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Directors Report of Linde India Ltd.

Dec 31, 2014

Dear Members,

The Directors have pleasure in submitting their Report together with the Audited Accounts of your Company for the year ended 31 December 2014:

The results for the year and for the previous year are summarized below:

in Rupees million Year ended Year ended 31 Dec. 2014 31 Dec. 2013

Revenue from operations 16,148.67 15,294.96

Operating profit before depreciation and amortisation 2,877.90 2,698.31

Profit after depreciation, impairment and interest, but before exceptional items 35.78 663.38

Exceptional items - 502.70

Profit before tax 35.78 1,166.08

Provision for current and deferred tax release/(charge) 18.22 (392.80)

Profit after tax 54.00 773.28

Profit brought forward 5,149.73 4,564.78

Profit available for appropriation 5,203.73 5,338.06

Appropriations :

Proposed dividend @ 15% (Previous year @ 15%) on 85,284,223 equity shares of Rs. 10 each, absorbing 127.93 127.93

Tax on proposed dividend 25.58 21.74

Transfer to general reserve 2.70 38.66

Balance carried forward 5,047.52 5,149.73

Financial performance

Your Company recorded a subdued performance during the year under review, amidst weak economic conditions and contraction of demand in most of the end user industry segments. While inflation showed some signs of abatement during the year, the slowdown in manufacturing and industrial activity across the country and deferment of new capital expenditure in most segments made market conditions very challenging. Besides, higher depreciation related to recently commissioned plants and higher finance cost on borrowings severely impacted the financial performance for the year under review.

The sluggish demand faced by most of the end user industry segments and many of our customers through the year and over supply position in the markets resulted in significant under utilisation of installed capacities, further impacting the financial performance. Revenue from operations during the year stood at Rs.16,1 48.67 million reflecting a growth of 6% compared to last year. This growth was primarily achieved by revenues realized from the newly commissioned plants, while the base gases and engineering business remained subdued.

Gases business grew by 22% during the year mainly driven by commissioning of 2X 853 tonnes per day (tpd) - air separation units (ASU) at Steel Authority of India Ltd''s works at Rourkela. The incremental revenues from ramping up of the newly commissioned plants in the previous year, viz. 2,550 tpd ASU at Tata Steel in Jamshedpur and 330 tpd merchant ASU at Taloja also contributed to higher revenues in the Gases business. The Project Engineering Division (PED) achieved a turnover of Rs. 2,001.58 million during the year compared to Rs. 3,676.66 million last year due to significantly lower number of new projects. The PED''s business is primarily driven by capacity expansion in steel and refinery segments. These sectors witnessed restrained capex spend by major customers due to adverse market conditions, high interest rates and policy bottlenecks in mining and other core sectors. However, the Division managed to improve overall profit margin through cost savings and efficient project management in ongoing projects.

The operating profit for the year amounted to Rs. 2,877.90 million, which grew by around 7% as compared to Rs. 2,698.31 million in the previous year. This includes a profit of Rs. 66.40 million shown as other income arising from disposal of right to use an apartment at Kolkata. This growth in operating profit has been achieved through focus on application development and promoting value added products like shielding gases and helium. Your Company also initiated cost control measures on various administrative fronts and focused on delivering operational efficiency including by using Six Sigma.

The Profit before exceptional items and taxes for the year under review amounted to Rs. 35.78 million as against Rs. 663.38 million in previous year. The decrease is on account of significantly higher depreciation charge of Rs. 1,813.46 million as compared to Rs. 1,290.43 million in the previous year mainly due to capitalization of new ASUs at SAIL, Rourkela and impairment in value of certain assets under capital work in progress. The steep increase in finance cost from Rs. 744.50 million to Rs. 1,028.66 million further impacted the profits for the year. The significant increase in the finance cost during the year under review is mainly on account of interest on ECB availed for SAIL Rourkela ASUs, which has been fully charged to revenue during the year under review following the capitalisation of the ASUs.

Net profit for the year stood at Rs. 54.00 million as against Rs. 773.28 million in the previous year, which included exceptional income of Rs. 502.70 million from sale of land at Ahmedabad.

Dividend

After a careful review of the Company''s performance, your Board has decided to recommend a dividend of 15% (Rs. 1.50 per equity share of Rs. 10 each) for the year 2014 in respect of 85,284,223 equity shares of Rs. 10 each in the Company, which will be paid out of the undistributed profits of previous financial years pursuant to the provisions of Section 205(1) of the Companies Act, 1956 and the relevant corresponding provisions of the Companies Act, 2013. The dividend together with dividend tax will result in a cash outlay of Rs. 153.51 million. The Board has also recommended a transfer to general reserve of Rs. 2.70 million (Previous Year Rs. 38.66 million) in compliance with the Companies (Transfer of Profits to Reserves) Rules, 1975.

Industry developments

The gases business is capital intensive by nature as it requires large investments in setting up of air separation units as well new packaged gases sites. The supply chain in the gases business also requires significant investments in the form of distribution assets and storage networks to service bulk volumes as well as in the form of cylinders to service relatively smaller volumes in packaged gases business. The industry comprises of major users in steel, chemicals and refinery sectors and a large number of merchant liquid customers primarily in metal, glass, automobile, petrochemicals and pharmaceutical sectors, besides customers for medical gases. New applications continue to provide growth opportunities. This growth is also supported by the increasing outsourcing of gases requirement under a "Build Own Operate" (BOO) type of supply scheme opportunities mainly in steel and refinery sectors.

Business segments

Your Company''s business has two broad segments, viz. Gases and Related Products and Project Engineering in line with the operating model of its parent, Linde AG.

Gases and related products

The Gases and Related Products segment comprises of pipeline gas supplies (On-site) to very large industrial customers - mainly primary steel production and refining industry, supply of liquefied gases through cryogenic tankers (Bulk) to cater to mid-size demands across a wide range of industrial sectors and compressed gas supply in cylinders (Packaged Gases) for meeting smaller demand for gases mainly across fabrication and manufacturing and construction industry. The primary production of gases (oxygen, nitrogen and argon) is mostly achieved through cryogenic distillation of air in Air Separation Units (ASU).

Oxygen, Nitrogen and Argon may be produced in the gaseous state and supplied through pipeline to the on- site customers, or produced in liquid form and stored in insulated cryogenic tanks for supply to bulk customers or further processed in the Packaged Gas plants to bottle compressed gas in cylinders. The strategy of the bulk and packaged gas business continues to be building and sustaining market leadership through application led gas sales and enhanced service levels.

The Healthcare business provides high quality gases for pharmaceutical use such as medical oxygen, synthetic air, nitrous oxide in addition to providing state of the art medical gas distribution systems to major hospitals. Your Company also provides total gas management solutions to private hospital chains and has ambitious plans to expand beyond its current footprint in metro cities. The strategy of the healthcare business is to sustain its leadership position in the large hospitals in metro cities and increase penetration in tier 2 cities with particular focus on supporting private hospital chains in providing total gas management solutions.

The turnover of your Company''s gases business for the year 2014 recorded a growth of about 22% over 2013 despite general slowdown in industrial activities in several sectors. As explained earlier, this growth was primarily achieved by revenues realized from the newly commissioned plants, while the base gases remained subdued. The delay in commissioning of some of the projects impacted the gases business. Merchant and packaged gases business however benefited from cyclical upturn in the automobile industry, which helped your Company in achieving highest ever argon volumes even in these difficult conditions. During the year, your Company was successful in converting a number of its gases application leads into business with customers including wins in new sectors like cement and aluminium. This further reinforces the strength of Linde''s technology solutions that is helping your Company to differentiate itself in the markets. As a result, your Company managed to secure higher oxygen volumes during the year. Higher sale of helium was achieved due to demand from customers in fibre optic cable segment and Government agencies in defence and space research.

Operations played a critical role in a difficult year with focus in the areas of power cost reduction, loss reduction, reliability improvement and plant mode optimization with the help of the Remote Operating Centre (ROC). During the year, the Company commissioned its 2X853 tpd ASUs at SAIL Rourkela works. The Hyderabad 65 tpd ASU was not operational following an optimisation programme with product being outsourced from other plants.

Your Company continues its development towards positioning itself as a solutions provider on the back of gases applications, technologies and services. During 2014, despite a challenging business climate, a large number of business wins were achieved on the back of this strategy. Linde''s REBOX® technology for steel reheating has been installed at a number of steel mills in India. The first contract in India for Linde''s world-leading technology for aluminium melting was also signed. Activities in the cement, heat treatment, foundry, chemistry, and pharma industries are developing at a high pace with successful installations of Linde''s technical solutions. Opportunities are also being pursued in the food industry, particularly relating to freezing. Your Company has a strong focus on the automotive industry and its ancillaries. A technology centre with focus on welding technologies and the automotive industry has been established in Pune. Besides, a number of opportunities are being pursued in the water treatment and clean energy sectors, including involvement in an algae-to-oil project.

The Packaged Gases Business (industrial) grew by about 6% in an intensely competitive market dominated by smaller retailers and refillers. The packaged gases consist of compressed industrial oxygen, argon, nitrogen, electronic and special gases. During the year, your Company created differentiation in its product and service offerings by launch of 230 bar oxygen and argon cylinders in key market zones such as Bangalore, Pune and Dahej. By leveraging its technical know-how and creating the right value proposition, your Company has been successful in stepping up the shielding gases volumes by more than 13% in 2014.

The Special Products and Chemicals (SP&C) business grew significantly by almost 58% on the strength of helium supplies for manufacture of optic fibre as well as in areas of space research and technologically advanced fields of medicine. Since commissioning of Helium transfilling operation at Taloja in 2012, the Company has penetrated successfully into the packaged helium as well as Dewar business. Business in XL grade gases, calibration and process gas mixtures also witnessed good growth - mainly from the Lighting and Automotive Industry. The chemicals and electronics gases business remained subdued due to weak demand from the industry.

The Healthcare segment continues to provide another growth lever for your Company. However, the business is challenged by intense competition and lack of adequate standards that creates an uneven playing field, where the Company has to compete against a lower standard of compliance by local players. This has an impact on the profitability of the Healthcare segment. In this back drop, your Company is focusing on reducing cost, getting out of low margin accounts, and creating differentiated Product and Service Offers (PSOs) including Total Gas Management, where Linde India becomes an integrated part of the Hospital by managing the Gas Supply to patients. Another initiative being pursued in Healthcare business is the introduction of best in class lightweight cylinders with Linde Integrated Valve (LIV), which sets a new benchmark in medical oxygen packaging for use within the hospital wards.

