Dear Shareholders,

Your Directors have pleasure in presenting the Twenty Eighth Annual Report of the
Company together with the Audited Accounts for the year ended 31st March, 2012.


FINANCIAL RESULTS:

Performance of the Company for the Financial Year ended 31st March, 2012 is
summarised below:


(Rs. in lakhs)


  

    

    
2011-12
    
2010-11
  
  

    
Net Sales (excl. Excise Duty)
    
59715.57
    
45659.29
  
  

    
Profit before Interest & Depreciation
    
7968.88
    
9159.27
  
  

    
Less: Interest
    
1254.72
    
1710.45
  
  

    
Depreciation
    
2265.06
    
2287.75
  
  

    
Profit / (Loss) after Interest and
    

    

  
  

    
Depreciation
    
4449.10
    
5161.07
  
  

    
Provision for:
    

    

  
  

    
Current Tax
    
1206.00
    
1033.09
  
  

    
Deferred Tax
    
242.00
    
1597.72
  
  

    
MAT credit entitlement
    

    
(1032.79)
  
  

    
Excess provision for Direct
    

    

  
  

    
Taxes of earlier years written back
    
(0.37)
    
(0.47)
  
  

    
Profit / (Loss) after Taxation
    
3001.47
    
3563.52
  
  

    
Balance brought forward from previous year
    
7830.05
    
6254.09
  
  

    
Profit available for appropriation
    
10831.52
    
9817.61
  
  

    
APPROPRIATIONS:
    

    

  
  

    
Transfer to General Reserve
    
500.00
    
1000.00
  
  

    
Proposed Dividend on
    

    

  
  

    
Equity Shares @5%
    
424.86
    
849.72
  
  

    
Tax on Distributable Profits
    
68.92
    
137.84
  
  

    
Balance carried forward to next year
    
9837.74
    
7830.05
  
  

    

    
10831.52
    
9817.61
  



OPERATIONAL AND FINANCIAL PERFORMANCE:

Your Directors are happy to report that during the year the Plant has operated well
achieving 100% capacity utilisation by achieving a production of 73,593 MTs (previous year
57,726 MTs). Sales during the year were 73,436 MTs (previous year 57,472 MTs). This
performance of higher production and sales in terms of volume and value is as a result of
implementing effective measures, change in product mix and marketing strategies. Inspite
of higher Gross Sales of Rs.659.75 crores, profit for the year before tax is lower at
Rs.44.49 crores. The contribution on sales was lower on account of raw materials and
energy price hikes, higher crude prices, depreciation of rupee, general inflation and
lower international product prices consequent upon the creation of additional capacities
for the product in international market during the year, which may be absorbed by growth
in the sector.


DIVIDEND:

Your Directors have recommended a Dividend of 50 paise per share (@5% Dividend on
8,49,71,600 Equity Shares) for the year 2011-12 commensurate with the profit earned. The
outflow towards the payment of Dividend would amount to Rs. 4,93,78,059 inclusive of Tax
thereon. Dividend, if approved by the shareholders, will be paid to all the eligible
shareholders.


CAPITAL & RESERVES:

Authorised and Paid-up Capital:

The Authorised Capital of the Company is Rs. 85 crores and the Paid-up Capital is Rs.
84.97 crores.


Reserves:

With the transfer of Rs. 5.00 crores to Reserves during the current year the total
Reserves position as on 31.3.2012 stood at Rs. 127.74 crores.


MANAGEMENT DISCUSSION AND ANALYSIS:


INDUSTRY STRUCTURE AND DEVELOPMENTS:

The Expanded Plant has demonstrated improved operations at 100% of designed capacity.
There was also considerable improvement in the Plant performance efficiencies resulting in
considerable cost savings. Indigenous market for Oxo-alcohols growth is continuing at
around 8-10% per annum. Towards the end of the year price movements for both raw-materials
and products are somewhat unfavourable. The Company is continuously committed in its
efforts in further improving the performance for better results in future.


