Dear  Members,
 
 My colleagues on the Board and I extend a warm welcome to all of you at
 the 48th Annual General Meeting of your Company. I am grateful to you
 indeed for making it convenient to attend the meeting.
 
 The Directors' Report and the Audited Statement of Accounts of the
 Company for the year 2005-06 and the notice to shareholders have been
 in your hands for some time, and, with your permission, I take them as
 read.
 
 MARKET SCENARIO
 
 The world demand for iron ore is on a steep rise. It has again risen in
 the year under report; and keeping pace with it, the world production
 of iron ore during the year went up to 1,520 million tonnes as against
 1,250 million tonnes during the previous year, which accounts for about
 22% of increase. Contributing 10% to the world production, India
 produced 155 million tonnes of iron ore, of which your company's
 production was 22.92 million tonnes i.e, 14-8%. Similarly, the
 world-wide trade of iron ore was about 680 million tonnes as against
 605 million tonnes of the previous year, showing an increase of 12%.
 India exported 89 million tonnes, claiming 13% of the world trade; and
 your company exported only 6.05 million tonnes, accounting for about 7%
 of India's export and about 1% of the global trade of iron ore. As
 mentioned in the last year's Annual General Meeting, your company has
 been giving priority to the domestic demands. Accordingly, the export
 quantity is getting reduced in order to give priority to the domestic
 demands. In comparison with that of last year, the export of iron ore
 during the year was less by 9.12%. Your company's domestic sale has
 gone up to 18.85 million tonnes from 15-7 million tonnes, an increase
 of about 20%.
 
 FINANCIAL STATUS
 
 You will be happy to note that your company has earned a profit (before
 tax) of Rs.2,770.13 Crores, an all-time record, on a turnover of
 Rs.3,710.92 crores, an increase of 126.38%, in comparison with the
 profit of Rs.1,223.65 crores earned in the previous year ie, 2004-05 on
 the turnover of Rs.2,229.99 crores. So also the net worth of your
 company has gone up from Rs.2,568.77 crores of the previous year to
 Rs.3,984,53 crores this year, the increase being 55.11%; Book value of
 share has improved from Rs.194-37 to Rs.301.50, making a similar
 increase of 55.11%; and the earnings per share increased from Rs.57.16
 to Rs.138.30, achieving an increase of 141.95%.
 
 Such a robust performance of your company has enabled payment of two
 interim dividends in the year accounting for 192.33%, and in terms of
 the guidelines of the Government of India, it is proposed to pay a
 final dividend of 84.29%, totalling to 276.62% towards dividend for the
 year 2005-06.
 
 I am happy to inform you that your company continues to be in the top
 bracket of highly performing companies. Your company continues to
 maintain the position of excellent rating under the MoU system of
 Government of India for the year 2005-06 also. The `Business Standard'
 accorded 1st rank under industrywise performance for your company. The
 `Economic Times' accorded 5th rank for your company out of 500
 companies of India that have performed the best. The `Financial
 Express' has given 2nd rank to NMDC out of the top ten Companies of
 India in terms of net profit margin for the year 2005-06. Your
 company's share of Rs.10/- (face value) touched an all time high of
 Rs.4990/- in the stock market.
 
 FUTURE PLANS
 
 Impressive as the performance has been, there is quite a lot to improve
 upon. The National Steel Policy aims at a production level of 110
 million tonnes of steel by the year 2020, which would mean a demand for
 iron ore to the extent of 190 million tonnes. In order to ensure the
 availability of 190 million tonnes of iron ore for domestic production,
 the Government intends to encourage investments in creation of an
 additional modern mining and beneficiation capacity of 200 million
 tonnes. In addition, the export of iron ore is estimated to be around
 100 million tonnes. In total, therefore, the demand for iron ore would
 go up to 290 million tonnes by 2020 as against the present production
 of 155 million tonnes. Though local value addition would be given
 priority, the Government would encourage iron ore trading in order to
 make this essential raw material available to the iron and steel
 industry throughout the country.
 
