Directors Report of Lokesh Machines Ltd.

Mar 31, 2018

Dear Share Holders,

The Directors are pleased to present the 34th Annual Report of the company along with the Audited financial Statements for the financial year ended March 31, 2018.

FINANCIAL RESULTS Rs in Lakhs

Particulars	(2017-18)	(2016-17)
Net Sales	17,494.48	13177.82
Other Income	84.05	35.19
Captive Consumption	352.98	1107.24
Total Income	17931.51	14320.24
Profit before Depreciation, Interest and Taxes	2941.66	2815.38
Depreciation	817.28	818.11
Profit before Interest and Taxes	2124.38	1997.27
Interest and Finance Charges	1408.88	1666.12
Profit before Taxes	715.50	331.15
Provision for Taxes	245.03	120.12
Profits after Taxes	470.47	211.03

PERFORMANCE REVIEW:

The turnover increased by 32.75 %, in the year

- The Machine Tool Division has posted significant growth compared to the previous year, primarily lead by the General Purpose machinery division which itself showed a growth of 46.72% as compared to previous year. GPM Machines export sale has also restarted this year with a marginal sale which is expected to be considerably higher in the coming year. Typically SPM movement will start once the economy reaches a reasonable uptick unlike the GPMs which pick up at the start of growth phase itself. Accordingly, the company is witnessing some movement in the SPM division too in the coming years.

- The Component division also had a marginal growth driven by an increased off take from the Connecting Rod business.

FUTURE OUTLOOK

The current market conditions are showing signs of rapid recovery and our capacity utilization is at an increased level today.

Your directors are confident of putting in an improved performance over the previous year.

1. The CNC machines division is expected to post substantial growth with improving market conditions. While the current capacity utilization is at its peak, the company is making significant improvements in productivity improvement and further increase in capacity utilization thus squeezing the assets to the maximum. With Europe showing signs of recovery and situation in Russia easing, there would certainly be an uptick in the Export performance as well.

2. The SPM order book reflects a reasonable growth. Almost all the orders are from the existing customers only for capacity expansion and not for any new products.

3. On the component division front, the Connecting Rod production is in stabilization mode. With a reasonable monsoons prediction, the Tractor industry in particular and the Auto sector in general are expected to do well and thereby help us increase the overall revenues.

DIVIDEND

The Company proposes to retain profits of the current year for company’s future plans and developments. Hence, your directors have not recommended dividend for the Financial Year 2017-2018.

TRANSFER TO GENERAL RESERVE

The Company does not propose to transfer any amount to General Reserve.

DIRECTORS

Mr. M. Krishna Swamy, Director of the company retires by rotation at the ensuing Annual General Meeting, and being eligible offer themselves for re-appointment.

The following Directors are proposed to be re-appointed as Directors of the company under Companies act 2013

1. Mullapudi Lokeswara Rao - Managing Director

2. Bollineni Kishore Babu - Whole time director

3. Mullapudi Srinivas - Whole time director

4. Mullapudi Srikrishna - Whole time director

The detailed profile of the above directors is given at Notice calling the Annual General Meeting.

All Independent Directors have given declaration that they meet the criteria of independence as laid under section 149(6) of the Companies Act 2013 and SEBI (LODR) Regulations, 2015. A separate meeting of Independent Directors of the Company, without the attendance of Non-Independent Directors, was held during the year, as required under Schedule IV to the Companies Act, 2013 (Code for Independent Directors) and Regulation 25 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. All the directors of the Company have disclosed their interest to the Company pursuant to Sec 184(1) of Companies Act, 2013.

As required by SEBI (LODR) Regulations, 2015 with the Stock Exchanges, the information on the particulars of the Directors seeking re-appointment are given in the notice to the AGM.

AUDITORS Statutory Auditors

The provisions of Section 139, 142 and other applicable provisions, if any, of the Companies Act, 2013 (the Act), and the Companies (Audit and Auditors) Rules, 2014 (including any statutory modification(s) or reenactment thereof, for the time being in force) and pursuant to recommendation of the Audit Committee and the Board of Directors, M/s. K.S.Rao & Co., Chartered Accountants, Hyderabad, (ICAI Firm Regn. No.003109S) be and are hereby appointed as Statutory Auditors of the Company for a term of five years from conclusion of 33^rd Annual General Meeting till the conclusion of 38^th Annual General Meeting at such remuneration plus reimbursement of out of-pocket, travelling and living expenses, etc., as may be mutually agreed between the Board of Directors of the Company and the said Auditors.”

Cost Auditors:

The Board has appointed M/s. DZR&Co, Cost Accountants for conducting the audit of cost records of the Company for various segments for the financial year 2017-18 as recommended by the Audit Committee. As required under section 148 and Rule 14 of the Companies (Audit and Auditors) Rules, 2014 a resolution is being placed at the ensuing AGM for ratification of remuneration payable to said Cost Auditors.

Secretarial Auditors:

M/s. L.D. Reddy & Co., Practicing Company Secretaries, was appointed to conduct the Secretarial Audit of the Company for the financial year 2017-18, as required under Section 204 of the Companies Act, 2013 and Rule 9 there-under. The secretarial audit report for FY 2017-18 forms part of this Report as Annexure.

Reply to the observations of Secretarial auditor:

Your company is law abiding entity, and filed the necessary forms & returns with the authorities. However, there was some delay filings occured during the year. Management is taking measures to avoid the delay filings in future.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE OUTGO

Information required under section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) 2014, is enclosed herewith as Rules, Annexure .

DEVELOPEMNT AND IMPLEMENTATION OF A RISK MANAGEMENT POLICY

The Company has been addressing various risks impacting the company policy of the company on risk management is provided elsewhere in this Annual Report in Management Discussion and Analysis.

The Company has developed and implemented a risk management policy for the company including identification therein of elements of risk, which in the opinion of the Board may threaten the existence of the company.

NOMINATION AND REMUENRATION POLICY

On the recommendation of the Nomination and Remuneration Committee the Board of Directors has formulated a policy of the Company on directors’ appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters and to frame proper systems for identification, appointment of Directors & KMPs, Payment of Remuneration to them and Evaluation of their performance.