During the year, the National Pharmaceutical Pricing Authority (NPPA) under Ministry of Chemicals, Government of India, fixed a ceiling price for medical oxygen and nitrous oxide by classifying them as emergency drugs. This has created a new challenge for these products in the Healthcare markets and your Company has taken adequate steps to address the same. Your Company has also made necessary representation to the Government Authorities in this regard.

Your Company also continues to work on developing the gases pipeline network at Dahej in Gujarat by adding new customers that can be served from the ASU under construction. The Company is also focusing to develop a pipeline scheme in the Kalinganagar industrial area in Odisha with a long term strategy to grow the gases business in this prominent steel industry cluster.

Your Company sees several opportunities in the Gases business in the medium to long term, which include projected increase in India''s steel making capacity to 200 million metric tonnes by 2020, decaptivation and outsourcing of gases demand by refineries and the Government''s ambitious "Make in India" campaign, with an aim to turn the country into a global manufacturing hub. On the other hand, rising power costs in West and unreliable power supply faced at some of the tonnage plants such as Hyderabad and Selaqui, over capacity in the markets resulting in pricing pressure in merchant business are considered as some of the threats.

Project engineering

The Project Engineering Division engages in the business of engineering, procurement, supply, construction and commissioning of Air Separation Units (ASU), nitrogen generators, hydrogen Pressure Swing Adsorption (PSA) plants, compressed air systems and gas distribution and storage systems. The Project Engineering Division (PED) is engaged for in- house Gases Division projects, as well as for sale of plants to third party customers.

The market condition remained extremely challenging for PED in 2014 as well, when the Division order intake reduced significantly, which is also reflected in the decrease in its revenues. PED achieved revenue of Rs. 2,001.58 million as compared to Rs. 3,676.66 million recorded in 2013. During the year, PED executed projects involving air separation plants, nitrogen plants, compressor air stations in steel industry both in public and private sectors. The Division has expanded its global reach during the year with a number of export orders under execution including nitrogen generator revamp for PT. Indo Rama Ventures (Indonesia), liquid nitrogen plant sale (UNIT 50) to Medipharm East Africa Ltd. (Nairobi). In a difficult year, the Division also managed to recover fixed costs by providing engineering supervision and commissioning services to Linde Engineering Taiwan.

Major projects executed during the year include Cryogenic N2 Generator for GAIL (India) Ltd, Pata, Inert Gas and Air Compressor system for ONGC Petro Additions Ltd. Other than these projects, the Division has also completed execution of Cryogenic Nitrogen Generator at OMPL, Mangalore and MRPL Phase III, Mangalore. The Division has thus, maintained its leadership in Cryogenic Nitrogen Plant market. Besides, the Division is also constructing 2X1,250 tpd ASU for NMDC, 1,000 tpd ASU for Bhushan Steel at Meramandali in Odisha utilising technology from Linde Engineering. The execution activities for new compressed air station for RINL''s Visakhapatnam Steel Plant and Nitrogen generation package for GSPC LNG Ltd. at Mundra, Gujarat is at its initial stages. The execution of these and several other projects is progressing well.

As a part of the ongoing support to the growth of Gases Business, PED completed commissioning of 2x853 TPD ASUs at SAIL, Rourkela.

PED is currently also executing another large in house project for the Gases Division for the commissioning of 2x1,000 scale Oxygen plants at Tata Steel''s 3 MTPA steelworks at Kalinganagar in Odisha, which is expected to be completed in 2015. PED is also engaged in dismantling and relocating the 110 tpd ASU from Taloja and its commissioning at a new site at Dahej. The project is in advanced stage of completion and is expected to be on line by H1 2015.

While PED is responsible for execution of in-house ASU projects for the Gases Division, it also continues to remain focused to strengthen its product offerings leveraging on the technological support from Linde Engineering. The Division continues to endeavour to improve its competitiveness through several initiatives by increasing the indigenous component in its plants. The Division''s total third party orders in hand stood at Rs. 2,420 million as on 31 December 2014.

Risks and concerns

Your Company''s business faces various risks such as strategic as well as operational risks in both of its segments viz. Gases and Project Engineering, which arise from both internal and external sources. As explained in the report on Corporate Governance, the Company has an adequate risk management system which takes care of identification, assessment and review of risks as well as their mitigation plans put in place by the respective risk owners. The risks which were being addressed by the Company during the year under review included risk relating to execution model of the Company for tonnage projects, over dependence of business on steel sector, continuing increase in inflation, increase in power costs, delay in customer projects, competitive risks, etc. Some of the above risks have reached closure as mitigating actions for them have been fully implemented. Since the Project Engineering Division of your Company is engaged in execution of various in house and third party projects, it has an inherent risk of time and cost overruns due to various reasons. Your Board of Directors provides oversight of the risk management process in the Company and reviews the progress of the action plans for each of the identified key risk on a quarterly basis.

Finance

As on 31 December 2014, your Company had three loan facilities by way of External Commercial Borrowing (ECB) aggregating EUR 199.6 million from Linde AG. The facilities were executed for funding of large air separation units (ASU) at Tata Steel Jamshedpur (2,550 tpd ASU), SAIL Rourkela (2X853 tpd ASU), Tata Steel Kalinganagar (2X1,000 scale Plants) and Hydrogen SMR unit at Asian Peroxide. Out of the three facilities, two EUR facilities aggregating EUR 122 million are fully drawn down. The third facility is a fixed rate INR facility equivalent to EUR 77.6 million and is partly drawn. During the course of the year, INR equivalent of EUR 29.4 million was drawn down and EUR 21.2 million was repaid leaving a net outstanding position of EUR 155.4 million as at the end of the year. The ECBs are fully hedged both with regard to the principal and interest payments.

During the year, the Company has also negotiated and fully drawn down three-year floating rate, two term loan facilities aggregating to USD 24.90 million equivalent of Rs. 1,500 million from Citibank. The term loan facility was executed to fund ongoing small capital expenditure requirement. This facility is in addition to the two-year USD 16.8 million equivalent of Rs. 1,000 million term loan executed in the previous year. All the three facilities are fully hedged with regard to the principal and interest payments.

The overall Working Capital Demand Loan (WCDL) as on 31 December 2014 was Rs. 1,500 million.

During the year, the Company transferred a sum of Rs. 0.81 million of unpaid/unclaimed dividend for the year ended 31 March 2007 to the Investor Education and Protection Fund.

Prescribed particulars

The prescribed particulars required under Section 217(1 )(e) and 217(2A) of the Companies Act, 1956, read with the Rules made there under as amended up to date are given by way of Annexure to this Report.

There were 12 employees who were employed throughout the year and were in receipt of remuneration aggregating to Rs. 6 million or more or were employed for part of the year and were in receipt of remuneration aggregating to Rs. 0.5 million per month or more during the year ended 31 December 2014. In accordance with the provisions of Section 217(2A) of the Companies Act, 1956 and the rules framed there under as amended, the names and other particulars of employees are set out in the annexure to the Directors'' Report. However, in terms of the provisions of Section 219(1 )(b)(iv) of the Companies Act, 1956, the Directors'' Report is being sent to all the shareholders of the Company excluding the said information. The aforesaid statement is available for inspection by shareholders at the Registered Office of the Company during business hours on working days up to the date of the ensuing Annual General Meeting. Any shareholder interested in obtaining a copy of the said information may write to the Company Secretary at the Registered Office of the Company.

Human resources

As a member of The Linde Group, your Company''s human resource function is aligned to its global HR strategy, with intent to support its business strategy. It therefore derives robust support from the Group in areas of recruitment, training, appraisal, compensation, managing and rewarding performance, etc. Human Resources function ensures that all employees are aligned to the organisation''s shared values, management principles and a high performance culture. Your Company strives to embrace best HR practices to become an "Employer of Choice". Your Company aims to maintain its competitive edge by ensuring the right talent for the right job. This is ensured by using multi-pronged selection tools like assessment centres, personality tests and one-on-one interviews. Our recruitment strategy centres on infusing quality talent aligned to the values of Linde with potential to take the organisation to a higher level of performance. Social networking sites are actively used - both as a source of candidate database and also as a platform to create strong employer brand.

At Linde India, learning and development is a way of life. The Linde University e-campus provides on-time and need-based learning opportunities for employees. Online trainings focused on developing leadership competencies among the managers were introduced in 2014. In certain cases, a blend of local site level training, or national level and even international level training programmes leveraging upon the knowledge base and training programmes of the Linde Group are used for development of the employees. All new employees undergo a structured induction program branded as "SAMPARK" and also a detailed Safety Induction program to inculcate the Company''s safety culture among all new joiners.

Your Company continues to actively participate in the Young Talent Development programme which was launched in 2012 along with other Linde group companies in South Asia, as an initiative to nurture and groom talent through a common talent development programme.

This is a unique one-year development programme for graduates, which received special recognition for People Excellence in the 2014 Linde Global HR Awards.

Your Company continued to maintain harmonious industrial relations environment across all its manufacturing locations in the country. Long term settlements for wage revision of unionized staff were concluded at West Bengal, Ahmedabad and Jamshedpur and subsequently implemented across the country. The recently concluded Linde Global Employee Survey saw 96% participation from employees in India, which validates the relationship of mutual trust that the management enjoys with the employees. Your Company had manpower strength of 832 as on 31 December 2014.

Corporate Social Responsibility (CSR)

As informed last year, the Board of Directors of your Company had set up a CSR Committee in February 2014. A CSR Steering Team comprising of cross functional managers was also set up by the Company to recommend CSR initiatives to the Committee and implement the decisions of the CSR Committee and the Board. The CSR Policy of the Company was approved by the Board in May 2014 and it focuses on four thematic areas of Education, Health, Environment and Skill Development. Particular focus is given to engaging employees into the CSR initiatives of the Company. This being the first year of a structured CSR initiative, a part of the year was available for implementation of CSR projects and a number of initiatives are still in the concept stage while your Company is continuing to fine-tune the execution process. Some of the CSR projects/initiatives that were taken up during the year include providing special education to physically handicapped children at Indian Institute of Cerebral Palsy (IICP), donation to Jamshedpur colony school, adoption of one classroom at IICP, working with Disha (NGO) on school for underprivileged children, sponsoring literacy of 300 women through TARA (NGO), health check-up in Rapcha village in Jamshedpur, contribution to Prime Ministers'' National Relief Fund towards relief of flood victims in the state of Jammu and Kashmir, etc. Your Company hopes to increase its CSR activities in the coming years towards meeting its obligations on CSR spend under the Companies Act, 2013, thereby making a positive impact on the community.

