surya roshni · pdf filecash flow statement 39 ... bank of patiala and punjab national bank...

SURYA ROSHNI LIMITED

1

BOARD OF DIRECTORS

B. D. Agarwal Chairman andManaging Director

B. B. Chadha

G. S. Gupta

K. K. Narula

M. G. Bakre IDBI Nominee

Rajendra Arya

Urmil Agarwal

J. P. Agarwal Vice-Chairman andJoint Managing Director

MANAGEMENT EXECUTIVES

Corporate

S. N. Bansal Executive Director & CFO

Lighting Division

Sharad Agarwal Executive Director

Chatur Singh Chief General ManagerKashipur Unit

B. B. Pradhan Chief General ManagerMalanpur Unit

Steel Division

Shiv Kumar Gaur Vice President (Commercial)

COMPANY SECRETARY

B. B. Singal

STATUTORY AUDITORS

Sastry K. Anandam & CompanyChartered Accountants

COST AUDITORS

R. J. Goel & Co. Lighting Division

H. R. Singal Steel Division

BANKERS

State Bank of IndiaPunjab National BankState Bank of Patiala

REGISTERED OFFICE AND

WORKS-STEEL DIVISION

Prakash Nagar, Sankhol, Bahadurgarh-124507 (Haryana)E-mail : [email protected]

WORKS-LIGHTING DIVISION

7 k.m. Stone, Kashipur-Moradabad Road,Kashipur-244713 Distt. Udham Singh Nagar (Uttaranchal)E-mail:[email protected]

J - 7, 8 & 9, Malanpur Industrial AreaMalanpur, District Bhind (Madhya Pradesh)E-mail : [email protected]

CONTENTS PAGE NO.

Notice 2

Management Discussion & Analysis 6

Directors' Report 8

Report on Corporate Governance 13

Auditors' Report 18

Balance Sheet 20

Profit & Loss Account 21

Schedules 22

Balance Sheet Abstract 37

Interest in Subsidiary Companies 38

Cash Flow Statement 39

Annual Report of Subsidiary Company:

� Surya Roshni Inc., New York 40

Consolidated Accounts 43


2

NOTICE

Notice is hereby given that the Thirty Third Annual General Meetingof the members of SURYA ROSHNI LIMITED will be held on Thursday,the 28th September, 2006 at 10.30 A.M., at the Registered Office ofthe Company at Prakash Nagar, Sankhol, Bahadurgarh 124 507(Haryana) to transact the following business:

ORDINARY BUSINESS

1. To consider and adopt the Audited Accounts of the Companyand the Reports of Directors and Auditors thereon for the yearended 31st March, 2006.

2. To declare dividend.

3. To appoint a Director in place of Shri K. K. Narula, who retiresby rotation and, being eligible, offers himself forre-appointment.

4. To appoint a Director in place of Shri B. B. Chadha, who retiresby rotation and, being eligible, offers himself forre-appointment.

5. To appoint Auditors and to fix their remuneration.

SPECIAL BUSINESS

6. To consider and, if thought fit, to pass with or withoutmodification(s), the following resolution as an OrdinaryResolution:

"RESOLVED THAT the consent of the Company be and is herebyaccorded in terms of Section 293(1)(a) and other applicableprovisions, if any, of the Companies Act, 1956 to mortgagingand/or charging by the Board of Directors of the Company of allthe immovable and movable properties of the Companywheresoever situated, present and future and the whole of theundertaking of the Company in favour of Industrial DevelopmentBank of India Ltd. (IDBI Ltd.) acting for itself and as agent ofBanks/Financial Institutions to secure:

a) Rupee Term Loan of Rs.2000 lac (Rupees Two thousand laconly) lent and advanced by IDBI Ltd. to the Company.

b) Corporate Loan of Rs.1000 lac (Rupees One thousand laconly) lent and advanced by State Bank of India to theCompany.

c) Corporate Loan of Rs.1000 lac (Rupees One thousand laconly) lent and advanced by State Bank of Patiala to theCompany.

d) Corporate Loan of Rs.1000 lac (Rupees One thousand laconly) lent and advanced by State Bank of India to theCompany.

e) Additional Bill discounting limit of Rs. 200 lacs (RupeesTwo Hundred lacs only) lent and advanced / agreed to beadvanced by Small Industries Development Bank of India(SIDBI) to the Company.

f) The Working Capital Limits of Rs.18150 lac, secured onSecond Charge basis, lent and advanced/agreed to be lentand advanced by State Bank of India, Punjab National Bankand State Bank of Patiala to the Company. The details are asunder;

S. No. Consortium Banks (Rs. In Lac)

1 State Bank of India 9,250

2 Punjab National Bank 7,800

3 State Bank of Patiala 1,100

Total 18,150

together with interest thereon at the respective agreed rates,

interest tax, compound interest, additional interest, liquidated

damages, commitment charges, premia on prepayment or on

redemption, costs, charges, expenses and other monies payable

by the Company to IDBI Ltd., SIDBI, State Bank of India, State

Bank of Patiala and Punjab National Bank under Loan Agreements

entered into/to be entered into by the Company in respect of the

aforesaid loans.

RESOLVED FURTHER THAT the Board of Directors of the

Company or a Committee of Directors authorised by the Board

in this behalf be and is hereby authorised to finalise all

agreement(s) for creating mortgage and/or charge as aforesaid

and to do all such acts, deeds and matter as may be necessary or

expedient for giving effect to the above resolution."

7. To consider and, if thought fit, to pass with or without

modification(s), the following resolution as an Ordinary

Resolution:

"RESOLVED THAT pursuant to the provisions of Section 198,

269,309, 310 and Schedule XIII and such other applicable

provisions, if any, of the Companies Act, 1956, (the Act) including

any statutory modification or any amendment or any substitution

or reenactment thereof for the time being in force, approval of

the members of the Company be and is hereby accorded to

increase the remuneration paid to Shri Basu Dev Agarwal as the

Managing Director of the Company w.e.f. 01-11-2006 for the

rest of his tenure, as set out in the draft Supplementary Agreement

to be executed between the Company and Shri Basu Dev Agarwal,

which is hereby specifically approved with authority to the Board

of Directors of the Company to alter and /or vary the remuneration

within the limits, if any, prescribed in the Act and/or any schedules

thereto.

RESOLVED FURTHER THAT in the event of loss or inadequacy

of profits in any financial year during the rest of his tenure, the

Company will pay Shri Basu Dev Agarwal remuneration,

perquisites, benefits and amenities not exceeding the ceiling laid

down in Section II of Part II of Schedule XIII of the Companies

Act, 1956, as may be decided by the Board of Directors.

RESOLVED FURHTER THAT the Board of Directors be and are

hereby authorised to do all such acts, deeds and things as may

be considered necessary to give effect to the aforesaid resolution."

8. To consider and, if thought fit, to pass with or without

modification(s), the following resolution as an Ordinary

Resolution:

"RESOLVED THAT pursuant to provisions of Section 198, 269,

309, 317 and Schedule XIII and other applicable provisions, if

any, of the Companies Act, 1956, (the Act) including any statutory

modification or any amendment or any substitution or

reenactment thereof for the time being in force, approval of the

members of the Company be and is hereby accorded to the

reappointment of, including remuneration, perquisites, benefits

and amenities payable to Shri Jai Prakash Agarwal as the Joint

Managing Director of the Company for a period of five years

commencing from 1st January, 2007 to 31st December, 2011, as

set out in the draft Agreement to be executed between the

Company and Shri Jai Prakash Agarwal, the main terms of which

are set out in this notice, which is hereby specifically approved

with authority to the Board of Directors of the Company to alter

and / or vary the terms and conditions of the said re-appointment

within the limits, if any, prescribed in the Act and / or any

schedules thereto.

Notice


3

RESOLVED FURTHER THAT in the event of loss or inadequacyof profits in any financial year during the aforesaid period, theCompany will pay Shri Jai Prakash Agarwal remuneration,perquisites, benefits and amenities not exceeding the ceiling laiddown in section II of Part II of Schedule XIII of the CompaniesAct, 1956, as may be decided by the Board of Directors.

RESOLVED FURTHER THAT the Board of Directors of theCompany be and are hereby authorised to enhance, enlarge, alteror vary the scope and quantum of remuneration, perquisites,benefits and amenities payable to Shri Jai Prakash Agarwal in thelight of the further progress of the Company which revision shouldbe in conformity with any amendments to the relevant provisionsof the Act and / or the rules and regulations made thereunderand / or such guidelines as may announced by the CentralGovernment from time to time."

By Order of the BoardRegistered Office :Prakash Nagar, Sankhol,Bahadurgarh - 124 507 (Haryana) B. B. SINGALDated : 24th May, 2006 COMPANY SECRETARY

NOTES

1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THISANNUAL GENERAL MEETING MAY APPOINT A PROXY TOATTEND AND VOTE ON A POLL ON HIS BEHALF. A PROXYNEED NOT BE A MEMBER OF THE COMPANY.

Proxies, in order to be effective, must be received at 408, PadmaTower-I, Rajendra Place, New Delhi - 110 008 or RegisteredOffice, not less than forty-eight hours before the commencementof this Annual General Meeting i.e. before 10.30 a.m. on 26thSeptember, 2006.

2. Explanatory statement pursuant to Section 173(2) of the CompaniesAct, 1956, in respect of item no.s 6, 7 and 8 is annexed hereto.

3. The Register of Members and Share Transfer books of the Companywill remain closed from 13.09.2006 to 18.09.2006 (both daysinclusive).

4. Members are requested to forward their change of addressnotifications, Bank Account details including 9 digit MICR numberappearing on the cheque pertaining to the respective bank accountto facilitate distribution of dividend through Electronic ClearingService (ECS) to the Company / Registrar and Transfer Agent - MasServices Pvt. Ltd., AB-4, Safdarjung Enclave, New Delhi - 110029, in respect of Shares held in physical form and to theirrespective Depository Participants if the shares are held inelectronic form.

5. Pursuant to Section 205A of the Companies Act, 1956, dividend,which remains unpaid or unclaimed for a period of seven yearswill be transferred to the Investor Education & Protection Fund ofthe Central Government.

Members who have not encashed their dividend warrant so farfor the financial year ended 31st March, 1999, or any subsequentfinancial year(s) are requested to address their claim to TheCompany Secretary, Surya Roshni Limited, 408, Padma Tower-I,5, Rajendra Place, New Delhi - 110 008.

6. Information provided as per Clause 49 IV (G) (i) of the ListingAgreement.

The following are the details of the directors seeking reappointmentor recommended to be appointed as a Director :

Notice

Shri K. K. Narula, aged about 67 years, has been the director ofthe Company since March, 2000. He is the Chairman of theCompany's Audit Committee and member of the RemunerationCommittee. He does not hold directorship in any other company.Shri Narula is a M. Com. from the University of Delhi and also aCertified Associate of Indian Institute of Bankers (CAIIB). He hasa vast experience of over 43 years in the field of Banking andFinance. He retired as Chief General Manager from SBI Chandigarh(LHO) and is currently working as Banking and ManagementConsultant. Further he is not holding any shares of the Company.

Shri B. B. Chadha, aged about 68 years, has been a director of theCompany since October, 2003. He is director in Jay Yushin Ltd.and Delton Cables Ltd. He is a Chairman in Audit Committeeand member in Remuneration Committees of Jay Yushin Ltd. ShriChadha is a Fellow member of Institute of Cost and WorksAccountants (ICWA) of India and member of Institute of InternalAuditors, Florida, USA. He has a vast experience of over 47 yearsin the field of Finance and other functional areas. He was heldthe position of Chairman and Managing Director in IndianTelephone Industries Limited for three years and at senior positionin SAIL for over thirty years. Further he is not holding any sharesof the Company.

EXPLANATORY STATEMENT PURSUANT TO SECTION 173(2) OFTHE COMPANIES ACT, 1956

ITEM NO. 6

The Company has been sanctioned the term / corporate loans fromIDBI Ltd., State Bank of India and State Bank of Patiala, Bill discountinglimit from SIDBI and working capital limits from consortium Banksi.e. State Bank of India, Punjab National Bank and State Bank of Patialafor its Steel and Lighting Divisions. The details are as under:

a) Rupee Term Loan of Rs.2000 lac (Rupees Two thousand lac only)lent and advanced by IDBI Ltd. to the Company.

b) Corporate Loan of Rs.1000 lac (Rupees One thousand lac only)lent and advanced by State Bank of India to the Company.

c) Corporate Loan of Rs.1000 lac (Rupees One thousand lac only)lent and advanced by State Bank of Patiala to the Company.

d) Corporate Loan of Rs.1000 lac (Rupees One thousand lac only)lent and advanced by State Bank of India to the Company.

e) Additional Bill discounting limit of Rs. 200 lacs (Rupees TwoHundred lacs only) lent and advanced / agreed to be advancedby Small Industries Development Bank of India (SIDBI) to theCompany.

f) The Working Capital Limits of Rs.18150 lac, secured on SecondCharge basis, lent and advanced/agreed to be lent and advancedby State Bank of India, Punjab National Bank and State Bank ofPatiala to the Company.

S. No. Consortium Banks (Rs. In Lac)

1 State Bank of India 9,250

2 Punjab National Bank 7,800

3 State Bank of Patiala 1,100

Total 18,150

the financial assistance together with interest thereon at the

respective agreed rates, interest tax, compound interest, additional

interest, liquidated damages, commitment charges, premia on

prepayment or on redemption, costs, charges, expenses and other

monies payable by the Company to IDBI Ltd., SIDBI, State Bank

of India, State Bank of Patiala and Punjab National Bank under


4Notice

Loan Agreements entered into/to be entered into by the Company

in respect of the aforesaid loans have to be secured by a joint

mortgage of all the immovable and movable properties of the

Company, present and future.

Section 293(1)(a) of the Companies Act, 1956, provides inter alia

that the Board of Directors of a Public Company shall not, without

the consent of such Public Company in General Meeting, sell,

lease or otherwise dispose of the whole or substantially the whole

of the undertaking of the Company, or where the Company owns

more than one undertaking, of the whole or substantially the whole

of any such undertaking. Since the mortgage by the Company of

its immovable and movable properties as aforesaid in favour of

the Lenders may be regarded as disposal of the Company's

properties/undertakings, it is necessary for the members to pass a

resolution under Section 293(1)(a) of the Companies Act, 1956,

before creation of the said mortgage/charge.

Copy of the Loan Agreement(s) executed between the Company

and Lenders and copies of the relevant documents/ correspondence

between the said Lenders and the Company are open for inspection

at the Registered Office of the Company between 11.00 A.M. to

1.00 P.M. on any working day prior to the date of the meeting.

None of the Directors of the Company is in any way, concerned

or interested in the resolution.

ITEM NO. 7

The Shareholders of the Company at the Extra-Ordinary General

Meeting held on 12-12-2003 had appointed Shri Basu Dev Agarwal

as a Managing Director for a period of five years from 01-11-2003 to

31-10-2008. Considering the inflationary trend and increased in

business activities of the Company which resulted in increase in work

and responsibility of the Managing Director and also the amount of

remuneration payable in the similar Industries, the Board of Directors

deemed fit to revise the remuneration payable to Shri Basu Dev

Agarwal, Managing Director w.e.f. 01-11-2006 for the rest of his tenure

by executing a Supplementary Agreement for modification of

remuneration and the rest clauses of the Principal Agreement dated

21-10-2003 will remain same and effective.

The Board of Directors in their meeting held on 24-05-2006 approved

the revised remuneration of Shri Basu Dev Agarwal, as Managing

Director w.e.f. 01-11-2006 for the rest of his tenure as follows :

SALARY : Salary of Rs.275000/- per month in the Grade of 275000-

30000-305000.

COMMISSION : 1% Commission of the net profit of the company

computed in the manner laid down in section 309(5) of the

Companies Act, 1956 subject to a maximum of 50% of the annual

salary.

PERQUISITES : Perquisites will be allowed in addition to salary

and commission restricted to an amount equal to the Annual Salary.

For this purpose unless the context otherwise requires, perquisites

are classified into three categories: Parts A, B and C and the ceiling

shall apply only to Part-A.

PART-A

HOUSING :

I. The expenditure by the Company on hiring unfurnished

accommodation for the Managing director shall be subject to

the following ceilings:

60% of the Salary, over and above 10% payable by the Managing

Director himself.

II. In case the accommodation provided to the Managing Directoris owned by the Company, the Company shall deduct 10% ofthe salary of the Managing Director.

III. In case no accommodation is provided by the Company to theManaging Director, House Rent Allowance shall be paid by theCompany to him subject to the ceiling laid down in Housing I,herein above.

IV. The Expenditure incurred by the Company on gas, electricity,water and furnishings shall be valued as per the Income TaxRule, 1962. This shall, however, be subject to a ceiling of 10%of the salary of the Managing Director.

2. Medical Reimbursement : Expenses incurred for self and familysubject to a ceiling of one month's salary per year or threemonth's salary in a period of three years.

3. Leave Travel Concession : For self and family once in a yearincurred with the rules specified by the Company.

4. Club Fees : Fees of clubs subject to a maximum of two clubs.Admission and life membership fees shall not be allowed.

5. Personal Accident Insurance : Premium not to exceed Rs. 4000/-per annum.

PART-B

Contribution to provident fund, Superannuation fund or annuityfund will not be included in the computation of the ceiling onperquisites to the extent these either singly or put together are nottaxable under the Income Tax Act. Gratuity payable shall notexceed a half month's salary for each completed year of service.

PART-C

The Company shall provide a car with driver and telephone facility atthe residence of the Managing Director. Provision of car with driverfor use of Company's business and telephone facility at the residencewill not be considered as perquisites. Personal long distance calls ontelephone and use of car for private purpose shall be billed by theCompany on the Managing Director.

The aforesaid remuneration shall be subject to the limit of 5% of thenet profits as laid down under sub-section (3) of section 309 of theCompanies Act, 1956.

If the Company has no profits or the profits are inadequate in anyfinancial year during the terms of his office as the Managing Director,Sh. Basu Dev Agarwal will be entitled to receive the aboveremuneration and perquisites as minimum remuneration, providedthat the total remuneration, of salary, perquisites and any otherallowances shall not exceed the ceiling as provided in section II ofthe Part II of Schedule XIII of the Companies Act, 1956 or such otheramount and perquisites as/is may be provided in the said scheduleXIII as may be amended from time to time or any equivalent statutoryre-enactment(s) thereof.

Apart from the aforesaid remuneration, Shri Basu Dev Agarwal willbe entitled to reimbursement of expenses incurred in connection withthe business of the Company.

No sitting fees will be paid to him for attending the meetings of theBoard of Directors of the Company or Committees thereof.

Copy of the Supplementary Agreement / Draft supplementaryAgreement executed / to be executed between the Company andShri Basu Dev Agarwal are open for inspection at the Registered Officeof the Company between 11.00 a.m. to 1.00 p.m. on any workingday prior to the date of the meeting.

Shri Jai Prakash Agwarwal, Joint Managing Director and Smt. UrmilAgarwal, Director of the Company, are the relatives of Shri Basu DevAgarwal and to the extent they are interested in the resolution.


5 Notice

ITEM NO. 8

The Shareholders of the Company at the Annual General Meetingheld on 28-09-2001 had re-appointed Shri Jai Prakash Agarwal as aJoint Managing Director for a period of five years from 01-01-2002 to31-12-2006. The Shareholders are aware that since Shri Jai PrakashAgarwal assumed the office of Joint Managing Director of theCompany, the Company has made all-round progress. The Companyrather owes its present stature and position to his guidance andforesight. His unshakable determination along with a vast experiencehas helped the Company scale new heights year after the other. Underthe management control and guidance of Shri Jai Prakash Agarwal,Joint Managing Director, the Company has consistently maintainedits sales and profitability.

The Board of Directors of the Company, in their meeting held on24th May, 2006 approved the re-appointment of Shri Jai PrakashAgarwal, as Joint Managing Director for a period of five years w.e.f.1st January, 2007 on the following remuneration and terms andconditions, subject to the approval of the Members, and otherconcerned authority, if necessary.

SALARY : Salary of Rs.250000/- per month in the Grade of 250000-30000-370000.

COMMISSION : 1% Commission of the net profit of the companycomputed in the manner laid down in section 309(5) of theCompanies Act, 1956 subject to a maximum of 50% of the annualsalary.

PERQUISITES : Perquisites will be allowed in addition to salary andcommission restricted to an amount equal to the Annual Salary .For this purpose unless the context otherwise requires, perquisitesare classified into three categories: Parts A, B and C and the ceilingshall apply only to Part-A.

PART-A

HOUSING :

I. The expenditure by the Company on hiring unfurnishedAccommodation for the Joint Managing director shall be subjectto the following ceilings:

60% of the Salary, over and above 10% payable by the JointManaging Director himself.

II. In case the accommodation provided to the Joint ManagingDirector is owned by the Company, the Company shall deduct10% of the salary of the Joint Managing Director.

III. In case no accommodation is provided by the Company to theJoint Managing Director, House Rent Allowance shall be paidby the Company to him subject to the ceiling laid down inHousing I, herein above.

IV. The Expenditure incurred by the Company on gas, electricity,water and furnishings shall be valued as per the Income TaxRule, 1962. This shall, however, be subject to a ceiling of 10%of the salary of the Joint Managing Director.

2. Medical Reimbursement : Expenses incurred for self and familysubject to a ceiling of one month's salary per year or threemonth's salary in a period of three years.

3. Leave Travel Concession : For self and family once in a yearincurred with the rules specified by the Company.

4. Club Fees : Fees of clubs subject to a maximum of two clubs.Admission and life membership fees shall not be allowed.

5. Personal Accident Insurance : Premium not to exceed Rs.4000/-per annum.

PART-B

Contribution to provident fund, Superannuation fund or annuity fundwill not be included in the computation of the ceiling on perquisitesto the extent these either singly or put together are not taxable underthe Income Tax Act. Gratuity payable shall not exceed a half-month'ssalary for each completed year of service.

PART-C

The Company shall provide a car with driver and telephone facility atthe residence of the Joint Managing Director. Provision of car withdriver for use of Company's business and telephone facility at theresidence will not be considered as perquisites. Personal long distancecalls on telephone and use of car for private purpose shall be billedby the Company on the Joint Managing Director.

The aforesaid remuneration shall be subject to the limit of 5% of thenet profits as laid down under sub-section (3) of section 309 of theCompanies Act, 1956.

If the Company has no profits or the profits are inadequate in anyfinancial year during the terms of his office as the Joint ManagingDirector, Shri Jai Prakash Agarwal will be entitled to receive the aboveremuneration and perquisites as minimum remuneration, providedthat the total remuneration, of salary, perquisites and any otherallowances shall not exceed the ceiling as provided in section II ofthe Part II of Schedule XIII of the Companies Act, 1956 or suchother amount and perquisites as/is may be provided in the saidschedule XIII as may be amended from time to time or any equivalentstatutory re-enactment(s) thereof.

Copy of the Agreement / Draft Agreement executed / to be executedbetween the Company and Shri Jai Prakash Agarwal are open forinspection at the Registered office of the Company between 11.00 a.m.to 1.00 p.m. on any working day prior to the date of the meeting.

Shri B. D. Agarwal, Managing Director and Smt. Urmil Agarwal,Director are the relatives of Shri Jai Prakash Agarwal and to the extentthey are interested in the above said appointment.

