Sagar Cements

The Directors are pleased to present hereby their Twenty Seventh
 Report together with the audited accounts of the Company for the year
 ended 31st March, 2008.
 
 Financial Results
 
 The performance of your company during the year 2007-08 was on the
 expected lines, with the Profit after tax registering an increase of
 12 % over the previous year.
 
 A summarized financial performance of your company during the year
 under review is given below:
 
                                                       Rs. In lakhs
 Description                                     2007-08     2006-07
 
 Sales                                             27462           24714
 Other income                                         99              88
 Total Income                                      27561           24802 
 Profit before Depreciation,
 Financial Charges and Tax                          5759            4383
 Less: Depreciation                         414              341
 Financial Charges                          340      754     160     501
 Profit before Tax                                  5005            3882
 Less: Provision for FBT                     11                       10
 Current Tax                               1593             1074
 Deferred Tax Liability                     305     1909      31    1115
 ProfitAfterTax                                     3096            2767
 
 Add: Profit brought forward                        2939             793
 Profit available for appropriation                 6035            3560 
 Appropriations
 Proposed dividend @ 25 % (Previous Year -25%)       340             302
 Dividend Tax                                         58              42
 Transfer to General Reserves                        310             277
 Carried to Balance Sheet                           5327            2939
 
 Dividend
 
 Better financial results achieved by your Company has enabled its Board
 to recommend a dividend @ 25% (including the interim divided @ 15%
 already paid by it) on its equity shares for the year ended 31st March,
 2008.
 
 Performance
 
 The performance of your company in terms of production and sale of
 cement/ clinker together with the average sales realization per MT
 thereof is given below:
 
 Particulars                          Clinker                 Cement
 
                                    2007-08_2006-07    2007-08_2006-07
 
 Production in Mts                  520710    544500   282242  276400
 Sales in MTs                       252536    329131   282443  277007
 Sales in MTs (Traded cement)          -          -    266277  305387
 
 While the lower production of clinker was caused by an extended
 maintenance days at the plant to align the new machineries acquired for
 our expansion with the existing one,the reduction in its sales was due
 to higher utilization of clinker for captive cement production.
 However, the net sales realization achieved by your Company at a higher
 level during the year helped it to over come this shortfall and achieve
 an overall good financial performance.
 
 Share Capital
 
 During the year under report, your Board allotted 6,35,000 equity
 shares of Rs. 10/- each against similar number of warrants offered for
 conversion,as a result of which the paid up share capital stood
 increased to Rs. 13,33,73,000 as on 31st March,2008. There were
 6,65,000 outstanding warrants as on 31st March, 2008, all of which have
 since been converted into equity shares, increasing the paid up capital
 to Rs. 14,00,23,000, consisting of 1,40,02,300 equity shares of Rs.
 10/- each, as on the date of this report. As you are aware, your
 Company had issued 18,50,000 warrants of Rs.82/- each convertible into
 equal number of equity shares for funding the expansion of your plant
 and the funds so mobilized on allotment and subsequent conversion of
 these warrants have been fully spent for the expansion of the plant.
 
 Future Outlook
 
 Currently, the cement industry is driven by an expanding housing sector
 coupled with initiatives taken by the Government for improving
 infrastructure through public-private participation and the various
 welfare schemes announced by them day in and day out. As we do not
 foresee any reduction in the Government spending on these growth
 drivers, there is unlikely to be any slow down in the demand for cement
 in the near future which augurs well generally for the industry and
 particularly for your company, which, with its expanded capacity will
 be well poised to grab the opportunities available in the above said
 scenario.
 
 In our previous report, we had mentioned about the expansion of our
 plant at Mattampally from its current level of 0.6 Million Tones to 2.5
 .Million Tones, We are happy to inform you that this expansion is 
 fexpected to be completed in a couple of months. We hope
 that this expansion, being a massive one as compared with earlier
 expansions by your company, will usher in an era of prosperity to all
 its stake holders.
 
