We expect to report an attractive bottomline in 2011-12 and emerge as
 the most efficient and integrated sugarcane company in the country.
 
 Mr. Gaurav Goel and Mr. Gautam Goel, Managing Directors, review
 Dhampurs performance and prospects.
 
 Q. How would you summarise Dhampurs performance in the financial year
 2009-11?
 
 A. For the Indian sugar industry, the financial year 2009-11 was one of
 the most volatile. It wasnt just a question of cyclicality during the
 course of the year under review; it was also about the speed of change
 in operating fortunes. In this respect, the cyclical whiplash was
 similar to the general economic meltdown that transpired in September
 2008 – unprecedented for its speed and sharp decline.
 
 What transpired between January and March 2010 in India was perhaps no
 different: Sugar realisations crashed from a peak of Rs. 40 plus per kg
 to a trough of Rs. 24 per kg, even as the industry was struggling to
 address the variance in landed cane cost from Rs.162 per quintal in
 sugar season 2008-09, to Rs. 263 per quintal in sugar season 2009-10
 and to Rs. 218 per quintal in sugar season 2010-11.
 
 Further, the financial year under review reflected an inverted ‘V –
 sugar realisations stood at Rs. 29 per kg, peaked at Rs. 40 per kg,
 bottomed to Rs. 24 per kg and finished the financial year at Rs. 28 per
 kg.
 
 Q. How did this volatility translate into Dhampurs performance for the
 financial year 2009-11?
 
 A. Our Companys turnover stood at Rs. 2,414 crore in 2009-11 (18
 months) as against Rs. 975 crore in 2008-09 (12 months). This growth
 resulted from a higher sugar sale contribution, including refined sugar
 from imported raws and from the power and chemical businesses, further
 leading to increased sales volumes and improved realisations.
 
 Q. How did the other divisions perform?
 
 A. We were satisfied with our power business performance, accounting
 for 21% of the total revenue in 2009-11 (18 months) against its
 contribution of 14% in 2008-09 (12 months). The improvement was a
 result of higher cogeneration revenues, on account of better
 realisations,
 
 higher generation and improved power export. This division accounted
 for 92% of Dhampurs EBIDTA in 2009-11 (18 months) which stood at 32%
 in 2008-09 (12 months). The power business was a major factor in
 reducing the cyclical impact on the Company.
 
 It was a challenging year for our chemicals business (ethanol and
 alcohol) owing to a higher cost of molasses and other raw materials,
 coupled with lower realisations at the beginning of the financial year.
 However, higher realisations in the later part of the year resulted in
 marginal profits at the EBIDTA level.
 
 Q. What were the highlights of the Companys performance in the
 financial year 2009-11?
 
 A. In the preceding paragraphs, we provided a perspective of the
 challenges the industry faced during the financial year 2009-11. This
 could have been worse, had it not been for some longstanding
 initiatives aimed at capacity growth and product diversification.
 Consider the following:
 
 - The Company crushed 65.26 lac tonnes of sugarcane, against 25.47 lac
 tonnes in 2008-09. Raw sugar imports processed, stood at 1.78 lac
 tonnes, against 0.18 lac tonnes in 2008-09. This increased conversion
 enhanced our asset utilisation. Additionally, the Company exported 0.31
 lac tonnes of sugar under the Advance Licence Scheme, which served as a
 cushion against a sharp decline in domestic realisations in early 2010.
 These factors enabled the sugar division to report a lower loss than
 equivalent companies during the period under review.
 
 - The proportion of revenue from the non-sugar business stood at 27%
 for the 18 month period ending March 2011, while it stood at 18% for
 the 12 month period ending September 2009, vindicating investments in
 downstream by-product utilisation. Power revenues stood at Rs. 665.05
 crore for the 18 month period and Rs. 155.52 crore for the 12 month
 period. The average per unit realisation stood at Rs. 4.37 in 2009-11
 and Rs. 3.25 in 2008-09, facilitated by increased realisations under
 the Open Access Policy announced by the U.P. State Government.
 
 - The Company commenced the supply of ethanol to oil marketing
 companies like Indian Oil Corporation Ltd, Bharat Petroleum Corporation
 Ltd and Hindustan Petroleum Corporation Ltd at a selling price of Rs.
 27 per litre.  Consequently, the percentage of chemical business
 revenues in the Companys overall revenue mix was 6% in 2009-11 (18
 months) and 4% in 2008-09 (12 months).
 
 The big picture was that cogeneration and chemical revenues stood at
 27% of Dhampurs total revenues for the 18 month period, against 18%
 during the 12 month period ending September 2009, justifying the
 investments we made to reduce our cyclical exposure.
 
 Q. What were the challenges addressed by Dhampur during the period
 under review?
 
 A. Cane pricing continued to be our biggest challenge. Even though the
 Central Government stipulated a Fair and Remunerative Price (FRP) of
 Rs. 129.84 and 139.12 per quintal in 2009-10 and 2010-11 respectively
 and the actual price stood to Rs. 248 per quintal for the 18 month
 period, which could not be covered by the realisations. This resulted
 in a loss for the sugar division.
 
