Directors Report of Asian Electronics Ltd.

Mar 31, 2013

To the Members

The Directors present the Forty-Eighth Annual Report on the business and operations of the Company for the year ended 31st March, 2013.

FINANCIAL RESULTS

[Amt in Rs. Lacs]

Year ending March 31, 2013 2012

Gross revenue 2032 8548

Operating proft (PBIDT) (1059) (9963)

Finance Expenses 39 2007

Depreciation 259 387

Proft before tax & Exceptional items (1356) (12357)

Exceptional items 85

Proft / (Loss) after tax (1441) (12357)

Excess provision of Income Tax of earlier year written back.

Proft after current tax and deferred (1441) (12357)

Tax and Exceptional items

Balance brought forward (20068) (7711)

Balance carried to Balance Sheet (21509) (20068)



DIVIDEND

In respect of the year under review, i.e., the year 2012-2013, in the absence of profts your Directors do not propose to declare any dividend.

OPERATIONS

During the year, the Company was able to achieve gross revenue of Rs. 20.32 crores as against Rs. 85.48 crores in the previous year.

Sales of lighting products comprises of domestic sales and export sales.

The Company has undertaken an exercise including creating SPVs (Special Purpose Vehicles) for effective and consolidated recovery of various assets and minimizing the impact on the operations or fnancial stability of the Company. However, such exercise needs an approval from lenders, shareholders and stakeholders in view of the uncertainty about the impact of any changes to the plans drawn up and timing of implementation, the Company and the management cannot ascertain the fnal outcome at this juncture.

DOMESTIC SALES

The Company''s sales suffered signifcantly for want of working capital and delayed recoveries from markets.

EXPORT SALES

The Export Sales was to the tune of Rs. 4.41 Crores for the year under review as compared to Rs. 10.45 crores in the previous year. Your Company intends to increase contract manufacturing and exports sales.

RESEARCH AND DEVELOPMENT

Asian Technology Center (ATC), the design and development center of the Company is based in Pune, Maharashtra. This R&D center is ISO-9001:2008 compliant and has developed products conforming to global standards.

ATC understands the importance of innovating and customizing the existing products in minimum possible time frame. The expertise in developing full functional prototypes helps to reduce the design cycles and achieve faster time to market.

Global practices of ‘NPI'' (New Product Introduction) and ‘TOT'' Transfer of Technology) are being followed for conducting Research & Development activities. The team at ATC consisting more than 20 engineers and 5 support staff has more than 100 man-years of experience of working together among them.

Major milestone of the R&D unit are as follows:

1) POC samples of LED products are developed using standard component available in the market.

2) Completion of pilot batch of Line Monitoring and Controllers for an overseas company in the field of Power Control and Management. The product involves 4-5 multilayer boards, its integration with IP cabinet, testing and basic functioning.

3) The sample batch quantities have been put in place for the coming year.

4) Some new projects regarding the Line monitoring devices are now into NPI.

5) Modifed Samples of High Voltage loop management System, whose POC had been evaluated and approved have been sent for evaluation to customer.

FINANCE

The enclosed statement forming part of the report gives details such as Financial Position at a glance, Distribution of Income etc. Your directors wish to bring the following to your attention:

The Company has a debt burden which its established sources of income and assets cannot service or repay. A detailed exercise had been carried out with the help of professional agencies and secured creditors in pursuance of establishing the viability. The reports inter alia conclude as under:

# The unit is viable and business is feasible.

# The Company needs equity infusion and debt restructuring or repayment at a discount.

# The present realisable values of assets have eroded signifcantly.

# The new initiatives taken for development and production of identifed products on contract basis make the enterprise viable.

The above clearly indicates need for fresh fund raising and the debt restructuring. The relevant notes have been carried elsewhere in this report.

The Company had filed a proposal with the Corporate Debt Restructuring (CDR) cell for the restructuring of its Bank Liabilities under consortium. The CDR proposal submitted by the Company was approved by the CDR Empowered Group Committee (CDR-EG) at its meeting held in March 2012. However, since the process consequent to such approval could not be completed, the concerned Banks did not execute the master restructuring agreement, therefore the CDR proposal has lapsed.

Now the Company has approached/is in the process of approaching individual Banks for settlement of their dues under One Time Settlement (OTS) basis.

CAPITAL EXPENDITURE

As at 31st March, 2013, the gross fxed assets stood at Rs. 9960.75 lacs and the net fxed assets at Rs. 2800.60 lacs. Additions to fxed assets during the year Amt Rs. 6.65 Lacs and deductions to the fxed assets during the year amt Rs. 6.34 Lacs.

INVENTORIES, RECEIVABLES AND CURRENT ASSETS

The management has done a detailed analysis of its current assets as reported in the previous year. For the reasons explained below, the board is of the opinion that the realizable value of assets has gone down signifcantly:

Inventories: The inventories include a large portion of products meant for oil division which has ceased to be operative and hence not realizable. Also a large volume of components, WIP remained unutilized for such products.

