Crompton Greaves Ltd

The Members,

Your Directors are pleased to present their Seventy Fourth Annual Report on thebusiness and operations of the Company and the accounts for the financial year ended 31March 2011.

THE YEAR IN RETROSPECT

The consolidated net revenue of the Company during 2010-2011 grew by 9.5% at Rs.10005crore, as compared with Rs.9141 crore last year. The Company has achieved a stand-alonenet turnover of Rs.5951 crore, during the year under review, as compared with Rs.5284crore during the previous year, a rise of 12.6%. Whilst order input has grown at a rate of11.1% at a consolidated level during the year; growth in revenue has been, and is expectedto be subdued on account of delayed off-takes by customers in the Power and Industrialsegments.

Stand-alone Power Systems grew by 1.8%, whilst consolidated Power Systems grew by 16.9%in Euro terms. A healthy growth in the slim transformer, gas insulated switchgear andproject business in the Power Systems segment were the key growth drivers for thissegment.

The Industrial Systems segment grew quite significantly, by 18.9% during the year,largely due to revival in demand from steel, cement, fertilizers, oil & gas and otherend user industries. The Company has successfully integrated the businesses of tractionelectronics, SCADA and drives which it acquired from Nelco last year; and is poised toincrease its offering in this segment as a part of its larger vision to transform itselffrom a Product company to a Solutions Provider status. It has established a new plantdedicated to the manufacture of drives and automation, spread over 30,000 sq feet,equipped with modern equipment. The plant adds a new frontier to the technologicalcapabilities of the Company as a Solutions Provider.

The Consumer Products segment continued to outperform the market, with a growth of25.4% fuelled by higher disposable incomes and the continuing growth in the constructionsector.

Consolidated profit before tax increased to Rs.1229 crore, as compared withRs.1189 crore in the previous year, an increase of 3.4% over last year. Stand-alone profitbefore tax increased from Rs.870 crore to Rs.927 crore, an increase of 6.5% overlast year. Stiff competition from Korean and Chinese players created continuing marginpressures, which was further aggravated by rising prices of key materials. The Company hassucceeded in sustaining operating margins largely on account of productivity enhancements,upgradation of production facilities, R&D-led savings in raw material consumption,process technology improvements, global sourcing initiatives, better working capitalmanagement and a debt free financial structure.

Consolidated profit after tax (before extraordinary items) increased to Rs.927crore as compared with Rs.825 crore in the previous year, an increase of 12.4 % over lastyear. Consolidated profit after tax increased to Rs.889 crore compared with Rs.860crore in the previous year, an increase of 3.3% over last year. The Company recorded astand-alone profit after tax of Rs.694 crore, an increase of 20.3% as compared withlast year.

1 SBU

IN RS. CRORE

The Profit before interest and tax of the respective Business Groups, comparedwith last year is given in TABLE 1.

A detailed review of the operations and performance of each Business Group as well asthe Company’s International operations is contained in the Management Discussion andAnalysis Report, which is given as a separate chapter in the Annual Report.

AMALGAMATIONS

The Board of Directors at their meeting held on 28 January 2011, approved theamalgamation of CG Capital and Investments Ltd (CG Capital), the Company’swholly-owned subsidiary with the Company. After divesting most of its portfolio ofinvestments, CG Capital was practically dormant; and administratively, it was felt moreconvenient to manage the residual investments of CG Capital through the Company directly,instead of maintaining a separate entity. Pursuant to the Scheme of Amalgamation, filed byCG Capital with the High Court of Judicature at Bombay, the regulatory procedures are inan advanced stage of progress.

On 6 July 2010, the Company completed the amalgamation of its wholly-owned subsidiary,Brook Crompton Greaves Limited with it, as reported in the previous year’sDirectors’ Report.

JOINT VENTURES

During the year, to consolidate its market share in the Middle East market, the Companyentered into a strategic alliance with the EIC Group, from Saudi Arabia, for establishmentof 2 joint venture companies - Saudi Power Transformers Company

Ltd (SPTC) and CG Power Systems of Saudi Arabia Ltd (PS SA). SPTC will strengthen theCompany’s manufacturing presence of medium power transformers in Saudi Arabia, whilstPS SA will enhance the Company’s EPC footprint in Saudi Arabia and other Middle Eastcountries. The Company holds a 49% equity stake in SPTC and a 51% equity stake in PS SA,through its overseas subsidiaries, CG Power Systems Belgium N.V. and CG Holdings BelgiumN.V. respectively.

In November 2010, the Company established CG-ZIV Power Automation Solutions Limited(CGZIV), a joint venture company in India with ZIV Aplicaciones y Tecnologia, S.L. (ZIV),for the manufacture of Substation Automation systems for substations in EHV and UHV range.ZIV, headquartered in Spain, is a key player in serving the needs of the electricalindustry in Protection, Control, Measurement and Communications through state of artinnovative, cost effective and customer oriented solutions in over 50 countries. Thisjoint venture is yet one more major step by the Company in establishing itself as a fullSolutions Provider. The Company holds a 70% equity stake in CGZIV.

