Directors Report of Va Tech Wabag Ltd.

Mar 31, 2018

Dear Members,

The Directors have pleasure in presenting the 23^rd Annual Report of the Company, together with the Audited Financial Statements for the financial year ended March 31, 2018.

Financial/ Operational Highlights

Your Company’s financial highlights for the year ended March 31, 2018 are summarized below:

Rs.in Crore

	Standalone		Consolidated
	2017-18	2016-17	2017-18	2016-17
Gross turnover (Revenue from operations)	1,856	1,798	3,457	3,208
Profit before interest, tax & depreciation (EBITDA) excluding exceptional items	193	215	301	298
Profit before tax	174	126	224	179
Provision for tax	(57)	(51)	(77)	(67)
Profit after tax attributable to owners of the parent	117	75	132	102

Business Environment

During the financial year 2017-18, many major advanced economies witnessed modest economic growth. The Global GDP growth has been higher at 3.8% in 2017 as compared to 3.2% in 2016, which was mainly driven by recovery in investments and trade on account of accommodative policies and financing conditions, improved confidence, and strengthening of commodity prices.

Advanced economies grew 2.3% in 2017 (1.7% in 2016), while the Emerging Market and Developing Economies (EMDEs) grew 4.8% in 2017 (4.4% in 2016). India continues to remain as one of the fastest growing economy in the world backed by strong fundamentals and continued reform momentum which has been initiated by the Government over last couple of years. Being the first year of implementation of GST, all sectors faced certain issues relating to process of claiming GST Input credit and output GST discharge. As per the World Bank report, GST implementation is expected to yield substantial growth dividends from higher efficiencies and raise more revenues in the long run. GST introduction has resulted in cash flow stress on your Company mainly on account of certain delays in customer invoicing due to pending rate amendment finalization and amendment of contracts with customers pursuant to the change in law and uncertainties on the rate reduction in municipal contracts.

Company’s Performance

In the FY 2017-18, your Company continued to maintain momentum on key parameters, despite moderate global economic growth. Your Company’s consolidated turnover stood at Rs.3,457 Crore compared to its previous year turnover Rs.3,208 Crore recording a growth of 7.8 %. The Consolidated Profit after tax for the current financial year rose to Rs.132 Crore from Rs.102 Crore in the FY 17, thereby recording a growth of 29.4%. The Standalone revenues have increased to Rs.1,856 Crore in FY 2017-18 and the Standalone Profit after tax for the current FY stood at Rs.117 Crore as against Rs.75 Crore previous year. Your Company also achieved an order intake of Rs.3,193 Crore and its order book stood at Rs.7,743 Crore including framework contracts as at the year end. The Consolidated EPS was Rs.24.08 for the year ended March 31, 2018 as against Rs.18.82 in the previous year.

Dividend

Based on the Company’s performance and in line with the dividend policy of the Company your Directors are pleased to propose a dividend of Rs.4/- on every equity share of Rs.2/each (200%) for FY 2017-18. The dividend, if approved at the 23^rd Annual General Meeting (AGM), will be paid to those Members whose names appear in the register of Members of the Company as at the end of the day on August 3, 2018. With this recommendation of dividend, your Company has been consistent in paying dividend to its Members since the date of listing of its securities. The final dividend on equity shares, if approved by the Members would involve a cash outflow of Rs.22.85 Crore including dividend distribution tax, resulting in a payout of 19.53% of the Standalone profits of the Company for FY 2017-18.

Pursuant to Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (“SEBI LODR”) the Board approved and adopted the Dividend Distribution Policy and the same is available on the Company’s website www.wabag.com.

Capital Structure

The issued, subscribed and paid up share capital of the Company stood at Rs.10.93 Crore as on March 31, 2018 as against Rs.10.91 Crore in the previous year. The increase in the paid up capital was on account of allotment of Equity shares of the Company to its employees as per the Employee Stock Option Plan approved by the Members. The number of shares and date on which such allotment was made by the company are given below:

Month/Day/Year	No. of equity shares
Capital as on March 31, 2017	5,45,73,058
Addition during the year
May 25, 2017	4,666
August 9, 2017	17,035
November 8, 2017	57,231
February 9, 2018	5,400
Capital as on March 31, 2018	5,46,57,390

Unclaimed Dividend - Investor Education and Protection Fund (IEPF)

Your Company had declared its first dividend to the Members of the Company on July 15, 2011 after its Initial Public Offering (IPO) during the year 2010 and since then has been consistent in the dividend distribution every year to its Members. The details of dividend per share paid by the Company since 2011 are available at page no.34 of this Report.

In accordance with the requirements as set out in the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (“the Rules”), any dividend which is unclaimed by a Member(s) for a period of 7 consecutive years have to be transferred to IEPF Authority along with the corresponding shares held by the said Members in the respective financial year for which the dividend is unclaimed.

Your Company has been approaching the Members who have not yet claimed their dividend entitlements from the Company through various modes viz., reminder letters, mails, notices, calls, etc., based on their latest available address and requesting them to initiate necessary action for claiming such dividend(s) from the Company, before it is transferred to Investor Education Protection Fund account in accordance with the Rules.

Members who have not yet claimed their dividend entitlements can approach the Company or its Registrar and Share Transfer Agent (RTA) viz., Karvy Computershare Private Limited and obtain necessary information and clarification for claiming the unpaid dividend entitlements.

If the Members do not claim the unpaid or unclaimed dividends within a period of 7 years from the date of declaration of dividends, then such dividends shall be transferred to IEPF authority in accordance with the Rules.

The details of Members and their unclaimed dividend/equity shares liable to be transferred to IEPF are uploaded on the Company’s website www.wabag.com.

IPO Refund - Investor Education and Protection Fund (IEPF)

Your Company made its initial public offering during the year 2010. During the year, the unsuccessful allottees of the IPO who had paid subscription amount and not claimed such amount have been approached by the Company through various reminders and follow up action and helped certain allottees (who had responded to the Company) to get their refund entitlements and transferred the balance unclaimed amount of Rs. 1,70,300/- to the IEPF account as per IEPF Rules. The holder wise details of IPO refund amount transferred to IEPF and Details of unclaimed dividend/ equity shares liable to be transferred to IEPF are available on the Company’s website www.wabag.com.

Depository System

Your Company’s shares are in compulsorily tradable securities in electronic form. As on March 31, 2018, 99.99% of the Company’s total paid up capital representing 5,46,56,474 equity shares are in dematerialized form. In view of the numerous advantages offered by the Depository system as well as to avoid frauds, Members holding shares in physical mode are advised to avail the facility of dematerialization from either of the depositories.

Management’s Discussion and Analysis

Management’s Discussion and Analysis forms an integral part of this report and gives details of the industry, economic developments, performance and state of affairs of the Company. A detailed report on the management’s discussion and analysis in terms of the provisions of regulation 34 of the SEBI LODR, is provided as a separate chapter in the annual report.

Key Projects Update

PETRONAS RAPID ETP PROJECT, Malaysia:

Petronas project is being executed by Company’s subsidiary viz., Wabag Muhibbah JV Sdn. Bhd., a company incorporated in Malaysia. The contract’s scope covers construction of a state-of-the-art water management system for treatment of effluent and waste water in the RAPID Complex. This is a large and complex oil & gas project and is progressing well. Currently, in an advanced stage of execution, the project is expected to be completed in FY 18-19 and will provide a significant reference to your Company.

AMAS STP PROJECT, Bahrain:

The scope of AMAS project in the Kingdom of Bahrain covers Design and Build of a Sewage Treatment Plant (STP) for Al Madina Al Shamaliya (AMAS), the new town being developed in Bahrain. AMAS is being developed for housing, recreational, and business activities purpose and will provide approximately 16,000 dwelling units. This STP plant with tertiary treatment will cater to the entire irrigation water requirements of all the 13 islands. Your Company partnered with Belhasa Projects LLC, UAE for executing this project. The plant has been mechanically completed and wet run of the plant is in progress. This project will provide a significant reference to your Company, given its complex construction on reclaimed land.

APGENCO KAKATIYA and RAYALASEEMA THERMAL POWER PROJECT, India:

Telengana State Power Generation Coporation Limited and Andhra Pradesh Power Generation Corporation Limited had placed orders for two 600 MW Thermal Power Plants - at Warangal and Cuddapah respectively. Due to financial issues faced by the erstwhile Consortium leader, WABAG took over leadership of the consortium from mid-2014 and assumed overall responsibility of completing the projects.

The performance guarantee test runs (PGTR) of the 600 MW plant in Warangal, Telangana was completed in FY 2017-18 and commercial operation date (COD) of the second 600 MW project in Cuddapah, Andhra Pradesh was also achieved in FY 2017 -18. These are critical completion milestones which will enable your Company to move closer to achieving financial closure of the projects.

DANGOTE PROJECT, Nigeria:

Your Company secured a repeat order from one of its key clients, Dangote group towards Engineering, Procurement, Commissioning & Testing of an ETP with Reverse Osmosis, Demineralization (RODM) & Condensed Polishing Unit (CPU) and Raw Water Treatment Plant (RWTP). The project involves treatment of toughest refinery effluent using latest technology, such as cyanide removal. This is a testimony of your Company’s focus on customer satisfaction, as this order was secured on the basis of execution excellence in the earlier contract from the customer. Your Company as part of this contract, is supplying its patented BIOPUR technology for the RODM package. The project is progressing on schedule with full momentum.

POLGHAWELA PROJECT, Srilanka:

The Project is to implement a new water supply scheme in Sri Lanka to cover the Alawwa - Polghawela - Pothuhera and part of Kurunegala Pradeshiya Sabha area by developing pipe water supply scheme & providing safe and reliable water enabling industrial development and economic growth. The contract scope covers construction of a weir across the river, a river intake system with a Raw Water Pumping station and pumping main to treatment plant, A 22,000m³/day treatment plant (upgradable to 29,000m³/day), 42 Km of clear water transmission from treatment plant to 6 storage Reservoirs spread across the project area and 320 Km length of DI/PVC Pipe distribution system.

The project is progressing well with the project Design phase in advanced stage and physical construction in progress with most of the major equipment ordering completed.

Corporate Governance

Corporate Governance deals with determining the ways for business analysis and taking business decisions by Management for the benefit of all stakeholders of the Company. Your Company has implemented several best corporate governance practices to enhance long-term shareholder value and respect minority shareholders’ rights in all our business decisions. Your Company, being committed to highest standards of corporate governance, ensures best practices throughout the business cycle and follows a transparent procedure in sharing timely information to all the stakeholders.

A report on Corporate Governance along with a certificate from the Auditors of the Company regarding the compliance of conditions of corporate governance as stipulated under Schedule V of the SEBI LODR forms part of this Annual Report.

Policies of the Company

The Board of Directors of the Company have from time to time framed and approved various Policies as prescribed by the Companies Act, 2013 (‘the Act’) read with the relevant Rules issued thereunder and the SEBI LODR. These Policies and Codes are reviewed by the Board/ Committee and are updated, from time to time as warranted. Some of the key policies adopted by the Company are as follows:

S.No	Name of the Policy/ codes
1	Dividend Distribution Policy
2	Policy for Determination of materiality for disclosure of events or information
3	Code of Conduct for Board Members and Senior Management Personnel
4	Policy on preservation and archival of documents
5	Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information
6	Related Party Transactions Policy
7	Policy on determining Material Subsidiaries
8	Whistle Blower Policy
9	Corporate Social Responsibility Policy
10	Nomination, Evaluation and Remuneration Policy

The above mentioned policies and codes are also available on the website of the Company www.wabag.com and Company’s intranet portal.

Business Responsibility Reporting (BRR)

Your Company strongly believes that sustainable and inclusive growth is possible by using the levers of environmental and social responsibility while setting targets and improving economic performance to ensure business continuity and growth. As stipulated under the SEBI LODR, the Business Responsibility Report, describing the initiatives taken by the Company from environmental, social and governance perspective forms a part of this Annual Report. The Report provides an overview of initiatives taken by your Company.

Directors & Key Managerial Personnel

As on March 31, 2018, your Board comprises of 6 Directors including 4 Independent Directors.

During the year under review, the term of Jaithirth Rao (DIN: 00025289) as an Independent Director of the Company ended on July 27, 2017 and on his request, has not been re-appointed. The Board places on record its appreciation for the services rendered by Jaithirth Rao during his tenure as a Member of the Board and its Committees. As per the provisions of the Act, S Varadarajan, (DIN: 02353065) Director & Chief Growth Officer holding office under section 188(1)(f) liable to retire by rotation at the ensuing Annual General Meeting (AGM) and being eligible, offers himself for re-appointment. S Varadarajan joined the organization in 1997 and has held various roles in the organization during his tenure of over two decades. Pursuant to the provisions of Section 196, 197 & 203 of the Act, read with The Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 and other applicable provisions, the Board of Directors on recommendation of the Nomination and Remuneration Committee at their Meeting held on May 24, 2018, subject to the approval of Members at the ensuing Annual General Meeting, considered and approved the re-appointment of S Varadarajan (DIN: 02353065) as the Whole Time Director of the Company for a period of five years commencing from June 1, 2018 on the terms and conditions as mentioned in the Notice convening 23^rd AGM of the Company.

