The Directors present their Twentyfifth Annual Report on the
 operations of your Company alongwith the standalone and consolidated
 financial results for the fifteen-month period ended 30th June, 2010.
 
 FINANCIAL RESULTS
 
 The highlights of the financial results (standalone) for the
 fifteen-month period are as under:- 
                                                    (Rs. in crores) 
                                    15 month         Year ended
                                    period ended     31st March,
                                    30th June, 2010  2009
 
 1 Sales / Income from operations   10983.14         9063.44
 Less : Excise Duty                   850.41          931.46
 
                                    10132.73         8131.98
 
 2 Other Income                       445.96          405.86
 
 3 Total Income                     10578.69         8537.84
 
 4 Total Expenditure                 8855.75         7107.11
 
 5 Profit before Interest & Finance 
 Charges and Depreciation            1722.94         1430.73
 
 6 Less : Interest & Finance Charges 1285.45         1159.30
 
 7 Profit before Depreciation         437.49          271.43
 
 8 Less : Depreciation                773.95          646.62
 
 9 Profit/(Loss) before Tax and 
 Exceptional Items                   (336.46)        (375.19)
 
 10 Add : Exceptional Items              -            648.70
 
 11 Profit/(Loss) before tax         (336.46)        (1023.89)
 
 12 Provision for Taxation (Net)
 
 - Current Tax                          0.03            0.03
 
 - Fringe Benefit Tax                    -              3.00
 
 Deferred Tax Charge / (Credit)       (14.15)         (338.81)
 
 13 Net Profit/(Loss)                (322.34)         (688.11)
 Add : Debenture Redemption 
 Reserve written back                  20.26            27.71
 Add:
 
 a) Balance brought forward from 
 previous year                       (1832.15)        (1046.00)
 
 b) Adjustment towards Exchange 
 Differences of 2007-08                  —             (125.75)
 
 14 Amount carried to next year      (2134.23)        (1832.15)
 
 Income from operations during the fifteen-month period under review was
 Rs.10983.14 crores and profit before interest, finance charges and
 depreciation was Rs.1722.94 crores.
 
 After providing for interest and finance charges of Rs.1285.45 crores,
 profit before depreciation was Rs.437.49 crores.  After providing for
 depreciation of Rs.773.95 crores, loss before tax provisions was
 Rs.336.46 crores for the period under review.
 
 After considering deferred tax credit of Rs.14.15 crores and providing
 for wealth tax Rs.0.03 crores, net loss during the period under review
 was Rs.322.34 crores. Considering Debenture Redemption Reserve written
 back Rs.20.26 crores and accumulated losses of Rs.1832.15 crores
 brought forward from the previous year, the accumulated losses as at
 30th June, 2010 was Rs.2134.23 crores. The losses are proposed to be
 carried to next years accounts.
 
 FINANCIAL YEAR
 
 The financial year of the Company has been extended by a period of 3
 (three) months upto 30th June, 2010. Accordingly, the Companys
 financial year 2009-10 is for a period of 15 (fifteen) months, 1st
 April, 2009 to 30th June, 2010.
 
 DIVIDEND
 
 In view of the accumulated losses, the Board of Directors does not
 recommend any dividend on the Equity Shares. The Board of Directors
 does not declare dividend on Cumulative Redeemable Preference Shares.
 
 OPERATIONS
 
 The deep economic recession had resulted in a negative global GDP
 during the year 2009. World economy has since regained certain
 stability and modest growth rates are being witnessed in the economies
 of developed countries. On the other hand, countries in the developing
 world have, however, registered relatively high levels of economic
 growth and robust domestic markets.
 
 Global steel industry had witnessed an unprecedented dip in demand and
 sharp decline in prices during the period of economic meltdown. Global
 steel production had declined by 8% during 2009 and consumption was
 lower by 6%, notwithstanding the visible rebound during second half of
 2009. Backed by fiscal stimulus-led global economic recovery, steel
 industry has since demonstrated visible signs of demand pick-up and
 price stabilization during the last quarter of year 2009. The current
 year, so far, has seen a marked increase in domestic steel demand led
 by impressive growth in vital end-user segments, such as, automobile
 and consumer goods.
 
