Annual Report 2005-06 - domain-b.com · Auditors’ Report ... Awarded an EPC contract in the...

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SNP Punj

Chairman (Emeritus)

Board of Directors

Atul Punj – Chairman & Managing Director

V. K. Kaushik – Jt. Managing Director & COO

Luv Chhabra – Director (Finance and Corporate Affairs)

Karamjit Singh Butalia – Non-executive Director

Alain Aboudharam – Independent Director

Keith Nicholas Henry – Independent Director

Dr. Naresh Trehan – Independent Director

Rajan Jetley – Independent Director

Company Secretary

Dinesh Thairani

Auditors

S. R. Batliboi & Co., Chartered Accountants

Bankers

ICICI Bank Limited, State Bank of India, Allahabad Bank, State Bank of Patiala

Indian Overseas Bank, Vijaya Bank, Citi Bank N.V., MashreqBank psc.

Central Bank of India, Federal Bank, Yes Bank Limited, Export Import Bank of India

ING Vysya Bank, The Karur Vysya Bank Ltd., Standard Chartered Bank, State Bank of Hyderabad

UCO Bank, Development Credit Bank, Indian Bank, Oriental Bank of Commerce, HDFC Bank Ltd.

Induslnd Bank, Punjab National Bank, State Bank of Bikaner & Jaipur, United Bank of India

Canara Bank, Bank Muscat, Commercial Bank of Qatar, Union National Bank, Dubai Islamic Bank

Registered Office

Punj Lloyd House, 17-18,

Nehru Place, New Delhi 110 019

India

Central Workshop

Banmore Industrial Area,

Banmore – 476444, District Morena (MP),

India

COMPANY INFORMATION

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INDEX

SEGMENT I1. Milestones ......................................................................................................................................................... 04

2. Visionary and Strategist ..................................................................................................................................... 06

3. Management Team ........................................................................................................................................... 07

4. Business Model ................................................................................................................................................. 09

5. Geographies - Projects & Customers ................................................................................................................. 11

6. Showcase .......................................................................................................................................................... 16

SEGMENT II1. What Numbers Say ........................................................................................................................................... 22

2. What the Numbers do not Say .......................................................................................................................... 23

3. Key Personnel .................................................................................................................................................... 24

SEGMENT III1. Operational Strategist ....................................................................................................................................... 27

2. Post Balance Sheet Developments ..................................................................................................................... 28

SEGMENT IV1. Management Discussion and Analysis ............................................................................................................... 31

2. Directors’ Report ............................................................................................................................................... 41

3. Auditors’ Report ................................................................................................................................................ 58

4. Balance Sheet, Profit and Loss Account, Schedules ............................................................................................ 62

5. Notes to Accounts ............................................................................................................................................. 76

6. Cash Flow Statement ........................................................................................................................................ 97

7. Auditors’ Report on Consolidated Accounts ...................................................................................................... 99

8. Consolidated Balance Sheet, Profit and Loss Account, Schedules .................................................................... 101

9. Notes to Accounts (Consolidated) ................................................................................................................... 115

10. Cash Flow Statement (Consolidated) .............................................................................................................. 132

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SEGMENT I

A WINDOW to PUNJ LLOYD

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A recollection of the achievements in the years gone by :

The former construction division of Punj Sons was awarded a pipeline-laying contract for the Mumbai-Puneproduct pipeline by Hindustan Petroleum Corporation.

Incorporated under the name of Punj Lloyd Engineering Private Limited.

First contract in the Asia Pacific region involving laying of pipeline by PT Trihasra Bimanusha Tunggal/Pertamina.

Successfully laid the longest stretch of pipeline of 557 km (the Kandla - Bhatinda pipeline) for Skoda andIndian Oil Corporation.

Awarded an EPC contract by Oil India Limited and Triune Projects in Rajasthan in the oil and gas sector.

Won a contract in Malaysia for laying a multi-product pipeline for Kumpunan Juri Teknik Sdn. Bhd., NKKCorporation and Nichimen corporation.

Awarded a contract for construction of low temperature storage of LPG and propylene for the Jamnagarrefinery of Reliance Industries Limited by Reliance Petroleum Limited and Bechtel, UK.

Awarded an EPC contract in the de-sulphurization program of the Indian Oil Corporation’s Mathura refinery.

Awarded an EPC contract in the oil and gas refining sector for Indian Oil Corporation’s MTBE plant at itsGujarat refinery.

First contract for construction of a liquefied natural gas storage and regasification terminal at Dabhol bySkanska Cementation International Limited and Enron, USA

First road project for the Vadodara-Halol toll road project for the National Highway Authority of India.

Awarded a contract for laying and installation of a pipeline for GAIL and Engineers India Limited.

Contract for the Belgaum-Maharashtra road project for NHAI

EPC pipeline contract in offshore terrain in Indonesia by PT Perusahaan Gas Negara, Indonesia

First project in the Caspian region for KAM Pipeline, Kazakhstan.

MILESTONES

Sept 26th1988

Aug 11th1992

Sept 11th1993

Sept 11th1995

Jan 18th1996

June 20th1997

Jan 31st1998

July 6th1983

April 1st1998

Dec 22nd1998

Jan 22nd1999

Sept 14th1999

Sept 25th2001

May 31st2002

June 13th2002

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Awarded a pipeline contract in the Eurasian region for the Baku-Tbilisi-Ceyhan pipeline by Botas PetroleumPipeline Corporation, Turkey and ILF Consulting Engineers

Awarded a pipeline contract in Oman by Petroleum Development Oman LLC.

EPC contract to construct a tank terminal at Singapore by Horizon Terminals Pte. Limited

Awarded a contract for a thermal power project by Jindal Power in Raigarh.

The Shares of the Company were listed on the BSE and NSE

Awarded construction of infrastructure for Global Health Private Limited for its Institute of Integrated MedicalSciences and Holistic Therapies in Gurgaon (near Delhi)

Awarded the EPC contract for fuel handling facilities for New Doha International Airport at Doha, Qatar

Issue of Foreign Currency Convertible Bonds

Awarded Dahej Uran Pipeline project

Joint Venture in Saudi Arabia with Prince Khalid Bin Bandar Bin Sultan.

Acquisition of SembCorp Engineers & Constructors (SEC) Singapore, which includes, Simon Carves(A subsidiary of SEC)

Awarded completion of balance work of the top of the Jetty Facilities at Dabhol LNG Terminal

Received fourth RIDCOR project in Rajasthan

Awarded Delhi Metro project for Elevated via-duct and four stations

Sept 20th2002

Feb 11th2004

Feb 16th2005

April 17th2005

Jan 6th2006

Feb 21st2006

March 9th2006

April 7th2006

May 12th2006

May 12th2006

June 6th2006

June 8th2006

June 15th2006

June 2nd2006

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VISIONARY and STRATEGIST

"Our vision is to be a leading transnational, engineering and construction Company

in the regions that we operate in."

"Our people are our most valuable assets and their zeal, dedication, commitment

and can-do attitude, will empower us to achieve our vision."

"The acquisition of SembCorp Engineers and Constructors (SEC) in Singapore and

its wholly owned subsidiary, Simon-Carves in UK will enhance the Company's

existing portfolio of services by adding complementary segments."

"Punj Lloyd forayed into the construction of high spec buildings, which has a high

growth potential."

"We have long-term relationships with all our large clients and the repeat orders that we receive from them bear

testimony to the quality and speed of our design and execution capability."

"Our operations in various segments in several regions around the world insulates us from the downturn in any potential

economy."

"As we grow rapidly, our business objective is to target robust, big ticket projects across different geographies for

sustainable growth."

"The next stage of evolution of the Company is to put in place an integrative mechanism that sustains our competitive

advantages and empowers the organization with the capabilities and size to be a winner in the markets which we

operate."

ATUL PUNJChairman and Managing Director

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MANAGEMENT TEAM


Atul’s vision, strategy and leadership is the driving force behind the Company’s success. He initiated the pipeline business before

widening its focal areas to include other hydrocarbons sector, infrastructure and engineering. A hands-on manager who travels

extensively across the globe, Atul’s strategic approach and clear thinking guides the company in its endeavour to be the best in its

class. Holder of a Bachelors degree in Commerce, he is a National Council Member of the Construction Federation of India, besides

being a Member of the National Committee on Hydrocarbons, Confederation of Indian Industry.

VIMAL KISHORE KAUSHIKJoint Managing Director and Chief Operating Officer

Vimal’s experience and operational expertise across various functions spans three and half decades. A natural leader, he spearheaded

the Company’s construction activities in the oil & gas and infrastructure sector. Vimal is an Electrical Engineer. Most of the group’s

operations across India and overseas bear his imprint. He currently oversees all the regional headquarters and the operations of the

company and plays a key role in managing equipment and construction resources, besides handling human resources.

LUV CHHABRADirector, Finance and Corporate Affairs

Luv brings to the table, rich experience of around three decades in the oil & gas and construction sectors. Having held eminent

positions as Managing Director - KEC International Limited and Petronet India Limited, Deputy Managing Director - Bharat Shell

Limited and Executive Director - Bharat Petroleum Corporation Limited, he has also been a Director on the Boards of Bharat Oman

Refineries Limited and Numaligarh Refineries Limited besides others. Luv holds an engineering degree and a Masters Degree in

Business Administration. His vast experience stands the Company in good stead while closing financing arrangements and strategic

ventures.

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NAME YEARS OF DOMAIN OF EXPERTISEEXPERIENCE

Dr. Naresh Trehan 30 Years Renowned Cardio-Vascular Surgeon

(Independent Director) Executive Director and Chief Cardiovascular Surgeon of the EscortsHeart Institute and Research Centre (EHIRC) since 1988

Conferred with various prestigious honours and awards includingthe Padma Shree Award for Surgery and Padma Bhushan Award forhis distinguished service in Medicine

Mr. Keith Nicholas Henry 33 Years British National. Honours degree in Civil Engineering – London(Independent Director) University and Masters Degree in Foundation Engineering –

Birmingham University

International business experience in development, ownership, designand construction of electricity, civil, oil & gas, process and defencerelated activities

Fellow of Institution of Civil Engineers

Other positions held :

Deputy Chairman, Petroleum GEO - Services ASA

Non-Executive Director of Burren Energy Plc, Emerald EnergyPlc, and South East Water Limited

Previous positions held:

Chief Executive, Kvaerner E & C PLC

Chief Executive, National Power PLC

Chief Executive, Brown & Root Ltd.

Non-Executive Director, Enterprise Oil PLC

Mr. Rajan Jetley 35 Years B.A. – St. Aloysius University, Jabalpur and M.B.A. – Delhi(Independent Director) University

Chairman of Jacob Ballas Capital India Pvt. Ltd. and RadissonHotels Asia

Sponsor and major shareholder of Bistro Hospitality Private Ltd. andon the board of Bistro Hospitality Private Ltd. and board member ofZee Telefilms

Previous Positions held include :

Managing Director, Air India

Managing Director, India Tourism Development Corporation

Chairman, Centaur Group of Hotels

Board Member of United Breweries Ltd.

Consultant to Air Lanka Airlines

Director, Airports Authority of India

Mr. Alain Aboudaram 48 Years Swiss National B.A. (Economics) - University of Lausanne

(Independent Director) CEO – Conseil Alain Aboudaram SA (CAASA)

Mr. Karamjit Singh Butalia 28 Years M.A. (Economics) and M.B.A. from Hull University

(Non-Executive Director) Global Head of Private Equity – Standard Chartered Private Equity

Previous employment – Managing Director – Citicorp Capital Asia(the private equity arm of Citicorp in Asia)

INDEPENDENT and NON-EXECUTIVE DIRECTORS

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Punj Lloyd, an engineering and construction Company has been making significant strides in the oil and gas sector and

subsequently in the infrastructure sector in various regions of the world. It has to its credit the laying of 8000 kilometers

of pipeline, construction of 6 million cubic meters of tanks and terminals and 11 refinery modernisation and quality

improvement projects across the globe. Currently 12 highway projects are underway. The Company has as many as

120 clients, with more than 180 projects in over 14 countries.

OIL & GAS

Pipelines

Storage Tanks and Terminals

Process Facilities

Punj Lloyd’s large asset base (gross block as of March ‘06 Rs. 8893.24 million) has enabled it to successfully complete

complex projects in arduous terrain in various regions of the world. The Company has carried out engineering and

construction of fixed and floating roof storage tanks for crude oil and petroleum products and has undertaken construction

of LPG and LNG terminals for oil and gas majors. Construction of gas gathering and process facilities, gas compressor

stations, specialized processing packages for refineries such as sulphur recovery, Vis-breaker, crude distillation,

hydrocrackers, and vacuum distillation units, as well as upgradation of refineries, effluent treatment plants and

regasification units for LNG import terminal have been successfully undertaken. The construction of process facilities

for the hydrocarbon and petrochemical industry typically entails equipment erection (where a single piece of equipment

can weigh upwards of 600 tons), fabrication and installation of piping (including special alloy piping), fabrication of

steel structures, electrical, instrumentation, painting, insulation and fireproofing services.

INFRASTRUCTURE PROJECTS

Punj Lloyd has undertaken and plans to further diversify into myriad activities in the infrastructure space.

Roads and Highways

MRT/LRT projects

Railways

Urban Infrastructure

Civil Aviation

Ports

Steel Plants and Industrial Structures

A Snapshot of theBUSINESS MODEL & STRATEGY

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POWER PROJECTS

Punj Lloyd’s activities encompass EPC contracts for thermal power plants and gas based power plants. Backed by

its strong engineering team and inhouse capabilities of procurement and construction expertise, Punj Lloyd is

capable of completing projects within challenging schedules.

MAINTENANCE AND MANAGEMENT SERVICES

These services entail an assortment of activities. Punj Lloyd primarily undertakes the following key services.

Engineering service

Facilities commissioning and start-up services

Quality procedures assessment and audit

Health, safety and environmental audit and procedures

Asset preservation and management

BROADBAND & TURNKEY TELECOM SOLUTIONS

Recognizing the importance of communication and information systems, the company provides internet bandwidth,

data centre and managed network solutions for corporates, ISPs, MNCs, BPOs. The optical fibre network which

the company owns and manages connects more than 15,000 route kilometres and serves 1 lakh broadband users.

Various activities like broadband IP (Internet Protocol) internet access services, intra-corporate VPN (Virtual Private

Network), mission critical information systems, cable TV services , laying of copper and optical fibre, microwave

surveys, and installation, commissioning and testing of GSM (Global System for Mobile Communications) and

CDMA (Code Division Multiple Access) equipment are also covered under this segment.

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A transnational player, Punj Lloyd has transcended geographical barriers. Having spread its wings across 14 countries, the

company is set to conquer new frontiers.

The Set up

Independent marketing and project teams are set up with assistance from corporate offices. The allocation of equipment

and personnel are coordinated centrally from the corporate offices to optimize resource allocation and costs. Project

teams are constituted when a particular contract is awarded and on the completion of a project, the project team is

regrouped to other projects, depending on the skills of such personnel and the requirements of the next project.

Strategic “centers of excellence” have been developed to focus on specific project segments, such as offshore works,

pipeline construction, compressor stations, LNG terminals and process facilities, to provide centralized support services.

GEOGRAPHIESProjects and Customers

Middle East

The increased exploration, production and transportation activity in the Middle East in the last five years has resulted in

the development of several oil and gas projects as well as several infrastructure projects including civil aviation related

projects. The company has undertaken projects for most countries in this region and will further intensify its activities.

Asia Pacific Region

The Asia Pacific region continues to be a geographic area of keen interest for Punj Lloyd due to the relative abundance

of undeveloped natural gas resources, growing demand for natural gas for power generation, industrial and residential

usage and its past success in the region.

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The game plan is to leverage the presence through regional headquarters in Singapore and strong presence in Indonesia

where the company has extensive operations including repair and maintenance facilities at the equipment yard in

Sungaipurun, to expand into neighboring markets such as Vietnam, Thailand and Philippines based on opportunities

that become available in these countries.

Caspian region

The Caspian region has one of the largest reserves of oil and gas outside the Middle East. The company has a significant

presence in the Caspian region with operations in the oil and gas sector.

Punj Lloyd intends to capitalize on the operations in Kazakhstan and the recent projects in Turkey and Georgia, to

participate in projects in the energy industry in other countries of the Caspian region, including in Azerbaijan and

Russia, which has the largest gas reserves in the world.

South Asia

The high demand for crude, refined oil, gas and derivative products in South Asia, is expected to result in several large

oil and gas exploration, production and transportation projects as well as refinery projects in this region, including

pipeline projects and several LNG import terminals. Further, low operating costs of refinery facilities in India are expected

to contribute to the strong growth in refinery projects in South Asia. In addition to this, the Government’s focus and

increased budgetary allocation and increased funding by international and multilateral development finance institutions

for infrastructure development in India and other South Asian countries has resulted in or is expected to result in

various infrastructure projects in this region.

Africa

This is the latest foray by Punj Lloyd and is a strategically important region. The company intends to further strengthen

its presence here due to the rich oil and gas reserves and potential for large engineering construction projects in the

energy industry and infrastructure sector.

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Segment Revenue

Asia Pacific22%

GEOGRAPHIC AREA WISE REVENUES - FY 2006

Caspian10%

Middle East10%

South Asia58%

Top Clients

Jindal Power Ltd10%

JurongConsultants P Ltd

12% National HighwayAuthority of India

4%

Oil and NaturalGas Co. Ltd.

21%

Others28%

PDO Oman6%

PFD International LLC/Tengizchevroil Kazakhstan

7%

Total E & PIndonesia

9%

Bharat PetroleumCo. Ltd.

3%

CLIENTS IN TERMS OF REVENUES - FY 2006

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OUR STRENGTH – OUR CLIENTELE

DOMESTIC

TNEB

Jindal Power

IOCL

NTPC

Hindustan Aeronautics

GAIL

Tata Teleservices Ltd.

Bharti Telecom

ITI

Power Grid Corp

JT Mobiles

Essar Communication

Vadodara – Halol

KRFB

NHAI

DMRC

Indian Airlines

NPC

RIDCOR

Global Health Private Ltd.

Gujarat Gas Co. Ltd.

BPCL

RITES

ONGC

DSIDC

Ratnagiri Gas and Power Pvt. Ltd.

IRCON

UP State Bridge Corp.

MCD

DLF Builders & Developers

Rajasthan Rajya Vidhyut Utpadan Nigam Ltd.

RIL

DDA

Dabhol Power Co.

Toyo India

Commander Works Engineer

Kochi Refinery

Nirma Ltd.

HPCL

Petronet MHB Ltd.

EIL

Essar Refinery

CPCL

Gujarat Adani Port Ltd.

Reliance Petroleum Ltd.

Chambal Fertilisers

IPCL

Kinetic Tehnology

IBP

OIL

Numaligarh Refineries

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INTERNATIONAL

Bechtel

Whessoe Oil and Gas

PT Caltex

Qatar Petroleum

Merak Energy

New Doha International Airport

LG Engineering and Construction

Hyundai Heavy Industries

Pertamina

Dolphin Energy Limited

AGIP KCO

JFE Engineering Corp

British Petroleum

Petro Kazhakhstan

Snamprogetti

Skoda

Nael and Bin Harmal Hydroexport Est

PDO

Parsons Fluor Daniel

BP

BG Exploration and Production

Petrofac

PT Perusahaan Gas Negara

Botas Petroleum

Spie Capag

Takreer

Gas Transmission Bangladesh

ADNOC

ADCO

Saipem

McConnell Dowell

PT Trihasra Bimanusa Tunggal

Shell

Tengizchevroil

Kuwait Oil Company

Technip

Helios Terminal Corp. Ltd.

IHI

TotalFinaElf E&P Indonesie

Cairn Energy

Skanska

Daelim

Tankstore

Siirtec Nigi

Horizon Singapore Terminals Pvt. Ltd.

