Indo Rama Synthetics (India)

The Directors take great pleasure in presenting the 22nd Annual Report
 together with the audited accounts for the financial year ended 31
 March 2008.
 
 Financial Highlights
 
 The financial performance of your Company for the year ended 31 March
 2008 is summarised below.
 
 PARTICULARS                                              (Rs. Million)
                                                  Year Ended Year Ended
                                                  31.03.2008 31.03.2007
 
 Net Sales and Other Income                        26,710.58  20,724.68
 
 Profit before Financial Expenses, 
 Depreciation and Tax ( EBIDTA)                      2455.15   1,807.15
 
 Financial Expenses                                   910.80     396.31
 
 Profit before Depreciation and Tax (PBDT)          1,544.35   1,410.84
 
 Depreciation                                        1473.27   1,068.07
 
 Profit before Tax (PBT)                               71.08     342.77
 
 Total Tax Expenses                                    40.88     136.38
 
 Profit after Tax (PAT)                                30.20     206.39
 
 Add: Profit brought forward from previous year     1,869.89   1,769.60
 
 Transfer from Debenture Redemption Reserve            24.06      48.13
 
 Profits available for Appropriation                1,924.15   2,024.12
 Appropriations :
 
 Transfer to General Reserve -
 
 Proposed Dividend on equity shares                   151.83     131.83
 
 Corporate Tax on Proposed Dividend                    25.80      22.40
 
 Surplus carried to Balance Sheet                    1746.52   1,869.89
 
 Total Appropriation                                 1924.15   2,024.12
 
 Operational & Financial Review
 
 During the year, the Company achieved gross sales of Rs.  27,218
 million and net sales of Rs. 25,455 million, an increase of 26.2% and
 26.5%, respectively over the last year. In spite of a difficult
 external environment, your Companys clear focus on cost
 competitiveness, consistent product quality and customer focus have
 helped it to increase its sales volume of polyester products to 450,636
 tonnes as compared to previous years 346,308 tonnes, a growth of 30%
 over the previous year.
 
 The US Dollar remained weak vis-a-vis the Indian Rupee for most of
 2007-08. In spite of the strong Rupee, Your Companys exports reflected
 a year-on-year growth of more than 90% to reach Rs. 4,053 million,
 compared to Rs. 2,122 million in the previous year.
 
 The weak US Dollar, however, meant that Indian textile exports were
 adversely affected, in turn leading to a surplus in the domestic
 market. This supply overhang meant that polyester product price
 generally remained lower throughout the year.
 
 Raw material prices, especially of mono ethylene glycol (MEG), recorded
 a sharp increase during the second half of the year, due in part to the
 spiralling price of crude oil and exacerbated by production shortages
 from key suppliers.
 
 2007-08 was also the first year when interest on project loans taken by
 the Company were charged to the Profit & Loss Account; during the year
 under report, interest rates also went up as did the amount of working
 capital needed for the expanded operations. Consequently, interest and
 finance costs during the year rose 130% compared to the previous year.
 
 As a result of the above factors — lower prices, higher input costs,
 high finance costs and a lower than optimal capacity utilisation of the
 plant, your Companys profitability was adversely impacted, especially
 during the second half of the year. Thus, your Company earned cash
 profits of Rs. 1,544 million during 2007-08. After factoring full
 year depreciation for the new plants, your Companys net profit after
 taxes for the year ended 31 March 2008 stood at 30.20 million.
 
 The lower profitability during the year also resulted in cash flow
 mismatches and diversion of certain short term funds for long term use,
 consequent to which your Company could not meet some of its financial
 commitments in time to Banks/Financial Institutions, which have
 resulted in overdues to these Institutions. Your Company has, however,
 paid up all overdues on interest and principal outstanding as on 31
 March 2008.
 
 Your Directors would like to point out that in view of the amendment in
 Section 115 JB of Income Tax Act, 1961 by Finance Budget, 2008,
 retrospectively from AY 2001-02, MAT liability of Rs. 147.70 million
 which relates to the years 2001 -02 to 2006-07, has been adjusted from
 General Reserve as it relates to earlier years. This is done to reflect
 true profitability for the current year.
 
 The Company has outstanding derivative instruments for hedging for its
 variable interest rate and foreign currency related exposures on which
 mark to market loss as on March 31, 2008 stood at Rs. 117.44 million.
 Since all the derivatives entered into by the Company are to mitigate
 or offset the risk that arise from their normal business activities
 only and are not held for trading or speculative purposes, the Company,
 pending adoption of AS 30, has not provided for the losses on mark to
 market basis in the current year profitability.
 
 Dividend
 
 In line with its consistent policy to reward the shareholders, your
 Directors deliberated on the issue of dividend and, despite the
 inadequacy of profits, decided to reward the shareholders and have
 recommended a dividend of 10% for the year 2007-08 to be paid out of
 the accumulated profits, subject to the approval of the shareholders.
 The dividend, if approved, will be paid to those members whose names
 appear on the Register of Members of the Company on 12 September 2008.
 In respect of shares held in dematerialised form, it will be paid to
 members whose names appear in the statement of beneficial ownership
 furnished by National Securities Depository Limited (NSDL) and Central
 Depository Services (India) Limited (CDSL) at the close of business
 hours on 29 August 2008.
 
 Corporate Governance
 
 A detailed report on the corporate governance system and practices of
 your Company along with auditors certificate on compliance are given
 as a separate chapter in the Annual Report.
 
