it is the unseen power that is propelling

It is the unseen power that is propellingthe progress at Suzlon – one of theworld’s fastest growing wind energycompanies.

Suzlon offers solutions across the windenergy value chain, fromconceptualization, design andmanufacturing to operations andmaintenance services.

The Company has aligned its capabilitiesand strategies to its vision and harnessedthe best of resources to create world classproducts and services.

Suzlon with its fully integrated businessmodel has risen to become the world’s5th largest player in the wind energyindustry. The company is on an aggressivegrowth path; by leveraging innovation,futuristic technologies and businessacumen, Suzlon is set to usher in the windof change in the global energy market.

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SUZLON ENERGY LIMITED

Company information

BOARD OF DIRECTORS Tulsi R. Tanti Chairman & Managing DirectorGirish R. Tanti Director (International Business Development & HR)

Ajay Relan Representative Director of CIFCAshish Dhawan DirectorPradip Kumar Khaitan DirectorV. Raghuraman Director

COMPANY SECRETARY Hemal A. Kanuga

AUDITORS SNK & Co. S.R. Batliboi & Co.Chartered Accountants Chartered Accountants111, Nalanda Enclave The Metropole, F-1Pritamnagar, Ellisbridge 1st Floor, Bund Garden RoadAhmedabad – 380 006 Pune – 411 001

BANKERS Bank of Baroda Punjab National BankBank of Maharashtra Standard Chartered BankCitibank, N.A. State Bank of Bikaner & JaipurDeutsche Bank AG State Bank of IndiaHDFC Bank Ltd. State Bank of IndoreIndustrial Development Bank of India Ltd. State Bank of PatialaIndian Overseas Bank UTI Bank Ltd.ING Vysya Bank Ltd.

REGD. OFFICE “Suzlon”, 5, Shrimali SocietyNear Shri Krishna ComplexNavrangpuraAhmedabad – 380 009Tel. :+91-79-2647 1100Fax :+91-79-2656 5540

CORPORATE OFFICE 5th Floor, Godrej Millennium9, Koregaon Park RoadPune – 411 001Tel :+91-20-2620 2000Fax :+91-20-2620 2100

BRANCH OFFICES Bangalore Jaipur RajkotChennai Kolkata SuratCoimbatore Mumbai ThiruvananthapuramHyderabad New Delhi VadodaraIndore

REGISTRAR AND SHARE Karvy Computershare Private LimitedTRANSFER AGENTS Karvy House, 46, Avenue 4

Street No.1, Banjara HillsHyderabad – 500 034Tel. : +91-40-2332 3031Fax : +91-40-2330 4703E-mail : [email protected]: www.karvy.com

FACTORY LOCATIONS Survey No. 588PaddarBhuj – 370 105

Plot No H-24 & H-25M.G. Udyognagar Indl. EstateDabhelDaman – 396 210

Plot No. 306/1 & 3Bhimpore, Nani DamanDaman – 396 210

Survey No.42/ 2 & 3, 54, 1 to 8Bhenslore Road, DunethaDaman – 396 210

Survey No: 282Chhadvel (Korde), SakriDhule – 424 305

Survey No. 574, 59ThiruvandarkoilThribhuvani RoadPondicherry – 605 107

Plot No. 50, 51, 52, 54 & 55Opp. Manjusar GIDCVadodara – 391 775

Tulsi R. TantiChairman & Managing Director

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Dear Shareholders,

Your conviction and belief in Suzlon found expression

in your overwhelming response to our Initial Public

Offering. This has furthered our responsibility and

commitment towards a cleaner, greener world. It is

our endeavour to ensure that your Company leads in

the world’s pursuit towards generating energy from

clean, sustainable and renewable sources.

It is with a lot of humility and pride that I look back a

little over ten years to when your Company began with a

dream, and in this watershed year has emerged as the

fastest and most profitable global player in the wind

energy space. Finding our place amongst the top five

global players and securing over 6% global market share

is a good beginning. I say it is just the beginning, because

your Company is on the threshold of penetrating the

global wind energy market in a big way. Your Company

secured around 92% of its sales in FY 2005-06 in India,

amounting to approximately 887 MW, the fourth largest

market for wind energy in the world. Building on the

strength of success in the Indian market and learning

from initial forays into the global market, your Company

plans to build a significant presence in the global market.

THE WIND IN OUR SAILS

Energy and energy prices are a determining factor in

politics, geo-politics and in the growth of economies

today. Energy is at the heart of two global challenges

- firstly, with rising energy prices, how do economies

remain competitive and growing? Secondly, how do

you prevent adverse environmental impact, such as

global warming, in which the increased use of

conventional fossil fuels may play a part?

While what is visible and talked about are the rising

oil prices; energy security and environment protection

and conservation are even greater and more persistent

challenges in today’s world.

Today, there is a global consensus that the reliance on

fossil fuels needs to be reduced, and that renewable

energy sources offer energy diversity. And these are

the ‘winds of change’ driving the need and demand

for renewable energy the world over.

Wind energy clearly leads in the renewable energy

space. Cumulative wind power installations the world

over are expected to reach 298,000 MW in 2015. This

will translate to 2.93% of the global energy generation

in 2015, compared to wind’s contribution of 0.69%

of total generation in 2005. Wind power emerged as

Chairman’s message

the fastest growing energy source in 2005, growing

at approximately 40% - probably one of the very few

industries to register such aggressive growth globally!

Today there is a consensus on projections for the

growth of the wind energy sector globally –

conservative estimates point to a CAGR of 21% over

the next five years, and total cumulative installations

of nearly 150,000 MW by 2010, up from current

installed capacity of 59,264 MW.

WIND ENERGY-CONSTRAINED BY SUPPLY, NOT DEMAND

Europe has long been the preeminent leader in wind

energy. Denmark, for instance, generates 20% of its

power requirement from wind, and Germany led the

world at the end of 2005 with wind power

installations of 18,445 MW. In the United States,

experts estimate that the wind potential of just three

states – Texas, Kansas and North Dakota – to be equal

to approximately half the electricity consumption of

the entire United States. In Asia, China has set for

high growth in wind energy with a new Renewable

Energy Law targeting 5,000 MW from renewable

sources by 2010, and 30,000 MW by 2020. These

targets are expected to raise the contribution of

renewable sources up to 10% of total consumption

by 2020. In 2005, China ranked first in terms of

average wind capacity installation growth over the

past three years, followed closely by India. India’s

aggressive growth track also reflects in its ranking as

the fourth largest wind energy market in the world in

2005. With other countries in the region like South

Korea and Australia also making strong commitments

to renewables, the potential for the growth of wind

energy across the world is very high.

Governments across the world have demonstrated

their support for renewable energy through favourable

policies - fixed tariffs for renewable-powered

electricity, Renewable Portfolio Standards (RPS), tax

related benefits (Production Tax Credits and similar),

investment grants and the carbon credit mechanisms.

All these factors indicate a steadily increasing demand

for wind energy, which will be a big force in driving

capacity addition in the energy space.

Suzlon has built its competencies, capabilities and

capacities to obtain a very significant share of these

‘winds of change’. In the past year, it grew its output,

revenues and profits by 91%, 98% and 108%

respectively. At Suzlon, we have planned and

implemented our investments well in advance to gear

up to capitalize on the global opportunity, and we

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have aligned ourselves to changing customer needs

and the emerging trends of the industry.

INDUSTRY TRENDS

Economic growth has always been the barometer to

test the demand for energy. With the global economic

engine powering forward, projections point to the

demand for energy doubling by 2030. With growing

demand and the need to replace ageing infrastructure,

incremental addition of 4,800 GW of capacity will be

required.

The past year has seen significant developments in

the wind energy sector, in the form of globalization

and consolidation. Further, the following trends are

clearly seen:

Cost of wind generated electricity has become

more competitive, offering virtually limitless

supplies of inexpensive, clean, green energy

Demand continues to significantly outstrip supply

Continued up-scaling of wind turbine models

Supply chain bottlenecks

Customer group largely dominated by utilities,

large energy companies and financial institutions

Though Europe continues to lead, other markets

are poised to scale-up quickly – with US, India,

China leading the way and emerging European

markets like UK, Portugal, Italy, Greece and

France following suit.

YOUR COMPANY AND THE INDUSTRY

Your Company strives to outperform the industry. For

instance, the wind energy industry has grown during

2000-05 at a CAGR of 26.3%, whereas Suzlon has grown

at 64.0%, in terms of cumulative installations.

TAKING ON THE GLOBAL OPPORTUNITY

It is evident that the market for wind energy is growing

across the world, and this growth will accelerate

further. Suzlon is focused on leading the way in

participating and capitalizing on the opportunity.

Changing from the earlier focus on the Indian market,

your Company has gone international – emerging as a

global player through expansion in key international

markets: Australia, China, South Korea and USA. Your

Company today has presence in all leading markets

across the world, and endeavors to lead in the markets

of China, India, USA, emerging European markets and

niche markets in Asia Pacific.

Suzlon has set up its international business headquarters

in Denmark to drive the Company’s global growth plans.

Suzlon is setting up manufacturing facilities in the China

and USA to strengthen its presence in the global

marketplace. In addition to this, Suzlon has invested in

local infrastructure and built competencies in Australia,

China and USA to manage and grow business

independently in these markets. With these initiatives

Suzlon has clearly stated its intention of becoming a

major player in the global wind energy market.

INTEGRATING VERTICALLY

Today, one of the major challenges faced by the

industry is control over its entire supply and value

chain. Recognizing the significance of this challenge

early on, your Company took its’ first steps towards

vertical integration of its value chain by setting up of

its first wind turbine component facility for rotor

blades in 2001. The Company has continued to expand

capacities and add manufacturing facilities of other

critical wind turbine components in past years.

Your Company has further improved its control over

the value chain by setting up Suzlon Generators

Private Limited in joint venture with Elin EBG Motoren

GmbH of Austria to manufacture generators for wind

turbines. The Company also moved to set up Suzlon

Structures Private Limited to manufacture tubular

towers for wind power projects. More recently, your

Company acquired Hansen Transmissions International

NV, one of the world leaders in gearbox technology,

at an enterprise value of Euro 465 million. This deal

marked the second largest international acquisition

by any Indian company in the private sector.

In line with its strategy, your Company has developed

control over critical technology and built up

manufacturing capability for all the key components

of the wind turbine generators; namely, rotor blades,

generators, gearboxes, control systems and towers.

Early efforts to vertically integrate its operations and

manufacture critical components helped your

Company to integrate component technologies into

the total turbine solution. This has helped your

Company develop technologically superior, more

reliable, and competitive turbines; resulting in the

Company maintaining its strong position in the

marketplace in times of severe supply bottlenecks.

Suzlon has also applied the integrated approach to its

business model, developing capability with its

associates concerns to offer integrated wind energy

solutions from concept to commissioning to lifetime

care. The scope of solutions offered cover services

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ranging from conceptualisation, design, and

manufacturing to EPC project delivery and lifetime

operations & maintenance services.

The Company’s strategic drive towards achieving

complete control over its supply chain will make your

Company one of the most integrated turbine

manufacturers in the world.

LEADING THE INVESTOR COMMUNITY

You would be glad to know that in just months after

the IPO, your Company has been selected for inclusion

in the prestigious S&P CNX Nifty Index, one of the

benchmark indices of the Indian capital markets.

I believe this landmark event is recognition of the

faith and trust that you placed in your Company, and

I look forward to your continued support over the

coming years.

INNOVATION, FUNDAMENTAL TO OUR EXISTENCE

At Suzlon, we apply innovation not only in R&D for new

products, but also implementing innovative business

ideas and concepts to enhance business performance.

Innovation is everywhere in your Company and is

fundamental to its existence. Innovation drives us

and is our stimulus for growth. Quite simply, we are,

because we innovate.

Innovation at Suzlon is:

Continued emphasis on research and development

to create superior technology

Applying creativity and foresight to change

management

A relentless drive towards success amidst

dynamic market realities

Creation and exploitation of market potential

in markets where none existed before.

THE HUMAN FACTOR

People are our key asset and your Company is all about

people. Your Company has grown from strength to

strength not only in its revenues, but also its human

capital. At the end of the financial year 2005-06,

your Company employed over 5,300 people from

twelve nationalities in its operations worldwide.

We realize the importance of nurturing our talent

pool, and one of our key initiatives in this direction is

the establishment of Learning and Development (L&D)

Centers at key locations of the Company. The L&D

Centers establish career tracks for specialists, and

undertake leadership programs for executives.

A culture of meritocracy drives your Company. It

encourages a uniform, high performance culture that

motivates employees to excel at everything they do.

Your Company felicitates and recognizes employees

for their performance. To promote the spirit of

entrepreneurship and to reward employees for their

exceptional performance, your Company launched its

first Employee’s Stock Option Plan in 2005.

I take this opportunity to thank and congratulate

every employee of your Company for the

uncompromising dedication and hard work which

has enabled your Company to rise to rank amongst

the top in the wind energy arena.

STRENGTHENING THE BOARD

Mr. V. Raghuraman consented to join your Company’s

Board from October 2005. He is currently a Senior Advisor

(Energy) with the Confederation of Indian Industry and

has a primary specialization in Energy Management and

Energy Conservation. He also served as the Chairman of

the World Energy Efficiency Association, Washington.

We welcome him wholeheartedly to the Suzlon family

and look forward to his guidance.

WE CARE

Your Company is committed to being an active and

responsible member of every community worldwide

where we do business and has set the goal of becoming

the ‘best in class’ in corporate governance, business

practices, sustainability and corporate citizenship.

Your Company believes that corporations have

important social responsibilities and hence attempts

to contribute to such common objects by way of

charitable donations for education, organizing blood

donation camps of employees and running clinics for

the underprivileged.

To emerge as a global leader, I believe that pursuit of

goals with tenacity and integrity is essential. With the

enthusiastic and focused efforts of our team combined

with the growing confidence and trust placed in us

by all of you, I am confident that your Company will

become a formidable player for the global wind energy

companies in the years ahead.

Best wishes for a cleaner, greener and a more prosperous

tomorrow.

Place : New Delhi Tulsi R. TantiDate : May 15, 2006 Chairman & Managing Director

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BACKGROUND

Suzlon is world’s 5th largest wind turbine manufacturerwith a share of over 6% of the global wind energysector. The Company continued its leadership of theIndian wind energy market for the 8th consecutiveyear, with a market share of over 50% in 2005.

Since its inception in 1995, the Company has grownto a worldwide presence, employing over 5,300 people(as on March 31, 2006) from twelve nationalities inoperations in Australia, Belgium, China, Denmark,Germany, India, Netherlands and USA.

PRODUCTS

Suzlon manufactures state-of-the-art Wind TurbineGenerators (WTGs), with a portfolio of machines withcapacities ranging from 0.35 MW to 2.1 MW, cateringto the needs of everyone from small customers toutility scale investors. The comprehensive productrange also enables the Company to supply and executeprojects across the world with extremely varied windregimes and climatic conditions.

INTEGRATED SOLUTIONS

Suzlon along with its associates concerns offersintegrated wind energy solutions from concept tocommissioning to lifetime care; covering a gamut ofservices including conceptualisation, design,manufacture, EPC project delivery and operations &maintenance services.

Suzlon’s world class manufacturing capabilities andcomprehensive wind power solutions are backed bystringent international quality control and assurancesystems, such as the ISO 9001:2000, and typecertifications for individual WTG models.

VERTICAL INTEGRATION

Suzlon has grown into a fully integrated wind turbinemanufacturer. In addition to manufacturing WTGs,Suzlon also manufactures critical components suchas rotor blades, generators, gearboxes, control systemsand tubular towers for WTGs. The Company’s mainmanufacturing facilities are located at Daman,Pondicherry, Maharashtra and Gujarat in India. Suzlonis also setting up manufacturing facilities in Chinaand USA to meet the needs of the rapidly expandingwind energy markets in these geographies.

REACH

Suzlon’s global headquarters are located in Pune, Indiaand its international business headquarters inDenmark; with country headquarters for the Asia-Pacific, China and North America at Melbourne, Beijingand Chicago respectively. Suzlon drives its technologydevelopment from centers located in Germany, Indiaand The Netherlands.

PERFORMANCE

In the financial year 2005-06, Suzlon continued itstrajectory of growth, recording sales and EBIDTA ofRs. 3841.03 crore and Rs. 884.22 crore respectively, anincrease of 98% and 93% over the previous year. ProfitAfter Tax (PAT) rose from Rs. 365.33 crore in 2004-05to Rs. 759.50 crore in 2005-06, an increase of 108%.Suzlon’s EBIDTA margin stood strong at 23%.

During the year the Company raised funds throughan IPO of 29,340,000 equity shares of Rs.10 each forcash at a premium of Rs. 500 per equity sharesaggregating to Rs. 1,496.34 crore, consisting of afresh issue of 26,762,680 equity shares by theCompany and an offer for sale of 2,577,320 equityshares by Citicorp International Finance CorporationInc. The issue was oversubscribed by over 45 times.

The Company’s shares are listed on the National StockExchange of India Limited and Bombay Stock ExchangeLimited. The Company is ranked amongst the largestin the world in wind energy sector, and among thetop-10 of the Indian private sector in terms of marketcapitalization.

STRONG WINDS 2005-06

Suzlon, in 2005, climbed to the 5th positionglobally with 6.1% share of installationsworldwide and ranked 2nd in terms of annualgrowth, as per rankings published by BTMConsult ApS in the World Market Update 2005,a report on the global wind energy sector.

The Chairman and Managing Director of theCompany, Mr. Tulsi R. Tanti was awarded theLifetime Achievement Award “Best RenewableMan of the Decade” by the Foundation ofIndian Industry and Economists.

The Solar Energy Society of India (SESI)recognized Mr. Tulsi R. Tanti’s contribution tothe promotion of renewable energy in Indiawith the SESI “Pioneer Award”.

Suzlon expanded its global presence, securinglandmark breakthrough orders in Australia,China and South Korea; emerging markets forwind energy with high potential for growth.

The Suzlon family grew by over 150% - ourstrength rising from 2,100 personnel at thebeginning of FY 2005-06 to 5,300 personnel asof March 31, 2006.

Suzlon’s Initial Public Offering was met with anoverwhelming response, with the Institutionalportion over-subscribed approximately 68 timesand the HNI portion 40 times.

Suzlon’s global headquarters and WTGmanufacturing facility at Daman (Unit V) werecertified to ISO 14001:2004 and OHSAS18001:1999 standards by DNV (Det Norske Veritas).

Suzlon’s sales and profit after tax grew by 98%and 108% respectively for the financial yearended March 31, 2006.

Suzlon at a glance

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ContentsDirectors’ report 09

Management discussion and analysis 17

Report on corporate governance 25

Auditors’ report 39

Balance sheet 42

Profit and loss account 43

Cash flow statement 44

Schedules forming part of balance sheetand profit and loss account 45

Balance sheet abstract andCompany’s general business profile 71

Section 212 report 72

Auditors’ report onconsolidated financial statements 78

Consolidated balance sheet 80

Consolidated profit and loss account 81

Consolidated cash flow statement 82

Schedules forming part of consolidatedfinancial statements 83

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Dear Shareholders,

Your directors are pleased to present their eleventh annual report on the business and operations of the Company

together with audited accounts for the year ended March 31, 2006.

FINANCIAL RESULTS

The standalone audited financial results for the year ended March 31, 2006 are as follows:

Particulars Rs. in crore US$ in million*

2005-06 2004-05 2005-06 2004-05

Sales 3,788.46 1,917.50 849.14 438.34

Earnings / profit before interest, depreciation and tax (EBIDTA) 921.77 440.14 206.60 100.61

Add : Other income 69.28 23.26 15.53 5.32Less : Interest 42.52 31.93 9.53 7.30Less : Depreciation 45.87 38.97 10.28 8.91Less : Preliminary expenses written off 0.00 0.06 0.00 0.01

Profit before taxation 902.66 392.44 202.32 89.71

Less : Current tax 107.00 48.00 23.98 10.97Deferred tax (27.97) (17.08) (6.27) (3.90)Fringe benefit tax 2.40 0.00 0.54 0.00Earlier year 0.04 0.06 0.01 0.01

Net profit 821.19 361.46 184.06 82.63

Balance brought forward 526.95 306.63 118.11 70.09

Profit available for appropriations 1,348.14 668.09 302.17 152.72

Interim dividend on equity shares 71.88 23.18 16.11 5.30

Proposed dividend on equity shares 71.88 11.59 16.11 2.65

Dividend on preference shares 1.51 1.51 0.34 0.35

Tax on dividends 20.38 4.86 4.57 1.11

Transfer to general reserve 300.00 100.00 67.24 22.86

Surplus carried to balance sheet 882.49 526.95 197.80 120.45

* 1 US$ = Rs 44.615 as at March 31, 2006 (1US$ = Rs 43.745 as at March 31, 2005)

Directors’ report

APPROPRIATIONS

Dividend

An interim dividend of Rs. 2.50 per equity share (25%

on par value of Rs. 10.00) absorbing a sum of

Rs. 71.88 crore was paid in February 2006.

Your directors recommend a final dividend of Rs. 2.50

per equity share absorbing a sum of Rs. 71.88 crore for

the financial year 2005-2006 subject to the approval of

the shareholders at the ensuing Annual General Meeting.

Your directors have also recommended dividend of Rs. 10

per share absorbing a sum of Rs. 1.51 crore on 10%

cumulative redeemable preference shares of Rs. 100 each.

The total dividend payout ratio for the year 2005-

2006 is 17.69% (previous year 10.04%).

Transfer to reserves

An amount of Rs. 300 crore is proposed to be

transferred to general reserve.

INITIAL PUBLIC OFFER

The year 2005-06 saw a successful Initial Public

Offering of the Company. The issue was over subscribed

by 45.95 times and the equity shares were listed on

the National Stock Exchange of India Limited and

Bombay Stock Exchange Limited on October 19, 2005.

Your directors are happy to report that the listing has

enhanced our visibility and brand value.

The Initial Public Offering of 29,340,000 equity shares

of Rs. 10 each for cash at a premium of Rs. 500 per

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The Company’s strategic focus outside home market

is to expand globally in the leading markets like USA

and China and the emerging markets of Europe. The

international business headquarters established in

Denmark has successfully garnered large international

orders across America, Asia Pacific and Australia.

Your directors believe that the Company will continue

to enhance its market position as a result of some of

the following initiatives:

Enhanced manufacturing capabilities.

Expansion of operations across varied geographies.

Extended range of successful turbine models

and development of new models.

Continuous R&D, product development and up-

gradation in WTG and its components.

Focused vertical integration to enhance the value

chain, secure timely deliveries and enhance the

technological knowledge pool at component level.

Strategic acquisitions across the value chain of

wind energy solutions.

Strong trained, dedicated and motivated human

asset base in India and abroad.

CAPITAL EXPENDITURE

Your directors believe that cost competitiveness,

backward integration, control over supply chain and

efficiencies in working capital are the drivers for the

growth of scale in the coming years. In this direction,

the Company has undertaken various projects for

setting up of new manufacturing facilities as well as

expansion of existing facilities. During the year 2005-

06, new rotor blade manufacturing facilities at Bhuj

and Dhule were commissioned.

The Company augmented its storage and warehousing

facilities by establishing new warehouse premises at

Daman and storage facilities at Pondicherry. The

tooling facilities and nacelle cover manufacturing

facilities planned in Gujarat and Daman, respectively

are expected to be up and running by end of first

quarter of 2006-07. The manufacturing facilities for

tubular towers which were earlier planned in Andhra

Pradesh and Maharashtra are now being set up at

Dhule (Maharashtra). Further, CAPEX plans are under

consideration to set up manufacturing facilities for

forged components.

The integrated manufacturing facilities at Tianjin,

China and the rotor blade facilities at Pipestone, USA

equity share aggregating to Rs. 1,496.34 crore

consisted of a fresh issue of 26,762,680 equity shares

by the Company and an offer for sale of 2,577,320

equity shares by Citicorp International Finance

Corporation Inc. Thus the Initial Public Offering

constituted 10.20% of the fully diluted post issue

paid up capital of the Company.

BUSINESS OVERVIEW

The Company had a very successful year, with robust

growth in sales and profits. The sales were Rs. 3,788.46

crore and profit after tax was Rs. 821.19 crore, registering

a growth of 97.57% and 127.19%, respectively.

The strong performance of the Company is attributed

to increasing demand for Wind Turbine Generators

(WTGs) worldwide. There is a growing global

acceptance for increasing the share of renewable

energy in the energy-mix in most countries. This has

lead to the development of conducive policies world

over to support the growth of renewable energy. Wind

energy has emerged as the largest beneficiary as it is

commercially viable alternative, and has made a

significant contribution in the world energy market.

Cumulative wind power installations worldwide

reached 59,264 MW by the end of calendar year 2005.

The cumulative installations are expected to reach

nearly 150,000 MW at a CAGR of 21% by the year

2010 (source: BTM Consult ApS – March 2006).

India ranked fourth amongst the wind energy markets

worldwide for the calendar year 2005 with cumulative

installations of 4,253 MW accounting for 7.20% of

the global installed capacity. The Indian wind energy

market has shown a growth of 41.80% during the

said period (source: BTM Consult ApS – March 2006).

The Indian wind sector is expected to continue to

grow, given the power shortfalls, rising demand for

power, as well as the strong emphasis by the

government on the promotion of the sector. The Indian

wind power installations are expected to reach

12,253 MW by the end of year 2010 (source: BTM

Consult ApS – March 2006).

The Company was placed fifth worldwide in terms of

annual installations, and second in terms of increase

in market share during the calendar year 2005 (source:

BTM Consult ApS – March 2006).

The Company continues to dominate the Indian market

with market share of over 50% and operates in eight

states in India. It had cumulative global sales of

2,321 WTGs with total capacity of 2,108.09 MW on

March 31, 2006.

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are expected to begin commercial production by the

end of the second quarter of 2006-07.

The Company invested in expansion of its offices

infrastructure. During the year, it acquired new office

premises at Pune and Delhi. The Company proposes to

expand its Bangalore office. The Company also plans to

set up Corporate House, which will include the Corporate

Learning & Development Centre, together forming part

of the Company’s vision of “The Suzlon Campus” at Pune.

STRATEGIC INITIATIVES

Your directors are happy to report that the transaction

for the acquisition of 100% shareholding of Eve

Holding NV, Belgium by the Company’s Wholly Owned

Subsidiary (WOS) AE-Rotor Holding B.V., the

Netherlands (‘AE-Rotor’) for a total enterprise value

of Euro 465 Million between the Company, AE-Rotor,

Allianz Capital Partners GmbH and its affiliates and

Apax Partners Worldwide LLP, the sellers of the shares,

has been consummated.

On May 9, 2006, AE-Rotor, the WOS of the Company

completed the purchase of 100% of the share capital

of Eve Holding NV for a consideration of Euro 431.43

Million after having received all requisite approvals

for the acquisition. The Company now has 100%

ownership of Eve Holding NV and its WOS - Hansen

Transmissions International NV, Belgium, which is

engaged in the business of design, development,

manufacturing and supply of industrial and wind gear

boxes. The said acquisition has been financed by debt

of Euro 450 Million from ICICI Bank Limited, State

Bank of India, Deutsche Bank AG and Barclays Bank

PLC and for which the Company has provided its

corporate guarantee as security.

This acquisition of Hansen will enable the Company

to integrate gearbox technology into the total turbine

solution enabling a more reliable, technologically

superior and competitive turbine in the market place.

Your directors propose to run this company as an

independent business unit.

SUBSIDIARY COMPANIES

Domestic subsidiaries

Suzlon Engitech Private Limited (Formerly Sarjan

Engitech Private Limited), a company engaged in

production of various engineering products, became

a WOS of the Company in June 2005.

Suzlon Towers and Structures Limited (Formerly Suzlon

Green Power Limited), a WOS of the Company and

engaged in the business of setting up of independent

power projects has expanded its objects to include

business activity pertaining to towers.

The subsidiary company for manufacture of

generators – Suzlon Generators Private Limited –

commenced commercial production during the year

2005-06.

The other domestic subsidiaries, viz., Suzlon

Structures Private Limited, Suzlon Windfarm Services

Limited, Suzlon Gujarat Wind Park Limited and Suzlon

Power Infrastructure Private Limited, have continued

to perform satisfactorily.

Overseas subsidiaries

International Research & Development (R&D)

Subsidiaries of the Company, viz., AE-Rotor Holding

B.V., together with its step down subsidiaries - AE-

Rotor Techniek B.V., Suzlon Energy B.V. - in the

Netherlands and Suzlon Energy GmbH in Germany

continue to focus on design and development of world

class technologies.