By Order of the Board

Registered Office :Prakash Nagar, Sankhol,Bahadurgarh - 124 507 (Haryana) B. B. SINGALDated : 24th May, 2006 COMPANY SECRETARY


6

MANAGEMENT DISCUSSION AND ANALYSIS

PROFILE

Surya Roshni Limited began its journey in the Steel Tubes Industry. Itthen diversified into manufacture of Lighting products in 1984. The1990s saw the company implement major expansion and backwardintegration programs. This resulted not only in the timely availabilityof good quality raw material but also proved to be immensely costeffective. Today, the Company is the leader in Steel Tubes / Pipesmarket and the second largest Lighting Company in India.

Quality has always been the driving force at Surya. Your companysucceeded in bench-marking quality and innovation standards byachieving the ISO 9002 in the year 1999. The company was awardedISO-14001 and OHSAS-18001 certifications related to Environmentand Safety respectively. The company continues to be committedtowards making quality products, ensuring human as well asenvironment safety and bringing value addition to the investments ofthe shareholders. Surya, standing poised towards achieving newheights, is on it's way to becoming one of the leading brands globally.

INDUSTRY STRUCTURE AND DEVELOPMENT

Despite competition from other established market players andunorganized sectors, Lighting Division is witnessing steady growth inturnover and profit. The following may impact the market in the comingyears :

• Small Scale Industry in GLS and FTL• The increasing cost of electricity resulting into opting for use of

energy saving lamps.• Shift from traditional to innovative lamps and systems

The management is keeping constant watch on these points toovercome from them.

The Steel Tubes industry too witnessed growth during the year underreview and the market growing steadily due to the boom ininfrastructure sector. The future is likely to see only those companiessuccessful, which have their products priced competitively and tosell their products in the international market. All possible efforts arebeing made by your company to reduce costs without compromisingon the quality of the product and increase the export.

SWOT ANALYSIS

Strengths :

• Well focused vision of the Management• Complete backward integration• High quality of products• Nation-wide marketing network

Weaknesses :

• Diminishing margin of profit on the products• Uncertainties of external market forces

Opportunities :

• Potential increase in demand of energy efficient products• Untapped potential in outsourcing and marketing of Luminaries• Increase in demand of regular lighting products with a general

improvement in the power condition in urban as well as ruralsectors and increase in spending on infrastructure development

Threats :

• Tough competition from multi-national companies• Unbranded products from the unorganised sector

SEGMENT-WISE PERFORMANCE :

The company is broadly divided into two main segments viz. Steeland Lighting.

A detailed note on the segment-wise performance is given under the

Notes on Accounts, forming a part of annual accounts of the company.

OUTLOOK :

The Government is giving continuous thrust on housing and

infrastructure sector where Steel Tubes and Lighting products are used.

The existing refineries are expanding their capacities and new refineries

are coming into the scene. In future also there seems to be a

tremendous scope for export in Cold Rolling as well as ERW Pipes

particularly to USA and other European Countries. The government

spending on infrastructure development is also expected to increase

the demand of pipes every year. With the easy availability of finance

and tax incentives, it is expected that housing sector will get a major

boost. In view of the same, the long term outlook of the Company

remains positive.

RISKS AND CONCERNS :

Technology obsolescence is an inherent business risk in a fast changing

world and speed of change and adaptability is crucial for survival of

business. Government energy policy and development of new

superior products may render some of its existing production facilities

obsolescent. At SURYA, the continuing modernization, aggressive cost

cutting and adaptability of new technology are always main strengths

and enabled the company to do away with obsolescent plants/

processes and to emerge as one of the most modern plants in the

lighting industry throughout the world. Its strength enable the Company

to face future risk and convert them into opportunities.

Further aggressive cost cutting, addition to the product mix to

incorporate more value-added products and with the present strengths

of the company, the management feels that it can now compete

effectively both in terms of quality and price with similar products

imported from various countries. With the assistance of world-

renowned consultants, the company has made good progress towards

its objective of becoming the world leader in lighting products. Intense

competition in the Lighting industry, the company is adding a new

product range. Moreover, stress is being laid on boosting exports as

well as institutional demands. At the same time, labour, time and

money is also being geared towards making the various plant premises

more and more eco friendly.

The Steel Tubes industry has also been witnessing a fast changing

environment. The quality parameters of pipes used in the oil sector

are becoming more stringent each day. Moreover, any failure of pipes

after the supply to customers in the oil and gas sector attracts heavy

penalties. The company is taking utmost care to ensure very high

quality of products. During the year under review, the company took

major steps towards upgaradation of technology in order to ensure

compliance of the quality norms.

Further a shift in the policy of the Government of India regarding:

a) Import duty on Steel, Zinc etc.,

b) DEPB on HR Coil, Steel Pipe, CR Strips, FTL and GLS,

c) Incremental benefit scheme for Status Holders,

could adversely affect business of the Company.

INTERNAL CONTROL SYSTEM :

Your Company remains committed to maintaining internal controls

designed to provide adequate assurance on the efficiency of operations

and security of its assets. The accounting records are adequate for

preparation of financial statements and other financial information.

The adequacy and effectiveness of internal controls across the various

business, as well as compliance with laid down systems and policies

are regularly monitored by your Company's internal audit process

Management Disscussion


7 Management Disscussion

both at divisional and corporate level. The major IT enabled business

applications are periodically validated for their integrity, control and

quality of functionality by the trained internal audit team. The Audit

Committee of Board, which met five times during the year, reviews

internal control systems as well as financial disclosures.

FINANCIAL AND OPERATIONAL PERFORMANCE :

The Company was able to maintain itself as a leader in the Steel Tubesindustry and as a strong contender in the Lighting industry. Givenbelow are the financials of the company for the current as well as theprevious year :

(Rs. in crores)

Particulars 2005-2006 2004-2005

Profit for the year 56.18 41.83

Less : Depreciation 27.47 24.49

Profit before tax 28.71 17.34

Provision for tax 10.02 4.85

Net Profit after tax 18.69 12.49

Balance brought forward from theprevious year 67.90 58.00

Profit available for appropriations 86.59 70.49

Proposed Equity Dividend 3.90 3.05

Tax on Distributed Profits 0.55 0.44

Transferred to General Reserve 1.00 1.00

Deferred Tax revision (0.23) (1.90)

Balance carried to Balance Sheet 81.37 67.90

During the year the turnover of the Company increased to Rs.1218.57crores from Rs.1179.18 crores last year, registering an increase of3.34%. However the gross profit increased to Rs.56.18 crores fromRs.41.83 crores last year, a rise of 34.30%.

During the year the Company has intimated to the Central ExciseDepartment for claiming the exemption in Excise Duty for a period often years from 2nd January, 2006 under Notification No. 50/2003-CEdated 10th June, 2003 regarding incentives to Units located inUttaranchal on undertaking substantial expansion by way of increasein installed capacity by more than 25% in respect of all the final andintermediate products manufactured and cleared from Kashipur Unitas well as captive consumption, which improves the profitability ofthe Company.

The Company has taken steps to install the Compact Fluorescent Lamp(CFL) plant, which is a value added product and will enhance theprofitability of the Company.

The Steel Division of the Company is in the process of replacing Diesel-Generating sets to Gas-Generating sets for reduction of energy cost.

During the year under review, the revenue distribution of variousproducts of the two divisions was as under:

INDUSTRIAL RELATIONS AND HUMAN RESOURCEMANAGEMENT :

Industrial relations during the year under review were cordial andpeaceful. The management wishes to place on record, the excellentcooperation and contribution made by the employees, collectivelycalled "SURYA PARIVAR", at all levels of the organisation to thecontinued growth of the company. There was constant focus on allround organizational development. Various training programsincluding visionary exercises were conducted for personal as well asprofessional development of the employees. Further various otheractivities like annual sports, festival celebrations take place every yearto get in touch with them and their families.

Relationship has been very cordial with the worker's union for thepast several years. During the month of December 2004 themanagement executed wage agreement with the union, which shallbe applicable till 31st December, 2007.

The Company's industrial relations continued to be harmonious duringthe year under review. The number of persons directly employed bythe Company was 3511 as on 31st March, 2006.

CAUTIONARY STATEMENT :

Statements in this report on Management's Discussion and Analysisdescribing the company's objectives, projections, estimates,expectations or predictions may be "forward looking statements" withinthe meaning of applicable laws and regulations. These statements arebased on certain assumptions and expectations of future events. Actualresults could differ materially from those expressed or implied.Important factors that could make a difference to the Company'soperations include economic conditions affecting global and domesticdemand-supply, finished goods prices in the domestic and overseasmarkets in which the Company operates, raw-materials cost andavailability, changes in Government regulations, tax regimes,economic developments and other factors such as litigation andindustrial relations. The Company assumes no responsibility to publiclyamend, modify or revise any forward looking statements, on the basisof any subsequent developments, information or events.


8

DIRECTORS' REPORTDear Shareholders,

Your Directors have pleasure in presenting the Thirty Third AnnualReport on the operations of your Company, together with auditedaccounts for the year ended 31st March, 2006.

1. FINANCIAL RESULTS(Rs. in crores)

Particulars 2005-2006 2004-2005

Profit for the year 56.18 41.83

Less : Depreciation 27.47 24.49

Profit before tax 28.71 17.34

Provision for tax 10.02 4.85

Net Profit after tax 18.69 12.49

Balance brought forward from theprevious year 67.90 58.00

Profit available for appropriations 86.59 70.49

Proposed Equity Dividend 3.90 3.05

Tax on Distributed Profits 0.55 0.44

Transferred to General Reserve 1.00 1.00

Deferred Tax revision (0.23) (1.90)

Balance carried to Balance Sheet 81.37 67.90

2. DIVIDEND

Your Directors are pleased to recommend the payment of dividend@ Rs.1.50 per share on the paid up equity share capital of Rs.26.00crores. The dividend on Equity Shares, if approved at the AnnualGeneral Meeting, will be payable to those shareholders whosenames appear on the company's register of members on 18thSeptember, 2006. In respect of shares held in dematerialised form,the dividend shall be payable on the basis of beneficial ownershipas at the end of 12th September, 2006, as per the details furnishedby National Securities Depository Ltd./ Central Depository Services(India) Ltd. for the purpose, as on that date.

3. PREFERENTIAL ISSUE

The Company has issued 44,00,000 optionally convertible warrantsconvertible into 44,00,000 equity shares on or before July 15, 2007on preferential basis to promoters and their associates of Rs.10/-each at premium of Rs.54/- per warrant on 16th January, 2006after the shareholders' approval in the Extra Ordinary GeneralMeeting held on 2nd January, 2006. During the year the warrantholders have exercised the option for conversion of 6,00,000warrants into equity shares and accordingly the paid-up capital ofthe Company increased from Rs.25,40,12,500/- toRs.26,00,12,500/-. Remaining 38,00,000 optionally convertiblewarrants are outstanding for conversion into equity shares and afterconversion the paid-up capital will be enhanced accordingly.

4. PERFORMANCE DURING THE YEAR UNDER REVIEW

During the year under review, the turnover of your Company increasedto Rs.1218.57 crores from Rs.1179.18 crores last year, registering anincrease of 3.34%. However the gross profit increased to Rs.56.18crores from Rs.41.83 crores last year, a rise of 34.30%. The exportturnover during the year under review is Rs.99.27 crores as againstRs. 143.05 crores in previous year. The performance of the variousdivisions and the subsidiaries of your Company is given below:

STEEL DIVISION

During the year under review, the turnover of the division isRs.829.21 crores as compared to Rs.844.99 crores in the last financialyear. The export turnover of the division is Rs.70.44 crores incomparison to Rs.115.18 crores in the last financial year. The divisionhas, however been able to maintain it's leadership in the Steel Tubes'market. The product is now well established in some countries withorders flowing on a regular basis.

LIGHTING DIVISION

Despite competition from other established market players andunorganised sectors, the Division has witnessed a steady growthin turnover and profit. During year under review, the turnover ofthe division increased to Rs.389.36 crores as compared toRs.334.18 crores last year, an increase of 16.51%. The exportturnover during the year under review increased to Rs.28.83 croresas against Rs.27.87 crores in previous year registering an increaseof 3.44%. Strategies are being continuously developed to givegreater thrust to the exports.

During the year the Company has intimated to the Central ExciseDepartment for claiming the exemption in Excise Duty for a periodof ten years from 2nd January, 2006 under Notification No. 50/2003-CE dated 10th June, 2003 regarding incentives to Unitslocated in Uttaranchal on undertaking substantial expansion byway of increase in installed capacity by more than 25% in respectof all the final and intermediate products manufactured and clearedfrom Kashipur Unit as well as captive consumption.

SUBSIDIARIES

Surya Roshni Inc., the only wholly owned subsidiary of the companyin USA. The sales during the year are US$ 18,774 as compared toUS$ 701,390 in the previous year. There was a net loss of US$167,822 as compared to previous year's loss of US$ 431,222. Effortsare being made to improve the performance.

5. FUTURE PROSPECTS

STEEL DIVISION

In view of thrust of the Government of India on water andinfrastructure sectors, there is tremendous scope for growth in theSteel Pipe and Cold Rolled Industry. More demand is expectedfrom various Oil and Gas companies for LDP pipes of APIstandards. In the Cold Rolling segment also demand is expectedto increase due to higher growth in the automobile sectors.

LIGHTING DIVISION

There is an increase in demand of regular lighting products with ageneral improvement in the power condition in urban as well asrural sectors and increase in spending on infrastructuredevelopment in the coming years. Well defined strategies are beingimplemented in order to cater the gradual increase in demand oflighting products and enhance the product share in market and toboost the demand for your Company's products. The Companyhas taken steps to install the Compact Fluorescent Lamp (CFL)plant, which is a value added product and will enhance theprofitability of the Company. As a result of the sincere initiativesbeing taken at all levels, the turnover and profitability of yourcompany during the current year are likely to reflect a considerablegrowth as compared to those of the year under review.

6. FIXED DEPOSITS :

The Public response towards the Company's fixed deposit schemecontinued to be encouraging during the year under review. At theclose of the year, 133 deposit holders, whose deposits, aggregatingto Rs.49.89 lacs, had become due for payment, did not claim orrenew their deposits. Since then, deposits aggregating to Rs.24.66lacs have either been claimed or renewed. The principal amountand interest were duly paid for all other deposits, which maturedduring the year.

7. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTIONAND FOREIGN EXCHANGE EARNINGS AND OUTGO :

Details of energy conservation and research and developmentactivities undertaken by the Company alongwith information inaccordance with provision of Section 217(1)(e) of the CompaniesAct, 1956, read with the Companies (Disclosure of Particulars inthe Report of Board of Directors) Rules, 1988, are given asAnnexure 'A' to the Directors' Report.

Directors' Report


9 Directors' Report

8. PARTICULARS OF EMPLOYEES AND DISCLOSURE OFINFORMATION

Particulars of employees, as required under Section 217(2A) ofthe Companies Act, 1956, read with Companies (Particulars ofEmployees) Rules, 1975, as amended and information as perCompanies (Disclosure of Particulars in the Report of Board ofDirectors) Rules, 1988, are given as Annexure 'B' to the Directors'Report.

9. DIRECTORS' RESPONSIBILITY STATEMENT

The Board of Directors of the Company confirms :

i. that in the preparation of the annual accounts, the applicableaccounting standards have been followed along with properexplanation relating to material departures;

ii. that the Directors had selected such accounting policies andapplied them consistently and made judgements and estimatesthat are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company at the end of thefinancial year and of the profit or loss of the Company forthat period;

iii. that the Directors had taken proper and sufficient care for themaintenance of adequate accounting records in accordancewith the provisions of this Act for safeguarding the assets ofthe Company and for preventing and detecting fraud and otherirregularities;

iv. that the Directors had prepared the annual accounts on a goingconcern basis.

10. DIRECTORS

As per Article 101 of the Articles of Association of the Company,

Shri K. K. Narula and Shri B. B. Chadha, retire by rotation and,being eligible, offer themselves for reappointment.

11. AUDITORS

The Auditors, Messers. Sastry K. Anandam & Company, CharteredAccountants, retire at the forthcoming Annual General Meetingand, being eligible, offer themselves for reappointment. Theobservations of the Auditors have been suitably dealt with in thenotes on accounts.

12. COMPLIANCE CERTIFICATE

As per Revised Clause 49 of the Listing Agreement with the StockExchanges, the compliance certificate from Chairman andManaging Director and CFO is given as Annexure 'C' to theDirectors' Report.

13. ACKNOWLEDGEMENT

Your Directors wish to place on record, their appreciation for thecontinued support from All India Financial Institutions, Bankers,Government Authorities, Business Constituents and Investing Public.

Your Directors also wish to place on record once again, theirappreciation for the contribution made by the workers, staff andexecutives at all levels, to the continued growth and prosperity ofthe Company. The overall industrial relations remained cordial atall the establishments.

for and on behalf ofthe Board of Directors

B. D. AGARWALPlace : New Delhi CHAIRMAN AND

Dated : 24th May, 2006 MANAGING DIRECTOR

ANNEXURE 'A' TO DIRECTORS' REPORTInformation as per Section 217(1)(e) read with Companies(Disclosure of particulars in the Report of Board of Directors) Rules, 1988 and formingpart of the Directors' Report for the year ended 31st March, 2006.

I. CONSERVATION OF ENERGY

a) Energy conservation measures taken :

At Steel Division, Bahadurgarh :

– One diesel Generator Set has been successfully converted into Duel Fuel (Gas and Diesel).

– Additional capacitor banks installed to improve power factor to reduce time losses.

– Transparent sheets have been installed in the sheds to improve natural light.

– Automatic Star Delta controller has been installed in the Annealing Furnace by which the electric motor will function as per requirementof annealing cycle / temperature required.

– Power adjustment as per load requirement and replacement of various electrical equipments to prevent energy losses.

– Replacement of various cables and reduction in the distance between supply point and consumption point to control energy loss duringtransmission.

At Malanpur Unit of Lighting Division :

– Replacing existing air compressor by screw compressor in Component Division.

– Replacing 7.5 KW blower by 4.6 KW blower in 14" danner and by putting blower in 14" process line.

– By doing modification in exhaust oven in FTL-III.

– By putting off two glazing burner on 20" danner.

– Controlling oil pump of press machines by timer in Cap Division.

– Replacing transistor based UPS with IGBT based system.

– Energy saving in services after making improvement in doing insulation or patching work in furnance (compressed air was controlled).

At Kashipur Unit of Lighting Division :

– Cellulose fills type system installed in HID/TLD & NTL side air cooling plant in place of conventional air washer to increase the efficiencyand replacement of existing 7.5 H.P. (2 no.s) water pumps by 1.0 H.P. water pumps for energy conservation.

– A.C. drive installed on Twin lobe air compressor for TL 5th chain and reduced the frequency from 50Hz to 35 Hz and maintain linepressure in limit 11 to 12 psi as per the plant requirement.

– A.C. drive installed in HID side air cooling plant blower and reduced the frequency from 50Hz to 45 Hz.

– Water line installed on ETP plant for gardening.

– Provide energy management system software in LT room for on-line energy monitoring.

– Transformer loss reduced analyzing by software.

– Introduced power capacitor to improve the P.F. and for reduced unit consumption.

– Installed 42 no.s small Thyrister in place of 7 no.s big Thyrister at F.P.P. furnance for longer life of electrode and better working.


10Directors' Report

b) Additional investment and proposals being implemented for reduction of consumption of energy :

At Steel Division, Bahadurgarh :

Order has been placed for purchase of Gas based Power Generation Set of 3 MW.

c) Impact of the measures at a) above for reduction of energy consumption and consequent impact on the cost of production of goods :

The above measures resulted in substantial saving in the consumption of energy and consequent saving in the cost of production of goods.

d) Total energy consumption and energy consumption per unit of production as per Form-A of the Annexure to the Rules in respect ofIndustries in the Schedule thereto :

Steel Division Lighting Division

2005-2006 2004-2005 2005-2006 2004-2005A) Power & Fuel Consumption

1. Electricitya) Purchased

Units (in thousands) 12349.64 14570.55 22424.27 21631.62Total Amount (Rs. in lacs) 492.75 576.64 751.72 778.85Rate / Unit (Rs.) 3.99 3.96 3.35 3.60

b) Own GenerationThrough Diesel GeneratorUnits (in thousands) 2804.35 4093.52 5083.93 6128.33Unit per Ltr. Of HSD 3.08 3.28 3.45 3.81Cost / Unit (Rs.) 9.41 6.97 7.38 5.73

c) Own Generation byNatural Gas Generator SetUnits (in thousands) 8479.53 4038.09 Not used Not usedUnit per SCM 2.67 2.52 Not used Not usedCost / Unit (Rs.) 2.69 3.23 Not used Not used

2. Furnace Oil/LDOQty. (K.Ltrs.) 235.65 729.77 9086.50 9078.55Total amount (Rs. in lacs) 43.84 124.89 1630.95 1026.86Avg. Rate (Rs.) 18.60 17.11 17.95 11.31

3. Natural Gas used in GI Pipe & CR MillQty. SCM3 (in thousands) 4017.14 4261.12 Not used Not usedTotal amount (Rs. in lacs) 288.95 310.14 Not used Not usedRate / SCM (Rs.) 7.19 7.28 Not used Not used

4. L.P.G.Qty. (Tonnes) Not used Not used 2165.31 2047.69Total amount (Rs. in lacs) Not used Not used 653.57 478.01Rate / KG (Rs.) Not used Not used 30.18 23.34

5. Diesel (LDO Used in C.R. Mill)Qty. (K.Ltrs.) 11.89 20.00 707.01 641.81Total amount (Rs. in lacs) 2.21 3.42 178.07 143.44Rate / Ltr. (Rs.) 18.60 17.11 25.19 22.35

6. PropaneQty. (Tonnes) Not used Not used 2416.86 2151.30Total amount (Rs. in lacs) Not used Not used 785.03 490.68Rate / KG (Rs.) Not used Not used 32.48 22.81

B) Consumption per unit production

Product Unit Steel Tubes / Pipes / Glass ItemC.R.Strips (Per M.T.) (Per M.T.)

Electricity Units 111.88 107.53 134.51 166.39 Furnace Oil/HSD/LDO/RFO Ltrs. 2.64 5.04 181.75 190.82 HSD/LDO (In CR Mill) Ltrs. 0.22 0.36 Not used Not used Propane / LPG Kg. Not used Not used 57.49 56.84 Natural Gas Consumption (In GI Mill) SCM 26.69 27.05 Not used Not used Natural Gas Consumption (In CR Mill) SCM 31.84 34.14 Not used Not used


11 Directors' Report

II. TECHNOLOGY ABSORPTION

Efforts made in technology absorption as per Form-B of the Annexure to the Rules :

1. Research and Development (R&D)

a) Specific areas in which R&D carried out by the company :

During the year under review, no R&D carried out.

b) Benefits derived as a result of above R&D : Not Applicable

c) Future Plan of action :

If required, Research and Development activities shall be carried out in future to achieve greater efficiency in production techniques.

d) Expenditure on R&D : No capital as well as recurring expenditure made on R&D.

