building infrastructure globally

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KECINTERNATIONALLIMITED

BOARD OF DIRECTORS

Mr. H. V. Goenka, Chairman

Mr. R. D. Chandak, Managing Director

Mr. S. S. Thakur

Mr. G. L. Mirchandani

Mr. D. G. Piramal

Mr. S. M. Kulkarni

Mr. A. T. Vaswani

Mr. J. M. Kothary

Mr. P. A. Makwana

CORPORATE INFORMATION

ANNUAL REPORT l 2007-08

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Management Team

Mr. R. D. ChandakManaging Director

Mr. Ajit Singh ChouhanExecutive Director – India & SAARC

Mr. Vimal KejriwalExecutive Director – International Business

Mr. Vardhan DharkarChief Financial Officer

Mr. K. RamkumarVice President – Supply Chain

Mr. Anant Goenka

Mr. N. DharmarajanVice President – Human Resources

Mr. A. BhattacharyaVice President – Execution & Co-ordination(International Business)

Mr. A. K. SharmaVice President – Telecom

Dr. Deepak LakhapatiVice President – Engineering Services

Company SecretaryMr. Ch. V. Jagannadha Rao

AuditorsDeloitte Haskins & SellsChartered AccountantsMumbai

Registrars & Share Transfer Agents

Intime Spectrum Registry LimitedC-13, Pannalal Silk Mills Compound L. B. S. Marg, Bhandup (W) Mumbai 400 078

Registered Office1st Floor, CEAT Mahal,463, Dr. Annie Besant Road, Worli, Mumbai 400 030

PlantsJhotwara, Jaipur 302 012 Rajasthan

B-190 Industrial Area, Butibori 441 108Maharashtra

Deori, P.O.PanagarhJabalpur 483 220Madhya Pradesh

BankersBank of IndiaExport-Import Bank of IndiaState Bank of IndiaICICI Bank LimitedPunjab National BankSyndicate BankCentral Bank of IndiaCorporation BankCanara BankStandard Chartered BankUCO BankAndhra BankBarclays Bank PLCDena BankIndustrial Development Bank of India LimitedAllahabad BankState Bank of Bikaner and JaipurYES Bank LimitedBank of BarodaState Bank of HyderabadAbu Dhabi Commercial Bank LimitedBNP Paribas

Vice President – Corporate

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DIRECTORS’ REPORTDear Shareholders,

Your directors have pleasure in presenting the Third Annual Report along with the audited accounts of the company for the year ended 31st March 2008.

FINANCIAL RESULTS

Rs. in crores

For the year ended 31st March 2008

For the year ended 31st March 2007

Gross Sales 2,853.88 2,075.68

EBITDA 354.57 252.54

Interest 67.65 59.25

Profit before Non-Cash Items/Tax 286.92 193.29

Depreciation & Amortisation 25.07 33.43

Profit before Tax 261.85 159.86

Provision for Taxation 89.69 55.22

Profit after Taxation 172.16 104.64

Appropriations:

Balance as per last account 117.25 42.91

Capital Redemption Reserve 3.88 0.00

Transfer to General Reserve 17.22 10.46

Proposed Dividend 24.67 16.96

Tax on Dividend 4.19 2.88

Balance transferred to Balance Sheet

239.45 117.25

DIVIDEND

Your directors recommend a dividend of Rs. 5/- per equity share of Rs. 10/- each for the year ended 31st March 2008 on the enhanced equity share capital of the company.

SCHEME OF ARRANGEMENT

A Scheme of Arrangement was proposed between National Information Technologies Limited, RPG Transmission Limited, MP Power Line Limited (now known as Octav Investments Limited) and the company and their respective shareholders with a view to consolidate the operations of the companies, which were in similar business activities. After obtaining all the necessary statutory approvals, the Scheme envisaging demerger of the Investment Division of the company to Octav Investments Limited and merger of the erstwhile National Information Technologies Limited and the erstwhile RPG Transmission Limited with the company was sanctioned on 30th January 2008 with retroactive effect from 1st October 2007. Consequently

the consolidated operations include under one entity, the Engineering, Procurement and Construction (EPC) business in power transmission, distribution, substation, railways and telecom. The consolidation has facilitated scaling up of the operations, allowed flexibility in marketing and offered benefits of synergy through combined operations besides cost efficiencies.

PERFORMANCE

The performance of the company includes the performance of the erstwhile National Information Technologies Limited and the erstwhile RPG Transmission Limited for six months as the Appointed Date pursuant to the above mentioned Scheme is 1st October 2007.

With efficient project execution, focus on timely delivery, reduction in costs, prudent financial management and human resources management, the company has surpassed previous records of revenues, profits and order book position. The company has achieved a net turnover of Rs. 2,814.47 crores and earned a net profit of Rs. 172.16 crores in the current financial year as against net turnover of Rs. 2,040.63 crores and net profit of Rs. 104.64 crores in 2006-07. Earnings Before Interest, Tax and Depreciation (EBITDA) is Rs. 354.57 crores in the current financial year as against Rs. 252.54 crores in 2006-07. Profit after tax in the current financial year is up by 64.53 % as compared with the profit after tax in 2006-07.

ORDER BOOK AND BUSINESS OUTLOOK

The company has a healthy order book of about Rs. 4,200 crores. During the year, the company completed 21 projects in the South Asian markets and 15 projects in International markets.

The company has performed well by bagging 26 orders in the South Asian markets from the State utilities and Power Grid Corporation of India Limited and 27 orders in International markets from various countries including Afghanistan, Algeria, Ethiopia, Kazakhstan, Kenya, Oman, Namibia, Nigeria, Saudi Arabia and UAE.

The company has successfully embarked upon the sub-station business by bagging sub-station packages in domestic markets and from Afghanistan and Kenya in the International markets.

The company is also executing Railway Electrification projects and has begun participating in Railway Composite projects. The company is being viewed as a quality EPC Player for telecom towers by all the major telecom operators in India.

With huge investments and numerous projects envisaged in the infrastructure sector, the company, with its experience and proven competency in project management and execution is well equipped to grow further.


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SHARE CAPITAL

In terms of the Scheme, the company has allotted 1,16,58,002 fully paid-up equity shares of Rs. 10/- each to the equity shareholders of the erstwhile National Information Technologies Limited and the erstwhile RPG Transmission Limited. These shares rank pari passu in all respects including dividend entitlement with the existing shares.

During the year, the company has redeemed 50,000 and 2,09,686 fully paid Zero Coupon Non–Convertible Redeemable Preference Shares of Rs. 100/- each before the due date of redemption. The company has not issued and allotted 1,27,980 preference shares of Rs. 100/- each to the shareholders of the erstwhile RPG Transmission Limited as the said preference shares have been redeemed.

As on 31st March 2008, the aggregate paid up capital of the company is Rs. 59.74 crores consisting of equity share capital of Rs. 49.34 crores and preference share capital of Rs. 10.40 crores.

LISTING WITH THE STOCK EXCHANGES

The equity shares of the company continue to remain listed with Bombay Stock Exchange Limited and National Stock Exchange of India Limited. The listing fees payable to both the stock exchanges for the year 2008-09 have been paid.

FIXED DEPOSITS

The company has not accepted any deposits within the meaning of Section 58A and 58AA of the Companies Act, 1956 and the Rules framed thereunder.

RISK MANAGEMENT POLICY

In terms of Clause 49 of the Listing Agreement with the Stock Exchanges, the company has devised a Risk Management Policy to enhance stakeholders’ value. The policy adopted by the company aligns strategy, processes, people, technology and knowledge for evaluating and managing uncertainties faced by the company and thereby leading to improvement in returns and overall value of the business.

The internal audit department maintains a risk register, which involves evaluating risks identified by various process owners on a continuous basis. The reports for the same are submitted to the Managing Committee and Audit Committee periodically.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under 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 are provided in the prescribed format as an annexure to this Report.

MANAGEMENT DISCUSSION AND ANALYSIS AND CORPORATE GOVERNANCE REPORT

As required by the Listing Agreement with the Stock Exchanges, Management Discussion and Analysis and Corporate Governance, as approved by the Board of Directors, together with a certificate from the company’s auditors confirming the compliance with the requirements of Corporate Governance policies are set out in the Annexures forming part of this annual report.

JOINT VENTURE

A joint venture company named ‘KEC Power India Private Limited’ with M/s. Power Holdings Inc., USA as a joint venture partner, has been incorporated in the state of Maharashtra in the month of March 2008. This company would provide services like conceptualizing, designing, developing power transmission and distribution lines, sub-stations and all types of power generating projects.

SUBSIDIARY COMPANY

Pursuant to the Scheme, RPG Transmission Nigeria Limited, the subsidiary company of the erstwhile RPG Transmission Limited at Nigeria has become the subsidiary of the company.

CONSOLIDATED FINANCIAL STATEMENTS

In terms of para 11 of Accounting Standard (AS) 21 on Consolidated Financial Statements, as the investment in the company’s subsidiary is temporary in nature no consolidation of financial statements of the subsidiary is required.

DIRECTORS

Ms. Neeta Mukerji ceased to be a Director of the company with effect from 18th November 2007 on ICICI Bank withdrawing her nomination. The Board wishes to acknowledge and record its appreciation for the contributions made by Ms. Mukerji during her tenure as Director of the company.

Mr. P. A. Makwana has been appointed as Director on the Board of the company with effect from 31st January 2008 in the casual vacancy caused by resignation of Dr. Vinayshil Gautam.

Mr. H. V. Goenka and Mr. G. L. Mirchandani retire by rotation and being eligible, offer themselves for re-appointment at the ensuing Annual General Meeting. Necessary resolutions relating to Directors who are seeking re-appointment are included in the Notice of Annual General Meeting. The Board of Directors recommends the re-appointment of Mr. H. V. Goenka and Mr. G. L. Mirchandani.

In compliance with Clause 49 IV (G) of the Listing Agreement, brief resume, expertise and other details of Directors proposed to be re-appointed are attached along with the notice to the ensuing Annual General Meeting.

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AUDITORS AND AUDITORS’ REPORT

Deloitte Haskins & Sells, Chartered Accountants, Mumbai were appointed as the auditors of the company to hold office from the date of conclusion of the Second Annual General Meeting till the conclusion of the ensuing Annual General Meeting. It is proposed to re-appoint Deloitte Haskins & Sells, as the auditors of the company to hold office from the conclusion of the ensuing Annual General Meeting till the conclusion of the next Annual General Meeting and authorize the Audit Committee to fix their remuneration. The company has received letter from them to the effect that their re-appointment, if made, would be within the limits prescribed under Section 224(1B) of the Companies Act, 1956 and that they are not disqualified for such re-appointment within the meaning of Section 226 of the said Act. The shareholders are requested to appoint Deloitte Haskins & Sells, as auditors of the company and also authorize the Audit Committee to appoint auditor(s) to audit accounts of the branches of the company.

DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors would like to assure the members that the financial statements for the year under review conform in their entirety to the requirements of the Companies Act, 1956.

As stipulated in Section 217(2AA) of the Companies Act, 1956, the Board of Directors of the company hereby state and confirm that:

i. in the preparation of the annual accounts for the year ended 31st March 2008, the applicable Accounting Standards have been followed;

ii. such accounting policies have been selected and applied consistently and judgements and estimates made 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 year under review;

iii. proper and sufficient care has been taken 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 annual accounts for the financial year ended 31st March 2008 have been prepared on a going concern basis.

PARTICULARS OF EMPLOYEES

In terms of provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of the employees are required to be set out in the Annexure to the Directors’ Report. However, as per the provisions of Section 219(1)(b)(iv) of the said Act, the Annual Report excluding the aforesaid information is being sent to all the Members of the company and others entitled thereto. Members who are desirous of obtaining such particulars are requested to write to the company.

ACKNOWLEDGEMENT

The Board of Directors wishes to place on record its gratitude for the faith reposed and the co-operation extended by banks, financial institutions, Government authorities, customers, shareholders and employees of the company and looks forward to continued support and co-operation from them.

On behalf of the Board of Directors

H. V. GoenkaChairman

Place : Mumbai

Date : 30th April 2008


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ANNEXURES TO DIRECTORS’ REPORTCONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

TECHNOLOGY ABSORPTION, ADOPTION AND INNOVATION

1. Efforts, in brief, made towards technology absorption, adaption and innovation:

Developed indigenous Burner blocks and the Heat Exchanger; retrofitted X-axis control of Ficep CNC drill line with Servostar drive and motor on DB 363 machine; installed PLC Poka-Yoke system on two more punching machines, new acid fume extraction and scrubbing system, acoustic enclosure at DG set, MX Module Mail Server with Firewall Antivirus Data security system and new exchange system and replaced existing obsolete office PCs with new systems upgraded with Window XP.

2. Benefits derived as a result of above efforts:

The above efforts have resulted in increased life of the machines, improved working environment, safe, speedy and uninterrupted communication services to all users.

3. In case of imported technology (imported during the last 5 years reckoned from the beginning of the financial year), following information may be furnished:

a. Technology imported: Bocad Software

b. Year of import: 2006

c. Has the technology been fully absorbed? : Yes

d. If not fully absorbed, areas where this has not taken place, reasons hereof and future plans of action: NA.

C. FOREIGN EXCHANGE EARNINGS AND OUTGO

Activities relating to exports; initiatives taken to increase exports; development of new export markets for products and services and export plans are detailed in Management Discussion & Analysis Report annexed to the Directors’ Report

Rs. in lacs

2007-08 2006-07

Total foreign exchange earned

1,73,979.58 1,25,782.89

Total foreign exchange used 1,05,288.32 81,854.91

A. CONSERVATION OF ENERGY

The company’s operations are not energy intensive. However, during the year under review, substantial efforts were made to ensure optimum consumption of fuel and electricity at all the three plants of the company (Jaipur, Butibori and Jabalpur). In particular, the following specific actions were taken:

Controlled and maintained power factor, controlled the fuel consumption, de-scaled oil cooler of air compressor, installed AC drive, sequential timer operated yard lighting, new auto temperature controller, Heating and Pumping Unit, fixed transparent Fiber Reinforced Plastic sheets and designed a system for heating De-Oil Solution.

These efforts have resulted in reduction in power consumption, optimum loading of motor and efficient operations of furnaces thereby saving approximately Rs. 11 lacs per annum.

B. TECHNOLOGY ABSORPTION

1. Specific areas in which R&D is carried out by the company:

Redesigned the layout of the finished goods packing area, the tools and fixtures of hydraulic fabrication machine, designed safety covers for Galvanizing process, installed indigenous electronically controlled Dynodrives, replaced obsolete mechanical variach system, procured Plasma Arc and Profile cutting machine.

2. Benefits derived as a result of the above R&D:

The above efforts have resulted in numerous benefits including higher production, reduction in wastage, flexible and better speed control, avoidance of quality rejections, faster output, better quality and smooth and speedy operations.

3. Future plans of action:

Develop indigenous electronic controls, replace window ACs of all CNC machines by Panel ACs, increase speed of PH-80 machine, modify heating systems on furnaces, install advanced CNC punching machine and Paperless Temperature Controller and Recorder and up-grade Tower Testing Station.

4. Expenditure on R & D:

a. Capital : Rs. 46.28 lacs b. Recurring : Rs. 196.25 lacs c. Total : Rs. 242.53 lacs d. Total R & D expenditure as a percentage of total

turnover: 0.08%

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MANAGEMENT DISCUSSION AND ANALYSIS Complete electrification of villages by 2009 and complete

electrification of all rural households by 2012 under the Rajiv Gandhi Gramin Vidyutikaran Yojana (RGGVY) Scheme.

YEARCapacity

Addition (MW)Total Installed capacity (MW)

2006-07-10th Plan 21,180 1,32,330

2011-12-11th Plan 78,577 2,10,907

2016-17-12th Plan 82,200 2,93,107

This is expected to result into investments being made in the transmission sector to the tune of Rs.1,40,000 crores and that in the distribution including rural electrification of Rs. 2,87,000 crores.

There is strong and sustainable growth in the Power Transmission & Distribution (T&D) sector worldwide driven by huge spending for transmission lines, both on account of increasing generation capacity and maintenance of existing lines, as well as distribution networks especially in developing countries of Asia, Africa and the Middle East.

Telecom

The mobile telephone sector has grown at an average growth rate of over 90% and with the expected growth of teledensity by the end of 2010, large number of new towers and investment would be required in the years to come.

Railways

To strengthen and upgrade the railway system, the total outlay for Railways as per the 11th plan is Rs. 2,30,000 crores. A dedicated Rail Freight Corridor (East & West) has been planned by the Ministry of Railways covering about 2,700 KM of track at an investment of Rs. 22,000 crores.

