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Directors Report of Ucal Fuel Systems Ltd.

Mar 31, 2014

Dear Members,

The Directors hereby present the Twenty Eighth Annual Report together with the audited accounts of the company for the year ended 31st March 2014.

FINANCIAL HIGHLIGHTS

The performance of the company for the year ended 31st March 2014 is as follows:

(Rs. in lakhs) For the year ended Particulars 31.03.2014 31.03.2013

Gross Revenue 52,682 57,084

Net Revenue (excluding Excise Duty) 46,563 50,435

Total Expenditure 40,333 43,756

Operating Income 6,230 6,679

Other Income 100 123

Profit before Interest, Tax & Depreciation 6,330 6,802

Interest 2,983 3,197

Deferred Revenue Expenses 417 417

Depreciation 1,923 1,925

Profit before Tax & Exceptional item 1,007 1,263

Tax Expense 185 305

Profit after Tax/Net Profit 822 958

Balance of profit brought forward from last year 8,815 8,316

Amount Available for Appropriations 9,637 9,274

Appropriations:

Transfer to General Reserve 200 200

Dividend 221 221

Tax on Dividend 33 38

Balance Carried to Balance Sheet 9,183 8,815



DIVIDEND

The Board recommends a dividend of 10% i.e. Rs. 1 per equity share, aggregating to Rs. 221 lakhs (exclusive of tax on dividend) for the financial year 2013-2014.

TRANSFER TO GENERAL RESERVE

A sum of Rs. 200 lakhs has been transferred to the general reserve of the company for the financial year 2013-2014.

PERFORMANCE

The turnover of the company decreased by 8% from Rs. 50,435 lakhs in the financial year 2012-2013 to Rs. 46,563 lakhs in the financial year 2013-2014. This was mainly because of the continued recessionary trend in the auto sector and consequent low off take by the customers. This decrease in turnover was in spite of the efforts put in by the management to identify new markets and new business. The Earnings before Interest, Tax and Depreciation (EBITDA) also decreased from Rs. 6,802 lakhs in the financial year 2012-2013 to Rs. 6,330 lakhs in the financial year 2013-2014. The decrease can be mainly attributed to the reduction in the volume of business and the high fixed expenditure cost.

In spite of considerable efforts the exports reduced to Rs. 2,069 lakhs during the financial year 2013-2014 from Rs. 2,589 lakhs in the financial year 2012-2013. This decrease is again a reflection of the global trends in the auto sector. The spares sales of the company during the financial year 2013-2014 was Rs. 3,164 lakhs as against that of Rs. 3,048 lakhs in the financial year 2012-2013 showing a marginal increase.

The Profit After Tax (PAT) for 2013-2014 was less than that of the financial year 2012-2013 by 14%. The Company''s earning per share was Rs. 3.72 during the financial year 2013-2014.

The economy continued its downward trend in 2013-2014 and the automobile segment did not show any signs of improvement. The company''s manufacturing plants worked at less than optimum capacity as the customer off take was low. However the company''s efforts to cut costs through various new initiatives, close monitoring and control of projects and steps to increase productivity continued unabated during the financial year 2013-2014. Rearranging the production facilities did yield some savings in the form of increased efficiency of operations but that was not substantial enough to make up for the low off take and the constant demand by the customer for price discounts. The supply chain management continued to be a challenge in terms of price and quality.

The reduced turnover resulted in a limited capital expenditure in 2013-2014 keeping in mind the low demand in the automobile segment. The company continued its emphasis on updating its facilities and spent Rs. 534 lakhs in capital investments in the financial year 2013-2014 as compared to Rs. 734 lakhs spent in the financial year 2012-2013. The company strengthened its R&D by spending Rs. 907 lakhs on R&D in the financial year 2013-2014 as against an amount of Rs. 1,013 lakhs spent in the previous financial year.

DIRECTORS

Mr.R.Sundararaman stepped down as Joint Managing Director on 01.04.2014. The Board places on record its appreciation for the services rendered by him during his tenure. Mr.R.W.Khanna''s nomination as director was withdrawn by Exim bank and he ceased to be Nominee Director with effect from 23.01.2014. In his place Exim Bank nominated Mr K.Ajit Kumar and he was appointed Nominee Director with effect from 23.01.2014. Subsequently Exim Bank withdrew his nomination too and he ceased to be Nominee Director with effect from 19.06.2014. The Board places on record its appreciation for the services rendered by Mr.R.W.Khanna and Mr.K.Ajit Kumar during their tenure as Directors. Mr. S.Muthukrishnan did not seek re-appointment at the previous Annual General Meeting.

The Board in its meeting held on 30th August 2014 appointed Mr.Ram Ramamurthy as Additional Director with immediate effect. His appointment will be confirmed at the ensuing Annual General Meeting of the company. Subject to the approval of the shareholders and Central Government, the Board also appointed Mr.Ram Ramamurthy as Whole time Director for a period of two years with effect from 4th September 2014. Apppropriate resolutions for his appointment and remuneration have been set out in the Notice convening the Annual General Meeting.

Mr.S. Natarajan retires by rotation and being eligible offers himself for reappointment. However in terms of Section 149 of the Companies Act 2013, Mr.S.Natarajan, Dr.V.Sumantran and Dr.M.S.Ananth are seeking appointment as Independent Directors for a consecutive term of five years from the conclusion of this Annual General Meeting.

Brief resume/details of Directors who are to be appointed/reappointed as mentioned herein has been furnished along with the explanatory statement in the Notice convening the Annual General Meeting.

Padma Vibhushan Dr. V. Krishnamurthy continues to guide the management in all areas and the Board is grateful to him for his continued guidance and support.

AUDITORS

The statutory auditors of the company M/s. G Balu Associates, Chartered Accountants, Chennai, will retire at the conclusion of the ensuing Annual General Meeting and being eligible offer themselves for reappointment. The necessary resolutions in this regard will be passed at the ensuing Annual General Meeting. The company has received a certificate from the auditors to the effect that their reappointment if made will be in accordance with the provisions of the Companies Act, 2013. The auditors have also confirmed that they hold a Peer Review Certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India. Mr. V. Kalyanaraman was appointed cost auditor of the company for the financial years 2013-2014 and 2014-2015. The cost audit report for the financial year 2013-2014 will be filed within the due date. The company has however come out of the purview of cost audit for the year 2014-2015.

AUDIT COMMITTEE

Dr.V.Sumantran was appointed member of the audit committee on 11.08.2014. Mr. S.Natarajan, Dr. M.S. Ananth and Mr. Jayakar Krishnamurthy continue to be the other members of the Audit Committee. Mr. S.Natarajan continues as Chairman of the Audit committee. The committee met five times during the year.

SUBSIDIARY COMPANIES

The company has two wholly owned subsidiaries.

