RPG Transmission

The Directors have pleasure in presenting the Fifty-fifth Annual Report
 and the audited accounts for the year ended March 31, 2007.
 
 Financial Results                                      (Rs. in Crores)
 
 Particulars                                       Year       9 Months
                                                   ended      ended
                                                   March 31,  March 31,
                                                   2007       2006
 
 Income                                              372.52    195.14
 Profit before taxation                               33.78     12.01
 Provision for taxation                                8.10      4.50
 (includes current, deferred
 and fringe benefit tax)
 Net profit for the year                              25.68      7.51
 
 Dividend
 
 The Directors have not recommended payment of dividend with a view to
 conserve funds.
 
 Operations and Profitability
 
 The performance of the Company during the year has been very
 encouraging.
 
 The turnover for the year is Rs.372.52 crores which, on an annualised
 basis is 43% higher than that achieved in the previous period. Profit
 before tax has increased by 111% (annualised) whilst post tax profit at
 Rs.25.68 crores has registered a growth of 157% (annualised).
 
 Earnings for the year stand at Rs.16.44 per share.  Cash flow from
 operations was Rs.16.01 crores during the year.
 
 It is noteworthy that the Company's margin levels have reached the
 industry average and also that the manufacturing capacities are now
 fully utilised. Net worth has increased substantially over the past
 year and fresh orders of Rs.362 crores were received during the year
 resulting in a closing order book position of Rs.487 crores.
 
 The lenders to the Company have reaffirmed their confidence in the
 Company and have substantially increased the working capital facilities
 for operations.
 
 Industry Overview - Outlook and Opportunities
 
 The Indian economy is expected to continue to grow at a rate of over 8%
 per annum over the next few years. Power is a critical infrastructure
 necessary to sustain these levels of economic development.
 
 The Government of India has enunciated its mission of power for all by
 2012 and prepared a comprehensive blueprint for power sector
 development with the objectives of ensuring sufficient, reliable and
 quality power.
 
 The strategies to achieve this objective revolve around:
 
 Power generation segment to focus on various strategies like low cost
 generation, optimisation of capacity utilisation, control of input
 costs, optimisation of fuel mix, technology upgradation and utilisation
 of non-conventional energy sources. As a part of this strategy, the
 Government has announced the setting up of 5 ultra mega power projects
 of 4000 MW each through tariff based competitive bidding.
 
 The Transmission segment to focus on development of a National Grid
 including inter state connections, technology upgradation and
 optimisation of transmission costs.
 
 The Distribution segment to focus on system upgradation, loss
 reduction, theft control, quality power supply and supply to rural
 areas.
 
 New regulation to make the sector commercially viable and to enable it
 to generate resources for required growth.  Regulations now permit
 trading as an independent activity, allows open access for
 transmission, has delicensed generation and has given freedom for
 captive generation.
 
 To meet these policy objectives, additional generating capacity of
 69000 MW is required by the end of fiscal 2012 from a level of 128000
 MW at present. This should lead to increased investment in power
 transmission and distribution.
 
 Private Sector Participation is also envisaged in the Transmission
 Sector. Going forward, 14 projects have been announced which would be
 set up on the Build-Operate-Own basis and would be finalised through
 the mechanism of tariff based competitive bidding. Large scale projects
 and accelerated implementation are expected to lead to a good top line
 growth for EPC companies over the next few years.
 
 Significant growth possibilities arise for the transmission sector as a
 consequence of the Government's thrust on Rural Electrification under
 the aegis of the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY).
 RGGVY was introduced in April 2005 with the aim of providing
 electricity in all villages and habitations within the 11th plan. Under
 RGGVY, electricity distribution infrastructure is envisaged to
 establish a Rural Electricity Distribution Backbone with at least a
 33/11KV substation and a Distribution Transformer in each village, and
 standalone grids with generation where grid supply is not feasible. The
 RGGVY scheme identified 125000 villages that were still to be
 electrified of which, about 29000 have been electrified at the end of
 the 10th plan. The allocation envisioned under this scheme is Rs.162500
 crores. The Company has already made a successful entry into this
 sector having procured two orders aggregating to Rs.95 crores.
 
