Directors Report of Shrenuj & Company Ltd.

Mar 31, 2013

Dear Members,

The Directors have pleasure in presenting the 31st Annual Report of your Company and the Audited Statement of Accounts for the year ended 31st March, 2013.

FINANCIAL RESULTS:

The performance of the Company for the financial year ended 31st March, 2013 is summarized below:

(Rs. in Million)

Particulars Standalone Consolidated 2012-13 2011-12 2012-13 2011-12

Net Sales/Income from Operations 22,392.98 20,241.65 38,621.47 31,505.85

Other income 16.08 8.62 158.53 91.38

total Revenue Generated 22,409.06 20,250.27 38,780.00 31,597.23

Profit before Finance cost 1,410.13 1,336.23 2,481.61 2,006.86

Less: Finance cost 1,012.65 876.68 1,557.41 1,171.66

Profit before tax 397.48 459.55 924.20 835.20

Less: Tax 92.50 116.00 172.80 148.99

Net Profit before minority interest 304.98 343.55 751.40 686.21

Add/(Less): Share of minority/associates - - (17.64) 17.19

Net profit after tax 304.98 343.55 733.76 703.40

Add: Balance b/f from previous year 1,085.78 835.09 2,025.58 1,415.04

Profit available for appropriation: 1,390.76 1,178.64 2,759.34 2,118.44

APPROPRIATIONS

General Reserve 32.00 35.00 32.00 35.00

Proposed Dividend 57.87 49.78 57.87 49.78

Tax on Proposed Dividend 9.84 8.08 9.84 8.08

Surplus in Profit & Loss Account 1,291.05 1,085.78 2,659.63 2,025.58

Total: 1,390.76 1,178.64 2,759.34 2,118.44

OPERATIONS:

With the recessionary trends setting in the global markets during the year under review, the management adopted a cautious approach for marketing its products. Nevertheless it was able to sustain sales at the last year''s levels. The Company''s operations are vertically integrated and its customer base is well spread across different geographical zones, thus minimizing risks. Your Company closed the year by starting ground work on the next phase of its expansion programme.

During the year 2012-13, revenues rose by 10.6% to Rs.22,393 million. EBIDTA at Rs.1,473 million was up by 5.3%. Net Profit was lower at Rs. 305 million (previous year Rs.344 million) mainly due to higher financing cost of Rs.1,013 million (previous year Rs.877 million).

Consolidated revenue for the year grew by 22.6% to Rs.38,621 million from Rs.31,506 million in 2011-12. Consolidated profit was Rs.734 million up by 4.3% from Rs.703 million.

The financial performance under prevailing market conditions was satisfactory. There has been a revival in the US market. With recent correction in gold prices and better availability of rough diamonds, the demand in emerging markets including India and China, is expected to grow at a rapid rate.

Our branded products are being well received by the customers. This segment has helped to improve margins as well as created brand equity for our value added products. Despite economic slowdown in some of the markets, sales of these products have remained robust. Groundwork has been laid for the next phase of expansion.

DIVIDEND:

Shrenuj has invested substantially in enhancing its manufacturing base globally as well as in India in the past few years. The group has adopted a high growth strategy and expects its revenues to increase significantly in the next three years. The Board of Directors has therefore recommended a lower dividend of 30% i.e. 60 paise per share on the expanded capital of Rs. 192,907,258/- (96,453,629 Equity Shares of Rs. 2/- each). The total outgo for the current year amounts to Rs. 67.71 million, as against Rs. 57.86 million in the previous year.

ECONOMIC SCENARIO & OUTLOOK:

The global economy experienced a slowdown especially in the developed economies, which had its impact on India as well. The Indian economy had to contend with high inflation in 2012-13 and increased lending rates. The tightening of the monetary policy and a depreciation of rupee further slowed the growth of the economy which affected all sectors including the diamond and jewellery industry. There are signs of revival in consumption and less volatility in prices which will help to improve margins.

Retail operations in India continue to grow as planned. "Diti" has grown to 175 PoS in 36 cities now. The Company is planning to increase this to 225 within this year. The response to our products has been very encouraging so far. The Company expects this segment to contribute more significantly in the coming years.

With the enlargement of our manufacturing facilities, the Company is well geared to meet the projected high growth in demand. The Company has successfully tested a new collection in the US market which is now being rolled out to over 800 stores. Its variants, using 10 hearts and 10 arrows diamonds, will be made available to consumers in other markets during the year.

EXPANSION CAPEX:

The Company has commissioned a new diamond cutting and polishing unit in Patna, Bihar on 16th of May, 2013. The unit, focusing on processing of smaller sized diamonds, will initially employ about 150 people in the pilot stage and 1,500 people when fully commissioned. The unit, when fully operational, will produce 300,000 pieces per month and will help the Company to meet its growing captive demand from jewellery production units for export markets. The new unit will supplement the diamond production from Shrenuj''s diamond polishing units in Mumbai, Surat, Johannesburg and Gaborone Botswana.

SHARE CAPITAL:

During the year the Company has issued 19,861,321 further shares on preferential basis to FII''s and Promoters under Chapter VII of the SEBI (ICDR) Regulation. The Company has also issued and allotted 182,713 equity shares of Rs. 2/- each to its employees on exercising stock options granted to them under the Employee Stock Option Scheme, 2006. With this Issued, Subscribed and Paid-up Share Capital of your Company has been augmented from Rs. 152.82 million to Rs. 192.91 million.

SUBSIDIARY COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS:

The Company has 8 subsidiary companies, 2 located in India and 6 outside India. It has 17 step-down overseas subsidiaries across the globe. Step down subsidiaries viz. Shrenuj Australia Pty Ltd. and Alija International Pty Ltd and associate companies having joint venture viz. SWA Trading Ltd. and Trapz LLC are in-active companies and therefore have initiated the process of winding up.

