Dear Shareholoders,
 
 Fiscal 2011 was a significant year for global economic recovery,
 showing noteworthy turnaround over the previous years'' performance.
 
 Despite various challenges, like economic uncertainty and natural
 disasters, the world economy as a whole was successful in retracing
 growth. The financial crisis has not left a deep impact on growth in
 developing economies, as they continue to make good progress compared
 with the developed world. A double-dip scenario was evaded and we are
 experiencing the positives of increased global economic activity.
 
 The Indian economy displayed a certain degree of insulation against
 negative global developments, and benefited from sustainable growth,
 primarily based on domestic demand. Though we are facing a high
 inflationary pressure, our economy is treading a positive direction
 with gross domestic product expected to grow at a rate of over 8% in
 2011-12.  With greater government impetus on economic progress, we are
 hopeful that the Indian economy will continue to be one of the best 
 performers worldwide.
 
 In such an environment, the global steel industry posted impressive
 growth, both in value and volume terms. In CY2010, the steel industry
 achieved peak production levels of over 1.4 billion tonnes. Growth
 since then has been encouraging. The current year started on an
 encouraging note, with performance expected to surpass earlier record
 levels.
 
 Our products find applications in steel making through the EAF route
 and overall growth naturally results in the growth of the EAF segment,
 to comply with better environment standards, thereby providing fillip
 to graphite electrode consumption. Steel production through the EAF
 route, is expected to touch a new peak in the short-term, implying
 robust demand.  We are observing that new capacities are being
 established and many steel giants are converting their existing
 conventional steel production facilities into EAF plants to comply with
 better environment standards. We believe this will drive greater demand
 for graphite
 
 electrodes, going forward.
 
 We, at HEG Limited, are proud to be a part of few global organisations
 who manufacture graphite electrodes. The Company built its successful
 growth story over the past few decades through the implementation of a
 focused strategy which resulted in cost consciousness, international
 quality, integrated manufacture and strong customer relations.
 
 Further, I am glad to share that we are expanding our graphite
 electrode capacity from 66,000 tonnes to 80,000 tonnes per annum. The
 first phase of the expansion is operational and full- capacity
 commercial production is expected to be on stream by October 2011. We
 have invested around Rs. 225 crore towards this expansion, through a
 combination of internal accruals and debt. This capacity expansion is
 being carried out at a relatively low capital investment which we
 believe will translate into lucrative payback in the near future.
 
 With this expansion, we will be successful in consolidating our
 position.
 
 We are expanding our graphite electrode capacity from the current rate
 of 66,000 tonnes to 80,000 tonnes per annum. The first phase of the
 expansion is operational and full- capacity commercial production is
 expected to be on stream by October 2011.
 
 Rs. 225 crore
 
 We invested around towards this expansion through a combination of
 internal accruals and debt.
 
 As the world''s largest single-site producer of graphite electrodes.
 Such a large single-site facility benefits us significantly, owing to
 better cost containment, greater quality control and easier operations
 management. We expect this expansion to benefit us as demand is
 continuously improving, evident from the strengthening of our order
 book. Capacity utilisation levels are rising throughout the industry,
 driven by higher demand, which should lead to a better pricing of
 graphite electrodes.  With larger capacity, post the expansion, we will
 derive greater benefits from a conducive operating scenario.
 
 While demand and pricing scenarios seem encouraging, let me briefly
 discuss the manufacturing side of our business.  Manufacturing graphite
 electrodes involves two main cost components – needle coke and power.
 Needle coke for CY 2011 was booked at competitive rates and we tied up
 with our suppliers for the entire requirement, keeping in view our
 expanded capacity.
 
 The other important cost component is power. Your Company is
 well-positioned in this regard, as we have three captive power plants
 with a total rated capacity of 77 MW. Around 64 MW capacity comes from
 two thermal power plants whereas the hydel power plant
 contributes 13.5 MW. All three power plants operated optimally during
 the year. The total power generation capacity is sufficient even for
 our expanded graphite electrode capacity.
 
 Your Company lays strong emphasis on providing the best service and
 product experience to its global customer base.  Quality of graphite
 electrodes remained a focal point of our operations and we continue to
 deliver products of international standards.
 
 No business would be successful unless supported by quality committed
 talent.  We believe that we engaged some of the best talent in the
 industry. We provide superior training programmes and lay emphasis on
 developing our human resources to drive organisational growth.
 
 Business growth and societal progress go hand in hand. As a successful
 company, we believe in sharing what we create. Towards that end, we
 continued to implement initiatives and demonstrate our corporate social
 responsibility. We adopted a few villages in Madhya Pradesh, with an
 aim to improve their lifestyle. We focuesed on higher education,
 granting scholarships, improving infrastructure and maintaining higher
 standards of living,
 
 Your Company is well-positioned in this regard, as we have three
 captive power plants with a total rated capacity of 77 MW. Around 64 MW
 capacity comes from two thermal power plants whereas the hydel power
 plant contributes towards the remaining 13.5 MW capacity.
 
 among others. Additionally, we emphasise community healthcare and
 family welfare. To create social capital and deliver our CSR
 activities, we have formed the Graphite Education and Welfare Society,
 a non-profit trust.
 
 As I look ahead, I foresee the graphite electrode industry being on a
 high- growth path. With the Company''s inherent advantages that include
 a large single-site facility, low-cost production, world-class
 products, broad client base and growing business prospects, we are
 confident of capturing opportunities which will take the Company to the
 next level of success.
 
 As I conclude, I would like to thank you for the continued trust and
 support extended by you in our Management and the Board of Directors. I
 take this opportunity to also thank our customers, employees,
 suppliers, service providers, financial institutions and bankers for
 their contribution towards the Company''s success. Let us all reaffirm
 our commitment towards the growth of HEG Limited as the industry
 leader.
 
 Best wishes,
 
 Ravi Jhunjhunwala
 
 Chairman and Managing Director