Dear Members,
 
 The Directors have pleasure in presenting the 40th Annual Report on
 the business and operations of Kinetic Engineering Limited and the
 Audited Financial Accounts for the financial year ended 31st March,
 2011.
 
 FINANCIAL HIGHLIGHTS
 
 For the Financial Year, the net income from operations was Rs.91.17
 crore, while the net loss after tax was Rs.10.91 crore.
 
 The results for the current financial year are not strictly comparable
 with the results for the preceding financial year, as the current
 financial year is a period of 12 months, while the preceding financial
 year was a period of 9 months.
 
 The company has crossed a gross revenue of Rs.90 cr. for the financial
 year 2010 - 2011. As you may be aware, your company entered the field
 of auto-components few years ago, after totally restructuring its
 operations from manufacture of two- wheelers to manufacture of various
 automotive components, and assemblies; and hence this marks a landmark
 in the company''s continued vision to become a substantially large
 player in the auto-component field.
 
 Some Highlights:
 
                         2010-2011     2009-2010
 
                        (12 months)   (9 months)
 
 Net Sales and Income  Rs. 9117 lac  Rs. 4920 lac  Increase in operating
                                                   income
 from Operations
 
 Material Cost             67%            78%      Substantial decrease
                                                   in material cost as 
                                                   a percent of sales
 
 Employment cost           19%            24%      Decrease in 
                                                   employment cost as
                                                   a percent of sales
 
 Due to the same, the company has registered a EBITDA of Rs. 284 lacs
 during the said period. The Company has registered a net loss of Rs.
 1091 lacs; largely due to the high depreciation costs (Rs. 799 lacs)
 incurred on basis of capex initiatives for new programs.
 
 Business Overview
 
 During the year, your company continues to consolidate its position as
 a specialized manufacturer of high technology components and assemblies
 with a focus on Power Train Components and assemblies. This year there
 has been a good progress in the ramp-up of existing production programs
 and development of new programs.
 
 As a result, there has been substantial growth in company''s sales
 revenues. This has been largely led by:
 
 - Commencement and ramp up of mass volume production for gear sets for
 Tata Nano, the lowest priced car in the world. The supply of Gear-sets
 for Tata Nano which had commenced last year, saw a significant ramp- up
 this year.. Your Company has set up a world class manufacturing
 facility with the best in class equipments to manufacture high quality
 components in large volumes. Your Company is well positioned to grow
 production in line with the anticipated increased production of Tata
 Nano and, we expect this program to grow further in the coming years.
 
 - Ramp up of supply of key power-train components and assemblies for
 different scooter models of Mahindra Two Wheelers Limited (MTWL), a
 company in which Kinetic Motor Company Limited, an entity promoted by
 your Company and where it holds a substantial equity, holds a 20%
 equity stake. Your company supplies various engine and transmission
 assemblies to MTWL, one of India''s fastest growing forces in the Indian
 2 wheeler field. Start up for programmes for transmission components
 for Mahindra Farm Equipment Sector (FES), the worlds largest producer
 of tractors.
 
 - Start up for programmes for Mahindra Auto Sector, one of country''s
 largest and fastest growing automobile companies
 
 - Start up of relationship with Enfield, one of country''s premium
 manufacturer of top end motorcycles by supplying painted parts to the
 company.
 
 As a result of the above, KINETIC''s revenues have increased from
 Rs.49.19 cr. in the financial year 2009-10 (9 months) to Rs.91.17 cr.
 in the financial year 2010-11 (12 months).
 
 Continued growth in the Indian automotive industry gives the confidence
 to your Directors that the Company would continue to see revenue
 increase from existing programs, though at a pace lower than the last
 year. Your company remains diversified in its product category and
 customer base. The representation is as follows :
 
 In addition, your company has made significant progress on development
 of prestigious new contracts, namely: complete Gear box assembly
 development for Mahindra Navistar & Piaggio.
 
 These new programs have been under development and testing during
 2010-11 and they are now nearing completion.  Being large and complex
 programmes, company expects them to start in the coming financial year
 and gain momentum in the 3rd quarter of the year, to be productionised
 during 2011-12, Further, the Company continues to add more parts from
 its existing customers including Mahindra and Mahindra, Carraro, Tata
 Motors as well as Tomos SPA. Once the new programs are in full
 production and based on projections given by our customers, company is
 confident of further increasing its revenues With a quality system set
 up in tune with the requirements of ISO 9001, and with ISO/TS
 16949:2002 certification, the Company plans to leverage its skills in
 domestic as well as international market, by further striving for total
 customer satisfaction through relationship building and providing
 superior products and technological solutions to its customers. In the
 coming years, the Company will focus on strengthening its technological
 base and customer relationships to establish its position as a leading
 Powertrain components and assemblies specialist.  Your Company would
 also like adopt best manufacturing practices and has appointed the TPM
 club of India to embark upon the journey of TPM to meet its objectives
 of zero breakdowns, quality improvements, efficiency maximization and
 cost savings.
 
 Finance Overview
 
 After achieving a significant reduction in debt in the preceding year,
 the Company has been successful in obtaining working capital limits of
 Rs.10 crore, from Saraswat Co-operative Bank Ltd.
 
 
 Research & Development
 
 Research and development is viewed as crucial for development of the
 Company. These activities aid in expanding and upgrading the product
 portfolio and improving the offerings to the customers.
 