2. Technology absorption, adaptation & innovation :

a) Efforts, in brief, made towards technology absorption, adaptation & innovation :

Major initiatives are being taken to upgrade the various processes by making use of latest and better techniques. Efforts are constantlybeing made to make the maximum use of the available infrastructure, at the same time innovating new techniques to bring aboutefficiency as well as economy in different areas. Employees are given appropriate training of and on the job, to enable them to achievethe planned performance.

b) Benefits derived as a result of the above efforts, e.g. product improvement, cost reduction, product development, import substitution etc.:

There were various benefits derived as a result of the efforts listed above, some of them included better utilization of the availableresources, product improvement and development, cost reduction, better overall efficiency.

c) In case of imported technology (imported during the last 5 years reckoned from the beginning of the financial year) : Nil

III. FOREIGN EXCHANGE EARNINGS AND OUTGO

a) Activities relating to exports, initiatives taken to increase export, development of new markets for products and services and export plans:

Major initiatives were taken to boost the exports of the company. Some of them included :

– Emphasis has been given on Foreign Traveling of Export Executives and Directors for development of new markets.

– The Company has participated in the conferences and exhibitions organized in various foreign countries.

– Steps has been taken for creating export market for Large Dia Pipe of API standards.

b) Total foreign exchange used and earned (Rs. in lacs)

Used : 4099.87 Earned : 8560.46for and on behalf of

the Board of Directors

Place : New Delhi B. D. AgarwalDate : 24th May, 2006 Chairman & Managing Director

ANNEXURE 'B' TO THE DIRECTORS' REPORT

Statement of particulars of employees pursuant to the provisions of Section 217(2A) of the Companies Act, 1956, and part of the Directors' Report

Sl. Name Age Designation / Remuneration Qualification Experience Date of LastNo. yrs. Nature of duties (Rs.) yrs. Commencement employement

of employment and position held

Employed throughout the financial year

1. Sh. B. D. Agarwal 77 Chairman & 35,10,000 B. A. 51 01.04.1982 Jindal Industries Ltd.Managing Director (Whole Time Director)

2. Sh. J. P. Agarwal 55 Vice Chairman and 30,60,000 B. Com. 34 01.04.1986 Jindal Industries Ltd.Joint Managing Director (Executive Director)

Notes:

1) Shri B. D. Agarwal, Chairman and Managing Director and Shri J. P. Agarwal, Vice Chairman and Joint Managing Director of the Company areboth related to each other.

2) The employment of Shri B. D. Agarwal and Shri J. P. Agarwal are contractual and governed by the terms and conditions approved by theCentral Government/ Shareholders.

3) Remuneration includes salary, commission, medical exp., house rent paid / house rent allowance, other allowances and taxable value ofperquisites.

4) No employees of the Company came within the purview of the provisions of Section 217 (2A)(a)(iii) of the Companies Act, 1956 during the year.

for and on behalf ofthe Board of Directors

Place : New Delhi B. D. AgarwalDate : 24th May, 2006 Chairman & Managing Director


12Directors' Report

ANNEXURE ‘C’ TO THE DIRECTORS’ REPORT

Certification by Managing Director and Chief Financial Officer (CFO) of the Company

We hereby certify that for the financial year ending 31st March, 2006 on the basis of the review of the financial statements and the cash flow statementand to the best of our knowledge and belief that:

1. These statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading.

2. These statements together present a true and fair view of the Company’s affairs and are in compliance with existing accounting standards,applicable laws and regulations.

3. There are, to the best of our knowledge and belief, no transactions entered into by the Company during the 2005-2006 which are fraudulent,illegal or violative of the Company’s Code of Conduct.

4. We accept the responsibility for establishing and maintaining internal controls. We have evaluated the effectiveness of the internal controlsystems of the Company and we have disclosed to the auditors and the Audit Committee those deficiencies, of which we are aware, in the designor operation of the internal control systems and that we have taken the required steps to rectify these deficiencies.

5. We further certify that:

a) There have been no significant changes in internal control during this year.

b) There have been no significant changes in accounting policies during this year.

c) There have been no instances of significant fraud of which we have become aware and the involvement therein, of management or anemployee having a significant role in the Company’s internal control system.

B. D. Agarwal S. N. BansalPlace : New Delhi Chairman and Executive Director &

Dated : 24th May, 2006 Managing Director CFO


13

CORPORATE GOVERNANCE REPORT FOR THE YEAR 2005-06

1. Corporate Governance Philosophy

The Securities and Exchange Board of India (SEBI) has prescribed mandatory standards of Corporate Governance for all companies listed onIndian stock exchanges and notified them under Revised Clause 49 of the Listing Agreement. This chapter constitutes your Company's compliancewith Clause 49 of the Listing Agreement.

Your Company has already adopted a Code of Conduct, which lays down the standards of values, ethics and business principles of theManagement. Our business and day to day affairs of the Company are conducted with highest level of compliance.

2. Board of Directors

The names, alongwith categories of the Directors on the Board, their attendance at Board meetings during the year and at the last AGM as alsothe number of directorships and committee memberships held by them in other companies are given below :

The Chairman is an Executive Director and the number of Independent Non-Executive Directors on the Board is more than 50% of the Boardstrength at any point of time. All Independent Non-Executive Directors comply with the legal requirements for being "independent". TheIndependent Directors do not have any pecuniary relationships or transactions either with the Company or with the promoters/management thatmay affect their judgment in any manner.

Under the Law, the Board of Directors must meet at least four times a year, with a maximum time gap of four months between any two meetings.

During the last financial year, our Board met seven times, on 17th May, 2005; 29th June, 2005; 29th July, 2005; 12th September, 2005;28th October, 2005; 5th December, 2005; 24th January, 2006.

None of the Directors of our Company were members in more than 10 committees or acted as Chairman of more than five committees across allcompanies in which they were Directors.

Surya Code of Conduct:

During the year, the Board of Directors adopted Code of Conduct for Directors and Senior Management. The Board Members and SeniorManagement personnel have affirmed their compliance with the code of conduct. The Code of Conduct was duly posted on the website of theCompany. The Chairman and Managing Director has certified that the Board Members and senior management personnel have complied withthe code of conduct and the same is placed before the Board.

3. Audit Committee

The Audit Committee comprises three Directors. The members of Audit Committee are Shri. K. K. Narula (Chairperson and IndependentDirector), Shri B. B. Chadha (Independent Director) and Shri G. S. Gupta (Independent Director). All the three members have extensive financialand accounting knowledge and background. The terms of reference of the Audit Committee are in line with revised Clause 49 II (C) and (D) ofthe Listing Agreement with the stock exchanges and Section 292A of the Companies Act, 1956. During the year under review, five committeemeetings were held i.e. 27.06.2005, 29.07.2005, 12.09.2005, 28.10.2005 and 23.01.2006 and were attended by all members of the Committee.The quorum for the Committee is two members. The Audit Committee meetings were attended by the heads of Finance and Internal Auditand the Auditors (including Cost Auditors) as invitees. The members held discussions with the Auditors during the meetings and theCommittee reviewed the periodic unaudited and audited results of the company before being considered and approved by the Board ofDirectors. Sh. B.B. Singal, Company Secretary, acts as the secretary to the Committee.

Name Category No. of Board Whether No. of Directorships No. of Committee positionsof the Director Meetings attended held in other companies held in other companies

attended AGM onduring 27th

Chairman Director Chairman Member2005-06 Sept. 2005

Sh. B. D. Agarwal Promoter(Chairman & ExecutiveManaging Director) Non-Independent 7 YES – 2 – –

Sh. J. P. Agarwal Promoter(Vice Chairman & ExecutiveJt. Managing Director) Non-Independent 7 NO – – – –

Sh. M. G. Bakre Non-Executive(IDBI Nominee) Independent 6 NO – – – –

Sh. K. K. Narula Non-ExecutiveIndependent 7 YES – – – –

Sh. Rajendra Arya Non-ExecutiveIndependent 6 NO – 1 – –

Smt. Urmil Agarwal Non-ExecutiveNon-Independent 1 NO – – – –

Sh. B. B. Chadha Non-ExecutiveIndependent 6 NO – 2 1 1

Sh. G. S. Gupta Non-ExecutiveIndependent 7 NO – 2 – –

Corporate Governance


14Corporate Governance

The role of the Audit Committee, which amongst other things includes the following:

1. Overseeing of the company's financial reporting process and disclosure of its financial information to ensure that the financial statementsare correct, sufficient and credible.

2. Recommending the appointment, re-appointment and, if required, the replacement or removal of the statutory auditors and fixation of auditfees and approval of payment of statutory auditors for any other services rendered by the statutory auditors.

3. Reviewing, with the management, the annual financial statements before submission to the board for approval, with particular reference to:a. Matters required to be included in the Directors' Responsibility Statement to be included in the Board's Report in terms of clause (2AA)

of Section 217 of the Companies Act, 1956.b. Changes, if any, in accounting policies and practices and reasons for the same.c. Major accounting entries involving estimates based on the exercise of judgment by management.d. Significant adjustments made in the financial statements arising out of audit findings.e. Compliance with listing and other legal requirements relating to financial statements.f. Disclosure of any related party transactions.g. Qualifications in the draft audit report.

4. Reviewing, with the management, the quarterly financial statements before submission to the Board for approval.

5. Reviewing, with the management, performance of statutory and internal auditors, adequacy of the internal control systems.

6. Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department, staffing and seniority ofthe official heading the department, reporting structure coverage and frequency of internal audit.

7. Discussion with internal auditors any significant findings and follow up thereon.

8. Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or afailure of internal control systems of a material nature and reporting the matter to the board.

9. Discussion with statutory auditors before the audit commences, about the nature and scope of audit as well as post-audit discussion toascertain any area of concern.

10. To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of non paymentof declared dividends) and creditors.

11. Reviewing the management discussion and analysis of financial condition and results of operations:

12. Reviewing the significant related party transactions, submitted by management.

13. Reviewing the management letters / letters of internal control weaknesses issued by the statutory auditors.

14. Reviewing the internal audit reports relating to internal control weaknesses.

15. Reviewing the appointment, removal and terms of remuneration of the Chief Internal Auditor

16. Reviewing the financial statements, in particular, the investments made by the unlisted subsidiary company.

The minutes of the Committee are placed before the Board.

4. Directors Remuneration

a. Pecuniary Relationships:

None of the Non Executive Directors of your Company have any pecuniary relationship or transactions with the Company except for sittingfees paid to them for attending Board meetings or Committee meetings thereof.

b. Remuneration Policy:

The following aspects are considered while determining the remuneration package of the senior management of the Company:• Industry Standards• Remuneration package of executives in the industry with similar skill sets

c. The details of remuneration / sitting fees paid to the Executive Directors / Non Executive Directors during the financial year 2005-2006 isas under:

Name Salary Perquisites Commission Stock Sitting Fees& Allowances Options

(Rs.) (Rs.) (Rs.) (Rs.)

Sh. B. D. Agarwal(Chairman & Managing Director) 17,55,000/- 8,77,500/- 8,77,500/- Nil N.A.Sh. J. P.Agarwal(Vice Chairman & Jt. Managing Director) 15,30,000/- 7,65,000/- 7,65,000/- Nil N.A.Sh. M. G. Bakre (IDBI Nominee) Nil Nil Nil Nil 45,000/-Sh. K. K.Narula Nil Nil Nil Nil 1,05,000/-Sh.Rajendra Arya Nil Nil Nil Nil 1,20,000/Smt. Urmil Agarwal Nil Nil Nil Nil 7,500/-Sh. B. B. Chadha Nil Nil Nil Nil 82,500/-Sh. G. S. Gupta Nil Nil Nil Nil 1,27,500/-

Period of Contract (Sh. B. D. Agarwal) : 5 years from 1st November, 2003 (i.e. upto 31st October, 2008)Period of Contract (Sh. J. P. Agarwal) : 5 years from 1st January, 2002 (i.e. upto 31st December 2006)

The Company has not issued Stock options to any of its Directors.

Number of Shares held by Non Executive Directors:

Shri Rajendra Arya – 200Smt. Urmil Agarwal – 158873


15

5. Remuneration Committee

The Remuneration Committee has been reconstituted on 29th January, 2004 and it comprises Shri K. K. Narula (Chairperson), Shri RajendraArya and Shri G. S. Gupta. The scope of the Remuneration Committee includes finalizing the remuneration packages for Executive Director(s)of the Company. Sh. B. B. Singal, Company Secretary, acts as the secretary to the committee.

There is no meeting held during the year under review.

6. Shareholders/ Investors' Grievance Committee

The Board of Directors of the Company had reconstituted the Investors' Grievance Committee on 29th June, 2005. The Committee has themandate to review and redress shareholder grievances. The Committee met 4 times during the year on 25.04.2005, 19.07.2005, 17.10.2005and 16.01.2006, and the attendance of Members at the Meeting was as follows:

Name of the members Status No. of Meetings Attended Remarks

Sh. B. D. Agarwal Member 4 –

Sh. Rajendra Arya Chairman 4 –

Sh. G. S. Gupta Member Nil Membership withdrawn on 29-06-05

Sh. K. K. Narula Member 2 Appointed as member on 29-06-05

The quorum for the Committee is two members. The minutes of the Committee are placed before the Board.

Compliance Officer : Sh. B.B.Singal (Company Secretary)

Number of shareholders' complaints received upto 31st March, 2006 : 319

Number of complaints not solved to the satisfaction of the shareholders : Nil

Number of pending complaints : Nil

7. General Body Meetings

The last three Annual General Meetings were held on the following dates :26.09.2003; 24.09.2004; 29.09.2005at the Registered Office of the company at Prakash Nagar, Sankhol, Bahadurgarh -124 507 at 10:30 a.m.

Two Special Resolutions were passed at the 30th AGM held on 26th September, 2003.

During the year 2005-2006, Extra-ordinary General Meeting was held on 2.01.2006, at the Registered Office of the company at Prakash Nagar,Sankhol, Bahadurgarh -124 507, in which the 44,00,000 Optionally Convertible Warrants were approved for issue on preferential basis topromoters and their associates.

During the last year one special resolution was put through postal ballot for alteration of Object Clause of the Memorandum of Association ofthe Company. Shri B. B. Singal, Company Secretary, has conducted the postal ballot exercise. The details of voting pattern was as follows:

Number of valid postal ballot forms received 1243

Votes in favour of the Resolution 10959549

Votes against the Resolution 6372

Number of invalid postal ballot forms received 31

8. Disclosures

i) The senior management has made disclosures to the board relating to all material financial and commercial transactions. There are nomaterially significant related party transactions that may have potential conflict with the interest of the company at large.

ii) The Company has complied with all applicable requirements prescribed by the regulatory and statutory authorities including Stock Exchangesand SEBI during the preceding three financial years on all matters related to capital market and no penalties / strictures in this respect havebeen imposed on the Company.

iii) The Company has complied with all mandatory requirements and has constituted Remuneration Committee of the Board.

iv) The Company has issued 44,00,000 optionally convertible warrants on preferential basis of Rs.10/- each at premium of Rs.54/- per warranton 16th January, 2006 followed by the shareholders' approval in the Extra Ordinary General Meeting held on 2nd January, 2006. TheCompany has received the 10% upfront money on 13-01-2006 amounted to Rs.2,81,60,000/- against the allotment of 44,00,000 warrantsand further the company has also received 90% allotment money amounted to Rs.3,45,60,000/- against allotment of the 6,00,000 equityshares on conversion of 6,00,000 warrants on 23-03-2006 and 24-03-2006 from the applicants of the aforesaid shares.

The above fund is utilised by the Company to financing the additional working capital requirements.

9. Means of Communication

i) Half yearly report sent to each shareholders residence : Noii) Newspapers in which quarterly results normally published : Financial Express, Dainik Tribune, Business Standardiii) Website where results or official news are displayed : www.suryaroshnilighting.comiv) Whether it also displays presentations made to institutional

investors or to the analysts : Yes (if any)v) Whether Management Discussion & Analysis Report is

part of the Annual Report or not : Yes



16

10. General Shareholder Informationi. AGM : Date and Time - 28.09.2006 at 10:30 a.m.

Venue - Prakash Nagar, Sankhol, Bahadurgarh, Haryana - 124 507.ii. Financial Year - 1st April to 31st Marchiii. Book closure Date - 13.09.2006 - 18.09.2006 (both days inclusive)iv. Dividend payment date - On or after 29.09.2006v. Listing on Stock Exchanges - The securities of the company were listed on the following Stock

Exchanges during the financial year 2005-06:

The Stock Exchange, Mumbai The National Stock Exchange of India Ltd.Rotunda Building, Dalal Street, Exchange Plaza, Bandra- KurlaFort, Mumbai - 400 001. Complex, Bandra, Mumbai - 400 051.

The company has paid the Annual Listing Fees to the Stock Exchanges for the Financial Year 2005-06 and 2006-07.

vi. Stock Code

Equity Shares - BSE - (Physical) - 336

(Dematerialised) - 500336

NSE - (Symbol) - SURYAROSNI

MONTH NSE BSE

HIGH (Rs.) LOW (Rs.) HIGH (Rs.) LOW (Rs.)

April, 2005 43.50 35.00 43.25 34.75

May, 2005 48.20 33.00 48.40 33.00

June, 2005 45.80 37.50 45.80 36.25

July, 2005 45.00 37.15 45.50 37.10

August, 2005 63.35 40.50 63.10 39.10

September, 2005 77.40 52.00 76.80 53.65

October, 2005 63.10 45.70 63.00 45.10

November, 2005 68.50 48.65 68.90 49.00

December, 2005 69.50 59.25 69.65 59.00

January, 2006 82.55 64.10 82.85 64.25

February, 2006 76.50 65.50 76.70 65.50

March, 2006 71.00 63.10 73.50 63.40

viii. Performance in comparison to BSE SENSEX


vii. Market Price Data :

ix. Registrar : MAS Services Private Limited(Common for both Physical and Electronic share registry) AB-4, Safdarjung Enclave, New Delhi - 110 029.

Tel. : (011) 26104142 ; 26104326 Fax : (011) 26181081E-Mail : [email protected]

x. Share Transfer System

The Company's share transfers are handled by MAS Services Pvt. Ltd., Registrar and Transfer Agents(RTA). The shares received in physicalmode by the Company/RTA are transferred expeditiously provided the documents are complete and shares under transfer are not underdispute. Confirmation in respect of the request for dematerialisation of shares is sent to the respective depositories - National SecuritiesDepository Limited / Central Depository Services India Limited within 15 days. None of the transfer was pending for more than a fortnightas on 31st March, 2006.

xi. Distribution of Shareholding

Shareholders Shares

Holdings Number % of Total Number % of Total

1-5000 19308 99.01 6288859 24.19

5001-10000 92 0.47 685312 2.64

10001- 20000 33 0.17 502477 1.93

20001-100000 36 0.18 1685949 6.48

Over 100000 34 0.17 16838653 64.76

TOTAL 19503 100.00 26001250 100.00


17 Corporate Governance

Shareholding Pattern

CATEGORY No. of Shares held % age of Paid-upCapital

Promoters (including Persons Acting in Concert) 6458494 24.839

Institutional Investors 2784318 10.708

Private Corporate Bodies 9990840 38.424

Indian Public 6608938 25.418

NRIs and OCBs 96938 0.373

Others (Clearing Members) 61722 0.237

TOTAL 26001250 100.00

xii. Dematerialisation of Shares & Liquidity : The company has obtained electronic connectivity with the National Securities DepositoryLtd. (NSDL) and the Central Depository Services Ltd. (CDSL) for demat facility(ISIN: INE335A01012). As on 31st March, 2006, 2,29,54,967 equity shares, being 88.28% ofthe company's total paid-up equity shares had been dematerialized.

The shares of the company are regularly traded at the NSE and BSE.

xiii. Outstanding GDRs /ADRs /Warrants or : 38,00,000 optionally convertible warrants are outstanding into equity shares in the ratio ofany Convertible instruments, conversion 1:1 on or before 15.07.2007 and after conversion equity capital will be enhanced accordingly.date & likely impact on equity

xiv. Plant Locations : Steel Division : Prakash Nagar, Sankhol, Bahadurgarh, Haryana - 124 507.: Lighting Division : 7 km Stone, Kashipur-Moradabad Road, Kashipur - 244 713 (Uttaranchal)

J-7, 8 & 9, Malanpur Industrial Area, Malanpur, Distt. Bhind (M.P).

xv. Address for correspondence : The Company SecretarySurya Roshni Limited408, Padma Tower - I, 5, Rajendra Place, New Delhi - 110 008.Tel. - (011) 51539765, 25810093-96 Fax - (011) 25753955E-Mail - [email protected]

AUDITOR'S CERTIFICATE

Auditor's certificate on compliance with the conditions of Corporate Governance under Clause 49 of the Listing Agreement

To the members of

Surya Roshni Limited

We have examined the compliance of conditions of corporate governance by Surya Roshni Limited ("the company") for the year ended 31st

March, 2006, as stipulated in Revised Clause 49 of the Listing Agreement of the company with the stock exchanges.

The compliance of the conditions of corporate governance is the responsibility of the management. Our examination was limited to the

procedures and implementation thereof, adopted by the company, for ensuring the compliance of the conditions of corporate governance. It

is neither an audit nor an expression of opinion on the financial statements of the company.

In our opinion and to the best of our information and according to the explanations given to us, we certify that the company has complied

with the conditions of corporate governance as stipulated in the abovementioned Listing Agreement.

We state that no investor grievances are pending for a period exceeding one month against the company as per the records maintained by the

company.

We further state that such compliance is neither an assurance as to the future viability of the company nor the efficiency or effectiveness with

which the management has conducted the affairs of the company.

For SASTRY K. ANANDAM & CO.

CHARTERED ACCOUNTANTS

Place : New Delhi (K. Ananda Sastry)

Dated : 24th May, 2006 Partner, FCA

Membership No. 9980


18

ANNEXURE TO THE AUDITORS' REPORT

Referred to in paragraph 3 of our report of even date

1. In respect of its fixed assets :

a) The Company has maintained records showing full particulars

including quantitative details and situation of its fixed assets

on the basis of available information.

b) As explained to us, the fixed assets have been physically

verified by the management during the year in a phased

periodical manner, which in our opinion is reasonable, having

regard to the size of the Company and nature of its assets.

No material discrepancies were noticed on such physical

verification. It was explained that the title deeds of some of

the assets including lands are with Industrial Development

Bank of India and therefore could not be verified.

c) In our opinion, the Company has not disposed of substantial

part of fixed assets during the year and the going concern

status of the Company is not affected.

2. In respect of its inventories :

a) As explained to us, inventories have been physically verified

by the management at regular intervals during the year.

b) In our opinion and according to the information and

explanations given to us, the procedures of physical

verification of inventories followed by the management are

reasonable and adequate in relation to the size of the Company

and the nature of its business.

c) The Company has maintained proper records of inventories.

As explained to us, there were no material discrepancies

noticed on physical verification of inventory as compared to

the book records.

3. In respect of loans, secured or unsecured, granted or taken by the

Company to/from companies, firms or other parties covered in the

register maintained under section 301 of the Companies Act, 1956:

a) The Company has not granted any loans, secured or

unsecured to Companies, firms or other parties covered in

the register maintained under Section 301 of the Companies

Act, 1956.

b) Since the Company has not granted any loans, the Clause

(b), (c), (d) relating to the rate of interest, receipt of Principal

amount, overdue amount does not apply.

c) The Company has not taken any loans, secured or unsecured

from Companies, firms or other parties covered in the register

maintained under Section 301 of the Companies Act, 1956.

d) Since the Company has not taken any loans, the Clause

relating to the rate of interest, payment of Principal amount,

overdue amount does not apply.

