for this purpose and is expected to generate revenues in the next financial year.

In the International Business, your company is focusing on very selective markets and is in the process of finalizing variousopportunities in Abu Dhabi, Japan, Sri Lanka, Kuwait and Singapore.

MINERALS & CHEMICALS

Your company has an excellent track record in the Mineral and Chemical Industries, which is one of its core business sector.

With the growing demand for Metals like Aluminum and Steel, etc., there has been a significant increase in Mineral Processactivities in respect of various Metals. Several new grass root projects are envisaged for production of aluminum, steel, coal etc.

Your company has a strong hold on Mineral Processing Technology and techniques and has served almost all customers inMineral Industry. Your company’s largest single value EPC contract for Vedanta Aluminum is under final stage of completion.Your company has also made major contribution in the field of Uranium Recovery and has supplied equipment systems toUranium Corporation of India for their new project in Turramidih. Three more such projects are in the anvil in Andhra Pradeshand Meghalaya, where your company expects to get a large share of their business.

Your company is also on the verge of concluding collaboration arrangements for equipment and technologies with well-knownInternational companies for aiming a larger area of business in such projects.

MANAGEMENT DISCUSSION AND ANALYSIS

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Your company has a unique track record of building almost 90% of phosphatic and fertilizer plants on turnkey basis. Many of theexisting phosphatic fertilizer plants are under expansion and your company is already executing Expansion Orders for IFFCO attheir Kandla and Paradeep units. More enquiries from other DAP/NPK plants are under various stages of discussion.

ENVIRONMENTAL MANAGEMENT

Your company is a pioneering company, in water & waste water treatment plant market in India. Your company has executedmany Waste Water Treatment plant projects for most of the core sector industries like Refineries, Process Chemical, Steel,Fertilizer, Sugar, Pulp & Paper etc. In recent past your company has further strengthened its presence in this sector, by securingcontracts from refineries and Government & semi Government organizations.

Water infrastructure market in India is consistently growing in last few years. Even today large section of population in India, donot have access to safe drinking water & safe treatment and disposal of sewage is still a distant reality for most of the semi urban& rural population in India. Government of India, has identified these needs & is taking steps to address this problem by increasedfunding through central government grants, NRCD etc. Many Municipal corporations & State Governments are planning projectswith funding from international agencies like World Bank, Asian Development Bank, JBIC etc.

Growing water demand is forcing many Industries to look for effluent recycling option involving membrane separation technology.In States like Tamilnadu & Gujarat, sea water desalination projects are coming up in big way. Your company is aggressivelypursuing this business, by technology tie ups / consortium bids with International companies. Many such projects are in advanceplanning stage and your company expects to get its potential share.

PULP & PAPER

The core strength of your company in the Pulp & Paper area is in the Fibre line equipments and Recausticizing plant in Recoveryarea and fibre recovery in the Machine side. Most of the Paper mills in India are based on Sulphate process of Paper making andinvariably all these mills have our equipment. Without the Recausticizing plant the process of Paper making is not economicallyviable.

With the growing demand of Paper Globally, your company is poised to make headway in the Fibreline area. A recently concludedEPC contract for Yunus Emere Pulp & Paper Mill in, Ashgabat, Turkministan won us all round accolade in our capacity to executesuch contract.

In the past, while small Paper Mills were successful in making paper out of Agro based pulp, your company promoted Specialwashers for such pulp handling and had the expertise to make it a grand success. Similarly, in the area of cooking Continuousdigesters, are introduced which is gaining ground and will be an addition to the existing product line.

Since the Central Government pollution laws have become very stringent, many small mills have augmented their capacities andpreferred to go for your Recausticizing plant, wherein the spent liquor from the system is recovered and reused preventingpollution and thereby abiding by environmental regulations.

Added to this, in the fibre line area, new technologies like Oxygen Delignification and the latest Ripple deck design washers havecreated considerable interest among our long chain of clientele.

HDO MANUFACTURING FACILITY

HDO Manufacturing Facility at Vatva started in the year 1977, and is located near Ahmedabad. The gigantic plot of 40906 sq. mtrs.is occupied with the factory area under EOT Cranes of 8656 sq. mtrs. The installed capacity is 2000 MT and licenced capacity is4000 MT per annum. Your company’s manufacturing facility is having prestigious ‘U’ Stamp certification from ASME, USA apartfrom its own ISO 9001 accreditation.

The manufacturing facility is complete with its own Power Generating Sets. The material preparation equipment consists of plateshearing machines, air plasma cutting machines, and gas cutting machines. A separate fabrication yard is equipped with all latestmachineries, such as 3-roll plate bending machines and vertical milling lathe.

Our manufacturing facility is capable of manufacturing all types of industrial filters for Pulp & Paper Industry, Sugar Industry,Chemical Industry, Food & Pharmaceuticals and Minerals Industry. It also manufactures fabricated equipment for PetrochemicalRefineries and Process Industries such as Pressure Vessels, Heat Exchangers (Shell & Tube and Air Cooled Type), Columns,Storage Tanks, Rotary Dryers, Gas Scrubbers, Granulators, LPG Bullets, Ammonia Storage Tanks, CO2 Tanks, Deaerators, SulphurCondensors, Gas Incinerating Projects, Rotary Vacuum Filters, Pressure Filters, Desalter Vessels, Three / Two phase Separators,Water Bath Heaters, Emulsion Heater Treaters, Other Oil & Gas Processing Equipment.

Your company is looking at making this manufacturing facility state-of-art and hence, the same is being refurbished completelyin order to make it independent operating facility which will cater to outsourced manufacturing requirements of globalmultinationals apart from Indian customers. Your company is already in discussion with such global multinationals for shiftingtheir manufacturing base at HDO Works in India.

MANAGEMENT DISCUSSION AND ANALYSIS Contd.

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INTERNATIONAL BUSINESS

Your company has dedicated International Business Group, which caters to global markets by providing electro-mechanical

packages and EPC installations for its core business. Through its network of local business agents, your company keeps close

coordination with its overseas customers and provides sales and service. Your company has developed long-term business

association in Sri Lanka, South East Asia and the Middle East. Your company is closely associated in post-war construction work

in Iraq and currently executing big Water Supply Project in Iraq. In the meanwhile, your company is in advanced stage of signing

an MOU with global players for marketing and manufacturing. This is expected to open up new export opportunities for your

company.

INTERNAL CONTROL SYSTEM

Your company has in place an adequate and appropriate system of internal control to ensure efficacy of operations and

compliance with applicable legislation. Towards achieving the same, your company has in place the following mechanisms:

� Monthly Business Reviews for each Division by Senior Management

� Comprehensive Compliance Framework with reporting from accountability levels to the Division and onwards to Senior

Management and the Board.

� Comprehensive Internal Audit Plans and regular Internal Audits of the Division with concentration on review of audit

findings by the Audit Committee in addition to other business areas

� Regular reporting to the Board on investor related matter as well as fulfillment of SEBI, listing Agreements

requirements and other corporate laws.

Your company is in the process of introducing SAP System on a single Server Platform for authenticity of data and management

reporting.

RISK MANAGEMENT

The company recognizes that this is inevitable and believes in having an optimum, well-defined and integrated risk management

strategy. It also believes that proper risk identification; evaluation and mitigation would help to achieve its target of sustainable

growth and profitability. Your company operates in the sectors where business is of cyclic nature. While the project business has

higher cyclical volatility, it is lower for the product business. The company’s attempt at de-risking includes expansion in complete

system solutions rather than focusing only on proprietary products. The company is also attempting to diversify into Cement and

Coal business and is in discussion with leading technology providers for jointly participating in various projects.

Increase in raw material prices adversely affects profitability. Hence, the company constantly monitors raw material prices and

accordingly, revises the selling price of its product. In case of large projects, normally the contracts do not provide for any input

price link escalation. In such cases, the increase in raw material price can have substantial impact on profitability. To minimize

this risk, the company has a system of obtaining back-to-back quotations from its suppliers and it also carries out price

finalization with major vendors during the initial months of project commencement.

The company has robust and well-documented system in place for reporting, evaluating and monitoring project risks at regular

intervals. The company faces various risks in the execution of large projects, which are monitored throughout the life cycle of

projects from commencement to commissioning. Proper estimation and evaluation systems provide major risk management

tools. During execution, cost and progress of the project are regularly monitored through well defined reporting system.

HUMAN RESOURCES

The company’s HR Policies and Processes are aligned to effectively drive its expanding business and forays into emerging

opportunities. This has been achieved by continuously investing in training and development programs, creating a compelling

work environment, empowering employees at all levels and maintaining well structured reward and recognition mechanisms.

The company helps employees build new skills and new competencies and promotes knowledge sharing and team building.

During the year, the company added several new employees at all levels through recruitment. The company’s recruitment

practice ensures that suitable candidates with merit are recruited and provided with the right opportunities.

CAUTIONARY STATEMENT

Statements in this Management discussion and analysis describing the company’s objectives, projections, estimates and

expectations may constitute “ Forward Looking Statements” within the meaning of applicable laws and regulations. Actual results

might defer materially from those either expressed or implied.


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ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW :

The financial statements have been prepared in compliance with the requirements of the Companies Act, 1956, and GenerallyAccepted Accounting Principles (GAAP) in India. The management of HDO accepts responsibility for the integrity and objectivityof these financial statements, as well as for various estimates and judgments used therein.

The estimates and judgments relating to the financial statements have been made on a prudent and reasonable basis, in orderthat the financial statements reflect in a true and fair manner the form and substance of transactions, and reasonably present thestate of affairs on the Balance Sheet date and profits of the Company for the year ended on that date.

Fiscal 2006 was an eventful year for us. IVRCL Infrastructures & Projects Ltd., Hyderabad, a reputed infrastructure developmentcompany became our holding company w.e.f September 09, 2005 after they acquired over 70% of the total share capital from theJumbo group.

Our total net sales increased to Rs. 1,414,080 thousands i.e. increased by 69% over fiscal 2005 and Net Profit (PAT) to Rs. 64,740thousand, increased by 480% over fiscal 2005.

Our revenues have grown substantially and we have funded this growth through the reinvestment of profits, bank borrowingsand capital market transactions.

Financial Performance:

The state of the financial position, presented in the Balance Sheet as at March 31, 2006 are discussed below:

1. SHARE CAPITAL

At present, the Company has only one class of shares – equity shares of par value of Rs. 10/- each. The authorized sharecapital of the Company consists of 10,000,000 equity shares of Rs. 10/- each amounting to Rs. 100,000 thousands.

During the year, the Company increased the equity share capital by Rs. 15,700 thousands. The total paid up share capital asat March 31, 2006 stood at Rs. 58,005 thousands.

A statement showing movement of share capital is given below:

2006 2005

Equity Shares (Rs. in ‘000) Equity Shares (Rs.in ‘000)(Nos.) (Nos.)

Balance at the beginning of the year 4,230,484 42,305 4,230,484 42,305

Shares issued - Private Placement 1,570,000 15,700 - -

Balance at the end of the year 5,800,484 58,005 4,230,484 42,305

2. RESERVES AND SURPLUS

Securities Premium Account:

The addition to the security premium account of Rs. 475,613 thousands during the year is due to the premium received onissue of 1,570,000 shares by way of private placement as reduced by the expenses incurred on issue of Shares Rs. 11,087thousands.

Revaluation Reserve:

The revaluation reserve amount of Rs. 225,790 thousands as on March 31, 2006 represents revaluation of some land andbuildings carried out during 1989, 1993 and 1996 by certified valuers giving rise to addition of Rs. 285,347 thousands asreduced by depreciation on revalued portion of these assets up to March 31, 2006 Rs. 59,557 thousands.

General Reserve:

Out of the profits for the year Rs. 20,000 thousands has been transferred to general reserve and balance of Rs. 31,512thousands (after providing for dividend) has been retained in the profit and loss account.

The total Shareholder funds of the Company stood at Rs. 1,115,881 thousands (excluding share application) as on March 31,2006 as compared to Rs. 576,767 thousands as on March 31, 2005. The book value per share increased to Rs. 192.38 as ofthe year end compared to Rs. 136.33 as of the previous year end.


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3. SECURED LOAN

The details of Secured Loans are discussed below:

March 31, 2006 March 31, 2005(Rs. in ‘000) (Rs. in ‘000)

Short Term Loan 340,000 -

Equipment & vehicles Loan 1,540 1,348

Working Capital Loans - 75,178

Total 341,540 76,526

The Company has taken term loans of Rs. 340,000 thousands against pledge of fixed deposit receipts. The loan amount hasbeen reinvested in fixed deposit with banks giving rise to an additional net interest income.

