Kakatiya Cement Sugar & Industries Ltd

To

The Members

Your Directors have pleasure in presenting the 32nd Annual Report together with theAudited Accounts for the year ended 31st March 2011.

FINANCIAL RESULTS

The Financial Results for the year ended 31st March, 2011 are summarised below:

Segment-wise performance has been furnished under Notes on Accounts.

DIVIDEND

Your Directors are pleased to recommend for your consideration a Dividend of Rs. 2.70per equity share for the year ended 31.03.2011, as against Rs. 2.70 per equity share inthe previous year aggregating an amount of Rs. 243.94 lakhs including DividendDistribution Tax.

Cement Division:

During the year under review, the Cement Division has produced 2,52,992 MT of cement asagainst 2,58,863 MT of cement for the previous year. The profit for the Division was Rs.830.46 lakhs as against Rs. 980.65 lakhs for the previous year.

Sugar Division:

The Sugar Division crushed 1,24,458 MT of sugarcane for the current season as against48,575 MT for the previous season. The recovery rate was 9.53% compared to 9.19% for theprevious season. The loss for the Division was Rs. 747.86 lakhs as against Rs. 154.26lakhs profit for the previous year.

Power Division:

During the year under review, the Power Division has generated 6,11,34,753 KWH against4,69,03,336 KWH of power for the previous year. The Profit for the Division was Rs. 303.65lakhs as against Rs. 343.85 lakhs for the previous year.

Cement Division:

In the first three months of the current year i.e. April - June 2011, the production ofcement was 62,020 MT as against 64,122 MT of the first three months of the previous year.Your Directors expect that current price realisations will sustain during the remainingpart of the current year.

Sugar Division:

Sugarcane crop in the factory zone is likely to improve and estimated to crush around2,00,000 MT during the crushing season 2011-12.

Power Division:

The matters relating to down ward revision of tariff by the APERC on the Power sales toAPTRANSCO, and PLF ceiling, contested in the Courts by the Company are pending.

FIXED DEPOSITS:

The aggregate amount of deposits accepted by the Company as on 31.03.2011 stood at Rs.20.06 lakhs. There were no fixed deposits, which were matured but not paid, other thanunclaimed deposits, as on that date.

INSURANCE:

All the properties of the Company including its buildings, Plant and Machinery andStocks wherever required have been adequately insured.

PARTICULARS OF EMPLOYEES:

The information required under Section 217 (2A) of the Companies Act, 1956 read withCompanies (Particulars of Employees) Rules 1975, as amended, forms part of this Report.However, the report and accounts are being sent to all the shareholders of the companyexcluding the above information. Those shareholders, who desire to obtain theseparticulars, would be provided the same upon receiving such request.

DIRECTORS' RESPONSIBILITY STATEMENT:

The Board of Directors of the Company hereby declares and states that -

1. In the preparation of annual accounts, the applicable accounting standards have beenfollowed and there were no material departures therefrom.

2. The Directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the status of the Company as on 31st March, 2011 and Profit & LossAccount of the Company for the year ended as on 31st March, 2011.

3. The Directors have 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 preventing and detecting fraud and otherirregularities.

4. The accounts were prepared on a going concern basis.

ENVIRONMENTAL PROTECTION:

The Company consciously makes efforts to preserve the environment and control thepollution from time to time.

Planting of saplings and seedlings in and around the factories and colonies is beingdone on a continuous basis, so as to develop green belt around the plant to improve theenvironment.

AUDITORS:

M/s. M. ANANDAM & CO., Chartered Accountants, Secunderabad, the Auditors of theCompany retire at the conclusion of this Annual General Meeting and they are eligible forre-appointment.

COST AUDIT:

For the year ended 31st March 2011, with the approval of Central Government, M/s.Narasimha Murthy & Co., Cost Accountants, Hyderabad have been appointed to conduct theCost Audit. In respect of financial year 2009-2010 Cost Audit Report was filed on27.09.2010. In respect of 2010-2011 it will be filed before the due date i.e. 30thSeptember 2011.

a. Industry Structure And Developments:

With the expansion of several cement units in AP and new entrants the gap betweendemand and supply is considerably narrowing, which is likely to put pressure on pricing.However, with efficient Management and sustained demand the outlook for next year islikely to be encouraging.

