Mideast Integrated Steels Ltd

TO THE MEMBERS

Your Directors have pleasure to present their 19th annual report of the Company for theyear ended 31st March 2012.

Financial Results

Dividend

Your Board have great pleasure to recommend a Maiden Dividend of 5% of the face valueof each share, amounting to Rs 68.94 Mn on the paid up capital of the company of Rs1378.75 Mn as on 31.03.2012.

The dividend on Ordinary Shares is subject to the approval of the shareholders at theAnnual General Meeting.

New Projects - Value Addition

Installation of a slag processing unit of 0.5 million tonnes capacity, has been startedat Jajpur steel plant. This would lead to significant value addition to the slag generatedin the process of steel making.

The company will also take up coal block development project and projects forcommissioning a coal washery and a thermal power station from the middling of coal washeryin Chhindwara district of Madhya Pradesh.

Necessary statutory approvals for dolomite and limestone mine at Katni are beingobtained, and it is hoped that commercial production will start by the end of the comingfinancial year. Your company is investing in Mesco Magic Cement Ltd for setting up a 2.0million tonnes cement plant at Rewa in Madhya Pradesh.

Expansion

Your company is upgrading the steel plant into a fully integrated steel plant of 1.2million tonnes per annum capacity. With an investment of Rs 10 billion, a steel melt shopwith a rolling mill for rebar and wire rod will be commissioned. It would have all thesupporting plants to make it a state-of-the art integrated steel plant. A high level teamhas successfully concluded its trip to China for finalizing technical and financialdetails for the first phase of the expansion of the steel plant. In the second phase, thetotal capacity of the steel plant will be raised to 3.5 million tonnes per annum.

The company has commissioned one line of the Sinter Plant and two lines of RailwaySidings during F.Y. 2011-12. In the next phase of expansion it is working on the plan toput up a steel making facilities, oxygen plant, Pulverized Coal dust injection unit, cokeoven battery, Lime Plant, Rolling Mill and re-heating furnace with a forward integrationto manufacture 1.2 mtpa of long products like Bars, Rebars, Rods and billets.

The company has already taken up steps for taking approvals / clearances to double thecapacity of Iron ore mining Output with the regulators.

The Global Economy

The world economic outlook continues to be under stress, International Monetary Fundhas predicted a growth of 3.5% in 2012 as against 3.9% in 2011. The projection for 2013 isslightly better at 3.9%. The advanced economies would continue to be sluggish in 2012posting growth rate of 1.4%, which is lower than the 1.6% in 2011. Emerging and developingcountries are also slowing down and are expected to grow by 5.6% in 2012 as against 6.2%growth in 2011. Weaknesses in financial markets and sovereign debt problems besetting theEuro Zone countries are likely to make only a marginal impact on global economy in generaland emerging economies in particular. However capital volatility and declining exportswill be seen in the remaining part of the year. Downside risks to this weaker globaloutlook continue to loom large. The most immediate risk is insufficient policy action thatwill further escalate the euro area crisis.

The US: The US is expected to achieve a growth rate of 2% in 2012, up from 1.7% in2011. There are signs that the US economy is on a steady recovery path to post betternumbers in 2013. Dealing with fiscal cliff via a medium term fiscal plan is critical forthe US to consolidate the gains it has made since 2008. IMF estimates that the negativespillovers from the euro area, limited so far, have been partially offset by fallinglong-term yields due to safe haven flows. In the assessment of IMF, excessive fiscaltightening in the United States, given recent political gridlock may lead to lowering ofgrowth. If policy makers fail to reach consensus on extending some temporary tax cuts andreversing deep automatic spending cuts, the U.S. structural fiscal deficit could declineby 4 percentage points of GDP in 2013. U.S. growth would then stall next year, withsignificant spillovers to the rest of the world. Moreover, delays in raising the federaldebt ceiling could increase risks of financial market disruptions and a loss in consumerand business confidence.

Europe: Euro Zone is likely end the year 2012 with -0.3 % growth, which shouldimprove to 0.7% in the year 2013. Even Germany will slow down to 1.0% in 2012 from 3.1% in2011. According to IMF, the euro area periphery has been at the epicenter of a furtherescalation in financial market stress, triggered by increased political and financialuncertainty in Greece, banking sector problems in Spain, and doubts about governments'ability to deliver on fiscal adjustment and reform as well as about the extent of partnercountries' willingness to help.

India: GDP at factor cost grew by 6.5% in 2011 -12 in India as against 8.4% in2010-11. Agriculture and allied sectors grew by 2.8%, while the industry was up by 3.4%,and services grew by 8.9%. The growth of industry was 7.2% in 2010-11, pointing toslowdown in industrial activity. Within Industry, mining and quarrying turned negativeduring 2011-12 and was at -0.9% while in the 2010-11 this sector was up by 5%.

