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Directors Report of Esab India Ltd.

Mar 31, 2015

Dear Members,

The Directors take pleasure in presenting the Twenty Eighth Annual Report together with the audited accounts of the Company for the 15 months period ended 31 March, 2015.

1. FINANCIAL SUMMARY / HIGHLIGHTS

(Rs. in Lakhs)

Particulars 2014-15* 2013

Income 56,331 44,264

Profit before Interest and Depreciation 6,197 5,871

Finance Charges - -

Gross Profit 6,197 5,871

Provision for Depreciation (1,375) (1,123)

Profit before exceptional and prior period items and tax 4,822 4,748

Exceptional items (1,761) -

Profit before Tax 3,061 4,748

Provision for Tax (697) (1,436)

Net Profit After Tax 2,364 3,312

Balance Profit brought forward 19,666 16,865

Balance available for appropriations 22,030 20,177

Proposed Dividend on Equity Shares (154) (154)

Tax on Proposed Dividend (32) (26)

Transfer to General Reserve (237) (331)

Surplus carried to Balance Sheet 21,607 19,666

* In order to comply with the requirement of Section 2(41) of the Companies Act, 2013, the financial year of the Company was changed from calendar year basis to April - March pattern. Hence the results for the current year are drawn up for a 15 months period and not strictly comparable.

2. EVENTS SUBSEQUENT TO THE DATE OF FINANCIAL STATEMENTS

The Company has been reviewing its industrial footprint and manufacturing capacities by product groups based on current and expected demand. Based on this, it has been proposed to shift certain operations from our Khardah

Factory to our other manufacturing facilities. The Board of Directors has approved the proposal at its meeting held on 26 May, 2015. The Company has given effect to the requisite adjustments arising out of this decision under 'Exceptional items' in the Income statement for 2014-15. The charge on this account represents expenditure on impairment of assets, compensation to employees covered by a voluntary separation scheme and one time settlement costs payable to sub-contractors.

3. CHANGE IN THE NATURE OF BUSINESS, IF ANY

There has been no material change in the nature of business during the period under review.

4. DIVIDEND

The Board of Directors has recommended a dividend of Re. 1/- per equity share of Rs.10/- each (10%) at its meeting held on 26 May, 2015 resulting in an estimated outflow of about Rs.186 Lakhs (Inclusive of dividend distribution tax) for approval of the shareholders at the Annual General Meeting. The proposed dividend takes into consideration a prolonged period of adverse market conditions and the consequent need to conserve resources for current and future business requirements.

5. BOARD MEETINGS

The Board of Directors met 5 times during this period of 15 months from 1 January, 2014 to 31 March, 2015. The Directors met on 19th February, 25th April, 31st July, 6th November, 2014 and 29th January, 2015.

6. DIRECTORS & KEY MANAGERIAL PERSONNEL

The Board of Directors of the Company at present has six members.

Mr Daniel A Pryor is the nominee of ESAB Holdings Limited and a non-retiring Director in terms of the provisions of the Articles of Association.

Mr Rohit Gambhir, is the Managing Director of the Company. He was appointed for a period of five years with effect from 1 November, 2013 as Executive Director and Chief Executive. He was re-designated as the Managing Director with effect from 1 November, 2014.

There are four Non-executive and Independent Directors on the Board of the Company.

In accordance with the provisions of Article 129 of the Company's Articles of Association, Mr Rohit Gambhir, retires by rotation at the forthcoming Annual General Meeting and being eligible, has offered himself for re-appointment. The details as required under Clause 49 of the Listing Agreement regarding Mr Rohit Gambhir are published as part of the Notice calling the Annual General Meeting.

Re-designation

Mr Rohit Gambhir, who was appointed as Executive Director & Chief Executive effective 1 November, 2013 was re-designated the Managing Director of the Company with effect from 1 November, 2014. Form DIR-12 was filed with the Registrar of Companies on 02.12.2014 vide SRN C35113976 and Form MR-1 was filed on 02.12.2014 vide SRN C35112846.

Resignations

Mr Suresh N Talwar, Non-executive Independent Director of the Company resigned from the Board of the Company with effect from 1 August, 2014 after an association spanning over 26 years on the Board. Mr Talwar has stated in his resignation letter that he is resigning from the Board to comply with the stipulation of Clause 49 of the listing agreement which does not permit more than 7 directorships in listed Companies. Form DIR-12 recording this change, was filed with the Registrar of Companies on 04.08.2014 vide SRN C14335277.

Mr Pradeep Mallick, Non-executive Independent Director of the Company resigned from the Board of the Company with effect from 23 January, 2015 after an association of over 11 years on the Board. In his letter of resignation Mr Pradeep Mallick has stated that he is resigning from the Board to pursue his personal goals. Form DIR-12 was filed with the Registrar of Companies on 10.02.2015 vide SRN C42671198

ESAB Holdings Limited vide its letter dated 29 January, 2015 withdrew the nomination of Mr Kenneth D Konopa from the Board of the Company with effect from the close of business hours on 29 January, 2015. Mr Kenneth D Konopa had joined the Board of the Company on 11.02.2013. Form DIR- 12 was filed with the Registrar of Companies on 16.02.2015 vide SRN C43273267.

The Board of Directors would like to place on record its appreciation to all the above Directors, for their individual contributions while they were on the Board and its Committees.

Appointments

Ms. Sabitha Rao joined the Board with effect from 31 July, 2014 as an Independent Director. She brings with her rich and varied experience in business consulting with specialization in HR and Finance. With her induction, the Company is also compliant with the requirements of Section 149 (1) (b) of the Companies Act, 2013 and Clause 49 (II) (A) (1) of the Listing Agreement entered into with the Stock

Exchanges, Form DIR-12 was filed with the Registrar of Companies on 4.8.2014 vide SRN C14335277.

In order to comply with the requirement of Section 149 (4) & (5) of the Companies Act, 2013, the Board of Directors recommended the appointment of the four Independent Directors on the Board as Independent Directors under the provisions of the Companies Act, for a period of five years with effect from 29 January, 2015, subject to the approval of the shareholders. The approval of the shareholders was obtained by Postal Ballot and the results of the said postal ballot were announced to the stock exchanges and published in the leading newspapers (the details of the said results are published elsewhere in the Corporate Governance Report forming part of this Directors' Report). The terms of appointment for these Independent Directors were issued by way of a letter duly signed by the Chairman of the Board. The above referred terms & conditions of the letter are available for viewing on the website of the Company viz. www.esabindia.com

Key Managerial Personnel

To comply with the requirement of Section 203 of the Companies Act, Mr Rohit Gambhir, Managing Director, Mr. B.Mohan, Vice President Finance & Chief Financial Officer and Mr S Venkatakrishnan, Company Secretary have been re-designated as the Key Managerial Personnel of the Company.

Mr B Mohan, Chief Financial Officer joined the Company on 1 February, 2005 and Mr S Venkatakrishnan, Company Secretary joined the Company on 10 March, 2006. Form DIR-12 relating to their re-designation as Key Managerial Personnel, was filed with the Registrar of Companies on 3.12.2014 vide SRN C35205897 and Form MR-1 relating to their individual consent, was filed on 3.12.2014 vide SRN C35222546.

7. DECLARATION FROM INDEPENDENT DIRECTORS ON ANNUAL BASIS

As required under Section 149 (7) all the Independent Directors on the Board of the Company have issued their annual declaration stating that they meet all the criteria of independence as required under the Act.

8. COMMITTEES OF THE COMPANY

A. AUDIT COMMITTEE

In compliance with Section 177 of the Companies Act, 2013 and Clause 49 (III) of the Listing Agreement, an Audit Committee consisting of three Independent Directors and one Non-executive Director has been constituted. Mr K Vaidyanathan, is the Chairman of the said Committee with Mr. Vikram Tandon, Mr. Sudhir Chand and Mr. Daniel A Pryor being the other members of the said Committee. The said Committee met on 19th February, 25th April, 31st July, 6th November, 2014 and 29th January, 2015.

Mr Pradeep Mallick resigned from the Board of the Company with effect from 23rd January, 2015 and consequently ceased to be a Member of the Audit Committee from that date.

There were no occasions during the year where the Board of Directors did not accept the recommendations of the Audit Committee.