 While developed economies had faced slow economic recovery, China and
 India registered impressive GDP growth.  Steel production in India grew
 by 4% and consumption had risen by 8%. The growth in consumption led to
 higher import of steel products into India. High level of cheap imports
 has since led to an inevitable fall in domestic prices of steel
 products, with consequential impact on financials of major steel
 makers.
 
 During the period under review, the Company sought to consolidate its
 efforts towards optimizing productivity and innovating its product
 basket.
 
 Production of Hot Rolled Coils at 3.31 Million MTs was higher by 24%
 compared to the previous financial year, on an annualized basis.
 Capacity utilization was over 80% of the enhanced annual capacity of
 3.3 Million MTs.
 
 Production of Direct Reduced Iron (Sponge Iron) at 1.68 Million MTs was
 higher by 23% over the previous financial year, on an annualized basis.
 Efforts undertaken by the Company towards securing additional supplies
 of Natural Gas had resulted in improved production of Direct Reduced
 Iron during the year.
 
 Production of Hot Metal was higher at 2.13 Million MTs. Upgradation of
 Blast Furnace during 2009 has resulted in significant improvement in
 process efficiencies and new benchmarks are being set on all production
 parameters.
 
 Production of Cold Rolled Steel Coils/Sheets and Galvanized
 Coils/Sheets had registered increase at 0.31 Million MTs and 0.20
 Million MTs, respectively. In its endeavour to continually offer
 superior products, the Company has added Galvalume, a premium
 metallic-coated steel product, to its product-basket. Galvaume finds
 extensive application in corrosion and temperature resistance.
 Production of Galvalume Coils/Sheets has been streamlined during the
 period.  Production of Tubes and Pipes had also stabilized during the
 period under review. Production of PVC coated sheets during the period
 was at 101% of installed capacity.
 
 Sales of Hot Rolled Coils at 2.88 Million MTs was higher by 19%,
 compared to previous year, on an annualized basis.  Sales of Cold
 Rolled Steel Coils/Sheets was higher by 11%, whereas sales of
 Galvanized Coils/Sheets was lower by 7%, compared to previous year, on
 an annualized basis. Sales of Tubes and Pipes was commensurate with
 production achieved during the period.
 
 During the period under review, prices of basic inputs, namely, iron
 ore, coke and pellets had increased substantially.  Simultaneously,
 prices of utilities, such as, natural gas and energy, had also gone up.
 This had resulted in lower margins with consequential impact on the
 Companys financial results.
 
 EXPORTS
 
 Export earnings during the period under review was Rs.433.44 Crores.
 
 Exports were lower during the period due to slack demand conditions in
 the US, European Union and Latin American zones. Sharp fall in export
 realizations, owing to depressed demand conditions, had impacted the
 Companys export earnings.
 
 PROJECTS
 
 The coke oven project of the annual capacity of 1 Million MTs,
 undertaken in joint venture, has been appraised at a cost of Rs.1124
 Crores. Debt component of the project is expected to be tied-up
 shortly. The project is expected to be commissioned within a period of
 24 months from achievement of financial closure.
 
 Initial development activities have already commenced in the proposed
 iron ore pellet project of 2 Million MTs. The Company has,
 simultaneously, entered into long-term supply contract with a major
 producer of iron ore pellets, so as to effectively secure its input
 requirements.
 
 The Company has obtained a prospective license for mining of iron ore
 in Damkodwadvi area of Bhamragarh in the state of Maharashtra.
 Prospecting activities have since been completed and it is estimated
 that the mines would have reserves of 101 Million Tons of high-quality
 iron ore. Various Government approvals are being obtained. The
 prospecting report has already been filed with the Mining Department of
 Government of Maharashtra for conversion of the license into a regular
 mining lease. Project activities had slowed due to certain
 anti-national insurgent activities in the area. However, efforts are
 being made for development of the mine by end-2011.
 
 Initial activities have also been undertaken by the respective
 Wholly-Owned Subsidiaries in the proposed iron ore and coal mining
 projects overseas.
 
 The Company had entered into separate Memoranda of Understanding (MOU)
 with the respective Governments of Jharkhand and Chattisgarh for
 setting-up an integral steel plant (annual capacity of 2.8 Million MTs)
 and coal-based thermal power plant (annual combined capacity of 1200
 MW).
 
