GEI Industrial Systems Ltd Directors Report.

Dear Shareholders,

The Directors have pleasure in submitting the 22nd Annual Report together with the Audited Accounts for the financial year ended 31st March, 2015.

(Rs. in Lacs)

Particulars Year ended 31.03.2015 Year ended 31.03.2014
Gross Turnover 3057.31 6937.61
EBIDTA -922.18 -1461.74
Profit After Tax (PAT) -3243.69 -5024.41

Financial Analysis / Review FY 2014-15

FY 14-15 and FY 13-14 continue to be difficult years for capital goods industry in India due to adverse factors which has shown no signs of improvement in the past two years. Some of the key factors which are responsible for this negative growth in the Industry are:

• Non implementation of policy initiatives by the Government leading to delay in upcoming projects in the infrastructure specially oil and gas and power sector.

• The power sector did not show any sign of comeback from the slowdown. Although Government has reallocated the coal blocks but the mining, production and availability of the coal is yet to pick up.

• Increase in the prices of key raw materials and other inputs.

• Inadequate Bank Finance for implementation of projects.

With the Make-in-India initiative by the Government of India the Company expects opportunities for growth in the manufacturing sector. With the coal block re-allocation, mining and production, activities in the power sector is likely to pick up in the near future. Stalled projects held due to environment and financial reasons of tariff rates and funding from lenders are likely to be revived. This would give a boost to Companys turnover and profitability. The Company has initiated various measures to increase the order book as well as to get into more profitable segments:

Measures to Increase the Order Book:

• Focus on the Oil and Gas sector in the export markets, especially Middle East where good opportunities exists for the Company.

• Company has established itself as EPC Company and executing orders for Nuclear Power Project. Company will explore opportunities in similar projects keeping focus on the Nuclear Power.

• Company is working to set up strategic alliance with potential partners for widening the product range falling in core competence.

• To offer engineering & technical services in its core area to clients within and outside the Country where there is good potential for business in the new projects, revamp and performance enhancement of Air Cooled Heat Exchanger and Air Cooled Vacuum Steam Condensers of various existing projects executed by the Company and others.

• Continued marketing efforts for ACSC packages for higher megawatt (300/660 MW) projects.

Measures to boost profitability:

• Increased focus on exports. During 2014-15, company bagged an export order worth 2.5m USD from Oman.

• Increased focus on product lines like EPC, Balance of Plant & Process skids to increase profitability.

• Standardize design to reduce inventory / procurement lead-time.

• Reduction / Rationalization of work force across locations.

• Reduction in Administration & selling expenses.

Accomplishments

Engineering, Procurement and Construction (EPC)

> Company has bagged order from Al Hassan Engineering Company, Oman for supply of Air Cooled Steam Condensers for Petroleum Development of Oman (PDO) for pilot project for enhanced oil recovery from Oil wells. This Is the first of its kind and then will be taken up for all such wells in Oman. This will open good opportunities for the Company.

> Successfully executed contract for Air Cooled Heat Exchangers with Winterization Scheme for the first time for cooling of low pour point fluids in the refinery. This is designed as per API 661 with Aluminium Louvers developed in house by GEI.

Export House Status

The Company continues its "Export House" status as recognised by the Ministry of Commerce & Industry, Government of India.

Fixed Deposits

The Company has not accepted deposits from the public during the year under review. There were no overdue deposits for repayment on the date of this report.

Directors

Mr. Ajitha kumar Kandampully Appu and Mrs. Perizad Ghosh has resigned from the Board of Directors w.e.f. 14 November 2014 and 16 April 2015. The Directors place on record their appreciation of the valuable services rendered by Mr. Ajitha kumar Kandampully Appu during their tenure.

Mr. Pannalal Mundhra and Mr. Robinson Fernandez retire by rotation and being eligible offer themselves for reappointment at the ensuing Annual General Meeting.