As required under the Listing Agreements with the Stock Exchanges a consolidated financial statement of the Company and all its subsidiaries is attached. The consolidated financial statement has been prepared in accordance with the Accounting Standards 21, 23 and 27 as notified by the Companies (Accounting Standards) Rules, 2006.

GENERAL EXEMPTION PROVIDED FROM NOT ATTACHING THE BALANCE SHEET OF SUBSIDIARY COMPANIES TO THE ANNUAL REPORT OF THE COMPANY U/S. 212(8) OF THE COMPANIES ACT, 1956:

The Government of India, Ministry of Corporate Affairs (MCA), New Delhi vide its Circular No.2/2011 dated 8th February, 2011 has granted general exemption to the Company from annexing to this report, the Annual Reports of the subsidiary companies. As per the directives issued under Section 212(8) of the Companies Act, 1956 the Company has fulfilled the conditions specified in the said circular.

Pursuant to the said circular from MCA, a gist of the financial performance of the subsidiary companies is disclosed elsewhere in the Annual Report. If any Member of the Company or any of its subsidiary companies so desires, the Company will make available copies of Annual Accounts of the subsidiary companies and related information. These documents will also be available for inspection during business hours at the Registered Office of the Company except Saturday, Sunday and Holidays.

CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO:

Information required under Section 217(1)(e) of the Companies Act, 1956 read with Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given in Annexure - I to this Report.

PARTICULARS OF EMPLOYEES:

As required under the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of employees are set out in the Annexure - II to this report.

GROUP FOR INTER SE TRANSFER OF SHARES:

Based on the information received from the Promoters and as required under Clause 10(1) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, persons constituting ''Group'' as defined in the Monopolies and Restrictive Trade Practices Act, 1969, for the purpose of Regulation 10 of the aforesaid SEBI Takeover Regulations comprise:

1. Shri Kirtilal K. Doshi including HuF

2. Shri Shreyas K. Doshi including HuF

3. Shri Anuj Kirtilal Doshi

4. Shri vishal Shreyas Doshi

5. Smt. Suman Kirtilal Doshi

6. Smt. Geeta Shreyas Doshi

7. Smt. Rachana vishal Doshi

8. Dr. Anjali Pradeep Mehta

9. Dr. Pradeep A. Mehta

10. Anuj Doshi Trust

11. Aman Doshi Trust

12. Shrenuj Investments & Finance Pvt. Ltd.

13. Prest Impex Private Limited

14. Kum. Aditi Shreyas Doshi

MANAGEMENT DISCUSSION AND ANALYSIS:

A detailed review of the operations, performance and future outlook of the Company and its business is given in the Management Discussion and Analysis, which forms part of the Annual Report as Annexure - III.

DIRECTORS:

Shri Minoo R. Shroff, Dr. Surendra A. Dave and Shri vishal S. Doshi, Directors of the Company will retire by rotation at the ensuing Annual General Meeting and being eligible have offered themselves for re-appointment.

The present term of office of Shri Shreyas K. Doshi, Chairman & Managing Director of the Company expires on 30th November, 2013. It is proposed to re-appoint him for a further period of five years with effect from 1st December, 2013 to 30th November, 2018.

Brief profiles of the Directors proposed to be re-appointed as required under clause 49 of the Listing Agreement are annexed to the Notice convening the Annual General Meeting forming part of the Annual Report.

FIXED DEPOSITS:

During the year under review the Company has accepted fixed deposits of Rs. 7 million from the public. The fixed deposits outstanding as on 31st March, 2013 were Rs. 23.50 million. As on 31st March, 2013, there were no unpaid / unclaimed matured public deposits.

HUMAN RESOURCE MANAGEMENT:

Shrenuj''s international distribution model complements its international manufacturing platform. Based on hub and satellite approach, its 20 offices cater to all corners of the world. The Company has entered into JVs in Israel, France, USA and Hong Kong, in addition to having its own offices worldwide. Shrenuj''s jewellery manufacturing operations are located in India and Botswana, in addition to dedicated outsourcing facilities in China. The product development teams of designers and merchandisers are spread across the globe to cater to national as well as international markets to quickly respond to the changes in fashion trends. Present strength of employees is 1,700 people in its worldwide operations.

INSURANCE:

Properties and assets of the Company are adequately insured.

DIRECTOR''S RESPONSIBILITY STATEMENT:

As required under Section 217 (2AA) of the Companies Act, 1956, your Directors confirm;

(i) that in the preparation of Annual Accounts for the year 2012-13, the applicable Accounting Standards, to the extent practicable, have been followed and that there are no material departures;

(ii) that the Directors have adopted such accounting policies and have applied them consistently and have made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year ended 31st March, 2013 and of the profit of the Company for the financial year;

(iii) that 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 have prepared annual accounts on a going concern basis.

CORPORATE GOVERNANCE:

The Company is committed to uphold the highest standards of Corporate Governance and adhere to the requirements set out by the Securities and Exchange Board of India. As required by Clause 49 VI of the Listing Agreement, a detailed report on Corporate Governance forms part of the Directors'' Report as Annexure - IV. The Auditors'' certificate on compliance with Corporate Governance requirements is attached to the Corporate Governance Report.

The Chairman & Managing Director''s declaration regarding compliance with the Business Conduct Guidelines (Code of Conduct) is also attached to the Corporate Governance Report as Annexure - 1.

GENERAL SHAREHOLDER INFORMATION:

General Shareholder Information is given in Annexure - V to this report.

EMPLOYEE STOCK OPTION SCHEME:

The Company had granted 1,565,763 stock options to its existing employees and employees of its subsidiary companies based in India and outside India (including Directors other than promoters) to subscribe to the equity shares of the Company, in accordance with the provisions of the Company''s Employee Stock Option Scheme - 2006.

