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Sagar Cements Annual Report 2009-2010 3

INDEX

Board of Directors 4

Notice 5

Directors’ Report and its Annexure 9

Report on Corporate Governance 18

Sagar Cements Auditors’ Report 30

Balance Sheet 33

Profit & Loss Account 34

Cash Flow Statement 35

Schedules forming part of Balance Sheet and Profit and Loss Account 36

Balance Sheet Abstract 50

Sagar Power Board of Directors 51

Sagar Power Notice 52

Directors’ Report 53

Auditors’ Report 56

Balance Sheet 59

Profit and Loss Account 60

Cash Flow Statement 61

Schedules Forming part of Balance Sheet and Profit and Loss Account 62

Balance Sheet Abstract 70

Consolidated Auditors’ Report 71

Consolidated Balance Sheet 72

Consolidated Profit and Loss Account 73

Consolidated Cash Flow Statement 74

Schedules to the Consolidated Balance Sheet and Profit and Loss Account 75

Sagar Cements Annual Report 2009-20104

BOARD OF DIRECTORS

BOARD OF DIRECTORS

Shri O.Swaminatha Reddy Chairman – Independent & Non Executive

Shri S.Veera Reddy Managing Director

Dr. S.Anand Reddy Joint Managing Director

Shri S.Sreekanth Reddy Executive Director

Shri K.Thanu Pillai Independent & Non Executive

Shri Gilbert Noel Claude Natta Non-Executive

Shri Werner C.R.Poot Non Executive

Shri P.Rajeswara Rao APIDC Nominee

Shri V.V.S.Ravindra IDBI Nominee and Independent

COMPANY SECRETARY

Shri R.Soundararajan

SENIOR MANAGEMENT TEAM

Corporate Office:

Shri M.S.A.Narayana Rao Group President

Shri M.V.Subba Rao Senior Vice President

Shri K.Ganesh Vice President – Projects

Shri P.Venkat Reddy Vice President - Finance

Shri P.S.Prasad Vice President – Marketing

Shri O.Anji Reddy Chief General Manager

(Electrical & Installations)

Site:

Shri N.Krishna Reddy Senior Vice President – Works

Shri K.V.Ramana Chief General Manager - Mines

Shri S.Venkateswarlu Chief General Manager – P & QC

Shri A.K.Nagesh General Manager (Mech. & Development)

AUDITORS

M/s. P.Srinivasan & Co.,

Chartered Accountants

2-2-18/8/5, C-31, Near Ahobhila Mutt, DD Colony

Hyderabad – 500 013

COST AUDITORS

M/s.Narasimha Murthy & Co.,

Cost Accountants

104, Pavani Estates, Y.V.Rao Mansion, Himayathnagar


BANKERS

State Bank of Hyderabad

State Bank of India

Punjab National Bank

IDBI Bank Limited

REGISTERED OFFICE

8-2-472/B/2, Road No.1, Banjara Hills

Hyderabad-500 034. Tel: 040 – 23351571

Fax: 040 - 23356573

PLANT

Mattampally, Via Huzurnagar, Nalgonda District,

Andhra Pradesh 508 204. Tel: 08683 – 247039


NOTICE

SAGAR CEMENTS LIMITED

NOTICE

Notice is hereby given that the 29th Annual General Meeting of the Members of the Company will be held at 4.00 p.m. on

Monday, the 20th September, 2010 at Hotel Golkonda, Masab Tank, Hyderabad-500 028, to transact the following business:

1. To receive, consider and adopt the Audited Profit and Loss Account for the year ended 31st March, 2010 and the Balance

Sheet as on that date together with the Reports of the Board of Directors and Auditors thereon;

2. To declare dividend;

3. To appoint a Director in place of Shri S.Sreekanth Reddy, who retires by rotation and being eligible, offers himself for re-

appointment.

4. To appoint a Director in place of Shri Werner C.R. Poot, who retires by rotation and being eligible, offers himself for re-

appointment.

5. To appoint Auditors for the company to hold office from the conclusion of the Annual General Meeting till the conclusion

of the next Annual General Meeting and to fix their remuneration.

Special Business

6. To consider and, if thought fit, to pass, with or without modification, the following resolution as an Ordinary Resolution.

“Resolved that Shri Gilbert Noel Claude Natta be and is hereby appointed as a Director of the Company liable to retire

by rotation.”

Notes:

1. A Member entitled to attend and vote at the Meeting is entitled to appoint a Proxy to attend and vote instead of himself/

herself and the proxy to be so appointed need not be a Member of the Company. However, proxies in order to be

effective must be lodged with the company at its Registered Office not less than 48 hours before the commencement of

the Meeting.

2. The details required to be given under Clause 49 of the Listing Agreement with the Stock Exchanges in respect of Item

No.3, 4 and 6 along with the Explanatory Statement pursuant to Sec.173 in respect of the special business in Item No.6

are given in the annexure, which forms part of this Notice.

3. Register of Members and the Share Transfer Books of the company will remain closed during the period from 10.09.2010

to 20.09.2010 (both days inclusive).

4. Members holding shares in physical form are requested to inform the Company or its Registrars about the change, if any,

in their addresses.

5. Pursuant to Section 205A of the Companies Act, 1956, all unclaimed/unpaid dividends up to the financial year ended 31st

March, 1995 have been transferred to the General Revenue Account of the Central Government. Shareholders, who have

not yet en-cashed their dividend warrants for the said period, are requested to forward their claims in the prescribed Form

No.II under the Companies Unpaid Dividend (Transfer to General Revenue Account of the Central Government) Rules,

1978 to:

Office of the Registrar of Companies

Kendriya Sadan

Sultan Bazaar

Koti

Hyderabad


6. Consequent upon the amendment to Section 205A of the Act and the introduction of Section 205C by the Companies

(Amendment) Act, 1999, the un-claimed dividends for the financial year ended 31st March, 1996 onwards and up to the

financial year ended 31st March, 2001 were duly transferred to the Investors Education and Protection Fund set up by the

Government of India.

7. Members who have not yet encashed their dividend warrants in respect of the dividend declared subsequently as detailed

below are requested to make their claims to the Company.

Year Nature of Dividend

2004-05 Final Dividend

2005-06 Final Dividend

2006-07 Interim and later confirmed as Final

2007-08 Interim and Final

2008-09 Final

8. Dividend for the year 2009-10, if declared at the meeting, will be paid to those members whose names appear on the

Company’s Register of Members on 20th September, 2010.

9. Section 109A of the Companies Act, 1956 provides for Nomination by the shareholders of the Company in the

prescribed Form No.2B and the shareholders are requested to avail this facility.

By Order of the Board

R.Soundararajan

Company Secretary

31st July, 2010

Registered Office:

8-2-472/B/2, Road No.1

Banjara Hills,

Hyderabad – 500 034, A.P.


Annexure to the Notice of the 29th Annual General Meeting

(Explanatory Statement U/s. 173 (2) of the Companies Act, 1956)

Item No.6 of the Notice

Shri Gilbert Noel Claude Natta was appointed as an additional director of the Company on 17th September, 2009. In

accordance with Section 260 of the Companies Act, 1956 he will be holding the said office till the ensuing Annual General

Meeting. Notice proposing his re-appointment as director has been received under Section 257 of the Companies Act, 1956.

Shri Gilbert Noel Claude Natta obtained his Scientific baccalauréat in 1966 and MBA ESSEC in 1971. He served in French

Military during the period from 1971 to 1973 as Supply Officer. During the period from 1973 to 1988 he served as a banker

with Banque Indosuez, a part of Suez Group and held his assignments in South Africa, Saudi Arabia, Holland and France. He has

vast experience in Commercial and Merchant Banking areas and held positions in France as Deputy Director of Strategy and

Budget and Head of Risks for Asia and Australasia. He joined Vicat in 1988 as Deputy Finance Director.

He was appointed as Development Director for the Vicat group in 1991 and he is now on the Board of its subsidiaries in Turkey,

Mauritania, Egypt, Kazakhstan and India, which include Vicat Sagar Cement Private Limited, a company promoted jointly by

Sagar Cements Limited and Parficim SAS, a wholly owned subsidiary of Vicat S.A.

The Board of Directors recommend the resolution to appoint Shri Gilbert Noel Claude Natta as director of the Company for

approval of the members.

As the resolution relates to the appointment of Shri Gilbert Noel Claude Natta as director, to that extent and to the extent of

his association with Vicat S.A., which is holding 10,00,000 Equity Shares in the company through its subsidiary Parficim S.A.S.,

he may be deemed to be interested in the resolution.


Annexure to the Notice of the 29th Annual General Meeting

(Pursuant to Clause 49 of the Listing Agreement)

Details of Directors seeking re-appointment at the Annual General Meeting

Name of the Director

Date of birth

Experience in specific

functional areas

Qualification

Directorships in other

Companies in India

Membership of Audit /

Shareholders / Investors

Grievances Committees

of other Public Limited

Companies

No. of shares held in

Sagar Cements Limited

Inter-se relationship with

other Directors of the

Company

Shri S.Sreekanth Reddy

27-08-1971

Cement Technologist

B.E. (I & P) and PG Diploma in

cement technology

Sagarsoft (India) Ltd.

Sagar Power Ltd.

Vicat Sagar Cement Pvt. Ltd.

Vijaynagar Sugar Pvt. Ltd.

Sree Venkateshwara Winery &

Distillery Pvt. Ltd.

Amareswari Cements Ltd.

Sagar Priya Housing and

Industrial Enterprises Ltd.

Nil

601400

Related to Shri S.Veera Reddy,

Managing Director and

Dr.S.Anand Reddy,

Joint Managing Director

Shri Werner C.R.Poot

13-01-1971

Chemical Engineering

Engineer

AVH Resources India

Pvt.Ltd.

Oriental Quarries and Mines

Pvt.Ltd.

Nil

Nil

None

Shri Gilbert Noel Claude

Natta

24-12-1948

Banking & Finance

ESSEC PARIS

Bharathi Cement Corporation

Ltd.,

Vicat Sagar Cement Pvt.Ltd.

Nil

Nil

None


R.Soundararajan

Company Secretary

31st July, 2010

Registered Office:

8-2-472/B/2, Road No.1

Banjara Hills,

Hyderabad – 500 034, A.P.


DIRECTORS’ REPORT

Dear Members

Your Directors are pleased to present their Twenty Ninth Report together with the audited accounts of the Company for the

year ended 31st March, 2010.

As you are aware, during the later part of the previous year, your Company had completed a major expansion of its plant’s

capacity from 0.297 mtpa to 2.35 mtpa and your Directors are pleased to inform you that the production from the said

expanded facility has since stabilized.

Financial Results

Rs. in lakhs

2008-092009-10Description

Dividend

Your Board has recommended for declaration at the forthcoming Annual General Meeting, a dividend @ Rs.2.50 per share

(25%) on the 15002300 Equity Shares of Rs.10/- each for the year ended 31st March, 2010.

Operations review

The total income of your Company grew by 58% to Rs.48636 lakhs during the year under report as compared to Rs.30738

lakhs in the previous year. Operating Profit grew by 44.4 % to Rs.8646 lakhs. Profit after Tax was higher at Rs.1912 lakhs as

DIRECTORS’ REPORT

Net Sales 47957 30654

Other income 679 84

Total Income 48636 30738

Profit before Depreciation, Financial Charges and Tax 8646 5986

Less : Depreciation 2769 1872

Financial Charges 2895 5664 1590 3462

Profit before Tax 2982 2524

Less : Net Provision for Tax 1070 878

Profit After Tax 1912 1646

Add : Profit brought forward 6127 5327

Profit available for appropriation 8039 6973

Appropriations proposed

Dividend @ 25 % (Rs.2.50 per equity share) 375 385

Dividend Tax 49 61

Transfer to General Reserve 500 400

Balance carried to Balance Sheet 7115 6127

Total 8039 6973

Basic and Diluted Earning Per Share 12.75 11.48


Cement (MTs)Clinker (MTs)Particulars

2009-10 2008-09 2009-10 2008-09

Production 1430000 737710 1120351 431250

Sales 350133 307152 1130636 415835

Sale of Traded Cement - - 204191 225650

compared to Rs.1646 lakhs in the previous year, registering a growth of 16%. Earnings per share for the year were also higher

at Rs.12.75 as against Rs.11.48 in the previous year.

The performance of your company in terms of production and sale of cement / clinker is given below:

The increase in the production was on account of the expanded capacity having become fully operational during the year under

review, which enabled your company to record a sharp rise in sales. The year also saw a marginal increase of Rs.63/- and Rs.126/-

in the average net sales realisation per tonne of clinker and packed cement respectively.

Share Capital

There was no change in the capital structure of your Company during the year under report.

Future Outlook

The long-term prospects for the cement industry as a whole look bright as the cement consumption, driven by higher off-take

by all user segments, is expected to remain robust. However, the capacity additions, which are taking place across the industry

and the entry of global cement companies, both through organic and inorganic routes, have intensified the competition within

the industry offering little scope for any significant improvement in the realization in the near term. This, coupled with increasing

inputs costs, may put the margins under pressure.

While the growth in the cement consumption is generally expected to overcome any possible conflict arising due to excess supply

and attendant set backs, your Company, on its part, is confident of maintaining its growth amidst aggressive competition by

improving its market share through innovative strategies and by cutting costs and improving efficiency in all areas of its

operations.

Subsidiary Company

Documents and Information pursuant to Sec.212 of the Companies Act, 1956 in respect of Sagar Power Limited, the subsidiary

of your Company, have been provided as attachment to the Balance Sheet, together with the consolidated financial statements.

The performance of this subsidiary would have been much better, but for the fact that one of the two units belonging to this

subsidiary continued to be almost non-operational for the second year in succession due to stoppage of flow of water in the

relevant canal caused by on-going construction of an aqua-duct across the said canal. With a view to focusing more on the core

area of your Company namely the cement business, your Company is divesting its stake in this subsidiary.

Joint Venture

As you are aware, your Company and Parficim S.A.S., a wholly owned subsidiary of Vicat S.A. of France have jointly promoted

Vicat Sagar Cement Private Limited as a special purpose vehicle, to set up a 5.5 mtpa capacity cement plant along with a captive

power unit of 60MW capacity in Gulbarga District of Karanataka State. Sagar Cements and the Vicat Group have so far invested

a sum of Rs.410 million and Rs.1196 million respectively in the project. This project is implemented in two phases, each phase

with a capacity of 2.75 mtpa. The acquisition of land in respect of first phase is nearing completion. This phase, for which

financial closure is expected to be achieved soon, is being planned, barring unforeseen circumstances, to go on stream by 2012.


Corporate Governance

Your Company has complied with all the mandatory provisions relating to Corporate Governance as prescribed under Clause

49 of the Listing Agreement with the Stock Exchanges. A separate report detailing such compliance together with the

mandatory Certificate obtained from the Statutory Auditors in connection therewith is included as part of the Annual Report.

Internal Control Systems

Your Company has adequate internal control systems in all important areas of its operations and effectiveness of these systems

is periodically reviewed for possible improvement in them.

Insurance

All the properties of the Company have been adequately insured.

Particulars of Employees

Particulars of employees required to be furnished in this Report pursuant to Sec.217 (2A) of the Companies Act, 1956 are given

in the annexure.

Industrial Relations

Your Company continues to enjoy cordial relationship with all its personnel at the Plant, Office and on the field.

Conservation of Energy, Technology absorption and Foreign Exchange Earnings and Outgo:

The particulars required under Sec.217 (1) (e) of the Companies Act, 1956 have been provided in the annexure, which forms

part of the Report.

Pollution Control

Your company is committed to keep the pollution at its plant within the acceptable norms and as part of this commitment, it

has installed an ESP system at the plant.

Directors

In compliance with Sec.256 of the Companies Act, 1956, Shri S.Sreekanth Reddy and Shri Werner C.R.Poot will be retiring by

rotation at the ensuing Annual General Meeting and these retiring directors, being eligible, are proposed for re-appointment. Shri

Gilbert Noel Claude Natta, who was appointed as additional directors on the Board on 17th September 2009, will be holding

his office up to the ensuing Annual General Meeting in accordance with Sec.260 of the Companies Act, 1956 and a notice

proposing his re-appointment U/s.257 of the said Act has been received from a member of the Company. Your Board

recommends the re-appointment of all the above mentioned directors at the ensuing Annual General Meeting.

Sub Committees of the Board

The Board has Audit Committee, Remuneration Committee, Investment Committee and Investors’ Grievances Committee,

the composition and details of which have been given in the Report on the Corporate Governance forming part of the Annual

Report.


Auditors

Messrs. P.Srinivasan & Co., Chartered Accountants, the present Auditors of your Company will be holding their office up to the

ensuing Annual General Meeting. Shareholders are requested to appoint Auditors to the Company to hold office from the

conclusion of its ensuing Annual General Meeting until the conclusion of its next Annual General Meeting. Your Board has accepted

the recommendation of its Audit Committee to re-appoint the retiring auditors, who, being eligible for re-appointment, have

since consented to the proposed re-appointment and confirmed that the said re-appointment would be within the limits

specified in Sub Section (1B) of Section 224 of the Companies Act, 1956.

Directors’ Responsibility Statement

Pursuant to Section 217 (2AA) of the Companies Act, 1956, we state:

(i) that in the preparation of the annual accounts, the applicable accounting standards had been followed along with

proper explanation relating to material developments;

(ii) that the directors had selected such accounting policies and applied them consistently and made judgment and

estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at

the end of the financial year and of the profit of the company for the period;

(iii) that the directors had taken proper and sufficient care for the maintenance of adequate accounting records in

accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for

preventing and detecting fraud and other irregularities;

(iv) that the directors had prepared the annual accounts on a going concern basis.

Public Deposits

Your Company had not accepted any Deposits from the public under Section 58A of the Companies Act, 1956 during the year

2009-10.

Management Discussion and Analysis Report

In accordance with Clause 49 of the Listing Agreement with the Stock Exchanges, the Management Discussion and Analysis

Report is given in the Annexure, to form part of the Annual Report.

Acknowledgement

Your Directors wish to place on record their appreciation of the valuable co-operation extended to the Company by its bankers

and various authorities of the State and Central Government. They thank the Distributors, Dealers, Consignment Agents,

suppliers and other business associates of your Company for their continued support. Your Board also takes this opportunity

to place on record its appreciation of the contributions made by the employees at all levels and last but not least, of the

continued confidence reposed by you in the Management.

For and on behalf of the Board of Directors

Hyderabad O.Swaminatha Reddy

31st July, 2010 Chairman


Annexure 1

Management Discussion and Analysis

Global Scenario

Irrespective of the economic policy followed by the individual countries for their development, the need for housing and

continued thrust on the investments in infrastructure development are expected to drive the global demand for cement in the

next two decades at least.

National Scenario

The cement industry in India is one of the basic infrastructure industries, contributing in a significant way to the Indian economy

in terms of employment generation, tax revenues, and industrial growth. The per capita consumption of cement is considered

as an important indicator of the country’s economic development, since it is used in almost every sector of the economy. This

industry, with more than 140 large and 365 mini plants is the second largest in the world. Aided by a strong capacity base, it

produces several varieties of cement such as Ordinary Portland Cement (OPC), Portland Pozzolana Cement (PPC), Portland

Blast Furnace Slag Cement (PBFS), Oil Well Cement, Rapid Hardening Portland Cement, Sulphate Resisting Portland Cement,

White Cement, etc. which meet with the global standards.

