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Directors Report of Blue Star Ltd.

Mar 31, 2017

Board''s Report

The Directors are pleased to present the 69th Annual Report, together with the Audited Financial Statements for the year ended March 31, 2017.

COMPANY OVERVIEW

Your Company is India''s leading air conditioning and commercial refrigeration company with close to 75 years of experience in providing expert cooling solutions, and has a network of 35 offices, 5 modern manufacturing facilities, 2200 dealers and 600 retailers. It fulfills the cooling requirements of a large number of corporate, commercial as well as residential customers. It also offers expertise in allied contracting activities such as mechanical, electrical, plumbing and fire-fighting services, in order to offer turnkey solutions, apart from execution of specialized industrial projects. The Company''s integrated business model of a manufacturer, contractor and after-sales service provider enables it to offer an end-to-end solution to its customers, which has proved to be a significant differentiator in the market place. It has also recently forayed into the business of residential water purifiers as well as air purifiers and air coolers.

FINANCIAL RESULTS (Rs. in crores)

Standalone

Consolidated

Particulars

For the year ended March 31, 2017

For the year ended March 31, 2016

For the year ended March 31, 2017

For the year ended March 31, 2016

Total Revenue

4183.47

3585.77

4459.30

3859.42

Total Expenses

4035.19

3462.73

4300.67

3715.06

Profit before exceptional items and tax

148.28

123.04

158.63

144.36

Profit after exceptional items and before tax

148.28

153.12

158.63

132.47

Income tax

36.31

26.22

36.67

27.70

Profit for the Year

111.97

126.90

123.05

104.78

OPERATING PERFORMANCE

Your Company posted another year of splendid performance. On a standalone basis, the Total Revenue of the Company increased by over 17% to Rs.4183.47 crores during the year under review as compared to Rs.3585.77 crores in the previous year. Further, the Net Profit after Tax of your Company was Rs.111.97 crores as compared to Rs.126.90 crores for the financial year ended March 31, 2016.

On a consolidated basis, your Company clocked a revenue of Rs.4459.30 crores, a growth of 16% over the previous year. Further, the Net Profit after Tax of your Company was Rs.123.05 crores, registering a growth of over 17%.

Your Company operates in three key segments (i) Electro-Mechanical Projects and Packaged Air Conditioning Systems (ii) Unitary Products, and (iii) Professional Electronics and Industrial Systems. The performance of the Company in the above mentioned segments during the year under review is as stated below:

(a) Electro-Mechanical Projects and Packaged Air Conditioning Systems

The revenue of the Electro-Mechanical Projects and Packaged Air Conditioning Systems business increased by 18% to Rs.2122.54 crores from Rs.1797.48 crores. This segment witnessed adverse impact due to slowdown of the real estate sector post demonetisation. However, the market witnessed modest growth propelled by Government-funded infrastructure projects.

Segment Results registered an increase of 26% from Rs.75.79 crores in the previous year to Rs.95.26 crores in the year under review. The increase is mainly owing to higher billings of projects with healthy margins and improved control on costs.

(b) Unitary Products

Unitary Products'' revenue in the year grew by 27% to Rs.2003.92 crores as against previous year''s revenue of Rs.1582.82 crores due to an early onset of summer in 2017. The performance of the room air conditioner business was impressively driven by the wide range of star-rated inverter split air conditioners. With a rise in preference for inverter ACs, the Company continued to perform better in the category of energy-efficient products. Further, commercial refrigeration products such as water coolers, bottled water dispensers and glass top freezers witnessed significant demand. Enhanced product penetration amongst the existing channels, coupled with a comprehensive range of products and aggressive promotional activities contributed to the growth and profitability in this segment. The market continued to witness an increased demand for display freezers. Sales of bottled water dispensers grew well as the Company engaged with more retailers while storage water cooler sales also increased with enhanced demand from the educational, Government and manufacturing segments.

The Company extended its product range by introducing water purifiers, air purifiers and air coolers.

The results of this segment grew by 26% from Rs.165.13 crores in the previous year to Rs.208.09 crores in the year under review.

(c) Professional Electronics and Industrial Systems

The Company had earlier transferred the business of Professional Electronics and Industrial Systems to its subsidiary, Blue Star Engineering & Electronics Limited. However, due to customer and contractual requirements, certain contracts of this business needed to be executed by the Company. The revenue generated by these contracts during the year under review was Rs.22.63 crores.

DIVIDEND

The Board, at its meeting held on May 9, 2017, recommended a dividend of Rs.7.50 per equity share of Rs.2 each for the financial year ended March 31, 2017. This proposal is subject to the approval of members at the ensuing Annual General Meeting.

DIVIDEND DISTRIBUTION POLICY

In accordance with the requirements of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as the ''Listing Regulations''), the Board has adopted the Dividend Distribution Policy for the Company. The Policy inter-alia specifies the parameters and internal/external factors to be considered for declaration of dividend. The policy can be viewed online at https://www.bluestarindia.com/media/104569/dividend-distribution-policy.pdf.

TRANSFER TO RESERVES

The Company proposes to transfer an amount of Rs.10.80 crores to the General Reserve for the financial year ended March 31, 2017.

FINANCING

Borrowing cost for the year was Rs.30.61 crores which was lower as compared to Rs.36.13 crores in the previous year, due to reduced borrowing levels led by effective working capital management, and ability to source the funds at a lower cost. In addition, disciplined and systematic hedging decisions based on accurate information of forex exposure resulted in net gain of Rs.1.91 crores, as compared to loss of Rs.0.79 crore in the previous year.

DEPOSITS

The Company has not accepted any deposit from the public falling within the ambit of Section 73 of the Companies Act, 2013 (hereinafter referred to as the ''Act''), and the Companies (Acceptance of Deposits) Rules, 2014.

CHANGES IN SHARE CAPITAL

During the year, the Company allotted 2,27,900 equity shares of ''2 each, fully paid up to the option grantees pursuant to the exercise of stock options by the eligible employees under the Blue Star Limited Employee Stock Option Scheme.

Further, during the year under review, the Company allotted 53,91,383, fully paid up equity shares of Rs.2 each, to the shareholders of Blue Star Infotech Limited, pursuant to the Composite Scheme of Amalgamation of Blue Star Infotech Limited and Blue Star Infotech Business Intelligence & Analytics Private Limited with the Company.

Consequent to the above, the issued, subscribed and paid up share capital of your Company as on March 31, 2017 stood at Rs.19,11,40,776 comprising 9,55,70,388 equity shares of Rs.2 each.

CONSOLIDATED FINANCIAL STATEMENT

In accordance with Regulation 34 of the Listing Regulations and Section 129(3) of the Act, the Consolidated Financial Statement has been prepared by the Company, as per the Indian Accounting Standards (Ind AS), and forms a part of this Annual Report.

The Consolidated Financial Statement shall also be laid at the ensuing Annual General Meeting of the Company.

SUBSIDIARIES AND JOINT VENTURE COMPANIES

Subsidiary Companies:

a) Blue Star Engineering & Electronics Limited

Blue Star Engineering & Electronics Limited is a wholly owned subsidiary of Blue Star Limited. It offers advanced technology products, surveillance solutions as well as electronic systems and product testing solutions.

Total revenue of Blue Star Engineering & Electronics Limited for the year ended March 31, 2017 was Rs.181.49 crores, as against its previous year''s revenue of Rs.133.35 crores. The subsidiary achieved a net profit of Rs.4.92 crores for the year under review, as against last year''s net profit of Rs.5.25 crores.

b) Blue Star Qatar WLL

Blue Star Qatar WLL is led by Blue Star Limited and Al Malki Trading and Contracting WLL, wherein Blue Star Limited holds 49% of the share capital and voting rights, and the balance is held by Al Malki Trading and Contracting WLL.

This company is a subsidiary of Blue Star Limited by virtue of Section 2(87)(i) of the Companies Act 2013, as Blue Star controls the composition of the company''s Board. The company is principally engaged in the business of designing, engineering, installation, maintenance, mechanical, electrical and plumbing contracts, and all works relating to heating, ventilation and air conditioning systems in the Middle East for residential, commercial and industrial purposes.

Total income of this company for the year ended March 31, 2017 was Rs.110.77 crores as compared to Rs.71.36 crores in the previous financial year. Net profit after tax for the year ended March 31, 2017 was Rs.3.63 crores as compared to Rs.1.34 crores in the previous year.

c) Blue Star International FZCO

Subsequent to the financial year, the Company has set up a wholly owned subsidiary, Blue Star International FZCO, in Dubai Airport Freezone, a free trade zone in UAE to consolidate its international business ownership. The Company made an initial investment of Rs.5 crores in the share capital of this subsidiary, which will carry on the products business outside India.

Joint Venture Companies:

a) Blue Star M & E Engineering Sdn Bhd

A joint venture between Arab-Malaysian Development Bhd and Blue Star Limited, Blue Star M & E Engineering Sdn Bhd carries on the business of mechanical, electrical and plumbing contracting, which includes operation and maintenance of heating, ventilation and air conditioning systems. There have been no significant changes in the nature of its activities during the financial year.

This company''s total income for the year ended March 31, 2017 was Rs.108.44 crores as compared to Rs.102.97 crores in the previous financial year. Net profit after tax for the year ended March 31, 2017 was Rs.5.14 crores as compared to Rs.4.97 crores in the previous year.

b) Blue Star Oman Electro-Mechanical Company LLC

A joint venture between W J Towell & Co LLC and Blue Star Limited, Blue Star Oman Electro-Mechanical Company LLC is engaged in mechanical, electrical and plumbing contracting services in Oman. Its income for the year ended March 31, 2017 was Rs.112.28 crores as compared to Rs.17.90 crores in the previous year. Net profit after tax of this venture for the year ended March 31, 2017 was Rs.0.70 crores as compared to Rs.0.47 crores in the previous year.

In accordance with Section 136 of the Act, the audited annual accounts, including the consolidated financial statement of the Company and audited accounts of the subsidiary companies, are available on the corporate website at www.bluestarindia.com. A copy of these documents will be available to the members, on their request in writing. The annual accounts will also be available for inspection by any member during business hours at the registered office of the Company.

A statement containing the salient features of the financial statements of the subsidiaries and joint venture companies in Form AOC-1, as required under Rule 5 of the Companies (Accounts) Rules, 2014 forms part of the Consolidated Financial Statement.

SIGNIFICANT DEVELOPMENTS

(a) International Business

The International Business Group comprises Global Projects and Global Product Sales. International business footprint expansion continues to remain a high focus area for the Company. During the year, Blue Star added its presence in 5 countries: Kenya, Sudan, Vietnam, Iran and Tanzania.

The Company continued its focus on expansion of its products export business. It participated in multiple major trade shows such as Climate Abu Dhabi Expo, UAE and Big 5 Exhibition in Dubai, UAE with the largest-ever display stall. It participated in Hotel Asia Exhibition 2016, which was one of the largest trade exhibitions of its kind in Maldives.

The Company introduced room air conditioners with the eco-friendly refrigerant R410A and anti-corrosive green fin technology for the Maldives market.