FORMAL ANNUAL EVALUATION MADE BY THE BOARD OF ITS OWN PERFORMANCE AND OF ITS COMMITTEES AND INDIVIDUAL DIRECTORS

As required under the provisions of Schedule IV of the Companies Act, 2013 the performance evaluation of independent directors has been done by the entire Board of Directors, excluding the director being evaluated. The evaluation of all the directors and the Board as a whole was conducted based on the criteria and framework adopted by the Board. The Board approved the evaluation results as collated by the nomination and remuneration committee.

None of the independent directors are due for re-appointment

LISTING:

The equity shares of the Company are listed with Bombay Stock Exchange Limited (BSE), and National Stock Exchange of India Limited (NSE). There are no arrears on account of payment of listing fees to the said Stock Exchanges

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 134 (5) of the Companies Act, 2013 Your Directors’ confirm that:

In preparation of annual accounts for the financial year ended 31 st March, 2018 the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give true and fair view of the state of affairs of the Company at the end of the financial year ended 31 st March, 2018 and of the profit of the Company for the financial year;

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

i. The Directors had prepared the annual accounts on a ‘going concern’ basis;

ii. The directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and

iii. The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

OTHER DISCLOSURES:

Board Meetings

During the year under review, Six Board Meetings were held on 30^th May, 2017, 31^st August, 2017; 13^th Sep 2017; 13^th December, 2017, 27^th December, 2017 and 9^th February, 2018.

Committees of Board

Your company has the following committees namely:

1. Audit Committee

2. Nomination and Remuneration Committee

3. Stakeholders Relationship Committee

The constitution of all the committees is as per the Companies Act, 2013 and SEBI (LODR) Regulations, 2015. The details of the Constitution of Committees are mentioned in Corporate Governance Report, which forms part of this Annual Report.

Corporate Governance Report

Your Company has complied with the requirements of Regulation 34(3) read with Schedule V of SEBI (LODR), Regulations, 2015 and provisions of the Companies Act, 2013, Report on Corporate Governance including Auditor’s Certificate on compliance with the code of Corporate Governance.

Change in Key Managerial Personnel

Mr. D. Raghavendrarao regisned from the office of Company Secretary with effect from close of business hours of 18^th October, 2017 and the Board has appointed Mr. Matru Prasad Mishra as the Company Secretary of the Company with effect from 14^th December, 2017.

Board’s response on Auditor’s qualification, reservation or adverse remarl or disclaimer made:

During the year, there were no instances of frauds reported by auditors under Section 143(12) of the Companies Act, 2013.

Management Discussion and Analysis

A brief note on the Management discussion and analysis for the year is enclosed as Annexure to this report Vigil Mechanism:

In pursuant to the provisions of section 177 of the Companies Act, 2013 a Vigil Mechanism for directors and employees to report genuine concerns has been established. All permanent employees of the Company are covered under the Whistle Blower Policy.

ACKNOWLEDGEMENTS

Your Directors wish to place on record their appreciation for the support and co-operation extended by the Shareholders, Bankers, Financial Institutions, Government Authorities, Stock Exchanges, Customers, Suppliers and other associates.

Your Directors also wish to place on record their appreciation for the enthusiastic support received from the team of dedicated employees in the activities of your Company.

On behalf of the Board

For Lokesh Machines Limited

B Kishore Babu M Lokeswara Rao

(Executive Director) (Managing Director)

---

Mar 31, 2016

Dear Stakeholders,

The Directors submit the 32nd Annual Report of the company along with the Audited financial Statements for the financial year ended March 31, 2016.

FINANCIAL RESULTS

Rs in Lakhs

Particulars	(2015-16)	(2014-15)
Net Sales	12107.33	11,814.24
Other Income	90.87	128.12
Captive Consumption	1139.61	128.75
Total Income	13337.81	12071.12
Profit before Depreciation, Interest and Taxes	2628.81	2939.24
Depreciation	740.83	867.90
Profit before Interest and Taxes	1887.98	2071.34
Interest and Finance Charges	1535.87	1817.78
Profit before Taxes	352.11	253.56
Provision for Taxes	138.30	178.95
Profits after Taxes	213.81	74.61

PERFORMANCE REVIEW:

The turnover increased by 2.48%, and The Earnings per Share increased from Rs. 0.63 in the previous year to Rs 1.45 in the year under report.

- The General Purpose machinery division could post a marginally higher sale domestically and could more on less hold on to the export sales.

- There was a substantial fall in the SPM sale due to the protracted recessionary condition and as no major project was taking off at our regular SPM customers. Typically SPM movement will start once the economy reaches a reasonable uptick unlike the GPMs which pick up at the start of growth phase itself.

- The job work revenue increased compared to the previous year due to start of new projects in the last quarter.

- The New Connecting Rod Manufacturing line had commenced production in the second half of last year further adding to the Component Division revenues.

FUTURE OUTLOOK

The current market conditions are showing signs of recovery, but not at a comfortable pace. There is still an air of cautious optimism and customers are conservative in their growth plans.

However, your directors are confident of putting in an improved performance over the previous year.

1) The SPM order book reflects a reasonable growth. Almost all the orders are from the existing customers only for capacity and not for any new products.

2) The CNC machines division is expected to post substantial growth with improving market conditions. The delivery lead times of these machines is less than 3 months and hence any improvement in the market brings in an immediate demand. However since rest of Europe and Russia continues to be in a state of recession, the exports could be same as last year. However, we hope for some improvement in the coming quarter which could reflect in increased export dispatches in the last quarter.

3) On the component division front, the Connecting Rod production is in a ramp up mode. With a reasonable monsoons prediction, the Tractor industry in particular and the Auto sector in general are expected to do well and thereby help us increase the overall revenues.

DIVIDEND

Your Directors are pleased to recommend for approval of the Members a dividend of 5% on equity shares of the company for the financial year 2015-16, amounting to Rs 0.50/- per equity share.

The dividend on the equity shares, if declared as above, would involve an outflow of Rs.79,32,867/- towards dividend and Rs. 1615,132 /- towards dividend tax, resulting in a total outflow of Rs. 95,47,999./-.

TRANSFER TO GENERAL RESERVE

The Company does not propose to transfer any amount to General Reserve.

