Your Directors have pleasure in presenting the Twenty first Annual
 Report and Audited Accounts for the 18 months period ended on September
 30, 2002.
 
 FINANCIAL RESULTS:
 
                                                           (Rs. in Lacs)
                                            30.09.2002        31.03.2001
                                           (18 months)       (12 months)
 
 Income                                       15760.76          15371.58
 
 Expenditure                                  14809.42          14013.49
 
 Profit before interest and depreciation        951.34           1358.08
 
 Less: Interest and depreciation               2896.12            614.83
 
 Profit/(Loss) for the year before Exceptional
 Extra ordinary and prior period items       (1944.78)            743.25
 
 Exceptional, extra ordinary and prior
 period items                                        -          (147.33)
 
 Profit/(Loss) for the year after exceptional
 Extra ordinary and prior period items       (1944.78)            595.92
 
 Deficit brought forward from previous year  (5285.34)        (5,933.66)
 
                                             (7230.12)        (5,337.74)
 Add: Dividend on preference shares
 written back                                        -             52.40
 
                                             (7230.12)        (5,285.34)
 
 Less: General Reserve deducted per contra      750.00            750.00
 
 Deficit carried to balance sheet            (6480.12)        (4,535.34)
 
 SALES AND OPERATIONS:
 
 During the period under review the Company has posted a total income of
 Rs 157.61 crores as against Rs. 153.72 crores of previous year. The
 Operating profits during the said period were at Rs. 9.51 crores as
 against Rs. 13.58 crores in the previous year. During the period the
 company has incurred net loss of Rs. 19.45 crores against profit of Rs.
 7..43 crores of the previous year. The said loss during the period
 under review is mainly on account of non-capitalisation of interest
 expenses.
 
 The companys effort in launching several value added products in the
 past have started yielding rich dividend. By providing Integrated
 Logistics Solutions, the company has been able to cater to the diverse
 needs of a majority of the industry segments as diverse as Multi Level
 Marketing, Telecommunication, white goods and computer hardware etc.
 
 FUTURE OUTLOOK:
 
 Your company has been able to very successfully integrate its
 employees, vendors, franchisees and other business associates with the
 infrastructure of fleet and technology to provide best of class service
 to its customers. This has given the company the ideal platform for
 future business growth.
 
 The express industry is expected to grow at a steady pace around 20%.
 The economic downtrend is expected to force large corporations and
 multinationals to concentrate on core competencies and outsource their
 logistic requirements. This will open up new vistas of opportunities
 for your company in the coming years. With its strong brand equity,
 widespread reach through robust network, committed workforce and large
 customer base, the company should be able to grow at a pace much higher
 than the expected industry growth. This would translate into cascading
 increase in profitability given the high operating leverage of the
 business.
 
 The company plans to take a quantum leap in technology during the year
 to provide more powerful and customer friendly tracking systems. The
 company is in the process of developing specialised products for some
 of the emerging segments which is expected to give the company
 considerable competitive edge. The company will enhance its
 capabilities in providing value added services such as warehousing,
 payment gateways and telemarketing so as to be able to provide holistic
 solutions to customers.
 
 The company believes that ability to reach out to customers is going to
 be an important deliverable in future. The company plans to extend its
 existing franchisee network to capture the nascent markets.
 
 Elbee brand has a very high value in the minds of the customer today.
 This has been made possible through years of consistent service and
 quality performance. The company intends to build on the strength
 through a focussed brand building exercise during the course of the
 year.
 
 Your company today is poised for quantum growth. The management is
 aware that this would warrant a need for effecting and managing a
 change process. The management is fully prepared to handle the process
 successfully to take the company forward to new horizons.
 
 BUILDING PROJECT:
 
 Loans from ICICI Bank Limited, IDBI, AFIC and Privately Placed Secured
 Redeemable Non Convertible Debentures placed with UTI are secured by
 way of first pari-passu charge on the Companys land and building
 situated at Nehru Road, Vile Parle, Mumbai. In order to reduce the
 financial liability and consequent huge interest burden thereon on the
 Company, the company jointly with its subsidiary M/s. Fiesta Estate
 Management Private Limited, who is also a joint owner, is negotiating
 for sale of said property, subject to necessary consents and approvals,
 if any, from the concerned authorities. Company, by way of its One Time
 Settlement (OTS) with above institutions expects to extinguish its
 debts from the proposed sale of the property.
 