B. NOMINATION AND REMUNERATION COMMITTEE

In compliance with Section 178 (4) and Clause 49 (IV) of the Listing Agreement, the Company has constituted a Nomination & Remuneration Committee consisting of three Independent Directors and one Non-Executive Director. Mr. K Vaidyanathan, is the Chairman of the said Committee with Mr. Sudhir Chand & Ms. Sabitha Rao, Independent Directors and Mr. Daniel A Pryor, Chairman of the Board as Members of the Committee.

Mr. Suresh Talwar resigned from the Board of the Company with effect from 1 August, 2014 and consequently ceased to be a Member of the Nomination and Remuneration Committee from that date.

Ms. Sabitha Rao joined the Board with effect from 31st July, 2014 and was co-opted into the said Committee with effect from that date.

The said Committee met on 25th April, 31st July, 6th November, 2014 and 29th January, 2015.

The said Committee laid down the Policy on Remuneration stating therein the positive attributes required for the Managing Director, Independent Directors and Key Managerial Personnel. The said policy also states the modus operandi for determining the remuneration to the above said personnel. The Policy on remuneration of the Company can be viewed on the Company's website www.esabindia.com

C. STAKEHOLDERS RELATIONSHIP COMMITTEE

In compliance with Section 178 (5) of the Companies Act, 2013 the Company has a Stakeholders Relationship Committee consisting of two Independent Directors, one Non-executive Director and the Managing Director. Mr Vikram Tandon is the Chairman of the Committee, Mr Sudhir Chand, Independent Director, Mr Daniel A Pryor, Chairman of the Board and Mr Rohit Gambhir, Managing Director are the Members of the said Committee.

Mr Rohit Gambhir was co-opted into this Committee with effect from 31st July, 2014 as a Member.

The said Committee met on 19th February, 25th April, 31st July, 6th November, 2014 and 29th January, 2015.

D. CORPORATE SOCIAL RESPONSIBILITY COMMITTEE

In compliance with Section 135 (1) of the Companies Act, 2013 the Company has constituted a Corporate Social Responsibility Committee consisting of one Independent Director, one Non-executive Director and the Managing Director. Ms Sabitha Rao is the Chairperson of the said Committee, Mr Daniel A Pryor, Chairman of the Board and Mr Rohit Gambhir, Managing Director are the Members of the said Committee.

The said Committee was newly constituted under the Act with effect from 31 July, 2014.

The Committee met twice on 30th September, 2014 and 29th January, 2015.

The Committee has laid down the Policy on Corporate Social Responsibility stating therein the strategy, objectives, funding & allocation for the CSR projects, implementation, strategy and steps involved in achieving the CSR objectives. The Policy on Corporate Social Responsibility of the Company can be viewed on the Company's website www.esabindia.com

E. RISK MANAGEMENT COMMITTEE

In Compliance with the requirement of Clause 49 of the Companies Act, 2013, the Company has also constituted a Risk Management Committee consisting of Mr Daniel A Pryor, Chairman of the Board, Mr Rohit Gambhir, Managing Director and Mr B Mohan, Vice President Finance & Chief Financial Officer of the Company.

The said Committee was newly constituted during the year on 6th November, 2014 and they met once on 29th January, 2015.

The said Committee laid down the Policy on Risk Management stating therein the objectives and purpose of the said policy. The main objective of this policy is to ensure sustainable business growth with stability and to promote a pro-active approach in reporting, evaluating and resolving those risks which are material in nature and are associated with the business. In order to achieve the key objective, the policy establishes a structured and disciplined approach to Risk Management, in order to guide decisions on material risk related issues.

The Risk Management Policy of the Company can be viewed on the Company's website www.esabindia.com

9. VIGIL MECHANISM

In compliance of Section 177 (9) & (10) of the Companies Act, 2013 and in terms of Clause 49 (VIII) (H) (2) of the Listing Agreement, the Company has set up a whistleblower policy which can be viewed on the Company's website www.esabindia.com. In terms of the said policy the Directors and employees are given direct access to the Chairman of the Audit Committee to report on alleged wrongdoings.

10. DIRECTORS' RESPONSIBILITY STATEMENT

To the best of their knowledge and belief, and according to the information and explanations obtained by them, your Directors make the following statement in terms of Section 134 (5) of the Companies Act, 2013.

1. In the preparation of the annual accounts for the financial year ended 31 March, 2015 the applicable accounting standards have been followed;

2. The Directors have selected such accounting policies listed in Note 2 to the Notes to the Financial Statements and applied consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of the affairs of the Company at the end of the financial year on 31 March, 2015 and of the Profit of the Company for that year;

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

4. The Directors have prepared the annual accounts for the year ended 31 March, 2015 on a going concern basis;

5. The Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively;

6. The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

SUBSIDIARY / JOINT VENTURE / ASSOCIATE COMPANY

The Company does not have any subsidiary, joint venture or an associate company.

HOLDING COMPANY

Colfax Corporation is a Delaware, USA based industrial group with existing global business interests in gas and fluid handling and fabrication technology products and services. Colfax Corporation holds over 73.72% of equity shares of your Company through ESAB Holdings Limited, UK and Exelvia Group India BV, Netherlands which are its 100% subsidiaries.

12. EXTRACT OF THE ANNUAL RETURN

The Extract of the Annual Return of the Company made up as at the end of the Financial Year i.e. 31 March, 2015 is attached by way of Annexure -1 to this report.

13. STATUTORY AUDITORS

M/s. S R Batliboi & Associates, LLP, Chennai (Firm Regn No.101049W) were appointed by the shareholders at the Annual General Meeting held on 25 April, 2014 as the statutory auditors of the Company to hold office until the conclusion of this Annual General Meeting.

As required under Section 139 (1) of the Companies Act, 2013, M/s. S R Batliboi & Associates, LLP, Chennai are now being appointed as statutory auditors of the Company to hold office for a term of five years from the end of this Annual General Meeting till the conclusion of the Annual General Meeting to be held in the year 2020.

M/s. S R Batliboi & Associates, LLP, Chartered Accountants, retire as Auditors of the Company at the forthcoming Annual General Meeting and have vide their letter dated 8 April, 2015 given their written consent to being appointed as the statutory auditors of the Company and have also issued a certificate that the appointment if made shall be in accordance with the conditions and that they satisfy the criteria provided under the relevant Section and Chapter X of the Companies Act read with Companies (Audit and Auditors) Rules, 2014.

The Directors recommend that M/s S.R.Batliboi & Associates LLP, Chennai, be appointed as the Company's Auditors to hold office until the conclusion of the Annual General Meeting to be held in the year 2020.

The statutory auditors have issued a clean report on the financials of the Company and have not issued any qualifications for the period 1 January, 2014 to 31 March, 2015.

14. SECRETARIAL AUDIT

In terms of Section 204 (1) of the Companies Act, 2013, the Company has appointed M/s. V Mahesh & Associates, Chennai to do the secretarial audit of the Company for the period 1 January, 2014 to 31 March, 2015. The said firm has vide letter dated 31 December, 2014 issued their consent to do the secretarial audit for the Company for the said period. Their appointment was informed to the Registrar of Companies, Chennai vide form MGT-14 dated 10.02.2015 vide SRN C42738104.

M/s. V Mahesh & Associates, have now completed their secretarial audit and have issued their certificate as per the prescribed format in MR-3 to the shareholders of the Company, which is annexed to this Report as Annexure - 2. They have no observations in their report and have confirmed that the Company has proper board processes, a compliance mechanism in place and has also complied with the relevant statutes, rules and regulations applicable to the Company. They have also confirmed that the Company has complied with the necessary secretarial standards, as applicable.

15. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE OUTGO

The information required under Section 134 (3) (m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, is given in the Annexure - 3 and forms part of this Report.

16. DETAILS RELATING TO DEPOSITS

The Company has not accepted any deposits during the period under review as envisaged under Section 73, 74 & 76 of the Companies Act, 2013.

17. SIGNIFICANT & MATERIAL ORDERS PASSED BY THE REGULATORS

During the year under review, there have been no significant and material orders passed by any regulators / courts / tribunals that could impact the going concern status and the company's operations in future.

18. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

The Company has not during the said period under review, made any loans to any third party as envisaged under Section 186 of the Companies Act, 2013.

