Balrampur Chini Mills

The Directors have pleasure in presenting their 33rd Annual Report
 along with the audited accounts of the Company for the year ended 30th
 September, 2008.
 
 Operating and Financial Review                          [Rupees in Lac]
 
 Financial Report                               2007-08          2006-07
 
 Gross Turnover                                155250.21       147632.44
 Operating Profit Before Interest, 
 Depreciation and Tax                           32949.44         9927.53
 Interest and Other Financial Charges 
 (Net)                                 8965.11           5441.73
 Depreciation & Amortisation          11720.50           8022.54
 Provision for Taxation                2560.90  23246.51  647.6814111.95
 Net Profit / Loss                               9702.93         4184.42
 Add : Balance brought forward from 
 previous year                                   3608.43          575.99
 Profit/(Loss) Available for Appropriation       6094.50         3608.43
 Appropriations :
 Proposed Dividend on Equity Shares              1277.68               -
 Corporate Tax on Dividend                        217.14               -
 General Reserve                                 3000.00               -
 Leaving a balance to be carried forward to 
 next years account                             1599.68         3608.43
                                                 6094.50         3608.43
 
 Dividend
 
 Your Directors are pleased to recommend payment of Dividend for
 consideration of the Shareholders on 25,55,36,310 Equity Shares of Re.
 1/- each @ 50%, i.e.  Re. 0.50 per share.
 
 Padma Bhushan to Shri Suresh Neotia
 
 The Board of Directors are pleased to inform that Shri Suresh Neotia,
 Chairman of the Company has received the prestigious Padma Bhushan
 Award at the hands of the Honble President of India in the year 2008
 for his contribution to trade and industry.
 
 Operations
 
 The operational data for the last two years are as follows :
 
 Season 2007-08         Balrampur   Babhnm  Tulsipur   Raideragh
 2006-07
 
 Crushing                 12000      10000     7000      5000
 Capacity (TCD)          (12000)    (10000)   (7000)    (5000)
 
 Start of              29.11.07   29.11.07   29.11.07    30.11.07
 Crushing Season      (16.11.06) (08.11.06) (18.11.06)  (12.11.06)
 Closing of            01.05.08   10.04.08   18.05.08    18.03.08
 Crushing Season      (29.05.07) (19.05.07) (13.06.07)  (29.04.07)
 Duration (Days)            155        134        172         109
                           (194)      (192)      (208)       (168)
 Sugar Cane Crushed      164.98     110.81      99.45       47.23
 (In lac Quintals)      (214.95)   (165.99)   (120.62)     (78.98)
 Recovery (%)             10.05      10.26       9.74       10.25
                          (9.78)     (9.89)     (9.42)      (9.87)
 Sugar Produced           16.57      11.37       9.68        4.84
 (In lac Quintals)       (21.00)    (16.41)    (11.37)      (7.80)
 
 Akbarpur      Rauragaon     Mankapur    Kumbhl                  Total
 
 7500          8000           8000         8000         8000     73500
 (7500)       (7500)         (8000)       (8000)       (-)      (65000)
 29.11.07      29.11.07     29.11.07    29.11.07     04.12.07       (-)
 (16.11.06)   (21.11.06)   (16.11.06)  (27.04.07)      (-)          (-)
 20.03.08      26.03.08     21.04.08    21.03.08     26.03.08       (-)
 (03.05.07)   (03.05.07)   (17.05.07)  (13.05.07)      (-)          (-)
       112          119          145         114          114       (-)
      (169)        (164)        (183)        (16)      (-)          (-)
     72.44        67.67        98.35       74.62        70.26    805.81
   (113.71)      (97.54)     (127.50)      (3.81)      (-)      (923.10)
     10.16        10.28        10.33       10.52        10.08     10.16
    (10.15)      (10.29)      (10.25)          -          -       (9.91)
      7.36         6.95        10.15         785         7.08     81.85
    (11.54)      (10.03)      (13.06)      (0.29)      (-)       (91.50)
 
 Performance 2007-08
 
 Your Company, across its various segments, collectively recorded a
 profit after tax of Rs. 9702.93 lac during the year under review,
 compared with a loss of Rs. 4184.42 lac in the previous year. The sugar
 segment, however, continued to incur loss during the year. Relatively
 better sugar price realisation in the second half of the year and
 payment of Rs. 110 per qntl of sugarcane price to the farmers as
 against the State Advised Price of Rs. 125 per qntl in accordance with
 the direction of the Supreme Court during the year under review helped
 in minimisation of losses in the sugar segment. Sugar price realisation
 during the year was Rs. 1497 per qntl, compared with Rs. 1456 per qntl
 last year.
 