The robust growth phase being witnessed in the cement is expected to continue over the medium term, given the revival in the

housing markets, continued Government spending on the rural sector, and the gradual increase in the number of infrastructure

projects being executed by the private sector. This, coupled with the investment norms including the investor-friendly guidelines

for Foreign Direct Investment (FDI) into the cement industry, is paving the way for entry of more multinational cement majors

apart from luring global private equity firms and fund managers towards this industry. However, in the short-term, the cement

industry faces a number of challenges in the form of subdued market conditions, increasing input costs, and the inability of cement

prices to keep pace with the rising costs leading to reduction in margins.

Sagar Cements – Financial Highlights

2009-102008-09Particulars

Total Income (in lakhs) 30738 48636 58

Profit before Interest, Depreciation & Tax 5985 8646 44

Profit before Tax 2524 2982 18

Profit after Tax 1646 1912 16

EPS (Rs./Share) 11.48 12.75 11

% of growth

The operating income of your Company for the year grew by 58% to Rs.48636 lakhs as compared to Rs.30738 lakhs in the

previous year. Operating Profit grew by 44.4% to Rs.8646 lakhs. Profit after Tax was higher at Rs.1912 lakhs as compared to

Rs.1646 lakhs in the previous year, registering a growth of 16%. Earnings per share for the year were also higher at Rs.12.75

as against Rs.11.48 in the previous year.

Annexure


Performance in production, sales and other areas

The year 2009-10 saw Sagar Cements stabilizing its production process from the capacity expanded in the later part of the

previous year. Though the production and dispatches during the year under analysis were on the higher side in absolute terms

as compared to the previous year, yet, the Company was constrained to restrict its cement production to around 52 % of its

expanded capacity of 2.35 MTPA due to the subdued market conditions, frequent bandhs organized as part of the Telengana

agitation and the un-precedented floods, which severely affected the transportation of goods in and around Andhra Pradesh,

a major market for the Company.

Cement (MTs)Clinker (MTs)Product

Year 2009-10 2008-09 2009-10 2008-09

Production 1430000 737710 1120351 431250

Sales 350133 307152 1130636 415835

Sale of Traded Cement - 204191 225650

In the year 2008-09, Sagar Cements entered into a Joint Venture with Vicat S.A. a cement major and the flagship company of

the globally known Vicat Group of France, to set up a green field cement plant of 5.5 million tonne capacity with a captive power

plant of 60 MW capacity at Chatrasala Village of Chincholi Taluk in Gulbarga District of Karnataka State. A separate entity under

the name ‘Vicat Sagar Cement Private Limited’ has been formed for the purpose, in the equity capital of which Sagar and Vicat

Group will be ultimately holding 49% and 51% respectively. This project is implemented in two stages, with each stage having

a capacity of 2.75 mtpa. Acquisition of land in respect of first stage is nearing completion and the financial closure is expected

to be achieved shortly. Barring unforeseen circumstances, this stage is expected to go on stream by the year 2012. Sagar

Cements and the Vicat Group have so far invested a sum of Rs.410 million and Rs.1196 million respectively in the project.

Opportunities and threats

Main drivers for the growth in demand for cement being road and housing projects, the increased spending by the Government

in these areas and the revival of the real estate sector would ensure no let up in the demand for cement, not withstanding the

substantial additions to capacity witnessed in the industry. This augurs well for Sagar Cements, which, with its expanded

capacity, is well placed to grab the opportunities available in the above scenario.

However, rising costs of coal, power and fuel and transportation remain a cause of worry. While there are no problems with

respect to the availability of limestone to meet the expanded capacity, concerns however do exist with regard to non-availability

of adequate quantity of coal, forcing the Company to take recourse to imported coal at a high cost.

Logistics is another area of concern for the Company. Distribution cost being a significant component of the cost structure.

Sagar Cement is working towards strengthening its distribution network to bring it down. As part of this strategy, the company

will be exploring ways to increase its bulk sales. A proposal to provide a railway siding near the Company’s plant is under

implementation, the completion of which will go a long way in reducing the transportation cost.

The Indian cement industry with its huge potential continues to attract the entry of more global cement majors and encourages

the strengthening of production bases by existing companies. This may lead to a substantial part of the cement capacity being

controlled by a few players. Sagar Cements proposes to meet some of the challenges posed by this development by further

improving its brand image, greater expenditure on advertising, strengthening its distribution networks as well as by customer-

focused initiatives.

Outlook

The growth traction in the cement industry is strongly related to the overall economic strength of the country. The massive

budget outlay earmarked by the Central and State Governments for infrastructure development is expected to absorb


increasing cement capacities. Sagar Cements is operationally strong and poised to benefit from such a demand positive situation

and will continue to focus on maintaining good plant performance and optimizing efficiencies. Sagar will be focusing on

penetration into more districts of A.P., to increase its market share in the said State and explore its OPA Market especially in

North Eastern States where there is a huge deficit in the supply of cement, and with this strategy, Sagar Cement is confident of

achieving a higher capacity utilization.

Risk Management

External risks and concerns:

High transportation and energy cost.

More than 50 % of the inputs are controlled by the Government leaving little scope for the industry to have control over them.

Non-availability of quality coal in sufficient quantity.

Newer entrants to the industry and consequent capacity addition.

Global economic slowdown.

Internal risks

The Company attaches utmost importance to the assessment of internal risks and the management thereof in all its dealings.

Company is constantly on the look out for identifying opportunities to enhance the enterprise value and keeping the need to

minimize the risks associated with such efforts, every proposal of significant nature is screened and evaluated for the risks

involved and then approved at different levels in the organization before implementation.

With a view to overcoming the risk of dependence upon any particular marketing segment or region, the Company carries an

aggressive advertisement campaign in the visual media to reach a wider section of its ultimate consumers and the feed back

received is quite encouraging. As the cement industry is witnessing rapid additions to its capacity, in order to mitigate the risk

associated with it, Sagar Cements is looking for growth opportunities in other Asian and African countries where infrastructure

spending is set to get a boost.

The Company has adequate system to manage the financial risks of its operations. The system is implemented through

imposition of checks and balances on extending credit to the customers, internal audit, which is periodically carried out through

an external audit firm, proper appraisal of major capital expenditure, adherence to the budget covering all areas of its operations

and by insurance coverage for the company’s facilities.

As far as the management of legal risks, the Company has adequate system to keep track of due compliance with applicable laws

and whenever the Company foresees any legal risk in the issue involved, it seeks the benefit of wisdom of eminent lawyers in the

areas concerned before acting upon the issue.

Internal Control System and its adequacy

The Board of Directors is fully satisfied with the adequacy of the internal control system in force in all major areas of operations

of the Company, which has recently implemented an ERP to further strengthen the system. The effectiveness of the System

is reviewed periodically for its further improvement.

Material developments in Human Resources / Industrial Relations, including number of employees:

As the Company considers Man Power as one of its most important assets, developing functional competencies of its human

resources continues to be one of its key focus areas. Accordingly, need based training in relevant areas is arranged at different

levels and senior managers are also encouraged to attend seminars and conferences of the professional bodies as part of updating

their skills. The Company continues to enjoy excellent industrial relations. As of date, the Company has 380 employees on its

rolls.


Cautionary Statement

The views and statements expressed or implied in this Management Discussions and Analysis are based on available information,

assessments and judgments. They are subject to alteration. The Company’s actual performance may differ due to national or

international ramification, Governmental Regulations and policies, tax laws and other unforeseen factors over which the

Company has no control.

Annexure 2

Particulars of Employees as required under Section 217(2A) of the Companies Act, 1956

Name of the Employee

Designation

Age

Remuneration received (Rs.)

Nature of employment

Nature of duties

Qualification

Experience (years)

Date of Commencement of

Employment

Last Employment held

Managing Director

74 years

12041771

Contractual

General Management

-

50

13-07-1991

Nil

Shri S. Veera Reddy

Joint Managing Director

46 years

11464802

Contractual

General Management

M.B.B.S.

19

21.11.1992

Nil

Dr.S.Anand Reddy

Executive Director

38 years

9626739

Contractual

General Management

B.E. (I & P)P.G.

Dip. In Cement

Technology

14

26.6.2003

Nil

Shri S.Sreekanth Reddy

Group President

65 years

2400000

Contractual

General Management

B.E. Hons.

(Mechanical)

45

29.01.2009

President (Works),

NCL Industries

Limited

Shri M.S.A.Narayana Rao

Shri S.Veera Reddy, Dr.S.Anand Reddy and Shri S.Sreekanth Reddy are related to each other.


ANNEXURE – 3

(Forming part of the Directors’ Report)

FORM A

[Pursuant to Rule 2 of the Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988]

Form of disclosure of particulars with respect to conservation of energy

Particulars01.04.2008 to

31.03.2009

01.04.2009 to

31.03.2010

1. Electricity

a) Purchased Units 1333.75 lakhs 701.12 lakhs

Total Amount 4514.05 lakhs 2366.62 lakhs

Rate / Unit (Rs.) 3 . 3 8 3.38

b) Own Generation (Units) 1.36 lakhs 0.76 lakhs

Unit / Ltr. of Diesel Oil 3.40 units 3.24 units

Rate / Unit (Rs.) 10.12 per unit 10.78 per unit

2. Coal ( C & D Grade used as fuel in Kiln)

Quantity 312046 MT 179541 MT

Total Cost (Rs.) 9313.00 lakhs 5160.63 lakhs

Average Rate (Rs.) 2 9 8 4 . 5 0 2874.35

A. Power & Fuel Consumption

Products - OPC - 1120351 431250

Electricity (in KWH) 140 100.09 110.01

Coal (MT) (For Clinker) 0.28 0.218 0.243

Particulars 01.04.2008 to

31.03.2009

01.04.2009 to

31.03.2010Standards

B. Consumption per unit of production

FORM B

[See Rule 2]

[Pursuant to Rule 2 of the Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988]

Form for disclosure of particulars with respect to Technology Absorption, Research and Development

1. Research and Development

Collaborates with the National Council for Cement and Building Materials for R & D activities.

2. Technology absorption, adaptation and innovation:

The company successfully commissioned a project in the year 2008-09 to add an additional 1.75 MTPA cement capacity,

employing the vertical roller mill technology and IKN pendulum cooler. FLSmidth Automation’s QCX / Robolab system

has been installed at the plant and Sagar Cements is one of the first few Indian companies to have implemented this system.

This ensures the best quality in lab operations to facilitate high product quality and would optimize overall plant operation.

Foreign Exchange Earnings and Outgo:

Earnings : Nil

Outgo : Rs.310 lakhs


Report on Corporate Governance

1. Company’s philosophy on code of governance:

Sagar Cements believes that adherence to good corporate practice leads to transparency in its operations and improvement

in the quality of its relations with all its stakeholders.

2. Board of Directors:

Composition:

The Board of Directors has an optimum combination of Executive and Non-Executive Directors and its composition is in

conformity with Clause 49 of the Listing Agreement entered into with the Stock Exchanges. All the Directors have made

the requisite disclosures regarding directorships and Committee positions held by them in other Companies.

Following was the composition of the Board as on 31st March, 2010:

Sl. No. Name of the Director Category of Directorship

1 Shri O.Swaminatha Reddy, Chairman Independent & Non-Executive

2 Shri S.Veera Reddy, Managing Director Non-Independent & Executive

3 Dr. S.Anand Reddy, Joint Managing Director Non-Independent & Executive

4 Shri S.Sreekanth Reddy, Executive Director Non-Independent & Executive

5 Shri K.Thanu Pillai Independent & Non-Executive

6 Shri Gilbert Noel Claude Natta Non-Independent & Non-Executive

7 Shri Werner C.R.Poot Non-Independent & Non-Executive

8 Shri V.V.S.Ravindra (IDBI Nominee) Independent & Non-Executive

9 Shri P.Rajeswara Rao (APIDC Nominee) Non-Executive & Non-Independent

Meetings held:

The Board had met six times during the financial year 2009-10 and held its meetings on 25-05-2009, 16-06-2009,

23-07-2009, 17-09-2009, 23-10-2009 and 21-01-2010.

Board Procedure:

Board Meetings are convened taking into consideration the business requirements, statutory and regulatory compliance. The

Agenda, backed by adequate background information, is made available in advance to all the members of the Board, to enable

them to take informed decisions on the matters covered in the agenda for the respective meetings.

Code of Conduct:

The Company has adopted a Code of Conduct for all its Directors and Senior Executives and the same is available on the

Company’s website, www.sagarcements.in.


Attendance of Directors and their other directorships:

Attendance of directors at the Board Meetings held during the financial year 2009-10 and at the last Annual General Meeting as

also the number of their directorships and Committee Memberships as on 31st March, 2010 are given below:

Sl.

No.Name of the Director

No. of membership of

Audit and the

Shareholders Grievances

Committees of Public

Limited Companies

No of membership of

the Boards of Public

Limited CompaniesWhether

attended the

last AGM

No. of

Board

Meetings

attended As

Member

As

Chairman

As

Member

As

Chairman

1 Shri O.Swaminatha Reddy 6 Yes 5 4 - 5

2 Shri S.Veera Reddy 6 Yes 6 - - 1

3 Dr.S.Anand Reddy 5 Yes 5 - 2 -

4 Shri S.Sreekanth Reddy 6 Yes 4 1 - -

5 Shri K.Thanu Pillai 5 Yes 11 1 4 -

6 Shri Werner C.R.Poot 6 Yes 1 - - -

7 Shri V.V.S.Ravindra 6 Yes 1 - 1 -

8 Shri P.Rajeswara Rao 6 Yes 4 - 1 1

9 Shri Gilbert Noel Claude Natta 3 NA 2 - - -

(w.e.f. 17.9.2009)

Note: Only Public Limited Companies, their Audit Committees and Investors’ Grievance Committees have been considered for

the above purpose.

Shareholding of Non-Executive Directors:

As on 31st March 2010, none of the Non-Executive Directors was holding any shares in the Company in his personal capacity.

3. Audit Committee:

Composition as on 31st March, 2010:

Name of the Director Status in the Committee

Shri O.Swaminatha Reddy Chairman

Shri K.Thanu Pillai Member

Shri V.V.S.Ravindra (w.e.f. 23-07-2009) Member

Shri P.Rajeswara Rao Member


Shri O.Swaminatha Reddy, a Chartered Accountant, is a Financial Consultant. Shri K.Thanu Pillai, M.B.A.,CAIIB, has retired

from State Bank of Hyderabad as its Managing Director. Shri V.V.S. Ravindra and Shri P.Rajeswara Rao, are the nominee directors

of IDBI and APIDC respectively. The composition of the Committee is in conformity with Clause 49(ii) (A) of the Listing

Agreement. The Chairman of the Committee was present at the last Annual General Meeting.

Terms of reference:

Terms of reference of the Audit Committee include all the items listed in Clause 49(ii) (D) of the Listing Agreement.

Meetings held:

The Audit Committee, which had met four times during 2009-10, held its meetings on 16-06-2009, 23-07-2009,

23-10-2009 and on 21-01-2010 in the said year.

Attendance at the meetings of the Audit Committee:

Name of the Director No. of meetings attended

Shri O.Swaminatha Reddy 4

Shri K. Thanu Pillai 3

Shri V.V.S.Ravindra 3

Shri P.Rajeswara Rao 4

4. Remuneration Committee:

Pursuant to Schedule XIII to the Companies Act, 1956 read with Clause 49 of the Listing Agreement, the Board has

constituted a Remuneration Committee with the terms of reference as mentioned in the said Clause.

Composition of the Committee:

Name of the Director Status

Shri K.Thanu Pillai Chairman

Shri O.Swaminatha Reddy Member

Shri P.Rajewar Rao Member

During the year 2009-10, the Committee did not hold any meetings. The Chairman of the Committee attended the last Annual

General Meeting.

Remuneration policy:

Remuneration to Non-Executive Directors:

Non-Executive Directors are not in receipt of any remuneration other than the sitting fee of Rs.10,000/- for each meeting of the

Board and Committees thereof attended by each of them.


Sitting fees payable to the nominee directors are paid directly to the institutions they represent. Details of sitting fees paid to the

non-executive directors during the year 2009-10 are given below:

Sl. No. Name of the Director Sitting Fee (Rs)

1 Shri O.Swaminatha Reddy 100000

2 Shri K.Thanu Pillai 80000

3 Shri P.Rajeswara Rao (APIDC Nominee) 100000

4 Sri Gilbert Noel Claude Natta (w.e.f. 17.9.2009) 30000

5 Shri V.V.S.Ravindra (IDBI Nominee) 90000

6 Shri Werner C.R.Poot 60000

Total 460000

Remuneration to the Executive Directors (Managing Director and Whole time Directors):

The Company pays remuneration to its Managing Director and other Whole time Directors by way of salary and perquisites,

which are fixed components and by way of commission, a variable component. Remuneration is paid in accordance with the

approval accorded by the shareholders under the applicable provisions of the Companies Act, 1956.

Details of remuneration paid / payable to the Executive (Whole-time) Directors for the financial year 2009-10:

Name of the Director TotalCategory Salary & Perquisites Commission

Shri S.Veera Reddy Managing Director 7116509 4925262 12041771

Dr.S.Anand Reddy Whole-time Director 6539540 4925262 11464802

Shri S.Sreekanth Reddy Whole-time Director 4701477 4925262 9626739

Total 18357526 14775786 33133312

5. Shareholders’ / Investors’ Grievances Committee:

The Investors Grievances Committee of the Board, constituted in accordance with Clause 49 of the Listing Agreement,

has the following directors as its members:

Shri P.Rajeswara Rao Chairman

Dr.S.Anand Reddy Member

Shri R.Soundararajan, Company Secretary, is the compliance officer for the above purpose. Based on the information obtained

from the Company’s Registrars, the Company had received 75 complaints from the investors during the year 2009-10 and

all these complaints, being routine in nature, were redressed in the normal course by the Registrars. There were no complaints

pending as on 31st March, 2010. In view of these and also of the fact that all requests for transfer of shares held in physical forms

were swiftly approved by the officials of the Company in terms of the authorization given to them by the Board, the need for

convening a meeting of the Grievances Committee was not felt during the year 2009-10.


6. Investment Committee:

With a view to evaluating investment opportunities available to the Company from time to time, your Board has

constituted an Investment Committee, which has the following directors as its members:

Shri O.Swaminatha Reddy Chairman

Shri S.Veera Reddy Member

Shri K.Thanu Pillai Member

7. General Body Meetings:

The details of the time, venue and the date of the last three Annual General Meetings of the Company are given below:

AGM VenueDate Time

28th AGM 17th September, 2009 3.30 p.m. Hotel Golkonda, Masab Tank,

27th AGM 24th September, 2008 4.00 p.m. Hyderabad - 500028

26th AGM 24th September, 2007 12.00 Noon

Details of Special Resolutions passed in the above said Annual General Meetings are given below:

No Special Resolutions were passed at the 28th Annual General Meeting.