OUTLOOK & OPPORTUNITIES

South Asia

India

The per capita power consumption in India is lowest compared to that of China and rest of World. To bridge this gap, investment is required to be made in the power sector in the Country. While the work on achieving the 11th Plan targets of capacity addition is well underway, the Union Budget 2008 has given a thrust to investments in the power sector. The APDRP scheme of the Government to accelerate distribution sector reforms received a thrust with fresh budget allocations of

ABOUT THE COMPANY

The company, a part of the USD 3 billion RPG group, carries vast experience and expertise in the Engineering Procurement Construction (EPC) business in power transmission, distribution, sub-station, railways and telecom having presence both in India and overseas. The company has been at the forefront of connecting regions throughout the world with network of highly efficient and reliable transmission lines.

With present employee strength of about 2,500, spread over 18 countries and footprints in over 40 countries, the company has emerged as one of the leading power transmission EPC companies in the world providing end to end solution in Transmission, Distribution and Sub-station projects.

Over the years, the company has demonstrated its capabilities in cross-country project management by meeting challenging requirements with regards to cost, quality and time with the support of pre-qualifications and an extremely valuable human capital in all the areas of its business – Power Transmission Networks, Power Distribution Networks, sub-stations, Railway Electrification projects, Optical Fiber Cable Installations, Telecom Infrastructure Services and strengthen itself in services of Designing and Engineering, Tower Testing, Satellite and GPRS Surveys and Hotline Stringing.

OVERVIEW OF THE EPC INDUSTRY

The company is primarily engaged in the business of Engineering, Procurement and Construction (EPC) business.

Transmission, Distribution and Sub-station

India’s economic performance in the past few years, particularly in the last three years, has been remarkable with GDP growth averaging around 8% per annum and this is expected to continue for the medium term. The country’s infrastructure sector recorded a year-on-year growth of more than 8%. New investments continue to be made to implement infrastructure projects in railways, roadways, ports, airports, power and telecommunications.

In the power sector, the Government of India envisages:

Additional Power generation capacity of 78,577 MW under the 11th Plan as against 21,180 MW under the 10th Plan (refer table below).

Development of National Grid : Inter-regional transmission capacity addition of 23,600 MW to reach 37,700 MW.

Strengthening Distribution – Upgrade sub-transmission and distribution networks under the Accelerated Power Development and Reform Programme (APDRP) Scheme.


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Central Asia

After the independence of CIS countries from the erstwhile USSR, most of these countries did not focus on improving their infrastructure. Due to new oil and gas discoveries, these countries are now investing in infrastructure projects.

THREATS

Competition

With the opportunities for the power sector in India and worldwide, many new players are emerging in the market. New players have adopted the aggressive pricing strategy to acquire pre-qualification and/or market share, which may keep the margins under pressure for some time.

Industry Growth

Although the Government of India has big plans in the power sector, the growth of the T&D industry is linked to sensitive political and environmental issues, which can stunt the growth for the industry.

PERFORMANCE

The performance of the company includes the performance details of the erstwhile National Information Technologies Limited and the erstwhile RPG Transmission Limited for six months ended 31st March 2008 as the same have been merged with the company pursuant to the Scheme of Arrangement between National Information Technologies Limited and RPG Transmission Limited and MP Power Line Limited (now known as Octav Investments Limited) and the company and their respective shareholders, which became effective from 1st October 2007.

During the year the company has completed 21 projects in the South Asia region. Several major domestic projects have been secured during the year aggregating to over Rs. 625 crores for various regional projects.

With the merger of the erstwhile National Information Technologies Limited with the company, the Telecom business will have the benefit of synergies and scale along with greater project execution capabilities. The telecom business has surpassed the Rs. 100 crores mark and the company has emerged as a major EPC player in the market of telecom towers.

The company has completed 15 projects in the International markets and despite the weakening dollar, the revenues from International business have surpassed past records. During the year, the company has won projects in several countries including Afghanistan, Algeria, Ethiopia, Kazakhstan, Kenya, Oman, Namibia, Nigeria, Saudi Arabia and UAE and has a healthy order book in the International markets.

The major projects bagged by the company in International markets include projects worth Rs. 876 crores in Saudi Arabia,

Rs. 800 crores. Besides, the Government has also proposed to set up a National Fund for Transmission and Distribution reform with a corpus of Rs. 1,00,000 crores. The Budget has also stressed upon the RGGVY scheme which requires an enormous and complex transmission infrastructure to be set up for providing power to villages by 2009 and all rural households by 2012. Moreover the Central Government has urged the Governments of Chhattisgarh, Karnataka, Maharashtra, Orissa and Tamil Nadu to bring five more Ultra Mega Power Projects (UMPP) to the bidding stage by extending the required support. Three UMPPs in Mundra, Sasan and Krishnapattanam have already been awarded and the fourth will be awarded soon. All this is expected to benefit the transmission sector.

The company with strong pre-qualification, proven competency in project management and execution as also highly skilled manpower is well equipped to participate in the available opportunities in the power sector.

SAARC

The Governments of the SAARC nations have realised that acute power shortages is hampering their development plans and are taking steps to improve the power scenario in their countries and have announced several projects. Similarly, there are major plans in other areas of infrastructure like telecommunications and railways. To strengthen the regional co-operation, SAARC grids are proposed in areas of Power, Gas, Road and Railways.

International

Middle East

The landscape for power development in this region is characterised by rapid population growth and growth in demand for power, a large extent of state ownership and significant price subsidisation. The appreciation in Crude Oil prices is providing these countries with capital to develop much-needed infrastructure. Additionally, efforts at privatisation and economic incentives have spurred private investment. The Gulf Cooperation Council (GCC) is on its second phase of power grid development. This represents a very large business opportunity for companies operating in the Power Transmission EPC business.

Africa

The GDP growth of South Africa is estimated to be around 5% per annum for the coming years. Due to inability of existing power infrastructure to support development plans, large scale investments are planned in the power sector. The growth rate in demand for electricity in this region is estimated at 4%. Multilateral agencies such as World Bank, ADB, EBRD, EIB are funding the power infrastructure in the region.

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Rs. 504 crores in Afghanistan, Rs. 502 crores in UAE, Rs. 382 crores in Kazakhstan, Rs. 242 crores in Algeria, Rs. 137 crores from Namibia and Rs. 150 crores in USA.

Financial Performance

The company has earned a net profit of Rs. 172.16 crores on Net Sales of Rs. 2,814.48 crores in current financial year as against Rs. 104.64 crores on Net Sales of Rs. 2,040.63 crores respectively in 2006-07. The Earnings Before Interest, Depreciation and Tax (EBITDA) improved to 12.60% as against 12.38% in last year. The earning per share has increased to Rs.39.56 in the current financial year on the enhanced equity capital base of Rs. 49.34 crores as against Rs. 27.77 in 2006-07 on the equity capital base of Rs. 37.69 crores. The company has an order book of Rs. 4,200 crores, an increase of 40% compared to Rs. 3,000 crores in the previous year.

RISKS & CHALLENGES

Currencies and Commodities

During the year the rupee has appreciated 7.66% against the dollar and the financial institutions are of a consensual view that the appreciation will continue. This will have a negative effect on the revenues from the International business in rupee terms although the revenue in dollar terms will remain unaffected. Similarly, with huge spending on infrastructure projects in India, China, Saudi Arabia and Brazil, the prices of base metals have significantly increased.

Interest rate

Dollar Interest rates have softened during the year. However due to sub-prime crisis the liquidity in international currency market has tightened, thereby impacting the availability of funding.

Delays

The following delays can affect the development in the power scenario of the country:

• Delayinexecutionoftransmissionprojectsduetodelayincorresponding generation project or due to issues relating to right of way etc.

• Delayinruralelectrificationduetolackofpoliticalwilltocontrol theft and shift from providing free energy to the agriculture activity.

ManpowerWith order flow expected to increase significantly, manpower with requisite skills in the industry may become a constraint. The industry today, faces acute shortage of skilled manpower with engineering expertise and managerial skills.

ADEQUACY OF INTERNAL CONTROL

The Internal Audit department conducts extensive audit assignments at the head office, the three manufacturing facilities and selected international and domestic sites covering all functions and presents various recommendations to the management periodically. The adequacy of internal control systems is periodically reviewed by the Audit Committee.

HUMAN RESOURCE

There are about 2,500 permanent employees in the company. The agenda for the year 2007-08 was focused on the following two key areas:

a. building organizational and individual capabilities; and

b. upscaling people productivity to meet the accelerated business growth.

A comprehensive skill and competency development approach, consisting of a package of e-learning initiatives, classroom training and customized skill improvement programs were adopted. Considering the geographical dispersion of the employees emphasis was given to the e-learning format with a large bouquet of courses on a self learning mode via computer and internet. These programs can be accessed by employees of the company anywhere in the world, at anytime.

During the year a productivity linked wage settlement was signed at Jaipur plant.

CAUTIONARY STATEMENT

Statements in this report describing the company’s objectives, expectations, predictions and assumptions may be ‘forward looking’ within the meaning of applicable Securities Laws and Regulations. Actual results may differ materially from those expressed herein. Important factors that could influence the company’s operations include global and domestic economic conditions affecting demand, supply, price conditions, natural calamities, change in Government’s regulations, tax regimes, other statutes and other factors such as litigation and industrial relations.


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CORPORATE GOVERNANCE1. COMPANY’S PHILOSOPHY

Corporate Governance essentially is a set of standards,

which aims to improve the company’s efficiency,

effectiveness and social responsibility. The concept

emphasizes on transparency, accountability, independence

and integrity of the Management, with focus on public

interest in particular. It further inspires and strengthens

investors’ confidence by ongoing commitment to overall

growth of the company.

The company’s Corporate Governance philosophy

encompasses not only regulatory and legal requirements,

such as the terms of listing agreement with stock exchanges,

but also several voluntary practices at a superior level of

business ethics, effective supervision and enhancement of

shareholders’ value.

The company believes that timely disclosures, transparent

accounting policies and a strong and independent Board

go a long way in protecting shareholders trust while

maximizing long-term corporate value.

Our philosophy on Corporate Governance begins with our

Board of Directors.

• More than three fourth of the Board of Directors

comprises of Independent Directors.

• ANon-ExecutiveDirectorchairstheBoard.

• The Audit Committee is comprised exclusively of

Independent Directors.

• AnIndependentDirectorchairstheInvestorsGrievance

Committee.

• The Board has established terms of reference for its

operation and the operation of its Audit Committee

in line with Clause 49 of the Listing Agreement and

Section 292A of the Companies Act, 1956.

In compliance with the disclosure requirements of Clause

49 of the Listing Agreement, the details are set out as

under:

2. BOARD OF DIRECTORS

Composition of the Board

The Board of Directors of the company, as on 31st March

2008, consists of nine members.

The company has one ‘Executive’ and eight ‘Non-Executive’

Directors of which seven are Independent and two are

Non-Independent Directors. Mr. H.V. Goenka, Chairman is

a Non-Independent Director. Mr. R. D. Chandak, Managing

Director is the Executive Non-Independent Director.

The Independent Directors of the company are

Mr. S. S. Thakur, Mr. G. L. Mirchandani, Mr. D. G. Piramal,

Mr. S. M. Kulkarni, Mr. A. T. Vaswani, Mr. J. M. Kothary and

Mr. P. A. Makwana.

Board Meetings

The meetings of the Board are held at the company’s

Registered Office in Mumbai and are scheduled well in

advance. The Board agenda is circulated to the Directors in

advance.

The members of the Board have access to all information

of the company and are free to recommend inclusion of

any matter in agenda for discussion. The Board meets at

least once in a quarter to review the quarterly results and

other items on the agenda. Additional meetings are held,

when necessary.

During the year under review, six Board Meetings of

Directors were held on:

23rd April 2007, 7th May 2007, 24th July 2007, 6th August

2007, 31st October 2007 and 31st January 2008.

Board’s Responsibilities

The Board’s mandate is to oversee the company’s strategic

direction, review and monitor corporate performance,

ensure regulatory compliance and safeguard the interests

of stakeholders.

Role of Independent Directors

The Independent Directors play an important role in

deliberations at the Board and Committee meetings and

bring to the company their expertise in the fields of finance,

management, law and public policy.

Information placed before the Board of Directors

The minimum information to be made available, so far

applicable, in terms of clause 49 of the Listing Agreement

is made available to the Board of Directors.

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Constitution of Board of Directors as on 31st March 2008 and related information:

Director Category No. of Board Meetings attended

Attendance at the AGM held on 24th

July 2007

No. of Outside

Directorships (*)

No. of outside Committees@ on which

the Director is a

Member (#) Chairman

Mr. H. V. Goenka

(Chairman)

Non-Executive

Non-Independent6 Yes 8 - -

Mr. R. D. Chandak (Managing Director)

Executive

Non-Independent6 Yes 4 - -

Mr. S. S. ThakurNon-Executive Independent

6 Yes 9 5 3

Mr. G. L. MirchandaniNon-Executive Independent

5 Yes 8 2 -

Mr. D. G. PiramalNon-Executive Independent

6 Yes 7 2 -

Mr. S. M. KulkarniNon-Executive Independent

5 Yes 9 7 5

Mr. A. T. VaswaniNon-Executive

Independent6 Yes 4 5 4

Mr. J. M. KotharyNon-Executive Independent

6 Yes 7 4 2

Mr. P. A. MakwanaNon-Executive Independent

- NA 2 4 2

# Number of Committees on which the Director is a member also includes the number of Committees on which the Director is the Chairman.

* excluding Directorships in private, foreign companies and companies, which are granted license under Section 25 of the Companies Act, 1956.

@ includes membership in Audit and Investors Grievance Committee.

Details of new Director(s):

In compliance with Clause 49 IV (G) of Listing Agreement, brief resume, expertise, details of other directorships, membership in committees of directors of other companies and shareholding in the company of the Directors proposed to be re-appointed are attached along with the Notice to the ensuing Annual General Meeting.

Mr. P.A. Makwana is appointed as a Director of the company w.e.f. 31st January 2008. Mr. Makwana aged 60 years is B.E. (Mechanical) and has an Advance Diploma in Business Administration. He has 34 years of experience in the banking profession. He is a Director in Merino Industries Ltd. and Banswara Syntex Ltd. He is a member and chairman of Audit Committee, Share Transfer Committee and Remuneration Committee of Merino Industries Ltd. and a member of Audit Committee and Share Transfer Committee of Banswara Syntex Ltd. He does not hold any shares in the company.

Code of Conduct

The Board has laid down a Code of Conduct for all Board members and senior management of the company which is posted on the website of the company.

All Board members and senior management personnel have affirmed compliance with the Code on an annual basis. A declaration to this effect signed by the Managing Director forms part of this Annual Report.

Committees of the BoardThe Board has established various Committees such as the Audit Committee, Remuneration Committee and Investors Grievance Committee.

An Independent Director chairs the Committees and the said Committees’ functions are within the defined terms of reference. The minutes of Committee meetings are circulated and discussed in the Board meetings.

(A) Audit CommitteeCompositioni. The Audit Committee has three Directors as members and

all the members of Audit Committee are Independent Directors;

ii. All members of Audit Committee are financially literate;

iii. The Chairman of the Audit Committee has accounting or related financial management expertise and is an Independent Director;


12

iv. The Chairman of the Audit Committee was present at Annual General Meeting to answer shareholders’ queries;

v. The Audit Committee invites representative of the Statutory Auditors at the meetings of the Committee. The Committee also invites such of the executives viz., Managing Director, Chief Financial Officer, Head (Internal Audit), as it considers appropriate to be present at the meetings of the Committee, but on occasions it may also meet without the presence of any executives of the company;

vi. The Company Secretary acts as the Secretary to the Committee.

Name of Members and Chairman

Mr. A. T. Vaswani (Chairman)

Mr. S. S. Thakur

Mr. S. M. Kulkarni

Dates of Meeting

The Committee met on 4th April 2007, 23rd April 2007, 7th May 2007, 23rd July 2007, 10th October 2007, 31st October 2007, 31st January 2008 and 19th March 2008 during the year under review. Mr. A.T. Vaswani and Mr. S.S. Thakur were present at all the meetings. Mr. S.M. Kulkarni was granted leave of absence for meetings held on 23rd July 2007 and 10th October 2007.

Brief description of the terms of reference

The terms of reference of the Audit Committee specified by the Board are in conformity with the requirements of Clause 49 of the Listing Agreement as well as Section 292A of the Companies Act, 1956. The Committee acts as a link between the statutory and internal auditors and the Board of Directors. The responsibilities of the Audit Committee include overseeing of the financial reporting process to ensure fairness, adequate disclosures and credibility of financial statements, recommendation of appointment and removal of statutory auditors, branch auditors, review of the adequacy of internal control systems and the internal audit function.

The Audit Committee is authorized to:

1. Investigate any activity within its terms of reference.

2. Seek information from any employee.

3. Obtain outside legal or other professional advice.

4. Secure attendance of outsiders with relevant expertise, if it considers necessary.

Role of Audit Committee

The role of the Audit Committee shall include the following:

1. Oversight of the company’s financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible.

2. Recommending to the Board, the appointment, re-appointment and if required, the replacement or removal of the statutory auditors and the fixation of audit fees.

