HEG

The Directors have pleasure in presenting their 36th Annual Report and
 audited statements of accounts for the year ended 31st March, 2008.
 
 We are glad to report a continued strong performance driven by focus on
 our core business of graphite electrodes, enhanced overall operating
 efficiencies, prudent financial management and a buoyant sector
 outlook.
 
 1) FINANCIAL RESULTS & APPROPRIATIONS
 
                                                           (Rs.in crore)
 
                                                    2007-08     2006-07
 
 Turnover:
 Domestic                                            359.13     485.67
 Export                                              726.75     491.88
 Less: Excise Duty                                    33.02      49.66
 Inter Division Sales                                106.88     110.02
 Net Sales                                           945.98     817.87
 Other Income                                         30.56      20.21
 Total Income                                        976.53     838.08
 Profit before Interest, Depreciation and 
 Amortization                                        303.90     194.82
 Interest                                             50.37      46.06
 Profit before Depreciation and Amortization         253.33     148.76
 Depreciation and Amortization                        46.13      48.69
 Profit Before Tax                                   207.20     100.07
 Provision for Taxation 
 Current Year                                         67.67      12.58
 Deferred                                             (9.88)     13.97
 Provision for Fringe Benefit Taxes                    0.43       0.36
 Income Tax for earlier Years                          2.62      (0.67)
 Net Profit for the Period                           146.35      73.84
 EPS (Basic)                                          35.17      18.32
 Appropriations
 Amount available for appropriation                  186.26     100.50
 Dividend:
 a) On Equity Shares
 i) Interim Dividend                                  30.46
 ii) Proposed Dividend                                13.29      20.16
 b) Corporate Dividend Tax                             7.44       3.43 
 Transfer to : 
 a) Debenture Redemption Reserve                          -      12.00
 b) General Reserve                                   25.00      25.00
 c) Transfer to Capital Reserve                       14.11
 d) Balance carried forward                           95.98      39.92
 
 2.  OVERALL PERFORMANCE
 
 The Company during the year under review recorded strong growth in
 graphite electrodes, where it benefited from value and volume
 increments. Net Sales increased to Rs. 945.98 crore, higher by close to
 16% from Rs. 817.87 crore in the previous year. The export turnover
 increased approximately 48% as compared to previous year.The Net Profit
 increased substantially to Rs. 146.35 crore from Rs. 73.84 crore.
 Earning per share increased to Rs.35.17 (Previous year Rs.18.32).
 
 3.  DIVIDEND
 
 Your Company had paid an interim dividend @ Rs. 7 per share on Equity
 Shares in January, 2008.The Board is pleased to recommend a final
 dividend @ Rs. 3 per share on Equity Shares for the financial year
 ended March 31, 2008. Your Directors have proposed the dividend keeping
 in mind the Companys capital expenditure undertaken for various
 expansion plans, which are as per HEGs strategic initiatives. The
 Companys initiatives include expansion of graphite and power plants.
 
 4.  OPERATIONS
 
 GRAPHITE ELECTRODES
 
 During the year under reporting, the production of Graphite Electrodes
 at Mandideep was higher at 51,863 MT. Sales volume also increased in
 tandem with the production. Higher realizations during the current year
 coupled with increase in sales resulted in better earnings growth.
 
 POWER GENERATION
 
 HEG has a strategic advantage from availability of economical captive
 power plants of hydro-electrical and thermal capacity of about 44 MW.
 In order to support further increase in graphite capacity, the Company
 is already in the process of implementing the expansion plan adding 33
 MW, at an investment of Rs. 90 crore.  This is likely to be
 commissioned by March 2009, taking the total capacity to approximately
 77 MW. In case of any surplus power, it will be sold to the State
 Electricity Board.
 
 5.  PROPOSED CAPACITY EXPANSION OF GRAPHITE ELECTRODE PLANT AT
 MANDIDEEP
 
 Your Company had on 5th June, 2008, announced that its graphite
 electrodes capacity will be augmented to about 80,000 TPA from the
 current level of about 60,000 TPA, by way of Brownfield expansion and
 de-bottlenecking of the existing capacities.This will give HEGs
 Mandideep plant the distinction of becoming the worlds single largest
 site for manufacturing graphite electrodes.The expansion will result in
 high levels of operating efficiencies and production cost benefits,
 resulting in improved volumes and realizations.
 
 This capacity expansion will be carried out at a significantly
 contained incremental capital cost of Rs. 190 crore, which is 40 per
 cent less than the expansion cost undertaken two years ago, and will be
 operational by the last quarter of 2009.This investment of Rs. 190
 crore is expected to have a very attractive pay-back period.  The
 Company proposes to fund its expansion mainly through internal
 accruals.
 