Safety, Health, Environment and Quality (HSE)

As a member of The Linde Group, your Company aims to improve the quality of the products and services constantly, while at the same time maintaining highest standards of safety, health and environmental protection.

Safety is one of the foundation principles upon which the Linde Spirit is built and as such continues to be the top most priority for your Company.

In order to reinforce on the HSE agenda, your Company continues to focus on ensuring compliance to the Golden Rules of Safety (set of 8 mandatory rules framed to manage, mitigate and control high risk jobs) at all times. With this objective, your Company regularly conducts Stand Downs to reinforce the Golden Rules of Safety. Stand Downs were conducted to reinforce Golden Rules around Driving and Vehicles, Contractor Management and Lifting Operations during the course of 2014. This follows the stand downs related to Permit-to-Work and Working-at-Height, which were held in 2013.

You will be happy to note that the Gases Division completed the year without any MIRs, while the combined Gases and Engineering divisions completed the "first ever" 365 MIR free days on 26 October 2014 - a significant milestone given the scale and complexity of the operations in India. This safety performance stands out given the particularly difficult road conditions encountered during delivery of our products, and challenges faced by our project teams at construction sites.

Your Company lays great stress on Behavioural Safety which continues to be the key differentiator to help create the right safety culture in the organization to sustain and further improve safety performance. "Site Safe" programme for operating sites and "Act Safe" programme for Drivers were conducted at different locations during the year. Besides this, "Site Safe" sustainability reviews were also carried for a number of operating sites that have been certified previously.

Your Company ended the year without any LTI (Lost Time Injury) of its employees, while only one contactor LTI case was reported in the year. This is indeed a good achievement. However, your Company is working steadfastly to further improve the safety performance with the objective of becoming an "injury free organisation".

Your Company continues to mandate and practice complete transparency in reporting of all accidents and incidents, even the minor ones are reported. Thereafter, depending on the incident, the same is duly investigated and corrective actions are identified and implemented. The "Lessons from Incidents" of all major Incidents are circulated to prevent repeat of similar incidents.

Your Company has also pushed ahead with the Major Hazards Review Programme (MHRP) and we are pleased to report that all major high risk sites have been certified with relevant MHRP CAT 1 and CAT 2 certificates. Your Company uses this programme to measure risks and hazards on a uniform basis for all locations and to establish control measures to minimize these risks as much as possible. In 2014, your Company also focused on MHRP audits of locations where hazardous materials are used or stored.

Your Company also aims to establish a minimum standard for health management and to promote various measures to improve the health management of our employees and contractors. On the Health and Occupational Hygiene (HOH) front, various training and awareness initiatives have been taken up covering manual handling, asbestos and noise management.

Your Company has set up water recycling and rain harvesting facilities at many of its tonnage plant sites. As an integral part of its initiatives to protect the environment, your Company monitors waste generation, emission of greenhouse gases, effluents, quality of air, etc. at the plant sites.

Outlook

India''s economy grew by about 6.2% through 2014. For 2015, the projections show optimism, which is largely due to expectation of policy reforms by the new Government at the Centre, recovery in the global economy, easing liquidity, speed on policy reforms and normal monsoons. The economy is projected to achieve a GDP growth of about 8% during 2015-16 driven by service sector and industrial growth on the back of policy reforms and lower interest rates.

Steel Production capacity in the country is set to increase to 200 million MT in 2020 as compared to a production capacity of 102 million MT in 2013. Majority of the expansion in steel making capacity is driven by country''s major steel players like Tata Steel, SAIL, Jindal Steel, etc. This increase in capacity will make India the second largest steel producing nation. The Steel industry is set to grow at a CAGR of 8-9% over the next five years.

The industrial gases business is expected to have a strong double digit growth in the medium to long term with demand coming in from Steel, Chemicals, Energy, Automobile, etc. Increase in steel production capacity in the country is likely to lead to more on-site gas plants. Besides, the "Make in India" campaign of the Government is expected to attract major investments in capital goods, infrastructure and pharma sector, which augurs well for the growth of Gases industry. Your Company is also focusing on increasing its footprint in food and beverage and the oil and gas markets.

The presence of a large domestic population, along with the increase in its per capita income is expected to provide enough of a demand stimulus to ensure continued economic growth for India. All macroeconomic fundamentals will have positive impact on industrial gases and engineering business.

Your Company has been able to develop itself by leveraging the strengths of its parent- both in the gases and engineering segment and putting best commercial practices in place to win large tonnage gas supply contracts and grow the merchant and packaged gases business. Your Company is thus poised to become the leading industrial gases company in the country.

Internal control systems and their adequacy

Your Company has an adequate system of internal control commensurate with the size and the nature of its business, which ensures that transactions are recorded, authorised and reported correctly apart from safeguarding its assets against loss from wastage, unauthorised use and removal.

The internal control system is supplemented by documented policies, guidelines and procedures. The Company''s Internal Audit Department continuously monitors the effectiveness of the internal controls with a view to provide to the Audit Committee and the Board of Directors an independent, objective and reasonable assurance of the adequacy of the organization''s internal controls and risk management procedures.

The Internal Audit function submits detailed reports periodically to the management and the Audit Committee. The Audit Committee reviews these reports with the executive management with a view to provide oversight of the internal control systems. The Company reviews its policies, guidelines and procedures of internal control on an on-going basis in view of the ever changing business environment.

Your Company''s statutory auditors have, in their report, confirmed the adequacy of the internal control procedures.

Secretarial audit

The Ministry of Corporate Affairs vide its Circular No. 08/2014 dated 4 April 2014 had clarified that the financial statements and the documents required to be attached thereto, the Auditor''s Report and the Board''s Report in respect of financial years that commenced earlier than 1 April 2014 shall be governed by the relevant provisions/schedules/ rules framed under the Companies Act, 1956. Therefore, although it was not mandatory for the Company to enclose a Secretarial Audit Report along with its Directors'' Report for the year 2014, your Company has with a view to bring more transparency in compliance with various statutory requirements and as a matter of good corporate governance, complied with the provisions of the Secretarial Audit and a Secretarial Audit Report in Form MR-3 given by Messrs Vinod Kothari & Co., a firm of Practising Company Secretaries is annexed with this Report. The Report confirms that during the period covered by the Audit, the Company has complied with the statutory provisions listed under Form MR-3 and the Company has proper board processes and compliance mechanism in place.

Corporate governance

As a member of The Linde Group, your Company attaches great importance to sound responsible management and good corporate governance. Your Company subscribes to the Linde Spirit and the Code of Ethics of The Linde Group. The Linde Spirit describes the corporate culture manifested in the Linde vision and the values that underpin day to day activities and the Linde''s Code of Ethics sets out the commitment of all employees to comply with legal regulations and uphold the ethical and moral values of the Group. Your Company is therefore, committed to business integrity, high ethical standards and professionalism in all its activities. As an essential part of this commitment, the Board of Directors supports high standards in corporate governance. It is the endeavour of the Board and the executive management of your Company to ensure that their actions are always based on principles of responsible corporate management. In The Linde Group, corporate governance is seen as an on-going process. Your Company''s Board therefore closely follows future developments in the governance norms and will take lead in ensuring compliance with the same. A separate report on Corporate Governance along with the certificate of the Auditors, B S R & Co. LLP, confirming compliance of the conditions of corporate governance, as stipulated under Clause 49 of the Listing Agreement entered into with the Stock Exchanges is annexed.

Responsibility statement

As required by Section 217(2AA) of the Companies Act, 1956, the Directors state and confirm:

That in preparation of the annual accounts for the year ended 31 December 2014, applicable accounting standards have been followed along with proper explanations relating to material departures, if any.

That they 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 at the end of the aforesaid financial year and of the profit or loss of the Company for that period.

That they 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.

That they have prepared the aforesaid annual accounts on a going concern basis.

Directors

During the year under review, there has not been any change in the Board of your Company.

At a meeting of the Board of Directors of the Company held on 17 February 2015, on the recommendation of the Nomination & Remuneration Committee, Ms. Desiree Co Bacher, Head of Finance and Control of RSE Regional Office in The Linde Group was appointed as an Additional Director (Non-Executive Director) of the Company with effect from that date. Apart from bringing gender diversity on the Board, Ms. Bacher also brings with her experience of over 20 years covering finance and controlling, project management and driving and managing process improvements in finance. The constitution of your Company''s Board is now fully compliant with the provisions of Section 149 of the Companies Act, 2013 and revised Clause 49 of the Listing Agreement. Ms. Bacher vacates office as per Article 92 of the Articles of Association of the Company at the ensuing Annual General Meeting. Necessary resolution for appointment of Ms. Bacher as Director of the Company is included in the Notice calling the Annual General Meeting.

Mr. Sanjiv Lamba retires by way of rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. Necessary resolution for re-appointment of Mr. Lamba as a Director of the Company is included in the Notice of the ensuing Annual General Meeting.

At the Board Meeting held on 17 February 2015, Mr. Binod Patwari stepped down as a Director of the Company. Mr. Patwari joined the Board as a Director of your Company on 15 June 2010 and was later inducted in the CSR Committee of the Board set up last year. During his aforesaid tenure, your Board has from time to time benefited from the wise counsel and experience of Mr. Patwari. Your Directors therefore, place on record their sincere appreciation of the valuable contribution made by Mr. Patwari to the Company during his tenure on the Board.

Cost audit

The Central Government''s directions vide their Order dated 10 August 2000 pursuant to Section 233B of the Companies Act, 1956, requires audit of the cost accounting records of the Company relating to Industrial Gases, for every financial year. Messrs Ramani Sarkar & Co., a firm of Cost Accountants in Kolkata conducted this audit for the Company''s financial year ended 31 December 2013 and submitted their report to the Central Government on 27 June 2014. The Company had appointed Messrs Bandyopadhyaya Bhaumik & Co., a firm of Cost Accountants as the Cost Auditor for the year ending 31 December 2014 and necessary application for their appointment was filed by the Company with the Ministry of Corporate Affairs within the due date. The said auditors would be conducting the audit of cost records for the year 2014 and submit their report in due course.

Messrs B S R & Co. LLP, Chartered Accountants, Statutory Auditors of the Company retire, and being eligible, offer them for re-appointment. The Company has obtained a written consent from Messrs B S R & Co.