During the year, the Company, through its newly

formed WOS Suzlon Windpark Management GmbH,

Germany and the existing WOS Suzlon Energy GmbH

acquired 100% stake in Windpark Olsdorf WATT GmbH

& Co KG (Germany). A new subsidiary – SE Drive Techneik

GmbH was also incorporated in Germany to carry out

Research and Development in the area of gearboxes.

Suzlon Windkraft GmbH (Formerly Constellation

GmbH), Germany engaged in design and development

for WTGs was taken over by SE Drive Techneik GmbH

during the year under review.

The WOS in Denmark – Suzlon Energy A/S which is

engaged in international business management –

along with its subsidiaries, viz., Suzlon Wind Energy

Corporation, USA, Cannon Ball Wind Energy Park-I,

LLC, USA and Suzlon Energy Australia Pty. Ltd.,

Australia have been successful in garnering

substantial business volumes – new and repeat orders

- across the globe.

The Company has incorporated two new WOS, viz.,

Suzlon Rotor Corporation, USA and Suzlon Energy

(Tianjin) Limited, China, respectively under which

manufacturing facilities for rotor blades, and an

integrated manufacturing facilities for WTGs, rotor

blades, nacelle covers, control panels and generators

will be set up. Both the manufacturing units are

expected to start commercial production by the end

of the second quarter of FY 2006-07.

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the first 1500 kW model during the year 2005-06.

HUMAN CAPITAL

The Company has always recognized the importance

of human capital and valued it highly. Human capital

at Suzlon has been one the key pillars of the Company’s

success. The Company has been able to attract, grow

and retain some of the best talent in the wind industry.

Lot of emphasis and efforts are made to create a

working environment that will encourage innovation,

enhance work satisfaction and build a merit driven

organizational culture. To meet the Company’s

phenomenal growth plans, the Company has been

able to scale up its human capital, with our manpower

strength growing from around 1,200 as on April 1,

2005 to around 3,200 employees as on March 31,

2006, a growth of over 150%.

The Company has been investing resources in

Learning and Development (L&D) initiatives. It has

established L&D Centres at its key locations for

development of its manpower worldwide. These

centres drive L&D initiatives for technical, functional

and behaviours areas.

QUALITY, HEALTH & SAFETY

The Company firmly believes that pursuit of excellence

is one of the most critical components for competitive

success. With Quality, Health & Safety (QES) as an

integral part of the Company’s belief structure, it

strives to deliver products and services maintaining

the highest levels of QES standards.

The Company has obtained integrated ISO 9001:2000

certificate recommendations from the world-

renowned Det Norske Veritas (DNV) for WTGs and rotor

blades. The Company has also received the ISO 14001

(Environmental) and ISO 18001 (OHSAS) certification

for facilities at two locations.

DEPOSITS

During the year, the Company has not accepted any

deposits within the meaning of the provisions of

Section 58A of the Companies Act, 1956.

DIRECTORS

Mr. Ashish Dhawan ceased to be the Nominee Director

of Chryscapital III, LLC, Mauritius and accordingly

resigned from the directorship of the Company with

The Company has also incorporated a new WOS in

Mauritius – Suzlon Energy Limited – which will engage

itself in the business of investment and holding as

also providing turnkey solutions for setting up of

windfarm projects.

In terms of the approval granted under Section

212(8) of the Companies Act, 1956 by the Ministry

of Company Affairs, Government of India vide its

letter No. 47/59/2006-CL-III dated February 23, 2006,

copy of the balance sheet, profit and loss account,

report of the Board of Directors and the report of

the auditors of the above referred subsidiaries have

not been attached to the balance sheet of the

Company. The Company will make available these

documents / details upon request by any member

of the Company interested in obtaining the same.

Also, the annual accounts of the subsidiaries would

be available for inspection by any member at the

registered office of the Company at “Suzlon”, 5,

Shrimali Society, Near Shri Krishna Complex,

Navrangpura, Ahmedabad – 380 009 and at the

corporate office of the Company at 5th Floor, Godrej

Millennium, 9, Koregaon Park Road, Pune – 411

001. However, pursuant to Accounting Standard

AS-21 issued by the Institute of Chartered

Accountants of India, consolidated financial

statements presented by the Company includes the

financial information of its subsidiaries.

Subsequent to the balance sheet date, the Mauritian

subsidiary has incorporated a new WOS in the U.K.

namely Suzlon Wind Energy Limited.

RESEARCH AND DEVELOPMENT

The Company is continuously striving to build its

technology leadership position in the wind industry.

There is strong focuses on incessant research and

development activities through its R&D Centres in the

Netherlands, Germany and in India where it employs

the best global talent in the industry. The R&D centres

are relentlessly working for improving the performance

and optimising the cost of its products.

The Company’s most popular model during the year

has remained the megawatt class 1250 kW turbine.

Going forward, the share of Multi-Megawatt 2100

kW turbine is expected to increase, especially in

markets like USA, Europe and Australia. The Company

has been successful in penetrating the India market

with the newly introduced 600 kW model and it sold

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effect from December 22, 2005. The Board expresses

its appreciation for the valuable services rendered

and matured advice provided by him during his

association with the Company as the representative

of Chryscapital III, LLC, Mauritius.

Mr. Ashish Dhawan, has been re-appointed as an additional

director of the Company in his individual capacity with

effect from December 28, 2005. In terms of Section 260

of the Companies Act, 1956, the said Additional Director

holds office upto the ensuing Annual General Meeting of

the Company and being eligible offers himself for

appointment as the Director of the Company.

Mr. V. Raghuraman who was appointed as an

additional director of the Company with effect from

October 29, 2005 holds office upto the ensuing

Annual General Meeting in terms of Section 260 of

the Companies Act, 1956 and being eligible offers

himself for appointment as the director of the

Company.

Mr. Tulsi R. Tanti and Mr. Pradip Kumar Khaitan, the

directors of the Company retire by rotation at the

ensuing Annual General Meeting and being eligible

offer themselves for re-appointment.

The brief resume of Mr. Tulsi R. Tanti, Mr. Ashish

Dhawan, Mr. Pradip Kumar Khaitan and Mr. V.

Raghuraman as required in terms of Clause 49 of the

listing agreement with the stock exchanges, is

provided in the corporate governance report as

annexed to the annual report.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act,

1956, the directors confirm that:

(a) in the preparation of the annual accounts, the

applicable accounting standards had been

followed along with proper explanation relating

to material departures;

(b) the directors had selected such accounting

policies and applied them consistently and made

judgements and estimates that are reasonable

and prudent so as to give a true and fair view of

the state of affairs of the Company as at March

31, 2006 and of the profit of the Company for

the year ended on that date;

(c) the directors had taken proper and sufficient

care for the maintenance of adequate accounting

records in accordance with the provisions of

this Act for safeguarding the assets of the

Company and for preventing and detecting fraud

and other irregularities;

(d) the directors had prepared the annual accounts

on a going concern basis.

EMPLOYEES’ STOCK OPTION PLAN 2005 (ESOP - 2005)

The Company has instituted ESOP – 2005 to reward

and help retain its employees and to enable them to

participate in its future growth and financial success.

ESOP - 2005 includes provision for the grant of options

to employees of the Company and its subsidiaries

except the subsidiaries in the United States of

America.

The following table sets forth the particulars of options

granted under the ESOP – 2005 as approved by the

shareholders in the Extraordinary General Meeting of

the Company dated June 16, 2005:

Total options granted 921,000under ESOP

Pricing formula 50% of the issue price

Options vested Nil

Options exercised Nil

Total number of equity 921,000shares arising as a resultof exercise of options

Options forfeited / lapsed 32,000

Variat ion in terms of Niloptions

Money realised by exercise Nilof options

Total number of options in 889,000force at the end ofthe year

Employee-wise details ofoptions granted to:

(i) Senior manager ia l Details annexed hereto.personnel

(ii) Any other employee Nilreceiving a grant inany one year ofoption amounting to5% or more of theoptions grantedduring the year2005-06

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(iii) Identified employees Nilwho were grantedoption, during anyone year, equal to orexceeding 1% of theissued capital(excluding outstandingwarrants and conver-sions) of the Companyat the time of grant.

Diluted Earnings Per Share Rs. 29.94(EPS) pursuant to issue ofshares on exercise ofoption calculated inaccordance with Account-ing Standard (AS 20‘Earnings Per Share’)

Difference, if any,between the employeecompensation cost calcu-lated using the intrinsicvalue of stock options andthe employee compensa-tion cost recognized if thefair value of the options hadbeen used and the impactof this difference on profitsand EPS of the Company.

Weighted average exercise Not Applicableprices and weightedaverage fair value ofoptions whose exerciseprice equals or exceeds oris less than the marketprice of the stock.

Description of the methodand significant assump-tions used during the yearto estimate fair values ofoptions, including thefollowing weighted-average information:

(i) Risk-free interest rate 8.00%

(ii) Expected life (years) 4.00

(iii) Expected volatility 0.500

(iv) Expected dividend yield 1.18%

(v) Price of the underlying Not Applicableshare in market at thetime of option grant.

Person-wise details of options granted to senior

managerial persons of the Company and its subsidiaries:

Name Designation Stockoptionsgranted

I.C. Mangal Head – BusinessDevelopment (West) 40,000

Kirti Vagadia Head – Corporate 40,000Finance

Praful Mehta Head – Purchase 40,000

R. Sridhar Head – Supply Chain 40,000Management

A.W.P. van Megen Vice President – 10,000International CorporateDevelopment

Nilesh Vaishnav Head – O&M, SWSL 26,000

T. Pradeep Kumar Head – Technology 10,000

Thorsten Spehr Head – WTG Design 30,000SEG, Germany

William Verheij Head – Rotor Blade R&D 15,000AERT, The Netherlands

The Securities and Exchange Board of India (SEBI) has

issued Securities and Exchange Board of India (Employees

Stock Option Scheme and Employee Stock Purchase

Scheme) Guidelines 1999. This is effective for all stock

options schemes established after June 19, 1999. In

accordance with these guidelines, the excess of the market

price of the underlying equity shares as of the date of

grant over the exercise price of the option, including

upfront payments, if any, is to be recognised and

amortized on a straight line basis over the vesting period.

Accordingly the Company has debited a sum of Rs. 10.36

crore to the profit and loss account for the year ended

March 31, 2006 under Employee Compensation Cost.

The equity shares issued under the ESOP – 2005 of the

Company shall rank pari-passu in all respects including

dividend with existing equity shares of the Company.

PARTICULARS OF CONSERVATION OF ENERGY,TECHNOLOGY ABSORPTION AND FOREIGNEXCHANGE EARNINGS AND OUTGO

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

the Companies Act, 1956 read with the Companies

(Disclosure of particulars in the report of board of

directors) Rules, 1988 are set out hereunder.

Conservation of energy

The operations of the Company are not energy

intensive. However, energy conservation is a priority

area for the Company. Company’s continued efforts

to reduce and optimise the use of energy consumption

The Company has chargeda sum of Rs. 10.36 crore(Rs. 255 per option) beingthe intrinsic value of optionunder the ESOP 2005 forthe year ended March 31,2006. Had the Companyadopted the fair valuemethod based on “Black-Scholes” Model for pricingand accounting theoptions, the cost of optionwould have been Rs. 324.33per option and accordingly,the profit before tax wouldhave been lower by Rs. 2.82crore. The diluted earningsper share after factoringthe impact of fair valuewould have been Rs. 29.95per share instead of Rs.29.94 per share.

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have shown positive results. Better controls are planned

to achieve further reduction in energy consumption.

All the new manufacturing facilities of the Company

are equipped with hi-tech energy monitoring and

conservation systems to monitor usage, minimise

wastage and increase overall efficiency at every stage

of power consumption.

Power and fuel consumption

Particulars 2005-06 2004-05

Electricity

Through purchases

Purchased units 5,426,552 28,86,538Total amount (Rs.) 17,823,277 93,10,278Rate / unit (Rs.) 3.28 3.23

Through diesel generator

Units generated 841,961 252,447Total amount (Rs.) 7,949,866 18,24,894Cost / unit 9.45 7.23

Technology absorption

The Company continues to be ISO 9001 certified by

DNV for design, development and manufacture and

supply of WTGs and rotor blades. Constant research

and development for upgradation of technology,

design and indigenous development of components

have not only reduced dependence on external supply

chain but have also increased the power generation

from its WTGs at optimum levels. The WTGs of the

Company have been operating successfully in the

coastal region of Gujarat, the hilly terrains of

Maharashtra, high wind sites in Tamil Nadu, deserts

of Rajasthan and the extremely cold climates in the

United States of America.

Foreign exchange used and earned

Rs. in crore

Particulars 2005-06 2004-05

Total foreign exchange used 1,550.71 768.92

Total foreign exchange earned 212.83 2.80

PARTICULARS OF EMPLOYEES

In terms of the provisions of Section 217(2A) of the

Companies Act, 1956, read with the Companies

(Particulars of Employees) Rules, 1975 as amended,

the names and other particulars of the employees are

required to be set out in the Annexure to the Directors’

report. However, as per the provisions of Section

219(1)(b)(iv) of the said Act, the Annual Report

excluding the aforesaid information is being sent to

all the members of the Company and others entitled

thereto. Member who is interested in obtaining such

particulars may write to the Company Secretary at

the Registered Office of the Company.

CORPORATE GOVERNANCE

The Securities and Exchange Board of India (SEBI) has

prescribed certain corporate governance standards vide

Clause 49 of the listing agreement. Your Directors reaffirm

their commitment to these standards and a detailed report

on corporate governance together with the auditors’

certificate on its compliance is annexed hereto.

MANAGEMENT DISCUSSION AND ANALYSIS

The management discussion and analysis on the

operations of the Company is provided in a separate

section and forms part of this report.

AUDITORS

M/s. SNK & Co., Chartered Accountants, Ahmedabad,

and M/s. S.R. Batliboi & Co., Chartered Accountants,

Pune, the joint statutory auditors of the Company

retire at the ensuing Annual General Meeting of the

Company. Both the statutory auditors have confirmed

their eligibility and willingness to accept office, if

re-appointed.

ACKNOWLEDGEMENT

The directors wish to place on record the co-operation

and support received from Government and Semi-

Government agencies, especially from the Ministry of

Non-conventional Energy Sources (MNES), all State

Level Nodal Agencies and all State Electricity Boards.

The directors are thankful to all the bankers and

financial institutions for their support to the Company.

The Board places on record its appreciation of

continued support provided by the valued customers,

suppliers, equipment vendors, partners and consultants.

The directors also acknowledge the hard work and

persuasive efforts put in by the employees of the

Company in carrying forward Company’s vision and

mission. The enthusiasm and continuous efforts of

the employees have enabled the Company to establish

itself as a global player.

The directors also express their gratitude to the

shareholders for their continuing confidence in the

Company.

For and on behalf of the Board of Directors

Place :New Delhi Tulsi R. TantiDate :May 15, 2006 Chairman & Managing Director

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INDUSTRY STRUCTURE AND DEVELOPMENTS

The demand for energy has a linear relationship

to the growth of the economy. This demand

for energy has witnessed a structural shift

towards renewable energy due to certain key

factors like rising fuel prices, increasing

concerns around environmental impact as well

as energy security.

Governments world over have shown their

support to renewable energy through favorable

policies, such as fixed tariffs for renewable

powered electricity, Renewable Portfolio

Standards (RPS), tax incentives, investment

grants, Carbon credit mechanisms etc.

Wind is the second largest source of renewable

energy. In 2005, the wind energy sector recorded

the highest growth of 40% YoY primarily due to

increase in activity in the United States, resurgence

of established markets like India, and growth in

new markets like China, France, Italy and Portugal.

The volume of new capacity added worldwide in

2005 was 11,407 MW and the cumulative

installations worldwide reached 59,264 MW at

the end of 2005. Globally, the industry has grown

at a CAGR of 24% in the past five years and is

expected to continue to grow at a CAGR of 21%,

to reach nearly 150,000 MW by the end of 2010.

Wind power installations in India alone are expected

to reach 12,250 MW by the end of 2010.

Europe had the highest new installations in 2005,

with its 6,372 MW accounting for approximately

55% of the global market additions. Asia showed

significant growth, almost doubling installations

in 2005 to 1,836 MW, compared to the 1,077

MW in 2004. India took the lead with 1,253 MW

Management discussion and analysis(Annexure to directors’ report)

of installed capacity in 2005, making it the fourth

largest wind energy market worldwide. China

showed great potential in the wind energy sector,

adding 569 MW.

Wind energy penetration into the global energy

market is expected to reach 2.93% in 2015, up

from 0.69% in 2005.

The trends in the wind energy sector indicate a

continuous scaling up of wind turbine generators

(WTGs). The average size of WTGs being installed

worldwide continued to get larger, however at

a slightly reduced pace than before. This trend

was also affected by the peculiarities of specific

geographies.

The demand for wind turbines outstripped

supply, primarily due to the scarcity of key

components. This situation has also contributed

to the increasing price of WTGs, and has also

resulted into wind turbine manufacturers

expanding capacity.

Wind power projects around the world are

getting larger in size and scale. The customer

profile is seeing a shift towards larger customers;

such as utilities and large energy companies.

The ability to raise large funds and manage

complex logistics issue has helped in the setting

up of large size wind farms. Currently, utilities

and large energy companies own and operate

nearly 30% of total wind installations worldwide.

OPPORTUNITIES

The global wind power market is estimated to

more than double with capacity addition of over

89,530 MW over the period 2006-10 as shown

below:

Country Cumulative % Share Estimated % Share Cumulative % ShareInstalled Capacity Capacity byCapacity between 2010

2005 2006-10

Europe 41,044 69% 46,650 52% 87,694 59%USA 9,181 15% 13,200 15% 22,381 15%India 4,253 7% 8,000 9% 12,253 8%China 1,264 2% 6,500 7% 7,764 5%Australia 717 1% 2,000 2% 2,717 2%Others 2,805 6% 13,180 15% 15,985 11%

59,264 100% 89,530 100% 148,794 100%

Source: BTM Consult ApS

Global installed capacity and estimated capacity addition

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India stood at 1,987.34 MW at the end of FY

2005-06, and India accounted for 94 percent

of its total MW sales.

With the opportunities listed above, we expect

the Indian market to grow and the Company to

maintain its position as the market leader in the

coming years.

China

China is emerging as a new market for Suzlon.

China has low cumulative installations in wind

energy at 1,264 MW in 2005 and the per capita

wind energy installation is amongst the lowest.

China is expected to add 6,500 MW in the next

five years.

Suzlon started with a representative office in

Beijing and is now setting up an integrated

manufacturing facility in Tianjin. Suzlon has

secured orders to supply 100 MW of capacity to

projects being set up in the country.

China is poised for an excellent growth and the

Company is gearing up to be a significant player

in that market in the coming years.

USA

USA is the fastest growing wind energy market

in the world. The market forecasts indicate that

in the next two years USA will become the top

country in terms of new annual installations.

Currently, the total installations stand next to

Europe at 9,181 MW and USA is expected to add

13,200 MW in the next five years.

Suzlon started its US operations in 2002-03,

and till date Suzlon has supplied nearly 100

MW. Suzlon has an order book of nearly 400

MW from the USA. Further the Company is

setting up a manufacturing facility for rotor

blades in the State of Minnesota.

We intend to focus on establishing ongoing

business relationships with a core group of key

customers, strategic investors and financial

investors, with a view to gain access to portfolio

of wind power projects.

The Company is working to be amongst the top

three in the US wind energy market.

Europe

Europe is currently the largest market for wind

energy in the world. Europe has 69% of the

total cumulative installations. The incremental

The Kyoto Protocol has laid down a worldwide

target for reduction in the global emission of

greenhouse gases by 5.3% by 2008-12,

compared to their actual levels in 1990.

Approximately 141 countries have shown their

support by adopting this protocol. Recent

European Union Directives stipulate the need to

help double the share of non-fossil renewable

energy sources, such as wind, from 6 percent to

12 percent of gross energy consumption in

Europe by 2010.

Some of the major markets for Suzlon and the

opportunities in those markets are as listed below:

India

The power industry in India has been

characterized by increasing demand for energy.

In 2005-06, demand for electricity exceeded

supply by an estimated 8.3% in terms of total

requirements.

The Government of India (GOI), in its mission

“Power for all by 2012”, estimates that installed

generation capacity in the country needs to

reach 200,000 MW by the end of its eleventh

Five Year Plan in 2012, compared to 124,287

MW as of March 31, 2006. With increasing

urbanisation, industrial growth and per-capita

consumption, the gap between the actual

demand and supply is likely to increase.

India is today the world’s fourth-largest market

for wind energy in terms of annual installations

with a global market share of 10.98%. India

added 1,253 MW of wind power in 2005 taking

its cumulative installation to 4,253 MW.

The wind energy sector has out performed the

BTM estimates on India. In the year 2003 BTM

projected India installing 500 MW in year 2005,

later revised to 900 MW. India surpassed this

estimate by installing 1,253 MW in 2005. BTM

now projects India to be one of the key

promising and emerging markets of the future.

Suzlon has been a market leader in India for

last 8 years consecutively, and has a market

share of over 50% in FY 2005-06. The primary

customers of the Company include companies

that have manufacturing facilities with high

power consumption, companies with high

profitability that seek investment opportunities

with stable returns, power utilities and State

nodal agencies. Cumulative sales of Suzlon in

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installations expected in Europe total to 46,650

MW by 2010.

The investment wave in Europe has been driven

by the EU’s renewables directive of 2001. The

cumulative installed capacity at the end of 2005

was 41,044 MW. The capacity installed in 2005

was 6,372 MW, which is expected to grow to

12,990 MW in 2010, making it imperative for

Suzlon to establish itself in the geography to

capitalize upon the opportunity.

Suzlon has established a subsidiary in Denmark,

Suzlon Energy A/S, to serve as international

business headquarters. The Company also plans

to establish its presence in the emerging

European markets. It expects European customers

to primarily consist of power utilities, wind

power project developers and private investors.

Australia

In Australia, about 1,700 MW of new projects

are in the pipeline. The Mandatory Renewable

Energy Target by the Australian Government is

low and restricts the installations to 4,000 MW

by 2010. However, the Australian wind power

industry estimates great potential in the space.

Suzlon has established Suzlon Energy Australia

Pty. Ltd. for managing its business activities in

Australia and New Zealand. Customers are

primarily expected to be primarily power utilities

and wind power project developers Suzlon has

secured an order to construct Australia’s largest

wind park of 94.5 MW of capacity.

Suzlon’s sustainable competitive advantage

Integrated solutions provider

Infrastructure development (in India)Wind resource assessmentLand acquisitionEvacuation facilities

Technology development

& WTG manufacturing

Project constructionInstallationCommissioning

Operation & maintenance services

The owner profile of wind turbines in India reflects a

‘low involvement’ buyer. Equipment sellers are expected

to offer services from concept to commissioning to

lifetime care of the wind farms; which is different

from other markets. To meet the Indian market demand,

the Company has developed resources and

competencies in the entire technical value chain, from

the identification of suitable sites, planning of wind

farms to their technical implementation, installation

and operations & maintenance services.

The Company established a subsidiary, Suzlon

Windfarm Services Limited, for managing the

operation and maintenance business for the Indian

market.

In the international market, Suzlon is primarily an

equipment supplier since site development and related

services are in most cases carried out by project

developer.

Vertical integration – A Suzlon differentiator

One of the critical differentiators for Suzlon has been

its early endeavor to vertically integrate its operations

and manufacture critical components in-house.

Suzlon’s manufacturing facilities are not restricted to

India, the Company is setting up manufacturing

facilities closer to the end-markets in USA and China.

Over the years, the Company has developed control

over technology and built capacities for

manufacturing of all key components of wind turbine

generators; namely, rotor blades, generators,

gearboxes, control systems and towers. This has

enabled the Company to leverage and integrate

component technologies into the total turbine

solution realizing a more reliable, technologically

superior and competitive turbine in the market place

and maintain its strong position in times of severe

supply bottlenecks.

Manufacturing in India

The main manufacturing facilities of the Company are

located at Daman, Pondicherry, Maharashtra and Gujarat

in India. Besides manufacturing WTGs, Suzlon also

manufactures components like rotor blades, generators,

control systems and tubular towers required for WTGs.

The Company enjoys cost advantages over its global

competitors by way of operating its major

manufacturing capacities in India.

Manufacturing in USA, China and Europe

To achieve its aspirations of being a key player in the

Chinese market, and to meet the 70% indigenous

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content criteria set by the local government, the

Company is setting up an integrated manufacturing

facility in Tianjin.

The Company is also establishing a manufacturing

facility in the State of Minnesota, USA to produce

rotor blades.

The Company recently acquired a Belgiam company,

Hansen Transmissions International, which is one of

the three major multi-MW gearbox manufacturers in

the world with its manufacturing facilities in Belgium.

RISKS AND CONCERNS

The key risks and concerns identified and the steps

taken by the Company to mitigate the adverse impact

of the same are listed below:

Supply chain risk

The supply chain bottlenecks faced by global

WTG manufacturers could result in delayed

deliveries of products and services, dissatisfied

customers and even penalties in extreme cases.

The Company, through its vertical integration

strategy, strengthened its supply chain with in-

house manufacturing of the critical components

of the WTG. The Company aims to become a

fully integrated end-to-end solution provider in

the wind energy sector in the years to come.

Regulatory risk, withdrawal of tax incentives

Another threat the Company faces is the

reduction in incentives and increased regulatory

pressures from governments and the regulatory

bodies. This may lead to reduced investment in

the sector affecting the Company’s business

growth. The Company has directed its efforts

towards developing more cost-efficient

turbines, whereby in case of withdrawal of

regulatory support, the investment would still

remain an attractive proposal to its customers.

Competition risk

Emergence of other sources of energy which could

directly compete with the wind energy on cost,

generation efficiency and other such parameters

may pose a risk to the Company. The Company has

continually invested in research and development

to make its products not only cost competitive

but also technologically more advanced.

Further, increased competitive pressure from new

entrants in the wind energy sector could lead to

dilution of the Company’s market share. Through

constant R&D and product development,

geographical diversification combined with

strategic alliances, the Company plans to

minimize this risk.

Apart from the risks related to the industry and

business, the Company also manages risks

relating to operational systems and procedures,

foreign exchange, interest rates and commodity

prices as stated below;

Operations risk

The Company’s increasingly widespread global

operations, though a key growth area, could impact

its operational efficiency and flexibility in dealing

with market dynamics. In order to reduce the

complexities, the company has set up a subsidiary

at Denmark that handles international sales and

marketing and has set up subsidiaries in most of

the countries to which Suzlon exports. All of them

have operational autonomy which facilitates rapid

decision making and responsiveness to the

requirements of customers, enabling Suzlon to

take advantage of local opportunities as soon as

they arise.

Exchange rate risk

The imports of the Company are significant and

are denominated in currencies such as the Euro,

the DKK and the U.S. Dollar. The exports are

denominated in the U.S. Dollar. Additionally,

changes in exchange rates influence the

borrowings denominated in currencies other

than the Rupee. It also impacts the Rupee value

of the loans given by the Company to its foreign

subsidiaries.

From time to time, the Company uses derivative

instruments to hedge its foreign exchange

exposures. The total underlying notional amount

outstanding under a derivative contract as at

March 31, 2006 was EURO 9 million.

Nevertheless, a weakening of the Indian Rupee

against the Euro, the U.S. Dollar and other major

foreign currencies may have an adverse effect

on its profitability and operating results

Conversely, an appreciating Indian Rupee could

mean lower earnings from export.

Interest rate risk

Majority of the Company’s long-term Rupee-

denominated debts and short term debts bear

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interest at floating rates linked with prime

lending rates of the respective lenders as

determined from time to time. Further all its

long-term foreign currency-denominated debts

bear interest at floating rates linked with six-

month U.S. Dollar LIBOR.

The Company uses derivative instruments to

hedge against adverse movements in interest

rates with the objective of reducing the cost of

debt. The total underlying notional amount

covered as of March 31, 2006 under a derivative

contract was USD 2 million. The values of these

instruments are subject to fluctuations in

interest rates.

Commodity price risk

The Company is exposed to market risk with respect

to the prices of raw material and components

used in the manufacture of its products. These

commodities include steel and copper. The costs

of these raw materials and components are subject

to fluctuations based on commodity prices. The

costs of components and various other parts

sourced from outside manufacturers may also

fluctuate based on their availability. In the normal

course of business, the Company purchases these

raw materials and components either pursuant to

supply agreements or through planned purchase

mechanism.

OUTLOOK

The sector in which the Company operates is

demanding attention, and more importantly getting

it. The sector is projected to grow at 21% for the next

five years. We are prepared to participate aggressively

in this opportunity.