Ucal Polymer Industries Limited (UPIL) - UPIL continues to perform well and support the company by expanding its scope of supply of plastic and rubber components to the company. The turnover for the financial year 2013-2014 was Rs. 2,598 lakhs compared to that of Rs. 2,357 lakhs in the financial year 2012-2013. The net profit after tax was higher at Rs. 248 lakhs in the financial year 2013-2014 thereby recording an increase of 9% as against Rs. 228 lakhs in the financial year 2012-2013. This has been achieved mainly due to the introduction of new products and improved efficiency of operations. A dividend of 20% has been declared by UPIL. UPIL''s objective of expanding its customer profile beyond UCAL Fuel Systems Limited (UFSL) is proceeding at a rather slow pace but its attempts to diversify its product portfolio has succeeded to a large extent in the financial year 2013-14.

Amtec Precision Products Inc, USA (Amtec) - The turnover of Amtec was Rs. 17,561 lakhs during the financial year 2013-2014 up from Rs. 14,832 lakhs in the financial year 2012-2013 thereby recording an increase of 18% in rupee terms. In US dollar terms, the turnover was $ 37.51 million during financial year 2013-2014 compared to $ 29.01 million in the financial year 2012-2013 showing an increase of 9%. Amtec has earned a cash profit of Rs. 400 lakhs during the financial year 2013-2014. The company''s growth has been reasonable considering the fact that the global auto industry had not really picked up in 2013-2014. Amtec''s efforts to gain entry into original equipment manufacturers and Tier 1 suppliers by obtaining minority certification did not materialize to the extent expected in the financial year 2013-2014. This is in spite of the fact that Amtec enjoys a high credibility amongst its customers. Capacity utilization continues to be low and in addition Amtec has not been able to take advantage of low cost sourcing from India. The employee costs continues to be high and an increase in the customer portfolio seems to be the only solution to increase profitability.

CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements for the year ended 31st March 2014 of the company and its subsidiaries together with the auditor''s report thereon is enclosed. The statement pursuant to Section 212 of the Companies Act, 1956 relating to the subsidiary companies forms a part of the accounts. A summary of the key financials of the company''s subsidiaries is also included in the Annual Report.

The consolidated results of the company and its subsidiaries show that a net profit after tax of Rs. 685 lakhs has been achieved during the financial year 2013-2014 as against that of Rs. 598 lakhs in the financial year 2012-2013. Efforts are on to improve the overall performance of the company and its subsidiaries in all respects.

The Ministry of Corporate Affairs vide its General Circular No. 2/2011 dated February 8, 2011 has granted a general exemption subject to certain conditions to holding companies from complying with the provisions of Section 212(1) of the Companies Act, 1956 which requires the attaching of the balance sheet, profit and loss statement and other documents of its subsidiary companies to its Annual Report. The Board in its meeting held on 30th August 2014 passed the necessary resolution for complying with all the conditions regarding the circulation of the annual report of the company without attaching all the documents of the subsidiary companies referred to in Section 212(1) of the Companies Act, 1956. Accordingly, the said documents are not being included in this Annual Report. The annual accounts, reports and other documents of the subsidiary companies will be available for inspection during business hours, by any shareholder of the company at the registered office of the company and also at the registered office of the concerned subsidiary. The annual accounts, reports and other documents of the subsidiary companies will be despatched to the shareholders upon receipt of a request from them.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirements of Section 217(2AA) of the Companies Act, 1956 , the Directors confirm that,

(a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(b) Such accounting policies have been selected and applied consistently and such judgments and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year 31st March 2014 and of the profit of the company for the year ended 31st March 2014;

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

(d) The annual accounts have been prepared on a "going concern" basis.

FIXED DEPOSITS

The company has not accepted any fixed deposits from the public during the financial year 2013-2014 and there is no outstanding fixed deposit as on date.

PERSONNEL

Particulars of employees as required under sub-section (2A) of Section 217 of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 form a part of this report. In terms of section 219(1)(b)(iv) of the Companies Act 1956, the Annual Report and accounts are being sent to the shareholders of the company excluding the statement of particulars of employees under section 217(2A) of the Companies Act 1956. The statement will be available for inspection by the shareholders at the registered office of the company during business hours. Any shareholder interested in obtaining such statement may write to the Company Secretary at the registered office of the company.

ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE

Information 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, on energy conservation, technology absorption, foreign exchange earnings and outgo, is given in Annexure-A and forms an integral part of this report.

CORPORATE GOVERNANCE

The Company adheres to all the requirements of the code of corporate governance as stipulated in clause 49 of the listing agreement with the stock exchanges as well as to the standards set by the Securities and Exchange Board of India. A report on corporate governance along with certification of the chairman and managing director and the chief financial officer is attached in Annexure-B. A certificate from the auditors of the company regarding compliance of the conditions of corporate governance as stipulated by clause 49 of the listing agreement is attached in Annexure-C. The Management Discussion and Analysis Report is attached in Annexure-D.

ACKNOWLEDGEMENT

The Board acknowledges with gratitude the support of its employees, customers and bankers, the cooperation of its vendors and suppliers and the assistance of governmental agencies. The Board is particularly grateful to the shareholders for continuing to repose their confidence in the company.

For and on behalf of the Board

Place : Chennai JAYAKAR KRISHNAMURTHY Date:30.08.2014 Chairman and Managing Director


Mar 31, 2013

The Directors hereby present the Twenty Seventh Annual Report together with the audited accounts of the company for the year ended 31st March 2013.

FINANCIAL HIGHLIGHTS

The performance of the company for the year ended 31st March 2013 is as follows:

(Rs.in lakhs)

For the year ended Particulars 31.03.2013 31.03.2012

Gross Revenue 57,084 57,905

Net Revenue (excluding Excise Duty) 50,435 52,502

Total Expenditure 43,756 44,139

Operating Income 6,679 8,363 Other Income 123 210

Profit before Interest, Tax & Depreciation 6,802 8,573

Interest 3,197 3,018

Deferred Revenue Expenses 417 417

Depreciation 1,925 2,144

Profit before Tax & Exceptional item 1,263 2,994

Tax Expense 305 726

Profit after Tax/Net Profit 958 2,268

Balance of profit brought forward from last year 8,316 7,476

Amount Available for Appropriations 9,274 9,744

Appropriations:

Transfer to General Reserve 200 400

Dividend 221 885

Tax on Dividend 38 143

Balance Carried to Balance Sheet 8,815 8,316



DIVIDEND

The Board recommends a dividend of 10% i.e. Rs. 1 per equity share, aggregating to Rs. 221 lakhs (exclusive of tax on dividend) for the financial year 2012-2013.

TRANSFER TO GENERAL RESERVE

A sum of Rs. 200 lakhs has been transferred to the general reserve of the company for the financial year 2012-2013.

PERFORMANCE

The turnover of the company decreased by 4% from Rs. 52,502 lakhs in the financial year 2011-2012 to Rs. 50,435 lakhs in the financial year 2012-2013. This was mainly due to the depressed demand in the auto sector and consequent low offtake by the customers. The Earnings before Interest, Tax and Depreciation (EBITDA) also decreased from Rs. 8,573 lakhs in the financial year 2011-2012 to Rs. 6,802 lakhs in the financial year 2012-2013. The decrease can be attributed to increase in the cost of inputs and the unceasing pressure from customers to reduce prices in spite of spiraling material, power, labour and interest costs. The unprecedented power cuts in Tamil Nadu had resulted in extensive use of diesel power to maintain production and this added to the manufacturing cost substantially thereby leading to decreased EBITDA. To overcome the huge power cost, the company has installed a dedicated feeder line and purchases power through the exchange.

