CMI FPE Ltd

Dear Shareholders,

Your directors have pleasure in presenting the Twenty-Sixth Annual Report of thecompany, together with the audited Accounts, for the financial year ended March 31, 2012.

1. FINANCIAL PERFORMANCE

(Rs in Lacs)

2. DIVIDEND

Your Directors are pleased to recommend a dividend of Rs 5 (i.e. 50%) per equityshare of the face value of Rs 10 each for the financial year ended March 31, 2012, payableto those Shareholders whose names appear in the Register of Members as on the Book ClosureDate.

The total dividend outgo for the Year under review, inclusive of tax on distributedprofits would absorb a sum of Rs 286.94 Lacs (as against Rs 1,147.77 Lacs comprising theordinary dividend of Rs 10 per equity share, and the Special Silver Jubilee Dividend of Rs10 per equity share paid for the previous year).

3. OPERATIONS

The year under review was unusual in many ways. Members are aware of the globalslowdown, considering the world situation and that India has been witnessing uncertainenvironment, high fiscal deficit, high inflation and extreme currency volatility;India’s growth in FY 2011-12, though lower compared to earlier years, has still beenone of the best performing in the world.

However, owing to current market conditions, exchange losses and execution schedules ofsome of the ongoing projects being revised by the customers, the financial results for theyear under review were adversely affected.

DEVELOPMENT

Your Company, in view of the prospective growth of the Steel Industry mainly related toFlat Products in India and abroad and in order to make Taloja as “Centre ofExcellence for Cold Rolling Mills”, has implemented modernization and expansion planat Taloja plant, leading to improved infrastructure, machines, productivity and capacityof the Taloja Plant.

Your Company has also acquired land for a “greenfield” facility at Hedavali,near Khopoli, Maharashtra for its future expansion needs.

5. DIRECTORS

Mr. Yves Honhon and Mr. Raman M. Madhok retire by rotation at the ensuing AnnualGeneral Meeting and, being eligible, offer themselves for re-appointment.

Mr. Raman Madhok resigned as Managing Director and Director of the Company witheffective from the close of working hours on August 23, 2011. The Board wishes to place onrecord its appreciation of the valuable services rendered and contribution made by

Mr. Raman Madhok during his tenure, first as an Advisor and then as Managing Directorof the Company.

Mr. Fabrice Orban was appointed as an Additional Director on the Board of Directors ofthe Company on November 17, 2011. He resigned as an Additional Director w.e.f. March 21,2012, consequent to his taking up a different assignment within the CMI Group in Europe.

6. DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to sub-section (2AA) of section 217 of the Companies Act, 1956, the Board ofDirectors of the Company hereby state and confirm that:

(i) in the preparation of the annual accounts, the applicable accounting standards havebeen followed;

(ii) the Company has in the selection of the accounting policies, consulted theStatutory Auditors and these have been applied consistently, and reasonable and prudentjudgments and estimates have been made so as to give a true and fair view of the state ofaffairs of the Company as at March 31, 2012 and of the profit of the Company for the yearended on that date;

(iii) the Company has taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act, 1956 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

(iv) the annual accounts have been prepared on a “going concern” basis.

7. CORPORATE GOVERNANCE

A Report on Corporate Governance, along with a Certificate from the Statutory Auditorsof the Company regarding the compliance with the conditions of Corporate Governance asstipulated under Clause 49 of the Listing Agreement, forms part of the Annual Report.

8. MANAGEMENT DISCUSSION AND ANALYSIS

A detailed analysis of the Company’s performance is discussed in the ManagementDiscussion and Analysis Report, which forms part of the Annual Report.

ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars relating to the energy conservation, technology absorption and foreignexchange earnings and outgo, as required under section 217(1)(e) of the Companies Act,1956 read with the Companies (Disclosure of Particulars in the Report of Board ofDirectors) Rules, 1988 are given in the Annexure to this Report.

10. PARTICULARS OF EMPLOYEES

As required under the provisions of sub-section (2A) of section 217 of the CompaniesAct, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended,particulars of the employees are set out in an Annexure to the Directors’ Report.However, as per the provisions of section 219(1)(b)(iv) of the Companies Act, 1956, theDirectors’ Report and Accounts are being sent to all the Shareholders of the Companyexcluding the Statement of particulars of employees. Any Shareholder interested inobtaining a copy of the Statement may write to the Company Secretary of the Company.