DIRECTORS

Mr. M. Krishna Swamy, Director of the company retires by rotation at the ensuing Annual General Meeting, and being eligible offer themselves for re-appointment.

Revision in the remuneration of Directors re-appointed as on 28-09-2015 as follows :

1. Mullapudi Lokeswararao - Managing Director

2. Bollineni Kishore Babu - Whole Time Director

3. Mullapudi Srinivas - Whole Time Director

4. Mullapudi Srikrishna - Whole Time Director

5. A. Vijay Kumar - Independent Director

The detailed profile of the above directors are given at Notice calling the Annual General Meeting.

All Independent Directors have given declaration that they meet the criteria of independence as laid under section 149(6) of the Companies Act 2013.

AUDITORS Statutory Auditors

At the Annual General Meeting(AGM) held on September 30, 2014, M/s. Brahmayya & Co, Chartered Accountants, were appointed as Statutory Auditor of the Company to hold office till the conclusion of the Annual General Meeting to be held in the calendar year 2017. In terms of the first proviso to Section 139 of the Companies Act, 2013, the appointment of the auditor shall be placed for ratification at every Annual General Meeting. Accordingly, the appointment of M/s. Brahmayya & Co, Chartered Accountants, as statutory auditors of the Company, is placed for ratification by the shareholders. In this regard, the Company has received a certificate from the auditors to the effect that if they are reappointed, it would be in accordance with the provisions of Section 141 of the Companies Act, 2013.

Cost Auditors:

The Board has appointed M/s. DZR&Co, Cost Accountants for conducting the audit of cost records of the Company for various segments for the financial year 2016-17 as recommended by the Audit Committee. As required under section 148 and Rule 14 of the Companies (Audit and Auditors) Rules, 2014 a resolution is being placed at the ensuing AGM for ratification of remuneration payable to said Cost Auditors.

Secretarial Auditors:

M/s. S Chidambaram, Practicing Company Secretaries, was appointed to conduct the Secretarial Audit of the Company for the financial year 2015-16, as required under Section 204 of the Companies Act, 2013 and Rule 9 there-under. The secretarial audit report for FY 2015-16 forms part of this Report as Annexure- C.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE OUTGO

Information required under section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies

(Accounts) 2014, is enclosed herewith as Rules, Annexure - A

DEVELOPEMNT AND IMPLEMENTATION OF A RISK MANAGEMENT POLICY

The Company has been addressing various risks impacting the company policy of the company on risk management 4is provided elsewhere in this Annual Report in Management Discussion and Analysis.

The Company has developed and implemented a risk management policy for the company including identification therein of elements of risk, which in the opinion of the Board may threaten the existence of the company.

NOMINATION AND REMUENRATION POLICY

On the recommendation of the Nomination and Remuneration Committee the Board of Directors has formulated a policy of the Company on directors’ appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters and to frame proper systems for identification, appointment of Directors & KMPs, Payment of Remuneration to them and Evaluation of their performance.

FORMAL ANNUAL EVALUATION MADE BY THE BOARD OF ITS OWN PERFORMANCE AND OF ITS COMMITTEES AND INDIVIDUAL DIRECTORS

As required under the provisions of Schedule IV of the Companies Act, 2013 the performance evaluation of independent directors has been done by the entire Board of Directors, excluding the director being evaluated. The evaluation of all the directors and the Board as a whole was conducted based on the criteria and framework adopted by the Board. The Board approved the evaluation results as collated by the nomination and remuneration committee.

LISTING:

The equity shares of the Company are listed with Bombay Stock Exchange Limited (BSE), and National Stock Exchange of India Limited (NSE). There are no arrears on account of payment of listing fees to the said Stock Exchanges

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 134 (5) of the Companies Act, 2013 Your Directors’ confirm that:

In preparation of annual accounts for the financial year ended 31st March, 2016 the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give true and fair view of the state of affairs of the Company at the end of the financial year ended 31st March, 2016 and of the profit and loss of the Company for the financial year;

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

i. The Directors had prepared the annual accounts on a ’going concern’ basis;

ii. The directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and

iii. The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Reply to the observations of Secretarial auditor :

Your company is law abiding entity, and filed the necessary forms & returns with the authorities. However, there were few non-compliance’s which the management ensures to comply the same in time in future.

OTHER DISCLOSURES:

Board Meetings

During the year under review, six Board Meetings were held on 11th May, 2015; 30th May, 2015;12th June, 2015; 14th August, 2015; 14th November, 2015 and 13th February, 2016.

Committees of Board

Your company has the following committees namely:

1. Audit Committee

2. Nomination and Remuneration Committee

3. Stakeholders Relationship Committee

The constitution of all the committees are as per the Companies Act, 2013 and Listing Agreement with Stock Exchanges. The details of the Constitution are mentioned in Corporate Governance Report, which forms part of this Annual Report.

Independent Directors Declaration

All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013.

Evaluation of Board’s Performance

Pursuant to the provisions of the Companies Act, 2013 read with the Rules issued there under and the Listing Regulations (including any statutory modifications or re-enactments for the time being in force), the processor valuation of the annual performance of the Directors / Board / Committees was carryout out. The criteria applied in the evaluation process are detailed in the Corporate Governance report which forms part of this report. Corporate Governance Report

Your Company has complied with the requirements of Regulation 34 of the SEBI (LODR) Regulations, 2015 entered with the Stock Exchanges and provisions of the Companies Act, 2013, Report on Corporate Governance including Auditor’s Certificate on compliance with the code of Corporate Governance.

Management Discussion and Analysis

A brief note on the Management discussion and analysis for the year is enclosed as Annexure B to this report

Vigil Mechanism:

In pursuant to the provisions of section 177 of the Companies Act, 2013 a Vigil Mechanism for directors and employees to report genuine concerns has been established.

ACKNOWLEDGEMENTS

Your Directors wish to place on record their appreciation for the support and co-operation extended by the Shareholders, Bankers, Financial Institutions, Government Authorities, Stock Exchanges, Customers, Suppliers and other associates.

Your Directors also wish to place on record their appreciation for the enthusiastic support received from the team of dedicated employees in the activities of your Company.