The Board of Directors from time to time have authorized the Company to invest the surplus of the Company in deposits with Banks and the investments in fixed maturity plans with mutual funds for a tenor not exceeding 100 days and have authorized the personnel of the Company in this regard. The investments are made in liquid and debt funds with no lock in period. The Company has earned an income of around Rs.8.74 crores for the period 1 January, 2014 to 31 March, 2015 in the form of dividends and profit on redemption of investments. The Company has not given any guarantees other than bank guarantees in the normal course of business to meet contractual obligations.

19. RISK MANAGEMENT POLICY

As required under Section 134 (n) of the Companies Act, 2013 and as required under Clause 49 (VI) of the Listing Agreement, the Company has constituted a Risk Management Committee consisting of Mr. Daniel A Pryor, as the Chairman and Mr Rohit Gambhir, Managing Director and Mr B Mohan, Chief Financial Officer as the Members of the Committee. The said committee has laid down the procedures to identify the risks and the minimization procedures. The Board at its meeting held on 29 January, 2015 have approved the said policy on Risk Management. The Board of Directors defined the roles and responsibilities of the said Committee. The policy on Risk Management has been hosted in the Company's website www.esabindia.com. The said committee on a periodical basis updates the Board of Directors on the material risks faced by the Company and the measures taken by the Company to mitigate the said risks.

20. CORPORATE SOCIAL RESPONSIBILITY

As required under Section 134 (o) read with Section 135 (1) of the Companies Act, 2013, the Company has constituted a Corporate Social Responsibility Committee on 31 July, 2014. The Committee has Ms. Sabitha Rao, as the Chairperson, Mr Daniel A Pryor and Mr Rohit Gambhir as the Members of the said Committee.

The said Committee formulated and recommended to the Board for approval a policy on Corporate Social Responsibility. The Board of Directors at its meeting held on 6 November, 2014 approved the policy on Corporate Social Responsibility. The said policy as required under Section 135 (4) (a) has been uploaded in the Company's website www.esabindia.com.

The Company's policy on CSR envisages expenditure in areas falling within the purview of Schedule VII of the Companies Act, 2013. The annual report on CSR activities is enclosed by way of Annexure - 4 to this report. The policy on CSR was adopted on 6 November, 2014 after formation of the Committee. Since the time available for implementation of the CSR activities was very limited and it is of utmost importance that the amounts are defrayed on deserving and genuine projects, the Company has expended about Rs.19.13 Lakhs during the financial year. The Company is in the process of identifying more projects on which CSR spends could be effected.

21. RELATED PARTY TRANSACTIONS

As required under Section 188 of the Companies Act, 2013 and Clause 49 (VII) & (VIII) of the Listing Agreement the company places before the audit committee the list of related parties from whom they buy raw materials or finished goods, to whom the Company extends services or exports goods. The details of the basis of pricing and the margins on such transactions are also tabled. The audit committee accords its omnibus approval for such related party transactions on an annual basis. The updates on the transactions with the related parties are placed before the audit committee on a quarterly basis. The details are also placed before the Board of Directors for its information.

As required under Clause 49 of the listing agreement the Company has formulated a policy on related party transactions and the same was approved by the Audit Committee and the Board of Directors. The said policy has been uploaded in the company's website www.esabindia.com.

All the transactions with the related parties entered into during the period under review have been in the ordinary course of business and at arms' length basis. There have been no material related party transactions entered into during this period which required the approval of the shareholders by way of special resolution. The details of related party transactions pursuant to Clause (h) of sub- section (3) of Section 134 of the Act, is enclosed in form no. AOC 2 as Annexure - 5.

22. FORMAL ANNUAL EVALUATION

As required under Section 134 (p) of the Companies Act, 2013 and Clause 49 (2) (B) (5) of the listing agreement the Board of Directors at its meeting held on 6 November, 2014 approved the evaluation criteria for evaluating the performance of the Board of Directors, its Committees and the performance of Independent Directors.

Accordingly, as required under Schedule IV of the Companies Act, 2013 and Clause 49 (II) (B) (6), of the listing agreement the Independent Directors at their separate meeting held on 29 January, 2015 evaluated the performance of the non-independent Directors and the Board as a whole. They also reviewed the performance of the Chairman of the Company and also assessed the quality, quantity and timelines of flow of information between the Company Management and the Board that was necessary for the Board to effectively and reasonably perform their duties.

Also as required under Clause 49 of the Listing Agreement, the Board assessed the performance of the Independent Directors as per the criteria laid down and have recommended their continuation on the Board of the Company at its meeting held on the 26th of May 2015.

The Board of Directors assessed the performance of the individual Directors on the Board based on parameters such as, relevant experience and skills, ability and willingness to speak up, focus on shareholder value creation, governance standards, knowledge of business, processes and procedures followed, openness of discussion / integrity, relationship with management, impact on key management decisions etc. The Members of the Committee of audit, nomination & remuneration and stakeholders relationship were also assessed on the above parameters and also in the context of the Committee's effectiveness vis-a-vis the Act and the listing requirements.

23. COST AUDITOR

As required under Section 148 of the Companies Act, 2013 the Board of Directors at its meeting held on 26 May, 2015 have appointed M/s. Geeyes & Co., Cost Accountants within the meaning of Cost & Works Accountants Act and holding a valid certificate of practice No.000044 as the Cost Auditor for conducting the Cost Audit for the financial year 2015-2016. The Audit Committee recommended the appointment subject to the compliance of the requirements stipulated in the relevant notifications issued by Ministry of Corporate Affairs.

The Company has received a letter from the Cost Auditor stating that the appointment, if made, will be within the limit prescribed under the Act.

The relevant Form 23 C for appointment of Cost auditor for the financial year 2014-15 was filed with the Registrar of Companies on 26.02.2014 vide SRN S29411832.

The Cost Audit Report issued by the Cost Auditor for the year ended 31 December, 2013 was filed with the Registrar of Companies vide form I XBRL dated 24.06.2014 SRN S30375265.

24. RATIO OF REMUNERATION TO EACH DIRECTOR

As required under Section 197 (12) and Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 the details of ratio of remuneration to each Director to the median employee remuneration are as given below :

A. Executive Director

Ratio of remuneration paid to Mr Rohit Gambhir, Managing Director vs the median employee is : 17 : 1.

Non-executive Independent Director Ratio of remuneration paid to Mr Vikram Tandon, Non- executive Independent Director vs the median employee is : 0.88 : 1

Ratio of remuneration paid to Mr Sudhir Chand, Non- executive Independent Director vs the median employee is : 0.91 : 1

Ratio of remuneration paid to Mr K Vaidyanathan, Non- executive Independent Director vs the median employee is : 0.98 : 1

Ratio of remuneration paid to Ms Sabitha Rao, Non- executive Independent Director vs the median employee is : 0.11 : 1

B. The percentage increase in the median remuneration of employees in the financial year was 9%.

C. The number of permanent employees in the rolls of the Company as at 31 March, 2015 is 355 (347 as on 31 December, 2013).

D. The average percentage increase in remuneration of employees to that of the increase in performance of the Company = 9% : 2%

E. Comparison of the remuneration to Key Managerial Personnel against the performance of the Company during the period 1 January, 2014 to 31 March, 2015.

F Variations in the market capitalization of the Company and the PE Ratio.

Market Capitalisation as on 31.12.2013 - Rs.710.23 Crores.

Market Capitalisation as on 31.03.2015 - Rs.1063.65 Crores

PE Ratio as on 31.12.2013 - 21.44

PE Ratio as on 31.03.2015 - 45.98

The Company made a public offer of Equity Shares at par (Rs.10 per Share) in the year 1989.

G. Average percentile increase made in salaries of employees other than KMP in comparison to the percentile increase in the remuneration of KMP and the justification thereof;

The average percentile increase in salaries of employees other than KMP is 9% while that of KMPs is 11.5%.

Justification thereof : The increase for Rohit Gambhir was considered at 15% in November, 2014 when he was designated as Managing Director. In respect of employees other than KMP an average increase of 9% was considered. Even within this, average of 9% was considered for employees below the level of Manager and about 7% for Managers and above - range varying between 3% and 13% based on performance. The overall increase of 9% also includes an average increase of about 13.7% that was considered for those employees who were promoted to the next higher grade based on performance.

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

Variable Component to Mr Rohit Gambhir - This is linked to various parameters, financial and non-financial. Key elements include sales, operating profit, working capital, implementation of business systems.