Kuwait National Petroleum Company

OUR STRENGTH – OUR CLIENTELE

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SHOWCASE

Punj Lloyd prides itself on its achievements and detailed hereunder is a showcase of some of the prestigious projects executed bythe company, segment-wise :

PIPELINES

SR. PROJECT NAME CLIENTNO.

1 Baku-Tbilisi-Ceyhan Crude Oil Pipeline Botas/BTC Co./Britishin Joint Venture with Limak A.S., Turkey Petroleum

2 Oman Gas Export Line in Joint Venture Petroleum Developmentwith Al Hassan Engineering Company, SAOG Oman LLC

3 Panaran Pemping PT. PerusahaanGas Negara

4 Tambora Field Development Phase II Total E&PIndonesie

5 KAM Pipeline PetroKazakhstan JSC

6 Dahej-Vijaipur Gas Pipeline Gas Authority of India Ltd.

7 Uran Trombay ONGCJawahardeep OilPipeline

BAKU-TBILISI-CEYHAN CRUDE OIL PIPELINE 264 KM X 48" DIA OMAN GAS EXPORT LINEWorked on sections in Turkey and Georgia 21 km lowering achieved in a day

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30 KM X 26" DIA PANARAN PEMPING GAS PIPELINE TAMBORA FIELD DEVELOPMENT PHASE IIThe famous Hopping Island Project Quasi offshore nature of work

177 KM X 16" DIA CRUDE OIL KAM PIPELINE 506 KM X 42" DIA DAHEJ-VIJAIPUR GAS PIPELINETemperatures ranged from -45° C to +45° C Completed in record 270 days

URAN TROMBAY JAWAHARDEEP OFFSHORE OIL PIPELINELaying of pipeline in marsh and sea by own pipelay barge

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TANKAGE & TERMINALSSR. PROJECT NAME CLIENTNO.

1 Bulk Liquid Horizon TerminalsProduct Terminal Pte. Ltd./Jurong

Consultants Pte. Ltd.

2 Petroleum Storage PB Tankers Ltd.Expansion, Phase 5 (Tankstore)

Singapore

3 LNG Storage and Regasification Skanska CementatonTerminal International Ltd.

4 LNG Storage Tanks for Receiving Hazira LNG Pvt.Terminal Ltd./Shell Global

Solutions Int. BV

5 LPG Low Temperature Reliance Industries Ltd.Storage Tank

LNG STORAGE TANKS AT SHELL HAZIRA LPG LOW TEMPERATURE STORAGE TANKSuccessful airlift of a 770 T heavy dome roof RELIANCE JAMNAGAR

in one and a half hours Repeat order from satisfied client, Reliance

BULK LIQUID PRODUCT TERMINAL LNG STORAGE AND REGASIFICATIONFirst Contractor in Singapore to erect tanks TERMINAL, DABHOL

by Jacking method India’s first LNG terminal and one of thelargest LNG terminals in the world at that time

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PROCESS FACILITIES


1 Peciko Development Project Phase 4, TotalFinaElf, IndonesieIndonesia

2 Visbreaker Unit (VBU) and Sulphur Block Petrofac International Ltd./Chennai Petroleum Corp. Ltd.

3 Motor Spirit Quality Indian Oil Corp. Ltd./Upgradation Lurgi India

4 SRU’s Mathura, Kochi, Baroda Siirtec Nigi, IOCL, Petrofac& Guwahati

VISBREAKER UNIT AND SULPHUR BLOCK FOR CHENNAI REFINERYCompleted before schedule

PECIKO PHASE-IV MOTOR SPIRIT QUALITY UPGRADATIONAchieved highest HSE rating at Haldia Refinery on EPC basis

Project completed in 18 months

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CIVIL


1 Elevated Viaduct from Barakhamba Road Delhi Metro Rail Corp. Ltd.Connaught Place for Line No. 3, in JointVenture with Persysdnbhd

2 Upgradation of Belgaum-Maharashtra North Karnataka Expressways Ltd. /Border Section of NH-4, Karnataka National Highways Authority of India (NHAI)

3 Upgradation of Dharmavaram-Tuni Andhra Expressways Ltd. / National HighwaysSection of NH-5, Andhra Pradesh Authority of India (NHAI)

POWER

1 1000 MW Jindal Power Plant Jindal Power Ltd.

UPGRADATION OF DHARMAVARAM TUNI , NH-5Completed 1 month ahead of schedule

VIADUCT FOR DELHI METRO RAIL CORP. LTD. UPGRADATION OF BELGAUM-MAHARASHTRAConstructed highest point of Delhi Metro in Delhi BORDER ROAD PROJECT

Longest concrete road package on BOOT basis

JINDAL POWER PLANT, 1000 MWGood HSE Performance Award by Client

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SEGMENT – II

TRANSCENDING THE NUMBER BARRIER

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Key Ratios FY 2005-06Share Statistics

Earning Per Share (Rs) 12.74

Cash Earning Per Share (Rs) 26.61

Book Value (Rs) 214.77

Dividend Per Share (Rs) 1.00

Profitability Ratios

OPBIT/Productive Capital Employed (%) 11.38%

ROCE (%) 8.04%

RONW (%) 4.94%

TAX/PBT (%) 34.45%

EBITDA (%) 12.98%

Net Profit Margin (%) 3.23%

Dividend Payout Ratio (%) 10.00%

Dividend/Operating Cash Flow (%) 4.51%

Leverage Ratios

Debt Equity Ratio (Times) 0.49

Liquidity Ratios

Current Ratio (Times) 2.72

Assets Turnover Ratio 1.64

Flow Ratio (Times) 1.31

Cash/CA (%) 7.16%

Cash/CL (%) 19.49%

PBDIT/Finance Charges (Times) 2.83

Activity Ratios

Receivables (Days Gross Sales) 87.19

Working Capital (Net of Cash) (Rs Mn) 8681.96

Working Capital Cycle (Days OI) 188.11

WHAT THE NUMBERS SAYRATIOS & GRAPHS

Per Share Ratios (Rs.) - FY 2006

12.74

26.61

0.00

10.00

20.00

30.00

Earning Per Share Cash Earning Per

Share

Profit Margins - FY 2006

3.23%

12.98%

0.00%2.00%4.00%6.00%8.00%

10.00%12.00%14.00%

Net Profit Margin (%) EBITDA (%)

Profitability Ratios (%) - FY 2006

4.94%

8.04%

11.38%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

RONW (%) ROCE (%) OPBIT / ProductiveCapital Employed

(%)

Dividend Ratios

4.51%

10.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

Dividend/Operating CashFlow (%)

Dividend Payout Ratio (%)

Liquidity Ratios - FY 2006

2.72

2.83

2.652.702.752.802.85

Current Ratio (Times) PBDIT / Finance Charges(Times)

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WHAT THE NUMBERS DO NOT SAY

Success Drivers

Formidable presence in the international arena

Punj Lloyd ranks among the largest EPC companies in India with operations spread across the regions of theMiddle East, the Caspian, Africa, the Asia Pacific and South Asia. This gives the company the competitive edge interms of familiarity with local working conditions, established contacts with local clients as well as suppliers. PunjLloyd is in a position to broaden its spectrum of activities by consolidating in existing markets and venturing in theuntapped ones by leveraging on its reputation and track record.

Vast experience and significant expertise

Punj Lloyd is not dependent on a particular industry or a nature of project. It has developed a reputation ofsuccessfully undertaking highly challenging projects in different fields, globally. This experience enables the engineeringteams to incorporate best practices from different geographic regions, which has stood it in good stead whileexpanding its operations in new markets and project segments.

Strong relationship with clients and strategic partners

This is critical for the success of the company’s business. Punj Lloyd has successfully managed to foray into newerregions to tap opportunities and has received repeat orders from major refineries, power companies and energymajors, despite increased competition. Esteemed clientele includes not only Public Sector Undertakings e.g. NHAI,GAIL but also industry leaders like Reliance, Total, Shell, and Horizon, Singapore. It must be noted that GE andNTPC teams have voiced their satisfaction on Punj Lloyd’s plant maintenance service for the Dabhol Power Project.

Sophisticated equipment base

A critical element in project delivery and quality, Punj Lloyd owns and manages a large fleet of sophisticatedconstruction and pipeline equipment enabling it to undertake projects at a short notice as opposed to its competitors.This also results in higher EBITDA margins.

Talent pool – the intangibles

Punj Lloyd has top-notch management backed by an experienced multinational and multicultural work forceconsisting of approximately 1,831 full time employees along with 4,050 casual and temporary contract employeesbased around the world. This enables the company to mobilize its skilled employee resources depending on thelocation and the necessary expertise for projects undertaken by the company. A sophisticated equipment base inconjunction with skilled employee resources and strong engineering capabilities enable Punj Lloyd to successfullyimplement modern engineering construction methodologies and strong project management practices.

Health, Safety and Environmental standards in place

Punj Lloyd is committed to internationally accepted best practices and a proactive approach to risk managementby practicing systematic analysis and risk control techniques. Conscious attempt to eliminate or minimize hazardsand also to improve environmental performance is reflected in the several awards and recognition accorded to thecompany by the British Safety Council and the company’s clients.

The Company received Greentech’s Gold Award for both safety and environment for the year 2004-05. The Companyis also ISO 14001 and OHSAS 18001 certified.

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KEY PERSONNEL

H. K. Kaul, President – Technical, M. Tech (Energetics) – IIT, Mumbai responsible for materials and procurement, planning,

information systems & IT, contracts & estimation, Q&HSE. Over 38 years experience in the engineering construction sector

Previous positions held include : Director (Commercial) – Engineers India Ltd., Director - EIL Asia Pacific Pvt. Ltd. , Member of

the Board of Governors of Construction Industry Development Council.

P. K. Gupta, President (Asia-Pacific), joined the company in 1989. A Mechanical Engineer from Thapar Institute of Engineering

& Technology, Patiala, with over 29 years of experience. Mr. Gupta joined Punj Lloyd as DGM, Projects and now heads the

South East Asian operations of the company. He holds the position of President Director of PT. Punj Lloyd Indonesia – Jakarta

P. K. Gandhi, President - HR & Admin, is a Post graduate in Personnel and IR from Xavier Institute of Social Science, Ranchi. He

has over 28 years of experience. He started his career with TATA Steel and also worked with Bechtel India as the Head – HR for

6 years.

Anil Aggarwal, joined the Company as Chief Financial Officer in 2006. A Chartered Accountant with an MBA in Finance &

Marketing from FMS, Delhi, Anil is also a Chartered Financial Analyst. He brings with him a rich experience of over 23 years,

having started his career with IOCL. Thereafter, he worked in senior positions with organizations like UTI, Reliance Capital Ltd.,

Cargill India Ltd., RPG Group. His last assignment, prior to joining Punj Lloyd, was with Bunge Agribusiness India Pvt. Ltd. as

Chief Financial Officer.

Sandeep Garg, Regional Director (Caspian), joined the company in 1991. An Electrical Engineer (1981) from IIT, Roorkee with

over 24 years of experience, he has handled execution of various projects - Gas Compressor Stations, Gas Gathering Facility,

Cryogenic and Hydro-cracker Projects. His last assignment was acquisition, operation and maintenance of the company owned

equipment assets, one of the largest in Asia.

Jamel Ben Amor, a Tunisian national, is Regional Director (Maghreb and Africa). A Mechanical Engineer from National School

of Engineers Tunis and Member of Society of Petroleum Engineers (SPE), American Society for Welding (AWS), International

Institute of Research (IIR), with 24 years experience.

Atul Kumar Jain, Regional Director (Oil and Gas, India), joined the company in 1982 as an engineering graduate. A Chemical

Engineer from IIT, Roorkee (1982), he has over 23 years of experience. Mr. Jain has handled various jobs in disciplines of

estimation, planning, co-ordination and project execution in India and overseas. His last assignment was as Project Director

Baku – Tbilisi - Ceyhan Crude Oil Pipeline in the Caspian. He authored the strategic plan to ensure completion of the Dahej -

Vijaipur LNG Pipeline Project in the shortest time span of 9 months with particular reference to the heavy monsoon.

Ravindra Kansal, rejoined Punj Lloyd in 2006, having earlier worked with the company for fifteen years . A B.E. (Chemical)

from Birla Institute of Technology and Science, Pilani, Mr. Kansal has an experience of over 20 years. He has handled process

design, sizing, proposal engineering and sales of solid liquid separation systems, water/waste water treatment plants, reverse

osmosis plants and air pollution control systems. Currently, he is Regional Director of the Middle East region.

Ashok Kumar Gupta, Executive Director joined the company in 1989. He is an Electrical Engineer from University of Jodhpur.

Prior to joining Punj Lloyd, he worked in Tripoli for 5 years, for East African Power & Lighting Co. in Nairobi and J K Synthetics

– Kota. He has 33 years of experience and has worked on challenging projects of the company in Indonesia and on offshore

projects.

25

Gora Chand Basu, Executive Director, joined the company in 1996. A Civil Engineer (1972) from Birla Institute of Technology,

Mr. Basu has over 31 years of project experience. Mr. Basu holds the responsibility for estimation and project management. His

current assignments are Bulk Liquid Storage Terminals in Singapore, Panipat Refinery. Hydrocracker Unit & Crude Oil Tank

Projects.

Subhash Sachdeva, joined Punj Lloyd in 1997. A B.E.(Civil) from Birla Institute of Technology and Science, Pilani, Mr Sachdeva

is backed by over 30 years of experience. Prior to joining Punj Lloyd, he worked with Somdatt Builders, Cimmco International,

National Projects Construction Corporation (NPCC) and INDO Burma Petroleum Co. Ltd.(IBP). Mr. Sachdeva is Executive

Director, Business Development- Infrastructure.

Ravi Bhanot, heads High Value Engineering Centre as Executive Director. An Electronics Engineer from IIT, he has over 30

years of experience in the field of process instrumentation, control and automation systems for the hydrocarbon processing

industry. He has worked in senior position in Chemtrols Engineering Ltd., Engineers India Ltd., Shriram Chemical Industries.

A.K. Khanna, Executive Director – Power Sector, joined the company in 2002. A Mechanical Engineer (1975) from Thapar

Engineering College, Patiala, he has over 27 years of experience. He has handled sales and marketing of hydro turbines and

Railway and Defense equipment. Mr. Khanna has 21 years of experience in turnkey projects of power, transmission lines, sub-

stations, pumping stations and construction contracts in India and abroad. Mr. Khanna has held the post of Chairman (NR) for

IPMA (affiliated to CII) for two consecutive years.

Ramanjit Singh Chadha, Executive Director, joined the company in 1981 as an Engineer. A Mechanical Engineer (1981) from

IIT Delhi and MBA from Faculty of Management Studies, Delhi with over 24 years of experience, Mr. Chadha implemented the

ERP Migration - Oracle 11i, Maximo 5i and their integration, applications on Lotus Domino and electronic document

management system. He now, heads ISD, Proposals and Estimation Cell.

Raju Kaul, Executive Director, joined the company in 2000. Chartered Accountancy (1983), MBA from Faculty of Management

Studies, Delhi (1995) with over 22 years of experience. Earlier worked with SAE (India) Ltd., an ABB group company, as Chief

Manager - Finance and was responsible for the treasury functions, MIS development of Systems, Budgetary control etc. Heads

the Finance and Treasury functions of the Company.

Akhil Kumar Gupta, Executive Director. A Civil Engineer from Roorkee University, he did his Masters from IIT. Backed by 22

years of highway project experience, he was earlier with IRCON and currently handles key highway projects for the company.

Ravi Keswani, Executive Director, joined the company in 1997. Chartered Accountancy (1987) , LLB from Delhi University

(1989) has over experience of 18 years. Earlier worked with Hero Cycles Limited. Heads the Accounts function of the Company

Pradeep Kulshrestha, joined Punj Lloyd in 1998. A B.E. from MITS in 1978 and M.E. from IIT, Pradeep worked with IRCON

Intl, prior to joining PLL. He has a rich experience of 18 years. Currently, Pradeep is Executive Director - Infrastructure and

handles execution of major civil infrastructure projects.

Dinesh Thairani, Company Secretary, joined the company in 1994. Fellow of Institute of Company Secretaries of India,

Masters in Commerce with over 16 years of experience in corporate secretarial field. Earlier worked with Onida Group of

Companies for 5 years.

26

SEGMENT III

PEEP INTO THE FUTURE

2727

OPERATIONAL STRATEGIST

“It is our mission to consolidate our position in existing markets andexpand our horizons by venturing into untapped geographies, byenhancing our portfolio of services with complementary segments. Tocontinually excel at project execution, engineering and design capabilities.”

“Punj Lloyd has a clear focus on new clients and geographies and theyshould lead to one or all of the following : (1) Expansion of the scale ofcurrent contracts within the same regions/clients. (2). Expansion of thescale of current contracts across new regions/clients. (3). New businesscontracts, extending into other areas of existing services/clients.”

“Given that Punj Lloyd has proved its mettle irrespective of thegeographies it is operating in, it is natural that the company aims to tapnewer markets which show significant potential and also leverage its

position in the regions in which it currently operates.”VIMAL KISHORE KAUSHIK

Joint Managing Director andChief Operating Officer

“The high demand for crude, refined oil and gas and derivative products in South Asia, is expected toresult in several large oil and gas exploration, production and transportation projects backed by increasedbudgetary allocation by the Governments. Highly lucrative regions like Middle East, Africa and Central Asiaare also on the company’s radar.”

“The company intends to expand its clientele in terms of territory and scope of activities. To achieve thisgoal Punj Lloyd will try to bid for contracts which enable it to move up the value chain, become the maincontractor on the projects, in turn opening the door for a higher number of international projects, efficientdeployment of resources and higher operating margins.

Most of the company’s contracts are awarded through competitive bidding process. The company mayenter into strategic alliances to qualify for certain high value contracts. Marketing activities will be channelisedtowards getting pre-qualified with major energy conglomerates and infrastructure development agenciesand entities.”

Punj Lloyd also recognizes the importance of appropriate mix of domestic and international clients.Besides, its strong historical record is on account of its existing clients who have time and again shown theirfaith in Punj Lloyd Limited with repeat orders and the company intends not only to live up to its historicalstandards but provide them with better solutions each time.

Punj Lloyd has to its credit the reputation of undertaking highly complex projects and completing themahead of the schedules. It is only a logical progression for the company to build on this and provide valueadded engineering services to segments which are complementary to its existing portfolio.

In the process of achieving its strategic objectives, the company will adhere to the highest standards ofhealth, safety and environment.”

28

POST BALANCE SHEET DEVELOPMENTSJOINT VENTURE IN SAUDI ARABIA

In keeping with the strategic objective of enhancing its global footprint, Punj Lloyd Limited (PLL) has enteredinto a joint venture in Saudi Arabia with His Royal Highness Prince Khalid Bin Bandar Bin Sultan (KBS). Thejointly owned company would be incorporated with a share capital of 2 million Saudi Riyals in which PunjLloyd would hold 49%, while the latter would have 51% stake. The new entity will operate in engineering,procurement, construction, commissioning of onshore and offshore projects for the hydrocarbon, power,chemical, water and sewage sectors, civil infrastructure and industrial projects in the Kingdom of SaudiArabia.

HRH Prince Khalid Bin Bandar Bin Sultan will act as the Chairman of the Joint Venture, identify commercialopportunities for the JV in Saudi Arabia and will liaise with various governmental and regulatory authoritiesbesides organizing banking facilities for the Joint Venture.

ACQUISITION OF SEMBCORP ENGINEERS ANDCONSTRUCTORS

Through its wholly owned subsidiary in Singapore, Punj LloydLimited has acquired a majority stake in SembCorp Engineersand Constructors (SEC) which is a wholly owned subsidiary ofSembCorp Industries (SCI), a leading utilities and marine groupin Asia.

