Pearl Polymers Ltd

Dear Members,

Your Directors are pleased to present the report on the business and operations of yourCompany and the audited accounts for the financial year ended 31^st March, 2011.

FINANCIAL HIGHLIGHTS

The financial performance of the Company for the year ended 31^st March, 2011as compared with the previous year's performance is envisaged below:

DIVIDEND

The Directors consider it prudent to retain the profits of the Company for the currentyear for funding future expansion in the Company and regret their inability to recommenddividend on Equity shares of the Company for the financial year ended 31^stMarch, 2011.

The Company has paid dividend at the rate of 0.01% p.a on the Redeemable CumulativePreference Shares of the Company in accordance with terms of issue of the said shares.

CHANGE IN CAPITAL STRUCTURE

During the year under review, the Company redeemed 4,20,000 (Four Lac Twenty Thousand)0.01% Redeemable Cumulative Preference Shares, consequent to which the total issued andsubscribed share capital of the Company is Rs. 18,58,49,320/-comprising of 1,68,34,932Equity shares of Rs. 10/-each and 1,75,000 Preference shares of Rs. 100/-each.

(a) Industry Structure and Development

The Indian plastic industry has evolved rapidly and has been able to find applicationin both the Industrial and household sector with innovation in specification and designsof varied products. Responsiveness being the intrinsic driver has been pursued further byattempts of those in the industry to anticipate customer perception and fulfill theirchanging needs. With extensive development in the underlying key sectors namely FMCG,pharmaceuticals and food-processing, the packaging industry has been set in motion toequip itself to meet the imminent demands by progressing towards superior technicalexpertise, building higher capacities while ensuring superior quality product.

Your Company is one of the leading manufacturers and exporters of PET bottles andcontainers representing the Indian Plastic Industry under the brand name PEARLPET'with dominance in both institutional and retail segment. The state of the artproduction facilities, most strategically placed at 5 locations namely: Baddi, Gurgaon,Pant Nagar, Mahad and Jigani, in close proximity to our diversified customer base areinvolved in manufacturing of blow-moulded PET bottles & containers and otherinjection-moulded plastic products.

(b) Financial performance with respect to operational performance

During the year under review, your Company registered a turnover of Rs. 200.23 crores,thereby reporting a growth of 10.94% over the previous year's turnover of Rs. 180.49crores. The Gross sales have improved tremendously over a period of last five years byalmost 36% since the financial year 2006-2007.

However, on account of significant increase in raw material prices, the Net profit ofthe Company for the year under review has declined and is figured at Rs. 67.16 lacs.However, your Company is optimistic about improving and expanding its operations toexploit the market potential to its advantage.

(c) Economic Scenario and Industry Outlook

Amid signs of global economic upswing, the economy witnessed high volatility in crudeoil prices besides increased polypropylene and other feedstock costs. The prices keptfluctuating due to concerns over Europe's sovereign debt crisis, Libyan unrests and theEarthquake in Japan that triggered pessimistic outlook and its contagion, especially tothe US banking system that raised concerns of repeat of the global recession of 2008-2009.

With concerns over stalling economic recovery, high oil inventory levels kept themarket sentiments bearish and the oil prices remained low during the start of the fiscal2011. However, in anticipation of actions from the US Federal bank to bolster a weakeconomic recovery, crude oil prices rose to range at US$91.50 a barrel. Increase in USemployment levels and initiation of reformation in earthquake stricken Japan exerted morepressure on oil supplies that increased crude oil prices further. Violence in OPEC memberstate Libya also ignited fears of instability throughout the key oil-supplying MiddleEastern and North African region further raising oil prices at its 29 month high pastUS$104 a barrel in the international markets affecting the projected growth and annualgrowth of the Indian plastic industry as a whole that remained around 15 percent duringthe fiscal 2011.

The plastic industry also witnessed ascending PET prices th at rose to a level as highas US$1700/MT due to rising feedstock values, limited availability and active markets inthe region towards the end of the year. Amid fluctuating prices, a GDP growth of 8.5percent was achieved in the year 2010-11, a tad less than what was initially projected at8.6 percent due to slow growth in the last quarter on account of the continued monetarytightening by the Reserve Bank of India (RBI) to tame inflation.

However, during the year 2011-12, the GDP is expected to grow at 7.5% with the firsttwo quarters witnessing a slower growth compared to 8.9% growth rate in the first twoquarters of the previous year 2010-11. The wholesale price index (WPI) based inflationrate is projected at 7%, which is a slightly optimistic figure given the prevailing rateof inflation. GDP is further expected to grow at a sustained annual average rate of 8.4%over 2011-12 to 2015-16 with the Indian packaging industry to grow at a CAGR of 15 % inthe next 5 years primarily driven by the FMCGs -personal and home care, pharmaceuticalsand food sectors where your Company has extensive experience.

