Gujarat NRE Coke Ltd

The Members,

Your Directors have pleasure in presenting the Twenty-Fourth Annual Report and theAudited Financial Results on the business and operations of your Company for the financialyear ended on March 31, 2011.

FINANCIAL RESULTS/HIGHLIGHTS

REVIEW OF OPERATIONS

The steel industry witnessed recovery during the financial year 2010-11. Consequently,coking coal and met coke being major raw material for steel industry and market, alsowitnessed consolidation with rise in prices. The Company reported higher income fromoperations amounting to Rs.325.96 Crores during the financial year ended 31st March, 2011as compared to Rs 246.98 Crores during the previous year as a consequence of betterrealizations and a continuous focus on cost management during the year under review.Consequently, the net profit after tax earned during the financial year ended 31st March,2011 was higher at Rs. 102.65 crores as compared to Rs. 51.87 crores during the previousyear.

DIVIDEND

The Directors are pleased to recommend a dividend of Re.1/- per Equity Share of Rs.10each and Re.1/- per "B" Equity Share of Rs.10 each respectively for the yearended March 31, 2011. While there is no change in rate of dividend as compared to previousyear, the total payout will amount to Rs.67.10 crores (with dividend tax) as compared toRs.64.56 crores (with dividend tax) for the previous year.

TRANSFER TO INVESTOR EDUCATION & PROTECTION FUND

In terms of Sections 205A & 205C of the Companies Act, 1956, the company hadtransferred during the year under review, a sum of Rs. 5,99,015.50 (Rupees Five lacs,Ninety nine thousand fifteen and paise fifty only) and Rs.7,56,351.93 (Rupees Seven lacs,Fifty six thousand, three hundred fifty one and paise ninety three only) to the InvestorEducation & Protection Fund created by the Central Government towards dividend for theyears 2002-03 & 2003-04 (1st interim) respectively, since these dividend remainedunclaimed for a period of 7 years.

ISSUE OF EQUITY

The Company allotted 4,98,19,421 "B" Equity Shares of Rs.10 each on 10th May,2010 pursuant to a bonus issue in the ratio of 1 "B" Equity Share of Rs. 10 eachfor every 10 Equity Shares held.

The Company also allotted 1,00,044 Equity Shares of Rs.10 each at a premium of Rs.34.64per share and 10,004 "B" Equity Shares of Rs. 10 each as bonus shares during theyear under review, upon conversion of 1 (one) Zero Coupon Unsecured Foreign CurrencyConvertible Bonds (FCCBs) of USD 100000 each issued in 2006.

The Company also allotted 85,50,000 Equity Shares of Rs.10 each at a premium ofRs.55.78 per share and 8,55,000 "B" Equity Shares of Rs. 10 each as bonus sharesupon conversion of warrants by promoters/promoter group companies. The Company furtherallotted 4,26,795 Equity Shares of Rs.10 each at a premium of Rs. 13.86 per share and42,679 "B" Equity Shares of Rs. 10 each as bonus shares upon conversion ofOptions issued under Employee Stock Option Scheme, 2005 and 1,27,300 Equity Shares of Rs.10 each at a premium of Rs.8.05 per share and 12,730 "B" Equity Shares of Rs. 10each as bonus shares upon conversion of Options issued under 2nd tranche of GNCL EmployeeStock Options Scheme 2007.

QUALIFIED INSTITUTIONAL PLACEMENT

The Company made a Qualified Institutional Placement (hereinafter referred to as QIP)comprising of 11% Secured Redeemable Non convertible Debentures (NCDs) amounting Rs. 250crores along with 2,08,00,000 Warrants at a conversion price of Rs.120 each to QualifiedInstitutional Buyers during the year under review to raise funds for capex and generalcorporate purposes.

NON-CONVERTIBLE DEBENTURES

During the year under review, the company redeemed Non-Convertible Secured RedeemableDebentures (NCDs) for an amount of Rs. 150 crores issued to Axis Bank Ltd. The NCDsoutstanding at the end of the year under review aggregated to Rs. 400 crores comprising ofQIP issue of NCDs amounting Rs.250 crores and NCD issued to LIC and nationalised banks inthe previous year(s) amounting to Rs. 150 crores.