DIVIDEND

The Company declared three interim dividends during the year :

• RS.0.80 PER EQUITY SHARE (40%) aggregating to a total dividend payout ofRs.60 crore (including dividend tax) declared on 25 October 2010; the Record Date for thispurpose was 1 November 2010 and the Interim Dividend was paid on 12 November 2010.

• RS.0.80 PER EQUITY SHARE (40%) aggregating to a total dividend payout ofRs.60 crore (including dividend tax) declared on 28 January 2011; the Record Date for thispurpose was 4 February 2011 and the Interim Dividend was paid on 14 February 2011.

2 FINANCIAL HIGHLIGHTS

IN RS. CRORE

*Consolidated Accounts of CG International BV, the holding company for CG’sinternational operations.

** Includes results of CG Stand-alone, Indian subsidiaries and CGIBV Consolidated.

@ Figures have been regrouped for the purposes of consolidation.

• RS.0.60 PER EQUITY SHARE (30%) aggregating to a total dividendpayout of Rs.45 crore (including dividend tax) declared on 23 March 2011; the Record Datefor this purpose was 28 March 2011 and the Interim Dividend was paid on 8 April 2011.

The above mentioned dividend payout as a percentage of the share capital works out to110%. These dividends were paid on the enlarged equity base of Rs.128.30 crore, consequentto the bonus issue of 3 shares for every 4 shares held, made in March 2010, which whencomputed on a pre-bonus share capital works out to 192%, as compared with last year’sdividend rate of 110%.

RESERVES

The Reserves, on a stand-alone basis, at the beginning of the year were Rs.1636 crore.The Reserves at the end of the year are Rs.2176 crore.

DIRECTORATE

In 2009, the Board of Directors had formed a Succession Committee to carry out a globalsearch, both external and internal, to identify a successor for Mr Trehan. The SuccessionCommittee identified Mr Laurent Demortier as the new CEO and Managing Director, who willtake over as successor to Mr SM Trehan.

Although, Mr SM Trehan’s tenure as Managing Director of the Company was scheduledfor completion on 2 May 2011, until such time as Mr Demortier was appointed as CEO andManaging Director, Mr Trehan’s term was extended from 3 May 2011 to 1 June 2011 onthe same remuneration as well as other terms and conditions applicable to his earliertenure. Mr SM Trehan retired as the Managing Director of the Company on 1 June 2011;however he will continue as a Non–Executive Director and has been appointed ViceChairman of the Board. Mr Trehan has served the Company with dedication for 28 years; andwas elevated to the position of Managing Director in

3 FINANCIAL HIGHLIGHTS

IN EURO MILLION

*Consolidated Accounts of CG International BV, the holding company for CG’sinternational operations.

** Includes results of CG Stand-alone, Indian subsidiaries and CGIBV Consolidated.

@ Figures have been regrouped for the purposes of consolidation.

Note: Average exchange rate considered for 1 EURO in 2010-11 is Rs 60.5116 and in2009-10 is Rs.67.4706.

May 2000. During his tenure as Managing Director, the Company has transformed itselffrom an Indian company to a truly Transnational Corporation. During the past 11 years asManaging Director, the Company witnessed a very successful turnaround. Under his ableleadership, the Company has grown from a modest Rs.1254 crore company to a Rs.10000 crorecompany, an eight-fold growth, with a compounded annual growth rate exceeding 19% for netrevenues and over 30% for net profits, over the last five years. Today, the Company is aforce to reckon with, and the 7th largest transformer manufacturer in the world. It has amanufacturing presence in 10 countries, and a workforce that consists of more than 8,000employees from different backgrounds and cultures. The Board places on record itsgratitude and appreciation for Mr Trehan’s inspirational leadership, unstintedcommitment, dedication and bias for action, which grew the Company and its marketcapitalization multifold during his tenure as Managing Director.

Mr Demortier has been appointed as an Additional Director of the Company, pursuant toSection 260 of the Companies Act, 1956 at the Board Meeting held on 2 June 2011. At thisMeeting, Mr Demortier has also been appointed the CEO and Managing Director of the Companyw.e.f from 2 June 2011, initially for a period of 5 years. Mr Demortier brings with himrich experience and professional expertise in the business areas relevant to the Company.

Mr Demortier was most recently Senior Vice-President, of Alstom Power Sector in-chargeof the Power Automation and Control Business Unit. He joined Alstom in the year 2000 andhas led several Business Units (BU) both in T&D and Power sectors.

During his eleven years with Alstom, Mr Demortier has spent eight years withinTransmission and Distribution (T&D) and the last three years within the PowerBusiness. In T&D he has run businesses of up to Euro 1.1 billion turnover and has ledglobal operations employing up to 6,200 people with 65 units across 43 countries. He hasled divestment, integration, acquisition, turnaround and organic growth mandates acrossthe Americas, Europe, Middle East, Africa and Asia, with considerable exposure to emergingmarkets. More recently, within the Power Business, he has built a new BU dedicated to thedevelopment of Power Conversion and Power Automation Solutions for all type of PowerGeneration Plants. This BU included three R&D facilities and 14 engineering centres inEurope, America and Asia.