The Members at the 20^th AGM held on July 27, 2015, had appointed Malay Mukherjee (DIN: 02861065), as an Independent Director of the Company to hold office for three consecutive years for a term up to the conclusion of the 23^rd AGM of the Company to be held in the calendar year 2018. Your Board, on the recommendation of the Nomination and Remuneration Committee held on May 24, 2018, subject to the approval of Members at the ensuing Annual General Meeting, considered and approved the re-appointment of Malay Mukherjee (DIN: 02861065) as Independent Director of the Company for a period of four years from the conclusion of the ensuing AGM viz., August 10, 2018 who shall not be liable to retire by rotation, under section 149 of the Act.

Your Board seeks approval from Members for re-appointment of Malay Mukherjee (DIN: 02861065) as Independent Director under section 149 of the Act to hold office for 4 consecutive years and S Varadarajan (DIN: 02353065) as Whole Time Director under Section 196 & 197 of the Act to hold office for 5 consecutive years. Your Company has received requisite notice in writing from Member proposing Malay Mukherjee & S Varadarajan as an Independent Director & Whole Time Director respectively.

The brief resume of the two Directors and other related information have been detailed in the Notice convening the 23^rd AGM of the Company.

The Key Managerial Personnel (KMP) of the Company as per Section 203 of the Act, are as follows:

Rajiv Mittal, Managing Director & Group CEO

Parthasarathy Gopalan, Chief Financial Officer Pankaj Sachdeva, CEO- India Cluster R Swaminathan, Company Secretary During the year there is no change in the KMP

During the year, the Honourable National Company Law Tribunal (“NCLT”) had passed an Order initiating CIRP under IBC, 2016. Subsequently NCLT had, within a week’s time, recalled the orders issued against the Company initiating CIRP for certain contractual dispute between the Company and a subcontractor in a Project. The NCLT dismissed the subcontractor petition as withdrawn on account of mutual settlement and submission given by IRP. We thank all our valued investors, bankers, vendors, partners, analysts and esteemed clients for their unflinching support and trust responded in our credentials during this period.

Declaration by Independent Directors

Independent Directors of the Company provide declarations, both at the time of appointment and annually. The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed under Section 149 of the Act, and the SEBI LODR. The Independent Directors have also confirmed that they have complied with the Company’s code of conduct.

Board Diversity

Building a diverse and inclusive workplace is an integral part of WABAG’s culture. These principles are also applied to the composition of our Board. A diversified Board will be able to leverage different skills, qualifications, professional experiences, perspectives and backgrounds, which is necessary for achieving sustainable and balanced development. Diversified Board enhances effective decision making and best utilization of the talent of Directors for the Business of the Company. The Nomination and Remuneration Committee sets out the approach to diversify the composition of the Board of Directors. Policy on Board Diversity forms part of Company’s Nomination, Evaluation and Remuneration Policy.

Board & Performance Evaluation

During the year under review based on the recommendation of the Nomination & Remuneration Committee, the process of seeking responses from Board, Committees and Individual Directors as well as the questionnaires were further strengthened, in line with guidance note on Board evaluation issued by SEBI. The Nomination and Remuneration Committee has put in place a robust framework for evaluation of the Board, Board Committees and Individual Directors. Customized questionnaires were prepared after taking into consideration inputs received from the Directors, covering various aspects of the Board’s functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations and governance. These questionnaires were circulated, responses received were analysed and the results were subsequently discussed by the Board. Recommendations arising from the evaluation process will be considered by the Board to optimize its effectiveness.

Pursuant to the provisions of the Companies Act, 2013 and Regulation 19 of SEBI LODR, the Board has carried out the annual evaluation of its own performance, the performance of the Directors individually as well as the evaluation of Committees of Board viz., Audit, Nomination and Remuneration, Stakeholders Relationship, Corporate Social Responsibility, Risk Management and Monitoring and Overseas Investment Committee. A separate exercise was carried out by Nomination & Remuneration Committee & Board to evaluate the performance of Board, Committees and that of individual Directors.

A separate exercise was carried out to evaluate the performance of individual Directors including the Chairman of the Board, who were evaluated on various parameters viz., participation and contribution by a Director, commitment including guidance provided to the senior management outside the Board / Committee meetings, effective deployment of knowledge and expertise, effective management of relationship with various stakeholders, independence of behavior judgment etc. The performance evaluation of the Independent Directors were carried out by the entire Board except the presence of Directors under evaluation. The performance evaluation of the Chairman and Non-Independent Directors were carried out by the Independent Directors. The evaluation process has been explained in the Corporate Governance report.

Appointment of Directors and Remuneration Policy

The assessment and appointment of Members to the Board is based on a combination of criteria that includes ethics, personal and professional stature, domain expertise, gender diversity and specific qualification required for the position. A potential Board Member is also assessed on the basis of the independence criteria defined in section 149(6) of the Act, and Regulation 16(1)(b) of the SEBI LODR.

In compliance with the requirements of Section 178 (3) of the Act, the ‘Nomination and Remuneration Committee’ (NRC) of your Board had fixed the criteria for nominating a person on the Board which inter alia include desired size and composition of the Board, age limit, qualification/ experience, areas of expertise and independence of the individual. The Committee had also approved the initial term of an Independent Director shall not exceed 3 years. Further, pursuant to provisions of the Act, the NRC of your Board has formulated the Nomination, Evaluation & Remuneration Policy for the appointment and determination of remuneration of the Directors, Key Managerial Personnel, Senior Management and other employees of your Company, the salient features of which are disclosed in this report. The NRC has also developed the criteria for determining the qualifications, positive attributes and independence of Directors and for making payments to Executive and Independent Directors of the Company. Policy of the Company on Director’s appointment and remuneration as required under sub-section (3) of Section 178 of the Companies Act, 2013 are formulated by the Nomination and Remuneration Committee and is outlined in the Nomination, Evaluation & Remuneration policy of the Company.

Your Company’s current policy is to have an appropriate mix of Executive and Independent Directors to maintain the independence of the Board and separate the functions of Management and Governance. As on March 31, 2018, your Board consists of 6 Directors, majority of them being Independent Directors. Besides the Chairman who is an Independent Director, the Board comprises the Managing Director and Chief Growth Officer, both being promoters and 3 Independent Directors. Your Board periodically evaluates the need for change in its composition and size.

Number of Meetings of the Board & its Committees

During the FY 2017-18, the Board of Directors met 4 times i.e, May 25, 2017, August 9, 2017, November 8, 2017 and February 9, 2018. The gap between any two consecutive meetings of the Board of Directors of the Company was not more than 120 days, as prescribed under the Act. The details regarding composition, attendance of the Directors and other relevant details are set out in the Report on Corporate Governance which forms part of this Annual Report.

The Company has several Committees which have been established as a part of the best corporate governance practices and are in compliance with the requirements of the relevant provisions of applicable laws and statutes. As on March 31, 2018, the Board has 6 Committees, namely, Audit Committee, Nomination and Remuneration Committee, Corporate Social Responsibility Committee, Stakeholders Relationship Committee, Risk Management & Monitoring Committee and Overseas Investment Committee. The details with respect to the composition, powers, roles, terms of reference, number of meetings, etc. of the Committees held during FY 2017-18 and attendance of the Directors at each meeting is provided in the Report on Corporate Governance which forms part of this Annual Report. All the recommendations made by the Committees of the Board were duly accepted by the Board.

As prescribed under section 177(8) of the Act, the Audit Committee comprises of three Independent Directors viz., Sumit Chandwani (DIN: 00179100), Chairman of the Committee, B D Narang (DIN: 00826573) and Malay Mukherjee (DIN: 02861065).

Induction & Training of Board Members

Induction of any new member on the Board is the responsibility of the Nomination and Remuneration Committee of the Board, which consists entirely of Independent Directors. Given the existing composition of the Board, the need for new domain expertise is reviewed by this Committee. When such a need becomes apparent, the Committee reviews potential candidates in terms of their expertise, attributes, personal and professional backgrounds and their ability to attend meetings. The details of shortlisted candidates are then placed before the Board for its consideration. If the Board approves, the person is appointed as an Additional Director, subject to the approval of Members in the Company’s next General Meeting. Your Directors when inducted to the Board, are given introduction to the Company’s culture through orientation sessions. On appointment, the Director concerned is issued a letter of appointment setting out in detail, the terms of appointment, duties, responsibilities and expected time commitments. Each newly appointed/ designated independent/ other Director is taken through a formal induction program including the presentation from the Managing Director & Group CEO, and other senior managerial personnel on the Company’s operations, marketing, finance and other important functions. The Company Secretary briefs the new Director about their legal and regulatory responsibilities as a Director. The induction for Independent Directors include interactive sessions with executive committee members, business and functional heads, visit to the plant site(s) etc. The above initiatives help the Director to understand the Company, its business and the regulatory framework in which the Company operates and equips him/ her to effectively fulfill his/her role as a Director of the Company.

On a periodical basis, presentations covering the business and performance updates of the Company and its Group, global business environment, risk management and mitigation, business strategy and plans are made at Board and Committee meetings

Directors Responsibility Statement

Pursuant to the provisions of Section 134(3)(c) of the Companies Act, your Directors confirm that:

in the preparation of the Financial Statements of the Company, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

they have taken proper and sufficient care towards the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

they have prepared the annual accounts on a going concern basis;

they have laid down internal financial controls which were adequate and are operating effectively; and

they have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.

Remuneration Policy

The objective of the Remuneration Policy is to assess the effectiveness of the Board as a whole, Committees of the Board and Individual Directors on regular basis and to attract, motivate and retain qualified and expert individuals that the Company needs in order to achieve its strategic and operational objectives, whilst acknowledging the societal context around remuneration and recognizing the interests of Company’s stakeholders. Nomination and Remuneration Committee shall formulate the criteria for appointment of Executive, Non-Executive and Independent Directors on the Board of the Company and persons in the Senior Management & other employees of the Company, their remuneration including determination of qualifications, positive attributes, independence of Directors and other matters as provided under sub-section (3) of Section 178 of the Act, (including any statutory modification(s) or re-enactment(s) thereof for the time being in force). Your Company follows a compensation mix of fixed pay benefits and performance based variable pay. Individual performance pay is determined by business performance and the performance of the individuals are measured through quarterly & annual appraisal process. The policy also addresses Board diversity and outlines remuneration principles for Directors, KMP’s and other employees based on various evaluation criteria determined by the Nomination and Remuneration Committee including measuring their performance and achievement vis-a-vis the Company’s goals.

1. Board Members

The overall limits of remuneration of the Board Members including Executive Board members (i.e. Independent & Non Independent Directors etc.) are governed by the provisions of Section 197 of the Act, and the Rules made thereunder and shall be approved by the members of the Company and shall be subject to availability of profits of the Company. The Board shall determine the remuneration based on recommendation of the Committee, within the overall limit approved by the Members. The Board can determine different remuneration for different Directors on the basis of their role, responsibilities, duties, time involvement etc.

The remuneration of the Board members is based on the Company’s size & global presence, its economic & financial position, industry trends, compensation paid by the peer companies, etc. to ensure that the compensation reflects each Board member’s responsibility and performance.

The remuneration payable to Executive Directors shall consist of (a) Fixed Pay, which is payable monthly, and shall include basic pay, contributions to retirement benefits, house rent allowance or company-leased accommodation and other allowances as per the Company’s policy (b) Variable Pay (paid at the end of the Financial Year) directly linked to the performance of the individual Director (i.e. achievement against pre-determined KRAs), his/ her respective Business Unit and the overall Company’s performance (c) Long term incentive/ESOPs as may be decided by the Committee from time to time. The compensation payable to Independent Directors by way of commission is limited to fixed amount as determined and approved by the Board. The commission payable is based on the performance of the business/ function as well as qualitative factors. The commission is calculated with reference to net profits of the Company in the financial year subject to overall ceilings stipulated under Section 197 of the Act, .

2. KMP/ Senior Management & Other Employees

The remuneration of Key Managerial Personnel (other than Managing Director and Executive Director), shall be approved by the Board and any revision thereof shall be done as per the compensation and appraisal policy of the Company. The remuneration payable to key managerial personnel (other than Managing Director and Executive Director), senior management and other employees shall consist of (a) Fixed Pay, which is payable monthly and include basic pay, contributions to retirement benefits, house rent allowance or company-leased accommodation and other allowances as per the Company’s policy (b) Variable Pay (paid at the end of Financial Year) directly linked to the performance of the individual employee (i.e. achievement against pre-determined KRAs), his/her respective business unit and the overall Company’s performance.

