Lakshmi Machine Works

The Directors have pleasure in presenting the forty-fifth Annual
 Report of your Company, together with the audited accounts for the year
 ended 31 st March, 2006.
 
 Financial results: 
                                                                 Rupees
 Year                                             2007-08       2006-07
 
 Gross profit                               4,870.266,489  3,773,515,946
 Depreciation                               1,158.698,971    687.518,044
 Profit before tax                          3,711.567.518  3.085.997,902
 Provision for income tax - Current tax     1,100.000,000    850.000,000
 -Wealth tax                                      197,873        160,120
 - Deferred tax (net)                         169,583,311    139.546,367
 - Fringe benefit tax                          16,798,089      7,094,247
 Prior year taxes paid                          1.976.279     27.221,126
 Profit after tax                           2.423.011.966  2.061.976.042
 Add/leas: investment fluctuation reserve     117.316.624    109.048.313
 Balance brought forward                    3,235,766,530  1.838.903,669
 Balance available for appropriation        5.776,095.120  4.009.928.024
 
 Appropriations:
 Interim dividend                             247.385.000    494.770.000
 Interim dividend tax                          42.043,081     69.391,494
 Proposed final dividend                      309,231.250     -
 Tax on procesed final dividend                52,553,851     -
 Transfer to general reserve                  250.000.000    210.000.000
 Surplus carried to balance sheet           4.874.881,938  3.235.766.530
 Total                                      5,776,095,120  4,009,928,024
 
 
 Dividend
 
 Your D rectors recommended payment of final dividend at 250% (i.e. Ra.
 25 per equity share of Rs. 10 each) on the equity share capital of Rs.
 123.602.500 for the year ended 31.03.2006. The dividend if approved
 will be paid to those members or their made teea whose names appear in
 the register of members on 23.07.2006; for those holding shares in
 physical form and as per the details furnished by the depositories as
 at the end of business houra on 15.07.2008; for those holding shares In
 dematertalised form without deduct on of tax.
 
 During October 2007. your Directors paid an interim dividend of 2008
 (i.e.  Rs.20 per equity share of Ra. 10 each) on the equity capital of
 Ra. 123.692.500 amounting to Rs. 247,385.000.
 
 For 2007-08. your Company paid/ recommended a dividend at 450% (l.e.
 Ra.45 per equity share of Rs. 10 each) on the equity capital of Rs.
 123.692,500 aggregating to Rs 556.616.2S0 and paid a dividend tax of
 Rs. 52.553.851.
 
 Operations
 
 During the year under review the Company achieved a turnover of Rs.
 220.516.47 lakhs (Rs. 185,358.14 lakhs in 2006-07) resulting In a net
 profit of Rs. 37,115.67 lakhs (Ra.  30.859.97 lakhs In 2006-07) before
 tax Your Company recorded a top line growth of 19% and a bottom line
 growth of 20% over the previous year, despite the unexpected advene
 change in the globe and domestic economic scenario.
 
 Textile Machinery Division The textile machinery dividend of your
 Company, during the year under review.  achieved a turnover of Rs.
 200.742.32 lakhs as against Rs. 165.504 86 lakhs during the last year,
 recording an Increase of 21 3 %.
 
 The Incluse textile Industry, motivated by the phasing out of quota
 since January, 3006, made ambitious investments on modernisation and
 exparsion programmes. building capacities to fully utilise the global
 opportunities thrown open by the post quota regime. This created an
 unprecedented demand for textile machinery in India in the past four
 years.  During 2007-08, certain unexpected developments in the global
 and Indian economic scenario, such as hardening of rupee against USS.
 slow down in the US economy, soaring raw material coat, power
 disturbance and high cost of funds which eroded the margin and hampered
 further growth of the textile sector, particularly small and medium
 enterprises. This forced the textile sector to reconsider their
 Investment programmes and either downsize or proposed their investment
 plans.
 