 CORPORATE GOVERNANCE:
 
 In line with guidelines recommended by the Securities and Exchange
 Board of India (SEBI) Committee on Corporate Governance, adequate steps
 have been taken to ensure that all the mandatory provisions of clause
 49 of the Listing Agreement are duly complied with. A separate report
 on Corporate Governance is included as part of the Annual Report. The
 Auditors Certificate confirming compliance of conditions of Corporate
 Governance is included in the said Corporate Governance Report.
 
 SUBSIDIARIES:
 
 The audited accounts of subsidiary companies, namely Elbee World
 Travels Limited and Fiesta Estate Management Private Limited together
 with the report of the directors and the auditors, as required under
 the provisions of the Companies Act, 1956 are attached herewith.
 
 HUMAN RESOURCE DEVELOPMENT:
 
 Your companys constant search for excellence has today given it a team
 of committed professionals rated as one of the best in the industry.
 The company had realised at an early stage that the industry is about
 people serving people. Accordingly, a lot of emphasis has been put on
 human resource development. During the year the company has further
 strengthened its team of professionals by adding specialists from other
 sectors of industry who have been able to add further value and have
 broadened the outlook of the organisation. Apart from training inputs
 towards specific skill development, the company has carried out a
 detailed role clarity exercise to remove duplicity of work and provide
 clearer direction to individual positions.
 
 Your company values the role played by the human capital in value
 creation, in business. The focus has been increasing this value chain
 by training & development of employees & making them highly productive.
 The HR strategies has been centered around Elbees Employee Value
 Triangle consisting of cost optimisation, employees productivity &
 Employees morale as its three equally important corners.
 
 DIRECTORS RESPONSIBILITY STATEMENT
 
 In accordance with the provisions of section 217 (2AA) of the Companies
 Act, 1956 your Directors Confirms that, read with explanations to the
 auditors qualifications given below in the Auditors Report:-
 
 (i) in the 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 judgements and estimates that are reasonable
 and prudent so as to give a true and fair view of the state of affairs
 of the company as at the end of September 30, 2002 and of the loss of
 the Company for the 18 months period ended on that date;
 
 (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 the safeguarding the assets
 of the company and for preventing and detecting fraud and other
 irregularities;
 
 (iv) that the Directors have prepared the annual accounts on a going
 concern basis.
 
 AUDITORS REPORT
 
 The Observations of the Auditors referred to in the Auditors Report
 are appropriately dealt with in the respective notes to accounts and
 hence does not call for further explanations except for the following:
 
 Regarding auditors observations at point No. 4 (f) (iv), (v) (vi) (vii)
 and (viii) your Directors wish to clarify as under:-
 
 4 (f) (iv):- Cost of Capital work in progress:- As on September 30,
 2002, capital work in progress amounted to Rs. 8362.50 lacs in respect
 of building under construction. The building is in an advanced stage of
 completion. The company jointly with it subsidiary viz. Fiesta Estate
 Management Pvt. Ltd (FEMPL). has entered into understanding with a
 party which may result into sale of the said building, subject to
 necessary consent and approvals, if any, from the concerned
 authorities. The company by way of its One Time Settlement (OTS) with
 the institutions expects to extinguish its debts from the sale of the
 said property and accordingly necessary adjustments would be made in
 the Books in the year of sale and settlement of OTS proposal.
 
 4 (f) (v):- The company owns two aircrafts valued at Rs. 2672.54 lacs.
 The said aircrafts were leased to Elbee Airlines Limited, which had
 suspended its operations effective July 1, 1998 and terminated the
 lease agreements. The Company intends to overhaul the aircrafts and
 either to lease them out or sale them at reasonable amount which will
 not result into any significant loss to the company.
 
 4 (f) (vi):- The companys investment in the subsidiary company viz
 FEMPL is strategic and long term in nature considering the joint
 development of the office building project, FEMPL along with its
 holding company ESL has entered into understanding with a party for
 sale the said building, subject to necessary consent and approvals, if
 any from the concerned authorities. FEMPL by way of its One Time
 Settlement with the institution expects to extinguish all its debts
 from the sale of the said property. Accordingly the company considers
 the diminution in the value of investment in the said company as
 temporary and loans are classified as good for recovery.
 
