Praj Industries Ltd

To The Members of Praj Industries Limited,

Your Directors are pleased to present the 25th Annual Report and the Audited Statementsof Accounts for the year ended 31st March, 2011.

Financial Results

In the year under review, your Company has recorded a total income of Rs 5820 million(previous year Rs 6447 million). While the total income decreased by 10% Profit before Taxdecreased by 54% to Rs 599 million (previous year Rs 1231 million). The performance wasimpacted by adverse global market conditions.

Dividend

Your Board of Directors decided to recommend a dividend of Rs 1.26 per equity share(63%) of face value of Rs 2/- each for the Financial Year ended 31st March, 2011.

Credit Rating

a) CRISIL has reaffirmed "P1+" rating to Company’s short-term bankingfacilities which signifies that the degree of safety regarding timely payment ofinstruments is very strong.

b) CRISIL has also reaffirmed its rating of the Company’s long-term bankfacilities to ‘AA/Stable’. The "AA" rating signifies high safety withregard to timely payment of long-term financial obligations.

Subsidiaries

Pacecon Engineering Projects Ltd. (PEPL), BioCnergy Europa B. V., Netherlands, PrajJaragua Bioenergia S.A., Brazil, Praj Americas Inc., Texas, Houston and Praj Far East Co.Ltd., Thailand are subsidiaries of your Company and are operating in their respectiveareas. Your Company has received approval from the Ministry of Corporate Affairs,Government of India under Section 212 (8) of the Companies Act, 1956 exempting it fromattaching various documents in respect of subsidiary companies, as set out under Section212 (1) of the Companies Act, 1956, to the Annual Accounts of your Company, for theFinancial Year ended 31st March, 2011.

As per the terms of the letter, a statement containing brief financial details of theCompany’s subsidiaries for the year ended 31st March, 2011 is included in the annualreport. The annual accounts of these subsidiaries and the related detailed informationwill be made available to any member of the Company and its subsidiaries at any point oftime upon request. The same will also be made available for inspection by any member ofthe Company / its subsidiaries at the registered office of the Company.

Strategic Partnership / Joint Ventures

Your Company has entered into a strategic partnership with Qteros Inc., USA toaccelerate commercialization efforts for industrial-scale cellulosic ethanol production.(Please refer to Annexure 1 for more details.)

Corporate Governance

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, ManagementDiscussion and Analysis Report (Annexure 1), Sustainability Report (Annexure 2) and Reporton Corporate Governance and Compliance Certificate on Corporate Governance (Annexure 3)are annexed to this report.

Directors

Ms. Parimal Chaudhari and Mr. Sivaramakrishnan Iyer, Directors, retire from the Boardby rotation and being eligible, offer themselves for re-appointment at the ensuing AnnualGeneral Meeting.

Mr. Prakash Kulkarni, who was appointed on 11th October, 2010 in the casual vacancycaused by the resignation of Mr. Anil Joshi, holds office upto the date of the forthcomingAnnual General Meeting. The Company has received Notice in writing along with requisitedeposit from a member under Section 257 of the Companies Act, 1956 proposing candidatureof Mr. Prakash Kulkarni for the office of Director liable to retire by rotation. Duringthe year,

Mr. Shashank Inamdar stepped down as CEO & Managing Director of the Companyeffective 15th November, 2010 and subsequently resigned from the office of additionaldirector with effect from 3rd February 2011. The Board placed on record its appreciationfor the valuable contribution made by Mr. Inamdar during his tenure with the Company. Mr.Gajanan Nabar was appointed as an Additional Director of the Company with effect from 15thNovember, 2010. He was also appointed as CEO & Managing Director of the Company.

A detailed profile of Mr. Nabar is forming part of Corporate Governance Report. Interms of Section 260 of the Companies Act, 1956 he shall hold office upto the date of theensuing Annual General Meeting. The Company has received Notice in writing along withrequisite deposit from a member under Section 257 of the Companies Act, 1956 proposingcandidature of Mr. Gajanan Nabar for the office of Director not liable to retire byrotation.