3. Approval of payment to statutory auditors for any other services rendered by the statutory auditors.

4. Reviewing, with the management, the annual financial statements before submission to the Board for approval, with particular reference to:

a. Matters required to be included in the Director’s Responsibility Statement to be included in the Directors’ Report in terms of clause (2AA) of Section 217 of the Companies Act, 1956.

b. Changes, if any, in accounting policies and practices and reasons for the same.

c. Major accounting entries involving estimates based on the exercise of judgment by management.

d. Significant adjustments made in the financial statements arising out of audit findings.

e. Compliance with listing and other legal requirements relating to financial statements.

f. Disclosure of any related party transactions. g. Qualifications in the draft audit report.

5. Reviewing, with the management, the quarterly financial statements before submission to the Board for approval.

6. Reviewing, with the management, performance of statutory and internal auditors, adequacy of the internal control systems.

7. Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit.

8. Discussion with internal auditors about any significant findings and follow up thereon.

9. Discussion with auditors periodically about internal control systems and ensure compliance of internal control systems.

10. Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board.

11. Discussion with statutory auditors before the audit commences, about the nature and scope of audit including the observations of the auditors, as well as post-audit discussion to ascertain any area of concern.

12. To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of non payment of declared dividends) and creditors.

13. To review the following information:

a. Management discussion and analysis of financial condition and results of operations; Statement of

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significant related party transactions (as defined in the Accounting Standard - 18), submitted by the management;

b. Management letters / letters of internal control weaknesses issued by the statutory auditors;

c. Internal audit reports relating to internal control weaknesses; and

d. The appointment, removal and terms of remuneration of the chief internal auditor shall be subject to review by the Audit Committee.

14. To review the financial statements, in particular, the investments made by unlisted subsidiary company, if any.

15. To review the functioning of the Whistle Blower mechanism, in case the same exists.

B. Remuneration CommitteeCompositionRemuneration Committee consists of three Non-Executive Independent Directors viz., Mr. J. M. Kothary (Chairman), Mr. A. T. Vaswani and Mr. S. M. Kulkarni.

The function of the Remuneration Committee includes recommendation of appointment of Whole-time Director(s) / Managing Director, evaluation of the performance of the Whole-time Director(s) / Managing Director and recommendation to the Board of the remuneration to Whole-time Director(s) / Managing Director.

During the year the Committee met once on 6th September 2007 to consider and recommend increase in the remuneration to the Managing Director. All the members of the Committee were present in the meeting.

Remuneration PolicyPayment of remuneration to the Managing Director is governed by the agreement executed between him and the company that was approved by the Board and the shareholders in terms of Schedule XIII to the Companies Act, 1956. His remuneration structure comprises of salary, perquisites, allowances, commission and contribution to provident, superannuation and gratuity funds. The Non-Executive Directors do not draw any remuneration from the company other than sitting fees.

Details of remuneration paid to the Managing Director during the year 2007- 08:

Rs. in lacs

Name Salary Com-mis-sion

Perqui-sites

Contribution to Provident

and other funds#

Total

Mr. R. D. Chandak

114.88 35.00 1.08 12.61 163.57

# Excludes provision for gratuity which is determined on the basis of actuarial valuation done on overall basis for the company.

The agreement with the Managing Director is for a period of approximately five years i.e. 2nd January 2006 to 28th September 2010. In addition to the remuneration, he is also entitled to commission. Either party to the Agreement is

entitled to terminate the Agreement by giving not less than four months notice in writing to the other party, provided however, that the company shall be entitled to terminate the incumbent’s employment at any time by payment to him of four months’ salary in lieu of such notice.

Remuneration to Non-Executive Directors is given below:

in Rs.

NameSitting Fees

TotalBoard Meeting

Committee Meeting

Mr. H. V. Goenka 1,20,000 - 1,20,000

Mr. S. S. Thakur 1,20,000 40,000 1,60,000

Mr. G. L. Mirchandani 1,00,000 - 1,00,000

Mr. D. G. Piramal 1,20,000 - 1,20,000

Mr. A. T. Vaswani 1,20,000 40,000 1,60,000

Mr. S. M. Kulkarni 1,00,000 60,000 1,60,000

Mr. J. M. Kothary 1,20,000 30,000 1,50,000

Ms. Neeta Mukerji *

(paid to ICICI Bank Ltd.)

40,000 - 40,000

Mr. P. A. Makwana - - -

*Ceased to be Director with effect from 18th November 2007.

Note: Committees include Audit and Finance Committees.

Equity Shares held by the DirectorsExcept as stated hereunder, none of the Directors, hold any shares in the company as on 31st March 2008:

Name of the Director No. of shares held

Mr. R. D. Chandak 1

The company does not have any Stock Option Scheme for its employees.

C. Investors’ Grievance Committee

Composition

The Investors Grievance Committee consists of two Directors viz., Mr. R. D. Chandak and Mr. J. M. Kothary. Mr. J. M. Kothary chairs the Committee.

The Board of Directors in its meeting held on 31st July 2006 passed a resolution authorizing any one of the members of Investors Grievance Committee or the Company Secretary or an authorized signatory to attend to the matters relating to share transfers/transmissions/issue of duplicate share certificates and other related matters under the overall supervision of the Committee.

The function and powers of the Committee include approval and rejection of transfer or transmission of shares, issue of duplicate certificates, review and redressal of shareholders


14

and investors complaints relating to transfer of shares and non-receipt of Annual Report etc. The Committee meets once a month.

The work relating to Share Transfer etc., is looked after by Intime Spectrum Registry Limited. The minutes of the Investors Grievance Committee are periodically placed before the Board of Directors.

Name and Designation of the Compliance Officer

Mr. Ch. V. Jagannadha Rao, Company Secretary is the Compliance Officer in terms of Clause 47 of the Listing Agreement.

Investors’ service

No. of complaints / correspondence received during the financial year ended 31st March 2008.

289

No. of complaints resolved to the satisfaction of shareholders during the financial year ended 31st March 2008.

289

Number of pending requests for share transfers & dematerializations as on 31st March 2008

No. of Requests No. of Securities

Transfers 29 2,511

Dematerialisations 74 4,496

The aforesaid pending requests have been processed subsequently.

General Meetings

Location and time of General Meetings

Year AGM/EGM

Location Date Time

2006-07 AGM Ravindra Natya Mandir, Prabhadevi, Mumbai-400025

24th July 2007

11:00 A.M.

2005-06 AGM Y.B. Chavan Auditorium,Nariman Point, Mumbai- 400021

15th June 2006

11.00 A.M.

2005-06 EGM KEC International Limited, 1st Floor, CEAT Mahal, 463, Dr. Annie Besant Road, Worli, Mumbai- 400030

2nd January 2006

3.00 P.M.

Special Resolution transacted at the last Annual General Meeting held on 24th July 2007

Borrowings under section 293(1) (d) of the Companies Act, 1956

Postal Ballot

During the year 2007-08, the company has obtained the approval of its members by passing the following resolution as Special Resolution by Postal Ballot in accordance with the procedure prescribed in terms of Section 192A of the Companies Act, 1956 read with the Companies (Passing of Resolutions by Postal Ballot) Rules, 2001 and as amended. Mr. R.D. Chandak, Managing Director conducted the Postal Ballot exercise and Mr. P. N. Parikh, Partner of Parikh Parekh & Associates, Practising Company Secretaries, was appointed as Scrutinizer by the Board.

Date of passing the Resolution

Subject MatterVotes Cast

In favour %

Against %

27th September 2007

Special Resolution under Section 314(1B) of the Companies Act, 1956 for holding and continuing to hold an office or place of profit in the company by Mr. Anant Goenka, son of Mr. H.V. Goenka, the Chairman of the company.

99.94 0.06

None of the items transacted at the last Annual General Meeting held on 24th July 2007 were required to be passed by Postal Ballot nor any resolution requiring a Postal Ballot is being proposed at the ensuing Annual General Meeting.

3. DISCLOSURES

Related Party Transactions

The company follows the following policy in disclosing the related party transactions to the Audit Committee:

a. A statement in summary form of transactions with related parties in the ordinary course of business is placed periodically before the Audit Committee.

b. Details of material individual transactions with related parties, which are not in the normal course of business, if any, are placed before the Audit Committee.

c. Details of material individual transactions with related parties or others, which are not on an arm’s length basis, if any, are placed before the Audit Committee, together with Management’s justification for the same.

Transactions with related parties entered in the ordinary course of business have been disclosed in Note 21 of the Schedule 19 to the Accounts of the company as at 31st March 2008.

15


Disclosures on materially significant related party transactions that may have potential conflict with the interests of the company at large

There are no materially significant transactions made by the company with its promoters, Directors or management, their subsidiaries or relatives etc. that may have potential conflict with the interest of the company at large.

Risk Management

The company has laid down procedures to inform the Board about the risk assessment and minimization procedures. These procedures are periodically reviewed to ensure that executive management controls risks by means of a properly defined framework.

Details of non-compliance by the company, penalties and strictures imposed on the company by Stock Exchange(s) or SEBI or any Statutory Authority on any matter related to Capital Markets

The Stock Exchange(s), Securities Exchange Board of India or any other statutory authority on any matters related to Capital Markets have imposed no strictures or penalties on the company.

Details of compliance with mandatory requirements and adoption of the non-mandatory requirements of this clause

Clause 49 of the Listing Agreement mandates to obtain a certificate from either the Auditors or Practicing Company Secretaries regarding compliance of conditions of corporate governance as stipulated in the Clause and annex the certificate with the Director’s Report, which is sent annually to all the shareholders. The company has obtained a certificate from its auditors to this effect and the same is given as an annexure to the Directors’ Report.

The Clause further states that the non-mandatory requirements may be implemented as per the discretion of the company. The company has constituted Remuneration Committee, which is a non-mandatory requirement.

CEO/CFO certification

Certificate from Mr. R. D. Chandak, Managing Director and Mr. Vardhan Dharkar, Chief Financial Officer in terms of Clause 49 (V) of the Listing Agreements with the Stock Exchanges for the financial year ended 31st March 2008 was placed before the Board of Directors of the company in its meeting held on 30th April 2008.

4. MEANS OF COMMUNICATION

Quarterly Results

The company’s shares are listed on Bombay Stock Exchange Limited and National Stock Exchange of India Limited.

The company has furnished quarterly financial results along with the notes on a quarterly basis as per the format prescribed in Clause 41 of the Listing Agreement within one month from the end of quarter to the Stock Exchanges.

The company has also published the financial results within 48 hours of the conclusion of the Board Meeting in at least one daily newspaper circulating in the whole or substantially the whole of India and in one newspaper published in the language of the region, where the registered office of the company is situated. The company informs the Stock Exchanges where its securities are listed about the date of the Board Meeting at least seven days in advance and also issues immediately a press release in at least one national newspaper and one regional language newspaper about the aforesaid Board Meeting.

Newspapers wherein financial results are published

Financial Results

Un-audited / Audited

News Papers

First Quarter

Un-audited Economic Times, Maharashtra Times

Second Quarter

Un-audited Economic Times, Maharashtra Times, Hindu Business Line

Third Quarter

Un-audited Economic Times, Maharashtra Times, Hindu Business Line

Fourth Quarter/ Full Year

Audited Economic Times, Maharashtra Times, Hindu Business Line, Business Standard

The financial results were displayed on the website of the company: http://www.kecrpg.com and on Securities and Exchange Board of India’s special website www.sebiedifar.com.

The achievements and important events taking place in the company like receipt of major orders are announced through press and electronic media and posted on the company’s website also.

The company’s other press coverage and corporate presentations if made to Institutional Investors and Analysts are also made available on the website. The means of communication between the company and the shareholders are transparent and investor friendly.

Management Discussion and Analysis forms part of this Annual Report.

5. GENERAL SHAREHOLDERS INFORMATION

Registered Office 1st Floor, CEAT Mahal463, Dr. Annie Besant Road,Worli, Mumbai 400 030.

Plants’ Location JaipurJhotwara, Jaipur 302 012RajasthanButiboriB-190 Industrial Area, Butibori 441 108MaharashtraJabalpurDeori, P.O. PanagarhJabalpur 483 220Madhya Pradesh


16

Date, time and venue of Annual General Meeting

27th June 2008 at 3:00 p.m. at Ravindra Natya Mandir, Pu. La. Deshpande Maharashtra Kala Academy, Sayani Road, Prabhadevi, Mumbai 400025

Financial Year 1st April – 31st March

Financial CalendarFirst quarter resultsSecond quarter resultsThird quarter resultsResults for the year ending March 2009

1st April to 31st MarchLast week of July 2008*Last week of October 2008*Last week of January 2009*End of June 2009**Tentative

Dates of Book closure 20th June 2008 to 27th June 2008 (both days inclusive)

Dividend Payment date The dividend warrants will be posted on or after 28th June 2008

Status of listing on Stock Exchanges

The equity shares of the company are listed on the following Stock Exchanges:

Name and address of the Stock Exchange

Stock Code

Bombay Stock Exchange LimitedPhiroze Jeejeebhoy Towers,Dalal Street, Mumbai – 400001.

532714KECIL

National Stock Exchange of India Limited Exchange Plaza, Plot No. C/1, G Block, Bandra - Kurla Complex, Bandra (E), Mumbai – 400051.

KEC

Out of the total 49,343,856 equity shares of Rs. 10/- each,

i. 48,296,712 equity shares have been listed and admitted to dealings on Bombay Stock Exchange Limited. Balance 1,047,144 equity shares would be listed on Bombay Stock Exchange Limited as and when physical shares of the company are dispatched in exchange for the shares held in Summit Securities Limited (formerly KEC Infrastructures Limited) and

ii. 48,286,230 equity shares have been listed and admitted to dealings on the National Stock Exchange of India Limited (out of which 11,647,520 equity shares listed and admitted on National Stock Exchange of India Limited w.e.f. 1st April 2008). Balance (i) 1,047,144 equity shares would be listed on National Stock Exchange of India Limited as and when physical shares of the company are dispatched in exchange for the shares held in Summit Securities Limited (formerly KEC Infrastructures Limited) and (ii) 10,482 equity shares are on account of disputed and stop transfer cases which would be listed on National Stock Exchange of India Limited as and when the matters are sorted out and dispatch of physical share certificate (s) is done by the company.

The company is in process of issue and allotment of 750 fully paid up equity shares of Rs. 10 each to a trustee against 1,688 equity shares of the erstwhile RPG Transmission Limited, where rights shares had been kept in abeyance under Section 206A (b) of the Companies Act, 1956. On settlement of the relevant court cases/issues, the equity shares to be issued to a trustee will be transferred to the persons entitled. The necessary listing procedures shall be complied with on issuance of the said shares.

Market Price Data – During April 2007 to March 2008

Month BSE NSE BSE Sensex

High (Rs.) Low (Rs.) High (Rs.) Low (Rs.) High

April 613.95 492.05 610.95 453.20 14,383.72

May 611.00 522.00 593.00 501.15 14,576.37

June 660.00 501.00 579.90 495.50 14,683.36

July 635.00 535.00 634.40 535.00 15,868.85

August 615.00 536.10 623.00 525.10 15,542.40

September 625.00 545.70 625.00 542.00 17,361.47

October 770.00 598.90 774.00 565.00 20,238.16

November 922.00 699.00 950.00 680.50 20,204.21

December 913.00 740.00 908.00 751.00 20,498.11

January 914.00 605.00 924.00 551.00 21,206.77

February 783.00 648.75 783.00 621.00 18,895.34

March 813.90 575.80 815.00 571.10 17,227.56

17


Share Transfer System

Investors Grievance Committee meets once in a month. If documents are complete in all respects, the company’s Registrar & Share Transfer Agents process, register the transfers and return the transferred share certificates to the shareholders within 30 days from the date of lodgement. The delegated authority as mentioned earlier attends to the share transfer formalities and approves the share transfers at least once in a fortnight.

Registrar and Share Transfer Agents

Intime Spectrum Registry Limited is the company’s Registrar & Share Transfer Agents and their contact details are as follows: Intime Spectrum Registry Limited C-13, Pannalal Silk Mills Compound, LBS Marg, Bhandup (West), Mumbai - 400 078. Tel: +91-22-25946970 Fax: (022) 25946969. Email: [email protected]

Contact Address

Shareholders can send their queries regarding Transfer/Dematerialisation of shares and any other correspondence relating to the shares of the company to the above-mentioned address of company’s Registrar and Share Transfer Agents. Shareholders holding shares in electronic mode should address all correspondence to their respective depository participants.

