TO THE MEMBERS
 
 The Directors have pleasure in presenting their 81st Annual Report on
 the business and operations of your Company for the financial year
 ended on 31st March, 2011.
 
 FINANCIAL HIGHLIGHTS
 
                                                      (Rs. in Lacs)
 
                                        For the              For the
                                        Financial Year  Financial Year
                                          2010-11            2009-10
 
 Gross Turnover                         10,044.75           10,140.91
 
 Profit before Interest, Depreciation, 
 Taxation & Exceptional items            1,196.88            1,093.75
 
 Interest                                  406.66              360.81
 
 Depreciation                              173.26              171.77
 
 Profit before Taxation and exceptional 
 items                                     615.37              561.17
 
 Prior Period Items                         (1.59)               --
 
 Profit before Taxation after exceptional 
 items                                     615.37              561.17
 
 Provision for Taxation – Current Tax      141.36              100.34
 
 Provision for Taxation – Deferred Tax      13.11               21.82
 
 Fringe Benefit Tax                           -                   -
 
 Income Tax for earlier year                 5.00               (1.68)
 
 Profit after Taxation                     455.90              440.69
 
 Balance brought forward from previous year853.14              412.45
 
 Profit available for appropriation      1,309.04              853.14
 
 APPROPRIATIONS:
 
 Proposed Dividend (Nil; previous year : Nil)  -                  -
 
 Tax on Dividend                               -                  -
 
 Transfer to/(from) General Reserve            -                  -
 
 Balance Carried to the Balance Sheet    1,309.04              853.14
 
 OPERATIONS
 
 Some of the key highlights of your Company''s performance during the
 year under review are:
 
 - The Gross Turnover Rs.10,044.75 lacs as against Rs.10,140.91 lacs in
 the last year.
 
 - Profit before Taxation and after Exceptional items Rs.615.37 lacs as
 against Rs.561.17 lacs in the last year.
 
 - Profit after Taxation Rs.455.90 lacs as against Rs.440.69 lacs in the
 last year.
 
 After recession in 2009, the world output witnessed a recovery in the
 year 2010 by 5%. The International Monetory Fund has forecast world GDP
 growth for the year 2011 at 4.4%. Comparatively, in the year 2010-11,
 the Indian economy recorded a GDP growth of 8.6% against 8% recorded in
 2009-10.
 
 During the year 2010-11 the Engineering Industry on the whole fared
 well except for certain sectors which experienced a slowing down.
 Suspension of delivery schedules by customers for certain new products
 had an adverse impact on the performance of the Company. All out
 efforts are being made during the ongoing year to regain the lost
 ground by focusing on new business areas comprising non- Railway
 products.
 
 In this context, prospects for Bio-Toilets with the new environment
 friendly technology appear to be encouraging in construction sites and
 in rural and urban areas lacking adequate modern sanitized toilet
 facilities.
 
 Your Company, has meanwhile, entered into a Memorandum of Understanding
 with Voith Turbo Scharfenberg, GMBH & Co., K.G. of Germany to produce
 high-end couplers for passenger coaches and EMU''s, with Sumitomo
 Electric Industries of Japan to manufacture Emergency Stoppers of Air
 Springs, Tokai Rubber also of Japan for Conical Springs and NRT & Co.
 of South Korea for supplying Platform Screen Doors (PSD) for various
 Metro Rail Projects in India.  PSD''s provide safe and energy saving
 solutions for Metro commuters.
 
 The Company''s in-house Research and Development wing is engaged in
 constant endeavour to upgrade the technological aspects of its products
 in line with the requirements of the Railways as well as to keep ahead
 of the competitors. The major in-house success stories during the year
 under review are the development of prototype Bogie Mounted Break
 Systems (BMBS) for wagon applications, Failure Intimation-cum-Brake
 Application Valve for Air Springs (FIBA), Micro Processor based
 Locomotive Control & Fault Diagonistic System, Electro-Pneumatic Brake
 system for EMUs/DMUs, Control Discharge Toilet System and of Vigilance
 Control Device (VCD) for Electrical Locomotives.  Your Company is also
 in the process of designing Passenger Information System for Trains,
 Remote Train Monitoring System, which is presently in advanced stage of
 development.
 