LLP to the effect that their re-appointment if made, will be within the limits specified under the Companies Act, 2013. In compliance with the provisions of the Companies Act, 2013, it is proposed to reappoint them as statutory auditors of the Company at the ensuing 79th Annual General Meeting to be held on 15 May 2015.

Disclaimer

Certain statements in this report relating to Company''s objectives, projections, outlook, expectations, estimates, etc may be forward looking statements within the meaning of applicable laws and regulations. Although the Company believes that the expectations reflected in such forward looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, actual results or performance could differ materially from such expectations, projections, etc whether express or implied as a result of among other factors, changes in economic conditions affecting demand and supply, success of business and operating initiatives and restructuring objectives, change in regulatory environment, other government actions including taxation, natural phenomena such as floods and earthquakes, customer strategies, etc over which the Company does not have any direct control.

On Behalf of the Board

S Lamba M Banerjee Chairman Managing Director

Jaipur 17 February 2015


Dec 31, 2012

The Directors have pleasure in submitting their Report together with the Audited Accounts of your Company for the year ended 31 December 2012:

The results for the year and for the previous year are summarised below:

Year ended Year ended in rupees million 31 Dec. 2012 31 Dec. 2011

Revenue from Operations 14,113.45 12,158.52

Operating Profit after depreciation, impairment and interest, but before exceptional items 536.38 1,748.50

Exceptional items (net) 718.62 -

Profit before tax 1,255.00 1,748.50

Provision for current and deferred tax (360.20) (531.93)

Profit after tax 894.80 1,216.57

Profit brought forward 3,863.40 2,856.34

Profit available for appropriation 4,758.20 4,072.91

Appropriations Proposed Dividend @ 15% (previous year @15%) on 85,284,223 Eguity Shares of Rs. 10 each, absorbing 127.93 127.93

Tax on Proposed Dividend 20.75 20.75

Transfer to General Reserve 44.74 60.83

Balance carried forward 4,564.78 3,863.40

Change of name

With a view to benefit from the global brand image of Linde AG in gases and engineering businesses and communicate one identity, particularly to the global customers of the promoter group, your Company initiated action for change of its name to align it with the Linde Group. Pursuant to the special resolution passed by the members of the Company through postal ballot and e-voting on 6 February 2013 and consequent upon all relevant approvals, the name of your Company has been changed to ''Linde India Limited'' with effect from 18 February 2013.

Financial performance

Your company recorded a rather subdued performance during the year 2012 against the backdrop of weak economic conditions and sluggish per- formance across most industrial sectors. During the year under review, your Company had to contend with significant headwinds, which among oth- ers included lower demand from major customers, delay in major projects related to customer delays, inflationary trends in power and other costs, etc. Revenue from Operations for the year 2012 at Rs. 14,113.45 million showed an increase of about 16% over the previous year. Turnover from the gases business grew by nearly 15% mainly driven by commissioning of new air separation units, viz. a 2550 tonnes per day Air Separation Unit for Tata Steel Works at Jamshedpur and a merchant Air Separation Unit having a total liquid capacity of 450 tonnes per day at Taloja. The commis- sioning of a new steam methane refined hydrogen plant for Sterlite Tech- nologies at Aurangabad and a Vacuum Pressure Swing Adsorption plant for Vishnu Chemicals at Vishakhapatnam also contributed to higher revenues in the tonnage business. Healthcare business also contributed to the higher turnover by achieving higher volumes of liquid and compressed medical oxygen as compared to the previous year. Other drivers of growth for the Gases business were the packaged gases and special gases. The Project Engineering Division achieved its highest ever turnover during the year amounting to Rs. 3,888.55 million, which recorded an increase of about 16 % over the previous year. The growth of the Project Engineering busi- ness was mainly driven by execution of large customer projects relating to air separation units, nitrogen VPSA plants, hydrogen PSA plants, pressure reducing stations across refinery and steel industries both in public and private sectors. The Project Engineering Division''s revenues include bill- ings from overseas projects being executed in Bangladesh, Sri Lanka and Indonesia.

The profit before depreciation, interest and taxes for the year 2012 stood at Rs. 2,065.76 million as compared to Rs. 2,462.05 million in the previ- ous year. The profit from operations during the year before exceptional items however, was significantly lower at Rs. 536.38 million as compared to Rs. 1,748.50 million recorded in the previous year.

This sharp decrease in the profits is the result of significantly higher finance costs on long term borrowings and higher depreciation following the capitalization of new plants. The depreciation includes impairment provision of Rs. 84.52 million relating to assets at an electronic gases cus- tomer''s site, arising from the discontinuance of their operations. During the year, your Company disposed of surplus factory land at Vizag and Ban- galore and a profit of Rs. 718.62 million arising from the same has been accounted for as an exceptional item.The profit before tax for the year amounted to Rs. 1,255.00 million as compared to Rs. 1,748.50 million in the previous year and the net profit after tax for the year 2012 amounted to Rs. 894.80 million as compared to Rs. 1,216.57 million achieved in the previous year.

Dividend

Your directors are pleased to recommend a dividend of 15 % (Rs. 1.50 per equity share of Rs. 10 each) for the year 2012 in respect of 85,284,223 equity shares of Rs. 10 each in the Company. The Board has recommended this dividend after careful consideration of the need to cater to the expec- tation of the shareholders on a sustained basis and the need to conserve resources for financing the ongoing investment program towards setting up of new plants and potential acquisitions. The dividend together with dividend tax will result in a cash outlay of Rs. 148.68 million. The Board has also recommended a transfer to General Reserve of Rs. 44.74 million (previous year Rs. 60.83 million) in compliance with the Companies (Trans- fer of Profits to Reserves) Rules, 1975.

Industry developments

The gases business is capital intensive by nature as it requires large invest- ments in setting up of air separation units as well new packaged gases sites. The supply chain in the gases business also requires significant investments in the form of distribution assets and storage networks to service bulk volumes as well as in the form of cylinders to service rela- tively smaller volumes in packaged gases business. The industry comprises of large captive users in steel, fertilizer and refinery sectors and a large number of merchant liquid customers primarily in metal, glass, automobile, petrochemicals and pharmaceutical sectors, besides customers for medical gases. New applications in segments like oil and gas, food freezing, refrig- eration, fire suppression, cement, paper, etc. continue to provide growth opportunities. This growth is being further supported by ''Build Own Oper- ate'' (BOO) type of supply scheme opportunities from the users mainly in steel and refinery sectors, which are increasingly outsourcing their gases requirements.

Business segments

Your Company''s business has two broad segments, viz. Gases and Related Products and Project Engineering in line with the operating model of its parent, Linde AG.

Gases and related products

The Gases and Related Products segment comprises of pipeline gas supplies to very large industrial customers (tonnage), gases in bulk and packaged gases for industrial and healthcare segments. The tonnage customers are supplied gaseous oxygen, nitrogen and argon by pipelines directly from the tonnage plants. Gases in bulk consist of liquid oxygen, nitrogen and argon and packaged gases consist of compressed industrial, electronic and special gases. The Healthcare business is served by a mix of bulk and compressed medical gases, such as medical oxygen, nitrous oxide, etc.

The strategy of the tonnage and bulk business continues to be building and sustaining market leadership through aggressive but profitable growth. The strategy of the healthcare business is to sustain its leadership position in the large hospitals in metro cities and increase penetration in tier 2 cities with particular focus on supporting private hospital chains in providing total gas management solutions.

The turnover of your Company''s gases business for the year 2012 recorded a growth of about 15 % as compared to the previous year. This growth has been mainly driven by incremental revenues from the commissioning of new plants during the year, viz. the 2550 tonnes per day Air Separation Unit for Tata Steel works at Jamshedpur, merchant Air Separation Unit at Taloja, a new steam methane reformed hydrogen plant for Sterlite Technologies at Aurangabad and a Vacuum Pressure Swing Adsorption plant for Vishnu Chemicals at Vishakhapatnam.

Healthcare business also contributed to the higher turnover by achieving higher volumes of liquid and compressed medical oxygen as compared to the previous year. During the year under review, your Company entered into an agreement for taking over the assets and gases business of Uttam Gases, comprising Uttam Air Products and Uttam Special Gases, one of the prominent players in the healthcare segment in North India. The acquisi- tion is in an advanced stage of completion and is expected to strengthen your Company''s position and enhance its healthcare revenues in the years ahead. Other drivers of growth for the Gases business were the packaged gases and special gases.

The markets during the year witnessed sluggish demand for industrial gases with some of our customers consolidating or reducing their capac- ity utilization. The demand landscape from some of the major customers forced some of our tonnage plants to operate at lower than full capacity during the year. Our primary markets, viz. steel, glass, automobile, phar- maceuticals, construction and infrastructure sectors demonstrated lower investment appetite for growth. The gases demand was not supported by significant greenfield expansions especially in the automobile sector. The delay in commissioning of large tonnage projects, particularly SAIL Rour- kela Steel Plant ASU, which is being constructed on build, own and operate (BOO) basis has adversely impacted the gases business during the year.

The year 2012 also witnessed rising input costs especially, power and diesel in most of the states in India. The power cost increase in West India was quite significant and the sluggish market situation made it difficult to fully recover such increased costs, thereby putting margins under pres- sure. The steel production in the country in 2012 was more or less stable as the steel majors, Tata Steel and SAIL had to meet their local and export demand despite the cost pressures arising from increased cost for coking coal and iron ore. Our customers among smaller non integrated steel mills also showed flat demand for gases and reeled under liquidity and input cost pressures in 2012. The demand from auto and anciliiary industries as well as stainless steel industry also remained flat round the year. This sector is a major consumer of Argon and has a significant impact on high value Argon sales. Besides, commissioning of a captive onsite ASU by one of the customers in Eastern India significantly reduced the demand for liq- uid oxygen in these markets.

The slowdown in the solar photovoltaic industry reported last year did not show any signs of recovery. During the year, one of the major elec- tronic gases customer discontinued operations in view of their thin film photovoltaic cell technology becoming uncompetitive. As a result, your Company had to take a significant hit by way of impairment of assets at the customer''s plant.