The Company could manage its working capital from internal generation and hence the liability as on March 31, 2006 wasnil. However, the Company enjoys Rs. 150,000 thousands as Cash credit limits from banks.

4. UNSECURED LOAN

The balance of Public deposits as on March 31, 2006 is nil as against amount outstanding as on March 31, 2005 Rs. 57,169thousands. The Company has repaid all deposits in advance during the year. However, an amount of Rs. 712 thousandsremained as unclaimed deposits as on March 31, 2006.

5. FIXED ASSETS

(Rs. in ‘000)

March 31, March 31, Growth(%)

2006 2005

Gross book value

Land 192,301 192,301 -

Buildings 113,194 99,181 14.13%

Plant & Machinery 92,912 89,389 3.94%

Vehicles 8,446 9,404 (10.19%)

Other Assets 75,693 69,089 9.56%

Intangible Assets 16,711 6,903 142.08%499,257 466,267 7.08%

Less: Depreciation and amortisation 184,785 206,680 (10.59%)

Net Block 314,472 259,587 21.14%

Add: Capital Work-in-progress 4,400 - -

Net Fixed Assets 318,872 259,587 22.84%

Depreciation

as a % of revenues 0.52% 0.55%

as a % of gross block 1.49% 1.02%

Accumulated depreciation as 37.01% 44.32%

a % to gross block

During the year, the Company has invested Rs. 32,990 thousands (net) towards the addition to fixed assets. The additionsare mainly in Plant & machinery Rs. 34,573 thousands, Buildings Rs. 14,013 thousands, Computers Rs. 5,665 thousands andacquisition of technical know-how Rs. 9,808 thousands. The deletions are mainly in Plant & machinery Rs. 31,050 thousandsand vehicles Rs. 1,375 thousands.

6. DEFERRED TAX ASSETS & LIABILITIES

The Company accounts for deferred tax in compliance with the Accounting Standard 22 issued by the Institute of CharteredAccountants of India. The Company has recognised deferred tax credit of Rs. 203 thousands during the year. Further, theCompany has recognised deferred tax asset of Rs. 3,044 thousands on the share issue expenses incurred during the year,


16

which has been adjusted in the Securities Premium Account. However, the net deferred tax asset has increased fromRs. 5,334 thousands as on March 31, 2005 to Rs. 8,581 thousands as on March 31, 2006 due to increase in timing differenceof depreciation charged to fixed assets.

7. INVESTMENTS

The major investment of the Company during the year is in equity shares of Ahmednagar Forgings Ltd. Rs. 16,100thousands. The Company disposed off the investment in Preference shares of Primo Distributors Ltd. Rs. 20,000 thousands.Total outstanding investment net of provisioning as at March 31, 2006 is Rs. 16,520 thousands. The corresponding numberas at March 31, 2005 was Rs. 20,056 thousands.

8. SUNDRY DEBTORS

Sundry debtors amount to Rs. 308,871 thousands as at March 31, 2006 as compared to such receivable amount ofRs. 378,760 thousands as at March 31, 2005. All these debtors are considered good and realisable including the overdueamount of Rs. 53,835 thousands. The management is making concerted efforts to recover the overdue receivables andhence no provision is considered necessary.

Debtors are 21.20% of revenues for the year ended March 31, 2006, as compared to 43.90% for the previous year,representing an outstanding of 77 days and 160 days of revenues for the respective years.

9. CASH & CASH EQUIVALENTS

(Rs. in ‘000)March 31, 2006 March 31, 2005

Cash & cheques in hand 7,536 2,909

Bank balances:

Current accounts 35,049 11,816

Fixed deposit accounts 717,054 82,209

Total 759,639 96,934

A major portion of the fund raised through equity-private placement have been kept in fixed deposit till the money is utilisedfor the specific purpose.

10. OTHER CURRENT ASSETS

The amount under this heading mainly consist of:

Unbilled Revenue – Rs. 82,206 thousands (Rs. 177,182 thousands)

This represents amounts to be billed to some of the contractee clients in respect of revenue earned under the percentagecompletion method, followed by the Company, as reduced by that portion of such revenue already billed and receivable fromthose clients.

This unbilled revenue recoverable is a dynamic figure every quarter in as much as the revenue earned is arrived at everyquarter under the same method duly adjusting in those quarters the billed revenue as well as the unbilled revenue carriedover from the corresponding previous quarter.

Retention Money – Rs. 418,365 thousands (Rs. 234,064 thousands)

The account represents the amounts retained by the clients towards performance security as a guarantee for satisfactoryperformance of the projects executed by the Company. All these amounts are regular except Rs. 20,350 thousands which isoverdue. No provision has been made for the overdue amount since the Company is making concerted efforts for recovery.

11. LOANS AND ADVANCES

Advance income tax net of provisions – Rs. 18,751 thousands (Rs. 13,363 thousands)

This mainly consists of tax deducted at source from contract revenue by the clients as per the provisions of the Income TaxAct, 1961 and advance tax paid as reduced by the income tax provisions made and/or assessed (undisputed). All undisputedliabilities have been fully adjusted against this account.

Advances recoverable in cash or in kind or for value to be received – Rs. 51,866 thousands (Rs 65,968 thousands)

The account represents advances paid to various suppliers, sub-contractors etc., which are partly adjusted in thesubsequent periods and the balance would also be recovered from their bill of services or otherwise. Hence all theseamounts outstanding are considered realisable.


17

12. CURRENT LIABILITIES

Customers’ advance payments– Rs. 94,310 thousands (Rs. 137,754 thousands)

These advances, provided to the Company in the nature of short-term liabilities, are recovered from client bills. Some of theadvances bears an interest cost and others are interest free. The Company has also provided bank guarantees for some ofthese advances.

Sundry Creditors and accrued expenses– Rs. 466,870 thousands (Rs. 464,823 thousands)

This represents amount due to suppliers, sub-contractors and other service providers. This also includes amounts accruedfor other operational expenses and cost on long term contracts. Through confirmation of account balances and a system ofreconciliation of supplies and services to the Company, all known liabilities incurred to earn the gross revenue have beenfully captured and accounted for during the year under discussion.

Other current liabilities represent all statutory dues such as PF, ESI, TDS, Sales Tax etc payable by the Company relating tothe month of March 2006. The Company has remitted the statutory liabilities on or before the respective due dates.

13. PROVISIONS

Proposed dividend of Rs. 11,601 thousands (Rs. 5,077 thousands) represents the dividend recommended to theshareholders by the Board of Directors. This will be paid after the Annual General Meeting, upon approval by the shareholders.

Provision for tax on dividend Rs. 1,627 thousands (Rs. 663 thousands) denotes taxes payable on dividends declared for theyear ended March 31, 2006.

Gratuity and Leave encashment provisions have been made as per the actuarial estimation and certification by anindependent Actuary as per the relevant accounting standard requirement.

Operational Performance:

14. INCOME RECOGNISED

(Rs. in ‘000)Year ended Year ended

March 31, 2006 March 31, 2005 Growth(%)

Manufacturing and supply of equipments 331,912 201,582 64.65%

Sales & Services (contracts) 1,124,582 661,145 70.10%1,456,494 862,727 68.82%

Less: Excise duty 42,414 24,629 72.21%

Net Sales & Services 1,414,080 838,098 68.72%

The growth of revenue in the fiscal 2006 as compared to fiscal 2005 have been from both the sources of contract revenueuniformly.

Miscellaneous Income – Rs. 20,731 thousands (Rs. 26,763 thousands)

The main items under this head are sale of scrap materials generated from the projects under execution and liabilities nolonger required written back.


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15. EXPENDITURE

Cost of sales & services:

(Rs. in ‘000)Year ended Year ended


Cost of systems, equipment, spares and services 983,538 554,022 77.53%

Raw materials/components consumed 146,026 88,988 64.10%

1,129,564 643,010 75.67%

Increase/Decrease in Inventories 21,174 (14,454)

Total 1,150,738 628,556 83.08%

Gross income from sales & services 1,456,494 862,727 68.82%

The increase in cost of sales and services by 83.1% as compared to increase in gross income by 68.8% is mainly due toincrease in the input cost.

16. OPERATING PROFIT

(Rs.in ‘000)Year ended Year ended


Total net revenue 1,438,770 867,863 65.78%

Cost of sales and services 1,150,738 628556 83.08%

Gross margin 288,032 239,307 20.36%

Manufacturing expenses 29,726 23,717 25.34%

Other expenses 67,237 70,234 -

Employees cost 103,786 100,301 3.47%

EBITDA 87,283 45,055 93.73%

Finance cost 6,014 19,849 (69.70%)

Depreciation 7,441 4,778 55.73%

Profit before Tax(PBT) 73,828 20,428 261.40%

Provision for Tax 15,089 9,261 62.93%

Extra-ordinary item (6,001) - -

Profit after Tax 64,740 11,167 479.74%

EBITDA(% to revenue) 6.07% 5.19%

PBT(% to revenue) 5.13% 2.35%

PAT(% to revenue) 4.50% 1.29%

Manufacturing expenses consists of stores and spares consumed, power charges and processing charges. Other expensesinclude Travelling, Repair charges, Professional and consultancy, commission etc.

The increase in Earnings before interest, depreciation and tax by 93.73% as compared to increase in Total net revenue by65.78% is due to higher operating leverage in fiscal 2006.

Better working capital management and internal generation of fund has resulted in the savings in finance cost. The higherpercentage of increase in PBT is mainly due to the savings in finance cost.


19

1. Corporate Governance Philosophy at Hindustan Dorr-Oliver Limited

Hindustan Dorr-Oliver Limited (hereinafter referred to as “Company”) is committed to corporate transparency and lays emphasison business ethics in all its dealings. The Company believes in meeting its obligations to all its stakeholders, including amongstothers, shareholders, customers, employees and the community in which the Company operates.

Your Directors are happy to inform you that your Company’s existing practices and polices are in conformity with therequirements stipulated by Stock Exchanges and SEBI.

2. Board of Directors

Composition of the Board (As on 31 March, 2006)The Board of Directors of the Company comprises of the following Executive and Non-Executive Directors, four of whom areindependent:Sr. Name of Category No. of No. of membership/No. the Director Directorships chairmanship in

in other Committees of other companiescompanies* Membership Chairmanship** Total

1. Mr. Prabahakar Non-ExecutiveRam Tripathi Chairman

Independent Director 4 Nil Nil Nil2. Mr. E. Sudhir Reddy Vice-Chairman &

Managing Director 8 1 Nil 13. Mr. R. Balarami Reddy Non-Executive Director 9 1 Nil 14. Mr. S.C. Sekaran*** Independent Director Nil Nil Nil Nil5. Mr. E. Sunil Reddy Non-Executive Director 3 Nil Nil Nil6. Mr. K.H.K. Prasad Non-Executive &

Independent Director Nil Nil Nil Nil7. Mr. T.N. Chaturvedi Non-Executive &

Independent Director 6 3 3 6

* Does not include Alternate Directorships, Directorships in Private Limited Companies, Foreign Companies andCompanies registered under Section 25 of the Companies Act, 1956.

** Does not include Alternate Chairmanship.

*** Mr. S.C. Sekaran has been appointed as Executive Director with effect from 1 June, 2006

The Board meets at least once in a quarter to review the Company’s performance, financial results and more often, if considerednecessary, to transact other business.

Attendance of each Director at Board Meetings and last Annual General Meeting

During the year 2005-06, 13 (thirteen) Board Meetings were held on – 25 May, 2005, 29 June, 2005, 30 July, 2005, 8 September,2005, 10 September, 2005, 12 September, 2005, 28 September, 2005, 14 October, 2005, 16 October, 2005, 29 October, 2005,31 December, 2005, 27 January, 2006 and 27 March, 2006. The last Annual General Meeting of the Company was held on28 September, 2005. The following are the details of attendance of Directors at Board Meeting and at the Annual GeneralMeeting held during the year:

No. of Board Meetings No. of Board Whether attendedName of the Director held during the tenure of Meetings Attended last AGM

the Director in 2005-06Ms. V. M. Chhabria(Resigned with effect from 10 September, 2005). 4 1 N.A.

Mr. Suresh Dadlani(Completed term of appointment as ManagingDirector on 21 June, 2005 and ceased to beDirector from that date) 1 1 N.A.

Ms. Komal C. Wazir(Resigned with effect from 10 September, 2005) 4 2 N.A.

Mr. Sudhinkumar Chandra(Resigned with effect from 10 September, 2005) 4 4 N.A.