 In view of the Government's commitment to the power sector as stated in
 the National Electricity Policy, the related reforms and policies put
 in place to ensure the success of its policies, the transmission sector
 is likely to witness significant investment in the next few years with
 commensurate opportunities anticipated for the Company.
 
 Human Resource Development
 
 The Company believes that the competence and commitment of its
 employees are the key drivers of its competitive advantage. Continuous
 training programmes on safety, quality, productivity awareness and
 environmental management are conducted to create a performance-oriented
 culture within the organisation.
 
 In terms of the provisions of Section 217(2A) of the Companies Act,
 1956, read with the Companies (Particulars of Employees) Rules, 1975 as
 amended, the names and other particulars of the employees are required
 to be set out in the Annexure to the Directors' Report. However, as per
 the provisions of Section 219(1)(b)(iv) of the said Act, the Annual
 Report excluding the aforesaid information is being sent to all the
 Members of the Company. Any Member who is interested in obtaining such
 particulars may write to the Company Secretary at the Registered Office
 of the Company.
 
 Re Engineering Initiatives
 
 In response to the perceived need to build organisational capabilities
 to proactively handle the emerging business opportunities, the Company
 has during the year:
 
 Strengthened the policies governing its people and revised its
 organisational structure with a view to empower its employees and
 increase accountability.
 
 Revised its business processes in order to have a lean and responsive
 system to meet its identified need of meeting quality, speed,
 reliability, cost effectiveness and flexibility criteria.
 
 Initiated Enterprise Resource Planning ERP systems and Project
 Management systems to integrate all departments and functions across
 the Company that can serve all those departments' particular needs and
 improve the management information systems.
 
 Collectively, the people, structure, processes and technology related
 initiatives have helped build an agile, efficient and responsive
 organisation.
 
 Adequacy of Internal Control Systems
 
 The Company believes in a principle of governance that gives freedom of
 management to assume responsibility but also firmly believes that these
 should be within a framework of appropriate systems and processes. The
 Company is committed to ensure an effective internal control
 environment that provides assurance on the efficiency of operations and
 security of assets. Operations of the Company are primarily spread
 across the country and in some countries of the SAARC region.
 
 The Company's internal audit function continually monitors the adequacy
 and effectiveness of the compliance with the laid down operating
 systems and processes and regulatory requirements. It also assists in
 the formulation of major risk management policies. •
 
 The Company has further strengthened its IT systems that serve to
 significantly enhance the planning, monitoring and control over its
 operations.
 
 The Audit Committee of the Board which oversees the functioning of the
 Internal audit, met four times during the year. It reviewed the
 adequacy and effectiveness of the internal control environment and
 monitored implementation of internal audit recommendations, including
 those related to risk management systems and policies.
 
 Listing of Shares
 
 The Company's shares are listed at the National Stock Exchange of India
 Ltd., Mumbai, (NSE), which has nationwide trading terminals. The
 Company confirms that it has paid annual listing fee due to the NSE,
 for the year 2007-08. The shares of the Company are compulsorily traded
 in dematerialised form.
 
 Fixed Deposits
 
 During the year, the Company has not accepted/renewed deposits. There
 was no failure to make repayments of Fixed Deposits and the interest
 thereon in terms of the conditions of the Company's scheme. Reminders
 are regularly sent to depositors who have not yet claimed repayment of
 their deposits, which have fallen due. At the year end, these unclaimed
 deposits amounted to Rs.2.31 lacs.
 