On behalf of the Board

For Lokesh Machines Limited

B Kishore Babu M Lokeswara Rao

(Executive Director) (Managing Director)

---

Mar 31, 2015

Dear Members,

The Directors submit the 31st Annual Report of the company along with the Audited financial Statements for the financial year ended March 31,2015.

FINANCIAL RESULTS

Rs in Lakhs

Particulars (2014-15) (2013-14)

Net Sales 11,814.25 11,179.90

Other Income 128.12 86.52

Captive Consumption 128.75 140.60

Total Income 12071.12 11407.02

Profit before Depreciation, Interest and 2939.24 2907.66 Taxes

Depreciation 867.90 897.00

Profit before Interest and Taxes 2071.34 2010.66

Interest and Finance Charges 1817.78 1905.10

Profit before Taxes 253.56 105.56

Provision for Taxes 178.95 59.86

Profits after Taxes 74.61 45.70

PERFORMANCE REVIEW:

The turnover increased by 6%, and the Profit before Interest and Taxes increased by 1% compared to the previous year. The Earnings per Share increased from Rs. 0.39 in the previous year to Rs 0.63 in the year under report.

The offtakes in the component division had come down due to a severe fall in the Commercial Vehicles and Tractors last year. There has been a fall in the Job Work Charges, the General Purpose machinery division could hold on to a respectable sale although it was Higher than the previous year. The SPM division performed much better than the previous years due to some major projects being undertaken by the OEMs. Though the market conditions were not significantly great, the OEMs still went ahead and completed their projects thereby ensuring that the machines on order with us were lifted.

FUTURE OUTLOOK

The current market conditions are slow at the moment and there has been a sizeable shrinkage in the general business. However, your directors we are pleased to inform you that we will be able to sail through this year

1) We are comfortable on our Special Purpose Machinery Order book and we are more or less booked for the entire year. These are project orders from the OEs which could be for their Greenfield or expansion projects and they will go ahead and execute these projects regardless of the temporary market conditions.

2) The CNC machines division is also expected to maintain the performance as we have had a breakthrough in the Russian market and have already successfully delivered a few machines. There are repeat orders from Russia which should help offset reduction in regular order flows. The company is exploring other new overseas markets to shore up export revenues.

3) On the component division front, we have already made a significant investment in new machining lines in the Pune plant. These lines are expected to commence production in the last quarter of this year and thereby add to our revenues.

With slowdown reaching unprecedented levels, there is a turnaround due now and the government is expected to announce some measures to provide the momentum to the overall growth in the general economic activity which the Directors are hopeful would help further in the current year.

DIVIDEND

Your Directors are pleased to recommend for approval of the Members a dividend of 5% on equity shares of the company for the financial year 2014-15, amounting to Rs 0.50/- per equity share.

The dividend on the equity shares, if declared as above, would involve an outflow of Rs.7,022,034/- towards dividend and Rs. 14,29,521/- towards dividend tax, resulting in a total outflow of Rs. 84,51,555/-.

TRANSFER TO GENERAL RESERVE

The Company does not propose to transfer any amount to General Reserve.

DIRECTORS

Mr. M. Krishna Swamy, Director of the company retires by rotation at the ensuing Annual General Meeting, and being eligible offer themselves for re-appointment.

The following Directors are proposed to be appointed / re-appointed as Directors of the company under Companies act 2013

1. Mullapudi Lokeswararao - Managing Director

2. Bollineni Kishore Babu - Whole time director

3. Mullapudi Srinivas - Whole time director

4. Mullapudi Srikrishna - Whole time director

The detailed profile of the above directors are given at Notice calling the Annual General Meeting.

All Independent Directors have given declaration that they meet the criteria of independence as laid under section 149(6) of the Companies Act 2013 and clause 49 of the Listing Agreement.

As required by clause 49 of the Listing Agreement with the Stock Exchanges, the information on the particulars of the Directors seeking re-appointment was given in the notice to the AGM.

AUDITORS

Statutory Auditors

At the Annual General Meeting(AGM) held on September 30, 2014, M/s. Brahmayya & Co, Chartered Accountants, were appointed as Statutory Auditor of the Company to hold office till the conclusion of the Annual General Meeting to be held in the calendar year 2017. In terms of the first proviso to Section 139 of the Companies Act, 2013, the appointment of the auditor shall be placed for ratification at every Annual General Meeting. Accordingly, the appointment of M/s. Brahmayya & Co, Chartered Accountants, as statutory auditors of the Company, is placed for ratification by the shareholders. In this regard, the Company has received a certificate from the auditors to the effect that if they are reappointed, it would be in accordance with the provisions of Section 141 of the Companies Act, 2013.

Cost Auditors:

The Board has appointed M/s. DZR&Co, Cost Accountants for conducting the audit of cost records of the Company for various segments for the financial year 2015-16 as recommended by the Audit Committee. As required under section 148 and Rule 14 of the Companies (Audit and Auditors) Rules, 2014 a resolution is being placed at the ensuing AGM for ratification of remuneration payable to said Cost Auditors.

Secretarial Auditors:

M/s. S Chidambaram, Practicing Company Secretaries, was appointed to conduct the Secretarial Audit of the Company for the financial year 2014-15, as required under Section 204 of the Companies Act, 2013 and Rule 9 there-under. The secretarial audit report for FY 2014-15 forms part of this Report as Annexure- C.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE OUTGO

Information required under section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, is enclosed herewith as Annexure - A

DEVELOPEMNT AND IMPLEMENTATION OF A RISK MANAGEMENT POLICY

The Company has been addressing various risks impacting the company policy of the company on risk management is provided elsewhere in this Annual Report in Management Discussion and Analysis.

The Company has developed and implemented a risk management policy for the company including identification therein of elements of risk, which in the opinion of the Board may threaten the existence of the company.

NOMINATION AND REMUENRATION POLICY

On the recommendation of the Nomination and Remuneration Committee the Board of Directors has formulated a policy of the Company on directors' appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters and to frame proper systems for identification, appointment of Directors & KMPs, Payment of Remuneration to them and Evaluation of their performance.