(d) Opportunities and Challenges

While the plastic industry is evolving to achieve novel aspects that have remainedun-attempted, there are number of challenges to be faced and countered, which among othersinclude: inflation, fluctuating feedstock prices and price competitors. Further, theglobalization coupled with liberalization of the Indian economy and influx ofmultinationals have also raised the standard of packaging. This necessitates initiativesto foster investments, develop market, upgrade quality standards, enhance globalparticipation and encourage Indian industry to adopt and become accustomed to world classtechnology and manufacturing practices.

The industry has however been able to counter various challenges by huge domesticdemand that continues to ensure overall growth, without the need to divert emphasis onforeign markets at present. Burgeoning middle class population with high personalconsumption levels and supporting disposable incomes, improving lifestyle, increasinghealth consciousness and growing importance to branding and packaging solutions provideopportunities and facilitate growth in the industry, besides the increasing demand fromFMCGs that are preferring plastic packaging over all other packaging materials due to highdurability, transportation convenience and economy.

While facing the above challenges, we continue to strengthen our Research andDevelopment team which is responsible for providing new and innovative packagingsolutions.

(e) Risk Management

As every other business, your Company also has significant exposure to different typesand levels of risk. However, the Company has a well structured risk assessment andminimization mechanism, which is periodically reviewed by the Board of Directors. Withthorough market understanding, strong marketing network, diverse and flexiblemanufacturing and technical expertise, your company has been able to manage and withstandrisks and concerns faced by the industry

(f) Internal Control System

The Company has a robust internal control system with an efficient monitoring andreporting mechanism to ensure compliance with applicable statutes and monitoreffectiveness & adequacy of controls throughout the organization. An extensive programof internal audit and management review supplements the process of internal control. M/sSanjeev Khanna & Associates, Chartered Accountants, the Company's Internal Auditorsperiodically conducts audit to evaluate performance and reports the effectiveness andadequacy of internal control system. Independence of the audit conducted is ensured byreporting of the internal audit findings via periodic internal audit reports alongwith theManagement comments thereon to the Audit Committee and the Board of Directors.

Further the CEO/ CFO certification also confirms adequacy of internal control systemand procedures in the Company

(g) Human Resource and Industrial Relations

The Company continued with its initiatives to foster people development, harness theircreativity and ensure a motivated and contended work team. Your Company is privileged tohave the right blend of professionals and executives in the organization and makes sincereefforts to ensure numerous opportunities for their growth in the organization.

The Industrial relations at all levels of the Company remained cordial during the year.As on 31^st March, 2011, the Company had an employee strength of 819 employees.

CAUTIONARY STATEMENT

Certain statements in the above section may be forward looking and be based onexpectations/ projections about the future. Company's actual results, performance couldthus differ materially from those projected in any such forward looking statements. TheCompany assumes no responsibility to publicly amend, modify or revise any of such forwardlooking statements on the basis of subsequent developments, information or events.

LISTING OF EQUITY SHARES

The equity shares of the Company are listed on the Bombay Stock Exchange Ltd. (BSE) andthe National Stock Exchange of India Ltd (NSE).

PUBLIC DEPOSITS

As on 31^st March, 2011, a sum of Rs. 35.20 Lacs relating to 180 depositorsremained unclaimed. Since then, deposits amounting to Rs. 18.34 Lacs in respect of 78depositors have been repaid/ renewed. In accordance with provisions of the Companies Act,1956, the Company has deposited the unclaimed deposits alongwith interest thereon into theInvestor Education and Protection Fund (IEPF) established under the Act.

DIRECTORS

The composition of the Board of Directors is in accordance with the provisions of theCompanies Act, 1956, the Articles of Association of the Company and satisfies therequirements envisaged in the Listing Agreement entered into with the Stock Exchanges.There are no changes in the Board of Directors of the Company during the year.

Pursuant to Section 255 and 256 of the Companies Act, 1956 read with Clause 110 of theArticles of Association of the Company, Mr. Varun Seth, Whole time Director and Mr. RameshMehra, Director are liable to retire by rotation at the ensuing Annual General Meeting andbeing eligible have offered themselves for re-election. A brief resume of the Directorsproposed to be re-elected, is included in the Notice for the ensuing Annual GeneralMeeting.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217(2AA) of the Companies Act, 1956 pertaining tothe Directors' Responsibility Statement, your Directors hereby confirm:

(i) that in preparation of annual accounts, applicable accounting standards have beenfollowed;

(ii) that the Accounting Policies selected in consultation with the Statutory Auditorshave been applied consistently, and judgments and estimates made are reasonable andprudent so as to give a true and fair view of the state of affairs of the Company as at 31^stMarch, 2011, and of profit of the Company for that period;

(iii) that proper and sufficient care has been taken to the best of knowledge andability for maintenance of adequate accounting records in accordance with the provisionsof this Act, for safeguarding the assets of the Company and for preventing and detectingfraud and other irregularities;

(iv) that the annual accounts for the year have been prepared on a going concernbasis.