CORPORATE GOVERNANCE REPORT

(Pursuant to Clause 49 of the Listing Agreement)(For the Financial Year ended 31 March, 2006)

20

No. of Board Meetings No. of Board Whether attendedName of the Director held during the tenure of Meetings Attended last AGM

the Director in 2005-06

Dr. H.R. Bhojwani(Retired by rotation at the Annual General Meetingheld on 28 September, 2005 and not reappointed) 6 Nil No

Mr. H. N. Nanani(Resigned with effect from 29 June, 2005) 2 2 N.A.

Mr. Prabahakar Ram Tripathi(Appointed with effect from 29 October, 2005) 3 3 N.A.

Mr. E. Sudhir Reddy(Appointed with effect from 8 September, 2005) 9 9 Yes

Mr. R. Balarami Reddy(Appointed with effect from 8 September, 2005) 9 8 No

Mr. S.C. Sekaran(Appointed with effect from 8 September, 2005) 9 6 Yes

Mr. E. Sunil Reddy(Appointed with effect from 29 October, 2005) 3 3 N.A.

Mr. K.H.K. Prasad(Appointed with effect from 29 October, 2005) 3 3 N.A.

Mr. T.N. Chaturvedi(Appointed with effect from 31 December, 2005 2 1 N.A.

3. Audit Committee

(i) The Audit Committee comprises of the following non-executive directors:

(a) Mr. T.N. Chaturvedi, Chairman

(b) Mr. Prabhakar Ram Tripathi, Member

(c) Mr. R. Balarami Reddy, Member

The Company Secretary of the Company acts as Secretary of the Committee.

The Representatives of the Internal and Statutory Auditors attend the Meeting of the Committee as and when invited.

(ii) The broad terms of reference of the Audit Committee include:

a. overseeing the Company’s financial reporting process;

b. to review financial statements and pre-publication announcements before submission to the Board;

c. recommending the appointment and removal of statutory auditors, fixation of audit fee;

d. to ensure compliance of internal control system and action taken on internal audit report;

e. to hold periodical discussion with statutory auditors on the scope and content of audit;

f. to review the Company’s financial and risk Management Policies;

g. to apprise the Board on the impact of accounting policies, accounting standards and legislation.

(iii) During the year, 4 (four) Audit Committee Meetings were held on : 29 June, 2005, 30 July, 2005, 29 October, 2005 and27 January, 2006.

(iv) Attendance of the Directors in the Audit Committee Meetings :

No. of Audit Committee No. of Audit CommitteeName of the Director Meetings held during the Meetings Attended

tenure of theDirector in 2005-06

Ms. Komal C. Wazir(Resigned with effect from 10 September, 2005) 2 1

Mr. Sudhinkumar Chandra(Resigned with effect from 10 September, 2005) 2 2

Dr. H.R. Bhojwani(Retired by rotation at the Annual General Meetingheld on 28 September, 2005 and not reappointed) 2 Nil

CORPORATE GOVERNANCE REPORT Contd.

21

No. of Audit Committee No. of Audit CommitteeName of the Director Meetings held during the Meetings Attended

tenure of theDirector in 2005-06

Mr. H. N. Nanani(Resigned with effect from 29 June, 2005) 1 1Mr. E. Sudhir Reddy(Appointed with effect from 8 September) 1 1Mr. R. Balarami Reddy(Appointed with effect from 8 September, 2005) 2 2Mr. S.C. Sekaran(Appointed with effect from 8 September, 2005) 1 1Mr. Prabahakar Ram Tripathi(Appointed as Director with effect from 29 October, 2005) 1 1Mr. T.N. Chaturvedi(Appointed with effect from 31 December, 2005 1 1

4. Remuneration Committee

(i) The Remuneration Committee comprises of the following non-executive directors:

(a) Mr. Prabhakar Ram Tripathi, Chairman(b) Mr. R. Balarami Reddy, Member(c) Mr. E. Sunil Reddy, Member

(ii) The broad terms of reference of the Remuneration Committee include:

(a) to determine on behalf of the Board the Company’s Policy on remuneration package for Executive Directors includingpension rights and compensation payments.

(b) to decide any other related matters.

(iii) During the year, one Remuneration Committee Meeting was held on 27 January, 2006.

(iv) Attendance of the Directors in the Remuneration Committee Meetings :

No. of Remuneration Committee No. of RemunerationName of the Director Meetings held during the CommitteeMeetings

tenure of the Director in 2005-06 Attended

Mr. Prabhakar Ram Tripathi 1 1Mr. R. Balarami Reddy 1 1Mr. E. Sunil Reddy 1 1

(v) Details of remuneration/sitting fees paid to Directors of the Company during the year ended 31 March, 2006 are givenbelow:

S. Name of the Director Gross Sitting Service contract/NoticeNo. Remuneration (Rs.) fee (Rs.) period/Severance

1. Ms. V. M. Chhabria - 2,500 Resigned with effect from 10 September, 20052. Mr. Suresh Dadlani 1,597,053 - Ceased to be Managing Director and director

with effect from 21 June, 20053. Ms. Komal C. Wazir - 8,000 Resigned with effect from 10 September, 20054. Mr. Sudhinkumar Chandra - 16,000 Resigned with effect from 10 September, 20055. Dr. H.R. Bhojwani - - Retired by rotation at the Annual General Meeting

he ld on 28 September, 2005 and notreappointed.

6. Mr. H. N. Nanani - 6,500 Resigned with effect from 29 June, 20057. Mr. Prabahakar Ram Tripathi - 6,500 Additional Director8. Mr. E. Sudhir Reddy - Nil Liable to retire by rotation9. Mr. R. Balarami Reddy - Nil Liable to retire by rotation10. Mr. S.C. Sekaran - Nil Liable to retire by rotation11. Mr. E. Sunil Reddy - Nil Additional Director12. Mr. K.H.K. Prasad - Nil Additional Director13. Mr. T.N. Chaturvedi - 4,000 Additional Director* Gross remuneration paid to the Managing Director as shown above includes contribution to Provident Fund and

Superannuation Scheme but does not include Company’s contribution to Gratuity Fund .

No commission has been paid to any Director for the year ended 31 March, 2006.


22

5. Shareholders’/Investors’ Grievance Committee

(i) The Shareholders’/Investors’ Grievance Committee comprises of the following members of the Board:

(a) Mr. S.C. Sekaran, Chairman

(b) Mr. E. Sudhir Reddy, Member

(c) Mr. K.H.K. Prasad, Member

(ii) Mr. A. Pushparaj, Company Secretary was designated as Compliance Officer.There was no Company Secretary during theperiod from 1 June, 2005 to 13 November, 2005.

(iii) The Committee meets at frequent intervals to consider, inter alia, share transfers, shareholders’/ investors’ complaints, etc.

(iv) During the year, 19 complaints were received from Shareholders. All complaints have been resolved to the satisfaction ofthe Complainants.

(v) The Company has acted upon all valid transfers received during the year 2005-06 and no transfers were pending as on 31 March, 2006.

6. General Body Meetings

(i) Location and time where last three Annual General Meetings of the Company were held are given below:

Financial Year Date of Meeting Location of the Meeting Time2002-03 13/09/2003 Amar Gian Grover Auditorium

Lala Lajpat Rai College, Lala Lajpat Rai MargHaji Ali, Mumbai – 400 034 3.00 PM

2003-04 20/09/2004 Amar Gian Grover AuditoriumLala Lajpat Rai College, Lala Lajpat Rai MargHaji Ali, Mumbai – 400 034 3.00 PM

2004-05 28/09/2005 The All India Plastic ManufacturersAssociation, AIPMA House, A-52,Road No.1, M.I.D.C., Marol,Andheri (E), Mumbai – 400 093 4.00 P.M.

(ii) Special Resolutions passed in last three Annual General Meetings:Financial Year Date of Annual General Meeting Items2002-03 13/09/2003 Voluntary delisting of the equity shares of the Company from

Stock Exchanges at Delhi, Kolkata and Chennai2003-04 20/09/2004 Revision in the remuneration of Mr. Suresh Dadlani, the Managing

Director of the Company2004-05 28/09/2005 Nil

(iii) Postal Ballot

During the year ended 31 March, 2006, no Resolution was put through postal ballot nor any resolution is proposed to bepassed through Postal Ballot at the ensuing Annual General Meeting in respect of items under non-mandatory requirement.

7. Disclosures

(a) During the year, there were no transactions of material nature with the Promoters, Directors or the management, theirsubsidiaries or relatives that had potential conflict with the interest of the Company. Register of Contracts containing thetransactions in which Directors are interested is placed before the Board regularly for signature of Directors. Transactionswith related parties are disclosed in Note No. 17 of Schedule ‘20’ to the Financial Statements in the Annual Report.

(b) There were no instances of non-compliance of any matter related to the Capital markets, during the last three years.

8. Means of Communication

(i) Half-yearly report sent to each household of shareholders : No(ii) Quarterly results - Which news papers normally published in : Free Press Journal, Economic Times, Navshakti and

Loksatta(iii) Any web site where displayed : www.sebiedifar.nic.in(iv) Whether it also displays official News release : Official news releases are displayed on the BSE and

and presentations made to Institutional Investors / Analysts NSE’s web sites -www.bseindia.com, www.nseindia.com

(v) Whether Management Discussion and Analysis Report forms a : Yespart of the Annual Report.

9. General Shareholders’ information

� Annual General Meeting:

Annual General Meeting is proposed to be held on Friday, the 22nd day of September, 2006 at 3.00 p.m. at the The All India

Plastic Manufacturers Association, AIPMA House, A-52, Road No.1, M.I.D.C., Marol, Andheri (E), Mumbai – 400 093.


23

� Financial Calendar

(a) Financial year - 1, April to 31, March(b) Results for the Quarter ended 30 June, 2006 - By end of July, 2006(c) Results for the Half Year ended - By end of October/

30 September, 2006 - November, 2006(d) Results for the Quarter ended

31 December, 2006 - By end of January, 2007(e) Results for the year ended 31 March, 2007 - By end of June, 2007

� Date of Book Closure

19 September, 2006 to 22 September, 2006 (both days inclusive)

� Dividend Payment Date

The Dividend Warrants will be despatched on or after 22 September, 2006 within the statutory time limit.

� Listing on Stock Exchanges

The Equity Shares of the Company are listed on Bombay Stock Exchange Limited, Calcutta Stock Exchange AssociationLimited and the National Stock Exchange of India Limited.

Listing fee has been paid to above Stock Exchanges for the year 2006-07.

In terms of the Special Resolution passed by the Shareholders of the Company at the Annual General Meeting held on13 September, 2003, the Company has made application for delisting of the equity shares of the Company to the CalcuttaStock Exchange Association Limited and their approval is awaited.

� Stock Code

Bombay Stock Exchange Limited, Mumbai : 509627National Stock Exchange of India Limited, Mumbai : HINDDORROLDemat ISIN : INE551A01022

� Market Price Data

The monthly high & low quotations of shares traded on the Bombay Stock Exchange and National Stock Exchange are as follows:

Month BOMBAY STOCK EXCHANGE NATIONAL STOCK EXCHANGEHigh (Rs.) Low (Rs.) High (Rs.) Low (Rs.)

April, 2005 168.15 111.05 172.00 111.00May, 2005 181.95 139.25 182.00 142.05June, 2005 187.00 159.00 190.80 156.55July, 2005 300.00 170.10 309.50 170.00August, 2005 363.50 243.00 363.80 243.00September, 2005 443.65 280.20 444.80 282.00October, 2005 390.00 277.05 392.90 288.70November, 2005 414.90 287.00 415.00 299.00December, 2005 413.00 360.00 413.00 359.50January, 2006 529.90 399.10 533.00 401.00February, 2006 536.00 445.00 534.40 442.00March, 2006 897.70 455.00 899.10 463.00

� Stock performance


24

� Registrar and Transfer Agents

Sharepro Services (India) Pvt. Ltd.Satam Estate, 3rd Floor 912, Raheja CentreAbove Bank of Baroda Free Press Journal RoadCardinal Gracious Road, Chakala Nariman PointAndheri (E), Mumbai – 400 099 Mumbai – 400 021Tel : 2821 5168 / 2834 8218 Tel : 2288 1568/69Fax : 2837 5646 Fax : 2282 5484

� Share Transfer System

Application for transfer of shares held in physical form is received at the office of the Registrar and Share Transfer Agentsof the Company. Shareholders’ /’ Investors’ Grievance Committee approves valid transfer of shares and share certificatesare despatched within the time prescribed under the Listing Agreement/SEBI Guidelines.

