Sobha Developers

The Directors have pleasure in presenting the Thirteenth Annual Report
 on the business and operations of the Company together with the Audited
 Accounts for the financial year ended March 31, 2008.
 
 Financial Highlights                                (Rs. in Million)
 
 Particulars                                 2007-08           2006-07
 
 Net Sales and other Income                  14,345            11,894
 
 Profit before Interest, Depreciation         3,656             2,596
 and Tax
 
 Finance Charges                                597               486
 
 Depreciation                                   350               244
 
 Profit before Tax                            2,709             1,866
 
 Provision for Tax - Current                    453               240
 
 - Fringe benefit                                 6                 5
 
 - Deferred                                     (33)                6
 Net Profit after Tax                         2,283             1,615
 Add: Balance of profit brought               1,250               819
 forward
 
 Profit available for appropriation           3,533             2,434
 
 Appropriations -
 
 Proposed Dividend (includes tax on             555               469
 dividend)
 
 Preference Dividend (includes tax on            -                  5
 dividend)
 
 Transfer to General Reserve                    250               200
 
 Transfer to Debenture Redemption               309                -
 
 Reserve
 
 Transfer to Capital Redemption                  -                87
 
 Reserve
 
 Transfer to Capitalisation towards              -               423
 
 Bonus Shares
 
 Balance carried to Balance Sheet             2,419            1,250
 
 1. RESULT OF OPERATION
 
 Highlights of operations for the year ended March 31, 2008 are given
 below
 
 The performance of your Company for the year ended March 31, 2008 was
 very encouraging. Your Company reached a new milestone surpassing all
 previous records. It has registered an all round growth in sales of
 residential projects and contractual projects.
 
 The total income increased to Rs.14,345 Million from Rs.11,894 Million
 in the previous year, registering a growth rate of 21%. Real Estate
 revenue has grown from Rs.7,532 Million to Rs.8,533 Million,
 registering a growth of 13%. Contractual revenue (including revenues
 from manufacturing) has grown from Rs.4,333 Million to Rs.5,692
 Million, representing a growth of 31%. Your Company launched seven
 residential projects during the year under review.
 
 The profit before depreciation, interest and tax amounts to Rs.3,656
 Million as against Rs.2,596 Million in the previous year. The net
 profit after tax rose to Rs. 2,283 Million as against Rs. 1,615 Million
 in the previous year. The total funds available for appropriation is
 Rs.3,533 Million, inclusive of the credit balance of profit carried to
 the Balance Sheet last year.
 
 2. APPROPRIATIONS
 
 2.1 Dividends for the year 2007-2008
 
 The Directors have pleasure in announcing that the Board of Directors
 has recommended a dividend of Rs.6.50 per equity share for the
 financial year 2007-08, subject to the approval of members atthe
 ensuing Annual General Meeting. Subsequent to the approval of the
 members at the Annual General Meeting, the dividend will be paid in
 compliance with the applicable rules and regulations. The proposed
 dividend (including dividend tax) as a percentage of profit after tax
 is 24%.
 
 The Register of Members and Share Transfer books will remain closed
 from July 18, 2008 to July 24, 2008 (both days inclusive) in connection
 with payment of dividends and the Annual General Meeting.
 
 The Board of Directors with the approval of the members of the Company
 at its 12th Annual General Meeting had distributed a final dividend of
 Rs.5.50 per equity shares for the financial year 2006-07.  As on March
 31, 2008 an amount of Rs. 2,14,803 remains unclaimed.
 
 2.2 Transfer to reserves
 
 Your Directors propose to transfer an amount of Rs.250 Million (Rupees
 Two Hundred Fifty Million) to the General Reserve and an amount of
 Rs.309 Million (Rupees Three Hundred and Nine Million) to the Debenture
 Redemption Reserve out of the profits of the Company for the year
 2007-08. An amount of Rs.1,169 Million (Rupees One Thousand One Hundred
 and Sixty Nine Million) has been retained in the profit and loss
 account.
 
 3. BUSINESS
 
 Your Company is an industry leader in Bangalore and has completed eight
 residential complexes during the period under review. In addition,
 seven new residential complexes have also been launched in Bangalore,
 Thrissur, Pune and Coimbatore. During the year, your Company completed
 eighteen contractual projects in Bangalore, Mysore, Chennai, Hyderabad,
 Chandigarh, Mangalore, Trivandrum, Pune, and Mumbai. During the year
 2007-08, your Company started executing fifteen contractual projects in
 different cities like Bangalore, Chennai, Thrissur, Chandigarh, Pune,
 Gurgaon and Bhubaneshwar.
 