 4 (f) (vii):- The companys subsidiary viz. Elbee World Travel Ltd. was
 formed by spinning off the erstwhile Travel Division into a separate
 company in 2001. This was done mainly to concentrate on the travel and
 tourism. The said company is still in its infancy and expects to grow
 in terms of volume of business and profitability in the near future
 considering the scope of the travel and tourism business and
 accordingly such diminution is considered as temporary.
 
 4 (f) (viii):- As regards the Sundry debtors, loans and advances, your
 Directors are confident of recovery of the same and no provisions is
 considered necessary at this stage.
 
 4 (f) (ix):- Your Directors are in process of rectifying the
 inconsistencies in the system and the software package used by the
 Company by appointing the experts in the field. Your Directors are of
 the view that the said inconsistencies will not have any significant
 impact when accounted for and reconciled.
 
 FIXED DEPOSITS
 
 The Company has neither invited nor accepted/renewed deposits from the
 Public within the meaning of section 58A of the Companies Act, 1956,
 during the year under review.
 
 PARTICULARS OF EMPLOYEES
 
 In accordance with the provisions of section 217 (2A) of the Companies
 Act, 1956 read with the Companies (Particulars of Employees) Rules
 1975, a statement of particulars of employees is required to be given
 in the Directors Report. In terms of the provisions of section 219 (1)
 (b) (iv) of the Companies Act, 1956, the Directors Report is being
 sent to all the members excluding the statement. Any member interested
 in obtaining a copy of the said statement may write to the Company or
 inspect the same at the Registered office of the company.
 
 PARTICULARS REGARDING CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND
 FOREIGN EXCHANGE EARNINGS AND EXPENDITURE
 
 The particulars pertaining to Foreign Exchange Earnings and Expenditure
 is as stated below. Earnings in Foreign Currency Earnings in foreign
 currency with respect to Export of goods on FOB basis, service charges,
 recovery of expenses and sale of tickets amounted to Rs. 261.41 Lacs
 (Previous year Rs. 1704.53 lacs).
 
 Expenditure in Foreign Currency
 
 Expenditure in foreign currency with respect to handling charges and
 other matters amounted to Rs. 72.47 lacs (Previous year Rs. 3345.37
 Lacs).
 
 Your Company does not own any manufacturing facility, hence the other
 particulars relating to conservation of energy and technology
 adsorption as required to be provided as the Companies (Disclosure of
 particulars in the Report of the Board of Directors) Rules, 1988 are
 not applicable.
 
 DIRECTORS
 
 As per provisions of the Companies 1956, Mr. Nikhil Morsawala and Mr.
 Asheesh Mohta are appointed as additional Directors at the Board
 Meeting held on 18th February, 2003. They hold the office till the
 ensuing Annual General Meeting and their appointment is proposed to be
 regularised as given in the Notice convening the Annual General Meeting
 of the Company.
 
 Mr. Avinash L. Kelkar was nominated by ICICI Limited as its nominee on
 the Board of the Company with effect from 30th January, 2002.
 
 Mr. Vivek Talwar has resigned from the Directorship of the company and
 the Board has accepted his resignation at their meeting held on 6th
 May, 2002. Mr. Mahendra Doshi and Mr. Sriram Chander have also resigned
 from the Directorship of your company and their resignation has been
 accepted at the meeting of Board of Directors held on 18th February,
 2003. The Board has placed on record its sincere appreciation for the
 contribution made by them during their tenure as directors of the
 Company.
 
 AUDITORS
 
 M/s. C. C. Chokshi & Co., Chartered Accountants retire at the ensuing
 Annual General meeting and are eligible for re-appointment.
 
 Members are also requested to authorise the Board of Directors to
 ratify/appoint Branch Auditors in consultation with the statutory
 auditors and fix their remuneration.
 
 ACKNOWLEDGMENTS
 
 Your Directors place on record their gratitude for the co-operation and
 support extended to the company by Financial Institutions, Banks,
 Customers and Business Associates of the company. Your Directors also
 take this opportunity to record their appreciation of the contribution
 made by the employees at all levels.
 
                                      By order of the Board of Directors
                                              for ELBEE SERVICES LIMITED
 
                                                             SANDIP SHAH
                                            Chairman & Managing Director
 
 Place: Mumbai
 Date: 27th February, 2003