LANCO INFRATECH LIMITED ANNUAL REPORT 2007-2008 CHAIRMAN'S REPORT Dear Shareholders, The Company's performance in the previous year has been encouraging. We doubled our turn over from Rs. 16,473 million in the previous year to Rs.33,365 million. We registered a 67% growth in our Operating Profits which stood at Rs.6,993 million. All our business verticals recorded growth with the Construction and EPC business registering the highest growth rate on account of the healthy order book. The year also marked our successful foray into the Sea Port segment. Going forward, believe that power sector will be our mainstay while we gradually grow our presence in the infrastructure segment. The allocation of a coal mine block in Orissa has enhanced our fuel security for the expansions in power segment. Presently, economies across the globe are going through a turbulent phase and Indian Economy is no exception. The shockwaves sent by the sub prime problems in the United States of America and elsewhere have been felt in all the financial markets in the world. That coupled with the surge in the commodity prices lead by Crude, Steel and Coal have resulted in inflationary pressures in most of the economies. India, an economy at the forefront of developing nations is also bearing the brunt of inflation and the Government and the Central Bank of the country have initiated policy measures aimed at taming inflation which have an impact on growth. The sectors in which your Company has interests viz. Infrastructure development, Construction and property development - have al I been affected by these developments. However, there is an acute awareness amongst policy makers that infrastructure development cannot be made to suffer because of these pressures and therefore the government is trying its best to moderate policy measures in a manner which would continue to allow infrastructure development to grow. There is therefore no slowdown on the initiatives being taken by the government to encourage Public Private Partnership (PPP) models for infrastructure development and it is indeed felt that fiscal pressures on government's finances would encourage the government to adopt PPP models more aggressively. On the other hand, the increased commodity and borrowing costs is challenging companies such as ours to look at innovative methods to reduce costs and maintain margins. I believe that the synergies provided by the integrated business model which we have gives us an excellent opportunity to test our skills in improving efficiencies across our value chain so that we can still be generating returns better than industry benchmarks. I am quite confident that a strong focus on value engineering in our EPC business can throw up good potential in terms of cost savings and also a large dose of technology in the construction activities can improve execution time cycles and thereby costs. Innovations in the way we finance our projects can enable us to reduce financing costs. Also, the pressure on energy prices is making countries across the globe look for alternative energy sources such as wind and solar power production in a much more serious manner than earlier, thereby providing new areas for future growth. Besides strengthening our existing business verticals we have identified opportunities presented in construction and infrastructure development of Transmission, Distribution Lines, Pipelines, Gas Distribution, Railway Transportation, Modernization of Railway and Bus Terminals to name a few. Entering in to joint ventures and strategic alliances to enhance our credibility in terms of financial, technical and execution abilities remains a core strategy in new areas. On the basis of the technology tie- ups we have also created subsidiaries to develop and execute business models for manufacturing and providing complete services for wind power generation and also solar photovoltaic cell manufacturing. I strongly believe that the synergetic growth model which we have would enable us to continue to grow strongly and rapidly for more years to come. The growth potentialities which we are targeting necessarily require an enhancement of human resources capabilities at all levels. We have put in place a human resources strategy which would focus on positioning managerial skills in each business vertical supported by resources to execute the plans. I believe that the ability to attract and retain best of the talent is of critical importance for achieving growth. A profitable growth model with foundations securely linked to a sustainable development model is what I believe is required from every Corporate and we are committed to discharge our responsibilities and duties as a good corporate citizen. We are taking a number of initiatives including putting in place a CSR policy document which would create a framework and a roadmap for achieving this objective. I take this opportunity to acknowledge and appreciate the support and inspiration that our stakeholders including customers, shareholders, associates and employees have provided us through this growth journey enabling us to excel. I thank each one of you for the same and look forward to your continued support as we continue to move forward on this successful journey. L. Madhusudhan Rao Executive Chairman