 The Company accounted for the sugarcane price at Rs. 110 per qntl as
 per the interim direction of the Honble Supreme Court for the season
 2007-08. The by-products divisions namely cogeneration and alcohol
 achieved positive results during the year under review.
 
 Crushing of sugarcane and production of sugar in season 2007-08 was
 805.81 lac qntls and 81.85 lac qntls as against 923.10 lac qntls and
 91.50 lac qntls. respectively in the preceding year.  Recovery was
 higher at 10.16% as against 9.91% in the previous season.  Reduced
 crushing was owing to lower availability of sugarcane due to various
 reasons such as lower areas under sugar- cane crop as well as decline
 in yield.
 
 During the year under review, the country exported a record 50 lac
 [approximately] tonnes of sugar. A higher quantum of export was
 possible due to the export of raw sugar allowed by the Government last
 year. The reimbursement of internal freight transport subsidy on the
 export of sugar, coupled with improved international sugar prices
 helped in achieving the best-ever quantum of exports. Large exports of
 sugar supported the eviction of excess sugar inventory in the country.
 
 Sugar price in the beginning of the year was weak. Prices gained some
 strength in the second half of the financial year under review. The
 improvement in price is attributable to the export of a large quantity
 of sugar as mentioned above and forecast of lower sugar production for
 season 2008-09.
 
 During the year under review, costs of other inputs like manpower,
 chemicals, etc. also increased significantly. Credit squeeze in the
 financial market towards the second half of the financial year caused
 increase in interest cost.
 
 The Government of India created two buffer stocks of 20 lac tonnes and
 30 lac tonnes during the year to ease the cash flow position of sugar
 companies to help them to liquidate cane arrears. Under the buffer
 stock scheme, the carrying cost of sugar is reimbursed to the
 companies. However, both these buffer stocks have since been
 dismantled.
 
 Sugar companies in India passed through an unprecedented cash flow
 crunch during the past two years. Sluggish sugar price and continuous
 losses resulted in massive cane arrears across all states. After great
 persuasion by the sugar mills, the Government came out with the excise
 loan scheme, in order to help liquidate cane dues at the earliest.
 Interest-free loans have been granted to the sugar companies by i
 commercial banks, based on the excise payment made during 2006-07 and
 an estimated excise duty payable during 2007-08.
 
 Your Company has received Rs. 121.53 crores loans under the scheme.
 This loan will be repaid in 24 monthly installments after a moratorium
 of two years from the date of disbursement.
 
 Power
 
 During the year under review, the total power generated by cogeneration
 plants was 7906.88 lac units, as against 6768.06 lac units in the
 previous year. The increase was on account of commencement of the new
 cogeneration plants at Kumbhi and Gularia. Consequently, the export to
 UPPCL was higher at 5735.35 lac units, as against 4926.17 lac units in
 the previous year. Accordingly, the total value of power exported to
 the grid was also higher at Rs. 17393.55 lacs, as against Rs. 14491.29
 lacs in the previous year.
 
 Distillery
 
 The distillery has performed exceedingly well. It produced 663.62 lac
 BL industrial alcohol, 174.33 lac BL ethanol and 72.94 lac BL ENA, as
 against 438.98 lac BL, 101.78 lac BL and 112.16 lac BL, respectively
 during the previous year. The average realisation per BL of industrial
 alcohol, ethanol and ENA was Rs. 19.62 in 2007-08 as against Rs. 19.60
 in 2006-07.
 
 The UP Government continues its Molasses Policy, under which 25%
 molasses are to be reserved by sugar mills for producing country
 liquor.
 
 Organic Manure
 
 During the year, the name of the division was changed from Bio-Compost
 to Organic Manure. The performance of Organic Manure was satisfactory.
 
 Greenfield Sugar Complex at Gularia and capital expenditure
 
 As reported in the last Directors Report, the greenfield integrated
 complex at Gularia having 8000-TCD sugar unit, commenced its operation
 on 4th December, 2007. The sugar unit crushed 70.26 lac qntl in season
 2007-08 with a recovery of 10.08%. The 31.3-MW cogeneration power plant
 commissioned and performed exceedingly well during the year under
 review and supplied power to UPPCL under the Power Purchase Agreement.
 