SEC is a design and build engineering and construction serviceprovider with core capabilities encompassing process and plantengineering, heavy civil engineering and building. SECrecorded revenue of over 1 billion Singapore dollars for theyear ended December 2005.

The synergy will ameliorate Punj Lloyd’s existing operations.It will enhance the Company’s portfolio within complementarygrowth sectors like infrastructure and petrochemicals.

This entity will contribute significantly to Punj Lloyd’s top-line and is a step forward towards consolidating itspositioning in existing markets.

CONFIDENCE IN PUNJ LLOYD REINFORCED

Repeat order from RIDCOR

Punj Lloyd Limited has bagged a Rs. 3020 million project from the Road Infrastructure Development Companyof Rajasthan Ltd. (RIDCOR), a joint initiative between Rajashtan Government and IL & FS, for improvementand maintenance work of the Lalsot to Kota road section in the State.

The project which involves widening of the 195-km stretch of existing road to two lanes with a width of 10.5meters. With this project, Punj Lloyd has four highway projects in Rajasthan as they are already executingthree other RIDCOR projects valued at Rs. 5930 million. The repeat orders are testament to Punj Lloyd’scapabilities.

After the acquisition of SembCorpEngineers & Constructors, Singapore

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Completion of Dabhol LNG Terminal

Punj Loyd with its JV partner, Whessoe was awarded the contract for completing the Dabhol LNG terminalfrom Ratnagiri Gas and Power Pvt Ltd. The value of the contract is US $ 93.02 million on EPC basis.

The contract constitutes EPC package for completion of balance Works of the LNG terminal and top of thejetty facilities for Ratnagiri (Dabhol) LNG Terminal Project. Punj Lloyd is the only Indian company to beassociated with all three LNG Terminals in India.

OTHER SUCCESS STORIES

Delhi Metro Project

Punj Lloyd Ltd., along with its joint venture partner, Persys, has bagged a Rs. 1420 million project from DelhiMetro Rail Corporation (DMRC) for the Inderlok – Mundka Corridor of Phase-II.

Persys is a Malaysian Construction Company with whom Punj Lloyd had successfully completed a DMRCproject earlier. This project which involves design and construction of an elevated via-duct of 4.784 kmlength includes structural work of four elevated stations - Nangloi, Nangloi Railway station, Rajdhani Park,Mundka on Inderlok - Mundka corridor of phase II.

EPC Project for Oil and Gas Export Pipelines

Punj Lloyd has, through its wholly owned subsidiary in Kazakhstan, M/s. Punj Lloyd Kazakhstan LLP hasbagged a contract for laying of pipelines and overhead electrical lines from the onshore processing facility atEskene West to the Caspian Pipeline Consortium (CPC) Pumping station at Atyrau and to Makat pumpingstation in the Republic of Kazakhstan for a value of US $ 79.40 million.

Dahej-Uran Pipeline Project for GAIL

Punj Lloyd has won a major contract for construction of spread 1 of Dahej-Uran pipeline project from GasAuthority of India Limited for a consideration of Rs. 1382.90 million. The scope of work includes laying ofthe 30”x144 km pipeline & associated facilities of spread-1.

The contract was won amidst intense competition. The outstanding feature of the project is the 8 majorcrossings by HDD (horizontal directional drilling) method.

Backwater and Onshore Pipeline for Kochi Refineries

Punj Lloyd has bagged a contract for construction of 30" dia backwater and onshore pipeline for crude oilfrom Kochi Refineries for a consideration of Rs. 399.81 million. This pipeline will be laid by Horizontal DirectionalDrilling method.

Bulk Liquid Storage and Blending Facility

Punj Lloyd has been awarded a contract for procurement and construction of storage tank for bulk liquidstorage and blending facility at Meranti, Jurong Island, Singapore for a consideration of US $ 25.5 million.

30

SEGMENT IV

STATUTORY REPORTS

31

ANNUAL REPORT 2005-06

After enduring the pains of transition, the Indian economy is set ona path of robust growth. It grew at a better than expected growthrate of 8.4% during FY06 as compared to the 7.5% growth lastyear. The India growth story remains intact fuelled by strongdomestic consumption.

KEY ECONOMIC INDICATORS -The Agriculture sector grew at 3.9%.

The Industrial output grew at 7.6% and manufacturingsector posted a 9% growth.

The services sector continued to occupy the centre stageaccounting for 55.2% of the GDP recording a growth of10.3%.

Crude Oil prices continue to be a cause of concern withcrude prices per barrel spiraling above US $ 70. However,the Government of India, through the National OilCompanies continue to absorb a substantial portion of theincreased price of crude.

Exchange Rate – The exchange rate position remainedcomfortable through FY 06.

Inflation – The Inflation rate dipped below 5% during theyear under review.

Interest Rates – Though interest rates hardened, their impacton the economy has remained benign thus far.

Liquidity in the fiscal year 2005-06 started at a comfortablelevel. The second half of the year witnessed a reversal inthe situation on account of high credit off-take, moderationin buildup of foreign exchange reserves and huge outflowowing to expatriate schemes.

Stock Markets – The stock markets rose sharply during theyear under review and crossed the 5 digits mark for thefirst time ever.

Infrastructure spending – With infrastructure being one ofthe key drivers of the India growth story, the spending onthis sector has displayed a rising trend.

Power Industry – With rapid industrial, service andagricultural growth and rising consumer income, the powerindustry is expected to have substantial growth.

PERFORMANCE FOR THE YEAR 2005 - 2006

REVENUE CONTRIBUTION

Business Segment Revenue (Rs. Millions)

Engineering & Construction 16,100.12

Others 1065.75

Total 17,165.87

A dominant player in the engineering and construction sectorin India, your Company’s portfolio encompasses integrated

design, engineering, procurement, construction and projectmanagement services for energy industry and infrastructuresector projects.

In the Oil and Gas segment, your Company is primarily engagedin providing engineering construction services for onshore andoffshore pipelines, gas gathering systems, oil and gas tanks andterminals including cryogenic LNG and LPG storage terminals,process facilities.

We are also engaged in the niche business of providingengineering construction services for power plants includingcontracts for gas turbine based power plants and piping worksin nuclear power plants.

Your Company has undertaken several civil infrastructure projectsfor highways, flyovers, bridges and elevated railroads. We alsohave presence in the Telecom domain. In addition, we providedvalue-added engineering services for the energy industry, andinfrastructure projects as well as comprehensive plant and facilitymaintenance and management services.

Over the years, your Company has catered to more than 120clients and executed more than 180 projects in over 14 countries.

Our operations are divided into five distinct regions: (i) SouthAsia - the Indian sub-continent and Bangladesh (ii) the Asia Pacificregion - Indonesia, Singapore and Malaysia (iii) the Middle East- United Arab Emirates, Qatar, Oman, Kuwait and Saudi Arabia(iv) the Caspian region, including Kazakhstan and Georgia (v)the African region - Libya and Tunisia.

Over a two decades time-span of experience in constructionprojects, we have constructed more than 8000 kilometers ofpipelines, 6 million cubic meters of tanks and terminals capacityand executed 11 refinery modernisation and qualityimprovement projects.

We are currently working on 12 highway projects in theinfrastructure sector.

As of June 27, 2006, we had an order Backlog (includes thevalue of unexecuted orders as on March 31, 2006, and thevalue of new orders received after that date) of overRs. 52,317.60 million. The projects reflected in our orderBacklog as of March 31, 2006 were primarily in the oil and gassector and the infrastructure sector, including highways andpower. The projects being executed by us in the oil and gassector are progressing satisfactorily. However, the road projectsundertaken by us in Assam and in Rajasthan for NHAI whichtogether constitute approximately 24% of the order backlog,have experienced delays resulting from the non-availability ofright of way. We have now received the right of way on theseprojects and we will make efforts to expedite the completionof these projects.

Management Discussion and Analysis

PUNJ LLOYD LIMITED

32

Order backlog status as of June 27, 2006 on consolidated basis

Projects India Abu Dhabi Oman Qatar Singapore Indonesia Kazakhstan Total(Rs. mn.)

Pipeline 6,511.1 2,410.8 24.0 - - 4,410.6 804.6 14,161.1Tankages 2,115.3 1,560.9 - - 4,384.4 - - 8,060.7Process Plant 54.2 - - 3,552.0 - - - 3,606.2Civil 22,516.7 - - - - - - 22,516.7Power 1,916.8 - - - - 2,056.1 - 3,972.9

Total 33,114.2 3,971.7 24.0 3,552.0 4,384.4 6,466.7 804.6 52,317.6

Consolidated list of Projects under execution and awardedto us during the year:

Name of the Project Value (Rs. Millions)approx

Uran Trombay Pipeline 3,996

Mumbai – Manmad - Manglya 842Pipeline Extension project fromManglya to Piyala/Bijwasan

Pune Solapur Pipeline 886

Mundra Delhi Pipeline 1,252

South Sumatra West Java-Ph-I 1,956

South Sumatra West Java-Ph-II 2,024

Huwaila field Development 360

OGD III & AHD II Pipeline Construction 1,286

Construction of flowlines & well 954head Installation in ADCO’s oil field

Tambora field development 1,194

Large Bore Small Bore Pipeline 1,577

During the financial year 2006-07, we have extended our servicesto Kochi Refineries Limited (value of project – Rs. 400 millions)and Agip Kazakhstan North Caspian Operating Company N.V.(value of project - Rs. 3,573 million).

In the endeavour to expand horizons across the globe, yourCompany intends to focus on projects in North African region,a market we have recently entered by opening a marketing office.Your Company is already qualified and was invited to bid inmajor pipeline projects in Libya.

Natural gas consumption in Africa is projected to grow at anaverage annual rate of 4% from 2002 to 2025, compared withaverage yearly growth rates of 2.7% for oil and 1.6% for coal.Gas consumption is expected to surpass coal consumption by2025, with oil remaining the dominant fuel throughout theprojection period. Incremental growth in Africa’s gas demandfrom 2002 to 2025 is projected to be fairly even across sectors,with the industrial, residential, and electric sectors eachaccounting for around one-third of total growth.

Storage Tanks and Terminals

The transportation of oil and gas necessitates setting up ofhuge storage tanks and terminals at the point of production,exploration and refining/processing of derivative products.

BUSINESS SEGMENTS

Oil & Gas

The oil & gas segment comprises the oil and gas sectorwhere we provide services across the spectrum includingcomplete design and EPC services. Services in the oil & gasdomain specifically include:

Pipelines

The demand for pipelines stems from the requirement totransport crude oil and petroleum products to refiners,product terminals and consumers. In addition, natural gasrequires to be transported to processors, LNG terminalsand consumers each day. Your Company has established areputation for carrying out engineering and constructionof complete pipeline projects. Your Company hassuccessfully executed Dahej – Vijaipur Pipeline Project inIndia of 42" dia (Length - 618 km.) and the Baku-Tbilisi-Ceyhan Crude Oil Pipeline Project (Lot C) in Turkey of 42"dia (Length - 207.524 km.) & 34" dia pipeline (Length -124.863 km.) and Cross Country Pipeline for Gas ExportLine Capacity Increase Project in Oman of 48" dia (Length- 265 km.) Pipeline construction is capital intensive innature, and your Company prefers to concentrate onpipeline projects of larger length and large diameter wherethe Company has a very successful and unmatched trackrecord and experience. Your Company owns, operates andmaintains a fleet of specialised equipment necessary toengage in the pipeline construction business.

We have successfully executed onshore and offshore energypipeline construction projects in remote areas with difficultterrains and climatic conditions such as deserts, rain forests,rocky and marshy areas. The Company has laid 7730 km.of oil and gas pipelines around the world.

During the financial year 2006-07, we bagged acontract of over Rs. 1,380 millions for the constructionof pipeline project from GAIL. The contract involvesfirst phase of the Dahej-Uran pipeline project, likelyto be completed by February 2007.

We have been granted a letter of acceptance inFebruary 2006 by HPCL for laying a pipeline andassociated facilities (Part III and Part IV) for the Mundra-Delhi Pipeline Project for a consideration of Rs. 1,252millions.

33


Your Company has expertise in the construction of floatingand fixed roof storage tanks and cryogenic storageterminals, including LNG storage and re-gasificationterminals. Over the years, we have a successful track recordof having constructed more than six million cubic metersof tanks and terminals.

We are currently working on a tank farm project on EPCbasis for Horizon terminals in Singapore and a tankconstruction project for PB Tankers (Tankstore) in Singapore.We have also undertaken the off-sites and utilities (pipingand mechanical erection) project of GASCO for Bechtel inAbu Dhabi.

We have added a new client namely, IHI Japan during thecurrent year and we are pleased to inform that we havereceived repeat order for fabrication and erection of 6additional tanks (Horizon, Singapore) based on the strengthof our performance.


Name of the Project Contract Value(Rs. Millions)

approx

Storage Tanks (19 in no.) for Onshore Gas 1,404.4Development Phase - III (OGD - III) Project5208 P2AE05, ABU DHABI for Bechtel, U.K.

Fuel Oil & White Oil Storage Tanks (15 in 2,010.0no.) for Tankstore Phase V expansion onPulau Busing Island for Tankstore,Singapore

Fuel Oil & White Oil Storage Tanks (36 in 3465.0no.) for Bulk Liquid Products Terminal onJurong Island, for Horizon SingaporeTerminals Private Limited, Singapore110000CBM Phase 2 Expansion of the BulkLiquid Product Terminal on Jurong Island

Tankage Work for Paradip Haldia Crude Oil 279.0Pipeline Project at Paradip, Orissa for IOCL,Noida

BEAAT – TAKREER Tanks 181.4

LNG Storage Tanks Petronet LNG, IHI 1,715.0

During the financial year 2006-07, we have been awarded thefollowing Contracts:

i) Procurement and Construction of Storage tanks and otherworks for Bulk Liquid Storage and blending facility atMeranti Jurong Island, Singapore from Helios TerminalCorporation Pte. Ltd. for 25.5 million.

ii) Contract for completing Dabhol LNG terminal in JointVenture with Whessoe from Ratnagiri Gas and Power PrivateLimited for US $ 93.02 million.

Process Facilities

Process facilities are required by oil and gas companies inthe course of producing and processing oil and gas andderivative products. Your Company has successfully

executed contracts for gas gathering and process facilities,gas compressor stations, specialised processing packagesfor refineries such as sulphur recovery, Vis-breaker, crudedistillation, hydrocrackers, and vacuum distillation units,as well as motor spirit quality upgradation project (MSQ)and offsite works of refineries, effluent treatment plantsand regasification units for LNG import terminal. Theconstruction of process facilities for the hydrocarbon andpetrochemical industry typically include equipmenterection (where single piece of equipment can weighanywhere in the range of 600 tons and above), fabricationand installation of piping (including special alloy & piping),fabrication of steel structures, electrical, instrumentation,painting, insulation and fireproofing services.

Civil works are also included in the construction packagesfor some of the process facilities, particularly in EPCcontracts. The civil works include land preparation andgrading, piling, foundation, construction of internal roads,buildings like offices, control rooms etc.

During the year, we completed Motor Spirit QualityUpgradation Project (MSQ) at IOCL’s Haldia Refinery whichhas now satisfactorily commenced production. The totalvalue of the contract was Rs. 2,000 millions.

Your Company has bagged a US $ 79.82 million order inMarch 2006 from the New Doha International AirportSteering Committee, Qatar for fuel handling systems.

Maintenance and Management Services

Your Company provides engineering, operations,maintenance and preservation services in connection withthe Company’s own construction works as well as otherprojects.

These services include:

Engineering services. The engineering centre performsmulti-disciplinary technical and engineering services foronshore and offshore pipelines, mechanical engineeringaspects of storage tanks and terminals, for process facilitiesand infrastructure projects.

Engineering services typically involve detailed design andengineering, developing specifications and drawings,preparing material take-offs, technical evaluation reportsand vendor information reviews as well as projectcoordination and planning, procurement processes andengineering support for construction activities. TheCompany’s engineering centre is staffed by multi-disciplinary, highly-skilled, extensively experiencedengineers and CAD experts and is equipped withsophisticated engineering software packages.

Facilities commissioning and start-up services. YourCompany also provides commissioning and start-up servicesincluding development of comprehensive pre-commissioning strategies and checklists, formulation of aseamless commissioning plan, checking and calibratinginstrumentation and controls, analysis and establishmentof utility services in accordance with prescribed standardsand norms, undertaking test-runs, monitoring performance

PUNJ LLOYD LIMITED

34

indicators, creation of “as-commissioned” documentationand recording pre commissioning and start-up parameters.

Quality procedures assessment and audit. Your Companyconducts quality control assessment and audit servicesincluding evaluation of existing quality assurance proceduresand systems, formulating and establishing procedures tocover time, cost and quality of deliverables across all processesand incorporation of “cost of quality” accounting procedureswithin the operating systems and processes.

Health, safety and environmental audit and procedures. Thisservice includes the evaluation of safety norms and practicesrelating to personnel, facilities, equipment and theenvironment emerging from current practices andprocedures.

Measurable parameters are identified for the evaluation ofhealth, safety and environmental compliance norms withrespect to specific work environment and responsibilitiesand operating practices and procedures. Because of ourexpertise in this segment, we are in a position to offer adviceon incorporate “cost of safety” accounting procedures inoperating systems and the development of time-boundsafety-risk assessment procedures and safety policies andprocedures for our clients.

Asset preservation and management. Your Companyundertakes asset preservation and management servicesthat include preservation and maintenance of distressedassets or plant and machinery under litigation, provisionof comprehensive management and maintenance servicesthat include security, safety, preservation and maintenanceof assets and equipment and maintenance for ability torecommence commercial operation.

For the current year we undertook -

Asset Maintenance & Preservation for Daewoo MotorsIndia Ltd. accruing a Revenue of Rs. 111 millions.

Asset Maintenance & Preservation of LNG and Jettyarea at Dabhol Power Project translating into earningsof Rs. 228 millions.

BUSINESS ENVIRONMENT

OIL AND GAS SEGMENT

Engineering and Construction services in the Energy Sector area function of the level of investments allocated to exploration,production, storage, refining and transportation activity by theindustry players and the governments.

Crude oil prices have crossed the US $ 70 per barrel mark. Thehigh growth rates in the emerging economies of India and Chinaare fueling the demand for oil and gas.

Natural gas is projected to be the fastest growing componentof world primary energy consumption according to the U.S.Department of Energy’s International Energy Outlook (2005)report (the “IEO”).

The IEO estimates that the consumption of natural gas willincrease, between 2002 and 2025, by almost 70%, from 92trillion cubic feet to 156 trillion cubic feet.

Gas demand is expected to increase more than any other energysource by 2030, an increase of 87% over the 2002-2030 periodaccording to the International Energy Agency, (IEA).IEA estimates that more than US $ 16 trillion, or US $ 550 billiona year, needs to be invested in energy-supply infrastructureworldwide over the three decades to 2030, and it equates 1% ofprojected gross domestic product. The average annual rate ofinvestment is projected to rise from US $ 455 billion in the decade2001-2010 to US $ 632 billion in the decade 2021-2030.IEA has further estimated that over the period 2001-2030,cumulative investment in the global natural gas supply chainwould amount to US $ 3.1 trillion, or US $ 105 billion per year.Capital needs in the downstream have been slated to total US $1.4 trillion with a large number of new cross-border high-pressure pipelines and LNG processing and transportationfacilities estimated to be built as supply chains grow longer.There is expected to be an increase in the volumes oftransportation facilities in the oil and gas industry.According to Global Construction Review 2005 (Supplement toPipeline and Gas Technology), operators are constructing,planning, or studying the feasibility of building approximately72,924 miles of crude oil, natural gas and refined productspipelines throughout the world, to meet growing energy demand.Natural gas dominates worldwide pipeline construction activity,at 55,838 miles planned and underway, nearly 77% (76.6%) ofthe world total. Crude oil lines are second to natural gas, with13,715 miles, approximately 18.8% of the world total. Refinedproduct lines are third at 2,237 miles, or 3% of the total. Othersconsist of primarily NGL and blended bitumen lines, with 1,134miles, comprising approximately 1.6% of the world total.IEA further anticipates that producers in the Middle East andAfrica will build new transmission lines not only for export butalso to meet growing domestic demand; and offshore pipelineswill increase in proportion to onshore, since an increasing volumeof production is expected to come from offshore fields withmore export lines being built offshore.

