The year 2010-11 was our best ever.
 
 We crossed Rs.10 billion turnover milestone, our revenue grew 29% and
 bottomline jumped 69%. Returns on investment in the business
 strengthened – ROCE grew 600 bps and ROE climbed 905 bps.
 
 Overview
 
 Our positive performance divergence resulted from the following
 factors:
 
 Sales growth: Sales volumes increased by 18% from 25.28 MSM in 2009-10
 to 29.71 MSM in 2010-11. What is heartening is that we strengthened our
 average realisation per sq. m – we sold more large-format ceramic and
 vitrified tiles.
 
 Value-addition: We increased the share of value-added tiles in our
 product mix from about 43% in 2009-10 to 52% in 2010-11, strengthening
 profitability.
 
 - Cost edge: We received gas for our Gailpur unit (major share of our
 production capacity) from May 2010 replacing high-cost propane,
 significantly reducing energy costs.
 
 - Operational excellence: We operated our facilities at peak capacity;
 our R&D and operation teams strengthened materia management and
 production processes to counter inflation and ncrease first quality
 tile output.
 
 - Stronger financials: We ploughed our cash flow into capital-intensive
 growth initiatives (capacity expansion and creation) - our tota capex
 in 2010-11 stood at about Rs.564.42 million, the net addition to
 external debt was only ^168.51 million - reducing our debt-equity
 ratio. Besides, we negotiated for better coupon rates, which reduced
 nterest liability in 2010-11 by 20% even as general interest rates
 climbed.
 
 Next level
 
 Rather than merely address the requirements of the moment, we created
 the building blocks of our future in 2010-11.
 
 Capacity expansion: We increased value-added capacity. We commissioned
 our 6 MSM brownfield expansion in March 2011 at Gailpur to manufacture
 high-end vitrified tiles (glazed and polished). Our additiona 2.60 MSM
 vitrified capacity (conversion from ceramic tiles) at Sikandrabad also
 commenced operations in March 2011. The result is that in 14 months
 (February 2010 to March 2011), we added 11 MSM of vitrified tile
 capacity, the largest by any single company in India, which will emerge
 as the game changer for important reasons: selling vitrified tiles
 through import impacted our ability to cater to the market in North
 India due to the logistics cost.  The manufacturing facilities will
 strengthen our competitive advantage to carve a sizeable market share
 in this segment and our shift from trading to manufacture is expected
 to improve operating margins from this business segment.
 
 Capacity acquisition: We acquired a 51% stake in Soriso Ceramic Pvt
 Ltd, having a 2.30 MSM per annum ceramic floor tile manufacturing
 facility in Gujarat in February 2011 for an investment of ^56.20
 million -- a first in our history. This is important for Kajaria for
 two reasons. Firstly, this extended our geographica presence with
 manufacturing facilities in the North and West, allowing us to
 effectively cater to arge tile consuming markets and secondly, the unit
 manufactures arge format tiles, which is a fast growing segment in
 ceramic tile flooring.
 
 New business verticals: We initia te d new businesses – bathware and
 wooden flooring – to leverage our distribution and brand competencies.
 
 We tied up with a leading European brand VitrA, a brand of Eczacibasi
 – one of the largest industrial groups in Turkey – for the marketing
 and sales of the innovative product line of VitrA products as an
 exclusive and sole marketer and distributor for India.  This trading
 venture will enable us to emerge as a complete bathroom solution
 provider. To start with, we opened two exclusive showrooms showcasing
 the entire product range.
 
 Wooden flooring, a high perception-value flooring solution has emerged
 as an important lifestyle product. Its demand is increasing rapidly
 driven by high aspirations of the modern apartment-purchasing community
 (28-32 years) – the customer buying tiles are likely to buy wooden
 flooring. Hence, this business vertical was a perfect fit in our
 business model. We expect to grow this vertical into a meaningful
 business over the medium term.
 
 New products: We developed digital wall tiles in two sizes (30x60 cm
 and 15x45 cm). These products are increasingly gaining acceptance in
 the Indian market. We have developed more than 50 unique designs
 through our newly commissioned digital printing machine – we expect
 these tiles to gain market acceptance, driving volumes and revenue.
 
 Branding: We expect to strengthen our recall -- Think tiles. Think
 Kajaria! – by reaching products wide and deep, investing in print and
 electronic media promotions and earmarking a sizeable amount for brand
 strengthening initiatives in 2011-12.
 
 Optimism over the medium term
 
 The Indian tile segment is expected to grow significantly over the
 coming years. This optimism is based on credible estimates and sectora
 realities. Indias per capita ceramic tile consumption at 0.42 sq m is
 the owest globally while China stands at 2.26 sq m. The replacement
 market is also much lower than in China, providing tremendous growth
 opportunity. This upward revision is based on an important fact. India
 is ikely to remain a work-in-progress economy in the near future on
 the back of massive infrastructure and housing space creation.
 
 Message to shareholders
 
 We are on the threshold of the second growth phase, one that we expect
 will surpass our previous achievements. The challenges are sizeable -
 producing quality products and tapping the deepest demand pockets. The
 anticipated returns are expected to be satisfying. We expect business
 growth between 25% to 30% in 2011-12 with a higher growth in
 profitability.
 
 Warm regards,
 
 The management team