 There are certain other developed products, namely, EOTT, FDCS, Air
 Springs & Control Equipment, 180 KVA Converters, Microprocessor based
 Loco Control System and Computerised Brake System etc., which all await
 approval from the Railways, eventually translating into tenders.
 
 The expansion plan at Nalagarh is almost over and the Commercial
 production has started for Air Brake Distributor Valve and Panel
 Mounted Brake System.
 
 DIVIDEND
 
 Considering the Capital investment to be made for the expansion
 programme in near future and to conserve resources your Directors do
 not recommend a dividend for the year ended on 31st March, 2011.
 
 ENERGY CONSERVATION
 
 Your Company has introduced certain Energy saving measures and
 re-engineering method in terms of utilization of factory and office
 spaces. Further, your Company continues to monitor and control the
 consumption of various sources of energy comprising power, oil, fuel,
 gas in a bid to reduce energy cost despite increase in production and
 power tariffs.
 
 FOREIGN EXCHANGE EARNING AND OUTGO
 
 Your Company earned Rs.72.68 lacs foreign exchange during 2010-11 as
 against Rs.48.63 lacs during 2009-10.  Foreign exchange outgo during
 the year amounted to Rs.432.51 lacs (including import of components and
 spare parts) against Rs.611.29 lacs during the previous year.
 
 PERSONNEL
 
 Industrial Relations with employees at the various levels continued to
 remain harmonious and cordial. Your Company as a part of its Human
 Resources Development activity continued to train employees at all
 levels to enhance their effectiveness in contributing towards the
 overall goal of your Company through knowledge improvement and skill
 up-gradation.
 
 A Long Term Agreement was settled and signed with the two recognized
 unions with a proviso to improve productivity by 15% and also the
 festival leave was reduced from 18 days to 14 days per year alongwith
 reduction in availment of earned leave by compulsory encashment of 7
 days leave per year.
 
 DIRECTORS
 
 In accordance with the provisions of the Companies Act, 1956 and the
 Articles of Association of the Company, Mr. Indrajit Sen and Mr.
 Sukhendu Ray retire by rotation and being eligible, offer themselves
 for re-appointment.
 
 Mr. Ashwani Kumar Goswami was appointed by the Board of Directors of
 the Company with effect from 30th June, 2009 as a Director in casual
 vacancy caused by the death of Mr. S. Gupta. Your Company has received
 a notice from a member pursuant to Section 257 of the Companies Act,
 1956 signifying his intention to propose the candidature of Mr. Ashwani
 Kumar Goswami for the office of Director.
 
 All these Directors have filed requisite forms and declarations as
 required under the Companies (Disqualification of Directors under
 Section 274(1)(g) of the Companies Act, 1956) Rules, 2003. The brief
 resume/details relating to Directors who are to be
 appointed/re-appointed are furnished in the Notice of the ensuing
 Annual General Meeting.
 
 RESEARCH & DEVELOPMENT (R&D) ACTIVITIES
 
 The Company''s own Research & Development Unit (R&D unit) always puts
 focus on continuous development of products and quality. Its emphasis
 is continuously to develop creative and innovative ideas in hi-tech
 engineering areas so that the efforts of R&D unit can yield substantial
 benefit for our customers and stakeholders and improve the sales and
 profitability of the Company.
 
 As a result of sustained efforts, your Company''s in house R&D unit has
 received Certificate of Recognition from the Government of India,
 Ministry of Science & Technology, Department of Scientific and
 Industrial Research (DSIR), New Delhi and is now registered with DSIR,
 New Delhi.  As a result, your Company''s R&D unit will receive
 substantial benefits in taxes and duties and be eligible for various
 grants from various Government agencies promoting R&D activities in
 India.
 