GEI Power Limited (Wholly Owned Subsidiary Company)

GEI Power is also adversely affected by the difficult situation in the new power plant segment. The Company is hopeful that a revival of the power sector in the country will help it get significant orders and increase capacity utilization in a big way.

As on date, the total manufacturing capacity of GEI and GEI Power is approx. 2000-2500 MW of Air Cooled Vacuum Steam Condensers or equivalent equipments. This does not include capacity available for Air Cooled Heat Exchanger for Oil and Gas Sector.

In view of the general exemption granted by the Ministry of Corporate Affairs, Government of India, under Section 129 of the Companies Act, 2013, the Audited Statements of Accounts, Directors Report etc. of the wholly owned subsidiary company - GEI Power Limited, are not annexed to this report. However the same will be made available to members of the Company on request and can also be inspected at the Registered Office of the Company as well as the subsidiary. Pursuant to the condition of the general exemption, a statement of the summarised financials of the subsidiary is attached along with the Consolidated Financial Statements. Pursuant to Accounting Standard AS-21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the Company include the financial information of its subsidiary.

Dividend

Due to inadequacy of profit, your Directors regret their inability to recommend any dividend on Equity Shares for the financial year 2014-15.

Directors’ Responsibility Statement

Pursuant to the requirement under Section 134 sub-section (3) clause (c) of the Companies Act, 2013 with respect to the Directors responsibility statement, it is hereby confirmed that:

(i) In the preparation of the accounts for the financial year ended 31st March, 2015, the applicable accounting standards have been followed along with proper explanation;

(ii) The Directors have selected such accounting policies and applied them consistently and made judgment and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the loss of the Company for the year;

(iii) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) The Directors have prepared the accounts for the financial year ended on 31st March, 2015 on a going concern basis.

(v) The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

Information in accordance with the provisions of Section 134 (1) (m) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 regarding conservation of energy, technology absorption and foreign exchange earnings and outgo is given in Annexure-A, forming part of this report.

Particulars of Employees

Disclosure requirement in accordance with Section 134 of the Companies Act, 2013 regarding salary particulars of employees is not applicable as they are within the threshold limits.

Corporate Governance

As required under the Companies Act, 2013 and the Listing Agreement with the Stock Exchanges, the Company adheres to the principles of Corporate Governance and continues to focus on adopting the best Corporate Governance practices. A detailed report duly certified by the Practising Company Secretary forms part of this report.

Secretarial Audit Report

As a measure of good Corporate Governance, Secretarial Audit of the Company was conducted by CS Dhanraj Singh Thakur, Practising Company Secretary, and their report is attached. The Secretarial Auditor has given their comments on the various statutory points about compliance with the requirements of Companies Act, 2013, Listing Agreement with the Stock Exchanges and other applicable laws.

The management reply on the qualifications given by the Secretarial Auditor in his report is as follows:

• Company did not receive the data relating to Statement of Unclaimed and Unpaid amounts of Dividend from the bank after so many reminders therefore the Company has not filed Form INV-5.

• Due to unavailability of proper and efficient proposal for the post of Company Secretary the company was unable to appoint the Company Secretary in its previous Board meetings .However, the board decided to review the proposals received along with some fresh applications so as to fill the vacancy at its earliest and appoint the candidate as the Company secretary of the company as per Section 203 of the Companies Act, 2013, subject to the approval of all or majority of the Directors in the forthcoming Board Meeting.

• After appointing Company Secretary in the forthcoming Board Meeting, the Company Secretary will be appointed as the Compliance Officer of the Company as per Clause 47(1) of the Listing Agreement.

• The Company in its Board Meeting held on 21st August, 2015 appointed the Internal Auditor as per Section 38 of the Companies Act, 2013 and Cost Auditor as per Section 148 of the Companies Act, 2013.

• The Company had complied with the provisions of Clause 31 of the Listing Agreement and the Annual report for the year 2013-14 was filed with a fine of Rs. 21,618/- to both of the Stock Exchanges, (NSE and BSE).