 Large scale integrated textile mills with long term are not affected by
 this slowdown and are going a head with their Investment programmes.
 This helped your Company achieve the above results, despite the
 prevailing turbulence in the user Industry. However, continuation of
 this phenomenon for a long period may have an impact on the future
 performance of your Company.
 
 The textile industry is aware that equpping themselves with the latest
 a tat soft he-art machinery is to meet the global challenges. The
 consolidation spree taking place in the textile Industry, Invasion of
 popular International brands Into India.  governments Initiative to
 establish integrated textile parks and the announcement of modified TUF
 and other SOPs Is expected to provide a fillip to the Industry.
 
 Machine Tool Division
 
 The turnover of the machine tool division during 2007-08 is Rs.
 12.478.93 lakhs as against Rs. 12,890.40 lakhs recorded in the last
 fiscal, showing a marginal decline over the previous year.
 
 Continuous growth of engineering and automobile Industry In India has
 enhanced demand for the machine tools.  However, a major portion of the
 demand is met through imports. High technology machine tools from
 abroad offers a stiff competition to the domestic machine tool
 manufacturers.
 
 As a result of continuous research and development, your Company has
 commercialised two variants of vertical machining centres during
 2007-08 which provides better stability and accuracy resulting in a
 reduced material consumption to the users. The horizontal machining
 centre developed by your Company was exhibited in INTEC 2008 and the
 commercialisation of this machine is expected during 2008- 09. Creation
 of a 24 hours SMS-based service complaint registration facility,
 supported by additional field servicing staff, will yield better growth
 prospects in the future.
 
 Foundry Division
 
 The foundry division achieved a turnover of Rs 7.295.22 lakhs against
 Rs. 6,962.89 lakhs recorded during the previous year, showing a
 marginal increase over the last fiscal. Heavy Casting of the value Rs.
 3,930.32 lakhs, which is 53.9% of the turnover, is exported to
 countries like the US, Germany, Spain. Finland and Canada.
 
 High precision heavy castings manufactured by your Company, is well
 accepted in the international markets particularly in the engine
 blocks, power, infrastructure and the transportation sectors. The
 machine shop, established for the manufacture of value added machined
 castings, commenced operation and delivery of machined wind mill parts
 in 2007-08. Introduction of LEAN manufacturing programme.  expansion of
 the manufacturing capacity, commissioning of a medium frequency furnace
 and a focused approach towards customers in the domestic and export
 market, will enhance the performance of this division In the future.
 
 Wind Mill Division
 
 To conserve the non-renewable energy resources, create a pollution-free
 atmosphere and to avert the repercussions of the global warming, your
 Company is continuously investing in wind energy. So far it has
 installed 17 high capacity wind energy generators with a total
 installed capacity of 26.45 MW. During 2007-08. this division generated
 566.98 lakh units as against 457.00 lakh units generated during the
 previous year.
 
 Exports
 
 Despite a turbulent export market with the appreciation of rupee
 against the US dollar, our export turnover Increased.
 
 During 2007-08. the Company achieved the following export turnover a
 Textile Machinery: Rs. 9,019.13 lakhs (Rs. 4,439.72 lakhs in 2006-07)
 
 b.  Castings Rs. 3.930.32 lakhs (Rs. 3788.45 lakhs in 2006-07)
 
 c.  Total Rs.  12.949.45 lakhs
 
 (Rs. 8,228.17 lakhs in 2006-07)
 
 However, efforts will be made for a sustained growth in exports of all
 the products.
 
 Research and Development
 
 Your Company has two separate R&D departments, one for textile
 machinery and the other for machine tools.  Extensive R&D is aimed at
 designing and development of machinery to suit the needs of the
 customers. The R&D facility enables the Company to upgrade the products
 with new technology and gives the customer cost-effective machinery
 with high productivity, flexibility and automation. The Company is
 continuously investing in R&D activities and in acquiring the latest
 technology to enhance its competitive edge.
 