INDIAN SCENARIO

The Indian Government’s “Hydrocarbon Vision 2025” to achieveself sufficiency by 2025 estimates demand for crude oil by 2025at 368 MMTPA against current 180 MMTPA. For achieving thesetargets, the Government is earmarking huge investments foractivities across the board in oil and gas industry.The Government’s decision to permit oil retailing by the privatesector is expected to translate into approximately 10,000 retailoutlets to be set up by RIL, Essar Oil and Shell. ONGC has alsorecently received Government approval for setting up retailoutlets. This will ensure huge investments to build an extensivepipeline infrastructure to cater to the terminals which will feedthese retail outlets.The demand and supply of natural gas in India is also expectedto increase in the next several years. According to industryreports, the supply of natural gas in India is only 70 millionmetric standard cubic meters per day (mmscmd), as comparedto a demand of 117 mmscmd. This demand is expected to growto 166 mmscmd by 2007. This in turn will result in the need foran extensive gas transportation pipeline infrastructure.

The growth of an extensive gas pipeline infrastructure in Indiais also expected to receive a major thrust from the discovery of

35


gas reserves of about 7 trillion cubic feet off Kakinada in AndhraPradesh by Reliance Industries Ltd. Reliance is also in the processof developing a 2,000 kilometer gas pipeline to cater to themining industry in Goa and the gas demand in South India, andalso proposes to add a spur to Mumbai to cater to the industrialbelt in the region, estimated at 45 mmscmd in 2005-06. Relianceproposes to set up another gas pipeline from Cuttack in Orissa,where it is exploring gas in the NEC-OSN field, to its refinery atJamnagar in Gujarat.

GAIL also proposes to lay 7,000 kilometers of pipelines at a costof Rs. 180,000 million over the next several years to provide gason tap wherever there is enough demand from the industry.The Dahej-Uran pipeline will feed the Uran industrial belt nearMumbai, which has projects like IPCL and ONGC. Gujarat StatePetronet Limited, a subsidiary of the Gujarat government-ownedGujarat State Petroleum Corporation Limited, is also implementinga 742 kilometer gas grid offering gas transportation services onan open access basis.

30% of the petroleum products are transferred through pipelineswhile the rest is through other modes in India. The correspondingfigure is 60% in developed countries. However, this ratio isexpected to skew in favor of pipelines and the share of pipelinesin transporting petroleum products is estimated to go up by 45%in the next 2-3 years, according to the Ministry of Petroleum.Pipelines are most efficient modes of transport as they consumeless energy as compared to other modes like railways and road.

The Ministry of Petroleum and Natural Gas, India, estimates thatusage of gas as an energy source would increase from the currentlevel of 10% to 20% by 2025. Hence, going forward, thedemand for transportation through pipelines is expected toremain robust in India.

Thus, world over including India, the Oil and Gas sector isexpected to be extremely vibrant. This will have a cascadingeffect on companies providing engineering, procurement,construction and other services to the oil and gas industry.

INFRASTRUCTURE PROJECTS

We provide engineering construction services for variousinfrastructure projects including highways, flyovers, bridges,elevated railroads.

12 highway projects are under execution in theinfrastructure sector.

Your Company is sensitive to the market dynamics and hasidentified Sectors like Railways, Hydro Power, IndustrialPlants, Water Supply, Urban Housing and Real Estatedevelopment for its diversification and expansion plans.While continuing to leverage our expertise and experiencein the Roads and Highway Sectors to bag further contracts,we also look forward to enlarging our product mix. Ouraim is to be known as a Composite Construction Group,capable of executing all type of civil jobs.


Name of the Project Contract ProjectValue length

(Rs. Millions) (Kms)

Assam

NHAI AS 16 Lanka - Daboka 1,987 24

NHAI AS 8 Nalbari - Bijni 1,871 30

NHAI AS 9 Nalbari - Bijni 1,312 21

NHAI AS 4 Guwahati - Rangia 1,736 28

NHAI AS 5 Rangia - Nalbari 1,929 28

Rajasthan

NHAI RJ - 8 Kota 3,974 65

RIDCOR HK 1 Hanumangarh 2,624 200- Ratangarh

RIDCOR HK2 Ratangarh 2,192 207- Kishangarh

RIDCOR LJ 2 Jhalawar - Baran 913 80

KEY INITIATIVES DURING THE YEAR

Forayed into construction of a high specification buildingfor Global Health Private Limited (Contract value Rs. 858.6millions) for its Institute of Integrated Medical Sciences andHolistic Therapies in Gurgaon (near Delhi). The total areaunder construction is 2.20 million sq. ft. including 3basements and 17 floors.

We are the Lowest Bidder in a Railway Project (Guntukul –Raichur) valued at approximately Rs. ,1260.00 Million. TheLOI is expected to be received shortly.

During the year we executed an elevated via duct for theDMRC which was the first project of its kind for us.


At present, Infrastructure/construction spending in India ispegged at only 4-5% of GDP and the government is takingsteps to enhance the same. Every 1% increase implies Rs. 312billion (US $ 7.1 billion). Key characteristics of the Indianconstruction industry are-

Market size is Rs. 3,200 billion per annum

Accounts for 4% of GDP

Annual average growth rate of the construction sector from1999-2000 to 2005-06 has been estimated at 10% andthe growth rate is likely to increase, given the Government’sinitiatives.

Financing of the construction sector constitutes only 5% of thetotal funding of banks and FIs put together, of which 75% is byway of non-fund based financing. An improvement is expectedin this area with strong political will demonstrated byGovernment spending.

The larger players with better technical capabilities and financialmuscle will be the biggest beneficiaries of this development.

PUNJ LLOYD LIMITED

36

Roads and Highways:

India’s road infrastructure suffers from the problems of low capacityand poor quality. The highways account for only 2% of the totalnetwork but carry 40% of the total traffic. The government has setforward a National Highway Development Plan to upgrade roadinfrastructure by 2012. The total estimated cost of this program isUS $ 50 billion–to be implemented in six phases.

The Golden Quadrilateral (GQ) project and the North SouthEast West (NSEW) corridor projects are moving towardscompletion. The allocations for the same have also beenincreased via an additional cess on per litre of petrol and diesel.The Government has announced the launching of the third phaseof NHDP, targeting Selected High Density Highways not formingpart of GQ or NSEW corridors. In addition, a special packagefor the development of roads in the North Eastern Region hasbeen approved.

Scheme Estimated Cost Remark(Mn US $)

NHDP Phase II 4000 Cash Contracts

NHDP Phase III, V, VI 14600 BOT Contracts

NHDP Phase IV 9000 Annuity Contracts

North EastDevelopment 2100 Cash Contracts

Express Ways 6500 BOOT

Total 36200

Greater private participation accompanied by acceleratedinfrastructure investment are factors driving higher ticket sizeof orders. NHAI’s orders over the past few years have increasedfrom Rs. 0.5 billion ticket size in the late nineties, to Rs. 1 billionin 2002-03, and is currently above Rs. 2-3 billion. Going forward,this may cross Rs. 5 billion for a number of its projects in thenear future, with some projects being Rs. 10 billion each.

Railways:

The deficits of infrastructure in terms of port connectivity andhinterland corridor development and their adverse impact onthe growth of Indian economy has provided a paradigm shift inthe Railway’s planning process. The Railways are now lookingforward to addressing these basic issues in keeping witheconomic demand and formulating an integrated programrather than piece-meal projects.

In line with the above, the Railways require an investment of US$ 22 billion for new coaches, tracks, and communications andsafety equipment over the next ten years. In order to improvethe efficiency and competitiveness of this mode of transport,ambitious programs such as a five-year Integrated RailwayModernisation Program and dedicated freight corridor have beeninitiated.

Rail Vikas Nigam Ltd. has been set up as an agency to overseethe modernisation program including funding and projectexecution.

Urban Infrastructure

Townships

The sectoral reforms like the allowance of 100% foreign directinvestment in the Real estate sector and the relative low costand easy availability of housing loans and rapid urbanisationhas fuelled a boom in the Housing sector. All this has attractedforeign players to enter the Indian housing market and be partof this growth. The Construction component of these projectsis approx US $ 1.00 billion over the next 5 years.

Your Company foresees tremendous business opportunity in KingAbdullah Economic City, a US $ 26 billion project started inDecember 2005 in Saudi Arabia. This city is located along theRed Sea, around 50 km north of Jeddah. This city opens hugepotential for Infrastructure development, for construction ofIndustrial Area, Air Port, Sea Ports, High Spec High Rise Buildings,Residential Vilas, Luxurious Homes, Commercial Centers,Shopping Centers, Sports Stadiums, Hospitals, Schools, Colleges,Universities, Resorts, Hotels Roads, Highways, Flyovers, WaterTreatment Plants and Supply Network, Sewerage Treatment Plantand System. Your Company has decided to be present in theKingdom of Saudi Arabia through a Joint Venture Company.

Metro Projects

In addition to these projects the Delhi Metro Rail Projecthas also been enlarged and similar projects have beenextended to other cities like Hyderabad, Calcutta andBangalore.

The total investment potential in these projects is ApproxUS $ 5.70 billion, out of which the Construction pie wouldbe approx. US $ 2.00 billion.

Hydro Power Projects

The Government has laid down three ambitious targets for thepower sector:

Power availability for all by 2012Complete Rural Electrification by 2007Accessibility to all Households by 2012

There has been a renewed thrust on Hydro Power regeneration,which aims at achieving 50,000 MW Hydro Power by 2012. Thepreliminary feasibility of these schemes have been completed.

The NHPC plan for capacity addition is 4357 MW by the end of10th plan. The NEEPCO, SEB and other Private sector playersalso seek an augmentation of 9600 MW during this period.

The Power Ministry has estimated an investment ofapproximately US $ 20 billion by the end of the tenth plan(2012). There is tremendous scope for Civil Infrastructurecompanies in these projects due to the involvement of Rockblasting, Tunneling, Accessibility and Dam related works. Theshare of the construction sector in these projects is estimated atapproximately US $ 9 billion.

37


Civil Aviation:

The civil aviation sector in India is characterised by hugeinfrastructure bottlenecks. However with the opening up of thesector to private players, there is heightened activity in this sector.The domestic and international traffic and the Cargo handlingbusiness are expected to increase tremendously over the nextdecade.

To meet this increased demand, the Airport Authority of Indiainvited bids for modernisation and upgradation of the Mumbaiand New Delhi airports, which have subsequently been privatisedand the Government aims at building/upgrading 35-41 airportsin all resulting in investment opportunities to the tune of US $ 2billion over the next 5 years.

Ports:

India has 12 major ports and 95% of its total foreign tradevolumes are through the sea.

The increasing globalisation has resulted in growing volume ofinternational trade through India and increased expansion andexpansion of domestic ports is the key. Many major ports havealready drawn plans to add container terminals and expand theirexisting capacities. The State Governments are increasingly seekingprivate partnerships for development of Minor ports. There isalso a proposal for establishment of a dedicated freight corridorfor Inter Port connectivity. All these initiatives have createdtremendous opportunities for the Civil Construction Sector.

The total investments in the Port Sector is estimated at US $ 20billion, of which the share of the Construction sector is estimatedto be approximately US $ 6 billion.

Steel Plants and Industrial Structures:

The large deposits of coal , steel and other minerals in the EasternStates of Orissa and Jharkhand has attracted large multinationalcompanies to invest in theses states.

The Governments of Jharkhand and Orissa have already signeda MOU with the Tatas and Posco Steel for setting up Steel plantsin their respective states. The Ispat group has also evinced interestin setting up steel plants in the State of Jharkhand.

A total investment of approx US $ 15.00 billion has alreadybeen committed by these players, of which the share of theConstruction sector would be approximately US $ 9 billion.

Your Company has taken several initiatives for increasing ourpresence, faster completion and optimum utilisation of theresources :

Aggressive approach to Annuity & Cash ContractsDepartmental execution of ProjectsFocus on large/mega projects worth more than US $ 120millionSelective International projectsGeographical focus on Projects for synergyBidding for small but lucrative projects in initial phase inthe new segments to penetrate the market.Joint Ventures/technical tie ups with large conglomeratesEfficient business processes

Experienced and technically skilled ManpowerLarge equipment baseUse of the latest project engineering software packages

POWER PROJECTS

Your Company is engaged in engineering constructionservices for power plants, and is currently working on twocontracts for thermal power plant stations belonging toJindal Power (2x250-MW at Raigarh) and BHEL (2x60-MWat PT Merak Energi, Indonesia). We also executed gas-turbine based power plants and piping works for nuclearpower plants.

Your Company has got empanelled with BHEL as a qualifiedcontractor for Civil and Balance of Plant works for powerstations upto 500 MW.

Your Company is now bidding with major Internationalplayers like MHI, Doosan (Korea), and TPE, Siemens (Germany)and got recognised as a serious EPC bidder in the powersector. We have now started bidding for NTPC, StateElectricity Boards and private power plants.

Our power sector business is project specific and the valueof each project is generally around Rs. 18,000 to 20,000millions. Your Company currently addresses only 40 percent of its business out of this investment.


India’s power sector is largely characterised by a huge demandsupply gap, in spite of the fact that supply has grown manifoldsince independence. India experiences a 13 per cent shortagein peak capacity and 8 per cent in energy terms, on an overallbasis.

India has emerged as the fifth largest power market in the worldwith an installed generation capacity of 123 GW, generation ofmore than 600 billion KWh, and a transmission & distributionnetwork of more than 6.3 million circuit kms.

The per capita consumption of electricity has doubled from about350 units in 1998 to over 600 units in 2005 and at present only44% of rural households have access to electricity.

With economic development and rising expense levels, per capitaelectricity consumption is increasing. As per industry estimates,India has to generate an incremental 10,000 MW capacity eachyear for the next decade to reduce the ever increasing demand-supply gap.

The Government of India has envisaged capacity addition of100,000 MW by year 2012 to meet its mission of power to all,which entails huge investment in this sector and has announcedUltra Mega Power Projects.

In line with the thrust on rural electrification, the Governmentof India (GOI) has already announced an ambitious plan toprovide “Electricity for all villages by 2007” and “Electricity forall by 2012”, and the per capita consumption of electricity istargeted to exceed 1000 units by 2012. The investmentrequirement in the sector is projected at over US $ 300 billionover this period.

With notable policy initiatives like SEB receivables restructuring,Accelerated Power Development and Reform Programme

PUNJ LLOYD LIMITED

38

(APDRP) funding to improve the distribution network and theElectricity Act, 2003, the Government has channeled the sectoron a growth path.

Your Company also has major presence in emerging economieswhere there is a major thrust on infrastructure developmentand we aim to capitalise on the huge opportunities there.

BROADBAND & TURNKEY TELECOM SOLUTIONS

We have a small broadband division which provides internetbandwidth, data centre and managed network solutionsfor corporates, ISPs, MNCs, BPOs and households. It ownsand operates an optical fibre network across Indiaconnecting over 15,000 route kilometres and serving 1 lakhbroadband users.

Your Company has developed and deployed turnkeytelecom solutions of data, voice, and video networks. Thesesolutions include design and implementation of high qualityhybrid networks consisting of optical fibre, co-axial cableand microwave equipment.

The designed networks offer broadband IP (InternetProtocol) internet access services, intra-corporate VPN(Virtual Private Network), mission critical informationsystems, cable TV services for digital quality software, datacentre services and managed optical fibre operation. TheCompany also undertakes laying of copper and optical fibre,microwave surveys, and installation, commissioning andtesting of GSM (Global System for Mobile Communications)and CDMA (Code Division Multiple Access) equipment.

By facilitating the deployment of end-to-end communicationand information systems, your Company is enabling globalinterconnectivity and interoperability between businessesand consumers. Its array of trenchless horizontal directionaldrilling equipment enables the Company to lay cables incongested cities without disrupting traffic and disturbingthe environment.

GEOGRAPHICAL PRESENCE

Your Company earns around 60% of its revenues from off-shoreoperations. It has formidable presence in the Middle East, theCaspian region, the Asia Pacific region and in South Asia. Goingforward, it intends to strengthen its foothold in strategicallyimportant locations like Africa.

These regions have significant oil and gas reserves and enormouspotential for large engineering construction projects in theenergy industry and infrastructure sector.

The Set up

Independent marketing and project teams are set up withassistance from corporate offices. The allocation of equipmentand personnel are coordinated centrally from the corporateoffices to optimise resource allocation and costs. Project teamsare constituted when a particular contract is awarded and on

the completion of a project, the project team is regrouped toother projects, depending on the skills of such personnel andthe requirements of the next project.

We have also developed strategic “centers of excellence” to focuson specific project segments, such as offshore works, pipelineconstruction, compressor stations, LNG terminals and processfacilities, to provide centralised support services.

Table showing break up of Revenues Geo-area wise

(Rs. Millions)Region For the year For the year

ended March 31, ended March 31,

2005 2006

Amount Percent Amount Percent

Middle East 1,428.00 7.98% 1,593.97 9.46%

Asia Pacific Region 2,984.50 16.67% 3,958.92 23.50%

South Asia 7,599.60 42.46% 9,602.82 57.00%

Caspian Region 5,887.80 32.89% 1,690.74 10.04%

Total 17,900.10 100% 16,846.45 100%

CURRENT YEAR’S ACTIVITIES

MIDDLE EAST

The increased exploration, production and transportation activityin the Middle East in the last five years has resulted in thedevelopment of several oil and gas projects as well as severalinfrastructure projects including civil aviation related projects.Your Company has undertaken projects for most countries inthis region.

ASIA PACIFIC REGION

The Asia Pacific region continues to be a geographic area ofkeen interest for us due to the relative abundance of undevelopednatural gas resources, growing demand for natural gas for powergeneration and industrial and residential usage and our pastsuccess in the region.

We intend to leverage our regional headquarters in Singaporeand strong presence in Indonesia where we have extensiveoperations including facilities at our base camp and yard inSungaipurun to expand into neighboring markets such asVietnam, Thailand and Philippines based on opportunities thatbecome available in these countries.

Caspian region

The Caspian region has one of the largest reserves of oil and gasoutside the Middle East. We have a significant presence in theCaspian region with operations in the oil and gas sector.

We intend to capitalise on our operations in Kazakhstan andour recent projects in Turkey and Georgia to participate inprojects in the energy industry in other countries in the Caspianregion, including in Russia, which has the largest gas reserves inthe world and in Azerbaijan.

South Asia

The high demand for crude and refined oil and gas and derivativeproducts in South Asia, including in India, Bangladesh, Sri Lanka

39


and Myanmar is expected to result in several large oil and gasexploration, production and transportation projects as well asrefinery projects in this region, including pipeline projects andseveral LNG import terminals. Further, low operating costs ofrefinery facilities in India are expected to contribute to the stronggrowth in refinery projects in South Asia. In addition, theGovernment’s focus and increased budgetary allocation andincreased funding by international and multilateral developmentfinance institutions for infrastructure development in India andother South Asian countries has resulted in or is expected toresult in various infrastructure projects in this region.

Africa

Your Company has recently forayed in this strategically importantregion and intends to further strengthen its presence here as it hasoil and gas reserves and potential for large engineering constructionprojects in the energy industry and infrastructure sector.