At the 27th AGM held on 24th September, 2008, one Special Resolution for re-appointment of Shri S.Sreekanth Reddy as

Executive (Whole-time) Director and two Special Resolutions for enhancement in the remuneration payable to Shri S.Veera

Reddy, Managing Director and Dr.S.Anand Reddy, Joint Managing Director, were passed.

At the 26th AGM held on 24th September, 2007, three Special Resolutions were passed, viz., one resolution for re-

appointment of Dr.S.Anand Reddy as the Executive Director and two resolutions for increasing the remuneration payable

to Shri S.Veera Reddy, M.D. and Shri S.Sreekanth Reddy, Whole time Director.

In addition to the above, the Company held an extraordinary general meeting on 23rd July, 2008, whereat the shareholders

passed a special resolution according their consent U/s. 81(1A) of the Companies Act, 1956 to issue 10,00,000 equity

shares of Rs.10/- each on a preferential basis to M/s. Vicat S.A. and or to any of its subsidiaries or affiliates, at a premium

of Rs.690/- per share.

Details of Resolutions passed at the previous AGM through Postal Ballot:

No Resolution was passed through Postal Ballot at the last (28th) Annual General Meeting.

8. Disclosures:

i. Related Party Transactions:

Full disclosures of related party transactions as per the Accounting Standard 18 issued by the ICAI are given under

note No.8 of Schedule 22 to the Annual Accounts. Most of these transactions were entered into with the

Company’s subsidiary Sagar Power Ltd., (for purchase of power), and its other associate companies namely

Amereswari Cements Ltd., (for sale of clinker and purchase of cement), Panchavati Polyfibres Ltd., (for purchase of

packing bags) and Vicat Sagar Cement Pvt.Ltd., (towards investment in JV project). These transactions, intended to

further the interest of the Company, were entered into after due negotiation based, inter-alia, on business expediency,

company’s own interest and legal requirements.


There were no materially significant transactions with Directors, their relatives or the Management that may have

potential conflict with the interests of the Company at large. The Register of Contracts maintained under Sec.301

of the Companies Act, 1956, containing transactions in which Directors are deemed to be interested, is placed before

each meeting of the Board. All related party transactions are also reviewed by the Audit Committee of the Board.

ii. Statutory compliance, Penalties and Strictures:

There was no instance of non-compliance by the Company on any matter relating to capital market during the last

three years or any penalties imposed or strictures passed on the Company by the Stock Exchanges, SEBI or other

statutory authorities relating to capital market during the said period.

iii. Compliance with Mandatory requirements and adoption of Non-Mandatory requirements:

The Company has implemented the mandatory requirements of Clause 49 of the Listing Agreement.

Regarding non-mandatory requirements, the Company has constituted a Remuneration Committee pursuant to

Clause 49 of the Listing Agreement read with Schedule XIII to the Companies Act, 1956, to recommend a suitable

remuneration payable to the Board members. Other non-mandatory requirements will be taken up for implementation

in due course.

9. Means of Communication:

Quarterly results:

As part of compliance with Clause 41 of the Listing Agreement, the Company furnishes its quarterly financial results to the

Stock Exchanges where its shares have been listed, followed by publication in the newspaper in accordance with the said

Clause.

Newspapers in which the results were published:

Details of newspapers in which quarterly results relating to the Financial Year 2009-10 were published are given below:

Quarter ended Date of Publication Name of the news papers carrying the publication

30th June, 2009 24.07.2009 Financial Express and Andhra Prabha

30th September, 2009 24.10.2009 “

31st December, 2009 22.01.2010 “

31st March, 2010 20.05.2010 “

Website where displayed:

The Financial Results and Shareholding pattern of the Company for the first three quarters during the year 2009-10 were

posted on the SEBI EDIFAR website (www.sebiedifar.nic.in). These particulars and particulars for the subsequent quarter are

also now available on the website of NSE and BSE as part of corporate filing made by the Company.

Presentation made to Institutional Investors and Financial Analysts:

Excepting the occasions when the Company had to respond in a general way to the queries now and then received from

investors / analysts regarding the affairs of the company, there were no specific presentations made to any of them during the

year 2009-10. Copies of the press-release, as and when issued by the Company, were simultaneously made available to the

Stock Exchanges.

Management Discussion and Analysis Report:

The Annual Report of the Company contains the Management Discussion and Analysis.


10. General Shareholder information:

a. Annual General Meeting:

Date & Time : 4.00 p.m. on Monday, the 20th September, 2010

Venue : Hotel Golkonda, Masab Tank, Hyderabad - 500028

b. Financial Year: 1st April to 31st March

c. Book Closure Dates: From 10th September, 2010 to 20th September, 2010 (both days inclusive))

d. Dividend payment date:

Board of Directors have recommended a dividend @ Rs.2.50 (25%) per share on the 15002300 equity shares of the

Company for the year 2009-10 and the same will be paid to the shareholders within 30 days of its declaration at the

ensuing Annual General Meeting..

e. Listing on Stock Exchanges:

Company’s shares have been listed on the National Stock Exchange of India Ltd. (NSE), and Bombay Stock Exchange

Ltd. (BSE) There are no dues against listing fee payable to these Exchanges.

f. Stock and ISIN Codes for the Company’s shares:

ISIN Code and Codes for the Company’s shares on the above said Exchanges are as below:

Name of the Stock Exchange Scrip Code

National Stock Exchange SAGCEM

Bombay Stock Exchange 502090

ISIN INE229C01013

g. Market price details:

High and Low prices for the Company’s shares during the Financial Year 2009-10 as traded on the Bombay Stock

Exchange Limited and National Stock Exchange of India are given below:

Month NSE

High Low Average

Closing PriceHigh Low Average

Closing Price

Apr-09 182.50 141.00 163.46 174.70 141.50 165.28

May-09 219.90 150.25 183.21 214.00 158.30 183.04

Jun-09 271.75 210.05 230.64 268.90 207.70 230.75

Jul-09 268.95 188.15 221.42 249.90 191.10 218.75

Aug-09 259.00 212.00 230.24 248.50 220.05 230.57

Sep-09 228.00 200.00 212.19 228.75 199.05 212.65

Oct-09 207.60 175.00 193.52 202.05 185.05 194.40

Nov-09 189.50 166.00 175.07 182.90 169.20 174.18

Dec-09 203.90 165.60 172.49 185.05 167.60 171.71

Jan-10 225.00 169.05 192.32 208.20 174.35 193.08

Feb-10 194.50 165.00 174.78 183.00 166.00 174.58

Mar-10 200.10 169.00 179.05 192.85 169.70 178.80

BSE


h. Sagar Cements’ Shares Price movements during the year 2009-10 as compared with SENSEX and

NIFTY are depicted below:

i. Registrar and Share Transfer Agents:

Karvy Computershare (P) Limited

Plot No.17-24, Vittalrao Nagar

Madhapur,Hyderabad – 500081

Tel:91 40 23420815-22

Fax: 91 40 23420814

Email: [email protected]

Website: karvycomputershare.com

j. Share Transfer System:

All proposals for transfer of shares held in physical form are scrutinized by the Company’s Share Transfer Agents

and, subject to the same being found to be in order, are approved jointly by the Joint Managing Director and the

Company Secretary, who, for administrative convenience and speedy approvals, have been delegated with the

necessary authority for the purpose by the Board of Directors.


k. Distribution of shareholding as on 31st March, 2010:

Frequency Distribution of shares held as on 31st March, 2010

Shares %

50 and less 53865 0.36 1877 20.45

51 to 100 523514 3.49 5312 57.86

101 to 200 151933 1.01 826 9.00

201 to 300 81652 0.54 290 3.16

301 to 500 177212 1.18 386 4.20

501 to 1000 204446 1.36 248 2.70

1001 to 5000 377753 2.52 178 1.94

5001 to 10000 179456 1.20 25 0.27

10001 to 20000 208609 1.39 14 0.15

20001 to 50000 184977 1.23 7 0.08

50001 to 100000 0 0.00 0 0.00

More than 100000 12858883 85.72 17 0.19

Total 15002300 100.00 9180 100.00

Shares %Category

Shareholding pattern as on 31st March, 2010

Shares %

Promoters - Individuals 9 5380110 35.86

Promoters - Bodies Corporate 3 1244785 8.30

Mutual Funds 5 1189353 7.93

FIs and Banks 4 4150 0.03

Foreign Corporate Bodies 1 1000000 6.66

Domestic Corporate Bodies 256 4367718 29.11

Public - Individuals holding more than 10000 shares 12 213882 1.43

Public - Individuals holding 10000 and less shares 8852 1582126 10.55

Non-Resident Indians 38 20176 0.13

Total 9180 15002300 100.00

HoldersCategory


l) Dematerialization of Shares and liquidity:

Trading in the shares of the Company has to be in the electronic form only. The Company has subsisting agreements

with NSDL and CDSL for the purpose. The ISIN number for the company’s shares is – INE229C01013. Shares

representing 83% of the share capital were kept in dematerialized form as on 31st March, 2010 as detailed below:

Total

In Demat FormIn physical form

With NSDL With CDSL

Shares % Shares % Shares % Shares %

2544848 17 11261916 75 1195536 8 15002300 100

m. Details of outstanding GDR / ADR / Warrants or any other convertible instruments:

There are no outstanding GDR / ADR / Warrants or any other convertible instruments.

n. Plant Location:

Mattampally

Via: Huzurnagar

Nalgonda District

Andhra Pradesh – 508204

o. Address for investors related correspondence:

Company Secretary


Registered Office:

8-2-472/B/2, Road No.1, Banjara Hills

Hyderabad – 500034

Tel. 040 – 23351571

Fax: 040 – 23356573

Email: [email protected]


DECLARATION

I, S.Veera Reddy, Managing Director of Sagar Cements Limited, hereby declare that all the members of its

Board of Directors and its senior management personnel have affirmed their compliance with the Code of

Conduct for the year ended 31st March, 2010.

Hyderabad S.Veera Reddy

21st July, 2010 Managing Director


CERTIFICATE

To

The Members


Hyderabad

We have examined the compliance of conditions of Corporate Governance by Sagar Cements Limited, for the year ended 31st

March, 2010, as stipulated in Clause 49 of the Listing Agreement of the said company with Stock Exchange.

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

limited to procedures and implementation thereof, adopted by the company for ensuring the compliance of the conditions of

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

In our opinion and to the best of the information and according to the explanation given to us, we certify that the company has

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

We state that no investor grievances are pending for a period exceeding one month against the company as per the records

maintained by the Investors Grievance Committee.

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

effectiveness with which the management has conducted the affairs of the company.

For P.Srinivasan & Co.,


Hyderabad K.Ranganathan

21st July, 2010 Partner

M.No.10842


AUDITORS’ REPORT

To

The Members


Hyderabad

We have audited the attached Balance Sheet of Sagar Cements Limited as at 31st March, 2010 and the Profit and Loss Account

for the year ended on that date annexed thereto and the Cash Flow Statement for the year ended on that date. These financial

statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these financial

statements based on our audit.

We conduct our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan

and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit

also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the

overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

1. As required by the Companies (Auditor’s Report) Order, 2003 issued by the Central Government of India in terms of Sub-

Section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified

in paragraphs 4 and 5 of the said Order.

2. Further to our comments in the Annexure referred to in paragraph 1 above, we report that:

a. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary

for the purpose of our audit;

b. In our opinion, proper books of accounts as required by law have been kept by the company so far as appears from

our examination of those books;

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

the books of accounts;

d. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply

with the accounting standards referred to in Sub-Section (3C) of Section 211 of the Companies Act, 1956;

e. On the basis of written representations received from the Directors as on 31st March, 2010 and taken on record by

the Board of Directors, we report that none of the Directors is disqualified as on 31st March, 2010 from being

appointed as a director in terms of Clause (g) of Sub Section (1) of Section 274 of the Companies Act, 1956;

f. In our opinion and to the best of our information and according to the explanations given to us, the said accounts give

the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in

conformity with the accounting principles generally accepted in India:

i. in case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2010;

ii. in the case of the Profit and Loss Account, of the Profit for the year ended on that date; and

iii. in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.




18th May, 2010 Partner

M.No.10842

SAGAR CEMENT AUDITORS’ REPORT


ANNEXURE TO THE AUDITORS’ REPORT

Annexure referred to in paragraph 1 of our Report

1. The company has maintained proper records showing full particulars including quantitative details and situation of fixed

assets.

2. Some of the fixed assets were physically verified during the year by the management in accordance with a programme of

verification, which in our opinion provides for physical verification of all the fixed assets at reasonable intervals. According

to the information and explanations given to us, no material discrepancies were noticed on such verification.

3. As per information and explanation given by the management during the year, the company has not disposed off a

substantial part of its fixed assets and going concern assumption of the company is not affected.

4. As explained to us, inventories were physically verified during the year by the management at reasonable intervals.

5. In our opinion and according to the information and explanations given to us, the procedures of physical verification of

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

nature of its business.

6. In our opinion and according to the information and explanations given to us, the company has maintained proper records

of its inventories and no material discrepancies were noticed on physical verification.

7. According to the information and explanations given to us, the company has not granted or taken any loans, secured or

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

Companies Act, 1956.

8. As the company has not granted or taken loans to / from companies, firms or other parties listed in the register maintained

under Section 301 of the Companies Act, 1956, the clause relating to rate of interest and other terms and conditions of

loans given or taken by the company, secured or unsecured, which are prima facie prejudicial to the interest of the company

is not applicable to the company.

9. As the company has not taken loans from / granted to companies, firms or other parties listed in the register maintained

under Section 301 of the Companies Act, 1956, the clause relating to the regular payment of principal amount and interest

is not applicable to the company.

10. As the company has not taken loans from or granted to companies, firms or other parties listed in the register maintained

under Section 301 of the Companies Act, 1956, the clause relating to steps taken for recovery / payment of the principal

and interest on overdue amount of more than one lakh, is not applicable to the company.

11. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures

commensurate with the size of the company and the nature of its business with regard to purchases of inventory, fixed

assets and with regard to the sale of goods. During the course of our audit, no major weakness has been noticed in the

internal control.

12. a) Based on the audit procedures applied by us and according to the information and explanations provided by the

management, we are of the opinion that the transactions that need to be entered into the register maintained under

Section 301 of the Companies Act, 1956 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 and exceeding the value of Rupees five lakhs in respect of any party during the year,

have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.


13. The company has not accepted deposits from the public during the year.

14. In our opinion, the internal audit functions carried out during the year by a firm of Chartered Accountants appointed by the

management have been commensurate with the size of the Company and the nature of its business.

15. In our opinion and according to the information and explanations given to us, the company has made and maintained

accounts and records prescribed by the Central Government under Section 209 (1) (d) of the Companies Act, 1956.

However, we have not carried out any detailed examination of such records.

16. According to the records of the company, 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, Customs Duty, Excise Duty, Cess and any other statutory dues applicable to it.

17. The company has no accumulated losses and it has not incurred any cash losses during the financial year covered by our

audit and the immediately preceding financial year.

18. In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment

of dues to financial institutions, banks or debenture holders.

19. The company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other

securities.

20. The company is not a chit fund or nidhi or mutual fund / society and hence the provisions of Clause 4 (xiii) of the Companies

(Auditor’s Report) Order, 2003 are not applicable to the company.

21. The company is not dealing in or trading in shares, securities, debentures and other investments and hence the provisions

of Clause 4 (xiv) of the Companies (Auditor’s Report) Order, 2003 are not applicable to the company.

22. As the company has not given any guarantee for loans taken by others from banks or financial institutions, hence the

provisions of Clause 4 (xv) of the Companies (Auditor’s Report) Order, 2003 are not applicable to the company.

23. In our opinion, the term loans taken by the company have been applied for the purpose for which they were raised.

24. According to the information and explanations given to us and on an over all 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. No long term funds

have been used for short term assets.

25. According to the information and explanations given to us, the company has not made preferential allotment of shares to

parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956.

26. According to the information and explanations given to us, during the period covered by our audit report, the company has

not issued any debentures.

27. During the year, the company has not raised monies by public issue.

28. According to the information and explanations given to us and the books and records examined by us, no fraud on or by

the company has been noticed or reported during the year.




18th May, 2010 Partner

M.No.10842



BALANCE SHEET AS AT 31ST MARCH, 2010

In Rs.

Particulars As on 31-03-09As on 31-03-10Schedules

As per our report of even date attached

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

P.Srinivasan & Co., S.Veera Reddy Dr.S.Anand Reddy

Chartered Accountants Managing Director Joint Managing Director

K.Ranganathan S.Sreekanth Reddy R.Soundararajan

Partner Executive Director Company Secretary

Hyderabad

18th May, 2010

Sources of Funds

Shareholder’s Funds

Share Capital 1 150023000 150023000

Reserves and Surplus 2 1920967576 1772198694

2070990576 1922221694

Loan Funds

Secured Loans 3 2218235259 2408569375

Creditors for Capital Goods 55651746 123088375

2273887005 2531657750

Deferred Income Tax Liability 303588877 202085650

Total 4648466458 4655965094

Application of Funds

Fixed Assets 4

Gross Block 4480731083 4343135291


Net Block 3575357930 3714647184

Capital Work-in Progress 101253319 77709675

Investments 5 408867550 177989300

Current Assets, Loans and Advances

Inventories 6 488614772 425331984

Sundry Debtors 7 411879456 249294641

Cash and Bank Balances 8 26731560 112203882

Loans and Advances 9 439647483 474215198

1366873271 1261045705

Less : Current Liabilities and Provisions

Liabilities 10 709310544 501513396

Provisions 11 94575068 73913374

803885612 575426770

Net Current Assets 562987659 685618935

Total 4648466458 4655965094

Accounting Policies and Notes on Accounts 22

BALANCE SHEET


PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2010

In Rs.