(b) Expansion

The Company has embarked upon an ambitious growth plan, and in this context, Blue Star acquired land in Jammu and Sri City for setting up manufacturing plants in these locations, in due course. The Company also expanded its product portfolio by entering into product adjacencies and product extensions such as water purifiers, air purifiers and air coolers.

NEW INITIATIVES

Implementation of Goods and Service Tax

While presenting the Union Budget 2017-18, the Central Government of India reaffirmed the Goods and Service Tax (GST) roll-out. To ensure seamless migration into the GST regime, a core team has been entrusted with earmarked work streams to drive and accomplish implementation within defined timelines. The Company is registered on the GST portal.

AWARDS AND RECOGNITIONS

In 2016-2017, the Company was conferred multiple awards and recognitions, both international and national, few of which are listed as follows:

- Blue Star was recognized as the ''MEP Company of the Year'' at the Annual Metro Rail India Summit 2017.

- Blue Star Oman Electro-Mechanical Company LLC has won the ''Most Promising MEP Contractor'' at the Dossier Construction''s Infrastructure Awards & Summit 2016.

- Blue Star received the Brand Excellence Award in FMCG sector (Consumer Durables) in 2016.

- Blue Star chillers were certified by the Air Conditioning, Heating, and Refrigeration Institute (AHRI) for achieving a 100% success rate in the performance testing of the air cooled as well as water cooled chillers in 2016.

• The Company won the Water Digest Awards 2017 for the ''Best Domestic RO UV Purifier'' in the country.

DIRECTORS

During the year under review, Ashok M Advani retired as the Chairman of the Company, with effect from November 30, 2016. The Board took on record the exemplary contribution towards the growth of the Company made by the Chairman during his 47 years of service and association with Blue Star. Ashok M Advani was appointed as the Chairman Emeritus of the Company, with effect from December 1, 2016. Suneel M Advani was appointed as the Chairman of the Board effective December 1, 2016. Further, M K Sharma, Independent Director, resigned with effect from June 12, 2017. The Board appreciated his valuable guidance and contribution during his tenure.

Vir S Advani, retires by rotation at the ensuing Annual General Meeting, and being eligible, offers himself for re-appointment.

Further, based on the recommendation of the Nomination and Remuneration Committee, the Board had appointed Rajiv R Lulla (DIN: 06384402) and Dinesh N Vaswani (DIN: 00306990) as the additional Non-Executive Directors of the Company, with effect from December 1, 2016. In compliance with the Act and Listing Regulations, Sam Balsara (DIN: 00076942) has been appointed as an additional Independent Director with effect from June 20, 2017 for a period of 5 years.

As per the provisions of the Act, they hold office up to the date of the ensuing Annual General Meeting of the Company.

Your Company has received notices under Section 160 of the Act, together with requisite deposit from the members proposing appointment of Rajiv R Lulla, Dinesh N Vaswani and Sam Balsara as Director(s) on the Board of your Company. Accordingly, the necessary resolution(s) seeking approval of the members for appointment of Rajiv R Lulla, Dinesh N Vaswani and Sam Balsara have been incorporated in the Notice of the ensuing Annual General Meeting.

Brief profiles of the Directors proposed to be appointed/re-appointed are annexed to the Notice convening Annual General Meeting.

The Board recommends their appointment at the ensuing Annual General Meeting.

Declaration by Independent Directors

The Company has received necessary declaration from each Independent Director of the Company under Section 149(7) of the Act, confirming that they meet with the criteria of independence as laid down in Section 149(6) of the Act, read with Regulation 25 of the Listing Regulations.

KEY MANAGERIAL PERSONNEL

In accordance with the provisions of Section 203 of the Act, the following personnel have been designated as the Key Managerial Personnel of the Company:

Name

Designation

Vir S Advani

Managing Director

B Thiagarajan

Joint Managing Director

Neeraj Basur

Chief Financial Officer

Vijay Devadiga

Company Secretary

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the provisions contained in Section 134 of the Act, the Directors, to the best of their knowledge and belief, confirm that:

- in the preparation of the annual accounts for the financial year ended March 31, 2017, the applicable accounting standards have been followed, along with proper explanation relating to material departures;

- the Directors have selected such accounting policies and applied them consistently, and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31, 2017, and of the profit of the Company for that period;

- the Directors have taken proper and sufficient care for the maintenance of adequate accounting records, in accordance with the provisions of the Act for safeguarding the assets of the Company, and for preventing and detecting fraud and other irregularities;

- the Directors have prepared the annual accounts for the year ended March 31, 2017, on a going concern basis;

- the Directors have laid down internal financial controls to be followed by the Company, and that such internal financial controls are adequate and are operating effectively; and

- the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws, and that such systems are adequate and operating effectively.

MEETINGS OF BOARD OF DIRECTORS

During the year under review, 5 (five) meetings of the Board of Directors were held on May 30, 2016; August 1, 2016; November 10, 2016; January 25, 2017; and March 6, 2017. The intervening gap between these meetings was within the period prescribed under the Act and Listing Regulations. The details of the meetings and attendance of the Directors are provided in the Corporate Governance Report.

BOARD COMMITTEES

Your Company has in place, all the Committee(s) as mandated under the provisions of the Act and Listing Regulations. Currently, there are seven Committees of the Board, namely:

- Audit Committee

- Nomination and Remuneration Committee

- Investor Grievance and Stakeholders'' Relationship Committee

- Risk Management Committee

- Corporate Social Responsibility Committee

- Share Transfer Committee

- Executive Management Committee

AUDIT COMMITTEE

The Audit Committee of the Company comprises Shailesh Haribhakti, Pradeep Mallick and B Thiagarajan. Shailesh Haribhakti is the Chairman of the Committee. B Thiagarajan was appointed as a member of the Audit Committee with effect from November 10, 2016. M K Sharma ceased to be member of the Committee with effect from June 12, 2017.

The composition of the Committee is in compliance with the requirements of Section 177 of the Act and Regulation 18 of the Listing Regulations. The charter of the Committee is in conformity with the Act and the Listing Regulations as more particularly set out in the Corporate Governance Report, which forms a part of this Report.

During the year under review, there was no instance wherein the Board had not accepted any recommendation of the Audit Committee.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The CSR Committee comprises Suneel M Advani, B Thiagarajan and Shobana Kamineni. Suneel M Advani is the Chairman of this Committee.

During the year under review, the Company was required to spend an amount of Rs.167.64 lakhs towards activities as stipulated under Schedule VII of the Act. The Company has spent an amount of Rs.172.55 lakhs towards various CSR initiatives. The brief outline of the CSR Policy and the initiatives undertaken by the Company on CSR activities during the year are set out in Annexure 2 of this Report in the format as prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. The Policy is also available on the website of the Company.

BOARD EVALUATION & FAMILIARISATION PROGRAMME

Pursuant to the provisions of the Act and Regulation 17 of the Listing Regulations, the Board of Directors has carried out an annual evaluation of the performance of the Board as a whole, the Directors individually and the working of the committees of the Board. In a separate meeting of the Independent Directors held on April 11, 2017, the performance of the Non-Independent Directors, the Board as well as that of the Chairman were evaluated, taking into account the views of the Executive and Non-Executive Directors.

The details of the familiarization programme for the Independent Directors of the Company are available on the website of the Company at https://www.bluestarindia.com/media/56472/familiarization-programme-for-independent-directors.pdf.

CORPORATE GOVERNANCE

The Company is committed to maintaining the highest standards of Corporate Governance and continues to be compliant with the requirements of the Corporate Governance as enshrined in the Listing Regulations. The Report on Corporate Governance, as stipulated under Regulation 27 of the Listing Regulations, forms part of the Annual Report. The certificate from the Statutory Auditors of the Company confirming compliance with the conditions of Corporate Governance, as stipulated under Regulation 27 of the Listing Regulations, has been annexed with the said report.

VIGIL MECHANISM FOR DIRECTORS AND EMPLOYEES

Pursuant to the provisions of sub-sections 9 and 10 of Section 177 of the Act and as per the Listing Regulations, the Company has established a vigil mechanism to enable the Directors and employees of the Company to report concerns of any unethical behaviour, unacceptable and improper practices or suspected fraud. The Company has a Whistle Blower Policy in place, which has also been uploaded on its website. An Ethics Committee has been constituted, comprising the Chief Financial Officer, HR Head and Company Secretary (Ethics Officer) to administer this Policy.

The Whistle Blower Policy is uploaded on the Company''s website under the weblink at: https://www.bluestarindia.com/media/6011/whistle-blower-policy.pdf.

The Company has also adopted a Code of Conduct which is available on the website of the Company under the weblink of https://www.bluestarindia.com/media/6010/code-of-conduct.pdf.

The Audit Committee reviews on a quarterly basis, complaints, if any, and implements corrective actions, whenever necessary.

INTERNAL CONTROL SYSTEMS

The Company has established an internal control system, commensurate with the size, scale and complexity of its operations. In order to enhance the standards of controls and governance, the Company has adopted COSO 2013 framework to ensure that robust internal financial controls exist in relation to operations, financial reporting and compliance.

Significant features of the Company''s internal control system are:

- A well-established, independent, Internal Audit team operates in line with best-in-class governance practices. It reviews and reports to the Audit Committee about compliance with internal controls, the efficiency and effectiveness of operations as well as key process risks.

- The Audit Committee periodically reviews internal audit plans, significant audit findings and adequacy of internal controls.

- Systematic self-certification of adherence to key internal controls, as part of control self-assurance by process owners, monitors and reviewers.

- Adherence with a comprehensive information security policy and continuous upgrades of the Company''s IT systems for strengthening automated controls.

During the year, the internal controls were tested and found effective, as a part of the Management''s control testing initiative. Accordingly, the Board, with the concurrence of the Audit Committee and the Auditors is of the opinion that the Company''s Internal Financial Controls were adequate and operating effectively for the financial year ended March 31, 2017.

LOANS, GUARANTEES AND INVESTMENTS

Details of loans, guarantees and investments covered under the provisions of Section 186 of the Act, as may be applicable, are given in the standalone financial statement as per Note 6.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All related party transactions that were entered into during the financial year were on an arm''s length basis and in the ordinary course of business. All related party transactions are approved by the Audit Committee.

There are no material transactions with any related party as defined under Section 188 of the Act, read with the Companies (Meetings of Board and its Powers) Rules, 2014. The details of transactions with the related parties are provided in the standalone financial statement as per Note 37.

A policy governing the related party transactions has been adopted and the same has been uploaded on the Company''s website under the weblink of https://www.bluestarindia.com/media/78799/policy-for-transaction-with-related-parties.pdf.

RISK MANAGEMENT

The Risk Management Committee has been formed to assist the Board in fulfilling its responsibilities relating to evaluation and mitigating various risks exposures that potentially impact the Company. An Enterprise Risk Management (ERM) framework prescribed under the Committee of Sponsoring Organizations (COSO) was adopted for implementation by the Committee.

The Risk Management Committee comprises Suneel M Advani, Vir S Advani, B Thiagarajan and Neeraj Basur. Vir S Advani is the Chairman of this Committee.

