Adhunik Metaliks Ltd.

Dear Shareholders, The transformation of any steel company into a resource-cum-utilities-cum alloy steel organisation is painstaking. At Adhunik, the transformation will be completed quicker than usual and be fully operational by 2012- 13. Once commissioned, the business model will generate sizeable unencumbered cash, which will help rightsize the balance sheet and enhance significant value in a sustainable way. A number of people still make the mistake of dismissing Adhunik as a steel company when we are clearly a resource-cum-utilities cum-special-steel organisation. This complement not only makes us unique from a mid-sized organisational perspective in India, but a number of initiatives undertaken over the years helped us emerge as a ''different'' company. This ''difference'' was partly reflected in our financials of 2010-11. We reported a sizeable EBIDTA of Rs.587.86 cr even as some of our facilities were yet to be commissioned, and the full import of our investments will only reflect this year and more visibly from 2012-13. The difference We are a different kind of company in the Indian power, metals and minerals sector for the following reasons: - We represent a combination of the robust growth emerging out of three sectors in India - power, mining and special steel. There are a number of Indian companies with an integration across two of these businesses. There is perhaps none with as strong an exposure across all three sectors, and definitely none in the country''s mid-cap space. These business complements are not mere add-ons; if spun off into separate companies, each can potentially hold its own in terms of scale and related economies - We possess a core process competence in our business space that translates into high operational efficiency. For instance, yields in our steel melting shop and rolling mill are attractively high with a declining proportion of rework - We demonstrated a high proportion of by-product utilisation with the objective of reducing conversion costs. We utilised our blast furnace and coke oven gases as fuel in our heating furnace; the gasification of coal helped us reduce oil and diesel consumption - We made a better utilisation of waste through the sale of fly ash to cement makers, the pioneering beneficiation of char for onward use in our rotary kiln and boilers - We rapidly transformed the major part (two-thirds) of our end product mix towards alloy steel - We pioneered the technology of recovery of sub grade manganese ore through a jigging plant The result is that we are low cost at one end and high value-added at the other, combining two diverse competencies into our organisational culture, now increasingly marked by prudent delegation, responsible experimentation and precise enumeration. Reviewing 2010-11 During 2010-11, we reported a 24.8% increase in consolidated revenue, 37.6% increase in consolidated EBIDTA, 346 basis point increase in consolidated EBIDTA margin and 34.2 % increase in consolidated net income. We are convinced that this performance represents the start of a J curve for the following reasons: Alloy steel business: The Company is present in the niche alloy steel segment, catering to the growing needs of downstream sectors like automobile, power, engineering and oil and gas. The Company has one of the largest single location alloy steel manufacturing units with 50% of the product portfolio comprising value- added products. Our products were approved by all major automobile OEMs (tier I and II) within just five years. This strengthened our average realisations for rolled steel production from Rs. 39,419 per tonne in 2009-10 to Rs.46,905 per tonne in 2010-11 Mining business: Our mining business (merchant mining through Orissa Manganese and Minerals Limited) grew 73% in 2010-11 over 2009-10. During the year under review, realisations for iron ore and manganese ore increased 70.2% and 83.9% respectively. This resulted in an increase in the share of revenue from mining increasing to 23% of consolidated revenues in 2010-11 against 16% in 2009-10. We expect to commence our Suleipat mine (50:50 JV) by the second half of FY 2011-12. The iron ore beneficiation plant commenced operations in March 2011 (benefits to accrue in 2011-12) and we plan to commence our pellet plant from the second half of 2011-12. The beneficiation and pelletisation plants will help us transform low-grade materials and fines into pellets. Our captive iron ore mine will be operational by the second half of 2011- 12 and we plan to commission captive coal mining by end 2013. Power: We enhanced our resource base through investments in captive and merchant power generation. Our captive power plant of 34 MW is running to full capacity. Besides, the construction of the first two phases of our merchant power plant in Jharkhand (through APNRL) is proceeding as per schedule. We were allocated a captive coal mine (reserve of 69 MMT) with Tata Steel for our merchant power plant and expect to commence mining from 2013. Growing competencies At Adhunik, we expect to drive our profitability for the following reasons: One, we invested significantly in ERP to integrate our entire manufacturing process - from the weigh bridge to production planning to debtors management. We introduced shared services through a centralised department to monitor the entire group activity rather than the same department being replicated across our businesses. This helped streamline our processes, enhance manpower management and increase process efficiency. We partnered with leading global IT giants like SAP, Microsoft, GE and Accenture in different areas to automate our business process. Two, our power investment is expected to drive consolidated revenues from 2012-13 onwards as Phase I & Phase II will have been entirely commissioned by then. We intend to expand the Jharkhand project by another 540 MW at the same location. We also signed MoUs with the Chhattisgarh, Bihar and Orissa governments to commission 1,000 MW power plants in each state, which will expand our merchant power portfolio. Three, our subsidiary which owns merchant mines is growing at more than 50% annually. Besides, the flexibility of using these resources helps us control costs and ensure raw material availability. Four, we expect to swap high-cost loans with low-cost alternatives and repay debt through accruals. Five, we plan to encash a part of the value of our mining assets when fully commissioned. Spreading smiles Adhunik is a responsible corporate citizen. The Company adopted six villages near Rourkela through timely investments in village infrastructure, healthcare, education, infrastructure, women empowerment and economic development (through Nav Nirman Sanstha). Overview The transformation of any steel company into a resource-cum-utilities- cum-alloy steel organisation is painstaking. At Adhunik, the transformation is being completed quicker and should be fully operational in 2012-13. Once commissioned, our business model will generate a fair amount of unencumbered cash that will rightsize the balance sheet and enhance significant value in a sustainable way. Regards, Mr. Manoj Agarwal Managing Director