A NOTE ON SUBSIDIARIES AND JOINT VENTURES

Your Company has 13 subsidiaries and 2 Joint Ventures acrossthe globe. The JVs are formed for specific projects and will bewound up on completion of the same.

PT. Punj Lloyd Indonesia

It is 100% owned by us and primarily engaged in thebusiness of execution of engineering, procurement andconstruction contracts.

During the year 2005-06, its gross revenues amounted toRs. 1945.70 million.

Punj Lloyd Int. Ltd.

It is 100% owned by us and engaged in supplying materialsand equipments in the hydrocarbon sector.


Spectra Infrastructure Ltd.

It is 100% owned by us and was established to make equityinvestments in BOOT infrastructure projects.


PLN Construction Ltd.

Incorporated as PLN Construction Private Limited, thiscompany’s name was changed to PLN Construction Ltd.and it became a public limited company in 2005. A 100%owned company, it undertakes execution of horizontaldirectional drilling contracts.

During the year 2005-06, the gross revenues amounted toRs. 136.09 million.

Spectra Punj Lloyd Ltd. (SPLL)

We hold 97.35% of SPLL, and its principal activity is leasingconstruction equipment of the Company and manufacturingand supplying redimix concrete.


Atna Investments Ltd. (AIL)

A 100% owned company, it makes investments in cabletelevision.


Punj Lloyd Inc. (PLI)

A 100% owned subsidiary. It is in the process of beingwound up.

Punj Lloyd (Malaysia) Sdn Bhd (PLM)

A 100% owned company, it is in the process of beingwound up.

Punj Lloyd Kazakhstan LLP (PLK)

We hold 100% stake in PLK, which is principally engagedin the construction and engineering business.


Spectra Punjab Ltd.

Established as an Internet Service Provider in Punjab andChandigarh, Spectra Punjab is 100% owned by PLL.

During the year 2005-06, the company has not carriedout any business activity.

Punj Lloyd Insulations Ltd. (PLIL)

It undertakes insulation business and is 100% owned by PLL.


Spectra Net Ltd. (SNL)

Engaged in cable television business, we along with oursubsidiary Atna Investments Ltd. have a 73.34% stake inSNL.


Spectranet Holdings Limited

It is 100% owned by Spectra Net Limited and is in thebusiness of investing in cable television business.

During the year 2005-06, the Company has not carriedout any business activity.

JOINT VENTURES

Thiruvananthapuram Road Dev. Co. Ltd. (TRDCL)

A Joint Venture between your Company and ConsolidatedTransportation Networks Limited, TRDCL has been set upas SPV to undertake the Thiruvnanthapuram city roadimprovement project on a BOT basis. The construction ofthe Road has been contracted to your Company.

PUNJ LLOYD LIMITED

40

Bistro Hospitality Pvt. Ltd. (BHPL)

We have during the year divested 4.9% of our holding inBHPL to Indo Pacific Estate Holdings Pvt. Ltd. During thecurrent financial year 2006-07, we have divested 10% ofour holdings in BHPL to Indo Pacific Investments (Mauritius)and also signed agreements for divestment of balanceholding in BHPL to TGI Fridays.

FINANCIAL REVIEW

(Rs. Millions)

Particulars 2005-06 2004-05

Net Sales/Income from 13,682.15 14,294.29Operations

Profit Before Interest, 1,748.13 1,894.35Depreciation & Tax (PBIDT)

Less: Interest 593.31 1,061.59

Gross Profit 1,154.82 832.76

Less: Depreciation 591.90 717.82

Profit Before Tax (PBT) 562.92 114.94

Less: Provision for Taxation 211.45 33.51including Deferred Tax Charge

Profit After Taxation (PAT) 351.47 81.43

Add: Profit Brought Forward 1,618.19 1,479.25

Transfer from Debenture 12.12 83.31Redemption Reserve

Transfer from Foreign Project 12.50 15.00Utilised Reserve

Surplus Available for 1,994.28 1,658.99appropriation

Net sales of the Company fell by 4.28 per cent from Rs. 14,294.29million in 2004-05 to Rs. 13,682.15 million in 2005-06. Profitbefore interest, depreciation and tax (PBIDT), declined fromRs. 1,894.35 million in 2004-05 to Rs. 1,748.13 million in2005-06.

During the year, Company carried out debt restructuring byrepaying some of its high cost debts and substituting some ofhigh cost debts by low cost debts. The total borrowing includingshort term loans declined from Rs. 5,698.16 million in 2004-05to Rs. 4,089.46 million in 2005-06. Interest and financial chargesdeclined from Rs. 1,061.59 million in 2004-05 to Rs. 593.31million in 2005-06. The profit before tax (PBT) increased by389.75 per cent from Rs. 114.94 million in 2004-05 to Rs. 562.92million in 2005-06.

Profit after tax (PAT) grew by 331.62 per cent from Rs. 81.43million in 2004-05 to Rs. 351.47 million in 2005-06.

41


Your Directors are pleased to present the 18th Annual Report for the year ended 31st March, 2006.

FINANCIAL RESULTSRs. million


Net Sales 13682.15 14294.29

Profit Before Interest, Depreciation & Tax (PBIDT) 1622.81 1570.74

Less: Interest 467.99 737.98

Gross Profit 1154.82 832.76

Less: Depreciation 591.90 717.82

Profit before Tax (PBT) 562.92 114.94

Less: Provision for Taxation including Deferred Tax Charge 211.45 33.51

Profit after Taxation (PAT) 351.47 81.43

Add: Profit Brought Forward 1618.19 1479.25

Transfer from Debenture Redemption Reserve 12.12 83.31

Transfer from Foreign Project Utilised Reserve 12.50 15.00

Surplus available for appropriation 1994.28 1658.99

Appropriation


Dividend on Equity Shares 52.22 18.24

Corporate Tax on Dividend 7.32 2.56

Amount transferred to General Reserve 40.00 20.00

Profit carried to Balance Sheet 1894.74 1618.19

Total 1994.28 1658.99

CAPITAL STRUCTURE

During the year under review, the share capital of your Companywas changed/altered as follows:

a) The authorised share capital of your Company was increasedfrom Rs. 500 million to Rs. 800 million, by creating newequity shares, in order to account for the issue of bonusshares as well as issue of shares under initial public offering.

b) 3,098,296 equity shares of Rs. 10 each were allotted onSeptember 30, 2005, on conversion of mandatoryconvertible preference shares.

c) 16,449,239 equity shares of Rs. 10 each were allotted onSeptember 30, 2005 as bonus shares (on pari-passu basis)in the ratio of 3:5.

Directors’ Report

d) 8,355,174 equity shares of Rs. 10 each were allotted onDecember 29, 2005, under the initial public offering ofthe Company, at a premium of Rs. 690 per share. The objectof this public issue was to purchase capital equipment,prepayment of debt and to get the shares of the Companylisted.

e) Consequent to the above the equity share capital of theCompany has increased from Rs. 243.20 million toRs. 522.19 million represented by 52,219,836 equity sharesof Rs. 10 each.

EQUITY DIVIDEND

Your Directors recommend a dividend of 10% on equity shares,i.e. Re. 1 per share.

PUNJ LLOYD LIMITED

42

OPERATIONS REVIEW

Net sales of the Company fell by 4.28 per cent from Rs. 14294.29million in financial year (FY) 2004-05 to Rs. 13682.15 million inFY 2005-06. As a consequence of delay in obtaining right of wayin road projects in Assam, the revenues and profitability haveshifted to the current year. Profit before interest, depreciationand tax (PBIDT), however, increased from Rs. 1570.74 million inFY 2004-05 to Rs. 1,622.81 million in FY 2005-06.

During the year, Company carried out debt restructuring byrepaying some of its high cost debts and substituting some ofhigh cost debts by low cost debts. The total borrowing includingshort term loans declined from Rs. 5698.16 million in FY 2004-05 to Rs. 4,089.46 million in FY 2005-06. Interest charges forthe year declined from Rs. 737.98 million in FY 2004-05 toRs. 467.99 million in FY 2005-06. The profit before tax (PBT)increased by 389.75 per cent from Rs. 114.94 million in FY 2004-05 to Rs. 562.92 million in FY 2005-06.

Profit after tax (PAT) grew by 331.62 per cent from Rs. 81.43million in FY 2004-05 to Rs. 351.47 million in FY 2005-06.

BUSINESS-WISE REVIEW

A detailed business wise review is being given in theManagement Discussion and Analysis section of the annualreport.

SUBSIDIARY COMPANIES AND JOINT VENTURES

Punj Lloyd Inc., a wholly owned subsidiary (WOS) in US andPunj Lloyd (Malaysia) Sdn. Bhd., WOS in Malaysia are in theprocess of being wound up.

After the closure of current financial year, the Company hasacquired 100% equity of Creighton Pte. Ltd., Singapore to makeit WOS of the Company. The name of the Company was laterchanged to Punj Lloyd Pte. Ltd.

On an application by the Company under section 212(8), theCentral Government has vide its letter No. 47/52/2006-CL-IIIdated February 22, 2006 exempted the Company from attachinga copy of Balance Sheet, Profit and Loss Account, and otherdocuments in respect of its subsidiaries for the year endedMarch 31, 2006.

A statement in respect of each of the subsidiary, giving the detailsof capital, reserves, total assets and liabilities, details ofinvestment, turnover, profit before taxation, provision fortaxation, profit after taxation and proposed dividend is attachedto the consolidated balance sheet.

Annual accounts of the subsidiary companies and the relateddetailed information will be made available to the holding andsubsidiary company investors, seeking such information. Copiesof the annual accounts of the subsidiary companies are availablefor inspection by any investor at the registered office of theCompany between 11.00 AM to 13.00 PM on all working days.

After the closure of the current financial year, the Company hasentered into a joint venture with His Royal Highness Prince KhalidBin Bandar Bin Sultan (KBS), Kingdom of Saudi Arabia. The jointlyowned company would be incorporated with the share capital

of 2 million Saudi Riyals in which the Company would hold49%, while the latter would hold 51% stake. The Joint VentureCompany will operate in engineering, procurement,construction, commissioning of onshore and offshore projectsfor the hydrocarbon sector, power, chemical, water and sewagesector, civil infrastructure and industrial projects in the Kingdomof Saudi Arabia.

ACQUISITION OF SEMBCORP ENGINEERS AND CONSTRUCTORSPTE. LTD. IN SINGAPORE

After the closure of the current financial year, your Companyhas through its wholly owned subsidiary in Singapore viz. PunjLloyd Pte. Ltd., acquired a majority stake in SembCorp Engineers& Constructors (SembE&C), a wholly-owned subsidiary ofSembCorp Industries (SCI) which is a leading utilities and marinegroup in Asia. Punj Lloyd has acquired 88% stake in SembE&Cat a consideration of Singapore Dollar 35.2 million. Theremaining 12% stake would be acquired by Punj Lloyd Pte. Ltd.on or before December 31, 2007.

SembE&C is a design-and-build engineering and constructionservice provider with core capabilities encompassing process &plant engineering, heavy civil engineering and building.SembE&C recorded revenue of over 1 billion Singapore dollarsfor year ending December 2005.

This acquisition is in line with your Company’s strategic intentto expand its geographical reach and portfolio enhancement incomplementary sectors. Punj Lloyd already has a formidablepresence in South Asia, Middle East, Asia Pacific, Caspian andAfrica. With this acquisition, its operations will expand to Europe,China besides Iran and other SE Asian markets, by leveragingthe opportunities through this acquisition.

This is an important milestone in your Company’s ability tooffer a complete portfolio of EPC solutions. With thisacquisition, Punj Lloyd will add engineering constructioncapabilities for airports, jetties, MRT/LRT, tunneling, sewageamongst others, to its capabilities in the infrastructure domain.In petrochemical sector, Punj Lloyd can leverage Simon-Carves’s(a wholly owned subsidiary of SembE&C) capabilities inengineering, procurement and construction of LDPE, PVC,Styrene and refinery processes domain. At present, Punj Lloydprovides engineering construction services in the oil and gassector for pipelines, tanks and terminals, process facilities, andin the infrastructure sector for construction of highways andexpressways, power plants and high specification buildingsbesides value added engineering and plant & facilitymaintenance.

This entity will contribute significantly to top-line of the Companyand will provide access to new geographies and enhance ourcompetitive positioning in existing markets. This acquisition willsubstantially enhance our Group’s capabilities to tap intocomplementary growth sectors like infrastructure andpetrochemicals. We will also greatly benefit from the experiencedand quality manpower, as this acquisition will add a very largenumber of experienced and qualified engineers to our existingtalent pool.

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HEALTH, SAFETY AND ENVIRONMENT

Punj Lloyd’s ultimate aim is to eliminate any chances of accidents,harm to people or damage to the environment through“Sustainable Development” policy. In addition PLL has alsoundertaken to protect and enhance the lives of the ethniccommunities at all their work sites. The Company understands,listens to, consults with and responds promptly to customers,communities and employees to bring about continuousimprovement. The Company believes that all accidents andoccupational health hazards are preventable through systematicanalysis and control of risks, awareness and training to stakeholders, employees, subcontractors and communities.

The employees work constantly and proactively towardseliminating or minimising the impact of hazards to people andenvironment. Most notable among the laurels bestowed on PunjLloyd across the globe for its sterling Health, Safety andEnvironment performance are:

5 star certificate from British Safety Council for BTC PipelineProject-Lot C, Turkey

86% HSE rating by TOTAL in Indonesia

Safety award for achievement of 4 million hours workedwithout a day away from work case at BTC Pipeline Project-Lot C, Turkey

Achievement of 2.5 million hours worked without a dayaway from work case at BTC Pipeline Project, Georgia

Citations of Best Contractor at Panipat hydrocracker unitproject, Delhi Metro project and Belgaum-MaharashtraRoad project in India

Greentech Environment Award: 2004-2005

DIRECTORS

During the year, Mr. Uday Punj, Mr. Tarwinder Singh, Mr. ManishKejriwal and Mr. Sandeep Bakshi resigned from the Board. YourDirectors place on record their deep sense of gratitude andappreciation for the valuable services rendered by them duringtheir tenure as Director of the Company.

Dr. Naresh Trehan and Mr. Luv Chhabra are retiring by rotationat the ensuing Annual General Meeting and being eligible offerthemselves for re-appointment. Brief resumes of these Directors,as required by Clause 49 of the Listing Agreement, are furnishedin the explanatory statement to the notice convening ensuingAnnual General Meeting.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the requirements of Section 217(2AA) of theCompanies Act, 1956, it is hereby confirmed:

that in the preparation of the annual accounts, theapplicable accounting standards have been followed alongwith proper explanation relating to material departures;

that the Directors have selected such accounting policiesand applied them consistently and made judgements and

estimates that were reasonable and prudent so as to give atrue and fair view of the state of affairs of the Company atthe end of the financial year and of the Profit or Loss of theCompany for the period under review;

that the Directors have taken proper and sufficient care forthe maintenance of adequate accounting records inaccordance with the provisions of this Act for safeguardingthe assets of the Company and for preventing and detectingfraud and other irregularities;

that the Directors have prepared the annual accounts forthe year ended 31st March, 2006 on a ‘going concern’ basis.

INITIAL PUBLIC OFFERING

Your Company made its initial public offering (IPO) of 9,172,937equity shares of Rs. 10 each at a premium of Rs. 690 each,including an offer for sale by existing shareholders of 817,763,equity shares through a book building process. The response tothe IPO was overwhelming. The issue was oversubscribedapproximately 38.68 times. Your Directors would like to takethis opportunity to thank all the investors for overwhelmingresponse to the IPO and the confidence reposed by them in ourbusiness prospects. The allotment was done as per the guidelinesprescribed by SEBI.

LISTING OF THE SHARES

Punj Lloyd’s shares are listed at Bombay Stock Exchange Ltd.and the National Stock Exchange of India Ltd. and the listingfee for the year 2006-07 has been paid to these stock exchanges.

FCCB ISSUE

Your Company has successfully issued Foreign CurrencyConvertible Bonds due 2011 (FCCB) for an aggregate value ofUS $ 125 million in April, 2006. The Bonds are convertible atany time between July 1, 2006 and March 24, 2011, by holdersinto fully paid equity shares of Rs. 10 each of the Company,representing one equity Share at an initial conversion price ofRs. 1362.94 per share with a fixed rate of exchange of Rs. 44.35= US$ 1. The conversion price is subject to adjustment in certaincircumstances. The Bonds may also be redeemed, in whole butnot in part, at the option of the Company at any time on orafter April 7, 2009 and prior to March 24, 2011, subject tosatisfaction of certain conditions. Unless previously converted,redeemed or purchased and cancelled, the Bonds will beredeemed on April 8, 2011 at 125.856% of their principalamount. The FCCBs are listed on Singapore Stock Exchange.The proceeds of the FCCB issue will be utilised primarily tofinance ongoing capital expenditures, repayment of internationaldebt, possible acquisitions outside India, investment in BOTprojects and any other use as may be permitted under applicablelaw or by the regulatory bodies, from time to time.

ESOPS

The details of the Punj Lloyd Employee Stock Option Plan, 2005are given below:-

PUNJ LLOYD LIMITED

44

Sl. Particulars 07.11.2005 10.05.2006No.

1. Total No. of options granted 643,489 154,2082. Pricing Formula Exercise price being Rs. 1,179.95

at 10% discount toIPO price i.e.Rs. 630/- per share.

3. Number of options vested Nil Nil4. Number of options exercised Nil Nil5. Total no. of shares arising as Nil Nil

a result of exercise of options6. Number of options lapsed Nil Nil7. Number of options forfeited Nil Nil8. Variation in terms of options None None9. Money realised by exercise None None

of options10 Total No. of options in force 643,489 Nil

as on 31st March, 200611 Grant to Senior Management

- Number of options 3,67,869 70,018

- Vesting period 4 Yrs. 4 Yrs.

CORPORATE GOVERNANCE

Report on Corporate Governance as stipulated under Clause 49of the Listing Agreements with the Stock Exchanges forms partof this Annual Report. Certificate of the auditors of the Companyregarding compliance of the conditions of corporate governanceas stipulated in Clause 49 of the Listing Agreement with thestock exchanges is attached to the report as Annexure 1.

MANAGEMENT DISCUSSION AND ANALYSIS

A detailed section of the Management Discussion and Analysisforms part of the Annual Report.

CONSOLIDATED FINANCIAL STATEMENT

In accordance with the accounting standard (AS-21) onconsolidated financial statements, your Directors are pleased toattach the consolidated financial statements, which form partof the Annual Report and Accounts.

ACCOUNT AND AUDIT

The Auditors, M/s. S. R. Batliboi & Co. retire at the conclusionof the 18th Annual General Meeting and being eligible, haveoffered themselves for re-appointment vide their letter datedJune 20, 2006. The observations of the Auditors are explainedwherever necessary in appropriate notes to Accounts.

INTERNAL CONTROL SYSTEM

The Company’s internal control system comprises audit andcompliance by in-house Internal Audit Division. The internalauditors independently evaluate the adequacy of internalcontrols and concurrently audit the majority of the transactionsin value terms. Independence of the audit and compliance is

ensured by the direct reporting of Internal Audit Division to theAudit Committee of the Board.

The Company has an Oracle based ERP system to ensure robustinternal controls in financial reporting system. During the year,the Company has also set up risk assessment and minimisationprocedures. These procedures shall be periodically reviewed toensure that the executive management controls risk throughmeans of a properly defined framework.

Clause 49 of the Listing Agreement requires the companies toestablish and maintain internal controls and evaluate theeffectiveness of the internal control system. Deficiencies in thedesign or operations of internal controls and the steps taken orproposed to be taken to rectify the deficiencies are to be disclosedto auditors and Audit Committee. For evaluating the effectivenessof internal control framework for financial reporting, theCompany is implementing Control Self Assessment (CSA) Tool.These tools assist the Company in defining, identifying,evaluating and testing controls for each group of accounts infinancial statement.