 4. INCREASE IN SHARE CAPITAL
 
 The authorized share capital of the Company was increased to Rs.
 2,000,000,000 (Rupees Two Thousand Million only) consisting of
 80,000,000 (Eighty Million only) equity shares of Rs.10 (RupeesTen
 each) and 12,000,000 (Twelve Million Only) preference shares of Rs. 100
 (Rupees One Hundred each). Necessary approvals from the shareholders
 were obtained in the Annual General Meeting of the Company held last
 year.
 
 5. LIQUIDITY
 
 Your Company maintains sufficient cash to meet its strategic objectives
 and growth is financed through internal accruals, project related
 specific borrowings and the advances received from customers.
 
 6. CRISIL/ICRA/FITCH RATING
 
 Your Company has obtained the following ratings from the various credit
 rating agencies:
 
 SI.  Name of the  Rating        Details of Rating
 No.  Credit       Obtained
      Rating
      Agency
 
 1    CRISIL         DA1       In recognition of the excellent
                               track record of quality, timeliness
                               and transfer of clear title
 
 2    ICRA           A1        Highest credit quality to short-
                               term debt instruments.
                               Instruments rated in this
                               category carry the lowest credit
                               risk in the short term.
 
 3    ICRA           LA        Long term debts indicating
                               adequate credit quality rating.
 
 4    CARE           PR1       strong capacity for timely.
                               payment of short term debt
                               obligations
 5    FITCH          F1        Strong capacity for timely
                               payment of short term debt
                               obligations.
 
 7. NEW BUSINESS INITIATIVES
 
 The Company is launching its residential projects in different
 locations, a major initiative being the launch of Sobha Hi-Tech City at
 Kochi, a massive township project in 400 acres of land with active
 support from the Government of Kerala. The Company is also planning to
 launch shopping malls, hotels, commercial development, retail home
 stores, plotted development as a strategy in expanding its portfolio of
 products.
 
 8. SUBSIDIARIES
 
 SBG Housing Private Limited, which was a subsidiary company in the
 previous year ceased to be a subsidiary during the period under review,
 as a result of divestment of your Companys equity holding in it. SBG
 Housing Private Limited was not a material subsidiary and the Board of
 Directors has accorded necessary approval for sale of Companys stake
 in the said subsidiary company. In view of this, Statement under
 Section 212 and Consolidated Financial Statement of Accounts under
 Accounting Standard 21 are not required and hence have not been
 furnished.
 
 9. INVESTMENT IN PARTNERSHIP FIRM
 
 During the year under review, your Company has entered in to a
 partnership agreement in the name and style Sobha City with Tree Hill
 Estates Private Limited as the other partner. The objective of this
 partnership is to leverage upon the combined technical, financial and
 management expertise of the partners in developing projects at
 Thrissur, Kerala. The details of the ratio of capital contribution and
 profit sharing in the partnership have been provided in the Notes to
 the Accounts. The consolidation of financial settlements with
 partnership firm has been carried our under Accounting standard- 21,
 which forms part of this Annual Report.
 
 10. HUMAN RESOURCE (HR) DEVELOPMENT
 
 Your Company aims to align HR practices with business goals, motivate
 people for higher performance and build a world-class competitive
 working environment. In pursuance of the Companys commitment to
 develop and retain the best available talent, a series of Training
 programmes have been undertaken as under:
 
 Technical Training Programs
 
 First Aid Training
 
 Safety Training
 
 Primavera Project Management Training
 
 ISO awareness 6 Certification
 
 Fire Drill
 
 Auto Cad
 
 Purchases Materials Management
 
 Cost Control & Cost Reduction Measures
 
 Power System & Grounding Practices
 
 Behavioral Training Programs conducted based on training needs
 identified during annual appraisals
 
 Communication Skills
 
 Leadership Skills
 
 Teambuilding
 
 Personality Development
 
 Time Management
 
 Presentation Skills
 
 Interpersonal Skills
 
 Stress Management
 
 Managerial Skills
 
 The objective of developing good HR practices is to make the Company
 agreat place to work.
 
 10.1. Key HR Activities done by HR during the year under review
 
 10.1.1.  Implemented paperless working system (online electronic form)
 for: application of leave, manpower budget, registration for training,
 help desk function, dissemination of monthly pay-slip, performance
 appraisal system, intimation of yearly increments and promotion.
 
