Directors Report of VBC Industries Ltd.

Mar 31, 2012

Dear Shareholder,

The Directors take pleasure to present the 40" Annual Report of VBC Industries Limited together with Audited Financial Statements for the financial year ended 31st March 2012.

Financial Results (Highlights):

Particulars Current year Previous year 2011-2012 2010-2011 (Rs.in Lakhs) (Rs.in lakhs)

4569.63 6159.31

Profit before Interest Depreciation & Tax(PBIDT) 833.83 1392.78

Less: Interest & Financial Charges 233.43 215.23

Profit before Depreciation & Tax (PBDT) 600.40 1177.55

Less: Depreciation 99.41 98.13

Profit before tax(PBT) 500.99 1079.42

Less: Provision for taxation including Deferred Tax Charge for the year 323.55 152.11

Profit after Tax(PAT) 177.44 927.31

Profit brought forward from previous year 1815.14 887.33

Profit available for appropriation and carried to Balance Sheet 1992.58 1815.14

BUSINESS PERFORMANCE

Your directors regret to inform the members that the company has shut down it's operations at Dmnadevarapadu, Kurnool from 28th December, 2011 onwards for its modernization and up-dation of air pollution Control revamping system which constrained the production activities and also the total income earned during the previous financial year 2011-12. During the Financial Year under review, the total production of Ferro Silicon was only 6336MT as against 8406 MT during the Financial Year 2010-11. This resulted in a decrease in the total income from Rs.6159.31 lacs during 2010-11 to Rs. 4569.63 lacs during 2011-12. The general power shortage scenario in Andhra Pradesh had also affected our production.

In light of the above constraints, your directors regret to inform their inability to declare any dividend for the year ended 31st March, 2012.

FUTURE PROSPECTS AND PERFORMANCE:

Considering the growing demand for steel during the current financial year (2012-13), the demand for our products will also be on the higher side and your company will immensely benefit in the years to come.

MODERNIZATION

Your directors wish to inform the members that the Company's plant at Dinnadevarapdu, Kurnool is expected to be in full strength after modernization and the plant has become operational. The Company's production is expected to be on the higher side with better earnings during the current Financial Year (2012-13).

EXPANSION

The members are kindly aware that the Company is setting up an integrated Ferro Alloys plant at Akkallapalle Village, Bheemini Mandal, Adilabad District. Your Company has already obtained the Consent For Establishment(CFE) from the Andhra Pradesh Pollution Control Board(APPCB) for the project for the manufacture of Ferro Silicon at an installed capacity of 50,000 TPA.

The Company is in the final stages of negotiating with consortium of banks for the requisite finance to meet the cost of the project and complete the financial closure shortly.

INVESTMENT IN KGPL 445 MW GAS POWER PROJECT

Konaseema Gas Power Limited (KGPL) in which your company has invested in equity has started its commercial operations in June, 2010. During the previous financial Year ended with 31st March, 2012, the Company generated 2279,20 million units only on account of inadequate availability of natural gas and incurred a net loss of Rs. 166.22 crores.

INVESTMENT IN OPCL 20MW HYDEL POWER PLANT

The 20 MW Hydro Electric Power Project commissioned by Orissa Power Consortium Limited (OPCL), in which your company has invested in equity, had earned a net profit of Rs. 7.91 crores of profit from its operational income of Rs. 34.94 crores during the financial year 2011-12.

CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION:

In compliance with the requirements of Section 217(1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of particulars in the report of Board of Directors) Rules, 1988, the statement showing the particulars in relation to conservation of energy, technology absorbed and foreign exchange earnings and outgoings is furnished and forms part of this report.

CORPORATE GOVERNANCE

As required under Clause 49 of the Listing Agreement, Reports on Management Discussion & Analysis and Corporate Governance together with the Certificate of Auditors on Corporate Governance are provided separately in this Annual Report and forms part of Directors' Report.

FIXED DEPOSITS

The company has not accepted any fixed deposits.

PERSONNEL

Your Company is maintaining cordial relations with all the employees. Your Directors and Management express happiness for commitment and dedication shown by the employees.

PARTICULARS OF EMPLOYEES READ WITH THE COMPANIES (PARTICULARS OF EMPLOYEES) RULES, 1975, AS AMENDED

There is no employee covered under Section 217 (2A) of the Companies Act, 1956.