Policy on Preservation & Archival of Documents

Your Company has framed a policy on “Preservation & Archival of documents” This Policy is intended to provide guidelines for the retention of records and preservation of relevant documents for such duration after which the documents shall be archived. This policy is implemented as per Regulation 9 read with Regulation 30(8) of the SEBI LODR for preservation of the documents inter alia to aid the employees in handling the documents efficiently either in physical form or electronic form. It not only covers the various aspects on preservation of the documents, but also archival and safe disposal/destruction of the documents. This policy is available on the Company’s website www.wabag.com.

Employees’ stock option scheme

During the year, there has been no change in the ‘Wabag’s Employees Stock Option Scheme 2010’. The scheme is in compliance with the SEBI (Share Based Employee Benefits) Regulations, 2014.

The Nomination and Remuneration Committee, inter alia administers and monitors the Company’s employees’ stock option scheme (ESOP Scheme) in accordance with the applicable SEBI (Share Based Employee Benefits) Regulations, 2014 (SEBI SBEB). During the year ended March 31, 2018, a total of 84,332 shares were allotted to eligible employees under the Company’s prevailing ESOP scheme. The details of the scheme as required under the SEBI Regulations are available on the Company’s website www.wabag.com.

The disclosures as stipulated under the SEBI Regulations as on March 31, 2018 is enclosed herewith as Annexure 1 to the Board’s Report. Your Company has obtained the relevant certificate issued by the Statutory Auditors of the Company confirming the implementation of the ESOP scheme in accordance with the SEBI Regulations and approval given by the members that the scheme has been implemented in accordance with the SEBI Regulations and the resolutions passed by the Members. The certificate would be placed at the AGM for inspection by the members.

Particulars of Employees

The table containing names and other particulars of Directors in accordance with the provisions of Section 197(12) of the Act, read with rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is enclosed herewith as Annexure II to the Board’s Report.

The statement containing particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) & (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in a separate annexure forming part of this report.

Investor Relations

Your Company continuously strives for excellence in active engagement with international and domestic Investors. Structured conference calls and periodic Investors/ analyst interactions including one on one meetings, telephonic discussions, participation in investor conferences, quarterly earnings call and annual analyst meet with Managing Director and business heads were organized during the year.

Your Company always believes in leading from the front with emerging best practices in Investor Relations and building transparent communication with investors/analysts. Your Company also ensures that important information about the Company and schedule of meets is available to all the stakeholders by uploading all such information on the Company’s website.

Equal Opportunity/ Prevention of Sexual Harassment at Workplace Policy

The Company as an organization is committed to provide a healthy environment to all the employees and has a policy of ZERO tolerance towards discrimination and/or harassment in any form. The Company has in place a Prevention of Sexual Harassment (POSH) policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. Regular communication and awareness about this policy is done through various programs to the employees. The Company has setup an Internal Complaints Committee (ICC) both at the registered office and at every location where it operates in India in accordance with the Act and has representation of men and women and is chaired by a senior woman member and has external woman representations. Workshops and awareness programs are organized for sensitizing the employees with the provisions of the Act and orientation programs for the members of the Internal Committee. The following is the summary of the complaints received and disposed of during the FY 2017-18:

a) No. of complaints received during the year: NIL

b) No. of complaints disposed of: NIL

c) No. of complaints pending : NIL

Auditors

A. Statutory Auditors

Pursuant to the provisions of Section 139 of the Act, the tenure of the present Statutory Auditors M/s Walker Chandiok & Co. LLP, Chartered Accountants, Chennai shall come to an end at the conclusion of the forthcoming AGM. The Board on the recommendation of the Audit Committee proposed appointment of M/s Sharp & Tannan (Firm Registration No: 003792S) Chennai as the Statutory Auditors of the Company to hold office for a period of 5 consecutive years from the conclusion of 23^rd AGM till the conclusion of 28^th AGM to be held in the year 2023 on such remuneration as decided by the Board on recommendation by the Audit committee subject to the approval of Members. They being eligible have consented to be appointed as Statutory Auditors for conducting audit for a term of 5 consecutive years. The Company has received consent letter and certificate from the said auditors to the effect that, their appointment if made would be within the limits and term laid down by the Act and they are not disqualified for such appointment. The said auditors have confirmed, that they have subjected themselves to the peer review process of the Institute of Chartered Accountants of India (ICAI) and hold a valid certificate issued by the Peer Review Board of ICAI.

The current auditors have submitted their report for FY 2017-18 and does not contain any qualification, reservation or adverse remark. The auditor’s report is enclosed with the financial statements in this Annual Report.

B. Cost Auditor

Section 148 of the Act, pertaining to audit of cost records is applicable to Company. Based on the recommendation of the Audit Committee, the Board has appointed K Suryanarayanan, Practicing Cost Accountant (Membership No.24946) to audit the Cost Accounts of your Company for the financial year ended March 31, 2018 on a remuneration of Rs.5 Lakhs per year.

C. Secretarial Auditor

Pursuant to the provisions of Section 204 of the Act, and rules thereunder, M/s. M Damodaran (Membership No.F5837) of M/s. M Damodaran & Associates, Practicing Company Secretaries, Chennai was appointed to conduct the Secretarial Audit of the Company for the FY 201718. The Secretarial Audit Report for the FY 2017-18 is enclosed herewith as Annexure III to the Board’s report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

The Board has appointed M/s. M. Damodaran of M/s. M Damodaran & Associates, Practicing Company Secretaries, as Secretarial Auditor of the Company for the FY 2018-19.

D. Internal Auditor

Pursuant to the provisions of Section 138 of the Act and the Rules thereunder and Regulation 18(3) of the SEBI LODR and based on the recommendations of Audit Committee, your Board had appointed M/s PKF Sridhar & Santhanam LLP, Chartered Accountants, Chennai, (FRN -003990S/ S200018) as Internal Auditors of the Company to conduct the Internal Audit of the Company for the FY 2017-18. The Internal Auditor reports directly to the Audit Committee and makes comprehensive presentations at the Audit Committee meeting(s) on the Internal Audit Report.

Your Board has appointed M/.s PKF Sridhar & Santhanam LLP, Chartered Accountants, Chennai as Internal Auditor of the Company for the FY 2018-19.

Details in respect of frauds reported by Auditors other than those which are reportable to the Central Government:

The Statutory Auditors, Cost Auditors, Secretarial Auditors, Internal Auditors of the Company have not reported any frauds to the Audit Committee or to the Board of Directors under Section 143(12) of the Act, including rules made thereunder.

Subsidiaries, Joint Ventures & Associates

The WABAG Group companies continues to contribute to the overall growth in revenues and overall performance of the Company. The Company has 18 subsidiaries, 3 associates and a joint venture entity as on March 31, 2018. During the year, your Company has incorporated a subsidiary viz., M/s VA TECH WABAG BRAZIL SERVICOS DE AGUA E SANEAMENTO LTDA in the country of Brazil.

In accordance with Section 129(3) of the Act, Consolidated Financial Statements of the Company and all its subsidiaries forms part of the Annual Report. Further, a statement containing the salient features of the financial statement of our subsidiaries in the prescribed format AOC - 1 is enclosed herewith as Annexure IV to the Board’s report. The statement also provides the details of performance and financial position of each of the subsidiaries.

In accordance with Section 136 of the Act, the Audited Financial Statements, including the Consolidated Financial Statements and related information of the Company and Audited Financial Statements of each of its subsidiaries, are available on our website www.wabag.com. These documents will also be available for inspection during business hours at the registered office of the Company.

Related Party Transactions

During FY 2017-18, the Company has entered into transactions with Related Parties as defined under Section 2(76) of the Act, all of which were in the ordinary course of business and on arm’s length basis and in accordance with the provisions of the Act, read with the Rules issued thereunder and the SEBI LODR.

There are no materially significant Related Party Transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large.

All Related Party Transactions are placed before the Audit Committee and also the Board for approval.

Policy on dealing with Related Party Transactions is available on the Company’s website www.wabag.com.

The details as required to be provided under Section 134(3)(h) of Act, are disclosed in form AOC-2 as Annexure V to the Board’s Report.

Policy on determining material subsidiaries of the Company is available on the website of the Company.

Overseas Direct Investment

WABAG, over the years has expanded its global reach through Overseas Direct Investments (ODI), either through subsidiaries, associates or joint venture Companies.

As of March 2018, the total funded financial investments of your Company through equity contribution in such ODIs amounted to Rs.25 Crore, which represents 6% of total financial commitment and the total non-funded financial investments in the form of guarantees through ODI route amounted to Rs.381.24 Crore which represents 93% of total financial commitment.

The investments made by the Company in overseas entities have started yielding return on investments in the form of dividend also. During the year, the Company earned a dividend income of Rs.20 Crore from its overseas investment.

In addition to such dividend receipts, your Company has also immensely benefited from these ODIs in the form of export earnings. During the financial year 2017-18, the Standalone revenue of the Company included revenue from overseas projects amounting to Rs.716 Crore, which is an increase of 17.6% over the previous year export revenue of Rs.609 Crore. The aggregate operational revenue generated by the Group during the financial year 2017-18 through company’s overseas entities and exports out of India aggregated to Rs.2,316 Crore, which is 67% of overall consolidated revenue of Rs.3,457 Crore. The benefits generated by the Company from its overseas entities are substantial considering its relative meagre financial investment in such ODI entities as stated above.

During the year, as part of business restructuring, expansion and other plans in Europe, LATAM and MEA clusters, some of the steps initiated by your Company were:

1. Formed a Branch in Argentina and Dubai and a subsidiary entity in Brazil.

2. As part of restructuring plan of European cluster, the shares held by German subsidiary in other group entities, have been restructured/transferred within other group entities. Pursuant to such action, the minority stake held by German subsidiary in Romanian subsidiary has been acquired by its holding company viz., VA Tech Wabag GmbH, Austria (“Austria subsidiary”). As at March 31, 2018, 99.97% shares of Romanian entity held by Austria.

3. Pursuant to the completion and commissioning of the Desalination Project by Company’s Joint venture entity viz., International Water Treatment LLC (“IWT”), Muscat, Oman in the year 2016, the project is presently under Defect Liability Period (“DLP”). Upon completion of the DLP, the Company will initiate necessary action along with other JV partners for closure of the entity. During the year, there are no further payments made by the Company to IWT. As stated in our Annual Report for the previous year, the capital restructuring process of IWT was approved by the local authorities in Oman in the previous year and the Company has taken up the case with regulatory authorities in India for necessary clearances and approvals.

Corporate Social Responsibility

In accordance with the Act, your Company allocated a limit equivalent to 2% of the average net profits of its three immediately preceding financial years for implementation of CSR activities. During the year under review, your Company incurred a sum of Rs.172.55 Lakhs towards CSR expenditure.

In keeping with the Company’s CSR focus on water and waste water, the Company identified various projects for implementation for the year 2017-18. Apart from three multiyear watershed projects, i.e. one at Pulleri village, Kanchipuram District, Tamil Nadu and two at Cuddalore District estimated at Rs.2.50 Crore, the Company signed MoU with NABARD as cofinancing partner for three more multi-year watershed projects, one each at Tuticorin District, Dindigul District and Virudunagar District, Tamil Nadu with three reputed local NGOs as implementing partners. The estimated cost (WABAG’s portion) for the three projects is Rs.2.25 Crore.

Furthermore, your Company also entered into a Memorandum of Understanding (MoU) with Bharat Rural Livelihood Foundation (BRLF), an independent non-profit society set up by the Government of India for implementing watershed project in six districts in West Bengal for which we have committed a sum of Rs.2.50 Crore spread over a period of 4 years. Out of this, the Company has already paid a sum of Rs.53.00 Lakhs towards the first year instalment. The key objective behind this CSR investment by WABAG is to leverage the MGNREGA funds which will have wider impact in terms of end beneficiaries, i.e. poor farmers and tribals in West Bengal. With this committment to BRLF, the total committment approved by the CSR Committee towards certain multiyear projects is over Rs.7.00 Crore.

Over and above the major watershed development projects as mentioned above, your Company also implemented a few minor projects - one health and hygiene project at Viralipatti, Pudukottai District; water treatment plant for special children at Shristi Trust, Munnar, Kerala; water treatment plant for Voluntary Health Services, Adyar, Chennai, pond renovation projects at Cuddalore District at the instance of NABARD besides a minor irrigation project at Sevalaya, Chennai.

Your Company had undertaken revitalizing and enriching projects in CSR in the areas of Water, sanitation and livelihood in 2017-18 thereby increasing the continued value creation in the areas in which your Company operates. These initiatives address the necessities of the local communities in and around Chennai where company is headquartered.

The CSR Committee of the Board has been constantly reviewing the projects and gives directions to expedite implementation of the projects undertaken.

Your Company’s CSR Committee comprises of Revathi Kasturi (Chairperson) (DIN: 01837477), Rajiv Mittal (DIN: 01299110) and S Varadarajan (DIN: 02353065). The Committee is responsible for formulating and monitoring the CSR policy of the Company. This policy is available on the Company’s website in the following link: http:/www.wabagindia.com/Policies.aspx

Pursuant to Section 135(4) of the Act, the major contents of CSR policy are as follows:

Core Ideology: For WABAG, responsible business practices include being responsible for our business processes, engaging in responsible relations with employees, customers and the community. Hence for the Company, Corporate Social Responsibility goes beyond just adhering to statutory and legal compliances, and creates social and environmental value while supporting the company’s business objectives and reducing operating costs, and at the same time enhancing relationships with key stakeholders and customers.