During the year, the Committee reviewed the Company''s risk management processes on a quarterly basis to mitigate various risk categories, including technological obsolescence, repudiation of claims by the customers, cost overrun in projects, accidents, safety/health hazards, dependence on channel partners, domestic and international competition, regulatory shifts, customer/supplier/geographical concentration, and others.

The Committee has adopted a formal Risk Management Policy. The Committee identifies, evaluates and assesses the risks, understands the exposure of risks and accordingly prepares the risk mitigation plan. It has identified the Risk Management Units which are constantly monitored, and the severity of risk is tracked, based on risk rating methodology. The Company maintains risk registers to ensure that the effectiveness of the mitigation action plan gets assessed independently. This register was reviewed by the Risk Management Committee, the Audit Committee and the Board.

NOMINATION AND REMUNERATION COMMITTEE

The Nomination and Remuneration Committee comprises Gurdeep Singh, Suneel M Advani, Pradeep Mallick and Dinesh N Vaswani. Gurdeep Singh is the Chairman of this Committee. Dinesh N Vaswani joined as a member of this Committee, with effect from January 25, 2017.

The Committee is constituted in line with the requirements mandated by the Act and of the Listing Regulations. The terms of reference of the Committee are in conformity with the said requirements, as more particularly set out in the Corporate Governance Report, which forms a part of this Report.

MANAGERIAL REMUNERATION

Details of the ratio of the remuneration of each Director to the median employee''s remuneration and other details, in terms of Section 197(12) of the Act, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is enumerated further.

i.

The ratio of the remuneration of each Director to the median remuneration of the employees of the Company for the financial year

Vir S Advani*

78x

B Thiagarajan

50x

ii.

The percentage increase in remuneration of each Director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year

Vir S Advani*

149.15%

B Thiagarajan

52.21%

Neeraj Basur

12.50%

Vijay Devadiga

10.00%

iii.

The percentage increase in the median remuneration of employees in the financial year

0.18%

iv.

The number of permanent employees on the rolls of Company

2498

v.

The explanation on the relationship between average increase in remuneration and Company performance

Increments are based on the individual employee performance, market benchmarking of salary, and net profit of the Company.

vi.

Comparison of the remuneration of the Key Managerial Personnel against the performance of the Company

Total remuneration paid to the Key Managerial Personnel constituted 9.94% of the net profit of the Company for FY 2016-17.

vii.

Variations in the market capitalization of the Company, price earnings ratio as at the closing date of the current financial year and previous financial year and percentage increase over decrease in the market quotations of the shares of the Company, in comparison to the rate at which the Company came out with the last public offer

2016-17

2015-16

Market Capitalization (Rs. in crores)

6617.29

3510.79

PE ratio

59.03

30.30

In the recent past, the Company has not made any public offer.

viii.

Average percentile increase already made in the salaries of employees, other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof, and point out if there are any exceptional circumstances for increase in the managerial remuneration

Average increase to employees other than Managerial Personnel and justification thereof

12.49%

To remain competitive in the market, to attract and retain talent.

Average increase to Managerial Personnel

Please refer to (ii) of this table.

Exceptional circumstances for increase to managerial remuneration*

The average increase given in FY 2016-17 was based on the outcome of compensation and benefits benchmarking survey to align remuneration of Whole-time Directors to market median.

ix.

Comparison of the remuneration of each Key Managerial Personnel against the performance of the Company

Vir S Advani*

4.76%

B Thiagarajan

3.02%

Neeraj Basur

1.68%

Vijay Devadiga

0.48%

x.

The key parameters for any variable component of remuneration availed by the Directors

The Nomination and Remuneration Committee evaluates the performance of the Directors against the key result areas determined by it and recommends payment of commission to the Directors.

xi.

The ratio of the remuneration of the highest paid Director to that of the employees who are not Directors but receive remuneration in excess of the highest paid Director during the year

NA

xii.

Affirmation that the remuneration is as per the Remuneration Policy of the Company

Affirmed

* Remuneration of Vir S Advani includes additional performance linked incentives (PLI) of 199.09 lakhs for the financial year 2016-17 pursuant to the approval of the shareholders at the previous Annual General Meeting held on August 1,2016. As the PLI has been paid to Vir S Advani effective financial year 2016-17, his remuneration for financial year 2016-17 is not comparable with that of the previous financial year.

The Non-Executive Directors of the Company are paid sitting fees and commission as per the statutory provisions and within the limits approved by the members. The ratio of remuneration and percentage increase for Non-Executive Directors'' Remuneration is therefore not considered for the purposes above. The details of remuneration of Non-Executive Directors are provided in the Corporate Governance Report.

HUMAN RESOURCES

The Human Resources philosophy of your Company is to attract and retain the best talent in the industry. Your Company considers its employees as partners in success. Your Company constantly endeavours in adopting the best policies to keep its employees motivated, engaged and aligned to the interests of the Company. Your Company undertakes various employee engagement programmes and also fosters a culture of continuous learning and development and creating future leaders. Your Company constantly explores various possibilities to make Blue Star a better place to work.

EMPLOYEE STOCK OPTIONS

The Nomination and Remuneration Committee of the Board of Directors of the Company, inter alia, administers and monitors the Employees'' Stock Option Scheme of the Company, in accordance with the SEBI (Share Based Employee Benefits) Regulations, 2014. Details of the shares issued under Employee Stock Option Scheme (ESOS), as also the disclosures, in compliance with Section 62 of the Act, and Rule 12 of Companies (Share Capital and Debentures) Rules, 2014, and SEBI (Share Based Employee Benefits) Regulations, 2014 is available on our website at www.bluestarindia.com.

PARTICULARS OF EMPLOYEES

Particulars of employees as required under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are required to be annexed to the Board''s Report. In accordance with the provisions of Section 136 of the Act, the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. Any member interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The Company incurred a total expenditure of Rs.53.67 crores on research and development for the year as against Rs.49.81 crores in the previous year.

During the year, the Company recorded foreign exchange earnings from export of its products, commission and other income, aggregating to Rs.256.63 crores as against Rs.349.09 crores in the previous year. The previous year''s earnings included Rs.104.39 crores pertaining to earnings made by erstwhile Blue Star Infotech Limited, that merged with the Company with effect from the Appointed Date of April 1, 2015.

There was a corresponding increase in foreign exchange outflow, which stood at Rs.1037.85 crores as compared to Rs.925.46 crores in the previous year.

The information on Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo, as required under Section 134(3)(m) of the Act, read with Rule 8 of the Companies (Accounts) Rules, 2014, is annexed herewith as Annexure 1.

MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis for the year under review, as stipulated under the Regulation 34 of Listing Regulations, is annexed to this report.

BUSINESS RESPONSIBILITY REPORT

In compliance with Regulation 34 of the Listing Regulations, the Business Responsibility Report describing sustainability initiatives undertaken by the Company during the year under review is provided in a separate section forming part of this Annual Report.

STATUTORY AUDITORS

M/s S R B C & CO LLP, Chartered Accountants (Regn No. 324982E/E300003) were appointed as the Statutory Auditors of the Company at the Annual General Meeting held on July 28, 2014 to hold office for a term of five years, i.e. till the conclusion of the Annual General Meeting to be held for the financial year 2018-19, subject to ratification of their appointment at every Annual General Meeting during the said term. The Board of Directors of the Company, at its meeting held on May 9, 2017, has recommended ratification of appointment of M/s S R B C & CO LLP as the Statutory Auditors of the Company for financial year 2017-18 by the members at the ensuing Annual General Meeting.

The Company has received a letter from M/s S R B C & CO LLP, Chartered Accountants, to the effect that ratification of their appointment, if made, would be in accordance with the relevant provisions of Section 139 and 141 of the Act, read with Rule 4(1) of the Companies (Audit and Auditors) Rules, 2014.

AUDITORS'' REPORT

The Board has duly reviewed the Statutory Auditors'' Report on the Financial Statements. There are no qualification, reservation, adverse remark given by the Auditors in their Report.

COST AUDITORS

In terms of the provisions of Section 148 of the Act, read with the Companies (Cost Records and Audit) Amendment Rules, 2014, the Board of Directors had, on the recommendation of the Audit Committee, appointed M/s Narasimha Murthy & Co, Hyderabad, Cost Accountants, as the Cost Auditors, to conduct cost audit for the financial year ended March 31, 2017.

As required under the Act, remuneration payable to the cost auditor is required to be placed before the members in a general meeting for their ratification. Accordingly, a resolution seeking members'' ratification for the remuneration payable to Cost Auditors, forms part of the Notice convening the Annual General Meeting.

SECRETARIAL AUDITOR

In terms of the provisions of Section 204 of the Act, read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board had appointed M/s N L Bhatia & Associates, practicing Company Secretaries, as the Secretarial Auditor of the Company for conducting the secretarial audit of your Company for the financial year ended March 31, 2017.

The Secretarial Audit Report given by M/s N L Bhatia & Associates, Practicing Company Secretaries has been provided as per Annexure 3 to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

EXTRACT OF THE ANNUAL RETURN

Pursuant to Section 92(3) and Section 134(3)(a) of the Act, read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014, an extract of annual return in Form MGT-9 has been provided as per Annexure 4 to this Report.

DISCLOSURES UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT, 2013

The Company has zero tolerance for sexual harassment at workplace, and has adopted a Policy on prevention, prohibition and redressal of the same, in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules there under for prevention and redressal of complaints of sexual harassment at workplace. All employees (permanent, contractual, temporary and trainees) are covered under this Policy.

The Company has set up Internal Complaints Committees to redress complaints received regarding sexual harassment. The Company organizes workshops and awareness programmes at regular intervals for sensitizing the employees with the provisions of the Act. During the year under review, 2 complaints with allegations of sexual harassment were filed with the Company, and the same were investigated and resolved as per the provisions of the aforesaid Act.

OTHER DISCLOSURES

- There were no material changes and commitments affecting the financial position of the Company, which have occurred between the end of the financial year under review and the date of this report.

- There were no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status of your Company and its operations in the future.

- Your Company has not issued any shares with differential voting.

- Your Company has not issued any sweat equity shares.

- There was no revision in the financial statements.

ACKNOWLEDGEMENTS

The Directors place on record, their sincere appreciation for the assistance, guidance and co-operation provided by the Government of India and other regulatory authorities. The Directors thank the financial institutions and banks associated with the Company for their support as well. The employees of Blue Star Limited are instrumental in the Company scaling new heights year after year, and their commitment and contribution is deeply acknowledged. Shareholders'' involvements are greatly valued. The Directors look forward to your continuing support.

For and on behalf of the Board of Directors

Suneel M Advani

Mumbai: June 20, 2017 Chairman


Mar 31, 2015

Dear Members,

The Directors are pleased to present the 67th Annual Report and the Audited Financial Statement for the year ended March 31, 2015, together with the Auditors'' Report thereon.