FIXED DEPOSITS

The Company has not accepted any fixed deposits from public,shareholders or employees during the year.

PERSONNEL

As required by the provisions of Section 217(2A) of theCompanies Act, 1956 read with Companies (Particulars ofEmployees), Rules, 1975, as amended, the names and otherparticulars of employees are set out in the Annexure 2 to theDirectors’ Report.

CONSUMPTION OF ENERGY AND FOREIGN EXCHANGE ANDOUTGO

The details as required under the Companies (Disclosure ofParticulars in Report of Board of Directors) Rules, 1988 are givenas Annexure 3 to the Directors’ Report.

ACKNOWLEDGEMENT

Your Directors acknowledge with gratitude the co-operation andassistance received from various agencies of the Central andState Governments, financial institutions and banks. YourDirectors thank the shareholders for their continued support.Your Directors also place on record their appreciation of thecontribution made by employees at all levels.

For and behalf of the Board

Sd/-

ATUL PUNJChairman & Managing` Director

Place : New DelhiDate : June 27, 2006

45


PHILOSOPHY OF THE COMPANY ON CORPORATE GOVERNANCE

Punj Lloyd Ltd. (PLL) is committed to adoption of best governance practices, their adherence in true spirit and conduct its affairs ina manner, which is transparent, clear and evident to those having dealings with or having a stake in the Company. PLL lays strongemphasis on business ethics in all its dealings. In line with PLL’s vision and long-term business objectives, all major corporatedecisions are taken by the Company’s professional Board in conjunction with a competent management team, keeping in view thebest interest of all its stakeholders.

The equity shares of the Company are listed on Bombay Stock Exchange Ltd. (BSE) and National Stock Exchange of India Ltd. (NSE)w.e.f. January 6, 2006. The Company has complied with all the requirements of clause 49 of the Listing Agreement after the listingof its shares.

BOARD OF DIRECTORS

COMPOSITION OF THE BOARD

As on March 31, 2006, PLL’s Board consisted of eight Directors. Table 1 gives the details of the Board as on March 31, 2006.

Table 1: Composition of the Board of Directors of PLL

Sl. Name of Director Category of Director No. of other Directorships * No. of Board LevelNo. Committee where

chairperson or member

Chairperson Member

1. Mr. Atul Punj Executive, Promoter 6 1 2

2. Mr. Vimal Kishore Kaushik Executive 6 1 1

3. Mr. Luv Chhabra Executive 1 – 1

4. Mr. Karamjit Singh Butalia Non Executive, 1 – 2Non Independent

5. Mr. Alain Aboudharam Independent # Nil – –

6. Mr. Keith Nicholas Henry Independent # Nil – –

7. Dr. Naresh Trehan Independent # 6 2 1

8. Mr. Rajan Jetley Independent # 1 – 2

* Directorship in Foreign Companies and the Indian Pvt. Ltd. companies is not included.# Independent Director, as per Clause 49 of the Listing Agreement, means a non-executive director of the Company who:

a. apart from receiving director’s remuneration, does not have any material pecuniary relationships or transactions with thecompany, its promoters, its directors, its senior management or its holding company, its subsidiaries and associates whichmay affect independence of the director;

b. is not related to promoters or persons occupying management positions at the board level or at one level below the board;

c. has not been an executive of the Company in the immediately preceding three financial years;

d. is not a partner or an executive or was not partner or an executive during the preceding three years, of any of the following:

i. the statutory audit firm or the internal audit firm that is associated with the Company, and

ii. the legal firm(s) and consulting firm(s) that have a material association with the Company.

e. is not a material supplier, service provider or customer or a lessor or lessee of the Company, which may affect independenceof the director; and

f. is not a substantial shareholder of the Company i.e. owning two percent or more of the block of voting shares.

Corporate GovernanceAnnexure 1

PUNJ LLOYD LIMITED

46

During the year, Mr. Uday Punj, Mr. Tarwinder Singh, Mr. ManishKejriwal, Mr. Sandeep Bakshi, Mr. P K Gupta and Mr. V K Sudresigned from the Board.

The Company does not have any pecuniary relationship withany non-executive or independent Director except for paymentof sitting fee of Rs. 10,000 per meeting to the Directors forattending the Board meetings. No sitting fee is paid for attendingthe meetings of Committees of Directors.

Subject to the approval by Central Government, the Board ofDirectors in their meeting held on February 28, 2006 and theshareholders in the Extra-Ordinary General Meeting held onApril 3, 2006 approved a payment of a sum not exceeding poundsterling 4,500 p.m. to Mr. Keith N. Henry.

NUMBER OF BOARD MEETINGS

During 2005-06, the Board of Directors met 5 times on June 29,2005, July 19, 2005, December 20, 2005, February28, 2006, and March 20, 2006. After listing of the shares of theCompany w.e.f. January 6, 2006, the gap between any two Boardmeetings did not exceed four months. Table 2 gives the details.

Table 2: Board Meeting Attendance Record of the Directorsin 2005-06

Name of Director Board Meetings Attendedmeetings attended last

held AGM?

Mr. Atul Punj 5 4 YesMr. Vimal Kishore Kaushik 5 4 YesMr. Luv Chhabra 5 4 YesMr. Karamjit Singh Butalia 5 5* NoMr. Alain Aboudharam 5 2 NoMr. Keith Nicholas Henry 5 3 NoDr. Naresh Trehan 5 2 NoMr. Rajan Jetley 5 2 No

* One meeting was attended by his alternate.

Name of Director Salary Sitting Perquisites Deferred Commission Totalfees Benefits (PF and (Provided)

superannuation)

Mr. Atul Punj – – – – – –

Mr. Vimal Kishore Kaushik 18,00,000 – 23,82,509 4,86,000 11,00,000 57,68,509

Mr. Luv Chhabra 17,31,000 – 23,27,393 4,67,370 11,00,000 56,25,763

Mr. Karamjit Singh Butalia – 50,000* – – – 50,000

Mr. Alain Aboudharam – 20,000 – – – 20,000

Mr. Keith Nicholas Henry – 30,000 – – – 30,000

Dr. Naresh Trehan – 20,000 – – – 20,000

Mr. Rajan Jetley – 20,000 – – – 20,000* Out of this, Sitting fee of Rs. 10,000 for attending one of the meeting of the Board of Directors was paid to alternate director to Mr. Karamjit

Singh Butalia.

REMUNERATION OF DIRECTORS

Table 3: Remuneration Paid or Payable to Directors during 2005-06 Amount in Rs.

SHAREHOLDING OF NON-EXECUTIVE DIRECTORS OF THE

COMPANY

Name of Director No. of shares held

Mr. Karamjit Singh Butalia –

Mr. Alain Aboudharam –

Mr. Keith Nicholas Henry –

Dr. Naresh Trehan 800

Mr. Rajan Jetley 96

During the year, 40,000 and 27,000 stock options have been

granted to Mr. V. K. Kaushik, Jt. Managing Director and COO

and Mr. Luv Chhabra, Director (Finance and Corporate Affairs)

of the Company at discount of 10% to the issue price in the

Public issue. The options will vest in the ratio of 10%, 20%,

30% and 40% at the end of one, two, three and four years from

the date of grant respectively. The Stock Options so granted

can be exercised within a period of three years from the date of

vesting.

47


INFORMATION SUPPLIED TO THE BOARD

Clause 49 of the Listing Agreement mandates that the followinginformation must be supplied to the Board of Directors:

Annual operating plans & budgets and any update thereof.

Capital budgets and any updates thereof.

Quarterly results for the Company and operating divisionsand business segments.

Minutes of the meetings of the audit committee and othercommittees of the Board.

Information on recruitment and remuneration of seniorofficers just below the level of Board, including theappointment or removal of Chief Financial Officer &Company Secretary.

Materially important showcause, demand, prosecutionnotices and penalty notices.

Fatal or serious accidents, dangerous occurrences, anymaterial effluent or pollution problems.

Any material default in financial obligations to and by theCompany, or substantial non -payment for goods sold bythe Company.

Any issue, which involves possible public or product liabilityclaims of substantial nature, including any judgement ororder which, may have passed strictures on the conduct ofthe Company or taken an adverse view regarding anotherenterprise that can have negative implications on theCompany.

Details of any joint venture or collaboration agreement.

Transactions that involve substantial payment towardsgoodwill, brand equity or intellectual property.

Significant labour problems and their proposed solutions.Any significant development in human resources/industrialrelations front like signing of wage agreement,implementation of voluntary retirement scheme, etc.

Sale of material nature of investments, subsidiaries, assets,which is not in the normal course of business.

Quarterly details of foreign exchange exposures and thesteps taken by management to limit the risks of adverseexchange rate movement, if material.

Non-compliance of any regulatory, statutory nature orlisting requirements and shareholders service such as non-payment of dividend, delay in share transfer, etc.

The Board of PLL is routinely presented with all such informationapplicable and materially significant. These are submitted eitheras a part of the agenda papers well in advance of the Boardmeetings or tabled in the course of the Board meeting.

COMMITTEES OF THE BOARD

a) AUDIT COMMITTEE

The Audit Committee of the Company comprises of twoindependent Directors and one non-executive and non-independent Director. The constitution of the Committee

meets the requirements of Section 292A of the CompaniesAct, 1956, as well as Clause 49 of the Listing Agreement.The members are:

Dr. Naresh Trehan, Chairman (Independent Director)

Mr. Karamjit Singh Butalia (Non Executive and nonindependent Director)

Mr. Rajan Jetley (Independent Director)

The terms of reference of PLL’s Audit Committee are:

Oversight of the Company’s financial reporting processand the disclosure of its financial information to ensurethat the financial statement is correct, sufficient andcredible.

Recommending the appointment and removal ofstatutory auditor, fixation of audit fee and also approvalfor payment for any other services.

Reviewing with management the quarterly/annualfinancial statements before submission to the Board,focussing primarily on the following :

Matters required to be included in the Directors’Responsibility Statement

Any change in accounting policies and practices.

Major accounting entries based on exercise ofjudgement by management.

Qualification in the draft audit report.

Significant adjustments arising out of audit.

Compliance with accounting standards.

Compliance with listing and other legalrequirements relating to financial statements

Qualifications in draft audit report.

Compliance with legal requirements concerningfinancial statements.

Any related party transaction, i.e., transaction of theCompany of material nature, with promoters or themanagement, their subsidiaries or relatives, etc., thatmay have potential conflict with the interest ofCompany at large.

Reviewing with the management, external and internalauditors, the adequacy of internal control systems.

Reviewing the adequacy of internal audit function,including the structure of the internal auditdepartment, staffing and seniority of the officialheading the department, reporting structure coverageand frequency of internal audit.

Discussion with internal auditors any significantfindings and follow up thereon.

Reviewing the findings of any internal investigationsby the internal auditors into matters where there is

PUNJ LLOYD LIMITED

48

suspected fraud or irregularity or a failure of internalcontrol systems of a material nature and reporting thematter to the Board.

Discussion with external auditors before the auditcommences, nature and scope of audit as well as havepost audit discussion to ascertain any area of concern.

Reviewing the Company’s financial and riskmanagement policies.

To look into the reasons for substantial defaults in thepayment to the depositors, debenture holders,shareholders (in case of non-payment of declareddividends) and creditors.

During 2005-06, the Audit Committee of PLL met three timesi.e. on July 19, 2005, December 20, 2005 and March 20, 2006.Table 4 gives the attendance record of Directors who aremembers of the Audit Committee.

Table 4: Attendance Record of Audit Committee Meetingsduring 2005-06

Name of Director Number of Number ofmeetings held meetingsunder tenure attended

Dr. Naresh Trehan 3 3

Mr. Karamjit Singh Butalia 3 3

Mr. Rajan Jetley 3 2

b) REMUNERATION COMMITTEE

The terms of reference of PLL’s Remuneration Committeeamong others are to decide the amount of salary, perquisitesand commission to be paid to the Directors (within theoverall ceiling fixed by the shareholders). The Committeeconsists of two independent and one non-executive andnon independent Director, who are:

Dr. Naresh Trehan;

Mr. Rajan Jetley; and

Mr. Karamjit Singh Butalia

During 2005-06, the Remuneration Committee met twice onApril 22, 2005 and February 28, 2006. Table 5 gives theattendance record of Directors who are members of theRemuneration Committee.

Table 5: Attendance Record of Managerial RemunerationCommittee Meetings during 2005-06

Name of Director Number of Number ofmeetings held meetingsunder tenure attended

Dr. Naresh Trehan * Nil Nil

Mr. Karamjit Singh Butalia 2 2

Mr. Rajan Jetley 2 1

* Inducted as member of Managerial Remuneration Committee w.e.f.February 28, 2006.

Criteria for making payment to Non-executive Directors ofthe Company:

During the financial year ended March 31, 2006, no paymentwas made to any Non-executive Director of the Company, exceptsitting fees for attending the meeting of Board of Directors.

However, subject to the approval of Central Government, theshareholders had approved the payment of remuneration toMr. Keith Henry, Non-executive Director a sum not exceedingpound Sterling 4,500. The criteria for making payment to Mr.Keith Henry has been his vast professional experience in thefield of gas, oil and other construction areas.

C) SHAREHOLDERS’/INVESTORS’ GRIEVANCE COMMITTEE

The terms of reference of the Committee are:

To approve the transfer/transmission of securities of theCompany and oversee and review all matters connectedwith the transfer/transmission of securities of the Company.

To issue new certificates of securities of the Company onsplit up or consolidation and issue of duplicate certificatesof securities of the Company against lost/torn/mutilatedcertificates etc.

To issue new certificates of securities in case of change indenomination of securities of the Company.

To decide on any matter relating to the securities of theCompany whether in physical or dematerialised form.

To formulate and implement the Company’s Code ofConduct for prohibition of Insider Trading in pursuance ofSEBI (Prohibition of Insider Trading) Regulations, 1992 andreview and monitor its compliance.

To appoint and/or remove Compliance Officer(s) of theCompany for complying with the Requirements of the SEBI(Prohibition of Insider Trading) Regulations, 1992 and theListing Agreement(s) to be entered into with various StockExchange(s).

To appoint and/or remove the Registrars and Transfer Agent(s)of the Company and for that purpose to authorise any officer(s)of the Company to enter into Tripartite Agreement(s) withthe Registrars and Transfer Agent(s) and Depository(s).

To review the performance of the Registrars and TransferAgents and recommend measures for improvement in thequality of investor services.

To look into the redressal of shareholders and investorscomplaints of any nature including but not limited to thefollowing:

Transfer of securitiesNon-receipt of Balance SheetNon-receipt of declared dividendsChange of address of the shareholdersNon-receipt of shares in physical or demat formShareholders’ complaints of other nature forwardedto the Company by Stock Exchanges/SEBICorrection/change of the bank mandate of refundorders

49


Other complaints of similar nature received from theshareholders.

Any other matters to be delegated under any applicablelaw or regulation or rules applicable to the Company.

To delegate all or any of the powers mentioned above toany officer(s) of the Company and/or to the Registrar andShare Transfer Agents appointed/to be appointed by theCompany.

The three-member Committee is headed by Dr. Naresh Trehan,an Independent Director and consists of the following members:

Dr. Naresh Trehan, Independent Director

Mr. Atul Punj, Executive Director

Mr. Luv Chhabra, Executive Director

Mr. Dinesh Thairani, Company Secretary, is the ComplianceOfficer.

The status of Shareholders/Investors Grievances is regularlycirculated to the members of the Committee for review. Duringthe period the Committee passed 4 resolutions by circulation.

As on March 31, 2006, no Investor complaints were pendingwith the Registrar and Share Transfer Agent.

Table 7 gives the data on the shareholder/ Investor complaintsreceived and redressed, during the year 2005-06.

Table 7: Shareholder and Investor Complaints Received andRedressed, during 2005 - 06

Total Complaints Total complaints Pending as onreceived redressed 31.03.2006

627 627 Nil

Code of Conduct for Directors and Sr. ManagementPersonnel:

The Board at its meeting held on December 20, 2005 hadadopted the Code of Conduct for Directors and Sr. ManagementPersonnel. The Code is applicable to both Executive and Nonexecutive Directors as well as Sr. Management. A copy of thecode has been put on the Company’s websitewww.punjlloyd.com. The code has been circulated to all themembers of Board and Sr. Management.

A declaration signed by Chairman and Managing Director isgiven below:

I hereby confirm that:

The Company has obtained from all the members of the Boardand Sr. Management, affirmation that they have complied withthe Code of Conduct for Directors and Sr. ManagementPersonnel in respect of the financial year 2005-06.

Sd/-ATUL PUNJChairman and Managing Director

MANAGEMENT

MANAGEMENT DISCUSSION AND ANALYSIS

This is given as a separate chapter in this Annual Report.

DISCLOSURE REQUIREMENTS

Disclosures on materially significant related partytransactions are given in the Balance Sheet at point no. 4in the Notes to Accounts.

During last three years, there has been no non complianceby the Company and no penalties, strictures are imposedon the Company by the Stock Exchanges, or SEBI or anystatutory authority on any matter related to capital markets.

The Company has complied with all the mandatoryrequirements of clause 49 of the listing agreement and ithas not adopted any of the non mandatory requirementsexcept setting up of a remuneration committee.

The treatment provided in respect of AS-9 has beenexplained in the Notes to Account at Point No. 13 at PageNo. 90 of the Annual Report.

SHAREHOLDERS

Re-appointment of Directors

The following Directors are retiring by rotation and, beingeligible, offer themselves for reappointment:

A. Dr. Naresh Trehan

Directorship in other Public Companies and CommitteeMembership

Directorship in other Public Companies CommitteeMembership

Dabur Pharma Ltd. NilEscorts Hospital and Research Centre Limited NilEscorts Heart and Superspeciality Hospital Ltd. NilJubilant Organosys Ltd. NilEscorts Heart & Super Speciality Institute Ltd. NilShrumps Real Estates Limited Nil

Dr. Naresh Trehan is Chairman of Audit and Shareholders/Investors Grievance Committee and member of RemunerationCommittee of PLL and holds 800 shares in the Company.

Brief resume

Dr. Naresh Kumar Trehan, 59, an Indian national, is anindependent Director on the Board of the Company. Dr. Trehanis a renowned cardiovascular surgeon. He graduated andcompleted his internship from King George Medical Collegeand subsequently obtained a diploma from the American Boardof Surgery and the American Board of Cardiothoracic Surgeryin the United States. At present, Dr. Trehan is the ExecutiveDirector and Chief Cardiovascular Surgeon of the Escorts HeartInstitute and Research Centre and has held this position since1988. Dr. Trehan has received many prestigious awards,including the Padma Shree Award and the Padma BhushanAward, presented by the Government of India.

PUNJ LLOYD LIMITED

50

B. Mr. Luv Chhabra

Directorship in other Public Companies and CommitteeMembership

Directorship in other Public Companies CommitteeMembership

Thiruvananthapuram Road Development NilCompany Limited

Mr. Luv Chhabra is member of Shareholders/Investors GrievanceCommittee of PLL and holds 16 shares in the Company.

Brief resume

Mr. Luv Chhabra, 49, an Indian national, is the Director, Financeand Corporate Affairs and a whole-time Director on the Board. Mr.Chhabra holds a Bachelors degree in engineering from the IndianInstitute of Technology, Delhi and a Masters degree in businessadministration from the Faculty of Management Studies, DelhiUniversity. He joined the Company on July 1, 2001 and has over 28years of experience in the oil and gas and construction sectors. Priorto joining the Company, Mr. Chhabra was Managing Director, KECInternational Limited, Managing Director, Petronet India Limited,Deputy Managing Director, Bharat Shell Limited and ExecutiveDirector, Bharat Petroleum Corporation Limited. He has also been adirector on the boards of Bharat Oman Refineries Limited, NumaligarhRefineries Limited, Petronet CCK Limited, Spectra Net Limited,Petronet VK Limited and Petronet MHB Limited.

