SPORT AN R T E

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th 14Annual Report 2008-09 Financial Highlights (Consolidated)

Revenue (Rs. Mn) PAT (Rs. Mn)

# 57,395 4,000 3,408 3,336 65,000 39,945 3,000 2,135 45,000 26,834 2,000 1,425

25,000 1,000

5,000 0 2006-07 2007-08 2008-09 2006-07 2007-08 2008-09 2008-09

Exports* (Rs. Mn) Earnings Per Share (Rs.) 20.9 49,404 55,000 21.0

45,000 11.5 16.0 10.7 35,000 32,750 11.0 25,000 17,872 6.0 15,000 5,000 1.0 2006-07 2007-08 2008-09 2006-07 2007-08 2008-09

Operational EBITDA (Rs. Mn) Networth (Rs. Mn) 15,672 # 15,597 8,167 9,500 6,555 6,348 16,000 8,000 13,000 6,500 3,283 10,000 6,535 5,000 3,500 7,000 2,000 4,000 500 1,000 2006-07 2007-08 2008-09 2008-09 2006-07 2007-08 2008-09

EBITDA Margin (%) Fixed Asset (Gross Block) - Rs. Mn

34,844 16.4% # 20.0% 14.2% 40,000 12.2% 11.0% 22,499 15.0% 30,000

10.0% 20,000 9,112

5.0% 10,000

0.0% 0 2006-07 2007-08 2008-09 2008-09 2006-07 2007-08 2008-09

* Includes Deemed Exports # Excluding Extraordinary Items; Forex provision of Rs.1,256 mn, Provision on ECB of Rs.178 mn and Inventory write down of Rs. 385 mn during the year. SPORT AN R WE TRANSPORT 'TRUST’ T E The Theme of this Annual Report is 'TRUST' W Meaning: Confidence; Reliance; Assured resting of the mind on the integrity, veracity, justice, friendship, or other sound principle, of another person. G N I

D W N R E TRUSTE B TRUST- - AW g For Welspun, Trust is the basic value in all our businesses. The LS in - t HSAW in CO jo Trust of thousands of stakeholders enable us to march ahead AT le ING - Doub with strength and confidence. Welspun leaves no stone unturned to earn the Trust of its stakeholders and bring them closer to the company for longer and sustainable relationships. This in turn has opened the gates of opportunities for Welspun and has enabled the Company to emerge as a Global Player in Line Pipe business.

The high degree of Trust our customers repose on us reflects our competency in delivering superior quality products, services as well as experiences. It is Welspun's consistent and committed endeavor to strengthen the relationship based on trust with all its stakeholders and make positive contributions at each stage.

WELSPUN City entrance, Anjar. Contents

Corporate Information 03

Chairman and Managing Director's Statement 06

Directors' Report 12

Corporate Governance Report 22

Practicing Company Secretary’s Certificate 31

Management Discussion and Analysis 34

Financial Section 56

FAQs 118

Forward looking statement

In this Annual Report we have disclosed forward-looking information to enable investors comprehend our prospects and take informed investment decisions. We have tried, wherever possible, to identify such statements by using words as 'anticipate', 'estimate', 'expects', 'projects', 'intends', 'plans', 'believes', and words of similar substance in connection with any discussion of the future performance. We cannot guarantee that these forward- looking statements will be realized, although we believe we have been prudent in our assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected. Readers should bear this in mind. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. Corporate Information

Company Identification Number : L27100GJ1995PLC025609 Par Value / Share : Rs.5/- each Date of Incorporation: 26th April 1995 Securities Registrar & Transfer Agent th Date of Being Listed in Stock Exchange : BSE: 27 March 1997 Link Intime Private Ltd. NSE: 4th December 2003 C- 13, Pannalal Silk Mills Type of Business : Manufacturing of Steel Pipes and Steel Plates Compound, LBS Marg, Registered Capital : Rs. 2500 million Bhandup (west), Paid Up Capital : Rs. 932.46 million divided into 186,491,192 equity - 400078 shares of Rs.5/- each fully paid-up

Board of Directors Mr. Balkrishan Goenka Mr. Rajesh R. Mandawewala (Chairman & Managing Director) (Director) Mr. Murarilal Mittal Mr. Raj Kumar Jain (Executive Director Finance) (Director)

Mr. N. Shankar Mr. K.H. Viswanathan (Nominee Director of Exim Bank Ltd.) (Director)

Mr. Asim Chakraborty Mr. Ram Gopal Sharma (Director -Whole time ) (Director)

Mr. Braja K. Mishra Mr. Nirmal Gangwal (Director) (Director)

Company Secretary Bankers Mr. Pradeep Joshi Andhra Bank Auditors MGB & Co., Chartered Accountants Citibank N.A. Registered Office Corporation Bank “Welspun City”, Export Import Bank of India Village Versamedi, Tal. Anjar, Dist Kutch, ICICI Bank Limited Gujarat - 370110 Industrial Development Bank of India Limited Tel: +91-2836-661111 Oriental Bank of Commerce Fax: +91-2836-279060 Standard Chartered Bank Corporate Office State Bank of Bikaner & Jaipur Trade World, B-Wing, 9th Floor State Bank of Hyderabad Kamala Mills Compound, Senapati Bapat Marg, Lower Parel, State Bank of Indore Mumbai 400 013, INDIA State Bank of Patiala Tel: +91-22-6613 6000/ 2490 8000 State Bank of Travancore Fax. +91-22-2490 8020/21 The Hongkong and Shanghai Banking Corporation Limited E-mail: [email protected] Website: http://www.welspunpipes.com United Bank of India Stock exchanges where the Company’s securities are listed Factories INDIA Ltd. i. Village Jolva & Vadadla, Near (Formerly Known as The Stock Exchange, Mumbai) Dahej, Taluka : Vagra, Dist. Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai - 400 051 Bharuch, Gujarat - 392 130. ii. Village Versamedi, Tal - Anjar, The National Stock Exchange of India Ltd. Dist.- Kutch, Gujarat - 370110 Exchange Plaza, Bandra Kurla Complex, Bandra (E), Mumbai - 400 001 USA iii. 9301, Frazier Pike Little Rock , Arkansas 72205, USA 3 Annual Report 2008-09

Important Changes and Developments

YEAR 1997 - Forayed into the Steel Business in SAW pipes with the Commissioning of the first HSAW mill at Dahej, Gujarat, India - Capacity 30,000 MTPA, enhanced to 50,000 MTPA.

1999 - Commissioning of state-of-art LSAW Mill at Dahej, Gujarat, India - Capacity 350,000 MTPA

2000 - Joint Venture with world's largest pipe coating company 'Eupec Pipe Coatings GmBH', Germany to provide 'Pipe Coating' solutions at Dahej, Gujarat, India

2002 - First Company from India to supply pipes for the Offshore Projects in the U. S.

2004 - Recognition as “ Fastest Growing Steel Companies” by the Construction World Magazine

2005 - The Joint Venture with Eupec Pipe Coatings got merged with the Company to provide complete pipe solutions under one roof. - Commissioning of ERW mill at the new location, Anjar, Gujarat, India with a capacity 250,000 MTPA Commissioning of ERW mill at the new location, Anjar, Gujarat, India with a capacity 250,000 MTPA - Initiated Backward Integration project of Plate-Cum-Coil stackel Mill at Anjar to meet internal requirements and outside sale for critical applications.

2006 - Setting up of 2 new HSAW Plants totaling to 350,000 MTPA, at Anjar,Gujarat, India - Setting up of the Bending Facility,at Anjar - Additional Coating Plants, at Anjar

2007 - Trial run of Plate mill producing the X 70 grade, widest plate of 4.5 mts wide and 45 mm thickness. - 43 MW captive Power Plant commercially operational in Sept' 07 - Initiated HSAW Pipe mill at the Little Rock, Arkansas U.S. - Largest ever order received by any of the pipe company i.e. Order from TransCanada Pipelines Ltd. U.S. - Ranked amongst India's Top100 Corporate 2007 by S&P and CRISIL - Recognized as the “Fastest Growing Company “by Business Today. - Amongst the top 20 companies to watch out for in 2008 by Business Today. - Recognized as the top 3 SAW Pipe companies in the World by CLSA Asia Pacific Markets - Recognition as “ Fastest Growing Steel Products Company” by the Construction World NICMAR.

2008 - Recognized as 2nd Largest (Large Diameter) Pipe producer in the World by Financial Times, UK - Plate Mill Operational, 28th March 2008; achieved Level II automation, Rolled X-70 API Grade, 4.5 mtrs. wide. - Double Jointing & Coating facility commissioned at the facility in Little Rock, Arkansas, U.S. - Awarded “Emerging Company of the Year“ for Corporate Excellence 2008 by Economic Times. - Commissioning of Additional HSAW Mill with the capacity of 150,000 MTPAat Anjar,Gujarat

2009 - Initiated De-merger of 1.5 Mn MTPA Plate cum Coil Mill at Anjar, Gujarat into a 100% subsidiary to achieve greater focus in the business. - Commissioning of the Pipe Mill in Little Rock, Arkansas, U.S. with the capacity of 350,000 tons of HSAW pipes. - Commissioning of the Coil Mill at Anjar,Gujarat.

4 Year ended 31st March (Consolidated) 2009 2008 2007 ( In Rs. Million except share, per share data and Ratios) Income Statement Data Income from Operations 57,395 39,945 26,834 Other Income 187 107 121 Total Revenues 57,582 40,052 26,955 Total Operating Expenses (Mfg Exp + COGS ) 51,048 33,389 23,552 Manufacturing and Other Expenses 11,021 7,100 3,232 Depreciation & Amortization 1,433 609 476 Interest Expenses (Net) 1,766 818 738 Operational EBITDA # 6,348 6,555 3,283 Net Income * 2,135 3,408 1,425 Per Share Data EPS - Basic 11.5 20.9 10.7 EPS - Diluted 11.4 18.3 8.7 Balance Sheet Data Cash at Bank 9,470 2,703 3,573 Short Term Investments 1,069 3,249 256 Net Block 30,996 20,094 7,235 Capital Work in Progress (CWIP) 5,839 6,713 9,258 Total Assets 44,623 38,087 22,544 Total Debt 26,538 20,677 15,146 Issued Share Capital 932 889 699 Total Shareholder's Equity 15,597 15,672 6,535 Other Financial Data Net Cash Flows by Operating Activities 13,195 2,855 (265) Net Cash Flows by Investing Activities (7,438) (14,998) (6,503) Net Cash Flows by Financing Activities 1,010 11,273 7,274 Financial Ratios Return on Shareholders Equity 13.7% 21.7% 21.8% Return on Total Assets 4.8% 8.9% 6.3% Operational EBITDA Margin (%) 11.0% 16.4% 12.2% Net Profit Margin (%) 3.7% 8.5% 5.3% Total Debt to Equity 1.7 1.3 2.3 Net Debt to Equity 1.0 0.9 1.7

Note : # Operational EBITDA would have been higher at Rs.8,167 mn which was impacted by Forex provision at Rs.1,256 mn, Provision on ECB of Rs.178 mn and Inventory write down of Rs. 385 mn during the year.

* Net Income would have been higher at Rs.3,336 mn during the year. But for exceptional item as explained above(#).

5 Annual Report 2008-09

Message from Chairman and Managing Director

Mydearfellowstakeholders,

We have chosen “Trust” as central theme for our 14th Annual Report. The literal meaning of Trust as per the Oxford English dictionary is reproduced below - to depict what trust portrays for our customers, employees, lenders, investors, suppliers andeveryotherstakeholder.

This financial year (FY 2008-09) has been an unprecedented year for the World at large. Too much has changed too fast and too sudden, without allowing enough time for corporate housestorecalibrateinthenewworldorder.

"Trust is probably the most basic human value," said Fred Rogers. In these testing times, we believe that trust only can take the world out of this financial maize. Let me use this forum to provide an insight on what trust has meant to us and how its various contours will enable us to emerge stronger to bethemost-respectedpipecompanyintheWorld.

ConfidenceofCustomers This year Welspun bagged numerous projects taking the Order-Book to an unprecedented Rs. 7,740 Crores (Rs. 77 billion) largely from international Oil and Gas giants, reaffirming Welspun's premium position in the International

Trust(OxfordEnglishDictionary) trust (noun): 'confidence, reliability of something or somebody', strong believe in the goodness, strength, 'responsibility' have trust in (verb): 'believe in the honesty and reliability of someone of something', 'have confidence in','earnestlyhope'

6 pipe market. Welspun additionally won some high-profile and significant orders for our recently commissioned Plate Mill, from large international clients. We believe that strong customer confidence towards our products and serviceswillremainanimportantdifferentiatorforWelspuntocontinuouslyremainindemand.

ReliabilityofProductsandProcesses InFY2009,ourcompanyachievedrecordturnoverofRs.5,740Crores(Rs.57billion).Notameanachievementfora company which effectively got christened just over a decade back. It is our world-class products, be it Pipes, Plates or Coating that has created a niche position in the world of Pipes and Plates. Continuing our promise to invest into best technology, we completed three state-of-art projects within this year. The most significant being the Pipe facility in Little Rock, Arkansas, U.S. When the whole world was talking about recession and job cuts, Welspun has created undoubtedly one of the best pipe facilities in the World employing over 300 local American people. During the opening ceremony in Little Rock, honorable Governor of Arkansas, Mike Beebe lauded the facility as a new chapter in Indo-U.S. relationship. Similarly, the Coil facility at Anjar was installed and the commissioning is in process. This Plate-cum-Coil facility is amongst a very few other mills in the World, which is capable to produce the highest range of Plates and the widest range of Coils. The completion of the 150,000 ton Spiral Mill in Anjar (fondly known as Spiral 3) also provided economies of scale to Welspun to execute large projects in the shortest possible time. With the completion of these projects, Welspun arguably can be hailed as the largest Large Diameter Pipe ProducerintheWorldwithatotalcapacityof1.5milliontonsperannum.

StrongbeliefinGoodness Ouremployeescontinuetobeourbiggestassets. WeadditionallyhiredservicesofHAYGroup,(aleadingUKbased change management consultant) to channelize our employee's strength and capabilities to achieve superlative performancethroughproject'Nipun'(meaning'Excellence').

StrengthofCorporateGovernance While challenging times tempts companies to take the easy route and dilute their corporate beliefs, our Company steadfastly continued to adhere to its ethics and corporate governance at the highest level. Our belief further strengthened when India’s largest business newspaper The Economic Times (ET) bestowed the ET Award for CorporateExcellenceasTheEmergingCompanyoftheYear2007-2008.Awrite-upwhichappearedinETmentions Welspun was chosen for this prestigious award “for successfully executing a backward integration model, managing to sustain growth over a period of time and building a client roster which includes some of the World's bestblue-chipnames”.

7 Annual Report 2008-09

Besides the ET Award, Welspun was additionally recognized by Dun & Bradstreet as the Most Valuable Company in Metal Pipes segment. Friends, these awards / recognitions further strengthens our determination to delight all ourstakeholdersineverypossiblemanner.

ResponsibilitytowardsCommunity As a vibrant and active corporate citizen, we believe Corporate Social Responsibility (CSR) is core to our business. Touching more and more lives, making meaningful contributions towards wellbeing, empowerment and sustaining the environment are the pillars of our CSR program. As a unique effort of making these programs more focused and self reliant, all our group companies have announced a voluntary contribution of 1 % of their annual netprofit(PAT)toWelspunFoundationforHealthandKnowledge,thetorchbearerofourCSRactivities.

Honesty We have always believed in transparent, timely and effective communication to all our stakeholders. In the same spirit, we followed strict accounting principles, without financial deviations to suit specific requirements. One live demonstration is our accounting treatment of volatile foreign currency movements throughout the year. We believe that many of these provisions may get reversed in the coming quarters given the current movement of the currencywiththestrengtheningoftheRupeeagainstthegreenbuck.

Earnesthope Last but not the least; Trust is the eternal nucleus of Earnest Hope. While the World is looming over multiple crisis be it the global economic slowdown, commodity price-crash, shareholder's wealth erosion and threat to security, we at Welspun believe that stability will prevail. We are already witnessing such positive corrections in and around usbeitthestockmarket,customerenquiries,businessconfidence,employeemoraleetc.etc.

We at Welspun trust, that the need of the hour is to believe and spread hope and continue to sharpen competitive edge,whichwillenableustocapitalizeattheappropriatetime.

Friends, finally, I take this opportunity to thank every one of you for your continued support. With promise to steer Welspununscathedthroughthistestingtime...

Yourssincerely

B. K. Goenka Chairman & Managing Director

8 Truth Trust and solid relationships are built on telling the truth. Companies must maintain this principle both with internal and external customers. It is imperative that this value is represented in everything a company does. We have seen how the lack of solid ethics can crumbleeveninthelargestofcompanies.

Responsibility Trust is built when everyone within an organization realizes what their responsibilities are and that they are held accountable for them. Choose to schedule reviews quarterly for every member of the company to make sure they are aware of their responsibilities. Take ownershipofmistakesandbediligenttofindwaystomakecorrections.

Unselfishness Trust is built when employees give of their time and talent in the workplace and do it, unselfishly. Customers appreciate the employee who goes out of their way to satisfy the customer.Customers don't appreciate hearing how badly the employee wants to go home, orhowtheydidn'tgetabreak,orhowawfultheirscheduleis.

Security Trust is built on a feeling of security. Good lighting in the parking lot and store entrance, fitting rooms with doors that lock, employees that handle ringing up a sale with accuracy, and alarm systems that are visible are all ways to make the customer feel safe in your place of business. Employees want to feela senseof job security and that they areappreciated for thejobtheydo.

Teamwork Trust is built when everyone within the organization feels a sense of ownership. How well do your employees work together? Are they willing to go out of their way to help each other out? Do the managers roll up their sleeves to help when the workload is overwhelming? Is there a reward system in place that encourages employees to want to excel? Most importantly, are there cheerleaders within the organization to keep the momentum going whentimesaretough?

9 SPORT AN R T E

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Welspun Gujarat Stahl Rohren Ltd. (WGSRL) boasts of a highly talented and strong team of over 5000 people across its offices and facilities in Anjar, Dahej & Mumbai in India and Little Rock, in Arkansas, U.S. It is with the effort of each and every one of these Welspunites, today, WGSRL takes pride to be in its position of being amongst the largest Line Pipe Companies in the World.

At Welspun, every employee works incessantly with a vision. Nothing is left undone when it comes to employee welfare and upliftment. Special care is taken to harness talent and honor them. The Company recently appointed HAY Group, (renowned U.K. Based change management consultants) to channelize our employee's strength and capabilities to achieve superlative performance through project 'Nipun' (meaning 'Excellence'). The ultimate aim is to direct the Company to be the most respected Company in the World by the year 2012.

Annual Report 2008-09

DIRECTORS' REPORT

To, The Members, Welspun Gujarat Stahl Rohren Limited.

Your Directors have pleasure in presenting the 14th Annual Report of your Company along with Audited Financial Statement for the financial year ended 31st March, 2009.

FINANCIAL RESULTS (Rs. in million) For the year ended Particulars 31.03.2009 31.03.2008 Income from operations & other income (Total Income) 58,961.93 40,211.89 Profit before interest, depreciation & tax 6,525.23 6,715.15 Less : Interest / Finance costs 1,734.96 801.57 Gross Profit / ( Loss) 4,790.27 5,913.58 Less: Depreciation 1,254.19 571.50 Profit before tax for the year 3,536.08 5,342.08 Less : Provision for current taxation 439.47 894.33 Provision for deferred taxation 749.75 943.93 Previous years 0.00 (19.58) Fringe benefit tax 11.18 9.17 Profit after tax for the year (“PAT”) 2,335.67 3,514.23 Add : balance brought forward from previous year 5,305.60 2,738.13 Profit available for appropriation 7,641.27 6,252.36 Transfer to General Reserve 234.00 351.50 Transfer to Debenture Redemption Reserve 268.75 268.75 Proposed Dividend on equity shares & tax 327.28 311.94 Equity dividend & tax of earlier years 15.28 14.57 Balance carried forward to next year 6,795.96 5,305.60

PERFORMANCE During the year under report, your Company produced 734,352 MT of pipes as compared to 670,125 MT in the preceding year registering a growth of 9.58%. Besides, the Company produced 192,569 MT of Plates from its newly commissioned Plate Mill facility at Anjar. The Company achieved a growth of 46.34% in Total Income, which increased it to Rs. 58,961.93 mn compared to Rs.40,211.89 mn in the preceding year. However, there was a fall in PAT by 33.54% from Rs. 3,514.23 mn to Rs. 2,335.67mn in the preceding year mainly due to extra ordinary provisions of :

Ÿ Rs. 1,256 mn on account of asset liability mismatch due to foreign exchange volatility. Ÿ Rs. 178 mn on account of external commercial borrowing due to foreign exchange volatility Ÿ Write down of inventories of Rs. 385 million to its net realizable value, due to sharp reduction in raw material prices world-wide. Ÿ Additional interest and depreciation due to commissioning of Plate Mill and Spiral III in India.

Despite economic slowdown world over, and particularly in western countries which is a major destination for the Company's pipe, your Company sustained growth in operations. Also, the company has a number of prestigious orders from oil and gas majors on hand taking its combined order book for pipe and plate to unprecedented level of over Rs. 77,400 million.

DIVIDEND Despite strong need to conserve resources, in order to build confidence level high to march ahead on its path to the vision, the Board recommends dividend @30% for the year ended 31st March 2009 i.e. Rs.1.50 per Equity Share of Rs.5/- each.

12 In respect of dividend declared for the financial year 2005-06, Rs. 0.34mn, financial year 2006-07, Rs.1.18 mn and for the financial year 2007-08, Rs.0.76 mn remained unclaimed as on 31st March 2009.

EXPANSION STATUS Pipe Mill in USA The pipe manufacturing and coating facility with a capacity of 350,000 MTPA at Arkansas in its wholly owned subsidiary company in USA commissioned in the month of February 2009. With the completion of this facility, the Company has multi nation presence with a total capacity at group level of 1.5 Million tons per annum. Project in Special Economic Zone (SEZ Project) Earlier, due to slow down in demand faced by the industry in FY09, the implementation of the Project in Special Economic Zone in its wholly owned subsidiary company had not taken momentum, but with the recent strong indication of revival in demand for pipes, your directors will reconsider the way forward at appropriate time.

TRANSFER OF PLATE& COIL MILL DIVISION In order to have spectrum of advantages, your Company has proposed a Scheme of Arrangement for transfer of its Plate and Coil Mill Division (the “PCM Division”) to its wholly owned subsidiary company at nil consideration (the “Scheme”) without issuance of further shares by the Transferee Company. The demerger will allow focused approach in product development, production, quality control, sales and marketing and overall management at the group level. Besides, it will allow creation of separate focused team with independent Board and management structure in line with steel industry requirement. It will additionally allow better financial control, better fiscal efficiency by rationalization of various applicable taxes, duties and create an independent identity of high-end steel business.

DETAILSOF UTILIZATIONOF FUNDS RAISED THROUGH PRIVATEPLACEMENT. The Company had outstanding Secured Non-Convertible Debentures aggregating to Rs.3,000 mn issued on Private Placement basis in the Financial Year 2007-08 for meeting capital expenditure under Expansion projects. The same has been utilized for the purposes for which the same was raised.

DIRECTORS During the year, Mr. Gopi Ram Goenka, Chairman of the Company and 'Babuji' of the Welspun family passed away for his heavenly abode on 28th December 2008. Your directors pay homage to the departed soul and pray the almighty to give courage to the bereaved family to withstand the colossal loss.

Besides, the following changes in the directorship took place since the last Annual Report: – Appointment of Mr. Balkrishan Goenka Vice Chairman and Managing Director as the Chairman and Managing Director of the Company w.e.f. 30th January,2009; – Resignation of Mr. Braja K. Mishra from the position of Chief Executive Officer and Executive Director w.e.f. 31st March 2009. He however continues to be on the Board as a non executive director; – Appointment of Mr.Asim Chakraborty as Director (whole time) w.e.f. 20th April 2009

In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the Company, Mr. Rajesh Mandawewala, Mr. Ramgopal Sharma and Mr. Nirmal Gangwal retire by rotation at the forthcoming Annual General Meeting and being eligible, have been recommended for re-appointment.

Details about these directors are given in the Notice of the ensuing Annual General Meeting being sent to the shareholders along with Annual Report. The Board recommends their reappointment.

13 Annual Report 2008-09

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, your directors hereby confirm that:

i) in the preparation of the accounts for the financial year ended 31st March, 2009, the applicable accounting standards have been followed along with proper explanation relating to material departures; ii) they have selected such accounting policies and applied them consistently and made judgments 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 profit of the Company for the year under review; iii) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv) they have prepared the accounts for the financial year ended 31st March, 2009 on a going concern basis.

AUDITORS Your Company's Auditors M/s. MGB & Co., Chartered Accountants, retire at the ensuing Annual General Meeting and being eligible, have given their consent to act as the Auditors of the Company for the forthcoming tenure. Members are requested to consider their re-appointment as the Auditors of the Company and to fix their remuneration by passing an ordinary resolution under Section 224 of the Companies Act, 1956.

AUDITORS' REPORT The Auditors' observation read with Notes to Accounts are self-explanatory and therefore do not call for any comments.

EMPLOYEE STOCK OPTION SCHEME The Company has granted Stock Options to eligible directors and employees of the Company and its subsidiary companies.

The particulars required to be disclosed pursuant to Clause 12 of SEBI (Employees Stock Option Scheme) Guidelines 1999 are given below Difference in employees compensation cost based on intrinsic value and fair value: The Company has adopted intrinsic value method for valuation and accounting of the aforesaid Stock Options as per SEBI guidelines, and accordingly has accounted Rs. 18.14 mn as employee compensation and Rs.3.70 mn as Directors' remuneration for the year ended 31st March 2009. Had the Company valued and accounted the aforesaid Stock Options as per the Black Scholes Model, the net profit for the year would have been lower by Rs. 17.02 mn and the diluted earnings per share would have been Rs. 12.38 instead of Rs. 12.50 per share.

Black Scholes Model captures all the variables with their respective appropriateness which influences the fair value of stock options. The significant assumptions to estimate the fair value of options as per Black Scholes Model are as under:

Grant Date 8th January 2007 Vest 1 Vest 2 Vest 3 8th January 2008 8th January 2009 8th January 2010 Variables 30% 35% 35% Stock Price (Rs.) 106.40 106.40 106.40 Volatility 57.1% 60.5 % 60.5% Risk Free Rate 7.3% 7.4 % 7.5% Exercise Price (Rs.) 80.00 80.00 80.00 Time to Maturity 2.50 3.50 4.50 Dividend Yield 0.6% 0.6% 0.6% Option Fair Value (Rs.) 52.24 59.97 65.01 Weighted Average Option Fair Value (Rs.) 59.41

14 Details of Stock Options as required to be disclosed pursuant to Clause 12 of SEBI (ESOS and ESPS) Guidelines, 1999 are given below:

a Options granted Nil Options : during the year b Options vested (excluding vested portion of lapsed Options) 1,508,500 c Options exercised 59,875 d Total number of equity shares arising as a result of exercise of Options 59,875 e Options lapsed 55,375 f Total number of Options in force 2,228,750 g Money realized by exercise of Options Rs. 4,933,925 h The pricing formula Exercise price is to be at 25% discount to the latest available closing market price of the equity shares of the Company, prior to the date of grant. i Variation of terms and conditions N.A. j Employee wise details of Whole Time Directors options granted to Mr. M.L.Mittal o 150,000 Mr. Asim Chakraborty o 50,000 Employee who received a grant o Nil in any one year of option amounting to 5% or more of option granted during that year Employees, who were granted o Nil option, during one year, equal to or exceeding 1% of the issued capital (excluding o/s warrants & conversions) : k Diluted EPS Rs. 12.50 as compared to Rs. 18.89 of last year

THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988 In terms of the above Rules, your Directors are pleased to give the particulars as prescribed therein in the Annexure, which forms a part of the Directors' Report.

PARTICULARS OF EMPLOYEES As required by the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rule, 1975 as amended, the names and other particulars of the employees are set out in the Annexure to the Directors' Report. However, as per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to all the shareholders of the Company excluding the aforesaid information. Any shareholder interested in obtaining such particulars may write to the Asst. Company Secretary at the Registered Office of the Company.

ENERGY,TECHNOLOGY AND FOREIGN EXCHANGE Information in accordance with the provisions of Section 217(1)(e) of the Companies Act, 1956, regarding conservation of energy, technology absorption and foreign exchange earnings and outgo is given in the Annexure forming part of Directors' Report.

SUBSIDIARY COMPANIES The Ministry of Corporate Affairs, Government of India vide their letter Ref. No. 47/402/2009-CL-III dated 20th May 2009, has exempted the Company from attaching a copy of Balance Sheet, Profit and Loss Account and other documents of its subsidiary companies as required to be attached under Section 212 of the Companies Act, 1956 to the Balance Sheet of the Company. Therefore, the said documents of the subsidiary companies viz. (1) Welspun Pipes Inc. USA (2) Welspun Tubular LLC, USA (3) Welspun Global Trade LLC, USA (4) Welspun Natural Resources Pvt. Ltd. (5)Welspun Pipes Ltd. (6) Welspun Plastics Private Ltd. and (7) Welspun Urja India Ltd. are not attached herewith. However, the aforesaid documents relating to the subsidiary companies and the related detailed information will be made available upon request by any member or investor of the Company. Further,the Annual Accounts of the subsidiary companies will be kept open for inspection by a member or an investor at the Registered Office of the Company or the respective subsidiary company.

15 Annual Report 2008-09

In accordance with the aforesaid approval, a statement containing the requisite information for each subsidiary is attached with the Annual Report.

FIXED DEPOSITS The Company has not accepted any public deposit within the meaning of the Companies (Acceptance of Deposit) Rules, 1975 and, as such, no amount on account of principal or interest on public deposit was outstanding on the date of the Balance Sheet.

LISTING WITH STOCK EXCHANGES The Company's equity shares are listed on the Bombay Stock Exchange Ltd., (BSE) and the National Stock Exchange of India Ltd. (NSE). Annual listing fees for the year 2009-10 have been paid to BSE & NSE.

AWARDS AND RECOGNITION - Economic Times, India's leading financial news group has awarded your Company “Emerging Company of the Year Award” for Corporate Excellence-2008. The award seeks to recognize the capacity to take calculated risks, show explosive growth potential and discover a business model that other want to emulate. - Financial Times UK has ranked the Company as 2nd Largest (Large Diameter) Line Pipe Manufacturer in World -2007. - Dun & Bradstreet Most Valuable Company in Metal Pipes

CORPORATEGOVERNANCE A separate report on Corporate Governance is annexed hereto as a part of this Report. A certificate from the Company Secretary in Practice regarding compliance of conditions of Corporate Governance as prescribed under Clause 49 of the Listing Agreement is attached to this Report. A separate report on Management Discussion & Analysis is enclosed as a part of the Annual Report.

CONSOLIDATEDFINANCIAL STATEMENTS As stipulated by Clause 32 of the Listing Agreement with the Stock Exchanges, the Consolidated Financial Statements have been prepared by the Company in accordance with the applicable Accounting Standards issued by The ICAI. The Audited Consolidated Financial Statements together with Auditors' Report thereon forms a part of the Report.

ACKNOWLEDGEMENT Your Directors wishes to express and place on records its gratitude for the faith reposed in and co-operation extended to the Company by the Financial Institutions, Banks, Government Authorities, Customers, Suppliers and Shareholders of the Company. Your Directors also wish to place on record their deep sense of appreciation for the devoted and sincere services of the Executives, Staff and Workers of the Company, whose unstinted support has been and continues to be integral to your Company's growth and success.

For and on behalf of the Board

B.K.Goenka Chairman & Managing Director

Place: Mumbai Date: 29th May 2009

16 Form – A (See Rule 2) FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY 2008-2009 2007-2008 A. POWER AND FUEL CONSUMPTION 1.ELECTRICITY (A) Purchased Unit (In '000s) MWH 6,137.42 3,706.10 Total Amount (Rs. in Lacs) 687.08 1,503.09 Rate/Unit (Rs) 11.19 10.19 (B) Own Generation (i) Through D.G. Set (CPP) Generated Unit (In '000s) MWH 18,903.79 20,525.21 Units Generated Per Unit Of Fuel * 3.90 Cost/Unit (Rs) 4.21 9.21 (ii) Through Steam Turbine / Generator Generated Unit (In ’000) MWH 286,867.00 95,942.00 Total Amount (Rs. in Lacs) 9,616.85 2,289.46 Rate / Unit (Rs.) 3.35 2.39

2 COAL (For Generation of Steam) Unit (In ’000) Kg 239,969.00 36,868.65 TotalAmount(Rs.inLacs) 9,844.50 1,102.97 Rate (Rs./Kg) 4.10 2.99

OTHER – LIGNITE & LIME STONE (For Generation of Steam) Unit Generated (In ’000) Kg 31,620.00 73,338.24 Total Amount (Rs. in Lacs) 590.81 1,186.49 Rate (Rs./Kg.) 1.87 1.62

3 FURNACE OIL Quantity (K. Ltrs.) 14,760.23 - TotalAmount(Rs.inLacs) 3,304.15 - Rate (Rs./Ltr) 22.39 - 4 OTHERS/INTERNAL GENERATION Nil Nil B. CONSUMPTION PER UNIT OF PRODUCTION PRODUCTS STANDARD 2008-2009 2007-2008 Name of Product - Welded Pipes Electricity- (KWH) - 149.38 128.84 Name of Product – M.S. Pipes (ERW) Electricity- (KWH) - 110.09 84.40 Name of Product – Power Electricity- (KWH) (Steam to Power) MT/MWH - 4.38 3.99 Name of Product – M.S.Plates Electricity- (KWH) - 255.00 - Furnace Oil (K.Ltrs.) - 77.00 -

* No DG set used at Anjar Plant during the year under report. The Captive Power Plant (CPP) used at Dahej Plant is a dual fuel operated and diesel is used as pilot and gas as main fuel. Consumption ratio varies according to load. Therefore individual output fuel wise can not be worked out.