4. In our opinion and according to the information and explanations

given to us, there are adequate internal control procedures

commensurate with the size of the Company and the nature of its

business for the purchase of inventory, fixed assets and also for

the sale of goods. During the course of our audit, we have not

observed any continuing failure to correct major weaknesses in

internal controls.

5. In respect of transactions covered under Section 301 of the

Companies Act, 1956:

a) In our opinion and according to the information and

explanations given to us, there are no transactions made in

pursuance of contracts or arrangements, that needed to be

AUDITORS' REPORT

ToThe Members

1. We have audited the attached Balance Sheet of M/s SURYA ROSHNILIMITED as at 31st March, 2006 and the Profit and Loss Account& also the Cash Flow Statement for the year ended on that dateannexed thereto. These financial statements are the responsibilityof the Company's Management. Our responsibility is to express anopinion on these financial statements based on our Audit.

2. We conducted our audit in accordance with Auditing Standardsgenerally accepted in India. Those standards require that we plan &perform the audit to obtain reasonable assurance about whetherthe financial statements are free of material misstatements. An auditincludes examining, on a test basis, evidence supporting the amounts& disclosures in financial statements. An audit also includesassessing the accounting principles used & significant estimatesmade by Management, as well as evaluating the overall financialstatement presentation. We believe that our audit provides areasonable basis for our opinion.

3. As required by the Companies (Auditors' Report) Order, 2003 asamended by the Companies (Auditors' Report) (Amendment) Order,2004 issued by the Central Government of India in terms of SubSection (4A) of Section 227 of the Companies Act, 1956 and onthe basis of such checks as we considered appropriate and accordingto the information and explanations given to us, we enclose in theAnnexure hereto a statement on the matters specified in paragraphs4 and 5 of the said order.

4. Further to our comments in the Annexure referred to in paragraph 3above, we report that:

(i) We have obtained all the information and explanations,which to the best of our knowledge and belief were necessaryfor the purposes of our audit.

(ii) In our opinion, proper books of account, as required by lawhave been kept by the Company so far as appears from ourexamination of those books.

(iii) The Balance Sheet, Profit and Loss Account and Cash FlowStatement dealt with by this report are in agreement withthe books of account.

(iv) In our opinion, the Balance Sheet, Profit and Loss Accountand Cash Flow Statement dealt with by this report Complywith the mandatory Accounting Standards referred in SubSection (3C) of Section 211 of the Companies Act, 1956.

(v) On the basis of written representations received from thedirectors as on 31st March, 2006, and taken on record bythe Board of Directors, we report that none of the directorsis disqualified as on 31st March, 2006 from being appointedas a director in terms of clause (g) of sub-section (1) of Section274 of the Companies Act, 1956.

(vi) In our opinion and to the best of our information andaccording to the explanations given to us, the said accountsread together with the Significant Accounting Policies andother notes thereon give the information required by theCompanies Act, 1956 in the manner so required, and presenta true and fair view, in conformity with the accountingprinciples generally accepted in India :a) in so far as it relates to Balance Sheet, of the State of

affairs of the Company as at 31st March, 2006;b) in so far as it relates to Profit and Loss Account, of

PROFIT of the Company for the year ended on that date;and

c) in so far as it relates to the Cash Flow Statement, of theCash Flows for the year ended on that date.

For SASTRY K. ANANDAM AND CO.CHARTERED ACCOUNTANTS

(K. ANANDA SASTRY)Place : New Delhi Partner, F.C.A.Dated : 24th May, 2006 Membership No. 9980

Auditors' Report


19

entered into in the register maintained under Section 301 of

the Companies Act, 1956.

b) Since there are no transaction, the Clause relating to making

entry in the register maintained under Section 301 of the

Companies Act, 1956 does not apply.

6. In our opinion and according to the information and explanations

given to us, the Company has complied with the provisions of

Section 58A and 58AA or any other relevant provisions of the

Companies Act, 1956 and the Companies (Acceptance of Deposits)

Rules, 1975 with regard to the deposits accepted from the public.

Since the Company has not defaulted in repayments of deposits,

compliance of Section 58AA or obtaining any order from the

Company Law Board, National Company Law Tribunal or Reserve

Bank of India or any other Court or Tribunal, does not arise.

7. In our opinion, the internal audit system of the Company is

commensurate with its size and nature of its business.

8. We have broadly reviewed the books of accounts relating to

materials, labour & other items of cost maintained by the Company

Pursuant to the Rules made by the Central Government for the

maintenance of Cost Records under Section 209(1) (d) of the

Companies Act, 1956 and we are of the opinion, that prima facie,

the prescribed accounts and records have been made and

maintained. We have , however, not made a detailed examination

of the same.

9. In respect of statutory dues :

i) the company is generally regular in depositing with

appropriate authorities undisputed statutory dues including

provident fund, investor education and protection fund,

employees state insurance, Income Tax, Sales Tax, Wealth

Tax, Service Tax , Custom Duty, Excise Duty, Cess and other

material statutory dues applicable to it.

ii) According to the information and explanations given to us,

no undisputed amounts payable in respect of Income Tax,

Wealth Tax, Sales Tax, Custom Duty, Excise Duty and Cess

were in arrears as at 31st March, 2006 for a period of more

than six months from the date they became payable.

iii) The disputed statutory dues aggregating to Rs. 5,15,11,293/-

that have not been deposited on account of matters pending

before appropriate authorities are as under:

Sl. Name of Nature of Dues Forum where Amount in (Rs.)

No. the Statue dispute is

pending

1. Central Excise Excise Duty – Commissioner of 14,37,127

Act, 1944 Central Excise

– CEGAT 20,23,799

– High Court 1,53,62,997

2. Trade Tax Act, Trade Tax Departmental

1948 Appeal before

Supreme Court 2,92,31,542

3. Employees State Employees High Court

Insurance Act, State Insurance

1966 Calculation 34,55,828

Total 5,15,11,293

10. The Company has no accumulated losses and has not incurred anycash losses during the financial year covered by our audit or in theimmediately preceding financial year.

11. Based on our audit procedures and according to the informationand explanation given to us, we are of the opinion that theCompany has not defaulted in repayment of dues to financialinstitutions, banks or debenture holders.

12. In our opinion and according to the information and explanationsgiven to us, no loans and advances have been granted by theCompany on the basis of security by way of pledge of shares,debentures and other investments.

13. In our opinion, the Company is not a chit fund or a nidhi/mutualbenefit fund/ society. Therefore, clause 4(xiii) of the Companies(Auditor's Report) Order 2003 is not applicable to the Company.

14. In our opinion, the Company is not dealing in or trading in Shares,securities, debentures and other investments. Accordingly, theProvisions of Clause 4 (xiv) of the Companies (Auditors' Report)Order, 2003 are not applicable to the Company

15. The Company has given guarantees for loans taken by subsidiaryfrom banks. According to the information and explanations givento us, we are of the opinion that the terms and conditions thereofare not prima-facie prejudicial to the interests of the Company.However, the guarantee has since been released.

16. In our opinion, the term loans have been applied for the purposesfor which they were raised.

17. According to the information and explanations given to us and onan overall examination of the Balance Sheet of the Company, wereport that no funds raised on short term basis have been used forlong term investments. No long term funds have been used tofinance short term assets except permanent working capital.

18. During the year, the Company has made Preferential Issue of44,00,000 Convertible Warrants into Equity Shares of nominalvalue of Rs.10/- each at a premium of Rs.54/- per share calculatedin accordance with SEBI (Disclosure & Investor Protection)Guidelines 2000 to Promoters & persons acting in concert. Out ofthe above Preferential Issue, 2,50,000 warrants were allotted toShri Jai Prakash Agarwal, Joint Managing Director of the Company.

19. The Company has no debentures as at 31st March, 2006.

20. The Company has not raised any money by way of public issueduring the year.

21. In our opinion and according to the information and explanationsgiven to us, no fraud on or by the Company has been noticed orreported during the year, that causes the financial statements to bematerially misstated.

for SASTRY K. ANANDAM AND CO.CHARTERED ACCOUNTANTS

(K. ANANDA SASTRY)

Place : New Delhi Partner, F.C.ADated : 24th May, 2006 Membership No. 9980

Auditors' Report


20

BALANCE SHEET AS AT 31ST MARCH, 2006

Particulars Schedule As at As atNo. 31st March, 2006 31st March, 2005

(Rs.) (Rs.)

SOURCES OF FUNDS

SHAREHOLDER'S FUND

Share Capital 1 28‚43‚32‚500 25‚40‚12‚500

Reserve & Surplus 2 1‚29‚77‚99‚325 1‚12‚11‚60‚785

LOAN FUNDS

Secured Loans 3 2‚89‚59‚02‚362 2‚67‚44‚89‚264

Unsecured Loans 4 52‚01‚02‚835 51‚91‚86‚380

DEFERRED TAX LIABILITIES (NET) 47‚83‚68‚049 49‚42‚28‚629

TOTAL 5‚47‚65‚05‚071 5‚06‚30‚77‚558

APPLICATION OF FUNDS

FIXED ASSETS : 5

Gross Block 5‚63‚75‚98‚129 5‚36‚77‚07‚424

Less : Depreciation 2‚88‚53‚40‚274 2‚81‚01‚78‚108

Net Block 2‚75‚22‚57‚855 2‚55‚75‚29‚316

Capital Work in Progress 10‚41‚12‚839 11‚04‚94‚010

INVESTMENTS 6 7‚19‚11‚514 7‚22‚79‚284

CURRENT ASSETS, LOANS & ADVANCES

Inventories 7 1‚53‚86‚02‚973 1‚58‚05‚56‚586

Sundry Debtors 8 1‚06‚05‚75‚722 90‚48‚40‚468

Cash & Bank Balances 9 4‚86‚91‚520 3‚37‚49‚433

Loans & Advances 10 23‚20‚65‚052 16‚57‚39‚472

2‚87‚99‚35‚267 2‚68‚48‚85‚959

LESS : CURRENT LIABILITIES & PROVISIONS

Current Liabilities 11 25‚01‚39‚022 30‚24‚23‚698

Provisions 12 8‚15‚73‚382 5‚96‚87‚313

33‚17‚12‚404 36‚21‚11‚011

NET CURRENT ASSETS 2‚54‚82‚22‚863 2‚32‚27‚74‚948

TOTAL 5‚47‚65‚05‚071 5‚06‚30‚77‚558

Significant Accounting Policies and Notes on Accounts 21

Balance Sheet

The Schedules referred to above and notes on accounts thereon form an integral part of Balance Sheet.

As per our attached report of even date

For SASTRY K. ANANDAM & CO.Chartered Accountants B. D. Agarwal

Chairman and

K. ANANDA SASTRY S. N. Bansal Managing Director

Partner Executive Director & CFOMembership No. 9980

J. P. AgarwalPlace : New Delhi B. B. Singal Vice Chairman &

Dated : 24th May, 2006 Company Secretary Joint Managing Director

Directors

B.B. Chadha

G.S. Gupta

K.K. Narula

M.G. Bakre

Rajendra Arya


21

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2006Particulars Schedule Year ended Year ended

No. 31st March, 2006 31st March, 2005(Rs.) (Rs.)

INCOME

Sales 13 12‚18‚56‚73‚868 11‚79‚17‚85‚268

Less : Internal consumption 76‚61‚93‚794 65‚06‚15‚971

11‚41‚94‚80‚074 11‚14‚11‚69‚297

Less : Excise duty recovered on sales 1‚30‚22‚87‚453 1‚15‚71‚18‚739

10‚11‚71‚92‚621 9‚98‚40‚50‚558

Other Income 14 1‚93‚78‚390 69‚47‚165

Accretion/(Decretion) to Stock 15 (9,76,79,586) 11‚88‚04‚770

TOTAL 10‚03‚88‚91‚425 10‚10‚98‚02‚493

EXPENDITURE

Raw Material Consumed 7‚63‚19‚44‚440 7‚87‚72‚42‚105

Less : Internal Consumption 70‚89‚59‚216 59‚56‚73‚478

6‚92‚29‚85‚224 7‚28‚15‚68‚627

Purchase for Resale 28‚05‚85‚794 22‚44‚11‚656

Packing Material Consumed 19‚50‚74‚412 15‚89‚90‚194

Manufacturing Expenses 16 49‚96‚44‚676 50‚43‚06‚158

Employees Remuneration & Benefits 17 49‚54‚06‚833 44‚84‚96‚849

Selling Expenses 18 65‚11‚42‚406 67‚93‚42‚618

Interest 19 27‚67‚47‚591 24‚55‚91‚186

Other Expenses 20 15‚55‚16‚101 14‚87‚92‚241

Depreciation 5 27‚51‚71‚516 24‚54‚06‚090

Less: Transferred from Capital Reserve on Revaluationof Fixed Assets 5‚01‚226 5‚01‚226

27‚46‚70‚290 24‚49‚04‚864

TOTAL 9‚75‚17‚73‚327 9‚93‚64‚04‚393

PROFIT/(LOSS) BEFORE TAX FOR THE YEAR 28‚71‚18‚098 17‚33‚98‚100

Provision for Tax

– Current 10‚81‚17‚023 4‚76‚68‚135

– Deferred (1,35,52,001) 8,21,763

– Fringe Benefit 56‚50‚000 –

PROFIT/(LOSS) AFTER TAX 18‚69‚03‚076 12‚49‚08‚204

Surplus brought forward from previous year 67‚90‚19‚541 57‚99‚44‚737

AVAILABLE FOR APPROPRIATIONS

Proposed Equity Dividend 3‚90‚01‚875 3‚04‚81‚500

Tax on Dividend 54‚70‚013 43‚53‚650

Deferred Tax Revision (23,08,578) (1,90,01,750)

Transfer to General Reserve 1‚00‚00‚000 1‚00‚00‚000

Balance carried to Balance Sheet 81‚37‚59‚307 67‚90‚19‚541

Earning per Equity Share - Basic & Diluted 7.36 4.92

Significant Accounting Policies and Notes on Accounts 21

Profit & Loss Account

The Schedules referred to above and notes on accounts thereon form an integral part of Profit & Loss Account.



Chairman and





Directors

B.B. Chadha

G.S. Gupta

K.K. Narula

M.G. Bakre

Rajendra Arya


22Schedules

Schedules to the Balance Sheet

SCHEDULE 1 As at As at31st March, 2006 31st March, 2005

(Rs.) (Rs.)

SHARE CAPITAL

Authorised :

4,98,00,000 Equity Shares of Rs.10/- each 49‚80‚00‚000 49‚80‚00‚000

6,20,000 Preference Shares of Rs.100/- each 6‚20‚00‚000 6‚20‚00‚000

56‚00‚00‚000 56‚00‚00‚000

Issued, Subscribed and Paid up :

2,60,01,250 (Previous Year - 2,54,01,250) 26‚00‚12‚500 25‚40‚12‚500Equity Shares of Rs. 10/- each fully paid up(6,00,000 Equity shares of Rs.10/- each fully paid-upallotted during the year upon conversion of Warrants)

(Of the above shares 3,00,000 Equity shares ofRs.10/- each allotted as fully paid up Bonus sharesby capitalisation of General Reserve during 1980-81,86,47,500 Equity shares of Rs.10/- each during1994-95 and 22,38,750 Equity shares of Rs. 10/-each during 1995-96 by capitalisation of securitiespremium account.)

38,00,000 (Previous Year - NIL) Optionally Convertible Equity 2‚43‚20‚000 –Warrants of Rs 64/- each Rs. 6.40 paid up convertible on orbefore 15th july, 2007 (6,00,000 Optionally Convertible EquityWarrants have been converted into equity shares during the year)* Refer Note No. 6

Total 28‚43‚32‚500 25‚40‚12‚500

SCHEDULE 2 As at As at As at31.03.2005 Addition Deduction 31.03.2006 31.03.2005

RESERVES AND SURPLUS

Capital Reserve

– Capital subsidy 50‚00‚000 – – 50‚00‚000 50‚00‚000

– on revaluation of Fixed Assets 1‚22‚23‚364 – 501,226 1‚17‚22‚138 1‚22‚23‚364

Capital Redemption Reserve 3‚00‚00‚000 – – 3,00,00,000 3,00,00,000

Securities Premium 22‚91‚29‚175 3,24,00,000 – 26,15,29,175 22,91,29,175

General Reserve 16‚57‚88‚705 1,00,00,000 – 17,57,88,705 16,57,88,705

44‚21‚41‚244 4,24,00,000 5,01,226 48,40,40,018 44,21,41,244

Profit & Loss Account 81,37,59,307 67,90,19,541

Total 1‚29,77,99,325 1,12,11,60,785


23 Schedules



(Rs.) (Rs.)

SECURED LOANS

Term Loans

From Financial Institutions 73‚44‚99‚607 60‚96‚97‚221

From Banks 77‚28‚77‚953 79‚97‚29‚669

Working Capital Loans from Banks 1‚38‚85‚24‚802 1‚26‚50‚62‚374

2‚89‚59‚02‚362 2‚67‚44‚89‚264

NOTES :

1) Term Loans from Banks and financial Institutions secured by deposit of title deeds relating to immovable assets of the company and further secured byhypothecation of all company's movable assets.

2) Working Capital Loans from Banks are secured against hypothecation of present and future stock of raw material, stock in process, finished goods, spareand stores, book debts etc., guaranteed by two directors of the company and further secured by way of second charge on the company's Fixed Assets.


(Rs.) (Rs.)

UNSECURED LOANS

Fixed deposits from Public 12‚39‚52‚000 17‚34‚00‚000

From Financial Institutions and Banks 25‚09‚27‚164 20‚00‚00‚000

Interest Free Sales Tax Loan 9‚66‚00‚000 9‚76‚83‚622

Deposit from Companies * 1‚44‚98‚250 1,42,18,750

Trade Deposit & Others 3‚41‚25‚421 3‚38‚84‚008

Total 52‚01‚02‚835 51‚91‚86‚380

* includes Current Year-Rs. 1,44,98,250 (Previous Year Rs. 1,42,18,750) from Surya Roshni Inc., a wholly owned subsidiary company.


24

Schedules to the Balance Sheet/Profit & Loss Account

Schedules

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25


As at As at31st March, 2006 31st March, 2005

(Rs.) (Rs.)

SCHEDULE 6

INVESTMENTS (AT COST)

Non Trade

Quoted

Nil (Previous Year 943) Equity Share of

Rs.10/- each issued at a premium of – 3,67,770

Rs. 380/- each, fully paid up in Punjab National Bank (PNB)

Unquoted

200 (Previous year 200) IDBI Growing Interest 10,00,000 10‚00‚000

Bond (2002A) of Rs. 5000/- each

In Subsidiary Companies :

100 Common Stock (Previous Year 100) of $ 100,000 43,62,000 $ 100,000 43‚62‚000

US $ 1000 each of Surya Roshni Inc., fully paid up

56 Common Stock (Previous Year 56) of $ 1,400,000 6,65,49,514 $ 1,400,000 6‚65‚49‚514

US $ 25000 each of Surya Roshni Inc., fully paid up

Total 7,19,11,514 7,22,79,284

Book Value of Quoted Investments Rs. Nil (Previous Year Rs. 3,67,770)

Market Value of Quoted Investments Rs. Nil (Previous Year Rs. 3,70,929.05)

SCHEDULE 7

STOCK (as certified by the Management)

Stores and spare parts, etc. (at cost on FIFO Basis) 17‚40‚61‚324 14‚86‚16‚258

Raw Materials (at cost on FIFO basis) 46‚75‚65‚695 43‚72‚84‚788

Scrap and salvage (at market value) 3‚16‚37‚299 1‚80‚38‚777

Semi-finished goods (at cost or net realisable value, whichever is less) 16‚46‚26‚442 20‚64‚38‚466

Finished goods (at cost or net realisable value, whichever is less) 70‚07‚12‚213 77‚01‚78‚297

Total 1‚53‚86‚02‚973 1‚58‚05‚56‚586

SCHEDULE 8

SUNDRY DEBTORS

(unsecured, considered good)

Debts outstanding for a period exceeding six months 1‚60‚66‚215 1‚42‚78‚533

Other debts 1‚04‚45‚09‚507 89‚05‚61‚935

Total 1‚06‚05‚75‚722 90‚48‚40‚468

Schedules


26

SCHEDULE 9

CASH AND BANK BALANCE

Cash on hand 26‚93‚329 28‚47‚336

Cheques/Drafts/TTs in hand/ in transit 2‚72‚65‚727 1‚70‚54‚010

Balance With Scheduled Banks in :

– Current Account 13‚03‚389 24‚84‚985

– Fixed Deposits 1‚51‚18‚094 91‚54‚814

– Unpaid Dividend Accounts 23‚10‚981 22‚08‚288

Total 4‚86‚91‚520 3‚37‚49‚433

SCHEDULE 10

LOANS AND ADVANCES

(Unsecured, considered good)

Advances recoverable in cash or in kind or for value to be received 19‚78‚87‚889 14‚46‚14‚204

Security Deposits 1‚67‚96‚565 1‚69‚59‚673

Earnest Money Deposits 28‚59‚838 29‚51‚100

Claims Recoverable/Receivable 1‚45‚20‚760 12,14,495

Total 23‚20‚65‚052 16‚57‚39‚472

SCHEDULE 11

CURRENT LIABILITIES

Sundry Creditors

– Due to SSI 1‚70‚94‚108 92‚64‚896

– Others 11‚23‚46‚189 16‚14‚92‚245

Other Liabilities 11‚52‚12‚226 12‚25‚52‚773

Interest accrued but not due 54‚86‚499 91‚13‚784

Total 25‚01‚39‚022 30‚24‚23‚698

SCHEDULE 12

PROVISIONS


Tax on Dividend 54‚70‚013 42‚75‚030

Provision for gratuity * 2‚66‚13‚346 1‚58‚16‚240

Provision for Leave Encashment * 1‚04‚88‚148 91‚14‚543

Total 8‚15‚73‚382 5‚96‚87‚313

* Refer Note No. 6


As at As at31st March, 2006 31st March, 2005

(Rs.) (Rs.)

Schedules


27

Schedules to the Profit & Loss Account

For the Year ended For the year ended31st March, 2006 31st March, 2005

(Rs.) (Rs.)