 However, we were able to limit our downside, owing to effective
 business integration – the end product of one business represented the
 raw material for another. This integration made it possible for us to
 set off the sugar division losses with the improved revenues of the
 power division.
 
 The outlook is optimistic: Sugar production is anticipated to increase
 in 2011-12, following a higher cane output, coupled with increased
 biomass generation for our power business and higher molasses for
 ethanol production.
 
 Q. What cost optimisation measures helped arrest divisional losses?
 
 A. Our cost optimisation initiatives comprised: 
 
 - Processing 1.76 lac tonnes of raw sugar during the period under
 review and running sugar operations during the off season, resulting in
 superior absorption of fixed costs.
 
 -Repayment of long-term debt worth Rs. 104.16 crore (net).
 
 Q. How does the Company expect to capitalise on emerging opportunities?
 
 A. Sugar: Sugar production is expected to rise to 24.5 million tonnes
 on the back of improved cane acreage and higher yield in 2010-11;
 international sugar prices touched a 30-year high owing to heavy
 rainfall and cyclones in Australia, adverse climatic conditions in
 Brazil, Thailand and China.  These factors have created export
 opportunities for India.
 
 Power: India is a power-deficient country and Uttar Pradesh is one of
 its worst-affected states, providing an opportunity for our power
 division. We secured business viability by venturing into Power
 Purchase Agreements (PPA) with the U.P.  Government. With the projected
 higher rate of sugarcane crushing, bagasse availability will improve
 and the power division could run throughout the year. Purchase of a
 certain minimum percentage of renewable energy by the states has been
 made mandatory, which gives us an added opportunity.
 
 Ethanol: The 5% (E5) ethanol blending program is part of the
 Governments objective of reducing the countrys dependence on fossil
 fuels and crude oil imports. The earlier ethanol blending program could
 not take off in spite of E5 being made mandatory due owing to the
 non-remunerative pricing of Rs. 21.50 per litre.  However, the current
 price of Rs. 27 effective from October 2010 provides an incentive to
 revive the ethanol blending program.
 
 Cane production and molasses availability are expected to increase,
 resulting in higher ethanol production. With E10 (10% blending) on the
 horizon, a shift in the sugar economy from a situation of shortage to
 self-sufficiency will ensure adequate ethanol availability for blending
 with petrol. Our focus will be to improve the production of chemicals
 as well, while capitalising on the ethanol blending programme, thereby
 strengthening realisations.
 
 How does the Company expect to perform in 2011-12?
 
 Going ahead, we will concentrate on increasing our capacities in the
 power and chemical businesses to offset sugar business cyclicality,
 helping us earn profits during sugar downturns.  We expect a better
 performance on account of higher sugar production and better average
 realisations, which should help us emerge with a stronger balance
 sheet.
 
 Controls decide...              Decontrol will...
 
 - raw material (sugarcane) 
 costs that mills                - even out the sugar cyclicality
 must pay farmers
 
 - end product (sugar)
  realisations regulated 
 through                         - ensure remunerative cane prices
 the monthly release mechanism
 
 - size of production through 
 control of the quantity         - lead to capacity consolidation 
                                   and economies of scale
 of cane that a mill can crush
 
 - sugar availability for the 
 domestic market through control - double ethanol production and 
                                   replace 3% of Indias
 of exports and imports            gasoline consumption
 
 - which sugar mill a farmer 
 may sell his cane to            - generate close to 8,000
                                   MW of green power against
                                   todays 900 MW
 
                                 - make India a consistent sugar 
                                   exporter
 
 What is the basis of this optimism?
 
 Our optimism is well supported by various positive trends:
 
 - Sugar industry decontrol is anticipated, which will be beneficial for
 the industry in the long run as it will result in a larger quantum of
 sugar being sold in the open market at relatively higher realisations.
 
 - Higher cane production will result in adequate feedstock for the
 cogeneration and ethanol businesses, countering sugar cyclicality.
 
 - Indias growing appetite for automobiles will enhance fuel demand and
 boost ethanol requirements.
 
 - The current Power Purchase Agreements with the U.P.  Government will
 be in effect for a period of 20 years, providing a remunerative offtake
 for this renewable power.
 
 What message do you want to give your shareholders?
 
 We will continue to focus on higher margins across all three divisions
 – bottomline-accretive revenue from cogeneration, value-added
 chemicals, especially ethanol, and higher sugar production. In doing
 so, we expect to report an attractive bottomline in 2010-11 and emerge
 as the most efficient integrated sugarcane products company in the
 country.
 
 *(The year 2008-09 refers to the 12 month period ending September 2009,
 and 2009-11 refers to the 18 month period ending March, 2011)