In spite of considerable efforts the exports reduced to Rs. 2,589 lakhs during financial year 2012-2013 from Rs. 3,734 lakhs in the financial year 2011-2012. This decrease was due to the recessionary conditions in the international markets.

The spares sales of the company during the financial year 2012-2013 was Rs. 3,048 lakhs as against that ofRs. 2,652 lakhs in the financial year 2011-2012.

The Profit After Tax (PAT) for 2012-2013 was substantially less than that of the financial year 2011-2012 by 58%. The Company''s earning per share was Rs. 4.33 during the financial year 2012-2013.

Given that the situation in 2013-2014 is not likely to be any better as the economy has shown no signs of revival till now, the company has launched a massive program to cut costs, increase productivity and intensify marketing efforts. Efforts are also on to secure better prices from the customers for the existing products due to rising costs. With the commissioning of the Bawal plant there has been a rearrangement of production facilities between plants to minimize costs. The operations at Gurgaon stand shifted to Bawal. The operations of the Export Oriented Unit at Ambattur which was essentially catering to the requirements of Am tec has dried up and it is proposed to shift the machineries there to another export oriented unit at Maraimalai nagar. The rearrangement of facilities will help in streamlining production and lead to increased efficiency of operations. Efforts are on to streamline the supply chain and reduce/strengthen the subcontractors and vendors.

The reduced turnover resulted in a very cautious approach with regard to capital expenditure in 2012-2013. The company spent only Rs. 734 lakhs in capital investments in the financial year 2012-2013 as compared to Rs. 4,601 spent in the financial year 2011-2012. The company continued its emphasis on R&D and spentRs. 1,013 lakhs on R&D in the financial year 2012-2013.

DIRECTORS

In accordance with the Articles of Association of the company Mr.S.Muthukrishnan retires by rotation at the forthcoming Annual General Meeting. Mr. S. Muthukrishnan had informed the board of his intention not to seek reappointment at the ensuing Annual General Meeting due to health reasons. Consequently no resolution is placed for his reappointment in the current Annual General Meeting. Mr.S.Muthukrishnan is the founder director of UCAL Fuel Systems Limited. It was under his leadership that UCAL Fuel Systems Limited developed into a world class supplier of auto components. The foundations laid by him have sustained the company in the most difficult times. The Board is grateful to Mr.S. Muthukrishnan for his leadership and guidance through the years.

Dr.V.Sumantran also retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for reappointment. Brief resume/details of Dr.V.Sumantran who is to be reappointed as mentioned herein has been furnished in the Notice convening the Annual General Meeting.

The Board is grateful to Padma Vibhushan Dr. V. Krishnamurthy who spends a considerable portion of his time with the company, guiding it in all areas.

AUDITORS

The statutory auditors of the company M/s. G Balu Associates, Chartered Accountants, Chennai, will retire at the conclusion of the ensuing Annual General Meeting and being eligible offer themselves for reappointment. The necessary resolutions in this regard will be passed at the ensuing Annual General Meeting. The company has received a certificate from the auditors to the effect that their reappointment if made will be in accordance with the provisions of Section 224( IB) of the Companies Act, 1956. The auditors have also confirmed that they hold a Peer Review Certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India. Mr. V. Kalyanaraman was appointed as cost auditor for financial year 2012-2013. The company will be filing the cost audit report for the year ended 31st March 2013 before the due date of 30th September 2013. Based on the recommendations of audit committee the Board has reappointed Mr. V. Kalyanaraman as cost auditor of the company for the financial years 2013-2014 and 2014-2015.

AUDIT COMMITTEE

Mr. S.Natarajan, Dr. M.S. Ananth and Mr. Jayakar Krishnamurthy continue to be the members of the Audit Committee. Mr. S.Natarajan continues as Chairman of the Audit committee. The committee met 4 times during the year.

SUBSIDIARY COMPANIES

The company has two wholly owned subsidiaries.

Ucal Polymer Industries Limited (UPIL) — UPIL continues to be a steady supplier to the company of plastic and rubber components. The turnover for the financial year 2012-2013 was Rs. 2,357 lakhs compared to that of Rs. 2,347 lakhs in the financial year 2011-2012. The net profit after tax was higher at Rs. 228 lakhs in the financial year 2012-2013 thereby recording an increase of 44% as against Rs. 159 lakhs in the financial year 2011-2012. This has been achieved mainly due to the rationalization of operations and vendors. A dividend of 10% has been declared by UPIL. The dividend remains modest as the company is planning to invest in revamping its facilities in the current year. One main concern is to expand the customer profile beyond UCAL Fuel Systems Limited and efforts are on in this direction. The company is also attempting to diversify its product portfolio to emerge as one of the leading suppliers of sophisticated and precision products of rubber and plastic.

Amtec Precision Products Inc, USA (Amtec) — The turnover of Amtec was Rs. 14,832 lakhs during the financial year 2012-13 down from Rs. 15,716 lakhs in the financial year 2011-2012 thereby recording a decrease of 6%. Amtec has earned a cash profit of Rs. 175 lakhs during the financial year 2012-2013. The company has not shown the desired growth due to the stagnating US economy. The molded product division was shifted nearer to the precision product division during the year. This has led to increased supervision and reduced costs. During the year Amtec obtained a minority certification in US which opens new possibilities of securing orders. The minority certification will immensely help Amtec to gain entry into original equipment manufacturers and Tier 1 suppliers as there is a mandate for these companies to award a certain percentage of their business to minority suppliers. Also with the US economy picking up there is every possibility that Amtec will post better results in 2013-2014. Rising employee costs is also a concern at Amtec which will get evened out only if the customer portfolio increases.

CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements for the year ended 31st March 2013 of the company and its subsidiaries together with the auditor''s report thereon is enclosed. The statement pursuant to Section 212 of the Companies Act, 1956 relating to the subsidiary companies forms a part of the accounts. A summary of the key financials of the company''s subsidiaries is also included in the Annual Report.

The consolidated results of the company and its subsidiaries show that a net profit after tax ofRs. 598 lakhs has been achieved during the financial year 2012-2013 as against that ofRs. 2,392 lakhs in the financial year 2011-2012. The economic recession was felt both in the domestic operations and in Amtec. The expected increase in customer offtake did not materialize and there was a time lag in cutting down costs corresponding to the customer off take which has led to reduced profits. This situation of low demand is being used by the company and Amtec to streamline their operations and costs and diversify their product mix.

