Nagarjuna Construction Co.

The Directors take pleasure in presenting the 18th Annual Report
 together with the audited statement of accounts for the year ended 31
 st March 2008.
 
 Financial results
                                                        (Rs in million)
                                                    2008-07     2006-07
 
 Gross income                                      34,784.94   29,002.31
 Profit before interest and depreciation            3,653.44    2,989.34
 Less: Interest and financial charges                 719.44      503.94
 Profit before depreciation                         2,934.00    2,485.40
 Less: Depreciation                                   482.06      298.95
 Profit before tax                                  2,451.94    2,186.45
 Provision for tax                                    810.86      667.31
 Profit after tax                                   1,641.08    1,519.14
 Less: Prior year taxes                                21.61      362.53
 Profit after prior year taxation                   1,619.47    1,156.61
 Profit brought forward                               860.23      710.51
 Profit available for appropriation                 2,479.70    1,867.12
 Appropriations:
 Dividend @ 65% (Rs.1 .30 per share)                  297.49      249.44
 Dividend tax                                          50.56       37.45
 Transfer to General Reserve                          800.00      700.00
 Transfer to Contingency Reserve                       20.00       20.00
 Balance carried forward                            1,311.65      860.23
 Paid-up capital                                      457.68      417.02
 Reserves and surplus                              15,209.18    9,914.31
 
 Operational performance
 
 You will be glad to note that your Company achieved a turnover of Rs.
 34784.94 million as against Rs.  29,002.31 million achieved in the
 previous year, registering a growth of 20%. The Company earned a gross
 profit of Rs. 3.653.44 million before interest and depreciation as
 against Rs.  2,989.34 million in the previous year.  After deducting
 interest of Rs. 719.44 million, providing a sum of Rs. 482,06 million
 towards depreciation, income tax provision of Rs. 810,86 million, the
 operations resulted in a net profit of Rs.  1,641.08 million as against
 Rs, 1,519.14 million in the previous year, recording a growth of 8%.
 
 During the year under review, the Company on consolidated basis has
 bagged new orders valued around Rs, 74,856 million. The order book
 position as on 31st March 2008 stood at Rs.  1,13,791 million.
 
 You will be glad to note that your Company along with Paschal-Werk G
 Maier GmbH, Germany, which is one of the worlds leading Formwork
 (modular shuttering system) producing companies and Maytas Infra Ltd.,
 have formed a new company Paschal Form Work (India) Pvt. Ltd.. which is
 establishing a factory near Visakhapatnam, Andhra Pradesh for
 production of Formwork.
 
 You will be glad to note that your Company was declared as the second
 largest construction company in India by Construction World - NICMAR.
 
 Dividend
 
 Your Directors take pleasure in recommending equity dividend of 65%
 (Rs. 1.30 per share of Rs. 2 face value) on the paid-up equity share
 capital for the approval of the members. The dividend, if approved, at
 the 18th Annual General Meeting by the members, will be paid to all
 those equity shareholders whose names appear in the register of members
 as on 21st July 2008 and also to those, whose names as beneficial
 owners are furnished by the National Securities Depository Limited and
 the Central Depository Services (India) Limited,
 
 Preferential issue of equity shares to M/s Blackstone Group
 
 As approved by the members at the Extraordinary General Meeting held on
 24th September 2007, the Company has issued 1,95,28,135equity shares of
 Rs. 2 each to M/s. Blackstone GPV Capital Partners Mauritius V-A Ltd
 and 7,18,765 equity shares of Rs. 2 each to M/s. Blackstone FP Capital
 Partners Mauritius V FN Ltd., both at a premium of Rs, 200.50 and
 raised Rs. 4100.00 million. 
 
 The aforesaid shares have been listed on the National Stock Exchange of
 India Ltd and the Bombay Stock Exchange Ltd. M/s. Blackstone GPV
 Capital Partners (Mauritius) V-H Ltd., to whom the shareholders have
 approved issue of 91,11,111 convertible warrants of Rs, 225 each has
 made an application to Foreign Investment Promotion Board (FIPB).
 Ministry of Finance, Department of Economic Affairs New Delhi for
 necessary approval and the same is awaited.
 
 Directors Responsibility Statement
 
 Pursuant to the provisions of Section 217 (2AA) of the Companies Act,
 1956 the Directors Responsibility Statement is given in Annexure - A
 which forms part of this report.
 
 Disclosures
 
 Deposits
 
 During the year under review the Company has not accepted any public
 deposits.
 
 Conservation of energy, technology absorption and foreign exchange
 earnings and outgo:
 
 A) Conservation of energy
 
 The Companys core activity at present is civil construction which is
 not power intensive. The Company is making every effort to reduce the
 consumption of power.
 
 B) Foreign exchange earnings and outgo
 
 Foreign exchange earnings Rs. Nil
 
 Foreign exchange outgo
 
 a.  Towards travel Rs.3.04 million.
 
 b.  Towards import of capital goods Rs.65.35 million.
 
 c.  On account of others Rs.2.95 million.
 
 Particulars of employees
 
 Details in respect of remuneration paid to employees as required under
 Section 217 (2A) of the Companies Act, 1956, read with the Companies
 (Particulars of Employees) Rules, 1975, as amended, forms part of this
 Report.  However, in pursuance of the provisions of Section 219(1) (b)
 (iv) of the Companies Act, 1956, this Report is being sent to all the
 members of the Company excluding the aforesaid information and the said
 details are made available at the registered office of the Company. The
 members interested in obtaining such details may write to the Company
 Secretary at the registered office of the Company.
 