FINANCIAL SUMMARY (STANDALONE) (Rsin crores) April 2014 April 2013 March 2015 March 2014

Total Income 3090.94 2815.93

Profit before Interest, Depreciation, Amortisation, Taxation and Exceptional Items 183.73 2815.93

Financing costs 43.47 177.09

Depreciation and Amortisation 39.34 49.64

Profit before tax and exceptional items 100.92 34.69

Exceptional income/(expenses) 41.90 92.76

Profit after exceptional items before tax 142.82 (16.86)

Taxes (benefit) (9.71) 75.90

Profit after tax 152.53 75.90

Add: Balance brought forward 222.46 194.84

Less: Adjustment to WDV of assets fully depreciated pursuant to Sch II of Companies Act, 2013 2.91 270.74

Total available for appropriation 372.08 7.60

Less: Transfer to General Reserve 15.25 35.97

Proposed Dividend 44.97 4.71

Corporate Dividend Tax 9.16 -

Balance carried forward 302.70 222.46

DIVIDEND

Your Directors recommend a dividend of Rs.5 per equity share of Rs.2 each for the year ended March 31, 2015. The Company proposes to transfer an amount of Rs.15.25 crores to General Reserve. The Dividend payout would aggregate to Rs.54.13 crores, including Corporate Dividend Tax.

OPERATING PERFORMANCE

Total Revenue of the Company increased by 10% to Rs.3090.94 crores during the year under review. Better control of input costs and expenses enabled Profit from operations before Other Income, Financing Costs and Exceptional Items to go up by 16% to Rs.134.25 crores from Rs.115.99 crores in the previous year.

Segment-wise performance showed a mixed picture. Revenue from Electro Mechanical Projects and Packaged Airconditioning Systems remained virtually stagnant at Rs.1602.41 crores due to prolonged sluggishness in the projects business. This led to a decline in the Segment Result to Rs.64.71 crores.

The decline was more than made up by 24% growth in revenue in Cooling Products from Rs.1076.81 crores to Rs.1331.72 crores. Cooling Products'' results climbed by 55% from Rs.94.77 crores to Rs.146.83 crores, which is a significant achievement.

Professional Electronics and Industrial Systems'' revenues grew by 18% from Rs.124.04 crores to Rs.146.66 crores, while results increased from Rs.21.75 crores to Rs.31.20 crores, a growth of 43%.

FINANCING COSTS

Financing costs for the year were Rs.43.47 crores as compared to Rs.49.64 crores due to lower borrowings, led by better operating performance and efficient cash flow management.

PERFORMANCE/FINANCIAL POSITION OF SUBSIDIARIES, ASSOCIATE AND JOINT VENTURE COMPANIES

Subsidiary companies:

As on March 31, 2015, Blue Star Limited has two wholly owned subsidiaries; namely, Blue Star Engineering & Electronics Limited (formerly known as Blue Star Electro-Mechanical Limited) and Blue Star Design & Engineering Limited.

a) Blue Star Engineering & Electronics Limited (formerly known as Blue Star Electro-Mechanical Limited)

During the year under review, as a part of the corporate restructuring exercise, the name of this subsidiary was changed from Blue Star Electro-Mechanical Limited to Blue Star Engineering & Electronics Limited, pursuant to approval granted by the Ministry of Corporate Affairs, vide fresh certificate of incorporation dated February 27, 2015.

Total revenue of this subsidiary was Rs.36.02 crores as against its previous year''s revenue of Rs.69.20 crores. It has incurred a net loss of Rs.18.48 crores for the year under review as against the net loss of Rs.13.27 crores in the previous year.

b) Blue Star Design & Engineering Limited

Total revenue of this subsidiary was Rs.6.06 crores as against previous year''s revenue of Rs.24.92 crores. It has suffered a loss of Rs.3.53 crores for the year under review as against a net profit of Rs.15.95 crores in the previous year.

The Company shall provide a copy of the annual accounts of these subsidiary companies to the members on their request in writing. The annual accounts of these subsidiary companies will also be kept open for inspection by any members at the registered office of the Company and also at the registered offices of the respective subsidiary companies during business hours.

Joint Venture Companies:

a) Blue Star M & E Engineering (Sdn) Bhd

This company is principally engaged in the field of mechanical, electrical and plumbing contracting, which include operation and maintenance of heating, ventilation and airconditioning systems. There have been no significant changes in the nature of its activities during the financial year.

The income for the year ended March 31, 2015 was Rs. 52.59 crores as compared to Rs. 80.35 crores in the previous financial year. Net profit after tax for the year ended March 31, 2015 was Rs.2.99 crores as compared to Rs.3.83 crores in the previous year.

b) Blue Star Qatar (WLL)

This company is principally engaged in the business of designing, engineering, installation, maintenance and trading of mechanical, electrical and plumbing contracts, and all works relating to heating, ventilation and airconditioning systems.

The income for the year ended March 31,2015 was Rs.87.62 crores as compared to Rs.79.63 crores in the previous financial year. Net profit after tax for the year ended March 31,2015 was Rs.3.90 crores as compared to Rs.3.62 crores in the previous year.

Associate Company:

Blue Star Infotech Limited

During the year ended March 31, 2015, the total revenue of Blue Star Infotech Ltd was Rs.270.64 crores, as against previous year''s revenue of Rs.276.57 crores. Profit for the year under review was Rs.18.16 crores as against profit of Rs.14.87 crores in the previous year.

CORPORATE RESTRUCTURING

Transfer of Professional Electronics and Industrial Systems Undertaking to Blue Star Engineering & Electronics Limited (formerly known as Blue Star Electro-Mechanical Limited)

The Company obtained approval of the members by way of a postal ballot on March 11, 2015 for the sale and transfer of its Professional Electronics and Industrial Systems undertaking to its wholly owned subsidiary, Blue Star Engineering & Electronics Limited at a fair price of Rs.110.50 crores, against consideration of issue and allotment of its equity shares by Blue Star Engineering & Electronics Limited to the Company. Subsequently, a Business Purchase Agreement dated March 13, 2015 was duly executed in this regard, in terms of which the transfer of the said undertaking was consummated on

March 31, 2015, upon issue and allotment of 2,84,50,052 fully paid up equity shares of Rs.2 each at a premium of Rs.36.84 per share by Blue Star Engineering & Electronics Limited to the Company.

Scheme of Amalgamation of Blue Star Design & Engineering Limited with Blue Star Engineering & Electronics Limited (formerly known as Blue Star Electro-Mechanical Limited)

On March 5, 2015, Blue Star Engineering & Electronics Limited filed a Scheme with the Hon''ble Bombay High Court, for amalgamation of Blue Star Design & Engineering Limited with itself. The Appointed Date of the said Scheme is February 1, 2015 and would become effective from the date on which Blue Star Engineering & Electronics Limited files the order of the Hon''ble Bombay High Court, approving the said Scheme with the Ministry of Corporate Affairs. This amalgamation will consolidate and simplify the Company''s investment structure and strengthen the financial position of the subsidiaries. It is also expected to provide an optimum integration of operations and generate operational synergies.

CONSOLIDATED RESULTS

As required under Clause 32 of the Listing Agreement and Section 129 of the Companies Act, 2013 (''hereinafter referred to as the Act''), the Consolidated Financial Statement has been prepared by the Company in accordance with the applicable Accounting Standards, which forms part of this Annual Report. A statement containing the salient features of the Financial Statement of the subsidiaries, joint ventures and associate companies in Form AOC-1, as required under Rule 5 of the Companies (Accounts) Rules, 2014, also forms part of the Consolidated Financial Statement.

The Consolidated Financial Statement for the year reflects a total income of Rs.3,190.43 crores as compared to Rs.2,952.13 crores for the previous year. The Company has clocked a consolidated net profit of Rs.54.18 crores as compared to Rs.77.54 crores in the previous year.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The Company incurred a total expenditure of Rs.40.74 crores on research and development for the year as against Rs.32.21 crores in the previous year.

During the year, the Company clocked an increase in its foreign exchange earnings from export of its products, commission and other income, aggregating to Rs.197.15 crores as against Rs.181.43 crores in the previous year. There was a corresponding increase in foreign exchange outflow, which stood at Rs.861.14 crores as compared to Rs.737.26 crores in the previous year.

The information on Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo, as required under Section 134(3)(m) of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014 is annexed herewith as Annexure 1.

DIRECTORS

a) Directors and Key Managerial Personnel (KMP):

In accordance with the provisions of Section 203 of the Act, the following have been designated as KMP of the Company:

Name of KMP Designation

Mr Satish Jamdar Managing Director

Mr Vir S Advani Executive Director

Mr B Thiagarajan Executive Director

Mr Manek Kalyaniwala (April 1, 2014 till July 31, 2014) Chief Financial Officer

Mr Neeraj Basur (w.e.f. August 1, 2014) Chief Financial Officer

Mr Sangameshwar Iyer (up to May 31, 2015) Company Secretary

Mr Ashok M Advani, Director of the Company, who is retiring by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.

The Board at its meeting held on May 29, 2015, re-appointed Mr Vir S Advani as a Wholetime Director, designated as Executive Director of the Company for a period of 5 years w.e.f. July 1, 2015, subject to approval of the members of the Company. The terms and conditions of his re-appointment and remuneration have been provided in the Notice convening the 67th Annual General Meeting.

b) Declaration by Independent Directors

The Company has received necessary declaration from each Independent Director of the Company under Section 149(7) of the Act that they meet with the criteria of their independence laid down in Section 149(6) of the Act read with Clause 49 of the Listing Agreement.

c) Formal Annual Evaluation

Pursuant to the provisions of Section 178 of the Act, read with Clause 49 of the Listing Agreement, the Board of Directors has carried out an annual evaluation of the performance of the Board as a whole, the Directors individually and the working of the committees of the Board. The performance evaluation of the Chairman and other Non-Independent Non-Executive Directors was carried out by obtaining feedback on them from the entire Board. This was later finalised at the meeting of the Independent Directors held on March 17, 2015.

MEETINGS OF BOARD OF DIRECTORS

There were 8 meetings of Board of Directors during the year under review; i.e. on April 28, 2014; May 30, 2014; July 28, 2014; July 29, 2014; October 9, 2014; October 21, 2014; January 21, 2015 and February 13, 2015. The gap between these meetings was within the period prescribed under the Act and Clause 49 of the Listing Agreement.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to clause (c) of sub-Section (3) of Section 134 of the Act, the Directors would like to state that:

(a) in the preparation of the annual accounts for financial year ended March 31, 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(b) the Directors have selected such accounting policies and applied them consistently, and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31, 2015 and of the profit of the Company for that period;

(c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records, in accordance with the provisions of the Act for safeguarding the assets of the Company, and for preventing and detecting fraud and other irregularities;

(d) the Directors have prepared the annual accounts for the year ended March 31, 2015, on a going concern basis;

(e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

(f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

STATUTORY AUDITORS

M/s S R B C & Co LLP, Chartered Accountants (Regn. No. 324982E) were appointed as the Statutory Auditors of the Company at the last Annual General Meeting held on July 28, 2014 to hold office for a term of five years, i.e. till the conclusion of the Annual General Meeting to be held for the financial year 2018-19, subject to ratification of their appointment at every Annual General Meeting during the said term. The Board of Directors of the Company at its meeting held on May 29, 2015 has recommended ratification of appointment of M/s S R B C & Co LLP as the Statutory Auditors of the Company for financial year 2015-2016 by the members at the ensuing Annual General Meeting.