Shares held in dematerialised form are electronically traded in the Depository and the Registrars and Share Transfer Agentsof the Company periodically receive from the Depository the beneficiary holdings so as to enable them to update theirrecords and to send all corporate communications, dividend warrants, etc.

The Company also offers the facility of transfer-cum-demat as per SEBI Guidelines.

� Distribution of shareholding as on 31 March, 2006

No. of Equity Shares Holders HoldingNo. of holders % No. of shares held %

Less than 500 3035 92.137 363519 6.267

000500 – 001000 133 4.038 100023 1.724001001 – 002000 57 1.730 85042 1.466002001 – 003000 17 0.516 43553 0.751003001 – 004000 6 0.182 21940 0.378004001 – 005000 4 0.121 17711 0.305005001 – 010000 14 0.425 109415 1.886010001 and above 28 0.860 5059281 87.232Total 3294 100.000 5800484 100.00

� Shareholding pattern as on 31 March, 2006

Category No. of Equity Shares held % age of shareholding

A. Promoter’s holding

1. Promoters

Indian Promoters 2966833 51.15Foreign Promoters _ _

2. Persons acting in concertSub-Total 2966833 51.15

B. Non-Promoters Holding

3. Institutional Investors

a. Mutual Funds & UTI 164900 2.85

b. Banks,Financial Institutions,Insurance Companies,(Central/State Govt. Institutions/Non-Govt. Institutions) 800 0.01

c. FIIs _ _Sub-Total 165700 2.86

4. Others

a. Private Corporate Bodies 1668877 28.77

b. Indian Public 992650 17.11

c. NRIs/OCBs 6424 0.11

d. Any other (please specify)

Sub-Total 2667951 46.00

Grand Total 5800484 100.00


25

� Dematerialization of shares and liquidity

About 71% of the shareholding of the Company has been dematerialised as on 31 March, 2006.

Trading in Equity Shares of the Company is permitted only in dematerialised form with effect from 26 December, 2000 as perthe Circular SMDRP/POLICY/CIR-23/2000 dated 29 May, 2000 issued by the Securities and Exchange Board of India.

� Plant Location

5/1/2, G.I.D.C., VatvaAhmedabad – 382 445

� Outstanding GDRs/ADRs/Warrants or any convertible instruments

The Company has allotted 2,00,000 no. of Warrants to IVRCL Infrastractures and Projects Limited (“The promoters”) eachof which will be convertible into five fully paid up Equity Shares of Rs. 2/- each within a period of eighteen months from thedate of allotment i.e. 14 October, 2005 on the exercise of option by IVRCL.

� Address for correspondence

Dorr-Oliver HouseChakala, Andheri (E)Mumbai – 400 099Tel: 022-28359400Fax: 022-28365659Email: [email protected]

10. CEO/CFO Certification

The certificate from Executive Director and GM- Finance in terms of Clause 49 (V) is given in the Report.

11. Code of Business Conduct and Ethics for Directors and Senior Management

The Board at its meeting held on March 27, 2006 has adopted the Code of Business Conduct and Ethics for Directors andSenior Management (“the Code”). This Code is a comprehensive Code applicable to all Directors, Executive as well asNon-Executive and Senior Management. The Code while laying down, in detail, the standards of business conduct, ethicsand governance, centers around the following theme –

“The Company’s Board of Directors and Senior Management are responsible for and are committed to setting the standardsof conduct contained in this Code and for updating these standards as appropriate, to ensure their continuing relevance,effectiveness and responsiveness to the needs of local and international investors and all other stakeholders as also toreflect corporate, legal and regulatory developments.This Code should be adhered to in letter and in spirit.”

A copy of the Code has been put on the Company’s website www.hdo.in

The Code has been circulated to all the members of the Board and Senior Management and the compliance of the same hasbeen affirmed by them. A declaration signed by the Executive Director is given below:

I hereby confirm that :

The Company has obtained from all the members of the Board and Senior Management, affirmation that they have compliedwith the Code of Business Conduct and Ethics for Directors and Senior Management in respect of the financial year 2005-06.

S.C. SekaranExecutive Director

Hyderabad1 June, 2006


26

AUDITORS’ CERTIFICATE

AUDITORS’ CERTIFICATE ON CORPORATE GOVERNANCETO THE MEMBERS OF

HINDUSTAN DORR-OLIVER LIMITED

1. We have examined the compliance of conditions of Corporate Governance by Hindustan Dorr-Oliver Limited, for the year endedon March 31, 2006 as stipulated in clause 49 of the Listing Agreement of the said Company with the stock exchanges.

2. The compliance of conditions of Corporate Governance is the responsibility of the Management. Our examination was limited toprocedures and implementations thereof, adopted by the Company for ensuring compliance with the conditions of CorporateGovernance. It is neither an audit nor an expression of opinion on the financial statements of the Company.

3. The requirement that two thirds of the members of the audit committee should be independent directors was not fulfilled by theCompany for the period from September 10, 2006 to October 28, 2005.

4. In our opinion and to the best of our information and according to the explanations given to us, subject to what is stated in paragraph3 above, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in Clause 49 of theabovementioned Listing Agreement.

5. We state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectivenesswith which the management has conducted the affairs of the Company.

For CHATURVEDI & PARTNERS Chartered Accountants

Hyderabad R N CHATURVEDIJune 1, 2006 Partner

Membership No. 92087

CEO/CFO CERTIFICATION

We, S. C. Sekaran, Executive Director and Subodh Bhel, G. M. - Finance, responsible for the finance function certify that :

a) We have reviewed the financial statements and cash flow statement for the year ended 31 March, 2006 and to the best of ourknowledge and belief :

(i) these statements do not contain any materially untrue statement or omit any material fact or contain statements that might bemisleading ;

(ii) these statements together present a true and fair view of the Company’ s affairs and are in compliance with existing AccountingStandards, applicable laws and regulations.

b) To the best of our knowledge and belief, no transactions entered into by the Company during the year ended 31 March, 2006 arefraudulent, illegal or violative of the Company’s code of conduct.

c) We accept responsibility for establishing and maintaining internal controls for financial reporting and we have evaluated theeffectiveness of internal control systems of the Company pertaining to financial reporting. Deficiencies in the design or operation ofsuch internal controls, if any, of which we are aware have been disclosed to the Auditors and the Audit Committee and steps havebeen taken to rectify these deficiencies.

d) i) There has not been any significant change in accounting policies during the year requiring disclosure in the notes to thefinancial statements; and

ii) We are not aware of any instance during the year of significant fraud with involvement therein of the management or anyemployee having a significant role in the Company’s internal control system over financial reporting.

Mumbai, S.C. Sekaran Subodh BhelJune 1, 2006 Executive Director G.M. Finance

27

TO THE MEMBERS OFHINDUSTAN DORR-OLIVER LIMITED

1. We have audited the attached Balance Sheet of Hindustan Dorr-Oliver Limited, as at March 31, 2006, the Profit and LossAccount and also the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements arethe responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statementsbased on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require thatwe plan and perform the audit to obtain reasonable assurance whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accounting principles used and significant estimates made by themanagement, as well as evaluating the overall financial statement presentation. We believe that our audit provides areasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003 issued by the Central Government of India in terms ofsub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the mattersspecified in paragraphs 4 and 5 of the said Order.

4. Attention is drawn to note 5 of Schedule 20 regarding overdue debtors and retention money aggregating to Rs. 53,835thousands. The management is, however, hopeful of recovering the aforesaid amount in due course of time in view ofconcerted efforts being made in this regard including filing of cases wherever considered appropriate. Accordingly, noprovisioning has been considered necessary by the management. The effects of above on the accounts are indeterminate.We are unable to express an opinion as to when and to what extent overdue debtors aggregating to Rs. 53,835 thousandsreceivable from the parties concerned would be realized.

5. Further to our comments in the Annexure referred to above, we report that:

a. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessaryfor the purposes of our audit;

b. In our opinion, proper books of account as required by law have been kept by the Company so far as appears from ourexamination of those books;

c. The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement withthe books of account;

d. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report complywith the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

e. On the basis of written representations received from the directors, as on March 31,2006 and taken on record by theBoard of Directors, we report that none of the directors is disqualified as on March 31, 2006 from being appointed as adirector in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956;

f. In our opinion and to the best of our information and according to the explanations given to us, subject to what is stated in para4 above, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give atrue 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 31,2006,

ii. in the case of the Profit and Loss Account, of the profit 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.




AUDITORS’ REPORT

28

ANNEXURE 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 fixedassets.

b. A major portion of the fixed assets has been physically verified by the management during the year pursuant to aprogramme for physical verification of fixed assets, which in our opinion, is reasonable having regard to the size of theCompany and the nature of its assets. According to the information and explanations given to us, no material discrepancieswere noticed on such verification.

c. Fixed assets disposed off during the year were not substantial and therefore do not affect the going concern status ofthe Company.

ii. a. The inventory has been physically verified during the year by the management. In our opinion, the frequency ofverification is reasonable.

b. The procedures of physical verification of inventories followed by the management are reasonable and adequate in

relation to the size of the Company and the nature of its business.

c. The Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical

stocks and the book records were not material and the same have been properly dealt with in the books of account.

iii. According to the information and explanations given to us, the Company has neither granted nor taken any loans,

secured or unsecured, to / from companies firms or other parties covered in the register maintained under Section 301

of the Companies Act, 1956.

iv. In our opinion and according to the information and explanations given to us, there exists an adequate internal control

system commensurate with the size of the Company and the nature of its business with regard to purchases of inventory,

fixed assets and with regard to the sale of goods and services. During the course of our audit, we have neither observed

nor have been informed of any continuing failure to correct major weaknesses in internal control system of the Company.

v. In our opinion and according to the information and explanations given to us, there were no contracts or arrangements

that needed to be entered into the register required to be maintained under Section 301 of the Companies Act, 1956.

vi. In our opinion and according to the information and explanations given to us, the Company has complied with the

directives issued by the Reserve bank of India and the provisions of Sections 58A, 58AA and other relevant provisions of

the Companies Act, 1956 and the rules framed there under with regard to the deposits accepted from the public. We are

informed by the management that no order has been passed by the Company Law Board, National Company Law

Tribunal or Reserve Bank of India or any Court or any other any Tribunal.

vii. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

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

of cost records under clause (d) of sub-section (1) of Section 209 of the Companies Act, 1956 in respect of items

manufactured by the Company.

ix. a. According to the information and explanations given to us, the Company is generally regular in depositing with the

appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund,

employees’ state insurance, income-tax, sales-tax, wealth tax, service tax, custom duty, excise duty cess and any other

statutory dues applicable to it and there are no undisputed amounts payable in respect of these dues which have

remained outstanding as at March 31, 2006 for a period of more than six months from the date they became payable.

AUDITORS’ REPORT Contd.

29

b. According to information and explanations given to us, there are no dues of income-tax, sales tax, wealth tax, service

tax, customs duty, excise duty or cess or any other statutory dues which have not been deposited on account of any

dispute excepting those mentioned hereunder:

S. No. Name of the Nature of Dues Amount in Forum whereStatute (Rs. in ‘000) dispute is pending

1 Custom Act Custom Duty 342 The collector of customs (Judicial), Mumbai2 Central Excise Act Central Excise Duty 237 CEGAT, New Delhi

Central Excise Act Central Excise Duty 4498 Addl. Commissioner3 Service Act Service Tax 1271 Deputy Commissioner4 Sales Tax Act Sales Tax 8936 D.C. /A.C. Appeal

Sales Tax 3376 High CourtSales Tax 500 Dy. Commercial Tax OfficerSales Tax 213 TribunalEntry Tax 52 D.C. AppealSales tax 655 Tribunal

5 Work Contract Tax WCT 4205 TribunalWCT 256 STOWCT 316 D.C. AppealWCT 7700 A.C. AppealWCT 800 D.C. Appeal

6 Stamp Duty Act Stamp Duty 3200 GIDC7 Income Tax Act Income Tax 1444 ITAT

x. The Company does not have any accumulated losses at the end of the financial year. The Company has not incurredcash losses in the financial year covered by our audit and in the immediately preceding financial year.

xi. In our opinion and according to the information and explanations given to us, we are of the opinion that the Companyhas not defaulted in repayment of dues to a financial institution or bank.

xii. In our opinion and according to the information and explanations given to us, the Company has not granted loans andadvances on the basis of security by way of pledge of shares, debentures and other securities.

xiii. In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/ society. Therefore the provisions ofclause 4 (xiii) of the Companies (Auditors’ Report) Order, 2003 are not applicable to the Company.

xiv. According to the information and explanations given to us, the Company is not dealing or trading in shares, securities,debentures and other investments. Accordingly, the provisions of clause 4 (xiv) of the Companies (Auditors’ Report)Order, 2003 are not applicable to the Company.

xv. According to the information and explanations given to us, the Company has not given any guarantee for loans takenby others from bank or financial institutions.

xvi. In our opinion, and according to the information and explanations given to us, term loans have been applied for thepurposes for which they were raised.

xvii. According to the information and explanations given to us and on an overall examination of the Balance Sheet of theCompany, we report that no funds raised on short-term basis have been used for long-term investment.

xviii. The Company has not made preferential allotment of shares to parties and companies covered in the register maintainedunder section 301 of the Companies Act, 1956.

xix. The Company has not issued any debentures during the year.

xx. The Company has raised money through preferential issue of shares. The management has disclosed the end use ofmoney raised by preferential issue (Refer Note 24 in Schedule 20) and the same has been verified by us.

xxi. To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on orby the Company has been noticed or reported during the course of our audit.