Distribution of Shareholding

Distribution of shares according to size of holding as on 31st March 2008

No. of equity shares held

No. of Share-holders

% of Share-holders

No. of Shares

% of Share-

holding

1-500 43,623 97.01 33,48,949 6.79

501-1000 747 1.66 5,53,280 1.12

1001-2000 261 0.58 3,68,883 0.75

2001-3000 89 0.19 2,19,810 0.44

3001-4000 36 0.08 1,27,126 0.26

4001-5000 21 0.05 98,357 0.20

5001- 10000 30 0.07 2,06,495 0.42

10001& above 162 0.36 4,44,20,956 90.02

Total 44,969 100.00 4,93,43,856 100.00

Categories of Shareholders as on 31st March 2008

Category No. of Shares Held

% of Shareholding

Promoters 2,04,96,597 41.54

Directors & Relatives 37,001 0.07

Foreign Institutional Investors

63,59,023 12.89

Financial Institutions, Nationalized Insurance Companies and Banks

33,94,143 6.89

Other Companies 22,49,434 4.56

Mutual Funds & UTI 1,14,15,145 23.13

NRIs & Foreign Companies

1,44,270 0.29

Clearing Members 15,758 0.03

General Public 52,32,485 10.60

Total 4,93,43,856 100.00

Shareholding Pattern as on 31st March 2008

Dematerialisation of shares and liquidityThe company has executed agreement with both the depositories of the Country i.e. National Securities Depositories Limited (NSDL) and Central Depository Services (India) Limited (CDSL) for admission of its securities under demat mode. International Securities Identification Number (ISIN) allotted to the equity shares of the company is INE389H01014. 4,25,62,492 equity shares representing 86.26 % are in dematerialised form as on 31st March 2008.

Shares held by Depositories as on 31st March 2008

There are no outstanding GDRs/ADRs/Warrants or any convertible instruments.

23.13%

41.54%

6.89%

12.89%

10.60% 4.95%

Promoters Mutual Funds and UTI Financial Institutions, Nationalized InsuranceCompanies and Banks

FIIs Public Others

13.74%

85.06%

1.2%

Physical NSDL CDSL


18

AUDITORS’ CERTIFICATE

To the Members of

KEC International Limited

We have examined the compliance of conditions of Corporate Governance by KEC International Limited, for the year ended on March 31, 2008, as stipulated in Clause 49 of the Listing Agreement of the said company with Stock Exchanges.

The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to a review of the procedures and implementation thereof, adopted by the company for ensuring the compliance of the condition of the Corporate Governance as stipulated in the said clause. It is neither an audit nor an expression of opinion on the financial statements of the company.

In our opinion and to the best of our information and according to the explanations given to us, we certify that the company has complied with the conditions of Corporate Governance as stipulated in Clause 49 of the above mentioned Listing Agreement.

We state that such compliance is neither an assurance as to the future viability of the company nor the efficiency or effectiveness with which the management has conducted the affairs of the company.

For Deloitte Haskins & Sells Chartered Accountants

U. M. Neogi Partner (Membership No. 30235)

Place: MumbaiDate: 30th April 2008

DECLARATION - CODE OF CONDUCTAll Board members and senior management personnel have, for the year ended 31st March 2008, affirmed compliance with the Code of Conduct laid down by the Board of Directors in terms of the Listing Agreement entered with the Stock Exchanges.

For KEC International Limited

R. D. ChandakManaging Director


19


AUDITORS’ REPORTREPORT OF THE AUDITORS TO THE MEMBERS OF KEC INTERNATIONAL LIMITED

1. We have audited the attached Balance Sheet of KEC International Limited as at 31st March, 2008 and also the Profit and Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India.Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. We report as follows :

i. As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Government of India in terms of ection 227(4A) of the Companies Act, 1956, we annex hereto a statement on the matters specified in paragraphs 4 and 5 of the said Order on the basis of the information and explanations received by us and reports received by the company from the auditors of the company’s overseas branches at Afghanistan, Algeria, Ethiopia, Ghana, Kazakhstan, Kenya, Lebanon, Libya, Namibia, Nigeria, Srilanka, Oman, Tunisia, United Arab Emirates, Zambia and that of NITEL division,Gurgoan on which we have relied.

ii. Further to our comments in the Annexure referred to in paragraph 3 (i) above, we report that:

a. we have obtained all the information and explanations, which to the best of our knowledge and belief, were necessary for the purposes of the audit;

b. in our opinion, the company has kept proper books of account as required by law, so far as appears from our examination of the books;

c. the reports of the auditors of the company’s overseas branches at Afghanistan, Algeria, Bangladesh, Ethiopia, Ghana, Kazakhstan, Kenya, Lebanon, Libya, Namibia, Nigeria, Srilanka, Oman, Tunisia, United Arab Emirates, Zambia for the six months ended 30th September, 2007 and that of NITEL division, Gurgoan for the six months ended 31st March ,2008 have been forwarded to the company and have been considered in preparing our report;

d. the Balance Sheet and the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account;

e. in our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

f. on the basis of written representations received from the Directors, as on 31st March, 2008, and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March, 2008 from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956;

g. in our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

i. in the case of the Balance Sheet, of the state of affairs of the company as at 31st March, 2008; ii. in the case of the Profit and Loss Account, of the profit for the year ended on that date; and iii. in the case of Cash Flow Statement, of the cash flows for the year ended on that date.


U.M.NeogiPlace: Mumbai PartnerDate: 30th April 2008 (Membership No. 30235)


20

ANNEXURE TO AUDITORS’ REPORT

ANNEXURE REFERRED TO IN PARAGRAPH 3 OF THE AUDITORS’ REPORT TO THE MEMBERS OF KEC INTERNATIONAL LIMITED ON THE ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2008

i. a. The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

b. Fixed Assets have been physically verified by the management as per the programme of verification decided by the company. According to the information and explanations given to us no material discrepancies were noticed on such verification. In our opinion, having regard to the size of the company and the nature of its assets the programme of verification of fixed assets of the company is reasonable.

c. Since there is no disposal of substantial part of fixed assets during the year, paragraph 4(i)(c) of the Companies (Auditor’s Report) Order, 2003 (the Order) is not applicable.

ii. a. The inventories have been physically verified by the management during the year at reasonable intervals.

b. In our opinion and according to the information and explanations given to us and having regard to the nature of items, the procedures of physical verification of stocks followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business.

c. On the basis of our examination of the records of inventory, we are of the opinion that the company is maintaining proper records of inventory. According to the information and explanations given to us no material discrepancies were noticed on physical verification between physical stocks and book records.

iii. a. The company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956(the Act). Accordingly, clauses (iii)(b) to (iii)(d) of the paragraph 4 of the Order are not applicable to the company for the current year.

b. The company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under section 301 of the Act. Accordingly, clauses (iii)(f) and (iii)(g) of paragraph 4 of the Order are not applicable to the company for the current year.

iv. In our opinion and according to the information and explanations given to us, there are generally, adequate internal control systems commensurate with the size of the company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control system.

v. According to the information and explanations given to us, we are of the opinion that there are no contracts or arrangements which need to be entered in the register maintained under section 301 of the Act. In view of this, clauses v(a) and v(b) of paragraph 4 of the Order are not applicable.

vi. In our opinion and according to the information and explanations given to us, the company has not accepted deposits from the public to which the directives issued by the Reserve Bank of India and the provisions of section 58A and 58AA or any other relevant provisions of the Act and the Companies (Acceptance of Deposits) Rules, 1975 apply.

vii. In our opinion, the company has an internal audit system commensurate with the size and nature of its business.

viii. As explained to us, the Central Government has not prescribed the maintenance of cost records under section 209(1)(d) of the Act for the company’s products.

ix. a. According to the information and explanations given to us and according to the records of the company, the company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees’ state insurance, income tax, tax deducted at source, tax collected at source, professional tax, sales tax, value added tax, customs duty, excise duty, wealth tax, service tax, property tax, water tax, license fee, works contract tax, entry tax, cess and other material statutory dues applicable to it.

b. According to the information and explanations given to us, no undisputed amounts in respect of the statutory dues referred to above were outstanding as at 31st March, 2008 for a period of more than six months from the date they became payable.

21


c. As explained to us and according to the records of the company, the following dues as at the year end of income tax/sales tax/ value added tax/ wealth tax /service tax/customs duty /excise duty/cess have not been deposited on account of dispute:

Name of statute(Nature of dues)

Relating to various years comprise in the period

Forum where dispute is pending and the amount involved

Appellate authorities & Tribunal

(Rs. in lacs)

Sales Tax(Tax / Penalty / Interest)

1990-2005 1,004.26

The Central Excise Act(Duty/Penalty/Interest)

1988-2007 346.71

Entry tax(Tax / Penalty / Interest)

1995-1996 2.20

Total 1,353.17

For the above purpose only statutory dues payable in India have been considered.

x. In our opinion, the company does not have accumulated losses. The company has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

xi. In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to financial institutions and banks.

xii. Since the company has not granted any loans or advances on the basis of the security by way of pledge of shares, debentures and other securities, paragraph 4(xii) of the Order is not applicable.

xiii. As the company is not a chit fund/ nidhi / mutual benefit fund / society, paragraph 4(xiii) of the order is not applicable

xiv. Since the company is not dealing or trading in the shares, securities, debentures and other investments, paragraph 4(xiv) of the Order is not applicable.

xv. According to the information and explanations given to us, the company has not given any guarantee for loans taken by others from banks or financial institutions.

xvi. In our opinion the term loans are being applied for the purpose for which they were raised.

xvii. According to the information and explanations given to us, and on an overall examination of the Balance Sheet of the company, we report that no funds raised on short-term basis have been used for long-term investment.

xviii. According to the information and explanations given to us, during the year, the company has not made preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act.

xix. Since the company has not issued any debentures, paragraph 4(xix) of the Order is not applicable.

xx. Since the company has not raised any money during the year by way of public issue, paragraph 4(xx) of the Order is not applicable.

xxi. According to the information and explanations given by the management, we report that no fraud on or by the company has been noticed or reported during the course of our audit.


U.M.NeogiPlace: Mumbai PartnerDate : 30th April 2008 (Membership No. 30235)


22

BALANCE SHEETAs at 31st March, 2008

Rs. in lacs

Schedule As at 31st March, 2008 As at 31st March, 2007I. SOURCES OF FUNDS

SHAREHOLDERS’ FUNDS

Capital 1 5,974.67 5,068.56

Reserves and surplus 2 43,542.55 22,130.93

LOAN FUNDS

Secured loans 3 59,062.38 38,633.29

Unsecured loans 4 114.52 9.00

DEFERRED TAX LIABILITY 19(18) 4,468.24 3,347.641,13,162.36 69,189.42

II. APPLICATION OF FUNDSFIXED ASSETS 5

Gross block 52,129.81 46,762.63

Less: Depreciation/Amortisation 8,985.34 6,000.18

Net block 43,144.47 40,762.45

Capital work in progress 1,687.72 180.77

Advances for capital expenditure 201.82 48.4345,034.01 40,991.65

INVESTMENTS 6 46.47 2,059.06

DEFERRED TAX ASSET 19(18) 2,464.30 444.54

CURRENT ASSETS, LOANS AND ADVANCES

Inventories 7 20,533.28 15,056.89

Sundry debtors 8 1,43,000.60 90,409.17

Cash and bank balances 9 6,801.95 2,139.25

Loans and advances 10 27,014.15 17,173.371,97,349.98 1,24,778.68

Less:CURRENT LIABILITIES AND PROVISIONS 11

Liabilities 1,26,330.23 95,388.15

Provisions 5,402.17 3,696.361,31,732.40 99,084.51

NET CURRENT ASSETS 65,617.58 25,694.171,13,162.36 69,189.42

Statement of significant accounting policies 18

Notes to the accounts 19

Per our report attached For and on behalf of the BoardFor Deloitte Haskins & Sells H. V. GOENKAChartered Accountants Chairman

U. M. NEOGI VARDHAN DHARKAR R. D. CHANDAKPartner Chief Financial Officer Managing Director

CH. V. JAGANNADHA RAO A. T. VASWANI Company Secretary Director

Place : Mumbai Place : MumbaiDate : 30th April 2008 Date : 30th April 2008

23


PROFIT AND LOSS ACCOUNTfor the year ended 31st March, 2008

Rs. in lacs

Schedule 2007-08 Previous YearINCOME

Sales and services - Gross 2,85,387.92 2,07,568.08

Less: Excise Duty 3,940.47 3,504.97

Sales - Net 12 2,81,447.45 2,04,063.11

Other income 13 25.02 69.45 2,81,472.47 2,04,132.56

EXPENDITURECost of materials 14 1,41,385.65 92,933.50

Erection and Subcontracting expenses 19(10) 61,800.52 52,702.86

Personnel expenses 15 12,325.41 9,546.63

Other expenses 16 30,503.65 23,695.22

Interest 17 6,765.42 5,925.08

Depreciation/Amortisation (Net) 19(1.5) 2,506.50 3,343.50 2,55,287.15 1,88,146.79

PROFIT FOR THE YEAR BEFORE TAXATION 26,185.32 15,985.77

Provision for taxation

Current Tax (including foreign taxes Rs. 711.11 lacs: previous year Rs. 403.50 lacs)

8,215.94 4,565.00

Deferred Tax 668.29 891.65

Fringe Benefit Tax 85.00 65.00

PROFIT FOR THE YEAR AFTER TAXATION 17,216.09 10,464.12

Balance as per last account 11,724.82 4,291.18

Transfer to Capital Redemption Reserve 387.67 -

Transfer to General Reserve 1,721.61 1,046.41

Dividend on equity shares 2,467.23 1,695.86

Tax on distributed profits 419.31 288.21

BALANCE CARRIED TO BALANCE SHEET 23,945.09 11,724.82

Rs. Rs.

Earnings per share ( Basic / Diluted) 39.56 27.77

Nominal value of share 10.00 10.00

(Note 25 of Schedule 19)

Statement of significant accounting policies 18

Notes to the accounts 19

Per our report attached to the Balance Sheet For and on behalf of the BoardFor Deloitte Haskins & Sells H. V. GOENKAChartered Accountants Chairman





24

SCHEDULE 1 - SHARE CAPITALAs at 31st

March, 2008As at 31st

March, 2007

Authorised:

Preference Share Capital:

15,00,000 Redeemable Preference shares of Rs. 100/- each 1,500.00 1,500.00

Equity Share Capital:

6,00,00,000 Equity shares of Rs. 10/- each 6,000.00 6,000.00

7,500.00 7,500.00

Issued, Subscribed and Paid Up:

(Note 2 of Schedule 19)

Preference Share Capital:

10,40,280 (Previous year 12,99,966) Zero Coupon Non - Convertible Redeemable Preference Shares of Rs. 100/- each

1,040.28 1,299.97

Equity Share Capital:

4,93,43,856 (Previous Year 3,76,85,854) Equity shares of Rs.10/- each 4,934.39 3,768.59

5,974.67 5,068.56

Rs. in lacs

SCHEDULE 2 - RESERVES AND SURPLUS As at 31st March, 2008As at 31st

March, 2007

Capital Redemption Reserve

Balance as per last Balance Sheet - -

Add :Transferred from Profit and Loss Account on redemption of

preference shares 387.67 -

387.67 -

Securities Premium account

Balance as per last Balance Sheet 9,236.45 9,236.45

Less: Utilised for premium paid for redemption of preference

shares (Note 2.3 of Schedule 19) 111.91 -

9,124.54 9,236.45

Amalgamation Reserve account (Note 1 of Schedule 19)


Less : Debited during the year on transfer of Investment division 2,047.61 -

Add : Credited during the year on merger of RPGT and NITEL 10,004.61 -

7,957.00 -

Less: Transferred to Reserve for Amortisation of Brand account 7,957.00 -

- -

SCHEDULEForming part of the Balance Sheet

Rs. in lacs

25


Rs. in lacs

SCHEDULE 3 - SECURED LOANS(Note 3 of Schedule 19)

As at 31st March, 2008

As at 31st March, 2007

Loans and advances from banks 59,056.00 38,601.49

Loans and advances from others 6.05 26.74

Deferred payment credit 0.33 5.06

59,062.38 38,633.29

Rs. in lacs

SCHEDULE 4 - UNSECURED LOANSAs at 31st


March, 2007

Short term loans and advances:From Banks - 4.46

Other loans and advances:From Others 114.52 4.54

114.52 9.00

SCHEDULE (contd.)Forming part of the Balance Sheet

Rs. in lacs

Reserve for Amortisation of Brand account (Note 1.5 of Schedule 19)


Add: Transferred from Amalgamation Reserve account 7,957.00 -

Less : Transferred to Profit and Loss Account 600.00 -

7,357.00 -

General Reserve

Balance as per last Balance Sheet 1,169.66 123.25

Less : Increase in employee benefits liability as at 1st April,2007

consequent to application of Accounting Standard -15

Employee Benefits [Note 19(a) of Schedule 19] 163.02 -

Add: Transferred from Profit and Loss Account 1,721.61 1,046.41

2,728.25 1,169.66

Profit and Loss Account 23,945.09 11,724.82

43,542.55 22,130.93


26

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27


SCHEDULE 6 - INVESTMENTSAs at 31st


March, 2007

Trade

Long Term

Quoted (Note 5 of Schedule 19)

- (Previous year 16,09,361) Fully paid Equity shares of Rs. 10 each of RPGTransmission Limited, transferred during the year in terms of the Scheme of Arrangement referred to in Note 1 of Schedule 19 - 2,047.61