Receivables: The Company has disputed export receivables from M/s Westinghouse Lighting Corporation where a lawsuit has been lost and also other cases where quality counter claims and customers'' reorganization have delayed recoveries. On domestic front, large number of debtors have raised counter claims. Coupled with a reduced turnover, this has made recoveries more diffcult. The Company has issued legal notices in over 200 cases.

Advances: In many cases, the Company had advanced certain amounts for long term business contracts. The reconciliation for the individual parties is under process and once confrmed suitable action for recovery shall be taken.

In view of the above, current assets as stated above are not at realizable values as stated in the Balance Sheet

REGISTERED OFFICE

Pursuant to the approval of members by way of Special Resolution passed at the Annual General Meeting held on 29th December, 2012 the registered offce of the Company has been shifted from D-11, Road No.28, Wagle Industrial Estate, Thane – 400604 to 107, Sumer Kendra Building, P.B. Marg, Behind Mahindra Towes, Worli. Mumbai – 400 018.

SHARE CAPITAL

During the year under review, the paid up share capital of the Company was increased consequent upon the allotment of 41,80,057 equity shares to Asian Electronics Limited, Employees Welfare Trust, 2009 under Employees Stock Option Scheme 2009.

SUBSIDIARY COMPANIES

The Company has effective from 1st October, 2009 transferred the following Divisions to two 100% subsidiaries (SPVs) as under:

a. Business of ESCO Division, i.e. fnancing of Projects / Products to customers on energy saving basis, and all activities related thereto together with all related assets, liabilities and entitlements at book values as at the time of transfer, on a going concern basis. The name of this 100% subsidiary is AEL ESCO PRIVATE LIMITED.

b. Business of Projects Division, i.e. State Electricity Board Projects and all activities related thereto together with all related assets, liabilities and entitlements at book values as at the time of transfer on a going concern basis. The name of this 100% subsidiary is AEL PROJECTS PRIVATE LIMITED.

The Accounts for the year ended 31st March, 2010 to 31st March, 2013 have incorporated all these transactions at the book values at the time of transfer the difference between the book values of identifed assets and liabilities of ESCO Division amounting to Rs. 5174.34 Lacs and of Project Division amounting to Rs. 1129.15 Lacs are shown as investment in those subsidiaries.

Pending approval of secured / unsecured lenders, the Company has, for the time being, shown the said investments under Investment Suspense Account read with Note 10 of the Accounts as on 31st March, 2013. On account of transfer of these two Divisions to two separate subsidiaries, the Company has also prepared Consolidated Balance Sheet and Proft & Loss Account which forms part of the Annual Reports for the fnancial years 2009-2010 to 2012-13.

ACCOUNTS

The accompanying Financial Statements of the Company have been prepared on a going concern basis.

In preparation of these accounts, the Accounting Standards made applicable by the Institute of Chartered Accountants of India, have been followed.

We have selected appropriate accounting policies which have been applied consistently and have made judgments and estimates that are reasonable and prudent so as to ensure that the accounts give a true and fair view of the state of affairs of the Company as at 31st March, 2013 and of the loss of the Company for the year ended on that date.

We have taken proper and suffcient care for maintenance of appropriate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities.

AUDITORS'' REPORT

As regards observations contained in Auditors'' Report dated 30th May, 2013, regarding transfer of related loans and debentures of ESCO and Project Divisions to wholly owned subsidiaries, Stock Options granted to Directors and Employees, litigations initiated by LIC Mutual Fund, Bank of India and other Banks for recovery of their dues and diminution in the value of investments, old / unsalable stocks, sundry debtors and loans and advances the following explanation of the Management may be noted:

OTHER CLARIFICATIONS

The boards of directors have advised a detailed scrutiny of accounts and nature of liability appearing under the head Statutory Dues and have the following explanation:

a) VAT/Central Sales Tax

Amount payable as on 31st March, 2013 is Rs. 675.50 Lacs. There is a refund due of over Rs. 300 lacs to be adjusted against the demand. For the balance amount an application is being made by the Company for payment in installments.

b) Tax Deducted at Source:

Amount payable as on 31st March, 2013 is Rs. 127.68 Lacs. There is a refund due of Rs. 163.65 Lacs and the department is advised to adjust the same.

c) Custom Duty and Service Tax:

Amount payable as on 31st March, 2013 is Nil However, accounting reconciliation is pending.

d) Provident Fund:

Amount payable as on 31st March, 2013 is Rs. 9.38 Lacs. However same has been paid before June, 2013.

EROSION OF NET WORTH

The accumulated losses of the Company as at 31st March, 2013 amounting to 215.09 Crores have resulted in erosion of more than ffty percent of its peak net worth of 234.14 Crores during the immediately preceding four fnancial years.

The Board is already seized of the situation arising on account of erosion of net worth and is taking the necessary steps including discussions with the lenders and a package of fnancial restructuring under the OTS mechanism which is under consideration with the secured lenders, for details regarding reasons of erosion and steps taken and proposed to be taken by the management please refer to the explanatory statement pursuant to section 173(2) of the Companies Act, 1956 forming part of the notice of 48th Annual General Meeting.