The employees have been allotted 1,247,163 new equity shares on exercising stock options out of 1,565,763 stock options granted to them. During the year 2012-13, the options exercised aggregated to 182,713. During the year 2012-13, the Company received a sum of Rs. 3.84 million as exercise consideration (excluding tax), of which Rs. 0.37 million was towards Share Capital and Rs. 3.47 million towards Securities Premium.

During the year under review, 2,91,500 (Previous year 27,100) options lapsed. There were no options outstanding for exercise as on 31st March, 2013. Options granted to and exercised by Senior Managerial Personnel during the year were as under:

- Shri Shekhar K. Shah - 98,263

None of the employees received 5% or more of the total number of options granted during the year, nor were granted options equal to or exceeding 1% of the Issued Capital of the Company.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Internal Control System of the Company is commensurate with the size, scale and complexity of its operations. It is being constantly assessed and strengthened with new and revised standard operating procedures and robust internal and information Technology (IT) controls. The Company''s Internal Auditor objectively and independently tests the design and operating effectiveness of the internal control system to provide a credible assurance to the Board and the Audit Committee regarding the adequacy and effectiveness of the Internal control system. The scope and authority of the Internal Audit activity are well defined and approved by the Audit Committee. Internal Audit plays a key role by providing an assurance to the Board and value adding consultancy service to the business operations.

AUDITORS AND AUDITORS'' REPORT:

The Statutory Auditors of the Company, M/s. Rajendra & Co., Chartered Accountants, Mumbai, retire at the conclusion of the ensuing annual general meeting of the Company and have confirmed their willingness and eligibility for re-appointment and have also confirmed that their re-appointment, if made, will be within the limits prescribed under Section 224(1)(B) of the Companies Act, 1956.

The Board has duly reviewed the Statutory Auditors'' Report on the Accounts. The observations and comments appearing in the Auditors'' Report are self-explanatory and do not call for any further explanation/clarification by the Board under Section 217(3) of the Companies Act, 1956.

APPOINTMENT OF COST ACCOUNTANT UNDER RULE 5 OF THE COMPANIES (COST ACCOUNTING RECORDS) RULES, 2011:

M/s. ABK Associates., Cost Accountants, were appointed to submit compliance report alongwith the requisite annexure duly certified by them for the financial year commencing from 1st April, 2012 to 31st March, 2013 as required under rule 2 of the Companies (Cost Accounting Records) Rules, 2011 to the Central Government within the time prescribed under above referred rules. The Company has e-filed the compliance report for the financial year end 31st March, 2012 alongwith the requisite annexure in form No. A on MCA portal on 22nd December, 2012.

TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND (IEPF):

The Company sends reminder letters to all shareholders whose dividends are unclaimed so as to ensure that they receive their rightful dues. During the year, the Company has transferred a sum of Rs. 289,243/- to Investor Education & Protection Fund, the amount which was due and payable and remained unclaimed and unpaid for a period of seven years, as provided in Section 205C(2) of the Companies Act, 1956. The Company has so far transferred a total sum of Rs. 2,791,694.43 to the said Fund.

ACKNOWLEDGEMENTS:

Your Directors take this opportunity to thank the members, financial institutions, banks, foreign patrons, Diamond Trading Company Limited, London, Regulatory Authorities, Stock Exchanges and all stakeholders for their continued co-operation and support. The Directors would also like to place on record their sincere appreciation to all executives, officers and employees at all levels of the Company for their commitment and continued contribution to the growth of the Company''s business.

For and on behalf of the Board

Place: Mumbai SHREYAS K. DOSHI

Date: 23rd May, 2013. CHAIRMAN & MANAGING DIRECTOR

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Mar 31, 2012

The Directors have pleasure in presenting the 30th Annual Report of your Company and the Audited Statement of Accounts for the year ended 31st March, 2012.

FINANCIAL RESULTS:

The performance of the Company for the financial year ended 31st March, 2012 is summarized below:

(Rupees in Million)

Financial Year

2011-12 2010-11

Profit before interest and depreciation 1399.43 1159.32

Less: Finance Cost 876.68 675.61

Depreciation / Amortization 63.20 58.61

Profit before tax 459.55 425.10

Less: Provision for tax 114.60 118.40

Deferred Tax Liability 1.40 1.50

Profit after tax 343.55 305.20

Add : Balance Brought Forward from Previous year 835.09 618.04

Profit available for appropriation 1178.64 923.24

APPROPRIATIONS

General Reserve 35.00 35.00

Proposed Dividend 49.78 45.73

Tax on Proposed Dividend 8.08 7.42

Surplus in Profit & Loss Account 1085.78 835.09

1178.64 923.24

OPERATIONS:

The performance of the Company was commendable with 30% increase in sales revenue to Rs. 20,241.65 million (Rs. 15,542.10 million). Net profit registered a growth of 12.6% to Rs. 343.55 million (Rs. 305.20 million). The increase in revenue is a reflection of the Company's impetus to acquire greater market share during the economic downturns. With the gradual recovery in US and a few other major markets your company helped in achieving its revenue target for the year.

The Company has recorded satisfactory growth, looking to the depressing global economic scenario. US and European operations were affected by the subdued consumer sentiments. The strong management bandwidth, sustainable business strategy and ability to respond to the evolving market dynamics were responsible for the improved performance.

Revenues from retail and branded jewellery operations have recorded an impressive 40.78% growth in FY 2011-12, rising to Rs. 2,245.59 million (Rs. 1,595.10 million). Company's retail brand "Diti", continued to expand its footprint at a rapid rate, with 175 points of sale in 29 cities across India. International branded jewellery collections of Shrenuj were well received and also contributed to the improved operating margins.