OPPORTUNITIES AND THREATS:

Your Company’s market share has increased considerably serving the customer
requirements to a larger extent.

Inflationary trends in prices of feedstocks, fuel and energy and depreciation of rupee
and no corresponding increase in product prices are some of the concerns regarding future
performance of the Company.


INTERNAL CONTROL SYSTEMS:

Your Company has robust internal control framework for all major business areas.
Internal Audit by an external audit firm ensures effectiveness of internal control system
in all the areas. The Audit Committee of the Board reviews audit reports and monitors
adequacy and effectiveness of the internal control systems.


HUMAN RESOURCES AND INDUSTRIAL RELATIONS:

Your Company is committed in its continuous efforts motivating employees at all levels
in its continual performance improvementprogramme. Refresher training programmes
tailor-made for different levels of employees keep them abreast with latest developments
in their areas. Industrial relations were highly cordial throughout the year. As on 31st
March, 2012 the Company has 278 employees on its rolls.


FUTURE OUTLOOK:

The Company’s performance is greatly influenced by the global and domestic
demand-supply conditions, raw-materials and selling prices. Inspite of your Company being
a sub world scale capacity as of now, it is able to compete well with imports mainly on
account of its efficient and economic operations.


CAUTIONARY STATEMENT:

The statements describing the Company’s outlook, estimates or predictions may be
forward-looking statements based on certain assumptions of future events. Actual results
may differ materially from those expressed or implied, since the Company’s operations
are influenced by external or internal factors. Your Company closely monitors all major
developments likely to affect the operations and will respond to meet the potential
threats and to gain from any possible opportunities.


DEPOSITS:

During the year under review, your Company has not invited or accepted any Fixed
Deposits from the Public.


SAFETY, HEALTH AND ENVIRONMENT:

Safety of Human and Physical assets is the top priority of the Company. Continuous
training of personnel at various levels on safety and strict compliance of regulations is
ensured which resulted one more accident free year. Your Company has established several
process measures and a number of Environmental control systems to contain Environmental
impact and ensures their close monitoring. It may be noted that your Company is always in
the forefront and proactive in implementing environment protection measures.


INSURANCE:

All the insurable assets of the Company including Plant and Machinery, Buildings and
Inventor ies are insured on reinstatement value basis.


LISTING:

The Equity Shares of your Company are listed on The Bombay Stock Exchange. Listing fees
has been paid.


DIRECTORS:

Your Directors express profound grief over the sad demise of Managing Director, Dr.
Mullapudi Harischandra Prasad on 3rd September, 2011, who was instrumental in
bringing the Company to the position of what it is today and place on record their warm
appreciation of his commendable contribution to the growth and developement of the
Company.

Board of Directors at its Meeting held on 12th November, 2011, appointed Dr.
B B Ramaiah as Managing Director for a period of 5 years i.e., from 12.11.2011 to
11.11.2016. His appointment is being placed for the approval of the shareholders at the
ensuing 28th Annual General Meeting.

During the year under report, APIDC withdrew Smt. Nilam Sawhney, I.A.S., as its Nominee
Director from the Board of the Company from 21.4.2012. Your Directors palce on record
their warm appreciation of her valuable guidance rendered during her tenure as Director of
the Company. In her place Sri B R Meena, I.A.S., Nominee Director of APIDC was co-opted as
an Additional Director on the Board of the Company with effect from 19.5.2012. He holds
office upto the date of the ensuing 28th Annual General Meeting. Resolution
seeking his appointment as Director is being placed for the approval of Shareholders at
the ensuing 28th Annual General Meeting.

In accordance with the provisions of the Companies Act, 1956 and Articles of
Association of the Company, Directors Sri M R B

Punja, Sri Surinder Kumar Kapoor and Dr. Anumolu Ramakrishna retire by rotation at the
ensuing 28th Annual General Meeting and, being eligible, offer themselves for
reappointment.