The Company has been able to maintain its leadership

position in India for eight consecutive years now, and

is confident of maintaining this in the coming years

too. On the international front, it has successfully

established its international business headquarters in

Denmark and country operations in USA, China and

Australia. It has built a healthy order book in all its

focus markets. It has established itself as a fully

vertically integrated player in the wind sector with

in-house manufacturing of all the key components

and developed competencies to provide end-to-end

wind power solutions. To boost its growth plans for

USA and China, it is establishing manufacturing

facilities in these countries.

We expect the year 2006-07 to be an inflection point for

our business, preparing us for higher growth then on.

We also hope to benefit from our efforts in vertical

integration to ensure that our competitiveness

increases as we take a higher share of the global wind

energy space.

The Company believes that this is just the beginning.

The best is yet to come.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has adequate internal controls for its

business processes across departments to ensure

efficiency of operations, compliance with internal

policies and applicable laws and regulations, protection

of resources and assets and accurate reporting of

financial transactions. The Company’s internal control

system is supplemented by extensive audits by the

Management Audit Team, which reports to the Audit

Committee of the Board. Regular internal audits and

checks ensure that objectives of internal controls are

met effectively. The Audit Committee of the Board

reviews and will continue to review the adequacy and

effectiveness of the internal control systems and suggest

improvements for strengthening them.

DISCUSSION ON FINANCIAL PERFORMANCE

Review of the results of operations

The financial statements have been prepared in

compliance with the requirements of the

Companies Act, 1956, and Generally Accepted

Accounting Principles (GAAP) in India. The

Company’s Management accepts responsibility

for the integrity and objectivity of these

financial statements as well as for various

estimates and judgments used therein. There

are no material departures in adoption of the

prescribed accounting standards. The estimates

and judgments relating to the financial

statements have been made on a prudent and

reasonable basis, in order that the financial

statements reflect in a true and fair manner the

form and substance of the transactions, and

reasonably reflect the Company’s present state

of affairs and profits for the year.

Sales have increased by 97.57% from

Rs. 1,917.50 crore in FY 2004-05 to Rs. 3,788.46

crore in FY 2005-06. The growth is primarily

due to increase in volumes and better sales

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realizations. The volume growth was led by

1250 kW product which registered sale of 735

units. Domestic sales contributed 94% to the

total revenues.

The EBIDTA (Rs 921.77 crore) grew higher by

109.43% against 97.57% growth in sales

revenue.

Profit Before Tax (PBT) increased by 130.01% from

Rs. 392.44 crore (representing 20.47% of Sales)

in 2004-05 to Rs. 902.66 crore (representing

23.83% of Sales) in 2005-06. The percentage

increase in PBT is higher than EBIDTA.

Profit after tax increased by 127.18% from Rs.

361.46 crore (representing 18.85% of Sales) in

2004-05 to Rs. 821.19 crore (representing

21.68% of Sales) in 2005-06.

The Company has provided Rs 104.82 crore

towards performance guarantee for generation

(PGG) of electricity for WTGs. The PGG stipulates

that the WTGS sold by the Company would

generate minimum number of energy units

during the period of guarantee and shortfall in

generation units, if any, would be made good

by the Company. The Company provides for the

present obligation on account of PGG on each

balance sheet date. The provision for PGG has

increased by 111% in 2005-06. The increase is

attributable to increase in volume of business

as well the low wind velocity recorded during

the current financial year.

The employees’ remuneration and benefit cost was

Rs. 62.96 crore. The increase in employees’

remuneration and benefit cost was mainly due to

increase in the number of employees. Employee

remuneration cost includes Rs. 10.36 crore on

account of ESOPs granted during the year, which

did not exist during the previous year.

At 1.44% of sales in FY 2005-06 as against 2.15%

of sales in FY 2004-05, the financial charges

(Rs. 54.56 crore in FY 2005-06 as against Rs.

41.30 crore in FY 2004-05) have reduced primarily

due to temporary infusion of funds raised from

the IPO. A part of the said funds were temporarily

used to reduce working capital borrowings. In

absolute terms, interest cost has increased due

to increase in the level of activity.

The depreciation (Rs.45.87 crore in FY 2005-06

as against Rs 38.97 crore in FY 2004-05) as a %

of sales reduced from 2.03% in 2004-05 to

1.21% in 2005-06. The increase in depreciation

charge during the financial year 2005-06 was

due to addition of fixed assets of Rs.185.28

crore during the year.

Review of financial condition

During the year, the Company offered

29,340,000 equity shares of Rs. 10 each at a

premium of Rs. 500 per share (including an offer

for sale of 2,577,320 equity shares held by

Citicorp International Finance Corporation)

under the Initial Public Offer (IPO). The Company

also issued bonus shares (pre-IPO) in the ratio of

2:1 resulting in addition of 173,845,800 equity

shares of Rs. 10 each and redeemed 1,00,00,000,

0.01% cumulative redeemable preference shares

of Rs. 100 each

The securities premium account increased by

Rs. 1281.17 crore compared to previous year.

There was an addition of Rs. 1,338.13 crore to

securities premium account due to premium on

issue of shares under the IPO. Securities premium

accounts was utilized by Rs. 38.11 crore (net of

tax benefit of Rs. 2.56 crore) towards Share Issue

Expenses and Rs. 18.85 crore have been

capitalized from the account towards issue of

bonus shares. An amount of Rs. 155 crore was

also capitalised from general reserve towards

issue of bonus shares. Out of the profits for the

year Rs. 300 crore have been transferred to

general reserve.

The total Loan Funds increased to Rs. 335.37

crore as on March 31, 2006 from Rs. 322.54

crore as on March 31, 2005. The overall secured

loans have come down by 3.10 % due to

repayment of secured working capital

borrowings through IPO funds.

The gross block increased by Rs. 182.53 crore

during the previous year i.e. from Rs. 217.88

Crore as at March 31, 2005 to Rs. 400.41 crore

as at March 31, 2006.

The major additions are:

Rotor Blade Plant at Dhule, Maharastra

Rotor Blade Plant at Bhuj, Gujarat.

New office premises for Head Office at

Pune, Maharashtra.

New Office premises at Delhi.

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The Investments increased by 132.33% when

compared to the previous year. The increase was

primarily on account of incremental Non-Trade

Investments in Indian as well foreign Subsidiaries.

CAUTIONARY STATEMENT

The Company have included statements in this

Discussion, that contain words or phrases such as

“will”, “aim”, “will likely result”, “believe”, “expect”,

“will continue”, “anticipate”, “estimate”, “intend”,

“plan”, “contemplate”, “seek to”, “future”,

“objective”, “goal”, “project”, “should”, “will pursue”

and similar expressions or variations of such

expressions that are “forward-looking statements”.

All forward-looking statements are subject to

risks,uncertainties and assumptions that could cause

actual results to differ materially from those

contemplated by the relevant forward-looking

statement. Importantfactors that could cause actual

results to differ materially from the Company’s

expectations include, among others:

• Variation in the demand for electricity;

• Changes in the cost of generating electricity

from wind energy and changes in wind patterns;

• Changes in or termination of policies of state

governments in India that encourage investment

in power projects;

• General economic and business conditions in

India and other countries;

• Company’s ability to successfully implement

Company’s strategy, growth and expansion plans

and technological initiatives;

• Changes in the value of the rupee and other

currencies;

• Potential mergers, acquisitions or restructurings

and increased competition;

• Changes in laws and regulations;

• Changes in political conditions;

• Changes in the foreign exchange control

regulations; and

• Changes in the laws and regulations that apply

to the wind energy industry, including tax laws.

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Report on corporate governance

1. CORPORATE GOVERNANCE PHILOSOPHY

Strong corporate governance stands for sound management practices, transparency and disclosure. Itencompasses not only the way in which the Company is being managed and deals with its stakeholders, butalso addresses all aspects of its relationship with society. The Company firmly believes that good corporategovernance stems from the management’s mindset and cannot be regulated by legislation alone. Keepingthis in mind, the Company is fully committed to conduct its affairs in a fair and transparent manner and toenhance shareholder value while complying with the applicable rules and regulations.

We are in compliance with all the requirements of the corporate governance code, enshrined in Clause 49of the listing agreement.

2. BOARD OF DIRECTORS

Composition

The Board of the Company consists of 6 (six) directors as on March 31, 2006, out of which 2 (two) areexecutive directors and 4 (four) are non-executive directors. The Chairman of the Board is an executivedirector and half of the Board is independent. The composition of the Board is in compliance with therequirements of Clause 49 of the listing agreement with the stock exchanges. All the directors have certifiedto us that they are not members of more than 10 (ten) committees and do not act as Chairman of more than5 (five) committees across all the companies in which they are directors.

The composition of the Board of Directors as on March 31, 2006 is as follows:

Name of the Category Total Total no. of Total No. ofdirector no. of membership of the Chairmanship of the

director- committees of Board committees of Boardship Member- Member- Chairman- Chairman-

ship ship ship shipin audit / in other in audit / in otherinvestor committees investor committees

grievance grievancecommittees committees

Mr. Tulsi R. Tanti Chairman & 15 1 1 Nil 1ManagingDirector

Mr. Girish R. Tanti Director 13 1 1 Nil Nil(InternationalBusinessDevelopment& HR)

Mr. Ajay Relan Non-Executive 11 4 Nil Nil Nil(representative Directorof CiticorpInternationalFinance CorporationInc., USA)

Mr. Ashish Dhawan Independent 14 2 3 1 1Director

Mr. Pradip Kumar Independent 13 4 8 1 1Khaitan Director

Mr. V. Raghuraman Independent 3 2 1 Nil NilDirector

Notes:

1. While considering the total number of directorships, directorships in private companies, foreign companies and Section25 companies have also been included.

2. Changes during the year:(i) Mr. Vinod R. Tanti and Mr. Balrajsinh A. Parmar resigned from the directorship of the Company with effect from July 1,2005. (ii) Mr. V. Raghuraman was appointed as an additional director with effect from October 29, 2005. (iii) Mr. AshishDhawan ceased to be the representative of Chryscapital III, LLC, Mauritius with effect from December 22, 2005 andsubsequently was appointed in his individual capacity as an independent director with effect from December 28, 2005.

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Details of board meeting held during the financial year 2005-06

During the financial year 2005-06, the board of directors of the Company met 6 (six) times on June 24,2005, August 22, 2005, September 8, 2005, October 29, 2005, January 30, 2006 and March 16, 2006.

Attendance at the board meeting and last Annual General Meeting

The attendance of directors at board meetings held in financial year 2005-06 and last Annual GeneralMeeting is as under:

Name of the director No. of board meetings Attendance at the lastattended AGM held on July 28, 2005

Mr. Tulsi R. Tanti 6 YesMr. Girish R. Tanti 6 YesMr. Ajay Relan 4 NoMr. Ashish Dhawan 6 NoMr. Pradip Kumar Khaitan 4 NoMr. V. Raghuraman* 2 N.A.Mr. Vinod R. Tanti** Nil N.A.Mr. Balrajsinh A. Parmar** Nil N.A.

* appointed as an additional director with effect from October 29, 2005.

** resigned from the directorship with effect from July 1, 2005.

Code of Ethics

The Company adopted a code of ethics for its directors and senior management in the financial year2005-06. The Code of Ethics of the Company has been posted on its website www.suzlon.com.

The declaration from the Chairman and Managing Director stating that all the directors and the senior managementof the Company have affirmed compliance with the code of ethics has been included in this report.

Profile of directors seeking appointment / re-appointment

(a) Mr. Tulsi R. Tanti

Mr. Tulsi R. Tanti has over twenty five years of experience in various technical and commercial areas. Hehas been involved in Suzlon’s operations since inception. Mr. Tulsi R. Tanti is a commerce graduate andholds a Diploma-in-Mechanical Engineering. He is also the President of the Gujarat Chapter of IndianWind Turbine Manufacturers Association. He was awarded a Lifetime Achievement Award “Best RenewableMan of the Decade” on March 31, 2006 from the Foundation of Indian Industry and Economists andSolar Energy Society of India (SESI) Pioneer Award for his contribution to the promotion of RenewableEnergy in India. He was also awarded the “World Wind Energy Award 2003” for his extraordinaryachievements in the dissemination of the wind energy in India. He was also awarded the “Champions ofComposites Technologies” award by Composite Centre International for his outstanding contribution inapplication of composite materials and development of composite technology and the “Business LeadershipAward 2002” by SESI. He is also on the board of the following other companies:

Name of the company Name of committee Position held*

Senergy Global Private Limited Nil NilSuzlon Generators Private Limited Nil NilAE-Rotor Techniek B.V. Nil NilSuzlon Energy B.V. (formerly AE-Rotor B.V.) Nil NilSuzlon Energy GmbH Nil NilSuzlon Energy A/S. Nil NilSuzlon Gujarat Wind Park Limited Nil NilSuzlon Structures Private Limited Nil NilSuruchi Holdings Private Limited Nil NilSugati Holdings Private Limited Nil NilSE Drive Technik GmbH Nil NilSuzlon Rotor Corporation Nil NilSuzlon Energy (Tianjin) Limited Nil NilSuzlon Energy Limited, Mauritius Nil Nil

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(b) Mr. Pradip Kumar Khaitan

Mr. Pradip Kumar Khaitan is a B.Com, LL.B., Attorney-at-Law (Bell Chambers Gold Medallist). He is awell-known lawyer and partner of Khaitan & Company, Advocates. He is a member of the Bar Councilof India and Indian Council of Arbitration, New Delhi. His areas of specialisation are commercial andcorporate laws, tax laws, arbitration, joint ventures, mergers and acquisition, restructuring andde-mergers. He is connected with several public charitable institutions as Trustee. He is also on theBoard of the following other companies:


CESC Limited Finance & forex committee Member

Dalmia Cement (Bharat) Limited Nil Nil

Electrosteel Castings Limited Audit committee Member

Graphite India Limited (1) Remuneration committee Chairman(2) Committee for borrowings Member

Hindustan Motors Limited (1) Executive committee Member(2) Investors grievance committee Member(3) Remuneration committee Member

India Glycols Limited Nil Nil

Lanco Industries Limited Nil Nil

OCL India Limited Nil Nil

Pilani Investment & IndustriesCorporation Limited Nil Nil

Woodlands Medical Centre Limited Nil Nil

VISA Steel Limited Remuneration committee Member

South Asian Petrochem Limited Remuneration committee Member

(c) Mr. V. Raghuraman

Mr. V. Raghuraman is a Post Graduate in Chemical Engineering. He is a Senior Advisor (Energy) withConfederation of Indian Industry. He is a specialist in Energy Management and Energy Conservation.He has also served as the chairman of World Energy Efficiency Association, Washington.Mr. V. Raghuraman has also authored several books on Fuel Efficiency in Industrial Practice, CaseStudies on Furnace Oil Utilisation Practices and has also written numerous articles in Journals andPeriodicals. He is also on the Board of the following other companies:


Orissa Sponge Iron & Steel Limited Audit committee Member

Cosmos Carbon Credits Limited Nil Nil

(d) Mr. Ashish Dhawan

Mr. Ashish Dhawan is a MBA with distinction from Harvard University and holds a dual bachelorsdegree (B.S. / B.A.) in applied mathematics and economics from Yale University. He is the co-founderof a private equity fund founded in India that manages funds amounting to approximately $1 billionfor its leading institutional clients. Previously he has also worked in the Proprietary Investment Groupat Goldman Sachs in New York, GP Investments, a private equity fund in Brazil and McCown De Leeuw& Co, a private equity firm in the USA. He was appointed on board of the Company as a nominee ofChryscapital III, LLC on August 10, 2004. He ceased as nominee on December 22, 2005 and wasappointed as an independent director on board of the Company with effect from December 28, 2005.He is also on the board of the following other companies:

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Chrysalis Investment Advisors(India) Private Limited Nil Nil

MphasiS BFL Limited Audit committee Member

Global Vantedge (India) Private Limited Nil Nil

Yes Bank Limited (1) Nominations committee Member(2) Board remuneration committee Chairman

IVRCL Infrastructures & Projects Limited Nil Nil

Chryscapital I, LLC Nil Nil

Chryscapital II, LLC Nil Nil

Chryscapital III, LLC Nil Nil

Chryscapital IV, LLC Nil Nil

Global Vantedge (Mauritius) Nil Nil

CM Investments, LLC Nil Nil

Global Vantedge (Bermuda) Nil Nil

Simplex Infrastructure Limited Nil Nil

*Memberships in various committees include all committees whether mandatory in terms of the listing agreementor otherwise.

3. COMMITTEES OF BOARD

(i) AUDIT COMMITTEE

Terms of reference

The broad terms of reference of the audit committee includes the following as has been mandated inClause 49 of listing agreement and Section 292A of Companies Act, 1956:

(1) Oversight of the Company’s financial reporting process and the disclosure of its financialinformation to ensure that the financial statement is correct, sufficient and credible.

(2) Recommending to the board, the appointment, re-appointment and, if required, the replacementor removal of the statutory auditors and the fixation of audit fees.

(3) Approval of payment to statutory auditors for any other services rendered by the statutory auditors.

(4) Reviewing, with the management, the annual financial statements before submission to theBoard for approval, with particular reference to:

(a) Matters required to be included in the directors’ responsibility statement to be included inthe Board’s report in terms of clause 2AA of Section 217 of the Companies Act, 1956,

(b) Changes, if any, in accounting policies and practices and reasons for the same,

(c) Major accounting entries involving estimates based on the exercise of judgement by management,

(d) Significant adjustments made in the financial statements arising out of the audit findings,

(e) Compliance with listing and other legal requirements relating to financial statements,

(f) Disclosure of any related party transactions,

(g) Qualifications in the draft audit report.

(5) Reviewing, with the management, the quarterly financial statements before submission to theBoard for approval.

(6) Reviewing, with the management, performance of statutory, internal auditors and also adequacyof the internal control systems.

(7) Reviewing the adequacy of internal audit function, if any, including the structure of the internalaudit department, staffing and seniority of the official heading the department, reportingstructure, coverage and frequency of internal audit.

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(8) Discussion with internal auditors regarding any significant findings and follow-up thereon.

(9) Review the findings of any internal investigations by the internal auditors into matters wherethere is suspected fraud or irregularity or a failure of internal control systems of a materialnature and reporting the matter to the board.

(10) Discussion with statutory auditors before the audit commences, about the nature and scope ofaudit as well as post-audit discussion to ascertain any area of concern.

(11) To look into the reasons for substantial defaults in the payment to the depositors, debentureholders, shareholders (in case of non-payment of declared dividends) and creditors.

(12) To review the functioning of the Whistle Blower mechanism, in case the same is existing.

The Managing Director, Head - Corporate Finance and the representatives of the statutory auditorswere invited to attend the meetings of the audit committee from time to time.

Composition, meetings and attendance

The audit committee of the Company has been constituted as per the requirements of Clause 49 oflisting agreement. The Chairman of the audit committee is an independent director and all themembers of the audit committee are non-executive directors with majority of them being independentdirectors. During the financial year 2005-06, the audit committee met 5 (five) times on April 30,2005, June 24, 2005, August 22, 2005, October 29, 2005 and January 30, 2006.

The composition of the audit committee as on March 31, 2006 and the attendance of the members inthe meetings held during the financial year 2005-06 are as follows:

Name of the member Chairman / Member No. of meetings attended

Mr. Ashish Dhawan Chairman 5

Mr. Ajay Relan Member 3

Mr. Pradip Kumar Khaitan Member 2

Mr. V. Raghuraman* Member 1

*appointed as an additional director with effect from October 29, 2005

The Company Secretary of the Company acted as the secretary to the audit committee.

(ii) REMUNERATION COMMITTEE

Terms of reference

The terms of reference of the remuneration committee includes determination of the remunerationpayable to the directors of the Company and to approve and administer the Employees Stock OptionPlan of the Company and matters incidental and ancillary thereto.


The remuneration committee of the Company consists of 3 (three) members all of whom areindependent directors. During the financial year 2005-06, the remuneration committee met once onJune 16, 2005 to grant options under Employees Stock Option Plan (ESOP).

The composition of remuneration committee as on March 31, 2006 and the attendance of themembers in the meetings held during the financial year 2005-06 are as follows:

Name of the member Chairman / Member* No. of meetings attended

Mr. Ashish Dhawan Member 1

Mr. Pradip Kumar Khaitan Member 1

Mr. V. Raghuraman** Member Nil

* The Chairman for the remuneration committee would be decided by the committee members from amongstthemselves from time to time.

**appointed as an additional director with effect from October 29, 2005

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Details of remuneration paid to directors during the financial year 2005-06

(a) Remuneration paid / payable to the executive directors for the financial year ended March 31, 2006is given as under:

Name of Salary Super- Bonus / Total Service Noticedirector (Rs.) annuation commission / (Rs.) contract period

(Rs.) stock options

Mr. Tulsi R. 96,41,532 20,02,476 Nil 1,16,44,008 Three years up to ThreeTanti March 31, 2008 months

Mr. Girish R. 33,76,056 7,01,184 Nil 40,77,240 Three years up to ThreeTanti March 31, 2008 months

Mr. Vinod R. 8,44,014 1,75,296 Nil 10,19,310 April 1, 2005 to ThreeTanti* June 30, 2005* months

Mr. Balrajsinh 8,44,014 1,75,296 Nil 10,19,310 April 1, 2005 to ThreeA. Parmar* June 30, 2005* months

* As per the agreement entered into by the Company with Mr. Vinod R. Tanti and Mr. Balrajsinh A. Parmar,respectively the term of their appointment as wholetime directors was for a period of three years i.e. for the periodfrom April 1, 2005 to March 31, 2008. However, the said Mr. Vinod R. Tanti and Mr. Balrajsinh A. Parmar resignedfrom the directorship of the Company with effect from July 1, 2005.

(b) Remuneration paid / payable to the non-executive directors for the year ended March 31, 2006 isas under:

The non-executive directors were not paid any remuneration except sitting fees for attending themeetings of the board of directors and / or committees thereof. The details of the sitting fees paid andstock options granted to the non-executive directors are as under:

Name of the non-executive director Sitting fees (Rs.) Stock options Shareholdinggranted in the Company

Mr. Ajay Relan 20,000/- Nil NilMr. Ashish Dhawan 40,000/- Nil NilMr. Pradip Kumar Khaitan 40,000/- Nil NilMr. V. Raghuraman 40,000/- Nil Nil

The Company does not have any material pecuniary relationship or transactions with its non-executivedirectors.

Remuneration policy

Remuneration to executive directors has been decided based on the years of experience and contributionmade by the respective executive directors and is consistent with the existing industry practice. Asregard payment of sitting fees to non-executive directors, the same has been within the limits allowedin terms of the Companies Act, 1956.

(iii) INVESTORS GRIEVANCE COMMITTEE

Terms of reference

The broad terms of reference of the investors grievance committee includes the following:

(a) Redressal of shareholder and investors complaints including but not limiting to transfer ofshares and issue of duplicate share certificates, non-receipt of balance sheet, non-receipt ofdeclared dividends, etc.; and

(b) Monitoring transfers, transmissions, dematerialisation, rematerialisation, splitting andconsolidation of shares issued by the Company.


The investors grievance committee of the Company consists of 3 (three) directors. The Chairman of theinvestors grievance committee is a non-executive director. During the financial year 2005-06, theinvestors grievance committee met 3 (three) times on September 3, 2005, October 19, 2005 andDecember 9, 2005.

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The composition of the investors grievance committee as on March 31, 2006 and the attendance ofthe members in the meetings held during the financial year 2005-06 are as follows:


Mr. Pradip Kumar Khaitan Chairman 3Mr. Tulsi R. Tanti Member 3Mr. Girish R. Tanti Member 3

Name and designation of compliance officer

Mr. Hemal A. Kanuga, Company Secretary is the compliance officer of the Company.

Status of investors’ complaints

The status of investors complaints as on March 31, 2006 is as follows:

Number of complaints as of the date of listing (October 19, 2005) NILNumber of complaints received from the date of listing i.e. October 19, 2005 till March 31, 2006 1048Number of complaints resolved up to March 31, 2006 1044Number of complaints pending as of March 31, 2006 4*

*Complaints pending on March 31, 2006 have since been resolved in April 2006.

The complaints received were mainly in the nature of non-receipt of refund orders, non-receipt ofallotment of shares in the Initial Public Offer (IPO) of the Company, non-receipt of electronic credit,non-receipt of dividend warrants, non-receipt of dividend mandates, etc. None of the complaints werepending for a period of more than one month.

There were no pending requests for transfer of shares of the Company as on March 31, 2006.

(iv) IPO COMMITTEE


The IPO committee of the Company consists of 2 (two) members who are executive directors of theCompany. During the financial year 2005-06, the IPO committee met 6 (six) times on June 24, 2005,July 9, 2005, September 6, 2005, September 12, 2005, October 3, 2005 and October 13, 2005.Composition of IPO committee is as follows:


Mr. Tulsi R. Tanti Chairman 6Mr. Girish R. Tanti Member 6

Terms of reference

The IPO committee of the Company was formed to give effect to the initial public offering of theCompany. The terms of reference inter alia included approval of IPO and offer for sale, appointmentof Registrars, Bankers, Book Running Lead Managers, Co-Book Running Lead Manager(s), approval ofDraft Red Herring Prospectus, Red Herring Prospectus, Prospectus, Fixation of Price Band and Bidopening and closing dates, allotment and listing of shares and to do all other matters relating to initialpublic offering by the Company.

4. ANNUAL GENERAL BODY MEETINGS

The details of last three Annual General Meetings of the Company are as follows:

Financial year Date Time Venue

2002-03 September 30, 2003 9.30 A.M. “Suzlon”, 5, Shrimali Society, Near Shri Krishna(Eighth AGM) Complex, Navrangpura, Ahmedabad – 380 009

2003-04 September 25, 2004 9.30 A.M. “Suzlon”, 5, Shrimali Society, Near Shri Krishna(Ninth AGM) Complex, Navrangpura, Ahmedabad – 380 009

2004-05 July 28, 2005 9.30 A.M. “Suzlon”, 5, Shrimali Society, Near Shri Krishna(Tenth AGM) Complex, Navrangpura, Ahmedabad – 380 009

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Details of special resolutions passed

The details of special resolutions passed in last three Annual General Meetings are as follows:

Financial year Particulars of special resolutions passed

2002-2003 1. Resolution under Section 81(1A) for issuance of redeemable cumulative(Eighth AGM) preference shares for a sum not exceeding Rs. 20,00,00,000 (Rupees

twenty crore only).

2. To increase the authorised share capital from Rs. 25,00,00,000 (Rupeestwenty five crore only) to Rs. 50,00,00,000 (Rupees fifty crore only) andsubsequently alter Clause V of the Memorandum of Association of theCompany due to increase in the authorised share capital.

2003-2004 Adoption of new set of Articles of Association of the Company.(Ninth AGM)

2004-2005 Amendment of Article 190 (a) of the Articles of Association of the Company.(Tenth AGM)

The Company was not required to pass any resolution by means of Postal Ballot during the financial year 2005-06.

No special resolution is proposed to be conducted through postal ballot at the ensuing Annual GeneralMeeting of the Company.

5. DISCLOSURES

(a) Disclosure on materially significant related party transactions

There were no material significant related party transactions during the financial year 2005-06 thatmay have potential conflict with the interest of the Company at large. The details of related partytransactions as per Accounting Standard-18 are included in the notes to the accounts.

(b) Details of non-compliance with regard to capital market

The equity shares of the Company got listed on the National Stock Exchange of India Limited (NSE) andBombay Stock Exchange Limited (BSE) with effect from October 19, 2005. The Company has compliedwith all the requirements of listing agreement as well as the regulations and guidelines prescribed bythe Securities and Exchange Board of India (SEBI). The Company has complied with Clause 38 of thelisting agreement with respect to payment of listing fees to the Exchanges and Annual Custodial Feesto the Depositories for the year 2006-07. There were no penalties imposed nor strictures passed on theCompany by the Stock Exchanges, SEBI or any other statutory authority on any matter related toCapital Markets, during last three years.

(c) Disclosure of accounting treatment

There is no deviation in following the treatments prescribed in any Accounting Standard in preparationof financial statements for the year 2005-06.

(d) Board disclosures- risk management

The Board members of the Company have been appraised about the risk assessment and minimisationprocedures intended to be adopted. The audit committee of the board is also regularly informed about thebusiness risks and the steps taken to mitigate the same. The implementation of the risk assessment andminimisation procedures is under progress and the board members are periodically informed of the status.

(e) Proceeds from public issue

The proceeds of the Initial Public Offer (IPO) of the Company have been utilized for the purposesmentioned in the prospectus only and there is no deviation in the application of these funds.

(f) Certification from CEO and CFO

The requisite certification from the Managing Director and Head - Corporate Finance required to begiven under Clause 49(V) has been placed before the Board of Directors of the Company.