Total Outlay for each financial year: From April 1, 2014, for each financial year, WABAG pledges at least 2% of the average net profits made during the 3 immediately preceding financial years specifically towards CSR initiatives.

Allocation of Resources & Thrust Areas: The CSR Committee of the Board of the Company will manage 2% of the average net profits made during the 3 immediately preceding financial years to undertake CSR initiatives which meet the needs of the local communities where we operate.

WABAG CSR Committee may make contributions to the corporate foundations/Trusts towards education for the under privileged children, vocational and livelihood training of youth, relief to the poor, education and encouragement of sports, medical relief and disaster relief & rehabilitation, or both.

WABAG’s commitment to CSR will be manifested by investing resources in one or more of the following areas:

Eradicating hunger, poverty and malnutrition, promoting preventive health care and sanitation and making available safe drinking water;

Promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly and the differently-abled and livelihood enhancement projects;

Promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centers and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups;

Ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal Welfare, agro-forestry, conservation of natural resources and maintaining quality of soil, air and Water;

Protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional arts and handicrafts;

Measures for the benefits of armed forces veterans, war widows and their dependents;

Training to promote rural sports, nationally recognized sports, Paralympics sports and Olympic sports;

Contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government for socio-economic development and relief and welfare of the Schedule Castes, the Scheduled Tribes, other backward classes, minorities and women;

Contribution of funds provided to technology incubators located within academic institutions which are approved by the Central Government;

Rural development projects: The surplus arising out of the CSR activities will not be considered as part of the business profits of the Company.

The annual report on our CSR activities is enclosed herewith as Annexure VIto the Board’s report.

Particulars of Loans, Guarantees or Investments

Details of loans, guarantees and investments covered under the provisions of section 186 of the Act, form part of the notes to the financial statements.

Internal Control Related to Financial Statements

Your company has put in place adequate internal financial controls over financial reporting. These are reviewed periodically and made part of work instructions or processes in the Company.

Your Company continuously tries to automate these controls to increase its reliability. The Company follows accounting policies which are in line with the Indian Accounting Standards notified under Section 133 of the Act, read with the Companies (Indian Accounting Standards) Rules, 2015. These are in accordance with the Generally Accepted Accounting Principles in India.

International subsidiaries provide information required for consolidation of accounts in the format prescribed by the Company. These are certified by the respective statutory auditors for being compliant with the group accounting policies for the purpose of annual consolidation of accounts.

In compliance with Section 134(5) of Act, your Company has put in place adequate system of internal controls commensurate with its size and the nature of its operations. The Company’s internal control system includes the following but not restricted to aspects of:

1. Financial propriety of business transactions

2. Safeguarding the assets of the Company

3. Compliance with prevalent statutes, regulations, management authorisations, policies and procedures.

The Audit Committee of the Board periodically reviews audit plans, observations and recommendations of the internal and external auditors, with reference to the significant risk areas and adequacy of internal controls and keeps the Board of Directors informed of its observations, if any, from time to time.

Awards & Recognitions Quality assurance

The The Company has sustained its commitment to the highest levels of quality, best-in-class service management, robust information security practices and mature business continuity processes that have collectively helped achieve significant milestones during the year. While sustaining existing external benchmarks and certifications, the Company has added new certifications and further enhanced its programs and initiatives.

Please refer page 13 of the Annual Report for the details of the rewards and recognition achieved by the Company globally during this year.

Risk Management

Your Company has a comprehensive Risk Management and mitigation process for business, operation and strategy. The Board has constituted a separate Committee viz. Risk Management and Monitoring Committee which meets regularly and gets updates from Management on different strategies and its implementation to avoid future risk and threat to the Company. The Committee consists of 5 Directors out of which 4 are Independent Directors. The details on the Company’s risk management framework, risk identification, risk evaluation, mitigation measures and monitoring mechanism forms part of the Management’s Discussion and Analysis section of this Annual Report.

Particulars of Contracts or Arrangements made with Related Parties

Particulars of contracts or arrangements with related parties referred to in Section 188(1) of the Act, in the prescribed Form AOC-2, is enclosed herewith as Annexure Vto the Board’s report.

Significant and Material Changes/Orders

There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company’s operations in future. There are no material changes and commitments affecting the financial position of the Company between the end of the FY of the Company to which the financial statements relate and date of this report.

Other Disclosures

1. During the year under review, the Company has not accepted any deposit within the meaning of Sections 73 and 74 of the Act, read with the Companies (Acceptance of Deposits) Rules, 2014 (including any statutory modification(s) or reenactments) thereof for the time being in force);

2. The Company has complied with Secretarial Standards issued by the Institute of Company Secretaries of India on Board and General Meetings;

3. The information on conservation of energy, technology absorption and foreign exchange earnings and outgo as stipulated under Section 134 of the Act, read with the Companies (Accounts) Rules, 2014, is enclosed herewith as Annexure VII to the Board’s report;

4. The Company has not issued equity shares with differential rights as to dividend, voting or otherwise.

5. During the year there was no change in nature of business of the Company or any of its subsidiaries

Extract of Annual Return

In accordance with Section 134(3)(a) of the Act, an extract of the annual return in the prescribed format is enclosed herewith as Annexure VIIIto the Board’s report.

Health, Safety and Environmental Protection (HSE)

The Company has complied with all applicable environmental and labour laws. The details of quality, health, safety, environment initiatives, objectives and achievements made by the Company are detailed in the Management Discussion and Analysis section of the Annual Report.

Sustainability Initiatives

Your Company is in the space of providing solutions in the realm of water and waste water treatment. Your Company’s strategy always focus on growth without adversely impacting the environment. In the past 4 years the Indian subcontinent has been facing drastic climate changes in which drought on one side and flood on other side made it more challenging. Sustainability runs through the Company in all its operations and functions. Your Company continuously focuses on solutions which have low carbon footprint and that are sustainable. Globally, your Company is actively involved in providing solutions that are eco-friendly and renewable in nature. Your Company’s contribution towards sustainability is continuous in nature as is reflected throughout this report and forms an integral part of our business.

Whistle Blower Policy

The Company has established a vigil mechanism/framed a whistle blower policy. The policy enables the employees and other stakeholders to report to the management any instances of unethical behaviour, actual or suspected fraud or violation of the Company’s code of conduct or ethics policy. This policy is reviewed by the Audit Committee to check the effectiveness of the policy. No personnel has been denied access to the Audit Committee. The provisions of this policy are in line with the provisions of Section 177 (9) of the Act, and SEBI LODR. The policy is available on the website of the company www.wabag.com.

Green Initiatives

The Company started a sustainability initiative with the aim of going green and minimizing the impact on the environment. Electronic copies of the Annual Report 2018 and Notice of the 23^rd Annual General Meeting are being sent to all Members whose email addresses are registered with the Company / Depository Participant(s). For Members who have not registered their email addresses, physical copies of the Annual Report 2018 and the Notice of the 23^rd AGM are being sent by the permitted mode. Members requiring physical copies can send a request to the Company.

The Company provides e-voting facility to all its Members to enable them to cast their votes electronically on all resolutions set forth in the Notice. This is pursuant to the Section 108 of the Act and Rule 20 of the Companies (Management and Administration) Amendment Rules, 2015.

Cautionary Statement

Certain statements in the Board’s Report describing the Company’s objectives, projections, estimates, expectations or predictions may be forward-looking statements within the meaning of applicable securities laws and regulations. Actual results could differ from those expressed or implied. Important factors that could make a difference to the Company’s operations include labour and material availability, and prices, cyclical demand and pricing in the Company’s principal markets, changes in government regulations, tax regimes, economic development within India and other incidental factors.

Appreciation

The Board of Directors wish to convey their gratitude and place on record their appreciation for all the employees at all levels for their hard work, solidarity, cooperation and dedication during the year. Further, the Board sincerely conveys its appreciation to its customers, stakeholders, suppliers as well as vendors, bankers, business associates, regulatory and government authorities for their continued support.

For and on behalf of the Board of Directors

B D Narang Rajiv Mittal

Chennai Chairman Managing Director & Group CEO

May 25, 2018 (DIN: 00826573) (DIN: 01299110)

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Mar 31, 2016

Dear Shareholders,

The Directors are pleased to present the 21st Annual Report of the Company, together with the Audited Financial Statements for the year ended March 31, 2016.

Financial summary

Your Company''s financial performance for the year ended March 31, 2016 is summarised below:

(Rs. in Lakhs)

Standalone Consolidated Particulars 2015-16 2014-15 2015-16 2014-15

Gross turnover 1,51,343 1,23,336 2,54,857 2,43,515

Profit before interest, tax & depreciation (EBITDA) 20,607 14,926 22,465 20,947

Net profit before tax 17,853 13,601 16,172 16,710

Provision for tax (6,110) (4,560) (6,890) (5,664)

Net profit after tax 11,743 9,041 9,282 11,046

Proposed dividend on equity shares (2,180) (2,176) (2,180) (2,176)

Tax on proposed dividend (456) (443) (456) (443)

Retained profit carried forward to the following year 46,008 36,901 49,730 43,302

Business environment

The global business environment during the year was subdued and witnessed slow growth across geographies. The oil price crisis in Middle East dominated throughout the year and had its effects spread across the world. The currency devaluation by China and the slowdown in this region witnessed tremendous volatility in the major currencies and commodities. Despite the global turmoil, Indian economy remained fairly stable but the growth momentum which was expected during the year did not happen on the back of slow decision making and lead up to various state elections held in May 2016.

Forecasting these developments to an extent, your Company had proactively spread its wings in the international emerging geographies where better visibility was seen in terms of new projects in the water treatment space. The focused approach of the business development and sales team helped your company in garnering good order intake in Malaysia, Bahrain, Sri Lanka, Nigeria and Saudi Arabia. Towards the end of the year, your company also bagged a big ticket tertiary treatment order in Chennai, India. The strategy of diversifying into targeted geographies for newer opportunities helped the Company secure its biggest ever order intake in a single financial year and thereby helped in navigating your Company safely amidst tough macro-economic conditions.

State of affairs

In the financial year 2015-16, your Company continued its growth momentum on key parameters. During the year, your company recorded order intake of Rs. 5,140 Crore which helped your Company to close the year with a strong order book of Rs. 7,308 Crore as on March 31, 2016. Your Company''s consolidated turnover stood at Rs. 2,549 Crore compared to previous year''s turnover of Rs. 2,435 Crore recording a growth of 5%. The standalone turnover stood at Rs. 1,513 Crore, an increase of 23%, compared to previous year''s turnover of Rs. 1,233 Crore. The consolidated EBITDA increased to Rs. 225 Crore in FY 2015-16 as against Rs. 209 Crore in the previous year registering a growth of 8% over previous year. On a standalone basis the EBITDA stood at Rs. 206 Crore in FY 2015-16 as against the previous year''s EBITDA of Rs. 149 Crore. The consolidated PAT stood at Rs. 92 Crore as against Rs. 110 Crore in the previous year. The increase in working capital due to the liquidity stress in the market impacted the Company''s bottom-line adversely. The consolidated EPS was atRs. 16.95 for the year ended March 31, 2016 as against Rs. 20.39 in the previous year.

Dividend

Your directors are pleased to recommend a final dividend of Rs.4/- per equity share on the face value ofRs. 2/-per equity share for the financial year ended March 31, 2016 amounting to Rs. 26.36 Crore (inclusive of tax Rs. 4.56 Crore). The dividend payout is subject to approval of members at the ensuing Annual General Meeting (AGM).

The dividend will be paid to members whose names appear in the Register of members as on July 15, 2016 in respect of shares held in dematerialised form, it will be paid to members whose names are furnished by National Securities Depository Limited and Central Depository Services (India) Limited as beneficial owners as on that date.

Management''s discussion and analysis

In terms of the provisions of Regulation 34 of the SEBI Listing Obligations And Disclosures Requirements Regulation (SEBI LODR) 2015, the Management''s discussion and analysis is set out in this Annual Report.

Key projects updates

PETRONAS RAPID ETP PROJECT, Malaysia

During the year, Malaysia''s National Oil and Gas company, Petroliam Nasional Berhad (PETRONAS), through its subsidiary under the PETRONAS Group, PRPC Utilities and Facilities Sdn. Bhd. (PRPC UF), signed a contract with VA Tech Wabag Limited and Muhibbah Engineering (M) Bhd for the ReFEED and Engineering, Procurement, Construction and Commissioning of the Effluent Treatment Plant (ETP) for PETRONAS'' Refinery and Petrochemicals Integrated Development (RAPID) Project in Pengerang, Johor. The project is being executed by Wabag-Muhibbah JV Sdn. Bhd., a JV company incorporated in Malaysia. The contract''s scope covers RAPID Complex''s effluent and waste water treatment to below the regulatory discharge limits with a state-of-the- art water treatment system. The project is progressing as per schedule. The ReFEED Engineering approval has been obtained while the detailed engineering, procurement and construction activities are progressing as planned.