 Site selection activities are in the progress for the integrated steel
 plant proposed in the state of Jharkhand. The state government has been
 approached to allocate alternate iron ore mines, commensurate with the
 size of the project.
 
 Progress in implementation of the coal-based thermal power plant in the
 state of Chattisgarh has slowed down due to delays in grant of coal
 linkage by the government.
 
 CAPTIVE POWER PLANT OF ISPAT ENERGY LIMITED
 
 Due to certain unforeseen delays in achieving financial closure, the
 schedule for implementation of the 110 MW Power Plant by Ispat Energy
 Limited, the Companys wholly-owned subsidiary, has been further
 delayed. The project, proposed to be implemented in two separate phases
 of 55 MW each, is now scheduled to be commissioned during early 2012.
 The cost of the project is estimated at Rs.491 Crores. Financial
 closure of the project is expected to be achieved shortly.
 
 ISSUE OF EQUITY SHARE WARRANTS
 
 The Company had received an aggregate amount of Rs.51.98 Crores, during
 the previous financial year, from certain promoters towards allotment
 of equity warrants. The amount was utilized by the Company for the
 identified purposes.
 
 The promoters had, however, not exercised their right to apply for
 equity shares within the stipulated period of eighteen months from the
 date of allotment of equity warrants. Consequently, in accordance with
 applicable SEBI Regulations, the aggregate amount of Rs.51.98 crores
 received from the promoters, towards equity warrants, has been
 forfeited by the Company.
 
 During the current financial year, the Company has received an amount
 of Rs.18 Crores from certain promoters, towards part of the allotment
 money payable for a fresh issue of equity warrants. The issue of such
 equity warrants to the promoters, on preferential basis, was approved
 by the members at their Extra Ordinary General Meeting held on 15th
 May, 2010. In-principle approval of the Stock Exchanges is yet to be
 received for want of certain clearance to be accorded by the Companys
 lenders.
 
 REDEMPTION OF 12% Cumulative Redeemable Preference Shares (CRPS)
 
 In accordance with the terms governing issue of 12% CRPS, the Company
 has further redeemed 6% of the face value (Rs.100/- each) of the 12%
 CRPS. Upon redemption, the adjusted face value of the 12% CRPS is
 Rs.84/- each.
 
 DIRECTORS
 
 Mr. Pramod Mittal, Mr. B K Singh and Dr. Basudeb Sen retire by rotation
 at the ensuing Annual General Meeting and, being eligible, offer
 themselves for re-appointment. Brief profiles of the retiring
 Directors, including area of their expertise and other details, are
 attached to the Notice convening the ensuing Annual General Meeting.
 
 The nomination of Mr. K M Jaya Rao was withdrawn by ICICI Bank Ltd.
 with effect from 20th April, 2009. Mr. Mayank Agrawal was nominated as
 Director by ICICI Bank Ltd., in place of Mr. K M Jaya Rao, with effect
 from 30th April, 2009.
 
 The nomination of Mr. B P Singh was withdrawn by IDBI Bank Ltd. with
 effect from 20th February, 2010. Mr. S N Baheti was nominated as
 Director by IDBI Bank Ltd., in place of Mr. B P Singh, with effect from
 5th April, 2010.
 
 The nomination of Mr. R P Singh was withdrawn by IFCI Ltd. with effect
 from 28th August, 2010. Ms. Manju Jain has been nominated as Director
 by IFCI Ltd., in place of Mr. R P Singh, with effect from that date.
 
 The Board of Directors wish to place on record its appreciation for the
 services rendered by Mr. K M Jaya Rao, Mr. B P Singh and Mr. R P Singh
 during their tenure as Directors of the Company.
 
 DIRECTORS RESPONSIBILITY STATEMENT
 
 Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors
 confirm that :- (i) in the preparation of the annual accounts for the
 financial year ended 30th June, 2010, the applicable accounting
 standards have been followed and there have been no material
 departures;
 
 (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 at the end of the financial year and of the profit or
 loss of the Company for that period;
 
 (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 30th June, 2010 on a going concern basis.
 
 SUBSIDIARY COMPANIES
 
 Ispat Energy Limited is setting up a 110 MW gas-based power plant at
 the Dolvi Steel Complex. The plant is expected to be commissioned, in
 two separate phases, of 55 MW each, during early 2012.
 