Hyderabad

18th May, 2010

Income

Income From Operations 12 5230025899 3342733929

Less : Excise Duty 434291956 277281816

Net Income 4795733943 3065452113

Other Income 13 67878108 8371720

Total 4863612051 3073823833

Expenditure

Raw Materials Consumed 14 418397172 191759097

Manufacturing Expenses 15 1533080047 827954935

Salaries and Wages 16 138248166 103189122

Purchase of Cement 464505645 643718392

Value Added Tax and Other Taxes 17 560689378 365218708

Administration and Other Expenses 18 89688756 78473127

Adjustment for Stocks 19 (21043366) (52186470)

Selling and Distribution Expenses 20 815454082 317142377

Interest and Financial Charges 21 289507311 158988253

Depreciation 4 276885046 187224994

Total 4565412237 2821482535

Profit Before Tax 298199814 252341298

Provision for:

Less: Fringe Benefit Tax 0 1430947

Less: Current Tax 50695216 28600447

Add: Provision for Income Tax Earlier Years 489607 3995701

Add: Minimum Alternate Tax Credit eligible for Set Off 44744233 25243113

Less: Deferred Tax/(Asset) Liability 101503227 86982125

Profit After Tax 191235211 164566593

Balance brought forward from Previous Year 612688130 532700165

Profit available for Appropriation 803923341 697266758

Appropriations:

Proposed Dividend 37505750 38505750

Corporate Dividend Tax 4960579 6072878



Total 803923341 697266758


Accounting Policies and Notes on Accounts 22

PROFIT & LOSS ACCOUNT


A. Cash Flow from operating activities:

Net Profit 2982.00 2523.41

Adjustments for

Depreciation 2768.85 1872.25

Interest and Finance charges 2895.07 1589.88

Loss on sale of assets 0.00 5663.92 (0.17) 3461.96

Operating Profit before working capital changes 8645.92 5985.37

Adjustments for

(Increase) /Decrease in Inventories (632.83) (3502.83)

Increase /(Decrease) in Trade creditors 2056.04 2752.42

(Increase) / Decrease in Receivables (1625.85) (1954.12)

(Increase) / Decrease in Advances 907.19 (1043.52)

Increase / (Decrease) in working capital borrowings 2546.76 3251.31 2778.39 (969.66)

Cash generated from operations 11897.23 5015.71

B Cash Flow from Investing Activities

Sale of Fixed Assets 0.00 12.97

Purchase of Fixed Assets (1611.39) (9424.52)

Investment (2308.78) (1500.00)

Net cash used in investing activities (3920.17) (10911.55)

C Cash flow from Financing Activities

Receipt of term loan 158.66 1398.46

Interest and Finance charges (2873.14) (1482.95)

Increase in capital creditors (674.37) (156.68)

Receipt of share application money 0.00 7490.77

Dividend paid (375.06) (150.02)

Repayment of Term Loans (4608.76) (505.29)

Income Tax paid (459.11) (262.89)

Net cash used in financing activities (8831.78) 6331.40

Net increase in cash and cash equivalent (854.72) 435.56

Cash and Cash equivalent at the beginning of the year 1122.04 686.48

Cash and Cash equivalent at the end of the year 267.32 (854.72) 1122.04 435.56


CASH FLOW STATEMENT AS AT 31ST MARCH, 2010Rs. in Lakhs

Particulars As At 31.03.2009As At 31.03.2010







Hyderabad

18th May, 2010

CASH FLOW STATEMENT


SCHEDULES In Rs.

Particulars As on 31-03-09As on 31-03-10

Schedule 1

Share Capital

Authorized

2,00,00,000 Equity shares 200000000 200000000

20,00,000 Preference Shares 20000000 20000000

Total 220000000 220000000

Issued, Subscribed and Paid up

1,50,02,300 Equity shares of Rs.10/- each 150023000 150023000

Total 150023000 150023000

*400 Equity shares of Rs.10/- each were issued for consideration other than cash

Schedule 2

Reserves and Surplus

Capital Reserve 3498687 3498687

General Reserve

Balance as per last account 105705766 65705766

Add: Amount Transferred from Profit & Loss A/c. 50000000 40000000

155705766 105705766

Share Premium 1050306111 1050306111

Surplus as per Profit and Loss Account


Add : Amount Transferred from Profit & Loss A/c. 98768882 79987964

Total 711457012 612688130

Grand Total 1920967576 1772198694

Schedule 3

Secured Loans

Term Loans

Andhra Pradesh State Financial Corporation 45053316 82635381

State Bank Of India 335886115 425886118

State Bank Of Hyderabad 371509224 471510884

IDBI Bank 750000015 950000019

L & T Finance Ltd. 42506377 61923609

Vehicle Loans From Banks 7913404 5922844

Total 1552868451 1997878855

Cash Credit From

State Bank of Hyderabad 249089821 202341521

Punjab National Bank 83652456 26390687

State Bank of India 204031432 98907117

IDBI Bank Ltd 79941545 83051195

Bill Discounting 48651554 0

665366808 410690520

Total 2218235259 2408569375

SCHEDULES FORMING PART OF BALANCE SHEET AND PROFIT AND LOSS ACCOUNT


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SCHEDULES In Rs.


Schedule 5

Investments (Unquoted)

26,000 Equity Shares of Rs.10/- each in Panchavati Polyfibres Ltd. Fully paid-up at cost 260000 260000

500 Equity Shares of Rs. 10/- each in PCL Fianancial Services Ltd. (Formerly

Sagar Priya Investment and Finance Ltd.) 5000 5 0 0 0

27,72,430 Equity Shares of Rs. 10/- each in SagarPower Limited 27724300 27724300

3,40,87,825 Equity shares of Rs. 10/- each in VICAT Sagar Cement Private Limited 380878250 150000000

Total 408867550 177989300

Schedule 6

Inventories

Stores and Spares 157241688 117967772

Raw Materials 12919846 25391740

Coal 171641340 131050933

Packing Materials 11087705 8942454

Goods In Transit 56513299 83811555

Work in Progress 68489755 29846561

Finished Goods 10721139 28320969

Total 488614772 425331984

Schedule 7

Sundry Debtors

Debtors Over Six Months 38832348 14686067

Other Debtors 373047108 234608574

Total 411879456 249294641

Schedule 8

Cash and Bank Balances

Cash on Hand 1717581 1465647

Current Account 13253604 57575810

Deposit Account 11760375 53162425

Total 26731560 112203882

Schedule 9

Loans and Advances

Advances recoverable in cash or in kind or for value

to be received (Unsecured and considered good)

Advance to Suppliers 114727520 245272656

Balances with Excise Authorities 23880144 70366650

Balances with Income Tax Authorities 120738036 62733071

Incentives receivable under AP Industrial Policy 40007391 0

Claims Receivable 14458853 0

Advance to Others 45591193 24826537

Deposits to Others 69392670 64547173

Prepaid Expenses 10851676 6469111

Total 439647483 474215198


In Rs.


Schedule 10

Current Liabilities

Sundry Creditors

For Materials 271373532 196089161

For Stores & Spares 70774672 28225248

For Expenses 81464796 70091262

For Other Liabilities 68921986 72117102

Interest Accrued But not Due 15620697 13427520

Deposits/Advances from Selling Agents, Stockists and Others 201154861 121563103

Total 709310544 501513396

Schedule 11

Provisions



Taxation 50695216 28600447

Fringe Benefit Tax 0 1433075

Total 94575068 73913374

Schedule 12

Income From Operations

Sale of Cement 3685651084 1556834246

Sale of Cement - Second Sale 727815117 924834578

Sale of Clinker 816559698 861065105

Total 5230025899 3342733929

Schedule 13

Other Income

Dividend (From Subsidiary Company) 8317290 2798430

Interest Received 3216545 4560470

Incentives under AP industrial policy 40007391 0

Others 16336882 1012820

Total 67878108 8371720

Schedule 14

Raw Materials Consumed

Limestone 204992465 99081207

Laterite 60742178 27503168

Iron Ore 51281743 31878493

Gypsum 99248650 32651898

Dolamite 0 292661

Fly ash 2132136 351670

Total 418397172 191759097


In Rs.


Schedule 15

Manufacturing Expenses

Consumption of Stores and Spares 83845612 42645936

Fuel Expenses

Coal 931300549 516062944

Power 451405288 231601858

Total 1382705837 747664802

Repairs and Maintenance

Buildings 974670 862757

Plant and Machinery 55848704 31662898

Vehicles 1645161 1663564

Others 8060063 3454978

Total 66528598 37644197

Grand Total 1533080047 827954935

Schedule 16

Salaries and Wages

Salaries, Wages, Allowances, Amenities, Bonus and Ex-gratia 121186022 92161514

Contribution to Provident Fund and other Funds 7100400 5373930

Staff and Workmen Welfare Expenses 9961744 5653678

Total 138248166 103189122

Schedule 17

Taxes

Value Added Tax 559705480 362146566

Entry Tax 806400 88743

Service Tax 177498 2983399

Total 560689378 365218708


In Rs.


Schedule 18

Administration and Other Expenses

Administrative Expenses

Director’s Remuneration and Perquisites 33133312 26940900

Printing and Stationery 2030566 1460999

Legal and Professional Charges 5572445 8481606

Insurance 9863036 5812871

Director’s Traveling Expenses 1942667 2090481

Traveling Expenses and Conveyance 7787215 7992992

Total 60329241 52779849

Auditor’s Remuneration

Statutory Auditors

Audit Fees 150000 150000

Tax Audit Fees 50000 50000

Certification Work 50000 68500

Reimbursement of Expenses 5000 10709

Total 255000 279209


Cost Auditors

Audit Fees 75000 75000


Total 82765 75000

Other Expenses

Rent 2977456 2055100

Rates, Taxes and Licenses 3853820 4205403

Miscellaneous Expenses 8866308 9666468

Loss on Sale of Asset 0 103286

Postage & Telephones 3948318 2797274

Office Maintenance 4130778 2639725

Wealth Tax 95070 89832

Testing Fees 389877 653813

Security Services 4760123 3128168

Total 29021750 25339069

Grand Total 89688756 78473127


In Rs.


Schedule 19

Adjustment for Stocks

Work-in-Process

Opening Stock 29846561 4223884

Less : Closing Stock 68489755 29846561

Total (38643194) (25622677)

Finished Goods



Total 17599828 (26563793)

Grand Total (21043366) (52186470)

Schedule 20

Selling and Distribution Expenses

Consumption of Packing Materials 124986505 48630252

Transportation Charges 491861759 205436682

Advertisement Expenses 37664473 25565259

Selling Expenses 160941345 37510184

Total 815454082 317142377

Schedule 21

Interest and Financial Charges

Interest on Term Loans 201261793 103850773

Interest on Working Capital 62804532 38128768

Other Financial Charges 25440986 17008712

Total 289507311 158988253


Schedule 22

NOTES FORMING PART OF ACCOUNTS

1. SIGNIFICANT ACCOUNTING POLICIES

a) Accounting Assumptions:

The financial statements are prepared under the historical cost convention on the basis of a going concern on an

accrual basis and they comply with the mandatory accounting standards referred to in Section 211 (3C) of the


b) Fixed Assets:

Fixed assets are accounted at cost of acquisition inclusive of inward freight, duties, taxes, incidentals related to

acquisition and pre-operational expenditure till commissioning of the asset. Capital work-in-progress comprises

outstanding advances paid to acquire fixed assets, and the cost of fixed assets that are not yet ready for their intended

use at the balance sheet date.

c) Revenue recognition:

Sales are recognized on dispatch of goods to customers and it includes excise duty and Value Added Tax on sale.

d) Foreign currency transactions:

Income and expenses in foreign currencies are converted at exchange rate prevailing on the date of transaction.

Foreign currency monetary assets and liabilities are translated at the exchange rate prevailing on the Balance sheet

date. Exchange differences on translation of monetary items for purchase of machinery are included in the cost of

such assets.

e) Investments:

Long term investments, including investments in subsidiary company, are stated at cost. Provision is made where

there is a permanent fall in valuation of Long term investments.

f) Depreciation:

Depreciation has been provided as per the rates given in Schedule XIV to the Companies Act, 1956. Depreciation

is charged on Plant & Machinery at straight-line method and on all other assets at written down value method.

g) Inventories:

Inventories including work-in-progress are valued at lower of cost or market value. The cost is calculated on weighted

average method. Cost comprises expenditure incurred in the normal course of business in bringing such inventories to

its location and includes, where applicable, appropriate overheads based on normal level of activity.

Stocks in transit are valued at cost.

h) Employee Benefits:

Short term benefits:

Short term employee benefits are charged off at the undiscounted amount in the year in which the related services

are rendered.

Long term benefits:

Payments to the defined contribution retirement benefit schemes are charged as an expense as they fall due.

Under defined benefit scheme, Company provides for gratuity, a defined benefit retirement plan (the “Gratuity Plan”)

covering eligible employees. In accordance with the Payment of Gratuity Act, 1972, the Gratuity Plan provides a

lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an

amount based on the respective employee’s salary and the tenure of employment. The company has taken master

policy with Life Insurance Corporation of India under group gratuity scheme. Liabilities with regard to the Gratuity


Plan are determined by actuarial valuation as of the balance sheet date, based upon which, the Company contributes

all the ascertained liabilities to the Life Insurance Corporation of India.

The leave encashment payable to the employees is provided based on the actuarial valuation carried out in accordance

with the revised AS 15.

i) Deferred Taxation:

Deferred Tax, resulting from timing differences between book and tax profits, is accounted for under the liability

method, at the current rate of tax.

j) Government grants receivable under Industrial Investment Promotion Policy 2005 – 10 of Government of Andhra

Pradesh are accounted based on verification and recommendation of the competent authority as per the policy of

Government and in accordance with Accounting Standards 9 and 12.

2. CONTINGENT LIABILITIES

a) Estimated amount of contracts to be executed on capital account and not provided for Rs.857.45 Lakhs (Previous

Year: Rs.3785 Lakhs).

b) Demand raised by APTRANSCO towards voltage surcharge and grid supporting charges is Rs.1,73,50,747/- and the

company paid Rs.1,08,02,441/- under protest. The said demand is contested by the company with Division Bench

of High Court of Andhra Pradesh.

c) Bank Guarantees: Rs.90 Lakhs (Previous year: Rs.72.36 lakhs).

d) Letter of Credit: Rs. Nil. (Previous year: Rs.NIL Lakhs).

e) There is a demand from Sales Tax authorities for a sum of Rs.31,00,933 /- in respect of Input Tax Credit on Coal

Consumption availed by the company from April, 2005 to December, 2005, claiming that the company is not eligible

for the said credit. (Paid under protest in the year 2006 Rs.15,50,466/-). The said demand is contested by the

company.

f) Demand raised by Sales Tax authorities for a sum of Rs.8,08,656/- in respect of input tax credit availed on closing

stock of coal held on 31st March, 2005 and filed writ petition before the High Court of Andhra Pradesh on payment

of 50% of the disputed tax amount i.e. Rs.4,04,328/-. (Paid under protest in the year 2007 is Rs.4,04,328/-).

g) During the year 2009-10, demand raised by Sales Tax Authorities for a sum of Rs.1,09,40,297/- in respect of tax on

sale of fixed assets. We have paid an amount of Rs.27,35,074/- and contested before the State Appellate Tribunal.

h) Show cause notices were issued by the Central Excise Authorities for an amount of Rs.19.44 lakh, pertaining to various

issues under Central Excise and Service Tax Act and for an amount of Rs.203.44 lakhs for availment of service tax

credit. The company has replied to the show cause notices and the matter is pending before the Department for

adjudication.

3. SECURED LOANS

a) The term loans from the Banks and Financial Institutions are secured by the fixed assets i.e., Land, Buildings, Plant &

Machinery, Mining Equipment owned by or belonging to the borrower company both proposed and future, and by

second charge on the current assets of the company and are guaranteed by Shri S.Veera Reddy, Managing Director,

Dr.S.Anand Reddy, Joint Managing Director and Shri S.Sreekanth Reddy, Executive Director.

b) Cash Credit from State Bank of Hyderabad, Punjab National Bank, State Bank of India and IDBI Bank Ltd., are secured

by hypothecation of raw materials, goods-in-process, finished goods, stores and spares and receivables, present and

future, and by second charge on fixed assets of the company and are guaranteed by Shri S.Veera Reddy, Managing

Director, Dr.S.Anand Reddy, Joint Managing Director and Shri S.Sreekanth Reddy, Executive Director.

c) Loan from L&T Finance Limited is secured by the mortgage of specific assets purchased from that loan and further

secured by personal guarantees of Dr.S.Anand Reddy, Joint Managing Director and Shri S.Sreekanth Reddy Executive

Director.

d) Vehicle loans from bank are secured by the mortgage of specific vehicle purchased from that loan and further secured

by personal guarantees of Dr.S.Anand Reddy, Joint Managing Director and Shri S.Sreekanth Reddy Executive Director.


4. Earnings per Share (EPS) In Rs.

Description Year ended

31st March 2009

Profit after tax 191235211 164566593

Weighted average number of shares 15002300 14336050

Earnings per share 12.75 11.48

Year ended

31st March 2010

5. a) As per Andhra Pradesh State Industrial Policy 2005-10, Company has made an application to the General Manager,

District Industries Centre, Nalgonda, Andhra Pradesh for claiming the incentives on Value Added Tax and power

consumption. General Manager, DIC, Nalgonda has verified and recommended an amount of Rs.400.07 lakhs during

the year to the State Level Committee. This amount has been considered as income during the current year and

shown in Schedule 13 ‘Other Income’.

b) Other income includes Rs.1.45 crores receivable from insurance company.

6. The disclosures required under Accounting Standard 15 “Employee Benefits” notified in the Companies (Accounting

Standards) Rules, 2006 are given below:

a) Reconciliation of opening & closing balance of Defined benefit obligation

Description Year ended 31st March 2009

Gratuity Leave

encashment

(Un-funded)

Gratuity Leave

encashment

(Un-funded)

Defined benefit obligation at the beginning of the Year 12996505 3291166 11310300 2333349

Current service cost 3088574 953488 1686205 957817

Interest cost 1039720 263293 904824 186668

Actuarial (gain) / loss (330502) 2095288 (540391) 1222335

Benefits paid (709218) (2358581) (364433) (1409003)

Defined benefit obligation at the year end 16085079 4244654 12996505 3291166

Year ended 31st March 2010

Fair value of plan assets at the beginning of the Year 11514791 - 7312912 -

Expected return on plan assets 1158566 - 792408 -

Actuarial gain / (loss) (66534) - (1261) -

Employer contribution 2729718 - 3775165 -

Benefits paid (709218) - (364433) -

Fair value of plan asset at the year end 14627323 - 11514791 -

b) Reconciliation of opening and closing balances of fair value of plan assets

In Rs.


c) Reconciliation of fair value of assets and obligations


Gratuity Leave

encashment

(Un-funded)

Gratuity Leave

encashment

(Un-funded)

Fair value of plan assets as at 31st March 2010 14627323 - 11514791 -

Present value of obligations as at 31st March 2010 16085079 4244654 12996505 3291166

Amount recognized in the Balance sheet (1457756) 4244654 (1481714) 3291166



Interest cost 1039720 263293 904824 186668

Expected return on plan assets (1158566) - (792408) -

Actuarial gain / (loss) (263968) 2095288 (539130) 1222335

Net cost 2705760 3312069 1259491 2366820

d) Expenses recognized during the year

In Rs.

e) Investment details

100% invested in LIC Group gratuity (cash accumulation policy)

f) Actuarial assumptions

Mortality table (LIC) 1994-96 (ultimate)

Discounting rate - 8%

Expected rate of return on plan asset – 9.25%

Expected average remaining working lives of employees–18 Yrs

Rate of escalation in salary – 4%

7. PARTICULARS OF MANAGERIAL REMUNERATION

Particulars As at 31.03.2009

Salary 11400000 8720833

Other Perks 6957526 7416317

Commission on Profits 14775786 10803750

TOTAL 33133312 26940900

Calculation of Profit U/s. 198 of the Companies Act, 1956

Profit as per Profit and Loss Account 298199814 252341298

Add: Directors Remuneration 33133312 26940900

Depreciation as provided in the books of accounts 276885046 187224994

Loss on Sale of Fixed Assets 0 103286

TOTAL 608218172 466610478

Less: Depreciation U/s. 350 of the Companies Act. 1956 276885046 187224994

Profit U/s. 198 read with Section 349 of the Companies Act, 1956 331333126 279385484

As at 31.03.2010

In Rs.