 The Company has completed all its expansions at various locations.
 
 Subsidiary Company
 
 The audited consolidated financial statements of the Company as
 required under the Listing Agreement and the Annual Report of the
 subsidiaries as required under Section 212(1) of the Companies Act,
 1956 are annexed. The statement under Section 212(3) of the Companies
 Act, 1956 in respect of the subsidiary companies is separately annexed.
 
 During the season 2007-08, the sugar unit of the Indo Gulf Industries
 Limited (IGIL), a subsidiary of the Company, has crushed 29.71 lac
 quintal of sugarcane and produced 2.86 lac quintal of sugar at a
 recovery of 9.63%. The Gross Turnover of IGIL during the year ended
 30th September, 2008 is Rs. 3151.22 lacs and reported a Net loss of
 Rs.1465.92 lacs.
 
 The Board of Industrial & Financial Reconstruction (BIFR) on 23rd
 October, 2008 has declared IGIL as a sick company in terms of Section
 3(l)(o) of the Sick Industrial Companies (Special Provisions) Act, 1985
 (SICA), and the State Bank of India was appointed as the Operating
 Agency under Section 17(3) of SICA to examine the viability of IGIL and
 formulate the Rehabilitation Scheme, based on IGILs proposal for
 revival.
 
 Balrampur Overseas Private Limited (BOPL), a wholly owned subsidiary of
 the Company, incorporated with the purpose of trading activities, has
 reported a net loss of Hong Kong $ 454,473 for the period ended 30th
 September, 2008.
 
 Cane and Sugar Policy
 
 The salient features of the sugar policy for 2007-08 were as follows:
 
 - The ratio of levy and free sale sugar remained unchanged at 10 : 90.
 
 - The price of levy sugar for the season 2007-08 was not revised and
 supplies continued at Rs.1383.41 per qntl. The said price was not
 revised for the last four years.
 
 - The Statutory Minimum Price (SMP) of sugarcane was fixed at Rs. 81.18
 per qntl. as against Rs. 80.25 per qntl in the previous year linked to
 a basic recover) of 9%, with a premium for higher recovery.
 
 - The U.P. Government fixed a State Advised Price (SAP) of Rs.125 per
 qntl. of sugarcane for the season 2007-08, being the same as fixed for
 season 2006-07.
 
 - Ethanol price has been fixed at Rs. 21.50 per litre ex- factory same
 as the last year, as agreed by the Industry with the Government.
 
 - The Government of India has discontinued the transport subsidy on
 exports since 30th September, 2008.
 
 - Two buffer stocks of 50 lac tonnes created by the Central Government
 have since been dismantled.
 
 Legal cases related to cane price
 
 Sugar Season 2006-07
 
 The State Government vide order dated 26th December, 2006, fixed a
 State Advised Price for the season 2006-07 at Rs.122.50, Rs. 125, and
 Rs. 130 per qntl for rejected, normal and early varieties respectively.
 The Honble Allahabad High Court vide order dated 19th December, 2007
 quashed the State Advised Price. Special Leave Petitions [SLP] were
 filed against this order by the State Government and cane growers
 before the Honble Supreme Court, which are pending.
 
 The Honble Supreme Court vide order dated 27th February, 2008, fixed
 an interim price of sugarcane at Rs. 115, Rs. 118 and Rs. 123 per qntl
 for rejected, normal and early varieties, respectively for the season
 2006-07.
 
 Sugar Season 2007-08
 
 The State Government vide its order dated 30th October, 2007, fixed a
 State Advised Cane Price [SAP] of Rs.125 per qntl. for the season
 2007-08, being the same as fixed for the season 2006-07. This cane
 price was again challenged by the sugar industry before the Allahabad
 Bench and Lucknow Bench of the Honble Allahabad High Court. 
 
 The Lucknow Bench vide order dated 7th July, 2008 upheld the State
 Advised Price for the season 2007-08, and the Allahabad Bench quashed
 the SAP. Both these orders were challenged by the respectively
 aggrieved parties in the Honble Supreme Court through Special Leave
 Petitions. The Honble Supreme Court vide order dated 8th September,
 2008 fixed an interim price of sugarcane at Rs.110 per qntl for the
 season 2007- 08. The SLPs are pending in the Honble Supreme Court.
 