The Ministry of Corporate Affairs vide its General Circular No. 2/2011 dated February 8,2011 has granted a general exemption subject to certain conditions to holding companies from complying with the provisions of Section 212( 1) of the Act which requires the attaching of the balance sheet, profit and loss statement and other documents of its subsidiary companies to its Annual Report. The Board in its meeting held on 2nd September 2013 passed the necessary resolution for complying with all the conditions regarding the circulation of the Annual Report of the company without attaching all the documents of the subsidiary companies referred to in Section 212(1) of the Act. Accordingly, the said documents are not being included in this Annual Report. The annual accounts, reports and other documents of the subsidiary companies will be available for inspection during business hours, by any shareholder of the company at the registered office of the company and also at the registered office of the concerned subsidiary. The annual accounts, reports and other documents of the subsidiary companies will be despatched to the shareholders upon receipt of a request from them.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956, the Directors confirm that,

(a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(b) Such accounting policies have been selected and applied consistently and such judgments and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year 31st March 2013 and of the profit of the company for the year ended 31st March 2013;

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

(d) The annual accounts have been prepared on a "going concern" basis.

FIXED DEPOSITS

The company has not accepted any fixed deposits from the public during the financial year 2012-2013 and there is no outstanding fixed deposit as on date.

PERSONNEL

Particulars of employees as required under sub-section (2A) of Section 217 of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 form a part of this report. In terms of section 219(l)(b)(iv) of the Companies Act 1956, the Annual Report and accounts are being sent to the shareholders of the company excluding the statement of particulars of employees under section 217(2A) of the Companies Act 1956. The statement will be available for inspection by the shareholders at the registered office of the company during business hours. Any shareholder interested in obtaining such statement may write to the Company Secretary at the registered office of the company.

ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE

Information 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, on energy conservation, technology absorption, foreign exchange earnings and outgo, is given in Annexure-A and forms an integral part of this report.

CORPORATE GOVERNANCE

The Company adheres to all the requirements of the code of corporate governance as stipulated in clause 49 of the listing agreement with the stock exchanges as well as to the standards set by the Securities and Exchange Board of India. A report on corporate governance along with certification of the chairman and managing director and the chief financial officer is attached in Annexure-B. A certificate from the auditors of the company regarding compliance of the conditions of corporate governance as stipulated by clause 49 of the listing agreement is attached in Annexure-C. The Management Discussion and Analysis Report is attached in Annexure-D.

ACKNOWLEDGEMENT

The Board acknowledges with gratitude the support, cooperation and assistance of all its stakeholders: - the customers, the bankers, the suppliers and vendors, the governmental agencies, the employees and more importantly the shareholders.

For and on behalf of the Board

Place : Chennai JAYAKAR KRISHNAMURTHY

Date : 02.09.2013 Chairman and Managing Director


Mar 31, 2012

The Directors have pleasure in presenting the Twenty Sixth Annual Report together with the audited accounts of the company for the year ended 31st March 2012.

FINANCIAL HIGHLIGHTS

The performance of the company for the year ended 31st March 2012 is as follows:

(Rs. in lakhs)

For the year ended Particulars 31.03.2012 31.03.2011 % Change

Gross Revenue 57,905 52,600 10

Net Revenue (excluding Excise Duty) 52,502 48,154 9

Total Expenditure 44,139 40,069 10

Operating Income 8,363 8,085 3

Other Income 210 85 147

Profit before Interest, Tax & Depreciation 8,573 8,170 5

Interest 3,018 2,725 11

Deferred Revenue Expenses 417 417 -

Depreciation 2,144 2,357 (9)

Profit before Tax & Exceptional item 2,994 2,671 12

Tax Expense 726 450 -

Profit after Tax/Net Profit 2,268 2,221 2

Balance of profit brought forward from last year 7,476 6,698 12

Amount Available for Appropriations 9,744 8,919 -

Appropriations:

Transfer to General Reserve 400 415 (4)

Dividend 885 885 -

Tax on Dividend 143 143 -

Balance Carried to Balance Sheet 8,316 7,476 -

DIVIDEND

The Board is pleased to recommend a dividend of 40% i.e. Rs.4 per equity share, aggregating to Rs. 885 lakhs (exclusive of tax on dividend) for the financial year ended 2011-2012.

TRANSFER TO GENERAL RESERVE

A sum of Rs.400 lakhs has been transferred to the general reserve of the company for the financial year 2011-2012.

PERFORMANCE

The turnover of the company during the financial year 2011-2012 increased to Rs.52,502 lakhs from Rs.48,154 lakhs in the previous financial year thereby recording an increase of 9%. The Earnings before Interest, Tax and Depreciation (EBITDA) increased by 5% to touch a level of Rs.8,573 lakhs from that of Rs.8,170 lakhs of the previous financial year. The increase in EBITDA has been much lower than expected due to various reasons like increased input cost especially that of steel and aluminum, inability to pass the increased cost to the customer, increased labour cost due to attrition, increased power cost and increased finance cost due to enhancement of interest rates and availment of further borrowings to meet the capital expenditure. The company's earning per share was Rs. 10.26 during the financial year 2011-2012. The exports reduced to Rs.3,734 lakhs during financial year 2011-2012 from Rs.5,189 lakhs in the previous financial year. This decrease was due to the reduced offtake by the customer. After market sales of the company during the financial year 2011-2012 was Rs. 1,091 lakhs as against that of Rs. 1,103 lakhs in the previous year. The company has despite certain adverse factors been able to maintain the Profit after Tax (PAT) at the same level as that of the previous financial year mainly because of its efforts at improving operational efficiency. In 2012-2013 further improvements are being attempted to increasee EBITDA through reduced levels of inventory, rationalization of vendors and continuous value engineering of the products. All leading automobile manufacturers have either set up a base in India or expanded their existing operations in India in the recent years in spite of a general slowdown and the company hopes to take advantage of this development in the future years.

PROJECTS

The company has invested Rs 4,601 lakhs in capital expenditure during the financial year 2011-2012 as compared to that of Rs 4,216 lakhs during the financial year 2010-2011. The manufacturing facility at Bawal is almost complete and most of the operations at the Gurgaon facility have been shifted to Bawal, Haryana. It is proposed to make Bawal, the company's headquarters in North India. The company has introduced fully automated manufacturing lines at Bawal for the very first time and machinery and equipment are in the process of being procured for which substantial capital expenditure is to be incurred in the current financial year 2012-2013. The first phase of construction is also complete at the facility in Mahindra City, Chengalpattu and operations have commenced on a small scale. The company is in the process of securing export orders .

DIRECTORS

Mr. P.P.R. Rao completed his term of three years as Executive Director on 25.9.2011 and ceased to be a director from that day onwards. The Board wishes to place on record its appreciation and gratitude for the excellent services rendered by Mr. P.P.R. Rao during his tenure.

In accordance with the Articles of Association of the company, Mr.S.Natarajan and Dr.M.S.Ananth, retire by rotation at the ensuing Annual General Meeting and being eligible offer themselves for reappointment. Brief Resume/details of the directors who are to be reappointed as mentioned herein have been furnished along with the explanatory statement in the Notice convening the Annual General Meeting.

Padma Vibhushan Dr. V. Krishnamurthy continues to guide the Board in all major policy decisions and the Board is grateful to him for his support.