Variable Component to Independent Directors - Is based on the roles and responsibilities and their contribution to the Company in their respective capacities. The Commission is individually determined based on their varying commitments of time and effort to the Board and to its committees.

I. The ratio of remuneration of 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: NIL

The Board of Directors would like to affirm that the remuneration paid to the Executive and Non-executive Directors and the Key Managerial Personnel is line with the Remuneration Policy of the Company.

As required under the provisions Section 203 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment of Remuneration of Managerial Personnel) Rules, 2014 as amended, the name and other particulars of the employee is set out in the Annexure - 6 to this Report.

As at the end of March, 2015 the Company had 587 employees as against 644 at the end of December, 2013. The Company believes in providing a working environment that is focused on the customers, teamwork, continuous improvement, innovation and a competitive environment where employees strive to improve value for shareholders.

25. FINANCE

The Company's relationships with its Bankers viz. AXIS Bank Ltd. and HDFC Bank Ltd. continued to be cordial during the year. The Company would like to thank its Bankers for their support.

26. ENVIRONMENT, HEALTH AND SAFETY

The Company continued its commitment to industrial safety and environment protection and all its five factories have obtained its OHSAS 18001 certification. Periodical audits are done by external and internal agencies to assess the continued levels of EHS efficiency of each of these plants and the OHSAS certification given is renewed after every such audit. The Company is also networked with the Group on EHS initiatives and works closely with them on initiatives and actions concerning EHS.

27. LISTING WITH STOCK EXCHANGES

The Company's equity shares are listed with (a) Bombay Stock Exchange Limited and (b) National Stock Exchange of India Limited. The annual fee for both the exchanges have been paid promptly for the year 2015-2016.

The Company had 9,908 shareholders as at the end of the year 31 March, 2015. 98.03% of shares are held in dematerialized form.

As required under Clause 5A (II) (h) of the listing agreement the details of the shares issued by the Company consequent to amalgamation of erstwhile Maharashtra Weldaids Limited with the Company in 1994, the details of the physical shares which remains unclaimed and transferred to the Unclaimed Suspense Account and the reconciliation of the shares claimed by shareholders during the year 2014-2015 and the shares outstanding in the suspense account as on 31.3.2015 is given below :

131 Shareholders holding 9,715 equity shares constituting about 0.06% of shares have not made their claim from the Company on the shares outstanding in the Unclaimed Suspense Account of ESAB India Limited. The voting rights for these shares shall remain frozen until these are claimed by the rightful owners.

28. CORPORATE GOVERNANCE In terms of Clause 49 of the Listing Agreement with the stock exchanges a Corporate Governance Report is made part of this Annual report.

A certificate from the Statutory Auditors of the Company regarding compliance of the conditions stipulated for Corporate Governance under clause 49 of the Listing Agreement is attached to this report.

The Company has also adopted the mandatory policy on Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013. Employees have been sensitized on the provisions of this enactment and the Company has also constituted an internal complaints committee with effect from 30 October, 2013 to deal with complaints if any, under the said Act. There were no complaints received during the year to report.

The declaration by the Managing Director addressed to the members of the Company pursuant to Clause 49 of the Listing Agreement regarding adherence to the Code of Conduct by the Members of the Board and by the Members of the Senior Management Personnel of the Company is also attached to this Report.

29. SECRETARIAL STANDARDS

As on 31 March, 2015 the Secretarial Standard 1 & 2 on Board Meetings and General Meetings have been notified and the Company has complied with the requirements of the said Secretarial Standard.

A certificate of compliances issued by the Secretarial Auditor M/s. V Mahesh & Associates dated 9 May, 2015 is enclosed as Annexure - 2 and forms part of this Report.

30. ISSUE OF SHARES

The Company during the year under review has not issued any SWEAT equity shares or shares with differential rights or under Employee stock option scheme nor did it buy back any of its shares.

31. ACKNOWLEDGEMENTS

Your Directors place on record their appreciation for the confidence reposed and continued support extended by its customers, suppliers and shareholders.

Your Board would like to place on record, its sincere appreciation to the employees for having played a very significant part in the Company's operations till date.

For and on behalf of the Board of Directors

Daniel A Pryor

Chairman

Chennai, 26 May 2015




Dec 31, 2013

The Directors take pleasure in presenting the Twenty Seventh Annual Report together with the audited accounts of the Company for the year ended 31 December 2013.

FINANCIAL RESULTS

(Rs. in Lakhs)

Particulars 2013 2012

Sales and other income 44,264 50,866

Earnings before tax and depreciation 5,871 6,598

Depreciation (1,123) (1,182)

Profit before taxation 4,748 5,416

Taxation (1,436) (1,639)

Profit for the year 3,312 3,777

DIVIDEND

The Board of Directors has recommended a dividend of Re.1 per equity share of Rs.10 each (10%) at its meeting held on 19 February, 2014 resulting in an estimated outflow of Rs. 180 Lakhs (dividend and tax thereon) for approval of the shareholders at the Annual General Meeting. The proposed dividend takes into consideration a prolonged period of adverse market conditions and the consequent need to conserve resources for current and future business requirements.

MANAGEMENT DISCUSSION AND ANALYSIS

ECONOMIC & BUSINESS ENVIRONMENT

The year 2013 has been a difficult one for most of the segments in the economy as the Country continued to experience low growth and high inflation. A host of local and international factors led to low levels of business sentiment and slowdown across virtually all our customer segments.

Industrial production continued to contract through the year under the impact of high interest rates, low investments and a significantly weakened currency. GDP growth estimates went through a series of downward revisions and the impact was particularly adverse in the

Manufacturing segment that is key to your Company''s prospects. Several projects were delayed or shelved due to a combination of financial and policy bottlenecks.

Some of the recent policy announcements encouraging Foreign Investments in India and clearances for long pending projects present a ray of hope but prospects of revival hinge on timely execution of the pronouncements and policies. A reportedly good monsoon is also expected to help boost flagging demand. Reduction in the fiscal deficit and a stable currency with reasonable interest rates are also key to revival prospects. The immediate future continues to be fraught with uncertainties and Industry looks to some stability in the second half of the year.

On issues specific to our Industry and your Company, the effect of slowdown across all Steel consuming segments had an adverse effect on volumes and margins. A significant reduction in infrastructure projects affected our Equipments business in particular with a cascading impact on Consumables. Input and conversion cost increases were not fully compensated by selling prices in an increasingly competitive and tough market. Liquidity conditions were very tight with persistent hardening of interest rates. This necessitated higher credit cycles with trade. The above elements together with an increasingly challenging product mix kept margins under huge pressure throughout the year.

Given the above backdrop, your Company focused strongly on product mix including new launches, product rationalization, productivity improvement measures and a tight control on costs to compensate for flat or declining volumes across product groups.

Business priorities and the Organization were reviewed continuously to look for optimizing costs and benefits. The Company maintained its position as a preferred partner in welding and cutting solutions. The Company is well positioned as a leaner organization with a strong Balance Sheet to endure a difficult phase and to capitalize on any opportunities when the trade cycle improves.

HOLDING COMPANY

Colfax Corporation is a Delaware, USA based industrial group with existing global business interests in gas and fluid handling and fabrication technology products and services. Colfax Corporation holds over 73.72% of equity shares of your Company through ESAB Holdings Limited, UK and Exelvia Group India B.V., Netherlands which are its 100% subsidiaries.

MANAGEMENT

Your Company went through significant organizational changes in its efforts towards right sizing and ensuring functional focus. Jiri Kula stepped down from his role as Managing Director effective 31.10.2013. During his two years of association with your Company in a particularly difficult phase, Jiri was instrumental in creating a strong focus on productivity, quality and costs. Rohit Gambhir was inducted as Additional Director effective 1.11.2013 and has been designated as Executive Director and Chief Executive. He brings with him rich and varied experience in sales, marketing and business management roles.

The Company initiated multiple actions for reductions in cost through rationalization of resources and capacities. The Company could avoid a substantial erosion in margins largely through cost and productivity related improvements.

FINANCIAL STATEMENTS

INCOME AND EXPENDITURE

Net Sales ( Including Service Income) was down by over 13% over 2012. This was across all product groups and segments. Relatively better performances in the R&M business and Exports that were aided by a weakening Rupee, helped in softening the impact of declines in all other product groups.