17 Annual Report 2008-09

FORM B (See Rule 2) Form for disclosure of particulars with respect to absorption. Research and Development (R&D)

01 Specific areas in which R&D is carried out by Anjar Pipe Mill: the Company During the year, the Company carried out R&D activities in the area of product development including developing API X 80 grade product line to meet specific customer requirements. 02 Benefits derived as a result of the above R&D. Anjar Pipe Mill: The R&D activity resulted in increased product range available under one roof. 03 Future plan of action The Company has an ongoing program for carrying out research and development which helps the Company to improve production processes and to innovate higher grade products.

The Company seeks to enhance its position as a leading pipe manufacturing company by further developing and improving its products for oil, gas and other applications with a special emphasis on LSAW and HSAW pipes and pipe coating. 04 Expenditure on R&D (a) Capital Rs. NIL (b) Recurring Rs. 4.23 mn (c) Total Rs. 4.23 mn (d) Total R&D expenditure as a percentage of total turnovers. 0.007%

Technology absorption, adaptation and innovation.

01 Efforts, in brief, made towards technology - absorption, adaptation and innovation.

02 Benefits derived as a result of the above - efforts, etc. Product improvement, cost reduction, product development, import substitution, etc.

03 In case of imported technology (imported - during the last 5 years reckoned from the beginning of the financial year), following information may be furnished:

(a) Technology imported

(b) Year of import (c) Has technology been fully absorbed? (d) If not fully absorbed, areas where this has not taken place, reasons therefore and future plans of action.

18 FORM B (See Rule 2) Form for disclosure of particulars with respect to absorption. Research and Development (R&D)

Foreign exchange earnings and outgo :

Activities relating to exports; The efforts and investment put in by the Company in the previous years for expanding the market reach has yielded tremendous result. The Company has received vendor approvals from oil & gas majors of Abu Dhabi, Kuwait etc.

Initiatives taken to increase exports; Appointment of agent for European market. Upgradation & investment in quality control and enhancing equipments for meeting the global standards.

Development of new export markets for The Company made entry in new markets like Venezuela and products and services and export plans; Mexico in South America and initiated vendor approval process with Eastern European majors.

Total foreign exchange used and earned. Used : Rs. 49. 91 bn Earned : Rs. 20. 25 bn

19 WE TRANSPORT TRANSPARENCY

Strong belief in values and ethical business conduct has paved way for Welspun to garner the confidence of its valued stakeholders. We believe in transparent communication and timely dissemination of information. The Company endeavors to keep its stakeholders abreast of all developments through multiple sources of communication - viz: annual report, press release, website, conference, amongst others.

Our policies and procedures on Corporate Governance reflect the corporate ethos we practice across the organization. We provide a transparent view to our stakeholders whether they are our shareholders, employees, business partners, customers, banks, regulators, or the community at large.

Annual Report 2008-09

CORPORATEGOVERNANCE REPORT

I. PHILOSOPHY ON CORPORATEGOVERNANCE. The Board of Directors of the Company acts as a trustee and assumes fiduciary responsibility of protecting the interests of the shareholders and other stakeholders of the Company. The Board supports the broad principles of Corporate Governance. In order to attain the highest-level good Corporate Governance practice, Board lays strong emphasis on transparency,accountability and integrity.

II. BOARD OF DIRECTORS. The Company's Board comprises individuals with considerable experience and expertise across a range of field such as finance & accounts, general management and business strategy.

Composition and category of directors; attendance of each director at the board meetings and the last AGM; number of other companies on the Board or Committees of which, a director is a Director, Member or Chairperson; and number of board meetings, dates on which held, are as under:

Board No. of other Member / Name of the Director Category Meeting Attendance Directorship Chairperson in Attended at the (as last declared to No. of Board during the Last AGM the Company) Committees Year 2008- including 09 other Companies ( as last declared to the Company)! Pub. Pvt. Other (01) Mr. G.R.Goenka-Chairman* P Nil No - - - - (02) Mr. B.K.Goenka-Chairman & Managing Director# P, E 4 No 13 6 4 4M (03) Mr. Braja K.Mishra-Director$ NE, NI 3 No - 1 - - (04) Mr. M.L.Mittal – Executive Director-Finance E 5 No 14 6 1 5M (05) Mr. R.R.Mandawewala P, NE 3 No 14 2 13 3M, 1C (06) Mr. K.H.Viswanathan NE, I 4 No - 4 - 1M, 1C (07) Mr. Rajkumar Jain NE, I 4 Yes 1 1 - 2C (08) Mr. Ram Gopal Sharma NE, I 5 No 2 - - 2M (09) Mr. Nirmal Gangwal NE, I 5 No 3 1 - 4M (10) Mr. N.Shankar (Nominee EXIM Bank) NE, I, L 4 No 1 - - 1M (11) Mr. Asim Chakraborty& E, NI N.A. N.A. - - - -

! Chairmanship/membership of the Audit Committee and the Shareholders' Grievance Committee alone considered * Ceased to be a director due to death on 28th December 2008. # appointed as the Chairman w.e.f. 30th January 2009 in place of Mr.Gopiram Goenka. $ resigned from the position of CEO and Executive. Continuing on the Board as a non executive director. & appointed w.e.f. 20th April 2009.

Abbreviations: P = Promoter,I = Independent, NI = Non Independent, E = Executive Director,NE = Non-Executive Director,L = Lenders, C=Chairperson, M=Member. 5 meetings of the Board of Directors were held during the financial year 2008-09 on the following dates: 28th April 2008, 18th June 2008, 21st July 2008, 30th October 2008 and 30th January 2009.

22 Ill. AUDIT COMMITTEE

(a) Terms of reference: The terms of reference stipulated by the Board of Directors to the Audit Committee are as contained under clause 49 of the Listing Agreement.

(b) Composition

The Audit Committee was constituted by the Board of Directors at its meeting held on 23rd August, 1997 and was re- constituted from time to time. The Committee comprises 4 non-executive independent directors. The Chairman of the Committee is an independent director. The composition of the Committee and attendance of the members is given hereunder:

Name of the Member Member/ Chairman Number of Meetings Attended

Mr. Rajkumar Jain Chairman 8

Mr. K.H.Viswanathan Member 8

Mr. Ram Gopal Sharma $ Member 8

Mr.N.Shankar& Member 7

$ Inducted w.e.f. 14th April 2008 & Inducted w.e.f. 16th May 2008

9 meetings of the Audit Committee of the Board of Directors were held during the financial year 2008-09 on following dates: 28th April 2008, 16th May 2008, 18th June 2008, 21st July 2008, 6th August 2008, 30th October 2008, 24th November 2008, 30th January 2009 and 25th February 2009.

IV. REMUNERATIONCOMMITTEE

The Company has duly constituted Remuneration Committee consisting of independent, non-executive directors. During the year under review, 1 meeting of the Committee was held on 28th April 2008. Terms of Reference, composition, remuneration paid to executive and non-executive directors are as under:

(a) Termsof reference Torecommend appointment of, and remuneration to, Managerial Personnel and review thereof from time to time.

(b) Composition of the committee The Committee comprises of 3 independent and non-executive directors as on date of this Report viz. Mr. Rajkumar Jain, Mr.K.H. Viswanathan and Mr.Ramgopal Sharma.

23 Annual Report 2008-09

(c) Remuneration policy

Particulars of pecuniary relationship or transaction of the Non-Executive Directors vis-à-vis the Company and remuneration to Executive Directors including the details of remuneration and sitting fees paid/ payable to the directors for the financial year 2008-09 are as under:

Name of the Salary & Perquisites Commission Service Notice Severance Stock Sitting Director Allowance Contract Period Fees Option Fees / Tenure (01) Mr. B.K.Goenka 1% Yes/5 Chairman & commission years Managing on profits as ending Rs.5.0 5 1 Nil Nil Nil Director Nil computed 30th June million month u/s. 349 & 2012 350 of the Act. (02) Mr. Braja Yes/ 5 K.Mishra years Rs.20.00 1 Nil 250,000 Nil Director@ Nil Nil ending million month 30th April 2014 (03) Mr. M.L.Mittal Yes/ 5 Executive years Rs.9.0 1 Nil 150,000 Nil Director- Nil Nil ending million month Finance 30th June 2013

@ resigned from the position of CEO and Executive. However, continuing as a non executive director. No remuneration shall be payable w.e.f. 1st April 2009.

No remuneration, perquisite or sitting fees was paid to, no service contract was entered in to with, and no stock options have been granted to Mr.G.R.Goenka and Mr.R.R.Mandawewala.

No remuneration or perquisite was paid to, and no service contract was entered into with, but the sitting fees were paid to the following directors/ nominating institutions for attending meetings of Board / Committees.

Name of the Director Sitting Fees (01) Mr. K.H.Viswanathan Rs.77,000 (02) Mr. Rajkumar Jain Rs.122,000 (03) Mr. Ram Gopal Sharma Rs.85,000 (04) Mr. Nirmal Gangwal Rs.40,000 (05) Mr. N.Shankar (Nominee EXIM Bank) Rs.67,000

None of the directors had any transaction with the Company. However, transactions have taken place with some of the companies in which a director holds directorship. These transactions took place at the prevailing market value as normal commercial transaction and the same were disclosed to the Board.

24 V. SHARE TRANSFER AND INVESTOR'S GRIEVANCE COMMITTEE a) Composition The Share Transfer and Investor Grievance Committee was constituted in accordance with the Clause 49 of the Listing Agreement. The Chairman of the Committee is a non-executive director. The composition of the Committee is given hereunder:

Name of the Member Member/ Chairman Mr. K.H.Viswanathan Chairman Mr. B.K.Goenka Member Mr. R.R.Mandawewala Member Mr. M.L.Mittal Member

Compliance Officer: Mr.Pradeep Joshi Asst. Company Secretary b) Number of Shareholders complaints / requests received during the year During the year under review,total 109 investor's complaints / requests were received. Break-up and number of complaints / requests received under different category is given hereunder:

1. Payment of Dividend : 41 2. Non-Transfer / delay in transfer / split etc. of Shares : 33 3. Non receipt of Annual Report : 17 4. Non receipt of Duplicate / Exchange Share Certificates : 6 5. Delay in De / Re- materialisation of Shares : 3 6. Others : 9

All the complaints / requests received during the year under report were resolved within the time to the satisfaction of the investors/shareholders and no complaints were pending as on 31st March 2009 for more than 30 days. All the shares received for transfer / transmission have been transferred / transmitted and no transfer is pending as at 31st March, 2009

VI. GENERAL BODY MEETINGS The details of Annual General Meetings held in the last three years are given hereunder:

Meeting Day & Date of Meeting Time Place

11th Annual General Meeting Friday, 12.30 pm Registered Office: Village Jolva and 29th September, 2006 Vadadla, Near Dahej, Taluka Vagra, Dist. Bharuch, Gujarat – 392 130 12th Annual General Meeting Wednesday, 12.30 pm Same as above 29th August 2007 13th Annual General Meeting Thursday, 12.30 pm Same as above 4th September 2008

During the year under report, no resolutions were passed as a special resolution. The following resolutions were passed by the shareholders of the Company by way of postal ballot: - Resolution dated 11th September 2008 u/s 16, 17 of the Companies Act, 1956 for insertion of new clauses 65 to 68 under Clause III (C) (“Other Objects Clause”) of the Memorandum of Association of the Company; - Resolution dated 11th September 2008 u/s 149(2A) of the Companies Act, 1956 authorizing commencement of businesses mentioned in the newly inserted Other Objects Clauses III(C) 65 to III(C)68 in the Memorandum of Association; and - Resolution dated 11th September 2008 u/s 146 of the Companies Act, 1956 for shifting of the registered office of the Company from one city to another city within the state of Gujarat. 25 Annual Report 2008-09

VII. MANAGEMENT a). Management Discussion and Analysis Management Discussion and Analysis of various businesses of the Company is separately given in the Annual Report. b). Disclosures by management to the Board All details relating to financial and commercial transactions where directors may have a pecuniary interest are provided to the Board, and the interested directors neither participate in the discussion, nor do they vote on such matters.

VIII.DISCLOSURE a) Related Party Transactions For related party transactions, refer Note No. 16 of Notes to Accounts annexed to the Balance Sheet and Profit & Loss Account. b) Non-Compliance There were no non-compliance by the Company during the year under report and hence no penalties and stricture were imposed on the Company by the Stock Exchange or SEBI or any authority on any matter related to capital market during last 3 years. c) Whistle Blower Policy The Company has a Whistle Blower Policy and no personnel have been denied access to the Audit Committee. d) Code of Conduct The Company has Code of Conduct for Board members and senior management personnel. A copy of the Code has been put on the Company's website for information of all the members of the Board and management personnel.

All Board members and senior management personnel have affirmed compliance of the same.

A declaration signed by the CEO of the Company is given below:

“I hereby confirmed that all Board members and senior management personnel have affirmed compliance with the Code of Conduct of the Company.”

B.K.Goenka Chairman & Managing Director e) Certification by Executive Director Finance. Certificates obtained from Executive Director -Finance on the Financial Statements of the Company in terms of Clause 49 of the Listing Agreement was placed before the Board, who took the same on record. f) Secretarial Audit A qualified practicing Company Secretary carried out a Secretarial Audit on quarterly basis to reconcile the share capital with National Securities Depository Services Ltd. (NSDL) and Central Depository Services Ltd. (CDSL) and the total issued and listed capital. The audit confirms that the total issued / paid-up capital is in agreement with total number of shares in physical forms and total number of demat shares held with NSDL and CDSL.

26 g) Brief resume of Director being appointed / re-appointed A brief resume, nature of expertise in specific functional areas, names of companies in which the person already holds directorship and membership of committees of the Board and his shareholdings in the Company forms part of the Notice of the Annual General Meeting, annexed to this Annual Report. h) Accounting Standards The Accounting Standards laid down by the Institute of Chartered Accountants of India and applicable to the Company were followed by the Company in preparation of accounts of the Company. i) Details (in aggregate) of shares in the suspense account including freeze on their voting rights There are no unclaimed shares and hence no suspense account is required to be opened and credited with such shares and also there is no freeze on voting rights of any shares.

IX. MEANS OF COMMUNICATION

The quarterly, half-yearly and yearly financial results of the Company are sent out to the Stock Exchanges immediately after they are approved / noted by the Board. The Company published its un-audited / audited financial results in Western Times (English and Gujarati editions), Economic Times (English Edition) and Business Standard (English Edition). These results are simultaneously posted on the website of the Company at www.welspunpipes.com and the website of Securities and Exchange Board of India at www.sebiedifar.nic.in. The official press release is also available on the website of the Company.

X. GENERAL SHAREHOLDER INFORMATION.

1.Annual General Meeting shall be held on Friday 4th September 2009 at 11:30 a.m. at the Registered Office of the Company at “Welspun City”,Village Versamedi, Taluka Anjar,Dist. Kutch, Gujarat - 370110.

2.Financial Yearof the Company is 1st April to 31st March.

3.Date of Book Closure: Wednesday,10th June 2009 to Friday,12th June 2009 (both days inclusive).

4.Dividend payment date: 7th September 2009

5.Listing on Stock Exchanges: National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Ltd., Mumbai (BSE)

Annual listing fees for the year 2009-10 have been paid to BSE & NSE.

Stock Code /Symbol:

Bombay Stock Exchange Ltd. : 532144 National Stock Exchange of India Ltd. : WELGUJ; Series: EQ ISIN No. (For dematerialized shares) : INE 191B01025

27 Annual Report 2008-09

6.Stock Market price data, high & low price of equity shares on Bombay Stock Exchange Ltd., and the National Stock Exchange of India Ltd. are as under:

BSE NSE Month High (Rs.) Low (Rs.) High (Rs.) Low (Rs.) Apr–2008 456.80 357.50 457.00 356.10 May-2008 417.00 336.00 417.00 336.00 Jun-2008 402.25 289.00 401.95 289.00 Jul-2008 352.70 269.50 352.00 269.00 Aug-2008 373.50 306.05 375.00 306.10 Sept-2008 344.95 209.15 346.00 209.00 Oct-2008 257.85 74.00 257.40 73.30 Nov-2008 150.80 79.65 150.40 79.45 Dec-2008 130.00 73.35 130.00 73.15 Jan-2009 124.50 67.20 124.50 67.05 Feb-2009 79.20 61.10 79.20 57.10 Mar-2009 82.50 48.50 82.70 45.00

7.Performance in comparison to broad-based indices i.e. BSE- Sensex and NSE- S&P Nifty is as under:

Month BSE Index Closing price of NSE Closing price of (Sensex) Shares (Rs.) (S&P Nifty) Shares (Rs.) Apr–2008 17,287.31 402.40 5,165.90 401.95 May-2008 16,415.57 389.60 4,870.10 390.10 Jun-2008 13,461.60 301.95 4,040.55 303.75 Jul-2008 14,355.75 329.75 4,332.95 328.85 Aug-2008 14,564.53 319.75 4,360.00 319.70 Sept-2008 12,860.43 237.65 3,921.20 237.45 Oct-2008 9,788.06 114.61 2,885.60 116.40 Nov-2008 9,092.72 80.60 2,755.10 80.55 Dec-2008 9,647.31 109.40 2,959.15 109.40 Jan-2009 9,424.24 70.85 2,874.80 70.90 Feb-2009 8,891.61 61.95 2,763.65 62.10 Mar-2009 9,708.50 74.45 3,020.95 74.45

8.Registrar and Transfer Agent: The Company has appointed Registrar and Transfer Agent to handle the share /debenture transfer work and to resolve the complaints of shareholders/ debenture holders. Name, Address and telephone number of Registrar and Transfer Agent is given hereunder:

M/s. Link Intime India Pvt. Ltd. (Formerly known as : Intime Spectrum Registry Ltd.) Unit : Welspun Gujarat Stahl Rohren Ltd. C-13, Pannalal Silk Mills Compound, LBS Marg, Bhandup (West), Mumbai 400 078

Tele.No.: +91-22-25963838 Fax No. : +91-22-25946969 Contact person: Mr.Suresh Kadam

28 9.Debentures and Debenture Trustee

The Secured Non Convertible Debentures issued by the Company are listed on BSE with the following identification numbers:

BSE Scrip Code ISIN Nos. 945649 INE 191B07030 945650 INE 191B07048 945651 INE 191B07055 945652 INE 191B07063

Debenture Trustee: IDBI Trusteeship Services Ltd., Asian Building, Ground floor, 17, R. Kamani Marg, Ballard Estate, Near Custom House, Mumbai-400 023.

10. Share / Debenture Transfer System: Our Registrar and Transfer Agent registers shares sent for transfer in physical form within 15 days from the receipt of the documents, if the same are found in order. Shares under objection are returned within two weeks.

11. Distribution of Shareholding: Shareholding Pattern as on 31st March, 2009

Number of Shares No. of shareholders Percentage of No. of Shares Percentage of Shareholders Shares held Upto – 500 70,244 91.68 7,375,750 3.96 501-1,000 3,317 4.33 2,576,407 1.38 1,001-2,000 1,370 1.79 2,065,454 1.10 2,001-3,000 515 0.67 1,307,236 0.70 3,001-4,000 261 0.34 923,122 0.50 4,001-5,000 169 0.22 793,043 0.43 5,001-10,000 294 0.38 2,148,841 1.15 10,001 and above 454 0.59 169,301,339 90.78 Total 76,624 100.00 189,491,192 100.00

12. Shareholding of the Directors of the Company as on 31st March, 2009

Name of the Director No of shares % Mr. B.K.Goenka 140 0.00 Mr. R.R.Mandawewala 140 0.00 Mr. Braja K. Mishra 14,495 0.00 Mr. Asim Chakraborty 700 0.00 Besides above, the following directors of the Company have been granted Stock Options pursuant to Employees Stock Option Scheme entitling to subscribe for equity shares in the Company:

Name of the Director No of Options Mr. Braja K. Mishra (net of Options exercised) 195,000 Mr. M.L.Mittal 150,000 Mr. Asim Chakraborty 50,000

Apart from the above, none of the directors hold any share or convertible securities in the Company.

29 Annual Report 2008-09

13. De-materialization of shares and liquidity: As on 31st March 2009, 92.97% shares have been dematerialized and have reasonable liquidity on Bombay Stock Exchange Ltd. and National Stock Exchange of India Ltd.

14. Outstanding Employee Stock Options, conversion date and likely impact on equity share capital is as under:

Outstanding as on 31.03.09 Impact on equity share capital

375,000 Options vested but not exercised representing equal Increase in equity capital by 375,000 shares of number of equity shares to be exercised during 08.01.2008 – Rs.5/-each at a premium of Rs. 75.00 per share 08.01.2010

881,875 Options granted and vested but not exersied representing Increase in equity capital by 881,875 shares of equal numberof equity shares to be exercised during 08.01.2009 – Rs.5/-each at a premium of Rs. 75.00 per share 08.01.2011 881,875 Options granted but not vested representing equal number Increase in equity capital by 881,875 shares of of equity shares to be exercised during 08.01.2010 – 08.01.2012 Rs.5/-each at a premium of Rs. 75 per share

20,000 Options vested but not exercised representing equal number Increase in equity capital by 20,000 shares of of equity shares to be exercised during 24.04.2008 – 24.04.2010 Rs.5/-each at a premium of Rs. 89.10 per share

35,000 Options granted but not vested representing equal number of Increase in equity capital by 35,000 shares of equity shares to be exercised during 24.04.2009 – 24.04.2011 Rs.5/-each at a premium of Rs. 89.10 per share

35,000 Options granted but not vested representing equal number of Increase in equity capital by 35,000 shares of equity shares to be exercised during 24.04.2010 – 24.04.2012 Rs.5/-each at a premium of Rs. 89.10 per share

15. Plant locations i) Village Versamedi, Tal-Anjar,Dist.-Kutch, Gujarat 370110

Ii) Village Jolva and Vadadla, Near Dahej, Tal:Vagra, Dist: Bharuch, Gujarat - 392130

16. Address for correspondence The Asst. Company Secretary, Welspun Gujarat Stahl Rohren Ltd., “B” Wing, 9th Floor,Trade World, Kamala Mills Compound, Senapati Bapat Marg, Lower Parel, Mumbai - 400 013.

Tel:+91-22-66136000; +91-22-24908000, Fax: +91-22-24908020 /21 e-mail: [email protected]

30 Certificate of Practicing Company Secretary on Corporate Governance Report

Tothe Members of Welspun Gujarat Stahl Rohren Limited,

We have examined the compliance of conditions of Corporate Governance by Welspun Gujarat Stahl Rohren Ltd., for the year ended on 31st March 2009, as stipulated in Clause 49 of the Listing Agreement of the said Company with stock exchange.

The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of the Corporate Governance. It is neither 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 explanation given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above-mentioned Listing Agreement.

We state that in respect of investor grievances received during the year ended 31st March 2009, the Registrars of the Company have certified that as at 31st March 2009, there were no investor grievances remaining unattended/pending for more than 30 days.

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

For S.S.Risbud & Co. Company Secretaries

Sanjay Risbud Proprietor Certificate of Practice No. 5117

Mumbai 29th May 2009

31

WE TRANSPORT THOUGHTS

At Welspun, we transport thoughts and make dreams real.

Around a decade back, Welspun started exporting pipes from India with the “MADE IN INDIA” label. During that time, it was hard to believe that an Indian Company can successfully compete with established International players in terms of quality and capability. However, within a decade, our blend of entrepreneurship, state-of-art technology and “DARE TO COMMIT” spirit has not only been delivering solutions which are world class but highly competitive as well.

Our ever growing customer base, empowerment of our employees, superior returns for our shareholders, dedication and service to our society and enrichment of the environment where we do our business reflects the transformation of our thoughts and dreams into reality. At Welspun, we are focused not only in our business and the markets in which we operate but we care for the society at large by contributing 1% of Profit after tax (PAT) on social activities. Our achievements are not only measured in terms of global ranking for market leadership but also by the smiles we bring on numerous faces. We take pride in continuously covering more miles towards achieving our goals. Annual Report 2008-09

Management Discussion and Analysis The Management Discussion and Analysis (MD&A) should be read in conjunction with the Audited Consolidated Financial Statement of Welspun Gujarat Stahl Rohren Limited (““ The Company” orO ur Company”), and the notes thereto for the year ended March 31, 2009. This MD&A coversThe Company’s financial position and operations for the year ended March 31, 2009. Amounts are stated in Indian Rupees unless otherwise indicated. Abbreviations and acronyms used in this MD&A are identified in the Glossary of Terms inThe Company 's Annual Report of 2009. The numbers used in the analysis are on a consolidated basis unless otherwise indicated and the corresponding number for the previous year have been regrouped and reclassified wherever necessary.

Forward-Looking Statements This report contains forward-looking statements, which may be identified by their use of words like 'plans', 'expects', 'will','anticipates', 'believes', 'intends', 'projects’, 'estimates' or other words of similar meaning. All statements that address expectations or projections about the future, including but not limited to statements about Our Company strategy for growth, product development, market position, expenditures, and financial results, are forward-looking statements. Forward-looking statements are based on certain assumptions and expectations of future events. Our Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or events

Overview Our Company has been consistently commanding premium prices for its products thereby enhancing value addition and maintaining higher profitability. It has added 0.5 mn MTPA to its existing capacity of 1 mn MTPA, in India and US taking the total to 1.5 mn MTPA., making it the largest integrated line-pipe Company in the world. After scaling new heights in the most challenging off-shore projects, Our Company is now currently involved in supplying pipes for most of the ongoing on-shore projects in US. Our Company has emerged as the largest exporter of line pipe in USA and this is no mean achievement considering the fact that US is one of the most demanding and quality conscious market. Our Company is the accredited supplier of over 50 major oil and gas companies across the world. These include not only Indian oil and gas companies like Limited, Gas Authority of India Limited (GAIL), Oil and Natural Gas Company Limited (ONGC) and , but also international oil and gas companies like British Petroleum, Golden Pass Pipeline LP (Exxon-Mobil), Enterprise, Kinder Morgan, Peru LNG S.R.L. (Hunt Oil), Saudi Arabian Oil Company (Saudi Aramco), Ruby (Elpaso), Qatar Petro, DOW and Gazprom (Stroytransgaz). This gives our Company an edge over a number of its peer companies, as accreditations are the pre-requisite to getting short-listed for more orders from customers and our oil and gas customers prefer to deal with larger entities. Our Company today, is one of the very few suppliers in the world who is qualified for all significant pipe contracts across the globe. In the last 12 years, it has expanded its operations to more than 30 countries, covering almost every location where oil and gas assets are located.

MARKET BACKGROUND, OUT LOOK & OPPORTUNITIES WORLD ECONOMIC GROWTH & DEVELOPMENT TO PROPEL ENERGY DEMAND Economic growth and Development tends to be directly correlated with increased energy consumption, at least to a certain point beyond which further economic development actually can lead to structural shifts in the economy that reduce the prominence of energy intensive industries. The International Energy Outlook for 2007 suggests that world demand for primary energy will increase by an average 2.3% per year for the period 2004 to 2010, before slowing to 1.8% per year for the period 2010 to 2015. Globally,the role of infrastructure in economic development can hardly be over emphasized. However, increased economic activities have led to higher demand of energy resources. Demand for steel pipes is expected to be higher in the medium term on account of increased exploration activities and thrust on setting up infrastructure to transport oil and gas. In India, rapid economic growth faces an urgent need to develop and improve Oil & Gas distribution, which would increase demand for SAW pipes. Depleting oil reserves worldwide have led to increased exploration efforts, resulting in more wells in the exploratory rig. Energy use tends to grow more slowly than GDP in developed economies, while the opposite is true for developing economies, reflecting the fact that the energy intensity of GDP falls only after economies have reached a certain level of prosperity. Global economic growth is likely to average at 5% p.a on a purchasing power basis (PPP) to 2030. Developing economies of Asia which represented only 10% of the world GDP 30 years ago has increased to ~ 30% by 2007 and is set to improve further to 44% by 2030. (Source: International Energy Outlook 2008, Release Date: 2008) 34 DEMAND ON E & P CONTINUES DESPITE DIP IN CRUDE PRICES The Energy Information Administration (EIA) forecasts natural gas to form 24% of total energy usage by 2030, with the share of oil falling to 34%. Increased use of natural gas would require building the infrastructure needed to transport the gas from the point of production/import to end users. This would mean construction of more large diameter pipelines, benefiting SAW pipe manufacturers. Also, the inter-regional gas trade is expected to be robust. According to EIA forecasts, the inter-regional gas trade will expand faster than output, and the main gas-consuming regions will become increasingly dependent on imports. Global supply of SAW pipes is likely to remain tight in coming couple of years. India is set to benefit from the supply demand imbalance. Much of the growth in line pipe will come from growth in large diameter pipes. Given the increase in production and exploration of natural gas, pipelines above 20" in diameter will see an increasing share of the total line pipe market, as demand for LSAW and spiral welded pipes outstrips growth for small diameter pipes. The oil and gas industry is the most capital intensive of all commercial industries, with its history of boom and bust. When oil and gas prices are high, many E & P companies invest their resulting strong cash flows in the development of existing properties and exploration for new reserves. These portfolio-expanding initiatives, typically lead to an increase in drilling activity which remains high until oil and natural gas prices begin to fall, at which point drilling activity also declines. The rig count is a good indicator of changes in the cycle; it is timely and sensitive to changes in the outlook. Even though crude oil prices have corrected significantly by ~ 66% from the highs of USD 147/ barrel to ~USD 40/barrel, the number of rigs currently being deployed by oil and gas majors is still close to the eighteen year highs. To connect these Oil finds Pipelines are an extremely important and extensive mode of land transport, recognized as both the safest transportation mode and the most economical way of distribution of the vast quantities of oil & natural gas from production fields to refineries and from refineries to consumers.. Although pipelines can be built under the sea, the process is economically and technically demanding, so the majority of oil at sea is transported by tanker ships. Pipeline routes tend to link isolated areas of production with major centres of refining and manufacture in the case of oil, or major populated areas, as in the case of natural gas. To satiate the increasing energy needs of global economies, oil & gas companies are investing in the laying of huge pipeline systems spanning thousands of kilometres. With more than 300,000 kms of pipeline projects planned over the next 4-5 year timeframe, the demand supply imbalance is expected to ease off in the near future too

International Demand Outlook till 2014

Total Length Quantity Business Potential Region Projects (kms) (MMT)(1) (US$ Bn) (2) North America 183 69,953 14 17

Latin America 52 33,934 7 8

Europe 97 45,974 9 11

Africa 47 17,368 3 4

Middle East 107 43,655 9 11

Asia 130 90,825 18 22

Australasia 60 15,899 3 4

Total 676 317,608 64 77

Note: 1. Conversion rate of 200 tonnes / km 2. Conversion rate of $1,200 / ton Source: Simdex, US, May 09 Update Based on the existing pipeline projects, the global pipeline requirements is expected to ~ 60 mn mtpa with a total of 676 projects with an opportunity of more than $80 bn across the globe for the next five years.(Source: Simdex data) Another growth driver is the replacement of the old pipelines in USA. More than 1 mn miles of the total of 1.5 mn miles of USA pipelines were laid during the 1960's and 1970's. Since most of the pipelines have an economic life of ~ 30 years, there is a pressing need to replace them in order to avoid systematic failure and supply disruptions. Considering that the annual production of pipes have been over 16 - 17 mn tonnes, the replacement of 1 mn miles of pipelines would take atleast 25 years to complete.

35 Annual Report 2008-09

On a regional basis, Asia currently accounts for the majority of world line pipe consumption at around 30%, followed by North America at 11%, and Europe at 9%. However, looking forward, CRU 2007 report expects to see the Middle East and the CIS increasing their shares of world consumption. Report currently estimate that the Middle East accounts for approximately 13% of total world line pipe demand, and expect its share to increase to 15% by 2011. Likewise, it expects the CIS to increase its share of consumption from 13% in 2006 to around 15% in 2011. As per CRU Report 2007, over the forecast period to 2011, investment in crude oil pipelines will remain a major component of overall pipeline construction, alongside the growing component of gas pipeline investment. The large-diameter pipe appears to offer the best volume prospects over the medium term. Of the four main competing types of line pipe, suppliers of plate based LSAW pipe like Welspun may be the best placed to take fullest advantage of current project demand trends.