AMAS STP PROJECT, Bahrain

The year 2015-16 saw your Company winning a large EPC order from the Kingdom of Bahrain, to Design and Build a Sewage Treatment Plant (STP) for Al Madina Al Shamaliya (AMAS), the new town being developed in Bahrain. The project is funded by Abu Dhabi Fund for Development (ADFD). WABAG is partnering with Belhasa Projects LLC, UAE for executing this project. AMAS is a mixed used new town on reclaimed land off the north coast of the Kingdom of Bahrain. With a total land area of approximately 750ha over 13 islands,

AMAS shall be developed for Housing, Recreational, and Business activities purpose which will provide approximately 15,000 dwelling units. The STP plant with tertiary treatment will cater to the entire irrigation water requirements of all the 13 islands. The client has approved the basic engineering; the civil work has commenced and the detailed engineering and procurement is at an advanced stage.

DANGOTE RWTP PROJECT, Nigeria

WABAG is designing and building a Raw Water Treatment plant for Dangote Fertilizer Ltd a Company forming part of the Dangote Group, one of Africa''s most diversified business groups. The greenfield, integrated fertiliser and refinery complex will be located near Lagos, Nigeria''s largest city, and will be the largest of its kind in Africa. 60 MLD of raw water from the lagoon will be processed using a combination of ultrafiltration/reverse osmosis. The scope of the contract includes design, engineering and supply of raw water treatment plant, as well as supervision of installation and commissioning. The project is progressing well and reached the final stages of engineering completion.

AL GHUBRAH DESALINATION PROJECT, Oman

During the year, the 191 MLD Al Ghubrah Desalination Project was completed and handed over to the client. The project was executed by International Water Treatment LLC (IWT) a SPV incorporated in Muscat, Oman, with the Company holding 32.5% stake and the other joint venture partners of the SPV being Cadagua SA, Spain (37.5%) and Galfar Engineering & Contracting SAOG, Oman (30%). The plant has an innovative design that provides it with a compact footprint and employs technology that includes a two-pass reverse osmosis system with pre-treatment using dissolved air flotation (DAF) and dual media filters. The Project suffered a time over-run which led to delay in the overall commissioning of the plant that has eroded the expected margins on the Project. As per terms of the contract the SPV is liable to pay liquidated damages (LD) to the client. The Company''s share of the liquidated damages would amount to 32.5% of the overall liquidated damages that could be levied. The SPV has initiated arbitration proceedings with the client on the extent of liquidated damages and the matter is sub judice. Although the Project suffered losses, the state-of-the-art Plant is a good reference for the Company which will enable it to win large projects in Desalination space.

APGENCO KAKATIYA and RAYALASEEMA THERMAL POWER PROJECT, India

Andhra Pradesh Power Gen. Co. Ltd. had placed orders for two 600 MW Thermal Power Plants - one at Warangal and another at Cuddapah. The orders were placed on a consortium in which WABAG was joint partner along with two more contractors.

WABAG was initially responsible for Water Systems Package. Due to financial issues on the part of the Consortium leader, WABAG had to take lead of the consortium from mid-2014 and took over the overall responsibility of completing the entire balance of plant for the 600 MW Power plant. For the first time, WABAG ventured into the construction of the full Balance of Plant package.

The first of the 600 MW Kakatiya Thermal Power projects was completed successfully and the Plant was inaugurated by the Chief Minister of Telengana in the Month of January 2016. The other 600 MW Rayalaseema Thermal Power plant is under construction and the plant is in progress as per schedule for completion.

Corporate governance

Your Company is committed to maintain the highest standards of corporate governance. We believe sound corporate governance is critical to enhance and retain investor trust. Our disclosures seek to attain the best practices in corporate governance as prevalent globally. We have implemented several best corporate governance practices in the Company to enhance long-term shareholder value and respect minority rights in all our business decisions. Our corporate governance report for FY 2015-16 forms part of this Annual Report. The requisite certificate from the auditors of the Company confirming compliance with the conditions of corporate governance as stipulated under SEBI LODR is annexed to the corporate governance report.

Directors & Key managerial personnel

Rajiv Mittal was appointed as the Managing Director & Group CEO for a period of 5 years effective October 1, 2015 by the members at the 20th AGM held on July 27, 2015. The members at the said AGM also appointed S Varadarajan as a Director of the Company liable to retire by rotation and Malay Mukherjee as an Independent Director for a period of 3 consecutive years for a term up to the conclusion of the 23rd AGM of the Company in the calendar year 2018. We thank the members for their support in confirming the above- mentioned appointments.

The board, on the recommendation of the Nomination and Remuneration Committee, appointed Parthasarathy Gopalan as the Chief Financial Officer (CFO) effective November 7,2015 in place of S Varadarajan who relinquished his post as the CFO of the Company. The board places on record its appreciation for the services rendered by S Varadarajan during his tenure as CFO with the Company. Further, based on the recommendation of the Nomination and Remuneration Committee, S Varadarajan was designated as the Director & Chief Growth Officer of the Company effective November 7, 2015.

As per the provisions of the Companies Act, 2013, S Varadarajan, retires by rotation at the ensuing annual general meeting and being eligible, seeks re-appointment. A brief profile of S Varadarajan is given in the notice dated May 26, 2016 convening the AGM of the Company. The board recommends his re-appointment.

Declaration by independent directors

The Company has received necessary declaration from each independent director under Section 149(7) of the Companies Act, 2013, that he/she meets the criteria of independence laid down in Section 149(6) of the Companies Act, 2013 and Regulation 25 of SEBI LODR.

Board diversity

The Company recognises the importance of a diverse board for its success and believes that a diverse board will leverage inter alia differences in thought, knowledge, skills, regional and industry experience, cultural and geographical background which in the long run will enhance shareholder value. The Nomination and Remuneration Committee sets out the approach to diversity of the board of directors.

Board evaluation

Pursuant to the provisions of the Companies Act, 2013 and Regulation 19 of SEBI LODR, the board has carried out the annual performance evaluation of its own performance, the directors individually as well as the evaluation of the working of its Audit, Nomination and Remuneration, Stakeholders Relationship, Corporate Social Responsibility, Monitoring & Overseas Investment Committee. A structured questionnaire was prepared after taking into consideration inputs received from the directors, covering various aspects of the board''s functioning such as adequacy of the composition of the board and its Committees, Board culture, execution and performance of specific duties, obligations and governance.

A separate exercise was carried out to eval uate the performance of individual directors including the Chairman of the board, who were evaluated on parameters such as participation and contribution by a director, commitment, including guidance provided to the senior management outside of board / committee meetings, effective deployment of knowledge and expertise, effective management of relationship with various stakeholders, independence of behavior and judgment etc. The performance evaluation of the Independent Directors was carried out by the entire board. The performance evaluation of the Chairman and Managing Director were carried out by the Independent Directors. The board also reviewed the performance of the Chief Financial Officer, Company Secretary and other senior managerial personnel. The evaluation process has been explained in the corporate governance report. The board approved the evaluation results as collated by the Nomination and Remuneration Committee.

Policy on directors appointment and remuneration

The Company''s current policy is to have an appropriate mix of Executive and Independent Directors to maintain the independence of the board and separate its functions of governance and management. As on March 31,2016 the board consists of 7 Directors, majority of them being independent directors. Besides the Chairman who is an independent director, the board comprises the managing director and an executive director both being promoters and 4 independent directors. The board periodically evaluates the need for change in its composition and size.

The policy of the Company on director''s appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters as required under sub-section (3) of Section 178 of the Companies Act, 2013 are formulated by the Nomination and Remuneration Committee and is outlined in the Nomination Evaluation & Remuneration policy of the Company.

Number of meetings of the board

The board met four times during the financial year, the details of which are given in the corporate governance report. The maximum interval between any two meetings did not exceed 120 days, as prescribed in the Companies Act, 2013.

Committees of the board

Currently, the board has six Committees: the Audit Committee, the Nomination and Remuneration Committee, the Corporate Social Responsibility Committee, the Stakeholders Relationship Committee, the Monitoring Committee and the Overseas Investment Committee. As required under section 177 (8) of the Companies Act, 2013, the composition of the Audit Committee is disclosed as under:

B D Narang, Chairman of the Committee, Jaithirth Rao, Malay Mukherjee and Sumit Chandwani.

A detailed note on the composition of the board and other committees is provided in the corporate governance report section of this annual report.

Induction & training of board members

On appointment, the concerned director is issued a letter of appointment setting out in detail, the terms of appointment, duties, responsibilities and expected time commitments. Each newly appointed/ designated independent director is taken through a formal induction program including the presentation from the managing director & group CEO on the Company''s operations, marketing, finance and other important functions. The company secretary briefs the director about their legal and regulatory responsibilities as a director. The induction for independent directors include interactive sessions with executive committee members, business and functional heads, visit to the plant site etc. The above initiatives help the director to understand the Company, its business and the regulatory framework in which the Company operates and equips him/ her to effectively fulfill his role as a director of the Company.

Periodic presentations are also made at the board and committee meetings on business and performance updates of the Company, global business environment, business strategy and risks involved.

Director''s responsibility statement

Pursuant to the requirement under Section 134 (3) (c) of the Companies Act, 2013, your 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;

- they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period;

- they have taken proper and sufficient care towards the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

- they have prepared the annual accounts on a going concern basis;

- they have laid down internal financial controls which were adequate and are operating effectively; and

- they have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.

Remuneration policy

The Company''s remuneration policy is driven by the success and performance of the individual employee and the Company. Through its compensation programme, your Company endeavors to attract, retain, develop and motivate a high performance workforce. The Company follows a compensation mix of fixed pay benefits and performance based variable pay. Individual performance pay is determined by business performance and the performance of the individuals are measured through quarterly & annual appraisal process.

The primary objective of the remuneration policy is to formulate the criteria for determining qualifications, competencies, positive attributes and independence for the appointment of a director and recommend to the board policies relating to the remuneration of the directors, KMPs and other employees. This includes reviewing and approving corporate goals and objectives relevant to the compensation of the executive directors, evaluating executive directors'' performance in the light of those goals and objectives, and either as a committee or together with the other independent directors (as directed by the board), determine and approve the executive directors'' compensation level based on this evaluation and making recommendations to the board with respect to key managerial personnel''s (KMPs) compensation, performance incentives and equity based plans that are subject to the board''s approval.

The purpose of the policy is also to assess the effectiveness of the board as a whole, committees of the board and individual directors on regular basis through the Nomination and Remuneration Committee of the board. The policy also addresses board diversity and outlines remuneration principles for directors, KMP''s and other employees based on various evaluation criteria determined by the Nomination and Remuneration Committee including measuring their performance and achievement against the Company''s goals.

Employees'' stock option scheme

Nomination and Remuneration Committee of the Board of directors of the Company, inter alia administers and monitors the Company''s employees'' stock option scheme (ESOP Scheme) in accordance with the applicable SEBI Regulations. During the year ended March 31, 2016, a total of 2,11,911 shares were allotted to eligible employees under the Company''s prevailing ESOP scheme. During the year ended March 31, 2016 there has been no material change in the Company''s existing ESOS and the scheme is in compliance with the applicable Regulations. The details of the scheme as required under SEBI Regulations is available on the Company''s website www. wabag.com.

The applicable disclosures as stipulated under the SEBI Regulations as on March 31, 2016 is enclosed herewith as Annexure I to the Board''s report. The Company has received a certificate from the statutory auditors that the scheme has been implemented in accordance with the SEBI Regulations and the resolutions passed by the shareholders. The certificate would be placed at the AGM for inspection by the members.

Particulars of employees

The ratio of remuneration of each director to the median of employees'' remuneration as per Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and a statement containing the names of every employee employed throughout the financial year and in receipt of remuneration ofRs. 60 Lakhs or more, or employed for part of the year and in receipt of Rs. 5 Lakhs or more a month, under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is enclosed herewith as Annexure II to the Board''s report.

Equal opportunity

The Company has always provided a congenial atmosphere for work to all employees that is free from discrimination of any kind. It has provided equal opportunities of employment to all without regard to the nationality, religion, caste, color, language, marital status and sex. The Company has also framed a policy on ''Prevention of Sexual Harassment'' (POSH) at the workplace. We follow a gender-neutral approach in handling complaints of sexual harassment and we are compliant with the law of the land wherever we operate. We have also constituted an Internal Complaints Committee to consider and address sexual harassment complaints. The details of issues raised and resolved regarding sexual harassment of women at the workplace is available in the human resources section which forms part of this annual report.