 Awards
 
 Your Company has received the Top Exporter award for the year 2005-06
 (Gold Trophy for medium enterprises) from the Engineering Export
 Promotion Council. Your Company is also the recipient of the ICWAI
 National award for Excellence in Cost Management - 2006 (second
 place) and ICWAI National award for Excellence in Cost Management
 -2007 (first place) under the private sector manufacturing
 organisations category.
 
 Directorate
 
 Justice Sri S. Natarajan (retd.) and Justice Sri G. Ramanujam (retd.),
 Directors, retire by rotation at the ensuing Annual General Meeting and
 being eligible, offer themselves for reappointment.
 
 Industrial relations
 
 The relationship with the employees was throughout the year Joint
 venture: Rieter- LMW
 
 Machinery Limited During 2007-08. the Company achieved a turnover of
 Rs.  14,340.42 lakhs {Ra.12,129 lakhs in 2006-07 review of good off
 take of machinery Green field project In China Your Company proposed to
 establish a green field project in Chine for the manufacture of textile
 spinning machinery at an estimated investment of Rs. 650 million
 through a wholly owned subsidiary.
 
 Fixed deposits
 
 The Company has not accepted any fixed deposit
 
 Listing
 
 You Companys shares are on the Madras Stock Exchange Limited.
 Chennai. Bombay Stock Exchange Limited. Mumbai. and the National Stock
 Exchange of India Limited, Mumbai and the listing fees have been paid.
 
 Auditors
 
 The Companys Auditors, M/s M.S Jogannaihan & and M/s.  Subcher &
 Srinivasan. are to retire at the ensuing Annual General Meeting.  They
 are eligible for reappointment and have consented to act as Auditors
 lor the Company, if appointed, and the necessary certificate pursuant
 to Sector 224 B) of the Companies Act 1956. has been received from
 them.
 
 Information pursuant to Section 217 of the Companies Act, 1956.
 
 Information on accordence with Clause (e) of Sub-Section 217 of the
 Companies Act. 1956, read with the Companies (Disclosure of Particulars
 in (he Report of the Board of Directors) Rules. 1968.  and forming a
 part of the Directors Report for the year ended 31.03.2008 a given in
 Annexure of this Report.
 
 Information In accordance with Sub Section (2A) of Section 217 of the
 Companies Act, 1956. rood with the Companies (Particulars of Employees)
 Rules. 1975. and forming part of Directors Report for the year ended
 31.03.2008 as given in Annexure- II of this Report.
 
 Additional disclosures In line with the requirement of the Listing
 Agreement with the stock exchanges.  the Management Discussion and
 Analysis Report, the Corporate Governance Report, the Segmental
 reporting, and related-party discloused are made part of this Annual
 Report.
 
 Directors responsibility statement
 
 In compliance of Section-217 (2AA) of the Companies Act. 1956, the
 Directors of your Company confirm that:
 
 - all applicable accounting standards have been followed in the
 preparation of the annual accounts and that there are no material
 departure;
 
 - such accounting policies have been selected and applied consistently
 and such 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
 at 31 03.2006, and of the profit of the Company for the year ended on
 that date.
 
 - proper and sufficient care has been taken for the maintenance of
 adequate accounting records in accordance with the provisions of the
 Act for safeguarding the assets of the Company and for preventing and
 detecting fraud and other regularities
 
 - the annual accounts have been prepared on a going concern besis
 
 General
 
 Details of production, licensed end installed capacity are annexed to
 the balance sheet as required by law.
 
 Your Directors thank the Companys seliing agents and bankers for their
 valuable assistance. Your Directors record their appreciation of the
 cooperation and contribution made by the employees at all levels
 towards the progress of the Company
 
                                        On behalf of the Board
 
                                     Dr. D. Jayavarthanavelu 
                                     Chairman and Managing Director
 
 Coimbetore 
 19.05.2008