FORMAL ANNUAL EVALUATION MADE BY THE BOARD OF ITS OWN PERFORMANCE AND OF ITS COMMITTEES AND INDIVIDUAL DIRECTORS

As required under the provisions of Schedule IV of the Companies Act, 2013 the performance evaluation of independent directors has been done by the entire Board of Directors, excluding the director being evaluated. The evaluation of all the directors and the Board as a whole was conducted based on the criteria and framework adopted by the Board. The Board approved the evaluation results as collated by the nomination and remuneration committee.

None of the independent directors are due for re-appointment LISTING:

The equity shares of the Company are listed with Bombay Stock Exchange Limited (BSE), and National Stock Exchange of India Limited (NSE). There are no arrears on account of payment of listing fees to the said Stock Exchanges

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 134 (5) of the Companies Act, 2013 Your Directors' confirm that:

In preparation of annual accounts for the financial year ended 31st March, 2015 the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give true and fair view of the state of affairs of the Company at the end of the financial year ended 31st March, 2015 and of the profit and loss of the Company for the financial year;

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

i. The Directors had prepared the annual accounts on a 'going concern' basis;

ii. The directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and

iii. The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

OTHER DISCLOSURES:

Board Meetings

During the year under review, five Board Meetings were held on 30th May, 2014; 14th August, 2014; 14th November, 2014 and 14th February, 2015 and 04th March 2015.

Committees of Board

Your company has the following committees namely:

1. Audit Committee

2. Nomination and Remuneration Committee

3. Stakeholders Relationship Committee

The constitution of all the committees are as per the Companies Act, 2013 and Listing Agreement with Stock Exchanges. The details of the Constitution are mentioned in Corporate Governance Report, which forms part of this Annual Report.

Corporate Governance Report

Your Company has complied with the requirements of Clause 49 of the Listing Agreement entered with the Stock Exchanges and provisions of the Companies Act, 2013, Report on Corporate Governance including Auditor's Certificate on compliance with the code of Corporate Governance.

Management Discussion and Analysis

A brief note on the Management discussion and analysis for the year is enclosed as Annexure B to this report Vigil Mechanism:

In pursuant to the provisions of section 177 of the Companies Act, 2013 and Clause 49 of the Listing Agreement a Vigil Mechanism for directors and employees to report genuine concerns has been established.

Particulars of Employees

The information required under section 197 of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given below :

i) The ratio of the remuneration of each director to the median remuneration of the employees of the Company for the financial year:

Name of the Director Ratio to Median remuneration

M Lokeswararao 20.04

B Kishore Babu 10.02

M Srikrishna 10.02

K Krishna Swamy 3.15

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

Name of the Director/Chief Financial Percentage of increase Officer/Chief Executive Officer in remuneration /Company Secretary/Manager

M Lokeswararao —

B Kishore Babu —

M Srikrishna —

K Krishna Swamy —

V Sudhakara Reddy —

D Raghavendrarao —

iii) The percentage increase in the median remuneration of employees in the financial year; 5%

iv) The number of permanent employees on the rolls of company; 378

v) The explanation on the relationship between average increase in remuneration and company performance;

On an average, employees received an annual increase of 5%. The individual increments varied from 5% to 15% based on individual performance

In order to ensure that remuneration reflects Company performance, the performance pay is also linked to organization performance, apart from an individual's performance.

vi) Comparison of the remuneration of the Key Managerial Personnel against the performance of the company;

Aggregate remuneration of key Managerial Personnel(KMP) 109.80

in FY 2015 (Rs. Lakhs)

Total Revenue (Rs.Lakhs) 12071.12

Remuneration of KMP(as % of revenue) 0.91%

Profit before Tax (PBT) (Rs.Lakhs) 253.56

Remuneration of KMP(as % of PBT) 43.30%

vii) Variations in the market capitalisation of the company, price earnings ratio as at the closing date of the current financial year and previous financial year:

Particulars March 31,2015 March 31,2014 % Change

Market Capitalisation 83,56,06,530 27,67,68,900 201.91% (Rs. Lakhs)

Price Earning Ratio 112.62 71.21 58.15

Percentage increase over decrease in the market quotations of the shares of the company in comparison to the rate at which the company came out with the last public offer:

Particulars March 31,2015 IPO Price % Change

Market Price (BSE) 70.95 140 50.68%

Market Price (NSE) 70.90 140 50.68%

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

ix) Comparison of the each remuneration of the Key Managerial Personnel against the performance of the company;



Mr M Mr.M. Mr.B. M.K Krishna Lokeswara Srikrishna Kishore Swamy rao Babu

Remuneration 42.00 21.00 21.00 6.60 in FY 15 (Rs. Lakhs)

Total Revenue (Rs. Lakhs) 12071.12 12071.12 12071.12 12071.12

Remuneration as % of Revenue 0.35 0.17 0.17 0.05

Profit Before Tax(PBT) (Rs. Lakhs) 253.56 253.56 253.56 253.56

Remuneration (as % of PBT) 16.56 8.28 8.28 2.60

Mr. V. Sudhakara Mr. D. Reddy Raghavendrarao

Remuneration 15.00 4.20 in FY 15 (Rs. Lakhs)

Total Revenue (Rs. Lakhs) 12071.12 12071.12

Remuneration as % of Revenue 0.12 0.03

Profit Before Tax(PBT) (Rs. Lakhs) 253.56 253.56

Remuneration (as % of PBT) 5.92 1.66

x) The key parameters for any variable component of remuneration availed by the directors;

None

xi) The ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year;

None

xii) Affirmation that the remuneration is as per the remuneration policy of the company:

The Company affirms that the remuneration is as per the remuneration policy of the Company.

SUBSIDIARY COMPANY:

The company does not have any Subsidiary company either in India or abroad.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS:

Details of the Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 are given in the notes to the financial statements pertaining to the year under review.

PUBLIC DEPOSITS:

The Company has not accepted any deposits from the public.

RELATED PARTY TRANSACTIONS:

Related party transactions entered during the financial year under review are disclosed in Note No.27 of the Financial Statements of the Company for the financial year ended 31st March, 2015. These transactions entered were at an arm's length basis and in the ordinary course of business. There were no materially significant related party transactions with the Company's Promoters, Directors, Management or their relatives, which could have had a potential conflict with the interests of the Company.