4 FINANCIAL HIGHLIGHTS

IN USD MILLION

*Consolidated Accounts of CG International BV, the holding company for CG’sinternational operations.

** Includes results of CG Stand-alone, Indian subsidiaries and CGIBV Consolidated.

@ Figures have been regrouped for the purposes of consolidation.

Note: Average exchange rate considered for 1 USD in 2010-11 is Rs. 45.5712 and in2009-10 is Rs. 47.7446.

Prior to Alstom, Mr Demortier worked with Honeywell Corporation between 1990 and 2000.At Honeywell, Mr Demortier held several senior responsibilities as Managing Director ofthe European Advanced Control

Engineering Business; Head of the Industrial Automation & Control Division France,Head of the European Measurement and Control BU; and, Country President for HoneywellFrance.

Mr Demortier holds an MBA from The Wharton School of the University of Pennsylvania,USA and a Masters Engineering Degree in Physics from Ecole Centrale Marseille, France. MrDemortier holds office up to the date of the forthcoming Annual General Meeting, andconsidering that he has been appointed as CEO and Managing Director, the Board recommendshis appointment to the Members. His appointment will also be subject to Central Governmentapproval thereafter.

Mr SM Trehan, Mr G Thapar and Mr S Bayman are the Directors who retire by rotation atthe forthcoming Annual General Meeting; and being eligible, offer themselves forre-appointment to the Board. The details of the Directors being recommended for extensionof tenure, appointment and re-appointment are contained in the accompanying Notice of theforthcoming Annual General Meeting.

PROMOTER GROUP

The Avantha Group is the promoter of the Company. For the purposes of the SEBI(Substantial Acquisition of Shares And Takeovers) Regulations, 1997, the names of thePromoter entities and other entities comprising the "Group" as on 31 March 2011,as defined under the Monopolies and Restrictive Trade Practices Act, 1969, are detailed atANNEXURE 1 to this Report.

RESEARCH AND DEVELOPMENT

The Company's "Technology Vision 2015" continues to steer the Company’sefforts on development of new products. During the year, a significant percentage of theturnover generated in India was through recent products developed, which were less than 3years old. The Company has also launched initiatives for eight platform technologies whichwould be pursued in the near future. In the Company, R&D projects are undertaken inIndia as well as at overseas locations, driven centrally by the Global R&D Centre inIndia. A collaborative approach on project selection, prioritization and regular reviewsensures adequate focus on commitments and time-frames which keeps the R&D effortsaligned with its Technology Vision and business priorities, at all times. The recentdevelopment of products suitable for Extra High Voltage transmission of 1200 kV is atestimony to the success of the focused approach of recent years. The Company has been inthe forefront for developing high voltage products and after developing products of up to800 kV, over the last two years has indigenously designed and developed the first 1200 kVCurrent Voltage Transformer and first 1200 kV Surge Arrester in the world for a researchstation being established by Power Grid Corporation of India Limited (PGCIL), the largestpower utility in India.

Towards attaining global leadership in high voltage power products, the Company hasalso established one of the world's largest Ultra High Voltage (UHV) Research Centres atNashik, which would be operational by 2012. This UHV research centre is a giant leaptowards fulfilling the Company’s cherished objective of positioning itself as thedominant player in the Ultra High Voltage arena.

Exhaustive information about the new products and processes developed during the yearalong with technology absorption, energy conservation measures and future directions aredetailed at ANNEXURE 2 to this Report.

The Company’s efforts at innovation was recognised by the Industry, when itreceived the "India Power Award for R&D efforts" for New ProductDevelopment, for its 765 kV SF6 circuit breaker.

It is a matter of pride that, 11 out of 14 R&D technology centres have beenrecognized by the Department of Scientific and Industrial Research (DSIR). Theserecognitions will also enable the Company to achieve enhanced tax benefits and providegreater impetus for R&D activities. The balance three technology centres are in theprocess of applying for recognition.

SUBSIDIARY COMPANIES

The Company has four Indian subsidiaries - CG Energy Management Limited (CEM), CGCapital & Investments Limited (CG Capital), CG-PPI Adhesive Products Limited (CGPPI)and CG-ZIV Power Automation Solutions Limited (CGZIV). CEM, CG Capital and CGZIV aresubsidiaries of the Company, and CGPPI, being a subsidiary of CG Capital, in terms of theprovisions of the Companies Act, 1956, is also the Company’s subsidiary.

The Netherlands-based CG International B.V, a 100% subsidiary of the Company, is theultimate mother holding company of the 30 downstream subsidiaries, as under :

• CG HOLDINGS BELGIUM N.V.

• CG POWER HOLDINGS IRELAND LIMITED

• CG POWER SYSTEMS BELGIUM N.V.

• CG AUTOMATION SYSTEMS UK LIMITED

• PAUWELS TRAFO GENT N.V.

• CG AUTOMATION SYSTEMS USA INC.