AUDITORS

M/s. G Balu Associates, Chartered Accountants, Chennai, Auditors of the company will retire at the conclusion of the ensuing Annual General Meeting and being eligible offer themselves for reappointment. The company has received a certificate from the auditors to the effect that their reappointment if made will be in accordance with the provisions of Section 224( 1B) of the Companies Act 1956. The auditors have also confirmed that they hold a Peer Review Certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India. Mr. V. Kalyanaraman has been appointed as cost auditor of the company for the financial year 2012-2013.

CHIEF FINANCIAL OFFICER

Mr. Jayakar Krishnamurthy relinquished his additional portfolio as Chief Financial Officer of the company with the appointment of Mr.N. Gnanasambandan, Vice President - Finance, as the Chief Financial Officer of the company with effect from 8th May 2012.

AUDIT COMMITTEE

Mr. S.Natarajan, Dr. M.S. Ananth and Mr. Jayakar Krishnamurthy continue to be the members of the Audit Committee. Mr. S.Natarajan continues as Chairman of the Audit committee.

SUBSIDIARY COMPANIES

The company has two wholly owned subsidiaries.

Ucal Polymer Industries Limited (UPIL) — The operations of UPIL continue to be steady. The turnover for the financial year 2011-2012 was Rs.2,347 lakhs up by 34% compared to that of Rs.1,750 lakhs of the previous financial year. The net profit after tax was higher at Rs. 159 lakhs recording a growth of 81% as against Rs.88 lakhs of the previous financial year. A dividend of 10% has been declared by UPIL. UPIL is actively working to enhance its customer base and go beyond UCAL Fuel Systems Limited.

Amtec Precision Products Inc, USA (Amtec) — The turnover of the company was Rs. 15,716 lakhs during the financial year 2011-2012 up from Rs.13,265 lakhs of the previous financial year thereby recording an increase of 18%. Amtec has earned a cash profit of Rs. 684 lakhs during the current financial year.

CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements for the year ended 31st March 2012 of the company and its subsidiaries together with the auditor's report thereon is enclosed. The statement pursuant to Section 212 of the Companies Act, 1956 relating to the subsidiary companies forms a part of the accounts. A summary of the key Financials of the company's subsidiaries is also included in the Annual Report.

The consolidated results of the company and its subsidiaries show that a net profit after tax of Rs.2,392 lakhs has been achieved during the financial year 2011-2012 as against Rs. 1,926 lakhs in the previous financial year. This can be attributed to an improvement in the operations of both the subsidiaries.

The Ministry of Corporate Affairs vide its General Circular No. 2/2011 dated February 8, 2011 has granted a general exemption subject to certain conditions to holding companies from complying with the provisions of Section 212(1) of the Act which requires the attaching of the balance sheet, profit & loss account and other documents of its subsidiary companies to its Annual Report. The Board in its meeting held on 10th August 2012 passed the necessary resolution for complying with all the conditions regarding the circulation of the Annual Report of the company without attaching all the documents of the subsidiary companies referred to in Section 212(1) of the Act. Accordingly, the said documents are not being included in this Annual Report. The annual accounts, reports and other documents of the subsidiary companies will be available for inspection during business hours, by any shareholder of the company at the registered office of the company and also at the registered office of the concerned subsidiary. The annual accounts, reports and other documents of the subsidiary companies will be dispatched to the shareholders upon receipt of a request from them.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956, the Directors confirm that,

In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

Such accounting policies have been selected and applied consistently and such judgments and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year 31st March 2012 and of the profit of the company for the year ended 31st March 2012;

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

The annual accounts have been prepared on a "going concern" basis.

FIXED DEPOSITS

The company has not accepted any fixed deposits from the public during the financial year 2011-2012 and there is no outstanding fixed deposit as on date.

PERSONNEL

Particulars of employees as required under sub-section (2A) of Section 217 of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 form a part of this report. In terms of section 219(l)(b)(iv) of the Companies Act 1956, the Annual Report and accounts are being sent to the shareholders of the company excluding the statement of particulars of employees under section 217(2A) of the Companies Act 1956. The statement will be available for inspection by the shareholders at the registered office of the company during business hours. Any shareholder interested in obtaining such statement may write to the Company Secretary at the registered office of the company.

ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE

Information 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, on energy conservation, technology absorption, foreign exchange earnings and outgo, is given in Annexure-A and forms an integral part of this report.

CORPORATE GOVERNANCE

The Company adheres to all the requirements of the code of corporate governance as stipulated in Clause 49 of the listing agreement with the stock exchanges as well as to the standards set by the Securities and Exchange Board of India. A Report on corporate governance along with certification of the Chairman and Managing Director and the Chief Financial Officer is attached in Annexure-B. A certificate from the Auditors of the company regarding compliance of the conditions of corporate governance as stipulated by Clause 49 of the listing agreement is attached in Annexure-C. The Management Discussion & Analysis Report is attached in Annexure-D.

ACKNOWLEDGEMENT

The Board acknowledges with sincere gratitude the cooperation and assistance of all its stakeholders: - the customers, for their continued patronage, the bankers, for their understanding and timely financial support, the suppliers and vendors, for their continued association, the governmental agencies, for their assistance, the employees, for their commitment and more importantly the shareholders for continuously reposing their confidence in the company.

For and on behalf of the Board

Place : Chennai JAYAKAR KRISHNAMURTHY

Date : 30.08.2012 Chairman and Managing Director


Mar 31, 2011

Dear Members,

The Directors have pleasure in presenting the Twenty Fifth Annual Report together with the audited accounts of the company for the year ended 31st March 2011.

FINANCIAL HIGHLIGHTS

The performance of the company for the year ended 31st March 2011 is as follows:

(Rs. in lakhs)

For the year ended

Particulars 31.03.2011 31.03.2010 % Change

Gross Revenue 52,600 42,613 23

Net Revenue (excluding Excise Duty) 48,154 39,366 23

Total Expenditure 40,069 33,239 21

Operating Income 8,085 6,127 32

Other Income 85 93 (8)

Profit before Interest, Tax & Depreciation 8,170 6,220 31

Interest 2,725 2,852 (4)

Deferred Revenue Expenses 417 418 -

Depreciation 2,357 2,376 (1)

Profit before Tax & Exceptional item 2,671 574 365

Tax Expense 450 (189) -

Profit after Tax / Net Profit 2,221 763 191

Prior period Adjustments - (6) -

Balance of profit brought forward from last year 6,698 6,199 8

Amount Available for Appropriations 8,919 6,956 -

Appropriations:

Transfer to General Reserve 415 - -

Dividend 885 221 300

Tax on Dividend 143 37 289

Balance Carried to Balance Sheet 7,476 6,698 -

DIVIDEND

The Board is pleased to recommend a dividend of 40% i.e. Rs.4 per equity share, aggregating to Rs.885 lakhs (exclusive of tax on dividend) for the financial year ended 2010-2011. This dividend recommended by the Board is the highest dividend payout by the company in absolute terms till date.

TRANSFER TO GENERAL RESERVE

A sum of Rs.415 lakhs has been transferred to the general reserve of the company for the financial year 2010-2011.