 Your company proposes to set up a cement plant in Karnataka through a
 Special Purpose Vehicle being floated by your company jointly with
 Vicat S.A., or its subsidiary, as a major partner in the said Special
 Purpose Vehicle. M/s.Vicat, S.A., is a flag ship cement company of the
 160 years old Vicat Group from France. This Group, which also has its
 presence in the United States, Turkey, Senegal, Switzerland, Egypt and
 Italy manufactures cement, produces ready mixed concrete and aggregates
 and conducts other activities that are parallel or complementary to its
 core operations. Your directors are confident that the proposed joint
 venture, apart from bringing further prosperity to your Company and
 Vicat, would also afford an opportunity your company to learn and adopt
 improved global management practices in all areas of its operations.
 
 Being keen on participating in the equity capital of your Company,
 M/s.Vicat S.A. has also come forward to invest on its own or through
 one of its subsidiaries / affiliates, a sum of Rs.70 crores in your
 company through subscription to its 1000000 equity shares of Rs. 10/-
 each at a price of Rs.700/- per share proposed to be offered on a
 preferential basis in accordance with applicable statutory guidelines,
 for which the Shareholders have since given their approval U/s 81(1 A)
 of the Companies Act, I9S6 at their just concluded Extra Ordinary
 General Meeting.The proceeds of this issue will be utilized by your
 company to strengthen its long term resources to meet its growing
 working capital needs and to part fund capital expenditure for
 providing a railway siding at your plant at Mattampally.
 
 Subsidiary Company
 
 Documents and Information pursuant to Section212 of the Companies Act,
 1956 in respect of Sagar Power Limited, a subsidiary of your Company,
 have been provided as an attachment to the Balance Sheet, together with
 the consolidated financial statements. The performance of this
 subsidiary continued to be satisfactory during the year 2007-08 which
 enabled it to earn a PBT of Rs.412 lakh, a marginal increase over the
 previous years PBT of Rs.409 lakhs. As the tax holidays available to
 the Guntur Branch Canal Unit, one of the two units owned by your
 subsidiary, ceased to be available from 2007-08 onwards, the Profit
 after tax for the subsidiary dropped to Rs.274.05 lakh from the
 previous years PAT of Rs. 412.69 lakhs.This subsidiary has proposed a
 dividend @ 30% on its equity capital for the year 2007-08.
 
 Corporate Governance
 
 Your Company has complied with the mandatory provisions of the
 Corporate Governance prescribed in the Clause 49 of the Listing
 Agreement with the Stock Exchanges. A separate report detailing such
 compliance together with the mandatory Certificate obtained from the
 Statutory Auditors in connection therewith is included as part of the
 Annual Report.
 
 Internal Control Systems,
 
 Your Company has adequate internal control systems in all areas of its
 operations at its plant at Mattampally and at its Registered Office at
 Hyderabad. Effectiveness of these systems is periodically reviewed for
 possible improvement.
 
 insurance
 
 All the properties of the Company have been adequately insured.
 
 particulars of Employee
 
 Particulars of employees required to be furnished in this Report
 pursuant to Section 217 (2A) of the Companies Act, 1956 are given in
 the annexure.
 
 industrial relation
 
 Company continued to maintain cordial relationship with all its
 personnel at the Plant, Office and on the field.
 
 Conservation of energy, Technology absorption and foriegn exchange
 
 The particulars required under Section 217 (I) (e) of the Companies
 Act, 1956 have been provided in the annexure, which forms part of the
 Report.
 
 Pollution Control
 
 As the shareholders are aware, your Company has an ESP system in place
 at its plant, to keep the pollution within the acceptable levels.
 