MEANS OF COMMUNICATION WITH SHAREHOLDERS

As per the requirements of Listing Agreement, quarterly andannual results of PLL would be published in two major nationaldailies. In addition, these results would also be posted on thewebsite of the Company, whose address is www.punjlloyd.com.The website also contains other public domain informationregarding PLL.

During 2005-06, PLL has not made any formal presentations toinstitutional investors or analysts. However, Company had aconference call with certain institutional investors and analysts.Transcripts of the same have been posted on the website.

LAST THREE ANNUAL GENERAL BODY MEETINGS

The details of the last three AGMs are given in Table 8.

Table 8: Last three AGMs of the Company

Year Location Date Time/A.M. No. ofSpecialresolutionspassed

2002-03 Punj Lloyd House, 18.12.2003 11.30 117-18, Nehru Place,New Delhi 110 019



POSTAL BALLOT

During the year, no resolution was passed through Postal Ballotand no resolution is proposed to be passed through postal ballot.

GENERAL SHAREHOLDER INFORMATION

18TH ANNUAL GENERAL MEETING

Date : Friday, September 22, 2006

Time : 11.30 A.M.

Venue : FICCI Golden Jubilee Auditorium,Federation House, Tansen Marg,New Delhi 110 001

TENTATIVE FINANCIAL CALENDAR FOR RESULTS, 2006-07

The Financial year of the Company is from 1st April to 31stMarch. The tentative schedule of financial results is as under:

First Quarter : Last Week of July, 2006

Second Quarter : Last week of October, 2006

Third Quarter : Last week of January, 2007

Fourth Quarter and : Last week of June, 2007Annual

BOOK CLOSURE DATE

The Share Transfer Register of PLL shall remain closed from Friday,15th Day of September, 2006 to Friday, 22nd Day of September,2006 (both days inclusive).

DIVIDEND PAYMENT DATE

Dividend of Rupee one per equity share will be paid within thestipulated period, after its declaration by the members at theAGM.

LISTING ON STOCK EXCHANGES IN INDIA

PLL’s shares are listed on Bombay Stock Exchange Ltd. and theNational Stock Exchange of India Ltd. The Company has paidlisting fees to both BSE and NSE for the year 2006-07. The StockCodes for the shares of the Company are:

BSE : 532693

NSE : PUNJLLOYD

STOCK MARKET DATA

Table 1 gives the monthly high and low quotations as well asthe volume of shares traded at BSE and NSE during 2005-06.

Table 1: Monthly Highs and Lows and Volumes Traded atthe BSE and NSE, 2005-06

Year BSE NSE

2005-06* High Low No. of High Low No. of(Rs.) (Rs.) Shares (Rs.) (Rs.) Shares

January 1,148.85 988.00 9,200,528 1,150.00 956.00 18,549,982

February 1,204.00 1,058.00 2,038,599 1,205.00 1,058.00 4,205,412

March 1,152.25 1,025.10 1,888,094 1,151.60 1,026.55 4,284,641

* The Share of the Company got listed on BSE and NSE on January 6, 2006.

51


PUNJ LLOYD LTD.

PUNJ LLOYD LTD.

Chart 1: Share prices of PLL Versus BSE Sensex for theyear ended 31st March, 2006

Note: Both Sensex and PLL share prices are indexed to 100 as on 6th January2006

Chart 2: Share prices of PLL Versus NSE Nifty for the yearended 31st March, 2006

Note: Both Nifty and PLL share prices are indexed to 100 as on 6th January 2006

REGISTRAR AND SHARE TRANSFER AGENTS

M/s Karvy Computershare Pvt. Ltd., Hyderabad are the Registrarand Share Transfer Agent of the Company for handling bothelectronic and physical shares.

SHARE TRANSFER SYSTEM IN PHYSICAL MODE

Share certificates sent for transfer are received at the RegisteredOffice of the Company or the office of Karvy ComputersharePvt. Ltd. All valid transfer requests are processed.

The Shareholders/Investors Grievance Committee shall meet toapprove valid transfer requests at regular intervals. After transfer,the physical shares are sent to the shareholders.

No shares were transferred in physical form during the periodfrom January 6, 2006 to March 31, 2006.

DEPOSITORY SYSTEM

Shareholders can trade in the Company’s shares only in electronicform. The process for getting the shares dematerialised is asfollows:

Shareholder submits the shares certificate along withDematerialisation Request Form (DRF) to DepositoryParticipant (DP).

DP processes the DRF and generates a uniqueDematerialisation Request No.

DP forwards the DRF and share certificates to the Registrarand Share Transfer Agent (RTA).

RTA after processing the DRF confirms or rejects the requestto Depositories.

If confirmed by the RTA, depositories give credit toshareholder in his account maintained with DP.

This process takes approximately 10-15 days from the date ofreceipt of DRF.

As the trading in shares of the Company can be done only inelectronic form, it is advisable that the shareholders who haveshares in physical form get their shares dematerialised.

DEMATERIALISATION OF SHARES AS ON MARCH 31, 2006

There were 93,827 shareholders holding 42,756,794 shares inelectronic form. This constitutes 81.88 % of the total paid-upshare capital of the Company.

DISTRIBUTION OF SHAREHOLDING AS ON MARCH 31, 2006

Table 2 gives the distribution of shares according to shareholdingclass, while Table 3 gives the distribution of shareholding byownership.

Table 2: Pattern of shareholding by share class as onMarch 31, 2006

No. of equity No. of % of No. of % ofshares held share- share- shares share-

holders holders holding

1-500 93,454 99.56 1,472,231 2.82

501-1000 141 0.15 110,076 0.21

1001-2000 74 0.08 106,991 0.21

2001-3000 26 0.03 67,265 0.13

3001-4000 16 0.02 56,822 0.11

4001-5000 20 0.02 91,397 0.17

5001-10000 37 0.04 285,053 0.54

10001 and above 102 0.10 50,030,001 95.81

Total 93870 100.00 52,219,836 100.00

PUNJ LLOYD LIMITED

52

Table 3: Pattern of shareholding by ownership as onMarch 31, 2006

Category Shareholding

No. of Share-shares held holding %

Promoters 28,618,899 54.80

Mutual Funds & UTI 933,927 1.79

Banks, Financial Institutions,Insurance Companies 349,067 0.67

Foreign Institutional Investors 9,786,623 18.74

Private Corporate Bodies 2,038,632 3.90

Indian Public 2,799,866 5.36

NRIs/OCBs 260,872 0.50

Others (Including shares in transit) 7,431,950 14.24

Total 52,219,836 100.00

OUTSTANDING GDRS/ADRS/WARRANTS OR ANYCONVERTIBLE INSTRUMENTS, THEIR CONVERSION DATESAND LIKELY IMPACT ON EQUITY

The Company successfully issued Foreign Currency ConvertibleBonds due 2011 (FCCB) for an aggregate value of US $ 125million. The Bonds are convertible at any time between July 1,

2006 and March 24, 2011, by holders into fully paid equityshares of Rs. 10 each of the Company, representing one equityShare at an initial conversion price of Rs. 1362.94 per sharewith a fixed rate of exchange of Rs. 44.35 = US$ 1. Theconversion price is subject to adjustment in certaincircumstances. The Bonds may also be redeemed, in whole butnot in part, at the option of the Company at any time on orafter April 7, 2009 and prior to March 24, 2011, subject tosatisfaction of certain conditions. Unless previously converted,redeemed or purchased and cancelled, the Bonds will beredeemed on April 8, 2011 at 125.856% of their principalamount. The FCCBs are listed on Singapore Stock Exchange.The proceeds of the FCCB issue will be utilised primarily tofinance ongoing capital expenditures, repayment of internationaldebt, possible acquisitions outside India, investment in BOTprojects and any other use as may be permitted under applicablelaw or by the regulatory bodies, from time to time.

SITE LOCATIONS

The Company is engaged in providing integrated design,engineering, procurement, construction and project managementservices for energy and infrastructure sector. The projects areexecuted at the sites provided by the clients. The Company doesnot have any manufacturing facilities except a Central workshopsituated at Banmore Industrial Area, Banmore Dist., Morena,Madhya Pradesh 476 444 for carrying out repair andmaintenance of equipment.

ADDRESS FOR CORRESPONDENCE

Company – Regd. Office Registrar & Share Transfer Agent

Dinesh Thairani Mr. K. S. Reddy

Company Secretary Sr. Manager

Punj Lloyd Limited Karvy Computershare Pvt. Limited

Punj Lloyd House, Karvy House, 46, Avenue 4,

17-18, Nehru Place, Street No. 1, Banjara Hills

New Delhi 110 019, India Hyderabad 500 034

Tel. No. +91-011-26200492 Tel. No. +91-040-23420816

Fax No. +91-011-26200111 Fax No. +91-040-23420814

e-mail: [email protected] e-mail: [email protected]

53


AUDITORS’ CERTIFICATE ON CORPORATE GOVERNANCE

ToThe Members of Punj Lloyd Limited

We have examined the compliance of conditions of corporate governance by Punj Lloyd Limited for the year ended on March 31,2006, as stipulated in clause 49 of the Listing Agreement of the said Company with stock exchanges.

The compliance of conditions of corporate governance is the responsibility of the management. Our examination was limited toprocedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of the CorporateGovernance. 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 explanations given to us, we certify that the Company hascomplied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement.

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

For S. R. BATLIBOI & CO.Chartered Accountants

Sd/-per RAJ AGRAWALPartnerMembership No. 82028


PUNJ LLOYD LIMITED

54

Annexure 2PARTICULARS OF EMPLOYEES REQUIRED UNDER SECTION 217(2A) OF THE COMPANIES ACT, 1956 READ WITH THE COMPANIES (PARTICULARSOF EMPLOYEES) RULES, 1975 AND FORMING PART OF THE DIRECTORS’ REPORT FOR THE YEAR ENDED MARCH 31, 2006

Sl. Name Designation Remuneration Qualifications Experience Date of Age Last employmentNo. and nature of duties (Rs.) (Yrs.) commencement (Yrs.) held before joining

of employment the Company

Employed throughout the year:

1. V. K. Kaushik Jt. Managing Director& COO 48,53,997 B.E. (Elec.) 37 01.11.2003 59 Punj Group

2. Luv Chhabra Director Finance &Corporate Affairs 52,79,388 B. Tech, MBA 29 01.07.2001 50 KEC International Ltd.

Employed for part of the year: Remuneration per month

1. Uday Punj * Whole Time Director 3,61,140 B. Com. (Hons) 26 06.08.1997 44 Business

2. Anil Aggarwal Chief Financial Officer 3,89,221 CA, MBA 24 09.01.2006 48 Bunge India Pvt. Ltd.

3 P. K. Gandhi President (HRD) 3,67,376 PGD 24 30.09.2005 52 Bechtel Ltd.

4. Tarwinder Singh * President 2,99,592 B.E./M.E. 32 09.08.2004 55 Dodsal Ltd.

5. P. K. Gupta* Whole Time Director 4,09,467 B.E. 32 06.01.1989 54 Simon Carves IndiaLtd.

6. V. K. Sud * Whole Time Director 2,71,863 B.E. 42 18.10.1995 67 Triune Proj. Ltd.

7. K. Raghunath * E.D. 2,16,477 MSW 24 17.03.2003 47 Reliance Industries Ltd.

* Ceased to be employee of the Company

NOTES:

1. Remuneration includes salary, allowances, commission, taxable perquisites, Company’s contribution to provident fund and superannuationfund.

2. The above employees are/were whole time employees of the Company.

3. The conditions of employment of the Chairman & Managing Director and other Whole Time Directors and employees are contractual.

4. None of the Employees is relative of any Director except Mr. Uday Punj, Whole Time Director (ceased to be Director w.e.f. 30.12.2005), whois relative of Mr. Atul Punj, Chairman & Managing Director. Mr. Atul Punj, Chairman and Managing Director is drawing no remuneration fromthe Company. Mr. Uday Punj alongwith his spouse and dependent children hold 7.71% of paid up equity share capital of the Company.

For and on behalf of the Board

Sd/-


Date : June 27, 2006

55


A. CONSERVATION OF ENERGY

The Company is in the construction business andconsequently, the provisions of Section 217 (1)(e) of theCompanies Act 1956, in respect of total energyconsumption and energy consumption per unit ofproduction has not been provided as these particulars donot apply to the Company.

B. FOREIGN EXCHANGE EARNINGS AND OUTGO

(a) Activities relating to export initiatives taken to increaseexports, development of new export markets for productand services and export plans:

During the year, the Company has set up a representativeoffice in Moscow, Russia and has signed Joint VentureAgreement with His Royal Highness Prince Khalid Bin BandarBin Sultan for setting up a Joint Venture Company underthe laws of the Kingdom of Saudi Arabia. The Company isconstantly making endeavours to increase its exportrevenues.

After the closure of the current financial year, your Companyhas through its wholly owned subsidiary in Singapore viz.Punj Lloyd Pte. Ltd., acquired a majority stake in SembCorpEngineers & Constructors (SembE&C), a wholly-ownedsubsidiary of SembCorp Industries (SCI) which is a leadingutilities and marine group in Asia. Punj Lloyd has acquired88% stake in SembE&C at a consideration of SingaporeDollar 35.2 million. SembE&C is a design-and-buildengineering and construction service provider with corecapabilities encompassing process & plant engineering,heavy civil engineering and building. SembE&C recorded

revenue of over 1 billion Singapore dollars for year endingDecember 2005.

(b) Total Foreign Exchange Used and Earned

Used (Rs. In ‘000)

Project Expenses 323,659

Foreign Branch Expenses 3,679,529

Travelling (on cash basis) 27,166

Bandwidth charges (on cash basis) 35,602

Value of imports calculated on CIF 485,354basis – stores, spares and other materials

Value of imports calculated on CIF 445,811basis – Capital Goods

Interest 3,132

Others (on cash basis) 22,756

Earned

Contract Revenues 5,010,012

Export at FOB Value 543

Management Fees 47,318

Interest Received 11,239

Insurance Claims 38,263

Sales of Spares, Stores and 6,048Consumables

Others 13,635

Annexure 3

PARTICULARS REQUIRED UNDER THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS)RULES, 1988.

PUNJ LLOYD LIMITED

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PUNJ LLOYD LIMITED

58

To

The Members of Punj Lloyd Limited

1 We have audited the attached Balance Sheet of Punj LloydLimited as at March 31, 2006 and also the Profit and LossAccount and the Cash Flow Statement for the year endedon that date annexed thereto in which are incorporatedthe returns from Georgia, Oman, Abu Dhabi, Indonesiaand Singapore Branches and an Unincorporated JointVenture in Turkey audited by other auditors. These financialstatements are the responsibility of the Company’smanagement. Our responsibility is to express an opinionon these financial statements based on our audit.

2 We conducted our audit in accordance with auditingstandards generally accepted in India. Those Standardsrequire that we plan and perform the audit to obtainreasonable assurance about whether the financialstatements are free of material misstatement. An auditincludes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements.An audit also includes assessing the accounting principlesused and significant estimates made by management, aswell as evaluating the overall financial statementpresentation. We believe that our audit provides areasonable basis for our opinion.

3 As required by the Companies (Auditor’s Report) Order,2003 (as amended) issued by the Central Government ofIndia in terms of sub-section (4A) of Section 227 of theCompanies Act, 1956, we enclose in the Annexure astatement on the matters specified in paragraphs 4 and 5of the said Order.

4 Further to our comments in the Annexure referred to above,we report that:

i We have obtained all the information andexplanations, which to the best of our knowledge andbelief were necessary for the purposes of our audit;

ii In our opinion, proper books of account as requiredby law have been kept by the Company so far asappears from our examination of those books andproper returns adequate for the purposes of our audithave been received from branches and unincorporatedjoint venture not visited by us. The branch/jointventure auditors’ report(s) have been forwarded to usand have been appropriately dealt with;

iii The Balance Sheet, Profit and Loss Account and CashFlow Statement dealt with by this report are inagreement with the books of account and with theaudited returns received from the branches/jointventure;

Auditors’ Report

iv In our opinion, the Balance Sheet, Profit and LossAccount and Cash Flow Statement dealt with by thisreport comply with the accounting standards referredto in sub-section (3C) of Section 211 of the CompaniesAct, 1956, except for Accounting Standard 9 in respectof credit taken for interest revenue as indicated in Note13 in Schedule ‘O’ to the financial statements.

v On the basis of the written representations received fromthe directors, as on March 31, 2006, and taken on recordby the Board of Directors, we report that none of thedirectors is disqualified as on March 31, 2006 from beingappointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

vi (a) Included in sundry debtors is an amount ofRs.301,016 thousand (previous year Rs. 281,100thousand) related to contract work with Spie Capag-Petrofac International Limited (SCPIL) in Georgiabranch. Additionally sundry debtors include anamount of Rs.77,000 thousand (previous yearRs. 75,500 thousand) from SCPIL for expensesincurred on behalf of SCPIL. Further, as stated in Note12 in Schedule ‘O’ to the financial statements, theterms of the related contract are currently in dispute.Accordingly, the branch auditors were unable to satisfythemselves as to the recoverability of the sundrydebtors amounting to Rs.378,016 thousand (previousyear Rs.356,600 thousand). Also, as stated in Note12 in Schedule ‘O’ to the financial statements, theCompany has raised variation orders of Rs. 1,490,000thousand (previous year Rs.1,468,000 thousand) onSCPIL and SCPIL have raised debit notes of Rs.477,400thousand (previous year Rs. 466,700 thousand) onthe Company. These variation orders and debit notesare being disputed and have not been agreed betweenthe Company and SCPIL. However, the ultimateoutcome of the dispute cannot presently be determinedby the Company. Because of the significance of thismatter, we do not express an opinion on the impactof the above uncertainty on the financial statements.Our previous year audit report was also qualified inrespect of the same matter.

(b) As stated in Note 13 in Schedule ‘O’ to the financialstatements, the Company has taken a credit forinterest of Rs.14,632 thousand (in addition to credittaken of Rs. 65,659 thousand in previous year) onthe amount withheld by a customer, which is notin accordance with Accounting Standard 9 onRevenue Recognition. Our previous year audit reportwas also qualified in respect of the same matter.

59


vii Without qualifying our opinion, we draw attention toNote 11 in Schedule ‘O’ to the financial statementsregarding deductions made/amounts withheld bysome customers aggregating to Rs 766,322 thousand(previous year Rs. 778,711 thousand) on variousaccounts which are being carried as sundry debtors.The Company is also carrying Work-in-Progressinventory of Rs. 64,000 thousand (previous yearRs. 64,000 thousand) relating to one of these cases.The ultimate outcome of the above matters cannotpresently be determined although the Company is ofthe view that such amounts are recoverable and henceno provision is required there against.

Without considering para vi (a) above, the impactwhereof on the Company’s profits is not presentlyascertainable, had the impact of para vi (b) above beenconsidered, profit for the year after tax would have beenRs. 298,205 thousand instead of Rs. 351,470 thousandand reserves & surplus at the end of the year would havebeen Rs.10,060,223 thousand, instead ofRs. 10,113,488 thousand. Had the impact of para vi (b)above been considered in the preceding year, the profitfor the year ended March 31, 2005 would have beenRs. 39,328 thousand instead of Rs.81,432 thousand andreserves & surplus at the end of the year would havebeen Rs. 4,537,128 thousand, instead of Rs. 4,579,232thousand.

viii Subject to our comments in para vi (a) & (b) above, inour opinion and to the best of our information andaccording to the explanations given to us, the saidaccounts give the information required by theCompanies Act, 1956, in the manner so required andgive a true and fair view in conformity with theaccounting principles generally accepted in India;

(a) In the case of the Balance Sheet, of the state ofaffairs of the Company as at March 31, 2006;

(b) In the case of Profit & Loss Account, of the profitof the Company for the year ended on that date;and

(c) In the case of Cash Flow Statement, of the cashflows of the Company for the year ended on thatdate.


per RAJ AGRAWALPartnerMembership No.: 82028


ANNEXURE REFERRED TO IN PARAGRAPH 3 OFOUR REPORT OF EVEN DATE TO THE MEMBERSOF PUNJ LLOYD LIMITED ON THE ACCOUNTS ASAT AND FOR THE YEAR ENDED MARCH 31, 2006.