The Application Technology sales organization in the gases business which was set up last year has been successful in securing business by enhanc- ing productivity of customers'' processes in varying industries. Success sto- ries of the Application Technology sales include REBOX® Oxyfuel conver- sion at Kalyani Carpenter Steel, Pune, LINSPRAY® for metal coating at GE Infrastructure Energy, HIGHJET®, for cupola furnaces and CRYOFLEX®, a cryo treatment equipment using liquid nitrogen in the automotive segment. Your Company has also made successful foray into cement industry with a trial order at a leading cement plant in India for their rotary kilns and deco risers. This is the first such initiative for converting air -fuel to oxy fuel kiln operations in the country and is expected to open opportunities in the cement industry. Our packaged shielding gases witnessed significantly higher volumes as a result of focus on technology sales in 2012.

During the year under review, your company steadily expanded its product and service offerings by adding hydrogen, helium and C02 in its portfolio. A new Helium transfill station was commissioned in 2012 at Taloja. New application based sales leveraging Linde''s expertise continues to be an opportunity. This is one of the growth strategies for the gases business of your Company moving forward. The Company also plans to make new investments for growing its retail packaged gases business in 2013 with a view to regain market share in select geographies.

Sharp increase in power costs and poor quality and reliability of power supply continues to be a major concern for our operations. Our ASUs in Hyderabad and Selaqui in North India continue to be impacted as a result of these issues. Economic slowdown and competitive activities owning to over capacity in the market also puts our business under significant pric- ing pressures.

Project engineering

The Project Engineering segment comprises the business of designing, supply, installation and commissioning of tonnage Air Separation Units (ASU) of medium to large size, apart from projects relating to setting up of nitrogen plants, Pressure Swing Adsorption (PSA) plants and gas dis- tribution systems. The Project Engineering Division (PED) also manufac- tures cryogenic vessels for in-house use as well as for sale to third party customers.

The year 2012 witnessed another spectacular performance from the Pro- ject Engineering business, which achieved revenue of Rs. 3,888.55 mil- lion from third party projects. This performance of the Division surpassed previous year''s all time high revenue of Rs. 3,360.22 million achieved by PED and is therefore, the highest ever turnover recorded by the Division so far. As in the previous year, this sterling performance of PED was driven by execution of several projects relating to large air separation units, nitro- gen plants, pressure reducing stations (PRS), cryogenic storage tanks and hydrogen PSA plants across refineries and steel industries both in public and private sector.

The Division commissioned a nitrogen plant for Mangalore Refinery and is currently engaged in commissioning of several other nitrogen plants at LNG Kochi Terminal, National Fertilisers Ltd., Nangal and ONGC Manglore Petrochemicals Ltd. Besides these, several nitrogen plant projects are at different stages of execution including those for ONGC Petro, Dahej and Matix Fertilizers, Durgapur and at GAIL, Pata. The Division has thus main- tained its leadership in cryogenic nitrogen plants. In addition, during the year, the Division also successfully commissioned an oxygen plant for Sesa Goa.

The Division is also currently engaged in the execution of record number of third party large ASU and other projects, progress of which are satisfac- tory. The 600 tonnes per day oxygen plant for Bhusan Power & Steel and a 420 tonnes per day ASU for Neelachal Ispat are under commissioning. The Scale 1000 oxygen plant for Bhusan Steel Ltd, Angul is progressing well. During the year, the Project Engineering Division bagged its largest ever order from National Mineral Development Corporation to the tune of Rs. 3,707 million for supply of 2x1250 tonnes per day Oxygen Plants at Nagarnar, which is under execution. The execution of export orders for Oxygen Plants for customers in Sri Lanka, Indonesia and Bangladesh are also progressing well.

The Division continues to provide greater focus to execution of in-house ASU projects for the Gases Division and is currently executing several large size internal projects for the Company. During the year, the Division suc- cessfully commissioned a 2550 tonnes per day ASU at Jamshedpur for sup- ply of gases to Tata Steel pursuant to a long term contract with them. This plant is the largest ASU in India and is also the largest ASU of the Linde Group in South and East Asia. The Division also commissioned a merchant ASU at Taloja having capacity of 450 tonnes per day of merchant products and a 1270 NM3 per hour VPSA Oxygen Plant for Vishnu Chemicals at Vizag for the Gases Division of the Company. The Company''s supply scheme project of 2x853 tonnes per day ASUs located at Rourkela Steel Plant are under pre-commissioning stages. During the year, PED has started execu- tion of 2 nos. scale 1000 Project for Tata Steel at Kalinganagar, which is one of the largest strategic in-house projects under execution.

The Division has given highest priority to make its business more com- petitive and has taken several initiatives in this regard. Such initiatives include indigenous manufacture of erstwhile imported components like radial absorber vessels, ambient vaporizers and special spiral wound steam heated vaporizers, etc.

The Division''s effective collaboration with Linde Engineering as their tech- nology partner continues. This partnership has been successful in bidding and winning several prestigious projects and your Company expects fur- ther enhancement in the consortium activities in near future. The Divi- sion bagged orders valuing about Rs. 4,491 million during the year tak- ing the total third party orders in hand to about Rs. 6,837 million as on 31 December 2012.

Your Company''s business in both its Segments - Gases and Project Engi- neering is exposed to a variety of risks, which emanate from both internal and external sources. As explained in the report on Corporate Governance, the Company has an adequate risk management system that takes care of identification, assessment and review of risks as well as their mitiga- tion plans put in place by their risk owners. The risks identified and being addressed by the Company during the year under review included risk concerning coordination issues in the execution model of the Company for its projects, risks related to merchant and plant loading targets in view of the economic slowdown, over dependence of the business on steel sector, risk of reliability and cost of power at existing plants, risk of competitive pressures, etc. Since the Project Engineering Division of your Company is engaged in execution of various in house and third party projects, it has an inherent risk of time and cost overruns due to various reasons. Your Board of Directors provides oversight of the risk management process in the Company and reviews the progress of the action plans for each of the identified key risks on a quarterly basis.

Finance

The Company had two fully drawn down loan facilities by way of Exter- nal Commercial Borrowing (ECB) totalling EUR 122 million from Linde AG for funding of 2550 tonnes per day ASU for Tata Steel and 2x853 tonnes per day ASUs for Steel Authority''s Rourkela Steel Plant projects. As on 31 December 2012, the aggregate outstanding against the aforesaid ECBs was EUR 115.6 million (Rs. 8,389.57 million). The said ECBs are fully hedged both with regard to the principal and interest payments.

During the year, the Company negotiated a two year term loan facility of Rs. 1,000 million from Citibank for financing of ongoing relatively smaller capital expenditure requirements. As on 31 December 2012, this facility is fully drawn down.

Further, during the year, for financing the Tata Steel Kalinganagar project and Asian Peroxide''s project, the Company has finalized funding arrange- ment of EUR 77.6 million (Rs. 5,553.83 million) by way of a new ECB facility from the parent Company, Linde AG.

Capital expenditure of Rs. 3,820.62 million during the year was mainly towards setting up of 2550 tonnes per day ASU for Tata Steel at Jamshed- pur, 450 tonnes per day merchant ASU at Taloja and towards procurement of distribution resources.

Prescribed particulars

The prescribed particulars required under Section 217(1) (e) and 217(2A) of the Companies Act, 1956, read with the Rules made there under as amended up to date are given by way of Annexure to this Report.

There were 7 employees who were employed throughout the year and were in receipt of remuneration aggregating to Rs. 6 million or more or were employed for part of the year and were in receipt of remuneration aggregating to Rs. 0.5 million per month or more during the year ended 31 December 2012. In accordance with the provisions of Section 217 (2A) of the Companies Act, 1956 and the rules framed thereunder as amended, the names and other particulars of employees are set out in the annexure to the Directors'' Report. However, in terms of the provisions of Section 219 (1) (b) (iv) of the Companies Act, 1956, the Directors'' Report is being sent to all the shareholders of the Company excluding the said information. The aforesaid statement is available for inspection by shareholders at the Registered Office of the Company during business hours on working days up to the date of the ensuing Annual General Meeting. Any shareholder interested in obtaining a copy of the said information may write to the Company Secretary at the Registered Office of the Company.

Corporate governance

As a member of The Linde Group, your Company recognises the impor- tance of good corporate governance. Your Company is therefore, commit- ted to business integrity, high ethical values and professionalism in all its activities. As an essential part of this commitment, the Board of Directors supports high standards in corporate governance. It is the endeavor of the Board and the executive management of your Company to ensure that their actions are always based on principles of responsible corporate man- agement. In The Linde Group, corporate governance is seen as an ongoing process. Your Company''s Board will therefore closely follow future devel- opments in the governance norms and will take lead in ensuring compliance with the same. A separate report on Corporate Governance along with the certificate of the Auditors, B S R & Co., confirming compliance of the conditions of corporate governance, as stipulated under Clause 49 of the Listing Agreement entered into with the Stock Exchanges is annexed.

Responsibility statement

As required by Section 217 (2AA) of the Companies Act, 1956, the Directors state and confirm:

That in preparation of the annual accounts for the year ended 31 December 2012, applicable accounting standards had been followed along with proper explanations relating to material departures, if any.

That they had 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 at the end of the aforesaid financial year and of the profit or loss of the Company for that period.

That they had 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.

That they had prepared the aforesaid annual accounts on a going concern basis.

Directors

Mr Aditya Narayan, an additional director w.e.f. 9 February 2012 was appointed as a Director of the Company at the 76th Annual General Meet- ing held on 17 May 2012. There has not been any change in the Board of your Company since the last Annual General Meeting.

Mr Sanjiv Lamba, Chairman of the Board, retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for reappoint- ment. Necessary resolution for reappointment of Mr Lamba as a Director of the Company is included in the Notice of the ensuing Annual General Meeting. The Board recommends the said resolution for your approval.

Cost audit

The Central Government''s directions vide their Order dated 10 August 2000 pursuant to Section 233 B of the Companies Act, 1956, requires audit of the cost accounting records of the Company relating to Industrial Gases, for every financial year. Messrs S. Gupta & Co., a firm of Cost Accountants in Kolkata conducted this audit for the Company''s financial year ended 31 December 2011. The Cost Auditors'' appointment for the financial year 2012 was considered by the Board of Directors on the recommendation of the Audit Committee and necessary application for approval of the appointment of the cost auditor had been filed with the Central Govern- ment. The Company has subsequently received the approval of the Min- istry of Corporate Affairs in the Central Government for appointment of M/s. Rammani Sarkar & Co. as Cost Auditors for auditing the cost accounts relating to industrial gases as well as Project Engineering Division for the financial year ended 31 December 2012. The Cost Auditor would take up the audit as soon as possible and would submit its report for the year 2012 within the due date.