The Company has received a letter from M/s S R B C & Co LLP, Chartered Accountants, to the effect that ratification of their appointment, if made, would be in accordance with the relevant provisions of Chapter X of the Act, read with Rule 4(1) of the Companies (Audit and Auditors) Rules, 2014.

AUDIT COMMITTEE

The Audit Committee of the Company comprises Mr Shailesh Haribhakti, Mr Pradeep Mallick, Mr M K Sharma and Mr Vir S Advani. Mr Shailesh Haribhakti is the Chairman of the Committee.

The composition of the Audit Committee is in compliance with the requirements of Section 177 of the Act and Clause 49 of the Listing Agreement. The charter of the committee is in conformity with the Act and the Listing Agreement as more particularly set out in the Corporate Governance Report, which forms a part of this report.

During the year under review, there was no instance wherein the Board had not accepted any recommendation of the Audit Committee.

VIGIL MECHANISM FOR DIRECTORS AND EMPLOYEES

Pursuant to the provisions of sub-sections 9 and 10 of Section 177 of the Act and as per Clause 49 of the Listing Agreement, the Company has established a Vigil Mechanism to enable the Directors and employees of the Company to report concerns of any unethical behaviour, violation of law or regulations, or suspected fraud. In this regard, the Company has formulated a Whistle Blower Policy, which is uploaded on the website of the Company. An Ethics Committee has been constituted comprising the Chief Financial Officer, HR head and Company Secretary (Ethics Officer) to administer this Policy. This Policy has adequate safeguards against victimisation of the whistle blower and ensures protection of the whistle blower''s identity. In addition, as part of the vigil mechanism framework, an independent internal audit mechanism has also been put in place to review and report instances of non compliances with laws, regulations and policies to the Audit Committee. The Company has adopted a Code of Conduct which is uploaded on the website of the Company.

INTERNAL FINANCIAL CONTROLS

The Company has an internal control system, commensurate with the size, scale and complexity of its operations. In order to enhance controls and governance standards, the Company has adopted COSO 2013 framework to ensure that robust internal financial controls exist in relation to operations, financial reporting and compliance. In addition, the Internal Audit function monitors and evaluates the efficacy and adequacy of the internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations. Periodical reports on the same are also presented to the Audit Committee.

LOANS, GUARANTEES AND INVESTMENTS

Details of loans, guarantees and investments covered under the provisions of Section 186 of the Act, as may be applicable, are given in the Financial Statement.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All related party transactions that were entered into during the financial year were on an arm''s length basis and in the ordinary course of business. All the related party transactions are pre-approved by the Audit Committee. In view of this, disclosure in form AOC-2 has not been provided as the same is not applicable to the Company. A policy governing the related party transactions has been adopted and the same has been uploaded on the Company''s website.

RISK MANAGEMENT

As required under Clause 49 of the Listing Agreement, the Company has constituted a Risk Committee comprising Mr Satish Jamdar, Mr Vir S Advani, Mr B Thiagarajan and Mr Neeraj Basur. Mr Satish Jamdar is the Chairman of this Committee.

The Committee has adopted a formal charter outlining its terms of reference. The Committee also oversees and monitors effectiveness of the implementation of various elements of the risk management framework across the Company.

The Company has also set up a core risk management team comprising its senior management. As a part of the enterprise-wide risk management initiative, a process and framework has been established that involves identification of key risks significant to the Company, assigning appropriate risk rating, formulating adequate mitigation plans and institutionalising implementation of these action plans to manage and mitigate all the identified risks.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Board of Directors has constituted a CSR Committee comprising Mr Suneel M Advani, Mr Satish Jamdar, Mr B Thiagarajan and Ms Shobana Kamineni. Mr Suneel M Advani is the Chairman of this Committee.

The Company intends to undertake projects in accordance with Schedule VII of the Act, as a part of its initiatives under CSR. In this regard, the Board has approved a CSR policy for implementation by the Committee.

The Company was required to spend a sum of Rs.26 lakhs by March 31,2015 towards activities as stipulated under Schedule VII of the Act. As the Committee is in the process of identifying appropriate NGO partners for execution of identified projects, the Company did not incur the said expenditure during the financial year ended March 31, 2015.

NOMINATION AND REMUNERATION COMMITTEE

The Nomination and Remuneration Committee comprises Mr Gurdeep Singh, Mr Ashok M Advani, Mr Suneel M Advani and Mr Pradeep Mallick. Mr Gurdeep Singh is the Chairman of this Committee.

The Committee is constituted in line with the regulatory requirements mandated by the Act and Clause 49 of the Listing Agreement. The terms of reference thereof are in conformity with the said requirements, as more particularly set out in the Corporate Governance Report, which forms a part of this report.

MANAGERIAL REMUNERATION

Details of the ratio of the remuneration of each Director to the median employee''s remuneration and other details in terms of Section 197 (12) of the Act, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given below:

i. The ratio of the remuneration of each Director to the median remuneration of the employees of the Company for the financial year

Mr Satish Jamdar 41x

Mr Vir S Advani 25x

Mr B Thiagarajan 27x

Mr Satish Jamdar No increase

Mr Vir S Advani No increase

Mr B Thiagarajan 3.44%

Mr Manek Kalyaniwala # 5.36% (retired w.e.f. July 2014)

Mr Sangameshwar Iyer 9.50%

ii. The percentage increase in remuneration of each Director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year

iii. The percentage increase in the median remuneration of employees in the financial year :

9.23%

iv. The number of permanent employees on the rolls of the Company :

2508

v. The explanation on the relationship between average increase in remuneration and Company performance

Increments are based on the individual employee performance, market benchmarking of salary and net profit of the Company.

vi. Comparison of the remuneration of the Key Managerial Personnel against the performance of the Company

Total remuneration paid to the Key Managerial Personnel constituted 5% of the net profit of the Company for the financial year 2014-15.

vii. Variations in the market capitalisation of the Company, price earnings ratio as at the closing date of the current financial year and previous financial year and percentage increase over decrease in the market quotations of the shares of the Company, in comparison to the rate at which the Company came out with the last public offer in case of listed companies, and in case of unlisted companies, the variations in the net worth of the Company as at the close of the current financial year and previous financial year 2014-15 2013-14

Market 2768.23 1810.41 Capitalisation (Rsin crores)

PE ratio 18.15 23.85

In the recent past, the Company has not made any public offer.

viii. Average percentile increase already made in the salaries of employees, other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof, and point out if there are any exceptional circumstances for increase in the managerial remuneration

Average increase to employees other than managerial personnel and justification thereof

11.39% (Adjusted for headcount changes) The average increase given in FY 2014-15 was based on the outcome of the compensation and benefits benchmarking survey initiated by the Company, to remain competitive in the market, to attract and retain talent.

Average increase to managerial personnel :

Please refer to (ii) of this table.

Exceptional circumstance for increase to manageria personnel ;

NA

ix. Comparison of the remuneration of each Key Managerial Personnel against the performance of the Company

Mr Satish Jamdar 1.71% of net profit

Mr Vir S Advani 1.03% of net profit

Mr B Thiagarajan 1.14% of net profit

Mr Manek Kalyaniwala 0.29% of net profit (from April to July 2014)

Mr Neeraj Basur 0.60% of net profit (appointed w.e.f.August2014)

Mr Sangameshwar Iyer 0.23% of net profit

x. The key parameters for any variable component of remuneration availed by the Directors

The Nomination and Remuneration Committee evaluates the performance of the Directors against the key result areas determined by it and recommends payment of commission to the Directors.

xi. The ratio of the remuneration of the highest paid Director to that of the employees who are not Directors but receive remuneration in excess of the highest paid Director during the year :

NA

xii. Affirmation that the remuneration is as per the Remuneration Policy of the Company :

Affirmed

#Since Mr Manek Kalyaniwala retired w.e.f. July 2014, the increment given to him was a special increment.

*Mr Manek Kalyaniwala retired on July 31, 2014. The amount paid to him is inclusive of his retirement benefits.

PARTICULARS OF EMPLOYEES

Particulars of employees as required under 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are required to be annexed to the Directors'' Report. In accordance with the provisions of Section 136 of the Act, the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. Any member interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

EMPLOYEE STOCK OPTIONS

The Board has an ESOP Compensation Committee comprising the following members; Mr Gurdeep Singh, Mr Shailesh Haribhakti and Mr Vir S Advani. Mr Gurdeep Singh is the Chairman of this Committee.

The Committee granted 14,95,000 options on June 6, 2014 and 42,000 options on February 13, 2015 during the financial year under review.

The details as required as per Rule 12 (9) of Companies (Share Capital and Debentures) Rules, 2014 and as per SEBI requirements have been provided as per Annexure 2 to this Report.

SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Act, read with the Rules therein, the Secretarial Audit Report given by M/s N L Bhatia & Associates, Practicing Company Secretaries has been provided as per Annexure 3 to this Report.

EXTRACT OF THE ANNUAL RETURN

Pursuant to Section 92(3) and Section 134 (3)(a) of the Act read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014, an extract of annual return in Form MGT-9 has been provided as per Annexure 4 to this Report.

DEPOSITS

The Company has not accepted any deposit from the public falling within the ambit of Section 73 of the Act and the Companies (Acceptance of Deposits) Rules, 2014.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Management Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the Listing Agreement, is annexed to this Report.

CORPORATE GOVERNANCE

The Company is committed to maintaining the highest standards of Corporate Governance and adhering to the disclosure norms as set out by Securities and Exchange Board of India. The Report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement forms part of the Annual Report. The certificate from the Auditors of the Company confirming compliance with the conditions of Corporate Governance as stipulated under Clause 49 has been annexed with this report.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY

There have been no material changes and commitments affecting the financial position of the Company, which have occurred between the end of the financial year under review and the date of this report.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS

There have been no significant and material orders passed by any regulators or courts or tribunals, impacting the going concern status of the Company and its future operations.

DISCLOSURES UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT, 2013

The Company has in place an Anti Sexual Harassment Policy, in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Company has set up an Internal Complaints Committee to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this Policy. The Company organises workshops and awareness programmes at regular intervals for sensitising the employees with the provisions of the Act.

During the year under review, the Company did not receive any complaint.

ACKNOWLEDGMENTS

The Directors take this opportunity to express their deep and sincere gratitude to the customers of the Company for their confidence and patronage, as well as to the Government of India and other regulatory authorities for their co-operation, support and guidance. The Directors would like to express a profound sense of appreciation for the commitment shown by the employees in supporting the Company in its continued robust performance on all fronts.

Mumbai, May 29, 2015

For and on behalf of the Board of Directors Ashok M Advani Chairman


Mar 31, 2014

The Directors are pleased to present their 66th Annual Report and the Audited Accounts for the year ended March 31, 2014.