 Subsidiary
 
 The Company has been awarded a contract for the construction of a
 transmission line in Nigeria. In accordance with Nigerian laws, before
 a contract is awarded there is a requirement to incorporate a
 subsidiary in that country.  Accordingly, during the year, the Company
 has incorporated a 100% subsidiary in Nigeria entailing an investment
 of Rs.34.52 lacs.
 
 Directors' Responsibility Statement
 
 As required under Section 217 (2AA) of the Companies Act, 1956, your
 Directors confirm having:
 
 i) followed in the preparation of these accounts the applicable
 accounting standards and wherever required, proper explanations
 relating to material departures, if any, have been given;
 
 ii) selected such accounting policies and applied them consistently and
 made judgments and estimates that are reasonable and prudent so as to
 give a true and fair view of the state of affairs of the Company at the
 end of the financial year and of the profit or loss of the Company for
 that year;
 
 iii) taken proper and sufficient care 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; and
 
 iv) prepared the accounts on a going concern basis.
 
 Directors
 
 Mr. J.M. Mukhi and Mr.S.N. Kuckreja, Directors of the Company, retire
 by rotation at the ensuing Annual General Meeting and being eligible,
 offer themselves for reappointment. The particulars of Directors
 proposed to be reappointed are given in the Annexure to the Notice in
 terms of Clause 49 of the Listing Agreement.
 
 The Board, at its meeting held on April 28, 2007 reappointed Mr. Aditya
 Atal as Wholetime Director of the Company for a period commencing from
 April 28, 2007 to April 27, 2010, subject to the approval of the
 members.
 
 Auditors
 
 M/s. A.F. Ferguson & Co., Chartered Accountants, have become a part of
 the Deloitte family and do not offer themselves for reappointment. It
 is proposed to appoint Deloitte Haskins and Sells, as the auditors of
 the Company to hold office from the conclusion of the ensuing Annual
 General Meeting till the conclusion of the next Annual General Meeting.
 
 Risks and Concerns
 
 Power transmission business being a part of the core sector of the
 economy is mainly based on policies framed by the Central and State
 Governments and the budget allocations. Orders are secured through
 competitive bidding. In addition, the prices of primary raw materials
 such as steel, zinc and aluminium continue to be volatile and whereas
 the Company is contractually protected from the effects of raw material
 price variations in most contracts, where such protection is not
 available to the Company, takes proactive measures to mitigate these
 risks by regularly pursuing cost effectiveness and increasing cost
 efficiencies which include various options like widening the suppliers'
 base and entering into term contracts for procuring the raw material.
 
 Depository System
 
 The Company's shares are available for dematerialisation with National
 Securities Depository Ltd. (NSDL) and Central Depository Services (I)
 Ltd (CDSL). As on March 31, 2007, 83.05% of the total shareholding of
 the Company is held in dematerialised form.
 
 Corporate Governance
 
 As required under Clause 49 of the Listing Agreement, the Corporate
 Governance Report, along with a certificate of compliance from the
 auditors forming part of this Report, is annexed.
 
 Management Discussion and Analysis (MD & A)
 
 This report includes the MD & A as appropriate so that duplication and
 overlap between Directors' Report and a separate MD & A is avoided and
 the entire material is provided in a composite and comprehensive
 document.
 
 Development, Technology Absorption, Foreign Exchange Earning and Outgo
 
 A statement giving details of conservation of energy, technology
 absorption, foreign exchange earnings and outgo in accordance with the
 Companies (Disclosure of Particulars in the Report of Board of
 Directors) Rules, 1988, is annexed hereto and forms part of this
 Report.
 
 Group for Interse Transfer of Shares
 
 As required under Clause 3(1)(e) of the Securities and Exchange Board
 of India (Substantial Acquisition of Shares and Takeovers) Regulations,
 1997 persons constituting Group (within the meaning as defined in the
 Monopolies and Restrictive Trade Practices Act, 1969) for the purpose
 of availing exemption from applicability of the provisions of
 Regulation 10 to 12 of the aforesaid Regulations, are given in the
 Annexure attached herewith and forms part of this Report.
 