• The Company has paid the Annual Listing fees to Bombay Stock Exchange (BSE) and National Stock Exchange of India Limited (NSE) for the year 2014-15 on a later date.

• As the office of Compliance Officer remained vacant for the year the Company was unable to comply with the provisions of SEBI (PIT) Regulations, 1992 due to inadvertence. Now that the Company Secretary will be appointed in the forth coming Board Meeting, we will ensure future compliances.

Auditors

The members are requested to ratify the appointment of Auditors for the period from the conclusion of the ensuing Annual General Meeting until the conclusion of the next Annual General Meeting and to fix their remuneration.

A.K. Khabya & Co., Chartered Accountants, the Statutory Auditors of your Company, holds office until conclusion of the ensuing Annual General Meeting and is eligible for reappointment.

The management reply on the qualifications given by the Statutory Auditor in his report is as follows:

• Clause No fii) (a) of Annexure to Audit Report - Relating to Physical verification of inventory: -

Management Response: Verification of inventories has been carried out by the management as weil . ihe Financial Institutions.

• Clause No fvifl (a) of Annexure to Audit Report - Relating to payment to Statutory Dues:-

Manaaement Response: The Company is facing cash flow pressure due to losses during the past three years. The company proposes to clear all statutory dues as soon as the cash flow position improves after the bankers restructuring.

Health, Safety & Environment

The Company continues to maintain the highest standards of health, safety and environment. It emphasises preventive philosophy in respect of these matters and recognises significance of creating awareness through training & development on a continuous basis. Eliminating potential risks in all the areas of operations is carried out with the aim of total safety.

As a responsible corporate citizen, your Company believes in being environment friendly that manifests in all the areas of its working and operations. Not only its technology helps environment protection but adopts the culture of sustainability in every sphere of its activities.

Industrial Relations

During the year under review, industrial relations continued to remain harmonious.

Acknowledqpment

Your Directors take this opportunity to thank the Financial Institutions, Banks, Central and State Government Authorities, Regulatory Authorities, Stock Exchanges and Stakeholders for their continued co-operation and support to the Company. Your Directors also wish to record their appreciation for the committed services rendered by the Executives, Staff and Workmen of the Company.

For and on behalf of the Board
Place: Bhopal C E Fernandes
Date: 21.08.2015 Chairman & Managing Director

ANNEXURE A

Annexure to Directors’ Report for the year ended 31st March. 2015

Information as required under Section 134(3) (m) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014.

A. CONSERVATION OF ENERGY:

a. Measures Taken:

Company has undertaken following steps for conservation of energy:

i) Strict vigil on Power, Light and Air conditioning load.

ii) Optimizing power factor by maintaining adequate power capacitors.

iii) Reduction in daily running time of ACs. along with switching off lights and ACs during lunch break.

b. Additional Investments and proposals, if any for reduction in consumption of energy - Automatic power factor control panel and Servo Voltage Stabilizer are proposed.

c. Impact of a & b - Saving in Light & Power Load

d. Total energy consumption - As per Form - A below

FORM-A

POWER & FUEL CONSUMPTION

Year Ended 31.03.2015 Year Ended 31.03.2014
(a) Purchased
Unit-Kwh 4,61,80 6,93,360
Total Amount (Rs) 55,28,362 77,45,207
Rate/Unit (Rs) 11.98 11.17
(b) Own Generation
Through Diesel Unit-Kwh 2016 2856
Cost/Unit (variable) Rs. 30.79 29.42

FORM-B

RESEARCH AND DEVELOPMENT

1. Expenditure on R&D *
(a) Capital Nil Nil
(b) Recurring Nil Nil
(c) Total Nil Nil
(d) Total R&D Expenditure as a percentage of total turnover Nil Nil

* Project specific R&D expenses were accounted in the respective projects/intangible assets under development.

2. Foreign Exchange Earnings & Outgo

Details of foreign exchange earnings and outgo for the year are given under Notes 24.3 and 24.4.