(g) Details of compliance with mandatory requirements and adoption of non-mandatory requirementsof Clause 49 of the listing agreement

The Company has complied with all the mandatory requirements as mandated under Clause 49 oflisting agreement. A certificate from the statutory auditors of the Company to this effect has been

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included in this report. Besides mandatory requirements, the Company has voluntarily constituted aremuneration committee to consider and recommend the remuneration of the directors and approvaland administration of the Employee Stock Option Plan(s) (ESOPs).

(h) Whistle blower policy

The Company does not have a whistle blower policy.

6. MEANS OF COMMUNICATION

(a) Quarterly / Annual results

The quarterly / annual results and notices as required under Clause 41 of the listing agreement arenormally published in the ‘The Economic Times’ / ‘Business Standard’ / ‘The Financial Express’ (English& Gujarati edition, as the case may be).

(b) Posting of information on the website of the Company

The annual / quarterly results of the Company, the official news releases and the presentations madeby the Company to analysts and institutional investors are posted on its website www.suzlon.com.Quarterly results and shareholding pattern are also displayed on EDIFAR website of SEBI for the benefitof public at large.

7. MANAGEMENT DISCUSSION & ANALYSIS REPORT

The management discussion and analysis report forms part of this annual report.

8. GENERAL SHAREHOLDER INFORMATION

(a) Annual General Meeting (proposed) : Eleventh Annual General Meeting

Day and date : Tuesday, July 18, 2006

Time : 11.00 a.m.Venue : Golden Hall

Rajpath Club LimitedSarkhej-Gandhinagar HighwayAhmedabad - 380 059

(b) Financial calendar for 2006-07 (tentative schedule)

Financial year : April 1 to March 31

Board meetings for approval of quarterly results :

Quarter ended on June 30, 2006 : July 2006

Quarter ended on September 30, 2006 : October 2006

Quarter ended on December 31, 2006 : January 2007

Quarter ended on March 31, 2007 : May 2007

Annual results for financial year ended : Within 3 months of the close of financial year.March 31, 2007 (audited)

Annual general meeting for the year 2006-07 : In accordance with Section 166 of CompaniesAct, 1956

(c) Book closure date : July 8, 2006 to July 18, 2006 (both days inclusive)

(d) Dividend payment date : On or before August 17, 2006

(e) Listing on stock exchanges : The equity shares of the Company are listed onthe following stock exchanges in India sinceOctober 19, 2005:

1. National Stock Exchange of IndiaLimited (NSE)“Exchange Plaza”Bandra-Kurla Complex, Bandra (East)Mumbai – 400 051

2. Bombay Stock Exchange Limited (BSE)P.J. Towers, Dalal StreetMumbai – 400 001

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(2) Comparison of the Company’s share price with BSE Sensex

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(f) Stock code

National Stock Exchange of India Limited (NSE) : SUZLON

Bombay Stock Exchange Limited (BSE) : 532667

International Security Identification Number : INE040H01013

(ISIN) for equity shares held in Demat formwith NSDL & CDSL

(g) Market price data

The equity shares of the Company were listed on NSE / BSE with effect from October 19, 2005. Thehigh, low during the each month since October 19, 2005 is given as under:

Stock exchange NSE BSE

Month High Low No. of High Low No. of(Rs.) (Rs.) shares (Rs.) (Rs.) shares

traded traded

October 2005 720.00 580.25 55713843 720.00 565.00 27825333November 2005 887.85 684.80 32896435 889.90 684.30 20737613December 2005 949.80 804.05 28136958 949.70 804.10 15375288January 2006 1,192.00 787.00 14555417 1,188.80 818.00 7359896February 2006 1,162.70 993.25 12740040 1,167.35 995.00 6100287March 2006 1,374.90 1,080.00 17165637 1,367.00 1,092.00 8518892

(h) Performance of the Company in comparison with the broad-based indices

(1) Comparison of the Company’s share price with NSE Nifty

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(3) Comparison of the Company’s share price with BSE capital goods index

(i) Registrar and share transfer agents : M/s. Karvy Computershare Private LimitedKarvy House, 46, Avenue 4Street No.1, Banjara HillsHyderabad - 500 034

Tel. : +91 - 40 - 2332 3031Fax : +91 - 40 - 2330 4703

Email : [email protected] : www.karvy.com

Contact person:Mr. V.K. Jayaraman, Asst.General Manager &Mr. S. Krishnan, Senior Manager

(j) Share transfer system

The shares of Company are compulsorily traded in dematerialised form. Shares received in physicalform are transferred within a period of 30 days from the date of lodgement subject to documentsbeing valid and complete in all respects. In order to expedite the process of share transfer in line withcorporate governance requirements, the Company has delegated the power of share transfer to R & TAgent M/s. Karvy Computershare Private Limited.

M/s. Karvy Computershare Private Limited, Hyderabad continues as our Registrar & Share Transfer Agent,to whom all communications regarding change of address (if the shares are held in physical form),transfer of shares and change of mandate (if the shares are held in physical form) can be addressed.

(k) Distribution of shareholding

(1) The distribution of shareholding of the Company as on March 31, 2006 is as follows:

Shareholding of No. of % to total Nominal % to totalnominal value shareholders shareholders amount shareholding

of shares held

Up to 5000 76882 99.03 % 17749940 0.62 %5001-10000 246 0.32 % 1851650 0.06 %10001-20000 135 0.17 % 2028540 0.07 %20001-30000 55 0.07 % 1404110 0.05 %30001-40000 36 0.05 % 1287550 0.05 %40001-50000 19 0.02 % 882140 0.03 %50001-100000 53 0.07 % 3784740 0.13 %100001 & above 209 0.27 % 2846325130 98.99 %

Total 77635 100.00 % 2875313800 100.00 %

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(2) Shareholding pattern as on March 31, 2006

The shareholding pattern of the Company as on March 31, 2006 is as follows:

Category No. of shares Percentage

Promoters (including persons acting in concert) 200642400 69.78%Foreign Institutional Investors 63390169 22.05%Non-resident Indians / Overseas Corporate Bodies 1795775 0.62%Mutual funds, Financial Institutions and Banks 1569914 0.55%Private corporate bodies 936397 0.33%Resident Indians 19196725 6.67%

Total 287531380 100.00%

(l) Dematerialization of shares

The equity shares of the Company are compulsorily traded in dematerialized form and are available fortrading under National Securities Depository Limited (NSDL) and Central Depository Services (India)Limited (CDSL). The International Security Identification Number (ISIN) allotted to the Company underDepository System is INE040H01013.

Number of shares held in dematerialised and physical mode as on March 31, 2006

Particulars No. of shares % of totalcapital issued

Shares held in dematerialized form with NSDL 280008776 97.38%Shares held in dematerialized form with CDSL 5497585 1.91%Shares held in physical form 2025019 0.71%

Total 287531380 100.00%

(m) Outstanding GDRs / ADRs etc:

No GDRs / ADRs / Warrants or Convertible Instruments are outstanding as of the date of this report.

(n) Plant locations

Office locations

101A, 1st & 8th FloorPrestige Towers, No. 100Field Marshal K.M. CarriappaRoad (Residency Road)Bangalore – 560 025

1st Floor, “Neelkanth”1-Bhavani Singh RoadOpp. Nehru Sahkar BhavanC-SchemeJaipur – 302 001

Plot No. 108/4, First & SecondFloor (East Wing)‘Srivari Gokul Towers’Race Course RoadCoimbatore – 641 018

1st Floor, Uma Enclave,Flat No.1B, Road No.9,Hyderabad – 500 034

4th Floor, Kankaria Estate6, Little Russel StreetKolkata – 700 071

412/413, Centre Point,4th Floor, R.C. Dutta RoadAlkapuriVadodara – 390 005

103, Sapphire Twins Building,1st Floor, Office No. 102 & 103Plot No. 16-17A.B. Road, PU-3, Scheme No. 54Indore – 452 008

T.C.15/610(4)Kumari NilayamUdarasiromani RoadThiruvanathpuram – 695 010

206, 2nd FloorThakorbhai Mithaiwala MarketSahara Gate Crossing, Ring RoadSurat – 395 003

1/4, Amrut Commercial CentreSardarnagar Main RoadNear Astron CinemaRajkot – 360 001

“Suzlon”5, Shrimali SocietyNear Shri Krishna ComplexNavrangpuraAhmedabad – 380 009

2nd & 5th FloorGodrej Millennium9 Koregaon Park RoadPune – 411 001

IL & FS Financial Centre6th Floor, East QuadrantPlot No.22, G BlockBandra Kurla Complex,Bandra (East)Mumbai – 400 051

1207, Raheja CentreFree Press Journal MargNariman PointMumbai – 400 021

Unit No. 104 & 106Raheja TowersAnna SalaiChennai – 600 002

Eros Corporate Towers9th Floor, Nehru PlaceNew Delhi – 110 019

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Auditors’ certificateToThe Members of Suzlon Energy Limited

We have examined the compliance of conditions of corporate governance by Suzlon Energy Limited, for the year endedon March 31, 2006, as stipulated in Clause 49 of the listing agreement of the said Company with stock exchanges.

The compliance of conditions of corporate governance is the responsibility of the management. Our examinationwas limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance ofthe conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financialstatements of the Company.

In our opinion and to the best of our information and according to the explanations given to us, we certify thatthe Company has complied with the conditions of Corporate Governance as stipulated in the above mentionedlisting agreement.

We further state that such compliance is neither an assurance to the future visibility of the Company nor theefficiency or effectiveness with which the management has conducted the affairs of the Company.

SNK & Co. S.R. BATLIBOI & Co.Chartered Accountants Chartered Accountants

per Jasmin B. Shah per Arvind SethiPartner Partner

Membership No: 46238 Membership No: 89802

Place : Pune Place : PuneDate : May 15, 2006 Date : May 15, 2006

For and of behalf of the Board of Directors

Place : New Delhi Tulsi R. TantiDate : May 15, 2006 Chairman & Managing Director

DECLARATION

I, Tulsi R. Tanti, Chairman & Managing Director of Suzlon Energy Limited hereby declare that, as of March 31, 2006, allthe Board Members and Senior Management have affirmed compliance with the Code of Ethics laid down by theCompany.

For Suzlon Energy Limited


Factory locations

(o) Address for correspondence

Registered Office“Suzlon”, 5, Shrimali SocietyNear Shri Krishna ComplexNavrangpuraAhmedabad – 380 009

Plot No. 50, 51, 52, 54 & 55Opp. Manjusar GIDCVadodara – 391 775

Survey No. 588PaddarBhuj – 370 105

Plot No H-24 & H-25M.G. Udyognagar Indl. EstateDabhel, Daman – 396 210

Plot No. 306/1 & 3Bhimpore, Nani DamanDaman – 396 210

Survey No.42/ 2 & 3, 54, 1 to 8Bhenslore Road, DunethaDaman – 396 210

Survey No: 282Chhadvel (Korde), SakriDhule – 424 305

Survey No. 574, 59ThiruvandarkoilThribhuvani RoadPondicherry – 605 107

Training centre

2nd & 5th Floor, Business AvenueLane No. 6Koregaon Park RoadPune – 411 001

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ToThe Members of Suzlon Energy Limited

1. We have audited the attached balance sheet of Suzlon Energy Limited ('Suzlon' or 'the Company') as at March 31, 2006 and alsothe profit and loss account and the cash flow statement for the year ended on that date annexed thereto. These financialstatements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financialstatements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we planand perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Anaudit also includes assessing the accounting principles used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 (as amended) issued by the Central Government of India in termsof sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specifiedin paragraphs 4 and 5 of the said Order.

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

(i) We have obtained all the information and explanations, which to the best of our knowledge and belief, were necessary forthe purposes of our audit;

(ii) 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;

(iii) The balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with thebooks of account;

(iv) In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply withthe accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

(v) On the basis of the 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;

(vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts givethe information required by the Companies Act, 1956, in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India:

(a) in the case of the balance sheet, of the state of affairs of the Company as at March 31, 2006;

(b) in the case of the profit and loss account, of the profit for the year ended on that date; and

(c) in the case of the cash flow statement, of the cash flows for the year ended on that date.





Auditors’ report

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Re: Suzlon Energy Limited

1. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed

assets.

(b) All fixed assets were physically verified by management in the previous year in accordance with a planned programme

which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. As informed,

no material discrepancies were noticed on such verification.

(c) There was no substantial disposal of fixed assets during the year.

2. (a) The management has conducted physical verification of inventory at reasonable intervals during the year.

(b) The procedures of physical verification of inventory followed by 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 and no material discrepancies were noticed on physical

verification.

3. (a) The Company has granted unsecured loans to three companies covered in the register maintained under Section 301 of

the Companies Act, 1956. The maximum amount involved during the year was Rs. 194.47 crore and the year end balance

of such loans was Rs. 114.60 crore.

(b) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and

conditions of such loans are not prima facie prejudicial to the interest of the Company.

(c) In respect of loans granted, repayment of principal and interest, where stipulated have been regular. In cases where the

loans granted are repayable on demand, the repayment is within the date demanded.

(d) Based on the information and explanations provided by the management and our comments in clause 3(c) above, there

is no overdue amount more than rupees one lakh of loans, granted to companies, firms or other parties listed in the

register maintained under Section 301 of the Companies Act, 1956.

(e) As informed to us, the Company has not taken any loans, secured or unsecured from companies, firms or other parties

covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly clauses 4(iii) (e), (f) and

(g) are not applicable.

4. In our opinion and according to the information and explanations given to us, there is an adequate internal control system

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

for the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control

system in respect of these areas.

5. (a) According to the information and explanations provided by management, we are of the opinion that the particulars of

contracts or arrangements referred to in Section 301 of the Act that need to be entered into the register maintained under

Section 301 have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such

contracts or arrangements for sale of wind turbine generators exceeding value of rupees five lakhs entered into during the

financial year are made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

However, in respect of other transactions made in pursuance of such contracts or arrangements, exceeding value of rupees

five lakhs, entered into during the financial year, due to the specialised and unique nature of the transactions and absence

of any comparable prices, we are unable to comment whether the transactions were made at prevailing market prices at the

relevant time.

6. The Company has not accepted any deposits from the public.

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

8. We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central

Government for the maintenance of cost records under Section 209(1)(d) of the Companies Act, 1956, and are of the opinion

that prima facie, the prescribed accounts and records have been made and maintained in respect of generation of electricity

from wind power. We have not, however, made a detailed examination of the records with a view to determining whether they

are accurate or complete.

Annexure referred to in paragraph 3 of our report of even date


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9. (a) The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund,

investor education and protection fund, employees' state insurance, income-tax, sales-tax, wealth-tax, service tax, customsduty, excise duty, cess and other material statutory dues applicable to it.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund,investor education and protection fund, employees' state insurance, income-tax, wealth-tax, service tax, sales-tax, customsduty, excise duty, cess and other undisputed statutory dues were outstanding, at the year end, for a period of more thansix months from the date they became payable.

(c) According to the information and explanations given to us, there are no dues of income-tax, sales-tax, wealth-tax, servicetax, customs duty, excise duty and cess which have not been deposited on account of any dispute.

10. The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current andimmediately preceding financial year.

11. Based on our audit procedures, and as per the information and explanations given by the management and relevant confirmationsfrom applicable banks and financial institutions, we are of the opinion that the Company has not defaulted in repayment ofdues to a financial institution or a bank. The Company did not have any debentures outstanding during the year.

12. According to the information and explanations given to us and based on the documents and records produced to us, theCompany has not granted loans and advances on the basis of security by way of pledge of shares, debentures and othersecurities.

13. In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, the provisions of clause 4(xiii)of the Companies (Auditor's Report) Order, 2003 (as amended) are not applicable to the Company.

14. In our opinion, the Company does not deal or trade in shares, securities, debentures and other investments. Accordingly, theprovisions of clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 (as amended) are not applicable to the Company.

15. According to the information and explanations given to us, the Company has given guarantee for loans taken by others frombanks or financial institutions, the terms and conditions whereof in our opinion are not prima facie prejudicial to the interestsof the Company.

16. In our opinion and according to the information and explanations given to us, on an overall basis, the term loans have beenapplied for the purposes for which they were obtained.

17. According to the information and explanations given to us and on an overall examination of the balance sheet of the Company,we report that no funds raised on short-term basis have been used for long-term investment.

18. The Company has not made any preferential allotment of shares to parties or companies covered in the register maintainedunder Section 301 of the Companies Act, 1956.

19. The Company did not have any outstanding debentures during the year.

20. We have verified the end use of money raised by public issue is as disclosed in the notes to the financial statements.

21. Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements andas per the information and explanations given by the management, we report that no fraud on or by the Company has beennoticed or reported during the course of our audit.





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Balance sheet as at March 31, 2006All amounts in rupees crore unless otherwise stated

Particulars Schedule As at March 31,

2006 2005

SOURCES OF FUNDS

Shareholders' funds

Share capital A 302.53 201.92Employee stock options B 10.36 –Reserves and surplus C 2,509.36 727.65

2,822.25 929.57

Loan funds

Secured loans D 276.61 285.46Unsecured loans E 58.76 37.08

335.37 322.54

3,157.62 1,252.11APPLICATION OF FUNDS

Fixed assets F

Gross block 400.41 217.88Less: Depreciation 104.73 57.61

Net block 295.68 160.27Capital work-in-progress 76.25 17.93

371.93 178.20

Investments G 292.74 126.00

Deferred tax asset, net (See Schedule - O, Note 6) 58.00 27.61

Current assets, loans and advances H

Inventories 1,104.49 494.58Sundry debtors 1,583.91 676.33Cash and bank balances 316.24 88.20Loans and advances 691.13 375.98

3,695.77 1,635.09

Less: Current liabilities and provisions I

Current liabilities 858.32 529.19Provisions 402.50 185.60

1,260.82 714.79

Net Current assets 2,434.95 920.30

3,157.62 1,252.11

Significant accounting policies and notes to accounts O

The schedules referred to above and notes to accounts form an integral part of the balance sheet.

As per our report of even date For and on behalf of the Board of Directors

For SNK & CO. For S.R. BATLIBOI & CO. Tulsi R. TantiChartered Accountants Chartered Accountants Chairman & Managing Director

Jasmin B. Shah Arvind Sethi Girish R. TantiPartner Partner Director

Membership No. 46238 Membership No. 89802

Place : Pune Place: Pune Place : New DelhiDate : May 15, 2006 Date : May 15, 2006 Date : May 15, 2006

Hemal A. KanugaCompany Secretary


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Profit and loss account for the year ended March 31, 2006All amounts in rupees crore unless otherwise stated

Particulars Schedule Year ended March 31,

2006 2005

INCOME

Sales 3,788.46 1,917.50Other income J 69.28 23.26

3,857.74 1,940.76

EXPENDITURE

Cost of goods sold K 2,282.21 1,141.45Operating and other expenses L 509.48 291.22

Employees' remuneration and benefits M 62.96 35.32Financial charges N 54.56 41.30Depreciation F 45.87 38.97Preliminary expenses written off – 0.06

2,955.08 1,548.32

PROFIT BEFORE TAX 902.66 392.44

Current tax 107.00 48.00Deferred tax (27.97) (17.08)Fringe benefit tax 2.40 –Earlier year 0.04 0.06

NET PROFIT 821.19 361.46

Balance brought forward 526.95 306.63

PROFIT AVAILABLE FOR APPROPRIATIONS 1,348.14 668.09

Interim dividend on equity shares 71.88 23.18Proposed dividend on equity shares 71.88 11.59Dividend on preference shares 1.51 1.51Tax on dividends 20.38 4.86Transfer to general reserve 300.00 100.00

Surplus carried to balance sheet 882.49 526.95

Earnings per share (in Rs.)Basic [Nominal value of shares Rs. 10 (Previous year Rs. 10)] 29.99 14.21(See Schedule - O, Note 7)Diluted [Nominal value of shares Rs. 10 (Previous year Rs. 10)] 29.94 14.21(See Schedule - O, Note 7)

Significant accounting policies and notes to accounts O

The schedules referred to above and notes to accounts form an integral part of the profit and loss account.







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Cash flow statement for the year ended March 31, 2006All amounts in rupees crore unless otherwise stated

Particulars Year ended March 31,

2006 2005

CASH FLOW FROM OPERATING ACTIVITIESProfit before taxation 902.66 392.44

Adjustments forDepreciation 45.87 38.97Loss on sale of fixed assets 0.44 0.44(Profit) / Loss on sale of investments – 10.09Interest income (33.32) (20.56)Interest expense 42.52 31.93Dividend income (3.09) (2.02)Provision for operation, maintenance and warranty 117.93 69.36Provision for power generation guarantee 104.82 49.62(Reversal) / Provision for doubtful debts and advances (5.39) 8.93Employee stock option scheme 10.36 –Preliminary expenses written off – 0.06Wealth-tax 0.02 0.01

Operating profit before working capital changes 1,182.82 579.27Movements in working capital(Increase) / Decrease in sundry debtors (902.84) (368.62)(Increase) / Decrease in inventories (609.91) (292.87)(Increase) / Decrease in loans and advances (197.57) (25.93)Increase / (Decrease) in current liabilities 260.50 213.17Cash (used in) generated from operations (267.00) 105.02Direct taxes paid (122.78) (41.79)

Net cash (used in) / generated from operating activities (389.78) 63.23CASH FLOW FROM INVESTING ACTIVITIES

Purchase of fixed assets (240.41) (70.28)Proceeds from sale of fixed assets 0.38 0.42Purchase of investments (170.89) (85.38)Inter-corporate deposits repaid / (granted) 3.18 (135.52)Sale of investments 4.15 2.60(Loans granted to) / Repayments received from subsidiaries (106.26) 14.94Interest received 26.80 20.46Dividends received 2.64 0.08

Net cash used in investing activities (480.41) (252.68)CASH FLOW FROM FINANCING ACTIVITIES

Redemption of preference share capital (100.00) –Proceeds from issuance of share capital including premium 1,364.89 200.00Share issue expenses (40.67) (7.57)Proceeds from borrowings 263.49 171.13Repayment of borrowings (250.65) (69.25)Interest paid (41.92) (31.44)Dividends paid (84.99) (40.32)Tax on dividends paid (11.92) (5.27)

Net cash from financing activities 1,098.23 217.29NET INCREASE IN CASH AND CASH EQUIVALENTS 228.04 27.84Cash and cash equivalents at the beginning of the year 88.20 60.36Cash and cash equivalents at the end of the year 316.24 88.20Components of cash and cash equivalents

Cash and cheques on hand 0.31 0.20With scheduled banks

in current account 17.57 18.29in term deposit accounts [See Schedule - O, Note 14(i)] 298.26 69.70

With non-scheduled banks in current account 0.10 0.01316.24 88.20

Notes:1. Purchase of fixed assets includes payments for items in capital work-in-progress and advances for purchase of fixed assets.2. Previous year's figures have been regrouped/reclassified, wherever necessary.








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Schedules to the balance sheet as at March 31, 2006

Particulars As at March 31,

2006 2005

SCHEDULE - A : SHARE CAPITAL

Authorised

330,000,000 (101,000,000) equity shares of Rs. 10 each 330.00 101.00

11,500,000 (11,500,000) preference shares of Rs. 100 each 115.00 115.00

445.00 216.00

Issued, Subscribed

Equity

287,531,380 (86,922,900) equity shares of Rs. 10 each fully paid up 287.53 86.92[Of the above equity shares, 251,855,300 (78,009,500) shares were allottedas fully paid bonus shares by utilisation of Rs. 174.04 crore (Rs. 19.04 crore)from general reserve, Rs. 1.03 crore (Rs. 1.03 crore) from capital redemptionreserve and Rs. 76.80 crore (Rs. 57.95 crore) from securities premium account]

Preference

1,500,000 (1,500,000), 10% cumulative redeemable preference shares ofRs.100 each fully paid up [See Schedule - O, Note 3(a)] 15.00 15.00

Nil (10,000,000), 0.01% cumulative redeemable preference shares ofRs.100 each fully paid up [See Schedule - O, Note 3(b)] – 100.00

302.53 201.92

SCHEDULE - B : EMPLOYEE STOCK OPTIONS

Employee stock options outstanding 22.44 –Less:Deferred employee compensation expense outstanding 12.08 –

10.36 –

SCHEDULE - C : RESERVES AND SURPLUS

Securities premium account

As per last balance sheet 29.85 –Add: Addition during the year 1,338.13 95.37

Less:Capitalisation by way of issue of bonus shares 18.85 57.95Share issue expenses [net of tax benefit Rs. 2.56 crore (Rs. Nil)] 38.11 7.57

1,311.02 29.85

General reserve

As per last balance sheet 170.85 70.85

Add: Transfer from profit and loss account 300.00 100.00

470.85 170.85

Less: Capitalisation by way of issue of bonus shares 155.00 –

315.85 170.85Profit and loss account 882.49 526.95

2,509.36 727.65

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2006 2005

SCHEDULE - D : SECURED LOANS

Term loans

From banks 25.28 15.38

(Various loans secured by a first charge on certain immovable and/or movablefixed assets, second charge on current assets and/or personal guarantees ofdirectors in certain cases.)

From others 137.31 53.12

(Secured by a first charge on certain immovable and movable fixed assets,specific security deposits, book-debts, second charge on current assets andpersonal guarantees of directors in certain cases.)

162.59 68.50

Working capital facilities from banks and financial institutions

Rupee loans 114.02 202.85

Foreign currency loans – 13.09

(Secured by hypothecation of inventories, book-debts and other currentassets of the Company, both present and future, first charge on certainimmovable fixed assets, second charge on all other immovable fixed assetsand personal guarantees of directors in certain cases.)

114.02 215.94

Vehicle loans – 1.02

(Vehicle loans are hypothecated against the respective vehicle's financed.)

276.61 285.46

SCHEDULE - E : UNSECURED LOANS

Long term

From other than banks 29.34 37.08[Due within one year Rs. 23.04 crore, (Rs. 8.37 crore)]

29.34 37.08Short term

From other than banks 29.42 –

29.42 –

58.76 37.08



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2006 2005

SCHEDULE - G : INVESTMENTS

LONG TERM INVESTMENTS (At cost, fully paid)

UNQUOTED

(i) Government and other securities (Non-trade)

Security deposited with government departments* 0.01 0.01

0.01 0.01

(ii) Trade Investments

Nil (65,000), 13% cumulative redeemable preference shares of Rs. 100each of Suzlon Infrastructure Limited (formerly Suzlon Developers Limited) – 0.65

99,999 (99,999), 13% cumulative redeemable preference shares of Rs. 100each of Sarjan Realities Limited 1.00 1.00

500,000 (500,000), 10% cumulative redeemable preference shares of Rs. 100each of Suzlon Infrastructure Limited (formerly Suzlon Developers Limited) 5.00 5.00

6.00 6.65

(iii) Other than trade investments

(a) Subsidiaries

Indian

4,990,000 (4,990,000) equity shares of Rs.10 each of Suzlon Towers andStructures Limited (formerly Suzlon Green Power Limited) 5.29 5.29

13,000,000 (2,000,000) equity shares of Rs.10 each of Suzlon WindfarmServices Limited 18.26 7.24

11,249,500 (11,249,500) equity shares of Rs.10 each of Suzlon StructuresPrivate Limited 11.25 11.25

8,721,500 (8,721,500) equity shares of Rs.10 each of Suzlon GeneratorsPrivate Limited 8.72 8.72

Nil (350,000), 13% cumulative redeemable preference shares of Rs. 100each of Suzlon Windfarm Services Limited – 3.50

900,000 (900,000), 10% cumulative redeemable preference shares ofRs. 100 each of Suzlon Windfarm Services Limited 9.00 9.00

750,000 (89,100), 8% cumulative redeemable preference shares of Rs. 100each of Suzlon Structures Private Limited 7.50 0.89

451,000 (451,000), 13% cumulative redeemable preference shares of Rs. 100each of Suzlon Towers and Structures Limited (formerly Suzlon GreenPower Limited) 4.51 4.51

2,000,000 (Nil) equity shares of Rs. 10 each of Suzlon Gujarat Wind ParkLimited 2.00 –

3,010,000 (Nil) equity shares of Rs. 10 each of Suzlon Power InfrastructurePrivate Limited 3.01 –

1,500,000 (Nil) equity shares of Rs. 10 each of Suzlon Engitech PrivateLimited 1.50 –



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2006 2005

SCHEDULE - G : INVESTMENTS (Contd.)