8. As required by Accounting Standards AS 18, the related parties disclosure issued by the Institute of Chartered Accountants

of India is as follows:

a) List of related parties and relationships

S.No. CountryName of the CompanyNature of Relationship

1 Subsidiary Companies M/s. Sagar Power Ltd. India

2 Associate Company M/s.Vicat Sagar Cement Pvt. Ltd. India

3 Transactions with Companies a) M/s.Panchavati Polyfibres Ltd.

in which Directors are b) M/s.Amareswari Cements Ltd.

interested c) M/s.Sagarpriya Housing and Industrial Enterprises Ltd. India

d) M/s.Golkonda Hospitality Services and Resorts Ltd.

e) M/s.BSCPL Infrastructure Ltd.

4 Directors interested in a) Sri O.Swaminatha Reddy, Chairman

individual capacity b) Sri S.Veera Reddy, Managing Director

c) Dr. S.Anand Reddy, Joint Managing Director

d) Sri S.Sreekanth Reddy, Executive Director

e) Sri K.Thanu Pillai, Director

f) Sri Werner C.R.Poot, Director

g) Sri P.Rajeswara Rao, APIDC Nominee

h) Sri Gilbert Noel Claude Natta, Director

b) Related Party TransactionsRs. in Lakhs

DescriptionSubsidiary

CompaniesAssociate

Company

Company in

which Directors

are interested

Directors in

individual

capacity are

interested

Total

Purchase of power 622.57 - - - 622.57

Purchase of goods - - 6065.49 - 6065.49

Sale of goods 1.05 - 4268.44 - 4269.49

Dividend Received 83.17 - 0.39 - 83.56

Dividend Paid 23.29 56.90 80.19

Remuneration to Directors - - - 331.33 331.33

Sitting fees - - - 4.70 4.70

Investment in Associate Company - 2308.78 - - 2308.78


9. ADDITIONAL INFORMATION PURSUANT TO THE PROVISIONS OF PARAGRAPH 3,4C AND 4 D OF

PART II OF SCHEDULE VI OF THE COMPANIES ACT, 1956 (AS CERTIFIED BY THE MANAGEMENT)


Quantity

MTs

Value

Rs.


Quantity

MTs

Value

Rs.

a) Turnover

Sale of Cement (inc. 2897 MTs for self

consumption (Previous Year:3126 MTs) 1130636 3685651084 415835 1556834246

Second sale of cement 204191 727815117 225650 924834578

Sale of Clinker 350133 816559698 307152 861065105

TOTAL 5230025899 3342733929

b) i) Details of Raw Material Consumed

1. Limestone 1996932 204992465 1040564 99081207

2. Laterite (HG) 62688 60306050 28598 27317400

3. Laterite (LG) 736 436128 416 185768

4. Gypsum 63257 99248650 23002 32651898

5. Iron-ore 37482 47942785 19647 29090544

6. Iron-ore sludge 3880 3338958 4446 2787949

7. Dolamite 0 0 1010 292661

8. Fly-ash 4348 2132136 784 351670

TOTAL 418397172 191759097

ii) Details of Raw Material consumed for trial runs

1. Limestone - - 10425 1737914

2. Laterite (HG) - - 139 143106

3. Laterite (LG) - - 278 164732

4. Iron-ore - - 139 222080

iii) Cement Purchased for Sale 203657 464505645 226307 643718392

c) Capacities and Production

Licensed and Installed Capacity (TPA) 2350000 2350000

Actual Production (MTs) 1120350 431250

d) Opening and Closing Stock

Opening Stock (MTs) 16999 908

Value (Rs.) 28320967 1757174

Closing Stock (MTs) 6179 16999

Value (Rs.) 10721139 28320967

e) Value of Imports (CIF)

Capital goods 11405710 98930460

Coal, Components and Spare Parts 256615687 299925506

f) Expenditure in Foreign Currencies

On account of Traveling and other expenses (Rs.) 858757 1794625

On account of Consumables and Capital goods 30149232 54647694


g) Value of Imported and Indigenous Raw Materials, Components, Spare Parts and other materials consumed:

10. There are no amounts due to micro and small enterprises.

11. Previous year’s figures have been regrouped, recast and reclassified wherever necessary to conform with those of the

current year.

12. Paise have been rounded to the nearest rupee.

Schedules 1 to 22 form part of the Accounts







Hyderabad

18th May, 2010

Year ended 31.03.2009

Spare Parts and

Other materials

Value Rupees %

Raw Materials

Value Rupees %


Spare Parts and

Other materials

Value Rupees %

Raw Materials

Value Rupees %

Particulars

Imported - - 30149232 36 - - - -

Indigenous 418397172 100 53696380 64 191759097 100 42645936 100

Total 418397172 100 83845612 100 191759097 100 42645936 100


BALANCE SHEET ABSTRACT







Hyderabad

18th May, 2010

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

(Inserted by Notification No.GSR 388 (E), dt.15.5.1995)

I. Registration Details

Registration No. : 2887 State Code : 01

Balance Sheet Date : 31 3 2010Date Month Year

II. Capital Raised during the Year (Amount in Rs.Thousands)

Public Issue : Nil Rights Issue : NilBonus Issue Nil Private Placement : 749077

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

Total Liabilities 4648466 Total Assets : 4648466

Sources of Funds

Paid-up Capital : 150023 Reserves and Surplus : 2224556

Secured Loans : 2273887 Unsecured Loans : 0


Net Fixed Assets : 3676611 Investments : 408867

Net Current Assets : 562988 Miscellaneous Expenditure : -

Accumulated Losses : -

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

Total Turnover : 5297904 Total Expenditure : 4999704Profit / (Loss) before Tax : 298200 Profit / (Loss) after Tax : 191235Earning Per Share (Rs.) : 12.75 Dividend Rate : 25%

V. Generic Names of Principal Products of the Company

Product Description Item Code No. (ITC Code)

Cement 252300

Clinker 252310

STATEMENT REGARDING SUBSIDIARY COMAPNY

Pursuant to Section 212 (3) of the Companies Act, 1956

Name of the Subsidiary

Net aggregate amount of subsidiary’s Profit / (Loss) not

dealt within the Holding Company’s Accounts

Current Year

Rs. in Lakhs

Up to Previous Year

Rs.in Lakhs

Holding Company’s

interest in equity

shares of Rs.10/- each

fully paid

Financial Year

Sagar Power Limited 31.03.2010 2772430 (6.36) 468.67


BOARD OF DIRECTORS

CORPORATE INFORMATION

BOARD OF DIRECTORS : Shri O.Swaminatha Reddy Chairman

Shri S.Veera Reddy Director

Shri N.Suresh Reddy Director

Shri M.Mohan Reddy Director

Shri S.Sreekanth Reddy Director

Dr.S.Anand Reddy Managing Director

Smt.S.Aruna Executive Director

AUDITORS : M/s.C.Ramachandram & Co.,


3-6-237, Unit – 606

Lingapur La Builde Complex

Himayat Nagar


REGISTERED OFFICE : 8-2-472/B/2

Road No.1

Banjara Hills


PLANTS : 1. Guntur Branch Canal Hydel Project

Tsallagundla Adda Road

Nekarikallu Mandal

Guntur District

Pin – 522 615

2. Lock-in-Sula Hydel Project

Banumukkala Village

Banakacherla Regulator

Pamulapadu Mandal

Kurnool District

Pin – 518 422

3. Theni Wind Project

S.F.No.750/3A, 3B, 4(P)

Poomalaigundu Village

Theni Taluk and District

Tamilnadu State

Pin : 625 531


NOTICE

SAGAR POWER LIMITED

Regd. Office: 8-2-472/B/2, Road No.1

Banjara Hills, Hyderabad – 500034

NOTICE

NOTICE is hereby given that the Sixteenth Annual General Meeting of the Members of the Company will be held at 3.00 p.m.

on Monday, the 20th September, 2010, at Hotel Golkonda, Masab Tank, Hyderabad-500 028, to transact the following

business:

1. To receive, consider and adopt the audited Balance Sheet as at and the audited Profit and Loss Account for the year ended

31st March, 2010 and the Reports of the Directors and Auditors thereto.

2. To declare dividend on the Cumulative Redeemable Preference Shares of the Company.

3. To declare dividend on the Equity Shares of the Company.

4. To appoint a director in the place of Shri S.Veera Reddy, who will be retiring by rotation at the Annual General Meeting and

being eligible, offering himself for re-appointment.

5. To appoint a director in the place of Shri N.Suresh Reddy, who will be retiring by rotation at the Annual General Meeting

and being eligible, offering himself for re-appointment.

6. To appoint Auditors to hold office from the conclusion of this Meeting until the conclusion of the next Annual General

Meeting and to fix their remuneration.

Notes:

(i) A Member entitled to attend and vote at the Meeting is entitled to appoint a Proxy to attend and vote on his / her behalf

and the proxy to be so appointed need not be a Member of the Company. However, proxies in order to be effective must

be lodged with the Company at its Registered Office not less than 48 hours before the commencement of the Meeting;

(ii) Members are requested to inform the Company of the change, if any, in their address.

(iii) Members / Proxy Holders are requested to bring the Attendance Slips duly filled in for being handed over at the entrance

of the venue for the meeting.

(iv) The Company had paid dividends for the years 2005-06, 2006-07, 2007-08 and 2008-09 and sent cheques / DDs to

the shareholders then entitled to the same within time. Those members who have so far not encashed their dividend

cheques may approach the Company quoting their folio numbers.

(v) Section 109A of the Companies Act, 1956 provides for Nomination by the shareholders of the Company in the

prescribed Form No.2B and the shareholders are requested to avail this facility.


For Sagar Power Limited

Hyderabad Dr.S.Anand Reddy

18th May, 2010 Managing Director


DIRECTORS’ REPORT

Dear Members

Your Directors are pleased to present their 16th Annual Report together with the Audited Accounts of your Company for the

year ended 31st March, 2010.

PERFORMACE

The following is the summary of the Financial Results of your Company for the year ended 31st March, 2010:

Rs. in lakhs

For the year endedParticulars

DIRECTORS’ REPORT

31 March, 2010 31 March, 2009

Income

Sale of Electrical Energy 735.38 861.49

Increase / Decrease in Stock 9.08 (22.40)

Net Income 744.46 839.09

Less: Generation, Distribution, Administration and

other Miscellaneous Expenses 225.54 218.51

Gross Profit before Depreciation and

Financial Charges and Tax 518.92 620.58

Less Depreciation 97.64 196.78

Financial Charges 114.15 211.79 48.81 245.59

Profit before tax for the year 307.13 374.99

Less: Provision for Income-tax 53.24 151.75

Provision for Fringe Benefit Tax 0.00 53.24 0.84 152.59

253.89 222.40

Add: Income-tax Excess Provision written back 0.00 15.08

MAT Credit Entitlement Account 46.07 68.71

Provision for Deferred Tax (Asset) (104.27) (58.20) 24.16 107.95

Profit after tax for the year 195.69 330.35

Add: Profit brought forward from the previous year 511.03 421.86

Profit available for appropriation 706.72 752.21

APPROPRIATIONS:

Proposed dividend @ 15% on 10,00,000 CRP

Shares (At Rs.1.50 per share) 15.00 15.00

Dividend @ 30% (At Rs.3.00 per share)

on the 54,30,365 Equity Shares of the Company 162.91 162.91

Dividend Tax on the dividends proposed 30.24 30.24

Transfer to General Reserve 20.00 33.03

Transfer to Preference Share Capital Redemption Reserve Account 100.00 0

Balance Carried to Balance Sheet 378.57 511.03

Total 706.72 752.21


For the year

Ended *Total

For the year EndedParticulars

* Commercial generation started from 2.6.2009

During the year, the generation of power from the Lock-In-Sula Unit of your Company was almost nil, due to stoppage of water

in the canal pending the completion of the on-going construction of an aqua-duct by the Government over the canal at the

project site. There was a marginal increase in the generation from the GBC unit as compared to its previous year’s generation.

The performance of the wind mill was satisfactory.

SHARE CAPITAL

There was no change in the Equity as well as Preference Share capital of your company during the year.

DIVIDEND

Despite the constraints continued to be faced by your Board of Directors caused by the absence of generation in one hydel unit,

your Directors, with a view not to disappoint the shareholders, have recommended a dividend @ 15% on the CRP Shares of

your Company and at 30% on the Equity Shares.

FUTURE OUTLOOK

Your Directors hope for completion of the on-going construction of the aqua-duct by the Government across the over the canal

near your LIS Unit during the current year, thereby paving the way for release of the water in the said canal to enable your Unit

to resume its generation of power to the optimum capacity without delay. Likewise, they also hope that the performance of

your GBC Unit would further improve upon during the current year.

To leverage the opportunities available in the power sector, your Board is on lookout for expanding and diversifying the

operations of your company and it is in this context that, as you are aware, your Company has already set up a wind mill power

project of 1.65 MW capacity in Theni District, in Tamil Nadu, the performance of which is satisfactory.

PARTICULARS OF EMPLOYEES

There are no employees in the Company whose particulars are required to be furnished in this Report pursuant to Sec.217 (2A)

of the Companies Act, 1956.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:

The particulars required under Sec.217 (1)(e) of the Companies Act, 1956 have been provided in the annexure, which forms

part of the Report.

DIRECTORS

In compliance with Sec.256 of the Companies Act, 1956, Shri S.Veera Reddy and Shri N.Suresh Reddy will be retiring by

rotation at the ensuing Annual General Meeting and, being eligible, will be offering themselves for re-appointment.

The performance of your Company during the year in terms of power generated at its Guntur Branch Canal Unit (GBC), Lock-

in-Sula Unit (LIS) and Wind Power Unit at Theni, is given below:

Hydel Power

Lock-in-Sula

For the year ended

Guntur Branch Canal

For the year ended

31.3.10 31.3.09 31.3.10 31.3.09 31.3.10 31.3.09 31.3.10 31.3.09

Units Generated 21769632 21587370 19500 9715 21789132 21597085 3836280 -

No. of Days 236 244 1 1 - - 303 -

Average Units Generated per Day 92244 88473 19500 9715 - - 12661 -

Capacity Utilization (%) 100% 99% 0 0 55% 55% 87% -

Capacity as per DPR (Units) 21847000 21847000 17520000 17520000 39367000 39367000 4400000 -

Wind Power


AUDIT COMMITTEE

The Audit Committee of the Board, constituted pursuant to Sec.292 (A) of the Companies Act, 1956 presently consists of the

following directors as its members:

Shri S.Veera Reddy Non-Whole time Director

Dr. S.Anand Reddy Managing Director

Shri N.Suresh Reddy Non-Whole time director

AUDITORS

Shareholders are requested to appoint the Auditors for the Company to hold office from the conclusion of the ensuing Annual

General Meeting till the conclusion of the next Annual General Meeting. Messrs.C.Ramachandram & Co., Chartered Accountants,

the present Auditors of your Company will be retiring at the ensuing Annual General Meeting and they are eligible for re-

appointment. They have also confirmed that their re-appointment, if approved by the shareholders, would be in accordance

with the limits specified in Sub Section (1B) of Section 224 of the Companies Act, 1956.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to Section 217 (2AA) of the Companies Act, 1956, your Directors hereby state

(i) that in the preparation of the annual accounts, the applicable accounting standards had been followed along with

proper explanation relating to material developments;

(ii) that the directors had selected such accounting policies and applied them consistently and made judgment and

estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at

the end of the financial year and of the profit of the company for the period;

(iii) that the directors had taken proper and sufficient care for the maintenance of adequate accounting records in

accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for

preventing and detecting fraud and other irregularities;

(iv) that the directors had prepared the annual accounts on a going concern basis.

ACKNOWLEDGEMENT

We wish to place on record our appreciation of the valuable guidance and co-operation extended by the bankers to the

Company, State and Central Government Authorities. We also wish to place on record our appreciation of the support given

by the promoter and holding company, namely, Sagar Cements Limited, to the operations of your Company and also of the

contributions made by the employees at all levels of your Company and the last but not least, of the continued confidence

reposed by you in the Management.

For and on behalf of the Board

Hyderabad O.Swaminatha Reddy

18th May, 2010 Chairman

ANNEXURE

FORM B

[ See Rule 2 ]

[Pursuant to Rule 2 of the Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988 ]

Form for disclosure of particulars with respect to Absorption, Research and Development

1. Research and Development : Nil

2. Technology absorption, adaptation and Innovation : Nil

3. Foreign Exchange Earnings and Outgo

Earnings : Nil

Outgo : Rs.1,50,000


AUDITORS’ REPORT

To

The Members

Sagar Power Limited

Hyderabad

1. We have audited the attached Balance Sheet of Sagar Power Limited as at 31st March, 2010, the Profit and Loss Account

for the year ended on that date annexed thereto and the cash flow statement for the year ended on that date. These

financial statements are the responsibility of the management of the company. Our responsibility is to express an opinion

on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. These standards require that

we plan and 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. An audit also includes assessing the accounting principles used and significant estimates made by management,

as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for

our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003 issued by the Central Government of India in terms of

Section 227 (4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in

paragraph 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

a. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary

for the purpose of our audit.

b. In our opinion, proper books of account as required by law have been kept by the company so far as it appears from

our examination of those books.

c. The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the books of account.

d. In our opinion, these financial statements have been prepared in compliance with the applicable accounting standards

referred to in Section 211 (3C) of the Companies Act, 1956.

e. Based on the representations made by all the Directors of the Company as on March 31, 2010 and taken on record

by the Board of Directors of the Company and in accordance with the information and explanations as made

available, the Directors of the Company do not, prima facie, have any disqualification as referred to in Clause (g) of

Sub Section (I) to Section 274 of the Companies Act, 1956.

f. In our opinion and to the best of our information and according to the explanations given to us, the said accounts give

the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in

conformity with the accounting principles generally accepted in India:

i. in case of Balance Sheet, of the state of affairs of the Company as at 31st March, 2010;

ii. in the case of the Profit and Loss Account, of the Profit of the Company for the year ended on that date; and

iii. in the case of Cash Flow Statement, of the cash flows for the year ended on that date.

For C.Ramachandram & Co.,


Place: Hyderabad C.Ramachandram

Date: 18.05.2010 Partner

Membership No.25834

AUDITORS’ REPORT


ANNEXURE TO THE AUDITORS’ REPORT

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

fixed assets.

(b) As explained to us, the fixed assets have been physically verified by the management during the year in a phased

periodical manner, which in our opinion is reasonable, having regard to size of the company and nature of its assets.

No material discrepancies were noticed on such physical verification.

(c) In our opinion, the company has not disposed off substantial part of fixed assets during the year and the going concern

status of the company is not affected.

2. (a) As explained to us, inventories have been physically verified during the year by the management. In our opinion, the

frequency of verification is reasonable.

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

of inventory followed by the management are reasonable and adequate in relation to the size of the company and the

nature of its business.

(c) On the basis of our examination of the inventory records in our opinion the company is maintaining proper records of

inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not

material.

3. (a) The company has not granted or taken any loans, secured or unsecured to/from companies, firms or other parties

covered in the register maintained U/s.301 of the Companies Act, 1956.

(b) The provisions of Clause (b), (c) and (d) of paragraph 4 (iii) of the Companies (Auditors Report) Order, 2003 are not

applicable to the company.