Auditors

Messrs B S R & Co., Chartered Accountants, Auditors of the Company retire, and being eligible, offers themselves for re-appointment. The Company has obtained a written consent from Messrs B S R & Co. to the effect that their re-appointment if made, will be within the limits specified under Sec- tion 224 (1 B) of the Companies Act, 1956.

With regard to the Statutory Auditors'' remarks in their report about utilization of short term funds for long term purposes, your Company believes that this gap in the long term funds was temporary in nature, when it had to utilize short term funds for procurement of distribution assets and towards set- ting up of a packaged gases site.

Disclaimer

Certain statements in this report relating to Company''s objectives, projections, outlook, expectations, estimates, etc may be forward looking statements within the meaning of applicable laws and regulations. Although the Company believes that the expectations reflected in such forward looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, actual results or performance could differ materially from such expectations, projections, etc whether express or implied as a result of among other factors, changes in economic conditions affecting demand and supply, success of business and operating initiatives and restructuring objectives, change in regulatory environment, other government actions including taxation, natural phenomena such as floods and earthquakes, customer strategies, etc over which the Company does not have any direct control.

On Behalf of the Board

S Lamba S Menon

Chairman Managing Director

On behalf of the Board: Kolkata

S Lamba, Chairman 19 February 2013

S Menon, Managing Director


Dec 31, 2010

The Directors have pleasure in submitting their Report together with the Audited Accounts of your Company for the year ended 31 December 2010:

The results for the year and for the previous year are summarised below:

Year ended Year ended 31 Dec 2010 31 Dec 2009 Rs. in million Rs. in million

Gross Sales 10361.08 8359.18

Operating Profit after depreciation, impairment and interest, but before exceptional items 1295.71 920.00

Exceptional items (Net) — (17.42)

Profit before tax 1295.71 902.58

Provision for current, deferred & fringe benefits tax (359.38) (370.16)

Profit after tax 936.33 532.42

Profit Brought Forward 2116.01 1759.88

Profit available for appropriation 3052.34 2292.30

Appropriations:

Proposed Dividend @ 15% (Previous year @ 15%) on 85,284,223 Equity Shares of Rs.10 each, absorbing 127.93 127.93

Tax on Proposed Dividend 21.25 21.74

Transfer to General Reserve 46.82 26.62

Balance carried forward 2856.34 2116.01

Financial Performance

The Companys performance during the year showed further improvement over the previous year following consistent revival in the various end user industry segments driven by fiscal stimulus packages put in place by the Government in the year 2009. Turnover for the year ended 31 December 2010 at Rs.10361.08 million recorded a robust increase of 24% compared to Rs. 8359.18 million for the previous year. The turnover from the gases business grew by over 37% driven mainly due to the full ramp up of the 1800 tonnes per day Air Separation Unit (ASU) at JSW Steel works at Bellary, acquisition of three existing ASUs of Industrial Gas Division of Tata Steel with an aggregate capacity of 1050 tonnes per day pursuant to long term contract with the said customer and the commissioning of a new 221 tonnes per day merchant ASU at Selaqui near Dehradun in North India. Other drivers of growth for the gases business were the higher volumes achieved by the healthcare business

and packaged gases, mainly the special gases. Your company continued to leverage the first mover advantage in the electronic gases during the year, which resulted in a healthy growth of about 87% in its revenues over that of the previous year. Project Engineering business, which had doubled its turnover in the previous year recorded third party billings to the tune of Rs.3031.08 million during the year under review, which marginally surpassed all time high turnover achieved by the Project Engineering Division in 2009. The third party billings of the Division during the year were mainly driven on the back of execution of several large air separation unit projects, nitrogen VPSA plant and hydrogen PSA plants mainly across public sector refineries and steel companies.

The Company recorded Profit before interest, tax and exceptional items of Rs. 1243.77 million for the year ended 31 December 2010, reflecting a healthy growth of 43% over the preceding year driven by strong growth in base business and new tonnage

business during the year, coupled with operating and other cost efficiencies. The net profit in the year 2010 amounted to Rs.936.33 million, a significant increase over Rs.532.42 million achieved in the previous year.

Dividend

Your directors are pleased to recommend a dividend of 15% (Rs. 1.50 per equity share of Rs. 10 each) for the year 2010 in respect of 85,284,223 equity shares of Rs.10 each in the Company. The Board has recommended this dividend after careful consideration of the matter with a view to balance the expectation of the shareholders and the need to conserve resources for financing the ongoing investment program towards setting up of new air separation units for supply scheme as well as merchant business. The dividend together . with dividend tax will result in a cash outlay of Rs. 149.18 million. The Board has also recommended a transfer to General Reserve of Rs. 46.82 million (Previous Year Rs. 26.62 million) in compliance with the Companies (Transfer of Profits to Reserves) Rules, 1975.

Corporate Governance

As a member of The Linde Group, your Company recognises the importance of good corporate governance. Your Company is therefore, committed to business integrity, high ethical values and professionalism in all its activities. As an essential part of this commitment, the Board of Directors supports high standards in corporate governance. It is the endeavour of the Board and the executive management of your Company to ensure that their actions are always based on principles of responsible corporate management. In The Linde Group, corporate governance is seen as an ongoing process. Your Companys Board will therefore closely follow future developments in the governance norms and will take lead in ensuring compliance with the same. A separate report on Corporate Governance along with the certificate of the Auditors, B S R & Co., confirming compliance of the conditions of corporate governance, as stipulated under Clause 49 of the Listing Agreement entered into with the Stock Exchanges is annexed.

Responsibility Statement

As required by Section 217(2AA) of the Companies Act, 1956, the Directors state and confirm:

That in preparation of the annual accounts for the year ended 31 December 2010, applicable accounting standards had been followed along with proper explanations relating to material departures, if any.

That they had 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 at the end of the aforesaid financial year and of the profit or loss of the Company for that period.

That they had 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.

That they had prepared the aforesaid annual accounts on a going concern basis.

Directors

During the year, Mr Binod Patwari, Head of Finance and Control, South and East Asia of The Linde Group was appointed as an Additional Director (non executive) of the Company with effect from 15 June 2010. Mr Patwari vacates his office as an Additional Director under Article 92 of the Articles of Association of the Company at the ensuing Annual General Meeting and it is proposed to appoint him as a Director at the said meeting. Mr Patwari is presently Head of Finance and Control, Asia Pacific of The Linde Group.

Mr Kashyap Roy, who was appointed Finance Director of the Company in February 2009 suddenly passed away on 1 August 2010 and ceased to be a Director of the Company with effect from the said date. Your Directors express deep regret on the sad and untimely demise of Mr Roy and place on record their sincere appreciation of the contribution made by him to the functioning of the Board during his tenure as Finance Director of the Company.

Dr J J Irani retires by rotation at the ensuing Annual General Meeting and does not offer himself for re-election. Your Board has regretfully acceded to Dr Iranis request. As per the requirement of Section 256(4) of the Companies Act, 1956 and Article 105 of the Articles of Association of the Company, an appropriate resolution for not filling the vacancy caused by the retirement of Dr Irani has been included in the Notice of the ensuing Annual General Meeting for consideration and approval of the shareholders. Accordingly, Dr Irani will cease to be a director of the Company from 2 June 2011. Dr Irani has been serving on your Board since 1987 and his deep understanding of the metallurgical industry has helped your Company to better grasp the emerging opportunities in this sector. During his long tenure as a Director of the Company, your Companys Board and its Audit and Remuneration Committees have benefited from the wise counsel and advice of Dr Irani. Your Directors therefore, place on record their sincere appreciation of the valuable contribution made by Dr Irani to the deliberations of the Board as well as towards the growth of the Company.

Cost Audit

The Central Governments directions vide their Order dated 10 August 2000 pursuant to Section 233B of the Companies Act, 1956, requires audit of the cost accounting records of the Company relating to Industrial Gases, for every financial year. Messrs S. Gupta & Co., a firm of Cost Accountants, conducted

this audit for the year ended 31 December 2009. The Company had also received the approval of the Central Government for appointment of M/s. S. Gupta & Co. for audit of cost records for the financial year 2010.

Auditors

Messrs B S R & Co., Chartered Accountants, Auditors of the Company retires, and being eligible, offers them for re-appointment. The Company has also obtained a written consent from Messrs B S R & Co. to the effect that their re-appointment if made, will be within the limits specified under Section 224 (1B) of the Companies Act, 1956.

Disclaimer

Certain statements in this report relating to Companys objectives, projections, outlook, expectations, estimates, etc may be forward looking statements within the meaning of applicable laws and regulations. Although the Company believes that the expectations reflected in such forward looking statements are reasonable, no assurance can be

given that such expectations will prove to have been correct. Accordingly, actual results or performance could differ materially from such expectations, projections, etc whether express or implied as a result of among other factors, changes in economic conditions affecting demand and supply, success of business and operating initiatives and restructuring objectives, change in regulatory environment, other government actions including taxation, natural phenomena such as floods and earthquakes, customer strategies, etc over which the Company does not have any direct control.

On Behalf of the Board

Srikumar Menon S M Datta Managing Director Chairman

Kolkata, 25 April 2011


Dec 31, 2009

The Directors have pleasure in submitting their Report together with the Audited Accounts of your Company fortheyearended31 December 2009:

The results for the year and for the previous year are summarised below:

Year ended Year ended 31 Dec 2009 31 Dec 2008 Rs. in million Rs. in million

Gross Sales 8359.18 5716.60

Operating Profit after depreciation, impairment and interest, but before exceptional items 920.00 832.33

Exceptional items (Net) (17.42) 245.68

Profit before tax 902.58 1078.01

Provision for current, deferred & fringe benefits tax (370.16) (277.61)

Profit after tax 532.42 800.40

Profit and Loss Brought Forward 1759.88 1149.17

Profit available for appropriation 2292.30 1949.57

Appropriations :

Proposed Dividend @ 15% (Previous year @ 15%) on 85,284,223 Equity Shares of Rs.10 each, absorbing 127.93 127.93

Tax on Proposed Dividend 21.74 21.74

Transfer to General Reserve 26.62 40.02

Balance carried forward 2116.01 1759.88

Financial Performance

The performance of the Company during the year was very satisfactory. The signs of slow down, following the global economic downturn that started in late 2008 impacting economies of the world to varying degrees, were less pronounced in India and both the Gases and Project Engineering businesses of the Company showed robust growth. Turnover for the yearended31 December 2009 at Rs. 8,359.18 million recorded an increase of 46% compared to Rs. 5716.60 million for the previous year. The turnover from the gases business grew by 25%, driven mainly by the commissioning of a new 1800 tpd Air Separation Unit (ASU) at Bellary for supply of gases to JSW Steel. Other drivers of growth for the gases business were the higher volumes achieved by the healthcare business and packaged gases, mainly the specialty gases. Electronic gases, where the Company had first mover advantage in the industry also contributed satisfactorily to the overall revenues.