In terms of Section 23 of the Sick Industrial Companies (Special Provisions) Act, 1985, if the accumulated losses of an industrial Company, as at the end of any fnancial year have resulted in erosion of ffty percent or more of its peak net worth during the immediately preceding four fnancial years, that Company falls under the category of potentially sick Industrial Company and therefore the fact is required to be reported to Board of Industrial and Financial Restructuring (BIFR) within 60 days from the date of fnalization of the audited accounts which is the date of this Annual General Meeting, the same is required be considered by the shareholders at the General Meeting.

PARTICULARS OF THE EMPLOYEES

None of the Employees were drawing salary of Rs. 60,00,000/- or more per annum, if employed throughout the year or Rs. 5,00,000/- or more per month, if employed for part of the year.

DIRECTORS

1. Retirement by Rotation :

Mr. Rajesh Mehta was appointed as an Additional Director with effect from June 1, 2011. He was also appointed whole time director of the Company, designated as Executive Director & Joint Chief Executive Offcer (Technology & Finance) for a period of two years with effect from 1st June, 2011

Mr. Mehta''s appointment as Director was approved by the shareholders at the 46th Annual General Meeting (AGM) held on 22nd September, 2011. His appointment as whole time director, designated as Executive Director & Joint Chief Executive Offcer (Technology & Finance) and the terms and conditions thereof were also approved by the shareholders at the said AGM

Mr. Rajesh Mehta tendered his resignation as Executive Director & Joint Chief Executive Offcer (Technology & Finance) w.e.f. 14th February, 2013, He also conveyed his intention to continue as a non-executive director liable to retire by rotation, The same was approved by the Board at their meeting held on 14th February, 2013.

Therefore in accordance with the provisions of the Articles of Association of the Company and the provisions of Companies Act, 1956, Mr. Rajesh Mehta retires by rotation at the ensuing Annual General Meeting and is eligible for reappointment. The Board recommends his re-appointment.

2. Appointment Of Director :

Pursuant to the provisions of Section 260 of the Act and Article No. 161 of the Articles of Association, Mr. Hardik Shah was appointed as Additional Director with effect from 6th March, 2013 and holds offce up to the date of the forthcoming Annual General Meeting.

The Company has received notice from a member proposing his appointment as Director.

3. Resignation :

Mr. James Mitropoulos has resigned from the post of Director w.e.f. 1st January, 2013. The same was accepted by the Board of Directors of the company at their meeting held on 14th February, 2013. The Board of directors places on record their appreciation for the valuable services rendered by Mr. James Mitropoulos during the tenure of his offce.

AUDITORS

M/s. Sorab S. Engineer & Co., Chartered Accountants who are the statutory auditors of the Company, hold offce until the conclusion of ensuing Annual General Meeting and are eligible for re-appointment. The members are requested to consider appointment of Statutory Auditors to hold the offce till conclusion next Annual General Meeting.

The Company also proposes to appoint branch auditors for the same period.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION ETC.

Information on Conservation of Energy, Technology Absorption, Foreign Exchange Earning and Out-go as required to be disclosed pursuant to Section 217 [1] (e) of the Companies Act, 1956, read with Companies [Disclosures of Particulars in the Report of Board of Directors] Rules, 1988 is given in the Annexure forming part of this Report.

IMPLEMENTATION OF "GREEN INITIATIVE IN CORPORATE GOVERNANCE" INTRODUCED BY THE MINISTRY OF CORPORATE AFFAIRS

Your Company''s products are designed for energy effciency and it was therefore a natural decision for the Company to whole-heartedly support the Green Initiative in Corporate Governance introduced by the Ministry of Corporate Affairs in April 2011. The Company therefore proposes to send all notices / documents / communications including annual reports in electronic form to email addresses of shareholders registered with Depository Participants (DPs) and made available by the Depositories. Shareholders are therefore requested to keep their email address updated with the DPs at all times so that the above documents always reach them at the email account of their choice. As regards shareholders whose email IDs are not available with the Company, physical copies of such documents will be sent.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217 (2AA) of the Companies Act, 1956 with respect to Directors'' Responsibility Statement, it is hereby confrmed:

(i) that in the preparation of the annual accounts for the fnancial year ended 31st March, 2013, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(ii) that the directors have selected the accounting policies and applied them consistently and made judgments and estimates that were 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 fnancial year and of the loss of the Company for the year under review;

(iii) that the directors have taken proper and suffcient 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) that the directors have prepared the accounts for the fnancial year ended 31st March, 2013 on ‘going concern'' basis.

PUBLIC DEPOSITS

During the year under review, the Company had not invited any fxed deposits.

The total outstanding Fixed deposits as on 31st March, 2013 were Rs. 3.49 Crores (831 depositors). Out of which Rs. 0.91 Crores (203 depositors) were not matured up to 31st March, 2013. Unpaid deposits as on 31st March 2013 are Rs.2.58 Crores (628 depositors). The Company has applied for extension for repayment of fxed deposits from the Central Government pursuant to rule 2 of the Companies (Application for Extension of Time under sub section (8) of Section 58A) Rules, 1979 which is under process with the concerned ministry.

CORPORATE GOVERNANCE

A separate report on Corporate Governance along with Auditor''s certifcate on its compliance is attached as an annexure to this report.