Overseas

244,000 (172,500) equity shares of 10 Euro each fully paid up of AE RotorHolding BV, The Netherlands 13.15 9.35

1,422,137 (413,864) equity shares of 100 DKK each fully paid up of SuzlonEnergy A/S, Denmark [DKK 36,400,350 (DKK 26,977,650) invested as additionalpaid in capital] 133.06 52.74

1,000 (Nil) equity shares of 1 USD each fully paid up of Suzlon Rotor Corporation,USA [USD 6,349,000 (USD Nil) invested as additional paid in capital] 28.24 –

Suzlon Energy (Tianjin) Limited, China 24.39 –

1 (Nil) equity share of 25,000 Euro each fully paid up of Suzlon WindparkManagement GmbH, Germany [Euro 5,000 (Euro Nil) paid as capital reserve] 0.16 –

1 (Nil) equity share of 25,000 Euro each fully paid up of SE Drive TechniekGmbH, Germany [Euro 350,000 (Euro Nil) paid as capital reserve] 2.01 –

2 (2) equity shares of 12,500 Euro each fully paid up of Suzlon Energy GmbH,Germany [Euro 2,486,000 (Euro 1,025,000) paid as capital reserve] 13.61 5.78

285.66 118.27(b) Other than subsidiaries

202,900 (202,900) equity shares of Rs. 10 each of Suzlon Hotels Limited 0.20 0.20

87,000 (87,000), 13% cumulative redeemable preference shares of Rs. 100each of Suzlon Hotels Limited 0.87 0.87

2,550 (2,550) equity shares of Rs. 10 each of Saraswat Co-operative Bank Ltd.* 0.00 0.00

1.07 1.07

Total Unquoted 292.74 126.00

Investments 292.74 126.00

(*Amount below Rs. 0.01 crore)

Aggregate cost of unquoted investments 292.74 126.00


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2006 2005

SCHEDULE - H : CURRENT ASSETS, LOANS AND ADVANCES

Current assets

Inventories

Raw materials [Including goods-in-transit Rs. 182.26 crore (Rs. 106.30 crore)] 914.58 415.27Semi-finished goods and work-in-progress 150.51 68.86Land and land lease rights 39.40 10.45

1,104.49 494.58

Sundry debtors(Unsecured)

Outstanding for a period exceeding six monthsconsidered good [See Schedule - O, Note 10(f)] 173.40 93.87considered doubtful 5.25 9.99

178.65 103.86

Others, considered good 1,410.51 582.46

1,589.16 686.32

Less: Provision for doubtful debts 5.25 9.99

1,583.91 676.33

Cash and bank balances

Cash on hand 0.31 0.20Balances with scheduled banks

in current accounts 17.57 18.29in term deposit accounts [See Schedule - O, Note 14(i)] 298.26 69.70

315.83 87.99

Balance with non-scheduled bank in current account 0.10 0.01[Maximum balance during the year Rs. 0.90 crore (Rs. 0.12 crore)]

316.24 88.20

Loans and advances(Unsecured and considered good, except otherwise stated)

Loans to subsidiaries (in foreign currency) 44.53 26.62Loans to subsidiaries (in Indian rupees) 117.61 29.26Deposits

with customers as security deposit 31.33 31.94others 71.41 12.08

Advance against taxes 6.88 –[Net of provisions of Rs. 157.48 crore (Rs. 61.00 crore)]

Advances recoverable in cash or in kind or for value to be received*considered good 419.37 276.08considered doubtful 2.70 3.35

422.07 279.43

Less: Provision for doubtful loans and advances 2.70 3.35

419.37 276.08

691.13 375.98

3,695.77 1,635.09

* Includes(a) Rs. Nil** (Rs. 3.89 crore) towards share application money pending allotment(b) Inter corporate deposits of Rs. 185.45 crore (Rs. 188.64 crore)

** Amount below Rs. 0.01 crore


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2006 2005

SCHEDULE - I : CURRENT LIABILITIES AND PROVISIONS

Current Liabilities

Sundry creditors 535.67 418.19

Acceptances 22.59 61.46

Subsidiaries 29.99 11.15

Other current liabilities 199.64 29.36

Interest accrued but not due 1.36 0.76

Advances from customers 69.07 8.27

858.32 529.19

Provisions

Wealth-tax 0.02 0.01

Income-tax – 6.58

[Net of advance tax of Rs. 164.36 crore (Rs. 54.42 crore)]

Gratuity, superannuation and leave encashment 1.11 0.90

Generation guarantee, LD, operation, maintenance and warranty 317.69 163.17

Dividend 73.39 13.10

Tax on dividend 10.29 1.84

402.50 185.60

1,260.82 714.79

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2006 2005

SCHEDULE - J : OTHER INCOME

Interest received

From banks 15.86 3.20

From others 17.46 17.36[Including interest on non-trade investment Rs. Nil (Rs. 0.06 crore)]

Dividend[including from subsidiaries Rs. 2.67 crore (Rs. 1.68 crore)] 3.09 2.02

Excess provisions written back – 0.30

Income from infrastructure development [See Schedule - O, Note 10(e)] 26.96 –

Miscellaneous income 5.91 0.38

69.28 23.26

SCHEDULE - K : COST OF GOODS SOLD

Consumption of raw materials

Opening stock 415.27 170.33

Add: Purchases 2,779.01 1,424.72

3,194.28 1,595.05

Less: Closing stock 914.58 415.27

(A) 2,279.70 1,179.78

Trading purchases (B) 113.11 9.61

(Increase) / Decrease in stocks

Opening balance

Semi finished goods and work-in-progress 68.86 16.17Finished goods – 14.12Land and land lease rights 10.45 1.08

(C) 79.31 31.37

Closing balance

Semi finished goods and work-in-progress 150.51 68.86Land and land lease rights 39.40 10.45

(D) 189.91 79.31

(Increase)/Decrease in stocks (E) = (C) - (D) (110.60) (47.94)

(A) + (B) + (E) 2,282.21 1,141.45

Schedules to the profit and loss account for theyear ended March 31, 2006


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2006 2005

SCHEDULE - L : OPERATING AND OTHER EXPENSES

Stores and spares 13.45 6.54Power and fuel 1.77 1.12Factory expenses 5.36 2.57Repairs and maintenance:

Plant and machinery 1.44 0.43Building 1.81 1.47Others 2.90 1.52

Operation and maintenance charges 11.73 7.23Design change and technological upgradation charges 20.91 9.14Operating lease charges 2.37 2.35Rent 5.46 3.49Rates and taxes 4.79 0.38Provision for operation, maintenance and warranty 117.93 69.36Provision for power generation guarantee 104.82 49.62Quality assurance expenses 22.71 11.14R & D, certification and product development 7.81 3.76Insurance 4.30 2.81Advertisement and sales promotion 15.45 5.59Infrastructure development expenses – 12.87Freight outward and packing expenses 82.02 24.57Sales commission 23.25 9.78Travelling, conveyance and vehicle expenses 17.93 11.10Communication expenses 2.88 2.10Auditors' remuneration and expenses 2.25 1.22Consultancy charges 7.89 6.11Charity and donations 2.06 5.17Other selling and administrative expenses 24.55 18.53Exchange differences, net 1.20 1.79Provision for doubtful debts and advances – 8.93Loss on sale of investments, net – 10.09Loss on assets sold / discarded, net 0.44 0.44

509.48 291.22

SCHEDULE - M : EMPLOYEES' REMUNERATION AND BENEFITS

Salaries, wages, allowances and bonus 57.70 30.33

Contribution to provident and other funds 2.94 1.81

Staff welfare expenses 2.32 3.18

62.96 35.32

SCHEDULE - N : FINANCIAL CHARGES

Interest

Fixed loans 6.09 8.74

Others 36.43 23.19

Bank charges 12.04 9.37

54.56 41.30

Schedules to the profit and loss account for theyear ended March 31, 2006

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SCHEDULE - O : SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS(All amounts in rupees crore unless otherwise stated)

Nature of operations

The Company is engaged in the manufacture of Wind Turbine Generators (WTG) of various capacities and its components. It hasmanufacturing plants at Daman, Pondicherry, Bhuj, Chhadvel (Dhule) and Vadodara.

1. Significant accounting policies

(a) Basis of accounting

The financial statements have been prepared on the historical cost convention to comply in all material respects, withthe mandatory accounting standards issued by The Institute of Chartered Accountants of India (ICAI), generallyaccepted accounting principles, and provisions of Companies Act, 1956 (the Act) following mercantile system ofaccounting as adopted consistently by the Company. Accounting policies not referred to otherwise, are consistentwith generally accepted accounting principles.

(b) Use of estimates

The presentation of financial statements in conformity with the generally accepted accounting principles requiresestimates and assumptions to be made that may affect the reported amount of assets and liabilities and disclosuresrelating to contingent liabilities as at the date of the financial statements and the reported amount of revenues andexpenses during the reporting period. Actual results could differ from those estimated.

(c) Revenue recognition

Sale of goods

Revenue from sale of goods is recognised when significant risks and rewards in respect of ownership of the goods aretransferred to the customer, as per the terms of the respective sales order. Sales are recorded net of taxes.

Interest

Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rateapplicable. In case of interest charged to customers, interest is accounted for on availability of documentary evidencethat the customer has accepted the liability.

Dividend

Dividend income from investments is recognised when the right to receive payment is established. Dividend fromsubsidiary companies declared after the year end, is accounted during the year as required by Schedule VI to theCompanies Act, 1956.

(d) Fixed assets and intangible assets

Fixed assets are stated at cost, less accumulated depreciation and impairment losses, if any. Cost includes all expenditurenecessary to bring the asset to its working condition for its intended use. Own manufactured assets are capitalisedinclusive of all direct costs and attributable overheads. Capital work-in-progress comprises of advances paid to acquirefixed assets and the cost of fixed assets that are not yet ready for their intended use as at the balance sheet date. In thecase of new undertaking, pre-operative expenses are capitalised upon the commencement of commercial production.

Intangible assets are recorded at the consideration paid for their acquisition. Cost of an internally generated assetcomprises all expenditure that can be directly attributed, or allocated on a reasonable and consistent basis, to creating,producing and making the asset ready for its intended use.

The carrying amounts of the assets belonging to each Cash Generating Unit (CGU) are reviewed at each Balance Sheetdate to assess whether they are recorded in excess of their recoverable amounts, and where carrying amounts exceedthe recoverable amount of the assets' CGU, assets are written down to their recoverable amount. Further, assets heldfor disposal are stated at the lower of the net book value or the estimated net realisable value.


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(e) Depreciation/Amortisation

Depreciation / Amortisation is provided on the Written Down Value (WDV) method unless otherwise mentioned, pro-

rata to the period of use of assets and is based on management's estimate of useful lives of the fixed assets or at rates

specified in Schedule XIV to the Act, whichever is higher.

Type of asset Rate

Leasehold land Amortised over the period of lease

Office building 5%

Factory building 10%

Plant and machinery 13.91%

Moulds 13.91% or useful life based on usage

Patterns 30% or useful life based on usage

Plugs for moulds 50% or useful life based on usage

Wind research and measuring equipment 50%

Computers and software 40%

Office equipment 13.91%

Furniture and fixture 18.10%

Motor car and others 25.89%

Trailers 30%

Intangible assets Amortised on a straight line basis over a period of five years

(f) Inventories

Inventories of raw materials including stores, spares and consumables, packing materials, work-in-progress, semi-

finished goods and finished goods are valued at the lower of the cost and estimated net realisable value. Cost is

determined on weighted average basis.

The cost of work-in-progress, semi-finished goods and finished goods includes the cost of material, labour and

manufacturing overheads.

Stock of land and land lease rights is valued at lower of cost and estimated net realisable value. Cost is determined

based on the weighted average basis. Net realisable value is determined by management using technical estimates.

(g) Investments

Long term investments are carried at cost. However, provision is made to recognise a decline, other than temporary, in

the value of long term investments.

Current investments are carried at lower of cost and fair value, determined on an individual basis.

(h) Foreign currency transactions

Transactions in foreign currencies are normally recorded at the average exchange rate prevailing in the month during

which the transaction occurred.

Outstanding balances of foreign currency monetary items are reported using the period end rates.

Non-monetary items carried in terms of historical cost denominated in a foreign currency are reported using the

exchange rate at the date of the transaction; and non-monetary items which are carried at fair value or other similar

valuation denominated in a foreign currency are reported using the exchange rate that existed, when the values were

determined.

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Exchange differences arising as a result of the above are recognised as income or expense in the profit and loss

account, except in case of liabilities incurred for acquiring imported fixed assets, where the differences are adjusted

to the carrying amount of such fixed assets in compliance with the Schedule VI of the Act.

In case of forward contracts, the difference between the forward rate and the exchange rate, being the premium or

discount, at the inception of a forward exchange contract is recognised as income or expense over the life of the

contract. Exchange differences on such contracts are recognised in the profit and loss account in the reporting period

in which the rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is

recognised as income or as expense for the period.

Foreign operations

The financial statements of integral foreign operations are translated as if the transactions of the foreign operations

have been those of the Company itself.

(i) Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are

capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time

to get ready for intended use. All other borrowing costs are charged to revenue.

(j) Retirement and other employee benefits

Defined contributions to provident fund and family pension fund are charged to the profit and loss account on accrual basis.

Liabilities with regard to gratuity are determined under Group Gratuity Scheme with Life Insurance Corporation of

India (LIC) and the provision required is determined as per actuarial valuation carried out by LIC, as at the balance sheet

date.

Contributions to superannuation fund with LIC through its employees' trust are charged to the profit and loss account

on an accrual basis.

The Company makes a provision in its books for unutilised leave lying to the credit of employees, subject to the

maximum period of leave, based on actuarial valuation as at the balance sheet date.

(k) Provisions, contingent liabilities and contingent assets

A provision is recognised when the Company has a present obligation as a result of past events and it is probable that

an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made.

Provisions are not discounted to their present value and are determined based on best estimate required to settle the

obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current

best estimates.

Contingent liabilities are disclosed by way of notes to the accounts.

Contingent assets are not recognised.

(l) Income tax

Tax expense for a year comprises of current tax, deferred tax and fringe benefit tax. Current tax is measured after taking

into consideration, the deductions and exemptions admissible under the provisions of the Income tax Act, 1961.

Deferred tax reflects the impact of current year timing differences between taxable income and accounting income

for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the

tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised only to the

extent that there is reasonable certainty that sufficient future taxable income will be available against which such

deferred tax assets can be realised.


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Deferred tax resulting from timing differences which originate during the tax holiday period but are expected toreverse after tax holiday period is recognised in the year in which the timing differences originate using the tax ratesand laws enacted or substantively enacted by the balance sheet date.

(m) Lease assets

Operating leases

Assets acquired as leases where a significant portion of the risks and rewards of ownership are retained by the lessor areclassified as operating lease. Lease rentals are charged off to the profit and loss account as incurred.

Initial direct costs in respect of assets given on lease are expensed off in the year in which such costs are incurred.

(n) Earnings per share

Basic earnings per share are calculated by dividing the net profit for the period attributable to equity shareholders(after deducting preference dividends and attributable taxes) by the weighted average number of equity sharesoutstanding during the period. The weighted average number of equity shares outstanding during the period areadjusted for any bonus shares issued during the year and also after the Balance Sheet date but before the date thefinancial statements are approved by the board of directors.

For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholdersand the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutivepotential equity shares.

The number of equity shares and potentially dilutive equity shares are adjusted for bonus shares as appropriate. Thedilutive potential equity shares are adjusted for the proceeds receivable, had the shares been issued at fair value.Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date.

(o) Employee stock option

Stock options granted to employees under the Employees Stock Option Scheme are accounted as per the intrinsic valuemethod permitted by the “Guidance Note on Share Based Payments” issued by the ICAI. Accordingly, the excess of themarket price of the shares as on the date of the grant of options over the exercise price is recognised as deferredemployee compensation and is charged to profit and loss account on straight-line basis over the vesting period.

The number of options expected to vest is based on the best available estimate and are revised, if necessary, ifsubsequent information indicates that the number of stock options expected to vest differs from previous estimates.

2. Changes in accounting policies

During the current year, the Company has changed the basis of valuation of inventories from First-in-First-Out (FIFO) toweighted average basis. As a result of this change, the value of the inventory as at March 31, 2006 is higher byRs. 2.67 crore and the profit before tax for the year is higher by a similar amount.

3. Terms of redemption of preference shares

(a) 1,500,000,10% cumulative redeemable preference shares of Rs. 100 each fully paid are redeemable at par after oneyear from March 10, 2004, which is the date of allotment, at the option of the Company or the preference shareholders,as the case may be.

(b) During the year, the Company has redeemed the 10,000,000, 0.01% cumulative redeemable preference shares ofRs. 100 each fully paid, out of the initial public offer proceeds.

4. Amount due to Small Scale Industrial undertakings (SSI) as at March 31, 2006: Rs. 5.61 crore (Rs. 18.24 crore)

SSI undertakings to whom the Company owes sums which are outstanding for more than 30 days as at March 31, 2006, havebeen determined based on the information available with the Company and the details are as under:

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Abirami Engineering Works, Anupam Industries Limited, Associated Power Structures Limited, Excel Machinery (Guj.) PrivateLimited, Nikho Engineers, Rays Electro Engineers, SSV Engineers, Anand Engineering Industries, Aureka, Indiram GeneralEngineering Works, Patson Transformers Private Limited, Prima Automation (I) Private Limited, Mukesh Engineering Industries,Bullows Paint Equipment Private Limited.

5. Provisions

In pursuance of Accounting Standard-29 (AS-29) “Provisions, Contingent Liabilities and Contingent Assets” issued by theICAI, the provisions required have been incorporated in the books of account in the following manner:

Particulars Generation Operation, Provision forguarantee maintenance liquidated

and warranty damages

Opening balance 61.47 97.73 3.97Additions 104.82 117.93 –Utilisation 24.23 42.76 –Reversal – – 1.24

Closing balance 142.06 172.90 2.73

The provision for operation, maintenance and warranty represents the expected liability on account of field failure of partsof WTG and expected expenditure of servicing the WTG's over the period of free operation, maintenance and warranty whichvaries according to the terms of each sales order.

The provision for generation guarantee represents the expected outflow of resources against claims for generation shortfallexpected in future over the life of the guarantee assured. The period of generation guarantee varies for each customeraccording to the terms of the contract. The key assumptions in arriving at the generation guarantee provisions are windvelocity, plant load factor, grid availability, load shedding, historical data, wind variation factor etc.

Provision for Liquidated Damages (LD) represents the expected claims which the Company may need to pay for non-fulfilment of certain commitments as per the terms of the sales order. These are determined on a case to case basisconsidering the dynamics of each sales order and the factors relevant to that sale.

6. Break up of the accumulated deferred tax asset, net, is given below:

Particulars Deferred tax During the Deferred taxasset/(liability) year 2005-06 asset/(liability)

as at as atMarch 31, 2005 March 31, 2006

Deferred tax asset

Provision for generation guarantee, LD, operation,maintenance and warranty 28.52 26.09 54.61Provision for doubtful debts 2.18 (0.62) 1.56Provision for bonus 0.07 (0.07) –

(a) 30.77 25.40 56.17

Deferred tax liability

Depreciation on fixed assets 3.16 (2.57) 0.59

(b) 3.16 (2.57) 0.59

Deferred tax asset (net) (c) = (a) - (b) 27.61 27.97 55.58

Tax effect of share issue expenses eligible forincome-tax deduction, under Section 35D,credited to securities premium account (d) 2.42

(c) + (d) 58.00


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7. Earnings Per Share (EPS)

All amounts in Rs. crore except per share data


2006 2005

Basic earnings per share

Net profit after tax 821.19 361.46Less: Preference dividend and tax thereon 1.72 1.72

(a) Net profit attributable to equity shareholders(Numerator for computation of basic and diluted EPS) 819.47 359.74

(b) Weighted average number of equity shares in calculating basic EPS(Denominator for computation of basic EPS) 273,233,510 253,005,661Add: Equity shares for no consideration arising on grant of stock options

under ESOP 2005 430,697 –

(c) Weighted average number of equity shares in calculating diluted EPS(Denominator for computation of Diluted EPS) 273,664,207 253,005,661

Basic earning per share of face value of Rs. 10 each (a/b *10,000,000) 29.99 14.21

Diluted earning per share of face value of Rs. 10 each (a/c *10,000,000) 29.94 14.21

Note:

The Expert Advisory Committee of the Institute of Chartered Accountants of India (EAC) has issued an opinion on computation of weightedaverage shares in respect of bonus shares on new shares issued during the year. The computation of EPS (basic and diluted) for the year endedMarch 31, 2005, if computed on that basis is Rs. 13.84 per share. The figures for current year have been computed, giving effect to the EACopinion.

8. Operating leases

Premises

The Company has taken certain premises under cancellable operating leases. The total rental expense under cancellable

operating leases during the period was Rs. 2.08 crore (Rs. 1.73 crore).

The Company has also taken furnished/unfurnished offices and certain other premises under non-cancellable operating lease

agreement ranging for a period of one to five years. The lease rental charge during the year is Rs. 3.38 crore (Rs. 1.77 crore)

and maximum obligation on long term non-cancellable operating lease payable as per the rentals stated in respective

agreement are as follows:

Obligation on non-cancellable operating leases Amount

Not later than one year 3.50

Later than one year and not later than five years 0.91

Later than five years Nil

WTG's

The Company has taken WTG's on non-cancellable operating lease, chargeable on per unit basis of net electricity generated

and delivered. The lease amount would be determined in the future on the numbers of units generated. Lease rental expense

for the period is Rs. 2.37 crore (Rs. 2.35 crore).

Sub-lease rental income recognised in the statement of profit and loss account for the period is Rs. 2.37 crore(Rs. 2.35 crore).

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9. Employee stock option scheme

Suzlon Energy Employee Stock Option Plan 2005 (the 2005 Plan or the Scheme)

The Company instituted the 2005 Plan for all eligible employees in pursuance of a special resolution approved by theshareholders at the extra-ordinary general meeting held on June 16, 2005 (grant date). The Scheme covers grant of options tospecified permanent employees of the Company as well as its subsidiaries except subsidiaries in the United States of America.

Pursuant to the scheme, the Company has granted 921,000 options to eligible employees at an exercise price, which is 50% of theissue price determined in the Initial Public Offering (IPO) of the Company in accordance with SEBI Guidelines i.e,Rs. 510 per equity share. Under the terms of the scheme, 30% of the options will vest in the employees at the end of the first year,30% at the end of the second year and the balance of 40% at the end of third year from the grant date in the following manner:

Date of vesting Proportionof vesting

June 16, 2006 30%June 16, 2007 30%June 16, 2008 40%

The Employee Stock Options granted shall be capable of being exercised within a period of five years from the date of firstvesting i.e. June 16, 2006. Once the options vest as per the Schedule above, they would be exercisable by the option holderand the shares arising on exercise of such options shall not be subject to any lock-in period. Further, in the case oftermination of employment, all non-vested options would stand cancelled. Options that have vested but have not beenexercised can be exercised within the time prescribed as mentioned above, failing which they would stand cancelled.

During the year ended March 31, 2006, no eligible employees have exercised their options as the date of first vesting fallsin the succeeding year. Further, 32,000 options were forfeited as certain employees resigned from the services of theCompany. The movement in the stock options during the year was as per the table below:

Options outstanding at the beginning of the year NilGranted during the year 921,000Forfeited during the year 32,000Exercised during the year NilExpired during the year NilOptions outstanding at the end of the year 889,000Exercisable at the end of the year Nil

Fair value of the option

The Company has charged a sum of Rs. 10.36 crore (Rs. 255 per option) being the intrinsic value of option under the 2005Plan for the year ended March 31, 2006. Had the Company adopted the fair value method based on 'Black-Scholes' Model forpricing and accounting the options, the cost of option would have been Rs. 324.33 per option and accordingly, the profitafter tax would have been lower by Rs. 2.82 crore. Consequently the diluted earnings per share after factoring the aboveimpact of fair value would have been Rs. 29.95 per share instead of Rs. 29.94 per share.

10. Other notes

(a) Term loans from banks amounting to Rs. 0.82 crore (Rs. 11.97 crore) and working capital facilities from banksamounting to Rs. 104.02 crore (Rs. 212.44 crore) are secured by personal guarantee of directors.

(b) During the year, the Company has retired and disposed off certain fixed assets at various locations. In compliance withAccounting Standard - 10 “Accounting for Fixed Assets”, issued by the ICAI, these assets have been eliminated from thefinancial statements. Consequently there is a reduction in the gross block as at March 31, 2006 by Rs. 0.53 crore (Rs.4.87 crore) and the corresponding accumulated depreciation as at the same date by Rs. 0.19 crore (Rs. 4.82 crore)pertaining to these assets.

(c) Expenditure amounting to Rs. 2.85 crore (Rs. 0.26 crore) and Rs. 4.83 crore (Rs. 1.54 crore) pertaining to employeeremuneration and benefits; and operating and other expenditure, respectively, being expenditure incurred in connectionwith the construction of certain own manufacturing assets have been deducted from the respective expenditure headswhere they were charged and have been capitalised under appropriate asset heads.


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(d) Sales do not include excise duty, service tax, sales-tax or VAT charged.

(e) The Company incurs expenditure on development of infrastructure facilities for power evacuation arrangements as per

authorisation of the State Electricity Boards (SEB) / Nodal Agencies. In certain cases the expenditure is reimbursed, on

agreed terms, by the SEB/Nodal agencies and in certain cases the Company recovers it from the customers. Where the

expenditure is reimbursed by the SEB/Nodal Agency, the cost incurred is reduced by the reimbursements received and

the net amount is charged to the profit and loss account. Where an arrangement is entered into with customers for

power evacuation charges, the proportionate direct cost computed on per Mega Watt basis is netted off from the

amount charged to customers and the net deficit/(surplus) is charged / credited to profit and loss account. The deficit/

surplus from infrastructure development across all SEB's / Nodal Agencies is shown under "infrastructure development

expenses" or "other income" as the case may be. Indirect expenses not directly relatable to power evacuation are charged

to the respective account heads in the profit and loss account.

(f) Balances of sundry debtors include Rs. 0.85 crore (Rs. 22.48 crore), which are contractually payable beyond a period

of six months from the date of sale.

11. Managerial remuneration to directors


2006 2005

Salaries 1.47 0.86

Perquisites – 0.60

Contribution to superannuation fund 0.31 0.18

Sitting fees 0.01 –

1.79 1.64

The directors are covered under the Company's scheme for gratuity along with the other employees of the Company. The

proportionate amount of gratuity is not included in the aforementioned disclosure, as the amount attributable to directors

is not ascertainable.

12. (a) Contingent liabilities


2006 2005

Guarantees given on behalf of subsidiaries in respect of loansgranted to them by banks 180.77 59.05

Guarantees given on behalf of other companies in respect of loansgranted to them by banks 0.88 1.39

Claims against the Company not acknowledged as debts 0.25 1.75Bills discounted with banks – 3.32

(b) Capital commitments


2006 2005

Estimated amount of contracts remaining to be executed oncapital account and not provided for net of advances 47.97 13.09

Commitments for investments in subsidiary 21.76 –

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13. Derivative instruments and unhedged foreign currency exposure

Particulars of derivatives Purpose

Forward contract outstanding as at balance sheet date

Buy DKK 386,239.60 Hedge of forex DKK liabilitiesBuy Euros 677,739.50 Hedge of forex Euro liabilitiesBuy USD 7,598,272.54 Hedge of forex USD liabilities

Target redemption forward contract

Euro 0.025 crore / Euro 0.05 crore per week for 18 weeks Hedge forex Euro liabilities

Range accrual interest rate swap

USD 0.20 crore Hedge against interest on forex loans

Particulars of unhedged foreign currency exposure as at the balance sheet date

Particulars Amount

Creditors (including goods in transit Rs. 132.32 crore) 215.15Debtors 24.32Loans given 47.20Loans received 82.00Bank balance in current accounts and term deposit accounts 4.45

14. Additional information pursuant to the provisions of paragraphs 3, 4B, 4C, 4D of part II of the Schedule VI of theCompanies Act, 1956

(a) Auditors' remuneration and expenses


2006 2005

Statutory audit fees 1.82 0.46Tax audit fees 0.03 0.02Taxation matters 0.12 –Other services 0.15 0.65Reimbursement of out of pocket expenses 0.13 0.08

2.25 1.22

(b) Licensed and installed capacities and production

Particulars Installed Units produced

capacity (Nos.) (in Nos.) (in MW’s)

Wind turbine generators

Upto 1 MW 83.00 36.05(63.00) (22.70)

Above 1 MW & Upto 2 MW 740.00 927.65(383.00) (478.75)

Above 2 MW 8.00 16.80( – ) ( – )

Blades * 2,460.00 –(1,172.00) –

(See note below) 831.00 980.50(446.00) (501.45)

*used for captive consumption

Note:

The installed capacities in respect of WTG's and blades have not been disclosed, as these are variable and subject to changes in product

mix and utilisation of manufacturing facilities, given the nature of its operations.