SCHEDULE 13

SALES

Inland (net of return) 11‚19‚29‚99‚543 10‚36‚13‚01‚650

Export* 99‚26‚74‚325 1‚43‚04‚83‚618

12‚18‚56‚73‚868 11‚79‚17‚85‚268

Less : Internal consumptions of components 76‚61‚93‚794 65‚06‚15‚971

Total 11‚41‚94‚80‚074 11‚14‚11‚69‚297

* Export Includes Export Benefits of Rs. 6,58,84,761(Previous Year Rs. 9,81,73,775) and Rs. Nil (Previous Year 12,65,900)to Surya Roshni Inc., a wholly owned subsidiary

SCHEDULE 14

OTHER INCOME

Rent 96,000 104,000

Interest (TDS Rs. 1,27,213) 10‚41‚054 6‚02‚419

Others 48‚82‚180 35‚01‚459

Insurance claims 64‚00‚699 1‚95‚180

Income from Investment (Non-Trade) 1‚06‚137 1‚04‚760

Foreign Exchange fluctuation – 8‚21‚618

Profit on Sale of Fixed Assets 68‚52‚320 15‚67‚729

Profit on Sale of Investments – 50,000

Total 1‚93‚78‚390 69‚47‚165

SCHEDULE 15

ACCRETION/(DECRETION) TO STOCK

Stock as at 1st AprilFinished Goods 77,01,78,297 71‚89‚41‚075Semi Finished Goods 20,64,38,466 14‚80‚27‚134Scrap 1,80,38,777 88‚82‚561

99,46,55,540 87‚58‚50‚770

Stock as at 31st MarchFinished Goods 70‚07‚12‚213 77‚01‚78‚297Semi Finished Goods 16‚46‚26‚442 20‚64‚38‚466Scrap 3‚16‚37‚299 1‚80‚38‚777

89‚69‚75‚954 99‚46‚55‚540

Accretion/(Decretion) to Stock (9,76,79,586) 11,88,04,770

SCHEDULE 16

MANUFACTURING EXPENSES

Stores and spares consumed 14‚29‚87‚564 14‚52‚95‚807

Power and fuel 25‚15‚82‚329 26‚99‚40‚228

Water charges 23‚89‚403 21‚85‚925

Repairs to :Machinery 3‚04‚09‚119 2‚67‚98‚402Building 71‚16‚314 1‚04‚97‚728Others 17‚08‚487 25‚17‚978

3‚92‚33‚920 3‚98‚14‚108

Miscellaneous manufacturing expenses 6‚66‚42‚223 3‚80‚94‚074

Excise Duty (31,90,763) 89,76,016

Total 49‚96‚44‚676 50‚43‚06‚158

Schedules


28

SCHEDULE 17

EMPLOYEES REMUNERATION AND BENEFITS

Salaries,wages and allowances including bonus and gratuity 43‚26‚68‚339 38‚56‚54‚221

Employers contribution to PF, ESI and administrative charges 3‚56‚02‚884 3‚24‚62‚583

Staff Welfare Expenses 1‚87‚70‚124 2‚34‚38‚542

Remuneration to Managerial Personnel * 65‚70‚000 53‚70‚000

Staff Recruitment and Training Expenses 17‚95‚486 15‚71‚503

Total 49‚54‚06‚833 44‚84‚96‚849

* Refer Note No.14

SCHEDULE 18

SELLING EXPENSES

Carriage Outward 28‚64‚38‚812 32‚31‚73‚447

Commission\Service Charges on sale 4‚64‚36‚596 4‚97‚14‚596

Discounts 21‚78‚81‚748 19‚51‚72‚971

Advertisement 2‚99‚31‚190 3‚25‚54‚472

Claims for defective 3‚91‚93‚774 2‚40‚11‚820

Others 3‚12‚60‚286 5‚47‚15‚312

Total 65‚11‚42‚406 67‚93‚42‚618

SCHEDULE 19

INTEREST

Term Loans and Fixed Deposits 14‚12‚05‚631 14‚03‚42‚957

Other Interest & Financial Charges 13‚55‚41‚960 10‚52‚48‚229

Total 27‚67‚47‚591 24‚55‚91‚186

SCHEDULE 20

OTHER EXPENSES

Rent 1‚17‚90‚156 1‚10‚48‚123

Insurance 81‚51‚486 77‚91‚007

Rates & Taxes 10‚61‚651 8‚51‚313

Postage, Telegraph,Telephone and Telex 1‚45‚14‚870 1‚42‚25‚050

Printing and Stationery 74‚98‚843 61‚19‚716

Travelling & Conveyance 4‚78‚47‚434 4‚33‚12‚548

Cost Auditors'Remuneration :– Fee 1,23,000 1,23,000– Expenses 7,228 17,803

Miscellaneous Expenses 3‚69‚34‚039 4‚55‚14‚351

Foreign Exchange Fluctuation 4‚17‚575

Loss on sale of fixed assets 47‚89‚440 22‚60‚053

Loss on sale of Investments 61,768 –

Sales Tax /Entry Tax Paid 1‚98‚32‚634 1‚41‚01‚783

15‚30‚30‚124 14‚53‚64‚747

Directors’ Expenses

Sitting Fees 4‚87‚500 5‚85‚000

Travelling & Conveyance 5‚36‚326 17‚10‚503

Meeting Expenses 36,593 21,821

Foreign Travelling 7‚33‚025 4‚48‚631

17‚93‚444 27‚65‚955



(Rs.) (Rs.)

Schedules


29

Statutory Auditors’ Remuneration

Statutory Audit Fees 3‚90‚000 3‚75‚000

Income Tax Audit Fees 1,00,000 1,00,000

Auditors' Expenses 32,233 31,127

Management Fees for certificates/reports 1,70,300 1,55,412

6‚92‚533 6‚61‚539

Total 15‚55‚16‚101 14‚87‚92‚241

SCHEDULE 21

A. SIGNIFICANT ACCOUNTING POLICIES

1. Basis of preparation of Financial Statements

(a) The financial statements have been prepared under the historical cost convention in accordance with the generally accepted accountingprinciples (GAAP) and the provisions of the Companies Act, 1956, as adopted consistently by the Company except for certain fixedassets which have been revalued.

(b) The Company generally follows mercantile system of accounting and recognises significant items of income and expenditure on accrualbasis.

2. Fixed Assets

Fixed Assets are stated at cost net of CENVAT and includes amounts added on revaluation, less accumulated depreciation. All costs,including interest on borrowings attributable to acquisition of Fixed Assets upto the date of commissioning of the assets and net charges onforeign exchange contracts and adjustments arising from exchange rate variations relating to borrowings attributable to the fixed assets arecapitalised.

3. Depreciation

(i) Depreciation on fixed assets is provided on straight line method as per the provisions of Sec. 205(2) of the Companies Act, 1956.

(ii) Depreciation on additions is being provided on pro rata basis from the date of such additions.

(iii) Depreciation on assets sold, discarded or demolished during the year is being provided at their rates up to the date on which such assetsare sold, discarded or demolished.

(iv) Depreciation on additions on account of change in rupee value due to revaluation of foreign currency loan is being provided atrespective rates of depreciation of related assets.

4. Foreign Currency Transactions

(i) The Monetary items denominated in foreign currency are translated at the exchange rate prevailing on the last day of the accounting yearexcept where the Company has entered into forward exchange contracts, the difference between the forward rate and the exchange rateat the date of the transaction is recognised in the statement of profit & loss over the life of the contract.

(ii) Exchange differences arising due to repayment or restatement of liabilities incurred for the purpose of acquiring fixed assets are recognisedas Income or Expense as per Accounting Standard 11 issued by the Institute of Chartered Accountants of India.

(iii) Non-Monetary items denominated in foreign currency are stated at cost.

5. Investments

The investments are valued at cost of acquisition.

6. Gratuity and Leave Encashment

The Provision for Gratuity and Leave Encashment are made as per actuarial valuation basis as at the end of the financial year. However theCompany has covered its Gratuity liabilities with Life Insurance Corporation of India (LIC) by forming a Gratuity Trust and the liabilities paidto LIC is debited to Gratuity provisions.

7. Insurance Claims

Insurance claims are accounted for on settlement of claims.

8. Inventories

(i) Raw material, Stores & Spares are valued at cost on FIFO basis.

(ii) Finished Goods are valued at cost or net realisable value whichever is lower. Cost includes direct cost and appropriate portion ofoverheads.

(iii) Semi-finished goods are valued at cost or net realisable value whichever is lower.

(iv) Scrap and Salvage is valued at market price.

(v) The closing stock constituting duty-free imports consequent to utilisation of DEPB credit is valued at the actual cost of purchaseincluding such foregone import duty.

9. Revenue Recognition

The VAT collected from the customers is not included in Sales.



(Rs.) (Rs.)

Schedules


30Schedules

B. NOTES ON ACCOUNTS

1. Contingent liabilities not provided for in respect of :

(a) Letter of Credit / Bank Guarantees outstanding Rs. 32,05,31,659 (Previous year Rs. 32,18,05,761).(b) Disputed Excise duties liability Rs. 1,88,23,923 (Previous year Rs. 2,09,00,344).(c) Disputed Trade tax liability Rs. 2,92,31,542 (Previous year Rs. 2,92,31,542).(d) Bonds executed by the company to custom department against fulfilment of export obligation under 5% EPCG Scheme Rs. 12,49,67,445

(Previous year Rs. 5,14,52,783).(e) Disputed ESI liability Rs. 34,55,828 (Previous year Rs. 34,55,828).(f) Disputed demand of Uttaranchal Power Corporation Rs. 34,87,907 (Previous year Rs. 34,87,907).

2. Estimated amount of contracts remaining to be executed on capital account (less advances) Rs.3,39,68,000/- (Previous year - Rs.5,75,75,000/)

3. Consequent upon opting for Central Excise exemption w.e.f. 02-01-2006 based on Notification No. 50/2003 dated 10-06-2003, a sum ofRs.1,34,61,135/- was paid under protest by Kashipur Factory and the same shall be recognised as expense in the year in which the matter isfinally settled by the appropriate authorities.

4. The name of small scale industrial undertaking to whom the company owe any sum together with interest outstanding for more than thirty days are:Bhavita Chemicals Pvt. Ltd. Mumbai, D. J. Fluorine Mumbai, Hindustan Adhesives Ltd. Delhi, K. D. Dowels & Keys Faridabad, Met-Pro ChemicalsMumbai, New Pack Plastics Pvt. Ltd. Noida, Niwar Metals Pvt. Ltd. Bhiwadi, Punjab Lighting Aids Mohali, Polydim Dies Pvt. Ltd. Musore, PatialaPackers Patiala, Patiala Packaging Ind. Patiala, Rishabh Gas & Chemicals Ghaziabad, Gwalior Carton works Malanpur, Jain Packaging IndustriesShikohabad, Kusum Packers Gwalior, Chhaya Packers & Printers Pvt. Ltd. Hapur, Cosmic Aluminium Wires (P) Ltd. Noida, Indian Machine ToolsGhaziabad, Jurgyan Industries Jabalpur, Mantlssa Engineers Ghaziabad, Natthu Singh Kushwha Spring Works Gwalior, Precision Engineers Ghaziabad,Pragati International Indore, S & U Mek Engineers (P) Ltd. Hyderabad, Hydmarks Applicon, Roll Form Equipment Pvt. Ltd.

5. The Trade Tax cases for the assessment year 1994-95 to 1995-96 has been decided in favour of Company by Hon'ble High Court, Allahabad.The assessment upto the year 1999-2000 has been completed and the refunds have been received, which were due on the basis of the aboveHon'ble High Court decision. However, the Trade Tax liability Rs. 2,92,31,542/- is shown as contingent liability as the matter is subjudice atthe Supreme Court of India.

6. The Company has issued 44,00,000 optionally convertible warrants convertible into 44,00,000 equity shares on or before July 15, 2007 onpreferential basis to promoters and their associates of Rs.10/- each at premium of Rs.54/- per warrant on 16th January, 2006 followed by theshareholders' approval in the Extra Ordinary General Meeting held on 2nd January, 2006. During the year the warrant holders have exercisedthe option for conversion of 6,00,000 warrants into equity shares and accordingly the paid-up capital of the Company has increased fromRs.25,40,12,500/- to Rs.26,00,12,500/-. Remaining 38,00,000 optionally convertible warrants are outstanding for conversion into equity sharesand after conversion the paid-up capital will be enhanced accordingly.

7. Earning per Share (Basic & Diluted)

Particulars This Year (Rs.) Previous Year (Rs.)

Profit after Tax 18,69,03,076 12,49,08,204Profit for Equity Shareholders 18,69,03,076 12,49,08,204Number of Equity Shares 2,60,01,250 2,54,01,250(Face Value Rs. 10/- each)2,54,01,250 Equity Shares for Full Year 254012506,00,000 Equity Shares for 3 days (600000*3/365) 4932Weighted Average number of Equity Shares used asdenominator for calculating EPS 2,54,06,182 2,54,01,250Basic & Diluted Earning Per Share (EPS) (Rs.) 7.36 4.9238,00,000 Equity Shares to be issued against the conversion of 38,00,000 Optionally Convertible Warrants are fairly priced and are assumedto be neither dilutive nor antidilutive. Hence the same is not considered for computation of diluted earning per share.

8. Deferred Tax

As per Accounting Standard (AS - 22) on accounting for Taxes on income issued by the Institute of Chartered Accountants of India, the deferredtax liability as on 31st March, 2006 comprises of the following :

Deferred Tax As on As on31st March, 2006 31st March, 2005

(a) Deferred Tax Liability1. Related to Fixed Assets (49,08,56,412) (50,26,20,330)

(b) Deferred Tax Assets1. Gratuity 89,58,052 53,23,7462. Leave Encashment 35,30,311 30,67,955

Net Deferred Tax Assets / (Liabilities) (47,83,68,049) (49,42,28,629)

The deferred tax liability upto 31st March, 2005 was measured as per the Income Tax rates enacted on the Balance Sheet date. The same hasbeen revised to Rs. 49,19,20,050/- and the difference of Rs. 23,08,578/- has been credited to the Profit and Loss Appropriation Account.


31 Schedules

9. Segment Information for the year ended 31st March, 2006 and 31st March, 2005The company has identified the following two Primary Business Segments :1. Steel - Engaged in the production of Steel Tubes & Pipes and Cold Rolled Strips.2. Lighting - Engaged mainly in the manufacture of different varieties of Lamps.Secondary Segment reporting has been performed on the basis of Geographical Locations.

Primary Business Segments

Particulars Lighting (Rs.) Steel (Rs.) Total (Rs.)

Revenue

External Sales 3‚12‚74‚14‚148 8‚29‚20‚65‚926 11‚41‚94‚80‚0742‚69‚12‚34‚771 8‚44‚99‚34‚526 11‚14‚11‚69‚297

Inter-segment Sales – – –– – –

Total 3‚12‚74‚14‚148 8‚29‚20‚65‚926 11‚41‚94‚80‚0742‚69‚12‚34‚771 8‚44‚99‚34‚526 11‚14‚11‚69‚297

RESULTSegment Result 28‚31‚26‚884 26‚13‚60‚415 54‚44‚87‚299(Profit(+)/Loss(-) before tax & interest) 20‚86‚46‚192 20‚33‚95‚929 41‚20‚42‚122Unallocable Corporate Expenditure –

–Operating Profit 54‚44‚87‚299

41‚20‚42‚122Interest Expenses 27‚67‚47‚591

24‚55‚91‚186Other Income 1‚93‚78‚390

69‚47‚165Income Tax 10‚02‚15‚022

4‚84‚89‚898Profit from ordinary activities 18‚69‚03‚076

12‚49‚08‚204Net Profit after Tax 18‚69‚03‚076

12‚49‚08‚204Other InformationSegment AssetsNet Block 1‚81‚76‚21‚148 93‚46‚36‚707 2‚75‚22‚57‚855

1‚71‚35‚92‚371 84‚39‚36‚944 2‚55‚75‚29‚316Capital Work-in-Progress 10‚41‚12‚839 – 10‚41‚12‚839

10‚42‚00‚228 62‚93‚779 11‚04‚94‚010Investment 7‚14,11‚514 5‚00‚000 7‚19‚11,514

7,15‚95‚984 6‚83‚300 7,22‚79‚284Current Assets, Loans and Advances 1‚25‚10‚34‚922 1‚62‚89‚00‚345 2‚87‚99‚35‚267

1‚03‚13‚02‚373 1‚65‚35‚83‚586 2‚68‚48‚85‚959Total Segment Assets 3‚24‚41‚80‚423 2‚56‚40‚37‚052 5‚80‚82‚17‚475

2‚92‚06‚90‚956 2‚50‚44‚97‚609 5‚42‚51‚88‚569Unallocated Corporate Assets –

–Total Assets 5‚80‚82‚17‚475

5‚42‚51‚88‚569Segment LiabilitiesLoan Fund 1‚97‚63‚59‚233 1‚43‚96‚45‚964 3‚41‚60‚05‚197

1‚71‚34‚17‚541 1‚48‚02‚58‚103 3‚19‚36‚75‚644Current Liabilities & Provisions 22‚47‚87‚262 10‚69‚25‚142 33‚17‚12‚404

19‚66‚59‚757 16‚54‚51‚254 36‚21‚11‚011Total Segment Liabilities 2‚20‚11‚46‚495 1‚54‚65‚71‚106 3‚74‚77‚17‚601

1‚91‚00‚77‚298 1‚64‚57‚09‚357 3‚55‚57‚86‚655Unallocated Corporate Liabilities 47‚83‚68‚049

49‚42‚28‚629Total Liabilities 4‚22‚60‚85‚650

4‚05‚00‚15‚284

Capital Employed 1‚58‚21‚31‚8241‚37‚51‚73‚285

Capital expenditure 48‚33‚01‚47132‚12‚99‚728

Depreciation 20‚33‚40‚502 7‚13‚29‚788 27‚46‚70‚29017‚44‚87‚580 7‚04‚17‚284 24‚49‚04‚864

Non-cash expenses other than Depreciation – – –– – –

Geographic SegmentIndia 10‚49‚26‚90‚510

9‚80‚88‚59‚454Outside India 92‚67‚89‚564

1‚33‚23‚09‚843


32

10. Related party disclosures

Related party disclosures as required under Accounting Standard on "Related Party Disclosures" issued by the Institute of Chartered Accountantsof India are given hereunder :

A. Relationship :

i) Subsidiary Companies– Surya Roshni Inc., New York

ii) Key Management Personnel– Sh. B.D. Agarwal– Sh. J.P.Agarwal

iii) Relatives of the Key Management Personnel

Relation Sh. B.D.Agarwal Sh. J.P.Agarwal

Spouse Smt. Ganga Devi Agarwal Smt. Urmil Agarwal

Son(s) Sh. V.P.Agarwal & Sh. J.P. Agarwal Sh. Vinay Surya

Daughter(s) Smt. Sudha Gupta Smt. Padmini & Smt. Bharti

Brother(s) Sh. Ruli Ram, Sh. Babu Ram & Sh. Ram Bilas Sh. V P Agarwal

Sister(s) Smt. Bimla, Smt. Rajesh & Smt. Parvati Smt. Sudha Gupta

Mother Deceased Smt. Ganga Devi Agarwal

Father Deceased Sh. B.D.Agarwal

iv) Entities over which the key management personnel are able to exercise significant influence– Galaxy Pipes Limited– Prakash Industries Limited

B. Transactions carried out with the related parties in the ordinary course of business :

i) Subsidiary Companies :

Surya Roshni Inc.This Year Previous Year

Amount in Rs. US $ Amount in Rs. US $

Investment:Total Investment at the beginning of the year 7,09,11,514 1,500,000 7,09,11,514 1,500,000Investment made during the year Nil Nil Nil NilTotal investment at the year end 7,09,11,514 1,500,000 7,09,11,514 1,500,000

Loan Taken:Loan at the beginning of the year 1,42,18,750 325,000 Nil NilLoan taken during the year Nil Nil 1,48,18,750 325,000Loan repaid during the year Nil Nil Nil NilLoan outstanding at the year end 1,44,98,250 325,000 1,42,18,750 325,000

Interest Paid:Interest paid during the year 5,39,174 12,413 2,50,553 5,719

Sale :Receivables against sales at the beginning of the year Nil Nil 2,75,93,362 631,174.3Sale of goods during the year Nil Nil 12,65,900 27,475Outstanding receivable at the year end Nil Nil Nil Nil

ii) Key Management Personnel & their Relatives :

Remuneration for the year 2005-2006 :– Sh. B.D.Agarwal (Chairman & Managing Director) Rs. 35,10,000– Sh. J.P.Agarwal (Vice-Chairman & Jt. Managing Director) Rs. 30,60,000– Sh. Vinay Surya (Chief Operating Officer - Export) Rs. 4,92,000

Sitting Fees for the year 2005-2006Smt. Urmil Agarwal (Director) Rs. 7,500/-

Schedules


33

11. Disclosure of loans / advances and investment as per Clause 32 of the Listing Agreement with the Stock Exchanges :Investment :

Subsidiary As on 31st March, 2006 Maximum outstanding during theyear ended 31st March, 2006

Surya Roshni Inc. (USA) Rs. 7,09,11,514 ($1,500,000) Rs.7,09,11,514 ($1,500,000)

12. Disclosure of Foreign Exchange Transactions in terms of AS - 11

Particulars This year Previous Year

i) Exchange rate fluctuation differences included in the net profit/ (4,60,10,963) 71,63,005(loss) for the period.

ii) Exchange rate fluctuation differences in respect of forward exchange (1,48,393) (97,954)contracts to be recognised in next year profit & loss Account.

13. The exchange difference of Rs.41,99,926/- (previous year Rs. 18,85,895/-) on account of borrowing for the purpose of acquiring fixed assetsis credited to Profit and Loss Account in accordance with the Accounting Standard 11 issued by the Institute of Chartered Accountants of India.

14. Remuneration of Managerial Personnel Paid/payable during the year:

Particulars This Year Previous Year(Rs.) (Rs.)

Salary, HRA & Medical Exp. 49,27,500 40,27,500

Commission 16,42,500 13,42,500

Total 65,70,000 53,70,000

COMPUTATION OF REMUNERATION OF MANAGERIAL PERSONNEL UNDER SECTION 198 OF THE COMPANIES ACT, 1956

Particulars This Year Previous Year(Rs.) (Rs.)

Profit for the year: 28,71,18,098 17,33,98,100

Add:(Depreciation 27,46,70,290 24,49,04,864

(Loss on sale of Fixed Assets 47,89,440 22,60,053

(Remuneration to Managerial Personnel 65,70,000 53,70,000

(Profit on sale of fixed assets as per section 350 of the Companies Act, 1956 83,54,426 19,10,043

58,15,02,254 42,78,43,060

Less: (Profit on sale of fixed assets 68,52,320 15,67,729

(Loss on sale of fixed assets as per Section 350 of the Companies Act, 1956 31,28,709 14,77,728

(Depreciation computed as per Section 350 of the Companies Act, 1956 27,46,70,290 24,49,04,864

28,46,51,319 24,79,50,321

Net Profit U/ 349 of the Companies Act, 1956 29,68,50,935 17,98,92,739

Remuneration @ 10% per annum 2,96,85,093 1,79,89,274

15. Additional information pursuant to the provisions of paragraph 3 and 4C of Part II of Schedule VI of the Companies Act, 1956.

A. Capacity and Production Unit Licenced Capacity *Installed Capacity Production

As at 31st March As at 31st March As at 31st March

2006 2005 2006 2005 2006 2005

Steel DivisionPipes/Tubes M.T. N.A. N.A. Not Yet Assessed 156301 156226Cold Rolled Strips/Sheets M.T. N.A. N.A. Not Yet Assessed 54948 54894Cold Rolled Formed Sections M.T. N.A. N.A. Not Yet Assessed – –Lighting DivisionGLS Lamps Million Nos. N.A. N.A. 170.500 160.500 150.714 135.630Fluorescent Tube Lamps Million Nos. N.A. N.A. 55.000 35.000 44.993 39.741Tubular Glass Shells Million Nos. N.A. N.A. 65.000 53.340 68.087 62.340Glass Shells for GLS Lamps Million Nos. N.A. N.A. 426.900 426.900 426.441 397.305Filament Million Nos. N.A. N.A. 303.000 213.000 238.178 232.478Auto Halogen Lamps Million Nos. N.A. N.A. 12.500 12.500 – –Cap - GLS Lamps Million Nos. N.A. N.A. 150.000 150.000 171.627 153.716Fluorescent Powder M.T. N.A. N.A. 250.000 200.000 228.480 236.640Lead Glass Tubings M.T. N.A. N.A. 3400.000 1700.000 2902.087 2045.13HPSV / HPMV Lamps Nos. N.A. N.A. 450000 150000 450554 273442

* as certified by the management

Schedules


34

B. Turnover Unit This Year Previous Year

Quantity Value (Rs.) Quantity Value (Rs.)