INSURANCE

Your company's movable and immovable assets have been adequately insured against various risks.

DIRECTORS

In accordance with the provisions of Section 255 of Xhe Companies Act, 1956 and clause 105 of the Articles of Association of the Company, Sri R.K.R. Gonela and Sri M. V. Ananthakrishna, who are liable to retire by rotation and being eligible, offer themselves for re-appointment. Board recommends their re-appointment. In accordance with the provisions of Clause 49 of the Listing Agreement with the Bombay Stock Exchange Limited, the details of Sri R.K.R. Gonela and Sri M.V.Ananthakrishna are annexed to the Notice of the Annual General Meeting which is forming part of this Annual Report.

AUDITORS:

M/s Brahmayya & Co., Chartered Accountants, the Statutory Auditors of the Company, holds office up to the conclusion of the forthcoming Annual General Meeting and have expressed their willihgness to be re-appointed as the Statutory Auditors of the Company. The Company has received a written confirmation from M/s Brahmayya & Co., to the effect that their appointment, if made, would be in conformity with the limits prescribed in Section 224(1 B) of the Companies Act, 1956.

Your Directors recommend their re-appointment for the financial year 2012-13.

COST AUDITORS

As per the latest guidelines issued by the Ministry of Corporate Affairs, every company having an annual turnover of Rs. 20.00 crores or more has to appoint cost auditors and assign the job relating to cost audit of the accounts of the Company. In pursuance of the said guidelines, your company has appointed Nageswara Rao & Co., as the cost auditors of the Company for the Financial Year 2011 - 12, whose term of office was till the submission of Cost Audit Report for the Financial Year 2011-12.

Accordingly, the Company has to re-appoint the Cost Auditors for the current Financial Year (2012-13) and the Cost Auditors have consented for their re- appointment and the same will be within the limits prescribed under Section 224(1 B) read with sub- section(2) of the Companies Act, 1956.

In view of above, your directors accord their consent for re-appointing M/s. Nageswara Rao & Co., as the Cost Auditors of the Company for carrying out the cost audit for the current financial year 2012-13.

DIRECTORS' RESPONSIBILITY STATEMENT:

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

(i) In the preparation of annual accounts for the financial year ended 31st March 2012, the applicable accounting standards have been followed along with proper explanation relating to material departures.

(ii) Such accounting policies have been selected and applied and that such judgments and estimates have been made as 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 or loss of the company for the period.

(iii) Proper and sufficient care for the maintenance of adequate accounting records have been taken 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) The annual accounts of the company has been prepared on a 'going concern' basis.

DECLARATION

The Company has been regular in filing all Forms and Returns with the Registrar of Companies as required under the Companies Act, 1956 and has not defaulted in repayment of deposits, payment of dividend, redemption of debentures and preference shares. Accordingly, the company has not committed any of the defaults specified under Section 274(1 )(g) of the Companies Act, 1956 (as amended by the Companies Amendment Act, 2000) disqualifying its Directors to act as Directors of other Public Companies.

ACKNOWLEDGEMENTS:

Your Directors thank all Members, Customers, Vendors, Regulatory & Government Authorities and the Bankers of the Company for the full support extended by them. Your Directors place on record their deep appreciation for the support and contribution of employees through their dedication, hard work and commitment and look forward to the future with confidence.

For and on behalf of the Board

for VBC INDUSTRIES LIMITED

Sd/-

Place : Hyderabad Dr. M.V.V.S. MURTHI

Date : 25.05.2012 Chairman

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Mar 31, 2010

The Directors take pleasure to present the 38th Annual Report of VBC Industries Limited together with Audited Financial Statements for the financial year ended 31st March 2010.

Financial Results (Highlights):

Particulars Current year Previous year 2009-2010 2008-2009 (Rs. In Lakhs)(Rs. In lakhs) Gross Revenue 4870.84 4663.82

Profit before Interest Depreciation & Tax (PBIDT) 701.76 582.02

Less: Interest & Financial Charges 234.83 218.84

Profit before depreciation and Tax (PBDT) 466.93 363.18

Less: Depreciation 96.41 95.72

Profit before tax(PBT) 370.52 267.46

Less: Provision for taxation including Deferred Tax Charge for the year 42.93 94.70

Profit after Tax(PAT) 327.59 172.76

Profit brought forward from previous year 560.24 387.48

Profit available for appropriation and carried to balance sheet 887.83 560.24

DIVIDEND:

The members are kindly aware that the Company is setting up an integrated Ferro Alloys plant at Akkillapalle Village, Bhimini Mandal, Adilabad District. Accordingly to conserve the resources, the Board of Directors are constrained not to recommend any dividend for the year 2009-10 even though the Companys performance is on the growth path.