 Sugar Season 2008-09
 
 The State Government vide order dated 18th October, 2008 has fixed a
 SAP for the crushing season 2008-09 at Rs.137.50, Rs.l40 and Rs.l45 per
 qntl for rejected, normal and early varieties respectively. The sugar
 factories have challenged the State Governments Order dated 18th
 October, 2008 in the Honble Allahabad High Court, Allahabad Bench, on
 the ground that the State Advised Price for the season 2008-09 has been
 fixed arbitrarily, without following any guidelines, criteria and
 mechanism. The writ petition is being heard in the High Court on a
 day-to-day basis. The High Court is likely to give judgement very soon.
 
 Sugar Industry Promotion Policy 2004
 
 After the withdrawal of the policy of incentives on 4th June 2007, the
 State Government authorities raised a demand of purchase tax and
 administrative tax on Molasses, entry tax on sugar, society commission
 and VAT, in spite of the exemptions granted under the Sugar Industries
 Promotion Policy. Notices were also issued for the recovery of entry
 tax, society commission, VAT and purchase tax. Therefore, we have filed
 writ petitions in the Honble Allahabad High Court, Lucknow Bench. The
 Honble High Court has granted us interim relief and directed the State
 Government not to take coercive steps to realise the aforesaid taxes.
 The abovementioned writ petitions are pending and the final hearing
 continues.
 
 Outlook
 
 Sugar production in the country during the season 2007-08 was at 263
 lac tonnes as against 283 lac tonnes during the previous season. The
 sugar production forecast for the season 2008-09 is at 200 lac tonnes
 approximately Reason for the lower production estimate for season
 2008-09 may be attributed to the lower area under sugarcane
 cultivation, as well as the lower yield of cane crop. This phenomena is
 visible across all parts of the country. Cane price arrears over the
 last couple of years caused by losses incurred by the industry as well
 as uncertainty in the scenario owing to the legal cases, has led to the
 diversion of area under cane to alternative crops.
 
 India exported a record quantity of 50 lac tonnes of sugar during the
 year under review. The major part of sugar export was raw sugar. Raw
 sugar export will be of great assistance to the sugar industry in times
 of excess production.
 
 The International Sugar Organisation has forecast the global production
 to fall by 7.4 million tonnes to 161.6 million tonnes in 2008-09. The
 world sugar deficit will be 3.90 million tonnes in 2008-09 against a
 surplus of 7.25 million tonnes in 2007-08.
 
 Sugar price in the domestic market is expected to remain firm as the
 excess inventory shall be absorbed in the system because of estimated
 lower sugar production in the country.
 
 The Government of India has increased the level of blending of ethanol
 from 5% to 10% effective from October 2008. However, the complete
 blending upto 5% is yet to be achieved in the country.
 
 In view of the persistent power shortage in the country, the Government
 of India has set the target growth rate of 10% in the power sector
 during the Eleventh Plan period. In order to achieve this target, the
 Government has opened up the power sector to attract investments,
 resulting into more sugar companies setting up cogeneration power
 projects.
 
 Listing of Equity Shares
 
 Your Companys equity shares are listed on the Calcutta, Bombay and
 National Stock Exchanges. Application has been made for delisting of
 the shares from Calcutta Stock Exchange which is pending. Your Company
 has paid the annual listing fees to each of these stock exchanges. The
 GDRs are listed on the Luxembourg Stock Exchange.
 
 Corporate Governance
 
 As per Clause 49 of the Listing Agreement with the stock exchanges,
 Managements Discussion and Analysis, a report on Corporate Governance
 together with the Auditors Certificate on the compliance of conditions
 of Corporate Governance form part of the Annual Report.
 
 Credit Rating
 
 The credit rating of A1+ for short-term debts enjoyed by your Company
 for a long time has since been revised to Al by ICRA for a sum of Rs.
 500 cr. The downgrading was done by ICRA in view of the tight cash flow
 position and unprecedented cash crisis suffered by the industry.
 
 Change in Capital Structure
 
 Your Company issued and allotted 73,00,000 Equity Shares of Re.l/- each
 at a premium of Rs. 91 per share on preferential basis to the Promoter
 Group of the Company on 4th January 2008. The Company also allotted to
 the Promoter Group on the same date 1,00,00,000 (one crore) convertible
 warrants to be convertible at the option of the warrant holder in one
 or more tranches, within 18 months from its allotment date into 1 fully
 paid equity share of Re. 1/- each per warrant, at a premium of Rs. 91
 per share.
 