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(c) Details of opening stock, turnover and closing stock

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

Nos. MW Amount Nos. MW Amount

Opening stock

Wind turbine generatorsUpto 1 MW – – – – – –Above 1 MW & upto 2 MW – – – 5.00 6.25 14.12Above 2 MW – – – – – –Land / Lease rights N.A. N.A. 10.45 N.A. N.A. 1.08

– – 10.45 5.00 6.25 15.20

Turnover

Wind turbine generatorsUpto 1 MW 83.00 36.05 135.95 63.00 22.70 71.58Above 1 MW & upto 2 MW 740.00 927.65 3,479.80 388.00 485.00 1,821.39Above 2 MW 8.00 16.80 44.59 – – –Wind turbine generator parts N.A. N.A. 64.92 N.A. N.A. 19.54Land / Lease rights and others N.A. N.A. 63.20 N.A. N.A. 4.98

831.00 980.50 3,788.46 451.00 507.70 1,917.50

Closing stock

Wind turbine generatorsUpto 1 MW – – – – – –Above 1 MW & upto 2 MW – – – – – –Above 2 MW – – – – – –Land/Lease rights N.A. N.A. 39.40 N.A. N.A. 10.45

– – 39.40 – – 10.45

(d) Raw materials consumed

Particulars (Units) Year ended March 31,

2006 2005

Qty. Amount Qty. Amount

Gear box (Nos.) 855 395.17 466 223.65Tower (tonnes) 78,241 453.35 43,198 244.62Others (see note below) Various 1,431.18 Various 711.51

2,279.70 1,179.78

Note:It is not practicable to furnish quantitative information in view of large number of items which differ in size and nature, each being lessthan 10% in value of the total raw materials consumed.

(e) Imported and indigenous consumption


2006 2005

Amount % Amount %

Raw materialsImported 1,249.50 54.81 591.81 50.16Indigenous 1,030.20 45.19 587.97 49.84

2,279.70 100.00 1,179.78 100.00

Stores and sparesImported 1.02 7.58 Nil –Indigenous 12.43 92.42 6.54 100.00

13.45 100.00 6.54 100.00

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Value of imports on CIF basis


2006 2005

Raw materials 1,463.79 708.03Stores and spares 1.07 –Capital goods 28.17 21.70

1,493.03 729.73

(f) Expenditure in foreign currency (on accrual basis)


2006 2005

Consultancy 2.09 1.76R & D and quality assurance 20.23 10.60Interest 12.27 4.41Others 22.40 21.06

56.99 37.82

(g) Dividend remitted in foreign currency during the year

Rs. 0.69 crore (Rs. 1.37crore) has been remitted in foreign currency on account of dividends.

No. of non-resident Amount of preference/ Year to which No. of equity/shareholders equity dividend remitted dividend relates preference shares

(in USD) held on whichdividend was due

1 157,383.13 2004-05 61,47,5401 736.56 2004-05 50,00,0001 609.61 2005-06 50,00,000

(h) Earnings in foreign currency (on accrual basis)


2006 2005

Export sales (F.O.B. value) 211.53 0.58Interest on loans 1.30 2.22

212.83 2.80

(i) Statement showing the use of proceeds from Initial Public Offer upto March 31, 2006

During the year ended March 31, 2006, the Company had issued 29,340,000 equity shares by way of initial publicoffering at a price of Rs. 510 per share. Out of the total issue, 2,577,320 equity shares were offered by CiticorpInternational Finance Corporation Inc. as Offer for Sale. The net proceeds of the issue, have been utilised for the objectsof the issue to the extent as detailed below;


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Description Estimated Actual

(a) Total issue proceeds 1,364.90 1,364.90(b) Less: Issue expense 47.00 40.67

(c) Net issue proceeds [(a)-(b)] 1,317.90 1,324.23

Used for:(i) Setting up and expansion of manufacturing facilities in India 195.04 101.72

(ii) Capitalisation of subsidiaries 352.49 185.53

(iii) New corporate house and corporate learning centre 96.79 16.79

(iv) Redemption of preference shares allotted to theprivate equity investors 100.00 100.00

(v) Utilisation towards growth opportunities in domestic andinternational markets / interim use of funds [(c)-(i)-(ii)-(iii)-(iv)] 573.58 920.19

The amount of Rs. 920.19 crore, includes an amount towards fixed deposits aggregating Rs. 55.41 crore. Further, thisamount also includes amounts paid towards reduction of cash credit utilisation and working capital. The Companywould ensure consistent and timely availability of the issue proceeds so temporarily used/deposited for reduction ofworking capital to timely meet the estimated fund requirements stated above.

15. Related party disclosures

As per Accounting Standard 18, issued by the Institute of Chartered Accountants of India, the disclosures of transactionswith the related parties as defined in the Accounting Standard are given below:

(a) List of the related parties and nature of relationship where control exists

Name of the party Nature of relationship

AE-Rotor Holding B.V. Subsidiary Company

AE-Rotor Techniek B.V. Subsidiary Company

Suzlon Energy B.V. * Subsidiary Company

Suzlon Energy GmbH Subsidiary Company

Suzlon Windfarm Services Limited Subsidiary Company

Suzlon Energy A/S Subsidiary Company

Suzlon Wind Energy Corporation Subsidiary Company

Suzlon Energy Australia Pty. Limited Subsidiary Company

Suzlon Structures Private Limited Subsidiary Company

Suzlon Towers and Structures Limited (Formerly Suzlon Green Power Limited) Subsidiary Company

Suzlon Windkraft GmbH* (Formerly Constellation GmbH) Subsidiary Company

Cannon Ball Wind Energy Park-I, LLC * Subsidiary Company

Suzlon Generators Private Limited Subsidiary Company

Windpark Olsdorf WATT GmbH & Co KG Subsidiary Company

Suzlon Windpark Management GmbH Subsidiary Company

Suzlon Rotor Corporation Subsidiary Company

Suzlon Power Infrastructure Private Limited Subsidiary Company

Suzlon Energy (Tianjin) Limited Subsidiary Company

SE Drive Techniek GmbH Subsidiary Company

Suzlon Gujarat Wind Park Limited Subsidiary Company

Suzlon Engitech Private Limited (Formerly Sarjan Engitech Private Limited) Subsidiary Company

Suzlon Energy Limited, Mauritius* Subsidiary Company

* No transactions taken place during the year

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(b) Other related parties with whom transactions have taken place during the year

(i) Associates

Suzlon Infrastructure Limited (formerly Suzlon Developers Limited), Sarjan Realities Limited.

(ii) Entities where Key Management Personnel (KMP) / Relatives of Key Management Personnel (RKMP) has significantinfluence.

Suzlon Capital Limited, Suzlon Hotels Limited, Sarjan Infrastructure Finance Limited, Shubh Realty (South) PrivateLimited, Sugati Holdings Private Limited and Kush Synthetics Private Limited.

(iii) Key management personnel

Tulsi R. Tanti, Girish R. Tanti, Vinod R. Tanti and Balrajsinh. A. Parmar, (See note below).

(iv) Relatives of key management personnel

Gita T. Tanti, Rambhaben Ukabhai, Pranav T. Tanti, Nidhi T. Tanti, Jitendra R. Tanti, Sangita V. Tanti, Lina J. Tanti,Esha G. Tanti, Sheela B. Parmar, Ranjitsinh A. Parmar, Amarsinh A. Parmar, Kiritsinh A. Parmar.

(v) Employee funds

Suzlon Energy Limited - Superannuation Fund.Suzlon Energy Limited - Employees Group Gratuity Scheme.

Note:

Vinod R. Tanti and B. A. Parmar have been Directors of the Company till June 30, 2005, and hence are not considered as KMP post

June 30, 2005.

(c) Transactions between the Company and related parties and the status of outstanding balances as at March 31, 2006

Particulars Subsidiary Associate Entities KMP RKMP Employeewhere funds

KMP/RKMP has

significantinfluence

Transactions

Purchase of fixed assets 31.12 – – – – –(including intangibles) (12.32) – – – – –

Sale of Fixed Assets – – – – – –– (0.02) – (0.16) (0.06) –

Subscription to/Purchase of 6.61 – – – – –Preference Shares (0.89) (5.00) (0.13) (2.45) (2.79) –

Subscription to/Purchase 163.86 – – 0.03 0.35 –of Equity Shares (84.81) – – (1.54) (3.96) –

Sale of investments 3.50 0.65 – – – –(19.65) – (1.24) – – –

Loans/Deposit given 175.63 202.82 – – – –(64.63) (430.17) (0.03) – – –

Sale of Goods 314.55 53.54 – – – –(4.31) (36.12) – – – –

Discount Given on Sale – – – – – –(4.55) – – – – –

Purchase of Goods and 276.06 17.08 0.07 – – –Services (36.77) (15.44) (3.41) – – –


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(c) Transactions between the Company and related parties and the status of outstanding balances as at March 31, 2006(Contd.)

Particulars Subsidiary Associate Entities KMP RKMP Employeewhere funds

KMP/RKMP has

significantinfluence

Interest Received 5.92 10.76 – – – –(4.38) (10.96) (0.05) – – –

Dividend Received 2.67 0.42 – – – –(2.26) (0.21) – – – –

Dividend Paid – – 8.90 7.59 44.10 –– – (4.21) (4.27) (24.55) –

Rent Received* 0.00 – – – – –(0.00) (0.05) – – – –

Rent / Hotel Charges Paid 0.01 – 0.03 – – –– – (0.41) – – –

Bank Commissions Reimbursed 0.91 – – – – –– – – – – –

Managerial Remuneration – – – 1.78 – –– – – (1.63) – –

Contribution to Various Funds – – – – – 2.49– – – – – (0.89)

Guarantees Given 170.71 – – – – –(48.00) – – – – –

Outstanding Balances

Investments 21.02 6.00 0.87 – – –(17.90) (6.65) (0.87) – – –

Advance from Customers 53.91 – – – – –– – – – – –

Sundry Debtors 42.94 17.93 – – – –(2.35) (10.41) – – – –

Loans / Deposits Outstanding 168.14 184.82 – – – –(65.35) (186.13) (3.92) – – –

Advances / Deposits to Suppliers 9.51 – – – – –– – (1.73) – – –

Sundry Creditors 31.18 5.87 0.01 – – –(11.15) (0.20) (0.14) – – –

Corporate Guarantees 180.77 0.88 – – – –(62.92) (1.39) – – – –

Dividend Receivable 1.81(1.94)

* below Rs. 0.01 crore

Notes:

Guarantees amounting to Rs. 22.31 crore (Rs. 42.51 crore) have been given jointly by a combination of either or all of the followingentities in connection with various loans taken by the Company:

Suzlon Infrastructure Limited (Formerly Suzlon Developers Limited) and Sarjan Realities Limited.

Certain subsidiaries and group companies have been allowed to make free of charge use of SAP software owned by the Company.

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(d) Disclosure of significant transactions with related parties

Type of the transaction Type of Name of the entity / Person Year ended March 31,relationship

2006 2005

Purchase of fixed assets Subsidiary AE-Rotor Techniek B.V. 8.09 6.06

(Including intangibles) Subsidiary Suzlon Energy GmbH 8.46 1.44

Subsidiary AE-Rotor Holding B.V. 14.56 4.82

Sale of fixed assets KMP Girish R. Tanti – 0.16

RKMP Ranjitsinh A. Parmar – 0.06

Subscription to / Purchase of Associate Suzlon Infrastructure Limited – 5.00preference shares (Formerly Suzlon Developers Limited)

Subsidiary Suzlon Structures Private Limited 6.61 0.89

Subscription to / Purchase of Subsidiary Suzlon Energy A/S 80.32 52.74

equity shares Subsidiary Suzlon Generators Private Limited – 8.71

Subsidiary Suzlon Structures Private Limited – 10.75

Subsidiary AE-Rotor Holding B.V. 3.79 3.08

Subsidiary Suzlon Wind Energy Corporation – 4.47

Subsidiary Suzlon Rotor Corporation 28.24 –

Subsidiary Suzlon Energy (Tianjin) Limited 24.39 –

Sale of investments Subsidiary Suzlon Energy A/S – 19.65

Subsidiary Suzlon Windfarm Services Limited 3.50 –

Associate Suzlon Infrastructure Limited(Formerly Suzlon Developers Limited) 0.65 1.24

Loan / Deposits given Subsidiary Suzlon Wind Energy Corporation – 5.38

Subsidiary Suzlon Windfarm Services Limited 54.86 30.32


Associate Sarjan Realities Limited 120.50 223.76

Entities where Shubh Realty (South) Private Limited 70.22 –KMP/ RKMPhas significantinfluence

Sale of goods Subsidiary Suzlon Wind Energy Corporation 218.97 –


Subsidiary Suzlon Structures Private Limited 45.00 –

Subsidiary Suzlon Energy A/S 39.01 –

Associate Suzlon Infrastructure Limited 36.77 36.12(Formerly Suzlon Developers Limited)

Discount given on sale Subsidiary Suzlon Wind Energy Corporation – 4.55

Purchase of goods and services Subsidiary Suzlon Windfarm Services Limited 60.52 26.19

Subsidiary AE-Rotor Techniek B.V. 2.87 2.54

Subsidiary Suzlon Structures Private Limited 157.83 1.83



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(d) Disclosure of significant transactions with related parties (Contd.)

Type of the transaction Type of Name of the entity / Person Year ended March 31,

relationship 2006 2005

Interest received Subsidiary AE-Rotor Holding B.V. 0.67 0.67

Subsidiary Suzlon Wind Energy Corporation 0.03 1.19




Entities where Shubh Realty (South) Private Limited 3.48 –KMP/RKMPhas significantinfluence

Dividends received / Accrued Subsidiary Suzlon Windfarm Services Limited 1.18 1.48

Subsidiary Suzlon Towers & Structures Limited 0.59 0.78(Formerly Suzlon Green Power Limited)

Subsidiary Suzlon Generators Private Limited 0.44 –

Subsidiary Suzlon Structures Private Limited 0.47 –



Dividends paid KMP Tulsi R. Tanti and Girish R. Tanti 7.59 4.27

RKMP Relatives of KMP 44.10 24.55

Entities where Suzlon Capital Limited, Sugati Holdings 8.90 4.21KMP/RKMP Private Limitedhas significantinfluence

Rent received Associate Suzlon Infrastructure Limited – 0.05(Formerly Suzlon Developers Limited)

Rent / Hotel charges paid Entities where Suzlon Hotels Limited 0.03 0.17KMP/RKMPhas significantinfluence

Entities where Suzlon Engitech Private Limited – 0.24KMP/RKMPhas significantinfluence

Subsidiary Suzlon Windfarm Services Limited 0.01 –

Bank commissions Subsidiary Suzlon Energy A/S 0.81 –reimbursed to SEL

Subsidiary Suzlon Energy Australia Pty. Limited 0.10 –

Managerial remuneration KMP Tulsi R. Tanti 1.17 0.44

KMP Girish R. Tanti 0.41 0.39

KMP Vinod R. Tanti 0.10 0.39

KMP Balrajsinh A. Parmar 0.10 0.41

Contribution to various funds Employee Suzlon Energy Limited - 1.28 0.89funds Superannuation fund

Employee Suzlon Energy Limited - 1.21 –funds Employees group gratuity scheme

Guarantees given Subsidiary Suzlon Structures Private Limited 54.00 32.00

Subsidiary Suzlon Windfarm Services Limited – 16.00

Subsidiary Suzlon Energy A/S 91.71 –

Subsidiary Suzlon Generators Private Limited 25.00 –

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16. Disclosure as required by clause 32 of listing agreement with stock exchanges

Type of relationship Name Amount Maximumoutstanding Amount

as at outstandingMarch 31, 2006 during the year

Subsidiaries Suzlon Engitech Private Limited 6.36 9.85

Suzlon Generators Private Limited 1.50 2.50

Suzlon Towers and Structures Limited 15.16 16.30(Formerly Suzlon Green Power Limited)

Suzlon Structures Private Limited – 5.26

Suzlon Windfarm Services Limited 56.83 61.08

Suzlon Gujarat Wind Park Limited 8.65 10.85

Suzlon Power Infrastructure Private Limited 28.25 32.15

AE-Rotor Holding B.V. 26.88 28.65

Suzlon Energy GmbH 12.18 12.18

Suzlon Rotor Corporation 4.24 4.24

SE Drive Technik GmbH 0.68 0.68

Suzlon Wind Energy Corporation – 8.85

Suzlon Energy Australia Pty. Limited – 2.06

Associates Sarjan Realities Limited 112.42 114.54

Suzlon Infrastructure Limited – 75.00(Formerly Suzlon Developers Limited)

Where control of Sarjan Infrastructure Finance Limited 2.18 4.93KMP/RKMP exists

Shubh Realty (South) Private Limited 70.22 70.22

Notes:

(a) All the above balance of loans are excluding accrued interest aggregating Rs.1.41 crore and are payable on demand.

(b) No loans have been granted by Suzlon Energy Limited to any person, who has invested in the shares of Suzlon Energy Limited orany of its subsidiaries.

(c) There are no balances outstanding from Companies under the same management, as per the provisions of Section 370 (1B) ofthe Companies Act, 1956.

17. Segment Reporting

In accordance with Accounting Standard-17 - “Segment Reporting” issued by the Institute of Chartered Accountants ofIndia, the Company has identified its business segment as Wind Turbine Generator (WTG), there are no other primaryreportable segments.

18. Prior year amounts have been reclassified wherever necessary to conform with current year presentation. Figures in thebrackets are in respect of the previous year.

Signatures to Schedules 'A' to 'O'








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Registration details: Registration No.: 25447 State Code 04

Balance sheet date: March 31, 2006

In Rs. thousand, except per share data

Capital raised during the year

Public issue 1,36,48,967

Rights issue –

Bonus issue 17,38,458

Private placement –

Position of mobilization and deployment of funds

Total liabilities 3,15,76,245

Total assets 3,15,76,245

Sources of funds

Paid-up capital 30,25,314

Employee stock options 1,03,643

Reserves and surplus 2,50,93,575

Secured loans 27,66,139

Unsecured loans 5,87,574

Application of funds

Net fixed assets 37,19,162

Investments 29,27,467

Net current assets 2,43,49,640

Deferred tax assets 5,79,976

Miscellaneous expenditure –

Accumulated losses –

Performance of the Company

Sales 3,78,84,566

Other income 6,92,825

Total income 3,85,77,391

Profit/loss before tax 90,26,551

Profit/loss after tax 82,11,809

Earnings per share (Basic) (Rs.) 29.99

Earnings per share (Diluted) (Rs.) 29.94

Dividend rate (%) (Equity share of par value Rs. 10 each) 50%

Generic names of principal products/services of Company

Item Code No. (ITC Code) 3601

Product Description Wind operated electricity generators

Balance sheet abstract and Company’s general business profile

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Statement pursuant to Section 212 of the Companies Act, 1956,relating to Company’s interest in subsidiary companies as on

and for the year ended March 31, 2006

1. Name of the subsidiary company AE-Rotor Holding AE-Rotor Techniek Suzlon Energy B.V. Suzlon Energy A/S, SuzlonB.V. B.V. Denmark Wind Energy

Corporation

2. Financial year ended on March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006

3. Number of shares held by Suzlon Energy Limited in the subsidiary companies at the end of the financial year of the subsidiary companies

(a) Equity shares 244,000 Refer Note 1 Refer Note 1 1,422,137 Refer Note 2Equity shares Equity shares

of Euro 10 each of 100 DKK each

(b) Preference shares – – – – –

(c) Extent of equity holding 100% Refer Note 1 Refer Note 1 100% Refer Note 2

(d) Extent of preference holding – – – – –

4. Net aggregate amount of profit / (losses) of the subsidiary for the above financial year so far as they concern the members of Suzlon Energy Limited

(a) Dealt with in the accounts of Suzlon Energy Limited N i l N i l N i l N i l N i l

(b) Not dealt with in the accounts ofSuzlon Energy Limited (0.61) 0.53 (0.02) (11.18) (27.83)

5. Net aggregate amount of profit / (losses) of the subsidiary for the previous financial years so far as they concern the members of Suzlon Energy Limited

(a) Dealt with in the accounts of Suzlon Energy Limited N i l N i l N i l N i l N i l

(b) Not dealt with in the accountsof Suzlon Energy Limited 1.03 1.76 (0.30) (1.86) (21.73)

6. Material changes if any between the end of the financial year of the subsidiary and Suzlon Energy Limited

(a) Fixed assets NA NA NA NA NA

(b) Investments NA NA NA NA NA

(c) Money lent by it NA NA NA NA NA

(d) Money borrowed by it other than formeeting current liabilities NA NA NA NA NA

Cannon Ball Suzlon Energy Suzlon Energy Windpark OlsdorfWind Energy Australia Pty. Ltd. GmbH Watt GmbH &

Park-I, LLC (Please refer note 2) Co KG.

March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006

Refer Note 3 Refer Note 2 2 Refer Note 4Equity shares

of Euro 12,500 each

– – – –

Refer Note 3 Refer Note 2 100% Refer Note 4

– – – –

N i l N i l N i l N i l

(0.03) (13.87) 0.13 (0.29)

N i l N i l N i l N i l

(0.57) (2.35) 0.19 N i l

NA NA NA NA

NA NA NA NA

NA NA NA NA

NA NA NA NA

Note:

1 AE-Rotor Holding B.V. holds:

1,800 Equity shares of Euro 10 each in AE-Rotor Techniek B.V. constituting 100% of its paid up capital and

1,800 Equity shares of Euro 10 each in Suzlon Energy B.V. constituting 100% of its capital

2 Suzlon Energy A/S Denmark holds

5,550,001 Equity shares of AUD 1 each in Suzlon Energy Australia Pty. Ltd.

1,000 Equity shares of USD 1 each in Suzlon Wind Energy Corporation

3 Suzlon Wind Energy Corporation holds:

1,000 Equity shares of USD 1 each in Cannon Ball Wind Energy Park – I, LLC constituting 100% of its paid up capital.


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Suzlon Rotor Suzlon Windcraft SE Drive Techniek Suzlon Windpark Suzlon Windfarm Suzlon Towers and Suzlon Generators Suzlon Structures Suzlon Gujarat Suzlon Power Suzlon EngitechCorporation GmbH GmbH Management GmbH Services Limited Structures Limited Private Limited Private Limited Wind Park Limted Infrastructure Private Limited

(formerly (formerly Suzlon Private Limited (formerly SarjanConstellation GmbH) Green Power Limited) Engitech Private

Limited

March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006

1,000 Refer Note 5 1 1 13,000,000 4,990,000 8,721,500 11,249,500 2,000,000 3,010,000 1,500,000Equity shares Equity share of Equity share of Equity shares Equity shares Equity shares Equity shares Equity shares Equity shares Equity sharesof 1 USD each 25,000 Euro each 25,000 Euro each of Rs. 10 each of Rs. 10 each of Rs. 10 each of Rs. 10 each of Rs. 10 each of Rs. 10 each of Rs. 10 each

– – – – 900,000 451,000 – 750,000Preference shares Preference shares Preference sharesof Rs. 100 each of Rs. 100 each of Rs. 100 each

100% Refer Note 5 100% 100% 100% 100% 75% 75% 100% 100% 100%

– – – – 100% 100% – 75% – – –

N i l N i l N i l N i l N i l N i l N i l N i l N i l N i l N i l

0.42 (0.47) (0.86) (0.02) 3.18 1.08 0.72 2.13 0.90 0.63 0.86

N i l N i l N i l N i l N i l N i l N i l N i l N i l N i l N i l

N i l (0.02) N i l – 7.27 2.28 N i l (0.29) (0.17) 0.03 (0.11)

NA NA NA NA NA NA NA NA NA NA NA




4 Suzlon Energy GmbH as an investing partner holds:

1 Equity share of Euro 2,500 in Windpark Olsdorf Watt GmbH & Co. KG. (a partnership company of Suzlon Energy GmbH, investing partner and Suzlon WindparkManagement GmbH, managing partner) constituting 100% of its paid up capital.

5 Suzlon Energy Drive Techniek holds:

2 Equity share of Euro 12,500 each in Suzlon Windkraft GmbH (formerly Constellation GmbH), constituting 100% of its paid up capital.

6 The figures in 4(b) above include profit / (loss) for 15 months for overseas subsidiaries whose financial year has changed from year ending December 31st toMarch 31st.

Amount in Rs. crore



Girish R. TantiDirector

Place : New DelhiDate : May 15, 2006


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Details regarding subsidiaries as on and for theyear ended on March 31, 2006

Name of the subsidiary company Issued and Reserves Total assets Total liabilitiessubscribed

share capital

AE-Rotor Holding B.V. 13.15 0.42 40.47 40.47

AE-Rotor Techniek B.V. 0.07 2.29 18.31 18.31

Suzlon Energy B.V. 0.07 (0.32) 3.88 3.88

Suzlon Energy A/S, Denmark 105.51 14.51 319.67 319.67

Suzlon Wind Energy Corporation 65.98 (49.56) 402.25 402.25

Cannon Ball Wind Energy Park-I, LLC 0.00 0.60 0.12 0.12

Suzlon Energy Australia Pty. Limited 18.48 (16.22) 35.61 35.61

Suzlon Energy GmbH 13.61 0.32 29.99 29.99

Windpark Olsdorf Watt GmbH & Co KG. 3.82 0.29 12.67 12.67

Suzlon Rotor Corporation 28.24 0.42 41.56 41.56

Suzlon Windkraft GmbH (Formerly Constellation GmbH) 0.64 (0.49) 0.20 0.20

SE Drive Techniek GmbH 2.01 (0.86) 2.04 2.04

Suzlon Windpark Management GmbH 0.16 (0.02) 0.16 0.16

Suzlon Windfarm Services Limited 22.00 9.11 154.59 154.59

Suzlon Towers and Structures Limited 9.50 2.69 34.16 34.16(Formerly Suzlon Green Power Limited)

Suzlon Generators Private Limited 11.63 0.30 69.49 69.49

Suzlon Structures Private Limited 25.00 1.73 127.74 127.74

Suzlon Gujarat Wind Park Limited 2.00 0.73 14.23 14.23

Suzlon Power Infrastructure Private Limited 3.01 0.66 42.35 42.35

Suzlon Engitech Private Limited 1.50 0.75 11.48 11.48(Formerly Sarjan Engitech Private Limited)

The exchange rates as on March 31, 2006 are (USD 1.00 =Rs. 44.615, AUD 1.00 = Rs. 31.812, DKK 1.00 = Rs. 7.237 and Euro 1.00 = Rs. 54.005).


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Investments Turnover Profit / (Loss) Provision for Profit / (Loss) Proposedfor taxation taxation & after taxation dividend

deffered tax

0.15 14.56 0.02 (0.08) 0.10 –

– 30.42 (0.09) 0.21 (0.30) –

– – (0.02) – (0.02) –

0.49 7.90 (11.40) (4.29) (7.11) –

0.00 310.56 (51.52) (29.34) (22.18) –

– – (0.01) – (0.01) –

– – (12.09) – (12.09) –

Note 1 11.96 0.50 0.46 0.04 –

– 0.00 (0.25) – (0.25) –

– – – (0.42) 0.42 –

– – (0.47) – (0.47) –

Note 1 – (0.86) – (0.86) –

– – (0.02) – (0.02) –

0.02 79.36 8.40 5.22 3.18 0.09

0.01 4.91 1.19 0.11 1.08 0.59

– 15.83 1.65 0.69 0.96 0.58

– 155.68 4.38 1.54 2.84 0.63

0.00 11.39 1.38 0.48 0.90 –

– 12.84 0.95 0.32 0.63 –

– 18.35 1.29 0.43 0.86 –

Amount in Rs. crore



Girish R. TantiDirector

Place : New DelhiDate : May 15, 2006



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Consolidated financial statements

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Auditors’ report on consolidated financial statements

ToThe Board of Directors of Suzlon Energy Limited

1. We SNK & Co. and S.R. Batliboi & Co., have audited the attached consolidated balance sheet of Suzlon Energy Limited (SEL) andits subsidiaries (together referred to as 'the Group', as described in Schedule P, Note 5) as at March 31, 2006 and also theconsolidated profit and loss account and the consolidated cash flow statement for the year ended on that date annexed thereto.These consolidated financial statements are the responsibility of SEL's management. Our responsibility is to express an opinionon these consolidated financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in theconsolidated financial statements. An audit also includes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our auditprovides a reasonable basis for our opinion.