BUSINESS PERFORMANCE:

During the financial year under review, your company has produced 7915 MT of Ferro Silicon as against the production of 6912 MT of Ferro Silicon during the previous year. The targeted production could have b§en achieved but for severe power cuts imposed by the power distribution companies in Andhra Pradesh.

The value of sales were increased from Rs. 4504.50 lacs to Rs.4659.69 lacs during the year under review.

PROSPECTS:

The demand for steel is steadily growing in our country on account of steady demand from sectors such as automobiles, white goods and infrastructure

industries. The domestic demand for steel will result in more demand for Ferro Alloys and benefit your Company in the years to come.

NEW PLANT:

Your companys plans to set up a modern integrated Ferro Alloys plant at Adilabad district with a capacity of 45,000 MTS of Ferro Silico Manganese initially, is progressing on several fronts like acquiring 225 acres of land at Akkallapale Village, Bhimini Mandal, Adilabad District, obtaining necessary permission from the Ministry of Commerce & Industry, Government of India, for the manufacture of Bulk Ferro Alloys, Calcium Carbide and Pig Iron etc. And is in the process of environmental clearances, obtaining permission for water and power supply from Government of Andhra Pradesh.

The Techno-Economic Viability (TEV) study of our Detailed Project Report (DPR) was conducted by Andhra Pradesh Industrial & Technical Consultancy Organization Limited (APITCO) and your Company is approaching Financial Institutions and Banks for early Financial closure enabling to meet the time schedules for the project completion.

The new project outlay as envisaged is Rs. 192.00 crores as per the DPR and your Company is putting up every effort to meet the time schedule of twenty four months from the date of financial closure.

CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION:

In compliance with the requirements of Section 217(1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of particulars in the report of Board of Directors) Rules, 1988, the statement showing the particulars in relation to conservation of energy, technology absorbed and foreign exchange earnings and outgoings is furnished and forms part of this report.

CORPORATE GOVERNANCE:

As required under Clause 49 of the Listing Agreement, Reports on Management Discussion & Analysis and Corporate Governance together with the Certificate of Auditors on Corporate Governance are provided separately in this Annual Report and forms part of Directors Report.

FIXED DEPOSITS :

The company has not accepted any fixed deposits.

-PERSONNEL:

Your Company is maintaining cordial relations with all the employees. Your Directors and Management express happiness for commitment and dedication shown by the employees.

PARTICULARS OF EMPLOYEES READ WITH THE COMPANIES (PARTICULARS OF EMPLOYEES) RULES, 1975, AS AMENDED

There is no employee covered under Section 217 (2A) of the Companies Act, 1956.

INSURANCE :

Your companys movable and immovable assets have been adequately insured against various risks.

DIRECTORS :

During the year under review, Sri K.S. Purohit had relinquished the office of Director and your Directors would like to express their sincere gratitude and thanks for the valuable services rendered by him during his long association with the Company and in guiding its course of destiny.

With a view to strengthening the Board, Mr. Mocherla Venkata Ananthakrishna was co-opted as an Additional Director by the Board of Directors at its meeting held on 28th January, 2010 and his term of office concludes at the ensuing Annual General Meeting.

Mr. Mocherla Venkata Ananthakrishna is holding a post-graduation degree in Master of Business Administration(MBA) from University of Michigan, Ann Arbor and B.Tech from University of Madras. Mr. Mocherla Venkata Ananthakrishna is a Certified Management Consultant having more than 20 years extensive experience of working in India, Indonesia and the US, conducting consultancy assignments and business development initiatives in the US, Canada, Singapore, Indonesia, Thailand and India. He is an Executive Director of M.K. Raju & Consultants Pvt. Limited. Mr. Mocherla Venkata Ananthakrishna, being eligible, offers himself for appointment and considering his experience and expertise, the Board considers it as essential to appoint him as an independent non-executive Director of the Company.