 OTHER INFORMATION
 
 In accordance with the provisions of Section 217 of the Companies Acts,
 1956 (the Act) read with the Companies (Particulars of Employees)
 Rules 1975, the names and other particulars of employees are set out on
 the annexure to the Directors'' Report. As per the provisions of Section
 219(1)(b)(iv) of the Act, the Directors Report is being sent to the
 shareholders of the Company excluding such particulars of employees
 under section 217(2A) of the Act.
 
 The Annexure is available for inspection by the Members at the
 Registered Office of the Company during business hours on any working
 day upto the date of the ensuing Annual General Meeting. Any member
 interested in obtaining a copy of the said annexure may write to the
 Company Secretary at the Registered Office of the Company.
 
 Form No. B pursuant to Section 217(1)(e) of the Companies Act, 1956
 read with The Companies (Disclosures of Particulars in the Report of
 the Board of Directors) Rules 1988 so far as is applicable to the
 Company is annexed and forms a part of this Report.
 
 In terms of amended provision of Clause 5 of the Listing Agreement with
 the Stock Exchanges, the first reminder has been sent to the
 shareholders by our Registrars.
 
 DIRECTORS'' RESPONSIBILITY STATEMENT
 
 In terms of the requirements of Section 217(2AA) of the Companies Act,
 1956, your Directors confirm that;
 
 (i) in the preparation of the Annual Accounts, the applicable
 accounting standards have been followed along with proper explanation
 relating to material departures;
 
 (ii) the Directors have selected such accounting policies and applied
 them consistently and made judgements 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 period;
 
 (iii) the Directors have taken proper and sufficient care for the
 maintenance of adequate accounting records in accordance with the
 provisions of the Act for safeguarding the assets of the Company and
 for preventing and detecting fraud and other irregularities;
 
 (iv) the Directors have prepared the Annual Accounts on a going concern
 basis; and
 
 (v) the Managing Director & CEO and the Sr. Vice President & CFO, both
 have furnished the necessary certification to the Board on these
 financial statements as required under the revised Clause 49 of the
 Listing Agreement(s) with the Stock Exchanges where the equity shares
 of the Company are listed.
 
 DEMATERIALISATION OF SHARES
 
 Your Company''s shares are under transfer-cum-demat option. Shares of
 your Company can be traded only in dematerialized form. You have the
 option to hold the Company''s shares in demat form through the National
 Securities Depository Limited (NSDL) or Central Depository Services
 (India) Limited (CDSL). 92.20% of the total equity share capital of
 your Company was held in dematerialized form with NSDL and CDSL as on
 31st March, 2011.
 
 CORPORATE GOVERNANCE
 
 Your Company has always practiced sound Corporate Governance and takes
 necessary measures to comply with the requirements of the Listing
 Agreements with the Stock Exchanges wherein your Company''s shares are
 listed. A separate report on Corporate Governance adopted by the
 Company forms part of this report.
 
 A certificate from the Auditors of the Company regarding compliance of
 the conditions of Corporate Governance as also the Management
 Discussion and Analysis Report stipulated under Clause 49 of the
 Listing Agreement are attached to this report.
 
 CODE OF CONDUCT
 
 Your Company has formulated Code of Conduct in compliance to the
 requirements of revised Clause 49 of the Listing Agreements with Stock
 Exchanges which has been posted in the Website of your Company. This
 Code of Conduct and Ethics applies to the Board members and Senior
 Management personnel of your Company.  Confirmation towards adherence
 to the Code during the Financial Year 2010-11 has been obtained from
 all Board Members and Senior Management personnel in terms of the
 requirements of Clause 49 of the Listing Agreement and a declaration
 relating to compliance to this Code during the year under review by all
 Board Members and Senior Management Personnel has been given by the
 Managing Director of the Company which accompanies this report.
 