Sugar being an agro-based industry needs good rainfall and irrigation facilities. Thelining work of Wyra canal continues to be in slow progress thereby affecting theirrigation facilities and this is likely to continue for another couple of years. Howeverwith the expectation of a reasonably good monsoon the area under sugar cultivation islikely to improve resulting in considerable improvement over last season crushing. As faras Power operations are concerned, with the improvement in sugar cane crushing, theavailability of bagasse will also improve, resulting in higher generation of power.Further the directions issued by the Government of Andhra Pradesh for generation of powerduring non-crushing season by using coal as fuel will also improve the performance of thepower division.

b. Opportunities and threats:

With a stable scenario for infrastructure and the forecasted demand for cement for theyear 2011-2012 outlook for cement industry appears positive.

c. Segment or product-wise performance:

Segment-wise or product-wise performance has already been furnished elsewhere in thisReport.

d. Outlook:

Division-wise outlook has already been furnished elsewhere in this Report.

e. Risks and concerns:

The Cement, Sugar and Power industries being core industries, there is no risk ofproduct obsolescence nor steep fall in demand by way of product substitution or otherwiseand therefore, your Directors do not foresee any major risks and concerns, in the nearfuture except as discussed elsewhere in this Report.

f. Internal control systems and their adequacy:

The Company has adequate internal control system. Apart from this, the Company also hasindependent internal auditors, who conduct periodical audit and their report is taken intoaccount by the Audit Committee for its review and suggest remedial actions whereverrequired.

g. Financial Performance with respect to operational performance:

This has been already discussed elsewhere in this Report.

h. Human Resources / Industrial Relations:

The Company enjoys cordial industrial relations with employees and believes that humanresources are an invaluable asset. The Board wishes to place on record its appreciation toall employees for their efforts and cooperation for the performance and growth of businessduring the year.

i. Social Responsibility:

During the financial year ended 31st March 2011 your Company supplied cement atconcessional price to the State Government as part of its Indiramma Housing WelfareScheme.

j. CAUTIONARY STATEMENT:

Statements in this "Management Discussion & Analysis" may be consideredto be "forward looking statements" within the meaning of applicable securitieslaws or regulations. Actual results could differ materially from those expressed orimplied. Important factors that could make a difference to the Company's operationsinclude global and Indian demand-supply conditions, increased installed capacity, finishedgoods prices, raw materials availability and prices, cyclical demand and pricing in theCompany's markets, changes in Government regulations, tax regimes, besides other factors,such as litigations and labour negotiations.

ACKNOWLEDGEMENTS:

Your Directors thank the State Bank of India, Industrial Finance Branch, Somajiguda,Hyderabad and Andhra Bank, Specialised Corporate Finance Branch, Somajiguda, Hyderabad forextending the support towards working capital to meet the requirements of its operations.

Your Directors appreciate the support and the cooperation received from the StateGovernment, NEDCAP, APTRANSCO and the Central Government for the Company's growth anddevelopment.

Your Directors would like to convey the deep appreciation to all the employees andworkers of the Company for their sustained effort and wholehearted co-operation throughoutthe year.

Your Directors thank the Distributors, Dealers and Suppliers for their continuoussupport and active involvement.

Finally your Directors record their deep sense of gratitude to all the Shareholders forthe abundant confidence reposed in the Board of Directors.

ANNEXURE TO DIRECTORS' REPORT:

Particulars required under the Companies (Disclosure of Particulars in the Report ofBoard of Directors) Rules, 1988.

B. TECHNOLOGY ABSORPTION

Efforts made in Technology Absorption FORM "B" Enclosed

C. FOREIGN EXCHANGE EARNINGS AND OUTGO

FORM-A

Form for Disclosure of particulars with respect to Conservation of Energy

FORM - B

Form for disclosure of particulars with respect to Absorption, Research &Development (R & D):

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

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

3. Future plan of action

4. Expenditure on R & D

A. Capital

B. Recurring

C. Total

D. Total R & D expenditure as a Percentage of total turnover

There is no separate Research and Development Wing as the scale of Company's operationsare relatively small. However, the Company has fairly good laboratory with adequatetesting facility to ensure quality of various inputs and also finished products. Besidesthe Company continuously endeavours to improve production process and product quality andencourages the technicians and workers to innovate.

TECHNOLOGY ABSORPTION, ADAPTATION & INNOVATION - NOT APPLICABLE