AUDITORS AND AUDITORS' REPORT

M/s J.C.Bhalla & Co., Statutory Auditors of the Company who retire at the ensuingAnnual General Meeting are eligible for reappointment. They have expressed theirwillingness to continue as the Statutory Auditors, if re-appointed at the Annual GeneralMeeting to hold office until the conclusion of the next Annual General Meeting. TheCompany has received from the auditors, a Certificate stating that their appointment, ifmade, would be within the prescribed limit under Section 224(1B) of the Companies Act,1956 and that they are not disqualified for such reappointment within the meaning ofSection 226 of the said Act.

The notes to accounts referred to in the Auditors' Report, are self-explanatory andtherefore do not require any further comments.

CORPORATE SOCIAL RESPONSIBILITY

Your company continues to honor the principle of triple bottom line while recognizing,balancing and fulfilling the social, ecological and economical needs. We strongly believethat for any economic development to be meaningful, the benefits from the business musttrickle down to the society at large. We continue to pursue corporate goals duly alignedwith the larger societal goals for creating enduring values for all our stakeholders andthe society. During the year, the following initiatives were taken:

Environmental Initiatives: While respecting and upholding our responsibilitytowards the environment and to further create and promote awareness amongst our workers,extensive plantation and gardening was carried out at the plants as well as the adjoiningareas. Initiative was taken towards promoting conservation of water and the workers wereencouraged to minimize its wastage. Conscious efforts were made towards proper treatmentand handling of scrap by facilitating reuse, recycle and safe disposal of waste, inbuiltin the packaging process such that no scrap or by-product is disposed off in a manner thatmay cause harm to the environment. All environmental norms were duly complied with at themanufacturing locations.

Social & Health Initiatives: Painting competitions were financed for ZilaParishad Schools situated in the village adjoining our units. Blood Donation Camps wereorganized and our employees actively participated in the campaign to promote blooddonation. Food, water and clothing were distributed to the flood affected victims indifferent parts of the country. The employees stayed geared up to help the affectedfamilies of staff having met untoward incidents and other victims of natural calamities.

Educational & Training Initiatives: During the year, various training programswere organized for the workers at the plant. Special training on First Aid was impartedbesides the periodical training on Fire and General Safety given to the employees. NewEntrants were provided training before being allowed to handle machines. Amongst otherefforts, various presentations were organized at the Corporate Office to apprise theemployees of the updates and constant changes occurring in the corporate world. Vocationalplant training was also imparted to students from Engineering and Diploma Institutes aspart of their curriculam.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

A statement on details pertaining to Energy Conservation, Technology absorption andForeign Exchange Earnings and Outgo, required under Section 217(1)(e) of the CompaniesAct, 1956 read with Companies (Disclosure of particulars in report of Board of Directors)Rules, 1988, forms part of this Directors' Report as Annexure-I

PARTICULARS OF EMPLOYEES

Pursuant to the Companies (Particulars of Employees) Amendment Rules, 2011, none of theemployees of the Company was in receipt of remuneration exceeding Rs. 60 Lacs per annum orRs. 5 Lac per month for period of employment during the last financial year ended 31^stMarch, 2011. Accordingly, no disclosure is required to be made pursuant to Section 217(2A) of the Companies Act, 1956 read with the amended Companies (Particulars of Employees)Rules, 1975.

CORPORATE GOVERNANCE

Your Company continued with its unswerving commitment and conscious attempts tomaintain highest standards of corporate governance. All major stipulations laid down underclause 49 of the Listing Agreement relating to good corporate governance have been dulyadhered to and are reflected in all its attempts to attain business objective whileenhancing stakeholders value.

A report on such Corporate Governance practices adopted in the Company along with theCertificate from the Statutory Auditors of the Company certifying due compliance with thesaid requirements forms part of this report.

ACKNOWLEDGEMENT & APPRECIATION

Your Directors acknowledge with gratitude the assistance and co-operation received fromthe financial institutions, Banks and Governmental & Non-Governmental authorities andwould like to thank all members for their continued support and confidence reposed in themanagement. Your Directors also wish to express deep sense of appreciation for thededication and unstinting efforts put in by the entire work team at Pearl that enables theCompany to remain at the forefront at all times.

A) ENERGY CONSERVATION MEASURES TAKEN :

Continuous efforts were made at making the operations of the Company energy efficientand the following initiatives were taken towards conservation of energy:

1. Besides our endeavour to introduce energy efficient equipment in the year 2010, newenergy efficient high-pressure air compressors have been purchased for our plants.

2. Old high-power consuming air-conditioners are being replaced with the modern 3 and 5star rated energy efficient ones in all Units.