Other income was higher by about 38% due to increase in income from mutual funds. Cash generation through tight management of working capital was a key positive in a difficult year and cash surpluses were deployed in debt and liquid funds.

Materials costs as a percentage to sales improved from 65.5% to 64.1% due to a combination of enriched product mix and supply chain initiatives.

Cost reduction initiatives including a tight control on discretionary spends resulted in overheads including employee costs being lower by over 11% from 2012 levels.

Expenditure on Consumption of Stores and Spares as also Repairs to Plant and Machinery were lower by 13.6% and 17.5% respectively from 2012 due to initiatives taken at Plants on Maintenance and cost reductions.

Excise duty on Finished Goods were lower by Rs.665 Lakhs in line with reductions in Inventory of manufactured items.

Rates and Taxes fell by Rs.106 Lakhs with a reduction in provisioning requirements for indirect tax matters as compared to 2012.

Transportation and Freight expenses fell by Rs.355 Lakhs through improved recoveries.

Depreciation was lower by 5% as compared to 2012 with Net Fixed Assets at the same levels as in 2012.

BALANCE SHEET

The focus on fundamentals and efficiencies resulted in a stronger Balance Sheet with improved working capital, healthy cash flows and a prudent deployment of resources on capital expenditure.

Capital Expenditure was about Rs.1,176 Lakhs and projects with productivity enhancements and Quality improvements were prioritized to conserve resources.

Current Investments and Cash grew by 16% over 2012 due to internal accruals and improved working capital.

Inventories were lower by about 9% in value terms due to the effect of lower volumes and reduction plans put in place through the year.

Trade receivables were higher by about 19% due to emerging trade requirements driven by tight liquidity conditions.

COST AUDITORS

The Board of Directors at its meeting held on 19 February 2014 have appointed M/s. Geeyes & Co., Cost Accountant within the meaning of Cost & Works Accountants Act and holding a valid certificate of practice No.00044 as the Cost Auditor for conducting the Cost Audit for the financial year 2014. The Audit Committee of Directors recommended the appointment subject to the compliance of the requirements stipulated in the relevant notifications issued by Ministry of Corporate Affairs.

The Company has received a letter from the Cost Auditor stating that the appointment, if made, will be within the prescribed limit under Section 224(1B) of the Act.

OUTLOOK, OPPORTUNITIES AND THREATS

There has been no significant change in the economic environment in the current quarter and most of the concerns highlighted in the earlier paragraphs continue to exist. It is expected that macro-economic elements and the business sentiments could stabilize towards the second half of the year. Multiple and inter woven elements driving economic indicators present strong challenges to any forecasting model.

Our new product offerings and work currently in progress on development of more products are expected to help sustain our leadership position. The long term prospects are still considered positive despite the uncertainties around the short term outlook. We are well placed as an organization to address growth in opportunities as and when any economic revival happens.

Governmental push on infrastructure, emerging focus on Tier II and Tier III cities and also the spin off effects of a good monsoon present opportunities though the eventual impact could take time.

Global developments including exchange rates, oil prices and FII inflows can aggravate the situation. Competitors with international standing continue to focus heavily on the Indian market and this can pose challenges on pricing and margins. Competition from hitherto smaller and unorganized players is a threat to address.

INTERNAL CONTROLS

Internal controls are continuously evaluated by Management and by the Internal Auditors. Findings from internal audits are reviewed regularly by the Management and by the Audit Committee and corrective actions and controls put in place wherever necessary. The Company is also subjected to reviews and audits as part of listing requirements in the USA of its holding company. These reviews help supplement the Company''s efforts in strengthening internal controls.

The reviews by Internal Auditors are scheduled and cover the various manufacturing and office locations. The scope of their work includes review of controls on accounting, statutory and other compliances and operational areas in addition to reviews relating to efficiency and economy in operations.

RELATED PARTIES

Note 32 to the Financial Statements sets out the nature of transactions with Related Parties. Transactions with Related Parties are carried out at arm''s length. The details of such transactions are placed before the Audit Committee.

FINANCE

The Company''s relationships with its Bankers viz. AXIS Bank Ltd. and HDFC Bank Ltd. continued to be cordial during the year. The Company would like to thank its Bankers for their support.

ENVIRONMENT, HEALTH AND SAFETY

The Company continued its commitment to industrial safety and environment protection and all its five factories have obtained its OHSAS 18001 certification. Periodical audits are done by external and internal agencies to assess the continued levels of EHS efficiency of each of these plants and the OHSAS certification given is renewed after every such audit. The Company is also networked with the Group on EHS initiatives and works closely with them on initiatives and actions concerning EHS.

DIRECTORS'' RESPONSIBILITY STATEMENT

To the best of their knowledge and belief, and according to the information and explanations obtained by them, your Directors make the following statement in terms of Section 217(2AA) of the Companies Act, 1956.

1. In the preparation of the annual accounts for the year ended 31 December 2013 the applicable accounting standards have been followed;

2. The accounting policies listed in Note 2 to the Notes to the Financial Statements have been selected and applied consistently and judgments and estimates that are reasonable and prudent made so as to give a true and fair view of the state of the affairs of the Company at the end of the financial year on 31 December 2013 and of the profit of the Company for that year;

3. Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. The annual accounts for the year ended 31 December 2013 have been prepared on a going concern basis.

CAUTIONARY STATEMENT

Certain statements in this Directors'' Report may constitute "forward looking statements" within the meaning of applicable laws and regulations. Actual results may differ materially from those either expressed or implied in this Report.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE

The information required under Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, is given in the Annexure and forms part of this Report.

DIRECTORS

In accordance with the provisions of Article 130 of the Company''s Articles of Association, Mr K Vaidyanathan and Mr P Mallick, retire by rotation at the forthcoming Annual General Meeting and being eligible, have offered themselves for re-appointment. The details as required under Clause 49 of the Listing Agreement regarding the above said Directors are published as part of the Notice calling the Annual General Meeting.

Mr Daniel Alexis Pryor and Mr Kenneth D Konopa continue to be nominee and non-retiring Directors of ESAB Holdings Ltd, the Holding Company, in terms of the provisions of the Articles of Association.

Mr Jiri Kula, who was appointed as the Managing Director of the Company for a period of three years from 1 September, 2011 demitted his office with effect from 31 October, 2013 due to family reasons and had to return back to his country.

Mr Rohit Gambhir, who joined the Company on 18 March, 2013 was appointed as Executive Director & Chief Executive with effect from 1 November, 2013 by the Board of Directors. The subject of appointment of Mr Rohit Gambhir as a Director liable to retire by rotation and his appointment as Executive Director & Chief Executive for a period of five years with effect from 1 November, 2013 and the terms and conditions of appointment are placed for the approval of the shareholders at the Annual General Meeting.

The Board would like to place on record, its appreciation for the contributions of Mr Jiri Kula, Managing Director during his tenure of Directorship.

AUDITORS

M/s. B S R & Co. LLP, Chartered Accountants, retire as Auditors of the Company at the forthcoming Annual General Meeting and have vide their letter dated 14 February 2014 not offered themselves for reappointment pursuant to Section 224 (2)(b) of the Companies Act, 1956.

The Company proposes to appoint M/s S.R.Batliboi & Associates LLP, Chennai as Auditors to hold Office from the conclusion of the forthcoming Annual General Meeting. The Company has received confirmation that their appointment, if made, will be within the limits prescribed under Section 224(1B) of the Companies Act, 1956.

The Directors recommend that M/s S.R.Batliboi & Associates LLP, Chennai, be appointed as the Company''s Auditors to hold office until the conclusion of the next Annual General Meeting.

PERSONNEL

At the end of December 2013 the Company had 644 employees as against 683 at the end of 2012. The Company believes in providing a working environment that is stakeholder focused and challenging in terms of objectives.

As required by the provisions of Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 as amended, the name and other particulars of the employee is set out in the Annexure to this Report. However, in terms of the provisions of Section 219(1)(b)(iv) of the Act, the Directors'' Report excluding the said Annexure is being sent to all the shareholders of the Company. Any shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the registered office of the Company.

PUBLIC DEPOSITS

The Company has not accepted any deposit from the public within the meaning of Section 58A of the Act for the year ended 31 December, 2013.