Unquoted 5,000 Fully paid Equity shares of Hilltop Infrastructure Inc. USA (formerly known

as KEC Power Inc., USA,) a Joint Venture company. 11.45 11.45

5,000 Fully paid Equity shares of Rs. 10/- each of KEC Power India PrivateLimited, a Joint Venture company. (acquired during the year) 0.50 -

Current

Unquoted

Subsidiary company

10,000,000 Fully paid Ordinary shares of Naira 1.00 each of RPG TransmissionNigeria Limited (acquired pursuant to the Scheme of Arrangement referred to in Note 1 of Schedule 19) 34.52 -

46.47 2,059.06

Aggregate book value of quoted investments - 2,047.61

Aggregate market value of quoted investments - 3,151.93

Aggregate book value of unquoted investments 46.47 11.45


Rs. in lacs

Rs. in lacs

SCHEDULE 7 - INVENTORIES As at 31st March, 2008 As at 31st March, 2007

Stores 114.45 69.40

Dies and tools 2,455.13 2,303.79

2,569.58 2,373.19

Raw materials 13,474.25 9,527.99

Work-in-process 1,002.19 1,041.97

Erection materials 428.33 151.39

Finished goods 2,216.02 1,586.13

17,120.79 12,307.48

Scrap 842.91 376.22

20,533.28 15,056.89


28

SCHEDULE 8 - SUNDRY DEBTORS As at 31st March, 2008 As at 31st March, 2007

UNSECURED

(Considered good, unless otherwise stated)

Debts outstanding for a period exceeding six months

Considered good 49,766.29 32,141.72

Considered doubtful 4,122.75 368.65

53,889.04 32,510.37

Other debts 93,234.31 58,267.45

1,47,123.35 90,777.82

Less: Provision for doubtful debts (Note 28 of Schedule 19) 4,122.75 368.65

1,43,000.60 90,409.17

Rs. in lacs

SCHEDULE 9 - CASH AND BANK BALANCES As at 31st March, 2008 As at 31st March, 2007

Cash on hand 337.29 265.43

Cheques on hand 30.55 -

Bank balances with scheduled banks:

In current accounts 2,671.44 960.33

In fixed deposits 177.38 -

In margin deposits 370.52 0.84

3,219.34 961.17

Bank balances with non-scheduled banks

In current accounts 2,784.47 659.18

In margin deposits 130.73 149.48

In call deposits 4.21 3.26

In fixed deposits* 115.40 100.73

3,034.81 912.65

Remittances in transit 179.96 -

6,801.95 2,139.25

NOTE:* The Banks are having lien on Rs. 106.39 lacs (previous year Rs. 95.54 lacs) included in fixed deposits for the facilities extended

to the company


Rs. in lacs

29


SCHEDULE 10 - LOANS AND ADVANCESAs at

31st March, 2008As at

31st March, 2007

Advances recoverable in cash or in kind or for value to be received:

Unsecured - considered good [including Rs. 88.98 lacs 21,048.63 14,717.43

(previous year Rs. Nil) due from RPG Transmission Nigeria

Limited, a wholly owned subsidiary company.]

Considered doubtful 339.60 -

21,388.23 14,717.43

Less : Provision for doubtful advances (Note 28 of Schedule 19) 339.60 -

21,048.63 14,717.43

Excise duty recoverable from Government authorities(DGFT) 1,927.20 337.98

Balances with customs and excise authorities 1,617.33 973.68

Current Tax payments less provisions 1,220.31 225.58

Sundry deposits 1,200.68 918.70

27,014 .15 17,173.37

Rs. in lacs

SCHEDULE 11 - CURRENT LIABILITIES AND PROVISIONSAs at

31st March, 2008As at

31st March, 2007A. CURRENT LIABILITIES

Acceptances 36,045.13 34,984.04

Sundry creditors

(i) Total outstanding dues of Micro and Small enterprises(Note 17 of schedule 19)

- -

(ii) Total outstanding dues of sundry creditors other than (i) above 75,669.52 37,830.57

Advances from customers 14,340.37 22,477.60

Unclaimed Dividend# 23.60 6.04

Interest accrued but not due on loans 251.61 89.90 1,26,330.23 95,388.15

B. PROVISIONSTax provisions less payments 829.73 681.01

Proposed equity dividend 2,467.23 1,695.86

Tax on distributed profits 419.31 288.21

Compensated Absences 575.69 243.16

Gratuity 1,110.21 788.12 5,402.17 3,696.36

1,31,732.40 99,084.51

# The figures reflect the position as at year end. The actual amount to be transferred to the Investor Education and Protection Fund in this respect shall be determined on the due dates.


Rs. in lacs


30

SCHEDULE (contd.)Forming part of the Profit and Loss Account

SCHEDULE 12-CAPACITIES, PRODUCTION, STOCKS AND TURNOVER(figures in brackets are in respect of the previous year)

Class of Goods #

Quantity

Capacities per annum

Opening Stock Acquired* Purchases Production Closing Stock Turnover

Installed Quantity Value Rs. in lacs

Quantity Value Rs. in lacs


Quantity Quantity Value Rs. in lacs


Towers & Structurals Tonnes 1,13,000 3,496 1,586.13 4,212 2,240.39 23,586 12,587.26 1,26,859 4,820 2,216.02 1,60,013 2,79,288.71

(58,000) (6,031) (2,522.85) (-) (-) (9,790) (5,383.43) (86,419) (3,496) (1,586.13) (1,03,297) (2,02,684.65)

Scrap 2,158.74

(1,378.46)

1,586.13 2,240.39 12,587.26 2,216.02 2,81,447.45

(2,522.85) (-) (5,383.43) (1,586.13) (2,04,063.11)

NOTES :

A. Installed Capacities - on the basis of maximum utilisation of plant & machinery - are stated as certified by the Managing Director, but not verified by the auditors being a technical matter.

B. Towers and Structurals :

i. The quantities of production and turnover include components sold as extras or free replacements and fabrication / galvanising on behalf of customers with raw materials supplied by them. The value of turnover includes tower testing charges and processing charges for fabrication / galvanising work.

ii. Production includes the quantities manufactured by third party processors 34,086 MTs (previous year 35,625 MTs.).

iii. The value of turnover includes equipment , components and miscellaneous items connected with installation of transmission lines and substations and those for railway electrification works and items purchased with the object of resale against specific projects / orders. These items being dissimilar in nature, it would be impracticable to furnish quantitative information in respect thereof.

* Acquired under the Scheme referred to in Note 1 of Schedule 19.

# As per notification no.477(E) dated 25th July, 1991 issued by the Ministry of Industry, the company’s industrial undertaking is exempt from the licensing provisions of the Industries (Development and Regulation) Act, 1951. Accordingly, the requirement concerning disclosure of licensed capacity is not applicable.

Rs. in lacs

SCHEDULE 13 - OTHER INCOME 2007-08 Previous Year

Rent 4.68 10.64

Loss on sale / write off of fixed assets (net) (189.18) (4.41)

Insurance claims 41.57 0.16

Miscellaneous receipts 167.95 63.06

25.02 69.45

31


SCHEDULE (contd.)forming part of the Profit and Loss Account

Rs. in lacs

SCHEDULE 14 - COST OF MATERIALS 2007-08 Previous Year Consumption of raw materials and components:

Raw Material

Opening stock 9,527.99 6,599.81

Acquired during the year* 1,140.85 -

Add : Purchases 1,30,076.91 89,995.82 1,40,745.75 96,595.63

Less: Closing stock 13,474.25 9,527.99 1,27,271.50 87,067.64

Finished goods, work-in-process and scrap:

Opening stock

Work-in-Process 1,041.97 610.03

Finished Goods 1,586.13 2,522.85

Scrap 376.22 353.87 3,004.32 3,486.75

Purchase of finished goods 12,587.26 5,383.43

Acquired during the year*

Work-in-Process 161.26 -

Finished Goods 2,240.39 -

Scrap 182.04 -

2,583.69 -

Less: Closing stock:

Work-in-Process 1,002.19 1,041.97

Finished Goods 2,216.02 1,586.13

Scrap 842.91 376.22 4,061.12 3,004.32

14,114.15 5,865.86 1,41,385.65 92,933.50

* Acquired under the Scheme referred to in Note 1 of Schedule 19.

Quantitative information relating to consumption of raw materials and components: Quantity MT Rs.in lacs Quantity MT Rs.in lacs

Steel 1,34,323 43,891.36 94,903 26,592.03

Zinc 6,432 8,027.11 4,056 6,626.96

Bolts and nuts 6,562 4,582.65 5,039 2,887.89

Others* - 70,770.38 - 50,960.76

1,27,271.50 87,067.64

% %

Indigenous 72 91,230.10 65 56,671.72

Imported 28 ª 36,041.40 35 30,395.92 100 1,27,271.50 100 87,067.64

* Others include equipment, components and miscellaneous items connected with installation of transmission lines and substations and those for railway electrification works and items purchased with the object of resale against specific projects/orders. These items being dissimilar in nature, it would be impracticable to furnish the quantitative information in respect thereof.

ªIncludes consumption of imported raw materials and components acquired under the Scheme referred to in Note 1 of Schedule 19.

For the purposes of para 4D (c) of part II of Schedule VI to the Companies Act, 1956, components and spare parts are assumed to mean those incorporated in the products finally sold and not those used as spares for the repairs and maintenance of plant and machinery.


32

SCHEDULE (contd.)Forming part of the Profit and Loss Account

Rs. in lacs

SCHEDULE 15 - PERSONNEL EXPENSES 2007-08 Previous Year

Salaries, wages and bonus 10,749.35 8,466.22

Contribution to provident fund, gratuity and other funds 901.94 552.92

Welfare expenses 647.65 486.69

Workmen's compensation 26.47 40.80

12,325.41 9,546.63

Rs. in lacs

SCHEDULE 17 - INTEREST 2007-08 Previous Year

On fixed period loans 1,237.85 1,491.97

Others 5,568.17 4,539.91

6,806.02 6,031.88

Less: Recoveries - interest on deposits with banks, housingloans etc. [Tax Deducted at source Rs. 1.56 lacs (previous year Rs. 3.52 lacs)] 40.60 106.80

6,765.42 5,925.08

Rs. in lacs

SCHEDULE 16 - OTHER EXPENSES 2007-08 Previous Year

Tools, non-erection stores and maintenance spares 490.80 320.87

Power and fuel 912.50 560.35

Rent 1,262.91 965.68

Rates and taxes (net) 3,103.53 1,332.98

Excise duty 73.27 89.33

Insurance 1,382.27 860.50

Bank (guarantee,letter of credit and other) charges 4,561.72 4,929.39

Commission 5,048.02 3,666.06

Freight (net) 4,044.98 3,342.49

Coolie, cartage and forwarding 381.66 248.13

Repairs:

Plant and machinery 318.43 117.30

Buildings 287.52 100.80

Others 508.66 461.53

1,114.61 679.63

Travelling & conveyance 2,285.17 2,050.12

Professional fees 986.03 1,159.02

Provision for doubtful debts 947.75 368.65

Directors’ fees 10.10 5.85

Exchange (gain) / loss (net) (1,232.61) (431.58)

Miscellaneous expenses 5,130.94 3,547.75

30,503.65 23,695.22

33


SCHEDULE 18 - STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES1 Basis of preparation of Financial Statements: The accounts have been prepared on historical cost convention. The company follows the accrual basis of accounting. The Financial

Statements are prepared in accordance with the accounting standards specified in the Companies (Accounting Standards) Rules, 2006 notified by the Central Government in terms of section 211(3C) of the Companies Act, 1956 .

2 Revenue Recognition:

a. Sales and Services are recognised on delivery. Sales exclude sales tax/ value added tax and are after adjustments in respect of earlier years.

b. Revenue from erection contracts entered into on or after 1st April, 2003 is recognised based on the stage of completion determined with reference to the costs incurred on contracts and their estimated total costs. Revenue from other erection contracts is recognised on the percentage of completion method- as soon as services are rendered.

c. When it is probable that the total contract cost will exceed total contract revenue, expected loss is recognised as an expense immediately. Total contract cost is determined based on technical and other assessment of cost to be incurred. Liquidated damages/ penalties are accounted as per the contract terms wherever there is a delayed delivery attributable to the company.

d. i. Revenue from contracts awarded to Jointly Controlled Entity but executed by the company under the arrangement with the Joint Venture Partner (being in substance in the nature of Joint Controlled Operations, in terms of Accounting Standard (AS) 27 “Financial Reporting of Interests in Joint Ventures”), is recognised on the same basis as similar contracts independently executed by the company.

ii Profit/ Loss on contracts awarded to Jointly Controlled Entity and executed under profit sharing arrangement, is accounted for when determined by the Jointly Controlled Entity.

e. Dividend income is accounted as and when right to receive dividend is established.

f. Interest income is accounted on time proportion basis.

g. Premium payable on redemption of preference shares is provided out of the Securities premium account, before the shares are redeemed.

3 Inventories:

a. Raw materials, work-in-process, finished goods and stores and erection materials are valued at the lower of cost and net realisable value (NRV). Cost of purchased material is determined on the weighted average basis. Cost of Tools and Dies is amortised over its estimated useful life of five years. Scrap is valued at net realisable value.

b. Cost of work-in-process and finished goods includes material cost, labour cost and manufacturing overheads absorbed on the basis of normal capacity of production.

4 Fixed Assets:

Fixed assets are stated at cost of acquisition or construction net of impairment loss less accumulated depreciation. Cost comprises of purchase/ acquisition price, import duties, taxes and any directly attributed cost of bringing the asset to its working condition for its intended use. Financing cost on borrowings for acquisition or construction of fixed assets, for the period upto the date of acquisition of fixed assets or when the assets are ready to be put in use/ the date of commencement of commercial production, is included in the cost of fixed assets. Assessment of indication of impairment of an asset is made at the year-end and impairment loss, if any, is recognised.

5 Depreciation:

Depreciation is provided on the basis stated hereunder:

a. Tangible Assets: i. Fixed assets acquired pursuant to the Scheme of Arrangement are amortised at the rates so as to reduce them to their

estimated salvage value at the end of their useful lives as certified by the valuer, or at the rates prescribed in Schedule XIV to the Companies Act, 1956 whichever is higher.

The estimated useful lives of certain assets (including those referred to above) which are different from the principal rates specified in Schedule XIV to the Companies Act, 1956 are as follows:

Plant and Machinery – 1 to 19 years, Furniture and Fixtures – 10 years, Vehicles – 7 years and Computers – 4 years.

ii. Cost of buildings of temporary nature is amortised over 3 years.

iii. Leasehold land is amortised over the remaining period of the lease.

iv. Depreciation is provided in the manner and at the rates specified in Schedule XIV to the Companies Act, 1956, on straight line basis, on the remaining assets.

SCHEDULE (contd.)Forming part of the Balance Sheet and Profit & Loss Account


34

b. Intangible Assets: i. Brand is amortised over twenty years being the useful life certified by the independent valuer and goodwill is amortised

over five years. ii. Other intangible assets are amortised on straight line basis over the estimated useful life restricted to ten years of the

respective assets.

6 Investments:

Long-term investments are stated at cost. Provision is made for diminution, other than temporary, in the value of investments.

7. Sundry debtors as at the year end under the contract are disclosed net of advances relating to the respective contracts received and outstanding at the year end.

8. Foreign Currency Transactions:

a. Foreign branches ( Integral) i. Fixed assets are translated at the rates on the date of purchase/acquisition of assets and Inventories are translated at the

rates that existed when costs were incurred. ii. All foreign currency monetary items outstanding at the year end are translated at the year-end exchange rates. Income

and expenses are translated at average rates of exchange and depreciation is translated at the rates referred to in (a) (i) above for fixed assets.

The resulting exchange gains and losses are recognised in Profit and Loss Account. b. Other foreign currency transactions: i. Foreign currency transactions during the year are recorded at the rates of exchange prevailing at the date of transaction.

Exchange gains or losses realised and arising due to translation of the foreign currency monetary items outstanding at the year end are accounted in the Profit and Loss Account.

ii. Forward Exchange Contracts: In case of transactions covered by forward exchange contracts, which are not intended for trading or speculation purposes,

premium or discounts are amortised as expense or income over the life of the contract. Exchange difference on such contracts are recognised in the Profit and Loss Account in the year in which the exchange

rate change. Profit or loss arising on cancellation or renewal of such forward exchange contracts are recognised as income or expense

for the year.

9. Excise duty payable is accounted on production of finished goods.

10. Employee Benefits:

i. Defined Contribution Plans: The company’s contributions to the Provident Fund and the Superannuation Fund are charged to the Profit and Loss

Account. ii. Defined Benefit Plan / Long Term Compensated Absences : The company’s liability towards gratuity and compensated absences is determined on the basis of year end actuarial valuation

done by an independent actuary. The actuarial gains or losses determined by the actuary are recognised in the Profit and Loss Account as income or expense.