 The Company has also received a sum of Rs. 9.20 per warrant, being 10%
 of the subscription price. The entire proceeds from the private
 placement of Rs. 76.36 crores were utilised for general corporate
 purpose.
 
 The Company also issued and allotted 81,650 Equity Shares of Re. 1/-
 each at a premium of Rs. 73.60 per share upon the exercise of 81,650
 options under the Employee Stock Option Scheme.
 
 Employee Stock Option Scheme
 
 Your Company has formulated and implemented an Employee Stock Option
 Scheme in accordance with the guidelines issued by the SEBI. Pursuant
 to the scheme on 27th November, 2007, 9,95,500 stock options were
 granted to the eligible employees, including the Wholetime Director.
 
 The details of options granted and outstanding as on 30th September,
 2008 along with other particulars as required by Clause 12 of the SEBI
 (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
 Guidelines, 1999 and the Auditors Certificate required to be placed at
 the forthcoming AGM, pursuant to Clause 14 of the said guidelines, are
 set out in the Annexure to the report.
 
 Directors
 
 Shri R.N Misra has resigned from the Wholetime Directorship of the
 Company.
 
 The Board placed on record its high appreciation for the valuable
 services rendered by Shri R.N. Misra during his tenure as a Director of
 the Company.
 
 Dr. Arvind Krishna Saxena was appointed as an Additional Director of
 the Company by the Board in its meeting held on 31st July 2008 and
 designated as a Wholetime Director for a period of three years with
 effect from 1st August, 2008.  He will hold office of the Director up
 to the date of the ensuing Annual General Meeting and the Company has
 received a notice under Section 257 of the Companies Act, 1956 from a
 member proposing Dr. Saxena as a Director of the Company.
 
 Shri Suresh Neotia and Shri Sudhir Jalan, Directors of your Company,
 retire from the Board by rotation and are eligible for re-election.
 
 Directors Responsibility Statement
 
 As required under Section 217 (2AA) of the Companies Act, 1956 your
 Directors confirm that -
 
 i.  In preparation of the annual accounts, the applicable accounting
 standards have been followed.
 
 ii. The Directors have selected such accounting policies and applied
 them consistently and made judgments and estimates that are reasonable
 and prudent, so as to give a true and fair view of the state of affairs
 of your Company at the end of the financial year, and of the profit of
 your Company for that period.
 
 iii. The Directors have taken proper and sufficient care for the
 maintenance of adequate accounting records in accordance with the
 provisions of the Companies Act, 1956, for safeguarding the assets of
 your Company and for preventing and detecting fraud and other
 irregularities, and
 
 iv. The Directors have prepared the annual accounts on a going
 concern basis.
 
 Particulars of Employees
 
 Particulars of employees as required under Section 217 (2A) of the
 Companies Act, 1956, are given in a separate annexure attached hereto
 and forms part of this report.
 
 Conservation of Energy, etc.
 
 Particulars in respect of conservation of energy, technology absorption
 and foreign exchange earnings and outgo as required under Section 217
 (1) (e) of the Companies Act, 1956, are given in a separate annexure
 attached hereto and form a part of this report.
 
 Fixed Deposits
 
 The Company has not accepted any deposits under section 58A of the
 Companies Act, 1956 during the year.
 
 Auditors
 
 M/s. G.P. Agrawal & Co., Chartered Accountants, Auditors of your
 Company, retire and being eligible, offers themselves for
 re-appointment.
 
 Cost Auditors
 
 Pursuant to the directives of the Central Government under the
 provisions of Section 233B of the Companies Act, 1956, M/s. N.
 Radhakrishnan & Co, Cost Accountants, have been appointed to conduct
 cost audits relating to sugar.
 
 Auditors Report
 
 The observations made in the Annexure to Auditors Report are self
 explanatory and do not require further explanations/ comments.
 
 Appreciation
 
 Your Board of Directors take this opportunity to express their grateful
 appreciation for the excellent assistance and co-operation received
 from the Financial Institutions, Central Government, Government of U.P,
 the State Bank of India, other bankers, shareholders, employees and
 customers for the growth of the organisation.
 
                             For and on behalf of the Board of Directors
 
 Kishor Shah                                               Vivek Saraogi
 Director cum Chief Financial Officer                  Managing Director
 
 Kolkata
 25th November, 2008.