Pipes/Tubes M.T. 160990 5‚61‚32‚62‚020 157700 5‚77‚30‚14‚431Zinc dross and rejected zinc M.T. 445 3‚43‚28‚798 503 2‚88‚25‚542Zinc blow and ash M.T. 1327 3‚95‚41‚716 1196 2‚21‚08‚004Side cutting. Beads etc. M.T. 13589 22‚48‚48‚260 12190 22‚28‚48‚521Others 9‚57‚08‚688 8‚84‚85‚903

Cold Rolled Steel Strips/Sheets M.T. 55069 1‚87‚86‚39‚246 54752 1‚86‚41‚36‚369H.R./C.R. Coils M.T. 16680 40‚57‚37‚198 17127 45‚05‚15‚756GLS Lamps Million Nos. 153.360 98‚22‚94‚104 135.038 87‚01‚17‚846Filament Million Nos. 237.284 13‚42‚44‚650 235.328 11‚51‚26‚838Fluorescent Tube Lamps Million Nos. 42.886 1‚26‚34‚07‚224 42.464 1‚23‚94‚88‚704Tubular Glass Shells Million Nos. 65.442 30‚30‚04‚641 60.203 27‚28‚26‚068Glass Shells for GLS Lamps Million Nos. 432.813 37‚44‚63‚884 406.133 28‚71‚31‚430Cap-GLS Lamps Million Nos. 173.633 14‚58‚28‚423 161.340 11‚34‚31‚316Lighting Fitting Complete & Acces. 13‚42‚45‚078 6‚78‚23‚576HPSV / HPMV Lamps Nos. 431044 10‚03‚54‚723 246894 5‚91‚62‚544Compact Fluorescent Lamps Nos. 2193328 19‚06‚89‚305 1482330 10‚84‚75‚772Fluorescent Powder M.T. 236.678 5‚05‚80‚175 221.120 4‚82‚79‚190Lead Glass Tubings M.T. 2793.474 11‚67‚25‚309 2087.828 8‚88‚71‚715Scrap & Others 9‚77‚70‚426 7‚11‚15‚743

TOTAL 12‚18‚56‚73‚868 11‚79‚17‚85‚268

Less : Internal Consumption of ComponentsTubular Glass Shells Million Nos. 47.325 21‚07‚85‚024 40.954 18‚87‚03‚462Glass Shells for GLS Lamps Million Nos. 167.080 11‚82‚31‚768 147.670 9‚88‚60‚443Filament Million Nos. 228.177 12‚91‚42‚782 219.213 10‚78‚34‚587Cap-GLS Lamps Million Nos. 149.189 12‚90‚43‚049 135.888 9‚87‚26‚395Fluorescent Powder M.T. 236.678 5‚05‚80‚175 211.120 4‚53‚79‚039Lead Glass Tubings M.T. 1262.705 5‚65‚08‚144 1290.154 5‚81‚12‚219Others 7‚19‚02‚852 5‚29‚99‚826

TOTAL 76‚61‚93‚794 65‚06‚15‚971

NET 11‚41‚94‚80‚074 11‚14‚11‚69‚297

C. Opening Stock Unit This Year Previous Year


Pipes/Tubes MT 14500 44‚20‚68‚387 15974 41‚22‚69‚109Cold Rolled Steel Strips/Sheets MT 1024 2‚98‚62‚484 882 2‚23‚47‚124GLS Lamps Million Nos. 14.923 10‚60‚48‚325 14.398 10‚25‚72‚314Fluorescent Tube Lamps Million Nos. 3.190 9‚63‚25‚393 2.888 9‚16‚58‚834Tubular Glass Shells Million Nos. 2.748 96‚44‚915 0.611 23‚67‚925Glass Shells for GLS Lamps Million Nos. 12.704 56‚58‚480 21.537 98‚86‚756Auto Halogen Lamps Million Nos. 0.002 2‚08‚866 0.002 1‚86‚486Filament Million Nos. 6.725 45‚45‚533 9.595 45‚45‚533Caps-GLS Lamps Million Nos. 8.097 35‚62‚680 15.725 95‚91‚945HPSV / HPMV Lamps Nos. 94061 2‚01‚00‚175 65920 1‚94‚37‚163Compact Fluorescent Lamps Nos. 267591 2‚77‚37‚122 245887 2‚28‚77‚695Lighting Fitting Complete & Acces. 1‚66‚73‚723 1‚43‚53‚801Lead Glass Tubings M.T. 110.660 40‚02‚572 153.532 59‚47‚830Fluorescent Powder M.T. 19.840 37‚39‚642 4.320 8‚98‚560Others – –

TOTAL 77‚01‚78‚297 71‚89‚41‚074Semi-Finished Goods 20‚64‚38‚466 14‚80‚27‚134Scrap 1‚80‚38‚777 88‚82‚561

TOTAL 99‚46‚55‚540 87‚58‚50‚770

D. Closing Stock Unit This Year Previous YearQuantity Value (Rs.) Quantity Value (Rs.)

Pipes/Tubes MT 9811 28‚94‚43‚080 14500 44‚20‚68‚387Cold Rolled Steel Strips/Sheets MT 903 2‚26‚71‚356 1024 2‚98‚62‚484GLS Lamps Million Nos. 14.309 8‚97‚61‚225 14.923 10‚60‚48‚325Fluorescent Tube Lamps Million Nos. 5.196 14‚70‚09‚550 3.190 9‚63‚25‚393Tubular Glass Shells Million Nos. 5.393 2‚15‚90‚580 2.748 96‚44‚915Glass Shells for GLS Lamps Million Nos. 6.331 27‚85‚561 12.704 56‚58‚480

Schedules

{Scrap


35

Auto Halogen Lamps Million Nos. 0.002 2‚08‚866 0.002 2‚08‚866Filament Million Nos. 7.615 30‚96‚685 6.725 45‚45‚533Caps-GLS Lamps Million Nos. 6.092 26‚80‚260 8.097 35‚62‚680Lighting Fitting Complete & Acces. 2‚94‚82‚314 1‚66‚73‚723HPSV / HPMV Lamps Nos. 121500 4‚25‚21‚429 94061 2‚01‚00‚175Compact Fluorescent Lamps Nos. 432131 3‚93‚37‚083 267591 2‚77‚37‚122Lead Glass Tubings M.T. 219.248 79‚30‚200 110.660 40‚02‚572Fluorescent Powder M.T. 11.640 21‚94‚024 19.840 37‚39‚642

TOTAL 70‚07‚12‚213 77‚01‚78‚297Semi-Finished Goods 16‚46‚26‚442 20‚64‚38‚466Scrap 3‚16‚37‚299 1‚80‚38‚777

TOTAL 89‚69‚75‚954 99‚46‚55‚540

NOTE : Closing Stock is after excluding the following :

Breakage during handling or distributed as samples :Unit This Year Previous Year

Fluorescent powder Kgs. 2.00 –GLS Lamps Nos. 269,957 86,968Fluorescent Tube Lamps Nos. 154,607 55,117HPSV / HPMV Lamps Nos. 2,571 607Compact Fluorescent Lamps Nos. 4,360 6,239Auto Halogen Lamps Nos. – 155GLS Filament Nos. 3,500 20,150Tubular Glass Shells Nos. – –Caps- GLS Lamps Nos. 250 3,475Glass Shells for GLS Lamps Nos. 400 5,106Lead Glass Tubings Kgs. 25 174

E. PURCHASE FOR RESALE Unit This Year Previous Year


Light Fitting Complete & Accessories 12‚84‚25‚388 6‚43‚43‚968Fluorescent Tube Lamps Million Nos. 0.053 12‚56‚258 3.080 7‚21‚82‚527GLS Lamps Million Nos. 2.302 1‚53‚43‚651 0.020 7‚06‚855HPSV/HPMV Lamps Nos. 10,500 11‚96‚657 2,200 2‚51‚768Compact Fluorescent Lamps Nos. 23‚62‚228 13‚43‚63‚840 15‚10‚273 8‚69‚26‚538

Total 28‚05‚85‚794 22‚44‚11‚656

F. RAW MATERIAL CONSUMPTION Unit This Year Previous Year


Strip/Skelp M.T. 2‚20‚183 5‚05‚32‚79‚042 2‚21‚019 5‚75‚43‚66‚379Zinc M.T. 6,032 50‚92‚74‚425 5,354 32‚48‚49‚749Sockets 1‚01‚29‚430 1‚20‚36‚482HR/CR Coil M.T. 16,680 35‚55‚46‚743 17,127 40‚96‚12‚992Filaments Million Nos. 258.430 13‚98‚80‚272 228.852 10‚79‚13‚501Caps Million Nos. 248.626 16‚79‚11‚268 221.464 13‚78‚66‚858Moly Wire Million Nos. 7.659 4‚21‚65‚229 7.601 1‚79‚88‚365Lead -In -Wire Million Nos. 531.773 3‚28‚92‚001 462.769 2‚75‚30‚437Tubular Glass Shell Million Nos. 47.321 19‚55‚53‚426 40.975 17‚52‚68‚263Glass Shell for GLS Lamps. Million Nos. 167.357 10‚10‚19‚522 149.584 8‚73‚07‚769Arc Tubes Nos. 312739 1‚76‚18‚590 162721 1‚39‚74‚364Di -Calcium Phosphate M.T. 188.140 2‚03‚49‚266 199.380 2‚04‚11‚797Lead Glass Tubings M.T. 1328.004 5‚69‚09‚310 1174.164 4‚95‚64‚441Soda Ash M.T. 6770.715 7‚55‚02‚407 6612.794 6‚47‚78‚056Red Lead M.T. 404.075 2‚50‚82‚836 285.300 1‚68‚16‚210Tungston wire M.T. 4.809 1‚74‚79‚312 5.479 1‚43‚28‚883Fluorescent Powder M.T. 250.301 5‚44‚16‚601 220.527 4‚70‚31‚464Aluminium Strip M.T. 396.192 5‚98‚83‚488 418.316 5‚96‚62‚224Brass Strip M.T. 40.328 89‚16‚865 35.985 68‚98‚198Silica Sand M.T. 14150.000 1‚24‚82‚290 13448.000 1‚22‚88‚421Others 67‚56‚52‚117 51‚67‚47‚252

Total 7‚63‚19‚44‚440 7‚87‚72‚42‚105Less : Internal Consumption of Components 70‚89‚59‚216 59‚56‚73‚478

NET 6‚92‚29‚85‚224 7‚28‚15‚68‚627

Unit This Year Previous YearQuantity Value (Rs.) Quantity Value (Rs.)

Schedules


36

16. CIF VALUE OF IMPORTSThis Year Previous Year

(Rs.) (Rs.)

Raw materials and purchases for trading 13‚77‚10‚322 5‚45‚39‚326

Stores & Spares 2‚87‚00‚357 2‚13‚83‚122

Capital goods 20‚54‚19‚113 9‚10‚42‚647

17. Value of consumption of imported andindigeneous raw material, stores, andspares and its percentage to total consumption This Year Previous Year

Rs. % age Rs. % age

Raw Materials Imported 7‚46‚54‚349 1.08 5‚55‚64‚200 0.76

Indigenous 6‚84‚83‚30‚875 98.92 7‚22‚60‚04‚427 99.24

Total 6‚92‚29‚85‚224 100.00 7‚28‚15‚68‚627 100.00

Stores and Spares Imported 2‚38‚40‚880 16.67 2‚38‚70‚353 16.43

Indigenous 11‚91‚46‚684 83.33 12‚14‚25‚454 83.57

Total 14‚29‚87‚564 100.00 14‚52‚95‚807 100.00

18. Earning In Foreign Exchange on Account of ExportThis Year Previous Year

(Rs.) (Rs.)

FOB Value 85‚60‚45‚641 1‚13‚97‚16‚785

19. Expenditure in Foreign CurrencyThis Year Previous Year

(Rs.) (Rs.)

a) Interest in rupee to FIs on Foreign Currency Loan 1‚43‚45‚645 2‚87‚24‚621

b) Royalty & Technical Services ( Net of Taxes) 1‚11‚18‚219 44‚18‚158

c) others 1‚26‚93‚458 2‚76‚11‚176

20. (a) Previous year figures have been regrouped and rearranged wherever necessary.

(b)Figures have been rounded off to the nearest rupee.

Schedules



Chairman and

K. ANANDA SASTRY S. N. Bansal Managing DirectorPartner Executive Director & CFOMembership No. 9980



Directors

B.B. Chadha

G.S. Gupta

K.K. Narula

M.G. Bakre

Rajendra Arya


37

STATEMENT PURSUANT TO PART IV OF SCHEDULE VI TO THE COMPANIES ACT, 1956

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

I. REGISTRATION DETAILS

Registration No. State Code

Balance Sheet Date

Date Month Year

II. CAPITAL RAISED DURING THE YEAR (AMOUNT IN RS. THOUSANDS)

Public Issue Rights Issue Bonus Issue Preferential/Private Placement

III. POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (AMOUNT IN RS. THOUSANDS)

Total Liabilities Total Assets

SOURCES OF FUNDS

Paid-Up Capital Convertible Equity Warrants Reserves & Surplus

Deferred Tax Liabilities (Net) Secured Loans Unsecured Loans

APPLICATION OF FUNDS

Net Fixed Assets Investments Net Current Assets Misc. Expenditure Accumulated Losses

IV. PERFORMANCE OF THE COMPANY (AMOUNT IN RS. THOUSANDS)

Turnover Total Expenditure

+ – Profit/(Loss)Before Tax + – Profit/(Loss)After Tax

Earning Per Share (in Rs.) Dividend Rate %

V. GENERIC NAMES OF THREE PRINCIPAL PRODUCTS/SERVICES OF COMPANY (AS PER MONETARY TERMS)

Item Code No. (ITC Code) Product Description



Balance Sheet Abstract

�

7 3 0 4 01 . 0 1

L A M P S8 5 3 9 00

C O L D O L L E D TS RR I P S7 2 0 9 22

2 8 5 6 3 7 1 7 1 9 1 1 2 5 4 8 2 2 3 N I L N I L

N I L N I L N I L

1 2 2 0 5 0 5 2 1 1 9 1 7 9 3 4

2 8 7 1 1 8 1 8 6 9 0 3

7 . 3 6 1 5

0 5

0 33 1

7 5 4 3

2 0 0 6

S T E E L T U B E S A N D P I P E S

6 0 0 0

5 8 0 8 2 1 7 5 8 0 8 2 1 7

2 6 0 0 1 3

�



Chairman and

K. ANANDA SASTRY S. N. Bansal Managing DirectorPartner Executive Director & CFOMembership No. 9980



Directors

B.B. Chadha

G.S. Gupta

K.K. Narula

M.G. Bakre

Rajendra Arya

4 7 8 3 6 8 2 8 9 5 9 0 2 5 2 0 1 0 3

1 2 9 7 7 9 92 4 3 2 0


38

INTEREST IN SUBSIDIARY COMPANIESStatement pursuant to section 212 of the Companies Act, 1956

1. Name of Subsidiary Companies Surya Roshni Inc.(New York)

2. Financial Year ending of the Subsidiary 31st March, 2006

3. Shares of the Subsidiary held bySurya Roshni Ltd. on the above date:

(a) Number of Shares & face value 100 Common Stock ofUS$ 1000 each and 56 CommonStock of US$ 25000 each

(b) Extent of Holding 100%

4. Net aggregate amount of Profit/(Loss)of the subsidiary so far as theyconcern members of Surya Roshni Ltd.:

(a) Dealt with in the accounts of Surya NILRoshni Ltd. for the year ended31st March, 2006

(b) Not Dealt with in the accounts of (US$ 167,822)Surya Roshni Ltd. for the yearended 31st March, 2006

5. Net aggregate amount of Profit/(Loss)for the previous financial years of theSubsidiary since it became Subsidiaryso far as they concern members ofSurya Roshni Ltd.:

(a) Dealt with in the accounts of Surya NILRoshni Ltd. for the year ended31st March, 2006

(b) Not Dealt with in the accounts of (US$ 604,503)Surya Roshni Ltd. for the yearended 31st March, 2006

6. Change of interest of Surya Roshni Not ApplicableLtd. in the Subsidiary between the endof the financial year of the Subsidiaryand that of Surya Roshni Ltd.:

7. Material changes between the end of Not Applicablethe financial year of the Subsidiary andthe end of the financial year of SuryaRoshni Ltd. in respect of Subsidiary'sfixed assets, investments, lending andborrowing for the purpose other thanmeeting than current liabilities

8. Remarks NIL

Interest in Subsidiary Companies

B. D. AgarwalChairman and

S. N. Bansal Managing Director

Executive Director & CFO

J. P. AgarwalPlace : New Delhi B. B. Singal Vice Chairman &Dated : 24th May, 2006 Company Secretary Joint Managing Director

Directors

B.B. Chadha

G.S. Gupta

K.K. Narula

M.G. Bakre

Rajendra Arya


39

CASH FLOW STATEMENT

This Year Previous Year

(Rs.) (Rs.) (Rs.) (Rs.)

A. CASH FLOW FROM OPERATING ACTIVITIES

NET PROFIT BEFORE TAX 28,71,18,098 17,33,98,100

ADJUSTMENT FOR :

Depreciation 27‚46‚70‚290 24‚49‚04‚864

Interest (Net) 27‚57‚06‚537 24‚49‚88‚767

Loss/(Profit) on Sale of Fixed Assets (20,62,880) 6,92,324

Rent Income (96,000) 54‚82‚17‚947 (1,04,000) 49‚04‚81‚955

Operating Profit before working capital changes 83‚53‚36‚045 66‚38‚80‚055

Adjustment for :

Trade & Other Receivables (22,20,60,834) 5‚07‚50‚909

Inventories 4‚19‚53‚613 (18,09,58,328)

Trade Payables (4,01,13,965) (22,02,21,186) (1,32,05,955) (14,34,13,374)

Cash Generated from Operations 61‚51‚14‚859 52‚04‚66‚681

Income Tax Paid (11,37,67,023) (4,76,68,135)

Interest Paid (13,55,41,960) (24,93,08,983) (10,52,48,229) (15,29,16,364)

NET CASH FROM OPERATING ACTIVITIES 36‚58‚05‚876 36‚75‚50‚318

B. CASH FLOW FROM INVESTING ACTIVITIES

Sale/(Purchase) of Investments 367,770 2‚32‚230

Interest Received 10‚41‚054 6,02,419

Purchases of Fixed Assets (48,96,82,642) (22,21,35,568)

Capital Work in Progress 63‚81‚171 (9,91,64,160)

Sale/Adjustments of Fixed Assets 2‚18‚45‚467 60‚08‚818

Rent Received 96,000 1,04,000

NET CASH USED IN INVESTING ACTIVITIES (45,99,51,180) (31,43,52,261)

C. CASH FLOW FROM FINANCING ACTIVITIES

Increase/(Decrease) Long Term Borrowings 9‚88‚67‚125 8‚08‚08‚330

Increase/(Decrease) Short Term Borrowings 12‚34‚62‚428 3‚22‚63‚248

Issue/(Redemption) of Share Capital 6‚27‚20‚000 –

Interest on borrowings (14,12,05,631) (14,03,42,957)

Dividend Paid (3,47,56,530) (3,46,90,569)

NET CASH INFLOW/(OUTFLOW) FROM FINANCING ACTIVITIES 10‚90‚87‚392 (6,19,61,948)

Net Increase/(decrease) in cash & cash equivalents 1‚49‚42‚087 (87,63,891)

Opening Cash & Cash equivalents 3‚37‚49‚433 4‚25‚13‚325

Closing Cash & Cash equivalents 4‚86‚91‚520 3‚37‚49‚433

Cash Flow Statement

AUDITORS’ REPORT

We have examined the above Cash Flow Statement of Surya Roshni Limited for the year ended 31st March, 2006 The Statement has beenprepared by the Company in accordance with the requirements of listing agreement Clause 32 with Stock Exchanges and is based on and inagreement with the books and records of the Company and also the Profit and Loss Account and Balance Sheet of the Company covered by ourreport of even date to the members of the Company.

For SASTRY K. ANANDAM & CO.CHARTERED ACCOUNTANTS

Place : New Delhi K. ANANDA SASTRYDated : 24th May, 2006 Partner, F.C.A

Membership No. 9980



Executive Director & CFO


Directors

B.B. Chadha

G.S. Gupta

K.K. Narula

M.G. Bakre

Rajendra Arya

SURYA ROSHNI INC. (NEW YORK)

40

BALANCE SHEET AS ON 31ST MARCH, 2006 & 2005

31.03.06 31.03.05$ $

ASSETS

CURRENT ASSETS :

Cash & Bank Balance (Note 6) 39,073 131,563

Accounts Receivable - Trade (net) (Note 4) 89,318 139,965

Other Assets 5,534 4,560

Inventory (Note 3) 272,147 392,744

Advance : Surya Roshni Ltd. (Note 5) 325,000 325,000

Total current assets 731,071 993,832

FIXED ASSETS :

Office Equipment 8,400 8,400

Less : Accm Depreciation (6,365) (4,431)

Total Fixed Assets 2,035 3,968

TOTAL ASSETS 733,106 997,801

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES :

Accounts Payable - Misc. 4,076 5,523

Accrued Expenses 1,355 2,705

SBI - Line of Credit (Note 6) – 94,000

Other Current Liabilities – 75

Total current liabilities 5,431 102,303

EQUITY : (Note 8)

Equity Capital - Common 1,500,000 1,500,000

RETAINED EARNINGS :

Beginning of the Period (604,503) (173,281)

Loss for Current Period (167,822) (431,222)

Total Retained Earnings (772,325) (604,503)

Total Stockholders' Equity 727,675 895,497

TOTAL LIABILITY & STOCKHOLDERS' EQUITY 733,106 997,801

(See accompanying notes to financial statements)

DIRECTORS' REPORT 2005-2006

The Directors present this Report and the Financial Statement of the Company

for the financial year ended 31st March, 2006

Operations

The company was incorporated on December 7, 1999, in the state of New York,

under the name of Surya Roshni Ltd. and subsequently the name was changed to

Surya Roshni Inc. The Company focuses on marketing and distribution of Energy

Saving Lamps for a wide variety of customers.

The sales during the year are USD 18,774 as compared to USD 701,390 in

the previous year. There was a net loss of USD 167,822 as compared to

previous year's loss of USD 431,222. Efforts are being made to improve the

performance.

Share Capital

The entire issued share capital of $ 1,500,000 is owned by the Surya Roshni

Limited (A Corporation of India) and the company is a Wholly Owned Subsidiary

of Holding Corporation.

Auditors

M/s Mahesh J Agashiwala, C.P.A.P.C. Certified Public Accountant the Auditors

of the company are eligible for re-appointment for the current financial year.

On Behalf of the Board of Directors

Basudev Agarwal

Dated : 1st May, 2006 Director - President & Secretary

REPORT OF INDEPENDENT AUDITORS

To The Board of Directors and Stockholdersof Surya Roshni Inc.

We have audited the accompanying Balance Sheet of Surya Roshni Inc. (the“Company”) as of 31st March, 2006 and 31st March, 2005 and the relatedstatements of Income and Expenditure, Retained Earnings and Cash Flows forthe years then ended. These financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on thesefinancial statements based on our audit.