11. Taxation:

Current tax is determined as the amount of tax payable in respect of estimated taxable income for the period. Deferred tax is recognised, subject to the consideration of prudence, on timing differences resulting from the recognition of items in the financial statements and in estimating current income tax provision. The carrying amount of deferred tax asset/liability is reviewed at each balance sheet date.

12. Debts and loans and advances identified as doubtful of recovery are provided for.

13. Contingencies/ Provisions : Provision is recognised when the company has a present obligation as a result of past event; it is probable that an outflow of

resources embodying economic benefit will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimates of the expenditure required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates. A contingent liability is disclosed, unless the possibility of an outflow of resources embodying economic benefits is remote.

14. Basis of Incorporation of integral foreign operations: Figures in respect of the company’s overseas branches in Afghanistan, Algeria, Bangladesh, Ethiopia, Ghana, Kazakhstan, Kenya,

Lebanon, Libya, Namibia, Nigeria, Oman, Sri Lanka, Tunisia, Zambia(for the six months ended 30th September, 2007) and United Arab Emirates have been incorporated on the basis of Balance Sheet and the Profit and Loss Account audited by the auditors of the respective branches. In respect of overseas branches in Iran and Iraq the accounts for the year have been prepared and audited in India.

35


Schedule 19 - NOTES FORMING PART OF THE ACCOUNTS

1 Scheme of Arrangement:

1.1 A Scheme of Arrangement (the Scheme) between National Information Technologies Limited (NITEL), RPG Transmission Limited (RPGT), MP Power Line Limited (now known as Octav Investments Limited) (OCTAV), the company and their respective shareholders under section 391 to 394 of the Companies Act, 1956 was sanctioned by the Hon’ble High Court of Judicature at Bombay on 18th January, 2008 and at Madhya Pradesh, Jabalpur on 24th January, 2008 (for RPGT) and 25th January, 2008 (for NITEL). The Scheme, which has become operative from 30th January, 2008 upon filing of the certified copies of the Orders of the Hon’ble High Courts with the Registrar of Companies in the respective states, is effective from 1st October, 2007(The Appointed Date).

1.2 Pursuant to the Scheme, with effect from the Appointed Date, the Investment Division of the company has been transferred to OCTAV at book values. In consideration for the transfer, in terms of the Scheme, for every 25 equity shares of Rs.10 each held in the company, 2 fully paid up equity shares aggregating 30,14,869 fully paid up equity shares of Rs. 10 each of OCTAV, have been issued and allotted on 28th February, 2008, to the members of the company whose names appeared in the Register of Members on 18th February 2008 being the record date. Pursuant to the Scheme, the book value of net assets of the Investment Division of Rs. 2,047.61 lacs has been debited to ‘Amalgamation Reserve Account’.

1.3 Pursuant to the Scheme, with effect from the Appointed Date and after demerger of Investment Division referred to above, NITEL and RPGT (Transferor Companies) (engaged in a similar line of business as that of the company), have been merged with the company, as a going concern, with all its assets, liabilities, properties, rights, benefits and interest therein subject to existing charges thereon in favour of banks and financial institutions.

In consideration for the merger:

i. In case of NITEL, for every 15 equity shares of Re. 1 each fully paid up of NITEL, 2 fully paid up equity shares aggregating 47,15,424 fully paid up equity shares of Rs. 10 each of the company have been issued and allotted on 29th February, 2008, to the shareholders of NITEL whose names appeared in the Register of Members, as on 19th February, 2008, being the record date.

ii. In case of RPGT, for every 9 equity shares of Rs. 10 each fully paid up of RPGT, 4 fully paid up equity shares aggregating 69,42,578 fully paid up equity shares of Rs. 10 each of the company, have been issued and allotted to the shareholders of RPGT whose names appeared in the Register of Members as on 19th February 2008, being the record date. In terms of the Scheme for 1 Zero Coupon Redeemable Preference share of Rs 100/- each held in RPGT, 1 Zero Coupon Redeemable Preference share of Rs. 100/- each aggregating 1,27,980 preference shares were to be issued by the company. However, consequent to redemption on 28th January, 2008 of the preference shares by the company, issue and allotment of Zero Coupon Redeemable Preference shares of the company referred to above was not required to be made.

1.4 All the staff, workmen and employees of RPGT and NITEL in service as on 1st October, 2007 have become staff, workmen and employees of the company without any break in their service.

1.5 In terms of the Scheme, the company recorded all the assets including investments and liabilities appearing in the books of account of RPGT and NITEL and transferred to and vested in the company at their fair values as on 1st October 2007. The fair value of fixed assets of RPGT and NITEL is as certified by the independent valuers. The difference of Rs. 10,004.61 lacs between the fair value of net assets of RPGT and NITEL transferred to the company, and the value of equity shares allotted by the company as per paragraph 1.3 above has been credited to ‘Amalgamation Reserve Account’. Further, in terms of the Scheme, the balance of Rs. 7957.00 lacs remaining in the ‘Amalgamation Reserve Account’ has been transferred to ‘Reserve for Amortisation of Brand Account’(net of deferred tax). As per the Scheme, out of the balance in ‘Reserve for Amortisation of Brand Account’ an amount equal to annual amortisation of brand shall be credited to the Profit and Loss Account each year so that overall depreciation/amortisation gets reduced to that extent. Accordingly, Rs. 600 lacs being the amortisation of brand for the period 1st October 2007 to 31st March 2008 has been credited to the Profit and Loss Account by netting it with Depreciation/Amortisation.

1.6 The amalgamation has been accounted for under the Purchase method as prescribed in Accounting Standard (AS-14) - “Accounting for amalgamations”. As per AS-14, the excess of the fair value of the net assets of Transferor Companies over the amount of the consideration is required to be credited to Capital Reserve. However, in terms of the Scheme the said difference amounting to Rs. 10,004.61 lacs has been credited to ‘Amalgamation Reserve Account’ and is being recognised in the Profit and Loss Account in the manner stated in paragraph 1.5 above.

SCHEDULE (contd.)Forming part of the Balance Sheet and Profit & Loss Account


36

2 Share Capital:

2.1 3,76,35,854 equity shares of Rs. 10/- each allotted in an earlier year for consideration other than cash for acquisition of Power Transmission Business.

2.2 1,16,58,002 equity shares of Rs. 10/- each allotted during the year for consideration other than cash to the shareholders of the erstwhile RPG Transmission Limited (RPGT) and the erstwhile National Information Technologies Limited pursuant to the Scheme of Arrangement referred to in Note 1 above.

The company is in process of issue and allotment of 750 fully paid up equity shares of Rs. 10 each to a trustee against 1,688 equity shares of RPGT, where rights have been kept in abeyance under section 206A(b) of the Companies Act, 1956. On settlement of the relevant court cases / issues, the equity shares to be issued to a trustee will be transferred.

2.3 10,40,280 (Previous year 12,99,966) Redeemable Preference shares of Rs. 100/- each are allotted in an earlier year for consideration other than cash for acquisition of Power Transmission Business, on the following terms and conditions:

7,25,000(7,25,000)

Redeemable Preference Shares of Rs. 100/- each are redeemable on 18th March, 2013 at a premium of Rs. 100/- per share with put and call option from 19th March, 2010. Premium thereon to be adjusted in case option is exercised.

2,50,000(2,50,000)

Redeemable Preference Shares of Rs. 100/- each are redeemable on 25th March, 2013 at a premium of Rs. 100/- per share with put and call option from 26th March, 2010. Premium thereon to be adjusted in case option is exercised.

65,280(65,280)

Redeemable Preference Shares of Rs. 100/- each are redeemable on 13th May, 2013 at a premium of Rs. 100/- per share with put and call option from 14th May, 2010. Premium thereon to be adjusted in case option is exercised.

* -(50,000)

Redeemable Preference Shares of Rs. 100/- each redeemable on 1st February, 2010 at a premium of Rs. 67.71/- per share.

@ -(2,09,686)

Redeemable Preference Shares of Rs. 100/- each redeemable on 1st February, 2009 at a premium of Rs. 73/- per share.

The figures in brackets are in respect of the previous year.

* redeemed on 29th June, 2007 at a premium of Rs. 34.11/- per share

@ redeemed on 29th June, 2007 at a premium of Rs. 45.24/- per share

The above excludes 1,27,980 Zero Coupon Redeemable Preference shares of Rs 100 each issued by the erstwhile RPGT, which is merged with the company pursuant to the Scheme of Arrangement referred to in Note 1 above, which were redeemed on 28th January, 2008 by the company.

3 Secured Loans:

3.1 Loans and advances from Banks:

a. Rs. 12,533.02 lacs (previous year Rs. 16,594.16 lacs) secured by first charge by hypothecation of tangible movable assets (including book debts) and is further secured by mortgage of the company’s immovable properties at Butibori and Jaipur.

b. Rs. 30,361.77 lacs (previous year Rs. 15,471.51 lacs) guaranteed by bank, which in turn is secured by security, stated against (a) above.

c. Rs. 979.75 lacs (previous year Rs. 1,382.60 lacs ) secured by assignment of certain book debts.

d. Rs. 214.20 lacs (previous year Rs. 261.80 lacs) secured by a first charge by way of hypothecation of specific movable plant and machinery, equipment and other assets acquired/ to be acquired by the company under the Asset Credit Scheme of IDBI together with machinery spares, tools and accessories and other movables.

e. Rs. 3,896.86 lacs (previous year Rs. 4,891.42 lacs) secured by hypothecation of whole of movables (save and except book debts) and equitable mortgage of the company’s immovable properties at Butibori, Nagpur and subject to prior charge referred to in (a) above on movable assets.

f. Rs. 2,674.90 lacs (previous year Nil) secured by (i) hypothecation of whole movables (save and except book debts) at Jabalpur and Gurgaon, subject to prior charge in favour of certain banks, (ii) hypothecation of whole of movables at Coimbatore and (iii) equitable mortgage of the company’s immovable properties at Jabalpur and Coimbatore.

g. Rs. 8,395.50 lacs (previous year Rs. Nil) secured by first charge on moveable assets of NITEL Division including Telecom Transmission Tower, both present and future.

37


3.2 Loans and advances from Others:

Rs. 6.05 lacs (previous year Rs. 26.74 lacs) secured by hypothecation of vehicles.

3.3 Deferred payment credits:

Rs. 0.33 lac (previous year Rs. 5.06 lacs) secured by hypothecation of the respective assets purchased under the scheme.

4 Fixed Assets:

a. A plot of leasehold land stated to measure 41 bighas and 1 biswas per deed dated 17th January, 1968, was found short by 24 bighas and 18 biswas on actual measurements, for the possession of which the suit was filed by KEC Infrastructures Limited (now known as Summit Securities Limited) on 19th October, 1976 in the District Court against the vendors in occupation of the adjacent land. On dismissal of the suit, KEC Infrastructures Limited (now known as Summit Securities Limited) preferred an appeal in the Rajasthan High Court on 7th December, 1998, against the order of the District Court.

b. Buildings at Jaipur, Butibori, Bhopal and Research and Development Centre, Vashi, New Mumbai, are constructed on Leasehold land.

5 In the previous year, in terms of the Corporate Debt Restructuring Scheme of the erstwhile RPG Transmission Limited (RPGT) with their lenders, 12,99,451 shares of RPGT having book value of Rs. 1,653.31 lacs were pledged in favour of IDBI Trusteeship Services Limited.

6. Claims against the company not acknowledged as debt

Sr. No Nature of Claims

Relating to various years comprise in the period (Rs. in lacs)

Previous Year(Rs. in lacs)

1 Sales Tax *# (Tax/Penalty/Interest) 1991-20081991-2003

670.491,294.50

2 The Central Excise Act *# (Tax/Penalty/Interest) 1988-20071994-2007

548.99344.84

3 Entry Tax# (Tax/Penalty/Interest) 1995-1999 29.00 29.00

4 Civil Suits# 1993-20081993-1997

23.1914.77

5 Claims by a party purporting to be a party to contracts entered into by the company, which company has been legally advised, are in any event extinguished and time barred

1982-1987 563.00 -

Total 1,834.67 1,683.11

* These claims which mainly relate to the issues of applicability, issue of disallowance of cenvat credit and in case of Sales Tax, also relate to the issue of submission of ‘C’ forms. Previous year also include the issue of modification of entitlement of sales tax deferral and exemption under 1993 packages Scheme of Incentive of the Government of Maharashtra.

# Future ultimate outflow including for the matters referred to in Note 9 below is uncertain as it depends on the decision by respective Court/Authorities.

(Rs. in lacs)

Previous Year

(Rs. in lacs)7. a. Contingent liabilities not provided for in respect of:

i. Income tax of Summit Securities Limited(formerly known as KEC Infrastructures Limited)

Refer Note 9 (c) below

ii. Demands of employees/subcontractors Amount not determinable

b. Bills discounted 6,599.00 4,523.92

8. Estimated amount of contracts remaining to be executed on capital account not provided for (net of capital advances) 2,529.80 213.27


38

9. a. Provision for taxation has been computed on the basis that section 43B of the Income Tax Act,1961, is applicable to amounts payable in India.

b. Contingent liability towards income tax at a overseas unit for financial year 1999-00 to 2001-02 in respect of matters pending at Appellate level amounting to Rs. 84.65 lacs (previous year Rs. 84.65 lacs).

c. In terms of the Composite Scheme of Arrangement under which the Power Transmission Business was aquired by the company in an earlier year, the company has taken over contingent liabilities, interalia, of income tax of KEC Infrastructures Limited (now known as Summit Securities Limited). In case, the eventual decision in pending appeals (excluding the matters in respect of which Summit Securities Limited /department is in appeal and Summit Securities Limited expects to succeed based on decision in other assessment years) in respect of certain disputed items is unfavourable to Summit Securities Limited, it is estimated that the contingent liability for taxation in respect of pending appeals could be in the region of Rs.776.66 lacs (previous year Rs. 776.66 lacs) and in turn the obligation for the company would be of the similar amount.

10. Erection and Sub-contracting expenses represents:

(Rs. in lacs)Previous Year

(Rs. in lacs)

Construction materials consumed 11,196.14 11,592.98

Stores consumed 1,403.07 1,326.94

Subcontracting expenses 39,204.70 32,058.99

Power, fuel and water charges 770.80 452.82

Construction transport 6,204.02 4,549.19

Others 3,021.79 2,721.94

Total 61,800.52 52,702.86

11. Disclosure under the Accounting Standard - 7 “Construction Contracts”

As Accounting Standard – 7 “Construction Contracts” comes into effect in respect of accounting period commencing on or after 1st April, 2003; the information given below is only in respect of the construction contracts entered into on or after 1st April, 2003:


(Rs. in lacs)

a. i. Contract Revenue recognised during the year 1,69,709.84 120,199.95

ii. Method used to determine the contract revenue recognised and the stage of completion of contracts in progress Refer note 2 (b) of Schedule 18

b. Disclosure in respect of contracts in progress as at the year end

i. Aggregate amount of costs incurred and recognised profits (less recognised losses) 2,73,515.13 1,69,161.89

*ii. Advances received 10,393.99 14,915.93

*iii. Retentions receivable 8,681.81 7,743.37

iv. Gross amount due from customers 4,072.75 3,698.08

- Included under Schedule 8 – Sundry Debtors net of adjustment referred to in Note 7 of Schedule 18 3,779.93 1,532.17

v. Gross amount due to customers 8,001.89 13,729.29

- Included in Sundry Creditors under Schedule 11 – Current Liabilities and Provisions net of adjustment of respective debit balances of sundry debtors 612.95 2,324.27

*Net of adjustment referred to in Note 7 of Schedule 18.

39


12. Managerial remuneration:


(Rs. In lacs)

To the Managing Director @

Salary 114.88 # # 87.33

Commission 35.00 -

Perquisites 1.08 0.94

Contribution to provident fund and other Funds # 12.61 10.70

163.57 98.97

To directors, other than the Managing Director Fees *10.10 5.85

Notes: # Excludes provision for Gratuity which is determined on the basis of actuarial valuation done on overall basis for the company. * Excludes sitting fees Rs.0.93 lac paid to directors of the erstwhile RPG Transmission Ltd. during the period October 1st , 2007 (the

appointed date) to January 30th, 2008 (the effective date), borne by the company in terms of the Scheme of Arrangement referred to in Note 1 above.

# # Excludes Rs. 5.36 lacs paid towards the encashment of leave accumulated as the Managing Director of the KEC Infrastructure Limited, borne by the company in terms of the Composite Scheme of Arrangement.

@ Appointed w.e.f. January 02, 2006.