DEPOSITORY SYSTEM

As the members are aware, the Company''s shares are compulsorily tradable in electronic form. As on 31st March, 2013, 98.97% of the Company''s total paid-up capital representing 3,92,25,919 shares are in dematerialized form. In view of the numerous advantages offered by the Depository system, Members holding shares in physical mode are requested to avail of the facility of dematerialization of the Company''s shares with either of the Depositories.

ACKNOWLEDGEMENTS

Your Directors take this opportunity to thank the Financial Institutions, Banks, Central & State Government authorities, Regulatory authorities, Stock Exchanges and the Stakeholders for their continuous co-operation and support to the Company.

Your Directors also thank customers, vendors and investors for their faith and support. Your Directors also place on record their deep sense of appreciation of the contribution made by employees at all levels. Their continuous support and their competence, hard work, team spirit and solidarity will make all the difference to the business of your Company.

On behalf of the Board of Directors

Place: Mumbai Arun B. Shah

Date: 9th July, 2013 Executive Chairman

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Mar 31, 2011

To the Members,

The Directors present the Forty-Sixth Annual Report on the business and operations of the Company for the year ended March 31, 2011.

FINANCIAL RESULTS

[Rupees in Lacs]

Year ending March 31, 2011 2010

Gross revenue 14732 22782

Operating profit (PBIDT) (4209) 3775

Finance Expenses 2472 2812

Depreciation 440 439

Profit before tax & Exceptional items (7121) 524

Exceptional items (805) (443)

Profit / (Loss) after tax (7926) 81

Excess provision of Income Tax of earlier - 213 year written back.

Profit after current tax and deferred (7926) 294

Tax and Exceptional items

Balance brought forward 215 (79)

Balance carried to Balance Sheet (7711) 215

DIVIDEND

In respect of the year under review, i.e., the year 2010-2011, in the absence of profits your Directors do not propose to declare any dividend.

OPERATIONS

During the year under review, the Company has achieved gross revenue of Rs. 147.32 crores as against Rs. 227.82 crores in the previous year.

Sales of lighting products comprises of domestic sales and export sales.

DOMESTIC SALES

The Company's sales suffered significantly for want of working capital and delayed recoveries from markets. The trading activities have yielded marginal returns but in the process have used some of the inventories.

EXPORT SALES

The Export Sales was to the tune of Rs. 8.40 crores for the year under review as compared to Rs. 20.71 crores in the previous year. The Company has consciously focused on this segment and taken steps to grow exponentially during the coming years. New products like the Power Products and the LED Products were introduced to new customers in this year. During the year, a patented Product 'E2T5' was exclusively developed complying to European specifications. The Power Products and LED related special designs are likely to cater to both the Export and Domestic markets and will play a major role in the business prospects of the Company in the coming years.

RESEARCH AND DEVELOPMENT

The Company has set up state of art Asian Technology Centre (ATC) in Pune, Maharashtra, which is ISO 9001:2008 compliant. ATC has designed & developed products conforming to Global Certification agencies like UL/ETL etc. in Power Protection Devices & Solid State LED lighting. It has also achieved significant progress in Research & Development for LED Garage Parking Lights for the Global market, LED Tubelights, Bulbs, cost rationalization and conventional CFL Down Lighters, OTS Products, Solar Products and Streetlights. The Company has also obtained the ISI certification for manufacture of CFLs. The awareness for LED-based products is growing fast in India and therefore the Company's foray into this product segment is a timely step towards establishing its presence in the marketplace for innovative and modern lighting solutions.

ATC follows Global practices of 'NPI' (New Product Introduction) and 'TOT' (Transfer of Technology) for conducting Research & Development activities. The team at ATC consisting of more than 40 engineers and 15 support staff has more than 100 man-years of experience of working together between them.

Major milestones during the year under review have been:

- UL certified LED Garage Parking Light for exports

- UL / ETL certified Power Protection Devices including 4 models of PM20-208, PM20-240, PM30-240, HEMX range.

- LED Tubelight, the Loomlight, for successful replacement of conventional tubelights in the Textile industry.

- TOT audit by independent external agency.

- Development of LED lighting products for the "general lighting" space.

An expenditure of over Rs. 2 crores a year is likely to yield a significant push to technology and business in years to come.

FINANCE

As advised during the last report, the Company had approached its lenders for rescheduling the debt over a longer period. The Company's finances further deteriorated due to lower capacity utilization, higher interest and reduced margins. Faced with defaults, the Company approached CDR through its largest creditor, IDBI Bank in Jan 2011. The proposal is pending approval of the requisite number of creditors. The Board of Directors is of the opinion that the Company's survival solely depends on the approval of such a package. The management is still in negotiation for such approval. In the meantime, the Company is facing law suits from LIC Mutual Fund and from HSBC for recoveries of their dues.

The enclosed statement forming part of the report gives details such as Financial Position at a glance, Distribution of Income etc.

CAPITAL EXPENDITURE

As at 31st March, 2011, the gross fixed assets stood at Rs. 9864.23 lacs and the net fixed assets at Rs. 3345.87 lacs. Additions to Fixed Assets during the year amounted to Rs.2.90 lacs.