11. AUDITORS

M/s. Deloitte Haskins & Sells, Chartered Accountants, retire at the conclusion ofthe forthcoming Annual General Meeting.

The Company has received a certificate from the above Auditors, proposed to bere-appointed, to the effect that their reappointment, if made, would be in conformity withthe limits specified under the provisions of section 224(1B) of the Companies Act, 1956.

12. HEALTH AND SAFETY

The Company continues to demonstrate a strong commitment towards safety andoccupational health of employees at all locations. Your Company has a well establishedSafety Health & Environment (SHE) Policy. The employees are encouraged to adopt ahealthy, safe and environmentally conscious lifestyle. The Company has taken various stepsto strengthen the Safety culture across the organization and imparting various trainingsat all level of employees.

13. PERSONNEL

The industrial relations continued to be cordial at all levels throughout the year.Your Directors wish to place on record their appreciation of the dedicated servicesrendered by all Executives, Staff and Workmen of the Company.

14. ACKNOWLEDGEMENT

Your Directors would like to express their appreciation for the co-operation andassistance received from the Government authorities, the financial institutions, banks,vendors, customers and shareholders during the year under review.

For and on behalf of the Board

Annexure to the directors’ Report

Particulars as per section 217(1)(e) of the companies Act, 1956 read with companies(disclosure of particulars in the report of board of directors) Rule, 1988 and formingpart of the directors’ Report for the year ended March 31, 2012.

A. CONSERVATION OF ENERGY

Energy conservation is a continuous process and is one of the prime areas for controlof cost. Steps taken by the Company are as under:

(a) Energy Conservation Measures taken: Intensified ongoing checks and test onperformance of electrical transformer plant and better load management.

Electrical lighting in the department is decentralized for conservation. Improvement ofPower Factor. Switching off the machine, lights and accessories during lunch time.Installation of Solar Street lighting. Conducting power condition audit and check harmoniccondition.

Installation of APFC panel to automatically control the Power factor almost near tounity.

(b) Additional investments and proposals, if any, being implemented for reduction ofconsumption of energy: Welding generators with rectifiers as and when required, fluxwelding introduced to reduce power consumption.

Planning of Energy audit.

Planned LED high bay fitting which will give tremendous savings on power consumption& maintenance

(c) Impact of measures at (a) and (b) above for reduction of energy consumption andconsequent impact on the cost of production of goods: The above measures have resulted inreduction of Energy consumption.

(d) Total Energy Consumption and Energy Consumption per unit of production as per FormA of the Annexure to the Rules is as follows:

DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY (Rs in Lacs)

1. Specific areas in which R&D carried out by the Company:

Ongoing development of new product design/ processes/materials/tooling, improvement ofsystems in existing products/ processes in related manufacturing areas of industrialmachinery, related electrical/electronic products and systems.

Testing and Certification of existing products for conformity to new Indian/international standards.

2. Benefits derived as a result of above R&D:

Indigenisation/Import substitution Cost reduction/improved utilization of material andenergy Technology upgradation Enhancement in quality and service to the customersDevelopment of new designs for products and processes Preparedness to counter competitionin the changed liberalized environment

3. Future Plan of Action:

Introduction of new products and processes Further improvement in the existing productsand processes in various areas in which the Company is operating.

Strengthening infrastructure for R&D

AND INNOVATION:

1. Efforts in brief, made towards technology absorption, adaptation and innovation:Participating in national/international conferences, seminars and exhibitions.

Imparting training to personnel by foreign technicians, mostly form CMI Group, invarious manufacturing techniques, manufacturing technologies, latest products/designs andassembly practices. Evaluation/adaptation/modification of imported designs/technologies tosuit indigenous requirements, alternative materials/components.

2. Benefits derived as a result of the above efforts, e.g., product improvement, costreduction, product development, import substitution, saving in foreign exchange, etc. Theabove measures helped in introduction of new products and processes and furtherimprovement in the existing products. 3. Information regarding technology imported duringthe last 5 years:

C. FOREIGN EXCHANGE EARNINGS AND OUTGO:

Particulars with regard to Foreign Exchange Earnings and Outgo are given in the Notesforming part of the Financial Statements. Activities relating to exports and export plans:The Company makes continuous efforts to explore new foreign markets for products andservices and makes its presence felt in the unexplored global markets through theassistance of its parent Company.