The Company has not entered into any related party transactions covered under Section 188(1) of the Companies Act, 2013.

ACKNOWLEDGEMENTS

Your Directors wish to place on record their appreciation for the support and co-operation extended by the Shareholders, Bankers, Financial Institutions, Government Authorities, Stock Exchanges, Customers, Suppliers and other associates.

Your Directors also wish to place on record their appreciation for the enthusiastic support received from the team of dedicated employees in the activities of your Company.

On behalf of the Board For Lokesh Machines Limited

B Kishore Babu M Lokeswara Rao (Executive Director) (Managing Director)

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Mar 31, 2014

Dear Stakeholders,

The Directors submit the 30th Annual Report of the company along with the Audited financial Statements for the financial year ended March 31, 2014.

Financial Results Rs in Lakhs

Particulars (2013-14) (2012-13) Net Sales 11,179.90 14,026.53 Other Income 86.52 46.09

Captive Consumption 140.60 290.12 Total Income 11407.02 14362.74 Profit before Depreciation, Interest and Taxes 2907.66 3195.69 Depreciation 897.00 961.15 Profit before Interest and Taxes 2010.66 2234.54 nterest and Finance Charges 1905.10 2083.92 Profit before Taxes 105.56 150.62 Provision for Taxes 59.60 44.34 Profits after Taxes 45.96 106.28 PERFORMANCE REVIEW:

The turnover decreased by 20.29%, and the Profit before Interest and Taxes decreased by 10.02% compared to the previous year.The Earnings per Share decreased from Rs.0.90 in the previous year to Rs 0.39 in the year under report.

The offtakes in the component division had come down due to a severe fall in the Commercial Vehicles and Tractors last year. There has been a fall in the General purpose machinery sale too, due to a slump in the automotive market. However with support from an improved export performance, the General Purpose machinery division could hold on to a respectable sale although it was lower than the previous year. The SPM division performed much better than the previous years due to some major projects being undertaken by the OEMs. Though the market conditions were not significantly great, the OEMs still went ahead and completed their projects thereby ensuring that the machines on order with us were lifted.

FUTURE OUTLOOK

The current market conditions are slow at the moment and there has been a sizeable shrinkage in the general business. However, your directors we are pleased to inform you that we will be able to sail through this year as;

1) We are comfortable on our Special Purpose Machinery Order book and we are more or less booked for the entire year. These are project orders from the OEs which could be for their Greenfield or expansion projects and they will go ahead and execute these projects regardless of the temporary market conditions.

2) The CNC machines division is also expected to maintain the performance as we have had a breakthrough in the Russian market and have already successfully delivered a few machines.There are repeat orders from Russia which should help offset reduction in regular order flows. The company is exploring other new overseas markets to shore up export revenues.

3) On the component division front, we have already made a significant investment in new machining lines in the Pune plant. These lines are expected to commence production in the last quarter of this year and thereby add to our revenues.

With slowdown reaching unprecedented levels, there is a turnaround due now and the government is expected to announce some measures to provide the momentum to the overall growth in the general economic activity which the Directors are hopeful would help further in the current year.

DIVIDEND

Your Directors are pleased to recommend for approval of the Members a dividend of 0.5% on equity shares of the company for the financial year 2013-14, amounting to Re. 0.50/- per equity share.

The dividend on the equity shares, if declared as above, would involve an outflow of Rs.58.88.700/- towards dividend and Rs. 10,00,785 /- towards dividend tax, resulting in a total outflow of Rs. 68,89,485./-.

TRANSFER TO GENERAL RESERVE

The Company does not propose to transfer any amount to General Reserve.

DIRECTORS

Mr. M.Srinivas, Director of the company retire by rotation at the ensuing Annual General Meeting, and being eligible offer themselves for re-appointment.

The following Directors are proposed to be appointed as Independent Directors of the Company under Section 149 of the Companies Act, 2013 read with rules made thereunder.

1. B.R Mahesh

2. R.Mohan Reddy

3. M.Hariprasada Rao

Mr. K. Krishna Swamy was proposed to be re-appointed as Wholetime Director of the Company for a period three years.

As required by clause 49 of the Listing Agreement with the Stock Exchanges, the information on the particulars of the Directors seeking re-appointment was given in the notice to the AGM.

PUBLIC DEPOSITS:

During the year, the company has not accepted any deposits from the public and is therefore not required to furnish information in respect of outstanding deposits under Non-Banking Non-Financial Companies (Reserve Bank) Directions, 1966 and Companies (Acceptance of Deposit) Rules, 1975.

LISTING:

The equity shares of the Company are listed with Bombay Stock Exchange Limited (BSE), and National Stock Exchange of India Limited (NSE). There are no arrears on account of payment of listing fees to the said Stock Exchanges.

DIRECTORS''RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 217 (2AA) ofthe Companies Act, 1956, the Directors of your Company confirm:

I. That all applicable accounting standards have been followed in the preparation of annual accounts and that there are no material departures

II. That the directors selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at March 31, 2014 and of the profit of the Company for the year ended on that date.

III. That directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act 1956, for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities.

IV. That the Directors prepared the annual accounts on a going concern basis.

PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION ANDFOREIGN EXCHANGE EARNINGS &OUTGO:

Particulars of conservation ofenergy, technology absorption and foreign exchange earnings and outgo as required under section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of particulars in the Report of the Board of Directors) Rules, 1988, is annexed as Annexure ''A'' to this Report.

PARTICULARS OF EMPLOYEES

Particulars of employees whose information is to be annexed to this report pursuant to sec-217(2A) of the Companies Act, 1956 are not applicable since the company has not employed any such employees. MANAGEMENT DISCUSSIONANDANALYSIS REPORT

The Management Discussion and Analysis Report for the year under review, as stipulated under Clause-49 of the Listing Agreement entered with the Stock Exchanges is annexed as Annexure ''B'' to this Report. CORPORATE GOVERNANCE

As per Clause-49 of the Listing Agreement entered with the Stock Exchanges, a detailed report on Corporate Governance together with the declaration by the Managing Director and Certificate issued by the Statutory Auditors'' of the company confirming the compliance of conditions of corporate governance are annexed as Annexure ''C''

SUBSIDIARY COMPANY:

The company does not have any Subsidiary company either in India or abroad.

