SHREE GANESH FORGINGS LIMITED ANNUAL REPORT 2006-2007 CHAIRMAN'S REPORT Dear Members, With great pleasure I would like to share with you the Highlights of our performance during the year 2006-07. For us, the year 2006-07 was a year for inorganic growth through joint venture and acquisitions. Your Company made substantial leaps through acquisitions. But before going into these, let us first discuss about our flagship company, Shree Ganesh Forgings, Limited on a stand alone basis. During the year the total revenue increased by 5.35% to Rs. 9725.92 lacs. As the stainless steel market was very volatile because of nickel prices, the company as it is manufacturing wide variety of grades concentrated not only on stainless steel but also other alloy and carbon steel grades in order not to depend on stainless steel. The revenue did not increase substantially as the company concentrated on carbon steel products in place of the costlier stainless steel products. But you can very well see that the quantum of production has increased substantially. Earning before Depreciation, Tax and Interest increased by 14.8% to Rs.11330 lacs. Due to increased provision for deferred tax, our profit after tax has come down; but we all know that deferred tax is a provision for the future only, the benefit of which we will get in due course. Hence we do not see anything to worry about. Profit before Tax increased marginally only due to the increase in operational and high interest costs. The project for more than doubling our capacity from 11000 MT to 22800 MT is in the final stages. Commercial production is expected to commence after September 2007. Two press machines with 2500 Tonne and 4000 tonne capacity and 48 CNC Robotic Machining Lines are being installed. This expansion will help us to achieve: Optimal machine utilization Reduction in manpower cost Reduction in material handling charges Less lead time. Improved quality and less rejection, Members, we made two successful acquisitions and a Joint Venture abroad during the previous year. We have incorporated a subsidiary, SGFL NV in Netherlands. Through this company we have acquired 100% holding of Hertecant NV Belgium and ELFE France. Hertecant is a well known, forging company in Europe. ELFE France is a specialized, distribution company specializing in stainless steel flanges', and fittings, The performance of these companies have substantially changed the face of Shree Ganesh Forgings Limited. We have also entered into a JV with Geldbach UK where we have 33% holding. Geldbach UK is part of the Geldbach group, one of the world's largest manufacturers of flanges for over 103 years. With these three ventures, we have consolidated our position in the European Market, Now we have to concentrate on our future plans beyond the Atlantic. We are planning for acquisitions in the US and Canada in the near future, This will make Shree Ganesh Forgings Limited a truly global entity where quality and reliability take predominance. Place: Mumbai (Deepak B. Sekhri) Date : 14.08.2007 Chairman Cum Managing Director