 Directors
 
 Sri Akhil Gupta, nominee of Blackstone has been appointed as an
 Additional Director on 12th December 2007 and holds office up to the
 date of the ensuing Annual General Meeting and is eligible for
 appointment as per the terms set out in the notice of the 18th Annual
 General Meeting.
 
 Prof. Dr. Ing. V S Raju, Sri P. Abraham, Sri A.V.N Raju and Sri R.N.
 Raju, retire by rotation at the 18th Annual General Meeting and being
 eligible, offer themselves for reappointment.
 
 NCC ESOP 2004
 
 Pursuant to the provisions of Clause 12 of the SEBI (Employee Stock
 Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, as
 amended, the required disclosures regarding employee stock options form
 part as Annexure B to this report. The Members may also please note in
 this connection that the NCC ESOP 2004 Scheme formulated by the HR &
 Compensation Committee has come to an end on 15th November 2007. As per
 the Finance Act of 2007, Stock Options attract levy of Fringe Benefit
 Tax. After detailed deliberations, the Company has introduced an
 incentive scheme for the benefit of the employees in place of the Stock
 Options Scheme.
 
 Employee relations
 
 The relations with the employees have been cordial throughout the year
 under review. Your Directors place on record their sincere appreciation
 in respect of the services rendered by the employees of the Company at
 all levels.
 
 Auditors
 
 The Joint Statutory Auditors of the Company viz., M/s. M Bhaskara Rao &
 Co., Chartered Accountants & M/s.  Deloitte Haskins and Sells,
 Chartered Accountants, retire at the conclusion of the 18th Annual
 General Meeting and being eligible offer themselves for reappointment
 to hold office from the conclusion of the 18th Annual General Meeting
 up to the conclusion of the 19th Annual General Meeting.
 
 Subsidiary companies
 
 The Company had 30 subsidiaries (including step down subsidiaries) at
 the beginning of the year. During the Financial Year 2007-08, the
 following companies were formed as subsidiaries / became subsidiaries
 of the Company.
 
 a. M/s. Nafto Gaz Engineering Pvt. Ltd., (NGEPL) has been formed as a
 wholly owned subsidiary during the year for undertaking oil and gas
 pipeline projects. The Company has invested a sum of Rs. 0.50 million
 in the equity of NGEPL.
 
 b.  Himachal Sorang Power Pvt Ltd., is a step down subsidiary
 (Subsidiary of NCC Infrastructure Holdings Ltd.,) and is executing the
 100 MW Hydro Power Project in Himachal Pradesh.
 
 c.  Siripada Homes Pvt. Ltd., and NJC Avenues Pvt. Ltd., were formed as
 step down subsidiaries (subsidiaries i of NCC Urban Infrastructure Ltd)
 for undertaking Real Estate Business.
 
 d.  Nagarjuna Contracting Company LLC, Dubai became a Wholly Owned
 Subsidiary of the Company in February, 2008.
 
 There has been no material change in the nature of the business of the
 subsidiaries. A statement pursuant to Section 212 of the Companies Act,
 1956 containing the details of the subsidiaries of the Company, forms
 part of the Annual Report.  (Annexure - C)
 
 The Ministry of Company Affairs, Government of India, has vide its
 letter bearing No. 47/266/2008-CL-lll, dated 14th may 2008, accorded
 approval under Section 212(8) of the Companies Act ,1956, exempting the
 Company from attaching the annual accounts of the subsidiary companies
 for the year ended 31st March 2008 with that of your Company.
 
 Statement pursuant to Section 212(8) of the Companies Act, 1956,
 containing the details of the subsidiaries of the Company, forms part
 of the Annual Report. (Annexure - D)
 
 Consolidated financial statements
 
 In accordance with the accounting standards AS-21 and AS-27 on
 consolidated financial statements read with the accounting standard
 AS-23 on accounting for investments in associates, your Directors have
 pleasure in attaching the consolidated financial statements for the
 financial year ended 31st March 2008, which form part of the Annual
 Report and accounts. The Company will make available the annual
 accounts of the aforesaid subsidiaries upon request by any
 member/investor of the Company/subsidiary company.
 
 Further, the annual accounts of the subsidiary companies will also be
 kept open for inspection by any member/investor at the Companys
 registered office and that of the subsidiaries concerned.
 
 Corporate Governance
 
 In pursuance of Clause 49 of the Listing Agreement entered into with
 the stock exchanges, a separate section on Corporate Governance has
 been incorporated in the Annual Report for the information of the
 shareholders. A certificate from the auditors of the Company regarding
 compliance of the conditions of Corporate Governance as stipulated
 under the said Clause 49 also forms part of the Annual Report.
 
 Acknowledgements
 
 Your Directors wish to place on record their sincere appreciation and
 thanks for the valuable cooperation and support received from the
 Companys bankers, financial institutions, central and state government
 authorities, J.V Partners, clients, consultants, suppliers, and members
 of the Company and look forward for the same in greater measure in the
 coming years.
 
                                        For and on behalf of the Board
 
                                        Dr. A.V.S. Raju
                                        Chairman
 
 Place : Hyderabad
 Date  : 30th May 2008