 10.1.2.  Mandated M/s Ernst & Young, to do a Compensation Survey to
 understand the Companys position vis-a-vis the Real Estate Industry.
 The basis for fixing the compensation for the year 2008-09 was this
 report.
 
 10.1.3. Initiated internally, an Employee Satisfaction Survey.
 
 10.1.4.  Participated in The Best Companies to Work for in India:
 2007 Survey conducted by Business Today- Mercer-TNS. The study was
 conducted based on Mercer Human Capital Model.
 
 Employee relations continue to be cordial and harmonious at all levels
 and in all divisions of the company.
 
 11. QUALITY AND SAFETY
 
 The Department of Quality, Safety and Technology (QST) holds the
 responsibility to monitor all quality and safety works in various
 projects of the Company and to introduce the latest construction
 technology so as to deliver projects at par with the relevant
 specifications, norms and standards.
 
 The department focuses on construction quality and safety aspects,
 infrastructure execution, civil maintenance works, geotechnical
 aspects, and importing/implementing new tools and materials for process
 upgradation.
 
 During the year under review the departmental manpower grew by 102%.
 The Companys projects were audited through its in-house developed and
 web-based Quality Evaluation System and the average quality rating
 achieved from all the sites has been 8.804 in the last quarter of
 financial year 2007-08 crossing the Company set limit of 8.7 out of a
 maximum of 10.
 
 This underlines the continuous high level of quality and safety
 achieved by the Companys projects.
 
 12. CORPORATE GOVERNANCE
 
 Your Company believes in adhering to the highest standards of corporate
 governance and has been benchmarking its policies with the best
 corporate practices. A detailed report on the corporate governance and
 a certificate from the practicing company secretary regarding
 compliance with conditions of corporate governance has been furnished
 in this Annual Report.
 
 13. DIRECTORS
 
 There were no changes amongst the Directors during the year under
 review.
 
 In terms of Article 107, 108 and 109 of Articles of Association, Dr.
 S.K. Gupta and Mr. R.V.S. Rao, Independent Directors, are liable to
 retire by rotation at the ensuing Annual General Meeting, and being
 eligible offer themselves for re appointment.
 
 Brief resumes of the Directors proposed to be re-appointed, nature of
 their expertise in specific functional areas and names of the companies
 in which they hold directorship / membership / chairmanship of the
 board committees, as stipulated under clause 49 of the listing
 agreement with the Stock Exchanges have been provided as an annexure to
 the Notice convening the Annual General Meeting.
 
 14.  RESPONSIBILITY STATEMENT OF THE BOARD OF DIRECTORS
 
 The Directors Responsibility Statement, setting out compliance with
 the accounting and financial reporting requirements specified under
 Section 217(2AA) of the Companies Act, 19S6, in respect of the
 financial statements, is furnished below and on behalf of the Board of
 Directors, it is hereby confirmed that
 
 i. in the preparation of the annual accounts, the applicable accounting
 standards had been followed along with the proper explanation relating
 to material departures, if any;
 
 ii. the Directors had selected the 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 of the
 Company for that period;
 
 iii. 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. the Directors had prepared the annual accounts on a going concern
 basis.
 
 15. AUDITORS
 
 The Auditors, M/s S.R.Batliboi & Associates, Chartered Accountants,
 retire at the ensuing Annual General Meeting and have confirmed their
 eligibility and willingness to accept office, if reappointed,
 
 16. ADDITIONAL INFORMATION TO SHAREHOLDERS
 
 Your Company provides the latest information on its projects, matters
 of interest to the investors, financials on its website
 www.sobhadevelopers.com.
 
 17. FIXED DEPOSITS
 
 During the year under review, your Company has not accepted or renewed
 any fixed deposit from the public. There is no amount outstanding as on
 the balance sheet date.
 
 18. CORPORATE SOCIAL RESPONSIBILITY
 
 Your Company is a responsible corporate citizen and is committed to
 Corporate Social Responsibility. A separate section titled Corporate
 Social Responsibility is attached, which forms part of this Annual
 Report.
 
 19. AWARDS
 
 Your Directors are glad to report the awards received during the
 financial year 2007-08 by the Company:
 
 Construction World Top Architects & Builders Awards 2007, under the
 category Indias Top 10 Builders.
 