Turnover of the Project Engineering business doubled, recording a growth of over 100% on the back of large orders executed mainly in the steel and refinery sectors in the PSU space.

The Company recorded Profit before interest and exceptional items of Rs. 871.77 million for the year ended 31 December 2009, reflecting a healthy growth of 48% over the preceding year driven by strong growth in base business and new tonnage business during the year, coupled with operating and other cost efficiencies. The net profit in the year 2009 amounted to Rs.532.42 million against the previous years net profit of Rs. 800.40 million, which however included interest income of Rs. 242.69 million and exceptional income of Rs. 245.68 million mainly comprising sale of property and gains arising from a finance lease arrangement. Excluding these one off incomes in the previous year, the net profit for the year grew by 60% on an underlying basis.

Dividend

Your directors are pleased to recommend a dividend of 15% (Rs. 1.50 per equity share of Rs. 10 each) for the year 2009. The Board has recommended this dividend after carefui consideration of the need to conserve resources for financins of some larse supply scheme and merchant Air Separation Units, which are under execution, besides those that are in various stages of bidding and negotiation. The dividend together with dividend tax will result in a cash outlay of Rs.149.67 million. The Board has also recommended a transfer to General Reserve of Rs. 26.62 million (previous year Rs. 40.02 million) in compliance with the Companies (Transfer of Profits to Reserves) Rules, 1975.

Industry Developments

The gases business is capital intensive and requires large investments in air separation units, distribution assets and storage networks to service bulk volumes at competitive prices. The industry comprises of large captive users in steel, fertilizer and refinery sectors and a large number of merchant liquid customers primarily in metal, glass, automobile, petrochemicals and pharmaceutical sectors, besides customers for medical gases. New applications in areas like food freezing, refrigeration, fire suppression, solar photovoltaic, etc continue to provide growth opportunities. This growth has been adequately supported by Build Own Operate (BOO) type of supply scheme opportunities from the captive users mainly in steel and refinery sectors, which are increasingly outsourcing their gases requirements to gases specialists.

The gases industry typically follows its end user segments, most of which are on growth mode. India began the year 2009 on a somewhat subdued note as a result of slow down following the global economic downturn in late 2008. With impact of the downturn less pronounced in India and the recovery in the economy being faster than expected, steel majors and the public sector refineries in the country have been implementing their expansion plans, resulting in increase in demand for gases. All global gas majors have been competing for their respective share of the incremental gases demand in line with their financial strengths and investment plans for the emerging markets. The solar photovoltaic industry in India is also expected to create additional demand for special and electronic gases.

Business Segments

Your Companys business has two broad segments, viz. Gases and Related Products and Project Engineering in line with the operating model of its parent, Linde AG.

Gases and Related Products

The Gases and Related Products segment comprises of gases in bulk, packaged gases and related products. Gases in bulk consist of liquid oxygen, nitrogen and argon and the packaged gases consist of compressed industrial, medical, electronic and special gases packaged in cylinders. This segment therefore, covers customers in Tonnage, Bulk, Packaged Gases and Healthcare businesses.

The turnover of your Companys Gases business for the year under review grew by 25% compared to the previous year. This growth was mainly driven by additional revenue generated from the Companys new 1800 tonnes per day Air Separation Unit (ASU) at Bellary, which was commissioned in March 2009. This is presently the largest operating ASU of your Company supplying oxygen, nitrogen and argon through pipeline to JSW Steel works under a long term agreement with the said customer. The ASU also produces additional liquid products for the merchant market. The revenue for the healthcare business registered a healthy growth of 16% over last year on the back of new orders for both gas supplies as well as medical engineering services. The revenues from both liquid and compressed medical oxygen recorded a growth of 15% over last year. The medical engineering services witnessed a significant growth arising from new orders for pipelines at large private and public hospitals. Special and electronic gases also recorded good growth in revenues in view of higher demand from new and existing customers in Solar Photovoltaic space. Welding and safety products also maintained the momentum of growth witnessed in the earlieryears.

As a part of the strategy for argon business, in view of lower domestic demand due to slow down in steel, automobile, etc., your Company aggressively entered the export markets in the Middle-East, which helped protect argon volumes albeit at lower prices. As the domestic demand has started to pick up on the back of revival in steel, automobiles, metal fabrication, etc., the Company plans to carefully review its exports in the short to medium term in view of the prevailing economic conditions in these markets.

Durins the year, your Company sisned Iong term gas supply contracts with Steel Authority of India Ltd., Jindal Stainless Ltd. and Tata Steel Ltd. for supply of oxysen, nitrogen and argon to them from onsite plants. The construction of these plants is progressing well, which includes setting up of a 2550 tonnes per day ASU for Tata Steel at Jamshedpur. Once commissioned, this would be the largest ASU in the steel sector in South and East Asia. As a part of the long term contract with Tata Steel, your Company has recently taken over the three existing ASUs of the Industrial Gas Division of Tata Steel and is operating them in the interim period. During this year, your Company has also reviewed its strategy for the fast growing West India market and has decided to replace the existing ageing ASU at its Taloja site by setting up a new ASU with a larger capacity at the same site for catering to the growing demand in this market. Your Company has also signed a long-term supply contract with Owens Corning and will set up an oxygen generator at Taloja for meeting their oxygen demand.

Your Company continued its focus on operational excellence and safety during the year under review. In order to improve operational safety, your Company has installed a new state of the art liquid nitrous oxide plant at Hyderabad for meeting the total demand for the product in domestic market and plans to close down its ageing nitrous oxide plants at Ahmedabad and Kolkata after commissioning of the debulking facilities at these locations.

In order to improve the logistics planning of liquid products, the Company launched the Groups Global Optimised Liquid Distribution scheduling package called GOLD. The system became operational in July 2009 with the setting up of a National Scheduling Centre at Kolkata. The scheduling of distribution of liquid products in the Company is now managed through the new system. This system is expected to reduce the number of trips made by the tankers as well as kilometers run, thereby reducing cost of distribution and improving distribution efficiency. The Fleet Control Room set up in Kolkata for monitoring the movement of the Companys fleet of tankers has shown encouraging results by improving driver behaviour, driving pattern of the tankers, besides providing real time information about the status of each tanker on the road as well as the customers sites.

Project Engineering

The Project Engineering segment comprises the business of designing, supply, installation and commissioning of tonnage air separation units of medium to large size, apart from projects relating to setting up of nitrogen plants, hydrogen PSA plants and gas distribution systems. The Project Engineering Division (PED) also manufactures cryogenic and non- cryogenic vessels for in-house use and sale to third party customers.

The Project Engineering Division achieved yet another outstanding performance during the year under review, recording its highest ever third party turnover of Rs.3007.58 million. The Division achieved a growth of more than 105% in the turnover, which acquires more significance as it came despite its commitment to several in-house projects. This robust performance of the PED was driven by billings towards several Air Separation Units, nitrogen plants and hydrogen PSA plants across refineries and steel companies primarily in the public sector. Margins however, continued to be under pressure owing to the highly competitive market environment.

During the year, the Division successfully commissioned the Companys most prestigious project of an 1800 tonnes per day Air Separation Unit at JSW Steel works at Bellary pursuant to a long term gas supply contract with the customer. In addition, the Division commissioned several nitrogen plants including those at Indian Oil, Hindustan Petroleum, etc. The Division has also installed nitrogen plants at Bongaigaon Refinery and Bina Refinery, which are ready for commissioning. The Division also commissioned Hydrogen PSA plants for Hindustan Petroleum and Bongaigaon Refinery. The Division has thus maintained its leadership in cryogenic nitrogen generators and has acquired leadership in the Hydrogen PSA plants as well.

The Division is currently engaged in the execution of a record number of projects including several in- house projects for the gases division, all of which are progressing satisfactorily. The ASU projects for Steel Authority of India Ltd.s Rourkela Steel Plantand IISCO, Burnpur, merchant ASU in North India as well as Large Compressed Air Station for Bhilai Steel Plant are in advanced stages of completion and these projects are slated to be commissioned during the year 2010. Besides these, several nitrogen plant projects are at different stages of execution including those at Kochi Refinery, Barauni Refinery, Mangalore Refinery and GNFC Ltd. The Division has started construction of the 2,550 tonnes per day Air Separation Unit at Jamshedpur works of Tata Steel Ltd. pursuant to a long term gas supply contract signed with the said customer. When commissioned, this plant will be the largest ASU in India and the largest ASU of The Linde Group in Asia. The Division has also started construction of the merchant ASU at Taloja and a VPSA plant pursuant to a gas supply scheme for Owens Corning at Taloja.

The Divisions effective collaboration with Linde Engineering as their technology partner continues, which has helped them in successfully bidding and winning several prestigious projects. The Division expects further enhancement in these consortium activities.

The Division has maintained a healthy order book as on 31 December 2009 at Rs. 10271.00 million, which includes orders aggregating to Rs. 4912.00 million in respect of in-house projects from the gases business.

Finance

Cash generation from operations showed a remarkable improvement and was to the tune of Rs.1,090.90 million as compared to Rs.684.11 million in the preceding year on the back of robust collections and efficient management of working capital. During the year, the Company finalised funding arrangement of Euro 58 million i.e. approximately Rs. 3857.60 million by way of an inter company loan through its parent company, Linde AG for financing of the Rourkela Steel Plant project of Steel Authority of India Ltd. Out of this, an aggregate sum of Rs. 1,177.55 million was drawn down till 31 December 2009 and a significant part thereof has been utilised towards this project. As on 31st December 2009, the Company had temporary surplus cash balance of Rs. 545.40 million, which had been parked in various fixed deposits with Banks.

Capital expenditure of Rs. 2,717.88 million during the year was mainly towards the setting up of ASU for Rourkela Steel Plant, merchant ASU in North India, Nitrous Oxide plant at Hyderabad and towards procurement of distribution resources.

Prescribed Particulars

The prescribed particulars required under Section 217(1 )(e) of the Companies Act, 1956, read with the Rules made there under as amended up to date are given by way of Annexure to this Report.