INVENTORIES, RECEIVABLES AND CURRENT ASSETS

The management has done a detailed analysis of its current assets as reported in the previous year. For the reasons explained below, the

Board is of the opinion that the realizable value of assets has gone down significantly:

Inventories: Rs. 8364.69 lacs. The inventories include a large portion of products meant for a specific client who has legal disputes with the Company and hence not realizable. Also a large volume of components, WIP remained unutilized for such products in domestic and exports markets. The total diminution of value is estimated at Rs. 3000.00 lacs (36%).

Receivables: Rs. 13167.87 lacs. The Company has disputed export receivables where a lawsuit has been lost and also other cases where quality counter claims and customers' reorganization have delayed recoveries. On domestic front, large number of debtors have raised counter claims. Coupled with a reduced turnover, this has made recoveries more difficult. The Company has issued legal notices in over 200 cases. However, the Board of Directors feels, in normal course of business, the recoveries will be difficult to the extent of Rs. 5215.16 lacs.

Advances: Rs. 2812.82 lacs. In many cases, the Company had advanced certain amounts for long term business contracts. The amounts of Rs. 261.00 lacs seem difficult of recoveries in view of reduced business activities.

In view of the above, current assets as stated above are not at realizable values as stated in the Balance Sheet

SUBSIDIARY COMPANIES

In furtherance of the various objectives as mentioned in the last year's Report, the Company has effective from 1st October, 2009 transferred the following Divisions to two 100% subsidiaries (SPVs) as under:

a. Business of ESCO Division, i.e. financing of Projects / Products to customers on energy saving basis, and all activities related thereto together with all related assets, liabilities and entitlements at book values as at the time of transfer, on a going concern basis. The name of this 100% subsidiary is AEL ESCO PRIVATE LIMITED.

b. Business of Projects Division, i.e. State Electricity Board Projects and all activities related thereto together with all related assets, liabilities and entitlements at book values as at the time of transfer on a going concern basis. The name of this 100% subsidiary is AEL PROJECTS PRIVATE LIMITED.

The Accounts for the year ended 31st March, 2010 and 31st March, 2011 have incorporated all such transactions at the book value at the time of transfer and the difference between the book values of identified assets and liabilities of ESCO Division amounting to Rs. 5174.34 Lacs and of Project Division amounting to Rs. 1129.15 Lacs are shown as investment in the proposed subsidiaries.

Pending approval of secured / unsecured lenders, the Company has, for the time being, shown the said investment under Investment Suspense Account in Schedule 6 of the Accounts as on 31st March, 2010 and 31st March, 2011. On account of transfer of these two Divisions to two separate subsidiaries, the Company has also prepared Consolidated Balance Sheet and Profit & Loss Account which forms part of the Annual Report 2009-2010 and 2010-2011.

The Company is looking out for strategic partners in these activities once the fate of CDR is known.

RIGHT ISSUE

The Company has received the Observation Letter from SEBI bearing No. CFD/DIL/ISSUES/SP/VB/17386/2010 dated 25th August, 2010. The validity of the said SEBI Observation Letter was for one year from the date of issuance ie. upto 24th August, 2011.

SEBI has directed Lead Manager M/s. Vertex Securities Limited, to update the Draft Letter of Offer as per the observations enumerated by it in the said Observation letter.

In the meanwhile, in order to get the approval of the Bankers to the Company for the Company's proposal for Corporate Debt Restructuring (CDR), the issue size is proposed to be increased to Rs. 68.90 Crore. No sooner the approval for proposed CDR is received, the updation of the Draft Letter of Offer will be undertaken by the Company to ensure that the Rights Issue is completed at the earliest.

ACCOUNTS

The accompanying Financial Statements of the Company have been prepared on a going concern basis.

In preparation of these accounts, the Accounting Standards made applicable by the Institute of Chartered Accountants of India have been followed.

We have selected appropriate accounting policies which have been applied consistently and have made judgments and estimates that are reasonable and prudent so as to ensure that the accounts give a true and fair view of the state of affairs of the Company as at 31st March, 2011 and of the loss of the Company for the year ended on that date.

We have taken proper and sufficient care for maintenance of appropriate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities.

AUDITORS' REPORT

As regards observations as contained in Auditors' Report dated 7th June, 2011, regarding transfer of related loans and debentures of ESCO and Project Divisions to wholly owned subsidiaries, Stock Options granted to Directors and Employees, litigations initiated by LIC Mutual Fund, Bank of India and other Banks for recovery of their dues and diminution in the value of investments, old / unsaleable stocks, sundry debtors and loans and advances, a reference may please be made to Note No. 2, 4 to 7, 9 and 11 of Schedule 21(III) to the financial statements respectively, which are self-explanatory.

PARTICULARS OF THE EMPLOYEES

None of the Employees were drawing salary of Rs. 60,00,000/- or more per annum, if employed throughout the year or Rs. 5,00,000/- or more per month, if employed for part of the year.

DIRECTORS

Retirement by rotation

In accordance with the provisions of the Articles of Association of the Company and the provisions of Companies Act, 1956, Mr. D. G. Prasad retires by rotation at the ensuing Annual General Meeting and is eligible for reappointment. The Board recommends his re- appointment.