AUDITORS’ REPORT Contd.

30

BALANCE SHEET(Rs. in ‘000)

Schedule As at 31 March, 2006 As at 31 March, 2005 Reference

SOURCES OF FUNDSShareholders’ funds

Share Capital 1 58,005 42,305Share application Money 6,400 -(Refer note No. 25 in Schedule ‘20’)Reserves and Surplus 2 1,057,876 1,122,281 534,462 576,767

Loan FundsSecured 3 341,540 76,526Unsecured 4 - 341,540 57,169 133,695

1,463,821 710,462APPLICATION OF FUNDSFixed Assets 5

Gross Block 499,257 466,267Less : Depreciation 184,785 206,680Net Block 314,472 259,587Add : Capital Work-in-Progress 4,400 318,872 - 259,587

(Including Capital Advances)Investments 6 16,520 20,056Net Deferred Tax Assets 8,581 5,334Current Assets, Loans and Advances:

Current AssetsInventories 7 86,376 90,447Sundry Debtors 8 308,871 378,760Cash & Bank Balances 9 759,639 96,934Other Current Assets 10 507,776 419,513Loans and Advances 11 71,506 93,967

1,734,168 1,079,621Less: Current Liabilities and Provisions:

Liabilities 12 590,622 629,453Provisions 13 23,698 24,683

614,320 654,136Net Current Assets 1,119,848 425,485

TOTAL 1,463,821 710,462

Significant Accounting Policies & Notes 20

The Schedules referred to above form anintegral part of the Balance Sheet.

As per our report of even date attached,For CHATURVEDI & PARTNERS FOR AND ON BEHALF OF THE BOARDChartered Accountants

R N CHATURVEDI S. J. Bhel A. Pushparaj E. Sudhir Reddy S. C. SekaranPartner G. M. - Finance Company Secretary Vice Chairman & ExecutiveMembership No. 092087 Managing Director Director

Hyderabad, June 1, 2006.

AS AT 31 MARCH, 2006

31

Schedule Year ended 31 March, 2006 Year ended 31 March, 2005Reference

INCOMEIncome from Sales and Services 14 1,456,494 862,727Less : Excise Duty 42,414 24,629Net Income from Sales & Services 1,414,080 838,098Other Income 15 24,690 29,765TOTAL 1,438,770 867,863

EXPENDITURECost of Sales and Services 16 1,129,564 643,010(Increase)/Decrease in Inventories 17 21,174 (14,454)Operating and Administrative Expenses 18 200,749 194,252Finance Cost 19 6,014 19,849Depreciation/Amortisation 11,152 8,489Less: Transfer from Revaluation Reserve 3,711 7,441 3,711 4,778TOTAL 1,364,942 847,435

PROFIT FOR THE YEAR BEFORE TAXATION 73,828 20,428Provision for TaxationCurrent Tax 13,000 9,000Deferred Tax (203) 261Fringe Benefit tax 2,292 15,089 - 9,261Tax Adjustments for earlier years (6,001) -

PROFIT FOR THE YEAR AFTER TAXATION 64,740 11,167Balance brought forward from previous year 86,489 83,062Balance available for appropriation 151,229 94,229

APPROPRIATIONSProposed dividend 11,601 5,077Corporate dividend tax 1,627 663Transfer to General Reserve 20,000 2,000

Balance carried to Balance Sheet 118,001 86,489

Basic Earnings Per Share (in Rupees) 13.06 2.64Diluted Earnings Per Share (in Rupees) 13.04 2.64(Refer note No. 18 in schedule ‘20’)

Significant Accounting Policies & Notes 20

The Schedules referred to above form anintegral part of the Profit & Loss Account




PROFIT AND LOSS ACCOUNT(Rs. in ‘000)

FOR THE YEAR ENDED 31 MARCH, 2006

32

Year Ended Year Ended31 March, 2006 31 March, 2005

CASH FLOWS FROM OPERATING ACTIVITIESProfit for the year before Taxation 73,828 20,428

Adjustments forDepreciation and amortisation 7,441 4,778Profit on sale of Fixed Assets (8) (13)Financial Charges 24,152 25,045Interest Income (20,817) (6,550)Dividend Income - (2)Liabilities no longer required written back (11,414) (19,397)Profit on sale of Investment (1,280) (1,926) - 3,861

Operating profit before working capital changes 71,902 24,289

Changes in assets and liabilities(Increase)/Decrease in Inventories 4,072 (12,615)(Increase)/Decrease in Sundry Debtors 69,889 (95,764)(Increase)/Decrease in Loans and Advances (54,351) (68,851)Increase/(Decrease) in Current Liabilities (35,019) (15,409) 218,408 41,178Cash generated from operations activities 56,493 65,467Taxes Paid 16,122 14,395

Net cash provided by operating activities 40,371 51,072

CASH FLOWS FROM INVESTING ACTIVITIESPurchase of Fixed Assets (70,522) (2,607)Sale of Fixed Assets 93 37Purchase of Investments (16,464) (2,122)Sale of Investments 21,280 -Dividend received - 2Interest received 14,753 (50,860) 6,305 1,615

Net cash used in investing activities (50,860) 1,615

CASH FLOWS FROM FINANCING ACTIVITIESProceeds from Equity Share Capital 15,700 -Share Application Money 6,400 -Proceeds from Loans 264,822 (30,690)Increase/(Decrease) in Fixed Deposit (57,169) 2,881Proceeds from Securities Premium 472,570 -(Net of share issue expenses of Rs. 14,130)Dividend Paid (5,915) -Vehicle Loans Taken 192 -Interest and other financial charges paid (23,406) (25,045)Repayment of Debentures - (10,148)Repayment of Inter corporate deposits - 673,194 10,548 (52,454)Net cash provided by financing activities 673,194 (52,454)

NET (DECREASE)/ INCREASE IN CASH ANDCASH EQUIVALENTS DURING THE YEAR 662,705 233

Cash and cash equivalents at the beginning of the year 96,934 96,701Cash and cash equivalents at the end of the year 759,639 96,934

CASH FLOW STATEMENT(Rs. in ‘000)

FOR THE YEAR ENDED 31 MARCH, 2006

33

Notes:

1. The cash flow statement has been prepared under the indirect method as set out in the Accounting Standard 3 on CashFlow Statement issued by the Institute of Chartered Accountants of India.

2. Figures in brackets indicate cash outflow.

3. Previous year figures have been regrouped and recast wherever necessary to conform to current year classification.

4. Cash & Cash Equivalents include: Year Ended Year Ended31 March, 2006 31 March, 2005

(Rs. in ‘000) (Rs. in ‘000)

Cash in Hand 1,353 613Cheques in Hand 6,183 2,296Balances with Scheduled Banks- In Current Accounts 35,049 11,816- In Fixed Deposits 675,000 -- In Margin Money Accounts 42,054 82,209

759,639 96,934




CASH FLOW STATEMENT Contd.FOR THE YEAR ENDED 31 MARCH, 2006

34

As at 31 March, 2006 As at 31 March, 2005

SCHEDULE - 1

SHARE CAPITAL

Authorised :10,000,000 Equity shares of Rs.10 each 100,000 100,000

Issued, subscribed and paid-up5,800,484 Equity shares of Rs. 10 each, fully paid 58,005 42,305

Of these,

(i) 2,966,833 Equity shares are held by the holding company,IVRCL Infrastructures and Projects Limited (Previous year3,168,000 Equity Shares were held by previous holdingcompany, Jumbo World Holdings Limited)

(ii) 4,092,000 Equity shares were issued as fully paid bonusshares by capitalisation of General Reserve.

SCHEDULE - 2

RESERVES AND SURPLUS

Revaluation ReserveBalance at the beginning of the year 229,501 233,212Less : Adjustment for Depreciation 3,711 225,790 3,711 229,501

General ReserveBalance at the beginning of the year 217,831 205,401Add : Transfer from General Reserve (Deferred Taxation) 641 -Add : Transfer from Profit & Loss Account 20,000 2,000Add : Transfer from Debentures Redemption Reserve - 10,430

238,472 217,831

General Reserve (Deferred Taxation)Balance at the beginning of the year 641 641Less : Transfer to general reserve on account of

reversal of temporary timing differences 641 - - 641

Debenture Redemption ReserveBalance at the beginning of the year - - 10,430Less : Transfer to General Reserve - - 10,430 -

Securities Premium AccountBalance at the beginning of the year - -Add : Addition during the year 486,700 -Less : Shares issue expenses

(Net of Deferred tax of Rs. 3,044) 11,087 475,613 - -

Profit and Loss Account 118,001 86,4891,057,876 534,462

SCHEDULES TO FINANCIAL STATEMENTS(Rs. in ‘000)

35


SCHEDULE - 3

SECURED LOANS

Term Loans

Equipment and Vehicle Loans from banks(Secured by hypothecation of equipment/vehiclespurchased thereagainst) 1,540 1,348

Working Capital Loans

Cash / Packing Credit loans from banks - 75,178(Secured by hypothecation of entire stocks, book debts,outstandingmoney receivable, claims, bills, contracts, engagements, securities,investments and other both present and future.)

(The facilities above, alongwith interchangeable non fundedfacilities (for issue of bank gaurantees up to Rs. 336,884 andletter of credit up to Rs. 142,069) are further collaterally securedby equitable mortgage (by way of deposit of title deeds) ofcertain immovable properties of the company)

Short term loan from bank(Secured by pledge of fixed deposit receipts of Rs. 385,000) 340,000 -

341,540 76,526

SCHEDULE - 4

UNSECURED LOANS

Fixed Deposits - 57,169(Repayable within one year Rs. Nil, previous year Rs.24,906)

- 57,169

(Rs. in ‘000)

SCHEDULES (Contd.)

36

SCHEDULE - 5

Fixed Assets : Particulars GROSS BLOCK DEPRECIATION/AMORTISATION NET BLOCK

As at Additions Sale/ As at Upto For On Sale/ Upto As at As at1 April, during Adjustments 31 March, 31 March, the Adjust- 31 March, 31 March, 31 March,

2005 the year 2006 2005 year ments 2006 2006 2005

Tangible Assets

Freehold Land 177,101 - - 177,101 - - - - 177,101 177,101

Leasehold Land 15,200 - - 15,200 1,959 195 - 2,154 13,046 13,241

Buildings

(including Company 99,181 14,013 - 113,194 41,784 4,058 - 45,842 67,352 57,397

owned flats)

Plant and Machinery 89,389 34,573 31,050 92,912 85,919 1,247 31,050 56,116 36,796 3,470

Office equipment 28,759 974 635 29,098 27,467 519 635 27,351 1,747 1,292

Computers 19,397 5,665 - 25,062 17,144 1,211 - 18,355 6,707 2,253

Electrical Fittings 432 - - 432 389 5 - 394 38 43

Jig, fixture & template 577 - - 577 572 5 - 577 - 5

Furniture and fixtures 19,924 672 72 20,524 17,591 633 72 18,152 2,372 2,333

Vehicles 9,404 417 1,375 8,446 6,952 1,317 1,290 6,979 1,467 2,452

Intangible Assets

Technical Know - How - 9,808 - 9,808 - 1,962 - 1,962 7,846 -

Goodwill 6,903 - - 6,903 6,903 - - 6,903 - -

Total 466,267 66,122 33,132 499,257 206,680 11,152 33,047 184,785 314,472 259,587

Previous year Total (463,844) (2,606) (183) (466,267) (198,350) (8,489) (159) (206,680) (259,587) -

Capital work-in-progress 4,400 -

Notes:

1. Freehold Land includes land at Nelankarai Village, Saidapet Taluka, Chinglepet District Chennai of the gross value of Rs. 2,808 forwhich the Company has taken legal action for removal of encroachment on certain part of the property.