 6.  HIVE-OFF OF STEEL UNIT AT DURG UNDER SCHEME OF ARRANGEMENT
 
 The Scheme of Arrangement to hive-off the Steel Division of the Company
 at burg to M/s. Jai Balaji Industries Ltd., has been approved by both
 the Honble High Courts at Jabalpur (vide its order dated May 16,2008)
 and Kolkata (vide its order dated May 9,2008).The certified true copies
 of these orders have been filed with the respective Registrars of
 Companies and with this the scheme has become effective.The
 consideration towards the transfer of the said Unit has been received
 by the Company.
 
 7.  CORPORATE GOVERNANCE
 
 A report on Corporate Governance is forming part of the Annual Report
 along with the Auditors Certificate on its compliance.
 
 8.  MANAGEMENT DISCUSSION AND ANALYSIS
 
 Management Discussion & Analysis Report as required under the Listing
 Agreements with the Stock Exchanges forms part of the Annual Report.
 
 9.  INTERNAL CONTROL SYSTEMS AND ADEQUACY THEREOF
 
 The Company has an adequate internal control system commensurate with
 the size and nature of its business.
 
 Internal audit programme covers various areas of activities and
 periodical reports are submitted to the management. The Audit Committee
 reviews financial statements and internal audit reports along with
 internal control systems. The Company has a well-defined organizational
 structure, authority levels and internal rules and guidelines for
 conducting business transactions.
 
 10.  PERSONNEL
 
 A) INDUSTRIAL RELATIONS
 
 The industrial relations during the period under review generally
 remained cordial at all the plants of the Company.
 
 B) PARTICULARS OF EMPLOYEES
 
 The information of employees getting salary in excess of the limits as
 specified under the provisions of sub section (2A) of Section 217 of
 the Companies Act,! 956, who were employed throughout or for a part of
 the financial year under review is given as an annexure forming part of
 this report.
 
 11.  PUBLIC DEPOSITS
 
 Your Company has not invited any deposits from public / shareholders in
 accordance with Section 58A of the Companies Act, 1956.
 
 12.  CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE
 EARNINGS AND OUTGO.
 
 The information with regard to Conservation of Energy,Technology
 Absorption, Foreign Exchange Earnings and out go in accordance with the
 provisions of Section 217(1 )(e) of the Companies Act, 1956 read with
 the Companies (Disclosures of particulars in the Report of Board of
 Directors) Rules, 1988, is given as an annexure forming part of this
 Report.
 
 13.  DIRECTORS
 
 Your Directors namely Shri Shekhar Agarwal, Dr. Kamal Gupta and Shri P.
 Murari shall retire by rotation at the ensuing Annual General Meeting
 and being eligible, have offered themselves for reappointment.The Board
 recommends their appointment.
 
 14.  AUDITORS
 
 M/s Doogar& Associates, Chartered Accountants and M/s S.S. Kothari
 Mehta& Co.,Chartered Accountants, Auditors of the Company, will retire
 from their office at the ensuing Annual General Meeting. They are,
 however, eligible for re-appointment.They have furnished a Certificate
 to the effect that their appointment will be in accordance with limits
 specified in sub-section (IB) of Section 224 of the Companies Act,
 1956. You are requested to consider their appointment.
 
 The Auditors Report read alongwith notes to accounts is self
 explanatory and therefore does not call for any further comments.
 
 15. DIRECTORS RESPONSIBILITY STATEMENT
 
 The Directors confirm that:
 
 (i) in preparation of the annual accounts, the applicable accounting
 standards have been followed and that no material departures have been
 made from the same;
 
 (ii) they 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
 the Company at the financial year ended 31st March, 2008 and of the
 profit of the Company for that year;
 
 (iii) they have taken proper and sufficient care for maintenance of
 adequate accounting records in accordance with the provisions of the
 Companies Act, 1956 for safeguarding the assets of the Company and for
 preventing and detecting frauds and other irregularities; and
 
 (iv) they have prepared the annual accounts on a going concern basis.
 
 16. ACKNOWLEDGEMENTS
 
 Your Directors wish to place on record, their appreciation for the
 valuable assistance and support received by your Company from Banks,
 Financial institutions, Central Government, Govt, of Madhya Pradesh,
 Govt, of Uttar Pradesh, Government of Chattisgarh and their
 departments.The Board also thanks the employees at all levels, for the
 dedication, commitment and hard work put in by them for Companys
 achievements.
 
                                         For and on behalf of the Board,
 
 Place : Noida                                        (RAVIJHUNJHUNWALA)
 Dated : June 13,2008                       Chairman & Managing Director