CORPORATE GOVERNANCE

In terms of Clause 49 of the Listing Agreement with the stock exchanges a Corporate Governance Report is made part of this Annual Report. The Company has not adopted the voluntary corporate governance guidelines 2009 issued by the Ministry of Corporate Affairs. However, the Company on its own volition has adopted most of the guidelines issued by the Ministry and has been transparent in its dealings with the shareholders in particular and stake holders in general.

In compliance with Section 292A of the Companies Act, 1956 and with the Listing Agreement, an Audit Committee consisting of four Independent Directors and one Non- executive Director has been constituted. The Company also has an Investors'' Grievance Committee consisting of two Independent Directors and one Non-executive Director. The Company has also during the year constituted a Nomination & Remuneration Committee consisting of three Independent Directors.

The Company has also adopted the mandatory policy on Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013. Employees have been sensitized on the provisions of this enactment and the Company has also constituted an internal complaints committee with effect from 30 October, 2013 to deal with complaints if any, under the said Act. There were no complaints received during the year to report.

A certificate from the Statutory Auditors of the Company regarding compliance of the conditions stipulated for Corporate Governance under Clause 49 of the Listing Agreement is attached to this report.

The declaration by the Executive Director & Chief Executive addressed to the members of the Company pursuant to Clause 49 of the Listing Agreement regarding adherence to the Code of Conduct by the Members of the Board and by the Members of the Senior Management Personnel of the Company is also attached to this Report.

ACKNOWLEDGEMENTS

Your Directors place on record their appreciation for the confidence reposed and continued support extended by its customers, suppliers and shareholders.

Your Board would like to place on record, its sincere appreciation to the employees for having played a very significant part in the Company''s operations till date.

For and on behalf of the Board of Directors

Daniel A Pryor

Chairman

Chennai, 19 February 2014


Dec 31, 2012

The Directors take pleasure in presenting the Twenty Sixth Annual Report together with the audited accounts of the Company for the year ended 31 December 2012.

FINANCIAL RESULTS

(Rs. Million)

Sales and other income 5,087 5,478

Earnings before tax and depreciation 660 824

Depreciation (118) (118)

Profit before taxation 542 706

Taxation (164) (232)

Profit for the year 378 474

DIVIDEND

The Board of Directors have recommended a dividend of Rs.7.50 per equity share of Rs.10/- each (75%) at its meeting held on 18 February, 2013 entailing an estimated outflow of Rs.134.1 Million (dividend and tax thereon) for approval of the shareholders at the Annual General Meeting. The proposed dividend takes into consideration the difficult prevailing market conditions for the company''s products and the need to invest in the business for the future.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE

The information required under Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, is given in the Annexure and forms part of this Report.

DIRECTORS

In accordance with the provisions of Article 130 of the Company''s Articles of Association, Mr Vikram Tandon and Mr Sudhir Chand, retire by rotation at the forthcoming Annual General Meeting and being eligible, have offered themselves for re-appointment. The details as required under Clause 49 of the Listing Agreement regarding the above said Directors are published as part of the Notice calling the Annual General Meeting.

ESAB Holdings Ltd, the Holding Company, in terms of the provisions of the Articles of Association has appointed Mr Daniel A Pryor as its Nominee and non-retiring Director with effect from 21 July 2012 and as Chairman of the Board of Directors with effect from 11 February 2013.

They have also appointed Mr Kenneth D Konopa as its Nominee and Non-retiring Director on the Board of the Company with effect from 11 February, 2013.

They have also withdrawn the nominations Mr. Brendan Colgan and Mr Nazmie Adams with effect from 9 May, 2012 and that of Mr David J Egan, with effect from 7 December, 2012 and consequently they cease to be Directors of the Company.

The Board would like to place on record, its appreciation for the contributions of the above Directors during their tenure of Directorships.

AUDITORS

M/s. B S R & Co., Chartered Accountants, retire as Auditors of the Company at the forthcoming Annual General Meeting and are eligible for reappointment.

The Company has received confirmation that their appointment, if made, will be within the limits prescribed under Section 224(1 B) of the Companies Act, 1956.

The Directors recommend that B S R & Co., be appointed as the Company''s auditors to hold office until the conclusion of the next Annual General Meeting.

PERSONNEL

At the end of December 2012 the Company had 683 employees as against 830 at the end of 2011. The Company believes in providing a conducive and challenging work environment for nurturing potential, encouraging performance and retaining talents at all levels.

There are no employees covered under the disclosure requirements as required by the provisions of Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975. as amended.

CORPORATE GOVERNANCE

In terms of Clause 49 of the Listing Agreement with the stock exchanges a Corporate Governance Report is made part of this Annual report. The Company has not adopted the voluntary corporate governance guidelines 2009 issued by the Ministry of Corporate Affairs. However, the Company on its own volition has adopted most of the guidelines issued by the Ministry and has been transparent in its dealings with the shareholders in particular and stake holders in general.

In compliance with Section 292A of the Companies Act, 1956 and with the Listing Agreement, an Audit Committee consisting of four Independent Directors and one non- executive Director has been constituted. The Company also has an Investors'' Grievance Committee consisting of two Independent Directors and one non-executive Director.

A certificate from the Statutory Auditors of the Company regarding compliance of the conditions stipulated for Corporate Governance under clause 49 of the Listing Agreement is attached to this report.

The declaration by the Managing Director addressed to the members of the Company pursuant to Clause 49 of the Listing Agreement regarding adherence to the Code of Conduct by the Members of the Board and by the Members of the Senior Management Personnel of the Company is also attached to this Report.

ACKNOWLEDGEMENTS

Your Directors place on record their appreciation for the confidence reposed and continued support extended by its customers, suppliers and shareholders.

Your Board would like to place on record, its sincere appreciation to the employees for having played a very significant part in the Company''s operations till date.

For and on behalf of the Board of Directors

Daniel A Pryor

Chairman

Chennai, 18 February 2013


Dec 31, 2011

The Directors take pleasure in presenting the Twenty Fifth Annual Report together with the audited accounts of the Company for the year ended 31 December 2011.

FINANCIAL RESULTS

(Rs. Millions) Particulars 2011 2010 Sales and other income 5,478 5,145

Earnings before interest, tax and depreciation 834 996

Interest / Finance charges (10) (8) Depreciation (118) (106) Profit before taxation 706 882

Taxation (232) (292)

Profit for the year 474 590

DIVIDEND

The Board of Directors had declared an interim dividend of Rs.15/- per equity share of Rs.10/- each (150%) on the 21st of July 2011 entailing an outflow of Rs.268.4 Million. The Board of Directors has not recommended any final dividend for the year 2011.

MANAGEMENT DISCUSSION AND ANALYSIS ECONOMY & BUSINESS ENVIRONMENT

The year under review was challenging on many fronts. Inflationary pressures continued unabated during the year with adverse impact on our overheads. Fuel price hikes and a steep depreciation in the Indian Rupee added to input costs. Power outages and sporadic shortages in one of our key raw materials added to input and conversion costs that were not compensated by selling price increases in an increasingly competitive market. Liquidity conditions were very tight with persistent hardening of interest rates. Together with global economic developments, this affected inflows and investments into India, resulting in delayed and cancelled investments in manufacturing and infrastructure segments. This had an adverse impact on our businesses and more specifically on our Equipments business.

GDP growth and Steel consumption, two key indicators that have a bearing on the Industry's growth rates, were clearly below expectations. GDP growth during this period

was around 7% while Steel consumption relevant to our operating segments is estimated to have grown by less than 3% for the most part of 2011.

The year also witnessed the arrival of established International competitors set up operations in India and also the scaling up by those present already in India. With pricing pressures across all product ranges and an increasingly challenging product mix, margins remained under pressure throughout 2011.

From a sector wise point of view barring a small list of segments like pre fabricated buildings, gas and pipeline segments, mining equipments etc., all key segments like Power, Automobiles, Cement, Sugar and Infrastructure witnessed slackening of demand and soaring input costs.

Given the above backdrop, your Company recorded reasonable growth in Sales revenues which grew by 7% driven primarily on product mix related changes even as volumes dropped in key segments of consumables with the exception of solid wires which saw a very small growth during the year.

The Company maintained its market leadership position and is well positioned to achieve growth in terms of volumes and shares through better service levels and management of costs. The Company is proud to have been associated with projects of national interest and had also some breakthrough businesses in emerging segments.