Calculation of Net Profit Under Section 349 of the Companies Act, 1956 for the year ended 31st March, 2008

(Rs. in lacs) (Rs. in lacs)

Profit before tax as per the Profit and Loss Account (A) 26,185.32

Add:

Managerial Remuneration 173.67

Depreciation/Amortisation(Net) 2,506.50

Loss on sale/Write off of Fixed assets (Net) 189.18

Provision for doubtful debts 947.75

(B) 3,817.10

Less:

Depreciation as per Section 350 of the Companies Act, 1956. 1,642.11

Amortisation of the Leasehold land and intangible assets 1,464.39

Loss on sale / Write off of Fixed assets as per Section 350 of the Companies Act, 1956 (Net)

189.18

(C) 3,295.68

Net Profit as per Section 349 of the Companies Act, 1956 (A+B-C) 26,706.74

Commission to the Managing Director @ 0.75% of the Net Profit, restricted to 35.00

13. a. Payment to statutory auditors :(Including Service tax, where applicable)


(Rs. in lacs)

As auditors 37.08 37.08

company law matters - 0.36

In other capacity 45.00 36.54

Reimbursement of out of pocket expenses 3.97 3.61

b. Miscellaneous expenses include fees Rs.59.73 lacs (previous year Rs. 43.18 lacs) paid to branch auditors.


40

14. Earnings in foreign exchange and expenditure in foreign currency (ascertained on mercantile basis of accounting except that depreciation on assets imported into India and increase/decrease in stock of imported finished goods not considered):


(Rs. in lacs)

A. Earnings :Export of goods:At FOB price 52,748.71 39,886.58At invoiced value (Tower testing charges) 448.99 234.39Sales & Services: Overseas projects 1,19,457.54 85,123.65Interest 7.13 66.27Others (Insurance claims, etc.) 84.60 40.42

Gain on Foreign Exchange (net) 1,232.61 431.58

B. Expenditure :

Expenses of overseas projects (including Foreign taxes) 96,657.84 75,038.93Commission 2,374.21 2,150.26Interest paid to Indian FI’s/Banks 1,106.72 981.55Other interest 303.17 8.78Professional fees 66.08 262.13Others (travelling, bank guarantee/letter of credit charges, etc.) 848.30 1,306.20

15. Direct imports on CIF basis :


(Rs. in lacs)

Raw Materials and components 3,539.06 1,739.43

Spares parts 22.50 17.65

Purchase of fixed assets 370.44 349.98

16. Research and Development Expenses :


(Rs. in lacs)

Revenue expenses charged to Profit and Loss Account (including depreciation on fixed assets) 196.25 182.99

17. There is no supplier covered under the Micro, Small and Medium Enterprises Development Act, 2006 (the Act). This information and that given in Schedule11-“Current Libilities and Provisions” has been determined based on the details regarding the status of the supplier obtained by the company. This has been relied upon by the auditors.

18. Major components of deferred tax assets/liabilities arising on account of timing differences are:


(Rs. in lacs)

Deferred Tax LiabilityDepreciation 4,468.24 3,347.64Deferred Tax AssetsPreliminary and other expenses 7.26 10.78

Provision for doubtful debts and advances 1,602.77 124.09

Expected loss on erection contracts - 309.67

Amalgamation Expenses 176.75 -

Expenses debited to Profit and Loss Account disallowable u/s 43B 594.80 -

Employee Benefits 82.72 -2,464.30 444.54

41


19 a. The Accounting Standard - 15 on ‘Employee benefits’ prescribed by the Central Government, has become applicable to the company from 1st April, 2007. In accordance with the transitional provisions specified in the said Accounting Standard Rs. 163.02 lacs [net of deferred tax assets Rs.82.72 lacs (net)] has been adjusted against the General Reserve as at 1st April, 2007. Further, the liability for the year determined as per the Standard, has been accounted for in the financial statements. The effect on the profit for the year consequent to the implementation of the provisions of the Standard is not material.

b. Details of Employee Benefits as required by the Accounting Standard-15 “Employee Benefits” are as follows :-

Rs. in lacs

1 Defined Contribution Plans

During the year ended 31st March, 2008, the company has recognised the following amounts in the profit and loss account:

- Contribution to Provident Fund and Family Pension Fund 284.78

- Contribution to Superannuation Fund 85.93

The above amounts are included in ‘Contribution to provident fund, gratuity and other funds’ under ‘Personnel Expenses’ in Schedule 15.

2 Defined Benefit Plan (Funded)

a. A general description of the Employees Benefit Plan:

The company has an obligation towards gratuity, a funded defined benefit retirement plan covering eligible employees. The plan provides for lump sum payment to vested employees at retirement, death while in employment or on termination of the employment of an amount equivalent to 15 days salary payable for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service.

b. Details of defined benefit plan - As per Actuarial Valuation as on 31st March, 2008

Particulars Rs. in lacs

I Components of employer expense

1 Current Service cost 94.68

2 Interest Cost 120.87

3 Expected return on Plan Assets (46.83)

4 Curtailment Cost/(Credit) -

5 Settlement Cost/(Credit) -

6 Past Service Cost -

7 Actuarial Losses / (Gains) 72.86

8 Effect of the limit in Para 59 (b) of AS 15 -

9 Total expense recognised in the profit and loss account

(included in ‘Contribution to provident fund, gratuity and other funds’ under ‘Personnel Expenses’ in Schedule 15) 241.58

II Actual Contribution and Benefits Payments for the year ended 31st March, 2008

1 Actual Benefits Payments (195.30)

2 Actual Contributions 269.03

III Net asset/(liability) recognised in the Balance Sheet as at 31st March, 2008

1 Present Value of Defined Benefit Obligation 1,994.23

2 Fair Value of Plan Assets 884.02

3 Funded Status [Surplus/(Deficit)] (1,110.21)

4 Unrecognised Past Service Costs -

5 Net asset/(liability) recognised in the Balance Sheet (1,110.21)


42

Particulars Rs. in lacs

IV Change in Defined Benefit Obligation during the year ended 31st March, 2008

1 Present value of Defined Benefit Obligation as at 1st April, 2007 1,120.07

2 Current Service Cost 94.68

3 Interest Cost 120.87

4 Curtailment Cost/(Credit) -

5 Settlement Cost/(Credit) -

6 Plan amendments -

7 Acquisitions/ Amalgamations 781.71

8 Actuarial Losses/ (Gains) 72.20

9 Benefits paid (195.30)

10 Present value of Defined Benefit Obligations as at 31st March, 2008 1,994.23

V Change in Fair Value of Plan Assets during the year ended 31st March, 2008

1 Plan Assets as at 1st April, 2007 293.61

2 Acquisition / Amalgamation 470.51

3 Expected return on Plan Assets 46.83

4 Actuarial Gains/ (Losses) (0.66)

5 Actual company Contributions 269.03

6 Benefits paid (195.30)

7 Plan Assets as at 31st March, 2008 884.02

VI Actuarial Assumptions

1 Discount Rate 8.00

2 Expected Return on plan assets 9.30

3 Salary escalation Rate 6.00

VII The expected rate of return on the plan assets is based on the average long term rate of return expected on investments of the Fund during the estimated term of the obligations.The actual return on plan assets is Rs 46,17,488/-

VIII The assumption of the future salary increases, considered in actuarial valuation, takes into account the inflation, seniority, promotion and other relevant factors.

IX The major categories of Plan Assets as a percentage of the total plan assets

1 Insurer Managed Funds 100%

2 Others 0%

3 Total 100%

X Experience Adjustments

1 Present value of Defined Benefit Obligation as at 31st March, 2008 1,994.23

2 Fair Value of Plan Assets as at 31st March, 2008 884.02

3 Funded Status [Surplus/(Deficit)] (1,110.21)

4 Experience adjustment on Plan Liabilities (72.20)

5 Experience adjustment on Plan Assets 0.66

43


20. The derivative instruments, which are not intended for trading or speculative purpose, outstanding as at March 31, 2008 are as follows:

Forward Exchange Contracts

Currency Buy/ Sell Cross currencyForeign Currency in lacs

31.3.08 31.3.07USD Sell INR 90.00 40.00USD Sell CHF - 8.07USD Buy INR - 16.39EUR Sell INR 50.00 18.73

The year end net monetary foreign currency exposure that have not been hedged by a derivative instrument are given below:

Receivables:

As at 31st March, 2008 As at 31st March, 2007Currency FC in lacs Rs. in lacs FC in lacs Rs. in lacs

AED 954.57 10,424.08 872.09 10,324.63AFA 1,751.12 1,412.45 510.28 450.01BTS 9.37 5.48 - -CAD 1.04 40.43 - -DA 155.97 94.58 3,002.96 1,817.39ETB - - 27.43 140.69EUR 25.55 1,620.59 32.25 1,902.30IRR 3,178.08 13.66 3,050.59 14.95KSH - - 91.96 57.94KWD 1.80 272.21 2.23 335.69KZT - - 518.19 182.09LBP 12,159.80 322.23 20,599.42 591.29LYD 11.45 390.27 7.81 263.75OMR 16.63 1,727.93 - -NGN - - 1.00 0.34PHP 0.44 0.42 0.45 0.40QR 0.03 0.36 0.03 0.39SLR 252.40 93.84 242.26 96.32SR - - 125.55 1,455.63

SYP 0.57 0.45 0.57 0.47ZMK 132,951.27 1,435.87 1,21,676.93 1,240.83

Payables:*

CHF - - 13.17 491.80ETB 58.60 247.90 - -GHC 10.81 450.73 - -GBP - - 1.90 163.17JPY 3.13 1.27 3.13 1.16KSH 736.58 463.82 - -KZT 18,252.91 6,069.09 - -NGN 2,594.84 889.77 - -NAD 338.40 1,671.99 - -OMR - - 0.43 48.87SR 186.66 1,997.26 - -

TND 7.01 245.07 71.04 2,376.48USD 850.37 34,116.70 1,017.06 44,552.61

Note: *The above excludes term loan taken in foreign currency Rs.8,395.50 lacs which has been swapped with Rupee currency fixed interest rate loan.


44

21. Related Party Disclosures

a. Name and nature of relationship of the party where Control exists:

Subsidiary

i. RPG Transmission Nigeria Limited - a wholly owned subsidiary company

b. Parties with whom transactions have taken place :

Subsidiary

i. RPG Transmission Nigeria Limited - a wholly owned subsidiary company

Joint Ventures:

i. Faiz Abdul Hakim Al-Sharif Group and KEC Company Ltd., Saudi Arabia

ii. Hilltop Infrastructure Inc. USA (Formerly known as KEC Power Inc. USA)

iii. KEC Power India Private Limited

Key Management Personnel : Mr. R. D. Chandak – Managing Director

c. Transactions with Related Parties

2007-08 (Rs. in lacs)

Previous Year (Rs. in lacs)

Subsidiary :

Commission paid 16.26 -

Advance given/Expenses recovered 0.43 -

Joint Ventures :

i. Faiz Abdul Hakim Al-Sharif Group and KEC Company Limited, Saudi Arabia

Advance given - 1,587.22

Advance received for execution of project 3,633.13 -

Expenses recovered 580.99 -

Exchange loss accounted 102.94 -

Share of loss 155.96 399.58

Share of profit in respect of projects referred to in Note 24(c) 474.81 -

ii. Hilltop Infrastructure Inc. USA

Purchase of Investment - 11.45

iii. KEC Power India Private Limited

Investment made 0.50 -

Key Management Personnel :

Mr. R. D. Chandak – Managing Director For remuneration refer Note 12 above

d. Balances outstanding as at year end in respect of these transactions:

Balance as at 31.03.08

(Rs. in lacs)

Balance as at 31.3.07

(Rs. in lacs)

Joint Ventures

Faiz Abdul Hakim Al-Sharif Group and KEC Company Ltd., Saudi Arabia 1,370.55 Cr. 1,465.68 Dr.

Subsidiary

RPG Transmission Nigeria Limited 88.98 Dr. -

45


22. Disclosure for operating leases under Accounting Standard 19 – “Leases”

2007-08 (Rs. in lacs)

Previous Year(Rs. in lacs)

Disclosure in respect of the agreements entered into after 1st April, 2001 for taking on leave and license / under operating leases the residential / office premises and warehouses, including furniture and fittings and elevators therein, as applicable, and machinery, is given below :

1 Lease payments recognised in the Profit and Loss account for the year. [includes minimum lease payment Rs.21.15 lacs (previous year Rs. 16.40 lacs)]

845.95 608.95

2 i. Under some of the agreements, refundable interest free deposits have been given

ii. Some of the agreements provide for increase in rent

iii. Some of the agreements provide for early termination by either party with a notice period which varies from 15 days to 3 months

iv. Some of the agreements contain a provision for its renewal

3 Future minimum lease payments under the agreements, which are non-cancelable are as follows :

i. Not later than one year 33.66 41.59

ii. Later than one year and not later than five years - -

23. Particulars in regard to bank balances with non-scheduled banks:

Name of the Bank

Maximum Balances at any time during the year Balances as on

2007-08 2006-07 31.03.08 31.03.07

Rs. in lacs Rs. in lacs Rs. in lacs Rs. in lacs

In current accounts :

Masraf-El-Umma Bank, Tripoli (Libya) 163.32 280.51 38.10 55.76

Metropolitan Bank, Philippines 0.43 3.68 0.42 0.40

Commercial Bank of Ethiopia, Adis Ababa (Ethiopia) 650.88 503.76 409.15 31.25

Commercial Bank of Ethiopia, Dessie (Ethiopia) 0.76 16.77 0.03 0.76

Commercial Bank of Ethiopia, Bedele (Ethiopia) 0.02 4.87 0.01 0.02

Commercial Bank of Ethiopia, Meckele (Ethiopia) 0.20 17.04 - 0.20

Commercial Bank of Syria, Syria 0.82 0.82 0.74 0.79

First Gulf Bank 1,780.12 17.54 1.10 2.49

Al- Ahli Bank of Kuwait 318.85 795.54 1.97 70.14

Commercial Bank of Qatar 0.39 2.03 0.36 0.39

UBA Bank Nigeria 0.34 0.34 0.33 0.34

Bank Tejarat (Irano-British Bank) Iran 0.51 0.51 0.49 0.51

Bank Tejarat (Bank of Iran & The Middle East) Iran 0.01 0.01 0.01 0.01

Bank Mellat (Bank of Tehran), Tehran, Iran 1.94 1.59 1.94 1.59


46

STB Bank, Tunisia 1,432.48 777.10 155.71 206.82

Banque Nationale D’ Algerie 3,568.89 1,333.76 840.30 11.96

Al- Ahli Bank of Kuwait 383.17 538.97 21.93 22.78

First Gulf Bank, Abu Dhabi 808.60 2,136.35 5.05 0.11

Union National Bank, Abu Dhabi 295.99 292.60 0.73 2.71

Abudhabi Commercial Bank, Abudhabi 1,057.84 1,930.07 1.23 -

National Bank of Abu Dhabi, U.A.E. 464.89 1,201.24 2.09 0.50

Barclays Bank PLC, U.A.E. 2.57 633.41 *- 2.57

Habib Bank Zurich, U.A.E. 529.63 2.88 5.01 0.99

Bank Muskat 13.74 0.90 2.92 0.22

Intercontinental Bank of Lebanon 82.29 73.39 1.61 73.39

Bank TuranAlem, Tenge 2,712.17 14.00 1,143.15 13.98

Indo Zambia Bank 158.05 793.85 134.16 158.50

Taib Bank 30.14 - 0.15 -

Standard Bank, Namibia 40.84 - 15.78 -

2,784.47 659.18

In Margin deposits

Union National Bank, Abu Dhabi 18.94 31.85 - 18.94

Bank Tejarat (Irano-British Bank) 0.05 0.05 0.05 0.05

Bank Habitat, Lebanon 46.49 46.49 42.93 46.49

STB Bank, Tunisia 87.75 84.00 87.75 84.00

130.73 149.48

In Call deposits :

Union National Bank, Abu Dhabi 600.35 2,305.78 4.21 3.26

In Fixed deposits :

Bank Tejarat (Irano-British Bank) 0.44 0.45 0.39 0.44

Bank Mellat (Bank of Tehran) Tehran 4.74 4.82 4.16 4.74

Union National Bank, Abu Dhabi 47.40 47.74 - 47.40

First Gulf Bank - Abu Dhabi 106.40 48.15 106.40 48.15

Bank Turan Alem Tenge -Kazakhstan 4.45 4.00 4.45 -

115.40 100.73

Note : Maximum balances with non-scheduled banks are translated at the year end rates of exchange.