 Your company, on its part, has plans to increase iron ore production
 from the present 22.90 million tonnes per annum to about 48.75 million
 tonnes by the year 2015-16. This would be achieved by increasing
 production from the existing mines and opening new mines.  The new
 mines being developed are: Bailadila-IIIB Mine with an annual capacity
 of seven million tonnes, Kumaraswamy iron ore mine in Karnataka
 initially with three million tonnes capacity which will ultimately go
 up to 7 million tonnes after the closure of Donimalai Iron Ore Mine. In
 addition, the Chhattisgarh Government had desired to form a joint
 venture with your company to develop Bailadila-13 Deposit. In pursuit
 of this endeavour, a Memorandum of Understanding (MoU) has been signed
 between the Chhattisgarh Mineral Development Corporation Ltd (CMDC), a
 Gout of Chhattisgarh Enterprise, and your company on 1.7.06.  Based on
 this MoU, the State Government will recommend grant of Mining Lease
 for Deposit 13 in favour of NMDC to the Ministry of Mines, Government of
 India. It is proposed to develop a mine with an annual capacity of 10
 million tonnes at Bailadila Deposit No.13. Similarly, the development
 of Bailadila-1 is also proposed to be in the joint venture between CMDC
 and your company. Your company is also envisaging development of
 Bailadila Deposit-3 with an initial capacity of three million tonnes.
 
 In the sphere of value addition, your company is getting geared up. An
 MoU has already been signed with Rashtriya Ispat Nigam Limited (RINL)
 in September 2005 to set up a Pellet/Sponge Iron Plant, and the
 project proposal is getting crystallized. Your company also proposes to
 set up a Sponge Iron Plant with an annual capacity of one lakh tonnes
 with 10 MW power plant at Nagarnar in Chhattisgarh. Your company is
 also planning to take over the management of Sponge Iron India Ltd as
 value addition measure in the State of Andhra Pradesh. Your company
 also has plans to set up an Integrated Steel Plant in Bailadila area to
 meet the demand of value addition.
 
 CORPORATE GOVERNANCE
 
 The company has been given due importance to the concept of corporate
 governance and has been following the principles and practices of good
 governance, for enhancing the delight of shareholders and stakeholders.
 
 CORPORATE SOCIAL RESPONSIBILITY
 
 The company continues to extend its patronage to the development of the
 people around the project areas. For better understanding of the local
 needs, your company works in consultation with the local Gram Sabhas
 and Collectorates. By this process, the prioritization of the
 requirements of the local people is ensured. After the identification
 of the works to be undertaken, your company carried out the jobs
 through its own agencies to ensure that the benefits directly reach the
 grass-root levels.
 
 It has also got a unique health care plan for all the people around its
 production projects.  NMDC project hospitals including those which are
 managed by corporate hospitals of repute like Apollo and Yashoda give
 free treatment to the people from the nearby villages. For their
 facility, your company is also extending free diet to the local
 population who are admitted for inpatient treatment.
 
 The company had signed a Memorandum of Agreement with the State
 Government of Chhattisgarh, for establishment of a Medical College at
 Jagdalpur, with the financial assistance of Rs.50 crores payable by
 NMDC on five equal annual instalments and so far, a sum of Rs.10 crores
 has been contributed by your company for this purpose. Your company has
 also extended financial assistance during this year to the tune of
 Rs.134 lakhs to various governmental and non-governmental agencies
 towards developmental activities for the public.
 
 Truly believing in the transparency of its working, your company has
 earnestly taken up the implementation of the Right to Information Act.
 Any citizen of India requiring information about the functioning of the
 company is at liberty to contact any of the Public Information Officers
 appointed by the company. NMDC website gives the information for
 availing this facility.
 
 As a member of the Global Compact, your company continues to believe in
 enhancing the human values. As part of its ongoing measures for
 propagating the ten principles of the Global Compact, your company has
 continued to contribute in this area also. Your company has also sent
 its Communication on Progress (CoP) for this year also to the
 headquarters of Global Compact. This is available on the website of the
 Company www.nmdc-india.com.
 
 I am grateful to the various officials of the Government, especially
 from the Ministry of Steel, Ministry of Environment and Forests, Port,
 Railways and officials of MMTC for their cooperation. I must also
 acknowledge with thanks the help extended by various national and
 international agencies who contributed to the growth of the company. I
 also take this opportunity to thank the untiring efforts put in by all
 the employees and the unions at various levels, and their support over
 the years which has enabled your company to achieve the present
 position. With such continued supports, I am sure, your company will
 grow from strength to strength and would be able to expand its areas of
 activities, scale greater heights of success and contribute positively
 for better stakeholders' delight.
 
 With the projected increase in steel production, both in India and
 abroad, and the demand for iron ore, your company has an excellent
 growth potential with positive increase in shareholders' value in the
 years to come.
 
 Hyderabad                        B Ramesh Kumar
 31 July 2006                     Chairman-cum-Managing Director