Nominee Director

IDBI Bank Ltd. (IDBI) vide its letter dated 5th June, 2010, appointed Mr. Hemendra Srivastava as its Nominee Director on the Board of Directors of the Company with effect from 19th June, 2011 in terms of the provisions of Loan Agreement dated 23rd March, 2007 and withdrew the nomination of Mr. Dipankar De, then existing Nominee Director of IDBI Bank on the Board of Directors of the Company, with effect from 19th June, 2011.

Subsequently, IDBI Bank Ltd. (IDBI) vide its letter dated 18th October, 2010 has appointed Mr. S. Ananthakrishnan, its Executive Director, as its Nominee Director on the Board of Directors of the Company with effect from 1st November, 2010 in terms of the provisions of Loan Agreement dated 23rd March, 2007 and has withdrawn the nomination of Mr. Hemendra Srivastava, then existing Nominee Director of IDBI Bank on the Board of Directors of the Company, with effect from 1st November, 2010.

IDBI Bank Ltd. vide its letter dated 28th June, 2011 has withdrawn the name of Mr.S.Ananthakrishnan as Nomine Director of IDBI on the Board of Directors of the Company with effect from 28th June, 2011.

The Board placed on its record its sincere appreciation for the valuable contribution made by Mr. Dipankar De, Mr. Hemendra Srivastava and Mr. S. Ananthakrishnan during their respective tenures as Nominee Directors of IDBI.

Mr. S. Neelakanta Iyer, who is associated with the Company as President (Manufacturing Operations) since April, 2007, has been appointed as Executive Director and Jt. CEO (Manufacturing Operations) of the Company with effect from 1st June, 2011.

Mr. Rajesh I. Mehta, who is Managing Director of INTEGRAL Technologies Pvt. Ltd., which is conducting research and development activities of the Company since last two years, has been appointed as Executive Director and Jt. CEO (Technology & Finance) with effect from 1st June, 2011.

Your Directors are pleased to report that the rich and varied experiences of Mr.Neelakanta Iyer and Mr. Rajesh Mehta will immensely benefit the Company.

AUDITORS

M/s. Sorab S. Engineer & Co., Chartered Accountants who are the statutory auditors of the Company, hold office until the conclusion of ensuing Annual General Meeting and are eligible for re-appointment. The members are requested to consider appointment of Statutory Auditors for the current financial year 2011-2012.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION ETC.

Information on Conservation of Energy, Technology Absorption, Foreign Exchange Earning and Out-go as required to be disclosed pursuant to Section 217 [1] (e) of the Companies Act, 1956, read with Companies [Disclosures of Particulars in the Report of Board of Directors] Rules, 1988 is given in the Annexure forming part of this Report.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217 (2AA) of the Companies Act, 1956 with respect to Directors' Responsibility Statement, it is hereby confirmed:

(i) that in the preparation of the annual accounts for the financial year ended 31st March, 2011, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(ii) that the directors had selected such accounting policies and applied them consistently and made judgements and estimates that were 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) that the directors had 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) that the directors had prepared the accounts for the financial year ended 31st March, 2011 on a 'going concern' basis.

CORPORATE GOVERNANCE

A separate report on Corporate Governance along with Auditor's certificate on its compliance is attached as an annexure to this report.

DEPOSITORY SYSTEM

As the members are aware, the Company's shares are compulsorily tradable in electronic form. As on 31st March, 2011, 98.84% of the Company's total paid-up capital representing 3,50,41,997 shares are in dematerialized form. In view of the numerous advantages offered by the Depository system, Members holding shares in physical mode are requested to avail of the facility of dematerialization of the Company's shares with either of the Depositories.

ACKNOWLEDGEMENTS

Your Directors take this opportunity to thank the Financial Institutions, Banks, Central & State Government authorities, Regulatory authorities, Stock Exchanges and the Stakeholders for their continuous co- operation and support to the Company.

Your Directors also thank customers, vendors and investors for their faith and support. Your Directors also place on record their deep sense of appreciation of the contribution made by employees at all levels. Their continuous support and their competence, hard work, team spirit and solidarity will make all the difference to the business of your Company.

On behalf of the Board of Directors

Place: Thane Arun B. Shah

Date: 18th August, 2011 Executive Chairman

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Mar 31, 2010

The Directors present the Forty-fifth Annual Report on the business and operations of the Company for the year ended March 31, 2010.

FINANCIAL RESULTS [Rupees in Lacs]

Year ending March 31, 2010 2009

Gross revenue 22782 21403

Operating profit (PBIDT) 3775 2429

Finance Expenses 2812 2130

Depreciation 439 461

Profit before tax & Exceptional items 524 (162)

Exceptional items (443) 698

Provision for taxes inclusive of - 33

FringeBenefit Tax and Deferred

Tax.

Excess provision of Income Tax of earlier 213 -

year written back.

Profit after current tax and deferred 294 502

Tax and Exceptional items

Balance brought forward (79) (581)

Balance available for Appropriation 215 (79)

Appropriation

Dividend on Equity Shares recommended - -

Income tax on Equity Dividend - -

Transfer to General Reserve - -

Balance carried to Balance Sheet 215 (79)



DIVIDEND

In respect of the year under review, i.e., the year 2009-2010, your Directors do not propose to declare any dividend with a view to conserve the resources.