*Current year being Scheduled Bank, closing balance included accordingly in Schedule 9-“Cash and Bank Balances”

47


24. Disclosure in respect of Joint Ventures under the Accounting Standard 27 – “Financial Reporting of Interests in Joint Ventures” :

Ownership interest

Current Year Previous Year

a. Jointly Controlled Entities

i. Faiz Abdul Hakim Al-Sharif Group and KEC Company Limited., Saudi Arabia 20% 20%

ii. Hiltop Infrastructure Inc. USA (formerly known as KEC Power Inc. USA ) 50% 50%

iii. KEC Power India Private Limited 50% -

b. Aggregate amount of assets, liabilities, income and expenditure related to the company’s interests in jointly controlled entities:

Rs. in Lacs (Rs. In lacs)

i. Assets

Fixed assets - 0.43

Cash & Bank Balances 28.15 28.55

Debtors 1,401.09 1,270.46

Loans & Advances 68.88 34.71

Subtotal 1,498.12 1,334.15

ii. Liabilities

Trade payable 722.14 280.48

Advances from customers 781.52 -

Short term loans - 374.04

Subtotal 1,503.66 654.52

iii. Income * 120.42 0.06

iv. Expenditure*

Construction Cost 66.62 71.77

Other Expenditure 80.58 23.47

Bank charges 123.37 139.01

* Excludes items of income and expenditure disclosed in Note 24 (c ) below

c. In respect of contracts as referred to in Note 2(d) (i) of Schedule 18, entered into and under execution during the year the company has recognised Turnover Rs.3,160.63 lacs, Cost of material Rs. 2,176.74 lacs, Erection & subcontracting expenses Rs. 26.10 lacs, Personnel expenses Rs. 20.56 lacs, Other expenses Rs. 462.42 lacs and Compensation to Jointly Controlled Entity’s partner Rs. 142.43 lacs based on the accounts of Jointly Controlled Entity reviewed by its auditors.

25. Basic / diluted earnings per share has been calculated by dividing the profit for the year after taxation of Rs.17,216.09 lacs (previous year Rs. 10,464.12 lacs), by 4,35,14,854 (previous year 3,76,85,854) being the weighted average number of equity shares outstanding during the year.


48

26. Arising from the merger, the company is now primarily engaged in the business of Engineering, Procurement and Construction business (EPC). As such there is no other separate reportable segment as defined by Accounting Standard -17 “Segment Reporting”.

27. Excise duty shown in Schedule -16 “ Other Expenses” is net of Rs 28.92 lacs (previous year includes Rs. 163.67 lacs ) being excise duty related to the difference between the closing stock and opening stock of the finished goods.

28. Provision for doubtful debts and for doubtful advances as at the year end include Rs. 2,807.76 lacs and Rs. 338.19 lacs respectively relating to the Sundry Debtors/Loans and Advances transferred to the company in terms of the Scheme of Arrangement referred to in Note 1 above.

29. Maximum balance outstanding any time during the period in respect of Commercial Paper issued against stand by facility for certain banks is Rs. 2,700.00 lacs (previous year Rs. 4,020.00 lacs). However no balance was outstanding as at the year end in respect thereof.

30. In view of the matter stated in Note 1 above, the figures of the current year are not directly comparable with those of the previous year. Further previous year’s figures have been regrouped where necessary to conform with those of the current year.

Signatures to Schedules 1 to 19 which form an integral part of accounts.

For and on behalf of the Board

H. V. GOENKA Chairman

VARDHAN DHARKAR R. D. CHANDAK Chief Financial Officer Managing Director

CH. V. JAGANNADHA RAO A.T.VASWANI Company Secretary Director


49


Rs. in lacs

Notes 2007-08 Previous YearA. CASH FLOW FROM OPERATING ACTIVITIES :

PROFIT BEFORE TAXATION 26,185.32 15,985.77 Adjusted for : Depreciation/Amortisation (Net) 2,506.50 3,343.50 Unrealised foreign exchange (gain)/ loss (net) 534.86 (1,364.41) Loss on sale of fixed assets (net) 189.18 4.41 Interest expenses 6,806.02 6,031.88 Interest income (40.60) 9,995.96 (106.80) 7,908.58 OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES 36,181.29 23,894.35 Changes in : 1 Trade and other receivables 2 (31,858.14) (23,672.10) Inventories (903.92) (2,566.89) Trade and other payables 2 6,068.22 (26,693.84) 4,104.91 (22,134.08) CASH GENERATED FROM OPERATIONS 9,487.45 1,760.27 Direct Taxes Paid (net of refund of taxes) (8,973.57) (3,873.76) Fringe Benefit Tax paid (80.00) (9,053.57) (71.81) (3,945.57) NET CASH FROM /(USED IN) OPERATING ACTIVITIES 433.88 (2,185.30)

B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of fixed assets(after adjustment of increase/decrease in capital work-in-progress and advances for capital expenditure)

(3,378.77) (1,177.81)

Sale of fixed assets 160.80 60.47 Interest received 40.60 146.43 Purchase of long term investments (0.50) (11.45) NET CASH USED IN INVESTING ACTIVITIES (3,177.87) (982.36)

C. CASH FLOW FROM FINANCING ACTIVITIES Redemption of preference shares (499.59) - Proceeds from long term borrowings 17,403.96 1,383.60 Repayment of long term borrowings (6,237.46) (11,876.54) Proceeds from /(Repayment of) short term borrowings (net) 3,528.76 16,162.64 Interest paid (6,665.66) (6,151.95) Dividend payment (including tax on distributed profit) (1,966.50) (509.62) NET CASH FROM/ (USED) IN FINANCING ACTIVITIES 5,563.50 (991.87)NET INCREASE/ (DECREASE) IN CASH/CASH EQUIVALENTS (A+B+C)

2,819.52 (4,159.53)

CASH AND CASH EQUIVALENTS AS AT THE COMMENCEMENT OF THE YEAR

2,139.46 6,298.99

Add : Cash and bank balance acquired under the Scheme 1,841.63 - CASH AND CASH EQUIVALENTS AS AT THE END OF THE YEAR 6,800.61 2,139.46 NET INCREASE / (DECREASE) IN CASH/CASH EQUIVALENTS 2,819.52 (4,159.53)

NOTES :1. The working capital changes for the year have been determined with respect to the liabilities taken over and the fair values of assets acquired under the Scheme

referred to in Note 1 of Schedule 19 to the Accounts.2. Changes in Trade and other receivables and trade and other payables have been arrived at after considering the adjustment referred to in Note 7 of Schedule 18

to the Accounts. 3. Excludes equity shares issued towards discharge of consideration pursuant to the Scheme of Arrangement referred to in Note 1 of Schedule 19 to the Accounts.4. Rs. in lacs

As at 31.3.2008 As at 31.3.2007CASH / CASH EQUIVALENTS :Cash & Bank Balances 6,801.95 2,139.25 [Include fixed deposits Rs. 106.39 lacs (previous year Rs. 95.34 lacs) on which banks are having lien]Effect of exchange rate changes (1.35) 0.21

6,800.61 2,139.46

5. Previous year’s figures have been regrouped to conform with those of the current year.

Per our report attached to the Balance Sheet For and on behalf of the Board

For Deloitte Haskins & Sells H. V. GOENKAChartered Accountants Chairman




Cash Flow Statement for the Year Ended 31st March 2008


50

BALANCE SHEET ABSTRACTBALANCE SHEET ABSTRACT & COMPANY’S GENERAL BUSINESS PROFILEAs required under Part IV, Schedule VI to the Companies Act, 1956

I. Registration Details

Registration No. 1 5 2 0 6 1 State Code 1 1

Balance Sheet Date 3 1 0 3 0 8

II. Capital raised during the year (Amount in Rs. Thousand)

Public Issue N I L Right Issue N I L

Bonus Issue N I L Private placement N I L

III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousand)

Total Liabilities 1 1 3 1 6 2 3 6 Total Assets 1 1 3 1 6 2 3 6

(Excluding Current Liabilites and provisions) (Net of Current Liabilities & Provisions)

Source of Funds

Paid up Capital 5 9 7 4 6 7 Reserve & Surplus 4 3 5 4 2 5 5

Secured Loans 5 9 0 6 2 3 8 Unsecured Loans 1 1 4 5 2

Deferred Tax Liability 4 4 6 8 2 4

Application of Funds

Net Fixed Assets 4 5 0 3 4 0 1 Investments 4 6 4 7

Net Current Assets 6 5 6 1 7 5 8 Accumulated Losses -

Deferred Tax Asset 2 4 6 4 3 0

IV. Performance of company (Amount in Rs. Thousand)

Turnover 2 8 1 4 7 2 4 7 (Including other income) Total Expenditure 2 5 5 2 8 7 1 5

Profit Before Tax 2 6 1 8 5 3 2 Profit After Tax 1 7 2 1 6 0 9

Earnings Per Share (in Rs.) 3 9 . 5 6 Dividend Rate 5 0 %

V. Generic Names of Three Principal/services of the company

Item Code No. (ITC Code) 7 3 0 8 2 0 . 0 1

Product Description Towers and Structurals

Item Code No. (ITC Code) -

Product Description Engineering, Procurement & Construction (EPC)

51


STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956RPG Transmission Nigeria Limited has become subsidiary of KEC International Limited with effect from 1st October 2007. KEC International Limited holds 10,000,000 Equity Shares of Naira 1.00 each fully paid up representing 100% of the paid-up equity capital of RPG Transmission Nigeria Limited as on 31st March 2008. The surplus in Profit & Loss Account for six months period ended on 31st March 2008 of Naira 174,953 (equivalent to Rs.0.60 lacs based on year end exchange rate) of the Subsidiary Company is not dealt with in the accounts of KEC International Limited.

For and on behalf of the Board

H. V. GOENKA Chairman

VARDHAN DHARKAR R. D. CHANDAK Chief Financial Officer Managing Director

CH. V. JAGANNADHA RAO A.T.VASWANI Company Secretary Director


DIRECTORS’ REPORTRPG TRANSMISSION NIGERIA LIMTEDYour Directors present the Annual Report together with the Audited Accounts of the company for the year ended 31st March 2008.FINANCIAL RESULTS: During the year under review, the company has earned a profit of Naira 4,51,403.DIVIDEND: Your Directors have not recommended payment of dividend to the equity shareholders, with an intention to conserve the profits.AUDITORS: Omorenuwa Idehen & Co, Chartered Accountants have indicated their willingness to be re–appointed.

On behalf of the Board of Directors

Aditya Atal9th April 2008 Director

AUDITORS’ REPORTAUDITORS’ REPORT TO THE MEMBERS OF RPG TRANSMISSION NIGERIA LIMITEDWe have audited the financial statement of RPG TRANSMISSION NIGERIA LIMITED for the year ended 31st March, 2008 which have been prepared in accordance with the accounting policies of the company.

Respective responsibilities of Directors and AuditorsIn relation to the financial statements, the company Directors are responsible for the preparation of the financial statements. It is our responsibility to express an independent opinion, based on our Audit, on the financial statements prepared by the Directors.

Basis of opinionWe conducted our audit in accordance with International Accounting Standards on Auditing. These standards require that we plan and perform our Audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An Audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes an assessment of the accounting principles used and significant estimates and judgments made by the Directors, and an evaluation of the overall adequacy of the financial statements.

We planned and perform such audit procedures and obtained all the information and explanations, which we considered necessary for the purpose of our audit. We examined the books of accounts of the company. We believe that our audit provides us with a reasonable basis for our opinion.

OpinionIn our opinion the financial statements which are in agreement with books, also conform with all relevant Accounting Standard, and give a true and fair view of the state of affairs of the company as at 31st March, 2008 and of the Profit for the year then ended on that date and have been properly prepared in accordance with the Nigerian Companies and Allied Matters Act CAP LFN 2004.

Lagos Nigeria Omorenuwa Idehen & Co 9th April 2008 Chartered Accountants


52

BALANCE SHEET AS AT 31ST MARCH 2008In Naira

2007-08 Previous period

Sources of Funds

Share Capital 10,000,000 10,000,000

General Reserve 539,763 88,360

10,539,763 10,088,360


Fixed Assets 11,044,287 14,957,536

Net current Assets (504,524) (4,869,176)

10,539,763 10,088,360

Per our report attached For and on behalf of the Board

Omorenuwa Idehen & Co Aditya AtalChartered Accountants Director9th April 2008 9th April 2008

PROFIT AND LOSS ACCOUNTS FOR THE YEAR ENDED ON 31ST MARCH, 2008

In Naira


Income

Sales & Services 11,579,682 6,913,697

11,579,682 6,913,697

Expenditure

Salaries and allowances 2,547,108 125,100

Rent 5,590,000 2,018,611

Transport and travelling 658,268 1,379,537

Audit fees 100,000 50,000

Depreciation 1,885,491 799,809

Other expenses 347,412 2,452,280

Total expenditure 11,128,279 6,825,337

Net Profit before Tax 451,403 88,360



53


Notes on Financial Statements In Naira


1 Trading Profit

The trading profit ( annex) is stated after charging

a Depreciation 1,885,491 799,809

b Auditors fees 100,000 50,000

2 Share capital

Authorised, issued and fully paid 10,000,000 Ordinary shares of Naira1.00 each 10,000,000 10,000,000

3 General Reserve

Retained profit for the year 451,403 88,360

Profit brought forward 88,360 -

Retained profit transferred to General Reserve 539,763 88,360

4 Fixed Assets

Motor Vehicles Furniture& Fixtures Total Total

a Gross Block as on 1st April’2007 5,100,000 10,657,345 15,757,345 -

b Additions during the year - 202,810 202,810 15,757,345

c Less: Adjustment 643,908 1,586,660 2,230,568 -

d Depreciation as at 1st April’2007 201,875 597,934 799,809 -

e Depreciation for the year 432,819 1,452,672 1,885,491 799,809

f Net Block as on 31st March’2008 3,821,398 7,222,889 11,044,287 14,957,536

5 Net Current Assets

a Current assets

Sundry Debtors (rent prepaid) 3,571,389 9,161,389

KEC International Ltd.- Agency accounts 192,903,243 119,211,211

Bank balances 420,094 117,088,042

196,894,726 245,460,642

b Current Liabilities

KEC International Ltd. 197,249,250 250,279,818

Sundry creditors and Accruals (audit fees) 150,000 50,000

197,399,250 250,329,818

As per Balance Sheet (504,524) (4,869,176)

Accounting PoliciesThe Following are the Principal Accounting Policies adopted by the company in the preparation of its financial statement

A. Basis of accounting: The accounts are prepared under the historical cost convention.

B. Turnover: The turnover represents the value of Agency Commission received exclusively from its foreign wholly owned Hold-ing company.

C. Fixed Assets: These are stated at cost

D. Depreciation: Depreciation charged on fixed assets are calculated on the straight-line basis at the annual rates which are expected to write off their cost over the anticipated useful life of each class of assets.

Assets Rate Motor vehicle 9.5 Furniture and fittings 16.21


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CASH FLOW STATEMENT FOR THE YEAR ENDED31ST MARCH, 2008 In Naira


A] CASH FLOW FROM OPERATING ACTIVITIES :

PROFIT / (LOSS) BEFORE TAXATION 451,403 88,360

Adjusted for :

Depereciation 1,885,491 799,809

OPERATING PROFIT BEFORE WORKING CAPITAL

CHANGES 2,336,894 888,169

Changes in:

Trade and other payables (118,802,032) 121,957,218

CASH GENERATED FROM OPERATIONS (116,465,138) 122,845,387

NET CASH FROM/ (USED IN) OPERATING ACTIVITIES (116,465,138) 122,845,387

B] CASH FLOW FROM INVESTING ACTIVITIES

Purchase of Fixed Assets (202,810) (15,757,345)

NET CASH USED IN INVESTING ACTIVITY (202,810) (15,757,345)

C] CASH FLOW FROM FINANCING ACTIVITIES

Issue of Ordinary Share Capital - 10,000,000

NET CASH FROM/(USED) IN FINANCING ACTIVITIES - 10,000,000

NET (DECREASE) / INCREASE IN CASH/CASH EQUIVALENTS (A+B+C) (116,667,948) 117,088,042

CASH AND CASH EQUIVALENTS AT COMMENCEMENT OF THE YEAR 117,088,042 -

CASH AND CASH EQUIVALENTS AS AT THE END OF THE YEAR 420,094 117,088,042

NET (DECREASE) / INCREASE IN CASH/CASH EQUIVALENTS 116,667,948 117,088,042

CASH / CASH EQUIVALENTS: AS on 31.03.2008 As on 31.03.2007

Cash & Bank Balances 420,094 117,088,042

420,094 117,088,042



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BALANCE SHEET ABSTRACT & COMPANY’S GENERAL BUSINESS PROFILEAs required under Part IV, Schedule VI to the Companies Act, 1956

I. Registration Details

Registration No. NA State Code NA

Balance Sheet Date 31.03.08

II. Capital raised during the year (In Naira)

Public Issue NIL Right Issue NIL

Bonus Issue NIL Private placement NIL

III. Position of Mobilisation and Deployment of Funds (In Naira)

Total Liabilities(Excluding Current Liabilites and provisions)

10,539,763 Total Assets(Net of Current Liabilities & Provi-sions)

10,539,763

Source of Funds

Paid up Capital 10,000,000 Reserve & Surplus 539,763

Secured Loans - Unsecured Loans -


Net Fixed Assets 11,044,287 Investments -

Net Current Assets (504,524) Accumulated Losses -

IV. Performance of Company (In Naira)

Turnover (Incl. other income) 1,15,79,682 Total Expenditure 1,11,28,279

Profit Before Tax 4,51,403 Profit After Tax 4,51,403

Earnings Per Share (in Rs.) 0.05 Dividend Rate -

V. Generic Names of Three Principal/services of the Company

Item Code No. (ITC Code) 730820.01

Product Description Towers and Structurals


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