 Ispat Jharkhand Steels Limited, a Special Purpose Vehicle (SPV)
 Company, proposes to set-up an integrated steel plant (annual capacity
 of 2.8 Million MTs) in the State of Jharkhand, pursuant to the
 Memorandum of Understanding entered into by the Company with Government
 of Jharkhand.
 
 Rewa Infrastructures Private Limited, a Special Purpose Vehicle (SPV)
 Company, proposes to set-up a multi-product SEZ in the State of
 Maharashtra. Due to economic down-turn coupled with various other
 factors, including land-acquisition difficulties being encountered, in
 general, by SEZ units, the project implementation activities have
 largely slowed down.
 
 The wholly-owned subsidiaries, namely, Erebus Limited and Arima
 Holdings Limited, have commenced initial activities in the proposed
 iron ore and coal mining projects in Brazil and Columbia, respectively.
 Activities are yet to be undertaken by Lakeland Securities Limited in
 the proposed coal mining project.
 
 The Company is seeking exemption under Section 212(8) of the Companies
 Act, 1956 from attaching the Balance Sheet, Profit and Loss Account and
 other documents of the Subsidiary Companies to the Balance Sheet of the
 Company. The Company shall make available these documents/details upon
 request made by any member of the Company or its Subsidiary Companies.
 The Annual Accounts of the Subsidiary Companies will also be kept open
 at the Registered Office of the Company and that of the Subsidiary
 Companies, for inspection by any member.
 
 CONSOLIDATED FINANCIAL STATEMENTS
 
 The Consolidated Financial Statements of the Company and its
 subsidiaries, prepared and presented in accordance with Accounting
 Standard (AS) 21, are attached to and form part of the Annual Report.
 
 AUDITORS
 
 The Auditors, M/s S R Batliboi & Co., Chartered Accountants, retire at
 the ensuing Annual General Meeting and have expressed their willingness
 to be re-appointed.
 
 The Company has obtained a letter from the Auditors to the effect that
 the re-appointment, if made, will be in conformity with the limits
 specified in Section 224 (1B) of the Companies Act, 1956.
 
 AUDITORS REPORT
 
 The Auditors in their report have, while drawing attention to Note. 12
 (a) of Schedule 23 of the Accounts for the financial year ended 30th
 June, 2010 commented on their inability to express any opinion on the
 future profitability projections made by the Company and their
 consequential impact, if any, on Deferred Tax Asset recognized in the
 said Accounts.
 
 The Auditors in their report have also drawn attention to Note No.15 of
 Schedule 23 of the Accounts for the financial year ended 30th June,
 2010, with regard to payment of remuneration to Managing and other
 Whole-time Directors in excess of approvals received by the Company
 from the Ministry of Corporate Affairs during the period.
 
 The Auditors, in their statement under Companies (Auditors Report)
 Order 2003 annexed to the aforesaid Report, have observed the
 following:- 
 
 a) Physical verification not conducted in respect of transit stock of
 materials, for which confirmations have been furnished for the major
 amount thereof;
 
 b) Delays in few cases in depositing undisputed statutory dues;
 
 c) Accumulated losses as at end of the financial year exceeding fifty
 percent of the Companys net worth;
 
 d) Certain delays in repayment of dues to domestic financial
 institutions, banks and debenture holders during the year and the
 arrears of such dues as on the Balance Sheet date; and
 
 e) Use by the Company of funds raised on short-term basis for repayment
 of long-term loans and financing of operating losses.
 
 In the opinion of the Board of Directors, based on the Companys
 business plans, strategies and profitability estimates, techno-economic
 study carried out by an expert appointed by the lenders, Debt
 Restructuring sanctioned by lenders under CDR mechanism, steady
 increase in steel demand, current trend of prices of finished steel
 products, up-gradation and modernization of Blast Furnace as well as
 process improvements carried out for enhancing steel-making capacity as
 well as operating efficiency and reversal of deferred tax credit during
 the respective quarters ended December, 2009, March, 2010 and June,
 2010, the Company is virtually certain that there would be sufficient
 taxable income in the future, to claim the tax credit.
 