The consolidated sales revenue rose by 28.25% to Rs. 31,505.85 million (Rs.24,565.15 million). Net profit registered a gain of 23.74% to Rs. 703.40 million (Rs. 568.45 million). EPS for the period (Basic & Diluted) was higher at Rs. 9.25 (Rs. 7.50) per share (face value of Rs.2/-).

The expansion of Company's diamond manufacturing bases in Botswana and South Africa during the past two years has helped to achieve these results, despite challenging market conditions and volatility in the rough diamond prices.

DIVIDEND:

The Board of Directors has recommended payment of a higher final dividend of 32.50% i.e. 65 paise per share on 76,592,308 Equity Shares of Rs. 21- each, for the year ended 31st March, 2012. The dividend will entail an outflow of Rs.57.86 million (including dividend tax of Rs. 8.08 million) on the paid up equity share capital of Rs.153.18 million. The payment of dividend is subject to the approval of the Members at the ensuing Annual General Meeting of the Company.

PROSPECTS:

Shrenuj's business is built on three core values: Heritage, Innovation and Passion. The Company's goal is to manufacture and market high quality diamond products that excite and attract consumers. Your Directors believe the best way of creating value is through a fully integrated business model, ensuring efficiency and better product control.

Your Company is committed to improving processes, continuously investing in the best technology and developing a highly skilled workforce. The Company distributes its loose polished diamonds and diamond jewellery products to all the major global consumer markets to create a global balance reducing its exposure to any one market, and retaining flexibility to capture opportunities as demand changes. The Company has a network of sales offices around the world. Each local office has an intimate knowledge of its market needs, and strives to offer the best possible service to its customers.

During the year your Company has commissioned a new diamond cutting and polishing unit in South Africa. The unit is equipped with state of the art technology to produce best in class diamonds. This new unit will augment the Company's manufacturing capacities in India and Botswana and help in servicing the growing needs of the Company's downstream marketing activities. The Company continues to focus on more value addition within its value chain in the coming years, with an expected share of about 50% revenue being generated by jewellery, franchising and retail segments by 2015.

A diamond ring named "Tsarevna Swan", which made it to the Guinness World Records as a ring studded with the most number of diamonds, exclusively supplied by your Company to Classic Jewelry House of Kiev, Ukraine. The ring is studded with a total of 2,525 diamonds in miniscule size with a total weight of 10.48 carats. It is a matter of great pride for the Company to get such a coveted international recognition.

The Company has completed market research for a niche diamond jewellery product in the US market. The results are very encouraging. The new product line is based on a very special cut, proven by leading gem-testing laboratories to be the most brilliant diamond in the world. The Company plans to launch this new brand in mid 2012 at about 250- 300 stores of a major jewellery chain store across US. These products will help to project Shrenuj as a market leader in this most discerning market.

SHARE CAPITAL:

During the year, Issued, Subscribed and Paid-up Share Capital of your Company has increased from Rs. 151.97 million to Rs. 152.82 million. The Company has issued and allotted 424,600 equity shares of Rs.2/- each to its employees on exercising stock options granted to them under the Employee Stock Option Scheme, 2006.

SUBSIDIARY COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS:

The Company has 8 subsidiary companies, 2 located in India and 6 outside India. It has 17 step-down overseas subsidiaries across the globe.

As required under the Listing Agreements with the Stock Exchanges a consolidated financial statement of the Company and all its subsidiaries is attached. The consolidated financial statement has been prepared in accordance with the Accounting Standards 21, 23 and 27 as notified by the Companies (Accounting Standards) Rules, 2006.

GENERAL EXEMPTION PROVIDED FROM NOT ATTACHING THE BALANCE SHEET OF SUBSIDIARY COMPANIES TO THE ANNUAL REPORT OF THE COMPANY U/S. 212(8) OF THE COMPANIES ACT, 1956:

The Government of India, Ministry of Corporate Affairs (MCA), New Delhi vide its Circular No.2/2011 dated 8th February, 2011 has granted general exemption to the Company from annexing to this report, the Annual Reports of the subsidiary companies. As per the directives issued under Section 212(8) of the Companies Act, 1956 the Company has fulfilled the conditions specified in the said circular.

Pursuant to the said circular from MCA, a gist of the financial performance of the subsidiary companies is disclosed elsewhere in the Annual Report. If any Member of the Company or any of its subsidiary companies so desires, the Company will make available copies of Annual Accounts of the subsidiary companies and related information. These documents will also be available for inspection during business hours at the Registered Office of the Company except Saturday, Sunday and Holidays.

CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO:

Information required under Section 217(1)(e) of the Companies Act, 1956 read with Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given in Annexure- I to this Report.

PARTICULARS OF EMPLOYEES:

As required under the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Amendment Rules, 2011 the names and other particulars of employees are set out in the Annexure II to this report.

GROUP FOR INTER SE TRANSFER OF SHARES:

Based on the information received from the Promoters and as required under Clause 10(1) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, persons constituting 'Group' as defined in the Monopolies and Restrictive Trade Practices Act, 1969, for the purpose of Regulation 10 of the aforesaid SEBI Takeover Regulations comprises:

1. Shri Kirtilal K. Doshi including HUF

2. Shri Shreyas K. Doshi including HUF

3. Shri Anuj Kirtilal Doshi

4. Shri Vishal Shreyas Doshi

5. Smt. Suman Kirtilal Doshi

6. Smt. Geeta Shreyas Doshi

7. Smt. Rachana Vishal Doshi

8. Dr. Anjali Pradeep Mehta

9. Dr. Pradeep A. Mehta

10. Anuj Doshi Trust

11. Aman Doshi Trust

12. Shrenuj Investments & Finance Pvt. Ltd.

13. Prest Impex Private Limited

14. Kum. Aditi Shreyas Doshi

MANAGEMENT DISCUSSION AND ANALYSIS:

A detailed review of the operations, performance and future outlook of the Company and its business is given in the Management Discussion and Analysis, which forms part of the Annual Report as Annexure - III.