Auditors

Statutory auditors

At the AGM held on July 27, 2015, Walker Chandiok & Co. LLP, Chartered Accountants, were appointed as statutory auditors of the Company to hold office till the conclusion of AGM to be held in the calendar year 2018. In terms of the first proviso to Section 139 of the Companies Act, 2013, the appointment of the auditors shall be placed for ratification at every AGM. Accordingly, the appointment of Walker Chandiok & Co. LLP, Chartered Accountants, as statutory auditors of the Company, is placed for ratification by the shareholders.

The auditors'' report for FY 2015-16 does not contain any qualification, reservation or adverse remark. The auditors'' report is enclosed with the financial statements in this annual report.

Cost auditor

Section 148 of the Companies Act, 2013 pertaining to audit of cost records is applicable to the Company. Based on the recommendation of the Audit Committee, the board has appointed S Chandrasekaran, Practicing Cost Accountant (Membership No.4784) to audit the cost accounts of the Company for the financial year ended March 31, 2016 and ending March 31, 2017 on a remuneration of Rs. 5 Lakhs per year. As per the provisions of Section 148 of the Companies Act, 2013, the remuneration payable to the cost auditor is required to be ratified by the members. Accordingly, the remuneration payable to S Chandrasekaran, Practicing Cost Accountant, cost auditors of the Company is placed for ratification by the shareholders.

Secretarial auditor

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and rules thereunder, M.Damodaran (Membership No. 5837) of M.Damodaran & Associates, Practicing Company Secretaries was appointed to conduct the secretarial audit of the Company for the FY 2015-16. The secretarial audit Report for FY 2015-16 is enclosed herewith as Annexure III to the Board''s report. The secretarial audit Report does not contain any qualification, reservation or adverse remark.

The board has appointed M. Damodaran of M. Damodaran & Associates, Practicing Company Secretaries, as secretarial auditor of the Company for the FY 2016-17.

ODI in Subsidiaries, joint ventures and associate companies WABAG, over the years has expanded its global reach through Overseas Direct Investments (ODI), either through subsidiaries, joint venture or associate companies. As of March 2016, the aggregate financial investments in such ODIs amount to Rs. 1,192.20 Crore. Out of such overseas investments, a very substantial component of investment comprises of guarantees or non-funded exposure for various projects, which as of March 2016 amounted to Rs. 1,149.18 Crore (96.40% of total financial exposure). The funded exposure of the Company in ODI for the same period consists of equity Rs. 29.50 Crore (2.47% of total financial exposure) and loans Rs. 13.52 Crore (1.13% of total financial exposure).

The Company has immensely benefited from these ODI, as its standalone revenue from overseas operations as of March 2016 amounted to Rs. 538 Crore, while consolidated overseas revenue less inter-segment revenue amounted to Rs. 1,039 Crore out of its consolidated revenue ofRs. 2,542 Crore. In all, during the financial year 2015-16, the aggregate revenue from ODI is Rs.1,577 Crore (i.e. Rs. 538 crore Rs. 1,039 crore), which accounted for about 62 % of the consolidated revenue of Rs. 2,542 crore, considering its relative meager financial exposure to ODI as stated above.

The consolidated financial statements of the Company and all its subsidiaries which form part of the annual report have been prepared in accordance with Section 129(3) of the Companies Act, 2013 and regulation 33 of SEBILODR. Further, a statement containing the salient features of the financial statement of our subsidiaries, joint ventures and associates in the prescribed format AOC-1 is enclosed herewith as Annexure IV to the Board''s report. The statement also provides the details of performance and financial position of each of the subsidiaries, joint ventures and associates.

During the year, WABAG MUHIBBAH JV SDN, BHD was incorporated in MALAYSIA as a subsidiary to carry out the RAPID Project. WABAG BELHASA JV WLL was incorporated in BAHRAIN as a subsidiary to carry out AMAS Project. VA TECH WABAG EGYPT LIMITED, EGYPT ceases to be a step down subsidiary of the Company since the Company was liquidated in the month of February 2016. Your Company had 21 subsidiaries as on March 31, 2016. BEIJING VA TECH WABAG WATER TREATMENT TECHNOLOGY CO. LTD ceases to be a step down subsidiary of the Company since the Company was liquidated in the month of April 2016. There has been no change in the nature of business of the subsidiaries during the year. During the year, the board of directors reviewed the affairs of the subsidiary Companies. Details of major subsidiaries of the Company and their business operations during the year under review are covered in the management''s discussion and analysis report.

In accordance with Section 136 of the Companies Act, 2013 the audited financial statements, including the consolidated financial statements and related information of the Company and audited accounts of each of its subsidiaries are available on our Company''s website www. wabag.comThese documents will also be available for inspection during business hours at our registered office in Chennai, India.

Corporate social responsibility

As per the provisions of the Companies Act, 2013 all Companies having a net worth of Rs. 500 Crore or more, or turnover of Rs. 1,000 Crore or more or a net profit of Rs. 5 Crore or more during any financial year are required to constitute a Corporate Social Responsibility (CSR) Committee of the board of directors comprising three or more directors, atleast one of whom should be an independent director. All such Companies are required to spend atleast 2% of the average net profits of their three immediately preceding financial years on CSR- related activities. Accordingly, the Company was required to spend Rs. 2.50 Crore towards CSR activities during the year. The Company spent Rs. 96.54 Lakhs during the FY 2015-16 towards various CSR initiatives. Further a capital commitment of Rs. 97 Lakhs was made in the month of March 2016 towards CSR program implementation on watershed development in partnership with NABARD. The implementing agency is National Agro Foundation, founded by late C Subramanian. Since the roll out of CSR program effective April 2014, the Company has been making a slow and steady progress. The CSR Committee has laid emphasis on outcome & impact than merely on expenditure being met during the year. Secondly, the Committee took extra time & caution in selecting the right

NGO''s as well as focused on projects in our area of expertise that is, water and waste water.

During FY 2015-16, we completed three projects - (1) Augmentation of water resources; (2) Sewage treatment plant for Cancer Institute, Adyar, Chennai and (3) Drinking water filtration solution and sanitation for the Govt. High School, Kodungaiyur, Chennai. One of the project identified i.e. Capacity Building for wetlands management could not be completed on account of apprehension by the intended participants and largely due to Chennai floods. This project is being implemented by an external agency - Care Earth Trust which has sought extension of time till September 2016.

Your Company''s CSR Committee comprises Revathi Kasturi (Chairperson), Rajiv Mittal and S Varadarajan. The Committee is responsible for formulating and monitoring the CSR policy of the Company.

The annual report on our CSR activities is enclosed herewith as Annexure V to the Board''s report.

Deposits

Your Company has not accepted any deposit and as such no amount of principal and interest were outstanding as of the Balance Sheet date.

Particulars of loans, guarantees or investments

Details of loans, guarantees and investments covered under the provisions of section 186 of the Companies Act, 2013 form part of the notes to the financial statements.

Internal financial control and its adequacy

The board has adopted policies and procedures for ensuring the orderly and efficient conduct of its business including adherence to the Company''s policies, safeguarding of its assets, prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and timely preparation of reliable financial disclosures.

Risk management policy

Details on the Company''s risk management framework, risk identification, risk evaluation, mitigation measures and monitoring mechanism forms part of the management''s discussion and analysis section of this annual report.

Particulars of contracts or arrangements made with related parties

Particulars of contracts or arrangements with related parties referred to in Section 188 (1) of the Companies Act 2013, in the prescribed Form AOC - 2, is enclosed herewith as Annexure VI to the Board''s report.

Significant and material orders

There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company''s operations in future.

Extract of annual return

In accordance with section 134(3) (a) of the Companies Act, 2013, an extract of the annual return in the prescribed format is enclosed herewith as Annexure VII to the Board''s report.

Conservation of energy, technology absorption, foreign exchange earnings and outgo

The particulars as prescribed under Section 134(3) (m) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, is enclosed herewith as Annexure VIII to the Board''s report.

Sustainability initiatives

Your Company is in the space of providing solutions in the realm of water and waste water treatment. Sustainability runs through the Company in all its operations and functions. Your Company continuously focuses on solutions which have low carbon footprint and that are sustainable. Globally, your Company is actively involved in providing solutions that are eco-friendly and renewable in nature. Your Company''s contribution towards sustainability is continuous in nature as is reflected throughout this report and forms an integral part of our business.

Acknowledgments

We place on record our appreciation for the committed services from every member of the WABAG family globally. We thank our customers, vendors, investors, banks, various financial institutions, government/regulatory authorities and members for their continued assistance and cooperation received during the year.

For and on behalf of the Board of Directors

Bucharest, Romania B D Narang Rajiv Mittal

May 26,2016 Chairman Managing Director & Group CEO

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Mar 31, 2013

Dear Shareholder''s

The Directors are pleased to present the 18th Annual Report and the audited accounts for the financial year ended 31 March, 2013

Financial Results

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

(Rs. In lakhs)

Standalone Consolidated

2012-13 2011-12 2012-13 2011-12

Gross Turnover 1,05,717 1,00,347 1,61,885 1,44,352

Profit Before Interest and Depreciation (EBITDA) 13,884 11,542 15,486 13,003

Profit Before Taxation 13,327 11,002 13,519 11,105

Provision for Tax 4,316 3,490 4,559 3,792

Profit After Taxation (PAT) 9,011 7,512 9,034 7,375

Proposed Dividend (including Dividend Tax) (2,174) (1,844) (2,174) (1,844)

Transfer to General Reserve (901) (751) (901) (751)

Profit / (Loss) Brought Forward 19,187 14,270 21,567 16,794

Retained Profit Carried Forward to the following 25,123 19,187 27,526 21,567 year

Dividend

Based on the Company''s performance, your Directors are pleased to recommend a dividend of Rs. 7 per Equity Share (350%) of the face value of Rs. 2 per Equity Share for the financial year 2012-13. The dividend, on approval of the members at the forthcoming Annual General Meeting, will be paid to members whose names appear in the register of members of the Company as on 12 July, 2013; in respect of shares held in dematerialised form, it will be paid to members whose names are furnished by National Securities Depository Limited and Central Depository Services (India) Limited, as beneficial owners as on that date. The equity dividend outgo for the financial year 2012-13, inclusive of tax on distributed profits will absorb a sum of Rs. 21.74 crores.

Business Performance

In the financial year 2012-13, your Company continued to report profitable growth. Your Company has a healthy order book of Rs. 4,284 crores as on 31 March 2013, supported by highest ever order intake in a financial year of Rs. 2,155 crores during the year. The standalone turnover stood at Rs. 1,057 crores compared to previous year''s Rs. 1,003 crores, recording a marginal growth of 5%. The consolidated turnover stood at Rs. 1,619 crores compared to previous year''s Rs. 1,444 crores, recording a growth of 12% over last year. The EBITDA for the year on a standalone basis stood at Rs. 139 crores registering a growth of 20% as against previous year''s Rs. 115 crores. The consolidated EBITDA increased from Rs. 130 crores of previous year to Rs. 155 crores for the current year. Your Company recorded healthy growth in both consolidated and standalone PAT% as compared to last year. The consolidated PAT recorded a 22% growth over the previous year while the standalone PAT recorded a 20% increase over the previous year. EPS growth recorded a 22% increase for the year ended 31 March, 2013. Your Company will continue to focus on both organic and inorganic growth models through strategic acquisitions that will pave way for its entry into various new geographies and access to latest technologies.

Sustainability

Sustainability is an integral part of our business and cannot be an independent function. Keeping this in view, we provide sustainable solutions to our customers in terms of projects with the objective of converting bio-gas waste into energy in running the STPs on self-sustaining basis, recycling and reuse of water for industrial business, converting salt water into sweet water thus providing a sustainable, reliable and viable alternative water source.

Sustainability is a business opportunity to WABAG in terms of making a real difference both to our people in terms of access to clean drinking water and to our planet by keeping the carbon footprint under check.

At WABAG, the sustainability initiatives go hand in hand with our projects execution which in turn benefit our customers too.

Stock Options

In order to attract, retain, reward and motivate employees to contribute and participate in the Company''s growth and profitability, your Company implemented two stock option schemes viz., the ESOP Scheme 2006 and the ESOP Scheme 2010 (''the Schemes'') in accordance with the Securities and Exchange Board of India (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (''the SEBI Guidelines''). The schemes are administered in accordance with the directions of the Remuneration Committee of the Board.

The applicable disclosures as stipulated under the SEBI Guidelines as at 31 March, 2013 are provided in Annexure I to this Report.

The Company has received a certificate from its Auditors that the Scheme has been implemented in accordance with the SEBI Guidelines and the resolution passed by the shareholders. The Certificate would be placed at the Annual General Meeting for inspection by the members.

Management discussion and analysis report

Management discussion and analysis report for the year under review, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India, is presented in a separate section forming part of the Annual Report.

Subsidiaries

Your Company had eighteen subsidiaries at the beginning of the year. One new subsidiary was set up during the year at Spain: During the year, Va Tech WABAG (Gulf) Contracting L.L.C., Dubai and Engenharia Hidraulica De Macau Ltd., Macau ceased to be subsidiaries of the Company.

The total number of subsidiaries as on 31 March, 2013 is seventeen. There has been no change in the nature of business or of the subsidiaries.