GROWTH DRIVERS IN PIPELINES - 'Best Yet to Come' Since 2003, the total line pipe market grew at annual average rate of 10.4%, compared to an annual average rate of 2.4% for the period 1996 to 2003. However, the fact that growth has been strong over the last few years is not surprising given the increases in the price of oil and gas. Indeed, line pipe consumption has in fact grown rather conservatively compared to oil prices, indicating the fine leg between Oil Price movement and line pipe demand. A similar demand analysis by Douglas-Westwood titled The World Onshore Pipelines Report 2008- 2012 forecasts that $180 billion will be spent on onshore pipeline projects worldwide through 2012. The report estimates a 16% increase in the pipeline mileage installed from 2008-2012 compared to the historic five-year period 2003-2007. Nearly 75% of this expenditure is expected to be spent in Asia, Eastern Europe, the FSU and North America. Asia stands out as the largest forecast market by length of pipeline construction accounting for $42 billion of forecast capital expenditure. The status of forecast pipeline projects shows a split between planning (47%), under construction or ordered (40%) and approved (13%). Much of this expected growth is based on modest increases in energy consumption.

Domestic Scenario - THE INDIAN PIPE INDUSTRY SEEKING NEW HORIZONS The Indian pipe industry is among the world's top three manufacturing hubs after Japan and Europe. North America, Middle East and South Asia is expected to be the key volume drivers for Indian pipe companies. The Indian pipe industry is highly fragmented with Herfindahl Index of Concentration for steel pipes excluding seamless.The industry is highly raw material intensive with RM cost accounting for around 70% of total cost. However,larger players operating in the organized sector have been able to pass on price hikes to their customers due to better quality specialized products catering to customer needs for critical applications. India is expected to see a spurt in construction of pipeline infrastructure as the country's spending on exploration and production (E&P) and gas related pipeline capex increases, which will benefit Indian HSAW,and ERW pipe manufacturers. India is emerging as the focal point for the future development of the Asian natural gas market. The rapid growth of the Indian economy has led to the development of the Indian energy sector and provided major triggers for the growth of the gas sector as well. Natural gas demand in India is expected to increase from 35 bcm to 142 bcm in 2025 @CAGR of 8.5%. The domestic market size of US$ 3.0 bn shows a strong demand in the domestic pipe industry which includes mainly the GAIL with the market potential of around 1.5 bn US$ based on its proposed pipeline projects in 2 phases till 2012, Relaince with US$ 0.9 bn and GSPL with US$ 0.7 bn in next 3 years. Domestic Market Plans of Some major domestic players

Company Total Length (kms) Quantity (KMT) (1) Business Potential (US$ Bn)(2)

GAIL 6,215 1,243 1.5

Reliance Industries 3,630 726 0.9

GSPL 2,711 542 0.7

Total 12,556 2,511 3.0

36 Proposed pipeline of GAIL Phase I by 2011 Length Cost Name of Pipeline (Kms) (Rs Mn) Add. Cap (MMSCMD) Dahej - Vijaipur / Grep Upgradation 1,115 50,000 66 Dadri - Bawana - Nangal 640 25,000 31 Chainsa - Jhajjhar - Hissar 450 10,000 35 Sub Total 2,205 80,500 132

Phase II by 2012 Length Cost Name of Pipeline (Kms) (Rs Mn) Add. Cap (MMSCMD) Jagdishpur - Haldia 1,690 66,000 32 Dabhol - Bangalore 1,480 40,000 16 Kochi - Mangalore - Bangalore 840 35,000 16 Sub Total 4,010 141,000 64 Grand Total 6,215 226,000 196

Note: 1. Conversion rate of 200 tonnes / km 2. Conversion rate of $1,200 / ton Source : SBI Cap Report, Nov 2008

The Table above indicates the plans of some major pipelines planned in India, covering the proposed pipeline projects announced by Gas Authority of India Ltd. (GAIL) in 2 phases showing a total demand of 6215 kms with a cost of more than Rs. 220 billion. The Plans discussed above are for few large players in the domestic market. However, the overall domestic market size is much bigger. The City Gas Distribution (CSD) in India is poised to take off in a big way with the extension of the project to thirty cities in different states by 2009 besides Mumbai and Delhi. Currently, CGD is operational only in Mumbai, Delhi and several cities in Gujarat while CGD projects are under implementation in more than half-a-dozen states including Uttar Pradesh, Rajasthan, Madhya Pradesh, , Karnataka, Kerala, Andhra Pradesh and West Bengal. With investments of over USD 2 bn, the network would be further expanded at a later stage to cover 200 cities in 15 states, providing gas to 160 million people. As of now, CGD accounts for just about 5-6 % of the total gas consumption, at 5- 6 mmscmd. But in the next four years, consumption is likely to grow to 20 mmscmd, and may be even higher. India has a relatively under-developed gas pipeline infrastructure, which is rapidly scaling up in tandem with the burgeoning demand and ramp-up in supplies. Currently, the country's gas requirements are serviced primarily through GAIL's pipeline network, supported by some pipelines of other PSUs like ONGC, and some regional players like Gujarat State Petronet (GSPL). With Reliance Industries (RIL) also jumping into the fray and last mile-connectivity receiving a fillip due to entry of many players into the CGD domain, the bottleneck of pipeline connectivity is set to be alleviated.

Swot Analysis of the Indian Pipe Industry Strengths Cheapest mode of transport for liquids and gases. Logistics form a major part of the cost for most of the Oil and Gas companies and the cost of transportation through pipe lines is now being encouraged. Market surveys show that transportation through Pipelines (Rs.1.30/km.) is significantly more cost effective in comparison to transportation by railways (Rs. 2.20/km.) and roads (Rs. 3.02/km.) Indian players globally cost competitive. The cost of Manufacturing is comparatively lower in India due to low labour cost, low power cost as compared to the developed countries. Indian companies have won accreditations from major oil and gas companies across the Globe Some of the Indian companies have won the accreditations from major Oil & Gas giants across the globe which gives a potential strength to the players to get orders despite of the tough competitions domestically. Strong order book positive for pipe companies The Indian pipe companies are continuously getting orders across the globe for its quality with the price stability and delivery.

37 Annual Report 2008-09

Increasing capacities to cater the increasing demand of Pipes The Increasing investments across the globe on this industry is thriving the capacity additions to fill the demand supply gap, which is soaring over the years with the increasing demand. The Region wise Global capacities in the world in SAW Pipes are as follows:

Global Pipe Capacities Capacities(in tpa) Region HSAW LSAW ERW North America 680,000 2,150,000 7,336,500 Western Europe 1,430,000 3,285,000 3,050,000 Eastern Europe 125,000 44,000 30,000 CIS 2,40,000 2,350,000 5,852,000 East India 3,191,000 3,762,000 10,390,000 Middle East 845,000 980,000 1,120,400 South Africa 150,000 470,000 1,974,000 Africa 246,000 – 100,000 Other World 3,212,000 1,900,000 2,121,000 Total World 10,119,000 14,941,000 31,973,900

Source: SBI CAP Report Nov 2008 Weaknesses Working capital-intensive industry as projects are of long duration in terms of execution of the order. Average execution period for an normal order takes 9-12 months. Higher dependence on government spending on account of connecting the resources to the final consumers via pipeline network and thrust on infrastructure development. The large number of unorganized players leading to tough competition amongst the peers.

Opportunities and Threats Opportunities Low pipeline penetration in India compared to developed nations less than 30% compared to 60% in USA and 65% in France, provides an huge opportunity in the domestic market with the growth in the pipe demand. Government thrust on infrastructure development, irrigation & water supply leading to the boom in the pipe demand, as pipe is the best and cheapest source of transportation. Rising oil and gas exploration activities in difficult and distant locations provides an opportunity to the pipe laying across the country for transporting the Oil &b Gas to the refineries and consumers. City gas pipe projects in India with investments of over USD 2 bn (discussed above) provides an huge opportunity to domestic demand for the Industry. Ageing pipelines need replacement Expected replacement demand in excess of 1 mn kms.on the International side mainly in US and neighboring countries, provies a huge opportunity to the Indian players with accreditations from the major oil & gas giants across the globe. Threats/ Risks Recent slowdown in world economy delaying oil and gas projects across the globe, with the Oil prices going down Fluctuations in foreign exchange and dependence on high imports of Raw Materials and exports to the countries across the globe. Competition from China in terms of cost but restricted to seamless and ERW pipes.

WELSPUN'S HIGHLIGHTS Pipe Capacity increased to 1.5 million MTPA by setting up additional capacity of 500,000 MTPA of pipe manufacturing, comprising of 350,000 MTPA of HSAW in Little Rock Arkansas, US and 150,000 MTPA of HSAW at Anjar, Gujarat. After commissioning of this mill, our Company’s total pipe capacity stands at 1.5mn MTPA making it one of the World' Largest capacity of Line pipe. The total capacity is broken into HSAW capacity (Including US) of 900,000 MTPA, LSAW capacity of 350,000 MTPAand ERW capacity of 250,000 MTPA,. Plate Mill cum Coil Mill of 1.5 million MTPA 38 During the year, 1.5 million ton, state-of-art Plate mill one of the three mills of its kind in the World commenced operations. This is the part of the backward integration project, It has the capacity to produce plates up to 4.5 meters wide and is all set to make a mark in our Company’s operational capabilities. The trial production of the mill was commenced in September 07 and since than our Company has been able to make the most challenging plates involving sizes up to 4.5 meter wide and steel grade of X 70 API Grade. The availability of in-house Plates will provide more flexibility in marketing the products. Along with quality and delivery on time to our valued customers. During the year it has booked external orders of Rs. 6,400 Million besides internal orders, this year for manufacturing of LSAW pipes. During the last quarter, the Company has also commissioned the Coil Mill, which is capable of producing API High Grade Coils to manufacture the HSAW pipes. Recently, our Company has announced its plan to demerge its Plate cum Coil Mill into a 100% subsidiary. It is a focused approach in product development, production, quality control, sales and marketing. It will additionally allow better financial control, better fiscal efficiency by rationalization of various applicable taxes, duties and create an independent identity of high-end steel business

Financial Prudence During the year our Company has accounted for Foreign exchange fluctuations on a conservative basis. As over 80% of the topline is contributed by exports (both direct and deemed). Any major fluctuation in currency would result into the decline in the estimated sales turnover.On the other hand most of the costs like raw-material, shipping, sales commission, together Comprising almost 75% of the cost is foreign currency denominated, thus providing natural hedge. Most of the competition our Company faces is from Europe and Japan regions, which have seen similar currency fluctuations and hence the same is expected to neutralize forex fluctuation effect in term of price competition.

Sales 08 - 09 (by Volume)

Sales Analysis Latin America, 5% South East, During the year our Company have supplied pipes 5% Middle East, across the globe, servicing its majority clients in the 7% parts of US and Canada and North Africa. Domestic, 10%

North Africa, USA, 44% 12%

Canada, 16%

Order Book Order Book Geographical Distribution (by volume) The strong order book shows over 78% exports orders

with around 59% from premium markets like the US Domestic, 21% and Canada as shown in figure. The Current Order book (as at 29th May 2009) stands at Rs. 77,400 Mn including orders for both pipes and plates. The Pipe Middle East, 4% Order book of our Company stands at Rs. 71,000 mn. The Geographical distribution of pipe orders is shown Africa, 12% North America, in the figure : 59%

South America, 4% Macro Economic Challenges during the year The ebb and flow of the overall global economic environment needs careful monitoring. The commodity market and financial markets have undergone huge correction, with continued volatility. All these factors have weakened business sentiments in general. Some of the Challenges faced during this year were:

Foreign Exchange rate: Rupee vs. Dollar movement During the year all major currencies (Dollar, Pound, Euro and Yen) were volatile, including rupee as it has depreciated

39 Annual Report 2008-09

from the level of Rs. 40.075/$ (as at 31st March 2008) to Rs. 50.720/$ (31st March 2009). Commodity Prices: Volatile Steel Prices Similar trend was seen on the commodity side with mainly the Oil Prices and the steel prices reaching peak and trough within a short span of time. Oil prices touched a high of $145.29/barrel and $33.87/barrel on the lower side during the year. Similarly the average price of steel has fluctuated substantially during year, from US$732/MT in 2008 decreasing to US$327/MT for the first five months of 2009. (Source: SBB: Steel Business Briefing, Average Steel Slab rates for Black Sea Export Free On Board). Macro economic factors across the Globe Developed economies turned in negative growth territory The turmoil in the global market led to negative GDP growth in the developed economies. Developing economies have witnessed lower growth rate The Developed economies also recorded lower GDP growth rates. This has resulted in slower decision making leading to delay in project implementation and demand concerns in global markets

Welspun - SWOT Analysis Strengths One of the World's largest capacity to tap growing demand With the commissioning of the facility in US of 350,000 tons closer to one of the biggest markets for pipes, as US accounts for more than 35% of global demand along with expansions in India. This has enhanced its current capacity to 1.5 mn tons with coating and double jointing facilities giving a one-stop solution to the customers across the globe. Fully integrated pipe manufacturer Slabs to Plates/ Coils to Pipes Our Company’s 1.5 mn mtpa plate cum coil mill became operational in March 08. This Plate cum Coil Mill is capable of producing American Petroleum Institute (API)-grade plates of width upto 4.5m and thickness up to 25 mm. The Plate cum Coil Mill will also provide internal flexibility to take short gestation orders. The mill meets our Company’s captive consumption requirement besides offering high end products for additional 2 million tons of pipe capacity in the Kutch region. The plate mill will not only improve our Company’s pipe profitability but also shall assure steel plates supply even when global market conditions are tight. Similarly on the coil side it will provide the supply of coils for the manufacture of HSAW pipes throughout the year. Demerger of Plate-cum-Coil division At present, our Company is carrying out demerger of its Plate cum Coil Mill into a 100% subsidiary. With a capacity to produce Plate and Coils of maximum size range and diversified steel grades, this state-of-art stackel mill is one of the only 3 mills of its kind in the World. The Mill aims to target Shipping, Wind Energy, Boiler, Heavy construction like bridges and many other specialized industries. It is a focused approach in product development, production, quality control, sales and marketing. It will additionally allow better financial control, better fiscal efficiency by rationalization of various applicable taxes, duties and create an independent identity of high-end steel business. Supplier to the Most Critical projects Our Company is amongst many firsts also stands the fact that it is the only manufacturer today, which has supplied pipes laid below 8000 ft. of water, forming the World's deepest pipeline “The Independence Trail project”. The supply to such critical project acts as a strong reference for other Oil and Gas companies that are looking to source critical application pipes It is already at the pole position with established pedigree on execution of contracts at the US shores. Proven ability to supply to Global Standards OurC ompany is amongst the few producers of most challenging X 80 grade of pipes with the primary certification obtained from the API (American Petroleum Institute). OurC ompany has also entered into framework agreements with two of its most renowned clients, Saudi Aramco and Chevron and has a long term Pipe Purchase Agreement in operation with Transcanada. On the domestic front, our Company has become a key supplier to India's largest fuel companies such as GAIL, IOCL, ONGC,BPCL and Reliance. With its product size ranging from ½ inch to 100 inch outer diameter,it is able to offer one stop solution for connectivity to Oil & Gas consumers.

40 Access to Port Facilities OurC ompany has access to port facilities allowing easy access to West Coast Indian exports to Middle East. Our Company’s production facilities additionally provide strategic advantages due to their proximity to national highways, seaports of Dahej, Kandla, Mundra and Mumbai in India, and Little Rock Port in USA through its own dedicated jetty. Only Indian Company short listed for most of the global orders OurC ompany is the only Indian Company to qualify for most of the internationally large orders. The kind of projects thatour C ompany bids for and receives, substantiates not only our order book position but also sets us apart from other domestic players.Our C ompany’s approval by over fifty oil and gas majors, globally makes it entitled to practically best of all Oil & Gas pipelines across the globe. Approvals form a stringent undefined entry barrier for new or not-so- experienced entrants. Pipes are a long term investment and it is extremely important for Oil and Gas companies to enter into definitive agreements with pipe manufactures that are well qualified and experienced. Our Strategy OurC ompany’s vision is to be the leading pipe Company internationally and domestically with a strong focus on tapping of opportunities across the globe where it has or can develop significant competitive advantage. Over the years, our C ompany’s key strategies continue to evolve with its growth and development and its changing business environment.Our C ompany today has a strong global market position with a well established brand, being reaffirmed by supplying pipes for the most challenging projects. In essence, it is adding up new clients with high esteem every year to its clientele and also getting repeat orders from its long list of existing international giants in Oil & Gas sector. These orders are largely won against the top end competitors. Going forward our strategy is as under:

1. Maximize the full-life value of the assets in India & US and the commercial positions. 2. Maximize competitive strengths 3. Maximize financial strength and reputation across the globe 4. Organic and Inorganic growth 5. Addition of new clientele globally. 6. Delighting existing customers by repeat orders.

Weaknesses Heavy Reliant on Export Market Our Company is exporting more than 80% of its products to countries like North America, South East Asia, Middle East, Etc. It is more reliant on the export market than domestic which is a big challenge in the current scenario of the economic slowdown across the countries particularly in US. Our Company is expressively looking towards the domestic market which is growing significantly with the recent new projects announced by Domestic Giants like GAIL. Reliant on bought-in slabs for plate production Our Company has started its own plate production to produce API grade plates and plans to produce Coil through its backward integration via Plate cum Coil mill. This has now reduced the dependency on the plates required to produce pipes. Our Company is however dependent on outside slabs to produce its plates and then converting it into pipes.

Opportunity Strong Demand in Middle east and Asian Markets The Simdex data (May 2009 update) discussed above clearly shows a huge potential demand of pipes in Middle East and the Asian Markets contributing to almost a US$ 33 bn market (almost 43% of the total market potential) with more than 230 projects coming up in the next five years. The huge replacement market in the US and Russia: The expected replacement demand for line pipes is much larger than for new pipes (approx 6-7 times).A recent entrant to the growth drivers of pipes is the demand arising from the replacement of old pipelines, pre-dominantly in the US and Russia. These pipes had been laid in the late 1960's and 1970's. The average life of a pipe used for transportation of Oil &Gas is approximately 25 to 30 years. More than 1 million miles of gas pipelines out of the 1.5 million miles in US

41 Annual Report 2008-09

were laid prior to 1975. These pipelines, which have outlived their economic life, have led a pressing need for replacement to ensure smooth flow of operations. Recently, few accidents in old pipelines and the resultant legal, commercial, reputational and organizational damages to some of the Oil and Gas majors, have led to other companies, considering the replacement of old pipes faster than envisaged earlier. Thus, the replacement market has additionally pushed the demand for pipes even further. The table below shows the pipelines laid in the US since 1960's to 1990 in Miles: The U.S. Oil and Gas Pipeline Mileage

1960s 1970s 1980s 1990s Oil pipeline, total 190,944 218,671 218,393 208,752 Gas pipelineb, total 630,900 913,300 1,051,800 1,189,200

bExcludes service pipe. Data are not adjusted to common diameter equivalent. Mileage as of the end of each year. Source: Oil pipeline: 1960-2000: Eno Transportation Foundation, Inc., Transportation in America, 2002(Washington, DC: 2002), p. 58. and 2001-03: U.S. Department of Transportation, Research and Special Programs Administration, Office of Pipeline Safety, Pipeline Statistics, Internet site http://ops.dot.gov/stats.htm as of Dec. 8, 2004. Gas pipeline: 1960-2003: American Gas Association, Gas Facts (Washington, DC: Annual issues), table 5-1 and similar tables in earlier editions.

Threats / Risk Factors Economic slowdown to impact energy demand. Drastic downturn in the global economy leading to a negative outlook in the oil & gas prices may adversely affect future E & P activities leading to a slowdown in the order for SAW pipes. The slowdown would be more visible in North America where the energy capex is driven by private companies which are more sensitive to oil & gas prices. Middle East, China and South Asia would be less affected as the capex programs are generally undertaken by the government sector companies. Volatile raw material prices. Raw materials account for the major portion (~ 70-75%) of the total costs. In case of rising raw material prices, the pipe manufacturers EBDITA margins are eroded as majority of the pipe supply contracts are fixed price contracts and do not incorporate any price escalation clause. To safeguard margins, pipe manufacturers enter into back-to-back contracts for supply of steel plates, HR coils, billets, iron ore and coking coal. Forex fluctuations. Fluctuating Rupee have been a major cause of concern for the Indian pipe manufacturers whose order book is largely dominated by export orders. A major portion of the sales realizations is covered by natural hedge in the form of imported raw materials, shipping cost and sales commission which constitute ~ 75 - 80 % of the revenues. The balance 20 -25% representing the value addition is covered through forward contracts or derivative products. Threat of imports. The recent dumping of ERW and seamless pipes by Chinese pipe manufacturers had a negative impact on the margins of Indian pipe companies. While the Company do not foresee major imports in the SAW pipes segment on account of the high freight cost due to the volume weight ratio factor in play, the remaining segments are vulnerable to global competition. Entry of Foreign Players. The lucrative markets of the Middle East and the huge potential for line pipes in India may attract the European and Japanese pipe manufacturers to set up manufacturing facilities locally. Even though the foreign players may negate the comparative advantage of the Indian pipe manufacturers and reduce their chances of obtaining export orders, the global markets for line pipes is sizeable enough to accommodate competition. Foreign pipe manufacturers setting up local operations in India would also need to go through the mandatory accreditation procedures and obtain customer's approvals. The accreditations and approvals are likely to take around 6 months to 15 months and hence there is no immediate threat to the Indian pipe manufacturers.

42 OUTLOOK In view of the demand for Pipelines due to various reasons stated above, the future for Pipeline business is positive. Our Company has firmly established itself as a creditable supplier in the international market. This is further reflected in the large and reputable client accreditations that our Company has been able to garner in the past few years. It is because of such optimistic situation that more and more pipe manufacturers are entering in the fray. Our Company has set up its different Plants at such strategic locations in the coastal belt of the Country from where the transportation cost of the manufactured pipes to the desired destination fixed by its customers is minimum. Our Company now has a total production capacity of more than 1.5 Million Tonnes of Pipes, which has enabled the status of being 'The emerging company of the Year 'by Economic Times and 'Amongst the top 2 linepipe manufacturer in the World '. By Financial Times, UK. Again on international front our Company proved to be a leader in venturing out of the India with its commissioning of its new pipe mill at Little Rock Arkansas US, with a Spiral Pipe capacity of 350,000 tons pa. with coating , double jointing and bending facilities, giving a one stop solutions to its customers locally in US and neighboring areas. INTERNAL CONTROL AND ADEQUACY Management of our Company maintains adequate internal control which is designed to provide reasonable assurance that assets are safeguarded and transactions are rightly executed and recorded in accordance with management authorization and accounting policies. All the records are adequately maintained for preparation of financial statements and other financial information. Apart from internal controls, our Company also audits the efficiency and security of its operations, its information technologies and data, in accordance with the global standards. The Audit Committee met five times in the financial year 2008-09 to review internal audit reports as well as the internal control systems and financial disclosures

MATERIALDEVELOPMENTS IN HUMAN RESOURCES The underlying philosophy behind the management of human capital at Welspun Gujarat Stahl Rohren Limited is summed up in the following quotation “There is more to building Human Capital than employing the best people. It is about bringing out the best in every one”. Bringing out the best in people is more science than art. Guided by this thought process, our Company has paid its undivided attention to empirically tested research. A step in this direction has been strengthening the strategic alignment of human capital with the business. Among the initiatives driving alignment have been DISHA 2012 and Project NIPUN. While DISHA 2012 set the direction and deliverables as well as the means to achieve them, Project NIPUN focused on the creation of a Systems Driven Organization. These initiatives have resulted in changes to the organization structure, role re-orientation and re-skilling & re-tooling amongst others.

The best made plans fail if not supported with the right systems. To ensure that our Company does not fall prey to this, a Balanced Scorecard based Performance Management System has been put in place. Our Company has also leveraged Information Technologyto support the effort: An HR- ERP package, aptly named WEL-CONNECT makes up the front end, while the back end is supported by an Oracle database. WEL-CONNECT,amongst other things, has modules covering: o Employee Life Cycle Management o Performance Management o Attendance Tracking & Leave Management, and o Resume & Recruitment Management PAY-WELprovides a compensation administration solution. A Bio-metric attendance system and a Canteen Management System provide data to PAY-WELusing an SQL interface. Contract Management is facilitated through an RFID attendance system. An e-Library portal provides audio, video and text content for Knowledge and Skill development. Systems by themselves do nothing if not manned by the right people. Recruitment and retention of highly talented individuals has, hence, also been an area of focus. Regular Open House and Skip Level Meetings provide a source of two-way communication with the talent on board. In addition, welfare amenities like a Medical Centre, CBSE affiliated school, transport facilities for employees and their children and family get-togethers ensure that they stay healthy in body and spirit. Further,

43 Annual Report 2008-09

employee participation in CSR initiatives provides an opportunity to be of service to society at large. The thrust of Training & Development effort has been skill enhancement. Hence, the emphasis has been more on technical training. Training has also focused on enhancing the effectiveness of staff. In addition to in-house training, staff was also sent abroad.

Our Company has also embarked on a Talent Development initiative aimed at building a leadership pipeline that will make available leaders of caliber to manage it’s growth and diversification plans.

DISCUSSION OF FINANCIAL ANALYSIS

The significant developments which had major impact on financial numbers were: Rupee depreciation from Rs. 40.075/$ to Rs. 50.720/$ between 1st April 2008 and 31st March 2009 Commencement of Operations of Plate mill in Anjar,Gujarat, India Commissioning of 150K MT Spiral Mill in Anjar,Gujarat, India. Commissioning of 350K MT Spiral Mill in Little Rock, Arkansas, US.

Given below are highlight of financial numbers and impact of above developments on Financial performance of our company.

Production in K MT Installed Capacity = 1.5 Mn MT

1,000 0 % 900 CAGR 2 800 717 670 700 600 501 500 400 300 200 rdcin(in 000' MT) Production 100 2006 - 07 2007 - 08 2008 - 09

Sales - Rs. Million

70,000 65,000 6 % 60,000 57,395 CAGR 46% 55,000 CAGR 4 50,000 45,000 39,945 40,000

Rs.Mn 35,000 30,000 26,834 25,000 20,000 15,000 10,000 2006 - 07 2007 - 08 2008 - 09

1. Revenue In FY 2009, on annualized basis,our Company achieved over 65% capacity utilization. The installed Capacity increased by 500k tons during the year (150k tons Spiral III in Anjar and 350k tons US mill) to 1.5 million tons/annum, making our Company one of the largest line pipe company in the World.

44 Production reached all time high of 717k tons, CAGR of 20% over a period of 3 years. Plate production achieved was 192k tons. Sales volume for pipes were 695k tons witnessing a growth of 8%, Plate division achieved an overall sale of 154 K, outside sale being 42k tons and internal sale being 112k tons. The pipe realizations were also higher during the year, amongst the highest ever achieved indicating our Company's ability to pass on the raw-material price increase to the customer. Sales increased by 44% in FY 08-09 compared to the previous year with a CAGR of 46% over a period of 3 years on account of high pipe volume, plate volume and improved realization.

2. Breakup of various cost items as a percentage of sales & services (“Net Sales”) Element of Cost FY 08-09 FY 07-08

Amount (%) Amount (%) (Rs Million) (Rs Million) Sales 57,395 100.0 39,945 100.0 Cost of goods sold 40,027 69.7 26,289 65.8 Key Expenses - Store & spares consumed 921 1.6 550 1.4 - Coating & other job charges 2,417 4.2 563 1.4 - Power,fuel&watercharges 1,332 2.3 350 0.9 - Material handling charges 1,963 3.4 1,266 3.2 - Freight expenses 1,898 3.3 2,211 5.5 - Staff cost 1,322 2.3 860 2.2 Other expenses 1,1686 2.0 1,300 3.2 Finance Cost (Net) 1,766 3.1 818 2.0 Depreciation 1,433 2.5 609 1.5 PAT (Profit After Tax) 2,135 3.7 3,408 8.5

Cost of goods sold as a percentage to Net Sales has increased from 65.8% to 69.7% mainly on account of forex provisioning on creditors linked to raw material. Operational cost increased mainly due to rise in coating and energy charges. Stores and spares cost increased on account of utilization of increased quantity as well as higher quality requirements warranted by manufacturing of high end application pipes and plates.

Coating and other job work charges saw a huge rise mainly due to increase in job work. Power, fuel and water charges increased due to rise in per unit cost of power with higher coal prices during the year and also because of additional energy requirement for plate mill operations, being partly served by captive 43MW Power Plant, which is likely to economize cost with stable power supply. Freight Charges saw declined due to better negotiations with the shipping companies. Staff cost increased due to additional employee for the plate mill, however higher productivity and efficiency level contributing to higher revenue generation during the year.

Finance expenses were higher mainly due to added interest expense on expansion projects in India - Plate Mill, HSAW Plant and the US Spiral Mill at Little Rock, Arkansas. US.

Depreciation charges also increased due to increase in Fixed Assets with the capitalization of the Plate Mill, and HSAW mill at Anjar,Gujarat and US Spiral Mill.

3. Margins Operating Margins: The EBITDA margin (without exceptional items) showed a growth of 25% at Rs. 8, 167 mn compared to the previous year at Rs. 6,555 mn. The extraordinary impacts on the EBITDA includes the forex provisioning of Rs. 1,256 mn on asset/ liability mismatch, Inventory write-down of Rs. 385 mn and forex provisioning on ECB of Rs. 178 mn due to revaluation at Rs. 50.72/$ during the year.However due to exceptional items the operational EBITDA stands at Rs. 6,348 mn for FY 2009 (Rs. 6, 555 mn in FY 2008) PAT Margins: Profit after tax declined mainly on account of lower volume for the plate mill, foreign exchange provisions, inventory write-down, higher interest cost and higher depreciation for the year.

45 Annual Report 2008-09

4. Return on Net Worth Return on Net worth (RNOW) is 14% in the FY 2008-09 as compared to 22% previous year. The investments made on Plate mill and the US project are likely to make significant contribution in coming years.

5. Surplus Funds Temporary surplus are invested in mutual funds and government securities. Nevertheless, in order to achieve higher growth and value creation for the stakeholders, our company wish to deploy funds, for debottlenecking & up-gradations, capacity enhancement by way of organic and in-organic initiatives and stronger focus on upstream Oil and Gas businesses. In future, our Company also wish to enhance the dividend rates and retire high cost debt to improve overall profitability.

6. Capital Deployment During the year the capital deployment increased from Rs. 38,087 mn to Rs.44,623 mn mainly due to capitalization of Plate Mill & New Spiral Plant at Anjar and US Spiral Mill. Management is confident that increase in size as well as range of activities would economize operations and achieve competitive advantage in the ever increasing competitive market.

7. Networth / Book value The Networth of our Company stands at Rs. 15,597 mn as at 31st March 2009 showing a reduction of Rs. 75 mn as compared to the previous year.During the year Rs. 2,135 mn and Rs. 109 mn was added as Net Profit for the year and Foreign Currency Translation Reserve. During the year, Rs. 1,994 mn and Rs. 327 mn were reduced on account of the provisions made for the Hedge Reserve account and appropriations made for the proposed dividend on Equity Shares. The Book Value of equity shares stands at Rs. 83.64 per equity share. The details of movement in various heads of net worth are as under:

a. Share Capital During the year, issued and paid up equity share capital (no. of shares) increased from 177,753,235 equity shares to 186,491,192 equity shares as at 31st March 2009, on account of: 8,678,082 equity shares due to Warrant conversion 59,875 equity shares due to exercise of option under ESOP Plan. b. Reserves and Surplus i) Capital Reserve: The balance as of 31st March, 2009 amounted to Rs. 1,057 mn is the same as was at the previous financial year end.

ii) Securities Premium account: The addition to the Securities Premium account of Rs. 849.7 mn during the year was mainly on account of conversion of Warrants into equity shares and ESOPs.

iii) Debenture Redemption Reserve: Debenture Redemption Reserve stands at Rs. 537.5 mn for the FY 08-09 to provide for redemption of Secured Non Convertible Debentures of Rs.3,000 mn issued during the previous year FY2007-08.

iv) Profit and Loss account: The balance retained in the Profit and Loss Account as on 31st March 2009 is Rs. 6489 mn (Rs. 5, 199 mn as at 31st March 2008), after providing for an equity dividend of 30% with distribution tax aggregating to Rs. 327 mn (Rs.312 mn as at 31st March 08), Rs. 234 mn (Rs. 352 mn as at 31st March 2008) transferred to General Reserve in accordance with the statutory requirements.

8. Secured Borrowed Funds During the Year,the Secured loans went up by Rs. 5,864 mn to Rs. 26,435 mn mainly due to disbursement of US $100 mn out of US$ 150 mn ECB borrowings. Additional funds have been invested in Capacity expansion in India and US. Our Company has got the ECB at very fine rate of 125 bps above six month Libor. As per the requirement of AS-11 it has been revalued at the closing exchange rate at the end of the year.

46 9. Fixed Assets Gross Block of Fixed Assets increased from Rs.22,499 to Rs. 34,844 mn mainly due to capitalization of Plate Mill, Spiral Mill and the US Mill.