None of the Directors other than Mr. Mocherla Venkata Ananthakrishna and Sri Mocherla Kanakaraju, father of Sri Mocherla Venkata Ananthakrishna is concerned or interested in the proposed appointment of Mr. Mocherla Venkata Ananthakrishna to the extent of his appointment as an Independent non-executive Director of the Company.

In accordance with the provisions of Section 255 of The Companies Act, 1956 and clause 105 of the Articles of Association of the Company, Sri VS. Rao and Sri R.K.R. Gonela, who are liable to retire by rotation and being eligible, offer themselves for re- appointment. Board recommends their re- appointment. In accordance with the provisions of Clause 49 of the Listing Agreement with the Bombay Stock Exchange Limited, the details of Sri VS. Rao and Sri R.K.R. Gonela are as under:

Sri VS. Rao is an Engineering Graduate in Mining from college of Engineering, Osmania University. He has worked in TISCO for nearly 36 years in various capacities and has acquired vast skill, knowledge and experience during the tenure of his service. He has also served as the Managing Director of VBC Industries Limited for more than 10 years. Sri V.S. Rao, being eligible offers himself for re- appointment and your Directors recommend the re- appointment of Sri V.S. Rao as a non-executive Director of the Company.

None of the Directors is concerned or deemed to be interested in the proposed re-appointment except Sri V.S. Rao to the extent of his re- appointment as a non-executive Director of the Company.

Sri R.K.R. Gonela, a graduate from Madras University is also possessing a degree in law from Delhi University. He joined the Indian Administrative Service in 1963 in AP Cadre. During the tenure of his services, he held the positions of Secretary to Government of Andhra Pradesh, Secretary for Finance, Industries and Social Welfare, Chairman VPT, Vice-Chairman and Managing Director of APIDC, Managing Director of Godavari Fertilizers and Chemicals Limited, Commissioner Land Revenue. He retired in the year 1997 as Special Chief Secretary to Government of Andhra Pradesh. While holding the positions in different capacities, Sri R.K.R. Gonela was involved in Industrial Policy, Industrial Development and Industrial Management of Andhra Pradesh Government. Sri R.K.R. Gonela, being eligible, offers himself for re-appointment and your Directors recommend the re-appointment of Sri R.K.R. Gonela as an Independent non- executive Director of the Company.

None of the Directors is concerned or deemed to be interested in the proposed re-appointment except Sri R.K.R. Gonela to the extent of his re- appointment as an Independent non-executive Director of the Company.

AUDITORS:

M/s Brahmayya & Co., Chartered Accountants, the Statutory Auditors of the Company, holds office up to the conclusion of the forthcoming Annual General Meeting and have expressed their willingness to be re-appointed as the Statutory Auditors of the Company. The Company has received a written confirmation from M/s Brahmayya & Co., to the effect that their appointment, if made, would be in conformity with the limits prescribed in Section 224(1B) of the Companies Act, 1956.

Your Directors recommend their re-appointment for the financial year 2010-11.

DIRECTORSRESPONSIBILITY STATEMENT:

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

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

(ii) Such accounting policies have been selected and applied and that such judgments and estimates have been made as 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 or loss of the company for the period.

(iii) Proper and sufficient care for the maintenance of adequate accounting records have been taken 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) The annual accounts of the company has been prepared on a going concern basis.

DECLARATION

The Company has been regular in filing all Forms and Returns with the Registrar of Companies as required under the Companies Act, 1956 and has not defaulted in repayment of deposits, payment of dividend, redemption of debentures and preference shares. Accordingly, the company has not committed any of the defaults specified under Section 274(1 )(g) of the Companies Act, 1956 (as amended by the Companies Amendment Act, 2000) disqualifying its Directors to act as Directors of other Public Companies.

ACKNOWLEDGEMENTS:

Your Directors thank all Members, Customers, Vendors, Regulatory & Government Authorities and the Bankers of the Company for the full support extended by them. Your Directors place on record their deep appreciation for the support and contribution of employees through their dedication, hard work and commitment and look forward to the future with confidence.

For and on behalf of the Board for VBC INDUSTRIES LIMITED Sd/- Place : Hyderabad Dr. M.V.V.S. MURTHI Date : 15.05.2010 Chairman