 Management Discussion and Analysis
 
 A detailed report on Management Discussion and Analysis is provided as
 a separate chapter in the Annual Report.
 
 Merger of Indo Rama Petrochemicals Limited with your Company
 
 As already reported, your Company had made strategic investments in
 Indo Rama Petrochemicals Limited (IRPL).  IRPL had commissioned a coal
 fired thermal power plant to produce 30 MW (2x15 MW) electrical power,
 58 tonnes per hour process steam and 16 M3 per hour of process
 demineralised water at the Companys polyester complex at Butibori. In
 order to maximise value creation for the shareholders for both
 companies, IRPL has been amalgamated with your Company in pursuance of
 a Scheme of Amalgamation which has been approved by Honble High Court
 of Judicature at Bombay, Nagpur Bench.  The Scheme became effective on
 31 December 2007 with retrospective effect from 1 February 2007. The
 merger has helped your Company to lower the cost of power for its
 manufacturing process, facilitate saving of losses under various cost
 elements and enhance the value proposition for your Company.
 
 Pursuant to merger of Indo Rama Petrochemicals Limited (IRPL) with your
 Company, power has been identified as a separate business segment.
 
 Share Capital
 
 Pursuant to the scheme of amalgamation detailed above and upon vesting
 of the undertaking of IRPL into your Company and consequent allotment
 of your Companys equity shares to the shareholders of IRPL as per the
 Share Exchange Ratio, the paid-up equity capital of your Company as on
 31 March 2008 increased to Rs. 1518.27 million as against Rs. 1318.27
 million. These new shares have also been listed on both, Bombay Stock
 Exchange Limited (BSE) and the National Stock Exchange of India Limited
 (NSE), where the equity shares of your Company are already listed.
 
 Conservation of Energy, Technology Absorption, Foreign Exchange
 Earnings and Outgo
 
 Information required under Section 217 (1)(e) of the Companies Act,
 1956, read with Companies (Disclosure of particulars in the Report of
 Board of Directors) Rules, 1988 are set out in the Annexure forming
 part of this Report.
 
 Particulars of Employees
 
 Information as per Section 217(2A) of the Companies Act, 1956, read
 with the Companies (Particulars of Employees) Rules, 1975, as amended
 from time to time, forms part of this Report.
 
 Fixed Deposits
 
 There were no unclaimed or unpaid deposits as on 31 March 2008 within
 the meaning of Section 58 A of the Companies Act, 1956 and the Rules
 made thereunder.
 
 Directors
 
 In accordance with Article 133 of the Articles of Association of the
 Company, Mr. A. K. Ladha and Mr. U.K. Khaitan retire by rotation at the
 ensuing Annual General Meeting and, being eligible, offer themselves
 for re-appointment.
 
 During the year under report, the term of Mr. O.R Lohia as Managing
 Director of the Company came to an end on 25 December 2007. The Board
 of Directors of the Company re-appointed Mr. Lohia for a further term
 of 5 years effective from 26 December 2007.
 
 Directors Responsibility Statement
 
 Pursuant to the requirement under Section 217(2AA) of the Companies
 Act, 1956 with respect to Directors Responsibility Statement, it is
 hereby confirmed that:
 
 (i) in the preparation of annual accounts for the financial year ended
 31st March, 2008, the applicable accounting standards have been
 followed along with proper explanations relating to material
 departures, if any;
 
 (ii) the Directors have selected such accounting policies and have
 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 as at 31 March 2008 and of the profits of the
 Company for the year ended on that date;
 
 (iii) the Directors have taken proper and sufficient care for the
 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 fraud and other
 irregularities; and
 
 (iv) the Directors have prepared the annual accounts for the financial
 year ended 31 March 2008 on a going concern basis.
 
 Auditors
 
 M/s S.R. Batliboi & Company, Chartered Accountants, Statutory Auditors
 of the Company retire at the conclusion of the forthcoming Annual
 General Meeting, and have confirmed their eligibility for
 re-appointment, in accordance with Section 224(1 B) of the Companies
 Act, 1956.
 
 The observations of the Auditors in their Report have been discussed in
 details in Note No. 4 (b) and Note No. 6 to the Schedule 22 of the
 Statement of Accounts and have also been explained in para two under
 the heading operational & Financial Review.
 
 Cost Auditors
 
 Pursuant to a directive of the Central Government, your Company is
 required to conduct a Cost Audit in respect of its Polyester operations
 every year until further notice.  Accordingly, qualified cost auditors
 were appointed to carry out audit of the cost accounts maintained by
 the Company for the year ended 31st March, 2008.
 
 Industrial Relations/Human Resources
 
 Your Company maintained healthy, cordial and harmonious industrial
 relations at all levels during the year under report.  Your Company
 firmly believes that a dedicated workforce constitute the primary
 source of sustainable competitive advantage. Accordingly, human
 resource development continues to receive focused attention. Your
 Directors wish to place on record their appreciation for the dedicated
 and commendable services rendered by the staff and workforce of your
 Company.
 
 Acknowledgements
 
 Your Directors take this opportunity to offer their sincere thanks to
 various departments of the Central and State Governments, government
 agencies, financial institutions, banks, shareholders, customers,
 employees and other related organisations, who through their continued
 support and co-operation, have helped in your Companys progress.
 
                    For and on behalf of the Board of Directors of
                    Indo Rama Synthetics (India) Limited
 
                                  O. R Lohia
                       Chairman & Managing Director
 
 Place : New Delhi
 Dated : 30th June, 2007