OPERATIONS

The Company is now focused on its core competence of manufacture of Energy efficient Lighting products and power products. During the year, the Company has achieved a gross revenue of Rs.227.82 crores as against Rs. 214.03 crores in the previous year.

Sale of lighting products comprises of Domestic Sales and Export Sales.

DOMESTIC SALES

The Company has, as a management structure, merged all sales activities under one stream compared to the earlier divisions of Consumer Lighting Group (CLG), Professional Lighting Group (PLG) and ESCO.

The year has witnessed a reduction in volume terms and value terms as well. The benefit of changed market position and credit terms will yield benefits over the next 2 years.

EXPORT SALES

The year has witnessed a significant growth in Export sales, resulting out of expansion in the product base, with major exports

to Europe and America. The exports sales have registered a rise of 146% as Exports rose to Rs. 20.94 crores in 2009-10 vis-avis Rs. 8.53 crores in the previous year. The company has consciously focused on this segment and taken steps to grow exponentially during the coming years. New products like the Power Products and the LED Products were introduced to new customers in this year. During the year, a patented Product ‘E2T5’ is exclusively developed complying to European specifications. The Power Products and LED related special designs are likely to cater to both the Export and Domestic markets and will play a major role in the business prospects of the Company in coming years.

RESEARCH AND DEVELOPMENT

The Company has set up Asian Technology Centre in Pune, Maharashtra, which has obtained UL/ETL Certification in Power Protection Productline & Solid State lighting including Garage Parking lights. It has also achieved significant progress in Research & Development for LED Tubelights, Bulbs, cost rationalization, conventional CFL down lighters, OTS Products, Solar Products and Streetlights. The Company has also obtained the ISI certification for manufacture of CFLs. The awareness for LED-based products is growing fast in India and therefore the Company’s foray into this product segment is a timely step towards establishing its presence in the marketplace for innovative and modern lighting solutions.

FINANCE

The Company has paid instalments of loans to IDBI Bank Ltd., UCO Bank, Bank of India and Indian Renewable Energy Development Agency Ltd. (IREDA) aggregating to Rs. 1,732.54 lacs during the Financial Year ended 31st March, 2010. Due to delayed recoveries and resultant curtailment of activities, the cash flows have not been comfortable leading to some delay in payment committed to secured and unsecured lenders. The Company is in negotiation to reschedule the borrowings in line with the present level of activities.

The enclosed statement forming part of the report gives details such as Financial Position at a glance, Distribution of Income etc.

CAPITAL EXPENDITURE

As at 31st March, 2010, the gross fixed assets stood at Rs. 9,867.27 lacs and the net fixed assets at Rs. 3,783.87 lacs. Additions to Fixed Assets during the year amounted to Rs. 42.99 lacs.

INVENTORIES & RECEIVABLES

The Company’s inventories have not been converted into cash or cash equivalent at a desired level. As regards receivables, including receivables on account of advances, their receivability / realisability is being examined. The Company has taken various steps, including evaluation of various business options with the help of a large global consultancy firm. The process is expected to yield benefits and should be completed in a manner that will allow the organization to meet with its plans during the current year.

SUBSIDIARY COMPANIES

With a view to improve the Shareholder Values, funding and business prospects, it is considered advisable to have different legal entities to pursue the activities, not closely linked, but as the Company’s own 100% subsidiaries.

Your Board has carefully considered the angles of its finances, business focus and prospects. The plans under each category are being critically examined by professional agencies of repute.

In furtherance of the various objectives, the Company has effective from 1st October, 2009 transferred the following Divisions to two 100% subsidiaries (SPVs) as under:

a. Business of ESCO Division, i.e. financing of Projects / Products to customers on energy saving basis, and all activities related thereto together with all related assets, liabilities and entitlements at book values as at the time of transfer, on a going concern basis. The name of 100% subsidiary is AEL ESCO PRIVATE LIMITED.

b. Business of Projects Division, i.e. State Electricity Board Projects and all activities related thereto together with all related assets, liabilities and entitlements at book values as at the time of transfer on a going concern basis. The name of 100% subsidiary is AEL PROJECTS PRIVATE LIMITED.

The Accounts for the year ended 31st March, 2010 have incorporated all such transactions at the book value at the time of transfer and the difference between the book values of identified assets and liabilities of ESCO Division amounting to Rs. 5174.34 Lacs and of Project Division amounting to Rs. 1129.15 Lacs are shown as investment in the proposed subsidiaries.

Pending formalities for formation of the two subsidiary companies and approval of secured / unsecured lenders, the Company has, for the time being, shown the said investment under Investment Suspense Account in Schedule 6 of the Accounts as on 31st March, 2010. On account of transfer of these two Divisions to two separate subsidiaries, the Company has also prepared Consolidated Balance Sheet and Profit & Loss Account which forms part of the Annual Report 2009-2010.