There were 48 employees who were employed throughout the year and were in receipt of remuneration aggregating Rs. 24 lakhs or more or were employed for part of the year and were in receipt of remuneration aggregating Rs. 2 lakhs per month or more during the year ended 31 December 2009. In accordance with the provisions of Section 217(2A) of the Companies Act, 1956 and the rules framed there under, the names and other particulars of the aforesaid employees are set out in the statement forming part of the Directors Report. However, in terms of the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Directors Report is being sent to all the shareholders of the Company excluding the said information. The aforesaid statement is available for inspection by shareholders at the Registered Office of the Company during business hours on working days up to the date of the ensuing AGM. Any shareholder interested in obtaining a copy of the said information may write to the company secretary at the Registered Office of the Company.

Human Resources

As a member of The Linde Group, your Companys human resource function is aligned to the global HR strategy of the Group. It derives robust support and policy guidelines from the Groups Global and Regional Business Units Human Resource Department in areas of recruitment, training, appraisal, compensation, managing and rewarding performance, talent retention, etc.

Your Company believes that employees are the key to its success. Only highly motivated employees can enable the Company to meet and exceed the expectations of various stakeholders including customers and investors. The Companys corporate culture is based on the Groups mission statement and is geared towards high performance. A high- performance culture is one in which the employees measure themselves against the best of the best, accept personal responsibility and strive to excel. BOC India endeavours to create a working environment, in which every employee knows exactly what is expected of him or her. The Company has a system of regular feedback so that people can develop their potential to the fullest. Based on a clear evaluation of individual performance and results, specific career development plans are put in place for every employee. The Company provides growth opportunities to employees within the organization as weii as by way of deputation in other countries of Regional Business Unit-South and East Asia of The Linde Group. Employees have been sponsored for various external as well as internal training programmes keeping in mind the need of the business and the Individual development plan of every employee. Amongst some of the initiatives taken for development of the Companys human resource, the Second In Line Managers Programme (SIL) of the Group was piloted in India. This is a program to prepare our managers for the challenges of today and tomorrow.

During early 2009, amongst one of the measures to minimize the impact of the slow down on the Companys business, your Company had to initiate a freeze on recruitment and also launched a voluntary separation scheme, which was accepted by 58 employees. In view of the economic revival in the country, the Company has since recruited fresh graduate engineers from leading engineering colleges from across the country to increase the bench strength and manage the ongoing growth in the business.

BOC India strives towards becoming the employer of choice and various initiatives have been and are underway to curtail the attrition rate. Creation of state of the art offices and work stations, fun at work, annual cultural programme, supporting activities of the Indoxco club, etc are some examples of these initiatives.

Your Company had manpower strength of 666 employees as on 31 December 2009 and continues to enjoy harmonious industrial relations at all its plants and offices spread across the country.

Safety, Health, Environment and Quality (SHEQ)

The SHEQ policy of The Linde Group is the guiding principle for the executive management as also all employees to consistently improve safety, health, environmental protection and quality of our products.

Your Company continues to make good progress with its SHEQ agenda. The Companys safety performance in 2009 has seen a significant improvement from the previous years. The Safety agenda covering transport safety, process safety and plant safety have contributed to considerable reduction in our incident numbers. The incident and near miss reporting has been integrated with the Groups reporting system "Synergi". All incidents reported are being investigated, corrective actions identified and actioned to close out the same. The "Lessons from Incidents" (LFIs) of all major Incidents are circulated to prevent repeat of similar incidents. During the year, your Company successfully implemented New Product Introduction (NPI) procedures of The Linde Group for handling and transportation of hazardous electronic and specialty gases such as silane. These NPIs set out the steps which must be taken when a new product is launched into the markets.

The Company continued with its extensive driver training program initiated in earlieryears. Installation of Fleet Control Room, which observes and monitors the driving pattern and behaviour of drivers of large fleet of Vacuum Insulated Transport Tankers (VITTs) on real time basis, has started oaying dividends. Driving parameters viz. speed, driving hours, driver rests, etc are being monitored round the clock. This has significantly contributed to safer driving and lesser transport related incidents.

Security arrangements at the plant sites and offices have been reviewed to make them more effective and alert against all possible threats with a view to make our plants and work places safer.

Your Companys Taloja tonnage site was recently audited by KPMG as a part of The Linde Groups "Corporate Responsibility" audit and has received a favourable report for its environment initiatives. Your Company has set up water recycling and rain harvesting facilities at many of its tonnage plant sites. As an integral part of its initiatives to protect the environment, your Company monitors waste generation, consumption of green house gases, effluents, quality ofair, etcatthe plant sites.

To take the Safety agenda forward, the senior management team of the Company has set a plausible example by providing strong visible leadership in all focus areas of safety.

Outlook

The slow down in several sectors of the Indian economy that started in fiscal year 2008-09 following the global economic downturn resulted in decline in the GDP growth rate of the country to 6.7% from near 9% in the earlier years. Thoush the impacts of the downturn were less pronounced in India, some of the new investments were deferred and the output felt. The sood news however, has been the speed of economic revival in india, which was faster than most people expected. The sovernments actions including fiscal stimulus lastyear helped the economy to gain momentum. As per the current estimates, the economy is set to record a GDP growth rate of 7.2% in the fiscal year 2009-10.

With the revival of the economy, the governments focus has now shifted to the high fiscal deficit. On the ether hand, in view of the risk of rising food inflation shifting to other sectors, the Reserve Bank of India (RBI) has already exercised its fiscal prudence on the supply side by announcing increase in cash reserve ratio. The government has in its budget 2010-11 also taken steps to very partially roll back the fiscal stimulus. Ihe government and the RBI are still faced with the task of raising interest rates in the near future. The complete exit of the stimulus and the increase in interest rates in the near future may adversely impact the revival of the industrial sector as these measures may cause decline in domestic demand as well as industrial production.

The Indias macro-economic fundamentals together with its domestic demand led mode! of economic growth looks promising. As a result of this, the GDP growth rates for the next couple of years are being estimated at 8 and 9%. The steel industry in India is in growth mode and the steel majors are in the process of implementing their expansion plans. This augurs well for the gases industry and will continue to drive demand for oxygen, nitrogen and argon at high levels in the years ahead in a fiercely competitive environment, where all the global gas majors are present. In this backdrop, your Company is poised to grow its gases and engineering businesses with robust and visible support of The Linde Group despite the challenges of today and tomorrow. Your Board therefore, looks at the year ahead with cautious optimism.

Internal Control Systems and their adequacy

Your Company has an adequate system of internal control commensurate with the size and the nature of its business, which ensures that transactions are recorded, authorised and reported correctly apart from safeguarding its assets against loss from wastage, unauthorised use and removal.

The interna1 control system is supplemented by documented policies, guidelines and procedures and an extensive program of review carried out by the Companys Internal Audit function which submits detailed reports periodically to the management and the Audit Committee. The Audit Committee reviews these reports with the executive management with a view to provide oversight of the internal control systems. The Company reviews its policies, guidelines and procedures of internal control on an ongoing basis in view of the ever changing business environment.

Your Companys statutory auditors have, in their report, confirmed the adequacy of the internal control procedures.

Corporate Governance

Your Company, as a member of The Linde Group meets high standards of corporate governance. The corporate goals of responsible management have traditionally been seen as important in Linde AG, the promoter Group of your Company. It has therefore been the endeavour of the Board of your Company and its executive management to demonstrate and practice business integrity, high ethical values and professionalism in all its activities. The Linde Group sees corporate governance as an ongoing process and your Companys Board will therefore continue to follow future developments in these norms closely. A separate report on Corporate Governance along with the certificate of the Auditors, B S R & Company, confirming compliance of the conditions of corporate governance, as stipulated under Clause 49 of the Listing Agreement entered into with the Stock Exchanges is annexed.

Responsibility Statement

As required by Section 217(2AA) of the Companies Act, 1956, the Directors state and confirm:

That in preparation of the annual accounts for the year ended 31 December 2009, applicable accounting standards had been followed along with proper explanations relatingto material departures, if any.

That they had selected such accountingpolicies and applied them consistently and madejudgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the aforesaid financial year and of the profit or loss of the Company for that penod.

That they had 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.

That they had prepared the aforesaid annual accounts on a going concern basis.

Directors

Mr Kashyap Roy, an Additional Director of the Company with effect from 23 February 2009, was appointed as a Director and Finance Director of the Company at the Annual General Meeting held on 28 May 2009.

Mr M S Huggon, a Director representing The Linde Group resigned from the Board with effect from 23 December 2009 in view of his increasing commitments in the Groups Regional Business Unit of U.K. and Ireland. The Board of Directors places on record its sincere appreciation of the significant contribution made by Mr Huggon to the deliberations of the Board as well to the growth agenda of the Company during his tenure on the Board since 2001.

Cost Audit

The Central Governments directions vide their Order dated 10 August 2000 pursuant to Section 233B of the Companies Act, 1956, requires audit of the cost accounting records of the Company relating to Industrial Gases, for every financial year. Messrs S. Gupta & Co., a firm of Cost Accountants, conducted this audit for the year ended 31 December 2008. The Company has received the approval of the Central Government for appointment of M/s. S. Gupta & Co. for audit of cost records for the financial year 2009, which would commence soon.

Auditors

Messrs B S R & Company, Chartered Accountants, the Auditors of the Company will hold office till the conclusion of the ensuing Annual General Meeting. The retiring auditors have not offered themselves for reappointment in view of the peer review certificate requirement for statutory auditors as per a recent amendment in Clause 41 of the Listing Agreement with the Stock Exchanges. It is proposed to appoint Messrs B S R & Co., Chartered Accountants, as Auditors of the Company in place of the retiring auditors as they are in compliance with the revised Clause 41 of the Listing Agreement. The Company has obtained a written consent from Messrs B S R & Co. to the effect that their appointment, if made, will be within the limits specified under section 224(1 B) of the Companies Act, 1956.

Disclaimer

Certain statements in this report relating to Companys objectives, projections, outlook, expectations, estimates, etc may be forward looking statements within the meaning of applicable laws and regulations. Although the Company believes that the expectations reflected in such forward looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, actual results or performance could differ materially from such expectations, projections, etc whether express or implied as a result of among other factors, changes in economic conditions affecting demand and supply, success of business and operating initiatives and restructuring objectives, change in regulatory environment, other government actions including taxation, natural phenomena such as floods and earthquakes, customer strategies, etc over which the Company does not have any direct control.

On Behalf of the Board

S Menon S M Datta

Managing Director Chairman

Kolkata, 20 April 2010

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