DIRECTORS:

Dr. Badrinarayan R. Banwale, Shri Suresh N. Talwarand Shri Shreyas K. Doshi, Directors of the Company will retire by rotation at the ensuing Annual General Meeting and being eligible have offered themselves for re- appointment.

Shri Festus Mogae, former President of Botswana was appointed as Additional Director of the Company w.e.f. 28th May, 2012. He will hold office as Additional Director upto the date of ensuing Annual General Meeting

Brief profiles of the Directors proposed to be appointed/re-appointed as required under clause 49 of the Listing Agreement are annexed to the Notice convening the Annual General Meeting forming part of the Annual Report.

FIXED DEPOSITS:

During the year under review the Company has accepted fixed deposits of Rs. 8.50 million from the public. The fixed deposits outstanding as on 31st March, 2012 were 16.50 million.

HUMAN RESOURCE MANAGEMENT:

Shrenuj & Company Limited is an integrated gem and jewellery conglomerate having presence across 15 countries with activities ranging from diamond processing, jewellery manufacturing to branding and retailing. It employs over 2,500 people in its worldwide operations. Shrenuj Group's state of the art diamond manufacturing facilities in India, Botswana and South Africa specialize in processing high quality diamonds. The Company's key to success and growth is its band of employees who are recruited on merit and subjected to intensive training.

INSURANCE:

Properties and assets of the Company are adequately insured.

DIRECTOR'S RESPONSIBILITY STATEMENT:

As required under Section 217 (2AA) of the Companies Act, 1956, your Directors confirm;

(i) That in the preparation of Annual Accounts for the year 2011-12, the applicable Accounting Standards, to the extent practicable, have been followed and that there are no material departures;

(ii) That the Directors have adopted such accounting policies and have applied them consistently and have made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year ended 31st March, 2012 and of the profit of the Company for the financial year;

(iii) That 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 have prepared annual accounts on a going concern basis.

CORPORATE GOVERNANCE:

The Company is committed to uphold the highest standards of Corporate Governance and adhere to the requirements set out by the Securities and Exchange Board of India. As required by Clause 49 VI of the Listing Agreement, a detailed report on Corporate Governance forms part of the Directors' Report as Annexure IV. The Auditors' certificate on compliance with Corporate Governance requirements is attached to the Corporate Governance Report.

The Chairman & Managing Director's declaration regarding compliance with the Business Conduct Guidelines (Code of Conduct) is also attached to the Corporate Governance Report as Annexure 1.

GENERAL SHAREHOLDER INFORMATION:

General Shareholder Information is given in Annexure V to this report.

EMPLOYEE STOCK OPTION SCHEME:

The Company had granted 1,565,763 stock options to its existing employees and employees of its subsidiary companies based in India and outside India (including Directors other than promoters) to subscribe to the equity shares of the Company, in accordance with the provisions of the Company's Employee Stock Option Scheme - 2006.

The employees have been allotted 1,247,163 new equity shares on exercising Stock Options out of 1,565,763 stock options granted to them. During the year 2011-12, the Options exercised aggregated to 424,600. Exercise price of Rs.21/- per Option is not lower than the par value of Equity Shares and not more than the price prescribed under Chapter VII of the SEBI (Issue of Capital Disclosure Requirements) Regulation, 2009 on grant date. During the year 2011-12, the Company received a sum of Rs. 11.27 million as exercise consideration (excluding tax), of which Rs.0.85 million was towards Share Capital and Rs. 10.42 million towards Securities Premium.

During the year under review, 27,100 Options lapsed. Options in force as at March 31,2012 stood at 501,313. Options granted to and exercised by Senior Managerial Personnel were as under:

- Shri Nihar N. Parikh - 400,000

- Shri Vinod M. Shetye -12,000

- Shri Ashir S. Doshi -12,000

- Shri Shekhar K. Shah -110,263

Shri C. S. Valand -12,000

- Shri Ashok R. Shah -12,000

- Shri Umesh N. Shah -12,000

None of the employees received 5% or more of the total number of options granted during the year nor were granted equal to or exceeding 1% of the Issued Capital of the Company.

Weighted average exercise price was Rs. 21/- whereas weighted average fair price using Black Scholes model was Rs. 33.20. The significant assumptions used to estimate the fair values of options were:

- Method - Black Scholes Model

- Risk free interest rate (%) - 8.45%

- Expected life (No. of years) - 55 days (April 30 and May 25 days till 25th May, 2012)

- Expected volatility (%) - 39.84%

- Dividend yield (%) - 30.00%

Market price of the underlying shares on grant date i.e. 26th May, 2009 was Rs. 26.55 on NSE and price as on date of valuation, i.e. 30th March, 2012 was Rs. 64.20 on NSE. The difference between the employees compensation cost based on intrinsic value and the fair value for the year is Rs. 14.79 million and diluted EPS is Rs. 4.31 against basic EPS of Rs.4.51.

AUDITORS AND AUDITORS' REPORT:

The Statutory Auditors of the Company, M/s. Rajendra & Co., Chartered Accountants, Mumbai, (Firm Regn. No. 108355W) retire at the conclusion of the ensuing annual general meeting of the Company and have confirmed their willingness and eligibility for re-appointment and have also confirmed that their re-appointment, if made, will be within the limits prescribed under Section 224(1 )(B) of the Companies Act, 1956.

The Board has duly reviewed the Statutory Auditors' Report on the Accounts. The observations and comments appearing in the Auditors' Report are self-explanatory and do not call for any further explanation/clarification by the Board under Section 217(3) of the Companies Act, 1956.