 Directors
 
 In compliance with Section256 of the Companies Act, l956,Shri
 O.Swaminatha Reddy and Shri S.Sreekanth Reddy will be retiring by
 rotation at the ensuing Annual General Meeting and are eligible for
 re-appointment. As the tenure of Shri S.Sreekanth Reddy as a Whole time
 Director ended on 25th June, 2008 it is proposed to appoint him as
 Executive Director for a period of 5 years with effect from 26th
 June,2008. Shri Wermer C.R.Poot,who has been appointed as an Additional
 Director, will be holding the said office up to the ensuing AGM and a
 notice proposing his re-appointment at the said meeting has been
 received from a shareholder of the Company.
 
 Audit Committee
 
 The Audit Committee of the Board, constituted pursuant to Section 292
 (A) of the Companies Act. 1956 read with Clause 49 of the Listing
 Agreement, consists of the following directors as its members:
 
 Shri O.Swaminatha Reddy    Chairman of the Committee 
                           (Non-executive and independent director)
 Shri K.Thanu Pillai        Member (Non-executive and independent 
                            director)
 Shri P.Rajewara Rao        Member (Nominee director of APIDC)
 
 Company Secretary is the Secretary of the Committee.The Committee had
 met five times during the year ended 31st March, 2008 and, inter-alia,
 reviewed the quarterly financial results of the Company.
 
 Remuneration Committee
 
 The Remuneration Committee of the Board, constituted pursuant to
 Schedule XIII to the Companies Act. 1956 read with Clause 49 of the
 Listing Agreement has the following Non-Executive / Independent
 Directors as its members:
 
 Shri K.Thanu Pillai       Chairman -Non-executive and 
                           Independent Director
 Shri O.Swaminatha Reddy   Member Non-executive and Independent Director
 Shri P.Rajesswara Rao     Member-Non-executive and Nominee director
 
 During the year 2007-08 this Committe met on 30th July, 2007 to
 recommend a suitable remuneration to the Managing and other Whole-Time
 Directors of the company which were later approved by the shareholders.
 
 Investment Committee
 
 With a view to evaluating investment opportunities available to the
 Company from time to time, your Board has constituted an Investment
 Committee with the following directors as its members:
 
 Shri O.Swaminatha Reddy   Chairman
 Shri S.Veera Reddy        Member
 Shri K.Thanu Pillai       Member
 
 Auditors
 
 Shareholders are requested to appoint Auditors to the Company to hold
 office from the conclusion of its ensuing Annual General Meeting until
 the conclusion of its next Annual General Meeting. Messrs. R Srinivasan
 & Co., Chartered Accountants, the present Auditors of your Company will
 be holding their office up to the Annual General Meeting and are
 eligible for re-appointment. The Audit Committee of the Board has since
 recommended their re-appointment and the retiring auditors have also
 confirmed that their re-appointment, if approved by the shareholders,
 would be in accordance with the limits specified in Sub Section (IB) of
 Section 224 of the Companies Act, 1956.
 
 Directors Responsibility Statement
 
 Pursuant to Section 217 (2AA) of the Companies Act, 1956, we state:
 
 (i) that in the preparation of the annual accounts, the applicable
 accounting standards had been followed along with proper explanation
 relating to material developments;
 
 (ii) that the directors had selected such accounting policies and
 applied them consistently and made judgment 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 of the company for the period;
 
 (iii) that the directors had 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;
 
 (Iv) that the directors had prepared the annual accounts on a going
 concern basis.
 
 Acknowledgement
 
 Your Directors wish to place on record their appreciation of the
 valuable co-operation extended to the Company by its bankers, State and
 Central Government Authorities.They thank the Distributors, Dealers,
 Consignment Agents, suppliers and other business associates of your
 Company for their continued support. Your Board also takes this
 opportunity to place on record its appreciation of the contributions
 made by the employees at all levels and the last but not least, of the
 continued confidence reposed by you in the Management.
 
                                         For and on behalf of the Board
 
 Hyderabad                                          O.Swaminatha Reddy
 23rd July, 2008                                              Chairman