• CG POWER SYSTEMS IRELAND LIMITED

• VISERGE LIMITED

• CG SALES NETWORKS FRANCE SA

• MICROSOL LIMITED

• CG SERVICE SYSTEMS CURACAO N.V

• CG SERVICE SYSTEMS FRANCE SAS

• CG HOLDINGS HUNGARY KFT

• CG HOLDINGS GERMANY GMBH

• CG ELECTRIC SYSTEMS HUNGARY ZRT.

• CG SALES NETWORKS AMERICAS INC.

• CG POWER SOLUTIONS USA INC.

• CG POWER SYSTEMS CANADA INC.

• CG POWER SOLUTIONS UK LIMITED

• CG POWER SYSTEMS OF SAUDI ARABIA LTD

• CG POWER SYSTEMS USA INC.

• CG HOLDINGS USA INC

• CG SALES NETWORKS SINGAPORE PTE. LTD

• CG POWER COUNTY LLC

• CG HOLDINGS BRAZIL LTDA

• POWER COUNTY WIND PARK SOUTH LLC

• CG GLENMORE LLC

• POWER COUNTY WIND PARKS LLC

• PT. CG POWER SYSTEMS INDONESIA

• POWER COUNTY WIND PARK NORTH LLC

In totality, as on 31 March 2011, the Company has 35 subsidiaries, 4 Indian and 31foreign.

Pursuant to a general exemption granted by the Ministry of Corporate Affairs underSection 212 of the Companies Act, 1956, the Company is not required to annex to thisReport, the Annual Reports of the above mentioned 4 Indian subsidiaries and 31 foreignsubsidiaries, for the year ended 31 March 2011. However, if any Member of the Company orits subsidiaries so desires, the Company will make available the Annual Accounts of thesubsidiaries to them, on request. These will also be available for inspection at theRegistered Office of the Company and of its subsidiaries, during working hours up to thedate of the Annual General Meeting. The details of each subsidiary with respect tocapital, reserves, total assets, total liabilities, details of investment (except in caseof investment in subsidiaries), turnover, profit before taxation, provision for taxation,profit after taxation and proposed dividend are detailed at Page 123 of this Report.

BRANCH OFFICE

The Company has established a branch office at Poland. The stand-alone financialstatement of the Company includes the financial statement of its Poland branch i.e.Crompton Greaves Ltd SA.

CONSOLIDATION OF ACCOUNTS

As required by Accounting Standards AS-21 and AS-23 of the Institute of CharteredAccountants of India, the financial statements of the Company reflecting the consolidationof the Accounts of the Company, its 35 subsidiaries mentioned above, and five AssociateCompanies, are annexed to this Report. The Associate Companies are Avantha Power &Infrastructure Limited, CG Lucy Switchgear Limited, Pauwels Middle East Trading &Contracting Pvt Co. LLC, CEnergy-Glenmore Windfarm 1 LLC and Saudi Power TransformersCompany Ltd.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

As required by the Companies (Disclosure of Particulars in the Report of Board ofDirectors) Rules, 1988, the relevant data pertaining to conservation of energy, technologyabsorption and foreign exchange earnings and outgo are given in the prescribed format as ANNEXURE2 to this Report.

PARTICULARS OF EMPLOYEES

The statement of particulars required pursuant to Section 217(2A) of the Companies Act,1956 read with the Companies (Particulars of Employees) (Amendment) Rules, 2011, forms apart of this Report. However, as permitted by the Companies Act, 1956, the Report andAccounts are being sent to all Members and other entitled persons excluding the abovestatement. Those interested in obtaining a copy of the said statement may write to theCompany Secretary at the Registered Office and the same will be sent by post. Thestatement is also available for inspection at the Registered Office, during working hoursup to the date of the Annual General Meeting.

DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors would like to assure the Members that the financial statements for theyear under review conform in their entirety to the requirements of the Companies Act,1956. The Directors confirm that :

• THE ANNUAL ACCOUNTS have been prepared in conformity with the applicableAccounting Standards;

• THE ACCOUNTING POLICIES selected and applied on a consistent basis, givea true and fair view of the affairs of the Company and of the profit for the financialyear;

• SUFFICIENT CARE has been taken that adequate accounting records have beenmaintained for safeguarding the assets of the Company; and for prevention and detection offraud and other irregularities;

• THE ANNUAL ACCOUNTS have been prepared on a going concern basis.

AUDITORS

The Company's Statutory Auditors, Sharp & Tannan, hold office up to the conclusionof the forthcoming Annual General Meeting; and, being eligible, are recommended forre-appointment on terms to be negotiated by the Audit Committee of the Board of Directors.They have furnished the requisite certificate to the effect that their re-appointment, ifeffected, will be in accordance with Section 224(1B) of the Companies Act, 1956. At the73rd Annual General Meeting of the Members of the Company held on 19 July 2010, theMembers had empowered the Board of Directors to approve appointment as well as fixation ofremuneration of Branch Auditors. The Company proposes to appoint Pricewaterhouse Coopersas the Branch Auditors to audit the accounts for the Company’s Poland Branch.

