DCM Shriram Industries

The Directors have pleasure in presenting the Annual Report and the
 Audited Accounts of your Company for the year ended 31st March 2008.
 
 The highlights of the year under review were the completion of
 modernisation and expansion of the sugar cane crushing capacity and the
 commencement of cogeneration of power for sale to the grid at Daurala
 Sugar Works. At Shriram Rayons, the spinning facilities were upgraded
 and the power house was modernised for energy saving. Operations were
 satisfactory other than the sugar business, where the sugar prices
 remained depressed and unremunerative during the year.
 
 FINANCIAL RESULTS
 
 The turn over for the year including other income at Rs.604 cr. was
 lower compared to Rs.633 cr. in the previous year due to low sugar
 prices. Gross Profit and Net Profit were Rs.7.08 cr. and Rs.(4.21) cr.
 compared to Rs. 19.1 cr. and Rs. 1.6 cr. respectively in the previous
 year. Exports during the year were Rs. 165 cr. against Rs.167 cr. in
 the previous year.
 
 In view of the loss for the year under review, the Directors have not
 recommended any dividend for the year.
 
 OPERATIONS
 
 Sugar
 
 As stated above, the year 2007-08 continued to be amongst the worst
 years ever for the Sugar Industry, and your Companys sugar operations,
 despite significant steps taken during the year in areas like
 productivity, cost cutting and value addition, showed a loss. Market
 sentiment during the financial year remained bearish owing to the
 continued mismatch between supply and demand and high inventories
 despite the creation of buffer stock of 5 million MT by the Government.
 While there was some improvement in the sugar market towards the end of
 the year in anticipation of lower production in the next season,
 liberal release of sugar in the free-sale market by the Government has
 once again dampened the sentiment.
 
 During the year, the State Government announced an unrealistic cane
 price for the season 2007-08 at Rs.125 per qtl. As this price was
 non-viable in light of the prevailing and anticipated low sugar prices,
 the sugar factories in U.P. approached the Honble High Court against
 the above, and the High Court gave an interim order for payment of
 Rs.110 per qtl, after which the factories started crushing operations.
 
 Daurala Sugar Works achieved its highest ever sugar production of 1.56
 lac MT of sugar by crushing 15.72 lac MT of cane. This was possible due
 to completion of the second phase of expansion/modernisation, whereby
 the crushing capacity has been increased to 12,000 TCD. Cane
 development activities were continued to improve yield and recovery in
 future.
 
 On upgradation and enhancement of the power house at Daurala, the
 Company commenced supply of power to the grid in March 2008. The
 project for exporting 12 MW power in the next season, is under
 implementation.
 
 Alcohol
 
 The overall performance of the Alcohol business of the Company was
 satisfactory, despite a rise in the cost of molasses consequent to a
 20% decline in molasses production. During the year, the distillery was
 upgraded with the installation of a multi pressure distillation plant
 to produce high quality extra neutral spirit. This has given access to
 a new segment of the market.
 
 Chemicals
 
 The performance of the Companys chemical business was largely
 maintained, through innovation in areas of productivity, cost reduction
 and product mix-changes, inspite of significant increase in prices of
 major raw materials and appreciation of rupee.
 
 Various initiatives are being taken to improve future profitability.
 
 Rayon
 
 The steps taken last year to upgrade the Rayon plant and the steps
 taken in the textile area in the current year resulted in improved
 product quality, export yield and customer satisfaction. As a result,
 exports in quantitative term increased by 15% over the previous year.
 During the year a high efficiency multi fuel boiler was commissioned,
 which will help the Unit to control energy costs and promote the usage
 of cleaner fuel.
 
 Nylon chafer operations were stable.
 
 Issue of further capital
 
 During the year the Company had issued 7 lac Warrants on Preferential
 basis to the Promoter group to meet long term working capital
 requirements. As per the terms of issue each Warrant carried an
 entitlement to subscribe to 3 equity shares of Rs.10 each at a premium
 of Rs.80 per share. Full consideration of Rs.18.9 cr. was received
 upfront. The Company allotted 11.55 lacs equity shares in two tranches
 during the year against these Warrants. With this the paid-up capital
 of the Company has gone up from Rs.15.30 cr. to Rs.16.45 cr. and the
 share premium of Rs.9.24 cr. has been added to Reserves. The balance
 9.45 lacs equity shares were also allotted on 1.4.2008. All the 21 lacs
 shares allotted against the Warrants have been listed and admitted for
 dealings on BSE, subject to the lock-in as per SEBI (DIP) Guidelines.
 
 A petition filed by a shareholder before the Honble Company Law Board
 under sections 397/398 of the Companies Act, 1956, challenging the
 preferential issue, is pending.
 
 Subsidiary
 
 Daurala Foods and Beverages Pvt. Ltd. has leased its bottling facility
 to the Company considering the synergy and economies of scale.
 
 RESEARCH & DEVELOPMENT
 
 R&D activities are always a priority area particularly in respect of
 chemical, alcohol and energy saving areas.  These activities provide
 inputs in developing new products and also in upgrading methods of
 production and quality of existing products so as to remain
 competitive.
 
 DIRECTORS RESPONSIBILITY STATEMENT
 
 As required under Section 217 (2AA) of the Companies Act, 1956, your
 Directors state:
 
 - While preparing annual accounts the applicable accounting standards
 had been followed.
 
 - The Company had selected such accounting policies and applied them
 consistently and made judgements that are reasonable and prudent so as
 to give a true and fair view of the state of affairs of the Company as
 at the end of the financial year and of the profit or loss of the
 Company for the period.
 
 - That the Company had taken proper and sufficient care for the
 maintenance of adequate accounting records in accordance with the
 provisions of this Act for safeguarding the assets of the Company and
 for preventing and detecting fraud and other irregularities.
 
 - That the Company had prepared the annual accounts on a going concern
 basis.
 
 AUDITORS OBSERVATIONS
 
 The explanations/ information in respect of the observations of the
 Auditors in their Report are given in detail in Notes to Accounts -
 2(b) and 16, Theses Notes read with the relevant Audit observations are
 self- explanatory.
 
 CORPORATE GOVERNANCE
 
 Corporate Governance and Management Discussion and Analysis Reports are
 given in Annexure-I.
 
 DIRECTORS
 
 During the year Shri S.B. Mathur and Shri Ravinder Narain were co-opted
 as Additional Directors. Proposals are being placed before the
 shareholders for approval to their appointments as regular directors,
 liable to retire by rotation.
 
 IFCI Ltd. has nominated Shri L. Mishra as a Director in place of Shri
 S.R Arora effective from 14.4.2008.
 
 Dr. V.L. Dutt and Shri Madhav B. Shriram retire by rotation at the
 forth-coming Annual General Meeting and being eligible offer themselves
 for reappointment.
 
 OTHER INFORMATION
 
 The information required under Section 217(2A) of the Companies Act,
 1956 and the Rules framed thereunder relating to particulars of
 employees is given in Annexure-ll to this Report.
 
 The information pursuant to Section 217(1 )(e) of the Companies Act on
 conservation of energy, technology absorption and foreign exchange
 earnings/outgo is given in Annexure - III.
 
 ACKNOWLEDGEMENT
 
 The Directors acknowledge the continued co-operation and support
 received from the financial institutions, banks and various Government
 agencies, and all our business associates.
 
 The directors also place on record their appreciation of the
 contribution made by employees at all levels.
 
                                          For and on behalf of the Board
 
                                                                CHAIRMAN
 
 New Delhi
 25th June 2008