APPOITMENT OF COST ACCOUNTANT UNDER RULE 5 OF THE COMPANIES (COST ACCOUNTING RECORDS) RULES, 2011:

M/s. ABK Associates, Cost Accountants, were appointed to submit compliance report alongwith the requisite annexure duly certified by them for the financial year commencing from 1st April, 2011 to 31st March, 2012 as required under rule 2 of the Companies (Cost Accounting Records) Rules, 2011 to the Central Government within the time prescribed under above referred rules.

TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND (IEPF):

The Company sends reminder letters to all shareholders whose dividends are unclaimed so as to ensure that they receive their rightful dues. During the year, the Company has transferred a sum of Rs.289,237/- to Investor Education & Protection Fund, the amount which was due and payable and remained unclaimed and unpaid for a period of seven years, as provided in Section 205C (2) of the Companies Act, 1956. The Company has so far transferred a total sum of Rs.2,502,451.43 to the said Fund.

ACKNOWLEDGEMENTS:

Your Directors take this opportunity to thank the Members, financial institutions, banks, foreign patrons, Diamond Trading Company Limited, London, Regulatory authorities, Stock Exchanges and all stakeholders for their continued co-operation and support. The Directors would also like to place on record their appreciation to all executives, officers and employees at all levels of the Company for their dedicated contribution to the growth of the Company's business.

For and on behalf of the Board

Place: Mumbai SHREYAS K. DOSHI

Date: 28th May, 2012. CHAIRMAN & MANAGING DIRECTOR

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Mar 31, 2011

Dear Members,

The Directors have pleasure in presenting the 29th Annual Report of your Company and the Audited Statement of Accounts for the year ended 31st March, 2011.

FINANCIAL RESULTS:

The performance of the Company for the financial year ended 31st March, 2011 is summarized below:

(Rupees in Lacs) Financial Year

2010-11 2009-10

Profit before interest and depreciation 11593.21 10301.23

Less : Finance Cost 6756.13 7527.70

Depreciation 797.28 - 399.12

Less: Transferred from Reserves (211.17) 586.11 -

Profit before tax 4250.97 2374.41

Less : Provision for tax 1184.00 820.00

Deferred Tax Liability 15.00 7.00

Profit after tax 3051.97 1547.41

Add: Excess provision for taxation written back - 3.35

Net Profit 3051.97 1550.76

Add : Balance Brought Forward from Previous year 6180.43 5235.58

Profit available for appropriation 9232.40 6786.33

APPROPRIATIONS

General Reserve 350.00 200.00

Proposed Dividend 457.29 348.09

Tax on Proposed Dividend 74.20 57.81

Surplus in Profit & Loss Account 8350.91 6180.43

9232.40 6786.33

OPERATIONS:

The Company's performance was satisfactory with sales increasing to Rs.155420.97 Lacs from Rs.103522.22 Lacs and Net Profit growing to Rs.3051.97 Lacs from Rs.1550.75 Lacs previous year. The results of the current year include figures of amalgamating companies and are therefore, to that extent, not comparable with those of previous year.

During the year, your Company strengthened several organizational processes across a wide range of functions with a view to enhancing its business capabilities. It continues to deliver strong overall performance this year and its growth plans continue to remain on track.

Revenues from retail and branded jewellery operations have recorded an impressive 82% growth in FY 2010-11, rising to Rs. 15951 Lacs (Rs. 8760.70 Lacs last year). Your Company's focus on retail and branding operations is delivering the desired results. The Company has 114 points of sales in 26 cities across India, reaching over 85% of our target consumer segment. The Company's retail ventures "Diti" in India and "Joliesse" in Hong Kong continue to record impressive growth.

The consolidated sales revenue increased by 30% to Rs. 2,45,651.52 Lacs (Rs. 1,88,995.87 Lacs). Net profit registered a gain of 12% to Rs. 5684.47 Lacs (Rs.5077.49 Lacs). EPS for the period (Basic & Diluted) stood at Rs. 7.50 (Rs. 7.32) per share (face value of Rs.2/-).

DIVIDEND:

The Board of Directors has recommended payment of a higher final dividend of 30% i.e. 60 paise per share on 7,60,14,995 Equity Shares of Rs. 21- each, for the year ended 31st March, 2011. The dividend will entail an outflow of Rs.531.48 Lacs (including dividend tax of Rs.74.19 Lacs) on the paid up equity share capital of Rs. 1519.70 Lacs. The payment of dividend is subject to the approval of Members at the ensuing annual general meeting of the Company. Equity shares that may be allotted on exercise of Options granted under the Employee Stock Option Scheme before the Book Closure for payment of dividend will rank pari passu with the existing shares and be entitled to receive the dividend. Dividend includes sum of Rs.1.39 Lacs being dividend for previous year paid to the ESOP allottees who have exercised stock options after Board Meeting but before Book closure in the previous year.

PROSPECTS:

Shrenuj Botswana (Pty.) Ltd., a step-down subsidiary has commenced a new jewellery manufacturing facility in Botswana, the very first in the country. This new unit will not only contribute incremental revenue but also lead to improved captive consumption of our high end diamonds produced within Botswana. This unit will also gain from tax advantage enjoyed by Botswana based units for export to the US markets. The Company is adding manpower to create additional capacities that will support Diamond manufacturing operations in Botswana. In addition to the normal bridal jewellery, we have developed a special brand 'ZANZOTH' which will be first 'Made in Botswana' brand. The Company will also continue to improve the throughput of our existing units through technological and skill upgradations.