The Company had appointed Ashwin Solanki & Associates, Cost Accountants, to auditthe cost accounts related to the Company's products, namely, Electric Lamps, ElectricFans, Electric Motors, Power Driven Pumps, Transformers and Alternators, for 2009-2010.The due date for filing the above cost audit reports was 30 September 2010; the actualdate of filing was 8 September 2010. The Company has re-appointed Ashwin Solanki &Associates as Cost Auditors, for the financial year 2010-2011, for all the above sixproducts.

FIXED DEPOSITS

The Company has discontinued acceptance of fresh deposits and also renewal of existingdeposits. 59 persons have not claimed repayment of their matured deposits amounting toRs.7,49,000 as at 31 March 2011. At the date of this Report, an amount of Rs.30,000 hasbeen claimed and repaid therefrom, or transferred to the Investor Education ProtectionFund, on completion of seven years. Link Intime India Pvt. Ltd (formerly Intime SpectrumRegistry Limited) continues to be the Company’s Registrars for all matters related tothe Company’s Fixed Deposit Scheme. The contact details of Link Intime India Pvt. Ltdare mentioned in the Report on Corporate Governance.

SHARE REGISTRAR & TRANSFER AGENT

The Company’s Registrar & Transfer Agents for shares is Datamatics FinancialServices Ltd (DFSL). DFSL is a SEBI-registered Registrar & Transfer Agent. The contactdetails of DFSL are mentioned in the Report on Corporate Governance. Investors arerequested to address their queries, if any to DFSL; however, in case of difficulties, asalways, they are welcome to contact the Company’s Investor Services Department, thecontact particulars of which are contained in the Report on Corporate Governance.

ENVIRONMENT, HEALTH & SAFETY

All manufacturing locations of the Company have received ISO 14001 EnvironmentalStandards and Management Certification and OHSAS 18001 Certification for OccupationalHealth & Safety Assessment Systems. The Company periodically conducts surveillanceaudits of both ISO 14001 and OHSAS 18001, to ensure continued conformity with thesestandards.

The theme of this year has been achievement of "zero reportable accidentstatus" across the Company’s manufacturing locations in India. Personalprotection equipment provided to workmen was enhanced at various locations, which hasresulted in reduction of the number of reported accidents. Safety audits were undertakenby independent assessors to assess the safety effectiveness at locations. The Companyperiodically conducts mock/ test drills for improving overall awareness and responsivenesstowards emergency situations. On-the-job training is provided for handling risksassociated with electrical equipment, hot works, working at heights, fire fighting and thevarious measures to handle resultant medical emergencies. An external audit for evaluationof fire risks was conducted at some manufacturing locations. National Safety Week wasobserved at all the Company’s locations from 4 March 2011 to 10 March 2011, duringwhich safety and first aid awareness was enhanced amongst employees by conducting essaycompetitions and lectures on different aspects of safety. The Company fosters environmentfriendly manufacturing practices at all locations. In this endeavour, it has beenreplacing use of hazardous substances such as lead and mercury used during certainmanufacturing processes, with environment friendly processes. The Company is entirelyreplacing thermocol packaging for its Consumer Products, with environment friendlypackaging materials.

A hygienic and healthy working environment is the norm followed across allmanufacturing locations. Various health check-ups for employees are regularly undertakenat all of the Company’s locations, especially for the workmen who are working withhazardous processes. The Company is also increasing its focus on manufacturing value addedproducts, which conserve energy or which can be utilized for power generation throughnon-conventional renewable sources such as wind and solar energy.

ACKNOWLEDGEMENTS

The Directors acknowledge and are grateful for the encouragement and co-operationextended by the financial institutions, banks, government authorities, customers, vendorsand Members during the year under review and look forward to their continued support. TheDirectors also wish to convey their sincere appreciation to the Company’s employeesat all levels, for their continued dedication, hard work and commitment which has been asignificant enabler in achieving the Company’s high performance levels.

On behalf of the Board of Directors

G THAPAR

Chairman

Mumbai, 2 June 2011

List of Group Entities

The following entities and persons, along with Crompton Greaves Limited constitute theGroup as defined under the Monopolies and Restrictive Trade Practices Act, 1969 :

• Avantha Holdings Limited

• APR Sacks Limited

• Arizona Printers & Packers Private Limited

• ASA Agencies (P) Limited

• Asia Aviation Limited

• Avantha Business Solutions Inc.

• Avantha Foundation

• Avantha International Asset B.V.

• Avantha International Holdings B.V.

• Avantha Power & Infrastructure Limited

• Avantha Realty Limited

• Avantha Technologies Limited

• Ballarpur Industries Limited

• Ballarpur International Graphic Paper Holdings B.V.

• Ballarpur International Holdings B.V.

• Ballarpur International Packaging Holdings B.V.

• Ballarpur International Paper Holdings B.V.

• Ballarpur Packaging Holdings B.V.

• Ballarpur Packaging Holdings Private Limited

• Ballarpur Paper Holdings B.V.