10. Working Capital from Banks During the year,working capital facility from banks decreased from Rs.599 to Rs.404 mn to mn due to better working capital management. Additionally, our Company regularly avails non-fund based facilities in form of letter of credit, bank guarantee etc. 11. Inventory Inventory increased from Rs.12,878 mn to Rs. 26,113 mn, an increase of Rs. 13,235 mn on higher level of activity in Pipe business in India and US, as well as on account of additional slab inventory required for the manufacturing of the Plates. As a result, the inventory turnover days increased from 118 days of Net Sales to 166 days of Net Sales. As new pipe expansions and plate mill achieve optimal production in next few years, the inventory is likely to rationalize to more reasonable level.

12. Debtors Sundry debtors decreased from Rs.7,259 mn to Rs.4,601 mn for the FY 08-09 recording a decline of 37%. Sundry debtors reduced to 29 days ( 66 days in FY 2008) of Net Sales due to better collection by the Company.

13. Cash and Bank Balances Cash and Bank balances as at 31st March 2009 increased to Rs.9,470 mn as against Rs.2,703 mn as at 31st March 2008. The funds are in fixed deposits and in margin money/ current account, which facilitates effective working capital management.

14. Loans and Advances The loans and advances increased from Rs. 3,193 mn as at 31st March 2008 to Rs. 5,552mn as at 31st March 2009 mainly on account of increase in balances with excise and custom authorities due to higher level of business activity. . 15. Current Liabilities With the rise in the business volume, the current liabilities have increased by Rs. 21,541 mn to Rs. 38,955 mn in FY 2009, which is mainly on purchases of inventory. The increase in inventory and other current assets are thus effectively managed by extending the creditors days, thereby reducing operating cycle significantly.

Note on foreign currency hedging

Policy: The Company has major part of its revenues and expenses in foreign currency, which provides natural hedge. The value addition is hedged through forward sale of dollars with vanilla products. The long term liabilities in foreign currency are kept unhedged as the Company is net foreign exchange earner.At any point of time the company manages the net forex position to almost at the nil level.

For the Stand Alone results, the Note no. 6 in this annual report on page no. 75 deals with “Disclosure of Derivative Instrument and Unhedged Foreign Currency Exposure” and the table for the current year is reproduced and explained below with the help of superscripts for each numerical item.

47 Annual Report 2008-09

The outstanding foreign currency derivative contracts as at 31st March, 2009 in respect of hedging are as follows:

(Rs.in Million) Particulars 31st March 2009

Amount Hedged Amount Unhedged*

a) In respect of Short term receivables and payables

(i) In respect of receivables

a) Existing as on the Balance sheet date - 5,238.96 (1)

b)In respect of Future forecasted transactions 16,483.09(2) -

(ii) In respect of payables

a) Existing as on the Balance sheet date - 19,772.69(3)

b)In respect of Future forecasted transactions 4,312.45(4) -

b) In respect of Short term receivables and payables existing as on balance sheet date (i) Other short term assets or receivables - 2,786.04(5)

(ii) Other short term liabilities or payables 7,556.86(6) 1,348.23(7)

c) In respect of Long term receivables and payables existing as on balance sheet date (i) In respect of Foreign Currency Loan receivable - 2,536.00(8)

(ii) In respect of Foreign Currency Loan payable 68.47(9) 7,623.87(10)

d) Other derivative Hedge instruments 3,536.00(11) -

Note: * The Company has export orders in hand as on 31st March 2009 in excess of un-hedged Short Term Payables (Net of Receivables) amounting to Rs. 13,095.92(12) million (Rs. 12,011.98 million) resulting in natural hedge against foreign exchange rates fluctuations.

Explanation for a) In respect of Short term receivables and payables The above table is reproduced in the form of overall receivables and payables position and provides the net position as on 31st March-09, with regard to foreign currency exposure and the net unhedged position. (Rs.in Million) Particulars 31st March, 2009 Receivables Payables Difference i In respect of Trade receivables and payables Existing as on the Balance sheet date 5,238.96(1) 19,772.69(3) In respect of future forecasted transactions based on 55,534.75 28,368.25 orders in hand Total Trade 60,773.71 48,140.94 12,632.77 ii Hedges Existing as on the Balance sheet date 16,483.09(2) 4,312.45(4) 12,170.64 In respect of future forecasted transactions Net Unhedged Trade 462.12

Conclusion: The difference between receivables and payables after including future forecasted numbers based on orders in hand and hedges in place the net unhedged position is closer to nil level, as the company enjoys the natural hedge.

48 Explanation for b) In respect of Short term receivables and payables existing as on balance sheet date 5. Rs. 2,786.04 million represents short term receivables in foreign currency, which is advance to subsidiary company (Welspun Pipes Inc.) and to vendors.

6. Rs. 7,556.86 million represents short term payables in foreign currency,which is against crystallized liability.

7. Rs. 1,348.23 million represents short term payables in foreign currency.

Explanation for c) In respect of Long term receivables and payables existing as on balance sheet date

8. Rs. 2,536.00 million represents loan receivable from its subsidiary company (Welspun Pipes Inc.).

9. Rs. 68.47 million represents foreign currency loan payable to the bank.

10. Rs. 7,623.87 million represents foreign currency ECB loan.

11. Other hedge instruments Interest Rate Swap: US $ 50 million swap floating to fixed (2.25%) for ECB loan for partially mitigating interest rate volatility.

Cross Currency Swap: Equivalent US $ 20 million conversion of long term rupee into foreign currency loan on notional principal basis. This results into conversion of high cost rupee loan into cost effective LIBOR based foreign currency loan.

12. Un-hedged short-term Payables (Net of Receivables) amounting to Rs. 13,095.92 million (3+7-1-5) are covered by export orders in hand and results in natural hedge.

Cautionary Statement Some of the statements in this Management Discussions and Analysis, describing the projections, estimates and expectations may be forward looking statements within the meaning of the applicable laws and regulations. Actual results may differ substantially from those expressed or implied, important developments that could affect Welspun's operations include a shift in the industry structure, significant changes in political and economic environment in India and globally, tax laws, import duties, litigations and labour relations.

49

WE TRANSPORT TRANSFORMATION

Welspun always believed that one of the prime reasons for its consistent growth has been its unflinching desire to contribute and bring about transformation towards the well-being of the community and society. The impact on the development of the communities where we have our presence bears testimony to this fact.

Adhering to the guiding principles of the CSR Policy and the 6'E's, (Enrichment of Mind, Enrichment of Body, Empathy, Empowerment of Women, Education and Environment) ‘Welspun Foundation for Health & Knowledge’ consistently works to contribute to the society.

The deserted barren soil and once devastatedAnjar ( devastated by the earthquake of 2001) in Gujarat, today boasts of a green-belt at 'Welspun City' stretched across 2500 acres. For Welspun, this is a journey, in its initial stages and it has just begun... Annual Report 2008-09

CORPORATESOCIAL RESPONSIBILITY

Welspun is dedicated to business operations while conducting itself in a manner that is consistent with good practices in social responsibility. Our commitments towards the objectives of Corporate Social Responsibility (CSR) have been carefully chosen in align with our six guiding path (6E's). These are Enrichment of mind, Enrichment of body, Education, Empathy, Empowerment of Women and Environment sustenance.

A dedicated CSR team from a cross section of different functions across theC ompany review and prioritize issues to be addressed in a systematic and fruitful manner. Through stakeholder engagement we have been able to review our issues and objectives and ensure we have in place a process to enable thorough, open and transparent dialogue with all our key stakeholders. In all, over one thousand lives have been benefited directly by the various CSR activities of Welspun in the last financial year.

Sustaining mutually accountable and responsible synergies, Welspun has adopted Corporate Social Responsibility policy in the year 2008. The policy outlines processes, systems and minimum standards for managing CSR related activities throughout Welspun. Some of the main features of the policy are given below…

Build a civic character,not just a business character. Follow practices laid down by various UN and International bodies in our business to meet society's expectations. Follow Ethical business conduct and practice the principles of accountability, honesty and integrity in all business aspects. Ensure consistency in performance of various activities/ projects. Work with government and agencies to support and respect Human Rights. Engage Local stakeholders and adhere to a collaborative, consultative approach in our communities. Provide maximum employment and economic opportunities and strengthen Human Relations.

---6E's---

Enrichment of mind Mental Wellness is an important dimension of health and wellness in today’s fast-paced and competitive Corporate environment. It signifies a state of flourishing of the overall being. At Welspun, we believe that nurturing of the mind helps to reach high levels of emotional, psychological, physical and social well-being.

In this endeavour, we conduct work/life balance & stress management workshops. Relaxation and yoga sessions are organized to de-stress and re-energize. We recognize knowledge as information in action. It is a dynamic blend of experience, values, information and insights, against which new experiences and information can be evaluated and consolidated. Welspun has initiated a drive in upgrading the libraries across all its facilities. This endeavour additionally focuses on accessing various study material both by physical and electronic means. A user-friendly library software is being developed to access the contents of the library and a number of Podcasts are being installed to meet the varied needs of readers.

Enrichment of body Feeling physically better and having control over life can greatly increase mental health as well. We believe achieving health and remaining healthy is an active process. Welspun has organized a number of health and eye camps in association with the local NGOs like Abhishyam foundation, Princey eye care, Local Gram Panchayat & local hospitals. It has served over 1500 people.

Education In our seamless effort to improve the lives of children through education, “Welspun Vidya Mandir”, a school up to Standard 10 and 'Welspun Anganvadi', a pre-primary school has been set up for not only the children of Welspun employees but children of

52 the other local families could also attend. Further, we also support various education initiatives at all levels. This involves granting aid to schools, acknowledging and rewarding meritorious students and an initiative called Welspun scholars. Welspun scholars are a group of approximately 14 students, who yearly, seek full study-assistance from Welspun. We support these students, the future of tomorrow,with all humility and passion.

Empathy Welspun consider empathy as a salient component in our activities. Effective understanding, communication and relationships are essential to develop solutions and avoiding or diffusing conflict. By helping others, we help ourselves to grow. In this regard from the CSR front we have worked with several NGOs and helped to promote the social cause like, Right to Information Act, Differently-able, Legal Rights for Women, orphanage children amongst many others.

Empowerment of Women Welspun enables women to realize their full potential. We work for equal access to women on health care, quality education, career and vocational guidance, employment, equal remuneration, occupational health and safety, etc. Welspun builds and strengthens partnerships with civil society, particularly women's organizations and work towards changing societal attitudes and community practices by active participation and involvement of women.

Girl child is a cause close to our hearts. We are determined to priorities the cause of the Girl child. A little amount of care, a handful of warmth and a heart full of love for a girl child can make a big difference. In this endeavour, ‘Naya Savera’ a campaign was launched in Mumbai. Around 35 employees took the pledge and adopted more than fifty girl child. These overwhelming responses bolster our spirit to lead the initiatives in the long run.

Environment Sustenance. We consider environmental conservation is closely intertwined with human welfare. Companies care concern for the environment manifests itself at all its facilities, establishment and project sites. Ensures compliance with applicable Health Safety and Environment (HSE) legislation Welspun environment conservation initiatives includes, eco-friendly production processes, reuse and recycling, effluent treatment, use of clean energy, a green cover in its factories, large scale tree plantation, campaigns on energy conservation, rain water harvesting and many more.

CSR activities of Welspun have touched the lives of many, including the beneficiaries, the employees, families of employees, the management, families of management staff, etc. The display of this strength in our people have made way to a snowball effect. Year after year our CSR initiatives have grown better and even today our work has been recognized and appreciated. We have been recognized as one Company amongst top 38 Companies contributing in the field of CSR (Source: Social Corporate Governance Award by Bombay Stock Exchange 2008).

Recognized as the Emerging Company of the Year, we are making every effort in our social commitment and from this year, we have pledged to contributes one per cent of profit after tax (PAT) of the Company on several CSR initiatives. Thereby we aim to sustain our efforts and not do sporadic attempts at community development. It goes beyond charity to capacity building. This is reflected from the change in the lives of people whom we have touched through our various programs and activities. Our commitment is the beacon towards many new innovation and initiatives in CSR. In coming years, Welspun is determined to face newer challenges and newer avenues with a meaningful approach and interventions towards social welfare activities.

53 WE TRANSPORT TREASURE

Our Pipes transport Oil and Gas (O&G) - a priceless treasure for Mankind. We take pride in our contribution to build one of the most economical mode of transporting O&G. From the deepest of oceans to the toughest of terrains, Welspun Pipes transport Oil and Gas from its point of source to the door-steps of its end users.

The trust and belief of the World's biggest Oil and Gas majors has helped us completing some of the most difficult and crucial projects. Companies like Transcanada, Exxon, Chevron, Saudi Aramco, Gas Authority of India Ltd. Reliance Industries Ltd. amongst many others in our list of clients bears testimony to this fact. Needless to say our investment in state-of-art manufacturing facilities in India and in the U.S. has equipped our employees with the latest technology. Our commitment to our customers was abundantly reflected when the Company dedicated its latest HSAW facility to the city of Little Rock, Arkansas in the U.S.

Financials Section

Standalone Accounts Audit Report on Standalone Accounts 56 Standalone Balance Sheet and Profit & Loss Account 60 Standalone Notes to Accounts 70 Standalone Cashflow Statement 89 Balance Sheet Abstract & General Business Profile 90 Section 212 disclosure 91

Consolidated Accounts Audit Report on Consolidated Accounts 92 Consolidated Balance Sheet and Profit & Loss Account 94 Consolidated Notes to Accounts 102 Consolidated Cashflow Statement 113 Section 212 (8) disclosure 115 Annual Report 2008-09

Auditors' Report

Tothe Members of Welspun Gujarat Stahl Rohren Limited 1. We have audited the attached Balance Sheet of Welspun Gujarat Stahl Rohren Limited (“the Company”) as at 31st March 2009, and also the Profit and Loss account and the Cash Flow Statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditors' Report) Order, 2003 issued by the Central Government of India in terms of Section 227(4A) of the Companies Act, 1956 (“the Act”), and on the basis of such checks as we considered appropriate and according to the information and explanations given to us, we annex hereto a statement on the matters specified in paragraph 4 and 5 of the said order.

4. We draw reference to Note 22 regarding demerger of Plate and Coil Mill division w.e.f 1st April 2009.

5. Further to our comments in the Annexure referred to in Paragraph (3) above, we report that:

(a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit; (b) In our opinion, proper books of account as required by law have been kept by the Company, so far as appears from our examination of those books; (c) The Balance Sheet, the Profit and Loss account and the Cash Flow statement dealt with by this report are in agreement with the books of account; (d) In our opinion, the Balance Sheet, the Profit and Loss account and the Cash Flow statement dealt with by this report comply with the accounting standards referred to in Section 211 (3C) of the Act; (e) On the basis of written representations received from the Directors and taken on record by the Board, we report that none of the directors is disqualified as at 31st March 2009 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act; (f) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read with the significant accounting policies and notes to accounts as per Schedule 18, give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: i) In the case of the Balance Sheet, of the state of affairs of the Company as at 31st March 2009; ii) In the case of the Profit and Loss account, of the Profit for the year ended on that date; and iii) In the case of the Cash Flow statement, of the cash flows for the year ended on that date.

Mohan Bhandari Partner Membership No. 12912 For MGB&Co Chartered Accountants

Mumbai, 29th May,2009 56 Annexure referred to in paragraph 3 of Auditors' Report to the members of Welspun Gujarat Stahl Rohren Limited on the accounts for the year ended 31st March 2009.

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets. (b) According to the information and explanations given to us, the fixed assets have been physically verified by the management at reasonable intervals in a phased program, which in our opinion is reasonable having regard to the size of the Company and the nature of its assets. The discrepancies noticed on such verification, were not material and have been properly dealt with in the books of account. (c) During the year,substantial part of the fixed assets has not been disposed off by the Company.

(ii) (a) The inventories have been physically verified by the management during the year except stock lying with third parties in respect of whom confirmations have been obtained. In our opinion, the frequency of verification is reasonable. (b) In our opinion, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. (c) On the basis of our examination of records and in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventories as compared to the book records were not material and have been properly dealt with in the books of account.

(iii) (a) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Act. (b) According to the information and explanations given to us, the Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Act.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventory,fixed assets and for sale of goods and services. During the course of our audit, no major weaknesses were noticed in the internal control system in respect of these areas.

(v) According to the information and explanations given to us, there are no contracts or arrangements the particulars of which are required to be entered into the register in pursuance of Section 301 of the Act.

(vi) In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public during the year within the meaning of section 58A and 58AA of the Act and the rules framed there under.

(vii) In our opinion, the Company has an internal audit system commensurate with its size and nature of its business.

(viii)On the basis of records produced, we are of the opinion that prima facie cost accounting records prescribed by the Central Government under section 209 (1) (d) of the Act, in respect of products of the Company covered under the rules under that section, have been maintained. However, we are neither required to carry out nor have carried out any detailed examination of such accounting records.

(ix) (a) According to the records of the Company,the undisputed statutory dues, including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax (VAT), Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and any other material statutory dues to the extent applicable have been deposited regularly with the appropriate authorities except delay in few cases. There are no undisputed amounts payable in respect of the aforesaid dues outstanding as at 31st March 2009 for a period of more than six months from the date they became payable.

57 Annual Report 2008-09

(b) There are no disputed dues on account of Wealth Tax, Income Tax, Custom Duty, and Cess. Dues on account of the disputed Sales Tax (VAT),Service Tax, Excise Duty,which have not been deposited, are as under:

Name of the Statute Amount Period to which the amount Forum where dispute is pending (Nature of dues) (Rs. in million) relates

Sales Tax 2.12 2000-01 to 2002-03 Sales Tax Tribunal

3.61 2001-2002 and 2005-2006 Joint Commissioner of Sales Tax (Appeals) The Central Excise Act, 1944 -ExciseDuty 0.09 2003-2004 Commissioner of Central Excise and Customs

0.08 2007-2008 Assistant Commissioner of CentralExciseandCustoms

- Service Tax 31.20 2004-2005 and 2005-2006 Custom Excise and Service Tax Appellate Tribunal (CESTAT)

7.82 2005-2006 and 2006-2007 Custom Excise and Service Tax Appellate Tribunal (CESTAT)

45.90 2006-2007, 2007-2008 and Commissioner of Central Excise 2008-2009 and Customs

(x) The Company does not have any accumulated losses at the end of the financial year and has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

(xi) According to the information and explanations given to us, the Company has not defaulted in repayment of dues to financial institutions, banks and debenture holders.

(xii) The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii)The Company is not a chit fund or a nidhi / mutual benefit fund / society.

(xiv)The Company is not dealing or trading in securities, debentures and other investments.

(xv) In our opinion and according to the information and explanations given to us, the terms and conditions on which the Company has given guarantee for loans taken by subsidiaries and others from banks and financial institutions are prima facie not prejudicial to the interest of the Company.

(xvi)According to the information and explanations given to us and records of the Company examined by us, the term loans taken by the Company have been applied for the purpose for which they are raised.

(xvii)On the basis of review of utilization of funds which is based on an overall examination of the Balance Sheet of the Company and related information as made available to us, we report that no short term funds have been used for long term investments.

58 (xvii )The Company has made preferential allotment of shares under their ESOP Scheme to the party covered in the register maintained under Section 301 of the Companies Act, 1956 during the year. The price at which these shares were issued is not prima-facie prejudicial to the interest of the Company.

(xix)The Company has created adequate security in respect of debentures issued.

(xx) The Company has not raised any money by way of public issue during the year.

(xxi)Based on our audit procedures performed and according to the information and explanations given by the management, no fraud on or by the Company has been noticed or reported during the course of our audit.

Mohan Bhandari Partner Membership No. 12912 For MGB & Co. Chartered Accountants

Mumbai, 29th May,2009

59 Annual Report 2008-09

Balance Sheet as at 31st March 2009 (Rs. In million) Schedules As at As at Particulars 31.03.2009 31.03.2008

Sources of Funds Shareholders' Funds Share Capital 1 932.46 888.77 Reserves and Surplus 2 14,865.53 14,005.89 15,797.99 14,894.66

Share Application Money-Warrants (Refer Note 1) 886.90

Loan Funds Secured Loans 3 21,634.02 16,893.85 Unsecured Loans 4 103.41 106.45 21,737.43 17,000.30

Deferred Tax Liabilities (Net) (Refer Note 12) 2,487.63 1,737.88

Total 40,023.05 34,519.74

Application Of Funds Fixed Assets Gross Block 5 26,528.82 22,324.85 Less:Depreciation/Amortisation 3,618.48 2,367.66 Net Block 22,910.34 19,957.19 Capital Work-In-Progress (Refer Note 10(iv)) 3,803.15 4,249.66 26,713.49 24,206.85

Investments 6 1,718.37 3,904.67

Foreign Currency Monetary Item Translation Difference Account (Refer Note 5(b)) 354.98 _

Current Assets, Loans and Advances Interest Accrued on Investments 25.18 37.90 Inventories 7 23,236.41 12,878.35 Sundry Debtors 8 5,838.55 7,259.11 Cash and Bank Balances 9 9,193.71 1,207.71 Loans and Advances 10 11,149.81 3,447.12 49,443.66 24,830.19 Less : Current Liabilities and Provisions Current Liabilities 11 37,607.18 17,744.96 Provisions 12 600.28 677.01 38,207.45 18,421.97 Net Current Assets 11,236.21 6,408.22

Total 40,023.05 34,519.74

Significant Accounting Policies and Notes to Accounts 18 As per our attached report of even date For and on behalf of the Board

B.K.Goenka M.L.Mittal For MGB & Co. Executive Director-Finance Chartered Accountants Chairman and Managing Director

Mohan Bhandari Partner Raj Kumar Jain Pradeep Joshi th Mumbai, 29 May 2009 Director Company Secretary

60 Profit And Loss Account for the year ended 31st March, 2009 (Rs. In million) Particulars Schedules Year ended Year ended 31.03.2009 31.03.2008

Income Sales and Services (Gross) 13 61,096.82 41,730.49 Less: Excise Duty 2,313.68 1,625.95 Sales and Services (Net) 58,783.14 40,104.54 Other Income 14 178.79 107.35 Total 58,961.93 40,211.89 Expenditure Cost of Goods 15 42,113.93 26,440.20 Manufacturing and Other Expenses 16 10,322.78 7,056.54 Financial Expenses (Net) 17 1,734.96 801.57 Depreciation / Amortisation 1,254.19 571.50 Total 55,425.86 34,869.81

Profit Before Tax 3,536.08 5,342.08 Provision For Taxation -CurrentTax 439.47 894.33 - Earlier Years - (19.58) - Deferred Tax 749.75 943.93 -Fringe Benefit Tax 11.18 9.17 Profit After Tax 2,335.67 3,514.23

Balance Brought Forward 5,305.60 2,738.13 Profit Available for Appropriation 7,641.27 6,252.36 Appropriations: General Reserve 234.00 351.50 Debenture Redemption Reserve 268.75 268.75 Proposed Dividend on Equity Shares 279.74 266.63 Tax on above Dividend 47.54 45.31 Dividend on Equity Shares for earlier period 13.06 12.45 Tax on Dividend 2.22 2.12 Balance carried to Balance Sheet 6,795.96 5,305.60

Earnings Per Share (Face Value Rs. 5/- each) (Refer Note 17) - Basic 12.59 21.53 - Diluted 12.50 18.89

Weighted Average No. of Shares used in computing Earning Per Share - Basic 185,569,595 163,259,990 - Diluted 186,864,123 186,079,450

Significant Accounting Policies and Notes to Accounts 18 As per our attached report of even date For and on behalf of the Board

B.K.Goenka M.L.Mittal For MGB & Co. Executive Director-Finance Chartered Accountants Chairman and Managing Director

Mohan Bhandari Partner Raj umarKJain Pradeep Joshi th Mumbai, 29 May 2009 Director Company Secretary

61 Annual Report 2008-09

Schedules Forming Part of Accounts (Rs. In million) Particulars As at As at 31.03.2009 31.03.2008

Schedule - 1 Share Capital Authorised 304,000,000 (304,000,000) Equity Shares of Rs. 5/- each 1,520.00 1,520.00 98,000,000 (98,000,000) Preference Shares of Rs. 10/- each 980.00 980.00

2,500.00 2,500.00

Issued, Subscribed and Paid Up(Refer note 1 and 2 ) 186,491,192(177,753,235) Equity Shares of Rs. 5/- each fully paid up 932.46 888.77

Total 932.46 888.77

(Of the above 8,120,000Equity shares Rs. 5/- each fully paid up are allotted for Consideration other than cash, pursuant to the Scheme of Arrangement.)

Schedule - 2 Reserves and Surplus Capital Reserve As per last Balance Sheet 1,057.26 1,057.26

1,057.26 1,057.26

Securities Premium As per last Balance Sheet 6,860.93 1,816.84 Add: Received during the year 848.14 4,706.22 Add: Discount on issue of shares under Employees Stock Options Scheme (Refer Note 2) 1.65 7.28 Add/(Less): Premium on redemption of Foreign Currency Convertible Bonds - 330.59 7,710.72 6,860.93

Debenture Redemption Reserve As per last Balance Sheet 268.75 - Add: Appropriated during the year 268.75 268.75 537.50 268.75

Employees Stock Options Outstanding-(Net) (Refer Note 2) 60.03 63.16 Less Deferred employee compensation (18.35) (41.68) 41.68 21.48

Hedging Reserve Account (Refer Note 5(c)) (2,004.20) (10.09)

General Reserve As per last Balance Sheet 501.96 150.46 Add: Appropriated during the year 234.00 351.50 Less: Transferred to Fixed Assets (Refer Note 5(b)) (9.35) - 726.61 501.96

Profit and Loss Account 6,795.96 5,305.60

Total 14,865.53 14,005.89

62 Schedules Forming Part of Accounts (Rs. In million) Particulars As at As at 31.03.2009 31.03.2008

Schedule - 3 Secured Loans (Refer Note 3) Debentures Secured Redeemable Non Convertible Debentures 3,000.00 3,000.00

3,000.00 3,000.00 From Banks In Foreign Currency 68.47 90.17 In Rupee 10,537.85 11,199.80

10,606.32 11,289.97

External Commercial Borrowings 7,623.87 2,004.87

Working Capital From Banks In Foreign Currency 303.83 436.82 In Rupee 100.00 162.19

403.83 599.01

Total 21,634.02 16,893.85

Schedule - 4 Unsecured Loans

Deferred Sales Tax Loan 103.41 106.45 (Repayble In six equal annual instalments from Financial Year 2009 / 2015)

Total 103.41 106.45

Schedule - 5 Fixed Assets - (at Cost)

Gross Block Depreciation/Amortisation Net Block Particulars As at Additions Deductions As at As at Additions Deductions As at As at As at 01.04.2008 31.03.2009 01.04.2008 31.03.2009 31.03.2009 31.03.2008 a) Tangible Assets Land 54.34 74.10 - 128.44 - - - - 128.44 54.34 Buildings 2,941.73 691.88 2.24 3,631.37 206.20 92.36 - 298.56 3,332.80 2,735.53 Plant and Machinery 19,083.44 3,495.09 310.27 22,268.27 2,070.16 1,136.15 0.60 3,205.71 19,062.55 17,013.28 Office and Other Equipments 132.93 30.94 2.41 161.46 54.66 13.84 1.51 66.99 94.47 78.27 Vehicles 36.89 7.59 2.06 42.42 9.34 4.21 1.02 12.52 29.90 27.55 Furnitures and Fixtures 58.72 9.37 1.08 67.01 22.75 4.07 0.25 26.57 40.44 35.96 b) Intangible Assets Software 12.46 213.06 - 225.52 4.55 3.57 - 8.12 217.40 7.91 22,320.51 4,522.03 318.06 26,524.48 2,367.66 1,254.19 3.38 3,618.48 22,906.00 19,952.85 Asset held for disposal 4.34 - - 4.34 - - - - 4.34 4.34 Total 22,324.85 4,522.03 318.06 26,528.82 2,367.66 1,254.19 3.38 3,618.48 22,910.34 19,957.19 Previous Year 9,111.91 13,413.43 200.49 22,324.85 1,877.26 573.92 83.52 2,367.66 19,957.19

NOTE 1. Depreciation for the year includes Rs Nil (Rs.2.42 million) transferred to Pre-operative expenses. 2. Gross block of Plant and Machinery includes Rs 63.49 million (Rs.63.49 million) in respect of expenditure incurred on capital asset, ownership of which does not vest in the Company.