2. Documents in respect of leasehold land are yet to be transferred in the name of the Company.

3. (a) Land & Building were revalued as on 1 April, 1989, 31 March 1993 and 31 March, 1996 by professional valuers on currentmarket value basis. The revalued amounts [Freehold Land Rs.177,101 (previous year Rs. 177,101), Leasehold LandRs. 15,200 (previous year Rs. 15,200), Factory Building Rs. 40,730; (previous year Rs. 40,730), and other BuildingsRs. 52,316; (previous year Rs. 52,316)] have been substituted for historical cost [Freehold Land Rs. 393; (previous yearRs. 393), Leasehold Land Rs. 1,084; (previous year Rs. 1,084), Factory Building Rs. 6,063; (previous year Rs. 6,063) and otherBuildings Rs. 9,957; (previous year Rs. 9,957)] in the Gross Block of Fixed Assets.

(b) Depreciation for the year Rs. 11,152; (Previous Year Rs. 8,489) includes depreciation on revaluation - Leasehold land Rs. 183and Buildings Rs. 3,528; (Previous Years Rs. 183 & Rs 3,528 respectively).

(c) Buildings include Company owned residential flats of the Book Value of Rs. 22,797; (Previous Year Rs.22,797) including facevalue of shares held in Co-operative Housing Societies of Rs. 5 in respect of which documents lodged with the Registrar ofProperties for registration are yet to be received back.

4. Plant & Machinery include assets given on lease of the gross value of Rs. 24,960 (Previous Year Rs. 56,010) and net block

Rs. Nil; (previous year Rs. Nil).

(Rs. in ‘000)

SCHEDULES (Contd.)

37


SCHEDULE - 6

INVESTMENTS

LONG TERM

Non - Trade - Quoted

Equity Shares of Rs. 10 each fully paid up

(i) 50 Shares in Voltas Limited 3 3

(ii) 50 Shares in Ion Exchange (I) Limited 6 6

(iii) 100 Shares in Jord Engineers India Limited * 3 3

(iv) 50 Shares in Western India Industries Limited 3 3

(v) 100 Shares in Western Paques (I) Limited * 12 12

(vi) 66 Shares in Triveni Engineering & Industries Limited * 7 7

(vii) 8,983 Shares in Gujarat State Petronet Limited 243 -

(viii) 100,000 Shares in Ahmednagar Forgings Limited 16,100 -

(ix) 884 Shares in Gitanjali Gems Limited 172 -16,549 34

Less : Provision for diminution in the value of Investments 31 16,518 30 4

Non - trade - Unquoted:

160,000 11% Redeemable Cumulative Preference Sharesof Rs. 100 each fully paid up in Primo Distributors Limited - 20,000

10 Equity Shares of Rs.10/- each fully paid up inWestern Bio Systems Ltd. - -

In Government Securities :National Saving Certificates 2 2 52 20,052

16,520 20,056

Market value of Quoted Investments Rs. 21,954(previous year Rs. 15)

* Presently delisted

SCHEDULE - 7

INVENTORIES

Components 5,452 4,670

Raw Materials 33,340 16,802

Work-in-progress 44,983 66,939

Stores & Spares 1,823 1,564

Tools and Patterns 778 47286,376 90,447

SCHEDULE - 8

SUNDRY DEBTORS

(Unsecured, considered good unless otherwise stated)

Outstanding for a period exceeding six months: 163,773 165,422

Others 145,098 213,338308,871 378,760

(Rs. in ‘000)

SCHEDULES (Contd.)

38


SCHEDULE - 9

Cash and Bank Balances

Cash in hand 1,353 613

Cheques in hand 6,183 2,296

Balance with scheduled banks

- In current accounts 35,049 11,816

- In fixed deposit accounts (Refer Note below) 675,000 -

- Margin Money 42,054 82,209

759,639 96,934

NoteFixed Deposit includes unutilised money on preferential allotmentof equity shares Rs. 385,000 and pledged with the bank againstshort term loan.

SCHEDULE - 10

Other Current Assets

Interest Accrued other than on Investments 7,205 1,141

Export Benefits receivable - 7,126

Retention Money 418,365 234,064

Unbilled Revenue 82,206 177,182

507,776 419,513

SCHEDULE - 11

LOANS AND ADVANCES

(Unsecured, considered good unless otherwise stated)

Loans (Excluding doubtful fully provided Rs. Nil;

previous year Rs. 4,983) - 14,571

Advances recoverable in cash or in kind or for value to bereceived [Excluding doubtful fully provided for Rs. 616(previous year Rs.20,290)] 51,866 65,968

Advance income-tax (net of provisions ) 18,751 13,363

Balance with Central Excise 889 6571,506 93,967

SCHEDULE - 12

CURRENT LIABILITIES

Creditors and accrued expenses [including costson long-term contracts] [Refer Note 9 in schedule 20 ] 466,870 464,823(Amount payable to holding company IVRCL Infrastructures& Projects Ltd. Rs. 2,150 (Previous year Rs. Nil),Maximum amount outstanding is Rs.2,150

Other Liabilities 27,437 25,443Advances from Customers 94,310 137,754Liability towards Investor Education and Protection Fund not due

- Unpaid Dividend 451 485- Matured Unpaid Deposits/Debentures 808 1,259 948 1,433

Interest accrued but not due on loans 746 -590,622 629,453

SCHEDULE - 13

PROVISIONS

Gratuity 4,515 11,978Leave Encashment 5,955 6,965Proposed dividend 11,601 5,077Corporate Dividend Tax 1,627 663

23,698 24,683

(Rs. in ‘000)

SCHEDULES (Contd.)

39

Year ended Year ended 31 March, 2006 31 March, 2005

SCHEDULE - 14

SALES AND SERVICES

Sale of Systems, Equipments, Spares and Services 1,414,080 838,098

SCHEDULE - 15

OTHER INCOME

Dividend [Tax deducted at source Rs. Nil (previous year Rs. Nil)] - 2

Profit on sale of investments 1,280 -

Interest received - Others 2,679 3,000

Miscellaneous income 20,731 26,763

24,690 29,765

SCHEDULE - 16

COST OF SALES AND SERVICES

Cost of Systems, Equipments, Spares and Services 983,538 554,022

Raw Materials and components consumed

Opening Stock 16,802 18,176

Add : Purchases 162,564 87,614

179,366 105,790

Less : Closing Stock 33,340 146,026 16,802 88,988

1,129,564 643,010

SCHEDULE - 17

(INCREASE) / DECREASE IN INVENTORIES

Opening StockComponents 4,670 5,125

Work in progress 66,939 71,609 52,030 57,155

Less : Closing Stock


Work in progress 44,983 50,435 66,939 71,60921,174 (14,454)

SCHEDULES (Contd.)(Rs. in ‘000)

40

Year ended Year ended 31 March, 2006 31 March, 2005

SCHEDULE - 18

OPERATING AND ADMINISTRATIVE EXPENSES

Manufacturing Expenses

Stores, Spares & Patterns 11,845 9,742

Power & Fuel 3,456 3,708

Processing Charges 14,425 29,726 10,267 23,717

Salaries, Wages and Bonus 80,698 82,081

Contribution to provident and other funds 11,021 7,911

Staff welfare expenses 12,067 103,786 10,309 100,301

Managerial Remuneration 1,597 4,535

Rent 1,391 2,852

Rates and taxes 1,991 4,849

Travelling/Conveyance expenses 20,843 22,763

Repairs and maintenance - Buildings 4,246 2,125

Repairs and maintenance - Plant & Machinery 116 142

Repairs and maintenance - Others 5,312 3,262

Insurance 2,039 2,104

Communication Expenses 4,725 5,672

Sitting and Other Fees 44 78

Donations - 102

Wealth Tax 14 20

Printing & Stationery 2,408 2,282

Advertisement and Publicity 2,984 498

Auditors Remuneration 1,168 998

Legal & Professional charges 7,619 8,609

Tender Fees 314 147

Miscellaneous Expenses 10,426 9,196

200,749 194,252

SCHEDULE - 19

FINANCE COST

Interest - On Fixed Loans 13,634 19,789- Others 5,225 18,859 1,691 21,480

Less : Interest Income:On Inter corporate deposits - 575On Bank deposits 18,138 (18,138) 4,621 (5,196)[Tax deducted at source Rs. 2,724(previous year Rs. 1,081)]Other Finance/Bank charges 5,293 3,565

6,014 19,849

(Rs. in ‘000)

SCHEDULES (Contd.)

41

SCHEDULE - 20

SIGNIFICANT ACCOUNTING POLICIES AND NOTES

COMPANY OVERVIEW

The Company, Hindustan Dorr-Oliver Limited is engaged in the business of providing Engineering & Turnkeysolutions, Technology and EPC installations in liquid solid separation applications in various industry segmentslike mineral processing and Benefication, Pulp and paper processing, fertilizer & chemicals and environmentalmanagement.

1. SIGNIFICANT ACCOUNTING POLICIES

a) Method of accounting

The financial statements are based on historical cost convention (except for revaluation ofcertain Fixed Assets), in accordance with Generally Accepted Accounting Principles (GAAP)comprising of mandatory accounting standards issued by the Institute of Chartered Accountantsof India and the provisions of the Companies Act, 1956.

The Company follows mercantile system of accounting and recognises income and expenditureon accrual basis except those with significant uncertainties.

b) Use of Accounting Estimates

The preparation of the financial statements in conformity with GAAP requires the management tomake estimates and assumptions that affect the balances of assets and liabilities and disclosuresrelating to contingent liabilities as at the reporting date of the financial statements and amountsof income and expenses during the year of account. Examples of such estimates include contractcosts expected to be incurred to complete construction contracts, provision for doubtful debts,income taxes and future obligations under employee retirement benefit plans.

c) Fixed Assets

Fixed Assets are stated at cost of acquisition/valuation less depreciation, amortization andimpairment losses, if any. Cost is inclusive of duties and taxes (net of Cenvat and other Credits),incidental expenses, erection/commissioning expenses and interest up to the date the qualifyingasset is put to use.

Capital work in Progress comprises advances paid to acquire fixed assets, and the cost of fixedassets not ready for their intended use as at the reporting date of the financial statements.

d) Investments

Long-term investments are stated at cost. Provision for diminution in value is made to recognisea decline other than temporary in the value of such investments.

e) Depreciation/Amortization

Depreciation is provided on the basis of the straight-line method as per rates prescribed in Schedule XIV of theCompanies Act, 1956 on the original cost of the Fixed Assets except the following which are depreciated basedon useful life determined by the management:

Particulars Rate

(i) Buildings (including company-owned flats) 1.64 % / 1.67%

(ii) Factory Buildings 3.34%

(iii) Plant & Machinery

Diesel generating sets, welding machines etc. 25%

Air Conditioners 20%

Office Equipments 20%

Motor Vehicles 20%

Laboratory Equipments 10% / 20%

Other items 10% / 20%

(iv) Furniture and Fittings 10%

SCHEDULES (Contd.)

42

In the case of certain assets where depreciation is calculated on revalued cost and the portion related to therevalued quantum is adjusted against Revaluation Reserve.

The premium, being the cost of leasehold land, is amortised over the lease period.

Assets costing less than Rs. 5 thousands individually are fully depreciated in the year of purchase.

Technical Know-how is amortized over a period of five years in equal installments.

f) Borrowing Cost

Borrowing costs that are attributable to the acquisition and construction of a qualifying asset are capitalised asa part of the cost of such assets till such time the asset is ready for its intended use. A qualifying asset is one thatrequires substantial period of time to get ready for its intended use. Other borrowing costs are recognised as anexpense in the year in which they are incurred.

g) Inventories

Inventories are valued at lower of cost and net realisable value after providing for obsolescence and otheranticipated losses, if any. Components and Work-in-Progress include cost of conversion and other costs incurredin bringing the inventories to their present location and condition.

h) Revenue Recognition

i) Long-term Contracts

Contract Revenue is recognized by reference to the stage of completion of the contract activity at thereporting date of the financial statements on the basis of percentage of completion method.

The stage of completion of contracts is measured by reference to the proportion that contract costsincurred for work performed up to the reporting date bear to the estimated total contract costs foreach contract.

An expected loss on the construction contract is recognized as an expense immediately when it iscertain that the total contract costs will exceed the total contract revenue.