STATUS OF FCCBs

Your Directors are pleased to inform that 1% Unsecured Foreign Currency ConvertibleBonds (FCCBs) of USD 55 million were fully converted by its holders before its due date ofredemption.

Further, at the year end, bonds worth USD 17.40 million remain outstanding out of theUnsecured Zero Coupon FCCBs of USD 60 million issued in 2006 and due for redemption in2011. However, subsequent to the close of the year under review, the Company has receivednotices and it has since converted all the outstanding bonds worth USD 17.40 million on8th April, 2011.

LISTING

Both the Equity Shares and "B" Equity Shares of your Company are listed atthe National Stock Exchange of India Limited (NSE) and Bombay Stock Exchange Limited(BSE). The Non-convertible Debentures of the company including Debentures issued under QIPare listed at Bombay Stock Exchange. The warrants issued by the Company under QIP arelisted at both NSE and BSE.

BUSINESS PLANS

Coking Coal and Metcoke are commodities which are in high demand globally. We atGujarat NRE believe in investing in our capacities and to take advantage of any upside inthe market due to increased demand and supply mismatch. The Metcoke producing capacity ofthe company in India is presently at 1.43 MTPA which is planned for increase to 4 MTPA inanother 4-5 years at an investment of around Rs. 800 crores. Similarly, there are plans toramp up production of coking coal in Australia mines to 6 MTPA by 2015 from existingproduction levels of around 1.55 MTPA, at an additional investment of around AUD 400million.

The company is in the process of commissioning its first waste heat power plant of 15MW out of the total 60 MW waste heat power generation facilities being built near its cokeplants. This only reiterates the company's commitment to the environment, having alreadyinvested in 87.5 MW power generating capacity through wind mills.

SUBSIDIARIES

The consolidated financial statements presented by the company include the financialinformation of the subsidiaries prepared in accordance with the applicable accountingstandard. The Ministry of Corporate Affairs vide its circular no 2/2011 dated 8th February2011 has granted a general exemption under Section 212(8) of the Companies Act 1956, fromattaching the Balance Sheet, Profit & Loss Account and other documents of thesubsidiary companies to the balance sheet of any company upon compliance of certainconditions. As the company is in compliance with these conditions, the Balance Sheet,Profit & Loss Account and other documents of the subsidiaries are not attached to thisAnnual Reports & Accounts. However, the annual accounts of the subsidiary companiesand related detailed information shall be made available to the shareholders of thecompany and its subsidiaries seeking such information at any point of time. The annualaccounts of the subsidiary companies are also available at the Registered office of theCompany during the working hours and also at the respective offices of the Subsidiarycompanies.

FINANCIAL OBLIGATIONS

The Company has been regular in the payment of interest and/or repayment of loans tofinancial institutions and/or banks or in meeting its other financial obligations duringthe year under review.

CORPORATE GOVERNANCE

Your Company continues to be committed to Good Corporate Governance aligned withbest-of-breed practices. A Report on 'Corporate Governance' as on 31st March, 2011in accordance with the provisions of Clause 49 to the Listing Agreement is annexed hereto.The same has been certified by the Statutory Auditors of the Company. A Report onManagement Discussions & Analysis is also annexed hereto and forms a part of thisReport.

Chairman & Managing Director (CEO) and Chief Financial Officer (CFO) have certifiedto the Board with regard to the financial statements and other matters as required byclause 49 of the listing agreement and the said certificate is also annexed to this AnnualReport.

EMPLOYEE STOCK OPTION SCHEME

With a view to remain a preferred employer, Stock Options were granted to theDirectors/Employees of the Company/its subsidiaries under Employee Stock Options Scheme2005 and GNCL Employee Stock Options Scheme 2007 during the financial years 2006-07 and2007-08 respectively. The Directors further granted 32,14,000 options on 9.7.2010 under3rd Tranche of GNCL Employee Stock Option Scheme, 2007.