PERFORMANCE

The turnover of the company during the financial year 2010-2011 increased to Rs.48,154 lakhs from Rs.39,366 lakhs in the previous financial year thereby recording an increase of 23%. The EBITDA increased by 31% to touch a level of Rs.8,170 lakhs from that of Rs.6,220 lakhs of the previous financial year. The increased offtake from various customers, greater controls established in the areas of capital expenditure, borrowings and other revenue expenditure coupled with better capacity utilization and increased productivity have contributed to the increased EBITDA. Due to better working capital management, the interest cost of the company came down by 4% inspite of increase in interest rates of banks. The company's earning per share was Rs. 10.04 during the financial year 2010-2011 which is higher by 137% compared to that of Rs.4.23 per share of the previous financial year. The exports also surged to Rs.5,189 lakhs during financial year 2010-2011 from Rs.3,799 lakhs in the previous financial year thereby recording a growth of 37%. After market sales of the company during the financial year 2010-2011 increased to Rs. 1,103 lakhs as against a sale of Rs.876 lakhs in the previous financial year thereby recording a growth of 26%.

NEW PROJECTS

The company has invested Rs.4,216 lakhs in capital expenditure during the financial year 2010-2011. A major portion of this capital expenditure has gone towards setting up of a manufacturing facility at Bawal, Haryana to meet the growing customer base in North India and towards establishing another manufacturing facility at Mahindra City, Chengalpattu, Tamil Nadu to consolidate all export operations in a special economic zone. The existing plants have also been strengthened and expanded to meet the growing needs of the customers particularly in the areas of carburettors, oil pumps and vacuum pumps. Commercial production commenced at the Bawal facility on 28th February 2011 and at the Mahindra City facility on 27th June 2011. Further investment will have to be incurred in 2011-2012 to complete these projects keeping in step with the market trends.

DIRECTORS

Subject to the approval of the shareholders and the approval of the Central Government, the Board in its meeting held on 27th August 2011 reappointed Mr.Jayakar Krishnamurthy who is also Chairman and Chief Financial Officer as Managing Director of the company for a further period of five years with effect from 1st September 2011. Appropriate resolution for his reappointment and remuneration has been set out in the Notice convening the Annual General Meeting.

Mr. RP.R. Rao, Executive Director, is completing his term of three years on 25th September 2011 and he will cease to be a Director from that day.

The Board in its meeting held on 27th August 2011 appointed Mr. R. Sundararaman as Additional Director. As per the provisions of the Companies Act, 1956 his appointment will be confirmed at the ensuing Annual General Meeting of the company. Subject to the approval of the shareholders and Central Government, the Board also appointed Mr. R. Sundararaman as Joint Managing Director of the company for a period of 3 years with effect from 8th September 2011. Appropriate resolutions for his appointment and remuneration have been set out in the Notice convening the Annual General Meeting.

EXIM Bank nominated Mr. R.W. Khanna as a Director on the Board of the company in place of Mr. K.Muthukumaran. The Board co-opted him as Nominee Director on 30th June 2011. The Board wishes to place on record its appreciation and gratitude for the excellent services rendered by Mr.K.Muthukumaran during his tenure as Director.

In accordance with the Articles of Association of the company, Mr. S.Muthukrishnan and Dr. V. Sumantran, retire by rotation at the ensuing Annual General Meeting and being eligible offer themselves for reappointment. Brief Resume/ details of the directors who are to be appointed and reappointed as mentioned herein have been furnished along with the explanatory statement in the Notice convening the Annual General Meeting.

The Board expresses its sincere gratitude to Padma Vibhushan Dr. V. Krishnamurthy for his guidance in all spheres of the business especially in major policy decisions.

AUDITORS

M/s. G Balu Associates, Chartered Accountants, Chennai, Auditors of the company will retire at the conclusion of the ensuing Annual General Meeting and being eligible offer themselves for reappointment. The company has received a certificate from the auditors to the effect that their reappointment if made will be in accordance with the provisions of Section 224(1B) of the Companies Act 1956. The auditors have also confirmed that they hold a Peer Review Certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India.

AUDIT COMMITTEE

Mr. S.Natarajan, Dr. M.S. Ananth and Mr. K. Muthukumaran were members of the Audit Committee till 30th June 2011. The Audit Committee was reconstituted on 30th June 2011 to include Mr.Jayakar Krishnamurthy, Chairman and Managing Director & Chief Financial Officer as a member in place of Mr. K.Muthukumaran whose nomination was withdrawn by Exim Bank. Mr. S.Natarajan continues to be the Chairman of the Audit committee.

SUBSIDIARY COMPANIES

The company has two wholly owned subsidiaries.

UCAL Polymer Industries Limited(UPIL) — The operations of UPIL continue to be satisfactory. The turnover for the financial year 2010-2011 was Rs.1,750 lakhs up by 40% compared to that of Rs. 1,253 lakhs of the previous financial year.

The net profit after tax was higher at Rs.88 lakhs recording a growth of 46% as against Rs.60 lakhs of the previous financial year. A dividend of 10% has been declared by UPIL.

Amtec Precision Products Inc, USA(Amtec) — The turnover of the company was Rs. 13,265 lakhs during the financial year 2010-2011 up from Rs. 11,040 lakhs of the previous financial year thereby recording an increase of 20%. Amtec has for the first time earned a cash profit of Rs.226 lakhs during the current financial year.

CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements for the year ended 31st March 2011 of the company and its subsidiaries together with the auditor's report thereon is enclosed. The statement pursuant to Section 212 of the Companies Act, 1956 relating to subsidiary companies forms a part of the accounts. A summary of the key financials of the company's subsidiaries is also included in the Annual Report.

The consolidated results of the company and its subsidiaries show that a net profit after tax of Rs. 1,926 lakhs has been achieved during the financial year 2010-2011 as against a loss of Rs.2,376 lakhs in the previous financial year. This can be attributed to an improvement in the operations of AMTEC and greater controls established in the operations of UCAL Fuel Systems Limited.

The Ministry of Corporate Affairs vide its General Circular No 2/2011 dated February 8, 2011 has granted a general exemption subject to certain conditions to holding companies from complying with the provisions of Section 212(1) of the Art which requires the attaching of the balance sheet, profit & loss account and other documents of its subsidiary companies to its Annual Report. The Board in its meeting held on 27th May 2011 passed the necessary resolution for complying with all the conditions regarding the circulation of the Annual Report of the company without attaching all the documents of the subsidiary companies referred to in Section212(l) of the Act. Accordingly, the said documents are not being included in this Annual Report. The annual accounts, reports and other documents of the subsidiary companies will be available for inspection during business hours, by any shareholder of the company at the registered office of the company and also at the registered office of the concerned subsidiary. The annual accounts, reports and other documents of the subsidiary companies will be despatched to the shareholders upon receipt of a request from them.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956, the Directors confirm that, In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

Such accounting policies have been selected and applied consistently and such judgments and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year 31SI March 2011 and of the profit of the company for the year ended 31st March 2011;

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

The annual accounts have been prepared on a "going concern" basis.