3. We did not jointly audit the financial statements of the following companies, whose total revenues and assets to the extent theyare included in the consolidated financial statements of the Group are as given below:

Name of the Company Extent of share in consolidated

Revenues (%) Assets (%)

Suzlon Windfarm Services Limited 0.71 3.06Suzlon Towers and Structures Limited (Formerly Suzlon Green Power Limited) 0.14 0.53Suzlon Generators Private Limited – 1.44Suzlon Structures Private Limited 0.06 2.65Suzlon Power Infrastructure Private Limited 0.02 0.86Suzlon Gujarat Wind Park Limited 0.06 0.30Suzlon Engitech Private Limited (Formerly Sarjan Engitech Private Limited) – 0.17

These financial statements have been audited solely by SNK & Co., Chartered Accountants and have been accepted withoutverification by S.R. Batliboi & Co., Chartered Accountants and hence our joint audit opinion insofar as it relates to the amountsincluded in respect of these subsidiaries, is based solely on the report of SNK & Co., Chartered Accountants.

4. We did not audit the financial statements of the following companies, whose total revenues and assets to the extent they areincluded in the consolidated financial statements of the group are as given below:

Name of the Company Extent of share in consolidated

Revenues (%) Assets (%)

Suzlon Energy A/S, Denmark [See note 1 below ('Suzlon Denmark')] 8.22 8.26Suzlon Rotor Corporation – 0.84AE-Rotor Holdings B.V., Netherlands [See note 2 below ('AERH')] – 0.95Suzlon Energy GmbH – 0.47Windpark Olsdorf WATT GmbH & Co. KG – 0.21Suzlon Windpark Management GmbH – –SE Drive Techniek GmbH – 0.04Suzlon Windkraft GmbH (Formerly Constellation GmbH) – –Suzlon Energy (Tianjin) Limited – 0.51

Note :

1. The financial statements of Suzlon Energy A/S, Denmark, include the financial statements of Suzlon Energy Australia Pty. Limited and theconsolidated financial statements of Suzlon Wind Energy Corporation.

2. The financial statements of AERH include the standalone financial statements of AERH and its subsidiaries AE-Rotor Techniek B.V. andSuzlon Energy B.V.

These financial statements have been prepared under the relevant applicable Generally Accepted Accounting Principles (GAAP) ofthe country where the subsidiary is registered. Adjustments have been made to realign the accounting policies of these subsidiariesto those of SEL, which have been reviewed by us jointly for the year ended March 31, 2006.


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5. We report that the consolidated financial statements have been prepared by SEL's management in accordance with therequirements of Accounting Standard-21, consolidated financial statements, issued by the Institute of Chartered Accountantsof India and on the basis of the separate financial statements of SEL and its subsidiaries.

6. In our opinion and to the best of our information and according to the explanations given to us, the attached consolidatedfinancial statements give a true and fair view in conformity with the accounting principles generally accepted in India;

(a) in the case of the Consolidated Balance Sheet, of the state of affairs of the Group as at March 31, 2006

(b) in the case of the Consolidated Profit and Loss Account of the profit of the Group for the year ended on that date;

(c) in the case of the Consolidated Cash Flow statement of the cash flows of the Group for the year then ended on that date.





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Particulars Schedule As at March 31,

2006 2005

SOURCES OF FUNDS

Shareholders' funds

Share capital A 302.53 201.92Share application money of subsidiary company pending allotment 0.19 0.05Employee stock options B 10.36 –Reserves and surplus C 2,421.71 702.36

2,734.79 904.33

Preference shares issued by subsidiary company 2.50 0.30(See Schedule - P, Note 6(b))

Minority interest 7.47 6.45

Loan funds

Secured loans D 389.89 356.72Unsecured loans E 60.81 39.09

450.70 395.81

3,195.46 1,306.89APPLICATION OF FUNDS

Fixed assets F

Gross block 629.27 359.69Less: Depreciation 153.57 80.77

Net block 475.70 278.92Capital work-in-progress 165.16 28.94

640.86 307.86Preoperative expenses, pending allocation 1.67 –

Investments G 7.60 7.76

Deferred tax asset, net (See Schedule - P, Note 7) 81.76 24.11

Current assets, loans and advances H

Inventories 1,331.02 575.57Sundry debtors 1,647.31 692.89Cash and bank balances 551.49 154.46Loans and advances 640.72 324.73

4,170.54 1,747.65Less: Current liabilities and provisions I

Current liabilities 1,297.71 598.00Provisions 410.11 182.90

1,707.82 780.90

Net current assets 2,462.72 966.75Miscellaneous expenditure J 0.85 0.41(To the extent not written off or adjusted)

3,195.46 1,306.89Significant accounting policies and notes to the consolidated financial statements P

Consolidated balance sheet as at March 31, 2006All amounts in rupees crore unless otherwise stated

The schedules referred to above and the notes to accounts form an integral part of the consolidated balance sheet.








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Particulars Schedule Year ended March 31,

2006 2005

INCOME

Sales and service income 3,841.03 1,942.48Other income K 55.64 23.43

3,896.67 1,965.91

EXPENDITURE

Cost of goods sold L 2,309.08 1,137.69Operating and other expenses M 512.14 273.74Employees' remuneration and benefits N 121.58 61.79Financial charges O 64.77 45.83Depreciation F 71.59 49.33Preliminary expenditure written off J 0.18 0.18

3,079.34 1,568.56

PROFIT BEFORE TAX AND MINORITY INTEREST 817.33 397.35

Current tax 110.30 48.91Earlier years' tax 0.17 0.06Fringe benefit tax 3.16 –Deferred tax (56.82) (16.74)

56.81 32.23

PROFIT BEFORE MINORITY INTEREST 760.52 365.12Add / (Less) : Share of loss/(profit) of minority (1.02) 0.21

NET PROFIT 759.50 365.33Balance brought forward 501.66 278.18

PROFIT AVAILABLE FOR APPROPRIATIONS 1,261.16 643.51

Interim dividend on equity shares 71.88 23.18Proposed dividend on equity shares 72.03 11.59Dividend on preference shares 1.66 1.96Tax on dividends 20.78 5.12Transfer to general reserve 300.00 100.00

466.35 141.85

Balance carried to Balance Sheet 794.81 501.66

Earnings per share (in Rs.)Basic [Nominal value of shares Rs. 10 (Previous year Rs. 10)] 27.73 14.34(See Schedule - P, Note 10)Diluted [Nominal value of shares Rs. 10 (Previous year Rs. 10)] 27.68 14.34(See Schedule - P, Note 10)

Significant accounting policies and notes to the Pconsolidated financial statements

Consolidated profit and loss account for the year ended March 31, 2006All amounts in rupees crore unless otherwise stated

The schedules referred to above the notes to accounts form an integral part of the consolidated profit and loss account.







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Particulars Year ended March 31,2006 2005

CASH FLOW FROM OPERATING ACTIVITIESProfit before taxation and minority interest 817.33 397.35

Adjustments for:Depreciation 71.59 49.33Loss on sale of investments – 0.01Loss on sale/disposal of assets 0.53 0.48Preliminary expenses incurred (0.62) –Preliminary expenses written off 0.18 0.18Interest expenses 50.76 35.26Interest income (31.17) (18.10)Dividend income (0.42) (0.34)Adjustments on consolidation 3.60 6.81Provision (reversal) for doubtful debts / loans (4.82) 9.33Employee stock option scheme 10.36 –Provision for operation, maintenance and warranty 85.77 57.84Provision for power generation guarantee 106.51 45.07Wealth-tax 0.02 0.01

Operating profit before working capital changes 1,109.62 583.23Movements in working capital(Increase) / Decrease in loans and advances (296.09) (12.74)(Increase) / Decrease in sundry debtors (950.21) (354.09)(Increase) / Decrease in inventories (754.35) (341.41)Increase / (Decrease) in current liabilities 667.77 284.71

Cash (used in)/generated from operations (223.26) 159.70Direct taxes paid (net of refunds) (130.76) (41.55)

Net cash (used in) / generated from operating activities (354.02) 118.15CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of fixed assets (405.97) (152.08)Proceeds from sale of fixed assets 2.16 9.91Purchase of investments (0.49) (4.99)Preoperative expenses incurred (1.67) (0.47)Paid for acquisition of subsidiaries (3.39) (9.81)Sale / redemption of investments 0.65 1.60Inter-corporate deposits repaid / (granted) 3.18 (135.62)Interest received 24.65 20.94Dividends received 0.42 0.34

Net cash used in investing activities (380.46) (270.18)CASH FLOW FROM FINANCING ACTIVITIES

Redemption of preference share capital (100.00) –Proceeds from issuance of share capital including premium 1,364.89 200.00Share application money received 0.14 0.05Share issue expenses (40.67) (7.57)Proceeds from borrowings 578.39 341.63Repayment of borrowings (523.88) (214.41)Interest paid (50.16) (34.77)Dividends paid (84.99) (41.16)Tax on dividends paid (12.21) (5.34)

Net cash from financing activities 1,131.51 238.43NET INCREASE IN CASH AND CASH EQUIVALENTS 397.03 86.40Cash and cash equivalents at the beginning of the year 154.46 68.06Cash and cash equivalents at the end of the year 551.49 154.46Components of cash and cash equivalents

Cash and cheques on hand 1.34 0.64With banks

in current account 32.70 19.55in term deposit accounts 389.53 80.44

With non-scheduled banksin current account 127.92 53.83

551.49 154.46Notes:1. Purchase of fixed assets include payments for items in capital work-in-progress and advance for purchase of fixed assets.2. Previous year’s figures have been regrouped/reclassified, wherever necessary.

Consolidated cash flow statement for the year ended March 31, 2006 All amounts in rupees crore unless otherwise stated








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2006 2005

SCHEDULE - A : SHARE CAPITAL

Authorised330,000,000 (101,000,000) equity shares of Rs. 10 each 330.00 101.0011,500,000 (11,500,000) preference shares of Rs. 100 each 115.00 115.00

445.00 216.00Issued, subscribedEquity287,531,380 (86,922,900 ) equity shares of Rs. 10 each fully paid up 287.53 86.92[Of the above Equity shares, 251,855,300 (78,009,500) shares were allottedas fully paid bonus shares by utilisation of Rs. 174.04 crore (Rs. 19.04 crore)from general reserve, Rs. 1.03 crore (Rs. 1.03 crore) from capital redemptionreserve and Rs. 76.80 crore (Rs. 57.95 crore) from securities premium account]Preference1,500,000 (1,500,000), 10% cumulative redeemable preference shares ofRs.100 each fully paid up [See Schedule - P, Note 6(a)(i)] 15.00 15.00Nil (10,000,000), 0.01% cumulative redeemable preference shares ofRs.100 each fully paid up [See Schedule - P, Note 6(a)(ii)] – 100.00

302.53 201.92

SCHEDULE - B : EMPLOYEE STOCK OPTIONS

Employee stock options outstanding 22.44 –Less: Deferred employee compensation expense outstanding 12.08 –

10.36 –

SCHEDULE - C : RESERVES AND SURPLUS

Capital reserve on consolidation 0.03 –

Securities premium accountAs per last balance sheet 29.85 –Add: Addition during the year 1,338.13 95.37Less: Capitalisation by way of issue of bonus shares 18.85 57.95Less: Share issue expenses [Net of tax benefit Rs. 2.56 crore (Rs. Nil)] 38.11 7.57

1,311.02 29.85General reserveAs per last Balance Sheet 170.85 70.85Add: Transfer from consolidated profit and loss account 300.00 100.00

470.85 170.85Less: Capitalisation by way of issue of bonus shares 155.00 –

315.85 170.85

Profit and loss account 794.81 501.662,421.71 702.36

SCHEDULE - D : SECURED LOANS

Term loansFrom banks and financial institutions [See Schedule - P, Note 6(c)(i)] 102.61 81.14From others [See Schedule - P, Note 6(c)(ii)] 151.79 53.12

254.40 134.26Working capital facilities from banks and financial institutionsRupee loans [See Schedule - P, Note 6(c)(iii)] 135.22 208.03Foreign currency loans [See Schedule - P, Note 6(c)(iii)] 0.16 13.31

135.38 221.34Vehicle loans 0.11 1.12(Secured against hypothecation of vehicles)

389.89 356.72

SCHEDULE - E : UNSECURED LOANS

Long termFrom other than banks 29.34 39.09

Short TermFrom other than banks 31.47 –

60.81 39.09

Schedules to the consolidated balance sheet as at March 31, 2006

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2006 2005

SCHEDULE - G : INVESTMENTS

LONG TERM INVESTMENTS (At cost, fully paid)

UNQUOTED

Government and other securities (non-trade) 0.03 0.03Trade investments 6.00 6.65Other than trade investments 1.57 1.08

7.60 7.76

Aggregate cost of unquoted investments 7.60 7.76

SCHEDULE - H : CURRENT ASSETS, LOANS AND ADVANCES

Current assets

InventoriesRaw materials [including goods-in-transit Rs. 181.34 crore (Rs. 107.55 crore)] 1,038.67 459.13Semi-finished goods and work-in-progress 165.53 102.87Finished goods 40.33 3.10Land and land lease rights 39.41 10.47Stores and spares 0.76 –Projects work-in-progress 46.32 –

1,331.02 575.57Sundry debtors(Unsecured)Outstanding for a period exceeding six months

considered good [See Schedule - P, Note 6(e)] 205.29 108.62considered doubtful 6.22 10.39

211.51 119.01Others, considered good 1,442.02 584.27

1,653.53 703.28Less: Provision for doubtful debts 6.22 10.39

1,647.31 692.89Cash and bank balancesCash on hand 0.84 0.64Cheques in transit 0.50 –

Balances with scheduled banksin current accounts 32.70 19.55in term deposit accounts 389.53 80.44

422.23 99.99Balance with non-scheduled banks in current accounts 127.92 53.83

551.49 154.46Loans and advances(Unsecured and considered good, except otherwise stated)Deposits

with customers as security deposit 25.94 32.58others 82.18 7.90

Advance income-tax 12.74 0.74

Advances recoverable in cash or in kind or for value to be received*considered good 519.86 283.51considered doubtful 2.70 3.35

643.42 328.08Less: Provision for doubtful loans and advances 2.70 3.35

640.72 324.73

4,170.54 1,747.65* Include (a) Rs. Nil** (Rs. 0.43 crore) towards share application money pending allotment

(b) Intercorporate deposits of Rs. 185.45 crore (Rs. 188.64 crore)** Amount below Rs. 0.01 crore

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2006 2005

SCHEDULE - I : CURRENT LIABILITIES AND PROVISIONS

Current liabilities

Sundry creditors 702.70 459.12

Acceptances 22.59 61.46

Other current liabilities 217.70 37.97

Interest accrued but not due 1.36 0.76

Advances from customers 353.36 38.69

1,297.71 598.00Provisions

Wealth tax 0.02 0.01

Income-tax 1.80 7.08

Gratuity, superannuation and leave encashment 6.85 1.00

Generation guarantee, LD, operation, maintenance and warranty 317.08 159.62

Dividend 73.69 13.10

Tax on dividend 10.66 2.09

Fringe benefit tax 0.01 –

410.11 182.90

1,707.82 780.90

SCHEDULE - J : MISCELLANEOUS EXPENDITURE(To the extent not adjusted or written off)

Preliminary expenses

Opening balance 0.41 0.21

Add: Addition during the year 0.62 0.38

Less: Written off during the year 0.18 0.18

0.85 0.41


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2006 2005

SCHEDULE - K : OTHER INCOME

Interest received

From banks 16.18 3.54From others 14.99 14.56

Dividends 0.42 0.34

Excess provision written back – 0.30

Sale of sales-tax entitlement – 2.99

Infrastructure development income 8.15 0.10

Miscellaneous income 15.90 1.60

55.64 23.43

SCHEDULE - L : COST OF GOODS SOLD

Consumption of raw material

Opening stock 459.13 170.37Add: Purchases 2,928.21 1,476.07

3,387.34 1,646.44Less: Closing stock 1,038.67 459.13

(A) 2,348.67 1,187.31

Trading purchases (B) 113.10 16.07

(Increase) / Decrease in stocks

Opening balance

Semi-finished goods and work-in-progress 102.87 30.37

Finished goods 3.10 19.30

Land and land lease rights 10.47 1.08

(C) 116.44 50.75Closing balance

Semi-finished goods and work-in-progress 165.53 102.87

Finished goods 40.33 3.10

Land and land lease rights 39.41 10.47

(D) 245.27 116.44

(Increase) / Decrease in stock (C) - (D) = (E) (128.83) (65.69)

Less: Transfer to designs and drawings (F) 23.86 –

(A) + (B) + (E) - (F) 2,309.08 1,137.69

Schedules to the consolidated profit and loss account for theyear ended March 31, 2006

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Schedules to the consolidated profit and loss account for theyear ended March 31, 2006


2006 2005

SCHEDULE - M : OPERATING AND OTHER EXPENSES

Stores and spares 17.78 7.01Power and fuel 4.07 1.25Factory expenses 16.70 2.58Repairs and maintenance:

Plant and machinery 1.48 0.45Building 1.93 1.47Others 3.06 1.72

Design change and technological upgradation charges 5.16 3.28Operation and maintenance charges 14.67 7.03Other manufacturing and operating expenses 0.46 0.39Insurance 5.96 3.11Quality assurance expenses 16.56 8.60R & D, certification and product development 1.77 3.40Rent 9.15 4.98Rates and taxes 5.12 0.66Provision for operation, maintenance and warranty 85.77 57.84Provision for power generation guarantee 106.51 45.07Advertisement and sales promotion 15.55 6.10Infrastructure development expenses 0.01 14.63Freight outward and packing expenses 79.64 24.59Sales commission 23.25 9.78Travelling, conveyance and vehicle expenses 33.52 16.02Communication expenses 5.55 2.66Auditors' remuneration 3.04 1.26Consultancy charges 16.19 7.87Charity and donations 2.11 5.17Other selling and administrative expenses 32.76 23.35Exchange differences, net 3.27 3.65Provision for doubtful debts and advances 0.57 9.33Loss on sale of investment – 0.01Loss on assets sold / discarded, net 0.53 0.48

512.14 273.74

SCHEDULE - N : EMPLOYEES' REMUNERATION AND BENEFITS

Salaries, wages, allowances and bonus 112.60 55.08Contribution to provident and other funds 3.64 2.24Staff welfare expenses 5.34 4.47

121.58 61.79

SCHEDULE - O : FINANCIAL CHARGES

Interest:

Fixed loans 12.92 12.02Others 37.84 23.24

Bank charges 14.01 10.57

64.77 45.83


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SCHEDULE - P : SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OFSUZLON FOR THE FINANCIAL YEAR ENDED MARCH 31, 2006All amounts in rupees crore unless otherwise stated

1. Basis of preparation of consolidated financial statements

The accompanying consolidated financial statements are prepared under the historical cost convention, on an accrual basis

of accounting in conformity with accounting principles generally accepted in India, to reflect the financial position of the

Company and its subsidiaries.

2. Principles of consolidation

The consolidated financial statements relate to Suzlon Energy Limited (the Company) and its subsidiaries (together referred to

as Suzlon or the Group). The consolidated financial statements have been prepared on the following basis:

(a) The financial statements of the Company and its subsidiaries have been combined on a line-by-line basis by adding

together the book values of like items of assets, liabilities, income and expenses, after fully eliminating intra group

balances and intra group transactions. The unrealised profits or losses resulting from the intra group transactions have

been eliminated as per Accounting Standard-21 Consolidated Financial Statements issued by the Institute of Chartered

Accountants of India (ICAI).

(b) The excess of the cost to the Company of its investment in the subsidiaries over the Company's portion of equity on the

acquisition date is recognised in the financial statements as Goodwill. The Company's portion of the equity in the

subsidiaries at the date of acquisition is determined after realigning the material accounting policies of the subsidiaries

to that of the parent and adjusting the charge / (reversal) on account of realignment to the accumulated reserves and

surplus of the subsidiaries at the date of acquisition.

(c) The consolidated financial statements are prepared using uniform accounting policies for like transactions and other

events in similar circumstances and necessary adjustments required for deviations, if any, are made in the consolidated

financial statements and are presented in the same manner as the Company's standalone financial statements.

3. Significant accounting policies

(a) Use of estimates

The presentation of financial statements in conformity with the generally accepted accounting principles requires

estimates and assumptions to be made that may affect the reported amount of assets and liabilities and disclosures

relating to contingent liabilities as at the date of the financial statements and the reported amount of revenues and

expenses during the reporting period. Actual results could differ from those estimated.

(b) Revenue recognition

Sale of goods

Revenue from sale of goods is recognised when significant risks and rewards in respect of ownership of the goods are

transferred to the customer, as per the terms of the respective sales order.

Power generation income

Power generation income is recognised on the basis of electrical units generated, net of wheeling and transmission

loss, as applicable, as shown in the power generation reports issued by the concerned authorities.

Sales-tax entitlement

Revenues on account of sale of Sales-Tax Entitlement Certificates are recognised as per the terms of agreement/

arrangement with the concerned parties.

Service and maintenance income

Revenue from annual service and maintenance contracts is recognized on the proportionate basis for the period forwhich the service is provided net of taxes.

Lease rental income

Lease rental income is recognized on accrual basis taking into consideration the data and facts available upon whichthe computation of lease rent depends.

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Interest

Interest income is recognized on a time proportion basis taking into account the amount outstanding and the rateapplicable. In case of interest charged to customers, interest is accounted for on availability of documentary evidencethat the customer has accepted the liability.

Dividend

Dividend income from investments is recognised when the right to receive payment is established.

(c) Fixed assets

Fixed assets are stated at cost, less accumulated depreciation and impairment losses, if any. Cost includes all expenditurenecessary to bring the asset to its working condition for its intended use. Own manufactured assets are capitalisedinclusive of all direct costs and attributable overheads. Capital work-in-progress comprises of advances paid to acquirefixed assets and the cost of fixed assets that are not yet ready for their intended use as at the balance sheet date. In thecase of new undertaking, pre-operative expenses are capitalised upon the commencement of commercial production.

The carrying amount of the assets belonging to each Cash Generating Unit (CGU) are reviewed at each balance sheetdate to assess whether they are recorded in excess of their recoverable amounts, and where carrying amounts exceedthe recoverable amount of the assets' CGU, assets are written down to their recoverable amount. Further, assets held fordisposal are stated at the lower of the net book value or the estimated net realisable value.

(d) Intangible assets

Research and development costs

Development cost incurred on an individual project is carried forward when its future recoverability can reasonably beregarded as assured. Any expenditure carried forward is amortized over the period of expected future sales from therelated project, not exceeding five years.

The carrying value of development costs is reviewed for impairment annually when the asset is not in use, andotherwise when events and changes in circumstances indicate that the carrying value may not be recoverable.

Intangible assets are recorded at the consideration paid for their acquisition. Cost of an internally generated assetcomprises all expenditure that can be directly attributed, or allocated on a reasonable and consistent basis, to creating,producing and making the asset ready for its intended use.

(e) Depreciation / Amortisation

Depreciation / Amortisation is provided on the Written Down Value method (WDV) unless otherwise mentioned, pro-rata to the period of use of assets and is based on management's estimate, of useful lives of the fixed assets or at ratesspecified in Schedule XIV to the Companies Act 1956 (the Act), whichever is higher:

Type of asset Rate

Goodwill Amortised on a straight line basis over a period of ten yearsLeasehold land Amortised over the period of leaseOffice building 5%Factory building 10%Plant and machinery

Single shift 13.91%Double shift 20.87%Triple shift 27.82%

Wind turbine generators 15.33%Moulds 13.91% or Useful life based on usagePatterns 30% or Useful life based on usagePlugs for moulds 50% or Useful life based on usageWind research and measuring equipment 50%Computers and software 40%Office equipment 13.91%Furniture and fixture 18.10%Motor car and others 25.89%Trailers 30%Intangible assets Amortised on a straight line basis over a period of five years


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(f) Inventories

Inventories of raw materials including stores, spares and consumables, packing materials; semi-finished goods; work inprogress and finished goods are valued at the lower of cost and estimated net realisable value. Cost is determined onweighted average basis.

The cost of work-in-progress, semi-finished goods and finished goods includes the cost of material, labour andmanufacturing overheads.

Inventories of traded goods are stated at the lower of the cost and net realizable value.

Stock of land and land lease rights is valued at lower of cost and net realisable value. Cost is determined based onweighted average basis. Net realisable value is determined by the management using technical estimates.

(g) Investments

Long Term Investments are carried at cost. However, provision is made to recognise a decline, other than temporary, inthe value of long term investments.

Current investments are carried at the lower of cost and fair value, determined on an individual basis.

(h) Foreign currency transactions

Transactions in foreign currencies are normally recorded at the average exchange rate prevailing in the month duringwhich the transaction occurred. Outstanding balances of foreign currency monetary items are reported using theperiod end rates.

Non-monetary items carried in terms of historical cost denominated in a foreign currency are reported using the exchangerate at the date of the transaction; and non–monetary items which are carried at fair value or other similar valuationdenominated in a foreign currency are reported using the exchange rate that existed, when the values were determined.

Exchange differences arising as a result of the above are recognised as income or expense in the profit and loss account,except in case of liabilities incurred for acquiring imported fixed assets, where the differences are adjusted to thecarrying amount of such fixed assets in compliance with the Schedule VI of the Act.

In case of forward contracts, the difference between the forward rate and the exchange rate, being the premium ordiscount, at the inception of a forward exchange contract is recognized as income or expense over the life of thecontract. Exchange differences on such contracts are recognised in the profit and loss account in the reporting periodin which the rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract isrecognised as income or as expense for the period.

The financial statements of integral foreign operations are translated as if the transactions of the foreign operationshave been those of the Company itself. In case of the Foreign Subsidiaries, revenue items are consolidated at theaverage rate prevailing during the year. All the monetary assets and liabilities are converted at the rates prevailing atthe end of the year. Non-monetary items like fixed assets and inventories, are converted at the average rate prevailingin the month during which the transaction occurred.

(i) Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets arecapitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of timeto get ready for intended use. All other borrowing costs are charged to revenue.

(j) Retirement and other employee benefits

Defined contributions to provident fund and family pension fund are charged to the profit and loss account on accrualbasis.

Liabilities with regard to gratuity, where applicable, are determined under Group Gratuity Scheme with Life InsuranceCorporation of India (LIC) and the provision required is determined as per actuarial valuation carried out by LIC, as atthe balance sheet date.

Contributions to Superannuation Fund with LIC through its employees' trust are charged to the profit and loss accounton an accrual basis.

The provision in the books for unutilised leave lying to the credit of employees, subject to the maximum period ofleave, are made on the basis of actuarial valuation as at the balance sheet date.

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(k) Provisions, contingent liabilities and contingent assets

A provision is recognised when there is a present obligation as a result of past events and it is probable that an outflowof resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisionsare not discounted to their present value and are determined based on best estimate required to settle the obligationat the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current bestestimates.

Contingent Liabilities are disclosed by way of notes to the accounts.

Contingent assets are not recognized.

(l) Income-tax

Tax expense for a year comprises of current tax, deferred tax and fringe benefit tax. Current tax is measured after takinginto consideration, the deductions and exemptions admissible under the provisions of applicable laws.

Deferred tax reflects the impact of current year timing differences between taxable income and accounting incomefor the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates andthe tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised only to theextent that there is reasonable certainty that sufficient future taxable income will be available against which suchdeferred tax assets can be realised. If the Company has carry forward of unabsorbed depreciation and tax losses,deferred tax assets are recognised only if there is virtual certainty that such deferred tax assets can be realisedagainst future taxable profits. Unrecognised deferred tax assets of earlier years are reassessed and recognised to theextent it has become reasonably certain that future taxable income will be available against which such deferred taxassets can be realised.

Deferred tax resulting from timing differences which originate during the tax holiday period but are expected toreverse after tax holiday period is recognised in the year in which the timing differences originate using the tax ratesand laws enacted or substantively enacted by the balance sheet date.

(m) Lease assets

Operating leases

Assets acquired as leases where a significant portion of the risks and rewards of ownership are retained by the lessor areclassified as operating lease. Lease rentals are charged off to the profit and loss account as incurred. Initial direct costsin respect of assets given on lease are expensed off in the year in which such costs are incurred.

(n) Earnings per share

Basic earnings per share are calculated by dividing the net profit for the period attributable to equity shareholders (afterdeducting preference dividends and attributable taxes) by the weighted average number of equity shares outstandingduring the period. The weighted average number of equity shares outstanding during the period are adjusted for any bonusshares issued during the year and also after the balance sheet date but before the date the financial statements are approvedby the board of directors.

For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholdersand the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutivepotential equity shares.

The number of equity shares and potentially dilutive equity shares are adjusted for bonus shares as appropriate. Thedilutive potential equity shares are adjusted for the proceeds receivable, had the shares been issued at fair value.Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date.