In accordance with the general circular issued by the Ministry of Corporate Affairs, Government of India, the balance sheets, profit and loss accounts and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company. However, the financial information of the subsidiary companies is disclosed in the Annual Report in compliance with the said Circular. The Company will make available the annual accounts of the subsidiary companies and the related detailed information to any member of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary companies will also be kept open for inspection at the registered office of the Company and that of the respective subsidiary companies. The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies. Details of major subsidiaries of the Company are covered in the Management''s discussion and analysis report forming part of the Annual Report.

Directors

Mr. Bhagwan Dass Narang and Mr. Jaithirth Rao, Directors retire by rotation at the ensuing Annual General Meeting. Being eligible Mr. Bhagwan Dass Narang and Mr. Jaithirth Rao offer themselves for reappointment. Members'' attention is drawn to the corresponding resolution in the Notice dated 23 May, 2013 convening the Annual General Meeting.

As stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges, brief resumes of Mr. Bhagwan Dass Narang and Mr. Jaithirth Rao are provided in the report on Corporate Governance, which forms part of this Annual Report. Your Directors recommend their reappointment at the ensuing Annual General Meeting.

Director''s Responsibility Statement

"Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956 with respect to Directors'' Responsibility Statement. It is hereby confirmed that:

(i) in the preparation of the annual accounts for the year ended 31 March, 2013, the applicable accounting standards read with requirements set out under Schedule VI to the Companies Act, 1956, have been followed and there are no material departures from the same;

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

(iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

(iv) the Directors have prepared the annual accounts of the Company on a ''going concern'' basis.

Auditors

M/s. Walker, Chandiok & Co, Chartered Accountants, Statutory Auditors of the Company, hold office until the conclusion of the ensuing Annual General Meeting and are eligible for reappointment.

The Company has received letter from the Auditors to the effect that their reappointment, if made, would be within the prescribed limits under Section 224(1B) of the Companies Act, 1956 and that they are not disqualified for reappointment within the meaning of Section 226 of the said Act.

The Notes on Financial Statements referred to in the Auditors'' Report are self-explanatory and do not call for any further comments.

Public Deposits

Your Company has not accepted any public deposits and as such, no amount on account of principal or interest on public deposits was outstanding as on the date of the Balance Sheet.

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo

Your Company continuously strives to conserve energy, adopt environment- friendly practices and employ technology for efficient operations. The particulars as prescribed under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are provided in the Annexure II to this Report.

Corporate Social Responsibility (CSR)

In keeping with the Company''s CSR philosophy to identify CSR projects close to its project sites and implement projects within the framework of its expertise, this year also your Company repeated the Innovative Learning Project for Nemmeli Govt. Higher Secondary School. The school is in proximity to your Company''s Sea Water Desalination Plant at Nemmeli. Your Company also arranged field trips to the school students to create awareness on environment with focus on ''waste to energy'' concept and practice. Further, your Company offered free ETP solution to the Cancer Institute as part of CSR besides a few other initiatives on philanthropy.

Particulars of Employees

In terms of 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 the employees are set out in the annexure to the Directors'' Report. Having regard to the provisions of Section 219(1) (b)(iv) of the said Act, the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. Any members interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

Corporate Governance Report

Your Company is committed to maintain the highest standards of Corporate Governance and adhere to the Corporate Governance requirements set out by SEBI. The Company has also implemented several best Corporate Governance practices as prevalent globally.

The Report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement forms part of the Annual Report.

The requisite Certificate from the Auditors of the Company confirming compliance with the conditions of Corporate Governance as stipulated under the aforesaid Clause 49 is attached to this Report.

Acknowledgements

Your Directors would like to express their appreciation for the assistance and co- operation received from various financial institutions, banks, governmental authorities, customers, vendors and members during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the committed services by every member of the WABAG family globally.

For and on behalf of the Board of Directors

Rajiv Mittal Sumit Chandwani

23 May, 2013 Managing Director Director

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Mar 31, 2012

The Directors are pleased to present the 17th Annual Report and the audited accounts for the financial year ended March 31, 2012

Financial Results

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

(Rs. in Lakhs)

Standalone Consolidated

2011-12 2010-11 2011-12 2010-11

Gross Turnover 1,00,347 73,346 1,44,352 1,24,182

Profit before Interest & Depn. (EBITDA) 11,542 8,931 13,004 12,103

Profit Before Taxation 11,002 8,379 11,105 9,627

Provision for Tax 3,490 2,853 3,792 3,161

Profit After Taxation (PAT) 7,512 5,526 7,375 5,257

Proposed Dividend (including dividend tax) (1,844) (1,232) (1,844) (1,232)

Transfer to General Reserve (751) (553) (751) (553)

Profit / (Loss) brought forward 14,270 10,529 16,794 13,321

Retained Profit carried forward to the following year 19,187 14,270 21,567 16,794

Dividend

Based on the Company's Performance, your Directors are pleased to recommend a dividend of Rs. 6 per Equity Share (300%) of the face value of Rs. 2 per Equity Share for the financial year 2011-12. The dividend, if approved by the members at the forthcoming Annual General Meeting, will be paid to members whose names appear in the register of members of the Company as on July 13, 2012; in respect of shares held in dematerialized form, it will be paid to members whose names are furnished by National Security Depository Limited and Central Depository Services (India) Limited, as beneficial owners as on that date. The equity dividend outgo for the financial year 2011-12, inclusive of tax on distributed profits will absorb a sum of Rs.18.44 crores.

Business Performance

In the financial year 2011-12, your Company continued its strong growth momentum. For the first time in the Company's history, your Company's Standalone turnover crossed Rs. 1000 crores, an increase of 36.81% over last year's turnover. The consolidated turnover stood at Rs. 1443.5 Crores compared to previous year's Rs. 1241.8 Crores, recording a growth of 16.24% over last year. The EBITDA for the year on a Standalone basis stood at Rs. 115.4 Crores registering a growth of 29.24% as against previous year's Rs. 89.3 Crores. The Consolidated EBITDA increased 7.44% from Rs. 121 Crores of previous year to Rs. 130 Crores for the Current year. Your Company recorded a healthy growth in both Consolidated and Standalone PAT% as compared to Last Year. The Consolidated PAT recorded a 40% growth over the previous year while the Standalone PAT recorded a 36% increase over the previous year. Your Company has an order back log of over Rs. 3700 Crores as on March 31, 2012. EPS growth recorded a 31% increase for the year ended March 31, 2012. The Company continues the "Asset Light" business model and forayed into two new BOOT projects during the year. Your Company is restructuring its strategic business units to align them to the respective business lines and generate higher revenue. Your Company will continue to focus on both organic and inorganic growth model through strategic acquisitions that will pave way for entry into various new business segments across geographies and utilize internal accruals to meet short-term working capital requirements.

Sustainability

Sustainability governs the business operations. Your Company focuses on low carbon emission and sustains the use of water and energy in its plant construction to benefit the customers. Your Company has implemented various innovative sustainable initiatives in business operations. This not only facilitates business gains but also facilitates environmental benefits through recycling and reuse of water; converting waste gas into electricity to run treatment plants on a self-sustainable basis and converting waste water into direct potable use.

Awards and recognitions

Your Company was conferred with the Export Excellence award from EEPC India for its contribution to engineering exports during 2009-10. The coveted award was presented by the Governor of Tamil Nadu on December 06, 2011. Your Company received the National Award for Excellence in Water Management for the year 2011 by Confederation of Indian Industry (CII) for the valuable contribution made in efficient water management. Your Company also bagged the KPMG - Infrastructure Today Award for the Aurangabad Water Supply Project on December 09, 2011, which was adjudged as the PPP project of the year.

Sub-division of shares

With a view to improve the liquidity of your Company's shares in the stock markets and make it more affordable for small retail investors, the face value of each equity share of your Company was sub-divided from Rs. 5 to Rs. 2 per equity share with effect from August 18, 2011.

Stock Options

In order to attract, retain, reward and motivate employees to contribute and participate in the Company's growth and profitability, your Company implemented two stock option schemes viz., the ESOP Scheme 2006 and the ESOP Scheme 2010 ("the Schemes") in accordance with the Securities and Exchange Board of India (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 ('the SEBI Guidelines'). The schemes are administered in accordance with the directions of the Remuneration Committee of the Board. The applicable disclosures as stipulated under the SEBI Guidelines as at March 31, 2012 are provided in Annexure I to this Report.

The Company has received a certificate from its Auditors that the Schemes have been implemented in accordance with the SEBI Guidelines and the resolution passed by the shareholders. The Certificate would be placed at the Annual General Meeting for inspection by members.

Management Discussion and Analysis Report

Management's Discussion and Analysis Report for the year under review is presented in a separate section forming part of the Annual Report.

Subsidiaries

Your Company had Fifteen Subsidiaries at the beginning of the year. Three new subsidiaries were set up during the year viz.,

1. VA Tech Wabag (Philippines), Inc.

2. VA Tech Wabag Muscat LLC.

3. Ujams Wastewater Treatment Company (Pty) Ltd.

The total number of Subsidiaries as on March 31, 2012 is eighteen. The Company has commenced the liquidation process for its subsidiary in Dubai. There has been no material change in the nature of the business of the Subsidiaries.

In accordance with the general circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Profit & Loss Account and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company. However, the financial information of the subsidiary companies is disclosed in the Annual Report in compliance with the said circular. The Company will make available the Annual Accounts of the subsidiary companies and the related detailed information to any member of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary companies will also be kept open for inspection at the Registered Office of the Company and that of the respective subsidiary companies. The Consolidated Financial Statements presented by the Company includes the financial results of its subsidiary companies. Details of major subsidiaries of the Company are covered in the Management's Discussion and Analysis Report forming part of the Annual Report.

Directors

Dr. Guenter Heisler and Mr. Sumit Chandwani, Directors retire by rotation at the ensuing Annual General Meeting. Being eligible Mr. Sumit Chandwani offers himself for re-appointment. Dr. Guenter Heisler has conveyed his decision, not to seek re- appointment. The Board wishes to place on record its appreciation for the valuable guidance extended and the contribution made by him during his association with the Company. Members' attention is drawn to the corresponding resolution and the explanatory statement thereto, in the Notice dated May 24, 2012 convening the Annual General Meeting.

Ms. Revathi Kasturi was appointed as an Additional Director of the Company on February 09, 2012 by the Board of Directors. As per the provisions of Section 260 of the Companies Act, 1956 Ms. Revathi Kasturi holds office up to the date of the forthcoming Annual General Meeting of the Company and is eligible for appointment as Director. The Company has received notice under section 257 of the Companies Act, 1956 from a member in respect of her appointment as a Director of the Company. Resolution seeking approval of the members for the appointment of Ms. Revathi Kasturi as a Director of the Company have been incorporated in the notice of the forthcoming Annual General Meeting.

As stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India, brief resumes of Ms. Revathi Kasturi and Mr. Sumit Chandwani are provided in the report on Corporate Governance, which forms part of this Annual Report. Your Directors recommend their appointment / re-appointment at the ensuing Annual General Meeting.

Director's Responsibility Statement

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956 with respect to Directors' Responsibility Statement. It is hereby confirmed that:

i) in the preparation of the annual accounts for the year ended March 31, 2012, the applicable accounting standards read with requirements set out under Schedule VI to the Companies Act, 1956, have been followed and there are no material departures from the same;

ii) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2012 and of the profit of the Company for the year ended on the date;

iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

iv) the Directors have prepared the annual accounts of the Company on a going concern' basis.

Auditors

M/s. Walker, Chandiok & Co, Chartered Accountants, Statutory Auditors of the Company, hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re- appointment. The Company has received letter from the Auditors to the effect that their re-appointment, if made, would be within the prescribed limits under Section 224(1B) of the Companies Act, 1956 and that they are not disqualified for re- appointment within the meaning of Section 226 of the said Act. The Notes on Financial Statements referred to in the Auditors' Report are self-explanatory and do not call for any further comments.

Public Deposits

Your Company has not accepted any public deposits and as such, no amount on account of principal or interest on public deposits was outstanding as on the date of the Balance Sheet.

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo Your Company continuously strives to conserve energy, adopt environment-friendly practices and employ technology for efficient operations. The particulars as prescribed under section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are provided in the Annexure II to this Report.

Corporate Social Responsibility (CSR)

Your Company uses CSR as an integral business process in order to support sustainable development and constantly endeavors to be a good corporate citizen. The CSR activities are presently carried out in the areas of education, health and environment at the Company's various project locations. During the financial year, your Company has executed 'Under Privileged Learning Innovations for Transformation' (UPLIFT) project, a unique educational project for the students of a school in the vicinity of the Corporate Office. The project focuses on scientific learning skills training programme for underprivileged students. Your Company strongly believes in serving the cause of students' community through this project.