63 Annual Report 2008-09

Schedules Forming Part of Accounts (Rs. In million) Particulars As at As at 31.03.2009 31.03.2008

Schedule - 6 Investments Long Term (at cost)-Unquoted a) Subsidiary Companies-Wholly Owned Welspun Pipes Inc. 10,001 Equity Shares of $1 each fully paid up. 0.44 0.44

16,000 Redeemable Preferred Stock of $ 1000 each fully paid up # 645.50 645.50

Welspun Pipes Limited 50,000 Equity Shares of Rs.10 each fully paid up # 0.50 0.50 b) Subsidiary Company-Other Welspun Natural Resources Private Limited (Extent of holding 51%) 5,100 Equity Shares of Rs.10 each fully paid up. 0.05 0.05

Welspun Urja India Limited (Extent of holding 51%) 25,500(Nil) Equity Shares of Rs.10 each fully paid up. 0.26 - c) Joint Ventures (Refer Note 21) Adani Welspun Exploration Limited (Extent of holding 35%) Nil (2,96,150) Equity Shares of Rs.10 each fully paid up. _ 2.97

Dahej Infrastructure Private Limited (Extent of holding 50%) 5,00,000 Equity Shares of Rs.10 each fully paid up. 5.00 5.00 d) Associate Red Lebondal Limited (Extent of holding 25%) 450 Equity Shares of Euro 1 each. 0.03 0.03 e) Others Quoted Limited * 100 Equity Shares of Rs 10 /- each 0.01 0.01

Welspun Syntex Limited * 25 Equity Shares of Rs 10 /- each fully paid up. 0.00 0.00 (Market Value-Rs.0.00 mn (Rs.0.01 mn))

Unquoted Welspun Enterprises (Cyprus) Limited 11,800 Equity Shares of Euro 1 each fully paid up. 0.77 0.77

Welspun Power and Steel Limited * 100 Equity Shares of Rs.10/- each 0.00 0.00

Current Investments a) Bonds - Quoted

11.45% Punjab Infrastructure Development Board 1,018.00 - (1018 bonds of Rs. 10,00,000 each)

10.25% Government of India 47.81 - (390 bonds of Rs 1,00,000 each)

Nil (50) Bonds of 8.75% Indian Railway Finance Corporation of Rs.10,00,000 each - 49.50

Nil (68) Bonds of 9.85% State Bank of Bikaner and Jaipur of Rs.10,00,000 each - 68.00

64 Schedules Forming Part of Accounts (Rs. In million) Particulars As at As at 31.03.2009 31.03.2008

Nil (479) Bonds of 0.00% Punjab Infrastructure Development Board (Deep Discount Bonds) - 107.51 of Rs.10,00,000 each

Nil (1452) Bonds of 9.45% PNB Tier I Perpetual Bond Series III of Rs.10,00,000 each - 1,452.18

Nil (122) Bonds of 9.75% PNB Tier Perpetual Bond Series II of Rs.10,00,000 each - 123.22

Nil (420) Bonds of 8.98% National Capital Region Planning Board of Rs.10,00,000 each - 420.90

Nil (100) Bonds of 9.95% State Bank of Travancore of Rs. 10,00,000 each - 100.00

Nil (10) Bonds of 9.90% Syndicate Bank Perpetual Bonds of Rs. 10,00,000 each - 10.00 b) Mutual Funds - Quoted LIC MF Floating Rate Fund - Short Term Plan-Dividend Plan - 38.35 (3,775,954 units of Rs. 10 each)

LIC MF Liquid Fund- Dividend Plan - 150.03 (13,663,695 units of Rs. 10 each)

LIC MF Floating Rate Fund - Short Term Plan -Dividend Plan - 444.56 (43,775,673 units of Rs.10 each)

Lotus India Gilt Fund Short Duration Plan- Institutional Weekly Dividend - 20.06 (2,006,391 units of Rs. 10 each)

SBI MF Premier Liquid Fund- Institutional Daily Dividend - 265.09 (26,422,684 units of Rs. 10 each)

Total 1,718.37 3,904.67

All the above Shares and Securities are fully paid up * Denotes amount less than Rs.10,000 Aggregate Book Value of Quoted Investments 1,065.82 3,249.41 Aggregate Book Value of Unquoted Investments 652.55 655.26 Aggregate Market Value of Quoted Investments 1,167.61 3,260.83 # The Company has given an undertaking to banks for non disposal of its shareholding for credit facilities granted to Subsidiaries

65 Annual Report 2008-09

Schedules Forming Part of Accounts

Mutual Fund Units bought and sold during the year: (Rs. In million) Name of the Fund Quantity (Nos.) Cost

AIG India Liquid Fund Super Institutional - Daily Dividend 0.25 252.07 Baroda Pioneer Liquid Fund - Institutional - Daily Dividend Plan 7.04 70.40 Bharti AXA Liquid Fund - Institutional - Daily Dividend Reinvestment 0.10 96.30 Birla Sun Life Cash Manager - Institutional Plan - Daily Dividend Reinvestment 59.65 596.63 Birla Sun Life Cash Plus - Institutional - Daily Dividend Reinvestment 1.10 11.83 Birla Sun Life Cash Plus - Institutional Premium - Daily Dividend Reinvestment 59.53 596.49 Birla Sun Life Floating Short Term Plan - Daily Dividend Reinvestment 15.00 150.09 Birla Sun Life Savings Fund - Institutional Plan - Daily Dividend Reinvestment 59.34 593.83 BOB MF Liquid Fund - Daily Dividend Reinvestment Plan 5.00 50.04 Canara Robeco Liquid Fund - Institutional - Daily Dividend Reinvestment 43.19 433.68 Canara Robeco Liquid Plus Fund - Institutional - Daily Dividend Reinvestment 21.48 266.55 Canara Robeco Liquid Super Institutional - Daily Dividend Reinvestment Fund 172.58 1,732.87 DBS Chola Freedom Income Short Term Fund - Daily Dividend Reinvestment Plan 3.00 30.05 DBS Chola Liquid Inst Daily Dividend Reinvestment Plan 178.37 1,789.39 DWS Insta Cash Plus - Institutional Plan - Daily Dividend Reinvestment 56.55 566.67 DWS Money Plus - Institutional Plan - Daily Dividend Reinvestment 5.01 50.11 DWS Ultra Short Term Fund - Institutional Plan - Daily Dividend Reinvestment 21.85 218.86 Edelweiss Liquid Fund - Institutional - Daily Dividend Reinvestment 6.01 60.07 Fidelity Cash Fund - Institutional Daily Dividend 12.70 127.00 Fidelity Liquidty Plus Fund - Institutional - Daily Dividend 1.62 16.18 Fortis Money Plus Institutional Plan - Daily Dividend 13.26 132.62 Fortis Overnight Fund - Institutional Plus - Daily Dividend 20.50 205.07 Fortis Overnight Fund - Regular Plan - Weekly Dividend 0.89 8.90 HDFC Cash Management Fund - Treasury Advantage - Wholesale Plan - Daily Dividend Reinvestment 25.90 259.78 HDFC Liquid Fund Premium Plan - Dividend - Daily Reinvestment 21.16 259.37 HSBC Cash Fund- Institutional Plus - Daily Dividend 30.64 306.56 HSBC Fixed Term Series 60 Institutional Dividend 5.11 51.11 ICICI Prudential Flexible Income Plan - Daily Dividend Reinvestment 2.79 29.47 ICICI Prudential Institutional Liquid Plan - Super Institutional - Daily Dividend Reinvestment 108.55 1,085.53 IDFC Cash Fund - Plan C - Super Institutional Plan - Daily Dividend Reinvestment 6.31 63.12 JM High Liquidity Fund - Super Institutional Plan - Daily Dividend Reinvestment 21.35 213.87 JP Morgan India Active Bond Fund - Institutional - Dividend Reinvestment Plan 10.00 100.00 JP Morgan India Liquid Fund - Retail Daily Dividend Plan - Reinvestment 0.21 2.13 JP Morgan India Liquid Fund - Super Institutional - Dividend Plan - Reinvestment 40.83 408.59 JP Morgan India Treasury Fund - Super Institutional - Daily Dividend Plan - Reinvestment 14.80 148.10 LICMF Floating Rate Fund - Short Term Plan - Dividend Plan 1,238.34 12,570.11 LICMF Income Plus Fund - Daily Dividend Plan 1,822.79 18,227.91 LICMF Liquid Fund - Daily Dividend Reinvestment Plan 2,360.02 25,913.27 LICMF Saving Plus Plan - Daily Dividend Reinvestment 407.03 4,070.25 Lotus India FMP - 3 Months Series XXXIII Dividend 2.04 20.37 Lotus India Short Term Plan - Institutional Daily Dividend 1.99 20.16 Mirae Asset Liquid Fund-Super Institutional - Dividend Plan - Daily - Reinvestment 1.02 1,018.83 Principal Cash Management Fund Liquid Option - Institutional Plan - Dividend Reinvestment Daily 4.12 41.20 Principal Cash Management Fund Liquid Option - Institutional Premium Plan - Dividend Reinvestment Daily 11.11 111.12 Reliance Liquid Fund - Treasury Plan-Institutional Option - Daily Dividend Reinvestment Option 16.02 244.94 Reliance Liquid Fund Cash Plan - Daily Dividend Reinvestment 0.53 5.95 Reliance Liquid Plus Fund - Institutional Option - Daily Dividend Plan 0.24 241.62 Reliance Liquidity Fund-Daily Dividend Reinvestment Option 10.07 100.70 Reliance Monthly Interval Fund - Series-I Institutional Dividend Plan 10.00 100.81 SBI Magnum Insta Cash Fund - Daily Dividend Option 124.38 2,083.34 SBI Premier Liquid Fund - Institutional Plan - Daily Dividend Reinvestment 144.97 1,454.40 SBI SHF - Ultra Short Term - Institutional Plan - Daily Dividend Reinvestment 81.80 818.36 Sundaram BNP Paribas Liquid Plus Super Institutional Dividend Reinvestment Daily 18.37 184.16 Sundaram BNP Paribas Money Fund Super Institutional Daily Dividend Reinvestment 21.43 216.30 Tata Floating Rate Short Term Institutional Plan - Daily Dividend 128.30 1,284.87 Tata Liquid Super High Investment Fund - Daily Dividend 0.56 621.15 Templeton India Treasury Management Account - Super Institutional Plan - Daily Dividend Reinvestment 0.40 401.56 UTI Liquid Cash Plan Institutional - Daily Income Option - Reinvestment 0.23 237.91 UTI Money Market Fund - Daily Dividend Option - Reinvestment 16.84 305.93 UTI Treasury Advantage Fund - Institutional Plan - Daily Dividend Option - Reinvestment 0.12 120.41

66 Schedules Forming Part of Accounts (Rs. In million) Particulars As at As at 31.03.2009 31.03.2008

Schedule - 7 Inventories (As taken, valued and certified by the management) Raw Materials 11,099.17 6,094.65 Stores and Spares 728.85 395.61 Finished Goods 4,850.13 1,626.13 Work/Goods In Process 2,334.92 1,122.43 Goods In Transit 4,223.34 3,639.53

Total 23,236.41 12,878.35

Schedule - 8 Sundry Debtors (Unsecured and Considered Good, unless otherwise stated)

More than Six Months - Considered good 872.80 276.60 - Considered Doubtful 97.29 158.89

Others - Considered good * 4,965.75 6,982.51 5,935.84 7,418.00

Less: Provision for doubtful debts 97.29 158.89

Total 5,838.55 7,259.11 * includes due from a Subsidiary Rs. 1860.99 million (Rs. Nil)

Schedule - 9 Cash and Bank Balances

Cash in Hand 4.53 5.13 Cheques in Hand 2.27 -

Balance with Scheduled Banks - In Current Accounts * 4,834.96 307.54 - In Margin Money Accounts 699.25 510.42 - in Fixed Deposit Accounts 3,641.59 304.47

Balance with Non-Scheduled Banks - In Current Accounts -Banque Exterieure'd Algerie 11.11 - (Maximum Balance outstanding Rs. 36.27 million) - Fixed Deposits Accounts- Standard Chartered Bank, London - 80.15 (Maximum Balance outstanding Rs. 80.17 million)

Total 9,193.71 1,207.71 * includes Rs. 2.28 million (Rs. 0.92 million) being balance in unclaimed dividend accounts not available for use by the Company.

Schedule - 10 Loans and Advances (Unsecured and Considered Good, unless otherwise stated)

Loans and Advances to Subsidiaries -Share Application Money 1,695.51 237.10 -Other Loans and Advances 4,769.57 74.31 Advances (Recoverable in cash or in kind or for value to be received) Balances with Excise and Customs authorities etc. 3,030.78 1,131.83 Other Advances 1,087.25 1,381.70 Deposits 566.70 622.18

Total 11,149.81 3,447.12

67 Annual Report 2008-09

Schedules Forming Part of Accounts (Rs. In million) Particulars As at As at 31.03.2009 31.03.2008

Schedule - 11 Current Liabilities Acceptances 30,940.78 12,757.68 Sundry Creditors Due To Micro Small and Medium Enterprises (Refer Note 4) 1.58 - Due To Others 6,085.83 3,199.82

Trade Advances and Deposits 322.35 1,138.78 Advance from a Subsidiary - 514.32 Interest Accured but not due 254.35 133.44 Unclaimed Dividend * 2.28 0.92 Total 37,607.18 17,744.96 * There is no amount due and outstanding to be credited to Investor Education and Protection Fund as at 31st March 2009 Schedule - 12 Provisions Proposed Dividend (Including tax on proposed dividend) 327.28 311.94 Taxation (Net) 242.97 344.31 Retirement Benefits 30.03 20.76

Total 600.28 677.01

Particulars Year ended Year ended 31.03.2009 31.03.2008 Schedule - 13 Sales and Services Sales 57,278.77 39,773.55 Job Work and Other Charges Received 2,509.87 606.06 (Tax deducted at Source Rs16.68 million (Rs.1.00 million) Export and Excise Benefits 1,308.18 1,350.88 Total 61,096.82 41,730.49 Schedule - 14 Other Income Dividend ( Gross) 70.73 50.89 Profit on Sale of Current Investments 68.62 43.94 Miscellaneous Income 39.44 12.52 Total 178.79 107.35 Schedule - 15 Cost of Goods (A) Raw Materials Consumed Opening Stock 6,094.65 2,074.36 Purchases (Net) 48,467.74 31,645.00 54,562.39 33,719.36 Less: Closing Stock 11,099.17 6,094.65 Total (A) 43,463.22 27,624.71 (B) Purchases of Traded Goods 2,763.75 19.66 Total (B) 2,763.75 19.66

(C) Increase/(Decrease) in Stock Closing Stock Finished Goods 4,850.13 1,626.13 Work/Goods In Process 2,334.92 1,122.43 7,185.05 2,748.56 Less : Opening Stock Finished Goods 1,626.13 252.19 Work/Goods In Process 1,122.43 578.13 Transfer from Trial Run - 539.36 2,748.56 1,369.68 Less: Increase/(Decrease) in Excise duty on Finished Goods 323.45 174.71

Total (C) 4,113.04 1,204.17

Total (A)+(B)-(C) 42,113.93 26,440.20

68 Schedules Forming Part of Accounts (Rs. In million) Particulars Year ended Year ended 31.03.2009 31.03.2008

Schedule - 16 Manufacturing and Other Expenses

Stores and Spares Consumed 982.30 582.28 Coating and Other Job Charges 2,525.15 567.03 Power, Fuel and Water Charges 1,310.89 350.14 Material Handling and Transport Charges 1,470.21 1,382.69 Freight Expenses 1,907.48 2,050.85 Commission and Discounts on Sales 676.66 502.06 Directors' Remuneration 69.47 86.61 Salaries, Wages and Allowances 947.28 639.00 Contribution to Funds 49.68 30.99 Staff Welfare Expenses 86.49 73.09 Rent 79.92 26.32 Rates and Taxes 61.82 11.05 Repairs and Maintenance - Plant and Machinery 46.01 22.88 - Buildings 16.05 13.46 -Others 15.52 6.98 Travelling and Conveyance Expenses 137.42 91.33 (Directors travelling Rs.18.54 million (Rs.12.17 million)) Communication Expenses 19.74 15.11 Professional and Consultancy Fees 53.38 148.64 Insurance 59.07 39.96 Directors' Sitting Fees 0.40 0.30 Printing and Stationery 11.89 8.78 Security Charges 20.48 11.93 Membership and Subscription 7.84 7.48 Vehicle Expenses 16.76 12.77 Foreign Exchange Difference (Net) (309.99) (79.09) Miscelleneous Expenses 86.44 70.15 Diminution in value of Current Investment 1.06 - Loss on sale/discard of fixed assets 5.11 105.29 Auditors Remuneration 4.04 4.57 Sales Promotion Expenses 24.23 17.45 Provision for doubtful debts (Net) (61.60) 158.89 Bad Debts and Advances written off 1.58 97.55 Total 10,322.78 7,056.54

Schedule - 17 Financial Expenses(Net) Interest on Debentures 337.43 162.21 Fixed Loans 1,165.80 230.11 Working Capital 108.04 98.42 Others 385.64 9.84 1,996.91 500.58 Discounting and Other Charges 518.37 664.37 2,515.28 1,164.95 Less: Interest Received (Gross) * 780.32 363.38 (Tax deducted at source Rs. 105.52 million (Rs.53.79 million))

Total 1,734.96 801.57 * includes interest received from a Subsidiary Rs 139.24 million (Rs Nil)

69 Annual Report 2008-09

Schedule: 18 Significant Accounting Policies and Notes to Accounts

(A) Significant Accounting Policies 1. Basis of Accounting The financial statements have been prepared under the Historical Cost Convention on accrual basis and in accordance with the accounting standards referred to in Section 211(3C) of the Companies Act, 1956. Pursuant to the announcement of the Institute of Chartered Accountants of India (ICAI) on “Accounting for Derivatives” on the early adoption of Accounting Standard (AS-30) “Financial Instruments: Recognition and Measurement”, the Company has early adopted the standard during the previous year, to the extent that the adoption does not conflict with the existing mandatory accounting and other authoritative pronouncements, Company Law and other regulatory requirements.

2. Use of Estimates The preparation of the financial statements in accordance with the generally accepted accounting principles requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities as at the date of the financial statements and the reported amount of revenue and expenses of the year. Actual results could differ from those estimates. Any revision of such accounting estimate is recognized prospectively in current and future periods.

3. Fixed Assets (a) Fixed assets are stated at original cost of acquisition / installation (net of cenvat credit availed) net off accumulated depreciation, amortization and impairment losses except land which is carried at cost. The cost of fixed assets includes cost of acquisition, taxes, duties, freight, other incidental expenses related to the acquisition, construction and installation including trial run expenses (net of revenue) and borrowing cost incurred during preoperational period. (b) Capital Work-In-Progress is stated at the amount expended upto the date of Balance Sheet including preoperative expenditure and advances on capital account. (c) Cost of Software includes license fees, cost of implementation and system integration and capitalized as intangible assets in the year in which the relevant software is put to use.

4. Borrowing Costs Borrowing Costs attributable to the acquisition or construction of qualifying assets are capitalized as part of cost of such assets. All other borrowing costs are charged to revenue.

5. Depreciation (a) Depreciation on fixed assets is provided on Straight Line Method at the rates prescribed in Schedule XIV to the Companies Act, 1956 except for certain Plant and Machinery which are depreciated on the basis of estimated useful lives of 13-15 years. The rates of depreciation derived from these estimated useful lives are higher than those given in Schedule XIV to the Companies Act, 1956. (b) For determining the appropriate rate of depreciation on Plant and Machinery, continuous process plant has been identified on the basis of technical opinion by the Company / Expert. (c) Software is amortized over a period of five years from the date of its use based on Management's estimate of useful life.

6. Investments Investments intended to be held for more than a year, from the date of acquisition, are classified as long-term and are stated at cost. Provision for diminution in value of investments is made to recognize a decline other than temporary. Current Investments are stated at cost or fair value which ever is lower.

7. Revenue Recognition (a) Sale of goods is recognized when the risks and rewards of ownership are passed on to the customers, which is generally on dispatch. Export Sales are accounted for on the basis of date of bill of lading. Gross Sales include excise duty, value 70 added tax incentive, adjustments for price variation, quality claims, liquidated damages and exchange rate variations related to export realization. (b) Export benefits: Duty entitlement pass book (DEPB) and Focus market are accounted on accrual basis. Target plus /Duty free entitlement certificate scheme of EXIM policy are recognized when utilized. (c) Revenue from Services is recognized when the services are completed. (d) Dividend income is recognized when the right to receive the dividend is unconditional.

8. Inventories Inventories are valued at lower of cost or net realizable value. The basis of determining cost for various categories of inventories:- (i) Raw Material Stores and Spares Moving weighted Average basis. (ii) Work / Goods in Process and Finished Goods Cost of Direct Material, Labour and other manufacturing expenses.

9. (i) Foreign Currency Transactions (a) Foreign exchange transactions are converted into Indian Rupees at the prevailing rate on the date of the transactions. Current monetary assets and liabilities are translated at the exchange rate prevailing on the last day of the year.Non monetary items are carried at cost. (b) Gains or losses arising out of remittance / translations at the year- end are credited / debited to the profit and loss account for the year and in cases where it relates to acquisition of fixed assets till put to use, are adjusted to the carrying cost of such assets except as per amendment to AS-11 (Refer Note No. 5 (b)). (c) Premium / discount on forward exchange contracts not relating to firm commitments or highly probable forecast transactions and not intended for trading or speculation purpose is amortized as income or expense over the life of the contract.

(ii) Derivative Instruments and Hedge Accounting The Company uses foreign currency forward contracts to hedge its risk associated with foreign currency fluctuations relating to certain firm commitments and forecasted transactions. The Company designates these hedging instruments as cash flow hedges and applying the recognition and measurement principles set out in Accounting Standard 30 “Financial Instruments: Recognition and Measurement” (AS 30). The gain or loss on the effective hedges is recorded in “Hedging Reserve Account” until the transaction is complete. The gain or loss is accounted in Profit and Loss Account upon completion of the transaction or when the hedge instrument expires or terminates or ceases to qualify for hedge accounting.

10. Employee Benefits a) Short term employee benefits are recognized as an expense at the undiscounted amount in the Profit and Loss Account of the year in which the related service is rendered. b) Post employment and other long term benefits are recognized as an expense in the Profit and Loss Account of the year in which the employee has rendered services. The expense is recognized at the present value of the amounts payable determined using actuarial valuation techniques. Actuarial gains and losses in respect of post employment and other long-term benefits are charged to the Profit and Loss account. c) Payments to defined contribution retirement benefit schemes are charged as expenses as and when they fall due.

11. Employees Stock Option Scheme In respect of stock options granted pursuant to the Company's Stock Option Scheme, the intrinsic value of the options is treated as discount and accounted as employee compensation cost over the vesting period.

12. Accounting for Taxes on Income (a) Current tax is determined as the amount of tax payable in respect of taxable income of the year computed as per Income Tax Act, 1961. Fringe Benefit tax is provided for on the estimated value of fringe benefits as per the provisions of

71 Annual Report 2008-09

the Income Tax Act, 1961. (b) Deferred tax is recognized subject to consideration of prudence, on timing difference, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods and measured using prevailing enacted or substantively enacted tax rates.

13. Operating Lease Lease of assets under which all the risks and rewards of ownership are effectively retained by the lessor are classified as operating leases. Lease payments under operating leases are recognized as an expense on accrual basis in accordance with the respective lease agreements.

14. Research and Development Capital expenditure on Research and Development is treated in the same manner as Fixed Assets. The revenue expenditure on research and development is charged to Profit and Loss Account.

15. Impairment of Assets At each Balance Sheet date, the Company reviews the carrying amount of fixed assets to determine whether there is any indication that those assets suffered impairment loss. If any such indication exists, the recoverable amount of the assets is estimated in order to determine the extent of impairment loss. The recoverable amount is higher of the net selling price and value in use, determined by discounting the estimated future cash flows expected from the continuing use of the asset to their present value.

72 B. Notes to Accounts

1) Share Application Money - Warrants The share application money aggregating to Rs. 886.90 million (outstanding as at 31st March 2008) in respect of 8,678,082 warrants held by promoters have been converted into equal number of fully paid equity shares of Rs. 5 each at a price of Rs. 102.20 each.

2) Employees Stock Options In respect of options granted under the Welspun Employee's Stock Option Scheme, in accordance with guidelines issued by Securities and Exchange Board of India, the value of options (based on intrinsic value of the share on the date of the grant of the option) is accounted as deferred employee compensation, which is amortized on a straight line basis over the vesting period. Salaries, wages and allowances include Rs.21.85 million (Rs.23.73 million) charged as Deferred Employee Compensation under Employee Stock Options Scheme.

During the year,49,500 equity shares of Rs. 5 each fully paid up were issued at a price of Rs. 80.00 each, 375 equity shares of Rs. 5 each fully paid up were issued at a price of Rs. 87.80 each and 10,000 equity shares of Rs. 5 each fully paid up were issued at a price of Rs. 94.10 each on exercise of options by employees. The discount allowed aggregating to Rs. 1.65 million (Rs. 7.28 million) in respect of shares allotted pursuant to Stock Option Scheme is credited to Securities Premium Account as per guidelines of Securities and Exchange Board of India.

Stock Options outstanding as at the year end are as follows:

Particulars Granted during Granted during Granted during 2006-07 2007-08 (A) 2007-08 (B) Exercise Price Rs. 80 Rs. 87.80 Rs. 94.10 Date of Grant 8 January 2007 13 April 2007 24 April 2007 Vesting period commences on 8 January 2008 13 April 2008 24 April 2008 Options outstanding at the beginning of the period 2,242,750 1,250 100,000 Options exercised during the year 49,500 375 10,000 Options Lapsed during the year 54,500 875 Nil Outstanding as at 31st March 2009 2,138,750 NIL 90,000

3) Secured Loans a) Redeemable Secured Non-Convertible Debentures (NCD)

Particulars No. of Face Value Date of Redemption Interest Amount Debentures (In Rs.) Allotment from the date (p.a.) (Rs. In million) of allotment Fixed Rate Debentures 1,000 1,000,000 28/11/2007 3 years 10.05% 1,000 Fixed Rate Debentures 1,250 1,000,000 29/11/2007 5 years 10.50% 1,250 Fixed Rate Debentures 450 1,000,000 31/12/2007 5 years 10.40% 450 Fixed Rate Debentures 300 1,000,000 18/01/2008 3 years 10.05% 300 Total 3,000

The debentures together with interest are secured by first pari passu charge by way of mortgage/hypothecation of entire immovable and movable fixed assets of the Company, both present and future and second/floating charge on current assets, subject to prior charge in favour of banks for working capital facilities. b) TermLoans from Banks Term Loans of Rs. 10,606.32 million (Rs. 11,289.97 million) are secured by first pari passu charge by way of mortgage /

73 Annual Report 2008-09

hypothecation of entire immovable and movable fixed assets of the Company, both present and future and also secured by second / floating charge on current assets, subject to prior charge in favour of banks for working capital facilities. c) External Commercial Borrowing (ECB) ECB of Rs. 7,623.87 million (2,004.87 million) is secured by first pari passu charge by way of mortgage / hypothecation on entire immovable and movable fixed assets of the Company both present and future. Further the ECB is secured by exclusive charge by way of hypothecation of Debt Service Reserve Account. d) Working Capital facilities Working Capital facilities from banks are secured by first charge by way of hypothecation of raw materials, finished goods and goods in process, stores & spares and book debts of the Company and second charge on entire immovable and movable fixed assets of the Company both present and future of the Company.

4) Micro, Small and Medium Enterprises The Company has amounts due to suppliers under The Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) as at 31st March 2009. The disclosure pursuant to the said Act is as under:

(Rs. In million) Particulars 31st March 2009 31st March 2008

Principal amount due to suppliers under MSMED Act, 2006 1.58 - Interest accrued and due to suppliers under MSMED Act, on the above amount 0.01 - Payment made to suppliers (Other than interest) beyond the appointed day, during the year 35 .07 3.14 Interest due and payable to suppliers under MSMED Act, for payments already made 0. 24 0.55 Interest accrued and remaining unpaid at the end of the year to suppliers under MSMED Act. 0.80 0.55

The above information and that given in Schedule -11 “Current Liabilities and Provisions” regarding Micro, Small and Medium Enterprises has been determined to the extent such parties have been identified by the Company on the basis of information available.

5) Foreign Exchange Differences a) Loss on account of difference in foreign exchange on realignment/realization and on cancellation of derivative instrument amounting to Rs. 3,433.25 million (gain of Rs. 1,729.82 million) is adjusted under respective heads of income or expenses in the Profit and Loss Account to which it relates and exchange difference loss of Rs. 6.27 million (other than (b) below) (Rs. 307.39 million) has been adjusted to the carrying cost of fixed assets/capital work in progress. b) The Companies (Accounting Standards) Amendment Rules 2009 has amended the provision of AS-11 related to "Effects of the changes in Foreign Exchange Rate" vide notification dated 31st March 2009 issued by the Ministry of Corporate Affairs. Accordingly, the Company has capitalised exchange difference loss amounting to Rs. 616.20 million (net of gain of Rs. 9.35 million adjusted through General Reserve pertaining to earlier period) to the cost of fixed assets and exchange difference loss of Rs. 532.50 million is transferred to "Foreign Currency Monetary Item Translation Difference Account" to be amortized over the balance period of such long term assets / liabilities but not beyond 31st March 2011. Out of the above, Rs.177.50 million has been written off in the current year and Rs. 354.98 million has been carried over.

74 c) The Company has early adopted AS-30 as referred to in Note 1 of the Significant Accounting Policies and accordingly Rs. 2004.20 million (Rs. 10.09 million) related to foreign exchange difference on Cash Flow Hedges for certain firm commitments and forecasted transactions is recognized in Shareholders' Funds and shown as Hedging Reserve Account.

6) Disclosure of Derivative Instrument and Unhedged Foreign Currency Exposure# The outstanding foreign currency derivative contracts as at 31st March, 2009 in respect of various types of derivative hedge instruments and nature of risk being hedged and not hedged are as follows: (Rs. In million)

Particulars 31st March 2009 31st March 2008 Amount Amount Amount Amount Hedged Unhedged* Hedged Unhedged* a) In respect of Short term receivables and payables (i) In respect of Debtors a) Existing as on the Balance sheet date - 5,238.96 - 1,592.88 b)In respect of Future forecasted transactions 16,483.09 - 16,066.42 - (ii) In respect of Creditors a) Existing as on the Balance sheet date - 19,772.69 - 14,088.80 b)In respect of Future forecasted transactions 4,312.45 - 8,920.94 - b) In respect of Short term receivables and payables existing as on Balance Sheet date (i) Other short term assets or receivables - 2,786.04 - 1,785.99 (ii) Other short term liabilities or payables 7,556.86 1,348.23 - 1,302.05 c) In respect of Long term receivables and payables existing as on Balance Sheet date (i) In respect of Foreign Currency Loan receivable - 2,536.00 - - (ii) In respect of Foreign Currency Loan payable 68.47 7,623.87 - 2,094.99 d) Other derivative Hedge instruments 3,536.00 - 222.75 -

Note: * The Company has export orders in hand as on 31 st March 2009 in excess of unhedged Short Term Payables (Net of Receivables) amounting to Rs. 13,095.92 million (Rs. 12,011.98 million) resulting in natural hedge against foreign exchange rates fluctuations.

Details of Cross Currency derivative contracts

(Rs. In million) Particulars 31st March 2009 31st March 2008 Cross Currency Hedges Amount in Foreign currency Amount in Foreign currency In respect of Short term receivables EUR/USD 88.15 58.00 In respect of Short term payables EUR/USD 74.22 98.14 JPY/USD 9.76 349.48

75 Annual Report 2008-09

7) Managerial Remuneration

a) Remuneration to Managing Director and Whole Time Directors' is approved by the members' and is within the limits prescribed in Schedule XIII to the Companies Act, 1956.

(Rs. In million) Particulars Managing Director Whole Time Directors 31st March 2009 31st March 2008 31st March 2009 31st March 2008 Salaries and Allowances 5.50 5.50 27.85 20.05 Commission 31.27 56.49 - - Perquisites/Contribution to Provident Fund - - 4.85 4.57 Total 36.77 61.99 32.70 24.62

Notes: (i) Salaries and Allowances include basic salary,house rent allowance and leave travel allowance. (ii) Perquisites include amortization of Employees Stock Options amounting to Rs. 3.70 million (Rs.3.75 million). (iii) Provision for post retirement benefits which is based on actuarial valuation done on an overall Company basis is excluded from the above calculation.

b) The Computation of net profit in accordance with Section 198 of the Companies Act, 1956 and commission payable to the Managing Director is as under:

(Rs. In million) Particulars 31st March 2009 31st March 2008 Profit before Tax as per Profit and Loss account 3536.08 5,342.08 Add: Managerial Remuneration 69.47 86.61 Directors’ Sitting fees 0.40 0.30 Depreciation as per profit and loss account 1254.19 571.50 Loss on sale/discard of fixed assets 5.11 105.29 Wealth Tax 0.26 0.14 Diminution in value of current investments 1.06 - Provision for doubtful debts (Net) (61.60) 158.89 Total 4804.97 6,264.81 Less: Depreciation u/s 350 1254.19 571.50 Profit on Sale of Current Investments 68.62 43.94 Foreign Currency Monetary Item Translation Difference Account 354.98 - Net Profit for Section 198 3127.18 5,649.37 Commission to Managing Director @1% 31.27 56.49 Maximum permissible managerial remuneration to Managing Directors and 312.72 564.94 Whole Time Directors under Section 198 of the Companies Act, 1956 @ 10% of the profits computed above Restricted as per service agreements 69.47 86.61

76 8) Contingent Liabilities not provided for (Rs. In million) Particulars 31st March 2009 31st March 2008 Performance Guarantees/Bid Bond given by banks to company’s customers / 13,648.35 9,056.75 government authorities etc. Corporate Guarantees given by the company (includes Rs. 4,131.17 million (Rs. 3,710.58 6,954.02 6,104.47 million) for loans taken by the subsidiaries. Loans/Liabilities outstanding against these guarantees are Rs. 4,131.17 million (Rs. 3,710.58 Million)) Letters of Credit outstanding (net of liability provided) for company’s sourcing 4,683.75 5,136.75 Claims against the Company not acknowledged as debts 14.79 2.74 Custom duty on pending export obligation against import of Raw Material 1,011.76 258.53

Disputed service tax /sales tax/ excise duty liabilities 92.37 88.91

9) Disclosures pursuant to adoption of Accounting Standard 15 (Revised 2005) Employee Benefits The Employees gratuity fund scheme managed by Kotak Life Insurance Limited is a defined benefit plan. The present value of obligation is based on actuarial valuation using the projected unit credit method. The obligation for leave encashment is recognized in the same manner as gratuity.

Defined Benefit Plan Details of defined benefit plan of Gratuity Fund (Funded) and leave encashment (Non-Funded) are as follows I. Actuarial Assumptions Economic Assumptions

Major Assumptions 2008-09 2007-08 (%p.a.) (%p.a.) Discount Rate (p.a.) 7.75 8.5 Expected Return on Assets 6.0 6.0 Salary Escalation Rate 5.0 6.0

Demographic Assumptions

Major Assumptions Mortality Latest Compiled Table of LIC (1994-96) Retirement Age 58 Years Attrition Rate 2% upto 44 and 1% thereafter

II. Expenses Recognized in the Profit and Loss Account (Rs. In million) Particulars Gratuity Gratuity Leave Encashment Leave Encashment (Funded) (Funded) (Unfunded) (Unfunded)

2008-09 2007-08 2008-09 2007-08 Current Service Cost 44.98 31.69 31.47 19.01 Interest Cost 4.60 4.47 2.22 2.13 Expected Return on Plan Assets (2.44) (2.87) Nil Nil Net Actuarial (Gain)/Loss recognized in the period (21.15) (17.46) (20.92) (8.65)

Expenses recognized in the Profit and Loss Account* 25.99 15.25 12.77 11.18

Expenses capitalized in the Account Nil 0.58 Nil 1.31

77 Annual Report 2008-09

III. Present Value of Defined Benefit Obligation and the Fair Value of Assets (Rs. In million) Particulars Gratuity Gratuity Leave Leave (Funded) (Funded) Encashment Encashment (Unfunded) (Unfunded) 2008-09 2007-08 2008-09 2007-08 Present Value of Obligation as at 31st March 2009 59.00 45.10 30.03 20.76 Fair Value of Plan Assets as at 31st March 2009 59.00 45.10 Nil Nil Liability Recognized in the Balance Sheet and disclosed under Nil Nil 30.03 20.76 Current Liabilities and Provisions (Refer Schedule-12)

IV. Change in the Present Value of Obligation (Rs. In million) Particulars Gratuity Gratuity Leave Leave (Funded) (Funded) Encashment Encashment (Unfunded) (Unfunded) 2008-09 2007-08 2008-09 2007-08 Present Value of Obligation as at 1st April 2008 45.10 25.01 20.76 12.41 Current Service Cost 44.98 31.69 31.47 19.01 Interest Cost 4.60 4.47 2.22 2.13 Benefits Paid (1.89) (1.38) (3.50) (4.14) Actuarial (Gain)/Loss on Obligations (33.79) (14.69) (20.92) (8.65) Present Value of Obligation as at 31st March, 2009 59.00 45.10 30.03 20.76

V. Change in Fair Value of Plan Assets (Rs.(Rs. In In million) million) Particulars Gratuity Gratuity (Funded) (Funded) 2008-09 2007-08 Fair Value of Plan Assets as at 1st April 2008 45.10 25.25 Expected Return on Plan Assets 2.44 2.87 Actuarial Gain/(Loss) on Obligations (12.64) 2.77 Contributions 25.99 15.59 Benefits Paid (1.89) (1.38) Fair Value of Plan Assets as at 31 st March 2009 59.00 45.10

* Included in the Contribution to Funds (Refer Schedule-16).