AUDITORS & AUDITORS''REPORT:

M/s. Brahmayya & Co, Chartered Accountants, the statutory auditors of the Company retire at the conclusion of this ensuing Annual General Meeting and have expressed their willingness to act as statutory auditors of the Company, if appointed and have confirmed that the said appointment would be in conformity with the provisions of 139 of the Companies Act, 2013.

The notes on accounts referred to in the Auditors'' Report are self explanatory and therefore does not require any further comments.

Board Committees

The Board of Directors at its meeting held on 30th May, 2014 has rechristened the existing Remuneration Committee as Nomination and Remuneration Committee and Investors Grievance Committee as Stakeholders Relationship Committee under the Companies Act, 2013 and Clause 49 of the amended Listing Agreement with the Stock Exchanges.

NEW MANUFACTURING UNITS AND EXPANSION:

The construction work is in progress at the 50.00 acres of land located at Automotive Park, Toopran Mandal, Medak District, Telangana to setup an auto component and machine tool manufacturing unit. The Commercial production is expected to be initiated shortly.

After implementing of Cylinder Blocks and Cylinder Heads plant at Ranjangoan, the company now has planned to expand further and enter into the manufacturing field of Connecting Rod as there is an interest evinced by our clients. For this new Connecting Rod projects, the company will be setting up a new unit and the machines are been sourced from and equipped by German technology ACKNOWLEDGEMENTS

Your Directors wish to place on record their appreciation for the support and co-operation extended by the Shareholders, Bankers, Financial Institutions, Government Authorities, Stock Exchanges, Customers, Suppliers and other associates.

Your Directors also wish to place on record their appreciation for the enthusiastic support received from the team of dedicated employees in the activities of your Company.

On behalf of the Board

For Lokesh Machines Limited

Place: Hyderabad. B Kishore Babu M Lokeswara Rao Date: August 14, 2014 (Executive Director) (Managing Director)

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Mar 31, 2012

The Directors have pleasure in presenting the Twenty Eighth Annual Report together with the Audited Statement of Accounts for the financial year ended March 31, 2012.



FINANCIAL RESULTS Rs in Lakhs

Particulars (2011-12) (2010-11)

Net Sales 16,296.57 14639.63

Other Income 185.92 400.94 Captive consumption 438.66 583.10

Total Income 16921.15 15623.67

Profit before Depreciation, 3605.38 3074.25 Interest and Taxes

Depreciation 845.73 741.36

Profit before Interest and Taxes 2759.65 2332.89

Interest and Finance Charges 1512.23 1223.21

Profit before Taxes 1247.42 1109.68

Provision for Taxes 487.59 401.16

Profits after Taxes 759.83 708.52

PERFORMANCE REVIEW:

Your Directors are pleased to report that the Company could maintain an all round growth in the operations. The turnover increased by 11.3 %, and the Profit before Interest and Taxes increased by 18.3% compared to the previous year. The Earnings per Share increased from Rs. 6.2 in the previous year to Rs 6.45 in the year under report.

FUTURE OUTLOOK

With the turnaround providing the momentum to the overall growth in the general economic activity, your Directors are hopeful for a better performance in the current year.

DIVIDEND

Your Directors are pleased to recommend for approval of the Members a dividend of 5% on equity shares of the company for the financial year 2011-12, amounting to Re. 0.50/- per equity share.

The dividend on the equity shares, if declared as above, would involve an outflow of Rs.58,88,700/- towards dividend and Rs. 9,55,295 /- towards dividend tax, resulting in a total outflow of Rs. 68,43,995./-. TRANSFER TO GENERAL RESERVE

The Company does not propose to transfer any amount to General Reserve.

DIRECTORS

Mr. B R Mahesh and Mr. R Mohan Reddy, Directors of the company retire by rotation at the ensuing Annual General Meeting, and being eligible offer themselves for re-appointment.

As required by clause 49 of the Listing Agreement with the Stock Exchanges, the information on the particulars of the Directors seeking re-appointment was given in the notice to the AGM.

PUBLIC DEPOSITS:

During the year, the company has not accepted any deposits from the public and is therefore not required to furnish information in respect of outstanding deposits under Non-Banking Non-Financial Companies (Reserve Bank) Directions, 1966 and Companies (Acceptance of Deposit) Rules, 1975.

LISTING:

The equity shares of the Company are listed with Bombay Stock Exchange Limited (BSE), and National Stock Exchange of India Limited (NSE). There are no arrears on account of payment of listing fees to the said Stock Exchanges.

DIRECTORS' RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 217 (2AA) of the Companies Act, 1956, the Directors of your Company confirm:

I. That all applicable accounting standards have been followed in the preparation of annual accounts and that there are no material departures

II. That the directors selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at March 31,2012 and of the profit of the Company for the year ended on that date.

III. That directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act 1956, for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities.

IV. That the Directors prepared the annual accounts on a going concern basis.

PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO:

Particulars of conservation of energy, technology absorption and foreign exchange earnings and outgo as required under section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of particulars in the Report of the Board of Directors) Rules, 1988, is annexed as Annexure 'A' to this Report.

PARTICULARS OF EMPLOYEES

Particulars of employees whose information is to be annexed to this report pursuant to sec-217(2A) of the Companies Act, 1956 are not applicable since the company has not employed any such employees.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Management Discussion and Analysis Report for the year under review, as stipulated under Clause-49 of the Listing Agreement entered with the Stock Exchanges is annexed as Annexure 'B' to this Report.

CORPORATE GOVERNANCE

As per Clause-49 of the Listing Agreement entered with the Stock Exchanges, a detailed report on Corporate Governance together with the declaration by the Managing Director and Certificate issued by the Statutory Auditors' of the company confirming the compliance of conditions of corporate governance are annexed as Annexure 'C'

SUBSIDIARY COMPANY:

The company does not have any Subsidiary company either in India or abroad.

AUDITORS & AUDITORS' REPORT:

M/s. Brahmayya & Co, Chartered Accountants, the statutory auditors of the Company retire at the conclusion of this ensuing Annual General Meeting and have expressed their willingness to act as statutory auditors of the Company, if appointed and have confirmed that the said appointment would be in conformity with the provisions of Sec-224(1B) of the Companies Act, 1956.