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

commensurate with the size of the company and the nature of its business with regard to purchases of inventory, fixed

assets and with regard to the sale of goods and services. During the course of our audit, we have not observed any

continuing failure to correct major weaknesses in internal control system.

5. (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or

arrangements referred to in Section 301 of the Companies Act, 1956 have been entered in the register required to

be maintained under that section.

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

contracts or arrangements and exceeding the value of Rupees five lakhs in respect of any party during the year, have

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

6. The company has not accepted any deposits from the public within the meaning of Sections 58 A and 58 AA or any other

relevant provisions of the Companies Act, 1956 and the Rules framed there under.

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

8. We have broadly reviewed the books of accounts maintained by the Company in respect of generation of power where,

pursuant to the Rules made by the Central Government of India, the maintenance of cost records has been prescribed

under Clause (d) of sub-section (1) of Section 209 of the Act and are of the opinion that prima facie, the prescribed

accounts and records have been made and maintained. We have not, however, made a detailed examination of the records

with a view to determine whether they are accurate or complete.


9. (a) According to the information and explanations given to us and the records of the Company examined by us, in our

opinion, the Company is regular in depositing the undisputed statutory dues including provident fund, employees state

insurance, income tax, sales tax, wealth tax, service tax, customs duty, excise duty, cess and other material statutory

dues as applicable with the appropriate authorities. There are no amounts that need to be deposited in investor

education and protection fund by the Company during the current year. At the last day of the financial year, there was

no amount outstanding in respect of any statutory due which was due for more than six months from the date they

became payable.

(b) According to the information and explanations given to us and the records of the Company examined by us, there are

no dues of sales tax, income tax, customs duty, wealth tax, service tax, excise duty and cess which have not been

deposited on account of any dispute.

10. The company has no accumulated losses as at March 31, 2010 and it has not incurred any cash losses in the financial year

ended on that date. The company had not incurred cash losses in immediately preceding financial year.

11. According to the records of the company examined by us and the information and explanation given to us, the company

has not defaulted in repayment of dues to Financial Institutions.

12. The company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and

other securities.

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 are not applicable to the company.

14. In our opinion, the company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly,

the provisions of Clause 4(xiv) of the Companies (Auditor’s Report) Order, 2003 are not applicable to the company.

15. In our opinion and according to the information and explanations given to us the company has not given any guarantee for

loans taken by others from banks or financial institutions during the year.

16. In our opinion, the term loans have been applied for the purpose for which they were raised.

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 and companies covered in the register

maintained under Section 301 of the Act during the year.

19. The company has not issued any debentures during the year.

20. The company has not raised any money by way of public issue during the year.

21. In our opinion and according to the information and explanations given to us, no fraud on or by the company has been

noticed or reported during the year, that causes the financial statements to be materially misstated.

For C.Ramachandram & Co.,


Place: Hyderabad C.Ramachandram

Date: 18.05.2010 Partner

Membership No.25834


SAGAR POWER LIMITED

(SUBSIDIARY OF SAGAR CEMENTS LIMITED)

BALANCE SHEET AS AT 31ST MARCH, 2010 In Rs.

Particulars As At 31st March, 2009Schedules



C.Ramachandram & Co., Dr.S.Anand Reddy

Chartered Accountants Managing Director

C.Ramachandram S.Aruna

Partner Executive Director

Place : Hyderabad

Date : 18.05.2010

I. SOURCES OF FUNDS

1. Shareholder’s Funds:

a) Share Capital A 64303650 64303650

b) Reserves and Surplus B 90553352 91798305

2. Loan Funds:

Secured Loans C 78000000 101500000

TOTAL 232857002 257601955

II. APPLICATION OF FUNDS

1. Fixed Assets: D

a) Gross Block 491020295 382045182

b) Less: Depreciation 284430907 274667208

c) Net Block 206589388 107377974

Add: Capital Work In Progress 1900598 104965144

208489986 212343118

2. Current Assets, Loans and

Advances: E

a) Inventories 4518276 4202031

b) Sundry Debtors 6596638 2617099

c) Cash and Bank Balances 4284113 2501000

d) Loans and Advances 33684917 31581807

49083944 40901937

Less: Current Liabilities and

Provisions F 57589818 38943554

Net Current Assets (8505874) 1958383

3. Deferred Tax Asset 32872890 43300454

TOTAL 232857002 257601955

Notes on Accounts J

BALANCE SHEET

As At 31st March, 2010


SAGAR POWER LIMITED

(SUBSIDIARY OF SAGAR CEMENTS LIMITED)

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2010 In Rs.

Particulars For the Year

ended

31.03.2009

For the Year

ended

31.03.2010

Schedules







Place : Hyderabad

Date : 18.05.2010

I. INCOME

Sale of Electrical Energy - Hydel 60825525 86149428

Sale of Electrical Energy - Wind 12713070 0

Increase/Decrease in Stock G 908034 (2239956)

TOTAL 74446629 83909472

II. EXPENDITURE

Generation, Distribution, Administration and Other Expenses H 22554111 21851147

Financial Charges I 11415291 4880517

Depreciation D 9763699 19677865

TOTAL 43733101 46409529


Less: Provision for Income Tax (MAT) 5219764 15175851

Less: Income Tax relates to earlier years 103490 0

Less: Provision for Fringe Benefit Tax (FBT) 0 83647

Add: MAT Credit eligible for set-off 4607029 6870808

Add: Income Tax Excess Provision 0 1507922

Less: Provision for Deferred Tax Asset/Liability 10427564 2415959

Profit After Tax 19569739 33035134

Profit Brought Forward from Previous Year 51102519 42185590


APPROPRIATIONS:

Proposed Dividend on Preference Shares 1500000 1500000

Provision for Dividend on Equity Shares 16291095 16291095

Dividend Tax @ 16.995% 3023597 3023597


Transfer to Preference Share Capital Redemption Reserve Account 10000000 0

Balance Carried to Balance Sheet 37857566 51102519

TOTAL 70672258 75220724

Annualized Earnings Per Share - Basic and Diluted 3.33 5.81

PROFIT & LOSS ACCOUNT


A. Cash Flow from Operating Activities

Net Profit Before Tax & Extra-Ordinary Items 30713528 37499943

Adjustments for

Depreciation 9763699 19677865

Interest 11415291 4880517

Profit/Loss on Sale of Fixed Assets 21998 0

21200988 24558382

Operating Profit Before Working Capital Changes 51914516 62058325

Adjustments for

Inventories (316245) 1133779

Trade and Other Receivables (6082649) 5668647

Trade Payables 29484868 (2391625)

23085974 4410801

Cash Generated from Operations 75000490 66469126

Direct Taxes paid 13803671 9922803

Net Cash Flow from Operating Activities 61196819 56546323

B. Cash Flow from Investing Activities

Purchase of Fixed Assets (6032565) (109325149)

Sale of Fixed Assets 100000 0

(5932565) (109325149)

Net Cash used in Investing Activities (5932565) (109325149)

C. Cash Flow from Financing Activities

Long Term Borrowings 0 100000000

Interest paid (12221539) (4074267)

Dividend paid on Equity & CRPS (17759602) (6923195)

Repayment of Term Borrowings (23500000) (36000000)

Net Cash used from Financing Activities (53481141) 53002538

Net increase in Cash and Cash equivalent 1783113 223712

Cash and Cash equivalent as at 01.04.2009 2501000 2277288

Cash and Cash equivalent as at 31.03.2010 4284113 2501000

SAGAR POWER LIMITED

CASH FLOW STATEMENT AS AT 31ST MARCH, 2010In Rs.








Place : Hyderabad

Date : 18.05.2010

CASH FLOW STATEMENT


SCHEDULES FORMING PART OF BALANCE SHEET AND PROFIT AND LOSS ACCOUNT

SAGAR POWER LIMITED

SCHEDULES FORMING PART OF BALANCE SHEET AS AT 31ST MARCH, 2010

In Rs.

Particulars As At

31.03.2009

As At

31.03.2010

Schedules

SCHEDULE - A

SHARE CAPITAL

AUTHORISED:

8000000 Equity Shares of Rs.10/- each 80000000 80000000

4000000 Cumulative Redeemable Preference Shares of Rs.10/- each 40000000 40000000

ISSUED, SUBSCRIBED AND PAID-UP:

5430365 Equity Shares of Rs.10/- each Fully Paid-up 54303650 54303650

1000000 15% Cumulative Redeemable Preference Shares of Rs.10/- each 10000000 10000000

TOTAL 64303650 64303650

SCHEDULE - B

RESERVES & SURPLUS

Preference Share Capital Redemption Reserve Account 40000000 30000000

General Reserve 12695786 10695786

Profit & Loss Account 37857566 51102519

TOTAL 90553352 91798305

SCHEDULE - C

SECURED LOANS

Axis Bank Limited (UTI Bank) 0 7500000

IDBI Bank Limited 78000000 94000000

TOTAL 78000000 101500000


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In Rs.

Particulars As At 31st March, 2009

CURRENT ASSETS, LOANS & ADVANCES

A. CURRENT ASSETS:

Inventories:

(As Certified by the Management)

Delivered Energy 908034 0


4518276 4202031

Sundry Debtors:

(Unsecured and Considered Good)

Outstanding for more than Six Months 0 0

Other Debts 6596638 2617099

6596638 2617099

Cash and Bank Balances:

a) Cash on Hand 126363 117368

b) Balance with Scheduled Banks

-in Current Accounts 4157750 2383632

4284113 2501000

B. LOANS AND ADVANCES:

(Unsecured and Considered Good)

Advances recoverable in Cash or in kind

or for value to be received 26036838 21900757

Advance Income Tax 3000000 9000000

Advance FBT 0 40000

MAT Entitlement Account 4607029 0

Deposits 41050 641050

33684917 31581807

TOTAL 49083944 40901937

SCHEDULE - F

CURRENT LIABILITIES & PROVISIONS

CURRENT LIABILITIES:

Creditors for Expenses 620020 869018

Creditors for Others 309243 721487

Advance Received against supply of Power 30146110 0

Interest Accrued but not due - IDBI 0 806250

31075373 2396755

PROVISIONS:

Provision for Income Tax 8219247 18283094

Provision for Dividend 18295198 18263705

26514445 36546799

TOTAL 57589818 38943554

(Dues to Small Scale Industries - Nil)

As At 31st March, 2010

SCHEDULE - E


SAGAR POWER LIMITED

SCHEDULES FORMING PART OF PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED 31ST MARCH, 2010

In Rs.

Particulars For the Year

ended

31.03.2009

For the Year

ended

31.03.2010

SCHEDULE - G

INCREASE/DECREASE IN STOCK:

Closing Stock 908034 0

Less: Opening Stock 0 2239956

TOTAL 908034 (2239956)

SCHEDULE – H

GENERATION, DISTRIBUTION, ADMINISTRATION AND OTHER EXPENSES:

Wheeling Charges 1230684 1722991

Banking Charges 182658 598598

Royalty on Water 480000 474961

Electricity Charges - Self 638459 116091

Salaries, Wages and Other Benefits 6524618 5586345

Staff Welfare Expenses 567344 440359

Travelling and Conveyance 1036512 524858


Communication Expenses 92749 182740

Rent 296460 252060

Rates and Taxes 54920 242125

Legal and Consultancy Charges 197609 315424

Insurance 320979 289860

Directors’ Remuneration 1785000 1640000

Auditors’ Remuneration 82725 82725

Advertisement 20780 10000

Vehicle Running Expenses 203619 377736


Repairs and Maintenance 8133572 8292355

General Expenses 576014 507273


TOTAL 22554111 21851147

SCHEDULE – I

FINANCIAL CHARGES:


Interest on Others 861932 77561

Bank Charges 30826 22520

TOTAL 11415291 4880517


Schedule J

NOTES ON ACCOUNTS


a) ACCOUNTING CONVENTION

The Company follows the Mercantile System of Accounting. The Accounts are prepared on Historical Cost basis and

as a going concern. Accounting policies not specifically referred to otherwise are consistent with the generally

accepted Accounting Standards.

b) FIXED ASSETS

Fixed Assets are stated at cost less depreciation.

c) DEPRECIATION

Depreciation on Fixed Assets has been provided on a pro-rata basis at the rates and in the manner prescribed under

Schedule XIV of the Companies Act, 1956, on Straight Line Method.

d) INVENTORY VALUATION

i) Banked Energy with APTRANSCO is valued at lower of cost or Net Realizable Value. Banked Energy with TNEB

is valued at Net Realizable Value.

ii) Stores & Spares are valued at cost.

e) EMPLOYEE RETIREMENT BENEFITS

Company’s contributions to the Provident Fund are charged to the Profit and Loss Account. Provision for other

retirement benefits i.e., gratuity and leave encashment is being made as per actuarial valuation certificate obtained in

this regard on year to year basis.

f) TAXES ON INCOME

Current Tax is determined based on the amount of tax payable in respect of taxable income for the period. Deferred

tax is recognized on timing differences between the taxable income and accounting income that originate in one period

and are capable of reversal in one or more subsequent periods. Deferred Tax Asset and liabilities have been computed

on the timing differences applying enacted Tax rates.

2 CONTINGENT LIABILITIES

a) As against the wheeling charges @ 2% of the quantity of energy wheeled as provided in the amended and restated

Power Wheeling and Purchase Agreement dated 1st August, 1998 between the company and Andhra Pradesh State

Electricity Board [now Transmission Corporation of Andhra Pradesh (APTRANSCO)], the Andhra Pradesh Electricity

Regulatory Commission (APERC) vide its Order dt.24.3.2002 determined that effective from 1st April, 2002, the

private power generators shall pay the wheeling charges @ 28.40% in kind and 50 paise in cash for of the energy

wheeled. The company had disputed the said Order of the Andhra Pradesh Electricity Regulatory Commission

before the High Court of Andhra Pradesh and the High Court vide its Judgment dated 18th April, 2003 set aside the

order of APERC. APTRANSCO has filed a special leave petition in the Supreme Court of India against the Order of

the High Court. The Supreme Court declined to grant a stay on the order of High Court but has allowed leave for

appeal to be heard in due course. Later, APTRANSCO charged the wheeling charges @ 6.40% in kind and 45 paise

in cash per unit of the energy wheeled with effect from 1st April, 2004 and 5.78% in kind and 46 paise in cash per unit

of the energy wheeled with effect from 1st April, 2005 and claimed the same from Sagar Cements Limited, who is

the energy consumer for the company. SPL has disputed the said order also before the High Court of Andhra

Pradesh. The Contingent Liability computed on the basis of imputed cost in respect of the above as claimed by

APTRANSCO till March 31st, 2010 was Rs.350.31 lakhs (As on March 31st, 2009 – Rs.350.31 lakhs).

b) The Government of Andhra Pradesh has inserted Section 3 B in Andhra Pradesh Electricity Duty Act, 1939, by which

every person or a generating company who generates energy and uses for his / its own purpose shall pay a duty

calculated @ 25 paise a unit of the energy consumed, excluding energy consumed in the auxiliaries as against 6 paise

per unit. The Chief Electrical Inspector has issued a letter dated 8th October, 2004 stating that the Company has

to pay the Electricity Duty with effect from 17th July, 2003, at the revised rate in respect of the energy consumed,

excluding energy consumed in the auxiliaries and the same is being disputed. The contingent liability on account of the

above till 31st March, 2010 was Rs.462.90 lakhs (As on March 31, 2009 – Rs.411.99 lakhs).


c) The Government of Andhra Pradesh has issued G.O.No.39, dt.02.04.2002 for payment of Royalty on consumptive

use of water. Accordingly, the irrigation and CAD Department issued a notice on 20.05.2005 vide Letter No.F/H/

222M claiming an additional amount of Rs.37,45,402/- towards Royalty on usage of water from April, 2002 to

December, 2004. The Company has contested the said order before the High Court of Andhra Pradesh. The

Contingent Liability pertaining to the period from April, 2002 to December, 2004 on account of the above as claimed

by the Government works out to Rs.37,45,402/-. The Contingent Liability for the subsequent period is not

ascertainable as the related data regarding gallons of water “Used” is not ascertainable by the Company.

3 The Term Loan from IDBI Bank Limited is secured by a First Charge on all the movable and immovable assets, present and

future of the company. The loan is secured by the personal guarantees of Dr.S.Anand Reddy, Managing Director and Shri

S.Sreekanth Reddy, Director.

4 The Company has adopted the Accounting Standard - 22 “Accounting for Taxes on Income” issued by the Institute of

Chartered Accountants of India with effect from 1st April, 2002. Deferred Tax Asset (net of Deferred Tax Liability) as

computed under Accounting Standard-22 as on 31st March, 2010 amounted to Rs.3,28,72,890/- (Previous Year

Rs.4,33,00,454/-). The Deferred Tax Asset / Liability represents the difference between the Depreciation and 43B

adjustments (being expenses allowed on payment basis under the Income Tax Act, 1961).

b) Table showing changes in the Fair value of Plan Assets:

5 The disclosures required under Accounting Standard “Employee Benefits” notified in the Companies (Accounting Standards)

Rules, 2006 are given below:

a) Table showing Changes in Present Value of Obligations:

Present Value of Obligation as at the beginning of the year 881821 784242 127366 101250

Acquisition adjustment - - - -

Interest cost 70546 62739 10189 8100

Past Service Cost - - - -

Current Service Cost 203604 97579 82177 26116

Curtailment Cost / (Credit) - - - -

Settlement Cost / (Credit) - - - -

Benefits paid - (60332) (206517) (138223)

Actuarial (gain) / loss on obligations (70546) (2407) 196328 130123

Present Value of Obligation as at the end of the year 1085425 881821 209543 127366

In Rs.

ParticularsGratuity

2009-10

Gratuity

2008-09

Leave

encashment

2008-09

Leave

encashment

2009-10

Value of Plan Assets at the beginning of the year 688482 537244 - -

Acquisition Adjustments - - - -

Expected Return on Plan Assets 61963 52615 - -

Contributions 296431 162411 - -

Benefits paid - (60332) - -

Actuarial Gain / (loss) on Plan Assets 147 (3456) - -

Value of Plan Assets at the end of the year 1047023 688482 - -


In Rs.