We conducted our audit in accordance with Generally Accepted AuditingStandards in the United States of America. Those standards require that we planand perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatements. An audit includes examining, on atest basis, evidence supporting the amounts and disclosures in the financialstatement. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe our audit provides a reasonablebasis for our opinion.

In our opinion, the financial statements referred to above present fairly, in allmaterial respects, the financial position of Surya Roshni Inc as of 31st March,2006 and 31st March, 2005 and the results of its operations and cash flows forthe years then ended in conformity with Generally Accepted AccountingPrinciples in the United States of America subject to Note no. 3 on the valuationof inventories and Note no. 4 on Accounts Receivables, as given in the attachednotes to the financial statements.

New York, NY Mahesh J. AgashiwalaMay 01, 2006 CPA P.C.


41

INCOME STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2006 & 200531.03.2006 31.03.2005

$ $

Sales 18,774 710,403

Less : Returns & Allowances – (9,013)

Net Sales 18,774 701,390

Cost of sales (Schedule A) 138,095 951,554

Total Cost of Sales 138,095 951,554

Gross profit / (Loss) (119,321) (250,164)

Operating expenses : (Schedule B)

Selling, general and administrative expenses 61,560 201,445

Other Income:

Interest Income 13,059 7,534

Interest Tax Refund – 12,853

Income (Loss) before Corporate Taxes (167,822) (431,222)

Corporate Taxes (Note 2) – –

Net Income (167,822) (431,222)(See accompanying notes to financial statements)

COMPARATIVE STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31ST MARCH, 2006 & 2005

31.03.2006 31.03.2005Cash flows from operating activities : $ $

Net Income / (Loss) (167,822) (431,222)

Adjustments to reconcile net profit to net cash

provided (used in) by Operating activities :

Depreciation for the Period 1,934 127

(Increase)/Decrease in Accounts Receivable 50,647 533,583

(Increase)/Decrease in Inventory 120,598 874,699

Decrease in Other Current Assets (974) 7,289

Increase/(Decrease) in Current Liabilities (96,873) (679,586)

Net cash provided by operating activities 75,332 736,113

Cash Flow from Investing activities :

Loan to Surya Roshni Limited, India – (325,000)

Cash Flow from Financing activities :

Increase in Equity – –

Net Increase/(decrease) in cash flow (92,490) (20,109)

Cash at beginning of year 131,563 151,673

Cash at end of Period 39,073 131,563(See accompanying notes to financial statements)

SCHEDULE OF COST OF SALES FOR THE YEAR ENDED 31ST MARCH, 2006 & 2005

(SCHEDULE A)31.03.2006 31.03.2005

$ $

Cost of Sales

Inventory - beginning 3,92,744 1,267,443

Purchases – –

Freight Charges 988 8,399

Packing Materials – 39,404

Warehousing 16,510 20,690

Custom & Clearing Charges – 8,363

Total 410,242 1,344,298

Inventory - ending (272,147) (392,744)

Cost of Sales 138,095 951,554

(See accompanying notes to financial statements)


42

SCHEDULES OF SELLING, GENERAL AND ADMINISTRATIVE EXPENSES FOR THE YEAR ENDED 31ST MARCH, 2006 & 2005

(SCHEDULE B) 31.03.2006 31.03.2005$ $

Bad Debts 40,947 93,145Bank Charges 275 453Commission 4,536 41,455Depreciation 1,934 127Discount 3,279 3,463FUTA – 56Insurance – 1,295Interest 364 1,374Miscellaneous Expenses 676 4,359Payroll & Other Taxes 2,619 2,350Postage – 482Professional Fees 6,000 12,200Rent – 10,230Salary-Others – 20,000Stationery & Office Supplies – 261Telephone Expenses – 2,023Travel 930 7,415Utilities – 758

61,560 201,445(See accompanying notes to financial statements)

STATEMENT OF RETAINED EARNINGS AS OF 31ST MARCH, 2006 & 2005 31.03.2006 31.03.2005RETAINED EARNINGS : $ $

Beginning Balance (604,503) (173,281)Net Profit / (Loss) for the Period (167,822) (431,222)

Ending Balance (772,325) (604,503)(See accompanying notes to financial statements)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST MARCH, 2006

NOTE 1 - ORGANIZATIONSurya Roshni Inc. ("the Company") was incorporated under the laws of the state of New York on December 7, 1999, and also obtained certificate to do businessin the States of California.The principal business of the Company is the marketing and distribution of light bulbs for a wide variety of customers.The Company is a wholly owned subsidiary of Surya Roshni Ltd. (India) which is incorporated in India.The company is no longer having any major operations. The company did not make any purchases during the year and there are negligible amount of sales.The company has no payroll during the year.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Accounting is done on accrual basis.b. Inventory is valued at cost or market price whichever is lower.c. No provision for taxes as the company has incurred losses in the year and has huge carryover losses.d. The Company follows Diminishing Balance Method of depreciation over the estimated useful life of the assets.

NOTE 3 - INVENTORYThe inventory of the Company is valued at $ 272,147 (based on its net realizable value). Almost 50% of the inventory comprises of PMI-15W bulbs wholevaluation had been reduced by $ 238,235 last year and has been reduced again by $ 22,639 in the current year. These bulbs have been purchased in September2001 and the marketability of these bulbs has reduced considerably since it lost its 'Energy Star Rating'. Apart from the above mentioned, most of the inventorylying in stock are purchases of the year 2002 and their value has been reduced this year by $ 78,285. The total reduction in the value of inventory has been of$ 100,924. The management is hopeful of realizing this value and is negotiating with liquidators.

NOTE 4 : ACCOUNTS RECEIVABLEAlmost 72% of the Accounts Receivable are over 2.5 years past due. Management has booked bad debts of $ 40,947 in the current year which comprises of aprovision for bad debts of $ 25,000. The total provision for bad debts presently is $ 50,000 which has been netted out against the total Accounts Receivable of$ 139,318. The amount realized from the last year's Debtors during the year is $ 6,421 only and the management expects to realize the overdue accounts byinstituting continuous follow up with the customers.

NOTE 5 - LOANS AND ADVANCESThe Company has advanced a loan of $ 325,000 to its parent company, Surya Roshni Limited, India @ 3.50% p.a. till January 2006 and the rate has been revisedto 5.5% from February 2006. Interest accrued till 31st March, 2006 is $ 1,757 (net of withholding tax) has been provided in the books.

NOTE 6 : LINE OF CREDITThe cash and bank balance includes the Certificate of Deposit of $ 30,000. This Certificate of Deposit is held as collateral against $ 27,000 Line of Credit fromState Bank of India. The CD earns 2.9% interest whereas the Company pays 3.4% interest on the Line of Credit.

NOTE 7 - INCOME TAXESThe Company has net operating loss carry forwards, which will expire as follows:Year ending 31st March, Federal New York California2013 $ 251,6582014 $ 429,9312023 $ 175,445 $ 251,4632024 $ 444,077 $ 443,922

NOTE 8 - EQUITYThe Company is authorized to issue 200 shares @ No Par Value.Shares issued and outstanding as on 31st March, 2006 was $ 1,500,000 (100 shares @ $ 1,000 per share and 56 shares @ $ 25,000 per share.)


43

AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIALSTATEMENTS

The Board of DirectorsSurya Roshni LimitedNew Delhi

We have examined the attached Consolidated Balance Sheet of Surya RoshniLimited and its subsidiary as at 31st March, 2006, the Consolidated Profit and LossAccount and the Cash Flow Statement for the year then ended.These financial statements are the responsibility of the Company’s management.Our responsibility is to express an opinion on the financial statements based on ouraudit. We have conducted our audit inaccordance with generally accepted auditingstandards in India. These Standards require that we plan and perform the audit toobtain reasonable assurance whether the financial statements are prepared, in allmaterial respects, in accordance with an identified financial reporting frameworkand are free of material misstatements. An audit includes, examining on a test basis,evidence supporting the amounts and disclosures in the financial statements. Anaudit also includes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statements. Webelieve that our audit provides a reasonable basis for our opinion.We did not audit the financial statements of subsidiary, whose financial statementreflect total assets of Rs. 327.04 lakhs as at 31st March,2006 and Rs. 436.54 lakhsas at 31st March, 2005 and total revenues of Rs. 14.20 lakhs and Rs. 315.78 lakhsrespectively for the years then ended. These financial statement have been audited

by other auditors, whose reports have been furnished to us and our opinion, insofaras it relates to the amounts included in respect of the subsidiary, is based solely onthe report of the other auditors.We report that the consolidated financial statements have been prepared by theCompany in accordance with the requirements of Accounting Standard (AS) 21,Consolidated Financial Statements, issued by the Institute of Chartered Accountantsof India and on the basis of the separate audited financial statements of Surya RoshniLimited and its subsidiary included in the consolidated financial statements.On the basis of the information and explanations given to us and on the considerationof the separate audit reports on individual audited financial statements of SuryaRoshni Limited and its subsidiary, we are of the opinion that :a) the Consolidated Balance Sheet gives a true and fair view of the consolidated state

of affairs of Surya Roshni Limited and its subsidiary as at 31st March, 2006;b) the Consolidated Profit and Loss Account gives a true and fair view of the

consolidated results of operations of Surya Roshni Limited and its subsidiary for theyear then ended ; and

c) the consolidated Cash Flow Statement gives a true and fair view of”the consolidatedCash Flow of the Company and its subsidiary for the year then ended.

For SASTRY K. ANANDAM AND CO.CHARTERED ACCOUNTANTS

(K. ANANDA SASTRY)Place : New Delhi PARTNER F.C.A.Dated : 24th May, 2006 Membership No. 9980

CONSOLIDATED BALANCE SHEET

Particulars Schedule As at As atNo. 31st March, 2006 31st March, 2005

(Rs.) (Rs.)

SOURCES OF FUNDS

SHAREHOLDER’S FUND

Share Capital 1 28‚43‚32‚500 25‚40‚12‚500

Reserve & Surplus 2 1‚25‚93‚49‚438 1‚08‚94‚27‚265

LOAN FUNDS

Secured Loans 3 2‚89‚59‚02‚362 2‚67‚44‚89‚264

Unsecured Loans 4 50‚56‚04‚585 50‚49‚67‚630

DEFERRED TAX LIABILITIES (NET) 47‚83‚68‚049 49‚42‚28‚629

TOTAL 5‚42‚35‚56‚934 5‚01‚71‚25‚288

APPLICATIONS OF FUNDS

FIXED ASSETS : 5

Gross Block 5‚63‚79‚72‚853 5‚36‚80‚74‚924

Less : Depreciation 2‚88‚56‚24‚217 2‚81‚03‚72‚008

Net Block 2‚75‚23‚48‚636 2‚55‚77‚02‚916

Capital Work in Progress 10‚41‚12‚839 11‚04‚94‚010

INVESTMENTS 6 10‚00‚000 13‚67‚770

CURRENT ASSETS, LOANS & ADVANCES

Inventories 7 1‚55‚07‚43‚451 1‚59‚77‚39‚136

Sundry Debtors 8 1‚06‚45‚60‚198 91‚09‚63‚937

Cash & Bank Balances 9 5‚04‚34‚568 3‚95‚05‚315

Loans & Advances 10 23‚23‚11‚924 16‚59‚38‚972

2‚89‚80‚50‚140 2‚71‚41‚47‚360

LESS : CURRENT LIABILITIES & PROVISIONS

Current Liabilities 11 25‚03‚81‚299 30‚68‚99‚454

Provisions 12 8‚15‚73‚382 5‚96‚87‚313

33‚19‚54‚681 36‚65‚86‚768

NET CURRENT ASSETS 2‚56‚60‚95‚459 2‚34‚75‚60‚592

TOTAL 5‚42‚35‚56‚934 5‚01‚71‚25‚288

Significant Accounting Policies and

Notes on Accounts 21

Auditors' Report & Balance Sheet

The Schedules referred to above and notes on accounts thereon form an integral part of Balance Sheet.



Chairman andK. ANANDA SASTRY S. N. Bansal Managing DirectorPartner Executive Director & CFOMembership No. 9980


Directors

B.B. Chadha

G.S. Gupta

K.K. Narula

M.G. Bakre

Rajendra Arya


44

CONSOLIDATED PROFIT & LOSS ACCOUNT

Particulars Schedule Year Ended Year EndedNo. 31st March, 2006 31st March, 2005

(Rs.) (Rs.)

INCOME

Sales 13 12‚18‚65‚11‚376 11‚82‚24‚71‚081

Less : Internal consumption 76‚61‚93‚794 65‚06‚15‚971

11‚42‚03‚17‚582 11‚17‚18‚55‚110

Less : Excise duty recovered on sales 1‚30‚22‚87‚453 1‚15‚71‚18‚739

10‚11‚80‚30‚129 10‚01‚47‚36‚371

Other Income 14 1‚99‚60‚952 78‚39‚096

Accretion/(Decretion) to Stock 15 (10,27,21,658) 8‚05‚36‚689

TOTAL 10‚03‚52‚69‚423 10‚10‚31‚12‚156

EXPENDITURE

Raw Material Consumed 7‚63‚19‚44‚440 7‚87‚72‚42‚105

Less : Internal Consumption 70‚89‚59‚216 59‚56‚73‚478

6‚92‚29‚85‚224 7‚28‚15‚68‚627

Purchase for Resale 28‚05‚85‚794 22‚44‚11‚656

Packing Material Consumed 19‚50‚74‚412 16‚07‚14‚119

Manufacturing Expenses 16 50‚04‚25‚262 50‚59‚44‚683

Employees Remuneration & Benefits 17 49‚55‚23‚667 44‚94‚74‚662

Selling Expenses 18 65‚13‚44‚757 68‚11‚56‚274

Interest 19 27‚67‚76‚097 24‚56‚71‚117

Other Expenses 20 15‚78‚28‚327 15‚47‚28‚460

Depreciation 5 27‚52‚57‚747 24‚54‚11‚646

Less: Transferred from Capital Reserve on Revaluation of Fixed Assets 5‚01‚226 5‚01‚226

27‚47‚56‚521 24‚49‚10‚420

TOTAL 9‚75‚53‚00‚060 9‚94‚85‚80‚018

PROFIT/(LOSS) BEFORE TAX FOR THE YEAR 27‚99‚69‚363 15‚45‚32‚138

Provision for Tax

– Current 10‚81‚17‚023 4‚76‚68‚134

– Deferred (1,35,52,001) 8‚21‚763

– Fringe Benefit 56‚50‚000 –

PROFIT/(LOSS) AFTER TAX 17‚97‚54‚341 10‚60‚42‚241

Surplus brought forward from previous year 65‚20‚52‚663 57‚23‚63‚695

AVAILLABLE FOR APPROPRIATIONS


Tax on Dividend 54‚70‚013 43‚53‚650

Deferred Tax Revision (23,08,578) (1,90,01,750)

Transfer to General Reserve 1‚00‚00‚000 1‚00‚00‚000

Balance carried to Balance Sheet 77‚96‚43‚694 65‚25‚72‚535

Earning per Equity Share - Basic & Diluted 7.08 4.17

Significant Accounting Policies and

Notes on Accounts 21

Profit and Loss Account

The Schedules referred to above and notes on accounts thereon form an integral part of Profit & Loss Account.


For SASTRY K. ANANDAM & CO.

Chartered Accountants B. D. AgarwalChairman and





Directors

B.B. Chadha

G.S. Gupta

K.K. Narula

M.G. Bakre

Rajendra Arya


45

Schedules to the Consolidated Balance Sheet


(Rs.) (Rs.)

SHARE CAPITAL

Authorised :

4,98,00,000 Equity Shares of Rs.10/- each 49‚80‚00‚000 49‚80‚00‚000

6,20,000 Preference Shares of Rs.100/- each 6‚20‚00‚000 6‚20‚00‚000

56‚00‚00‚000 56‚00‚00‚000

Issued, Subscribed and Paid up

2,60,01,250 (Previous Year - 2,54,01,250) Equity Shares of 26,00,12,500 25‚40‚12‚500Rs. 10/- each fully paid up (6,00,000 Equity Shares ofRs. 10/- each fully paid-up allotted during the year uponconversion of Warrants)

(Of the above shares 3,00,000 Equity shares ofRs.10/- each allotted as fully paid up Bonus shares bycapitalisation of General Reserve during 1980-81,86,47,500 Equity shares of Rs.10/- each during 1994-95 and22,38,750 Equity shares of Rs. 10/- each during 1995-96 bycapitalisation of securities premium account.)

38,00,000 (Previous Year - NIL) Optionally Convertible Equity 2‚43‚20‚000 –Warrants of Rs 64/- each Rs. 6.40 paid up convertible on or before15th july,2007 (6,00,000 Optionally Convertible Equity Warrantshave been converted into equity shares during the year)

Total 28‚43‚32‚500 25‚40‚12‚500

SCHEDULE 2 As at As at As at31.03.2005 Addition Deduction 31.03.2006 31.03.2005

RESERVES AND SURPLUS

– Capital subsidy 50‚00‚000 – – 50‚00‚000 50‚00‚000

– on revaluation of Fixed Assets 1‚22‚23‚364 – 5,01,226 1‚17‚22‚138 1‚22‚23‚364

Capital Redemption Reserve 3‚00‚00‚000 – – 3‚00‚00‚000 3‚00‚00‚000

Securities Premium 22‚91‚29‚175 3‚24‚00‚000 – 26‚15‚29‚175 22‚91‚29‚175

General Reserve 16‚57‚88‚705 1‚00‚00‚000 – 17‚57‚88‚705 16‚57‚88‚705

Translation Reserve (52,86,514) 9‚52‚240 – (43,34,274) (52,86,514)

43‚68‚54‚730 4‚33‚52‚240 5,01,226 47‚97‚05‚744 43‚68‚54‚730

Profit & Loss Account 77‚96‚43‚694 65‚25‚72‚535

1‚25‚93‚49‚438 1‚08‚94‚27‚265

SCHEDULE 3 As at As at 31st March, 2006 31st March, 2005

(Rs.) (Rs.)

SECURED LOANS

Term Loans

From Financial Institutions 73‚44‚99‚607 60‚96‚97‚221

From Banks 77‚28‚77‚953 79‚97‚29‚669

Working Capital Loans from Banks 1‚38‚85‚24‚802 1‚26‚50‚62‚374

2‚89‚59‚02‚362 2‚67‚44‚89‚264

NOTES :

1) Term Loans from Banks and Financial Institutions secured by deposit of title deeds relating to immovable assets of the company and further secured byhypothecation of all company's movable assets.

2) Working Capital Loans from Banks are secured against hypothecation of present and future stock of raw material, stock in process, finished goods, spare andstores, book debts etc., guaranteed by two directors of the company and further secured by way of second charge on the company's Fixed Assets.

Schedules


46

SCHEDULE 5

FIXED ASSETS (Amt. in Rs.)

PARTICULARS

GROSS BLOCK DEPRECIATION NET BLOCK

Up To Additions Sales/ As at Up To For the Year Sales/ Up To As at As at01.04.2005 Adjustments 31.3.2006 31.3.2005 ended 31.3.2006 Adjustments 31.3.2006 31.3.2006 31.3.2005

Land & Site Development 9‚70‚78‚041 – – 9‚70‚78‚041 – – – – 9‚70‚78‚041 9‚70‚78‚041

Building 59‚44‚89‚391 2‚85‚39‚312 – 62‚30‚28‚703 17‚04‚42‚464 1‚74‚55‚821 # – 18‚78‚98‚285 43‚51‚30‚418 42‚40‚46‚927

Plant & Machinery 4‚49‚18‚96‚119 43‚95‚95‚114 21‚45‚82‚855 4‚71‚69‚08‚378 2‚53‚50‚19‚362 24‚37‚02‚227 # 19‚66‚61‚423 2‚58‚20‚60‚166 2‚13‚48‚48‚212 1‚95‚68‚76‚757

Furniture & Fixtures 2‚52‚12‚450 18‚33‚529 11,500 2‚70‚34‚479 1‚50‚04‚270 14‚43‚901 2,270 1‚64‚45‚901 1‚05‚88‚578 1‚02‚08‚180

Vehicles 6‚19‚46‚700 1‚24‚59‚098 47‚79‚808 6‚96‚25‚990 2‚67‚04‚091 62‚88‚954 31‚80‚936 2‚98‚12‚109 3‚98‚13‚881 3‚52‚42‚609

Office Equipments 6‚94‚80‚230 60‚65‚843 3‚94‚274 7‚51‚51‚799 4‚24‚36‚414 57‚58‚156 1‚50‚820 4‚80‚43‚750 2‚71‚08‚049 2‚70‚43‚816

Airconditioners & Coolers 97‚45‚952 9‚74‚675 23,500 1‚06‚97‚127 46‚36‚578 4‚46‚259 10,089 50‚72‚748 56‚24‚379 51‚09‚374

Miscellaneous Assets 31‚70‚476 2‚22‚295 – 33‚92‚771 10‚73‚264 1‚62‚429 – 12‚35‚693 21‚57‚078 20‚97‚212

Temporary Erections 1‚50‚55‚565 – – 1‚50‚55‚565 1‚50‚55‚565 – – 1‚50‚55‚565 – –

TOTAL 5‚36‚80‚74‚924 48‚96‚89‚866 21‚97‚91‚937 5‚63‚79‚72‚853 2‚81‚03‚72‚008 27‚52‚57‚747 20‚00‚05‚538 2‚88‚56‚24‚217 2‚75‚23‚48‚636 2‚55‚77‚02‚916

Previous Year 5‚17‚15‚09‚122 22‚21‚35‚841 2‚55‚70‚039 5‚36‚80‚74‚924 2‚58‚38‚29‚119 24‚54‚11‚646 1‚88‚68‚757 2‚81‚03‚72‚008 2‚55‚77‚02‚916 2‚58‚76‚80‚003

# Includes depreciation on revalued cost of assets amounting to Rs. 5,01,226/- (Previous Year Rs. 5,01,226/-)


(Rs.) (Rs.)

INVESTMENTS (AT COST)

NON TRADE

Quoted

943 (Previous Year Nil)Equity Share ofRs.10/- each issued at a premium of – 3,67,770Rs. 380/- each, fully paid up in Punjab National Bank (PNB)

Unquoted

200 (Previous year 200) IDBI Growing Interest 10,00,000 10‚00‚000Bond (2002A) of Rs. 5000/- each

Total 10,00,000 13,67,770

Book Value of Quoted Investments Rs. Nil (Previous Year Rs. 3,67,770 )

Market Value of Quoted Investments Rs. Nil (Previous Year Rs. 3,70,929.05)

Schedules



(Rs.) (Rs.)

UNSECURED LOANS

Fixed Deposits From Public 12‚39‚52‚000 17‚34‚00‚000

From Financial Institutions & Banks 25‚09‚27‚164 20‚00‚00‚000

Interest Free Sales Tax Loan 9‚66‚00‚000 9‚76‚83‚622

Trade Deposit & Others 3‚41‚25‚421 3‚38‚84‚008

Total 50‚56‚04‚585 50‚49‚67‚630


47

As at As at 31st March, 2006 31st March, 2005

(Rs.) (Rs.)