10) Capital Projects (i) Pre-operative Expenses (including borrowing costs) of Rs. 266.46 million (Rs. 1,823.37 million) in respect of projects capitalized during the year have been allocated proportionately to the direct cost of respective building and plant and machinery.

(ii) Borrowing costs (net) capitalized / allocated to fixed assets / Capital work in progress is Rs. 240.30 million (Rs.720.12 million) related to plate and coil mill.

(iii) Capital Commitments not provided for Rs. 733.69 million (Rs.1,703.52 million), net of advances.

(iv) Capital Work in Progress, includes Capital Advances Rs. 403.43 million (Rs.896.18 million) and Preoperative Expenses Rs. 460.27 million (Rs. 471.96 million). 78 (v) The details of Preoperative Expenses are as under:

(Rs. In million) Particulars 31st March 2009 31st March 2008 Expenditure upto previous year 471.96 517.66 Add : Expenditure incurred during the year Power, Fuel and Water Charges - 72.57 Material Handling and Transport Charges (2.67) 8.77 Salary, Wages and Allowances 11.85 88.75 Contribution to Funds -5.31 Staff Welfare Expenses 0.38 8.33 Rent -1.17 Rates and Taxes -3.23 Repairs and Maintenance Expenses 1.51 0.27 Traveling and Conveyance Expenses (Directors Rs. Nil) ( Rs. 4.01 million) - 11.51 Communication Expenses 0.24 1.19 Professional and Consultancy Fees 0.45 641.67 Insurance 2.53 11.26 Vehicle Expenses -4.71 Security Charges -5.88 Miscellaneous Expenses 0.18 10.56 Foreign Exchange Difference (net) - 117.50 Depreciation -2.42 Financial Expenses 240.30 781.91 Provision for Income Tax -2.15 Sub Total 254.77 2,296.82 Trial Run Expenses Raw Material Consumed - 713.28 - MS Slab Nil (26,156 MT) Production -- - MS Plate Nil (9,302 MT) - Power* Nil (12,300 MT) - Steam* Nil (89,971 MT) *Includes captive consumption of Nil (2192 MWH) (Power) and Nil (48,420 MT) (Steam). Stores and Spares Consumed -2.53 Power, Fuel and Water Charges - 234.20 - Coal Nil (28,370 MT) Material Handling and Transport Charges - 3.37 Salaries, Wages and Allowances - 7.54 Selling and Distribution Expenses - 0.74 Discounting and Other Charges - 2.16 Trial Run Recoveries Net Sales - (291.33) - Plate Nil (7,417 MT) - Power Nil (5,332 MWH) - Steam Nil (41,552 MT) Self Consumption of Trial Run Production - (71.66) - Plate Nil (1,681 MT) - Power Nil (4,776 MWH)

79 Annual Report 2008-09

(Rs. In million) Particulars 31st March 2009 31st March 2008 Stock in process transferred to operation - (533.00) - MS Plate Nil (15,903 MT) Finished goods transferred to operation - (6.36) - MS Plate Nil (203 MT) Net (Loss) - (61.48) Less : Income Interest on Fixed Deposits (Tax deducted at source Rs. Nil (Rs. 4.35 million)) - 33.60 Interest on Others (Tax deducted at source Rs. Nil (Rs. 0.13 million)) - 1.45 Dividend on units in mutual funds - 26.74 Miscellaneous Income -1.18 Total 726.73 2295.33 Less : Amount allocated to Assets Capitalized during the year 266.46 1823.37 Balance Carried to Balance Sheet 460.27 471.96

11) Segment Reporting The Company is engaged in the business of steel products which in the opinion of the management is considered the only business segment in the context of Accounting Standard 17 on “Segment Reporting”.Also, the Company does not consider any significant difference as regards the risks and returns of the product with reference to export and domestic sales. Therefore, Segment Information as required by Accounting Standard - 17 is not applicable.

12) Taxation The component of deferred tax balances are as under (Rs. In million) Particulars 31st March 2009 31st March 2008 Deferred Tax Assets Retirement Benefits 10.21 7.05 Other Fiscal Disallowance 33.42 54.49 Total 43.63 61.54 Deferred Tax Liabilities Fiscal allowance on fixed assets 2,410.60 1,799.42 Others 120.66 - Total 2,531.26 1,799.42 Deferred Tax Liabilities (net) 2,487.63 1,737.88

13) Auditors' Remuneration includes

(Rs. In million) Particulars 31st March 2009 31st March 2008 Audit Fees 2.80 3.50 Tax Audit Fees 0.5 0.75 Certification and other fees 0.72 0.25 OutofPocketexpenses 0.02 0.07

80 14) Prior Period Expense/Income

Details of Prior period income of Rs. 166.27 million (Rs.28.98 million (net)) is as under: (Rs. In million) Account Head 31st March 2009 31st March 2008 Expenses Depreciation -4.39 Salaries, Wages and Allowances - (4.46) Rates and Taxes -0.51 Commission and Discounts - (25.55) Finance Expenses 1.81 (3.59) Others 0.20 0.07 Income Export and Excise Incentives (126.80) (0.35) Interest Income (24.25) - Others (17.23) - Prior Period (Income)/Expenses-(net)Total (166.27) (28.98)

15) Operating Lease The Company leases office, residential facilities, equipment etc. under operating lease agreements that are renewable on a periodic basis at the option of both the lessor and the lessee. The initial tenure of lease is generally for eleven months.

(Rs. In million) Particulars 31st March 31st March 2009 2008 Lease Rental charges for the year 62.62 16.40 Future lease rental obligations payable (under non-cancelable leases) Not Later than one year 92.85 93.81 Later than one year but not later than five years 366.19 365.95 Later than five years 277.78 277.17 Total 736.82 736.93

16) Related party disclosures As per Accounting Standard 18, the disclosure of transactions with related parties as defined in the Accounting Standard are given below: Particulars of Subsidiaries / Associates / Joint Ventures Subsidiaries

Name of the Subsidiary Nature of Business Country of Extent of Holding Incorporation (%) Direct Subsidiary Welspun Pipes Limited Manufacturer of Steel India 100% Pipes Welspun Natural Resources Private Limited Oil and Gas Exploration India 51% Welspun Pipes Inc SPV for Steel Pipes USA 100% Business in US Welspun Urja India Limited # Energy and Solar Power India 51% Generation

81 Annual Report 2008-09

Name of the Subsidiary Nature of Business Country of Extent of Holding Incorporation (%) Indirect Subsidiary Held through Welspun Pipes Inc. Welspun Tubular LLC Manufacturer of Steel USA 100% Pipes in US Welspun Global Trade LLC Marketing Company in US USA 100% Held through Welspun Natural Resources Private Limited Welspun Plastics Private Limited ## Oil and Gas Exploration India 100% (Effective holding by the Company 51%) Held through Welspun Plastics Private Limited Nirmal Plastic Industries (Partnership firm) Oil and Gas Exploration India 95% (Effective holding by the Company 48.45%) # became subsidiary w.e.f 16 th March 2009 ## became subsidiary w.e.f 12 th August 2008

Associate Company Red Lebondal Limited SPV for Steel Pipe Cyprus 25% Marketing Joint Ventures Adani Welspun Exploration Limited Oil and Gas Exploration India 35% (Held through Welspun Natural Resources Private Limited) (Effective holding of the company 17.85%)

Dahej Infrastructure Private Limited Development of Jetty India 50%

Other related parties with whom transactions have taken place during the year and balances outstanding as on the last day of the year. Welspun India Limited, Welspun Power and Steel Limited, Welspun Orissa Power and Steel Limited, Welspun Trading Limited, Limited, Remi Metals Limited (w.e.f 15th November 2008), Welspun Anjar SEZ Limited, Welspun Foundation for Health and Knowledge, Welspun Syntex Limited, Vipuna Trading Limited, Welspun Logistics Limited, Sequence Apartments Private Limited, Welspun Realty Private Limited, Welspun Enterprises (Cyprus) Limited, Krishiraj Trading Limited, Welspun Mercantile Limited, Welspun Wintex Limited, Goodvalue Polyplast Limited.

Directors /Key Management Personnel

Name of the Related Party Nature of Relationship Late Shri G.R. Goenka Chairman* B. K. Goenka Chairman and Managing Director ** R. R. Mandawewala Director M. L. Mittal Executive Director-Finance B. K. Mishra Director

* ceased to be chairman (on demise) w.e.f 28th December 2008. ** became chairman w.e.f 30th January 2009

82 Disclosure in respect of transactions which are more than 10% of the total Transactions of the same type with related party during the year:

1. Sale of Goods and Recoveries to - Welspun Trading Limited Rs. 28,741.51 million (Rs.11,530.95 million). (Refer Note no.23) 2. Sale of Fixed Assets include to-Welspun Tubular LLC Rs. 0.03 million (Rs.Nil), Welspun Power and Steel Limited Rs. 0.26 million (Rs.Nil), Welspun India Limited Rs. Nil (Rs.0.74 million). 3. Purchase of Goods and Services include from- Welspun Tubular LLC Rs. 151.04 million (Rs.Nil), Welspun Pipes Inc Rs. 603.29 million (Rs. 109.65 million) 4. Purchase of Fixed Assets includes from - Welspun Power and Steel Limited Rs. 0.04 million (Rs. 64.36 million). 5. Expenditure includes -Rent paid to-Welspun India Limited Rs. 2.92 million (Rs. 28.96 million), Vipuna Trading Limited Rs. 6.62 million (Rs. 2.33 million), Welspun Realty Private Limited Rs. 47.51 million (Nil), Balance written off-Welspun Enterprises (Cyprus) Limited Rs. 0.19 million (Rs. Nil). 6. Donation to-Welspun Foundation for Health and Knowledge Rs. 24 million (Rs. 21.40 million) (meant for corporate social responsibility activities). 7. Other Income includes-Interest received from Welspun Pipes Inc Rs. 139.24 million (Rs. Nil) and Rent received from Remi Metals Limited Rs. 0.13 million (Rs. Nil). 8. Loans, Advances and Deposits includes given to-Welspun Pipes Inc Rs. 4,195.60 million (Rs. 599.05 million), Welspun Pipes Limited Rs. 1,000 million (Rs. 0.29 million) and repaid during the year Rs. 1,000 million (Rs. Nil), to Welspun Logistics Limited Rs. 128.78 million (Rs. 230 million) and repaid during the year Rs. 196.70 million (Rs. 135.10 million), to Welspun Realty Private Limited Rs. 443.60 million (Rs. 500 million) and repaid during the year Rs. 476 million (Rs. Nil), Welspun Power and Steel Limited Rs. 205 million (Rs.91.32 million) and repaid during the year by Welspun Power and Steel Limited is Rs. 205 million (Rs. Nil) and to Welspun India Limited is Rs. 1.69 million (Rs. 27.33 million) and repaid during the year Rs.1.11 million (Rs. 16.80 million). 9. Investment in Equity Shares of Welspun Urja India Limited Rs. 0.26 million (Rs. Nil) which is acquired from Welspun Wintex Limited Rs. 0.10 million (Rs. Nil), Welspun Mercantile Limited Rs. 0.06 million (Rs. Nil) and Welspun Trading Limited Rs. 0.10 million (Rs Nil). 10. Share Application Money given includes to-Welspun Pipes Limited Rs. 1,288.95 million (Rs. 234 million), Welspun Natural Resources Private Limited Rs. 172.50 million (Rs. 1.50 million), Dahej Infrastructure Private Limited Rs. Nil (Rs. 56.70 million). 11. Share Application Money given includes repaid by-Adani Welspun Exploration Limited Rs. 31.14 million (Rs. Nil). 12. Sale of Investment in Shares of - Adani Welspun Exploration Limited Rs. 2.96 million (Rs. Nil) to Welspun Natural Resources Private Limited. 13. Issue of Equity Shares by conversion of warrants to Krishiraj Trading Limited Rs. 886.90 million (Rs. 1743.93 million), Welspun Mercantile Limited Rs. Nil (Rs. 372.22 million). Issue of Equity Shares by exercise of employee stock option scheme (ESOP) to CEO and Executive Director Rs. 0.94 million (Rs. 3.60 million). 14. Reimbursement of Expenses (Net) includes to Welspun India Limited Rs. 68.93 million (Rs. 30.64 million), Welspun Anjar SEZ Limited Rs. 28.63 million (Rs. Nil).

Disclosure of Closing balances as at 31st March 2009

1. Loans, Advances and Deposits given include-Welspun Pipes Inc Rs. 4,762.58 million (Rs. 74.31 million), Welspun Logistics Limited Rs. 23.40 million (Rs. 91.32 million), Welspun Realty Private Limited Rs. 467.60 million (Rs. 500 million). 2. Loans, Advances and Deposits taken-Welspun Tubular Inc Rs. Nil (Rs.514.32 million). 3. Sundry Debtors include-Welspun Tubular LLC Rs. 1860.99 million (Rs. Nil), Welspun Trading Limited Rs. 169.02 million (Rs. 3,191.56 million ). 4. Sundry Creditors include-Welspun India Limited Rs. 0.97 million (Rs. 8.55 million), Welspun Anjar SEZ Limited Rs. 28.62 million (Rs. Nil), Welspun Logistics Limited Rs. 14.41 million (Rs. Nil). 5. Investments held include of-Welspun Pipes Inc Rs. 645.95 million (Rs. 645.95 million).

83 Annual Report 2008-09

6. Share Application Money given-Welspun Pipes Limited Rs. 1,520.65 million (Rs. 234.00 million), Welspun Natural Resources Private Limited Rs. 174.86 million (Rs. 3.10 million), Dahej Infrastructure Private Limited Rs. 56.70 million (Rs. 56.70 million). 7. Share Application Money received-Krishiraj Trading Limited Rs. Nil (Rs. 886.90 million). 8. Guarantees and Collaterals provided include issued to-Welspun Pipes Inc Rs. 4,057.60 million (Rs. 3,206 million), Red Lebondal Limited Rs. 710.08 million (Rs. 561.05 million), Welspun Trading Limited Rs. 1,609.80 million (Rs. 1609.87 million).

Note: Details of remuneration paid to key managerial persons are disclosed at Note 7 above.

17) Earnings Per Share

(Rs. In million) Particulars Year Ended Year Ended 31st March, 2009 31st March, 2008 I) Profit computation for Basic Earning per Share Profit After Tax 2335.67 3,514.23

II) Weighted Average number of equity shares for Earning per Share computation a) For Basic Earnings per share 185,569,595 163,259,990 b) For Diluted Earnings per Share 186,864,123 186,079,450

III) Earnings Per Share on Face Value of Rs. 5 each Basic Rs. 12.59 Rs. 21.53 Diluted Rs. 12.50 Rs. 18.89

18) Financial Statements of Subsidiaries The Ministry of Corporate Affairs, Government of India vide its order no.47/402/2009-CL-III dated 20th May, 2009 issued under section 212 (8) of the Companies Act, 1956 (“The Act”) has exempted the Company from attaching the Balance Sheets and Profit and Loss Accounts of its subsidiaries under Section 212 (1) of the Act. As per the orders, key details of each subsidiary are attached along with statements under Section 212 (1) of the Act.

19) Disclosure pursuant to Clause 32 of the listing agreement,: (Rs. In million)

Sr. Particulars Balance as on 31st Maximum amount No. March outstanding during the year 2009 2008 2009 2008 1. Loans and advances in the nature of loans to subsidiaries: - Welspun Pipes Inc 4,762.58 74.31 4,762.58 599.05 - Welspun Pipes Limited 6.99 - 1,000.00 -

2. Loans and advances in the nature of loans to associates/joint ventures - - --

3. Loans and advances in the nature of loans where there is no repayment ---- schedule, or interest below rate specified as per Section 372A of the Companies Act, 1956 4. Loans and advances in the nature of loans to firms/companies in which ---- directors are interested 5. Investments by the Loanee in the shares of the Company ----

84 20) Remittance in Foreign Currency on Account of Dividend

Particulars 2008-09 2007-08 Number of non- resident shareholders where direct remittances have been 29 35 made by the Company Number of shares on which dividend is remitted 22,425,005 26,209,131 Year to which dividend relates 2007-2008 2006-2007 Amount remitted (Rs. in million) 33.64 26.21

21) Disclosure in respect of Joint Ventures In compliance with Accounting Standard 27 on “Financial Reporting of Interest in Joint Ventures”, the Company's share of each of the assets, liabilities, income and expenses etc in respect of jointly controlled entities are as follows:

Name of Joint Venture Description of Interest Country of Ownership Incorporation Interest Dahej Infrastructure Private Limited (DIPL) Jointly Controlled Company India 50% Adani Welspun Exploration Limited (AWEL) Jointly Controlled Company India * 35% *(Held through Welspun Natural Resources Private Limited effective holding 17.85%)

Financial interest (on the basis of audited accounts) (Rs. In million) Particulars As on 31.03.09 As on 31.03.09 As on 31.03.08 As on 31.03.08 Company’s Share of Interest DIPL AWEL* DIPL AWEL Assets 45.47 97.46 47.84 44.53 Liabilities 7.49 7.08 5.96 6.11 Income 4.12 - 0.16 - Expense 8.02 - 1.60 -

22) a) Demerger of Plate and Coil Mill division The Board of Directors in the meeting held on 20th April 2009 has approved a Scheme of Arrangement in the nature of demerger and transfer of Plate and Coil Mill Division of the Company to “Welspun Steel Plates and Coil Mills Private Limited” with relevant assets and liabilities. The Scheme is subject to approval of creditors and members of the Company and the Hon'ble High Court of Gujarat. The appointed date for demerger is 1st April, 2009.

b) Information pursuant to AS-24 on “Discontinuing Operations”: (i) Carrying amount of assets and liabilities of continuing and discontinuing operations: (Rs. In million) Particulars 2009 2008

Continuing Discontinuing Total Continuing Discontinuing Total operations operations operations operations Total Assets 60,555.82 22,054.69 82,610.51 36,713.32 16,228.40 52,941.72

Total Liabilities 48,817.33 17,995.19 66,812.52 25,272.31 11,887.85 37,160.16

(ii) The Plate and Coil mill started commercial production on 27th March 2008 and the plates manufactured therein are intended to be used captively for production of pipes, accordingly major part of the production is captively used. The Board of directors has not identified the plate manufacturing as separate segment and hence the revenue, expenses, results and cash flow as required under AS 24 could not be worked out.

85 Annual Report 2008-09

23) The Company has been getting majority of the export orders and executing those orders through one of the related party for business necessity and allowing it a small profit margin of about 0.5% of Sales. The realization, income/ benefits, claims or expenses are transferred/ paid immediately to the Company.

24) a) Previous year figures have been regrouped / rearranged / re casted wherever considered necessary to confirm to this year's classification. Figures in brackets pertain to previous year. b) Plate and Coil Mill division was capitalized at end of the previous year 2008 and in current year it is in full operation. Hence previous year figures are not comparable with that of the current year.

25) Additional Information pursuant to Part II of Schedule VI of the companies Act, 1956

i) Licensed & Installed Capacity Licensed Installed 1. Welded Pipes MT N.A 1,150,000(1,000,000) 2. Coating of Pipes ‘000 SQMS N.A 14,500 (14,500) 3. M.S. Plate MT N.A 1,500,000(1,500,000) 4. Power (co-generation) MWH N.A 300,000 (300,000)

ii) Production, purchase, sales and stocks: (Rs. In million) 31st March 2009 31st March 2008 Qty Amount (Rs.) Qty Amount (Rs.) Opening Stock Welded Pipes MT 34,901 1,571.04 6,260 252.13 M.S. Plate MT 203 7.27 2 0.06 Coating 000’SQMS 31 10.84 - - Others 36.98 - 1,626.13 252.19 Production* Welded Pipes MT 734,352 670,125 M.S. Plate MT 192,569 - Coating 000’SQMS 688 3,301 Power MWH 286,867 95,942 Steam MT 1,366,281 501,651

Transfer from Trial Run MT - 203

Purchase of Traded Goods Coils MT 51,315 2,606.91 - - Others MT - 156.84 18 19.66

Sales- (Inclusive of excise duty) Welded Pipes MT 691,563 49,344.24 641,484 37,771.77 M.S. Plate MT 42,073 3,298.32 - - Coating 000’SQMS 186 203.08 3,270 1,563.76 Power MWH 94,834 415.39 42,397 118.20 Steam MT 290,701 466.88 119,101 50.95 Trading Sales- Coils MT 51,315 2,860.07 - - Trading Sales- others - 159.98 18 20.61 Equipment Sales MT - 530.80 - 248.26 57,278.77 39,773.55

86 (Rs. In million) 31st March 2009 31st March 2008 Qty Amount (Rs.) Qty Amount (Rs.) Closing Stock Welded Pipes MT 57,675 2,983.63 34,901 1,571.04 M.S. Plate MT 38,656 1,558.93 203 7.27 Coating 000’SQMS 533 307.57 31 10.84 Others - 36.98 4,850.13 1,626.13 Note:- * 1) Production includes used for captive consumption (i) Welded Pipes MT 20,015 - (ii) M.S. Plate MT 112,043 2 (iii) Power MWH 192,033 53,545 (iv) Steam MT 1,075,580 382,550

2) Production of welded pipes include produced by third parties on job work basis – 3,006 MT (Nil)

3) Value of following materials consumed for power generation is included in Power, Fuel and Water charges Coal MT 239,969 984.45 36,869 110.30 Lignite MT 31,620 59.08 69,785 116.41 Lime Stone MT --3,553 2.24 iii) Raw Materials Consumed: H.R. Coils MT 557,504 26,837.21 409,922 12,924.25 H.R.Plates * MT 97,921 6,398.44 259,011 13,338.84 M.S.Slab MT 211,902 8,558.36 -- Welding & Coating Material MT 1,669.21 1,361.62 43,463.22 27,624.71 * Note: Does not include 112,043 MT (2 MT) consumed out of own production iv) Raw Materials Consumed: Imported % 77 33,264.97 81 22,418.55 Indigenous % 23 10,198.25 19 5,206.16 100 43,463.22 100 27,624.71 v) Stores and Spares Consumed: Imported % 15 151.57 38 223.87 Indigenous % 85 830.73 62 358.41 100 982.30 100 582.28 vi) CIF Value of Import a) Raw materials 37,488.55 25,549.21 b) Capital goods 1,169.73 2,342.84 c) Stores and Spares 727.07 167.52 d) Traded goods 2,736.75 19.66 e) Coal 875.21 160.38

87 Annual Report 2008-09

(Rs. In million)

31st March 2009 31st March 2008 Qty Amount (Rs.) Qty Amount (Rs.) vii) Expenditure in Foreign Currency: a) Travelling expenses 4.72 7.61 b) Freight charges/ Material 3,012.08 2,539.91 handling and transportation charges c) Membership and Other Fees 1.20 0.63 d) Commission 558.56 278.73 e) Interest 665.79 204.87 f) Professional and 147.69 139.90 Consultancy (Including amount capitalized) g) Discounting and Other bank 236.85 142.29 charges h) Job work charges 2,241.71 213.26 i) Miscellaneous expenses 45.53 66.79

viii) Earnings in Foreign Currency: a) FOB value of Exports 17,540.71 16,545.94 b) Interest Income 203.20 31.31 c) Job work Charges 2,504.50 559.78 d) Others - 147.39

SIGNATURES TO SCHEDULES 1 TO 18 As per our attached report of even date For and on behalf of the Board

B.K.Goenka M.L.Mittal For MGB & Co. Executive Director-Finance Chartered Accountants Chairman and Managing Director

Mohan Bhandari Partner Raj Kumar Jain Pradeep Joshi Mumbai, 29th May 2009 Director Company Secretary

88 Cash Flow Statement Annexed to the Balance Sheet for the year ended (Rs. In million) PARTICULARS 31st March 2009 31st March 2008 CASH FLOW FROM OPERATING ACTIVITIES Net Profit before tax and exceptional items 3,536.08 5,342.08 Adjustments for: Depreciation/Amortisation 1,254.19 571.50 Exchange Adjustments 1,413.13 319.74 Employee stock option compensation-(Net) 21.85 23.73 Interest income (780.32) (363.38) Dividend income (70.73) (50.89) Provision for doubtful debts-(Net) (61.60) 158.89 Provision for Diminution in value of Current Investments 1.06 - (Profit)/Loss on sales/redemption of Current Investments (68.62) (43.94) Interest expenses 1,996.90 500.58 Loss on sale/discard of fixed assets 5.11 105.29 Operating Profit before working capital changes 7,247.05 6,563.60 Adjustments for: Trade and other receivables (42.24) (2,617.13) Inventories (10,358.06) (7,743.21) Trade and other paybles 16,328.21 7,661.77 Cash generated from operations 13,174.97 3,865.04 Taxes paid - net (551.99) (830.31) NET CASH GENERATED FROM OPERATING ACTIVITIES 12,622.97 3,034.73

CASH FLOW FROM INVESTING ACTIVITIES Purchase of fixed assets/Capital Work in Progress (3,300.09) (9,267.96) Sale of fixed assets 309.57 7.34 Interest received 800.33 309.28 Dividend received 70.73 50.89 (Increase)/decrease in Share Application money to Subsidiaries (1,458.41) (235.50) (Increase)/decrease in Share Application money to Joint Ventures 23.64 (80.34) (Increase)/decrease in Loans and Advances to Subsidiaries (4,234.49) (74.31) Purchase of long term investments- Subsidiaries (0.26) (646.00) Purchase of long term investments- Others - (8.65) Sale of long term investments- Others 2.96 - Purchase of Current Investments (95,620.89) (66,436.57) Sale of Current Investments 97,872.05 63,486.79 NET CASH USED IN INVESTING ACTIVITIES (5,534.86) (12,895.02)

CASH FLOW FROM FINANCING ACTIVITIES Proceeds from issue of equity shares (Including securities premium) 4.93 21.78 Proceeds from issue of Warrants - 2,116.15 Interest paid (1,876.00) (414.23) Dividend paid (including corporate dividend tax) (325.88) (179.34) Proceeds from Debentures 1,550.00 6,800.00 Redemption of Debentures (1,550.00) (3,800.00) Proceeds from long term borrowings 5,385.86 3,741.23 Repayment of long term borrowings (2,089.03) (721.02) Increase/(decrease) in other borrowings(Net) (202.00) 69.54 NET CASH FROM FINANCING ACTIVITIES 897.88 7,634.11

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 7,986.00 (2,226.19) CASH AND CASH EQUIVALENT - OPENING BALANCE 1,207.71 3,433.90 CASH AND CASH EQUIVALENT - CLOSING BALANCE 9,193.71 1,207.71

Notes: 1. Cash and Cash equivalents at end of year includes unrealised gain of Rs 1.07 million (Loss of Rs.0.05 million) being on account of Current account/fixed deposits in foreign currency. 2. Cash and Bank balances include Rs. 701.53 million (Rs. 511.39 million) which is not available for use by the Company. 3. Previous year's figures have been regrouped/recast wherever necessary.

As per our attached report of even date For and on behalf of the Board

B.K.Goenka M.L.Mittal For MGB & Co. Executive Director-Finance Chartered Accountants Chairman and Managing Director

Mohan Bhandari Partner Raj Kumar Jain Pradeep Joshi Mumbai, 29th May 2009 Director Company Secretary 89 Annual Report 2008-09

BALANCE SHEET ABSTRACT AND GENERAL BUSINESS PROFILE I. REGISTRATION DETAILS

Registration No. 04-25609 State Code 04 Balance Sheet Date 31.03.2009

II. CAPITAL RAISED DURING THE PERIOD (Amount in Rs. thousands)

Public Issue - Right Issue - Bonus Issue - Private Placement -

III. POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS ( Amount in Rs. thousands)

Total Liabilities 40,023,062 Total Assets 40,023,062

Sources Of Funds Application Of Funds Paid Up Capital 932,456 Net Fixed Asset 26,713,492 Reserves And Surplus 14,865,533 (including Capital Work In Progress) Share Application Money - Investments 1,718,370

Foreign Currency Monetory Deferred Tax Balances (net) 2,487,634 Item Translation Account 354,975 Secured Loans 21,634,025 Net Current Assets 11,236,225 Unsecured Loans 103,414 Misc. Expenditure -

IV. PERFORMANCE OF THE COMPANY (Amount in Rs. Thousands)

Turnover And Other Income 58,961,935 Total Expenditure 55,425,855 Profit Before Tax 3,536,079 Profit After Tax 2,335,671 Earning Per Share (Rs.) 12.59 Dividend Rate 30%

V. GENERIC NAMES OF THREE PRINCIPAL PRODUCTS OF THE COMPANY (AS PER MONETARY TERMS)

Item Code No. (ITC Code) 73 - 05 Product Description Steel Pipes And Tubes Item Code No. (ITC Code) 72 - 08 Product Description Steel Plates

For and on behalf of the Board

B.K.Goenka Chairman and Managing Director

M.L.Mittal Executive Director-Finance

Raj Kumar Jain Director

Pradeep Joshi Company Secretary

90 #

-

-

-

-

-

51%

LTD

Rs.10each

31st March 2009

WELSPUN URJA INDIA

25,500 equity shares of

-

-

-

-

LLC

3.69

100%

(6.62)

WELSPUN GLOBAL TRADE

(156.98)

-

-

-

-

-

LLC

100%

WELSPUN TUBULAR

-

-

100%

110.84

(67.52)

Pradeep Joshi Company Secretary

ofUS$1each

16,000 preference

WELSPUN PIPES INC

10,001 common stock

stock of US$ 1000 each

-

-

-

-

-

100%

Rs.10 each

WELSPUN PIPES LTD

50,000 equity shares of

Raj Kumar Jain Director

@

-

-

-

-

-

51%

0.10

WELSPUN PLASTICS LTD

-

-

-

-

-

51%

Rs.10 each

31st March, 2009 31st March, 2009 31st March, 2009 31st March, 2009 31st March, 2009 31st March, 2009

WELSPUN NATURAL

5,100 equity shares of

RESOURCES PVT. LTD.

M.L.Mittal Executive Director-Finance

SHARES OF THE SUBSIDIARY COMPANY HELD ON THE ABOVE DATE AND EXTENT OF HOLDING

(i) Equity shares

NAME OF THE SUBSIDIARY COMPANY FINANCIAL YEAR OF THE SUBSIDIARY ENDED ON

(ii) Preference Stock

(ii) Extent of holding / Control

Net aggregate amount of profit / (lossess) of subsidiary for the above financial year so far as they concern members of the Company

(i) Dealt with in the accounts of the Company for the year ended

31 March 2009 (Rs. millions)

Net aggregate amount of profits / (Losses) for previous financial year the subsidiary as fas as it concern the members of the Company.

(i) Dealt with in accounts of the Company.

31 March 2009 (Rs.millions) (ii) Not dealt with in the accounts of the Company for the year ended

(ii) Not dealt with in the accounts of the Company.

@ Subsidiary of Welspun Natural Resources Pvt Limited w.e.f 12th August 2008 # Became Subsidiary w.e.f 16th March 2009

STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT,1956, RELATED TO SUBSIDIARY COMPANIES

For and on behalf of the Board

B.K.Goenka Chairman and Managing Director

91 Annual Report 2008-09

Auditors' Report on Consolidated Financial Statements

To The Board of Directors Welspun Gujarat Stahl Rohren Limited

1) We have audited the attached Consolidated Balance Sheet of Welspun Gujarat Stahl Rohren Limited (“the Company”) and its subsidiaries, associates and joint venture Companies (“the group”) as at 31st March 2009, the Consolidated Profit and Loss Account for the year ended on that date, annexed thereto and the Consolidated Cash Flow statement for the year ended on that date. These financial statements are the responsibility of Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2) We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3) a) The financial statements of subsidiaries, with total assets of Rs. 13,976,612,670 as at 31st March 2009 and total revenues of Rs. 1,295,002,929 for the year ended on that date, have not been audited by us. These financial statements have been audited by other auditors whose reports have been furnished to us, and in our opinion, in so far as it relates to the amounts included in respect of those subsidiaries, are based solely on the report of the other auditors.

b) The financial statements of a subsidiary enterprise (partnership firm) namely Nirmal Plastics Industries, India have been consolidated based on the management estimate and therefore unaudited. The total assets and total revenues for consolidation are Rs. 3,676,450 and Rs. Nil respectively.

4) The financial statements of Red Lebondal Limited, Cyprus an associate have been consolidated based on the management estimate and therefore unaudited. The profit/ (loss) of such associate considered for consolidation is Rs. Nil for the year.

5) The financial statements of joint ventures have been audited by other auditor whose report has been furnished to us. The total assets and total revenues for consolidation are Rs. 331,520,792 and Rs. 327,838 respectively. Our opinion in so far as relates to the amount included in respect of those joint ventures, is based solely on the report of respective auditor.

6) We draw reference to Note 25 regarding demerger of Plate and Coil Mill division w.e.f 1st April, 2009.