The Options under Employee Stock Option Scheme 2005 got vested on 20th January, 2010.The eligible employees/Directors exercised 10,58,224 options under this scheme till theend of the year under review.

As required by clause 12 of the SEBI (Employees Stock Option Scheme and Employees StockPurchase Scheme) Guidelines 1999, the disclosures with regard to Stock Options in respectof both Employee Stock Option Scheme, 2005 and GNCL Employee Stock Option Scheme 2007 ason 31st March, 2011 are given in an Annexure to this report.

DIRECTORS

Dr Basudeb Sen and Mr Chinubhai R Shah, Directors of the Company retire by rotation atthe forthcoming Annual General Meeting and being eligible, offer themselves forre-appointment in terms of the Articles of Association of the Company.

The present tenure of Chairman & Managing Director, Mr Arun Kumar Jagatramka wouldexpire on 27th March 2012. It is proposed to reappoint him as Chairman & ManagingDirector for a period of 5 years w e f 28th March 2012 and a resolution seeking theapproval of shareholders in this regard is included in the notice of 24th Annual GeneralMeeting.

Mr Rajendra Prasad Jain resigned from the post of Executive Director with effect from21st October 2010 due to health reasons.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirements under Section 217(2AA) of the Companies Act, 1956 withrespect to Directors' Responsibility Statement, your Directors confirm having

i) Followed in the preparation of the annual accounts, the applicable accountingstandards with proper explanation relating to material departures, if any;

ii) Selected such accounting policies and applied them consistently and made judgmentsand estimates that are reasonable and prudent so as to give a true and fair view of thestate of affairs of the Company at the end of the year under review and of the profit ofthe Company for the year ended on that date;

iii) taken proper and sufficient care for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act, 1956 for safeguarding theassets of the company and for preventing and detecting fraud or other irregularities; and

iv) prepared the annual accounts on a 'going concern basis'."

AUDITORS

M/s. N. C. Banerjee & Co., Chartered Accountants, the Statutory Auditors holdoffice upto the forthcoming Annual General Meeting of the Company and are eligible forreappointment to audit the Accounts of the Company for the financial year 2011-12. Asrequired under the provisions of Section 224(1B) of the Companies Act, 1956, the Companyhas received written confirmation from M/s. N C Banerjee & Co., that theirreappointment as Auditors, if made, would be in conformity within the limits prescribed inthe said section and that they are not disqualified from being appointed as the Auditorsof the Company within the meaning of Section 226 of the said Act.

AUDITORS' REPORT

The observations of the Auditors in their Report read with relevant notes on theaccounts, as annexed are self-explanatory and need no elaboration.

PUBLIC DEPOSITS

The Company has not accepted or renewed any Public Deposits, as defined under Section58A of the Companies Act, 1956, during the year under review.

PARTICULARS OF CONSERVATION OF ENERGY , TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGEEARNINGS AND OUTGO

The information on Particulars of conservation of energy, technology absorption andforeign exchange earnings and outgo as required under Section 217(1)(e) of the CompaniesAct, 1956, read with the Companies (Disclosure of Particulars in the Report of the Boardof Directors) Rules, 1988 forms a part of this Report as an Annexure. A copy of the saidAnnexure(s) is annexed hereto.

PARTICULARS OF EMPLOYEES

The information on Particulars of employees as required under Section 217(2A) of theCompanies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 formsa part of this Report as an Annexure. A copy of the said Annexure(s) is annexed hereto.

PERSONNEL / INDUSTRIAL RELATIONS

The Company maintained cordial and harmonious relations at all levels at the officesand plants of the Company and its subsidiaries throughout the year under review.

APPRECIATION

We wish to acknowledge the understanding, support and services of our workers, staffand Executives which has largely contributed to efficient operations and management of theCompany during the year under review. We also take this opportunity to express our deepsense of gratitude to all our customers, dealers, suppliers, bankers, government officialsand all other business associates for their continuous guidance and support to the Companyand their continued confidence in its management. We also take this opportunity to expressour sincere thanks to our shareholders and debenture holders for the confidence and faithin our company.