 Cautionary Statement
 
 This report contains forward looking statements that involve risks
 and uncertainties. Statements describing the Company's objectives,
 projections, estimates may be considered forward looking within the
 meaning of applicable laws and regulations. Additionally, when used in
 this report, the words anticipate, believe, estimate, expect,
 intend, will and other similar expressions as they relate to the
 Company are intended to identify such forward looking statements.
 
 The Company undertakes no obligation to publicly update, amend, modify
 or revise any forward looking statements, whether as a result of new
 information, future events or otherwise.
 
 Actual results, performance or achievements could differ materially
 from those expressed or implied in such forward looking statements.
 Readers are cautioned not to place undue reliance on these forward
 looking statements that speak only as of date.
 
 This Report should be read in conjunction with the financial statements
 included herein and the notes thereto.
 
 Acknowledgements
 
 The Board places on record its gratitude to the Company's valued
 customers, bankers, financial institutions, members, investing public
 and employees for their continued support and confidence in the
 Company.
 
 On Behalf of Board of Directors
 
 Place : Gurgaon            S.N. Kuckreja
 Date  : April 28, 2007     Chairman
 
 ANNEXURE TO DIRECTORS' REPORT
 
 I. PARTICULARS REQUIRED UNDER THE COMPANIES (DISCLOSURE OF PARTICULARS
 IN THE REPORT OF BOARD OF DIRECTORS) RULES 1988.
 
 a. Energy Conservation
 
 During the year under review, all the measures initiated in the
 previous years continued and following other steps have also been taken
 to maximise energy conservation:
 
 (i) Energy Audit conducted in house and the recommendations are under
 implementation.  These are expected to result in a savings of about
 Rs.24 lacs per annum.
 
 (ii) The Automation of Galvanizing Furnace Firing System is under
 progress. This will result in better temperature control, reduced
 furnace oil consumption and improved quality of the final product and
 also save the Company about Rs.5 lacs per annum.
 
 b. Technical Upgradation and Process Improvement
 
 (i) The Company is in process of extending ERP to various functional
 levels not earlier covered.
 
 (ii) Domestic Waste Water Treatment Plant has been set up, complying
 revised ISO 14000 Standards.
 
 (iii) Modification of Secured Land Fills - 3 Nos. This has resulted to
 save on new SLF construction cost of Rs.30 lacs, and prevented wastage
 of useful land.
 
 (iv) Modification of GP Bath (10 M to 13 M), has been successfully
 completed.
 
 (v) One CMC machine has been upgraded with AC Servo System.
 
 c. Foreign Exchange Earnings and Outgo  
 
 Earnings  Out Flow            (Rupees in Lacs)
 (incl. Deemed Exports)
 
 2006-2007  2005-2006    2006-2007    2005-2006
 
    764.28     128.69       785.90        34.35
 
 II. THE FOLLOWING IS THE LIST OF PERSONS CONSTITUTING GROUP (WITHIN
 THE MEANING AS DEFINED IN THE MONOPOLIES AND RESTRICTIVE TRADE
 PRACTICES ACT, 1969) FOR THE PURPOSE OF AVAILING EXEMPTION FROM
 APPLICABILITY OF THE PROVISIONS OF REGULATION 10 T012 OF SECURITIES AND
 EXCHANGE BOARD OF INDIA (SUBSTANTIAL ACQUISITION OF SHARES AND
 TAKEOVERS) REGULATIONS, 1997 (THE SAID REGULATIONS), AS PROVIDED IN
 CLAUSE 3(1)(E) OF THE SAID REGULATIONS
 
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 Limited, Harrisons Rubber Products Limited, Sentinel Tea and Exports
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 Limited, Haldia Energy Limited, RPG Infrastructure Investments Private
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 Limited, Shaft Investments Private Limited, South Asia Electricity
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