Price escalation and other claims and /or, variation in the contract work are included in contractrevenue only when negotiations have reached an advanced stage such that it is probable that thecustomer will accept the claim; and the amount that is probable will be accepted by the customer canbe measured reliably.

Incentive payments, as per customer-specified performance standards, are included in contractrevenue only when the contract is sufficiently advanced and that it is probable that the specifiedperformance standards will be met and the amount of the incentive payment can be measured reliably.

ii) Other contracts

In the case of other contracts, sales and profits are accounted for on the basis of actual work done onthe contracts/ dispatch of items. Warranty and fields services are provided for on the basis of technicalassessment made by the Management and reversal is effected on completion of warranty period.

i) Provisions and contingencies

A provision is recognised when the Company has a present legal or constructive obligation as a result of pastevent and it is probable that an outflow of resources will be required to settle the obligation, in respect of whichreliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to its present valueand are determined based on best estimate required to settle the obligation at the balance sheet date. These arereviewed at each balance sheet date and adjusted to reflect the current best estimates. Contingent liabilities arenot recognised and are disclosed by way of a note to the accounts.

j) Foreign Currency Transactions

Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of the transactions.Monetary items denominated in foreign currency and outstanding at the balance sheet date are translated at theexchange rate prevailing on the balance sheet date. Exchange differences on foreign exchange transactionsother than those relating to fixed assets are recognised in the profit and loss account. Any gain/loss onexchange fluctuation on the date of payment of expenditure incurred for acquisition of fixed assets is treated asan adjustment to the carrying cost of such fixed assets.

SCHEDULES (Contd.)

43

k) Retirement Benefits

i) Gratuity

Liability for gratuity is provided on the basis of an actuarial valuation as at the year end and fundedwith gratuity fund administered by the management and the group gratuity scheme with the LifeInsurance Corporation of India (‘LIC’).

ii) Superannuation

Contributions made under a scheme of Life Insurance Corporation of India are charged to the profitand loss account.

iii) Leave Encashment

Liability for leave encashment is provided on the basis of an actuarial valuation carried out by theactuary as at the year end.

iv) Provident fund

The contribution towards Provident Fund is made to the Statutory Authorities/ fund administered bythe management and is charged to the profit and loss account.

l) Impairment

The carrying values of assets of the cash-generating units at each balance sheet date are reviewed forimpairment. If any indication of such impairment exists, the recoverable amounts of those assets areestimated and impairment loss is recognised, if the carrying amount of those assets exceeds their recoverableamount. The recoverable amount is the greater of the net selling price and their value in use. Value in use isarrived at by discounting the estimated future cash flows to their present value based on appropriate discountfactor.

m) Income-Tax

Tax Expenses for the year, comprises both current tax and deferred tax. Current tax is determined as the amountof tax payable in respect of taxable income for the year. Deferred tax is recognised on timing differences, beingthe difference between taxable income and accounting income that originate in one period and are capable ofreversal in one or more subsequent periods and quantified using the tax rates and law enacted or substantivelyenacted by the reporting date. Where there is an unabsorbed depreciation or carry forward loss, deferred taxassets are recognised only if there is virtual certainty of realisation of such assets. Other deferred tax assets arerecognised only to the extent there is reasonable certainty of realisation in future. Deferred tax assets arereviewed for the appropriateness of their respective carrying values at each balance sheet date.

n) Earnings Per Share

Basic earnings per share is calculated by dividing the net earnings after tax for the year attributable to equityshareholders by the weighted average number of equity shares outstanding during the year.

For calculating diluted earnings per share, the number of shares comprises the weighted average sharesconsidered for deriving basic earnings per share, and also the weighted average number of shares, if any whichwould have been used in the conversion of all dilutive potential equity shares. The number of shares andpotentially dilutive equity shares are adjusted for the bonus shares and the sub-division of shares, if any.

o) Contingent Liabilities

Contingent liabilities are determined on the basis of available information and are disclosed by way of a note tothe accounts.

SCHEDULES (Contd.)

44

2. Contingent liabilities not provided for in respect of:As at As at

31 March, 2006 31 March, 2005(Rs. in ‘000) (Rs. in ’000)

i) *Claims against the Company not acknowledged asdebts, to the extent quantifiable. 18,293 8,375

ii) *Income-tax matters(other than the matters inappeal by the department before the tribunal) 1,444 1,209

iii) *Sales-tax matters 27,009 18,603

iv) (a) * Excise matters 6,009 137

(b) “Show Cause” Notices issuedduring 1985-86 by the Excise Authorities for additionalexcise duties in respect of goods supplied are disputed andthe Company has filed a writ petition in the High Court ofGujarat. The matter is still pending. The liability, if any,arising out of this dispute is not ascertainable. The Companyhad paid excise duty on provisional basis for the period 1982to 1997.

v) *Customs duty matters 342 342

vi) Stamp Duty liability on transfer of certain Land and Buildings. 3,200 3,200

* Excluding interest/penalty as may be determined/ levied on the conclusion of the matters.

3. Disclosure of provisions as per AS-29 “Provisions, Contingent Liabilities and Contingent Assets” is as follows: (Rs. in ’000)

Particulars As at Provisions Amount used/ Amount reversed As at01.04.2005 made during paid during 31.03.2006

the year the year

Provision for Doubtful Loansand Advances 616 - - _ 616

Diminution in value of Investment 30 1 - _ 31

Warranty 2,532 697 - _ 3,229

Lease Rentals 19,674 _ - 19,674 -

TOTAL 22,852 698 - 19,674 3,876

4. Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances ofRs. 4,616 thousands) : Rs.11,430 thousands (previous year Rs.Nil thousands).

5. Sundry Debtors and Retention Money of Rs. 53,835 thousands are overdue from the parties concerned. The Companyis making concerted efforts to recover the said dues including filing of legal cases wherever considered appropriate.Accordingly, the management is hopeful of recovery in due course of time and therefore, no provision is considerednecessary.

6. The balances in Sundry Debtors, Sundry Creditors and Advances are, however, subject to confirmations andadjustments, if any. Such adjustments, in the opinion of the management, are not likely to be material and will becarried out as and when ascertained.

7. In the opinion of the Board, Current Assets, Loans and Advances have a value on realisation in the ordinary course ofbusiness at least equal to the amount at which they are stated.

8. Managerial Remuneration

Year Ended Year Ended

31 March, 2006 31 March, 2005(Rs. in’ 000) (Rs. in’ 000)

Salaries and Allowances 1,312 3,930Contribution to Provident and Superannuation funds 102 152Perquisites 183 453

1,597 4,535

SCHEDULES (Contd.)

45

9. Sundry Creditors include Rs.47,491 thousands (previous year Rs.40,389 thousands) due to Small Scale Industrialundertakings. Names of small scale industrial undertakings to whom amount is due for more that 30 days are givenhereunder:

Sulaksh Combains, Ishan Equipment Pvt. Ltd., Aardike Engg. Enterprises, Krishna Industries, Gurukrupa Fabrication,Empire Engineering, Fabrite Metal (Bombay) Pvt Ltd., Fabwell Engineers, K. Pack Systems Pvt. Ltd., Marvel Industries,MSA FAB, Oriental Fabricators, Pragati Industries, Sakhi Engineers Pvt. Ltd., Swam Pneumatics Pvt. Ltd., ThakurIndustries, Tubela Engineering Works, Westend Foundry Pvt. Ltd.

10. Overdue amounts as at 31 March, 2006 to Small Scale Industries and/or Ancillary industrial suppliers on account ofprincipal amounts, together with interest Rs.Nil, aggregate to Rs.11,559 thousands (previous year Rs.10,597 thousands).

11. Auditors RemunerationYear ended Year ended

31 March, 2006 31 March, 2005(Rs. in’ 000) (Rs. in ‘000)

i) Audit Fee 525 350ii) Tax Audit 100 -

iii) Limited Review of Results 215 215

iv) In other capacity:

Management Services - 100

Certification fees 159 184

Reimbursement of out of pocket expenses 169 149(including towards service tax)

Total 1,168 998

12. Value of imports on C.I.F. basis


13. Expenditure in foreign currency on account of (on payment basis)

Cost of systems, equipments, spares and services. 73,761 11,820

Foreign Travel 800 777

Others 13,600 4,977

Total 88,161 17,574

14. Remittance in foreign currency on account of dividend

i) Remittance in foreign currency(Rs. in thousands) - 3,801ii) Number of non-resident shareholders - 1iii) Number of shares on which remittances were made - 3,168,000iv) Year for which remittance was made - 31.03.2004

The above information pertains only to those non-resident shareholders to whom remittances were made by theCompany.

15. Earnings in foreign exchange

Sale of systems (including components and spares) on FOB basis 92,622 20,648

Freight and insurance recoveries 2,354 604

16. Value of components used for supply of systems and services (Refer Schedule 16)

Year ended 31 March, 2006 Year ended 31 March, 2005% (Rs. in ‘000) % (Rs. in ‘000)

Imported 7.05 69,346 6.25 34,673Indigenous 92.95 914,192 93.75 519,349

Total 100.00 983,538 100.00 554,022

In view of the large number and heterogeneous types of spares, accessories and components, it has not been considerednecessary to furnish separately the respective quantitative information.

SCHEDULES (Contd.)

46

17. Related Party Transactions

a. List of related parties

i. Holding Company

Jumbo World Holdings Limited (up to 8 September, 2005)

IVRCL Infrastructure and Projects Limited (W.e.f. 9 September, 2005)

ii. Fellow Subsidiaries (W.e.f. 9 September, 2005)

IVR Prime Urban Developers Limited

IVRCL PSC Pipes Private Limited

IVR Enviro Projects Private Limited

IVRCL Water Infrastructures Limited

IVRCL Road Toll Holdings Ltd

Geo IVRCL Engineering Limited

IVRCL Steel Constructions & Services Limited

iii. Associates(Up to 8 September, 2005)

Dandavati Investments & Trading Company Private Limited

Firestorm Finance & Trading Company Private Limited

Gordon Woodroffe Limited

Gordon Woodroffe Logistic Limited

Harshit Finlease & Investments Limited

Jerom Trading & Investments Limited

Jumbo World Holdings (India) Limited

Malabar Breweries Limited

Mather & Platt Pumps Limited

Mather & Platt Fire Systems Limited

New Video Private Limited

Primo Distributors Private Limited

Shaw Wallace & Company Limited

Shaw Wallace Distilleries Limited

Shaw Wallace Executives Welfare & Benefit Co.

Shaw Wallace Financial Services Limited

SKOL Breweries Limited

SMN Engineers Limited

(w.e.f. 9 September, 2005)

Viva Infrastructure Private Limited

Paresh Infrastructures Private Limited

Telcon Ecoroad Resurfaces Private Limited

iv. Subsidiaries of Fellow Subsidiaries

(W.e.f. 9 September, 2005)

FIRST STP Private Limited

Chennai Water Desalination Limited

Jalandhar Amritsar Tollways Limited

Salem Tollways Limited

Kumarapalayam Tollways Limited

IVRCL Hotels & Resorts Limited

v. Key Management Personnel

Mr Suresh Dadlani - Managing Director (Upto 21 June, 2005)

Mr E Sudhir Reddy- Vice Chairman and Managing Director (W.e.f. 10 September, 2005)

Mr S C Sekaran – Executive Director (w.e.f. 1 June, 2006)

SCHEDULES (Contd.)

47

b. Followings are the transactions with the related parties:

(Rs in 000)

Particulars Years Holding Associates Key TotalCompany Management

Personnel

Income/ExpensePurchases 2005-06 4567 - - 4567

2004-05 - 5044 - 5044Interest Paid 2005-06 296 - - 296

2004-05 - - - -

Interest Received 2005-06 - - - -

2004-05 - 1740 - 1740

Dividend Paid 2005-06 3554 - - 3554

2004-05 3801 - - 3801

Expenses Received 2005-06 - 772 - 772

2004-05 - 990 - 990

Expenses Paid 2005-06 1373 300 - 1673

2004-05 2333 2167 - 4500

Rent Paid 2005-06 - 774 - 774

2004-05 - 1251 - 1251

Rent Received 2005-06 - 895 - 895

2004-05 - 1200 - 1200

FinanceShare ApplicationMoney Received 2005-06 6400 - - 6400

2004-05 - - - -

Loans/ Advances Taken 2005-06 10000 - - 10000

2004-05 - - 4000 4000

Investment (Sales)/Purchase 2005-06 - (21280) - (21280)

2004-05 - 20000 - 20000

Balances withrelated partiesAdvances Recoverable 2005-06 - 621 - 621

2004-05 - 116 - 116

Advances Payable 2005-06 2150 34 - 2184

2004-05 12881 1995 - 14876

Debtors 2005-06 - 5348 - 5348

2004-05 - 46933 - 46933

Deposits Recoverable 2005-06 - - - -

2004-05 - - - -

Deposits Payable 2005-06 - 1000 - 1000

2004-05 - 1019 - 1019

Remuneration 2005-06 - - 1597 1597

2004-05 - - 4535 4535

SCHEDULES (Contd.)