7) a) We report that the consolidated financial statements have been prepared by the Company in accordance with the requirements of Accounting Standard (AS) 21, “Consolidated Financial Statements”, AS-23 “Accounting for investments in Associates in Consolidated Financial Statements” and AS-27 “Financial Reporting of Interests in Joint Venture” issued by the Institute of Chartered Accountants of India and on the basis of separate financial statements of the Company,its subsidiaries, associates and joint ventures .

b) Based on our audit and on consideration of the reports of the Company on separate financial statements of subsidiaries, associates and joint ventures, in our opinion and to the best of our information and according to the explanations given to us, the attached Consolidated Financial Statements give a true and fair view in conformity with the accounting principles generally accepted in India.

92 (i) In the case of the Consolidated Balance Sheet of the consolidated state of affairs of the group as at 31st March, 2009.

(ii) In the case of the Consolidated Profit and Loss Account of the consolidated results of operations of the group for the year ended on that date; and

(iii) In the case of the Consolidated Cash Flow Statement of the consolidated cash flows of the group for the year ended on that date.

Mohan Bhandari Partner Membership No. 12912 For MGB & Co. Chartered Accountants

Mumbai, 29th May,2009

93 Annual Report 2008-09

Consolidated Balance Sheet as at 31st March 2009 (Rs. In million) Particulars Schedules As at As at 31.03.2009 31.03.2008

Sources of Funds Shareholders' Funds Share Capital 1 932.46 888.77 Reserves and Surplus 2 14,664.43 13,896.45 15,596.89 14,785.22

Share Application Money-Warrants (Refer Note 18) - 886.90

Minority Interest 0.40 0.05

Loan Funds Secured Loans 3 26,434.65 20,570.47 Unsecured Loans 4 103.41 106.46 26,538.06 20,676.93

Deferred Tax Liabilities (Net) (Refer Note 13(c)) 2,487.63 1,737.88

Total 44,622.98 38,086.98

Application Of Funds Fixed Assets Gross Block 5 34,843.63 22,499.39 Less:Depreciation/Amortisation 3,847.22 2,405.77 Net Block 30,996.41 20,093.62 Capital Work-In-Progress (Refer Note 4(e) ) 5,838.55 6,713.40 36,834.96 26,807.02

Investments 6 1,139.95 3,250.20

Foreign Currency Monetary Item Translation Difference Account(Refer Note 10(ii)) 354.98 -

Current Assets, Loans and Advances Income Accrued on Investments 112.52 88.24 Inventories 7 26,112.65 12,878.35 Sundry Debtors 8 4,601.45 7,258.73 Cash and Bank Balances 9 9,470.34 2,703.34 Loans and Advances 10 5,551.52 3,192.78 45,848.48 26,121.44 Less : Current Liabilities and Provisions Current Liabilities 11 38,954.88 17,414.41 Provisions 12 600.59 677.33 39,555.47 18,091.74 Net Current Assets 6,293.01 8,029.70

Miscellaneous Expenditure (To the extent not w/off) Preliminary Expenses 0.08 0.06

Total 44,622.98 38,086.98 Significant Accounting Policies and Notes to Accounts 18 As per our attached report of even date For and on behalf of the Board

B.K.Goenka M.L.Mittal For MGB & Co. Executive Director-Finance Chartered Accountants Chairman and Managing Director

Mohan Bhandari Partner Raj Kumar Jain Pradeep Joshi th Mumbai, 29 May 2009 Director Company Secretary

94 Consolidated Profit And Loss Account for the year ended 31st March 2009 (Rs. In million)

Particulars Schedules Year ended Year ended 31.03.2009 31.03.2008

Income Sales and Services (Gross) 13 59,708.95 41,570.47 Less: Excise Duty 2,313.68 1,625.95 Sales and Services (Net) 57,395.27 39,944.52 Other Income 14 186.97 107.35

Total 57,582.24 40,051.87 Expenditure Cost of Goods 15 40,026.62 26,289.41 Manufacturing and Other Expenses 16 11,020.97 7,099.96 Financial Expenses (Net) 17 1,766.34 818.06 Depreciation / Amortisation 1,432.75 608.76

Total 54,246.68 34,816.19 Profit Before Tax 3,335.56 5,235.68 Provision For Taxation - Current Tax 439.47 894.33 - Earlier Years - (19.58) - Deferred Tax 749.75 943.93 - Fringe Benefit Tax 11.18 9.18 Profit After Tax 2,135.15 3,407.82 Minority Interest 0.10 - Share of Loss from Associate Company - (0.03) Profit After Tax and Minority Interest, Share of Loss from Associate Company 2,135.05 3,407.80 Balance Brought Forward 5,198.80 2,737.58 Difference in Accounting for Investments - 0.19

Profit Available for Appropriation 7,333.85 6,145.57 Appropriations: General Reserve 234.00 351.50 Debenture Redemption Reserve 268.75 268.75 Proposed Dividend on Equity Shares 279.74 266.63 Tax on above Dividend 47.54 45.31 Dividend on Equity Shares for earlier period 13.06 12.45 Tax on Dividend 2.22 2.12 Balance carried to Balance Sheet 6,488.54 5,198.80

Earnings Per Share (Face Value Rs. 5/- each) (Refer Note 27) - Basic 11.51 20.87 - Diluted 11.43 18.31 Weighted Average No. of Shares used in computing Earning Per Share - Basic 185,569,595 163,259,990 - Diluted 186,864,123 186,079,450

Significant Accounting Policies and Notes to Accounts 18 As per our attached report of even date For and on behalf of the Board

B.K.Goenka M.L.Mittal For MGB & Co. Executive Director-Finance Chartered Accountants Chairman and Managing Director

Mohan Bhandari Partner Raj Kumar Jain Pradeep Joshi th Mumbai, 29 May 2009 Director Company Secretary

95 Annual Report 2008-09

Schedule Forming Part of Accounts (Rs. In million) Particulars As at As at 31.03.2009 31.03.2008

Schedule - 1 Share Capital Authorised 304,000,000 (304,000,000) Equity Shares of Rs. 5/- each 1,520.00 1,520.00 98,000,000 (98,000,000) Preference Shares of Rs. 10/- each 980.00 980.00

2,500.00 2,500.00

Issued, Subscribed and Paid Up (Refer note 12(b) and 18) 186,491,192(177,753,235) Equity Shares of Rs. 5/- each fully paid up 932.46 888.77

Total 932.46 888.77

Outof theabove, 8,120,000 EquitySharesOfRs. 5/- eachfully paidup are allotedfor Consideration other than cash, pursuant to the Scheme of Arrangement.

Schedule - 2 Reserves and Surplus

Capital Reserve As per last Balance Sheet 1,057.26 1,057.26

Securities Premium As per last Balance Sheet 6,860.93 1,816.84 Add: Received during the year 848.14 4,706.22 Add: Discount on issue of shares under Employees Stock Option Scheme (Refer Note 12(b)) 1.65 7.28 Add/(Less): Premium on redemption of Foreign Currency Convertible Bonds - 330.59 7,710.72 6,860.93

Debenture Redemption Reserve As per last Balance Sheet 268.75 - Add: Appropriated during the year 268.75 268.75 537.50 268.75

Employees Stock Options Outstanding (Refer No 12(b)) 60.03 63.17 Less:- Deferred employee compensation (18.35) (41.68) 41.68 21.49

Hedging Reserve Account (Refer note 10(iii) (2,004.20) (10.09)

Foreing Currency Translation Reserve 106.32 (2.64)

General Reserve As per last Balance Sheet 501.96 150.46 Add: Appropriated during the year 234.00 351.50 Less:Transferred to Fixed Assets(Refer Note 10(ii)) (9.35) - 726.61 501.96

Profit and Loss Account ** 6,488.54 5,198.79

Total 14,664.43 13,896.45 ** Includes Share of loss in Joint Ventures Rs. 5.36 Million (Rs 1.5 million)

96 Schedule Forming Part of Accounts (Rs. In million) Particulars As at As at 31.03.2009 31.03.2008

Schedule - 3 Secured Loans(Refer Note 19) Debentures Redeemable Non Convertible Debentures 3,000.00 3,000.00 Non Convertible Bonds-Arkansas, Series 2007 532.19 434.21 3,532.19 3,434.21

Term Loans From Banks 14,682.33 14,495.97 Interest Accrued And Due - 36.41

External Commercial Borrowings 7,623.87 2,004.87

Working Capital From Banks In Foreign Currency 303.83 599.01 In Rupee 100.00 -

Lease Finance (Refer Note No. 14(i)) 10.43 -

26,252.65 20,570.47

Share in Joint Ventures 182.00 - Total 26,434.65 20,570.47

Schedule - 4 Unsecured Loans Deferred Sales Tax Loan 103.41 106.45 (Repayble In six equal annual instalments from Financial Year 2009 / 2015) 103.41 106.45

Share in Joint Ventures -0.01 Total 103.41 106.46

Schedule - 5 Fixed Assets - (at Cost)

Gross Block Depreciation / Amortisation Net Block Particulars As at As at Up to For the Deductions Upto As at As at Additions Deductions 01.04.2008 31.03.2009 31.03.2008 Year 31.03.2009 31.03.2009 31.03.2008 a) Tangible Assets Land 54.34 720.15 - 774.49 - 11.71 - 11.71 762.78 54.34 Buildings 2,952.28 3,598.46 2.24 6,548.50 206.34 111.24 - 317.58 6,230.92 2,745.94 Plant and Machinery 19,084.32 7,994.61 310.27 26,768.67 2,070.21 1,231.62 0.60 3,301.23 23,467.43 17,014.12 Office and other Equipments 136.43 110.47 2.41 244.49 55.01 28.32 1.51 81.82 162.67 81.42 Vehicles 39.74 8.02 2.06 45.70 9.62 5.05 1.02 13.66 32.05 30.11 Furnitures and Fixtures 58.96 18.25 1.08 76.13 22.77 4.92 0.25 27.44 48.70 36.19 b) Intangible Assets Goodwill 109.15 (0.96) - 108.18 36.38 45.84 - 82.22 25.97 72.77 Software 12.46 213.06 - 225.52 4.55 3.57 - 8.12 217.40 7.91 Total 22,447.68 12,662.05 318.05 34,791.69 2,404.88 1,442.26 3.38 3,843.77 30,947.92 20,042.80 Asset Held For Disposal 4.34 - - 4.34 - - - - 4.34 4.34 Total (A) 22,452.02 12,662.05 318.05 34,796.03 2,404.88 1,442.26 3.38 3,843.77 30,952.26 20,047.14

Share of Joint Venture (B) 47.37 6.39 6.17 47.60 0.89 2.60 0.04 3.45 44.15 46.48 TOTAL (A+B) 22,499.39 12,668.45 324.22 34,843.63 2,405.77 1,444.86 3.41 3,847.22 30,996.41 20,093.62 Previous Year 9,111.91 13,587.98 200.50 22,499.39 1,877.26 612.03 83.51 2,405.77 20,093.62 Notes: 1. Depreciation for the year includes Rs 12.10 million (Rs.2.42 million) transferred to Pre-operative expenses. 2. Gross block of Plant and Machinery includes Rs 63.49 million (Rs.63.49 million) in respect of expenditure incurred on capital asset, ownership of which does not vest in the Company.

97 Annual Report 2008-09

Schedule Forming Part of Accounts (Rs. In million) Particulars As at As at 31.03.2009 31.03.2008

Schedule - 6 Investments Long Term (at Cost)-Unquoted

Associate Red Lebondal Limited (Extent of holding 25%) 0.03 0.03 (450 Equity shares of Euro 1 each) Less : Share of Loss for the year (0.03) (0.03)

Others Quoted Welspun India Limited * 100 Equity Shares of Rs 10 /- each 0.01 0.01 Welspun Syntex Limited * 25 Equity Shares of Rs 10 /- each 0.00 0.00

Unquoted Welspun Enterprise (Cyprus) Limited 11,800 Equity shares of Euro 1 each 0.77 0.77 Welspun Power and Steel Limited *100 Equity Shares of Rs.10/- each 0.00 0.00 Worli Realty Private Limited 8% 390 Non-Cumulative Redeemable Preference shares of Rs 10/-each 0.39 -

Current Investments a) Bonds

11.45% Punjab Infrastructure Development Board 1,018.00 - ( 1,018 bonds of Rs.10,00,000 each) 10.25% Government of India 47.81 - ( 390 bonds of Rs.1,00,000 each) Nil (50) Bonds of 8.75% Indian Railway Finance Corporation of Rs.10,00,000 each - 49.50 Nil (68) Bonds of 9.85% State Bank of Bikaner and Jaipur of Rs.10,00,000 each - 68.00 Nil (479) Bonds of 0.00% Punjab Infrastructure Development Board (Deep Discount Bonds) - 107.51 of Rs.10,00,000 each Nil (1452) Bonds of 9.45% PNB Tier I Perpetual Bond Series III of Rs.10,00,000 each - 1,452.18 Nil (122) Bonds of 9.75% PNB Tier Perpetual Bond Series II of Rs.10,00,000 each - 123.22 Nil (420) Bonds of 8.98% National Capital Region Planning Board of Rs.10,00,000 each - 420.90 Nil (100) Bonds of 9.95% State Bank of Travancore of Rs. 10,00,000 each - 100.00 Nil (10) Bonds of 9.90% Syndicate Bank Perpetual Bonds of Rs. 10,00,000 each - 10.00 b) Mutual Funds

LIC MF Floating Rate Fund - Short Term Plan -Dividend Plan - 38.35 Nil ( 13,663,695 units of Rs.10 each) LIC MF Liquid Fund -Dividend Plan 3.13 150.03 285,158.488 units of Rs. 10 each( 13,663,695 units of Rs.10 each) LICMF Floating Rate Fund - Short Term Plan - Dividend Plan - 444.56 Nil (43,775,673 units of Rs.10 each) Lotus India Gilt Fund Short Duration Plan - Institutional Weekly Dividend - 20.06 Nil (2,006,391 units of Rs.10 each) SBI MF Premier Liquid Fund-Institutional-Daily Dividend - 265.09 Nil (26,422,684 units of Rs. 10 each) Total 1,070.11 3,250.20

Share in Joint Venture 69.84 - 1,139.95 3,250.20 All the above Shares and Securities are fully paid up

* Denotes amount less than Rs.10,000 Aggregate Book Value of Quoted Investments 1,068.95 3,249.43 Aggregate Book Value of Unquoted Investments 71.00 0.77 Aggregate Market Value of Quoted Investments 1,167.61 3,260.83

98 Schedule Forming Part of Accounts (Rs. In million) Particulars As at As at 31.03.2009 31.03.2008

Schedule - 7 Inventories (As taken, valued and certified by the management) Raw Materials 11,931.78 6,094.65 Stores and Spares 728.85 395.61 Finished Goods 4,926.77 1,626.13 Work/Goods In Process 2,548.61 1,122.43 Goods In Transit 5,976.64 3,639.53

26,112.65 12,878.35 Share in Joint Ventures -- Total 26,112.65 12,878.35 Schedule - 8 Sundry Debtors (Unsecured and Considered Good, unless otherwise stated)

More than Six Months- Considered good 872.80 276.23 - Considered Doubtful 97.29 158.89

Others -Considered good 3,728.65 6,982.50 4,698.74 7,417.62

Less: Provision for doubtful debts 97.29 158.89

4,601.45 7,258.73 Share in Joint Ventures -- Total 4,601.45 7,258.73 Schedule - 9 Cash and Bank Balances

Cash in Hand 4.60 5.17 Cheques in Hand 2.27 -

Balance With Scheduled Banks - In Current Accounts * 5,031.78 997.12 - In Margin Money Accounts 699.25 510.42 - In Fixed Deposits Accounts 3,671.93 1,110.19

Balance With Non Scheduled Banks - In Current Accounts -Banque Exterieure'd Algerie 11.11 - (Maximum Balance outstanding Rs. 36.27 million)

- Fixed Deposits Accounts- Standard Chartered Bank, London - 80.15 (Maximum Balance outstanding Rs.80.17 million) 9,420.94 2,703.05

Share in Joint Ventures 49.40 0.29 Total 9,470.34 2,703.34 * includes Rs.2.28 million (Rs.0.92 million) being balance in unclaimed dividend account not available for use by Company

Schedule - 10 Loans and Advances (Unsecured and Considered Good, unless otherwise stated) Advances (Recoverable in cash or in kind or for value to be received) Balances with excise and customs authorities etc. 3,030.78 1,132.48 Other Advances 1,885.42 1,427.83 Deposits 568.23 629.16 5,484.43 3,189.47

Share in Joint Ventures 67.09 3.31 Total 5,551.52 3,192.78

99 Annual Report 2008-09

Schedule Forming Part of Accounts (Rs. In million) Particulars As at As at 31.03.2009 31.03.2008

Schedule - 11 Current Liabilities Acceptances 31,706.02 12,757.68 Sundry Creditors 4,637.91 3,300.78 Trade Advances and Deposits 2,184.27 1,209.83 Interest accured but not due 376.93 133.44 Unclaimed Dividend * 2.28 0.92 38,907.41 17,402.66 Share in Joint Ventures 47.47 11.75 Total 38,954.88 17,414.41 * There is no amount due and outstanding to be credited to Investor Education and Protection Fund as at 31st March 2009 Schedule - 12 Provisions For Proposed Dividend (Including tax on proposed dividend) 327.28 311.94 For Taxation (Net) 242.91 344.31 For Retirement Benefits 30.38 20.76 600.57 677.01 Share in Joint Ventures 0.02 0.32 Total 600.59 677.33 Particulars Year ended Year ended 31.03.2009 31.03.2008 Schedule - 13 Sales and Services Sales 55,890.57 39,613.37 Job Work and Other Charges Received 2,509.87 606.06 Export and Excise Benefits 1,308.18 1,350.88 59,708.62 41,570.31 Share in Joint Ventures 0.33 0.16 Total 59,708.95 41,570.47 Schedule - 14 Other Income Dividend ( Gross) 70.87 50.89 Profit on Sale of Current Investments 68.62 43.94 Miscellaneous Income 47.48 12.52 186.97 107.35 Share in Joint Ventures -- Total 186.97 107.35 Schedule - 15 Cost of Goods (A) Raw Materials Consumed Opening Stock 6,094.65 2,074.35 Purchases (Net) 49,490.65 31,494.23 55,585.30 33,568.58 Less: Closing Stock 11,931.78 6,094.65 Total (A) 43,653.52 27,473.93 (B) Purchases of Traded Goods 776.47 19.66 Total (B) 776.47 19.66 (C) Increase/(Decrease) in Stock Closing Stock Finished Goods 4,926.77 1,626.13 Work/Goods In Process 2,548.61 1,122.43 Less : Opening Stock 7,475.38 2,748.57 Finished Goods 1,626.13 252.19 Work/Goods In Process 1,122.43 578.13 Transfer from Trial Run - 539.36 2,748.56 1,369.68 Less: Increase/(Decrease) in Excise duty on Finished Goods 323.45 174.71 Total (C) 4,403.37 1,204.18 Total (A)+(B)-(C) 40,026.63 26,289.41 Share in Joint Ventures -- Total 40,026.62 26,289.41 100 Schedule Forming Part of Accounts (Rs. In million) Particulars Year Ended Year Ended 31.03.2009 31.03.2008

Schedule - 16 Manufacturing and Other Expenses

Stores and Spares Consumed 920.78 549.92 Coating and Other Job Charges 2,417.47 563.17 Power, Fuel and Water Charges 1,332.06 350.14 Material Handling and Transport Charges 1,963.04 1,266.12 Freight Expenses 1,897.86 2,211.13 Commission and Discounts on Sales 676.66 502.06 Directors' Remuneration 69.47 86.61 Salary, Wages and Allowances 1,104.15 669.32 Contribution to Funds 49.68 30.99 Staff Welfare Expenses 98.78 73.11 Rent 88.52 26.32 Rates and Taxes 61.82 11.05 Repairs and Maintenance - Plant and Machinery 46.01 22.88 - Buildings 16.05 13.46 -Others 16.75 8.79 Travelling and Conveyance Expenses 149.80 91.41 Communication Expenses 35.01 15.34 Professional and Consultancy Fees 78.06 148.82 Insurance 78.86 41.64 Directors' Sitting Fees 0.40 0.30 Printing and Stationery 12.38 8.78 Security Charges 22.15 11.93 Membership and Subscription 8.65 7.48 Vehicle Expenses 21.01 12.78 Foreign Exchange Difference (Net) (387.25) (79.09) Miscelleneous Expenses 258.52 70.86 Diminution in value of Current Investment 1.06 - Loss on sale / discard of fixed assets 5.11 105.29 Auditors Remuneration 4.04 4.57 Sales Promotion Expenses 28.22 17.47 Provision for Doubtful Debts(Net) (61.60) 158.89 Bad Debts and Advances Written Off 1.58 97.55

11,015.09 7,099.09

Share in Joint Ventures 5.88 0.87 Total 11,020.97 7,099.96

Schedule - 17 Financial Expenses(Net) Interest on Debentures 337.43 162.22 Fixed Loans 1,430.69 267.35 Working Capital 108.04 98.42 Others 385.63 9.84 2,261.79 537.83

Discounting and Other Charges 525.62 694.19 2,787.41 1,232.02

Less: Interest Received (Gross) 1,021.07 413.96

1,766.34 818.06

Share in Joint Ventures -- Total 1,766.34 818.06

101 Annual Report 2008-09

Schedule: 18 Significant Accounting Policies and Notes to the Consolidated Accounts

Background

Welspun Gujarat Stahl Rohren Limited (hereinafter referred to as “the Parent Company”, “the Company”, “WGSRL”) together with its subsidiaries (collectively referred to as “Group”) are engaged in the business of Production and coating of High grade Submerged Arc Welded Pipes, Hot Rolled steel plates and other related activities.

1. Basis of Consolidation a) The Consolidated Financial Statements (CFS) of group are prepared under the Historical Cost Convention on accrual basis in accordance with the Generally Accepted Accounting Principles in India and Accounting Standard-21 on “Consolidated Financial Statements” issued by the Institute of Chartered Accountants of India (ICAI), to the extent possible in the same format as that adopted by the Parent Company for its separate financial statements by regrouping, recasting or rearranging figures wherever considered necessary. b) The consolidation of the financial statements of the Parent Company and its subsidiaries is done on a line-by-line basis by adding together like items of assets, liabilities, income and expenses. All significant inter-group transactions, unrealized inter-company profits and balances have been eliminated in the process of consolidation. Minority interest in subsidiaries represents the minority shareholders proportionate share of the net assets and net income. c) CFS is prepared using uniform accounting policies for transactions and other events in similar circumstances. d) The CFS includes the accounts of the Parent Company and the subsidiaries (as listed in the table below). Subsidiaries are consolidated from the date on which effective control is acquired and are excluded from the date of transfer / disposal.

Name of the Subsidiaries Nature of Business Country of Extent of Incorporation Holding Direct Subsidiaries Welspun Pipes Limited Manufacturer of Steel Pipes India 100% Welspun Natural Resources Private Limited Oil and Gas Exploration India 51% Welspun Pipes Inc SPV for Steel Business USA 100% Welspun Urja India Limited# Energy and Power India 51% Generation Indirect Subsidiaries Held through Welspun Pipes Inc. Welspun Tubular LLC Manufacturer of Steel Pipes USA 100% Welspun Global Trade LLC Marketing Company USA 100% Held through Welspun Natural Resources Private Limited Welspun Plastics Private Limited ## Oil and Gas Exploration India 100% Held through Welspun Plastics Private Limited Nirmal Plastic Industries (Partnership firm) Oil and Gas Exploration India 95%

# became subsidiary w.e.f 16th March 2009 ## became subsidiary w.e.f 12th August 2008

e) Associate The Group has adopted and accounted for Investment in the following Associate Company using the “Equity Method” as per AS-23 issued by the ICAI in this CFS.

Name of the Company Nature of Business Country of Extent of Incorporation Holding

Red Lebondal Limited SPV for Steel Business Cyprus 25%

102 f) Joint Ventures (i) The Group has adopted and accounted for interest in the following Joint Ventures in this CFS, using the “Proportionate Consolidation Method” as per AS-27 issued by ICAI.

Name of the Enterprise Nature of Business Country of Extent of Incorporation Holding Adani Welspun Exploration Limited Oil and Gas Exploration India 35% (Held through Welspun Natural Resources Private Limited) Dahej Infrastructure Private Limited Development of Jetty India 50%

(ii) The Parent Company's share of capital commitments in the Joint Ventures as at 31st March, 2009 is Rs. Nil. (iii) The Parent Company's share of contingent liabilities in the Joint Ventures as at 31st March, 2009 is Rs. Nil. (iv) No contingent liabilities and capital commitments have been incurred as at 31st March, 2009 in relation to the Parent Company's interest in the Joint Venture along with other venturer.

2. Use of Estimates The preparation of CFS in accordance with the generally accepted accounting principles requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities as of the date of financial statements and the reported amount of revenue and expenses of the year.Actual results could differ from these estimates. Any revision of such accounting estimate is recognized prospectively in current and future periods.

3. Comparability a) Previous year figures have been regrouped, rearranged or recasted wherever necessary to confirm to this year's classification. Figures in brackets pertain to previous year. b) The CFS for the previous year does not include the financial statements of subsidiaries acquired during the year, hence not comparable.

4. Fixed Assets (a) Fixed assets are stated at original cost of acquisition / installation (net of cenvat / credit availed) net off accumulated depreciation, amortization and impairment losses except land which is carried at cost. The cost of fixed assets include cost of acquisition, taxes, duties, freight, other incidental expenses related to the acquisition, construction and installation including trial run expenses (net of revenue) and borrowing cost incurred during preoperational period. (b) Capital Work-In-Progress is stated at the amount expended upto the date of Balance Sheet including preoperative expenditure and advances on capital account. (c) Cost of Software includes license fees, cost of implementation and system integration and capitalized as intangible assets in the year in which the relevant software is put to use. (d) Goodwill arising out of acquisition is amortized over a period of three years from the year of acquisition. (e) Capital Work-in-Progress, includes Capital Advances of Rs. 439.85 million (Rs. 2,735.24 million) and Preoperative Expenses Rs. 586.60 million (Rs. 692.22 million). (f) Pre-operative Expenses (including borrowing costs) of Rs. 1,373.01 million (Rs. 1,823.37 million) in respect of projects capitalized during the year have been allocated proportionately to the direct cost of respective building and plant and machinery.

5. Borrowing Costs a) Borrowing Costs attributable to the acquisition or construction of qualifying assets are capitalized as part of cost of such assets. All other borrowing costs are charged to revenue. b) Borrowing costs (net) capitalized / allocated to fixed assets / Capital work in progress is Rs. 571 million (Rs. 755.15 million).

103 Annual Report 2008-09

6. Depreciation (a) Depreciation on fixed assets is provided on Straight Line basis at the rates prescribed in Schedule XIV to the Companies Act, 1956 except for certain plant and machinery which are depreciated on the basis of estimated useful lives of 13-15 years. The rates of depreciation derived from these estimated useful lives are higher than those given in Schedule XIV to the Companies Act, 1956. In case of subsidiaries depreciation is provided at the rates adopted in the accounts of respective subsidiaries as permissible under applicable local law (except in the case of a joint venture where Written Down Value Method is followed, the net book value of such assets as at 31st March, 2009 is Rs. 1.23 million (Rs. 1.43 million). (b) For determining the appropriate rate of depreciation on Plant and Machinery, continuous process plant has been identified on the basis of technical opinion by the Company/ Expert. (c) Software is amortized over a period of five years from the date of its use based on management's estimate of useful life.

7. Investments Investments intended to be held for more than a year, from the date of acquisition, are classified as long term and are carried at cost. Provision for diminution in value of investments is made to recognize a decline other than temporary. Current Investments are stated at cost or fair value which ever is lower.

8. Revenue Recognition (a) Sale of goods is recognized when the risks and rewards of ownership are passed on to the customers, which is generally on dispatch. Export Sales are accounted for on the basis of date of bill of lading. Gross Sales include excise duty, value added tax incentive, quality claims, adjustments for price variation, liquidated damages, exchange rate variations related to export realization. (b) Export benefits: Duty entitlement pass book (DEPB) and Focus market are accounted on accrual basis. Target plus /Duty free entitlement certificate scheme of EXIM policy are recognized when utilized. (c) Revenue from Services is recognized when the services are completed. (d) Dividend income is recognized when the right to receive the dividend is unconditional.

9. Inventories Inventories are valued at lower of cost or net realizable value. The basis of determining cost for various categories of inventories: (i) Raw Material, Stores and Spares - Moving weighted Average basis. (ii) Work / Goods in Process and Finished Goods-Cost of Direct Material, Labour and other manufacturing expenses.

10. (i) Foreign Currency Transactions Accounting of Transaction a) Foreign exchange transactions are converted into Indian Rupees at the prevailing rate on the date of the transactions. Current monetary assets and liabilities are translated at the exchange rate prevailing on the last day of the year. Non monetary items are carried at cost. b) Gains or losses arising out of remittance / translations at the year- end are credited / debited to the profit and loss account for the year and in cases where it relates to acquisition of fixed assets till put to use are adjusted to the carrying cost of such assets except as per amendment to AS-11 (Refer note no 10 (ii)). c) Premium / discount on forward exchange contracts not relating to firm commitments or highly probable forecast transactions and not intended for trading or speculation purpose is amortized as income or expense over the life of the contract.

104 Translation and Exchange Rates Financial statements of overseas non-integral operations are translated as under: a) Assets and Liabilities are translated at the exchange rate prevailing at the end of the year. Depreciation is accounted at the same rate at which assets are converted. b) Revenues and expenses at yearly average rates prevailing during the year (except for inventories and deferred tax are converted at opening / closing rates as the case may be). Off Balance Sheet items are translated into Indian Rupees at year-end rates. c) Exchange differences arising on translation of non-integral foreign operations are accumulated in the Foreign Currency Translation Reserve until the disposal of such operations.

(ii) The Companies (Accounting Standards) Amendment Rules 2009 has amended the provision of AS-11 related to "Effects of the changes in Foreign Exchange Rate" vide notification dated 31st March 2009 issued by the Ministry of Corporate Affairs. Accordingly, the Company has capitalised exchange difference loss amounting to Rs. 616.20 million (net of gain of Rs. 9.35 million adjusted through General Reserve pertaining to earlier period) to the cost of fixed assets and exchange difference loss of Rs. 532.50 million is transferred to "Foreign Currency Monetary Item Translation Difference Account" to be amortized over the balance period of such long term assets / liabilities but not beyond 31st March 2011. Out of the above, Rs.177.50 million has been written off in the current year and Rs. 354.98 million has been carried over.

(iii) Derivative Instruments and Hedge Accounting The Company uses foreign currency forward contracts to hedge its risk associated with foreign currency fluctuations relating to certain firm commitments and forecasted transactions. The Company designates these hedging instruments as cash flow hedges and applying the recognition and measurement principles set out in Accounting Standard 30 “Financial Instruments: Recognition and Measurement” (AS 30). The gain or loss on the effective hedges is recorded in “Hedging Reserve Account” until the transaction is complete. The gain or loss is accounted in Profit and Loss Account upon completion of the transaction or when the hedge instrument expires or terminates or ceases to qualify for hedge accounting.

The Company has early adopted AS-30 and accordingly Rs. 2,004.20 million (Rs. 10.09 million) related to foreign exchange difference on Cash Flow Hedges for certain firm commitments and forecasted transactions is recognized in Shareholders' Funds and shown as Hedging Reserve Account.

11. Employee Benefits In case of Parent Company a) Short term employee benefits are recognized as an expense at the undiscounted amount in the Profit and Loss account of the year in which the related service is rendered. b) Post employment and other long term benefits are recognized as an expense in the profit and loss account of the year in which the employee has rendered services. The expense is recognized at the present value of the amounts payable determined using actuarial valuation techniques. Actuarial gains and losses in respect of post employment and other long-term benefits are charged to the Profit and Loss account. c) Payments to defined contribution retirement benefit schemes are charged as expenses as and when they fall due.

In case of Subsidiaries / Joint Ventures In case of subsidiaries and a joint venture, liability in respect of leave encashment and gratuity is provided on estimated basis.