Particulars of Employees

In terms of 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 the employees are set out in the annexure to the Directors' Report. Having regard to the provisions of Section 219(1)(b)(iv) of the said Act, the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. Any members interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

Corporate Governance Report

Your Company is committed to maintain the highest standards of Corporate Governance and adhere to the Corporate Governance requirements set out by SEBI. The Company has also implemented several best Corporate Governance practices as prevalent globally. The Report on Corporate Governance forms part of the Annual Report. The requisite Certificate from the Auditors of the Company confirming compliance with the conditions of Corporate Governance as stipulated under the aforesaid Clause 49, is attached to this Report.

Acknowledgements

Your Directors would like to express their appreciation for the assistance and co-operation received from the Financial Institutions, Banks, Government authorities, Customers, Vendors and Members during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the committed services by every member of the Wabag family globally.

For and on behalf of the Board of Directors

Rajiv Mittal Sumit Chandwani

Date: May 24, 2012 Managing Director Director

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Mar 31, 2011

The Directors are pleased to present their Sixteenth Report together with the audited accounts of your Company for the year ended 31st March, 2011.

Financial Highlights (Rs. in thousands)

Description 2010-11 2009-10

Gross Turnover 7,321,734 7,009,679

Profit before Interest & Depn. (EBITDA) 896,717 860,420

Profit Before Taxation 837,908 680,406

Provision for Tax 285,322 270,611

Profit After Taxation 552,586 409,795

Proposed Dividend (123,183) --

Transfer to General Reserve (55,259) --

Profit / (Loss) brought forward 1,052,902 643,107

Retained Profit carried forward to the following year 1,427,046 1,052,902

Dividend

Your Directors are pleased to recommend a dividend of Rs. 10/- per Equity Share (200%) of the face value of Rs. 5/- each for the financial year 2010-11. The dividend, if approved at the ensuing Annual General Meeting, will be paid to Shareholders whose names appear on the register of members of the Company as on 1st July, 2011. The equity dividend outgo for the financial year 2010-11, inclusive of tax on distributed profits would absorb a sum of Rs. 12.32 Crores.

Operations and Business Performance

Your Company has achieved a Gross turnover of Rs. 732.17 Crores in the year 2010-11 as against Rs. 700.97 Crores for the previous financial year registering an incremental increase of Rs. 31.20 Crores, thereby recording a growth rate of 4.5% over previous year. All the SBUs (Strategic Business Unit) except IBG (International Business Group) recorded good growth against last year in terms of turnover. MBG (Municipal Business Group) registered 14% growth, IWG (Industrial Water Group) registered 44% growth and OBG (Operations Business Group) registered 21% growth against last year. IBGs turnover growth was mainly affected due to delay in Order booking on the Dambula project which however has been received and taken to order book as of 31st March, 2011. Your company carries an order backlog of Rs. 2,465 Crores to execute in the following financial years.

Your company has achieved Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) of Rs. 89.67 Crores for 2010-11 against Rs. 86.04 Crores for the previous financial year registering a growth of 4.2% and Profit After Tax (PAT) of Rs. 55.26 Crores as against 40.98 Crores registering a growth of 35%. The significant growth in PAT was achieved on account of lower interest costs due to better negotiations and control, higher interest income due to judicial investment strategy and lower depreciation. The board has recommended a 200% dividend which is Rs. 10/- per equity share of the face value of Rs. 5 each.

Your Company has a "Asset Light" model. During the year, the company has ventured into Built Own Operate Transfer (BOOT) space through partnerships. The Companys Management is of the view that increased focus on O&M (Operations & Maintenance) service business and support from low cost economies coupled with Multi Domestic Units formation, would show significant improvements in the results of the Company. Alliance with Sumitomo, Japan and Zawawi Group, Oman would pay rich dividends in the years to come. The company will utilize cash for strategic acquisition/inorganic growth model to make inroads into various business segments and across different geographies.

Awards & Recognitions

The Company received the prestigious GWI Global Water Award for the year 2010 recognizing our contribution made in the international water arena. The coveted award was presented by Mr. Kofi Annan, former Secretary General of the United Nations in Berlin on 18th April at the Global Water Summit 2011.

Your Company was adjudged as the Best Exit Company for Private Equity of the year 2010 in an online survey conducted by the Asian Venture Capital Journal, Hong Kong. The Company was also adjudged as the Best Water Company for the year 2010 under Water and Waste Water Segment by Frost & Sullivan.

Sustainability

The ISO 14001:2004 & OHSAS 18001:2007 certification to your Company demonstrates our commitment to the society at large, by excelling in our environmental performance and protecting the safety and well being of our employees. This is carried out by promoting healthier and safer working practices besides focusing on the sustainability. It is pertinent to note that 380 WABAGites were trained on HSE awareness, systems & procedures, risk assessment methodology, operational control procedures and emergency preparedness.

Initial Public Offer

To further augment the capital base for future growth plans, your Company made an Initial Public Offering of 36,07,581 equity shares of the face value of Rs. 5 each during the year. This Issue, which constitutes approximately 34.37% of the fully diluted post issue paid up share capital of your Company, comprised a fresh issue of 9,54,198 equity shares of Rs. 5 each and an offer for sale of 26,53,383 shares.

The Issue which was priced at Rs. 1,310 per share, received an overwhelming response and was oversubscribed by over 30 times. The shares were listed on National Stock Exchange of India Limited and Bombay Stock Exchange Limited on 13th October, 2010. The listing of shares has enhanced your Companys brand name and visibility in the marketplace.

Sub Division of Shares

In order to improve the liquidity of your companys equity shares in the stock markets and to make it more affordable for the small retail investors, your Directors at their meeting held on 26th May, 2011, have recommended sub-division (stock-split) of each equity share of the company from the present face value of Rs. 5/- into face value of Rs. 2/- each subject to the approval of the shareholders.

Corporate Governance Report

Your Company has always been devoted to adopting and adhering to the best Corporate Governance practices recognized globally. The Company understands and respects its fiduciary role and responsibility towards stakeholders and the society at large and strives hard to serve their interests, resulting in creation of value and wealth for all stakeholders.

A report on Corporate Governance along with a certificate from the statutory auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the listing agreement forms part of the Annual Report.

Management Discussion and Analysis Report

A detailed analysis of the Companys operational and financial performance, Domestic and International Projects undertaken, various initiatives taken by the Company in key functional areas such as Human Resources and Information Technology is separately discussed in the Management Discussion and Analysis Report, which forms part of this Annual Report. This report also discusses in detail, initiatives taken by the Company in the area of Research and Development.

Stock Options

In order to attract, retain, reward and motivate the employees to contribute and participate in the growth and profitability of the Company, your Company has formulated two stock option schemes viz., the ESOP Scheme 2006 and the ESOP Scheme 2010. The schemes are administered and implemented in accordance with the directions of the Remuneration Committee of the Board. Under the ESOP Scheme 2006, no options were granted during the year; 252,976 options were exercised by the employees post vesting. Under ESOP Scheme 2010 - 436,929 options were granted on 20th August, 2010 to the eligible employees and no options were exercisable, during the year.

Details required to be provided under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are attached hereto as Annexure I and forms part of this Report.

Directors

In terms of Article 108 and 110 of the Company, Mr. Bhagwan Dass Narang and Mr. Jaithirth Rao will retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment in terms of the provisions of Article 109 of the Articles of Association of the Company.

Mr. Sumit Chandwani, Nominee Director of ICICI Venture Funds Management Company Ltd. resigned as a Nominee Director on 31st May, 2011. The Board of Directors on the same day appointed Mr. Sumit Chandwani as an Additional Director on the Board with effect from 1st June, 2011. Mr. Sumit Chandwani holds office up to the date of the ensuing Annual General Meeting.

As stipulated in terms of Clause 49 of the listing agreement with the stock exchanges, brief resumes of Mr. Bhagwan Dass Narang, Mr. Jaithirth Rao and Mr. Sumit Chandwani are provided in the report on Corporate Governance, which forms part of this Annual Report. Your Directors recommend their appointment/re-appointment at the ensuing Annual General Meeting.

Directors Responsibility Statement

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, your Directors, based on the representations received from the Operating Management, and after due enquiry, confirm that

i) in the preparation of the annual accounts, the applicable accounting standards have been followed and no material departures have been made from the same;

ii) they have, in the selection of the accounting policies, consulted the Statutory Auditors and these have been applied consistently and reasonable and prudent judgments and estimates have been made so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2011 and of the profit of the Company for the year ended on that date;

iii) 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:

iv) the Annual Accounts have been prepared on a going concern basis.

Subsidiaries

As on 31st March, 2011, your Company had fifteen subsidiary companies:

i) VA TECH WABAG (Singapore) Pte Ltd

ii) VA TECH WABAG (Gulf) Contracting LLC, Dubai

iii) Beijing VA TECH WABAG Water Treatment Technology Co. Ltd.

iv) Engenharia Hidraulica de Macau, Limitada, Macao

v) VA TECH WABAG Algeria S.A.R.L., Algeria

vi) VA TECH WABAG Brno spol. s.r.o., Czech Republic

vii) VA TECH WABAG Deutschland GmbH, Germany

viii) VA TECH WABAG GmbH, Austria

ix) VA TECH WABAG (Hong Kong) Limited

x) VA TECH WABAG Tunisia S.A.R.L, Tunisia

xi) WABAG Wassertechnik AG, Switzerland

xii) WABAG Water Services (Macao) Limited, Macao

xiii) WABAG Water Services SRL, Romania

xiv) VA TECH WABAG Tecknolojisi Ve Ticaret Limited, Turkey

xv) VA TECH WABAG Egypt Limited, Egypt

More details on the operations of the companys overseas subsidiaries are provided in the Management Discussion and Analysis Report.

As required under the provisions of Section 212 of the Companies Act, 1956, the statement containing details of Companys subsidiaries is attached and forms part of this Annual Report.

In terms of general exemption provided by the Central Government vide General Circular No.2/2011 dated 8th February, 2011, read together with General Circular No.3/2011 dated 21th February, 2011, issued by the Ministry of Corporate Affairs, copies of Balance Sheet, Profit and Loss Account, Directors Report and Auditors Report of the subsidiary companies have not been attached with the Balance Sheet of the Company. The Board of Directors at their meeting held on 26th May, 2011 has consented for not attaching the balance sheet of the subsidiaries to the Annual Accounts of the Company. The Companys accounts are presented in compliance with the conditions set out in the said circular. The documents pertaining to the Companys subsidiaries shall be provided on request to any member, desiring to have a copy, on receipt of request by the Company Secretary, at the Registered Office of the Company.

Auditors

M/s. Walker, Chandiok & Co, Chartered Accountants, retire as Statutory Auditors of the Com pany and has given their consent for re-appointment. The shareholders will be required to elect Auditors for the current year and fix their remuneration. As required under the provisions of Section 224(1 B) of the Companies Act, 1956, the Company has obtained a written certificate from the above Auditors proposed to be re-appointed to the effect that their re-appointment, if made, would be in conformity with the limits specified in the said section. The observations of the Auditors, together with the Notes to Accounts referred to in the Auditors Report, are self-explanatory and do not call for any further explanations from the Directors.

Public Deposits

Your Company has not accepted any deposits from the public or its employees during the year under review.

Loans and advances

Your company has not made any loans or advances to its subsidiaries, which is required to be disclosed in the annual accounts of the company pursuant to clause 32 of the listing agreement.

Internal Control System

The Company has a well placed, proper and adequate internal control system, which ensures that all assets are safeguarded and protected and that the transactions are authorised recorded and reported correctly. The Internal Auditors of the Company independently evaluate the adequacy of internal controls and concurrently audit the majority of the transactions in value terms. Independence of the audit and compliance is ensured by direct reporting of Internal Auditors to the Audit Committee of the Board.

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo

Your Company continuously strives to conserve energy, adopt environment friendly practices and employ technology for more efficient operations. The particulars relating to the energy conservation, technology absorption and foreign exchange earnings and outgo as required under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given in the Annexure II and forms part of this Report.

Corporate Social Responsibility (CSR)

Your Company as a responsible organisation seeks to meaningfully contribute to the socio-economic well being and development of the communities and the ecosystem that it interacts with in carrying out its business. The CSR activities are presently carried out in the areas of education, health and environment at the Companys various project locations.

Particulars of Employees

The Company had 2 employees who were in receipt of remuneration of not less than Rs. 60,00,000 during the year ended 31st March, 2011 or not less than Rs. 5,00,000 per month during any part of the said year. However, as per the provisions of section 219(1)(b)(iv) of the Companies Act, 1956, the Directors Report and Accounts are being sent to all the Shareholders of the Company excluding the Statement of particulars of employees. Any Shareholder interested in obtaining a copy of the Statement may write to the Company Secretary at the Registered Office of the Company.

Acknowledgements

Your Directors take this opportunity to thank the Companys customers, shareholders, suppliers, bankers, financial institutions and the Central and State Governments for their unstinted support. The Directors would also like to place on record their appreciation to employees at all levels for their hard work, dedication and commitment.

For and on behalf of the Board

Place: Chennai Rajiv Mittal Sumit Chandwani

Date: 31st May, 2011 Managing Director Director