The Company has developed many successful international diamond jewellery brands, such as Arisia, Sveni and Bhavya (India and Middle East), Valina and Caro 74 (USA), Fiana (France), Scintilla88 and MasterCut (Australia), and Amante88 (Hong Kong). In addition, Shrenuj is a leading participant in DTC's Forevermark Programme in Japan and India and one of the authorised manufacturers of Platinum Guild International. These brands are managed independently by the company's marketing teams in each country, backed by a strong downstream distribution worldwide. The Company now intends to garner a larger share of the jewellery value chain pie and targets to increase its presence in the higher end of the value chain, i.e. jewellery manufacturing and retailing.

The Company has launched the new "Embrazo" Collection in US during the Christmas Season and is now ready to unveil "Zanzoth" collection in near future.

The Company has recently acquired state of the art Sarin Galaxy 1000 diamond planning machines in Mumbai and Botswana, the very first in their regions. The Company's focus on technology upgradation has helped us remain at the forefront of product quality and efficiencies in manufacturing operations. These machines will ramp up our productivity and reduce tolerance to bare minimum level in diamond operations.

The Company expects to continue its growth momentum in an expanding global diamond and jewellery market by organic and inorganic growth. Overall market sentiments have improved and the consumer confidence indices in all the key markets are showing positive growth.

SCHEME OF ARRANGEMENT:

The Company received the Order dated 1st October, 2010 from the Hon'ble High Court, Bombay on 12th October, 2010 sanctioning the scheme of arrangement between Shrenuj Diajewels Limited and Shrenuj Gems & Jewellery Limited, wholly owned subsidiary companies with the Company. The requisite stamp duty was paid on account of amalgamation of Shrenuj Diajewels Limited and Shrenuj Gems & Jewellery Limited with the Company.

Pursuant to the said Order and pursuant to the provisions of the Companies Act, 1956 and relevant provisions of the Memorandum and Articles of Association of the Company, your Board had issued and allotted 60,22,525 Equity Shares of Rs.2/- each to the unsecured lenders of the Company on 27th October, 2010.

SHARE CAPITAL:

Consequent to the approval of the scheme of arrangement by the Hon'ble High Court, Bombay, the Authorised Share Capital of both the transferor companies i.e. Shrenuj Diajewels Limited and Shrenuj Gems & Jewellery Limited was added to the Authorised Share Capital of the Transferee Company i.e. Shrenuj & Company Limited without any further payment of stamp duty or registration fees and clause V of the Memorandum of Association and Article 2 of the Articles of Association of the Company was replaced accordingly. With this the Authorised Share Capital of the Company is now Rs. 4500 Lacs divided into 22,50,00,000 equity shares of Rs.2/- each.

During the year, Issued, Subscribed and Paid-up Share Capital of the Company has increased from Rs. 1386.45 Lacs to Rs. 1519.70 Lacs. The Company has issued and allotted 60,22,525 equity shares to unsecured lenders pursuant to the Scheme of Arrangement and 6,39,850 equity shares of Rs.2/- each were issued and allotted to the employees of the Company pursuant to exercise of stock options under Employee Stock Option Scheme, 2006.

SUBSIDIARY COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS:

The Company has 8 subsidiary companies, 2 located in India and 6 outside India. It has 18 step-down overseas subsidiaries across the globe.

During the year, two subsidiary companies viz. Shrenuj Gems & Jewellery Limited and Shrenuj Diajewels Limited have merged with the Company. An application for liquidation of Lume Germany Gmbh has been made and effective date for the same is 31st March, 2010.

As required under the Listing Agreements with the Stock Exchanges a consolidated financial statement of the Company and all its subsidiaries is attached. The consolidated financial statement has been prepared in accordance with the Accounting Standards 21, 23 and 27 as notified by Companies (Accounting Standard) Rules, 2006.

GENERAL EXEMPTION PROVIDED FROM NOT ATTACHING THE BALANCE SHEET OF SUBSIDIARY COMPANIES TO THE ANNUAL REPORT OF THE COMPANY U/S. 212(8) OF THE COMPANIES ACT, 1956:

The Government of India, Ministry of Corporate Affairs (MCA), New Delhi vide its Circular No.2/2011 dated 8th February, 2011 has granted general exemption to the Company from annexing to this report, the Annual Reports of the subsidiary companies. As per the directives issued under Section 212(8) of the Companies Act, 1956 the Company has fulfilled the conditions specified in the said circular.

Pursuant to the said circular from MCA, a gist of the financial performance of the subsidiary companies is disclosed elsewhere in the Annual Report. If any Member of the Company and subsidiary company so desires, the Company will make available copies of Annual Accounts of the subsidiary companies and related information. These documents will also be available for inspection during business hours at the Registered Office of the Company.

CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO:

Information required under Section 217(1)(e) of the Companies Act, 1956 read with Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given in Annexure-1 to this Report.

PARTICULARS OF EMPLOYEES:

As required under the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of employees are set out in the Annexure II to this report.

MANAGEMENT DISCUSSION AND ANALYSIS:

A detailed review of the operations, performance and future outlook of the Company and its business is given in the Management Discussion and Analysis, which forms part of the Annual Report as Annexure - III.

DIRECTORS:

Shri Shobha Singh Thakur, Shri Keki M. Mistry and Shri Nihar N. Parikh, Directors of the Company will retire by rotation at the ensuing Annual General Meeting and being eligible have offered themselves for re-appointment. Brief profiles of the Directors proposed to be re-appointed as required under clause 49 of the Listing Agreement are annexed to the Notice convening the Annual General Meeting forming part of the Annual Report.

FIXED DEPOSITS:

During the year under review the Company has accepted fixed deposits of Rs. 80 Lacs from the public. Pursuant to the scheme of arrangement approved by the Hon'ble High Court the deposits outstanding as on 31st March, 2010 were converted into equity shares of the Company.