AUDIT COMMITTEE:

With effect from 12.11.2011 Sri Surinder Kumar Kapoor, Director, has been inducted as
Member of the Audit Committee. Consequent upon his induction, the Audit Committee consists
of four Non-Executive Independent Directors Sri Justice G Ramanujam (Retd.), Sri A A
Krishnan, Dr. Anumolu Ramakrishna and Sri Surinder Kumar Kapoor. Sri Justice G Ramanujam
(Retd.) is the Chairman of the Committee.


AUDITORS:

M/s Brahmayya & Co., Chartered Accountants, Vijayawada, the present Statutory
Auditors of the Company, hold office until the conclusion of the ensuing Annual General
Meeting and are eligible for re-appointment.


COST AUDITORS:

M/s Narasimha Murthy & Co., Cost Accountants, Hyderabad, were appointed as Cost
Auditors of the Company for the year ended 31st March, 2012. Cost
Auditors’ report in respect of Financial Year 2010-11 has been filed with the
Ministry of Corporate Affairs on 19.8.2011, i.e., within the stipulated date of 30.9.2011.


CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:

Par ticulars prescribed under Section 217(1)(e) of the Companies Act, 1956 read with
Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are
given in Annexure ‘A’ to this Report.


PARTICULARS OF EMPLOYEES:

There is no employee of your Company drawing a remuneration requiring disclosure under
Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of
Employees) Rules, 1975 as amended by Companies (Particulars of Employees) Amendment Rules,
2011.


DEMATERIALISATION OF SHARES:

As on 31st March, 2012 out of the total number of 8,49,71,600 Equity Shares,
7,65,39,159 Equity Shares constituting 90.08% stands dematerialised.


DIRECTORS’ RESPONSIBILITY STATEMENT:

It is hereby confirmed: 

i) that in the preparation of Annual Accounts, the applicable Accounting Standards have
been followed along with proper explanation relating to material departures, if any.

ii) that Accounting Policies have been selected and applied consistently and judgements
and estimates made 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 that year.

iii) that proper and sufficient care has been taken 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 Annual Accounts on a going concern basis.


REPORT ON CORPORATE GOVERNANCE:

As required under Clause 49 of the Listing Agreement with the Stock Exchange, the
report on Corporate Governance and the Auditors’ Certificate on the compliance of
Corporate Governance are annexed and form part of the Directors’ Report (Annexure
‘B’).


ACKNOWLEDGEMENTS:

Your Directors acknowledge the co-operation and continued valuable support received
from Central and State Government authorities, the Promoters - The Andhra Sugars Limited
and APIDC, Financial Institutions, Banks, HPCL, Davy Process Technology Ltd., London, Aker
Solutions Pvt. Ltd., Shareholders, Customers and Suppliers. Your Directors also wish to
place on record their deep sense of appreciation of the valuable contribution made by the
employees at all levels, which enabled the Company to achieve a sustained growth in the
operational performance during the year under review.


  

    
Hyderabad
    
On behalf of the Board
  
  

    
21-7-2012
    
M R B Punja
  
  

    

    
Chairman
  



Annexure ‘A’ to the Directors’ Report:

Additional information as per 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
for the year ended 31st March, 2012.


A. Conservation of Energy:

Plant operations were optimised realising better efficiencies of Energy in terms of
both electricity and steam realising major savings of 8–10%.

Considerable energy savings were also realised by replacing steam jet ejectors with
vacuum pumps for vacuum system in the distillation columns. Other conservation steps
include installation of additional LT capacitors improving the power factor, replacement
of HPMV lamps with CFL lamps.


FORM A

Current Year Previous Year

A. Power and Fuel Consumption:


  

    
1. Electricity:
    

    

  
  

    
a. Purchased
    

    

  
  

    
Units
    
4,42,92,101
    
3,88,29,239
  
  

    
Total Amount (Rs.)
    
15,84,71,856
    
13,11,40,807
  
  

    
Rate/Unit (Rs.)
    