 AUDITORS
 
 Messrs Lodha & Co, Chartered Accountants retire as Statutory Auditors
 of the Company at the conclusion of the ensuing Annual General Meeting
 and are eligible for re- appointment. The Audit Committee of Board of
 Directors and the Board of Directors of the Company have recommended
 the re-appointment of Messrs Lodha & Co., Chartered Accountants having
 Registration no. 301051E allotted by The Institute of Chartered
 Accountants of India as Statutory Auditors of your Company to hold
 office from the conclusion of the ensuing Annual General Meeting till
 the conclusion of next Annual General Meeting. Messrs Lodha & Co.
 confirmed their eligibility and willingness to continue to act as
 Auditors of the Company for the Financial Year 2011-12, if
 re-appointed.
 
 AUDITORS'' REPORT
 
 The Board of your Company has noted the observations of the Auditors in
 their report. These have been dealt with adequately at the appropriate
 places in the notes to these accounts and therefore, do not call for
 further comments.
 
 PUBLIC DEPOSITS
 
 Your Company has not accepted any Public Deposits.
 
 SUBSIDIARY COMPANY
 
 The Stone Intermodal Private Limited is a Wholly Owned Subsidiary of
 the Company.
 
 Of late, the Company has incorporated Stone Bio-Tech Private Limited as
 a Subsidiary of the Company to undertake business which inter alia
 includes Bio-technology business.
 
 The statement pursuant to Section 212 of the Companies Act, 1956
 containing details of Subsidiary Company forms part of the report.
 
 As required under the Listing Agreement, the Consolidated Financial
 Statements of the Company together with its Subsidiary Company prepared
 in accordance with Accounting Standard AS-21 issued by the Institute of
 Chartered Accountants of India are attached.
 
 SOCIAL RESPONSIBILITY
 
 Your Company always promotes all round development of a pollution free
 environment. Safety and Environment performance has been integral to
 the business performance of your Company and continues to receive focus
 throughout the year.
 
 PROMOTERS AND PROMOTERS GROUP COMPANIES
 
 Pursuant to intimation received from Promoters of your Company, the
 names of Promoters Companies comprising the Group as defined in the
 Monopolies and Restrictive Trade Practices Act, 1969, have been
 disclosed elsewhere in this Annual Reports for the purpose of
 Regulation 3(1)(e) of the Securities and Exchange Board of India
 (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.
 
 FORWARD-LOOKING STATEMENTS
 
 This Annual Report and particularly those which relate to the
 Management Discussion and Analysis Reports contain statements which, to
 the extent they are not statements of historical or present fact,
 constitute forward-looking statements.  From time to time, oral or
 written forward- looking statements may also be included in other
 materials released to the public. These forward-looking statements are
 intended to provide management''s current expectations or plans for
 future operating and financial performance, based on assumptions
 currently believed to be valid.  Forward-looking statements can be
 identified by the use of words such as anticipate, believe,
 emerge, estimate, enjoy, eventually, expect, guidance,
 intend, near future, plans, prospects, project, strategy,
 target, will, would and other words of similar meaning as they
 may relate to the Company and/or its business in connection with a
 discussion of future operating or financial performance. All
 forward-looking statements involve risks and uncertainties that may
 cause actual results to differ materially from those expressed or
 implied in the forward-looking statements. The growth of the industry
 and business of the Company depend upon Government policies, global
 economic scenario etc., and any adverse/ favourable situation may
 change outlook. Readers are therefore cautioned that such statements
 speak only of the situation as of their dates and hence actual
 performances or achievements could differ from those expressed or
 implied in such forward-looking statements. Your Company undertakes no
 responsibility to publicly or otherwise update or revise any such
 forward-looking statement at any time.
 
 ACKNOWLEDGEMENT
 
 Your Directors take this opportunity to express their whole- hearted
 appreciation for the unstinted support and co-operation received from
 the Banks, Financial Institutions, Government, Indian Railways, Foreign
 Collaborators, Customers, Shareholders and other stake holders during
 the year under review. Your Directors also wish to place on record
 their appreciation for the services rendered by the employees at all
 levels in the Company and for their valuable contribution and look
 forward to their continued cooperation in the years ahead.
 
                                   For and on behalf of the Board
 
                                                     G. P. GOENKA
 
 Date  : 5th August, 2011
 
                                                         Chairman
 Place : Kolkata