RIGHT ISSUE

Though the proposed Rights Offer of 1,53,59,139 Equity Shares of Rs.5/- each at a premium of Rs. 15/- per Share had been cleared in the month of May, 2010, the receipt of observation letter from SEBI was delayed on account of procedural problem for transfer of Merchant Banking Licence from the name of the Lead Managers viz. Transwarranty Capital Pvt. Ltd. to Vertex Securities Ltd., the transferee company. The said problem has now been sorted out by the Lead Managers and the Company expects to receive the observation letter from SEBI very shortly and thereafter, the Board will take decision about the timing for the opening of the issue on completion of the remaining formalities.

ACCOUNTS

The accompanying Financial Statements of the Company have been prepared on a going concern basis.

In preparation of these accounts, the Accounting Standards made applicable by the Institute of Chartered Accountants of India have been followed.

We have selected appropriate accounting policies which have been applied consistently and have made judgments and estimates that are reasonable and prudent so as to ensure that the accounts give a true and fair view of the state of affairs of the Company as at 31st March, 2010 and of the profit of the Company for the year ended on that date.

We have taken proper and sufficient care for maintenance of appropriate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities.

AUDITORS REPORT

As regards observations as contained in the Auditors’ Report dated 31st May, 2010 regarding transfer of related loans and debentures of ESCO and Project Division to wholly owned subsidiaries and Stock Options granted to the Directors and employees, a reference may please be made to Note No. 2 of Schedule 23 (III) and Note Nos. 4 to 7 of Schedule 23(III) to the Financial Statements respectively, which are self-explanatory.

PARTICULARS OF THE EMPLOYEES

None of the Employees were drawing salary of Rs. 24,00,000/- or more per annum, if employed throughout the year or Rs. 2,00,000/- or more per month, if employed for part of the year.

DIRECTORS

Retirement by rotation

In accordance with the provisions of the Articles of Association of the Company and the provisions of Companies Act, 1956, Dr. Deepak Divan retires by rotation at the ensuing Annual General Meeting and is eligible for reappointment. The Board recommends his re-appointment.

Resignation of Director

Mr. Suhas R Tuljapurkar has resigned as a Director of the Company with effect from 30th September, 2009. The Board accepted his resignation and placed on record its sincere appreciation for his valuable contribution to the Company.

Nominee Director

IDBI Bank Ltd. (IDBI) vide its letter dated 5th June, 2010 has appointed Mr. Hemendra Srivastava as Nominee Director on the Board of Directors of the Company with effect from 19th June, 2010 in terms of the provisions of Loan Agreement dated 23rd March, 2007 and has withdrawn the nomination of Mr. Dipankar De.

Your Directors are pleased to report that your Company would immensely benefit from the rich and varied experience of Mr. Hemendra Srivastava.

The Board placed on record its sincere appreciation for the valuable contribution made by Mr. Dipankar De during his tenure as a Nominee Director of IDBI.

AUDITORS

M/s. Sorab S. Engineer & Co., Chartered Accountants who are the statutory auditors of the Company, hold office until the ensuing Annual General Meeting and are eligible for re-appointment. The members are requested to consider their re-appointment for the current financial year 2010-2011 and authorize the Audit Committee / Board of Directors to fix their remuneration. The retiring auditors have, under Section 224 (1B) of the Companies Act, 1956, furnished certificates of their eligibility for the re- appointment.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION ETC.

Information on Conservation of Energy, Technology Absorption, Foreign Exchange Earning and Out-go as required to be disclosed pursuant to Section 217 [1] (e) of the Companies Act, 1956, read with Companies [Disclosures of Particulars in the Report of Board of Directors] Rules, 1988 is given in the Annexure forming part of this Report.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217 (2AA) of the Companies Act, 1956 with respect to Directors Responsibilities Statement, it is hereby confirmed:

(i) that in the preparation of the annual accounts for the financial year ended 31st March, 2010, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(ii) that the Directors had selected such accounting policies and applied them consistently and made judgements and estimates that were 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) that the Directors had 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) that the Directors had prepared the accounts for the financial year ended 31st March, 2010 on a going concern basis.

CORPORATE GOVERNANCE

A separate report on Corporate Governance along with Auditor’s certificate on its compliance is attached as an annexure to this report.

DEPOSITORY SYSTEM

As the members are aware, the Company’s shares are compulsorily tradable in electronic form. As on 31st March, 2010, 93.06% of the Company’s total paid-up capital representing 2,85,86,298 shares are in dematerialized form. In view of the numerous advantages offered by the Depository system, Members holding shares in physical mode are requested to avail of the facility of dematerialization of the Company’s shares on either of the Depositories.

ACKNOWLEDGEMENTS

Your Directors take this opportunity to thank the Financial Institutions, Banks, Central & State Government authorities, Regulatory authorities, Stock Exchanges and the stakeholders for their continuous co-operation and support to the Company.

Your Directors also thank customers, vendors and investors for their faith and support. Your Directors also place on record their deep sense of appreciation of the contribution made by employees at all levels. Their continuous support and their competence, hard work, team spirit and solidarity will make all the difference to the business of your Company.



On behalf of the Board of Directors

Place : Thane Arun B. Shah

Date : 12th August, 2010 Executive Chairman