 Total amount spent on Research & Development (R&D) during the period
 under review was Rs. 102.45 lacs, which represents 1.13 % of the
 Company''s turnover.
 
 Conservation of energy
 
 Some of the measures for conservation of energy undertaken during the
 period under review were:
 
 1.  Unity Power factor maintained through out the year, saving Rs.45
 lacs as an Incentive in electricity bills.
 
 2.  600 CFM Godrej make Sulair compressor installed replacing 1000 CFM
 Reciprocating type compressor saving 50000 units per year.
 
 3.  CFL Street lights installed of capacity 36 watt replacing 70 watt
 Sodium Lamps.
 
 4.  Energy efficient tube fittings installed in Hall No.22 instead off
 250 watt Mercury lamps, results in 8000 units saving per year.
 
 5.  Sursulf furnace converted in to gas fire instead of electrical
 heating, saving of Rs 5 lacks per year in heat treatment section.
 
 6.  Arrested oil leakages in Nano gear line machine shop.
 
 7.  Air line leakages arrested by new PU pipe and fittings
 
 8.  Air Compressor running pattern study and adjusted accordingly
 saving 1,20000 unit.
 
 9.  20 Watt CFL spiral lamps fitted in Administration building and 40
 watt tube fittings removed Save Rs.1 lac per year.
 
 10.  In variator line energy efficient tube fittings installed in Hall
 No.9A replacing 250 watt mercury lamps. Saving 30000 units per year.
 
 11.  ThermopacTPB 10 operate during load period instead of continious.
 Saving 40000 units per year.
 
 12.  Treated waste water from Effluent Treatment Plant 60000 liters of
 water used for Gardening and tree plantation.
 
 13.  From Coolent treatment plant 8000 liters oil extracted from the
 coolent on yearly basis.  The above measures have resulted in
 significant saving in energy cost.
 
 Awards and Recognitions
 
 Your company has received the prestigious Regional Award as Star
 Performers in Product Group Trophy in the category of Large
 Enterprises by EEPCIndia (Enginerring Export Promotion Council). This
 award recognizes your company''s efforts in successfully increasing
 exports from India and has come due to the increased volume, ability to
 meet stringent quality parameters, and on time delivery and other
 performance related parameters.
 
 Foreign exchange earnings and outgo
 
 The information on foreign exchange earnings and outgo is contained in
 Schedule-16 Notes to the Accounts (Point Nos. 13&14)
 
 Directors responsibility statement
 
 Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors
 confirm that:
 
 1.  In preparation of the accounts for the period under review, the
 Company has followed the applicable accounting standards
 
 2.  Appropriate accounting policies have been selected and applied
 consistently and the judgments and estimates made are reasonable and
 prudent so as to give a true and fair view of the state of affairs of
 the company as on 31 st March, 2011 and of the profit of the company
 for the year ended on that date.
 
 3.  Proper and sufficient care has been taken 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
 
 4.  The annual accounts for the period under review have been prepared
 on a ''going concern'' basis
 
 Corporate governance
 
 Pursuant to Clause 49 of the Listing Agreement with Stock Exchanges, a
 report on Corporate Governance with certificate of the Auditors of your
 company on Compliance with the conditions of Corporate Governance is
 given as annexure to the Directors'' report.
 
 Fixed deposits
 
 During the period under review fixed deposits amounting to Rs.0.25 lac
 were repaid on maturity. The balance as on 31.3.2011 standing in the
 fixed deposit account was Rs.0.85 lac.
 
 Directors
 
 In accordance with the provisions of the Companies Act, 1956 as well as
 the Articles of Association of the Company, Dr. K.H.Sancheti, Mr. S. C.
 Shah and Mr. S. R. Sanghi, directors, retire at the ensuing Annual
 General Meeting, and are eligible for re-appointment.
 
 The directors Mr. Arun H. Firodia, Mr. Ajinkya A. Firodia & Mrs.
 Sulajja Firodia Motwani are related to each other.
 
 Auditors
 
 The auditors M/s P. G. Bhagwat, Chartered Accountants, hold office
 until the ensuing Annual General Meeting, and have furnished a
 certificate in terms of Sec. 224(1) of the Companies Act, 1956, about
 their eligibility.
 
 Employees
 
 Particulars of Employees as required under Section 217 (2A) of the
 Companies Act, 1956 read with Companies (Particulars of Employees)
 Rules, 1975 form part of this report. However, as per the provisions of
 Section 219(1 )(b)(IV) of the Companies Act, 1956, the report and the
 accounts are being sent to the shareholders of the company, excluding
 the statement of particulars of employees under Section 217(2A) of the
 Companies Act. Any shareholder interested in obtaining a copy of the
 said statement may write to the Company at the Registered Office of the
 Company.
 
 Acknowledgement
 
 The directors express their sincere thanks to Reliance Capital Limited,
 Clearwater Capital Partners India Limited, banks, suppliers and
 stakeholders for the support extended to the Company and also wish to
 place on record their appreciation of the dedicated services rendered
 by the employees of the Company.
 
                          For and on behalf of the Board of Directors
 
                                                        A. H. Firodia
 
 Pune : 30th May, 2011                                       Chairman
 
 Registered Office:
 
 D1 Block, Plot No. 18/2, MIDC, Chinchwad
 
 Pune - 411019