 Since certain anomalies have been observed in the approvals received
 from Ministry of Corporate Affairs in relation to payment of
 remuneration to Managing and Whole-time Directors, the Company has made
 its representation to the Ministry of Corporate Affairs for
 reconsideration and rectification of such anomalies. The matter is
 under consideration of Ministry of Corporate Affairs and, hence, no
 recovery of such excess remuneration has been made by the Company.
 
 Further, the Board of Directors inform that:- 
 
 a) Physical verification of materials in transit has not been carried
 out. However, necessary certificate/confirmation has been furnished in
 respect of the major amount thereof
 
 b) Delays in few cases in depositing undisputed statutory dues have
 been due to mis-matches in cash flows, which were subsequently
 rectified.
 
 c) Due compliance of the provisions contained in Section 23(1) of the
 Sick Industrial Companies (Special Provisions) Act, 1985 shall be
 ensured.
 
 d) Delays in making payments were mainly due to mis-matches in
 cash-flows, which are rectified, from time to time.
 
 e) Due to mis-matches in cashflows, certain repayment of long-term
 loans and financing of operating losses have been made out of funds
 raised on short-term basis.
 
 CORPORATE GOVERNANCE
 
 Pursuant to Clause 49 of the Listing Agreement with the Stock
 Exchanges, the Management Discussion and Analysis and Corporate
 Governance Report together with the Certificate from the Auditors of
 the Company confirming compliance of the conditions of Corporate
 Governance form part of this Report.
 
 SECRETARIAL COMPLIANCE REPORT
 
 The Company had engaged M/s Robert Pavrey & Associates, Practising
 Company Secretaries, to review Secretarial Compliance for the financial
 year ended 30th June, 2010. The Secretarial Compliance Certificate
 addressed to the Board of Directors of the Company is attached to the
 Annual Report. The Secretarial Compliance Certificate confirms that the
 Company has complied with the applicable provisions of the Companies
 Act, 1956, Depositories Act, 1996, Listing Agreement with Stock
 Exchanges and all the Regulations of SEBI as applicable to the Company
 including SEBI (Substantial Acquisition of Shares and Takeovers)
 Regulations, 1997 and the SEBI (Prohibition of Insider Trading)
 Regulations, 1992.
 
 Though not mandatory, the Secretarial Compliance Certificate is also
 obtained, on a quarterly basis, from the aforementioned Practising
 Company Secretaries, and reviewed by the Board.
 
 CODE OF CONDUCT
 
 The Board has laid down a Code of Conduct for all Board Members and
 Senior Management of the Company. The Code of Conduct has been posted
 on the Companys website.
 
 Board Members and Senior Management personnel have affirmed compliance
 with the Code for the financial year 2009-10. A separate declaration to
 this effect is annexed to the Corporate Governance Report.
 
 CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE
 EARNINGS AND OUTGO
 
 In accordance with the requirements of Section 217(1)(e) of the
 Companies Act, 1956 read with Companies (Disclosure of Particulars in
 the Report of Board of Directors) Rules, 1988, the particulars with
 respect to Conservation of Energy, Technology Absorption and Foreign
 Exchange Earnings and Outgo are annexed and form part of this Report.
 (Annexure A).
 
 PERSONNEL
 
 Employee relations continued to be harmonious during the year.
 
 The Companys Performance Management System is robust and bench-marked
 with prevailing best practices. The Company seeks to continuously
 enhance competitiveness, skills and productivity of its employees. A
 healthy work environment is ensured and employee-recognition is prompt
 and rewarding. The Companys retention strategy is aimed at creating
 challenging assignments for its employees and also develop their career
 ambitions.
 
 The Board wishes to place on record its appreciation for the efforts of
 all its employees.
 
 Information in terms of Section 217(2A) of the Companies Act, 1956 read
 with the Companies (Particulars of Employees) Rules, 1975 forms part of
 this Report. (Annexure B).
 
 APPRECIATION
 
 Your Directors wish to place on record their appreciation for the
 support extended to the Company by its lenders, the Central and State
 Governments as well as its business partners. Your Directors also thank
 the members for their continued support.
 
                                       For and on behalf of the Board
 
 Mumbai,                            ANIL SUREKA          VINOD MITTAL
 the 28th August, 2010.   Executive Director (Finance)   Vice Chairman 
                                                         & Managing 
                                                         Director