Annexure To The Directors’ Report

Information as required under section 217(1)(e) of the Companies Act, 1956 read withthe Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988

(a) Energy Conservation measures taken:

The Company in line with its Eco-friendly philosophy continues to lay emphasis ongeneration of green energy through alternate sources such as wind mills, waste heat plantsusing flue gas emanated by coke ovens etc. instead of fossil fuels. It continued togenerate power through its wind mills having a capacity of 87.5 MW during the year underreview. Further, the Company is at an advanced stage for setting up co-generation powerplants at its coke plants at Bhachau and Khambhalia in the State of Gujarat and at Dharwadin the State of Karnataka for generating power using the gas emanating from its cokeovens.

(b) Additional investments and proposals, if any, being implemented for reduction ofconsumption of energy:

The Company is setting up co-generation power plants having aggregate capacity of 60 MWat its plants in the States of Gujarat and Karnataka at an investment of around Rs. 275crores which are expected to be commissioned by 2011-12. Such captive generation of powerthrough co-generation power plants reduces use of power acquired from external agencies.Apart from this, the Company has also installed energy efficient equipment whereverrequired.

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

The increase in generation of power through alternate means such as wind mills providespower at a rate lower than the generally prevailing prices for purchasing power andthereby reducing the cost of production.

(d) Total energy consumption and energy consumption per unit of Production:

As per Form-A annexed

(a) Efforts made in technology absorption:

As per Form-B annexed.

(a) Activities relating to export, initiative taken to increase exports; development ofnew export markets for products and services; and export plans:

The exports of the Company during the year under review was Rs.321.58 crores ascompared to Nil amount in the previous year. Exports were made to countries such asBrazil, Japan and Malaysia during the year under review and efforts are being made toexplore the possibilities of increasing the volumes through penetrating new markets.

(b) Total foreign exchange used and earned (Amount) :

FORM-A

Disclosure of particulars with respect to Conservation of Energy for the year ended31st March, 2011

A. POWER AND FUEL CONSUMPTION

* includes units through wind turbine generators.

** represents cost of Electricity purchased after adjusting generation through windturbine generators.

FORM - B

Form for disclosure of particulars with respect to technology absorption

RESEARCH AND DEVELOPMENT (R&D)

1. EFFORTS MADE : Efforts are being made towards improvements in theexisting production process through indigenous methods.

2. BENEFITS :

a) Improved quality and productivity.

b) Conservation of fuel & reduced emissions.

3. PARTICULARS OF TECHNOLOGY IMPORTED DURING LAST 5 YEARS:

Employed throughout the year and were in receipt of remuneration in the aggregate, ofnot less than Rs.60 Lacs p.a. or employed for a part of the year and were in receipt ofremuneration in the aggregate, of not less than Rs. 5 Lacs per month

Notes:

1) Remuneration includes salary, commission, company's contribution to provident fund,gratuity and monetary value of perquisites.

2) The appointment of Chairman & Managing Director is contractual. Terms andconditions of employees other than those aforesaid, are as per respective agreements andas per the Rules of the Company.

3) Mr. Arun Kumar Jagatramka is related to Mrs. Mona Jagatramka, Director of theCompany within the meaning of Section 6 of the Companies Act, 1956.

4) Apart from Mr Arun Kumar Jagatramka, Chairman & Managing Director, no employeeholds by himself or alongwith his/her spouse and dependant children, two percent or moreof the equity shares of the company.

Disclosure in compliance with Clause 12 of the SEBI (Employees Stock Option Scheme andEmployees Stock Purchase Scheme) Guidelines, 1999, as amended , are given below -

NB The shareholders through postal ballot as per its results declared on 2nd May, 2009have approved re-pricing of all options issued under GNCL Employee Stock Option Scheme,2007- 1st Tranche and 2nd Tranche at Rs.18.05 per option.

List of employee wise details of Options Granted to Senior Managerial Personnel andoutstanding as on 31.3.2011

NB Options granted to Senior Managerial Personnel under Employee Stock OptionScheme,2005 have been fully exercised by them.