Schedules

SCHEDULE 7

STOCK (as certified by the Management)

Stores and spare parts, etc. (at cost on FIFO Basis) 17‚40‚61‚324 14‚86‚16‚258Raw Materials (at cost on FIFO basis) 46‚75‚65‚695 43‚72‚84‚788Scrap and salvage (at market value) 3‚16‚37‚299 1‚80‚38‚777Semi -finished goods (at cost or net realisable value, whichever is less) 16‚46‚26‚442 20‚64‚38‚466Finished goods (at cost or net realisable value, whichever is less) 71‚28‚52‚691 78‚73‚60‚847

Total 1‚55‚07‚43‚451 1‚59‚77‚39‚136

SCHEDULE 8

SUNDRY DEBTORS

(unsecured, considered good)

Debts outstanding for a period exceeding six months 2‚00‚50‚691 2‚04‚02‚002Other debts 1‚04‚45‚09‚507 89‚05‚61‚935

Total 1‚06‚45‚60‚198 91‚09‚63‚937

SCHEDULE 9

CASH AND BANK BALANCE

Cash on hand 26‚93‚329 28‚47‚336Cheques/Drafts/TTs in hand/ in transit 2‚72‚65‚727 1‚70‚54‚010Balance With Scheduled Banks in :

– Current Account 30‚46‚437 82‚40‚867– Fixed Deposits 1‚51‚18‚094 91‚54‚814– Unpaid Dividend Accounts 23‚10‚981 22‚08‚288

5‚04‚34‚568 3‚95‚05‚315

SCHEDULE 10

LOANS AND ADVANCES

(Unsecured, considered good)

Advances recoverable in cash or in kind orfor value to be received 19‚81‚34‚761 14‚48‚13‚704Security Deposits 1‚67‚96‚565 1‚69‚59‚673Earnest Money Deposits 28‚59‚838 29‚51‚100Claims Recoverable/Receivable 1‚45‚20‚760 12,14,495

Total 23‚23‚11‚924 16‚59‚38‚972

SCHEDULE 11

CURRENT LIABILITIES

Sundry Creditors– Due to SSI 1‚70‚94‚108 92‚64‚896– Others 11‚25‚28‚019 16‚17‚33‚876

Other Liabilities 11‚52‚12‚226 12‚66‚68‚554Interest accrued but not due 55‚46‚946 92‚32‚128

Total 25‚03‚81‚299 30‚68‚99‚454

SCHEDULE 12

PROVISIONS

Proposed Equity Dividend 3‚90‚01‚875 3‚04‚81‚500Tax on Dividend 54‚70‚013 42‚75‚030Provision for gratuity 2‚66‚13‚346 1‚58‚16‚240Provision for Leave Encashment 1‚04‚88‚148 91‚14‚543

Total 8‚15‚73‚382 5‚96‚87‚313


48

Schedules to the Consolidated Profit and Loss Account

For the Year Ended For the Year Ended 31st March, 2006 31st March, 2005

(Rs.) (Rs.)

SCHEDULE 13SALESInland (net of return) 11‚19‚38‚37‚051 10‚39‚19‚87‚463Export* 99‚26‚74‚325 1‚43‚04‚83‚618

12‚18‚65‚11‚376 11‚82‚24‚71‚081Less : Internal consumptions of components 76‚61‚93‚794 65‚06‚15‚971

Total 11‚42‚03‚17‚582 11‚17‚18‚55‚110

* Export Includes Export Benefits of Rs. 6,58,84,761 (Previous Year Rs. 9,81,73,775)and Rs. Nil (Previous Year 12,65,900) to Surya Roshni Inc., a wholly owned subsidiary

SCHEDULE 14OTHER INCOMERent 96‚000 1‚04‚000Interest (TDS Rs. 1‚27‚213) 16‚23‚616 14‚94‚350Others 48‚82‚180 35‚01‚459Insurance claims 64‚00‚699 1‚95‚180Income from Investment (Non-Trade) 1‚06‚137 1‚04‚760Foreign Exchang fluctuation – 8‚21‚618Profit on Sale of Fixed Assets 68‚52‚320 15‚67‚729Profit on Sale of Investments – 50,000

1‚99‚60‚952 78‚39‚096

SCHEDULE 15ACCRETION/(DECRETION) TO STOCKStock as at 1st April

Finished Goods 78‚73‚60‚847 77‚43‚91‚706Semi Finished Goods 20‚64‚38‚466 14‚80‚27‚134Scrap 1‚80‚38‚777 88‚82‚561

1‚01‚18‚38‚090 93‚13‚01‚401Stock as at 31st March

Finished Goods 71‚28‚52‚691 78‚73‚60‚847Semi Finished Goods 16‚46‚26‚442 20‚64‚38‚466Scrap 3‚16‚37‚299 1‚80‚38‚777

90‚91‚16‚432 1‚01‚18‚38‚090

Accretion/(Decretion) to Stock (10,27‚21‚658) 8‚05‚36‚689

SCHEDULE 16MANUFACTURING EXPENSESStores and spares consumed 14‚29‚87‚564 14‚52‚95‚807Power and fuel 25‚15‚82‚329 26‚99‚40‚228Water charges 23‚89‚403 21‚85‚925Repairs to :

Machinery 3‚04‚09‚119 2‚67‚98‚402Building 71‚16‚314 1‚04‚97‚728Others 17‚08‚487 25‚17‚978

3‚92‚33‚920 3‚98‚14‚108Miscellaneous manufacturing expenses 6‚74‚22‚809 3‚97‚32‚599Excise Duty (31‚90‚763) 89,76,016

Total 50‚04‚25‚262 50‚59‚44‚683

SCHEDULE 17EMPLOYEES REMUNERATION AND BENEFITSSalaries,wages and allowances including bonus and gratuity 43‚27‚85‚173 38‚66‚32‚034Employers contribution to PF, ESI and administrative charges 3‚56‚02‚884 3‚24‚62‚583Staff Welfare Expenses 1‚87‚70‚124 2‚34‚38‚542Remuneration to Managerial Personnel 65‚70‚000 53‚70‚000Staff Recruitment and Training Expenses 17‚95‚486 15‚71‚503

Total 49‚55‚23‚667 44‚94‚74‚662

SCHEDULE 18SELLING EXPENSESCarriage Outward 28‚64‚38‚812 32‚31‚73‚447Commission\Service Charges on sale 4‚64‚36‚596 4‚97‚14‚596Discounts 21‚78‚81‚748 19‚51‚72‚971Advertisement 2‚99‚31‚190 3‚25‚54‚472Claims for defective 3‚91‚93‚774 2‚40‚11‚820Others 3‚14‚62‚637 5‚65‚28‚968

Total 65‚13‚44‚757 68‚11‚56‚274

Schedules


49

Schedules to the Consolidated Profit and Loss Account

For the Year Ended For the Year Ended 31st March, 2006 31st March, 2005

(Rs.) (Rs.)

SCHEDULE 21

A. SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. General

Surya Roshni Limited was incorporated in India and operates as a Holding Company for other group companies.2. Principles and Basis of preparation of Financial Statements

The consolidated financial statements have been prepared in accordance with Accounting Standards (AS 21) Consolidated Financial Statements.

The consolidated financial statements comprise the financial statements of the parent company and its subsidiary.

The following group company considered for consolidation.

Sl. Name of the Subsidiary Company Country of Extent of Holding (%) Conversion Rate

No. Incorporation as on March 31, 2006 This Year Previous Year1. Surya Roshni Inc. USA 100.00 US$ Rs. 44.61 US$ Rs. 43.75

The consolidated financial statements are prepared on historical cost convention using accounting policies of the parent company unless otherwise stated. InterCompany balances and transactions have been eliminated in the consolidation.

3. Fixed Assets

Fixed Assets are stated at cost net of CENVAT and includes amounts added on revaluation, less accumulated depreciation. All costs, including interest on borrowingsattributable to acquisition of Fixed Assets upto the date of commissioning of the assets are capitalised.

4. Depreciation(i) Depreciation on fixed assets for the parent company is provided on straight line method as per the provisions of Sec. 205(2) of the Companies Act, 1956 and

for the subsidiary, the basis of depreciation rates prescribed under respective domestic laws.(ii) Depreciation on addition is being provided on pro rata basis from the date of such additions.(iii) Depreciation on assets sold, discarded or demolished during the year is being provided at their rates up to the date in which such assets are sold, discarded or

demolished.(iv) Depreciation on additions on account of increase in rupee value due to revaluation of foreign currency loan is being provided at respective rates of depreciation

of related assets.5. Foreign Currency Translations

The Monetary items denominated in foreign currency have been translated at the exchange rate prevailing on the last day of the accounting year and the resultantdifference is carried as translation reserve under "Reserves and Surplus".

6. Investments

The investments are valued at cost of acquisition.

Schedules

SCHEDULE 19INTERESTTerm Loans and Fixed Deposits 14‚12‚05‚631 14‚03‚42‚957Other Interest & Financial Charges 13‚55‚70‚466 10‚53‚28‚160

Total 27‚67‚76‚097 24‚56‚71‚117

SCHEDULE 20OTHER EXPENSESRent 1‚17‚90‚156 1‚14‚95‚686Insurance 81‚51‚486 78‚47‚663Rates & Taxes 10‚61‚651 8‚84‚476Postage, Telegraph,Telephone and Telex 1‚45‚14‚870 1‚43‚34‚644Printing and Stationery 74‚98‚843 61‚31‚135Travelling & Conveyance 4‚78‚88‚921 4‚36‚36‚954Cost Auditors'Remuneration :

– Fee 1‚23‚000 1‚23‚000– Expenses 7‚228 17‚803

Miscellaneous Expenses 3‚92‚04‚777 5‚04‚67‚770Foreign Exchange FluctuationLoss on sale of fixed assets 47‚89‚440 22‚60‚053Loss on sale of Investments 61,768 –Sales Tax / Trade Tax Paid 1‚98‚32‚634 1‚41‚01‚783

15‚49‚24‚775 15‚13‚00‚966

Directors' ExpensesSitting Fees 4‚87‚500 5‚85‚000Travelling & Conveyance 5‚36‚326 17‚10‚503Meeting Expenses 36‚593 21‚821Foreign Travelling 7‚33‚025 448,631

17‚93‚444 27‚65‚955Statutory Auditors' RemunerationStatutory Audit Fees 3‚90‚000 3‚75‚000Income Tax Audit Fees 1‚00‚000 1‚00‚000Auditors' Expenses 32‚233 31‚127Management Fees for certificates/reports 1‚70‚300 1‚55‚412

6‚92‚533 6‚61‚539

Total 15‚74‚10‚752 15‚47‚28‚460


50

7. Gratuity and Leave Encashment

The Provision for Gratuity and Leave Encashment are made as per actuarial valuation basis as at the end of the financial year. However the Parent Company hascovered its Gratuity liabilities with Life Insurance Corporation of India (LIC) by forming a Gratuity Trust and the liabilities paid to LIC is debited to Gratuity provisions.

8. Insurance Claims

Insurance claims are accounted for on settlement of claims.

9. Inventories

(i) Raw material, Stores & Spares are valued at cost. Cost calculated on FIFO basis.(ii) Finished Goods are valued at cost. Cost includes direct cost and appropriate portion of overheads.(iii) Semi-finished goods are valued at cost or net realisable value whichever is lower.(iv) Scrap and Salvage is valued at market price.(v) The closing stock constituting duty-free imports consequent to utilisation of DEPB credit is valued at the actual cost of purchase including such foregone import

duty.

10. Revenue Recognition

The VAT collected from the customers is not included in Sales.

11. Share Capital

Authorised

4,98,00,000 Equity Shares of Rs.10/- each 49‚80‚00‚000

6,20,000 Preference Shares of Rs.100/- each 6‚20‚00‚000

56‚00‚00‚000

Issued, Subscribed and Paid up2,60,01,250 Equity Shares of Rs. 10/- each fully paid up 26‚00‚12‚500(6,00,000 Equity Shares of Rs.10/- each fully paid-up allotted during the year upon conversion of warrants)

(Of the above shares 3,00,000 Equity shares of Rs.10/- each allotted as fully paid up Bonus shares bycapitalisation of General Reserve during 1980-81, 86,47,500 Equity shares of Rs.10/- each during 1994-95and 22,38,750 Equity shares of Rs. 10/- each during 1995-96 by capitalisation of securities premium account.)

38,00,000(Previous year - Nil) Optionally Convertible Warrants of Rs.64/- each Rs. 6.40/- paid up convertible 2,43,20,000on or before 15th July, 2007. (6,00,000 Optionally Convertible Equity Warrants have been converted intoequity shares during the year)

Total 28‚43‚32‚500

12. Deferred Tax

As per Accounting Standard (AS - 22) on accounting for Taxes on income issued by the Institute of Chartered Accountants of India, the deferred tax liability as on 31stMarch, 2005 comprises of the following :

Particulars As on 31st March, 2006 As on 31st March, 2005

(a) Deferred Tax Liability

1. Related to Fixed Assets (49,08,56,412) (50,26,20,330)

(b) Deferred Tax Assets

1. Gratuity 89,58,052 53,23,746

2. Leave Encashment 35,30,311 30,67,955

Net Deferred Tax Assets/(Liabilities) (47,83,68,049) (49,42,28,629)

The deferred tax liability upto 31st March, 2005 was measured as per the Income Tax rates enacted on the Balance Sheet date. The same has been revised toRs.49,19,20,050/- and the difference of Rs.23,08,578/- has been credited to the Profit and Loss Appropriation Account

Schedules

9. Segment Information for the year ended 31st March, 2006 and 31st March, 2005The company has identified the following two Primary Business Segments :1. Steel - Engaged in the production of Steel Tubes & Pipes and Cold Rolled Strips.2. Lighting - Engaged mainly in the manufacture of different varieties of Lamps.Secondary Segment reporting has been performed on the basis of Geographical Locations.

Primary Business Segments

Particulars Lighting Cons. Steel Total Cons.

Revenue

External Sales 3‚12‚82‚51‚656 8‚29‚20‚65‚926 11‚42‚03‚17‚5822‚72‚19‚20‚584 8‚44‚99‚34‚526 11‚17‚18‚55‚110

Inter-segment Sales – – –– – –

Total 3‚12‚82‚51‚656 8‚29‚20‚65‚926 11‚42‚03‚17‚5822‚72‚19‚20‚584 8‚44‚99‚34‚526 11‚17‚18‚55‚110

RESULT

Segment Result 27‚54‚24‚093 26‚13‚60‚415 53‚67‚84‚508(Profit(+)/Loss(-) before tax & interest) 18‚89‚68‚230 20‚33‚95‚929 39‚23‚64‚159Unallocable Corporate Expenditure –

–Operating Profit 53‚67‚84‚508

39‚23‚64‚159Interest Expenses 27‚67‚76‚097

24‚56‚71‚117Other Income 1‚99‚60‚952

78‚39‚096Income Tax 10‚02‚15‚022

4‚84‚89‚897


51

Particulars Lighting Cons. Steel Total Cons.

Schedules

Profit from ordinary activities 17‚97‚54‚34110‚60‚42‚241

Net Profit after Tax 17‚97‚54‚34110‚60‚42‚241

Other Information

Segment Assets

Net Block 1‚81‚77‚11‚929 93‚46‚36‚707 2‚75‚23‚48‚6361‚71‚37‚65‚972 84‚39‚36‚944 2‚55‚77‚02‚916

Capital Work-in-Progress 10‚41‚12‚839 – 10‚41‚12‚83910‚42‚00‚230 62‚93‚780 11‚04‚94‚010

Investment 5‚00‚000 5‚00‚000 10‚00‚0006‚84‚470 6‚83‚300 13‚67‚770

Current Assets, Loans and Advances 1‚26‚91‚49‚795 1‚62‚89‚00‚345 2‚89‚80‚50‚1401‚06‚05‚63‚774 1‚65‚35‚83‚586 2‚71‚41‚47‚360

Total Segment Assets 3‚19‚14‚74‚563 2‚56‚40‚37‚052 5‚75‚55‚11‚6152‚87‚92‚14‚446 2‚50‚44‚97‚610 5‚38‚37‚12‚056

Unallocated Corporate Assets ––

Total Assets 5‚75‚55‚11‚6155‚38‚37‚12‚056

Segment Liabilities

Loan Fund 1‚96‚18‚60‚983 1‚43‚96‚45‚964 3‚40‚15‚06‚9471‚69‚91‚98‚791 1‚48‚02‚58‚103 3‚17‚94‚56‚895

Current Liabilities & Provisions 22‚50‚29‚539 10‚69‚25‚142 33‚19‚54‚68120‚11‚35‚514 16‚54‚51‚254 36‚65‚86‚768

Total Segment Liabilities 2‚18‚68‚90‚522 1‚54‚65‚71‚106 3‚73‚34‚61‚6281‚90‚03‚34‚305 1‚64‚57‚09‚357 3‚54‚60‚43‚662

Unallocated Corporate Liabilities 47‚83‚68‚04949‚42‚28‚629

Total Liabilities 4‚21‚18‚29‚6774‚04‚02‚72‚291

Capital Employed 1‚54‚36‚81‚9381‚34‚34‚39‚765

Capital expenditure 48‚33‚08‚69532‚13‚00‚001

Depreciation 20‚34‚26‚733 7‚13‚29‚788 27‚47‚56‚52117‚44‚93‚136 7‚04‚17‚284 24‚49‚10‚420

Non-cash expenses other than Depreciation – – –– – –

Geographic Segment

India 10‚49‚26‚90‚5109‚80‚88‚59‚454

Outside India 92‚76‚27‚0721‚36‚29‚95‚656

14. Earning per share (Basic and Diluted)

Particular This Year (Rs.) Previous Year (Rs.)

Profit after Tax 17,97,54,341 10,60,42,241Profit for Equity Shareholders 17,97,54,341 10,60,42,241Number of Equity Shares (Face Value Rs. 10/- each) 2,60,01,250 2,54,01,2502,54,01,250 Equity Shares for Full Year 2,54,01,2506,00,000 Equity Shares for 3 days (600000*3/365) 4,932Weighted Average number of Equity Shares used as denominator for calculating EPS 2,54,06,182 2,54,01,250Basic & Diluted Earning Per Share (EPS) (Rs.) 7.08 4.17

38,00,000 Equity Shares to be issued against the conversion of 38,00,000 Optionally Convertible Warrants are fairly priced and are assumed to be neither dilutive norantidilutive. Hence the same is not considered for computation of diluted earning per share.

15. Related party disclosureRelated party disclosures as required under Accounting Standard on "Related Party Disclosures" issued by the Institute of Chartered Accountants of India are givenhereunder :

A. Relationship :i) Key Management Personnel

– Sh. B.D. Agarwal– Sh. J.P.Agarwal

ii) Relatives of the Key Management Personnel

Relation Sh. B.D.Agarwal Sh. J.P.Agarwal

Spouse Smt. Ganga Devi Agarwal Smt. Urmil AgarwalSon(s) Sh. V.P.Agarwal & Sh. J.P. Agarwal Sh. Vinay SuryaDaughter(s) Smt. Sudha Gupta Smt. Padmini & Smt. BhartiBrother(s) Sh. Ruli Ram, Sh. Babu Ram & Sh. Ram Bilas Sh. V. P. AgarwalSister(s) Smt. Bimla, Smt. Rajesh & Smt. Parvati Smt. Sudha GuptaMother Deceased Smt. Ganga Devi AgarwalFather Deceased Sh. B.D. Agarwal

iii) Entities over which the key management personnel are able to exercise significant influence– Galaxy Pipes Limited– Prakash Industries Limited

CONSOLIDATED CASH FLOW STATEMENT

This year Previous Year

(Rs.) (Rs.) (Rs.) (Rs.)

A. CASH FLOW FROM OPERATING ACTIVITIES

NET PROFIT BEFORE TAX 27‚99‚69‚363 15‚45‚32‚138

ADJUSTMENT FOR :

Depreciation 27‚47‚56‚521 24‚49‚10‚420Interest (Net) 27‚51‚52‚481 24‚41‚76‚767Loss/(Profit) on Sale of Fixed Assets (20,62,880) 6,92,324Rent Income (96,000) 54‚77‚50‚122 (1,04,000) 48‚96‚75‚511

Operating Profit before working capital changes 82‚77‚19‚485 64‚42‚07‚649Adjustment for :Trade & Other Receivables (21,99,69,213) 4,67,98,419Inventories 4‚69‚95‚685 (14,27,31,439)Trade Payables (4,43,47,444) (21,73,20,972) (1,53,19,069) (11,12,52,089)

Cash Generated from Operations 61‚03‚98‚513 53‚29‚55‚560Income Tax Paid (11,37,67,023) (4,76,68,134)Exchange Difference on translation of foreign currency 4,32,368 43‚122Interest Paid (13,55,70,466) (24,89,05,121) (10,53,28,160) (15,29,53,172)

NET CASH FROM OPERATING ACTIVITIES 36‚14‚93‚392 38‚00‚02‚387

B. CASH FLOW FROM INVESTING ACTIVITIES

Sale/(Purchase) of Investments 3‚67‚770 2,32,230Interest Received 16‚23‚616 14‚94‚350Purchases of Fixed Assets (48,96,89,866) (22,21,35,841)Capital Work in Progress 63‚81‚171 (9,91,64,160)Sale/Adjustments of Fixed Assets 2‚18‚49‚279 60‚08‚958Rent Received 96,000 1,04,000

NET CASH USED IN INVESTING ACTIVITIES (45,93,72,030) (31,34,60,463)

C. CASH FLOW FROM FINANCING ACTIVITIES

Increase/(Decrease) Long Term Borrowings 9‚85‚87‚625 6‚65‚89‚580Increase/(Decrease) Short Term Borrowings 12‚34‚62‚428 3‚22‚63‚248Issue/(Redemption) of Share Capital 6‚27‚20‚000 –Interest on borrowings (14,12,05,631) (14,03,42,957)Dividend Paid (3,47,56,530) (3,46,90,569)NET CASH INFLOW/(OUTFLOW) FROM FINANCING ACTIVITIES 10,88,07,892 (7,61,80,698)Net Increase/(decrease) in cash & cash equivalents 1,09,29,253 (96,38,773)Opening Cash & Cash equivalents 3‚95‚05‚314 4‚91‚44‚088Closing Cash & Cash equivalents 5‚04‚34‚568 3‚95‚05‚315

Cash Flow Statement

B. Transactions carried out with the related parties in the ordinary course of business :

i) Key Management Personnel & their Relatives :

Remuneration for the year 2005-2006 :– Sh. B.D.Agarwal (Chairman & Managing Director) Rs. 35,10,000– Sh. J.P.Agarwal (Vice-Chairman & Jt. Managing Director) Rs. 30,60,000– Sh. Vinay Surya (Chief Operating Officer – Export) Rs. 4,92,000Sitting Fees for the year 2005-2006

Smt. Urmil Agarwal (Director) Rs. 7,500/-

AUDITORS’ REPORTWe have examined the above Consolidated Cash Flow Statement compiled from the consolidated audited financial statements of Surya Roshni Limited for theyear ended March 31,2006, reported by us on 24th May,2006 and found the same to be drawn in accordance therewith.

For SASTRY K. ANANDAM & CO.CHARTERED ACCOUNTANTS

K. ANANDA SASTRYPlace : New Delhi Partner, F.C.ADated : 24th May, 2006 Membership No. 9980


52



Executive Director & CFOJ. P. Agarwal

Place : New Delhi B. B. Singal Vice Chairman &


Directors

B.B. Chadha

G.S. Gupta

K.K. Narula

M.G. Bakre

Rajendra Arya

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