 Construction World-NICMAR Awards 2007 - Indias Most Admired Company
 Award.
 
 Dalai Street journal ranked Sobha in 4th position the top 25 Fastest
 Growing Medium Companies of India.
 
 Real Estate Observer recognized Sobha as the Best Developer from South
 India.
 
 The Best IPO of the Year 2007 awarded by REE (Real Estate Excellence)
 Award
 
 20. REDEMPTION OF DEBENTURES
 
 During the year under review, your Company has redeemed and repaid some
 of its matured secured redeemable non convertible debentures issued
 earlier and has also issued new secured redeemable non convertible
 debentures to augment long term resources.
 
 20.1. Secured Redeemable Non Convertible Debentures redeemed and repaid
 during the year under review:
 
                                     (Rs. in Million)
 
 No. of        Face Value
 Debentures        of
 Redeemed    Debentures
 
    100           10
 
    100           10
 
    250            1
 
    500            1
 
    500            1
 
     50           10
 
     25           10
 
  1,525
 
 In favour of                   Total
                               Amount
 
 LIC Mutual Fund Asset          1,000
 
 Management Company
 Limited
 
 LIC Mutual Fund Asset          1,000
 Management Company
 Limited
 
 LIC Mutual Fund Asset            250
 
 Management Company
 Limited
 
 Deutsche Asset                   500
 Management India
 Pvt. Limited
 
 Deutsche Asset                   500
 
 Management India
 Pvt. Limited
 
 Birla Sunlife Asset              500
 Management Co.
 Limited
 
 ING Investment                   250
 Management (I) Pvt.
 Limited
 
 Total                          4,000
 
 Your Company has redeemed in aggregate, 1,525 redeemable non
 convertible debentures amounting to Rs.4,000 Million.
 
 20.2. Secured Redeemable Non Convertible Debentures issued during the
 year under review:
 
 (Rs. in Million)
 
 No. of            Face Value
 Debentures          of
 Issued            Debentures
 
    50                 10
  
   100                 10
 
    25                 10
 
    25                 10
 
    50                 10
 
    75                 10
 
   100                 10
   500                  1
 
   500                  1
 1,425
 
 In favour of                           Total
                                        Amount
 
 Birla Sunlife Asset                       500
 Management Co. Limited
 
 Deutsche Asset                          1,000
 Management India Pvt
 Limited
 
 DSP Merrill Lynch Fund                    250
 Managers Limited
 
 ING Investment                            250
 Management (I) Pvt
 Limited
 
 LIC Mutual Fund Asset                     500
 Management Co.
 Limited
 
 DSP Merrill Lynch Fund                   750
 Managers Limited
 LIC Mutual Fund Asset                  1,000
 
 Management Co.
 Limited
 Deutsche Asset                           500
 
 Management India
 Pvt. Limited
 
 Deutsche Asset                           500
 Management India
 Pvt. Limited
 
 Total                                  5,250
 
 Your Company has issued in aggregate, 1,425 redeemable non convertible
 debentures amounting to Rs.5,250 Million.
 
 21. ISSUEOFCOMMERCIAL PAPER
 
 In order to augment short term working capital fund requirements for
 operations, your Company issued 4,000 Commercial Paper to the extent of
 Rs.2,000 Million during the period under review which have been placed
 with different institutions as under:
 
 (Rs. in Million)
 
 No. of          Face Value
 Commercial              of
 Paper           Commercial
 Issued               Paper
 
 1,500               0.50
 
   500               0.50
 
   500               0.50
 
   500               0.50
 
 1,000               0.50
 
 4,000
 
 In favour of                Total
                             Amount
 
 Kotak Mahindra Flexi          759
 
 Debt Scheme
 Karnataka Bank Limited.       250
 
 ICICI Bank Limited            250
 
 J M Money Manager             250
 
 Super Plus
 
 JP Morgan Securities          500
 India Pvt. Limited.
 