HOLDING COMPANY

By virtue of a buy-out and consequent changes in shareholding pattern, your company is now a subsidiary of Colfax Corporation. Colfax is a Delaware, USA based industrial group with existing global business interests in gas and fluid handling and fabrication technology products and services, prior to acquisition of Charter International Plc, the erstwhile holding company.

MANAGEMENT

The Company recognized the need for operating efficiencies to control costs and drive growth and hence effected organizational changes to move towards a functional structure from a divisional structure to achieve greater focus on priority areas. Of particular importance were the changes on our Operations with enhanced focus on Manufacturing, Quality and Supply Chain.

Mr.G.Hariharan retired in August 2011 from his position as Managing Director on completion of his contractual term

after more than two decades of association with the Company. The Board would like to place on record its appreciation for the services rendered by Mr.G.Hariharan in various capacities till his retirement.

He has been replaced by Mr.Jiri Kula , who was appointed Managing Director, effective 1 September 2011. He brings with him rich experience in the Welding industry with operational experience in some of ESAB's major Plants.

The Company had also launched initiatives at its Plants on Maintenance, process controls and monitoring systems towards achieving operational excellence. In recognition of some of its initiatives, the Company won awards from the Quality Circle Forums in recognition of improvements at two of its Plants.

FINANCIAL STATEMENTS

The year saw a decline in profitability with lower growth in some parts of the business and marginal declines in a few other parts of the business. Margins declined with increase in input costs and overheads not compensated by selling price increases. The sales mix posed further challenges to our margins. The Company continued to maintain a good level of cash conversion and focused on efficiency and productivity improvements to partly compensate for lower margins.

INCOME AND EXPENDITURE INCOME

Net Sales (Including income on Engineering services) were up by about 7% in 2011 with a growth of 8.7% in Consumables. Equipments business was flat with a small growth of 3.4% reflecting the underlying trade cycle.

Income from Services increased by 43% reflecting the full year's impact of the merger of the erstwhile Subsidiary, Esab Engineering Services Limited, with your Company in April 2010. While there are opportunities to grow activities in this segment, project management, retention of skilled resources and moving up the value chain on service offerings remain key challenges.

Other income was lower by 17% over 2010. This was primarily on account of non recurring profits on sale of investments in 2010 and higher commission income during that year. Income from scrap increased with better realizations in 2011.

EXPENDITURE

Material costs as a percentage to sales increased from 63% to 64.5%. This was due to the combined effect of cost increases that were not sufficiently compensated by improvement in realizations and also due to the effect of a less profitable sales mix.

Salaries and wages were higher by 19.5% over 2010 due to the combined effect of organizational changes, payroll revisions and the full year's impact of integration of the erstwhile EESL business into Esab India Limited.

Contribution to funds fell by nearly 60% to Rs.16.1 Million largely due to lower provisioning requirements on retirement benefits under pension schemes and favourable changes in underlying discounting assumptions for actuarial valuations.

Consumption of stores and spares was about 44% higher due to higher requirement of spares on ageing equipment and also due to higher costs on spares with respect to our new wires plant at Nagpur.

Power and Fuel expenditure increased by about 21% due to higher tariffs, higher production volumes at Nagpur together with higher costs arising from use of Diesel Generators and bought out power.

Repairs and Maintenance expenditure was up by Rs.22 Million with focus on overhauling older equipment in our Consumables Plants and controlling capital expenditure. Some of this expenditure was also directed at process improvements and up gradation of warehousing facilities.

Transportation costs representing freight payable on sales was higher by about 6% and in line with growth in sales. The expenditure was contained at this level through negotiations and recoveries amidst significant increases in fuel costs through the year.

Increased travel requirements from business requirements resulted in higher spend on Travel and conveyance expenditure by 28% in 2011.

Commission and sales incentives declined to Rs.36 Million from Rs.77 Million in 2010 due to rationalization of trade schemes to control net margins.

Trademark fees were higher by Rs. 51 Million in 2011 reflecting the full year's impact of Agreements executed in August 2010.

External service charges represent expenditure on outsourced support services at our Plant and Office locations. These were higher due to business requirements during the year.

Interest and finance charges represent charges on banking facilities including collection management schemes and were marginally higher than in 2010. The increase was commensurate with the growth in volume of banking transactions.

Depreciation was higher by 11% in 2011 with the full year's impact of capitalization of 2010 and additions of 2011, largely at Nagpur.

BALANCE SHEET

The Company closed the year with a stronger Balance Sheet having funded all its operating requirements internally and continuing to focus on working capital and productivity of assets.

Net Fixed Assets were 2.6% lower at Rs.107 Million as compared to Rs.109 Million in 2010.

Capital expenditure for the year was Rs.92 million, which represents about a 60% reduction as compared to capital

expenditure of 2010. During the year, the key items capitalized were the Plant and Machinery items relating to the expansion at Nagpur and additional office space / canteen at Ambattur.

Investments relate to short term surpluses deployed in debt and liquid schemes of Mutual Funds at the end of the year.

Inventory in value terms was up by 19% over the previous year with growth in sales. This translates to 44 days of sales as against 40 days in the previous year. There were planned increases in safety stocks of many products to improve customer service levels.

Sundry Debtors were significantly lower at Rs.201 Million as against Rs.272 Million at the end of 2010. This represents an improvement to about 13 days to Gross sales as against 19 days in 2010.

On an aggregated basis, the Inventory and Receivables figures compare favourably with the previous year.

Cash and Bank balances were lower by Rs.113 Million with the impact of dividend payouts in 2011 and an increase in Net Working Capital.

Other Current Assets, Loans and Advances increased by Rs.55 million due to higher supplier advances at the end of the year on Steel and Rutiles.

OUTLOOK, OPPORTUNITIES AND THREATS

The outlook for 2012 appears more challenging with established players expanding in India and with difficult liquidity and economic conditions continuing to exert pressures on margins and working capital. Of primary concern are high levels of inflation and relatively depressed market sentiments. Competition from the lower end manufacturers also continues to be intense.

Prices of Steel and other metals have been displaying erratic trends with upward bias driven by power shortages and rising input costs.

We are focusing on productivity improvements, resourcing, quality, costs, indigenization of raw materials and components, range rationalization and enrichment of product mix to enhance our market shares and margins.

Margins are expected to remain under pressure even as we adapt to a rapidly changing environment.

INTERNAL CONTROLS

Internal controls are continuously evaluated by Management and by the Internal Auditors. Findings from internal audits are reviewed regularly by the Management and by the Audit Committee and corrective actions and controls put in place wherever necessary.

The reviews by Internal Auditors are scheduled and cover the various manufacturing and office locations. The scope of their work includes review of controls on accounting, statutory and other compliances and operational areas in

addition to reviews relating to efficiency and economy in operations.

RELATED PARTIES

Note 20 of Schedule O to the Financial Statements sets out the nature of transactions with related parties. Transactions with related parties are carried out at arm's length. The details of such transactions are placed before the Audit Committee.

FINANCE

The Company's relationships with its consortium and other bankers continued to be cordial during the year. The Company would like to thank its Bankers for their support.

CORPORATE SOCIAL RESPONSIBILITY

The Company supports community welfare initiatives. The company has continued with its financial help to institutions in and around its plant at Ambattur, Chennai and in other cities to take care of their upkeep and welfare of the lesser privileged citizens.

ENVIRONMENT, HEALTH AND SAFETY

The Company continued its commitment to industrial safety and environment protection and all its five factories have obtained its OHSAS 18001 certification. Periodical audits are done by external and internal agencies to assess the continued levels of EHS efficiency of each of these plants and the OHSAS certification given is renewed after every such audit. The Company is also networked with the ESAB group on EHS initiatives and works closely with the group on initiatives and actions concerning EHS.

DIRECTORS' RESPONSIBILITY STATEMENT

To the best of their knowledge and belief, and according to the information and explanations obtained by them, your Directors make the following statement in terms of Section 217(2AA) of the Companies Act, 1956.

1. In the preparation of the annual accounts for the year ended 31 December 2011 the applicable accounting standards have been followed;

2. The accounting policies listed in Schedule O to the Notes to Accounts have been selected and applied consistently and judgements and estimates that are reasonable and prudent made so as to give a true and fair view of the state of the affairs of the Company at the end of the financial year on 31 December 2011 and of the profit of the Company for that year;

3. Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. The annual accounts for the year ended 31 December 2011 have been prepared on a going concern basis.