According to Aug 2012 Review of Economy by Reserve Bank of India, the economy'sperformance in 2011-12 was marked by slowing growth, high inflation and widening fiscaland current account gaps. The economy grew at its slowest pace in nine years with mining,manufacturing and construction dragging the growth down. In spite of slowing growth,inflation stayed high for larger part of the year. Recession in the euro area and generaluncertainty regarding the global economic climate chipped the external demand as well.Domestic policy uncertainties, governance and corruption issues amidst lack of politicalconsensus on reforms led to a sharp deterioration in investment climate. The need is totackle twin deficits - current account deficit which is at 4.4% of GDP and fiscal deficitat 5.1% of GDP which is likely to go beyond the already high limit that was budgeted.

The Global Iron & Steel Market:

Global steel demand is a function of global economic growth. In developing countriessteel consumption is higher compared with developed countries. Emerging economiesparticularly China, Indonesia, Brazil and India would continue to be the main marketswhere growth in steel demand will be seen. According to World Steel Association, thedemand for steel is expected to reach 1422 million tonnes in 2012 and would grow by 4.5%the next year touching 1486 million tonnes. Despite economic slowdown in the developedworld, demand for steel will continue to be in the positive. IMF data suggests that in2012, prices of commodities other than fuel have declined by 12% and in 2013 it isexpected to see a further dip of 4%. In such a scenario, the prices of steel and iron oremay not go up in the immediate future. Already iron ore prices are down by 30% from theirhigh in the beginning of 2012.

World Steel Association estimates that China's apparent steel use in 2012 is expectedto increase by 4.0% to 649 million tonnes following 6.2% growth in 2011. In 2013, steeldemand will again grow by 4.0% and reach 675 million tonnes. The decline in steel demandis on account of government's efforts to rebalance the economy and contain the real estatebubble. Despite falling prices, China continues to produce steel, as a result a forceddestocking cannot be ruled out. Due to the difficulties being faced by the steel industryin China, it is expected that coking coal prices may come down during the year.

Management is of the view that China has already reached its saturation and it will bedifficult for China to sustain the current levels.

India's steel use is forecast to grow by 6.9% to reach 72.5 million tonnes in 2012. In2013, the growth rate in steel use is expected to accelerate to 9.4% on the back ofurbanization and surging infrastructure investment. Therefore demand for steel will remainrobust in the country.

Apparent steel use in the US is forecast to grow by a healthy 5.7% in 2012. In 2013,the steel use in the US is expected to grow by 5.6% to 99.5 million tonnes bringing it to92% of the 2007 level.

Finance

Your Directors are glad to state that the Hon'ble High Court of Delhi has approved ourproposal under section 391 to 394 of the Companies Act, 1956. Accordingly, your companyhas settled the payment with all major secured creditors like IDBI, IFCI, LIC, IIBI, SBIetc. amounting to Rs 345.82 crores. except few unsecured creditors. The Payment ofprincipal amount of around Rs 17 crores was already made to IPICOL and matter relating topayment of interest is under settlement.

Deposits

The Company has not accepted fixed deposits during the financial year under review.

Auditors

M/s Sangram Paul & Co. Chartered Accountants, Statutory Auditors of the Company,retires at the conclusion of the ensuing Annual General Meeting and being eligible offersthemselves for reappointment. A certificate under section 224(1 -B) of the Companies Act,1956 has been obtained from them. Further management has proposed to appoint M/s Todarwal& Todarwal Chartered Accountants as Joint Auditors of the company, subject to approvalof shareholders, till the conclusion of the next Annual General Meeting of the company.

Directors

Mr. Debiprasad Bagchi, Mr. Sanjiv Batra, Mr. Nandanandan Mishra were appointed asAdditional Director from 27th March, 2012. Mr. Madhukar who was appointed as AdditionalDirector from 13th April, 2012. Also Mr. Puran Chandra Sahu who was appointed asAdditional Director from 1st June, 2012

Mr. Debi Prasad Bagchi, Mr. Sanjiv Batra, Mr. Nandanandan Mishra, Mr. Madhukar and Mr.Puran Chandra Sahu will hold office till the date of the forthcoming Annual GeneralMeeting and notices have been received from a Member proposing the candidatures of Mr.Debi Prasad Bagchi, Mr. Sanjiv Batra, Mr. Nandanandan Mishra, Mr. Madhukar and Mr. PuranChandra Sahu for being appointed as Directors of the Company.

Shifting of Registered Office

Subject to the approval of the shareholders, Board has proposed to shift its registeredoffice from H-1, Zamrudpur, Community Centre, Kailash Colony, New Delhi -110 048 to MescoTowers, 3915, Lewis Road, Kedar Gauri Square Bhubaneswar - 751 002, Odisha.

Energy Conservation, Technology Absorption & Foreign Exchange Earnings & Outgo

The Particulars required in accordance with the provisions of Section 217(1)(e) of theCompanies Act, 1956, read with the Companies (Disclosure of Particulars in the Report ofBoard of Directors) Rules, 1988, are given in Annexure 'A'.