Mr. Pramod Chaudhari, Promoter Director, continues to lead as Executive Chairman of theCompany.

a) Internal Auditors

The Internal Auditors, M/s. Khare Deshmukh & Co., Chartered Accountants, Pune haveconducted the internal audits periodically and submitted their reports to Audit Committee.Their reports have been reviewed by the Statutory Auditors and the Audit Committee.

b) Statutory Auditors

The Statutory Auditors, M/s. B. K. Khare & Co., Chartered Accountants, Mumbai,(Registration Number 105102W) hold office until the conclusion of the ensuing AnnualGeneral Meeting. The Company has received a letter from them to the effect that theirreappointment, if made, would be within the prescribed limits under Section 224 (1B) ofthe Companies Act, 1956.

Directors’ Responsibility Statement

In accordance with the requirements of Section 217(2AA) of the Companies Act, 1956, theBoard of Directors states that:

• In the preparation of the annual accounts, the applicable accounting standardshave been followed and there are no material departures from the same;

• The accounting policies selected have been applied consistently and judgementsand estimates made 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 financial year 2010-11 and of the Profitof the Company for that period;

• Proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act, 1956 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

• The annual accounts have been prepared on a going concern basis.

Employee Stock Option Plan

• During the year, your Company allotted 40,231 equity shares on exercise ofoptions under the Employee Stock Option Plan 2005 Grant I, II & III. Consequent to theabove, the Issued, Subscribed and Paid-up Equity Share Capital of your Company increasedfrom 184,738,492 equity shares (Rs 369.477 million) to 184,778,723 equity shares (Rs369.557 million) as of 31st March, 2011.

• During the year, the Company has issued Grant IV – Plan A & Plan B ofOptions under the Employee Stock Option Plan 2005 aggregating 1,950,000 options to seniorexecutives including new CEO & MD of the Company at the rate of Rs 72.70 per option.

• The information to be disclosed as per SEBI (Employee Stock Option Scheme andEmployee Stock Purchase Scheme) Guidelines, 1999 is annexed to this Report (Annexure 4).

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 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. The statement is also available for inspectionat the Registered Office, during working hours upto the date of the Annual Generalmeeting.

Group for SEBI Takeover Regulations:

For the purpose of Regulation 3 (1) (e) of the SEBI (Substantial Acquisition of Sharesand Takeovers) Regulations, 1997, persons constituting ‘Group’ as defined in theMonopolies and Restrictive Trade Practices Act, 1969 are – Mr. Pramod Chaudhari, Mrs.Parimal Chaudhari, Moriyaset Trust, Mr. Parth Chaudhari, P-Cube Enterprises PrivateLimited, Turtle Communication and Fusiontech Ventures Private Limited.

Energy Conservation, Technology Absorption, Adaptation, Innovation

Your Company offers innovative solutions to customers through continual research anddevelopment. During the year, your Company,

• developed a pre-processing system for sand removal from cassava chips for whichthe Company has filed a patent.

• worked on value-added products which can be derived out of brewery spent yeast;

• developed a technology package for Hyloronic Acid, a high value ingredient usedin skin care formulations and in osteo - arthritic and opthalmic treatments. Patent filingis in process.

• introduced an effluent treatment special process for evaporation ofbiomethanated spentwash. The same is being tried out at a commercial scale operation.

• developed Technology for production of "Value added Fermentation NutritionProducts" from waste streams of Brewery Plants.

Other than this, your Company has introduced many new schemes and processes forlowering energy and water consumption and generation of wastewater. The initiatives takenby your Company to enhance its commitment to Sustainable Practices are given separately ina Sustainability Report, enclosed separately.

Foreign Exchange Earnings & Outgo

Your Company has retained its status as a net forex earner.

Acknowledgements

Your Directors wish to place on record their appreciation towards all associatesincluding Customers, Collaborators, Government Agencies, Financial Institutions, Bankers,Suppliers, Shareholders, Employees and others who have reposed their confidence in theCompany.