FIXED DEPOSITS

The company has not accepted any fixed deposits from the public during the financial year 2010-2011 and there is no outstanding fixed deposit as on date.

PERSONNEL

Particulars of employees as required under sub-section (2A) of Section 217 of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 form a part of this report. In terms of section 219(l)(b)(iv) of the Companies Art 1956, the Annual Report and accounts are being sent to the shareholders of the company excluding the statement of particulars of employees under section 217(2A) of the Companies Act 1956. Any shareholder interested in obtaining such statement may write to the Company Secretary at the registered office of the company.

ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE

Information 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, on energy conservation, technology absorption, foreign exchange earnings and outgo, is given in Annexure-A and forms an integral part of this report.

CORPORATE GOVERNANCE

The Company adheres to all the requirements of the code of corporate governance as stipulated in Clause 49 of the listing agreement with the stock exchanges as well as to the standards set by the Securities and Exchange Board of India. A Report on corporate governance along with certification of the Chairman and Managing Director & Chief Financial Officer is attached in Annexure-B. A certificate from the Auditors of the company regarding compliance of the conditions of corporate governance as stipulated by Clause 49 of the listing agreement is attached in Annexure-C. The Management Discussion & Analysis Report is attached in Annexure-D.

ACKNOWLEDGEMENT

The Board acknowledges with sincere gratitude the cooperation and assistance of all its stakeholders: - the customers, for their continued support, the bankers, for their understanding and timely financial support, the suppliers and vendors, for their continued association, the governmental agencies, for their assistance, the employees, for their commitment and more importantly the shareholders for continuously reposing their confidence in the company.

For and on behalf of the Board

Place : Chennai JAYAKAR KRISHNAMURTHY

Date : 27.08.2011 Chairman and Managing Director &

Chief Financial Officer


Mar 31, 2010

The Directors have pleasure in presenting the TWENTY FOURTH ANNUAL REPORT together with the Audited Accounts of the Company for the year ended 31st March 2010.

1. FINANCIAL HIGHLIGHTS

The performance of the Company for the year ended 31st March 2010 is presented below:

(Rs. in lakhs)

Particulars For the year ended % Change 31.03.2010 31.03.2009

Gross Revenue 42,613 34,216 25

Net Revenue (excluding Excise Duty) 39,366 30,026 31

Total Expenditure 33,239 25,626 30

Operating Income 6,127 4,400 39

Other Income 93 312 (70)

Profit before Interest, Tax & Depreciation 6,220 4,712 32

Interest 2,852 2,528 13

Deferred Revenue Expenses 418 156 168

Depreciation 2,376 1,848 29

Profit before Tax & Exceptional item 574 180 219

Tax Expense (189) 142 (233)

Profit after Tax / Net Profit 763 38 1,908

Prior period Adjustments (6) (34) (82)

Balance of profit brought forward from last year 6,199 5,920 5

Amount Available for Appropriations 6,956 5,924 17

Appropriations:

Transfer to General Reserve - - -

Dividend 221 - -

Tax on Dividend 37 - -

Balance Carried to Balance Sheet 6,698 5,924 11

Earnings per Share 4.23 0.27 1,467

2. DIVIDEND

The Board has recommended a dividend of 10% for the financial year 2009-10.

3. PERFORMANCE OF OPERATIONS

The sales turnover of the Company has increased during the year from Rs.300.26 Cr to Rs.393.66 Cr thus recording an overall growth of 31.1 % over the previous year. The turnover has increased as a result of robust revival of demand starting from the second quarter of the financial year 2009-10. As a result of increase in turnover coupled with control on costs, operating income has recorded a jump of 39%. Further, consequent to restructuring of loans, the interest cost has decreased from 8.42% of sales in 2008-09 to 7.24% of sales in 2009- 10. The depreciation is also higher due to additional investments in fixed assets necessitated by technological advancements. The net profit after tax for the year 2009-10 was higher at Rs.7.62 Cr as against Rs.0.38 Cr in 2008-09.

4. DIRECTORS

At the Board meeting held on 30th April 2010, Mr.S. Muthukrishnan stepped down as the Chairman of the Company and Mr.Jayakar Krishnamurthy, who was Vice Chairman and Managing Director assumed the Chairmanship of the Company. He was also appointed as Chief Financial Officer of the Company w.e.f. 30th April 2010. Mr. S. Muthukrishnan continues as a Director on the Board. The Board wishes to place on record its appreciation for the contribution made by Mr. S.Muthukrishnan during his tenure as Chairman of the Company.

As already reported in the last AGM, Mr.V.Narayanan and Mr.M.R.Sivaraman ceased to be Directors w.e.f. 29th September 2009. EXIM Bank nominated Mr.K.Muthukumaran as a Director on the Board of the Company w.e.f. 9th September 2009 in place of Mr Mukul Sarkar. The Board wishes to place on record its appreciation for the excellent services rendered by the outgoing Directors during their tenure.

In accordance with the Articles of Association of the Company, Mr.S.Natarajan and Dr.M.S.Ananth, retire by rotation at the ensuing Annual General Meeting and are eligible for reappointment.

5. AUDITORS

M/s. G Balu Associates, Chartered Accounts, Auditors of the Company retire at the ensuing Annual General Meeting and are eligible for reappointment.

6. PREFERENTIAL ALLOTMENT

During the year, with the approval of the shareholders and Securities and Exchange Board of India (SEBI), the paid up capital of the Company was increased from Rs. 13,89,60,000 to Rs. 22,11,36,250 by allotment of 82,17,625 Equity shares of Rs.10/- each at a premium of Rs. 26.35 per share, on a Preferential basis to the Promoters / Persons acting in concert group.

7. MERGER

Merger of UCAL Machine Tools Limited with UCAL Fuel Systems Limited Consequent to the Honable High Court of Madras approving the merger of UCAL Machine Tools Limited (UMTL) with UCAL Fuel Systems Limited (UFSL) effective from the appointed date i.e., 1.4.2009, vide its order dated 22nd June 2010 (received on 1st July 2010), UMTL stands merged with UFSL. Accordingly, the financial results of UCAL Fuel Systems Limited for the financial year 2009-10 are financial results of the merged entity.

8. SUBSIDIARY COMPANIES

Consequent to the merger of UMTL with UFSL, the Company now has two wholly owned subsidiaries.

UCAL Polymer Industries Limited has been functioning profitably and has declared a dividend of 10% for the financial year 2009-10. The Company is actively working to expand its customer base beyond UFSL.

Financial year 2009-10 has been a breakthrough year for Amtec Precision Products, Inc., USA. Amtec has avoided cash losses since October 2009 despite recession in the US economy. The infusion of funds into Amtec by the promoter / persons acting in concert group has greatly stabilized the operations of Amtec and has enabled it to sustain itself through the recession and achieve good results.

Statutory Requirements and Subsidiary Performance / Consolidated Financial Statements The statement pursuant to Section 212 of the Companies Act, 1956, relating to Subsidiary Companies is attached to the accounts.