Particulars of Employees

The information required under Section 217(2A) of the Companies Act, 1956 and the Rulesthere under, in respect of the employees of the Company, is provided in the Annexureforming part of this Report. In terms of Section 219(1)(b)(iv) of the Act, the Report andAccounts are being sent to the Members, excluding the aforesaid Annexure. The Annexure isavailable for inspection by Members at the Registered Office of the Company duringbusiness hours on working days up to the date of the ensuing AGM, and if any Member isinterested in obtaining a copy thereof such Member may write to the Company Secretary.

Corporate Governance

Pursuant to Clause 49 of the Listing Agreement executed with the Stock Exchanges, aManagement Discussion and Analysis, Corporate Governance Report, Managing Director's andAuditors' Certificate regarding compliance of conditions of Corporate Governance are madea part of the Annual Report. A Business Responsibility Report on the Company's corporatesustainability initiatives is also included.

Directors' Responsibility Statement

Pursuant to Section 217 (2AA) of the Companies Act, 1956, with respect to Director'sResponsibility Statement, it is hereby confirmed that:

1. In the preparation of the annual accounts, the applicable accounting standards havebeen followed and that there are no material departures from the same;

2. The directors have 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 state of affairs of the Company at the end of the financial year and ofthe profit of the Company for that year;

3. The directors have taken proper and sufficient care to the best of their knowledgeand ability for the maintenance of adequate accounting records in accordance with theprovisions of the Companies Act, 1956, for safeguarding the assets of the Company and forpreventing and detecting fraud and other irregularities;

4. The directors have prepared the annual accounts of the Company on a 'going concern'basis.

Acknowledgement

Your directors wish to express their appreciation for the co-operation and supportextended by various government and regulatory authorities, bankers, shareholders, allbusiness associates and stakeholders of the company. The Directors also extend theirappreciation to the executors of the staff and workers of the company.

Annexure 'A' to Directors' Report

PARTICULARS REQUIRED UNDER THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OFTHE BOARD OF DIRECTORS) RULES, 1988.

CONSERVATION OF ENERGY

ENERGY CONSERVATION MEASURES TAKEN:

Commissioning of one strand of sinter 1X36 M2 plant has helped in considerably reducingthe energy consumption namely coke rate and improving productivity of Blast furnace.

* The coke rate has come down to 719 kg/Gross coke rate against 846 kg/Gross coke rate.

* BF productivity improved to 2.05 T/M3/Day against 0.99 T/M3/day during the sameperiod.

Further 100 % of solid waste generation in plant (flue dust, lime sludge, BF sludge andunused coke breeze etc.) is being recycled at sinter plant improving the environmentalcondition.

Installation and successful operation of Staker-cum-Reclaimer has reduced finesgeneration in Raw Material Yard, which consists of Imported Coke, costliest energyprovider to Blast Furnace. Hence, a lot of energy wastage has been reduced in terms ofCoke fines.

* Turbo Generator #2 has been commissioned and running continuously. Commissioning ofTurbo generator #1 is under progress and shall be put into operation by November 2012.Blast Furnace Gas is distributed in the following pattern so as CO emission to atmosphereis minimized.

Priority #1 : Boiler (To reduce the LDO consumption) Priority #2 : Stove HeatingPriority #3 : CPP (To run the Turbo Generator) Priority #4 : Sinter Plant

* After optimization of usage of Blast Furnace gas, the normal LDO consumption in powerplant has reduced from 1.5KL/day to 0.9KL/Day (November 2011- July 2012). Also duringstart up of blast furnace, the LDO consumption has reduced from 24KL/day to 10.0KL7day.

Also the Power Generation from Turbine Generator #1 has increased by 7000KwH/day afterthe Blast Furnace Gas optimization & carrying out major maintenance jobs e.g.replacement of bearings.

FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY

Form - B

Form for disclosure of particulars with respect to Technology Absorption: 2011-2012 RESEARCHAND DEVELOPMENT

1. SPECIFIC AREAS IN WHICH R&D WAS CARRIED OUT BY THE COMPANY

Regular R&D was carried out in the areas of raw materials including coal, coke,energy utilization, energy conservation, waste utilization, blast furnace productivity,product development and improvement in life of plant and machinery.

Modifications have been made in hot air blasting, reheating of cooled air, watercooling system of Blast furnace, hot metal weighing system, raw material weighing system,spectrometer for quality check & control.

2. BENEFITS DERIVED

Improvement in blast furnaces productivity;

3. FUTURE PLAN OF ACTION

Standardization of processes and systems Full Implementation of ERP systems ISOimplementation

4. EXPENDITURE ON R & D (Rs in Mn)

(a) Capital Rs 244.85

(b) Recurring - Rs 5.63

(c) Total-Rs 250.48

(d) Total R&D expenditure as a percentage of total turnover (%) 6.45%