ParticularsGratuity

2009-10

Gratuity

2008-09

Leave

encashment

2008-09

Leave

encashment

2009-10

Actuarial gain (loss) for the year - Obligation 70546 2407 (196328) (130123)

Actuarial gain (loss) for the year -Plan Assets 147 (3456) - -

Total (gain) / (loss) for the year (70693) 1049 196328 130123

Actuarial (gain) / loss recognized in the year (70693) 1049 196328 130123

Unrecognized actuarial (gains) / losses at the end of year - - - -

d) Expense Recognized in the Statement of Profit and Loss

Current Service Cost 203604 97579 82177 26116

Past Service Cost - - - -

Interest Cost 70546 62739 10189 8100

Expected Return on Plan Assets (61963) (52615) - -

Curtailment Cost / (Credit) - - - -

Settlement Cost / (Credit) - - - -

Net Actuarial Gain / (Loss) recognized in the year (70693) 1049 196328 130123

Expenses Recognized in the statement of Profit & Loss 141494 108752 288694 164339

c) Actuarial Gain / Loss Recognized

e) Investment details:

100% invested in LIC Group Gratuity (cash accumulation policy)

f) Actuarial assumptions

Mortality table (LIC) 1994-96 (ultimate)

Discounting rate - 8%

Expected rate of return on plan asset – 9.25%

Expected average remaining working lives of employees–18 Yrs

Rate of escalation in salary – 4%





1 Holding Company M/s. Sagar Cements Ltd. India

2 Transactions with Companies a) M/s.Panchavati Polyfibres Ltd.,

in which Directors are interested b) M/s.Sagar Cements Ltd. India


individual capacity b) Sri S.Veera Reddy, Director

c) Dr. S.Anand Reddy, Managing Director

d) Smt. S.Aruna, Executive Director

e) Sri S.Sreekanth Reddy, Director

f) Sri N.Suresh Reddy, Director

g) Sri M.Mohan Reddy, Director


b) Related Party Transactions Rs. in Lakhs

DescriptionHolding

Company

Company inwhich Directors

are interested

Directors inindividual capacity

are interestedTotal

Sale of power 594.26 - - 594.26Purchase of goods - 1.57 - 1.57Others - 3.22 - 3.22Dividend Paid 83.17 - 62.23 145.40Remuneration to Directors - - 17.85 17.85Sitting fees - - 0.07 0.07

9. Additional information pursuant to the provisions of Paragraph 3, 4C and 4 D of Part II of Schedule VI of the

Companies Act, 1956

Particulars 2008-09

Quantity

MTs

Value

Rs.

2009-10

Quantity

MTs

Value

Rs.

a) Capacity – Installed Capacity Hydel Power

(As certified by the Management and relied

upon by the Auditors, being a technical matter) 8.3 MW - 8.3 MW -

b) Actual Generation - Both 25625 - 21591 -

c) Turnover – Hydel Power 20848 60825525 29497 86149428

d) Turnover- Wind Power 3750 12713070 0 0

e) Opening Stock of Delivered Energy 0 0 8414 2239956

f) Closing Stock of Banked Energy 751 908034 0 0

g) Self Consumption 276 0 508 0

h) Consumption of Stores and Spares (100% indigenous) - 4567106 - 4506792

i) Value of Imports (CIF) Nil Nil Nil Nil

j) Expenditure in Foreign Currency Nil 150000 Nil Nil

k) Earnings in Foreign Exchange Nil Nil Nil Nil

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

C.Ramachandram & Co., Dr.S.Anand ReddyChartered Accountants Managing Director

C.Ramachandram S.ArunaPartner Executive Director

Place : Hyderabad Date : 18.05.2010


current year.

11. Paise have been rounded off to the nearest rupee.

Schedules A to J form part of the Accounts

7. Directors’ Remuneration In Rs.

To Whole-time Director

Salary 1020000 980000

Perquisites 765000 660000

Total 1785000 1640000

For Statutory Audit 60000 60000

For Tax Audit 15000 15000

Total 75000 75000

8. Auditors’ Remuneration In Rs.

Nature of fee 2008-092009-10

Particulars 2008-092009-10


BALANCE SHEET ABSTRACT

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

(Inserted by Notification No.GSR 388 (E), dt.15.5.1995)

I Registration Details

Registration No. : 17761 State Code : 1

Balance Sheet Date : 31 3 2010

Date Month Year

I I Capital Raised during the Year (Amount in Rs.Thousands)

Public Issue : Nil Rights Issue : Nil

Bonus Issue : Nil Private Placement : Nil

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

Total Liabilities : 232857 Total Assets : 232857

Sources of Funds:

Paid-up Capital : 64304 Reserves & Surplus : 90553

Secured Loans : 78000 Unsecured Loans : 0

Application of Funds:

Net Fixed Assets : 208490 Investments : Nil

Net Current Assets : (8506) Misc. Expenditure : 0

Accumulated Losses : Nil Deferred Tax Asset : 32873

IV Performance of Company (Amount in Rs.Thousands)

Total Turnover : 74447 Total Expenditure : 43733

Pofit Before Tax : 30714 Profit After Tax : 19570

Earning Per Share (Rs.) : 3.33 Dividend Rate on ES : 30%

Dividend Rate on CRPS : 15%

V Generic Names of Principal Products of the Company

Item Code No. (ITC Code) : Not Applicable

Product Description : POWER


CONSOLIDATED FINANCIAL ACCOUNTS OF


AUDITORS’ REPORT ON CONSOLIDATED STATEMENTS

To

The Board of Directors


Hyderabad

We have audited the attached Consolidated Balance Sheet of Sagar Cements Limited and its Subsidiary (Sagar Power Limited)

as at 31st March, 2010, the consolidated Profit and Loss Account and the consolidated Cash Flow Statement for the year ended

on that date. These financial statements are the responsibility of the company’s management. Our responsibility is to express

an opinion on these financial statements based on our audit.

We conduct our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan

and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements.

An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit

also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the

over all financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

We did not audit the financial statements of the subsidiary, whose financial statements reflect total assets of Rs.23.28 crores as

at 31st March, 2010 and total revenues of Rs.7.35 crores for the year then ended. These financial statements have been audited

by other auditors whose reports have been furnished to us, and our opinion, in so far as it relates to the amounts included in

respect of the subsidiary, is based solely on the reports of the other auditors.

We report that the consolidated financial statements have been prepared by the company in accordance with the requirements

of Accounting Standard (AS) 21, Consolidated Financial Statements, issued by the Institute of Chartered Accountants of India,

and on the basis of the separate audited financial statements of Sagar Power Limited included in the consolidated financial

statements.

On the basis of the information and explanations given to us and on the consideration of the separate audit report on individual

audited financial statements of the company and its subsidiary, in our opinion, the consolidated financial statements give a true

and fair view in conformity with the accounting principles generally accepted in India:

i) In the case of consolidated Balance Sheet, of the consolidated state of affairs of the group as at 31st March, 2010;

ii) In the case of consolidated Profit and Loss Account, of the consolidated results of operations of the group for the

year ended on that date; and

iii) In the case of the consolidated Cash Flow Statement, of the consolidated cash flows of the group for the year ended

on that date.




May 18, 2010 Partner

M.No.10842

CONSOLIDATED AUDITORS’ REPORT



CONSOLIDATED BALANCE SHEET AS AT 31ST MARCH, 2010

In Rs.








Hyderabad

18th May, 2010

Sources of Funds

Shareholder’s Funds

Share Capital 1 160023000 160023000

Reserves and Surplus 2 1977788797 1838984471

Minority Interest 60311482 51591881

2198123279 2050599352

Loan Funds

Secured Loans 3 2296235259 2510069375

Creditors for Capital Goods 55651746 123088375

2351887005 2633157750

Deferred Income Tax Liability 270715987 158785196

Total 4820726271 4842542298


Fixed Assets 4

Gross Block 4971751378 4725180473


Net Block 3781947318 3822025158

Capital Work-in Progress 103153918 182674821

Investments 5 381143250 150265000

Current Assets, Loans and Advances

Inventories 6 493133048 429534015

Sundry Debtors 7 418476094 249294641

Cash and Bank Balances 8 31015673 114704882

Loans and Advances 9 443186290 505797006

1385811105 1299330544

Less : Current Liabilities and Provisions

Liabilities 10 710239807 501293052

Provisions 11 121089513 110460173

831329320 611753225

Net Current Assets 554481785 687577319

Total 4820726271 4842542298

Accounting Policies & Notes on Accounts 22

CONSOLIDATED BALANCE SHEET


CONSOLIDATED PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2010

In Rs.


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

P.Srinivasan & Co., S.Veera Reddy Dr.S.Anand ReddyChartered Accountants Managing Director Joint Managing Director

K.Ranganathan S.Sreekanth Reddy R.SoundararajanPartner Executive Director Company Secretary

Hyderabad18th May, 2010

Income

Income From Operations 12 5242738969 3342733929

Less : Excise Duty 434291956 277281816

Net Income 4808447013 3065452113

Other Income 13 59560818 5599290

Total 4868007831 3071051403

Expenditure

Raw Materials Consumed 14 418397172 191759097

Manufacturing Expenses 15 1483123514 753388239

Salaries and Wages 16 145340128 109215826

Purchase of Cement 464505645 643718392

Value Added Tax and Other Taxes 17 560689378 365218708

Administration and Other Expenses 18 94261133 82704838

Adjustment for Stocks 19 (21951400) (49946514)

Selling and Distribution Expenses 20 815474862 317152377

Interest and Financial Charges 21 300922602 163868770

Depreciation 4 286648745 206902859

Total 4547411779 2783982592


Provision for:

Less: Fringe Benefit Tax 0 1514594

Less: Current Tax 55914980 43776298

Add: Provision for Income Tax Earlier Years 386115 5503623

Add : Minimum Alternate Tax Credit eligible for set off 49351262 32113921

Less: Deferred Tax/(Asset) Liability 111930791 84566166

Profit After Tax 202487658 194829297

Less: Minority Interest 8719601 4364460

Profit attributable to company 193768057 190464837

Balance brought forward from Previous Year 638778122 557010118


Appropriations:





Total 832546179 747474955


Accounting Policies & Notes on Accounts 22

CONSOLIDATED PROFIT & LOSS ACCOUNT


A. Cash Flow from operating activities:

Net Profit 3205.96 2870.69

Adjustments for

Depreciation 2866.48 2069.03

Interest and Finance charges 3009.23 1638.69

Loss on sale of assets 0.00 5875.71 (0.17) 3707.55

Operating Profit before working capital changes 9081.67 6578.24

Adjustments for

(Increase) /Decrease in inventories (635.99) (3491.49)

Increase /(Decrease) in Trade creditors 2075.60 2875.45

(Increase) / Decrease in Receivables (1691.81) (1954.12)

(Increase) / Decrease in Advances 1233.68 (1356.51)

Increase / (Decrease) in working capital borrowings 2546.76 3528.24 2778.39 (1148.28)

Cash generated from operations 12609.91 5429.96

B Cash Flow from Investing Activities

Sale of Fixed Assets 0.00 12.97

Purchase of Fixed Assets (1670.50) (10517.77)

Investment (2308.78) (1500.00)

Net cash used in investing activities (3979.28) (12004.80)

C Cash flow from Financing Activities

Receipt of term loan 158.66 2313.48

Interest and Finance charges (2995.36) (1523.69)

Increase in capital creditors (674.37) (156.68)

Receipt of share application money 0.00 7490.76

Dividend paid (469.48) (191.53)

Repayment of Term Loans (4843.76) (780.32)

Income Tax paid (643.22) (139.39)

Net cash used in financing activities (9467.53) 7012.63

Net increase in cash and cash equivalent (836.90) 437.79

Cash and Cash equivalent at the beginning of the year 1147.05 709.26

Cash and Cash equivalent at the end of the year 310.15 (836.90) 1147.05 437.79


CONSOLIDATED CASH FLOW STATEMENT AS AT 31ST MARCH, 2010Rs. in Lakhs








Hyderabad

18th May, 2010

CONSOLIDATED CASH FLOW STATEMENT


SCHEDULES In Rs.


Schedule 1

Share Capital

Authorized

2,00,00,000 Equity shares 200000000 200000000

40,00,000 Preference Shares of Rs. 10/- each 40000000 40000000

20,00,000 Preference Shares 20000000 20000000

Total 260000000 260000000

Issued, Subscribed and Paid up

1,50,02,300 Equity shares of Rs.10/- each 150023000 150023000

10,00,000 15 % Cumulative Redeemable Preference shares of Rs.10/- each 10000000 10000000

Total 160023000 160023000

*400 Equity shares of Rs.10/- each were issued for consideration other than cash

Schedule 2

Reserves and Surplus

Capital Reserve 3498687 3498687

Pref. Share Capital Redemption reserve Account 40000000 30000000

General Reserve


Add: Amount Transferred from Profit and Loss A/c. 52000000 43303513

168401551 116401551

Share Premium 1050306111 1050306111

Surplus as per Profit and Loss Account


Add : Amount Transferred from Profit and Loss A/c. 76804326 81768004

Total 715582448 638778122

Grand Total 1977788797 1838984471

Schedule 3

Secured Loans

Term Loans

Andhra Pradesh State Financial Corporation 45053316 82635381

State Bank Of India 335886115 425886118

State Bank Of Hyderabad 371509224 471510884

IDBI Bank 828000015 1044000019

Axis Bank Limited (UTI Bank) 0 7500000

L & T Finance Ltd. 42506377 61923609

Vehicle Loans From Banks 7913404 5922844

Total 1630868451 2099378855

Cash Credit From

State Bank of Hyderabad 249089821 202341521

Punjab National Bank 83652456 26390687

State Bank of India 204031432 98907117

IDBI Bank Ltd 79941545 83051195

Bill Discounting 48651554 0

Total 665366808 410690520

Grand Total 2296235259 2510069375

SCHEDULES TO THE CONSOLIDATED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT


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.


SCHEDULES In Rs.


Schedule 5

Investments (Unquoted)

26,000 Equity Shares of Rs.10/- each in Panchavati Polyfibres Ltd., Fully paid-up at cost 260000 260000

500 Equity Shares of Rs. 10/- each in PCL Fianancial Services Ltd. (Formerly

Sagar Priya Investment and Finance Ltd.) 5000 5 0 0 0

3,40,87,825 Equity shares of Rs.10/- each in VICAT Sagar Cement Private Limited 380878250 150000000

Total 381143250 150265000

Schedule 6

Inventories


Raw Materials 12919846 25391740

Coal 171641340 131050933

Packing Materials 11087705 8942454

Goods In Transit 56513299 83811555

Work in Progress 68489755 29846561

Finished Goods 11629173 28320969

Total 493133048 429534015

Schedule 7

Sundry Debtors

Debtors Over Six Months 38832348 14686067

Other Debtors 379643746 234608574

Total 418476094 249294641

Schedule 8

Cash and Bank Balances

Cash on Hand 1843944 1583015

Current Account 17411354 59959442

Deposit Account 11760375 53162425

Total 31015673 114704882

Schedule 9

Loans and Advances

Advances recoverable in cash or in kind or for value to be received

(Unsecured and considered good)

Advance to Suppliers 110618248 245272656

Balances with Excise Authorities 23880144 70366650

Balances with Income Tax Authorities 128345065 71773071

Incentives receivable under AP Industrial Policy 40007391 0

Claims receivable 14458853 0

Advance to Others 45591193 46727294

Deposits to Others 69433720 65188223

Prepaid Expenses 10851676 6469112

Total 443186290 505797006


In Rs.


Schedule 10

Current Liabilities

Sundry Creditors

For Materials 271373533 196089161

For Stores & Spares 70774672 28225248

For Expenses 82084816 68343181

For Other Liabilities 69231229 72838589

Interest Accrued But not Due 15620697 14233770

Deposits/Advances from Selling Agents, Stockists and Others 201154860 121563103

Total 710239807 501293052

Schedule 11

Provisions



Taxation 55890866 46883541

Fringe Benefit Tax 0 1433075

Total 121089513 110460173

Schedule 12

Income From Operations

Sale of Cement 3685651084 1556834246

Sale of Cement - Second Sale 727815117 924834578

Sale of Clinker 816559698 861065105

Sale of Electrical Energy - Wind 12713070 0

Total 5242738969 3342733929

Schedule 13

Other Income

Dividend (From Subsidiary Company) 0 0

Interest Received 3216545 4560470

Incentives under AP Industrial Policy 40007391 0

Others 16336882 1038820

Total 59560818 5599290

Schedule 14

Raw Materials Consumed

Limestone 204992465 99081207

Laterite 60742178 27503168

Iron Ore 51281743 31878493

Gypsum 99248650 32651898

Dolamite 0 292661

Fly ash 2132136 351670

Total 418397172 191759097


In Rs.


Schedule 15

Manufacturing Expenses

Consumption of Stores and Spares 83845612 42645936

Fuel Expenses

Coal 931300549 516062944

Power 393111564 148365071

Total 1324412113 664428015

Repairs and Maintenance

Buildings 974670 862757

Plant and Machinery 55848704 31662898

Vehicles 1848780 2041300

Others 16193635 11747333

Total 74865789 46314288

Grand Total 1483123514 753388239

Schedule 16

Salaries and Wages

Salaries, Wages, Allowances, Amenities, Bonus and Ex-gratia 127710640 97747859

Contribution to Provident Fund and other Funds 7100400 5373930

Staff and Workmen Welfare Expenses 10529088 6094037

Total 145340128 109215826

Schedule 17

Taxes

Value Added Tax 559705480 362146566

Entry Tax 806400 88743

Service Tax 177498 2983399

Total 560689378 365218708


In Rs.


Schedule 18


Administrative Expenses

Director’s Remuneration and Perquisites 34918313 28580901


Legal and Professional Charges 5770054 8797030

Insurance 10184015 6102731

Director’s Traveling Expenses 1942667 2090481

Traveling Expenses and Conveyance 8823727 8517849

Total 63717405 55606375

Auditor’s Remuneration

Statutory Auditors

Audit Fees 232725 232725

Tax Audit Fees 50000 50000

Certification Work 50000 68500


Total 337725 361934


Cost Auditors

Audit Fees 75000 75000


Total 82765 75000

Other Expenses

Rent 3273916 2307160

Rates, Taxes and Licenses 3908740 4447528

Miscellaneous Expenses 9442322 10173741

Loss on Sale of Asset 21998 103286

Postage & Telephones 4041067 2980014


Wealth Tax 95070 89832

Testing Fees 389877 653813

Security Services 4760123 3128168

Total 30123238 26661529

Grand Total 94261133 82704838


In Rs.


Schedule 19

Adjustment for Stocks

Work-in-Process



Total (38643194) (25622677)

Finished Goods



Total 16691794 (24323837)

Grand Total (21951400) (49946514)

Schedule 20

Selling and Distribution Expenses

Consumption of Packing Materials 124986505 48630252

Transportation Charges 491861759 205436682

Advertisement Expenses 37685253 25575259

Selling Expenses 160941345 37510184

Total 815474862 317152377

Schedule 21

Interest and Financial Charges


Interest on Working Capital 62804532 38128768

Other Financial Charges 26333744 17108793

Total 300922602 163868770


Schedule 22

NOTES FORMING PART OF ACCOUNTS


a) Accounting Assumptions:

The financial statements are prepared under the historical cost convention on the basis of a going concern on an

accrual basis and they comply with the mandatory accounting standards referred to in Section 211 (3C) of the


b) Fixed Assets:

Fixed assets are accounted at cost of acquisition inclusive of inward freight, duties, taxes, incidentals related to

acquisition and pre-operational expenditure till commissioning of the asset. Capital work-in-progress comprises

outstanding advances paid to acquire fixed assets, and the cost of fixed assets that are not yet ready for their intended

use at the balance sheet date.

c) Revenue recognition:

Sales are recognized on dispatch of goods to customers and it includes excise duty and Value Added Tax on sale.

d) Foreign currency transactions:

Income and expenses in foreign currencies are converted at exchange rate prevailing on the date of transaction.