HUMAN RESOURCE MANAGEMENT:

Human Resource at Shrenuj is positioned to act as a strategic enabler and change catalyst. It seeks to play a key role in making Shrenuj a globally respected professional organization. Your Company continuously invests in human resource development, identifying and grooming management talent, and has a culture of harnessing people power to the maximum. While building a competent workforce ready to take on challenges thrown up by external environment, it also ensures that the Company develops a work culture that maintains a fine balance between the employees' perspective of being an organization which is caring and rewarding and the employer's perspective of being performing and progressive.

In the dynamic and competitive business environment that exists today, Shrenuj believes that the employees are the key differentiators. As a strategic business partner, the Human Resources team is committed to protecting the interest of the stakeholders and supporting the leadership team in building a world class organization.

INSURANCE:

Properties and assets of the Company are adequately insured.

DIRECTOR'S RESPONSIBILITY STATEMENT:

As required under Section 217 (2AA) of the Companies Act, 1956, your Directors confirm;

(i) That in the preparation of Annual Accounts for the year 2010-11, the applicable Accounting Standards, to the extent practicable, have been followed and that there are no material departures;

(ii) That the Directors have adopted such accounting policies and have applied them consistently and have made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year ended 31 st March, 2011 and of the profit of the Company for the financial year;

(iii) That 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 have prepared annual accounts on a going concern basis.

CORPORATE GOVERNANCE:

The Company is committed to uphold the highest standards of Corporate Governance and adhere to the requirements set out by the Securities and Exchange Board of India. As required by Clause 49 VI of the Listing Agreement, a detailed report on Corporate Governance forms part of the Directors' Report as Annexure IV. The Auditors' certificate on compliance with Corporate Governance requirements is attached to the Corporate Governance Report.

The Chairman & Managing Director's declaration regarding compliance with the Business Conduct Guidelines (Code of Conduct) is also attached to the Corporate Governance Report.

GENERAL SHAREHOLDER INFORMATION:

General Shareholder Information is given in Annexure V to this report.

EMPLOYEE STOCK OPTION SCHEME:

The Company had granted 15,65,763 stock options to its existing employees and employees of its subsidiary companies based in India and outside India (including directors other than promoters) to subscribe to the equity shares of the Company, in accordance with the provisions of the Company's Employee Stock Option Scheme - 2006.

Under the said ESOP Scheme the employees have so far been allotted 6,69,850 new equity shares upon exercise of Stock Options upto the date of Board Meeting. During the year, the Options vested under ESOS - 2006 aggregated to 15,65,763 and Options exercised aggregated to 6,39,850. Exercise price of Rs.21/- per Option is not less than the par value of Equity Shares and not more than the price prescribed under Chapter VII of the SEBI (Issue of Capital Disclosure Requirements) Regulation, 2009 on grant date. The Company received a sum of Rs. 134.37 Lacs as Exercise consideration (excluding tax), of which Rs. 12.80 Lacs was towards Share Capital and Rs.121.57 Lacs towards Securities Premium.

During the year, 69,500 Options lapsed. Option in Force as at March 31, 2011 stood at 8,56,413. Options granted to Senior Managerial Personnel were:

Shri Nihar N. Parikh - 4,00,000

Shri C. S. Valand - 12,000

Shri Vinod M. Shetye - 12,000

Shri Ashok R. Shah - 12,000

Shri Ashir S. Doshi - 12,000

Shri Umesh N. Shah - 12,000

Shri Shekhar K. Shah - 12,000

None of the employees received 5% or more of the total no. of options granted during the year. None of the employees were granted equal to or exceeding 1% of the Issued Capital.

Weighted average exercise price is Rs. 21.00 whereas weighted average fair price using Black Scholes model is Rs. 33.20. The significant assumptions used to estimate the fair values of options are:

Method - Black Scholes Model

Risk free interest rate (%) - 7.61%

Expected life (No. of days) - 421 days

Expected volatility (%) - 49.39%

Dividend yield (%) - 25.00%

Market price of the underlying share on grant date 26th May 2009 was Rs. 26.00 on NSE and price as on date of valuation, 31st March 2011 was Rs. 52.30 on NSE. The difference between the employees compensation cost based on intrinsic value and the fair value for the year is Rs. 52.06 lacs and diluted EPS is Rs. 3.96 against basic EPS of Rs.4.03.

AUDITORS AND AUDITORS' REPORT:

The Statutory Auditors of the Company, M/s. Rajendra & Co., Chartered Accountants, Mumbai, retire at the conclusion of the ensuing annual general meeting of the Company and have confirmed their willingness and eligibility for re-appointment and have also confirmed that their re-appointment, if made, will be within the limits prescribed under Section 224(1 )(B) of the Companies Act, 1956.

The Board has duly reviewed the Statutory Auditors' Report on the Accounts. The observations and comments appearing in the Auditors' Report are self-explanatory and do not call for any further explanation/ clarification by the Board under Section 217(3) of the Companies Act, 1956.

TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND (IEPF):

The Company sends reminder letters to all shareholders whose dividends are unclaimed so as to ensure that they receive their rightful dues. During the year, the Company has transferred a sum of Rs.2,18,421/- to Investor Education & Protection Fund, the amount which was due and payable and remained unclaimed and unpaid for a period of seven years, as provided in Section 205C (2) of the Companies Act, 1956. The Company has so far transferred a total sum of Rs.22,13,214.43 to the said Fund.

ACKNOWLEDGEMENTS:

Your Directors take this opportunity to thank the Members, Financial Institutions, Banks, Foreign Patrons, Diamond Trading Company Limited, London, Regulatory authorities, Stock Exchanges and all stakeholders for their continued co-operation and support. The Directors would also like to place on record their appreciation to all executives, officers and staff at all levels of the Company for their dedication.

For and on behalf of the Board

Place: Mumbai SHREYAS K. DOSHI

Date: 28th May, 2011. CHAIRMAN & MANAGING DIRECTOR