48

Disclosure of Material Transactions with Related Parties

Particulars Year Ended Year Ended

March 31, 2006 March 31, 2005(Rs. in ‘000) (Rs. in ‘000)

Purchases

IVRCL Infrastructures and Projects Ltd 4567 -

Jumbo Electronics Company Limited - 81

Gordon Woodroffe Logistic Limited - 162

Mather & Platts Pumps Limited - 3664

Central Disttelleries Breweries Limited - 1137

Interest PaidIVRCL Infrastructures and Projects Ltd 296 -

Interest ReceivedHarshit Finlease and Investment Ltd. - 1740

Dividend Paid

IVRCL Infrastructures and Projects Ltd 3554 -

Jumbo World Holdings Limited - 3801

Expenses Received

Shaw Wallace Disttelleries Limited 532 673

Shaw Wallace Executive Welfare & Benefit Co - 263

Dandavati Investment and Trading Co Ltd. 240 -

Dunlop India Limited - 5

Shaw Wallace & Co Ltd - 20


Mather & Platts Fire Systems Limited - 26Expenses PaidIVRCL Infrastructures and Projects Ltd 731 -

Jumbo World Holdings Limited 642 2333


Mather & Platts India Limited - 473

Shaw Wallace & Co Ltd 164 270

Jumbo World Holdings (India) Limited - 63

Shaw Wallace Disttelleries Limited 130 817

Shaw Wallace Executive Welfare & Benefit Co. 4 -

New Video Limited 2 1

Firestorm Finance & Trading Company Private Ltd. - 5Rent Paid

Shaw Wallace & Co Ltd. 404 555

New Video Limited 300 600

Shaw Wallace Executive Welfare & Benefit Co. 70 96

Rent ReceivedShaw Wallace Disttelleries Limited 810 1080

Dunlop India Limited 85 120Shares Application Money ReceivedIVRCL Infrastructures & Projects Ltd. 6400 -Loans Advances TakenIVRCL Infrastructures & Projects Ltd. 10000 -

Notes

1. Related party relationship is as identified by the Company and relied upon by the Auditors.

2. No amount pertaining to related parties which have been provided for as doubtful debts or written off in respect ofrelated parties.

SCHEDULES (Contd.)

49

18. Earnings per share


Net Profit attributable to shareholders(Rs.in thousands) 64,740 11,167

Weighted average number of equity shares outstanding

For Basic EPS 4,957,142 4,230,484For Diluted EPS 4,966,402 4,230,484

Earnings Per Share ( EPS)(Face Value of Rs. 10 each)

Basic(Rupees) 13.06 2.64

Diluted(Rupees) 13.04 2.64

19. Segment ReportingPrimary Segment – BusinessThe Company is primarily engaged in the business of manufacturing, supply of equipment including erection andcommissioning and providing engineering services. As such, there is no separate reportable segment as per the Ac-counting Standard - 17 (Segment Reporting) issued by The Institute of Chartered Accountants of India.Secondary Segment – GeographicalDomestic Revenue - Rs.1,361,518 thousands (previous year Rs. 841,475 thousands)Export Revenue - Rs.94,976 thousands (previous year Rs. 21,252 thousands)The Company’s operating facilities are located in India.

20. Deferred Tax

The Company has carried out deferred tax computation in accordance with Accounting Standard 22– ‘Accounting forTaxes on Income’ issued by the Institute of Chartered Accountants of India.

The deferred tax assets as shown in the balance sheet consists of:

As at As at31 March, 2006 31 March, 2005

Particulars (Rs. in’ 000) (Rs. in ‘000)Tax impact of differences between carrying amount of thefixed assets in the financial statements and the income tax 4,474 1,793

Tax impact of expenses charged in the financial statementsbut allowable as deductions in future years under income tax (13,055) (7,127)

Deferred Tax Liability/(Assets) (8,581) (5,334)

21. In terms of the disclosures required to be made under the accounting standard (AS) 7 (revised 2002) issued by theInstitute of Chartered Accountants of India for ‘Construction Contracts’, the amounts considered in the financialstatements up to the reporting date are as follows:


(Rs. in ‘000) (Rs. in ‘000)

Contract Revenue recognised as revenueDuring the year – (paragraph 38a) 923,838 602,392Contract costs incurred and recognisedProfits, less losses – (paragraph 39a) 846,794 526,255

Advances received, net of recoveriesFrom progressive bills – (paragraph 39b) 39,641 111,814

Gross amount due from customers forContract works – (paragraph 41a) 470,210 313,388

Gross amounts due to customers for

Contract work – (paragraph 41b) - -The paragraph references mentioned against each item below are as given in the said accounting standard.

SCHEDULES (Contd.)

50

22. Particulars in respect of each class of goods manufactured.

A. Capacity, production and stocks

Class of Goods Capacity Sales and Stock(In Metric Tonnes) production

(In Metric Opening Closing Tonnes)

Licenced Installed Quantity Value Quantity ValueFilteration (See Note (See Note (See NoteSedimentation below) below) below)Classification 4000 2000* 1370 Nil Nil Nil NilCentrifugation. (4000) (2000) (1225) (Nil) (Nil) (Nil) (Nil)Pollution ControlFluidisationMiscellaneous

*As certified by the Management and relied upon by the Auditors, being a technical matter.Note : By virtue of endorsements made on its Industrial License, the Company within its overall capacity is alsopermitted to manufacture (i) Pressure Vessels, Reactors, Columns, Horton Spheres and Storage tanks, includingglass lined equipments. (ii) Heat transfer equipment and systems. (iii) Solid Liquid Gas Separation Plants includingFilteration Systems (iv) Mixing Homogenizing Equipments (v) Natural Gas Crackers including primary reformers(vi)Concentrating and Drying Systems Consisting of Evaporator Systems (vii) Dryers and Drying Systems.

i) Mixers Agitators and Aerators up to 750 Metric Tons p.a.

B. Turnover

Year ended Year ended Particulars 31 March, 2006 31 March, 2005

Quantity (Rs. in ‘000) Quantity (Rs. in ‘000)(Nos.) (Nos.)

a) Equipments, systems and spares:

Filteration Equipment 112 199,385 88 75,073

Sedimentation Equipment 70 29,874 54 18,196

Miscellaneous Equipment 4 21,724 67 45,263

Components 70 38,515 81 38,422

b) Services 1,166,996 685,773

Grand Total 1,456,494 862,727Notes :i. Sales are net of credit notes issued to customers relating to discounts, allowances etc.ii. In view of the large number and heterogeneous types of equipments and services, it has not been considered

necessary to furnish separately the respective quantitative information.

C. Raw materials and Components consumed (including for maintenance)

Year ended Year ended Particulars 31 March, 2006 31 March, 2005

Unit Quantity (Rs. in Quantity (Rs. in‘000) ‘000)

Imported Strip liners Tonnes 21 4,583 162 18,499

Stainless Steel Plates& Structurals Tonnes 160 34,088 51 10,565

SS Pipes, Tubes Meters 1,537 1,614 3,207 1,423

Mild steel plates andStructurals Tonnes 981 32,607 509 15,643

MS Pipes, Tubes Meters 7,450 5,559 69,675 11,677

CI Castings Tonnes 179 15,288 84 7,187

SS and N.F. Castings Tonnes 19 2,239 10 1,731

Other Components(Imported) 4,729 _

Other Components(Indigenous) 45,319 22,263

Total 1,46,026 88,988

SCHEDULES (Contd.)

51

D. Value of raw materials, loose tools, stores and spares parts consumed analysed as

Year ended Year ended Description 31 March, 2006 31 March, 2005

% (Rs. in ‘000) % (Rs. in ‘000)In Raw Materials and Components:

Imported 6.38 9,312 20.79 18,500

Indigenous 93.62 1,36,714 79.21 70,488

Total 100.00 1,46,026 100.00 88,988

Stores, Spares and Patterns (indigenous) 100.00 11,845 100.00 9,742

The consumption, therefore, includes adjustments for shortage/excess and the effects of reduction of stock items totheir realisable values.

23. The Company had, in earlier year, entered into an agreement for granting a non exclusive license to sell, engineer,manufacture, or have third parties manufacture, erect, commission, operate and service the ‘System’ under the basicknow-how for a consideration of Euro 355,000. An amount of 9,808 thousands (Euro 180,000), being the cost oftechnical know how paid by the Company, has been capitalized. The management is discussing to obtain other technicalknow how/ technologies from the same party for a consolidated consideration and is confident that the balance amountfor the technical knowhow obtained by the Company will not be payable. The amount of balance consideration, ifrequired, shall be capitalized as and when the negotiations are finalized.

24. Utilisation of Preferential Issue Proceeds

In the month of October 2005, the Company has issued and allotted 1,570,000 equity shares of Rs.10 each for cash atpremium of Rs.310 per equity share at an issue price of Rs.320 per equity share aggregating to Rs.502,400 thousandson preferential basis.

The utilization of the fund raised through the preferential issue up to March 31, 2006 is as under:

Year EndedParticulars 31 March 2006

(Rs. in ‘000)

Purchase of Fixed Assets 40,238

Repayment of Public Deposits 51,952

Issue Expenses 15,571

Working Capital 9,639

Unutilised issue proceeds in Fixed Deposit with banks 385,000

Total 502,400

25. The Board of Directors of the company at their meeting held on September 12, 2005 and approved at its Extra OrdinaryGeneral Meeting (EGM) held on October 8, 2005 have resolve to create, offer, issue and allot upto 200,000 warrantsconvertible into 200,000 equity shares of Rs. 10 each on a preferential allotment basis pursuant to section 81(1A) of theCompanies Act, 1956, at a conversion price of Rs. 320 per equity share of the company, arrived at in accordance withSEBI Guidelines in this regard and subsequently these warrants were allotted on October 14, 2005 to the HoldingCompany. These warrants are convertible into equity shares within a period of 18 months from the date of allotment atthe option of warrant holders. The company has received 10% application money amounting to Rs. 6,400 thousandsfrom the Holding Company.

26. Staff salaries and General expenses include Rs.2,623 thousands (previous year Rs. 2,442 thousands) for Research &Development activities.

27. The previous year’s figures have been regrouped/rearranged wherever necessary.


S. J. Bhel A. Pushparaj E. Sudhir Reddy S. C. SekaranG. M. - Finance Company Secretary Vice Chairman & Executive

Hyderabad, June 1, 2006. Managing Director Director

SCHEDULES (Contd.)

52

BALANCE SHEET ABSTRACT

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE PURSUANT TO PARTIV OF SCHEDULE VI OF THE COMPANY ACT, 1956

I. Registration

Registration No. 1 7 6 4 4 State Code 1 1

Balance Sheet Date 3 1 0 3 2 0 0 6

II. Capital raised during the year :

Public Issue Right Issue

N I L N I L

Bonus Issue Private Placement

N I L 1 5 7 0 0

III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands)

Total Liabilities Total Assets

2 0 7 8 1 4 1 2 0 7 8 1 4 1

Source of Funds

Paid-up Capital Reserve & Surplus

5 8 0 0 5 1 0 5 7 8 7 6

Secured Loans Unsecured Loans

3 4 1 5 4 0 N I L

Application of Funds

Net Fixed Assets Investments

3 1 8 8 7 2 1 6 5 2 0

Net Current Assets Misc. Expenditure

1 1 1 9 8 4 8 N I L

Accumulated Losses Deferred Tax Assets (Net)

N I L 8 5 8 1

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

Turnover Total Expenditure

1 4 1 4 0 8 0 1 3 6 4 9 4 2

Other Income

2 4 6 9 0

Profit Before Tax Profit After Tax

7 3 8 2 8 6 4 7 4 0

Earning Per Equity Share (Rs.) Dividend rate %

1 3 . 0 6 2 0

V. Generic Names of Three Principal Products/Services of Company (as per monetary terms)

Item Code No. (ITC Code) : 84391000

Product Description : Machinery for making pulp of Fabrous Cellulosic Material


Product Description : Waste Water Treatment Plant


Product Description : Mixing and Homogenizing Equipment for Chemical Industries