3. Replacement of old and less efficient chilled water pumps with more efficientlow-power consuming new generation water pump is in process without sacrificing on theoverall performance of the water chiller. Few pumps have been installed on trial basis andresults are encouraging.

4. Replacement of some of the old high-power consuming stretch blow moulding machineswith low-power consuming machines is in process which gives higher productivity withoutsacrificing quality.

5. Feasibility of using CNG as a fuel for generators to produce electrical energy isbeing considered, in view of the ever-increasing diesel price. Besides, the benefit of acomparatively lower cost, it will also help control pollution.

B) ADDITIONAL INVESTMENTS AND PROPOSALS, IF ANY, BEING IMPLEMENTED FOR REDUCTION OFCONSUMPTION OF ENERGY:

1. Proposal for replacement of existing reciprocating type chiller compressor with moreefficient scroll compressor which is expected to consume at least 20% less energy than thepresent one is being explored.

2. Proposal for replacing existing CRT computer monitors with LCD monitors in all fiveunits (which would consume 60% less energy) is being worked upon.

3. Proposal for running lighting load of the plants on inventors to avoid running thesmaller DG sets for Plant- lighting at the time of shut-down, with a back-up of 3.5 hoursis being considered. If successful will lead to controlled pollution and conserve diesel(an extract of natural resource).

4. Proposal for replacing old ISBM with new low power consuming ISBM is beingconsidered.

The measures undertaken are continuously monitored and reviewed in light of theirimpact.The required modifications are made to suit the need and to improve performance andprofit margins.

C) IMPACT OF MEASURES TAKEN ALREADY AND PROPOSED VIDE (A) & (B) ABOVE ARE AIMED AT:

1. The new energy efficient high-pressure air compressors and low- power consumingstretch blow-moulding machines have significantly reduced the power consumption.

2. Low-power consuming water pumps on selective chillers and installation of scrollcompressors have resulted into considerable conservation of energy.

3. Use of CNG as a fuel for generators to produce electrical energy is expected toreduce the costs and simultaneously conserve diesel, a natural resource.

a) Specific areas in which Research & Development was carried out by the company

• Installation of high-productivity energy efficient machines to reduce rejectionpercentage.

• Focus on improving customer satisfaction.

b) Benefits derived as a result of above R&D

• Significant improvement in customer satisfaction and acceptance level for theproduct

• Marked reduction in customer compliants

c) Future Plan of Action:

• Exploring use of LPG/CNG as fuel for our DG sets to minimize on future fuel cost

d) Expenditure on R & D : Nil

a) Efforts made, in brief, towards technological absorption, adaptation andinnovation

The new processes and technologies developed through R&D have been adapted andabsorbed in manufacturing techniques. Continuous efforts are being made to reduce cost,improve product quality and promote usage of PET packaging into new areas where othermodes of packaging are being used.

b) Benefits derived as a result of the above efforts, e.g. product improvement, costreduction, product development, import substitution, etc.

By virtue of the measures adopted, the Company has been able to achieve optimalutilization of raw material, reduced machine time, reduction in energy consumption andabove all consumer satisfaction.

c) Information regarding importing technology: N.A C. FOREIGN EXCHANGEEARNINGS AND OUTGO

a. Activities relating to exports, initiatives taken to increase exports, developmentof new export markets for products and services and export plans:

The Company is exploring the possibility of exporting PET products to various countries

b. Total Foreign Exchange earning and outgo

DECLARATION REGARDING COMPLIANCE BY BOARD MEMBERS AND SENIOR MANAGEMENT PERSONNEL WITHTHE COMPANY'S CODE OF CONDUCT

This is to confirm that all the Members of the Board of Directors of the Company andthe Senior Management have affirmed their compliance with the Code of Conduct laid downfor the Directors and Senior Management of the Company for the Financial Year ended 31^stMarch, 2011.

This certificate is being given in compliance with the requirements of clause49(I)(D)(ii) of the Listing Agreement entered in to with the Stock Exchanges.

To the Members of Pearl Polymers Limited

We have examined the compliance of conditions of Corporate Governance by Pearl PolymersLimited for the year ended on March 31, 2011 as stipulated in Clause 49 of the ListingAgreement of the said Company with the Stock Exchanges in India.

The compliance of conditions of Corporate Governance is the responsibility of themanagement. Our examination was limited to procedures and implementation thereof, adoptedby the Company for ensuring compliance of the conditions of Corporate Governance. It isneither an audit nor an expression of opinion on the financial statements of the Company.

In our opinion and to the best of our information and according to the explanationsgiven to us, we certify that the Company has complied with the conditions of CorporateGovernance as stipulated in the above mentioned Listing Agreement.

We further state that such compliance is neither an assurance as to the futureviability of the Company nor the efficiency or effectiveness with which the management hasconducted the affairs of the Company.