SUMMARISED FINANCIAL RESULTS

(Rs. in crores) April 2013 April 2012 - March 2014 - March 2013

Total Income 2824.90 2803.58

Profit before Interest, Depreciation and Taxation 160.23 135.34

Financial Expenses 49.64 49.85

Depreciation 34.69 32.90

Add: Profit on sale of investments - -

Profit before tax 75.90 52.59

Taxes - 0.85

Profit after tax 75.90 51.74

Add: Balance brought forward 194.84 180.17

Total available for appropriation 270.74 231.91

Less: General Reserve 7.60 5.50

Proposed Dividend 35.97 26.98

Corporate Dividend Tax 4.71 4.59

Balance carried forward 222.46 194.84

DIVIDEND

The Directors have proposed a dividend of Rs.4.00 per equity share (Previous Year Rs.3.00 per equity share, which included a special dividend of Rs.1 per share on the occasion of the birth centenary of the Company''s founder, Mr Mohan T Advani). The dividend will absorb Rs.40.68 crores, including Corporate Dividend Tax.

OPERATING PERFORMANCE

Total Revenue of the Company for the year was practically flat at Rs.2824.90 crores as compared to Rs.2803.58 crores, on account of the challenging external environment. However, as a result of sharp focus on costs and efficiencies, the Operating Profit before Tax, Depreciation and Amortisation went up by 18.4% to Rs. 160.23 crores as compared to Rs. 135.34 crores in the previous year.

The Segment Result for Electro Mechanical Projects & Packaged Air conditioning Systems saw a small decline from Rs. 72.33 crores in the previous year to Rs.67.15 crores, primarily on account of sluggish execution of projects by customers. Cooling Products recorded a healthy increase of 18% in its Segment Result from Rs. 80.35 crores to Rs. 94.77 crores, with an 11% increase in its Segment Revenue from Rs. 965.16 crores to Rs. 1075.51 crores. The Revenue of Professional Electronics & Industrial Systems declined marginally by 3% from Rs.182.29 crores to Rs. 176.73 crores, whilst the Segment Result remained unchanged at Rs. 29.84 crores.

FINANCIAL PERFORMANCE

Finance costs for the year were held at Rs. 49.64 crores as compared to Rs.49.86 crores, due to a sustained focus on cash flow and tight control on borrowing levels.

EXPORT & FOREIGN EXCHANGE EARNINGS

Foreign exchange inflows for the year, including commission income, further improved to Rs. 180.87 crores as against Rs. 158.57 crores in the previous year. Foreign exchange outflow for the year was Rs.869.67 crores compared to Rs. 682.88 crores in the previous year, largely due to the sharp depreciation in the value of the local currency.

SUBSIDIARY COMPANIES

During the year, the Company''s subsidiaries, Blue Star Electro-Mechanical Ltd reported a turnover of Rs. 68.50 crores and a loss of Rs. 13.28 crores, whilst Blue Star Design & Engineering Ltd reported a turnover of Rs. 24.82 crores and a profit of Rs. 15.95 crores.

CONSOLIDATED RESULTS

The Annual Report also includes the Consolidated Financial Statements of the Company, which include the results of the Company''s subsidiaries; namely Blue Star Electro-Mechanical Ltd and Blue Star Design & Engineering Ltd, and its share in the results of its joint venture and associate companies. The Consolidated Financial results for the year show a Total Income of Rs. 2914.9 crores compared to Rs.2924.0 crores and consolidated Net Profit of Rs. 77.54 crores compared to Rs. 39.07 crores in the previous year.

In terms of the general permission granted by the Ministry of Corporate Affairs vide General circular no.2/2011, the Accounts of the subsidiaries have not been attached with the accounts of the holding company. Any member desirous of obtaining the same will be provided with a copy thereof upon making a request to the Company.

CORPORATE RESTRUCTURING

On May 30, 2014, the Board approved a proposal for amalgamation of the Company and its subsidiary; namely, Blue Star Design & Engineering Ltd, with its wholly owned subsidiary, Blue Star Electro-Mechanical Ltd (BSEML) w.e.f. October 1, 2014 (Appointed Date), subject to Court and statutory/regulatory approvals. Post the amalgamation, the shares of BSEML shall be listed on the exchanges, and the name of BSEML shall be changed to Blue Star Limited.

The amalgamation will result in a number of benefits, including business consolidation, integration of the MEP contracting activities, simplification of group structure resulting in better regulatory compliances and improved corporate governance, besides improving operational efficiency and reducing costs.

AUDITORS

M/s S R Batliboi & Associates LLP, Chartered Accountants, retire as Auditors of the Company at the forthcoming Annual General Meeting. They have expressed their unwillingness to be re-appointed. It is therefore proposed to appoint M/s S R B C & Co, LLP, Chartered Accountants as Statutory Auditors of the Company at the forthcoming Annual General Meeting. M/s S R B C & Co, LLP, Chartered Accountants have given their consent for this appointment. As required under the provisions of section 141(3)g of the Companies Act, 2013, the Company has obtained a written certificate from M/s S R B C & Co, LLP, Chartered Accountants, to the effect that their appointment, if made, would be in conformity with the limits specified in the said section.

In pursuance to the provisions of Section 233B of the Companies Act, 1956 and with the prior approval of the Central Government, M/s N I Mehta & Company, Cost Accountants (Regn. No. 000023) were appointed as Cost Auditors to conduct audit of cost records for air conditioners activity for the financial year 2013-14. The Cost Audit Report for the financial year 2012-13 has been filed with the Ministry of Corporate Affairs.

DIRECTORS'' RESPONSIBILITY STATEMENT

The Directors would like to inform the members that the Audited Accounts for the financial year ended March 31, 2014 are in full conformity with the requirement of the Companies Act, 1956. These financial results have been audited by the statutory auditors, M/s S R Batliboi & Associates LLP, Chartered Accountants. The Directors further confirm that:

1) In the preparation of the Annual Accounts, the applicable accounting standards have been followed.

2) The accounting policies are consistently applied and reasonable, prudent judgment and estimates are made 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 profits of the Company for that period.

3) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for providing and detecting fraud and other irregularities.

4) The Directors have prepared the Annual Accounts on a going concern basis.

DIRECTORS

Ms Shobana Kamineni was appointed as Additional Director w.e.f. May 30, 2014 at the Meeting of the Board of Directors of the Company held on April 28, 2014.

She holds office upto the date of the forthcoming Annual General Meeting.

The Company has received notice together with the necessary deposit from a member signifying the member''s intention to propose Ms Kamineni as an Independent Director of the Company at the forthcoming Annual General Meeting.

Mr Vir S Advani retires by rotation at the forthcoming Annual General Meeting and being eligible, offers himself for re-election thereat.

Mr Suresh N Talwar retired by rotation at the last Annual General Meeting. In line with the retirement policy of the Company for Directors, Mr Talwar did not seek re-appointment.

It is proposed to re-appoint Mr Satish Jamdar as Managing Director at the forthcoming Annual General Meeting.

In terms of Section 149 of the Companies Act, 2013, it is proposed to appoint the following Directors; namely Mr Pradeep Mallick, Mr Shailesh Haribhakti, Mr Gurdeep Singh and Mr M K Sharma as Independent Directors to hold office for a term of five consecutive years upto March 31, 2019, subject to the retirement policy of the Company for its Directors.

The Company has received necessary notices under Section 160 of the Companies Act, 2013 together with the necessary deposit from a member signifying his intention to appoint the aforesaid Directors at the forthcoming Annual General Meeting.

EMPLOYEES

The number of employees has gone down from 2698 at the end of the previous year to 2540 as at March 31, 2014.

EMPLOYEE STOCK OPTION SCHEME

During the financial year 2012-13, the Company had obtained the consent of the shareholders vide a Special Resolution passed by Postal Ballot for introduction of an Employee Stock Option Scheme. However, no options have been granted by the Company till date under the said Scheme. Necessary disclosures will be made by the Company as and when options are granted.

DISCLOSURE OF PARTICULARS

Information as per Section 217(1)(e) of the Companies Act, 1956, read with the rules made there under relating to conservation of energy, technology absorption, foreign exchange earnings and outgo are given in Annexure A forming part of this report. Particulars of employees as required under Section 217(2A) of the Companies Act,1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, form part of this report. However, in pursuance of Section 219(1) (b) of the Companies Act, 1956, this report is being sent to all the shareholders of the Company excluding the aforesaid information. The said particulars will be made available for inspection at the Registered Office of the Company. Members interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company. A Management Discussion and Analysis Report and Corporate Governance Report as required under Clause 49 of the Listing Agreement are published separately in this Annual Report.

For and on behalf of the Board

Ashok M Advani

Mumbai: May 30, 2014 Chairman


Mar 31, 2013

The Directors are pleased to present their 65th Annual Report and the Audited Accounts for the year ended March 31, 2013.

SUMMARISED FINANCIAL RESULTS

(Rs. in crores)

April 2012 April 2011 March 2013 March 2012

Total Income 2803.37 2724.59

Profit (Loss) before Interest, Depreciation and Taxation 135.34 13.25

Financial Expenses 49.85 70.25

Depreciation 32.90 31.45

Add: Profit on sale of investments - -

Profit (Loss) before Tax 52.59 (88.45)

Taxes 0.85 0.70

Profit (Loss) after Tax 51.74 (89.15)

Add: Balance brought forward 180.17 279.77

Total available for appropriation 231.91 190.62

Less: General Reserve 5.50 -

Proposed Dividend 26.98 8.99

Corporate Dividend Tax 4.59 1.46

Balance carried forward 194.84 180.17

DIVIDEND

The Directors have proposed a dividend of Rs.2.00 per equity share (Previous Year Rs.1.00 per equity share). In addition, a special dividend of Rs.1.00 per equity share has been recommended to commemorate the birth centenary of the Founder Chairman of the Company, Mr Mohan T Advani, as well as the 70th anniversary of the founding of Blue Star. The dividend will absorb Rs.31.57 crores, including Corporate Dividend Tax.

OPERATING PERFORMANCE

Total Revenue of the Company rose to Rs.2803.37 crores for the year ended March 31, 2013 from Rs.2724.59 crores in the previous year. Operating Profit before Interest, Tax, Depreciation and Amortisation increased substantially from Rs.13.25 crores in 2011-12 to Rs.135.34 crores in 2012-13. Total Segment Result showed a huge improvement from Rs.54.65 crores to Rs.182.52 crores.

The major improvement in profit was in Segment I i.e. Electro Mechnical Projects & Packaged Airconditioning Systems, where the Segment Result turned around from a loss of Rs.85.09 crores to a profit of Rs.72.33 crores. This was the result of a number of corrective actions such as control of cost overruns, faster closure of jobs and focus on more profitable business areas.

Cooling Products showed a modest increase in Revenue to Rs.965.15 crores, but a decline in Segment Result from Rs.87.45 crores to Rs.80.35 crores.

Professional Electronics & Industrial Systems had a difficult year with decline in Revenue to Rs.182.29 crores, while the Segment Result reduced to Rs.29.84 crores mainly due to the industrial slowdown.