• Ballarpur Speciality Paper Holdings B.V.

• BILT Graphic Paper Products Limited

• BILT Industrial Packaging Company Ltd.

• Bilt Paper Limited

• BILT Tree Tech Limited

• Biltech Building Elements Limited

• Blue Horizon Investments Limited

• CEnergy-Glenmore Windfarm 1 LLC

• CG Automation Systems UK Ltd

• CG Automation Systems USA Inc

• CG Capital & Investments Ltd

• CG Electric Systems Hungary Zrt

• CG Energy Management Ltd

• CG Glenmore LLC

• CG Holdings Belgium N.V.

• CG Holdings Brazil Ltda

• CG Holdings Germany GmbH

• CG Holdings Hungary Kft

• CG Holdings USA Inc

• CG International B.V.

• CG Lucy Switchgear Ltd

• CG Power County LLC

• CG Power Holdings Ireland Limited

• CG Power Solutions UK Ltd

• CG Power Solutions USA Inc.

• CG Power Systems Belgium N.V.

• CG Power Systems Canada Inc.

• CG Power Systems Ireland Limited

• CG Power Systems of Saudi Arabia Ltd

• CG Power Systems USA Inc.

• CG Sales Networks Americas Inc.

• CG Sales Networks France SA

• CG Sales Networks Singapore PTE. Ltd.

• CG Service Systems Curacao N.V.

• CG Service Systems France SAS

• CG-PPI Adhesive Products Ltd

• CG-ZIV Power Automation Solutions Ltd.

• Corella Investments Limited

• Dunakiliti Kanzervuzem Kft

• Floragarden Tarim Gida Sanay ve Ticaret A.S.

• GG International N.V.

• Global Green Company Limited

• Global Green USA Limited

• Greenhouse Agraar Kft

• Gyanodaya Prakashan (P) Limited

• Imerys NewQuest (India) Private Limited

• Intergarden (India) Private Limited

• Intergarden N.V.

• JG Containers (Malaysia) Sdn. Bhd.

• Jhabua Power Investments Limited

• Jhabua Power Limited

• Karam Chand Thapar & Bros. Limited

• KCT Chemicals and Electricals Limited

• Korba West Power Company Limited

• Krebs & Cie (India) Limited

• Leading Line Merchant Traders (P) Limited

• Lustre International Limited

• Malanpur Captive Power Limited

• Microsol Ltd

• Mirabelle Trading Pte. Limited

• MTP NEW Ocean (Mauritius) Limited

• NewQuest Insurance Broking Services Ltd.

• NewQuest Services Private Limited

• NQC Global (Mauritius) Limited

• NQC International (Mauritius) Limited

• Orient Engineering & Commercial Limited

• Oyster Buildwell (P) Limited

• Pauwels Middle East Trading and Contracting Pvt Co LLC.

• Pauwels Trafo Gent N.V.

• Power County Wind Parks LLC

• Power County Wind Parks North LLC

• Power County Wind Parks South LLC

• Premier Tissues (India) Limited

• Prestige Wines and Spirits (P) Ltd.

• PT. CG Power Systems Indonesia

• Puszta Konserv Kft, Hungary

• Pyramid Healthcare Solutions USA

• Sabah Forest Industries Sdn. Bhd.

• Sairam Infra Projects Pvt. Ltd.

• Salient Business Solutions Limited

• Salient Business Solutions USA, Inc.

• Salient Financial Solutions Limited

• Salient Knowledge Solutions Limited

• Saraswati Travels (P) Limited

• Saudi Power Transformers Company Ltd

• Seer Buildwell (P) Limited

• SMI NewQuest India Private Limited

• Sohna Stud Farms P. Ltd.

• Solaris Chemtech Industries Limited

• Solaris Industrial Chemicals Limited

• THE Paperbase Company Limited

• TAF Asset 2 B.V.

• The Pioneer Limited

• TKS Developers Limited

• Topscore Tradevariety (P) Ltd

• Toscana Footwear Components Limited

• Toscana Lasts Limited

• UHL Power Company Limited

• Ultima Hygiene Products (P) LImited

• Vani Agencies P. Ltd.

• Vanity Propbuild (P) Limited

• Varun Prakashan (P) Limited

• Venus Financial Services Limited

• Viserge Ltd

TO DIRECTORS’ REPORT

Information Under Section 217(1)(e) of the Companies Act, 1956.

1 ENERGY CONSERVATION MEASURES TAKEN

During the year, efforts at energy conservation have focused on substitution of sourcesof heating in manufacturing processes to such having lower carbon footprint, reduction ofprocess cycle time and manufacturing of green products meeting BEE star ratings or suchwhich have applications in the renewable energy sector.