12. Employees Stock Option Scheme a) In respect of stock options granted pursuant to the Company's Stock Option Scheme, the intrinsic value of the options is treated as discount and accounted as employee compensation cost over the vesting period. b) In respect of options granted under the Welspun Employee's Stock Option Scheme, in accordance with guidelines

105 Annual Report 2008-09

issued by Securities and Exchange Board of India, the value of options (based on intrinsic value of the share on the date of the grant of the option) is accounted as deferred employee compensation, which is amortized on a straight line basis over the vesting period. Salaries, wages and allowances include Rs. 21.85 million (Rs. 23.73 million) charged as Deferred Employee Compensation under Employee Stock Options Scheme. During the year, 49,500 equity shares of Rs. 5 each fully paid up were issued at a price of Rs. 80.00 each, 375 equity shares of Rs. 5 each fully paid up were issued at a price of Rs. 87.80 each and 10,000 equity shares of Rs. 5 each fully paid up were issued at a price of Rs. 94.10 each on exercise of options by employees. The discount allowed aggregating to Rs. 1.65 million (Rs. 7.28 million) in respect of shares allotted pursuant to Stock Option Scheme is credited to Securities Premium Account as per guidelines of Securities and Exchange Board of India. Stock Options outstanding as at the year end are as follows: Particulars Granted during Granted during Granted during 2006-07 2007-08 (A) 2007-08 (B) Exercise Price Rs. 80 Rs. 87.80 Rs. 94.10 Date of Grant 8 January 2007 13 April 2007 24 April 2007 Vesting period commences on 8 January 2008 13 April 2008 24 April 2008 Options outstanding at the beginning of the period 2,242,750 1,250 100,000 Options exercised during the year 49,500 375 10,000 Options Lapsed during the year 54,500 875 Nil Outstanding as at 31st March 2009 2,138,750 Nil 90,000 13. Accounting for Taxes on Income (a) Current tax is determined as the amount of tax payable in respect of taxable income of the year computed as per Income Tax Act, 1961. Fringe Benefit tax is provided for on the estimated value of fringe benefits as per the provisions of the Income Tax Act, 1961. (b) Deferred tax is recognized subject to consideration of prudence, on timing difference, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods and measured using prevailing enacted or substantively enacted tax rates. (c) The components of deferred tax balances are as under (Rs. In million) Particulars 31st March 2009 31st March 2008 Deferred Tax Assets Retirement Benefits 10.21 7.05 Other Fiscal Disallowance 33.42 54.49 Total 43.63 61.54 Deferred Tax Liabilities Fiscal allowance on fixed assets 2,410.60 1,799.42 Others 120.66 - Total 2,531.26 1,799.42 Deferred Tax Liabilities (net) 2,487.63 1,737.88 14. (i) Finance Lease Long-term leases, which in economic terms constitute investment finance on a long term basis (finance lease) are recognized as assets. The initial tenure is three years. The minimum lease payments required under this finance lease that have initially or remaining non-cancellable lease terms in excess of one year as at 31st March 2009 and its present value are as follows: (Rs. In million) Particulars 31st March 2009 Minimum Lease payment as at Not Later than one year 3.89 Later than one year but not later than five years 7.46 Total 11.35 Less: Amount representing interest 0.92 Present Value of Minimum lease payment 10.43 Less: Amount due not later than one year 3.38

106 Amount due later than one year but not later than five years 7.05 (ii) Operating Lease a) Lease of assets under which all the risks and rewards of ownership are effectively retained by the lessor are classified as operating leases. Lease payments under operating leases are recognized as an expense on accrual basis in accordance with the respective lease agreements. b) The Group leases office, residential facilities, equipment etc. under operating lease agreements that are renewable on a periodic basis at the option of both the lessor and the lessee. The initial tenure of lease is generally for eleven months. (Rs. In million) Particulars 31st March 2009 31st March 2008 Lease Rental charges for the year 85.56 33.05 Future lease rental obligations payable (under non-cancellable leases) Not Later than one year 105.30 93.81 Later than one year but not later than five years 414.06 365.95 Later than five years 277.78 277.17 Total 797.14 736.93

15. Research and Development Capital expenditure on Research and Development is treated in the same manner as Fixed Assets. The revenue expenditure on research and development is charged to Profit and Loss Account.

16. Impairment of Assets At each Balance Sheet date, the Company reviews the carrying amount of fixed assets to determine whether there is any indication that those assets suffered impairment loss. If any such indication exists, the recoverable amount of the assets is estimated in order to determine the extent of impairment loss. The recoverable amount is higher of the net selling price and value in use, determined by discounting the estimated future cash flows expected from the continuing use of the asset to their present value.

17. Miscellaneous Expenditure In case of an Indian Subsidiary,preliminary expenses are deferred and amortized over a period of five years.

18. Share Application Money - Warrants The share application money aggregating to Rs. 886.90 million (outstanding as at 31st March 2008) in respect of 8,678,082 warrants held by promoters have been converted into equal number of fully paid equity shares of Rs. 5 each at a price of Rs. 102.20 each.

19. Secured Loans a) (i) Redeemable Secured Non-Convertible Debentures (NCD)

Particulars No. of Face Value Date of Redemption Interest Amount Debenture (In Rs.) Allotment from date of (p.a.) (Rs. in million) allotment Fixed Rate Debentures 1,000 1,000,000 28/11/2007 3 years 10.05% 1,000 Fixed Rate Debentures 1,250 1,000,000 29/11/2007 5 years 10.50% 1,250 Fixed Rate Debentures 450 1,000,000 31/12/2007 5 years 10.40% 450 Fixed Rate Debentures 300 1,000,000 18/01/2008 3 years 10.05% 300 Total 3,000

The debentures together with interest are secured by first pari passu charge by way of mortgage/hypothecation of entire immovable and movable fixed assets of the Company, both present and future and second/floating charge on current assets, subject to prior charge in favour of banks for working capital facilities.

107 Annual Report 2008-09

(ii) Non Convertible Bonds Non Convertible Bonds of Rs. 532.19 million (Rs. 434.21million) issued by the City of Little Rock / State of Arkansas are secured by property,plant and equipment of Welspun Tubular LLC. b) TermLoans From Banks i) In case of parent company term Loans of Rs. 10,606.32 million (Rs. 11,289.97 million) are secured by first pari passu charge by way of mortgage / hypothecation of entire immovable and movable fixed assets of the Company both present and future and also secured by second / floating charge on current assets subject to prior charge in favour of banks for working capital facilities. ii) In case of subsidiaries, term loan aggregating to Rs. 4,076.01 million (Rs. 3,206 million) is secured by property, plant and equipment and further secured by corporate guarantee of the Parent Company. c) External Commercial Borrowing (ECB) ECB of Rs. 7,623.87 million (2,004.87 million) is secured by first pari passu charge by way of mortgage / hypothecation on entire immovable and movable fixed assets of the Company both present and future. Further the ECB is secured by exclusive charge by way of hypothecation of Debt Service Reserve Account. d) Working Capital facilities Working Capital facilities from banks are secured by first charge by way of hypothecation of raw materials, finished goods and goods in process, stores & spares and book debts of the Company and second charge on entire immovable and movable fixed assets of the Company both present and future of the Company. e) Lease Finance In case of subsidiaries Lease finance is secured by equipment.

20. a) Contingent Liabilities not provided for (Rs. In million) Particulars 31st March, 2009 31st March, 2008

Performance Guarantees Bid Bond given by banks to company’s customers / 13,648.35 9,073.34 government authorities etc.

Corporate Guarantees given 2,822.85 2,393.89

Letters of Credit outstanding (net of liability provided) for company’s sourcing 4,769.18 6,607.36

Claims against the Company not acknowledged as debts 14.79 2.74

Custom duty on pending export obligation against import of Raw Materials and 1,011.76 258.53 Machineries

Disputed service tax /sales tax/ excise duty liabilities 92.37 88.91

b) Capital Commitments not provided for Rs.739.06 (Rs. 4,900.01 million), net of advances. c) The details of Preoperative Expenses are as under: (Rs. In million) Particulars 31st March 2009 31st March 2008 Expenditure upto previous year 692.22 524.99 Add : Expenditure incurred during the year Power, Fuel and Water Charges 0.78 72.65 Material Handling and Transport Charges 6.63 9.51 Salaries, Wages and Allowances 381.42 171.79 Contribution to Funds - 5.31 Staff Welfare Expenses 0.56 11.05 Rent 23.53 5.48 Rates and Taxes 0.55 4.15 Repairs and Maintenance Expense 1.54 0.69

108 Particulars 31st March 2009 31st March 2008 Traveling and Conveyance Expenses (Directors Rs. Nil (Rs. 4.50 million)) 28.60 28.31 Communication Expense 7.46 7.11 Professional and Consultancy Fees 45.51 667.22 Insurance 13.59 15.15 Vehicle Expenses 1.48 5.63 Security Expenses 8.65 8.20 Miscellaneous Expenses 36.69 27.64 Foreign Exchange Difference - 130.02 Depreciation 11.97 3.27 Finance Expenses 572.60 816.94 Provision for Income Tax 0.18 2.22 Sub Total 1,833.96 2517.33 Trial Run Expenses Raw Material Consumed - 713.28 Stores and Spares Consumed 127.89 2.53 Power, Fuel and Water Charges - 234.20 Material Handling and Transport Charges - 3.38 Salary, Wages and Allowances - 7.54 Selling and Distribution Expenses - 0.74 Discounting and Other Charges - 2.16 Trial Run Recoveries Net Sales (0.54) (291.33) Self Consumption of Trial Run Production - (71.66) Stock in process transferred to operation - (533.00) Finished goods transferred to operation - (6.36) Net (Loss) - (61.48) Less : Income Interest on Fixed Deposits (0.92) (33.60) Interest on Others - (1.45) Dividend received on units in mutual funds (Gross) (0.68) (26.74) Foreign Exchange Difference (0.10) (0.2) Miscellaneous Income - (1.23) Total 1,959.61 2,515.59 Less : Amount allocated to Assets Capitalized during the year 1,373.01 1,823.37 Balance Carried to Balance Sheet 586.60 692.22

21. Segment Reporting The Company is engaged in the business of steel products which in the opinion of the management is considered the only business segment in the context of Accounting Standard 17 on “Segment Reporting”.Also, the Company does not consider any significant difference as regards the risks and returns of the product with reference to export and domestic sales. Therefore, Segment Information as required by Accounting Standard - 17 is not applicable.

109 Annual Report 2008-09

22. Prior Period Expense/Income Details of Prior period income of Rs. 166.27 million (Rs. 28.98 million (net)) is as under: (Rs. In million) Account Head 31st March 2009 31st March 2008

Expenses Depreciation - 4.39 Salaries, Wages and Allowances - (4.46) Rates and Taxes - 0.51 Commission and Discounts - (25.55) Finance Expenses 1.81 (3.59) Others 0.20 0.07 Income Export and Excise Incentives (126.80) (0.35) Interest Income (24.25) - Others (17.23) - Prior Period (Income)/Expenses-(net)Total (166.27) (28.98)

23. Related Party Disclosure a) List of Parties where control exists: The list of Subsidiary Companies is disclosed in Note 1(d) above. b) Other related parties with whom transactions have taken place during the year and balances outstanding as on the last day of the year. (i) Joint Ventures Adani Welspun Exploration Limited, Dahej Infrastructure Private Limited and (ii) Associates Red Lebondal Limited. (iii) Other Related Parties: Welspun India Limited, Welspun Power and Steel Limited, Welspun Orissa Power and Steel Limited, Welspun Trading Limited, Welspun Retail Limited, Remi Metals Limited (w.e.f 15th November 2008), Welspun Anjar SEZ Limited, Welspun Foundation for Health and Knowledge, Welspun Syntex Limited, Vipuna Trading Limited, Welspun Logistics Limited, Sequence Apartments Private Limited, Welspun Realty Private Limited, Welspun Enterprises (Cyprus) Limited, Krishiraj Trading Limited, Welspun Mercantile Limited, Welspun Wintex Limited, Goodvalue Polyplast Limited.

Directors /Key Management Personnel

Name of the Related Party Nature of Relationship Late shri G.R. Goenka Chairman* B. K. Goenka Chairman and Managing Director ** R. R. Mandawewala Director M. L. Mittal Executive Director-Finance B. K. Mishra Director

* ceased to be chairman (on demise) w.e.f 28th December 2008. ** became chairman w.e.f 30th January 2009

110 Disclosure in respect of transactions which are more than 10% of the total transactions of the same type with related party during the year

1. Sale of Goods and Recoveries from include to - Welspun Trading Limited Rs. 30,036 million (Rs.11,530.95 million) (Refer Note 26). 2. Sale of Fixed Assets include to- Welspun Power and Steel Limited Rs. 0.26 million (Rs.Nil), Welspun India Limited Rs. Nil (0.74 million). 3. Purchase of Goods and Services include from- Welspun Power and Steel Limited Rs. 37.47 million (Rs.Nil), Welspun India Limited Rs. 22.32 million (Rs. 11.48 million), Welspun Logistics Limited Rs. 23 million (Rs. 3.58 million), Welspun Retail Limited Rs. 2.35 million (Rs. 2.6 million) 4. Purchase of Fixed Assets includes from - Welspun Power and Steel Limited Rs. 0.04 million (Rs. 64.36 million). 5. Expenditure includes -Rent paid to - Welspun India Limited Rs. 2.92 million (Rs. 28.96 million), Vipuna Trading Limited Rs. 6.62 million (Rs. 2.33 million), Welspun Realty Private Limited Rs. 47.51 million (Nil), Balance written off Welspun Enterprises (Cyprus) Limited Rs. 0.19 million (Rs. Nil). 6. Donation to - Welspun Foundation for Health and Knowledge Rs. 24 million (Rs. 21.40 million) (meant for corporate social responsibility activities). 7. Other Income includes - Rent received from Remi Metals Limited Rs. 0.13 million (Rs. Nil) 8. Loans, Advances and Deposits includes given - to Welspun Logistics Limited Rs. 128.78 million (Rs. 230 million) and repaid during the year Rs. 196.70 million (Rs. 135.10 million), to Welspun Realty Private Limited Rs. 443.60 million (Rs. 500 million) and repaid during the year Rs. 476 million (Rs. Nil), Welspun Power and Steel Limited Rs. 205 million (Rs.91.32) and repaid during the year by Welspun Power and Steel Limited is Rs. 205 million (Rs. Nil). 9. Investment in Equity Shares of - Welspun Urja India Limited Rs. 0.26 million (Rs. Nil) which is acquired from Welspun Wintex Limited Rs. 0.10 million (Rs. Nil), Welspun Mercantile Limited Rs. 0.06 million (Rs. Nil) and Welspun Trading Limited Rs. 0.10 million (Rs Nil). 10. Issue of Equity Shares by conversion of warrants to Krishiraj Trading Limited Rs. 886.90 million (Rs. 1743.93 million), Welspun Mercantile Limited Rs. Nil (Rs. 372.22 million). Issue of Equity Shares by exercise of employee stock option scheme (ESOP) to CEO and Executive Director Rs. 0.94 million (Rs. 3.60 million). 11. Reimbursement of Expenses (Net) includes to Welspun India Limited Rs. 68.93 million (Rs. 30.64 million), Welspun Anjar SEZ Limited Rs. 28.63 million (Rs. Nil).

Disclosure of Closing balances as at 31st March 2009

1. Loans, Advances and Deposits given include - Welspun Realty Private Limited Rs. 467.60 million (Rs. 500 million), Welspun Logistics Private Limited Rs. 23.40 million (Rs. 91.32 million). 2. Sundry Debtors include-Welspun Trading Limited Rs 789.54 million (Rs. 3,191.56 million), Remi Metals Limited Rs. 158.59 million (Rs. Nil). 3. Sundry Creditors include-Welspun India Limited Rs. 0.97 million (Rs. 8.55 million), Welspun Anjar SEZ Limited Rs. 28.62 million (Rs. Nil), Welspun Logistics Limited Rs. 14.41 million (Rs. Nil). 4. Investments held include of-Welspun Enterprises (Cyprus) Limited Rs. 0.77 million (Rs. 0.77 million). 5. Share Application Money received-Krishiraj Trading Limited Rs. Nil (Rs. 886.90 million) 6. Guarantees and Collaterals provided include issued to Red Lebondal Limited Rs. 710.08 million (Rs. 561.05 million), Welspun Trading Limited Rs. 1,609.80 million (Rs. 1,609.87 million).

24. Financial Statements of Subsidiaries The Ministry of Corporate Affairs, Government of India vide its order no.47/402/2009-CL-III dated 20th May, 2009 issued under section 212 (8) of the Companies Act, 1956 (“The Act”) has exempted the Company from attaching the Balance Sheets and Profit and Loss Accounts of its subsidiaries under Section 212 (1) of the Act. As per the orders, key details of each subsidiary are attached along with statements under Section 212 (1) of the Act.

111 Annual Report 2008-09

25. a) Demerger of Plate and Coil Mill division The Board of Directors in the meeting held on 20th April 2009 has approved a Scheme of Arrangement in the nature of demerger and transfer of Plate and Coil Mill Division of the Company to “Welspun Steel Plates and Coil Mills Private Limited” with relevant assets and liabilities. The Scheme is subject to approval of creditors and members of the Company and the Hon'ble High Court of Gujarat. The appointed date for demerger is 1st April, 2009. b) Information pursuant to AS-24 on “Discontinuing Operations”: (i) Carrying amount of assets and liabilities of continuing and discontinuing operations: (Rs. In million) Particulars 2009 2008

Continuing Discontinuing Total Continuing Discontinuing Total operations operations operations operations Total Assets 60,555.82 22,054.69 82,610.51 36,713.32 16,228.40 52,941.72

Total Liabilities 48,817.33 17,995.19 66,812.52 25,272.31 11,887.85 37,160.16

(ii) The Plate and Coil mill started commercial production on 27th March 2008 and the plates manufactured therein are intended to be used captively for production of pipes, accordingly major part of the production is captively used. The Board of directors has not identified the plate manufacturing as separate segment and hence the revenue, expenses, results and cash flow as required under AS 24 could not be worked out.

26. The Company has been getting majority of the export orders and executing those orders through one of the related party for business necessity and allowing it a small profit margin of about 0.5% of Sales. The realization, income/ benefits, claims or expenses are transferred/ paid immediately to the Company.

27. Earning Per Share (Rs. In million) Particulars 31st March, 2009 31st March, 2008

I) Profit computation for Basic Earnings per Share Profit After Tax 2,135.05 3,407.80

II) Weighted Average number of equity shares for Earnin g per Share computation a) For Basic earning per share 185,569,595 163,259,990 b) For Diluted Earning per Share 186,864,123 186,079,450

III) Earning Per Share on Face Value of Rs. 5 each Basic Rs. 11.51 Rs. 20.87 Diluted Rs. 11.43 Rs. 18.31

SIGNATURES TO SCHEDULES 1 TO 18 As per our attached report of even date For and on behalf of the Board

B.K.Goenka M.L.Mittal For MGB & Co. Executive Director-Finance Chartered Accountants Chairman and Managing Director

Mohan Bhandari Partner Raj Kumar Jain Pradeep Joshi th Mumbai, 29 May 2009 Director Company Secretary

112 Consolidated Cash Flow Statement Annexed To The Balance Sheet For The Year Ended Rs. In Million Particulars 31st March 2009 31st March 2008

CASH FLOW FROM OPERATING ACTIVITIES Net Profit before tax and exceptional items 3,335.56 5,235.68 Adjustments for: Depreciation/Amortisation 1,432.75 608.76 Exchange Adjustments 2,852.85 317.09 Employee stock option compensation (Net) 21.85 23.73 Interest income (1,021.07) (413.96) Dividend income (70.87) (50.89) Provision for doubtful debts (Net) (61.60) 158.89 Provision for Diminution in value of Current Investments 1.06 - (Profit)/Loss on sales/redemption of Current Investments (68.62) (43.94) Interest expenses 2,261.79 537.83 Loss on sale/discard of fixed assets 5.11 105.29 Operating Profit before working capital changes 8,688.81 6,478.48

Adjustments for: Trade and other receivables 408.39 (2,754.34) Inventories (13,234.30) (7,743.21) Trade and other paybles 17,883.96 7,703.90 Cash generated from operations 13,746.86 3,684.83 Taxes paid (Net) (552.05) (830.31) NET CASH GENERATED FROM OPERATING ACTIVITIES 13,194.81 2,854.52

CASH FLOW FROM INVESTING ACTIVITIES Purchase of fixed assets/Capital Work in Progress (11,006.07) (12,229.14) Sale of fixed assets 315.70 7.34 Acquisition of Minority Interest - (178.53) Interest received 1,004.07 309.55 Dividend received 70.87 50.89 Purchase of long term investments (0.39) (8.63) Purchase of Current Investments (95,693.72) (66,436.57) Sale of Current Investments 97,871.91 63,486.79 NET CASH USED IN INVESTING ACTIVITIES (7,437.63) (14,998.30)

113 Annual Report 2008-09

Consolidated Cash Flow Statement Annexed To The Balance Sheet For The Year Ended Rs. In Million Particulars 31st March 2009 31st March 2008

CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from issue of equity shares (Including security premium) 4.93 21.78 Proceeds from issue of Warrants - 2,116.15 Interest paid (2,018.31) (415.07) Dividend paid (including corporate dividend tax) (325.88) (179.34) Proceeds from Debentures 1,550.00 6,800.00 Redemption of Debentures (1,550.00) (3,800.00) Proceeds from long term borrowings 5,385.86 7,381.43 Repayment of long term borrowings (2,089.03) (721.02) Increase/(decrease) in other borrowings(Net) 51.99 69.54

NET CASH FROM FINANCING ACTIVITIES 1,009.56 11,273.48

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 6,766.74 (870.30) Cash and Cash Equivalent Opening balance 2,703.34 3,573.22 Cash and Cash Equivalent taken over on account of investment in Joint Ventures 0.26 0.42 Cash and Cash Equivalent Closing balance 9,470.34 2,703.34

NOTES: 1. Cash and Cash equivalents at end of year includes unrealised gain of Rs 1.07 million (Loss of Rs.0.05 million) being on account of Current account/fixed deposits in foreign currency. 2. Cash and Bank balances includes Rs. 724.98 million (Rs. 511.39 million) which is not available for use by the Company. 3. Previous year's figures have been regrouped/recast wherever necessary.

SIGNATURES TO SCHEDULES 1 TO 18 As per our attached report of even date For and on behalf of the Board

B.K.Goenka M.L.Mittal For MGB & Co. Executive Director-Finance Chartered Accountants Chairman and Managing Director

Mohan Bhandari Partner Raj Kumar Jain Pradeep Joshi th Mumbai, 29 May 2009 Director Company Secretary

114 (U.S) (U.S)

(U.S)

India India India

Country

Delaware Delaware

Delaware

(Rs.in million)

- -

- India

Dividend

Proposed

Taxation

Profit After

3.69 3.69

0.20 0.20

110.84 110.84

(156.98) (156.98)

Taxation

Profit Before

------

-

55.60

919.99

Turnover

------

0.39

3.13

Subsidiary

other than

Investment

Investment in

-

-

0.10

79.59

829.85

Total Liabilities

0.11

38.92

75.10

175.07

2,351.00

2,894.58 9,105.24 7,050.07 1,268.25

11,648.64 11,806.30

Total Assets

- -

-

5.00

(4.49)

(157.66)

Reserves

- -

0.5

37.05

174.96

812.03 27.39

1,521.15

Share

Money

Capital and

Application

INR

INR

INR INR

USD

USD

USD

Currency

Reporting

Company

Name of the Subsidiary

Welspun Natural Resources Private Ltd.

Welspun Global Trade LLC #

# the financial statements of the foreign subsidiaries have been converted into Indian Rupees at the 31st March 2009 exchange rate.

Welspun Tubular LLC #

1

5 6 Welspun Pipes Limited

2 Welspun Plastics Ltd 7 Welspun Urja India Ltd

3 Welspun Pipes Inc #

4

Sr.No

Statement pursuant to exemption received under Section 212 (8) of the Companies Act,1956, relating to Subsidiary Companies

115 WE TRANSPORT TOTALSOLUTIONS

What happens when businesses blend capability of people with state-of- the-art technology and high quality raw material? It delivers world class products & services and provide complete solutions to its satisfied customer base. Welspun transports total solutions from its factories to the doorsteps of its customers.

We give our ears to our customers and try and listen and feel their requirements. We create unique solutions for each project leveraging on our decade-long experience, expertise and innovations in product offerings. This approach involves delivering our products and service capabilities through co-ordinated manufacturing, logistics and value- added services operations for to our customers. Our order book of US$ 1.60 billion is just the preface to this story. SPORT AN R T E

W

G

N I W D R N E E - B - W Total SolutionsA g LS in - t in SAW jo H e CO bl ATING - Dou Annual Report 2008-09

FAQ Section

Pipe Business

1. What is the current capacity in Pipes in India and US? Provide details as per the products? Whether the company is looking for any further expansion plans? The Current Pipe Manufacturing Capacity is 1,500,000 MTPA Capacities in India: LSAW: 350,000 MTPA HSAW: 550,000 MTPA ERW: 250,000 MTPA

Capacity in US HSAW: 350,000 MTPA

The LSAW expansion Project of 300,000 tons has been kept under hold and decision to implement the same is expected in FY 2010.

2. What is the Current Utilization level for the company in India and US plant? The total proportional Utilization levels in India and US facilities is around 65%. The capacity utilization depends on diameter and thickness of pipes. The installed Capacity increased by 500k tons during the year (150k tons Spiral III in Anjar and 350k tons in US mill) to 1.5 million tons/annum, making Welspun one of the largest line pipe company in the World.

3. What is the production volume in pipes for FY 09 and what is the realization per tonne in terms of Sales and EBITDA? The Production of Welded Pipes is 717K MT for the FY 2009. The average sales realization is Rs. 76,614 in welded pipes with the EBITDA of Rs. 10,525 per MT.in FY 09.

4. What are the major orders executed during the year client wise?

Major Clients in FY 2009 Region/ Country Transcanada Canada Kinder Morgan USA Sonatrach Algeria The National Gas Company – Trinidad Trinidad MITCO Malaysia Peru LNG S.R.L. (Hunt Oil) Peru Saudi Arabian Oil Company (Saudi Aramco) Middle East TEPPCO (Pinedale) USA Repsol Spain Petroleum Development Oman LLC Middle East

118 Plate Business

5. What is the Current Capacity of Plate cum Coil mill at Anjar,Gujarat? Plate cum Coil manufacturing capacity: 1,500,000 MTPA.

6. What is the production in Plate Mill? When is the coil mill expected to start its production? The company produced 192,569 MT of Plates during the year.The coil mill was commissioned in the last quarter of the FY 09 and is expected to produce high grade coils in H2 FY 10.

7. What is the breakup of internal and external plate sales during the year? The External Plate sales during the year were 42,073 tons. The Internal sales were 112,043 tons during the year.

Order Book Position

8. What are the key export markets for the company? The company has a well established sales and marketing network divided into domestic and international marketing divisions The Key Export market for company is North America, Canada, South America, South East Asia, Africa and Middle East.

9. What is the current Order Book Position in tonnage? What is the geographical breakup by volume? The combined order book position (for both pipes and Plates) of the company stands at Rs. 77,400 mn. The total pipe order book of the company is Rs. 71,000 mn. The Geographical Distribution of Order Book for Pipes (by Volume) is:

Order Book Geographical Distribution

Domestic, 21%

Middle East, 4%

Africa, 12% North America, 59%

South America, 4%

10. Who are the Major Clients in the Order Book? Ruby - Elpaso, USA Enterprise- Teppco (TOPS), USA Transcanada Pipe Line, Canada Sonatrach, Algeria GAIL, India Petroleum Development, Oman Saudi Arabian Oil Company,Saudi PUNJ LLOYD, India GWSSB, India Adani (Mundra Port & Special Eco. Zone Ltd.), India

119 Annual Report 2008-09

11. Who are the major suppliers? The Major Raw Materials suppliers for Steel Slabs Arcelor Mittal, Mexico JSW Steel, India Steel Plates Nippon Steel, Japan POSCO, Korea Voest Alpine, Austria Salzgitter,Germany Welspun PCMD, India (this is our plate and coil mill division) Arcelor Mittal, Mexico AUROHILL, UK Coils POSCO, Korea TISCO, China Hyundai Steel, Korea , India Rautaruukki OY,Finland BAOSTEEL, China

12. What are the new markets the company is looking for? The new markets for the company are mainly CIS countries and Europe. The company is also looking forward towards increasing its market share in the existing markets.

13. What is the Company's current market share in case of HSAW,LSAW & ERW Pipes? The company is the leading producer of large diameter,niche products like deep off-shore, heavy thickness pipelines. In the market it operates, particularly the Northern American market, it commands significant market share. Welspun has emerged as the World's largest exporter of line pipe in the US market

14. Who are customers that the company has got accreditations from? The Company has got accreditations from over 50 Oil and Gas majors world wide. Tolist, some of them are:

COMPANY NAME COMPANY NAME AGIP NTPC BECHTEL ONGC BRITISH GAS PETRO CHINA BRITISH PETROLEUM PETRONAS, MALAYSIA (PETROJET) CHINA NATIONAL PETROLEUM CORPORATION PETROLEUM DEVELOPMENT OMAN LLC CPMEC, CHINA PGN, INDONESIA CHEVRON (Frame Agreement) QATAR PETROLEUM DOW RELIANCE INDUSTRIES LIMITED RUBY (ELPASO) SAIPEM, SNAM EGYPTIAN GENERAL PETROLEUM CORPORATION SAUDI ARAMCO (Framework Agreement) ENTERPRISE SHELL GOLDEN PASS PIPELINE LP (EXXON-MOBILE) STOLT OFFSHORE – Acergy GAIL SONATRACH GASCO, ABUDHABI TECHNIP GASCO, EGYPT TOTAL GAZPROM (STROYTRANSGAZ) TRANSCANADA (Long term contract) KINDER MORGAN UNOCAL MOGE, MYANMAR PERU LNG S.R.L. (HUNT OIL) N.A.O.C. - NIGERIA VIETSOPETRO NPCC, ABU DHABI

120 Debt Position

15. What is the net debt to equity mix for the company? The Net Debt ratio for the company for FY 09 stands at 1:1. (Refer to page no 7 for the figures) The net debt is calculated as Total Debt (-) Cash (-) Short TermInvestment / Total Shareholder's Equity.

16. What is the current gross and net debt position as at 31st March 2009? The Total Debt position (Secured & Unsecured) is Rs. 26,538 mn as at 31st March 2009.The Net Debt Position for the company is Rs. 15,999 mn as at 31st March 2009.

Others 17. What is the Outlook for future in terms of business opportunity? Welspun has firmly established itself as a credible supplier in the international market. It set up its Plants at such strategic locations in the coastal belt of the country from where the transportation cost of the manufactured pipes to the desired destination fixed by its customers is minimum. It has also proved its capability in venturing out of India with its commissioning of its new pipe mill at Little Rock Arkansas US, with a Spiral Pipe capacity of 350,000 tons pa. with coating, double jointing and bending facilities, giving a one stop solutions to its customers locally in US and neighboring areas. With the onset of recovery in the Oil Prices and Global markets the demand for pipes is likely to improve. The domestic market shall also provide immense opportunity.

121 W.G.S.R.L. Event Calendar FY 2009-2010

Date Events/Announcements

Week 29 of 2009 Q1 Board meeting and Results followed by Week Starting July 13 Investors / Analysts call

Week 43 of 2009 Q2 Board meeting and Results followed by Week Starting Oct. 19 Investors / Analysts call

Week 4 of 2010 Q3 Board meeting and Results followed by Week Starting Jan 18 Investors / Analysts call

Week 20 of 2010 Q4 Board meeting and Results followed by Week Starting May 10 Investors / Analysts call

Glossary of Terms

2B Tubular 5L Line API American Petroleum Institute Bn Billion CAGR Compounded Annual Growth Rate CARE Credit Analysis and Research CIS Commonwealth of Independent States CRISIL Credit Rating Information Services of India Limited CT Casing and Tubular EBITDA Earnings Before Interest Tax Depreciation and Amortization ECB External Commercial Borrowing ERW Electric Resistant Welded FCCB Foreign Currency Convertible Bonds GAIL Gas Authority of India Limited GSPL Gujarat State Petroleum Limited HRC Hot Rolling Coil HSAW Helical Submerged Arc Welded INR Indian Rupee (Rs.) ISO International Organization for Standardization JPY Japanese Yen LIBOR London Interbank Offered Rate LLC Limited Liability Company LSAW Longitudinal Submerged Arc Welded Mn Million MT Metric Tonnes MTPA Metric Tonnes per annum NELP New Exploratory Licensing policy Q Quarter RBI Reserve Bank of India SAW Submerged Arc Welded TPA Tonnes per annum UK United Kingdom US$ United States of America Dollar US United States of America VAI Voest Alpine Industries VAT Value added Tax WGSRL Welspun Gujarat Stahl Rohren Limited YEAR AWARD / RECOGNITION BESTOWED BY

2008 Most Valuable Company in Metal Dun & Bradstreet Pipes

Emerging Company of the Year Economic Times Corporate Excellence Award

2nd Largest Steel Pipe Producer Financial Times, U.K. in the World (Large Diameter)

2007 Fastest Growing Company Business Today

Fastest Growing Steel Products Construction World Company NICMAR

Amongst the top 3 SAW Pipe CLSA Asia Pacific Company in the World Market Research

Amongst the 20 Companies to Business Today watch out for in 2008

SPORT AN R T E

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N I W D R N E E - B - W TRIUMPHg TRIUMPHA LS in - t in SAW jo H e CO bl ATING - Dou TEHE CONOMIC T IMES

ECMERGING OMPANY OF T HE Y EAR 2007-2008 WELSPUN GUJARAT STAHL ROHREN LTD.

Mr. B. K. Goenka, Chairman & Managing Director, accepting the Award from Hon’ble Prime Minister Dr. Manmohan Singh (17.01.2009) Trade World, B-Wing, 9th Floor, Kamala Mills Compound, Senapati Bapat Marg, Lower Parel, Mumbai 400 013, INDIA

www.welspunpipes.com