The notes on accounts referred to in the Auditors' Report are self explanatory and therefore does not require any further comments.

NEW MANUFACTURING UNITS AND EXPANSION:

The construction work is in progress at the 50.00 acres of land located at Automotive Park, Toopran Mandal, Medak District, Andhra Pradesh to setup an auto component and machine tool manufacturing unit. The Commercial production is expected to be initiated shortly.

After implementing of Cylinder Blocks and Cylinder Heads plant at Ranjangoan, the company now has planned to expand further and enter into the manufacturing field of Connecting Rod as there is an interest evinced by our clients. For this new Connecting Rod projects, the company will be setting up a new unit and the machines are been sourced from and equipped by German technology.

ACKNOWLEDGEMENTS

Your Directors wish to place on record their appreciation for the support and co-operation extended by the Shareholders, Bankers, Financial Institutions, Government Authorities, Stock Exchanges, Customers, Suppliers and other associates.

Your Directors also wish to place on record their appreciation for the enthusiastic support received from the team of dedicated employees in the activities of your Company.

On behalf of the Board For Lokesh Machines Limited

B Kishore Babu M Lokeswara Rao

(Executive Director) (Managing Director)

Place: Hyderabad.

Date: August 14, 2012

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Mar 31, 2010

The Directors have pleasure in presenting the Twenty Sixth Annual Report together with the Audited Statement of Accounts for the financial year ended March 31, 2010.

FINANCIAL RESULTS

Rs in Lakhs

PARTICULARS (2009-10) (2008-09)

Net Sales 9682.90 7404.36

Other Income 131.32 123.27

Total Income 9814.22 7527.63

Profit before Depreciation, Interest and Taxes 2663.58 1631.45

Depreciation 707.34 646.87

Profit before Interest and Taxes 1556.24 984.58

Interest and Finance Charges 916.07 880.92

Profit before Taxes 640.17 103.66

Provision for Taxes 235.54 66.12

Profit after Taxes 404.63 37.54

After the severe recession during the previous year in the auto and engineering industry, there have been signs of recovery towards the second half of the period under report. The turnover increased by 30.77 %, and the Profit before Interest and Taxes increased by 58.06 % compared to the previous year. The Earnings per share increased from Rs. 0.32 in the previous year to Rs 3.44 in the year under report. Your company has nearly matched the pre-recession performance.

FUTURE OUTLOOK

With the turn around providing the momentum to the overall growth in the general economic activity, your Directors are hopeful for a better performance in the current year.

MANUFACTURING FACILITY AT PUNE

Your company is setting up a manufacturing facility at Ranjangaon, Pune to exclusively cater to the requirements of Mahindra & Mahindra Ltd. for cylinder blocks. This unit, being set up at a project cost of Rs. 25 crores is expected to commence commercial operations from December 2010. Your company has started getting enquiries from other auto majors, and hopes to expand its operations in the near future.

DIVIDEND

Based on the companys performance, your Directors are pleased to recommend for approval of the members a dividend of 10 %, amounting to Re. 1.00/- per equity share of Rs.10/- each. The dividend on the equity shares, if declared as above, would involve an outflow of Rs.11,777,400/- towards dividend and Rs. 2,001,569 /- towards dividend tax, resulting in a total outflow of Rs. 13,778,969/-.

Out of the profits the Directors propose to transfer an amount of Rs 2,500,000 to the General Reserves.

DIRECTORS

Mr. K Krishna Swamy and Dr. Y Satyanarayana, Directors retire by rotation at the ensuing Annual General Meeting and are eligible for reappointment.

Your Board has reappointed Mr. K. Krishna Swamy as Wholetime Director from June 29, 2010 for a period of 5 years.

Mr. M Lokeswara Rao has been reappointed as Managing Director by the Board with effect from October 1, 2010 for a period of 5 years.

Mr. B Kishore Babu and Mr. M Srikrishna have been reappointed by the Board, as Wholetime directors with effect from October 1, 2010 for a period of five years.

As required by clause 49 of the Listing Agreement with the Stock Exchange, brief resumes of the above directors are included in the Notice convening the Annual General Meeting. Appropriate Resolutions are being proposed at the forthcoming Annual General Meeting for obtaining your approval to the above reappointment of directors.

DIRECTORS RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 217 (2AA) of the Companies Act, 1956, the Directors of your Company confirm:

I. That all applicable accounting standards have been followed in the preparation of annual accounts and that there are no material departures.

II. That the directors selected such accounting policies and applied them consistently and made judg- ments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at March 31, 2010 and of the profit of the Company for the year ended on that date.

III. The directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act 1956, for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities.

IV That the Directors prepared the annual accounts on a going concern basis.

ADDITIONAL PARTICULARS

Particulars of conservation of energy, technology absorption and foreign exchange earnings and outgo as required under section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of particulars in the Report of the Board of Directors) Rules, 1988, is annexed as Annexure ‘A to this Report.

PARTICULARS OF EMPLOYEES

The details of employees as envisaged by Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 is annexed as Annexure ‘B to this Report.

CORPORATE GOVERNANCE

A detailed report on Corporate Governance together with the Auditors Certificate on its compliance is annexed as Annexure ‘C

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Management Discussion and Analysis Report is annexed as Annexure ‘D to this Report.

AUDITORS

M/s. Brahmayya & Co, Chartered Accountants, the auditors of the Company retire at the conclusion of this Annual General Meeting and are eligible for re-appointment. Appropriate Resolution is being proposed at the ensuing Annual General Meeting for the reappointment of the Auditors.

ACKNOWLEDGEMENTS

Your Directors wish to place on record their appreciation of the support and co-operation extended by the State Bank of Hyderabad, State Bank of Indore, Punjab National Bank, Barclays Bank PLC., Indusind Bank Limited, business constituents and shareholders.

Your Directors also wish to place on record their appreciation of the excellent enthusiastic support received from the team of dedicated employees in the activities of your Company.

On behalf of the Board

B Kishore Babu M Lokeswara Rao

(Director) (Managing Director)

Place: Hyderabad.

Date: August 14, 2010