(o) Employee stock option

Stock options granted to employees under the Employees Stock Option Scheme are accounted as per the intrinsic valuemethod permitted by the “Guidance Note on Share Based Payments” issued by the ICAI. Accordingly, the excess of themarket price of the shares as on the date of the grant of options over the exercise price is recognised as deferredemployee compensation and is charged to profit and loss account on straight-line basis over the vesting period.

The number of options expected to vest is based on the best available estimate and are revised, if necessary, if subsequentinformation indicates that the number of stock options expected to vest differs from previous estimates.


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4. Changes in accounting policies

During the current year, Suzlon Energy Limited has changed the basis of valuation of inventories from First-In-First-Out(FIFO) to Weighted Average basis. As a result of this change, the value of the inventory as at March 31, 2006 is higher by Rs.2.67 crore and the profit before tax for the year is higher by a similar amount.

5. The list of subsidiary companies which are included in the consolidation and the Company's effective holdings thereinare as under:

Name of the subsidiary Country of Effective ownershipincorporation in subsidiaries as at March 31,

2006 2005

AE-Rotor Holding B.V. Netherlands 100% 100%

AE-Rotor Techniek B.V. Netherlands 100% 100%

Suzlon Energy B.V. Netherlands 100% 100%

Suzlon Energy A/S Denmark 100% 100%

Suzlon Wind Energy Corporation USA 100% 100%

Cannon Ball Wind Energy Park-I, LLC USA 100% 100%

Suzlon Energy Australia Pty. Limited Australia 100% 100%

Suzlon Energy GmbH Germany 100% 100%

Suzlon Windfarm Services Limited India 100% 100%

Suzlon Towers & Structures Limited India 100% 100%(Formerly known as Suzlon Green Power Limited)

Suzlon Generators Private Limited India 74.91% 74.91%

Suzlon Structures Private Limited India 75% 75%

Windpark Olsdorf WATT GmbH & Co KG Germany 100% –

Suzlon Windpark Management GmbH Germany 100% –

Suzlon Windkraft GmbH (Formerly Constellation GmbH) Germany 100% –

Suzlon Rotor Corporation USA 100% –

Suzlon Power Infrastructure Private Limited India 100% –

Suzlon Energy (Tianjin) Limited China 100% –

SE Drive Techniek GmbH Germany 100% –

Suzlon Gujarat Wind Park Limited India 100% –

Suzlon Engitech Private Limited India 100% –(Formerly Sarjan Engitech Private Limited)

As the operation of Suzlon Energy Limited, Mauritius (a wholly owned subsidiary) were not material in relation to the sizeof the consolidated operations, the financial statements of the subsidiary did not form part of the consolidated financialstatements.

6. Other notes

(a) Terms of redemption / conversion of preference shares of the Company:

(i) 1,500,000, 10% Cumulative redeemable preference shares of Rs. 100 each fully paid are redeemable at par afterone year from March 10, 2004, which is the date of allotment, at the option of the Company or the preferenceshareholders, as the case may be.

(ii) During the year, the Company has redeemed the 10,000,000, 0.01% cumulative redeemable preference shares ofRs. 100 out of the Initial Public Offer proceeds.

(b) 29,700 and 220,300, 8% Cumulative redeemable preference shares of Rs. 100 each fully paid of Suzlon Structures PrivateLimited (SSPL) are redeemable at par after one year from March 29, 2005 and June 28, 2005, being the respective datesof allotment, at the option of SSPL or of the Preference Shareholders as the case may be. This portion represents theholding by the external shareholders of SSPL only, other than the Holding Company.

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(c) The details of security for the secured loans in consolidated financial statements are as follows:

(i) Term loans from banks and financial institutions

Rs. 7.22 crore (Rs. 1.49 crore) secured by charge on certain WTG's, land and personal guarantee of directors.

Rs. 5.75 crore (Rs. 6.72 crore) secured by way of hypothecation of stocks and debtors and on specific receivables.

Rs. 28.54 crore (Rs. Nil) secured by way of hypothecation of all plant and machinery and other fixed assetsand second charge on all current assets.

Rs. 31.21 crore (Rs. 28.13 crore) secured by way of first charge on certain immovable and moveable fixedassets, second charge on current assets and personal guarantee of directors.

Rs. 25.28 crore (Rs. 15.38 crore) secured by a first charge on certain immovable and movable fixed assets,second charge on current assets and personal guarantees of directors in certain cases.

Rs. 4.61 crore (Rs. 12.02 crore) secured by way of hypothecation of certain windfarm projects and mortgageof land.

Rs. 14.33 crore (Rs. 17.41 crore) secured by way of charge on certain WTG's and land appurtenant theretoand personal guarantee of directors.

(ii) Term loans from others

Secured by a first charge on certain immovable and movable fixed assets, specific security deposits, book debts,second charge on current assets and personal guarantees of directors in certain cases.

(iii) Working capital facilities from banks and financial institutions

Rupee loans

Rs. 114.03 crore (Rs. 202.85 crore) secured by hypothecation of inventories, book-debts and other currentassets, both present and future, first charge on certain immovable fixed assets, second charge on all otherimmovable fixed assets and personal guarantees of directors in certain cases.

Rs. 5.87 crore (Rs. Nil) secured by hypothecation of all current assets and second charge on fixed assets.

Rs. 15.48 crore (Rs. 5.18 crore) secured by way of hypothecation of inventories, book debts and othercurrent assets, both present and future, second charge on all other immovable fixed assets and personalguarantee of directors.

Foreign currency loans

Rs. 0.16 crore (Rs. 0.18 crore) is secured by way of mortgage of office building at Pipestone, USA.

Further out of the above, term loans from banks and financial institutions amounting to Rs. 53.57 crore (Rs. 62.41 crore)

and working capital facilities from banks and financial institutions amounting to Rs. 119.51 crore (Rs. 221.12 crore) are

secured by personal guarantee of directors.

(d) Sales do not include excise duty, service tax, sales-tax or VAT charged.

(e) Balances of sundry debtors include Rs. 0.85 crore (Rs. 22.48 crore), which are contractually payable beyond a period

of six months from the date of sale.

(f) Operating leases

Premises

Suzlon has taken certain premises under cancellable operating leases. The total rental expense under cancellable

operating leases during the period was Rs. 3.85 crore (Rs. 1.73 crore).

The Group have also taken furnished / non-furnished offices and certain other premises under non-cancellable operating

lease agreement ranging for a period of one to five years. The lease rental charge during the year is Rs. 5.30 crore

(Rs. 1.77 crore) and maximum obligation on long term non-cancellable operating lease payable as per the rentals stated

in respective agreement are as follows:

Obligation on non-cancellable operating leases Amount

Not later than one year 6.36Later than one year and not later than five years 7.12Later than five years Nil


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(g) Employee stock option scheme

Suzlon Energy Employee Stock Option Plan 2005 (the 2005 Plan or the Scheme)

The Company instituted the 2005 Plan for all eligible employees in pursuance of a special resolution approved by the

shareholders at the extra-ordinary general meeting held on June 16, 2005 (Grant Date). The Scheme covers grant of

options to specified permanent employees of the Company as well as its subsidiaries except subsidiaries in the United

States of America.

Pursuant to the scheme, the Company has granted 921,000 options to eligible employees at an exercise price, which is

50% of the issue price determined in the Initial Public Offering (IPO) of the Company in accordance with SEBI

Guidelines i.e, Rs. 510 per equity share. Under the terms of the Scheme, 30% of the options will vest in the employees

at the end of the first year, 30% at the end of the second year and the balance of 40% at the end of third year from the

grant date in the following manner:

Date of vesting Proportion ofvesting

June 16, 2006 30%June 16, 2007 30%June 16, 2008 40%

The employee stock options granted shall be capable of being exercised within a period of five years from the date of

first vesting i.e. June 16, 2006. Once the options vest as per the Schedule above, they would be exercisable by the

option holder and the shares arising on exercise of such options shall not be subject to any lock-in period. Further, in

the case of termination of employment, all non-vested options would stand cancelled. Options that have vested but

have not been exercised can be exercised within the time prescribed as mentioned above, failing which they would

stand cancelled.

During the year ended March 31, 2006, no eligible employees have exercised their options as the date of first vesting

falls in the succeeding year. Further, 32,000 options were forfeited as certain employees resigned from the services ofthe Company. The movement in the stock options during the year was as per the table below:

Options outstanding at the beginning of the year NilGranted during the year 921,000Forfeited during the year 32,000Exercised during the year NilExpired during the year NilOptions outstanding at the end of the year 889,000Exercisable at the end of the year Nil

Fair value of the option

The Company has charged a sum of Rs. 10.36 crore (Rs. 255 per option) being the intrinsic value of option under the2005 Plan for the year ended March 31, 2006. Had the Company adopted the fair value method based on “Black-Scholes” Model for pricing and accounting the options, the cost of option would have been Rs. 324.33 per option andaccordingly, the profit after tax would have been lower by Rs. 2.82 crore. Consequently the diluted earnings per shareafter factoring the above impact of fair value would have been Rs. 27.69 per share instead of Rs. 27.68 per share.

(h) Provisions

In pursuance of Accounting Standard-29 (AS-29) “Provisions, Contingent Liabilities and Contingent Assets” issued by theICAI, the provisions required have been incorporated in the books of accounts in the following manner:

Particulars Generation Operation, Provision forguarantee maintenance liquidated

and warranty damages

Opening balance 57.98 97.67 3.97Additions net of utilisation 83.47 75.23 0.00(Reversal) (1.24)

Closing balance 141.45 172.90 2.73

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The provision for operation, maintenance and warranty represents the expected liability on account of field failure ofparts of WTG and expected expenditure of servicing the WTG's over the period of free operation, maintenance andwarranty, which varies according to the terms of each sales order.

The provision for Generation Guarantee (GG) represents the expected outflow of resources against claims for generationshortfall expected in future over the life of the guarantee assured. The period of GG varies for each customer accordingto the terms of the contract. The key assumptions in arriving at the GG provision are wind velocity, plant load factor,grid availability, load shedding, historical data, wind variation factor, etc.

Provision for Liquidated Damages (LD) represents the expected claims which the Company may need to pay for nonfulfilment of certain commitments as per the terms of the sales order. These are determined on a case to case basisconsidering the dynamics of each individual sales order and the factors relevant to that sale.

7. Break up of the accumulated deferred tax asset, net, is given below:

Particulars Deferred tax asset / (liability)as at March 31,

2006 2005

Deferred tax assets

Provision for generation guarantee, LD and operation, maintenance and warranty 54.61 28.52Provision for doubtful debts 1.56 2.18Unabsorbed losses 33.56 4.15Unabsorbed depreciation – 3.50Others 0.15 0.30

(a) 89.88 38.65

Deferred tax liabilityDepreciation on fixed assets 10.54 14.54

(b) 10.54 14.54

Deferred tax asset (net) (c) = (a) - (b) 79.34 24.11Tax effect of share issue expenses eligible for income-taxdeduction under Section 35D, credited to securitiespremium account (d) 2.42

(c) + (d) 81.76 24.11

Note:

During the year, the Company acquired the entire share capital of Suzlon Engitech Private Limited (SEPL), Suzlon Power Infrastructure PrivateLimited (SPIPL) and Suzlon Gujarat Wind Park Limited (SGWPL), whose balances since date of their acquisition have been consolidated in thebooks of Suzlon Energy Limited. The deferred tax assets (net) of SPIPL and SGWPL as at March 31, 2005 amounting to Rs. Nil andRs. 0.08 crore, respectively and the deferred tax assets (net) of SEPL as at June 30, 2005 amounting to Rs. 0.06 crore have been consolidated.

8. Estimated amount of contracts remaining to be executed on capital accounts and not provided for, net of advances.Rs. 97.86 crore (Rs. 32.37 crore).

9. Managerial remuneration to directors


2006 2005

Salaries 1.47 0.86Perquisites – 0.60Contribution to superannuation fund 0.31 0.18Sitting fees 0.01 –

1.79 1.64

The directors are covered under the Company's scheme for gratuity along with the other employees of the Company. Theproportionate amount of gratuity is not included in the aforementioned disclosure, as the amount attributable to directorsis not ascertainable.


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10. Earnings Per Share (EPS)All amounts in Rs. crore except per share data


2006 2005

Basic earnings per share

Net profit 759.50 365.33

Less:Preference dividend and tax thereon 1.90 3.24

(a) Net Profit attributable to equity shareholders(Numerator for computation of basic and diluted EPS) 757.60 362.09

(b) Weighted average number of equity shares in calculating basic EPS(Denominator for computation of basic EPS) 273,233,510 253,005,661

Add: Equity shares for no consideration arising on grant ofstock options under ESOP 2005 430,697 –

(c) Weighted average number of equity shares in calculating diluted EPS(Denominator for diluted EPS) 273,664,207 253,005,661

Basic earning per share of face value of Rs. 10 each (a/b *10,000,000) 27.73 14.34

Diluted earning per share of face value of Rs. 10 each (a/c*10,000,000) 27.68 14.34

11. Contingent liabilities


2006 2005

Guarantees given on behalf of other companies in respect of loansgranted to them by banks 0.88 1.40

Counter guarantees given to the banks against guarantees issued bybanks on Company's behalf 0.25 1.93

Claims against the Company not acknowledged as debts 0.25 1.75

Bills discounted with banks – 3.33

Disputed labour cost liabilities 0.01 0.02

Disputed service tax liabilities 0.87 0.87

Bonds / undertakings given by the Company under duty exemptionscheme to customs authorities 5.66 5.18

12. Derivative instruments and unhedged foreign currency exposure

Particulars of derivatives Purpose

Forward contract outstanding as at balance sheet date

Buy DKK 386,239.60 Hedge of forex DKK liabilitiesBuy Euros 5,677,739.50 Hedge of forex Euro liabilitiesBuy USD 68,348,272.54 Hedge of forex USD liabilities

Target redemption forward contractEuro 0.025 crore / Euro 0.05 crore per week for 18 weeks Hedge forex Euro liabilities

Range accrual interest rate swap

USD 0.20 crore Hedge against interest on forex loans

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Particulars of unhedged foreign currency exposure as at the consolidated balance sheet date

Particulars Amount

Creditors (including goods in transit Rs. 133.76 crore) 243.47Debtors 24.32Loans given 47.20Loans received 82.00Bank balance in current accounts and term deposit accounts 4.45

13. Related party disclosures

(a) Related parties with whom transactions have taken place during the year.

(i) Associates

Suzlon Infrastructure Limited (Formerly known as Suzlon Developers Limited), Sarjan Realities Limited.

(ii) Entities where Key Management Personnel (KMP) / Relatives of Key Management Personnel (RKMP) has significantinfluence

Suzlon Capital Limited, Suzlon Hotels Limited, Sarjan Infrastructure Finance Limited, Shubh Realty (South) PrivateLimited, Sugati Holdings Private Limited and Kush Synthetics Private Limited.

(iii) Key Management Personnel

Tulsi R. Tanti, Girish R. Tanti, Vinod R. Tanti and Balrajsinh A. Parmar (See note below).

(iv) Relatives of Key Management Personnel

Gita T. Tanti, Rambhaben Ukabhai, Pranav T. Tanti, Nidhi T. Tanti, Vinod R. Tanti, Jitendra R. Tanti, Sangita V. Tanti,Lina J. Tanti, Esha G. Tanti, Sheela B. Parmar, Ranjitsinh A. Parmar, Amarsinh A. Parmar, Kiritsinh A. Parmar.

(v) Employee funds

Suzlon Energy Limited - Superannuation FundSuzlon Energy Limited - Employees Group Gratuity SchemeSuzlon Windfarm Services Limited - Superannuation FundSuzlon Windfarm Services Limited - Employees Group Gratuity SchemeSuzlon Towers and Structures Limited - Superannuation Fund(Formerly Suzlon Green Power Limited)

Note:

Vinod R. Tanti and Balrajsinh A. Parmar have been Directors of the Company till June 30, 2005, and have not been considered askey management personnel post June 30, 2005.

(b) Transactions between the Group and related parties and the status of outstanding balances as at March 31, 2006

Particulars Associate Entities KMP RKMP Employeewhere fundsKMP /

RKMP hassignificantinfluence

Transactions

Purchase of fixed assets 0.31 – – – –(0.04) – – – –

Sale of fixed assets – – – – –(0.02) – (0.16) (0.10) –

Subscription to / purchase – – – – –of preference shares (5.00) (0.13) (2.45) (2.79) –

Subscription to / purchase – – 0.03 0.35 –of equity shares – – (1.54) (3.97) –


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(b) Transactions between the Group and related parties and the status of outstanding balances as at March 31, 2006(Contd.)

Particulars Associate Entities KMP RKMP Employeewhere fundsKMP /

RKMP hassignificant

influence

Sale of investments 0.65 – – – –– (1.24) – – –

Loans / Deposit given 204.02 – – – –(444.57) (0.03) – – –

Sale of goods 54.69 – – – –(36.12) – – – –

Purchase of goods and 19.93 0.07 – – –services (15.47) (3.74) – (0.18) –

Services rendered, – – – – –compensation and reimbursement (1.35) (0.02) – – –

Interest received 10.77 – – – –(11.10) (0.05) – – –

Dividend received / accrued 0.42 – – – –(0.21) – – – –

Dividend paid – 8.90 7.59 44.20 –– (4.21) (4.27) (24.55) –

Rent received – – – – –(0.05) – – – –

Rent / Hotel charges paid – 0.03 0.01 – –– (0.41) (0.00)* – –

Managerial remuneration – – 1.78 – –– – (1.63) – –

Contribution to various funds – – – – 2.56– – – – (1.59)

Outstanding balances

Investments 6.00 0.87 – – –(6.65) (0.87) – – –

Sundry debtors 19.06 – – – –(11.25) – – (0.01) –

Loans / Deposits outstanding 184.82 – – – –(186.14) (3.92) – – –

Advances / Deposits to supplier 0.01 – – – –– (1.73) – – –

Sundry creditors 8.08 0.01 – – –(0.20) (0.18) – – (0.45)

Corporate guarantees 0.88 – – – –(1.40) – – – –

Contribution payable to various funds – – – – –– – – – (0.02)

* amount below Rs. 0.01 crore

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(c) Disclosure of significant transactions with related parties

Type of the transaction Type of Name of the entity /Person Year ended March 31,relationship 2006 2005

Purchase of fixed assets Associate Sarjan Realities Limited 0.31 0.04

Sale of fixed assets KMP Girish R. Tanti – 0.16

RKMP Ranjitsinh A. Parmar – 0.06

RKMP Amarsinh A. Parmar – 0.04

Subscription to / purchase Associate Suzlon Infrastructure Limited – 5.00of preference shares

RKMP Gita T. Tanti 0.05 –

RKMP Jitendra R. Tanti 0.02 –

RKMP Leena J. Tanti 0.05 –

RKMP Pranav Tanti 0.05 –

RKMP R.V. Tanti 0.05 –

RKMP Sangita V. Tanti 0.05 –

Sale of investments Entities where Sarjan Infrastructure Finance Limited – 1.24KMP / RKMPhas significantinfluence

Associate Suzlon Infrastructure Limited 0.65 –

Loan / Deposits given Associate Suzlon Infrastructure Limited – 206.41


Associate Shubh Realty (South) Private Limited 70.22 –

Sale of goods Associate Sarjan Realities Limited 16.81 –

Associate Suzlon Infrastructure Limited 37.86 36.12

Services rendered, Associate Suzlon Infrastructure Limited – 1.31compensation andreimbursement

Purchase of goods and Associate Suzlon Infrastructure Limited 16.61 15.44services

Interest received Associate Sarjan Realities Limited 5.94 7.81

Associate Suzlon Infrastructure Limited 1.31 3.15

Associate Shubh Realty (South) Private Limited 3.48 –

Dividend received / accrued Associate Suzlon Infrastructure Limited 0.29 0. 08


Dividend paid Entities where Suzlon Capital Limited – 0.02KMP/ RKMPhas significantinfluence

Rent received Associate Suzlon Infrastructure Limited – 0.05

Rent / Hotel charges paid Entities where Suzlon Hotels Limited 0.03 0.17KMP / RKMPhas significantinfluence

Entities where Suzlon Engitech Private Limited – 0.24KMP / RKMPhas significantinfluence

RKMP Girish R. Tanti 0.01 –


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(c) Disclosure of significant transactions with related parties (Contd.)

Type of the transaction Type of Name of the entity /Person Year ended March 31,relationship 2006 2005

Contribution to various funds Employee Suzlon Energy Limited - 1.28 0.90Funds Superannuation Fund

Employee Suzlon Energy Limited - 1.21 0.45Funds Employees Group Gratuity Scheme

Employee Suzlon Wind Farm Services Limited - – 0.11Funds Superannuation Fund

Employee Suzlon Wind Farm Services Limited - – 0.09Funds Employees Group Gratuity Scheme

Employee Suzlon Tower and Structures Limited - 0.02 0.05Funds Superannuation Fund

Employee Suzlon Power Infrastructure 0.03 –Funds Private Limited - Superannuation Fund

Suzlon Power Infrastructure 0.02 –Private Limited - Employees GroupGratuity Scheme

Managerial remuneration KMP Tulsi R. Tanti 1.17 0.44

KMP Girish R. Tanti 0.41 0.39

KMP Vinod R. Tanti 0.10 0.39

KMP Balrajsinh A. Parmar 0.10 0.41

14. Disclosure as required by Clause 32 of Listing Agreement with stock exchanges

Type of relationship Name Amount Maximumoutstanding Amount

as at outstandingMarch 31, 2006 during the year

Associates Sarjan Realities Limited 112.42 114.54Suzlon Infrastructure Limited – 75.00(Formerly Suzlon Developers Limited)

Where control of Sarjan Infrastructures Finance Limited 2.18 4.93KMP / RKMP exists Shubh Realty (South) Private Limited 70.22 70.22

Note:

(a) All the above balance of loans are excluding accrued interest aggregating Rs. 1.41 crore and are payable on demand.

(b) No loans have been granted by Suzlon Energy Limited to any person, who has invested in the shares of Suzlon Energy Limited or anyof its subsidiaries.

(c) There are no balances outstanding from Companies under the same management, as per the provisions of Section 370 (1B) of theCompanies Act, 1956.

15 Segment reporting

Suzlon's operations primarily relate to manufacture and sale of WTG's and its parts. Others primarily consist of operation andmaintenance revenue from the sale of WTG and power generation revenue from own installed WTG's.

The accounting principles consistently used in the preparation of the financial statements are also consistently appliedto record income and expenditure in individual segments. These are as set out in the Note on Significant AccountingPolicies.

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(a) Primary business segment


Sale of Others Elimina- Total Sale of Others Elimina- TotalWTG tions WTG tions

Total external sales 3,758.56 82.47 – 3,841.03 1,916.52 25.96 – 1,942.48

Add: Inter segment sales 2.37 8.28 (10.65) – 2.35 24.99 (27.34) –

Segment revenue 3,760.93 90.75 (10.65) 3,841.03 1,918.87 50.95 (27.34) 1,942.48

Segment results 781.54 55.75 (10.65) 826.64 413.55 6.38 – 419.93

Add / (Less): Items toreconcile with profit asper profit and loss account

Add: Other income – – – 55.64 – – – 23.43

Less: Financial charges – – – (64.77) – – – (45.83)Preliminary exp W/Off – – – (0.18) – – – (0.18)

Profit before tax,minority interest – – – 817.33 – – – 397.35

Provision for

Income-tax – – – 110.47 – – – 48.97

Deferred tax – – – (56.82) – – – (16.74)

Fringe benefit tax – – – 3.16 – – – –

Total tax – – – 56.81 – – – 32.23

Profit before minority interest – – – 760.52 – – – 365.12Add: Share of (Profit)/loss of – – – (1.02) – – – 0.21

minority In subsidiary

Profit for the year – – – 759.50 – – – 365.33

Segment assets 3,695.27 366.44 – 4,061.71 1,667.68 118.02 – 1,785.70

Common assets – – – 841.57 – – – 302.09

Enterprise assets – – – 4,903.28 – – – 2,087.79

Segment liabilities 1,583.22 39.13 – 1,622.35 755.35 18.48 – 773.83

Common liabilities – – – 561.14 – – – 524.63

Enterprise liabilities – – – 2,183.49 – – – 1,298.46

Capital expenditure 417.02 22.79 – 439.81 143.47 51.31 – 194.78during the year

Segment depreciation 62.38 9.21 – 71.59 39.50 9.82 – 49.32

Non-cash expensesother than depreciation 0.11 0.07 – 0.18 0.14 0.04 – 0.18


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(b) Geographical segment


India USA Others Total India USA Others Total

Segment revenue 3,530.47 310.56 – 3,841.03 1,936.14 6.34 – 1,942.48

Segment assets 3,465.50 387.01 209.20 4,061.71 1,675.38 50.42 59.90 1,785.70

Capital expenditure 369.70 2.19 67.93 439.81 189.35 0.93 4.50 194.78incurred

16. All figures have been reported in rupees crore and have been rounded off to the nearest lakhs. Prior year amounts have beenreclassified wherever necessary to confirm with current year's presentation. Figures in the brackets are in respect of theprevious year.

Signatures to schedules 'A' to 'P'








5. All transfer deeds, requests for change of address, bank particulars /

mandates / ECS mandates, PAN should be lodged with Company’s

registrar and share transfer agents, Karvy Computershare Private

Limited, “Karvy House”, 46, Avenue 4, Street No.1, Banjara Hills,

Hyderabad - 500 034, in case of shares held in physical form on or

before July 7, 2006. The above details in respect of the shares held in

electronic form should be sent to the respective depository participants

by the shareholders well in time.

6. Members are requested to furnish the registrars / depository

participants, the name and branch of the bank and account number

to enable the Company to distribute dividend through Electronic Clearing

Services (ECS). In the absence of ECS facility with the shareholder’s

bank, the bank account details will be printed on the dividend warrants,

if available.

7. Profile of directors seeking re-appointment / appointment is provided

under Section “Board of Directors” of the report on corporate

governance, which forms an integral part of this Annual Report, as

stipulated under Clause 49 of the listing agreement with stock exchanges.

8. Corporate members intending to send their authorised representatives

to attend the meeting are requested to send a certified copy of the

board resolution authorising their representative to attend and vote

on their behalf at the meeting.

9. Members desirous of asking any questions at the Annual General

Meeting are requested to send in their questions so as to reach the

Company’s registered office atleast 7 days before the Annual General

Meeting so that the same can be suitably replied to.

10. Members / proxies are requested to bring their attendance slip along

with their copy of Annual Report to the meeting.

In terms of the provisions of Section 260 of the Companies Act,

1956, Mr. Ashish Dhawan holds office up to the ensuing Annual

General Meeting of the Company. The Company is in receipt

of a notice in writing pursuant to Section 257 of the Companies

Act, 1956 proposing the candidature of Mr. Ashish Dhawan for

the office of the director of the Company.

The Board recommends the appointment of Mr. Ashish Dhawan

as the director of the Company.

No other director except Mr. Ashish Dhawan is in any way

concerned or interested in the said resolution appointing Mr.

Ashish Dhawan as the director of the Company.

By order of the Board of Directors

Place : New Delhi Hemal A. Kanuga

Date : May 15, 2006 Company Secretary

Regd. Office:

“Suzlon”,

5, Shrimali Society

Near Shri Krishna Complex

Navrangpura

Ahmedabad – 380 009

Item No.6

Mr. V. Raghuraman was appointed as an Additional Director

of the Company with effect from October 29, 2005. In terms of

the provisions of Section 260 of the Companies Act, 1956, Mr.

V. Raghuraman holds office up to the ensuing Annual General

Meeting of the Company. The Company is in receipt of a notice

in writing pursuant to Section 257 of the Companies Act, 1956

proposing the candidature of Mr. V. Raghuraman for the office

of the director of the Company.

The Board recommends the appointment of Mr. V. Raghuraman

as the director of the Company.

No other director except Mr. V. Raghuraman is in any way

concerned or interested in the said resolution appointing Mr.

V. Raghuraman as the director of the Company.

Item No.7

Mr. Ashish Dhawan, who was earlier appointed as director in

the capacity of the representative / nominee of Chryscapital

III, LLC, Mauritius ceased to be the director in his capacity as

nominee / representative of Chryscapital III, LLC with effect

from December 22, 2005 on termination of the shareholders’

and subscription agreement as entered into by the Company

with the said Chryscapital III, LLC, Mauritius. Mr. Ashish Dhawan

was appointed as an Additional Director of the Company in

his individual capacity with effect from December 28, 2005.

Annexure to the notice

Explanatory statement

[Pursuant to Section 173(2) of the Companies Act, 1956]

Suzlon Notice final.pmd 6/25/2006, 5:11 AM2

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