Dear Stakeholder,
 
 As you are aware the Indian sugar industry continues to be buffeted by
 strong headwinds that are not only stifling its potential but also
 putting its very survival at risk.  The challenges, in the past two
 sugar seasons, have been particularly severe.
 
 The challenges include rising input costs fuelled by surging cane
 prices; agricultural practices leading to lower recoveries; below cost
 selling prices and a regulatory framework that''s invariably influenced
 by political and social compulsions. The challenges have further
 multiplied on account of falling Rupee and currency volatility;
 escalating interest costs; lack of liquidity; and monsoon concerns.
 
 Unfortunately, we have witnessed a ''surplus period'' in the last two
 sugar years due to higher production in India along with many other
 nations, and muted growth in consumption because of a sluggish global
 economy.  This has impacted the basic viability of the business.  The
 cost of production has shot up, a trend that is expected to persist in
 the coming fiscal, which could lead to continuous pressure on the
 industry particularly in northern India. The situation has been further
 exacerbated by a host of industry-unfriendly policies which has led to
 unrealistic retail prices; restricted exports to a trickle and dictated
 a hike in cane prices during the last five years, twice that of the
 increase in sugar prices.
 
 Although India produced over 26.0 million tonnes of sugar in the
 2011-12 sugar season, next year''s output is likely to drop marginally
 as key cane growing areas received poor rainfall. If this scenario
 persists and drought-hit farmers replace cane with less water-intensive
 crops, India, the world''s largest consumer of sugar, might well become
 a net importer of this sweetener as early as 2013/14.
 
 However, amidst this rather dismal business environment, there do
 appear to be a few reasons for optimism and hope.
 
 The Rangarajan Committee, set up by the prime minister''s office has
 recommended de-regulation of the sugar industry by dropping the levy
 sugar obligation, disbanding the release mechanism and freeing exports
 and imports.  While recommending the Central Government''s Fair and
 Remunerative Price (FRP) as the base price for sugarcane, the panel has
 also suggested a profit-sharing mechanism so that farmers, too, can be
 benefitted from higher sugar prices. I am hopeful that the committee''s
 recommendations will be accepted and implemented to kick-start the
 much-needed and long awaited reform process in the sugar industry.
 
 The new Uttar Pradesh government appears to have made a good beginning
 by focusing its attention on issues of critical concern to the
 industry. It has agreed to a number of measures to boost sugarcane
 production and improve cane quality. It is also considering a new
 incentive policy for pushing growth and modernisation of the sugar
 industry.  These moves, in my view, are important first steps to spur
 sugar production and energy generation in the state; and I sincerely
 hope these will be implemented at the earliest.
 
 Transforming Simbhaoli to Meet the Challenges of the Future
 
 For our part, all our efforts are directed towards re-gaining
 Simbhaoli''s core position and building a future-ready organisation by
 offsetting the inherent risks in the sugar business, paring debt and
 taking advantage of the emerging opportunities. In this regard, we are
 implementing a comprehensive business and financial restructuring plan
 whose key components are growth, transformation, consolidation and
 execution.
 
 I am happy to report that together with ED&F Man, UK, we have
 established a joint-venture company, Uniworld Sugars Private Limited.
 The joint-venture''s first project is a Rs. 2.15 bn, 1000-tonnes a day
 capacity greenfield raw sugar refinery near Kandla Port, Gujarat, which
 is expected to be up and running in the next 10 months.
 
 In partnership with Sindicatum Sustainable Resources Group, Singapore
 we have set up a Special Purpose Vehicle (SPV), Simbhaoli Power Limited
 for implementing a co-generation expansion project. All the existing
 power assets of our co-generation plants will be transferred to the
 SPV. As a result, the aggregate surplus power generation capacity will
 rise to 65 MW, a jump of 100%.
 
 We have also taken concrete steps to strengthen our IMFL brands
 portfolio by launching new brands in the semi- premium segment. Most
 significantly, we have made a foray in the super-premium segment by
 inking an exclusive marketing tie-up with Pravda S.A., Poland, for
 promoting their heritage vodka brand, Pravda, for the first time in
 India.
 
 As per the order passed by the Hon''ble High Court of Judicature,
 Allahabad sanctioning the Scheme of Arrangement, the Simbhaoli
 Distillery Division (SDD) alcohol undertaking has been transferred to
 Simbhaoli
 
 Spirits Limited, a subsidiary company.
 
 Our Trust brand continues to hold a pre-eminent position in the
 speciality sugar space. Our distribution network is growing at a fast
 clip and now spans 15 states across the country. A year earlier, we had
 stepped into the value- added space by introducing Trust Sipp, an
 instant fruit drink mix, which has found a favourable response with the
 consumers in northern India. The challenge will be to increase the
 geographical reach of these brands for improving market share and
 volumes.
 
 Your Company is continuing its extensive cane development drive in the
 three catchment areas adjoining our plants, which involves educating
 farmers about improved agri-practices and replacing old sugarcane
 varieties with new ones, which have the potential of increasing yield
 and improving sugar recovery.
 
 I am convinced that technology is a key enabler to drive productivity
 and change business processes to reduce operational costs. Integrated
 Casetech, with its cache of great technical skills, deep plant process
 understanding and strong delivery capabilities is helping sugar
 enterprises in different part of the world to achieve better and
 sustainable business outcomes. Best of all, as a subsidiary, it is
 going to become an important revenue stream for your Company in the
 future.
 
 To conclude, the vision and management skills of our team and the
 commitment and effort of our employees give me the confidence that we
 can meet any challenge the future may throw at us; and that we are well
 on our way to building a robust and sustainable business. I would like
 to thank each one of our stakeholders for their belief and trust in
 Simbhaoli in these exceptionally challenging times.
 
 Gurmit Singh Mann
 
 Chairman & Managing Director
 
 New Delhi 
 
 September 25, 2012