The Company has received exemption from the Central Government under Section 212(8) of the Companies Act, 1956 with regard to attaching of the Balance Sheet, Profit and Loss Account and other documents of the subsidiaries for the year ended 31st March 2010. Accordingly the accounts of the subsidiaries have not been attached. These documents will be available for inspection by any member of the Company at the registered office and also at the registered office of the concerned subsidiary. The accounts of the subsidiary companies and detailed information will be made available to the members upon receipt of request from them. The summary of the key financials of the Companys subsidiaries is included in this Annual Report.

9. FIXED DEPOSITS

The Company has not accepted public deposits during the year. Old deposits aggregating ‘ 64,000 remained outstanding as on 31st March 2010 as the matter is subjudice.

10. CORPORATE GOVERNANCE

The Company has complied with the requirements of the Code of Corporate Governance as stipulated by clause 49 of the listing agreement with the stock exchanges. A Report on Corporate Governance along with Certification by the Chairman & Managing Director and Chief Financial Officer is attached in Annexure-C.

A Certificate from the Auditors of the Company regarding compliance of the conditions of Corporate Governance as stipulated by clause 49 of the listing agreement is attached in Annexure-D.

The Management Discussion and Analysis Report is attached in Annexure-E.

11. PERSONNEL

Information in accordance with sub-section (2A) of Section 217 of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, is furnished in Annexure-B.

12. DIRECTORS RESPONSIBILITY STATEMENT

The Directors confirm that,

a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b) Such accounting policies have been selected and applied consistently and the judgments and estimates are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year 31st March 2010 profit of the Company for the year ended 31st March 2010;

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

d) The annual accounts have been prepared on a going concern basis.

13 . ENERGY, TECHNOLOGY & FOREIGN EXCHANGE

Information on energy conservation, technology absorption, foreign exchange earnings and outgo are given in Annexure-A.

14. ACKNOWLEDGEMENT

The Board places on record its appreciation of all its stakeholders: - the Customers for their continued support, the Bankers for their understanding and timely financial support, the Suppliers and Vendors for their continued association, the Governmental Agencies for their assistance, the Employees for their commitment and more importantly the Shareholders for continuously reposing their confidence on the Company.

Annexure-a to the report of the directors

a. energy conservation measures undertaken and consequent savings

1. Installation of timer control in coolant pump and hydraulic pump

2. Implementation of Impregnation plant vacuum pump cooling water recycling

3. Auto off Controller provided for 25 HP Compressor thereby reducing the idle working of loads

4. Increase in the efficiency of the compressor by reduction of heat from the compressor room

b. energy conservation proposal

1. Introduction of energy efficient LED lamps in street lights and Compact Florescent Lamp (CFL) in Machine Shop

2. Introduction of Natural lighting pipe

3. Solid State Relay (SSR) to be tried out in the PDC furnaces to control the temperature optimally

4. Transvector nozzle to be tried out in the air jet and washing machine

5. Automatic On/Off control to be provided for Mercury vapour lamp in PDC

6. Providing of the auto cut off controller for hydraulic pump and cooling tower fan motor

7. Replacing of the mono block water pump with submersible pump

8. Conversion of the pneumatic cylinder to Hydro pneumatic cylinder

9. Optimizing the Heater Capacity in solenoid oven by changing flat type heater into U-type heater

10. Introduction of lighting energy saver for lighting load

11. Introduction of auto valve for incoming air line of the machine (Valve is Open when the Machine is Switch ON)

c. research and development

Specific areas in which r&d is carried out by the Company:

- Development of Carburetors and Secondary Air Valves for 2-Wheelers & 3-Wheelers

- Development of Oil Pump for Passenger Cars & Commercial Vehicles

- Development of Vacuum Pump for Diesel engine Passenger Cars

- Development of Water Pump for Petrol & Diesel engine applications

- Electronic Engine Management System for 2-Wheelers

- Electronic Exhaust Gast Recirculation (EGR) controller

- Computer Aided Engineering (CAE) focusing on developing the required theoretical, design, technologies and simulation capability as related to our product range and future technologies

- Focused Value Engineering and Value Analysis activities for standardization and cost reduction

Benefits derived out of R&D

- Capability to address market needs through Indigenous product development by way of faster turn around of products and its variants, support to the customer

> Offerings based on the current range of products to existing and new customers

> Development of new products to existing / new customers

- Development of Indigenous technology and building a technology repository

- Building knowledge capital within the organization

> We were successful in demonstrating our CAE capability for Oil Pump to General Motors

- Reduction in cost through Value Engineering / value Analysis

- Import substitution / alternate sourcing of critical parts completed as per plan

- Design guidelines have been documented for all our products to help the design activities

Future Plans

Developing new technologies which can be used for developing products for our existing customers as well as new customers such as:

- Electronic Throttle Valve for Gasoline engines

- 4 Stroke Port Injection system for 2-Wheelers

- Water Pump

- Develop a library of Vacuum Pump with higher capacity to meet future needs.

- Variable Flow Oil Pump

Expenditure on R&D

Particulars Rs. in Lakhs

Capital 20.69

Revenue 885.31

Total 906.00

% of turnover 2.31%

D. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

We have reached a technologically self reliant stage, as evidenced by the following:

- We are able to design products to the changing needs of the customers through our in-house R&D efforts. Example: 32mm throttle bore size carburetor for Pulsar 220 Motorcycle, so far largest in our range.

- Identification of suitable substitutes for materials and processes to meet ELV (End of Life Vehicle) requirement and to use Ethanol blended petrol as required by some of the customers / applications.

- Re-designing our products to meet the requirements of the customers. Example: Re-designing the Vacuum Pump to meet the reverse rotation requirement.

- Innovative features have been incorporated in the carburetor - Throttle Position Sensor, Solenoid operated starter for cold starting.

- We are able to develop products to meet the customer targets in terms of fuel economy, emission levels. Example: New models and the variants launched by our customers with our carburetors are meeting the Emission norms, effective from April 2010.

Benefits derived as a result of the above efforts

- The Company has been able to develop new products meeting the customer timelines and price targets.

- The Company has been able to expand into new domains like Pumps - Oil Pump, Vacuum Pump & Water Pump.

- The Company has been able to approach new customers with our offerings by demonstrating our design capabilities.

- Our R&D center continues to enjoy the recognition of Department of Scientific & Industrial Research (DSIR).

- Our R&D engineers have presented 6 papers in National and International conferences.

E. FOREIGN EXCHANGE EARNINGS AND OUTGO

The earnings of foreign exchange were on account of export of Carburetors, MPFI parts and Secondary Air Valves during the year. The foreign exchange outgo was mainly on account of components, capital goods, foreign travel, royalty and technical know-how fee. During the financial year ended 31st March 2010, the total FE Outgo was Rs. 5,581.37 Lakhs while the FE earned was Rs. 1,973.44 Lakhs resulting in a net FE outgo of Rs. 3,607.93 Lakhs.

For and on behalf of the Board

Place : Chennai

Date : 31.08.2010 JAYAKAR KRISHNAMURTHY

CHAIRMAN & MANAGING DIRECTOR AND CHIEF FINANCIAL OFFICER

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