Foreign currency monetary assets and liabilities are translated at the exchange rate prevailing on the Balance sheet

date. Exchange differences on translation of monetary items for purchase of machinery are included in the cost of

such assets.

e) Investments:

Long term investments, including investments in subsidiary company, are stated at cost. Provision is made where

there is a permanent fall in valuation of Long term investments.

f) Depreciation:

Depreciation has been provided as per the rates given in Schedule XIV to the Companies Act, 1956. Depreciation

is charged on Plant & Machinery at straight-line method and on all other assets at written down value method.

g) Inventories:

Inventories including work-in-progress are valued at lower of cost or market value. The cost is calculated on weighted

average method. Cost comprises expenditure incurred in the normal course of business in bringing such inventories to

its location and includes, where applicable, appropriate overheads based on normal level of activity.

Stocks in transit are valued at cost.

h) Employee Benefits:

Short term benefits:

Short term employee benefits are charged off at the undiscounted amount in the year in which the related services

is rendered.

Long term benefits:

Payments to the defined contribution retirement benefit schemes are charged as an expense as they fall due.

Under defined benefit scheme, Company provides for gratuity, a defined benefit retirement plan (the “Gratuity Plan”)

covering eligible employees. In accordance with the Payment of Gratuity Act, 1972, the Gratuity Plan provides a

lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an

amount based on the respective employee’s salary and the tenure of employment. The company has taken master

policy with Life Insurance Corporation of India under group gratuity scheme. Liabilities with regard to the Gratuity

Plan are determined by actuarial valuation as of the balance sheet date, based upon which, the Company contributes

all the ascertained liabilities to the Life Insurance Corporation of India.

The leave encashment payable to the employees is provided based on the actuarial valuation carried out in accordance

with the revised AS 15.


i) Deferred Taxation:

Deferred Tax, resulting from timing differences between book and tax profits, is accounted for under the liability

method, at the current rate of tax.

j) Government grants receivable under Industrial Investment Promotion Policy 2005 – 10 of Government of Andhra

Pradesh are accounted based on verification and recommendation of the competent authority as per the policy of

Government and in accordance with Accounting Standards 9 and 12.

2. CONTINGENT LIABILITIES

a) Estimated amount of contracts to be executed on capital account and not provided for Rs.857.45 Lakhs (Previous

Year: Rs.3785 Lakhs).

b) Demand raised by APTRANSCO towards voltage surcharge and grid supporting charges is Rs.1,73,50,747/- and the

company paid Rs.1,08,02,441/- under protest. The said demand is contested by the company with Division Bench

of High Court of Andhra Pradesh.

c) Bank Guarantees: Rs.90 Lakhs (Previous year: Rs.72.36 lakhs).

d) Letter of Credit: Rs. Nil. (Previous year: Rs.NIL Lakhs).

e) There is a demand from Sales Tax authorities for a sum of Rs.31,00,933 /- in respect of Input Tax Credit on Coal

Consumption availed by the company from April, 2005 to December, 2005, claiming that the company is not eligible

for the said credit. (Paid under protest in the year 2006 Rs.15,50,466/-). The said demand is contested by the

company.

f) Demand raised by Sales Tax authorities for a sum of Rs.8,08,656/- in respect of input tax credit availed on closing

stock of coal held on 31st March, 2005 and filed writ petition before the High Court of Andhra Pradesh on payment

of 50% of the disputed tax amount i.e. Rs.4,04,328/-. (Paid under protest in the year 2007 is Rs. 4,04,328/-).

g) During the year 2009-10, demand raised by Sales Tax Authorities for a sum of Rs.1,09,40,297/- in respect of tax on

sale of fixed assets. We have paid an amount of Rs.27,35,074/- and contested before the State Appellate Tribunal.

h) Show cause notices were issued by the Central Excise Authorities for an amount of Rs.19.44 lakh, pertaining to

various issues under Central Excise and Service Tax Act and for an amount of Rs.203.44 lakhs for availment of service

tax credit. The company has replied to the show cause notices and the matter is pending before the Department for

adjudication.

i) As against the wheeling charges @ 2% of the quantity of energy wheeled as provided in the amended and restated

Power Wheeling and Purchase Agreement dated 1st August, 1998 between the company and Andhra Pradesh State

Electricity Board [now Transmission Corporation of Andhra Pradesh (APTRANSCO) ], the Andhra Pradesh Electricity

Regulatory Commission (APERC) vide its Order dt.24.3.2002 determined that effective from 1st April, 2002, the

private power generators shall pay the wheeling charges @ 28.40% in kind and 50 paise in cash for of the energy

wheeled. The company had disputed the said Order of the Andhra Pradesh Electricity Regulatory Commission

before the High Court of Andhra Pradesh and the High Court vide its Judgment dated 18th April, 2003 set aside the

order of APERC. APTRANSCO has filed a special leave petition in the Supreme Court of India against the Order of

the High Court. The Supreme Court declined to grant a stay on the order of High Court but has allowed leave for

appeal to be heard in due course. Later, APTRANSCO charged the wheeling charges @ 6.40% in kind and 45 paise

in cash per unit of the energy wheeled with effect from 1st April, 2004 and 5.78% in kind and 46 paise in cash per unit

of the energy wheeled with effect from 1st April, 2005 and claimed the same from Sagar Cements Limited, who is the

energy consumer for the company. SPL has disputed the said order also before the High Court of Andhra Pradesh.

The Contingent Liability computed on the basis of imputed cost in respect of the above as claimed by APTRANSCO

till March 31st, 2010 was Rs.350.31 lakhs (As on March 31st, 2009 – Rs.350.31 lakhs).

j) The Government of Andhra Pradesh has inserted Section 3 B in Andhra Pradesh Electricity Duty Act, 1939, by which

every person or a generating company who generates energy and uses for his / its own purpose shall pay a duty

calculated @ 25 paise a unit of the energy consumed, excluding energy consumed in the auxiliaries as against 6 paise

per unit. The Chief Electrical Inspector has issued a letter dated 8th October, 2004 stating that the Company has to

pay the Electricity Duty with effect from 17th July, 2003, at the revised rate in respect of the energy consumed,


excluding energy consumed in the auxiliaries and the same is being disputed. The contingent liability on account of the

above till 31st March, 2010 was Rs.462.90 lakhs (As on March 31, 2009 – Rs.411.99 lakhs).

k) The Government of Andhra Pradesh has issued G.O.No.39, dt.02.04.2002 for payment of Royalty on consumptive

use of water. Accordingly, the irrigation and CAD Department issued a notice on 20.05.2005 vide Letter No.F/H/

222M claiming an additional amount of Rs.37,45,402/- towards Royalty on usage of water from April, 2002 to

December, 2004. The Company has contested the said order before the High Court of Andhra Pradesh. The

Contingent Liability pertaining to the period from April, 2002 to December, 2004 on account of the above as

claimed by the Government works out to Rs.37,45,402/-. The Contingent Liability for the subsequent period is not

ascertainable as the related data regarding gallons of water “Used” is not ascertainable by the Company.

3. SECURED LOANS

a) The term loans from the Banks and Financial Institutions is secured by the fixed assets i.e., Land, Buildings, Plant &

Machinery, Mining Equipment owned by or belonging to the borrower company both proposed and future, and by

second charge on the current assets of the company and are guaranteed by Shri S.Veera Reddy, Managing Director,

Dr.S.Anand Reddy, Joint Managing Director and Shri S.Sreekanth Reddy, Executive Director.

b) Cash Credit from State Bank of Hyderabad, Punjab National Bank, State Bank of India and IDBI Bank Ltd., are

secured by hypothecation of raw materials, goods-in-process, finished goods, stores and spares and receivables,

present and future, and by second charge on fixed assets of the company and are guaranteed by Shri S.Veera Reddy,

Managing Director, Dr.S.Anand Reddy, Joint Managing Director and Shri S.Sreekanth Reddy, Executive Director.

c) Loan from L&T Finance Limited is secured by the mortgage of specific assets purchased from that loan and further

secured by personal guarantees of Dr.S.Anand Reddy, Joint Managing Director and Shri S.Sreekanth Reddy Executive

Director.

d) Vehicle loans from bank are secured by the mortgage of specific vehicle purchased from that loan and further secured

by personal guarantees of Dr.S.Anand Reddy, Joint Managing Director and Shri S.Sreekanth Reddy Executive Director.

e) The Term Loan from IDBI Bank Limited is secured by a First Charge on all the movable and immovable assets,

present and future of the company. The loan is secured by the personal guarantees of Dr.S.Anand Reddy, Managing

Director and Shri S.Sreekanth Reddy, Director.

4. Earnings per Share (EPS)

In Rs.

Description Year ended

31st March 2009

Profit attributable to company 193768057 190464837

Weighted average number of shares 15002300 14336050

Earnings per share 12.92 13.29

Year ended

31st March 2010

5. a) As per Andhra Pradesh State Industrial Policy 2005-10, Company has made an application to the General Manager,

District Industries Centre, Nalgonda, Andhra Pradesh for claiming the incentives on Value Added Tax and power

consumption. General Manager, DIC, Nalgonda has verified and recommended an amount of Rs.400.07 lakhs during

the year to the State Level Committee. This amount has been considered as income during the current year and

shown in Schedule 13 ‘Other Income’.

b) Other income includes Rs.1.45 crores receivable from insurance company.


6. The disclosures required under Accounting Standard 15 “Employee Benefits” notified in the Companies (Accounting

Standards) Rules, 2006 are given below:

a) Reconciliation of opening & closing balance of Defined benefit obligation


Gratuity Leave

encashment

(Un-funded)

Gratuity Leave

encashment

(Un-funded)

Defined benefit obligation at the beginning of the Year 12996505 3291166 11310300 2333349


Interest cost 1039720 263293 904824 186668

Actuarial (gain) / loss (330502) 2095288 (540391) 1222335

Benefits paid (709218) (2358581) (364433) (1409003)

Defined benefit obligation at the year end 16085079 4244654 12996505 3291166


Fair value of plan assets at the beginning of the Year 11514791 - 7312912 -

Expected return on plan assets 1158566 - 792408 -

Actuarial gain / (loss) (66534) - (1261) -

Employer contribution 2729718 - 3775165 -

Benefits paid (709218) - (364433) -

Fair value of plan asset at the year end 14627323 - 11514791 -

b) Reconciliation of opening and closing balances of fair value of plan assets

In Rs.

Fair value of plan assets as at 31st March, 2010 14627323 - 11514791 -

Present value of obligations as at 31st March, 2010 16085079 4244654 12996505 3291166

Amount recognized in the Balance sheet (1457756) 4244654 (1481714) 3291166

c) Reconciliation of fair value of assets and obligations


Interest cost 1039720 263293 904824 186668

Expected return on plan assets (1158566) - (792408) -

Actuarial gain / (loss) (263968) 2095288 (539130) 1222335

Net cost 2705760 3312069 1259491 2366820

d) Expenses recognized during the year

e) Investment details

100% invested in LIC Group gratuity (cash accumulation policy)

f) Actuarial assumptionsMortality table (LIC) 1994-96 (ultimate)Discounting rate - 8%Expected rate of return on plan asset – 9.25%Expected average remaining working lives of employees–18 YrsRate of escalation in salary – 4%


Particulars As at 31.03.2009

Salary 11400000 8720833

Other Perks 6957526 7416317

Commission on Profits 14775786 10803750

TOTAL 33133312 26940900

Calculation of Profit U/s.198 of the Companies Act, 1956

Profit as per Profit and Loss Account 298199814 252341298

Add: Directors Remuneration 33133312 26940900

Depreciation as provided in the books of accounts 276885046 187224994


TOTAL 608218172 466610478

Less: Depreciation U/s. 350 of the Companies Act. 1956 276885046 187224994

Profit U/s.198 read with Section 349 of the Companies Act, 1956 331333126 279385484

As at 31.03.2010

In Rs.7. PARTICULARS OF MANAGERIAL REMUNERATION





1 Subsidiary Companies M/s. Sagar Power Ltd. India

2 Associate Company M/s.Vicat Sagar Cement Pvt. Ltd. India

3 Transactions with Companies a) M/s.Panchavati Polyfibres Ltd.

in which Directors are b) M/s.Amareswari Cements Ltd.

interested c) M/s.Sagarpriya Housing and Industrial Enterprises Ltd. India

d) M/s.Golkonda Hospitality Services and Resorts Ltd.

e) M/s.BSCPL Infrastructure Ltd.


individual capacity b) Sri S.Veera Reddy, Managing Director

c) Dr. S.Anand Reddy, Joint Managing Director

d) Sri S.Sreekanth Reddy, Executive Director

e) Smt. S.Aruna, Executive Director, Sagar Power Ltd.

f) Shri N.Suresh Reddy, Director, Sagar Power Ltd.

g) Shri M.Mohan Reddy, Director, Sagar Power Ltd.

h) Sri K.Thanu Pillai, Director

i) Sri Werner C.R.Poot, Director

j) Sri P.Rajeswara Rao, APIDC Nominee

k) Sri Gilbert Noel Claude Natta, Director

b) Related Party Transactions Rs. in Lakhs

DescriptionSubsidiary

CompaniesAssociate

Company

Company in

which Directors

are interested

Directors in

individual capacity

are interested

Total

Purchase of power 622.57 - - - 622.57

Purchase of goods - - 6065.49 - 6065.49

Sale of goods 1.05 - 4268.44 - 4269.49

Dividend Received 83.17 - 0.39 - 83.56

Dividend Paid 23.29 56.90 80.19

Remuneration to Directors - - - 331.33 331.33

Sitting fees - - - 4.70 4.70

Investment in Associate Company - 2308.78 - - 2308.78


9. ADDITIONAL INFORMATION PURSUANT TO THE PROVISIONS OF PARAGRAPH 3,4C AND 4 D OF

PART II OF SCHEDULE VI OF THE COMPANIES ACT, 1956(AS CERTIFIED BY THE MANAGEMENT)


Quantity

MTs

Value

Rs.


Quantity

MTs

Value

Rs.

a) Turnover

Sale of Cement (inc. 2897 MTs for self

consumption (Previous Year:3126 MTs) 1130636 3685651084 415835 1556834246

Second sale of cement 204191 727815117 225650 924834578

Sale of Clinker 350133 816559698 307152 861065105

TOTAL 5230025899 3342733929

b) i) Details of Raw Material Consumed

1. Limestone 1996932 204992465 1040564 99081207

2. Laterite (HG) 62688 60306050 28598 27317400

3. Laterite (LG) 736 436128 416 185768

4. Gypsum 63257 99248650 23002 32651898

5. Iron-ore 37482 47942785 19647 29090544

6. Iron-ore sludge 3880 3338958 4446 2787949

7. Dolamite 0 0 1010 292661

8. Fly-ash 4348 2132136 784 351670

TOTAL 418397172 191759097

ii) Details of Raw Material consumed for trial runs

1. Limestone - - 10425 1737914

2. Laterite (HG) - - 139 143106

3. Laterite (LG) - - 278 164732

4. Iron-ore - - 139 222080

iii) Cement Purchased for Sale 203657 464505645 226307 643718392

c) Capacities and Production

Licensed and Installed Capacity (TPA) 2350000 2350000

Actual Production (MTs) 1120350 431250

d) Opening and Closing Stock

Opening Stock (MTs) 16999 908

Value (Rs.) 28320967 1757174

Closing Stock (MTs) 6179 16999

Value (Rs.) 10721139 28320967

e) Value of Imports (CIF)

Capital goods 11405710 98930460

Coal, Components and Spare Parts 256615687 299925506

f) Expenditure in Foreign Currencies

On account of Traveling and other expenses (Rs.) 858757 1794625

On account of Consumables and Capital goods 30149232 54647694


g) Value of Imported and Indigenous Raw Materials, Components, Spare Parts and other materials consumed:

10. There are no amounts due to micro and small enterprises.


current year.

12. Paise have been rounded to the nearest rupee.

Schedules 1 to 22 form part of the Accounts







Hyderabad

18th May, 2010


Value Rupees %Value Rupees %


Value Rupees %Value Rupees %

Imported - - 30149232 36 - - - -

Indigenous 418397172 100 53696380 64 191759097 100 42645936 100

Total 418397172 100 83845612 100 191759097 100 42645936 100

Spare Parts and

Other materialsRaw MaterialsSpare Parts and

Other materialsRaw MaterialsParticulars

h) Additional information pursuant to the provisions of Paragraph 3, 4C and 4 D of Part II of Schedule VI of the Companies

Act, 1956

Particulars 2008-09

Quantity

(Kwh)Rupees

2009-10

Quantity

(Kwh)Rupees

a) Capacity – Installed Capacity Hydel Power

(As certified by the Management and relied upon

by the Auditors, being a technical matter) 8.3 MW - 8.3 MW -

b) Actual Generation - Both 25625 - 21591 -

c) Turnover - Hydel Power 20848 60825525 29497 86149428

d) Turnover - Wind Power 3750 12713070 0 0

e) Opening Stock of Delivered Energy 0 0 8414 2239956

f) Closing Stock of Banked Energy 751 908034 0 0

g) Self Consumption 276 0 508 0

h) Consumption of Stores and Spares (100% indigenous) - 4567106 - 4506792

i) Value of Imports (CIF) Nil Nil Nil Nil

j) Expenditure in Foreign Currency Nil Nil Nil Nil

k) Earnings in Foreign Exchange Nil Nil Nil Nil



Regd. Office: 8-2-472/B/2, Road No.1, Banjara Hills, Hyderabad-500 034

TWENTY NINTH ANNUAL GENERAL MEETING

ADMISSION SLIP

I certify that I am a registered shareholder / proxy for the registered shareholder of the Company. I hereby record my presence

at the Twenty Ninth Annual General Meeting of the Company to be held at Hotel Golkonda, Masab Tank, Hyderabad-500 028,

on Monday, the 20th September, 2010 at 4.00 p.m.

Name of the Member (IN BLOCK LETTERS) ________________________________________

Name of the Proxy (IN BLOCK LETTERS) ________________________________________

(To be filled in if the proxy attends instead of the Member)

Registered Folio No. : ______________

No. of Shares : ______________

Signature of the Shareholder / Proxy

NOTE: Please bring this attendance slip with you, duly filled in and hand over the same at the entrance of the Meeting Hall.


Regd. Office: 8-2-472/B/2, Road No.1, Banjara Hills, Hyderabad-500 034

TWENTY NINTH ANNUAL GENERAL MEETING

PROXY FORM

I/We _________________________________ of _____________________________ being a Member / Members of

Sagar Cements Limited, hereby appoint _________________________ of ___________________________________

or failing him / her ___________________________ of _____________________________________ as my / our proxy

to vote for me / us on my / our behalf at the Twenty Nintth Annual General Meeting of the Company to be held on Monday,

the 20th September, 2010 at 4.00 p.m. at Hotel Golkonda, Masab Tank, Hyderabad-500 028 and at any adjournment

thereof.

Signed this _____________ day of ______________________ 2010

Registered Folio No. : ______________

No. of Shares : ______________

Signature of the Shareholder

N.B.: A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote instead of

himself / herself and the proxy so appointed need not be a Member of the Company. The Proxy in order to be

effective must be received by the Company at its Registered Office not less than 48 hours before the commencement

of the meeting.

Please affix

Re.1/-

Revenue

Stamp