3.58
    
3.38
  
  

    
b. Own generation
    

    

  
  

    
i) Through diesel generator
    

    

  
  

    
Units
    
13,32,389
    
4,38,503
  
  

    
Units per litre of Diesel Oil
    
4.02
    
3.45
  
  

    
Rate/Unit (Rs.)
    
10.72
    
11.10
  
  

    
ii) Through Steam
    

    

  
  

    
Turbines/Generator
    
N.A.
    
N.A
  
  

    
2. Coal:
    

    

  
  

    
Quantity (Tonnes)
    
N.A
    
N.A
  
  

    
Total Amount (Rs.)
    
N.A
    
N.A
  
  

    
Average Rate (Rs.)
    
N.A
    
N.A
  
  

    
3. a. Furnace Oil:
    

    

  
  

    
Quantity (MTs/KLs)
    
908.650
    
2,133.805
  
  

    
Total Amount (Rs.)
    
4,09,49,267
    
6,76,95,062
  
  

    
Average Rate (Rs.)
    
45,066.05
    
31,725.05
  
  

    
b. LSHS:
    

    

  
  

    
Quantity (MTs)
    
5,481.350
    
3,193.195
  
  

    
Total Amount (Rs.)
    
24,69,00,570
    
11,10,61,057
  
  

    
Average Rate (Rs.)
    
45,043.75
    
34,780.54
  
  

    
4. Others/Internal Generation:
    

    

  
  

    
Oxo-Alcohol Residue:
    

    

  
  

    
Quantity (MTs)
    
3,660.000
    
2,783.500
  
  

    
Total Amount (Rs.)
    
Nil
    
Nil
  
  

    
Average Rate(Rs.) / MT 
    
Nil
    
Nil
  


B. Consumption per tonne of production:


  

    

    
Current Year
    
Previous Year
  
  

    
Product
    
Power
    
Steam
    
Power
    
Steam
  
  

    

    
KWH
    
MT
    
KWH
    
MT
  
  

    
2-Ethyl Hexanol
    
642
    
1.95
    
732
    
2.24
  
  

    
Butanols
    
539
    
1.88
    
564
    
1.97
  



B. Technology Absorption :

FORM B

I. Research & Development (R & D)

1. Specific areas in which R&D carried out by the Company:

a) Installation of Vacuum pumps for all Vacuum applications, viz., 2-EH refining
section, batchstill & Oxo buffer system in place of steam ejector system. The
investment of Rs. 60 lakhs has been recovered in 3 months. Annual savings is expected to
be Rs. 230 lakhs.

b) Import substitution of buffer solution by developing alternate source and system
using indigenous chemicals resulting in savings of Rs.100 lakhs per annum.


2. Benefits derived as a result of above R&D:

a) Realised considerable reduction in Steam consumption & Effluent generation.
Based on the encouraging results obtained Company has plans for further improving the
Energy Conservation measures in other areas also.

b) Considerable cost savings in Buffer solution.


3. Plan of Action:

The vacuum pumps have already been installed and commissioned.


4. Expenditure on R & D:

The Company has incurred an expenditure of Rs. 60 Lakhs on R&D during the year.


II. Technology Absorption, Adaptation and Innovation:

1. Efforts made:

The New Technology in Oxo & Synthesis and in the Butanol Plants have been fully
absorbed and the Company is now able to operate the Plant at high loads on a continuous
basis.


2. Benefits:

The Company has realised the benefits after Modernisation-cum-Optimisation by way of
improved process efficiencies and also reduction in specific power consumption.


3 . Imported Technology: Nil


C. Foreign Exchange Earning and Outgo (on cash basis):

(Rs. in lakhs)


  

    

    
For the Year ended 31-3-2012
    
For the Year ended 31-3-2011
  
  

    
i. Earnings
    
Nil
    
Nil
  
  

    
ii. Outgo
    
622.82
    
1361.10
  


 


  

    

    
On behalf of the Board
  
  

    
Hyderabad
    
M R B PUNJA
  
  

    
21-7-2012
    
Chairman