CAUTIONARY STATEMENT

Certain statements in this Directors' Report may constitute "forward looking statements" within the meaning of applicable laws and regulations. Actual results may differ materially from those either expressed or implied in this Report.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE

The information required under Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, is given in the Annexure and forms part of this Report.

DIRECTORS

In accordance with the provisions of Article 130 of the Company's Articles of Association, Mr Pradeep Mallick and Mr Suresh N Talwar, retire by rotation at the forthcoming Annual General Meeting and being eligible, have offered themselves for re-appointment. Mr.K.Vaidyanathan and Mr.Jiri Kula joined the Board as Additional Directors. In terms of Section 260 of the Companies Act, 1956, these Directors hold office up to the date of this Annual General Meeting. Mr.Brendan Colgan and Mr.Nazmie Adams were appointed as Nominee Directors by Esab Holdings Limited during the year.

Mr.K.Vaidyanathan and Mr.Jiri Kula, being eligible for re-appointment have offered themselves for being elected as Directors of the Company liable to retire by rotation. The details as required under Clause 49 of the Listing Agreement regarding the above said Directors are published as part of the Notice calling the Annual General Meeting.

Mr. Michael Foster resigned from the Board on the 27 June, 2011. Mr. Nawshir Mirza resigned from the Board with effect from the 1 July 2011. Mr. G Hariharan retired from the services of the Company on the 31 August 2011. Mr. James R Deeley resigned from the Board on the 20 October 2011.

The Board would like to place on record, their appreciation for the contributions of the above Directors during their tenure of Directorships.

AUDITORS

M/s. B S R & Co., Chartered Accountants, retire as Auditors of the Company at the forthcoming Annual General Meeting and are eligible for reappointment.

The Company has received confirmation that their appointment, if made, will be within the limits prescribed under Section 224(1B) of the Companies Act, 1956.

The Directors recommend that B S R & Co., be appointed as the Company's auditors to hold office until the conclusion of the next Annual General Meeting.

PERSONNEL

At the end of December 2011 the Company had 830 employees as against 812 at the end of 2010. The Company believes in providing a conducive and challenging work environment for nurturing potential, encouraging performance and retaining talents at all levels.

There are no employees covered under the disclosure requirements as required by the provisions of Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 as amended.

CORPORATE GOVERNANCE

In terms of Clause 49 of the Listing Agreement with the stock exchanges a Corporate Governance Report is made part of this Annual report. The Company has not adopted the voluntary corporate governance guidelines 2009 issued by the Ministry of Corporate Affairs. However, the company on its own volition has adopted most of the guidelines issued by the Ministry and has been transparent in its dealings with the shareholders in particular and stake holders in general.

In compliance with Section 292A of the Companies Act, 1956 and with the Listing Agreement, an Audit Committee consisting of four Independent Directors and one non-executive Director has been constituted. The Company also has an Investors' Grievance Committee consisting of two Independent Directors and one non-executive Director.

A certificate from the statutory auditors of the Company regarding compliance of the conditions stipulated for Corporate Governance under clause 49 of the Listing Agreement is attached to this report.

The declaration by the Managing Director addressed to the members of the Company pursuant to Clause 49 of the Listing Agreement regarding adherence to the Code of Conduct by the Members of the Board and by the Members of the Senior Management Personnel of the Company is also attached to this Report.

ACKNOWLEDGEMENTS

Your Directors place on record their appreciation for the confidence reposed and continued support extended by its customers, suppliers and shareholders.

Your Board would like to place on record, its sincere appreciation to the employees for having played a very significant part in the Company's operations till date.

For and on behalf of the Board of Directors

David Egan Jiri Kula

Chairman for the Meeting Managing Director

Chennai, 28 February 2012


Dec 31, 2009

The Directors take pleasure in presenting the Twenty Third Annual Report together with the audited accounts of the Company for the year ended 31 December 2009.

FINANCIAL RESULTS (Rs. Million)

Particulars 2009 2008

Sales and other income 4,293 4,321 Earnings before interest, tax and depreciation 1,094 1,001

Interest / Finance charges (8) (9)

Depreciation (77) (67)

Profit before taxation 1,009 925

Taxation (347) (313)

Profit for the year 662 612

DIVIDEND

The Board of Directors had declared an interim dividend on 9 December 2009 of 200% entailing a total outflow of Rs.360 million including dividend distribution tax. Your Board has not recommended any final dividend for the year.

SUBSIDIARY

The Company did not have any subsidiary during the year under review.

ENVIRONMENT, HEALTH AND SAFETY

The Company is committed to industrial safety and environment protection. In line with ESAB Global standards, the Company has adopted the Environmental, Health and Safety policy and has obtained its OHSAS 18001 certification for four of its five plants. Efforts are on to get the said certification for its Nagpur plant as well. Internal reviews and audits are undertaken to assess the levels of awareness and processes in place at the various operating locations of the Company.

DIRECTORSRESPONSIBILITY STATEMENT

To the best of their knowledge and belief, and according to the information and explanations obtained by them, your Directors make the following statement in terms of Section 217(2AA) of the Companies Act, 1956.

1. In the preparation of the annual accounts for the year ended 31 December 2009 the applicable accounting standards have been followed;

2. The accounting policies listed in Schedule O to the Notes to Accounts have been selected and applied consistently and judgements and estimates that are reasonable and prudent made so as to give a true and fair view of the state of the affairs of the Company at the end of the financial year on 31 December 2009 and of the profit of the Company for that year;

3. Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. The annual accounts for the year ended 31 December 2009 have been prepared on a going concern basis.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE

The information required under Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, is given in the Annexure and forms part of this Report.

DIRECTORS

In accordance with the provisions of Article 130 of the Companys Articles of Association, Mr G Hariharan and Mr Nawshir H Mirza, retire by rotation at the forthcoming Annual General Meeting and, being eligible, have offered themselves for re-appointment. The details as required under Clause 49 of the Listing Agreement regarding the above said Directors are published as part of the Notice calling the Annual General Meeting.

Mr Jon Templeman, resigned from the Board with effect from 8 May 2009. Mr Satish Lai Tandon, a non-executive Director passed away on 2 October, 2009. Your Board of Directors would like to place on record their appreciation for the valuable services rendered by both Mr Jon Templeman and Mr Satish Lai Tandon during their tenure of Directorship.

AUDITORS

B S R & Co., Chartered Accountants, retire as Auditors of the Company at the forthcoming Annual General Meeting and are eligible for reappointment. The Directors recommend that BSR & Co., be appointed as the Companys auditors to hold office until the conclusion of the next Annual General Meeting. The Company has received confirmation that their appointment, if made, will be within the limits prescribed under Section 224(1 B) of the Companies Act, 1956.

PERSONNEL

At the end of December 2009 the Company had 745 employees as against 756 at the end of 2008. We are committed to providing a a conducive environment for high performance and to encourage talent at all levels.

As required by the provisions of Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 as amended, the name and other particulars of the employees are set out in the Annexure to the Directors Report.

CORPORATE GOVERNANCE

In terms of Clause 49 of the Listing Agreement with the stock exchanges a Corporate Governance Report is made part of this Annual Report.

In compliance of Section 292A of the Companies Act, 1956 and with the Listing Agreement, an Audit Committee consisting of two Independent Directors and one non-executive Director has been constituted. The Company also has an Investors Grievance Committee consisting of two Independent Directors and one non-executive Director.

A certificate from the statutory auditors of the Company regarding compliance of the conditions stipulated for Corporate

Governance under clause 49 of the Listing Agreement is attached to this report.

The declaration by the Managing Director addressed to the members of the Company pursuant to Clause 49 of the Listing Agreement regarding adherence to the Code of Conduct by the Members of the Board and by the Members of the Senior Management Personnel of the Company is also attached to this Report.

ACKNOWLEDGEMENTS

Your Directors place on record their appreciation for the confidence reposed and continued support extended by its customers, suppliers, the ESAB group, shareholders and the Bankers to the Company.

Your Board would like to place on record, its sincere appreciation to the employees for having played a very significant part in the Companys performance.

For and on behalf of the Board of Directors

M G Foster

Chennai, 2 March 2010 Chairman

 
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