FINANCIAL PERFORMANCE

There was a significant reduction in finance costs which declined from Rs.70.25 crores to Rs.49.85 crores. Focus on cash flow to reduce borrowing and lower foreign exchange loss succeeded in improving the financial position and reducing the finance cost.

EXPORT & FOREIGN EXCHANGE EARNINGS

Foreign exchange inflows for the year, including commission income, was Rs.158.57 crores compared to Rs.149.45 crores for the previous year. Foreign exchange outflow for the year was Rs.664.43 crores as compared to Rs.544.35 crores in the previous year.

SUBSIDIARY COMPANY

During the year, the Company''s wholly owned subsidiary, Blue Star Electro-Mechanical Ltd reported a turnover of Rs.97.64 crores, and a loss of Rs.15.95 crores.

CONSOLIDATED RESULTS

The Annual Report also includes the Consolidated Financial Statements of the Company, which include the results of the Company''s wholly owned subsidiary, Blue Star Electro-Mechanical Ltd, and its share in the results of its joint venture companies and associate company. The Consolidated Financial results for the year show a Total Income of Rs.2960.45 crores compared to Rs.2843.02 crores and consolidated Net Profit of Rs.39.07 crores compared to a Net Loss of Rs.105.10 crores in the previous year. In terms of the general permission granted by the Ministry of Corporate Affairs vide General circular no.2/2011, the Accounts of the subsidiary have not been attached with the accounts of the holding company. Any member desirous of obtaining the same will be provided with a copy thereof upon making a request to the Company.

AUDITORS

M/s S R Batliboi & Associates LLP, Chartered Accountants, retire as Auditors of the Company at the forthcoming Annual General Meeting and have given their consent for re-appointment. As required under the provisions of section 224 of the Companies Act, 1956, the Company has obtained a written certificate from M/s S R Batliboi & Associates LLP, Chartered Accountants, to the effect that their appointment, if made, would be in conformity with the limits specified in the said section.

In pursuance to the provisions of Section 233B of the Companies Act, 1956 and with the prior approval of the Central Government, M/s ABK & Associates, Cost Accountants (Regn. No. 036) were appointed as Cost Auditors to conduct audit of cost records for airconditioners activity for the financial year 2012-13.

The Cost Audit Report for the financial year 2011-12 was filed with the Ministry of Corporate Affairs within the prescribed time.

DIRECTORS'' RESPONSIBILITY STATEMENT

The Directors would like to inform the members that the Audited Accounts for the financial year ended March 31, 2013 are in full conformity with the requirement of the Companies Act, 1956. These financial results have been audited by the statutory auditors, M/s S R Batliboi & Associates LLP, Chartered Accountants. The Directors further confirm that:

1) In the preparation of the Annual Accounts, the applicable accounting standards have been followed.

2) The accounting policies are consistently applied and reasonable, prudent judgment and estimates are made 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 profits of the Company for that period.

3) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for providing and detecting fraud and other irregularities.

4) The Directors have prepared the Annual Accounts on a going concern basis.

DIRECTORS

Mr B Thiagarajan and Mr M K Sharma were appointed as Additional Directors at the Meeting of the Board of Directors of the Company held on May 13, 2013.

Mr Thiagarajan was also appointed as a Wholetime Director of the Company for a period of 5 years effective from May 13, 2013, subject to the approval of the shareholders at their forthcoming Annual General Meeting.

Mr Thiagarajan and Mr Sharma hold office up to the date of the forthcoming Annual General Meeting of the Company.

The Company has received notice from a member signifying his intention to propose Mr Thiagarajan and Mr Sharma as Directors of the Company at the forthcoming Annual General Meeting.

Mr Gurdeep Singh retires by rotation at the forthcoming Annual General Meeting and being eligible, offers himself for re-election thereat.

Mr Suresh N Talwar retires by rotation at the forthcoming Annual General Meeting. In line with the retirement policy of the Company for Directors, Mr Talwar will be stepping down from the Board with effect from the conclusion of the forthcoming Annual General Meeting and accordingly, he is not seeking re-election thereat.

The Directors wish to place on record their deep appreciation and gratitude to Mr Talwar for the services rendered by him during his tenure as Director of the Company.

EMPLOYEES

The number of employees decreased from 2785 at the end of the previous year to 2698 as at March 31, 2013.

EMPLOYEE STOCK OPTION SCHEME

During the year, the Company decided to introduce and implement an Employee Stock Option Scheme, and for this purpose, has obtained the consent of the shareholders vide a Special Resolution passed by Postal Ballot. No options have been granted by the Company during the year under review. Necessary disclosures will be made by the Company as and when options are granted.

DISCLOSURE OF PARTICULARS

Information as per Section 217(1)(e) of the Companies Act, 1956, read with the rules made thereunder relating to conservation of energy, technology absorption, foreign exchange earnings and outgo are given in Annexure A forming part of this report. Particulars of employees as required under Section 217(2A) of the Companies Act,1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, form part of this report. However, in pursuance of Section 219(1) (b) of the Companies Act, 1956, this report is being sent to all the shareholders of the Company "excluding" the aforesaid information. The said particulars will be made available for inspection at the Registered Office of the Company. Members interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company. A Management Discussion and Analysis Report and Corporate Governance Report as required under Clause 49 of the Listing Agreement are published separately in this Annual Report.

For and on behalf of the Board

Ashok M Advani

Mumbai: May 13, 2013 Chairman


Mar 31, 2012

The Directors are pleased to present their 64th Annual Report and the Audited Accounts for the year ended March 31, 2012.

SUMMARISED FINANCIAL RESULTS

(Rs in crores)

April2011 April 2010 -March 2012 -March2011

Total Revenue 2724.59 2892.91

Profit (Loss) before Interest, Depreciation and Taxation 13.25 282.58

Financial Expenses 70.25 24.36

Depreciation 31.45 31.71

Add: Profit on sale of investments - 0.43

Profit (Loss) before Tax (88.45) 226.94

Taxes 0.70 71.94

Profit (Loss) after Tax (89.15) 155.00

Add: Balance brought forward 279.77 213.44

Total available for appropriation 190.62 368.44

Less: General Reserve - 15.50

Proposed Dividend 8.99 62.96

Corporate Dividend Tax 1.46 10.21

Balance carried forward 180.17 279.77

DIVIDEND

The Directors have proposed a dividend of Rs1.00 per equity share. The dividend will absorb Rs10.45 crores including Corporate Dividend Tax.

OPERATING PERFORMANCE

Total Revenue of the Company was Rs2724.59 crores for the year ended March 31, 2012 compared to Rs2892.91 crores in the previous year. Operating Profit Before Interest, Depreciation and Tax declined from Rs282.58 crores to Rs13.25 crores.

The sharp decline in Operating Profit was largely caused by a combination of factors in the Electro Mechanical Projects business in Segment 1. These included a slowdown in execution of projects due to delays in collections from customers; inflationary cost over-runs and erosion of gross margins on fixed price contracts; and higher expected costs for completion of ongoing projects. In accordance with Accounting Standard AS7, all these cost increases were absorbed in the accounts for 2011-12, resulting in losses and reduced revenues.

In the Cooling Products segment, while top-line growth was favourable, margins were under pressure due to higher input costs and significant increases in fuel and freight costs. Consequently, the segment result was marginally lower. The Professional Electronics and Industrial Systems business was also affected by the general business slowdown.

FINANCIAL PERFORMANCE

Finance costs increased sharply from Rs24.36 crores to Rs70.25 crores. This was partly due to higher interest on increased borrowings. In addition, there was a significant foreign exchange loss and cost of forward cover of Rs36.67 crores. Profit/(Loss) After Tax was a disappointing Rs(89.15) crores compared to Rs155 crores in the previous year.

EXPORT & FOREIGN EXCHANGE EARNINGS

Foreign exchange inflow for the year, including commission income, was Rs149.5 crores compared to Rs160.3 crores for the previous year. Foreign exchange outflow for the year was Rs544.4 crores as compared to Rs561.5 crores in the previous year.

SUBSIDIARY COMPANY

During the year, the Company made a further investment of Rs19.52 crores in the shares of the wholly owned subsidiary, Blue Star Electro-Mechanical Limited.

CONSOLIDATED RESULTS

The Annual Report also includes the Consolidated Financial Statements of the Company. This incorporates the results of the Company's wholly owned subsidiary, Blue Star Electro-Mechanical Ltd and its share in the results of its joint venture companies and associate company. The consolidated results for the year show a Total Revenue of Rs2843.03 crores compared to the previous year's Rs3012.59 crores and a Net Loss of Rs105.10 crores versus Profit After Tax of Rs160.96 crores in the previous year. In terms of the general permission granted by the Ministry of Corporate Affairs vide General circular no.2/2011, the Accounts of the subsidiary have not been attached with the accounts of the holding company. Any member desirous of obtaining the same will be provided with a copy thereof upon making a request to the Company.

AUDITORS

M/s S R Batliboi & Associates, Chartered Accountants, retire as Auditors of the Company at the forthcoming Annual General Meeting and have given their consent for re-appointment. As required under the provisions of section 224 of the Companies Act, 1956, the Company has obtained a written certificate from M/s S R Batliboi & Associates, Chartered Accountants, to the effect that their appointment, if made, would be in conformity with the limits specified in the said section.

In compliance with the provisions of Section 233B of the Companies Act, 1956 and with the prior approval of the Central Government, M/s ABK & Associates, Cost Accountants (Regn. No. 036) were appointed as Cost Auditors to conduct audit of cost records for airconditioners for the financial year 2011-12. The Cost Audit Report for the financial year 2010-11 which was due to be filed with the Ministry of Corporate Affairs within 180 days from the close of the financial year (i.e. dt: 27.9.201 1) was filed on 27.8.201 1.

Vide an order of the MCA issued under Notification No.52/26/CAB-2010 dated 24.1.2012, the MCA has covered a number of industries, under automatic Cost Audit with effect from the financial year commencing on or after 1.4.2012. Accordingly, M/s ABK & Associates, Cost Accountants have been appointed as the Cost Auditor of the Company to conduct the cost audit of all the manufactured products of the Company, viz. airconditioning and refrigeration equipment, packaged airconditioners, industrial packaged chillers, air handling units and airconditioners manufactured by the Company for the financial year ending March 31, 2013, upon the remuneration and terms and conditions as may be mutually agreed between the Company and M/s ABK & Associates.

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors hereby inform the members that the Audited Accounts for the financial year ended March 31, 2012 are in full conformity with the requirement of the Companies Act, 1956. These financial results have been audited by the statutory auditors M/s S R Batliboi & Associates, Chartered Accountants. The Directors further confirm that:

1) In the preparation of the Annual Accounts, the applicable accounting standards have been followed.

2) The accounting policies are consistently applied and reasonable, prudent judgment and estimates are made 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 profits of the Company for that period.

3) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for providing and detecting fraud and other irregularities.

4) The Directors have prepared the Annual Accounts on a going concern basis.

DIRECTORS

With effect from April 1, 2012, Mr Ashok M Advani relinquished his position of Executive Chairman and Wholetime Director and continues as Chairman. Mr Suneel M Advani relinquished his position of Managing Director with effect from April 1, 2012 and is presently the Executive Vice Chairman of the Company.