The typical measures taken towards energy conservation are:

• Modification of fluorescent lamp exhausting process to gas based furnace

• Installation of electric furnaces instead of LDO based furnaces

• Installation of 54 kW baking oven with modified blowers resulting in reducedenergy consumption per stator

• Replacement of infrared heaters with compact ovens for varnishing process

• Usage of customized hand trolleys for material movement, reducing dieselconsumption per forklift

The Company believes that energy consumption efforts of the corporate sector need to besupplemented by creating awareness for green products in the society. To this effect,energy conserving CFLbulbs were distributed to underprivileged communities by certainlocations. Energy conservation related messages also feature in the Company’sadvertisement campaigns from time to time.

2 ADDITIONAL INVESTMENTS AND PROPOSALS, IF ANY, BEING IMPLEMENTED FOR REDUCTIONIN CONSUMPTION OF ENERGY:

The following processes are under implementation for reducing energy consumption:

• Implementation of induction brazing processes

• Introduction of glue based process to replace shrink fitting process whichreduces energy requirements for heating

• Optimization of varnish impregnation process to reduce energy consumption for LTmotors line

• Introduction of epoxy based coating process for geyser tanks in place of glasscoating

• Optimization of current transformer drying cycle

• Usage of self bonding winding wires reducing energy needs for varnishing

• Reduction of cycle time for manufacture of contact tips in vacuum interrupterdevelopment

3 IMPACT OF THE MEASURES AT 1 AND 2 FOR REDUCTION OF ENERGY CONSUMPTION ANDCONSEQUENT IMPACT ON THE COST OF PRODUCTION:

The above measures have resulted in effective management and utilization of energyresources and have resulted in cost savings for the Company. However, since the Company'smanufacturing processes are not energy intensive, the energy conservation measures have anegligible impact on the Company's overall cost of production of goods.

During the year, the Company has won multiple awards signifying appreciation from theexternal community for the Company’s efforts at energy conservation; notable amongthem are:

• The Lighting division received the National Energy Conservation Award 2010 fromthe Ministry of Power, for efforts in improving efficacy of FTL lamps.

• The Company received the Confederation of Indian Industry (CII) National awardfor "Excellence in Innovative Energy Saving Product 2010".

• The Company received "the Empower Award" from Urjavaran Foundation andInternational Copper Foundation for the Most Energy Efficient FTLs.

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

R&D priorities of the Company are aligned with the Company's strategic businessplan and market indicators. R&D continues its thrust on offering smart solutionsthrough development of new technologies and new products. To optimize the Company’sproducts for providing increasing value demanded by the market, several projects wereundertaken for rationalizing material content and reducing process cycle time ofmanufacturing. Two of the six platform technologies initiated in the previous years havestarted yielding benefits, and have resulted in new products and improved processes. Theother platform technology projects have shown good progress and would yield results in thefuture years. Work on insulation systems done in the previous years have helped theCompany in development of ultra high voltage class products this year.

2. Benefits derived as a result of the above R&D: New products commercialised PowerSystems

• 200 MVA auto transformer

• 66 MVA transformer

• 250 MVA, 500 kV single phase auto transformer

• Neutral grounding reactors with taps

• 500 kV shunt reactor

• 765 kV class 333 MVA, single wound limb single phase auto transformer

• 125 MVAr 400 kV shunt reactor with largest rating

• 36 kV dry type 1.9 VF inductive voltage transformer

• Numerical relays of the following types :

a)"over current" condition, "over/under voltage" condition

b) self powered

c) non -communicable "over current" condition for 3 phases and earth fault

d) feeder protection

• 400 kV, 2000 A condenser bushing

• 36 kV, 40 kA outdoor vacuum circuit breaker

• 800 kV capacitive voltage transformer

• 800 kV and 1200 kV surge arresters

• 420 kV bushing current transformer with oil insulated paper technology

• 36 kV, 26.3 kA gas insulated switchgear

• 12 kV, 50 kA indoor vacuum circuit breaker

• 12 kV, 40 kA-0.5sec & 26.3 kA-1sec. internal arc withstand panel

• 12 kV, 25 kA, 1250 A outdoor vacuum circuit breaker

• 36 kV, 40 kA outdoor vacuum circuit breaker

• 36 kV, 26.3 kA indoor vacuum circuit breaker

• 400 kV 4000 A gas circuit breaker

• Optimized 145 kV gas circuit breaker

• 145 kV/245 kV gas circuit breaker suitable for -60deg application

• 400 kV gas circuit breaker with controlled switching

R&D from CG Power (overseas locations)

The Company has also benefited from the Research and Development work undertaken at CGPower (Overseas locations) as under :

• 500 MVA 765 kV power transformer

• 750 MVA auto transformer

• Compact substation containing cabinet, LV panel, switchgear local intelligence

• Containerized 52 kV substation for offshore applications

• "Bioslim" transformer with lower footprint capable of being hung in awind turbine