 Total                       2,000
 
 22. UTILISATION OF IPO PROCEEDS
 
 Your Company completed its highly successful Initial Public Offer
 during the year 2006-07. It had collected net IPO proceeds of Rs.5,374
 Million (Rupees Five Thousand Three Hundred and Seventy Four Million
 only). The proceeds of the IPO were used for procurement of land at
 various strategic places, repayment of loans, construction expenses of
 projects and for general corporate purposes. The summary of utilisation
 of net IPO proceeds is as follows:
 
                                            (Rs. in Million)
 
 Particulars                       Utilisation as         Utilisation
                                       given in                 as on
 Prospectus;, March 31,2008
 
 Towards Land Acquisition              2,343                    2,569
 
 Development and                       1,425                    1,218
 Construction of Projects
 
 Repayments of Loans of the            1,322                    1,587
 Company
 General Corporate Purposes              254                      -
 
 Total                                 5,344                    5,374
 
 23. RELEASE OF LOCK-IN SHARES HELD BY THE PROMOTERS
 
 Pursuant to Clause 4.12 of SEBI (Disclosure of Investors Protection)
 Guidelipes2000, the following shares held by the Promoters and the
 pre-lPO shareholdings of the Company were under lock-in for 1 year
 commencing from December 12,2006.
 
 Sl.       Name of the                  No. of             %
 No        Shareholder                  Shares
 
 1        Mr. P.N.C. Menon           41,348,421          64.60
 
 2        Mrs. Sobha Menon           16,488,522          25.76
 
 3        Mr. RN.C. Menon and         5,494,407           8.59
          Mrs. Sobha Menon
 
 4        Kotak Mahindra                486,223           0.76
          Pvt. - Equity
          Trustee Limited
 
 5        Bennet, Coleman &              97,245           0.15
          Co. Limited
 
 6        Mr. P.N. Haridas               45,000           0.07
 
 7        Mr. P.N.K. Mani                45,000           0.07
 
 8        Mr. Ravi Menon                     30           0.00
 
 9        Mr. K. Suresh                      15           0.00
 
 10       Mr. M. Radhakrishnan               15           0.00
 
 11       Mr. J.C. Sharma                    15           0.00
 
 12       Mr. P. Gopalkrishnan               15           0.00
          Total                      64,004,908         100.00
 
 Consequent to the completion of the said lock-in period from the date
 of allotment of equity shares to the public, the above mentioned shares
 are free of lock-in.
 
 However, pursuant to Clause 4.11 of SEBI (Disclosure of Investors
 Protection) Guidelines 2000, the following promoters shares to the
 extent of 20% of post issue capital, continue to be under lock-in for a
 period of 3 years from the date of allotment of equity shares to the
 public.
 
 Name of the Sharehoder                 No,         %
                                      of Shares
 
 1      Mr. P.N.C. Menon              4,228,298    5.80
 
 2      Mrs. Sobha Menon             10,352,050   14.20
        Total                        14,580,348   20.00
 
 24.  CODE OF CONDUCT COMPLIANCE
 
 Pursuant to Clause 49 of the Listing Agreement entered with Bombay
 Stock Exchange Limited and National Stock Exchange of India Limited,
 the declaration signed by the Managing Director affirming compliance
 with the Code of Conduct by Directors and senior management personnel,
 for the financial year 2007-08 is annexed and forms part of the
 Directors and Corporate Governance Report.
 
 25.  PARTICULARS OF EMPLOYEES
 
 As required under Section 217(2A) of the Companies Act, 1956 read with
 the Companies (Particulars of Employees) Rules, 1975 as amended, the
 names and other details have been furnished as an Annexure to this
 Report.
 
 26.  CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT, TECHNOLOGY
 ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
 
 In terms of Section 217 (1) (e) of the Companies Act, 1956 read with
 the Companies (Disclosure of Particulars in the report of Board of
 Directors) Rules, 1988, the particulars of conservation of energy,
 technology absorption, foreign exchange earnings and outgo are set out
 as an annexure to this report.
 
 27.  CAUTIONARY STATEMENT
 
 Statements made in the report, including those stated under the caption
 Management Discussion and Analysis describing the Companys plan,
 projections and expectations may constitute forward looking statement
 within the meaning of applicable laws and regulations. Actual results
 may differ materially from those either expressed or implied.
 
 28.  ACKNOWLEDGEMENTS
 
 Your Directors would like to place on record their sincere thanks to
 the Companys clients, vendors, investors and bankers for their
 continued support to the Company during the year. The Directors wish to
 place on record their appreciation of the contributions made by
 employees at all levels.
 
 We thank the Government of India, State Governments and other
 government agencies for their support and look forward to their
 continued support in future.
 
 
 For and on behalf of the Board of Directors of Sobha Developers Limited
 
 
 Ravi Menon                                    J.C. Sharma
 Vice Chairman                           Managing Director
 
 Place: Bangalore
 Date : May 30,2008