Mr Satish Jamdar and Mr Pradeep Mallick will retire from the Board by rotation and being eligible, offer themselves for re-election.

EMPLOYEES

The number of permanent employees decreased from 2825 at the end of the previous year to 2785 as at March 31, 2012.

DISCLOSURE OF PARTICULARS

Information as per Section 217(1)(e) of the Companies Act, 1956, read with the rules made thereunder relating to conservation of energy, technology absorption, foreign exchange earnings and outgo are given in Annexure A forming part of this report. Particulars of employees as required under Section 217(2A) of the Companies Act,1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, form part of this report. However, in pursuance of Section 219(1) (b) of the Companies Act,1956, this report is being sent to all the shareholders of the Company"excluding"the aforesaid information. The said particulars will be made available for inspection at the Registered Office of the Company. Members interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company. A Management Discussion and Analysis Report, as required under Clause 49 of the Listing Agreement is published separately in this Annual Report.

For and on behalf of the Board

Ashok M Advani

Mumbai : May 16, 2012 Chairman


Mar 31, 2011

Consistently high commodity prices and increase in general operating costs due to the overall inflationary conditions eroded margins and resulted in a reduction of 8% in the Profit before Interest, Depreciation and Taxation to Rs. 282.67 crores as compared to Rs. 305.84 crores in the previous year.

FINANCIAL PERFORMANCE

The Companys financial expenses increased sharply from Rs. 8.45 crores in the previous year to Rs. 24.39 crores in the current year, due to a higher interest rate regime and additional borrowings. The major slowdown in execution of several large projects, resulted in a comparatively tardy cash flow and increase in the Capital Employed in the business. As a result, the Profit before Tax for the year saw a reduction of 18% to Rs. 227.00 crores as compared to Rs. 276.62 crores in the previous year.

The higher income tax rate rose mainly due to lower benefits for the Himachal plant. This resulted in the Profit after Tax declining by 27% from Rs. 211.49 crores to Rs. 155.00 crores.

EXPORT & FOREIGN EXCHANGE EARNINGS

Product exports revived during the year, growing by 33% to Rs. 130.8 crores. Foreign Exchange inflow for the year, including commission income, was Rs. 160.3 crores as compared to Rs. 129.4 crores for the previous year. Foreign Exchange outflow for the year was Rs. 561.5 crores as compared to Rs. 475.5 crores in the previous year.

SUBSIDIARY COMPANY

During the year, the Company made an investment of Rs. 98 crores in the acquisition of the plumbing and fire fighting business of D S Gupta Construction Pvt Ltd, through the Companys wholly owned subsidiary, Blue Star Electro-Mechanical Limited, which was incorporated during the year.

CONSOLIDATED RESULTS

The Annual Report also includes the Consolidated Financial Statements of the Company, which include the results of the Companys wholly owned subsidiary Blue Star Electro-Mechanical Limited and its share in the results of its joint venture companies and associate company. The Consolidated Financial results for the year show a Total Income of Rs. 3009.85 crores and a Profit after Tax of Rs. 160.96 crores.

AUDITORS

M/s S R Batliboi & Associates, Chartered Accountants, retire as Auditors of the Company at the forthcoming Annual General Meeting and have given their consent for re-appointment. As required under the provisions of section 224 of the

Companies Act, 1956, the Company has obtained a written certificate from M/s S R Batliboi & Associates, Chartered Accountants, to the effect that their appointment, if made, would be in conformity with the limits specified in the said section.

M/s ABK & Associates, Cost Accountants have been appointed as the Cost Auditor of the Company to conduct the cost audit of airconditioners manufactured by the Company for the financial year ending March 31,2012 upon the remuneration and terms and conditions as may be mutually agreed between the Company and M/s ABK & Associates.

The observations made in the Auditors Report are self-explanatory and do not call for any further comments under Section 217(3) of the Companies Act, 1956.

DIRECTORS RESPONSIBILITY STATEMENT

The Directors would like to inform the members that the Audited Accounts for the financial year ended March 31, 2011 are in full conformity with the requirement of the Companies Act, 1956.These financial results have been audited by the statutory auditors M/s S R Batliboi & Associates, Chartered Accountants. The Directors further confirm that:

1) In the preparation of the Annual Accounts, the applicable accounting standards have been followed.

2) The accounting policies are consistently applied and reasonable, prudent judgment and estimates are made 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 profits of the Company for that period.

3) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for providing and detecting fraud and other irregularities.

4) The Directors have prepared the Annual Accounts on a going concern basis.

DIRECTORS

During the year, Mr Vir S Advani was appointed as Executive Director of the Company with effect from July 1, 2010.

Mr Vir S Advani and Mr Shailesh Haribhakti will retire from the Board by rotation and being eligible, offer themselves for re-election.

It is proposed to appoint Mr Ashok M Advani as Managing Director designated as Executive Chairman and re-appoint Mr Suneel M Advani as Managing Director designated as Vice Chairman & Managing Director at the forthcoming Annual General Meeting.

EMPLOYEES

The increased level of operations and strengthening of the Companys R&D capabilities has resulted in an increase in the number of employees from 2603 as on March 31, 2010 to 2825 as on March 31, 2011.

DISCLOSURE OF PARTICULARS

Information as per Section 217(1)(e) of the Companies Act, 1956, read with the rules made thereunder relating to conservation of energy, technology absorption, foreign exchange earnings and outgo are given in Annexure A forming part of this report. Particulars of employees as required under Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, form part of this report. However, in pursuance of Section 219(1)(b) of the Companies Act, 1956, this report is being sent to all the shareholders of the Company "excluding" the aforesaid information.The said particulars will be made available for inspection at the Registered Office of the Company. Members interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company. A Management Discussion and Analysis Report, as required under Clause 49 of the Listing Agreement is published separately in this Annual Report.

For and on behalf of the Board

Ashok M Advani

Mumbai, May 24, 2011 Executive Chairman


Mar 31, 2010

The Directors arc pleased to present their 62nd Annual Report and the Audited Accounts for the year ended March 31 r 2010.

HIGHLIGHTS OF 2009-10

- Total Income grew only marginally to Rs, 2556.11 crwes.

- Profit After Tax increased by 17% to Rs. 211.49 crores from Rs. 18029 crores [n the previous year.

Earnings per share reached Rs. 23.52 (face value of Rs, 2/-) compared to Rs. 20.05 in the previous year.

- A dividend of Rs, 8.00 per share (Rs. 7,00 for last year) has been recommended,

- Year-end borrowings reduced for the third year in succession to a low of Rs.8.93 crores from Rs. 27.28 crores in the previous year.

SUMMARISED FINANCIAL RESULTS

(Rs. in crores) April 2009 April 2008 -March 2010 -March 2009 Total Income 2556.11 2524.38

Profit before Interest, depreciation and taxation 305.84 281.35

Financial Expenses 8.45 17.25

Depreciation 34.73 25.88

Add; Profit on sale of investments 13.96 -

Profit before tax 276.62 238.22

Provision for taxation 67.21 60.90

Add/{Less): Deferred Tax 2.08 2.97

Profit after tax 31149 180.29

Add: Balance brought forward 165,46 119.22

Tota I avai labie for appropriation 377,34 299.51

Lass: General Reserve 80.00 60.00

Proposed Dividend 71.95 62.95

Corporate Dividend Tax 11.95 10.70

Balance carried forward 213.44 165.86

DIVIDEND

The Directors have proposed a dividend of Rs. 8.00 per equity share. The dividend will absorb Rs. 83.90 crones including Corporate Dividend Tax.

OPERATING PERFORMANCE

The economic slowdown Impacted the Companys revenue growth during the year. While the Electro Mechanical Projects and Packaged Airconditioning segment showed marginal growth, Cooling Products and Professional Electronics and industrial Systems recorded a small decline. However, on the profit front Cooling Products and Professional Electronics and Industrial Systems segments recorded positive growth which offset the small reduction in the Electro Mechanical Projects and Packaged Airconditioning segment.This, together with an exceptional item of sale of investments, increased the Profit After Tax by 17ft during the year

FINANCIAL PERFORMANCE

Effective cost control measures coupled with lower cost of finance helped the Company to cope with flat revenues. Financial expenses Including Interest cost reduced by over 50%. However, slow cash collections and Increased Sundry Debtors reduced the net cash flow from operations. Nevertheless, good inventory management and suppliers credit kept overall borrowings under control - a marked reduction to Rs. 8.93 crores from Rs.27.2fl crores In the previous year.

The Company made additional investments in fixed assets amounting to Rs. 47,47 crores during th€ year which was

financed entirely out of Internal resources.

The Earnings per share increased by 17% to Rs. 2352 per equity share of Rs. 2/- each.

EXPORT & FOREIGN EXCHANGE EARNINGS

Export income declined sharply during the year, with product exports declining by 51% and commission Income by 7%. There were no project exports during the year.

Foreign exchange outflow during the year was Rs. 475.49 crores as compared to Rs. 510.45 crores during the previous year.

DIRECTORS RESPONSIBILITY STATEMENT

The Directors would like to inform the members that the Audited Accounts for the financial year ended March 31, 2010 are in full conformity with the requirement of the Companies Act 1956, These financial results have been audited by the statutory auditors M/s S R Batliboi & Associates, The Directors further confirm that

1) In the preparation of the Annual Accounts, the applicable accounting standards have been followed.

2) The accounting policies are consistently applied and reasonable, prudent judgment and estimates are made 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 profits of the Company for that period.

3) The Directors have taken proper and sufficient care for the mai ntena nee of adequate accou nting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for providing and detecting fraud and other irregularities.

4J The Directors have prepared the Annual Accounts on a going concern basis.

DIRECTORS

It is pro posed to a ppoint Mr Vir S Advani asaWholetimeDI rector of the Com pa ny with effect from July 1,2010. M r S u re sh N Ta I war and Mr Gurdeep Singh will retire from the Board by rotation and being eligible, offer themselves for re-election.

EMPLOYEES

Due to the business slowdown, employee strength was prudently contained. As on March 31, 2010, total employee strength stood at 2603, slightly lower than 2620 in the previous year.The Company provided modest performance linked increases in salaries which helped to maintain employee morale.

The employee relations scenario continued to be harmonious and congenial and the Company signed a short term settlement with the Union during the year.

Safety awareness among the employees and business partners was enhanced during the year. Over 4000 employees and technicians/workers of business partners were covered under the corporate safety training programme. Safety systems and processes were developed for project sites and factories and implemented to ensure a safer work place.

DISCLOSURE OF PARTICULARS

Information as per Section 217(1)[e) and 217(2A) of the Companies Act, 1956, read with the rules made thereunder relating to conservation of energy technology absorption, foreign exchange earnings and outgo and particulars of employees respectively, are given In Annexures A and 8 forming part of this report. A Management Discussion and Analysis Report, as required under Clause 45 of the Listing Agreement Is published separately In this Annual fleport

For and on behalf of the Board Alhok M Advani Mumbai: May 12, 2010 Executive Chairman

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