• 200 MVA 500/18kV 3 phase generator step up transformer

• 235 MVA 500/18kV 3 phase generator step up transformer

• 69 kV dead tank breaker

• 600 MVA, 500/230 kV auto transformers bank

• Data concentrator for distribution automation solution

Industrial Systems

• 2550 kW, 560 frame closed air circuit air cooled N series HT motor

• Range extension of "Sheetal series" economy range motors

• Range extension of "e-Lite Series" motors

• 107 W 4P 3-speed motor-cooler fan application and cooler series motor

• 450 frame mill duty AC motors

• 690 V AC drives

• Air/Water handling motors

• 2.5 MW,11 kV, closed air circuit air cooled N Series Motor

Consumer Products

• 400 mm sweep "EVA" plastic based table fan with two piece detachablebase

• 1200 mm sweep "HS Plus" ceiling fan with BEE five star rating

• 1200 mm sweep "Flavia" ceiling fan with dual tone colours

• Solarium Plus, 3 litres class, instant water heater

• 15 litres; 25 litres Magna range of storage water heater

• 50 W low voltage submersible pump series

• 1 ph series agricultural monobloc pump

• 3 phase open well submersible pump

• 1.5 HP to 10 HP open well submersible pumps

• 6" borewell submersible pump with copper rotor

• Cooking induction tops

• DXT Plus mixer grinder with low noise

• 2.5/3.5/5 KVA home UPS

• 5 W compact downlighter version LED Pharox lamp

• 30/45 W LED streetlight

• PVC extruded T 5-8 W luminaire

• Recessed commercial luminaire with micro linear frosted diffuser

• High end suspended/recessed lumbency range luminaire

• Flameproof clean-room commercial luminaire

• Long life low maintenance induction lamp streetlight

• 150/250W and 50/70W pressure die cast IP66 streetlight

New Processes Implemented/ Processes Improved

• Current transformer insulation through narrow band winding technology

• Development of reduced autoclave cycle for current transformers through vacuummonitoring method

• Case hardening by nitriding process for mechanism components

• Surface treatment by delta process for mechanism components to enhance thecorrosion withstand capacity up to 500 hours of salt spray test

• Unification of processes for manufacture of contacts in vacuum interrupter

• Development of PVD coating technology for punching tools

• Usage of nano-crystalline cores in place of conventional cores in instrumenttransformers

• A new economical and versatile proprietary grade, S0 steel for FHP and LT motorsup to ND 132 frame

• Enhancement from 3150 to 4000 A of 245 kV gas circuit breaker

• Development of 36 kV 800 A Isolator

• Introduction of induction brazing for traction motors instead of gas brazing

• Implementation of cold core insertion process for N series motors

Technology Competence Achieved

• Design of 500 kV shunt reactors

• Design of neutral grounding resistance with taps

• Gas insulation switchgear product technology

• Mixed dielectric synthetic oil current voltage transformers design &manufacture

• Development of high energy ultra high voltage lightning arresters

• Insulation design using narrow band technology

• IEC 61850 communication protocol for numerical relays

• Prediction of short circuit performance of gas circuit breaker usingcomputational fluid dynamics based simulation

• Design of low temperature application products

Patents

• During the year, eight patents have been granted, out of which five patents weregranted in India, two in the USA and one in Russia.

• During the year, the Company filed 159 patents in India and 4 patents overseasthrough Patent Co-operation Treaty process, which together with 398 patents filed earlier,are pending for registration.

• On the occasion of the World Intellectual Property Day, on 26 April 2011, theCompany was awarded the prestigious "Annual Intellectual Property Award2010-2011", instituted by the Indian Intellectual Property Office, in collaborationwith Confederation of Indian Industry, for securing the highest number of designregistrations during the last five years (2006-07 to 2010-11).

3. Future Plan of Action

The Company’s future R&D efforts will comprise identification of road map forthe Company’s technology needs, world-wide integration of R&D and technologyplans and segmentation in the form of products, platform and emerging technologies. Theabove initiatives would require creation of new "Centres of Excellence",development of a policy for funding of global R&D operations, plans for new R&Destablishments at overseas locations and greater number of collaborative projects withacademia, suppliers and research houses.

4. Expenditure on R&D

The Company's expenditure on Research & Development is detailed in the table below:

1. Efforts and Benefits

R Competency in development of UHV products is being built through a combination ofin-house development and acquiring key capabilities from external technology sources.Products such as 800 kV gas circuit breaker, capacitive voltage transformer and surgearresters have been manufactured through in-house development. 1200 kV capacitive voltagetransformer is an important capability, which has been added to the Company’stechnology portfolio.

R Efforts are in progress to innovate technologies needed for the Company’sSolutions businesses in drives, monitoring and controlling systems. In case of LED basedproducts, technologies are being developed by collaborating with industry leaders. On theother hand, drives and automation for Industrial Systems and streetlight automation arebeing developed in-house.

2. Imported Technology: Nil

ACTIVITIES RELATING TO EXPORTS; INITIATIVES TAKEN TO INCREASE EXPORTS; DEVELOPMENT OFNEW EXPORT MARKETS FOR PRODUCTS AND SERVICES; AND EXPORT PLANS

The Company’s activities and initiatives relating to exports are contained in theManagement Discussion and Analysis Report.

FOREIGN EXCHANGE EARNED AND USED

On behalf of the Board of Directors

G THAPAR

Chairman

Mumbai, 2 June 2011