(i) (a) The Company has maintained proper records showingfull particulars, including quantitative details andsituation of fixed assets.

(b) All fixed assets have not been physically verified bythe management during the year but there is a regularprogramme of verification which, in our opinion, isreasonable having regard to the size of the Companyand the nature of its assets. As informed, no materialdiscrepancies were noticed on such verification.

(c) There was no substantial disposal of fixed assets duringthe year.

(ii) (a) The management has conducted physical verificationof inventory at reasonable intervals during the year.

(b) The procedures of physical verification of inventoryfollowed by the management are reasonable andadequate in relation to the size of the Company andthe nature of its business.

(c) The Company is maintaining proper records ofinventory and no material discrepancies were noticedon physical verification.

(iii) (a-d) As informed, the Company has not granted anyloans, secured or unsecured, to companies, firms orother parties covered in the register maintainedunder Section 301 of the Companies Act, 1956.Accordingly clauses 4 (iii) (b, c and d) of theCompanies (Auditor’s Report) Order, 2003 (asamended) are not applicable to the Company.

(e-g) As informed, the Company has not taken any loans,secured or unsecured, from companies, firms orother parties covered in the register maintainedunder Section 301 of the Companies Act, 1956.Accordingly, clauses (iii) (e, f and g) of theCompanies (Auditor’s Report) Order, 2003 (asamended) are not applicable to the Company.

(iv) In our opinion and according to the information andexplanations given to us, there is an adequate internal controlsystem commensurate with the size of the Company and thenature of its business for the purchase of inventory and fixedassets and for the sale of goods and services except in respectof accounting of purchase of inventory which requires furtherstrengthening. Other than our foregoing comments, duringthe course of our audit, no major weakness has been noticedin the internal control system in respect of these areas.

(v) According to the information and explanations providedby the management, we are of the opinion that there areno contracts or arrangements that need to be entered intothe register maintained under Section 301 of theCompanies Act, 1956. Accordingly, clause (v) (b) of theCompanies (Auditor’s Report) Order, 2003 (as amended)is not applicable to the Company.

PUNJ LLOYD LIMITED

60

(vi) The Company has not accepted any deposits from thepublic.

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

(viii) To the best of our knowledge and as explained, the CentralGovernment has not prescribed maintenance of costrecords under clause (d) of sub-section (1) of Section 209of the Companies Act, 1956 for the products/services ofthe Company.

(ix) (a) Undisputed statutory dues including provident fund,investor education and protection fund, employees’state insurance, income-tax, sales-tax, wealth-tax,service tax, customs duty, excise duty, cess have

generally been regularly deposited with the appropriateauthorities though there have been delays in some cases.

(b) According to the information and explanations givento us, no undisputed amounts payable in respect ofprovident fund, investor education and protectionfund, employees’ state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty,cess and other undisputed statutory dues wereoutstanding, at the year end, for a period of morethan six months from the date they became payable.

(c) According to the records of the Company, the duesoutstanding of income tax, sales-tax, wealth tax,service tax, customs duty, excise duty and cess onaccount of any dispute, are as follows:

Name of the Nature of dues Amount (Rs in ‘000) Period to which Forum where disputestatute amount relates is pending

Andhra Pradesh Sales Tax on the 20,021 1998-99 Sales Tax AppellateGeneral Sales Tax material components to 2002-2003 Tribunal, Hyderabad/Dy.Act, 1956 of the works contract. Commissioner, Sales Tax

(Appeals), Vizag, AndhraPradesh.

Gujarat Sales Tax Differential Sales Tax 62,087 1998-99 Sales Tax AppellateAct, 1969 for non submission of to 1999-2000 Tribunal, Ahmedabad,

statutory forms. Gujarat.

Kerala General Sales Differential Sales Tax 3,645 1998-99 Dy. Commissioner, SalesTax Act, 1963 for disallowance of to 1999-2000 Tax (Appeals), Cochin.

deduction on purchasesu/s 3 of the CSTAct, 1956.

Rajasthan Sales Tax Sales Tax on the material 112,428 1999-2000 Rajasthan High Court,Act, 1994 components of the works to 2000-2001 Jodhpur Bench.

contract.

Delhi Sales Tax Sales Tax Demands on 17,671 2000-01 Additional CommissionerAct, 1975 internet services to 2002-2003 (Appeals), Delhi

Delhi Sales Tax on Differential Sales Tax for 39,253 2004-05 Additional CommissionerWorks Contract disallowance of deduction Appeal, Delhi Sales TaxAct, 1999. ex-parte order.

Andhra Pradesh Use of G Form against 31,146 2001-02 Sales Tax AppellateGeneral Sales Tax Cement purchases to 2004-2005 Tribunal, Visakhapatnam,Act, 1956 Andhra Pradesh.

(x) The Company has no accumulated losses at the end ofthe financial year and it has not incurred cash losses in thecurrent and immediately preceding financial year.

(xi) Based on our audit procedures and as per the informationand explanations given by the management, we are ofthe opinion that the Company has not defaulted inrepayment of dues to a financial institution, bank ordebenture holders.

(xii) According to the information and explanations given tous and based on the documents and records produced to

us, the Company has not granted loans and advances onthe basis of security by way of pledge of shares, debenturesand other securities.

(xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, the provisions ofclause 4(xiii) of the Companies (Auditor’s Report) Order,2003 (as amended) are not applicable to the Company.

(xiv) In respect of dealing/trading in shares, securities,debentures and other investments, in our opinion andaccording to the information and explanations given to

61


us, proper records have been maintained of thetransactions and contracts and timely entries have beenmade therein. The shares, securities, debentures and otherinvestments have been held by the Company, in its ownname.

(xv) According to the information and explanations given tous, the Company has given guarantees for loans taken bysubsidiaries/joint ventures from banks or financialinstitutions, the terms and conditions whereof in ouropinion are not prima-facie prejudicial to the interest ofthe Company.

(xvi) Based on information and explanations given to us by themanagement, term loans were applied for the purposefor which the loans were obtained.

(xvii) According to the information and explanations given tous and on an overall examination of the balance sheet ofthe Company, we report that no funds raised on short-term basis have been used for long-term investment.

(xviii)The Company has not made any preferential allotment ofshares to parties or companies covered in the registermaintained under Section 301 of the Companies Act, 1956.

(xix) The Company did not have any outstanding debenturesduring the year.

(xx) We have verified that the end use of money raised by publicissues is as disclosed in the notes to the financial statements.

(xxi) Based upon the audit procedures performed for thepurpose of reporting the true and fair view of the financialstatements and as per the information and explanationsgiven by the management, we report that no fraud on orby the Company has been noticed or reported during thecourse of our audit.


per RAJ AGRAWALPartnerMembership No.: 82028


PUNJ LLOYD LIMITED

62

SOURCES OF FUNDSShareholders’ Funds

Capital A 522,198 252,347Reserves & Surplus B 10,113,488 4,579,232

10,635,686 4,831,579Loan Funds C

Secured Loans 3,460,109 4,529,924Unsecured Loans 629,355 1,168,239

4,089,464 5,698,163

Deferred Tax Liability (Net) 558,192 569,064(Refer note 25 in Schedule ‘O’)

TOTAL 15,283,342 11,098,806

APPLICATION OF FUNDS

Fixed Assets DGross Block 7,638,790 7,039,067Less : Accumulated Depreciation 3,023,817 2,711,227Net Block 4,614,973 4,327,840

Capital Work in Progress Including Capital Advances 771,792 124,299Preoperative Expenditure (Pending allocation) E 47,847 18,645

5,434,612 4,470,784

Investments F 1,244,085 548,582

Current Assets, Loans and Advances GInventories 6,261,853 3,967,426Sundry Debtors 3,784,834 3,181,089Cash and Bank Balances 732,759 303,391Other Current Assets 109,903 53,070Loans and Advances 1,951,436 1,426,781

12,840,785 8,931,757Less : Current Liabilities and Provisions H

Liabilities 4,030,117 2,776,847Provisions 206,023 75,470

4,236,140 2,852,317Net Current Assets 8,604,645 6,079,440

Miscellaneous Expenditure I – –(to the extent not written off or adjusted)

TOTAL 15,283,342 11,098,806

Significant accounting policies & Notes to Accounts O

The Schedules referred to above form an integralpart of the Balance Sheet

As at As atSchedules March 31, 2006 March 31, 2005

Balance Sheet as at March 31, 2006

As per our report of even date


per RAJ AGRAWAL DINESH THAIRANI ANIL AGARWAL LUV CHHABRA ATUL PUNJPartner Company Secretary Chief Financial Director Finance Chairman and ManagingMembership No. 82028 Officer and Corporate Affairs Director


(Amount in INR ‘000)

63


Profit and Loss Account for the year ended March 31, 2006

Year ended Year endedSchedules March 31, 2006 March 31, 2005





INCOMESales & Contracts Revenue J 13,682,149 14,294,286Other Income K 348,213 499,862Waiver of Funded Interest – 130,000

14,030,362 14,924,148EXPENDITUREMaterials Consumed and Cost of Goods Sold L 4,517,011 3,775,000Operating and Administrative Expenses M 7,765,226 9,208,692Financial Charges N 593,306 1,061,591Miscellaneous Expenditure Written Off I – 46,103Depreciation/Amortisation (IncludingAmortisation of Goodwill Rs. 149,795 Thousand,Previous Year Rs. 149,795 Thousand) 621,597 751,149

Less : Transfer from Revaluation Reserve 29,697 591,900 33,330 717,819

13,467,443 14,809,205

Profit Before Tax 562,919 114,943Provision for TaxCurrent Tax 207,971 42,590Deferred Tax Charge/(Credit) (Including Creditof Rs. 34,506 Thousand of earlier years) (10,872) (9,079)Fringe Benefit Tax 14,350 –

Total Tax Expense 211,449 33,511

PROFIT AFTER TAX 351,470 81,432Balance Brought Forward from Previous Year 1,618,190 1,479,249Transfer from Debenture Redemption Reserve 12,120 83,305Transfer from Foreign Project Utilised Reserve 12,500 15,000

Profit Available for Appropriation 1,994,280 1,658,986

APPROPRIATIONSGeneral Reserve 40,000 20,000Proposed Dividend 52,220 18,238Tax on Proposed Dividend 7,324 2,558

99,544 40,796SURPLUS CARRIED TO BALANCE SHEET 1,894,736 1,618,190Earning Per Share (Nominal Value Per Share 10)Basic (in Rupees) 8.07 2.31Diluted (Refer Note 24 in Schedule ‘O’) 7.64 –

Significant Accounting Policies &Notes to Accounts O

The Schedules referred to above form anIntegral part of the Profit and Loss Account


PUNJ LLOYD LIMITED

64

As at As atMarch 31, 2006 March 31, 2005

Schedules to the Accounts for the year ended March 31, 2006

SCHEDULE A : CAPITALAUTHORISED60,000,000 equity shares (previous year 30,000,000) ofRs. 10 each. 600,000 300,00020,000,000 preference shares of Rs. 10 each. 200,000 200,000

800,000 500,000ISSUED, SUBSCRIBED AND PAID UP52,219,836 (previous year 24,317,127) equity shares ofRs. 10 each, fully paid up. 522,198 243,171NIL (previous year 917,628) zero percent convertiblepreference shares of Rs. 10 each, fully paid up. – 9,176OF THE ABOVEi) 136,700 equity shares were allotted as fully paid up

pursuant to a contract without payments beingreceived in cash.

ii) 28,615,239 equity shares (previous year 12,166,000equity shares) of Rs. 10 each fully paid up were issuedas bonus shares by capitalisation of profits.

iii) During the year, the Company has converted 917,628zero percent convertible preference shares of Rs. 10each into 3,098,296 equity shares of Rs. 10 each.(Refer Note 26 in Schedule ‘O’)

TOTAL 522,198 252,347


SCHEDULE B : RESERVES AND SURPLUSCapital ReserveBalance as per Last Account 2,138 2,138

Securities Premium AccountBalance as per last Account 2,539,174 339,112Additions during the year 5,765,070 2,239,122

8,304,244 2,578,234Less: Utilised during the yearConversion of Preference Shares 21,807 –Share Issue Expenses 305,097 39,060

(Refer Notes 26 and 28b in Schedule ‘O’) 7,977,340 2,539,174

Asset Revaluation ReserveBalance as per last Account 122,529 155,859Less: Adjustment on Account of Depreciation on

Revalued Amount of Assets 29,697 33,330Less: Adjustment on Account of Sale/Disposal of

Revalued Assets 7,483 –

85,349 122,529General ReserveBalance as per last Account 185,600 165,600Add: Transfer from Profit and Loss Account 40,000 20,000

225,600 185,600Less: Utilised during the year (For issue of Bonus Shares) 164,492 –

(Refer Note 27 in Schedule ‘O’) 61,108 185,600



65




SCHEDULE B : RESERVES AND SURPLUS (CONTINUED)Foreign Project Utilised ReserveBalance as per last Account 105,000 112,500Add: Transfer from Foreign Project Reserve – 7,500

105,000 120,000Less: Transfer to Profit and Loss Account 12,500 15,000

92,500 105,000Foreign Project ReserveBalance as per last Account – 7,500Less: Transfer to Foreign Project Utilised Reserve – 7,500

– – – –Debenture Redemption ReserveBalance as per last Account 12,120 95,425Less: Transfer to Profit and Loss Account 12,120 83,305

– 12,120Exchange Fluctuation Reserve Account 317 (5,519)Profit and Loss Account Balance 1,894,736 1,618,190TOTAL 10,113,488 4,579,232

SCHEDULE C : LOAN FUNDSSECURED LOANS:A) SHORT TERM WORKING CAPITAL LOAN ACCOUNT

I. FROM BANKS 1,658,340 975,845Out of the above,i) Rs. 473,813 thousand (previous year Rs. 56,679

thousand) is secured by way of first charge on paripassu basis on current assets (excluding book debts)and second charge on pari passu basis on fixed assetsof the project division of the Company and furthersecured by personal guarantee of Chairman &Managing Director of the Company.

ii) Rs. 17,352 thousand (previous year Rs. 210,724thousand) is secured by way of first charge on paripassu basis on current assets (excluding book debts)and second charge on pari passu basis on fixed assetsof the project division of the Company.

iii) Rs. 1,167,175 thousand (previous year Rs. 644,820thousand) is secured by way of exclusive charge onthe receivables of the specific projects financed bythe bank, first pari passu charge on the current assets(excluding book debts) and pari passu second chargeon the movable assets of the project division of theCompany and further secured by personal guaranteeof Chairman & Managing Director of the Company.

iv) Rs. Nil (previous year Rs. 63,622 thousand) is securedby way of first charge on pari passu basis on currentassets (except book debts) and second charge onfixed assets of the project division of the Companyand exclusive charge on receivables of specific


(Amount in INR ‘000)As at As at

March 31, 2006 March 31, 2005

PUNJ LLOYD LIMITED

66



projects financed by the bank and further securedby personal guarantee of Chairman & ManagingDirector of the Company.(Refer Note 28c of Schedule ‘O’)

B) ON TERM LOAN ACCOUNTI) FROM BANKS 1,435,951 3,220,036

Loans aggregating to Rs. 478,992 thousand(previous year Rs. 1,275,566 thousand) are repayablewithin one year.Out of the above,

i) Rs. Nil (previous year Rs. 149,740 thousand) issecured by way of first charge on pari passu basis onfixed assets of the project division of the Companyand further secured by personal guarantee ofChairman & Managing Director of the Company.

ii) Rs. 546,620 thousand (previous year Rs. 693,010thousand) is secured by way of exclusive charge onthe equipment purchased out of the proceeds ofloan.

iii) Rs. 120,000 thousand (previous year Rs. 899,988thousand) is secured by way of first pari passu chargeon movable fixed assets of the project division ofthe Company.

iv) Rs. 262,500 thousand (previous year Rs. Nil) issecured by way of first pari passu charge on movableassets of the project division of the Company andpersonal guarantee of Chairman & ManagingDirector of the Company.

v) Rs. Nil (previous year Rs. 162,490 thousand) issecured by way of exclusive charge on financed fixedassets and second charge on pari passu basis oncurrent assets of the Company and further securedby personal guarantee of Chairman & ManagingDirector of the Company.

vi) Rs. Nil (previous year Rs. 50,000 thousand) is securedby way of second pari passu charge on the currentassets (excluding receivables) of the project divisionof the Company and second pari passu charge onthe fixed assets of the project division of theCompany and further secured by personal guaranteeof Chairman & Managing Director of the Company.

vii) Nil (previous year Rs. 150,000 thousand) is securedby way of subservient charge on the entire currentand movable fixed assets of the project division ofthe Company.

viii) Rs. 235,648 thousand (previous year Nil) is securedby way of exclusive charge on the land and buildingfor corporate office being built at Gurgaon.

SCHEDULE C : LOAN FUNDS (CONTINUED)


67


ix) Rs. 171,192 thousand (previous year Rs. 514,955thousand) is secured by way of pari passu first chargeon the existing and future movable fixed assets ofthe project division of the Company, pari passusecond charge on current assets of the projectdivision of the Company (excluding receivables ofthe Company) and further secured by personalguarantee of Chairman & Managing Director of theCompany.

x) Rs. 99,991 thousand (previous year Rs. 599,853thousand) is secured by way of second pari passucharge on the movable fixed assets of the projectdivision of the Company and further secured bypersonal guarantee of Chairman & ManagingDirector of the Company.

II) FROM OTHERS 43,961 223,410Loans aggregating to Rs. 27,123 thousand (previousyear Rs. 38,302 thousand) are repayable within oneyear.

Out of the above,

i) Rs. 43,961 thousand (previous year Rs. 84,910thousand) is secured by first and exclusivecharge by way of hypothecation on certainspecific equipments financed through the loan.

ii) Nil (previous year Rs. 138,500 thousand) issecured by way of exclusive charge on the landand building for corporate office being built atGurgaon.

III) HIRE PURCHASE CREDITORS

- FROM OTHERS 291,842 66,446Loans aggregating to Rs. 78,811 thousand (previousyear Rs. 36,235 thousand) are repayable within oneyear.(Secured by exclusive charge by way of hypothecationon certain specific equipments.)

IV) EXTERNAL COMMERCIAL BORROWINGS

FROM BANK 30,015 44,187Loans aggregating to Rs. 15,007 thousand (previousyear Rs. 14,729 thousand) are repayable within oneyear.(Secured by exclusive charge on the equipmentfinanced through the loan.)

TOTAL 3,460,109 4,529,924

UNSECURED LOANS:

i) SHORT TERM WORKING CAPITAL LOAN ACCOUNT

FROM BANKS 190,506 332,555





PUNJ LLOYD LIMITED

68



ii) ON TERM LOAN ACCOUNT

FROM BANKS 404,046 750,000Loans aggregating to Rs. 400,000 thousand(previous year Rs. 584,280 thousand) arerepayable within one year.

iii) FROM SUBSIDIARY COMPANY 8,500 –Loans aggregating to Rs. 8,500 thousand(previous year Nil) are repayable within oneyear.

iv) 10% UNSECURED REDEEMABLE NON-CONVERTIBLE – 12,120DEBENTURES(Redeemable at par in five equal annualinstallments starting from the end of third yeari.e. November 26, 2001)Amounts aggregating to Nil (previous yearRs. 12,120 thousand) are repayable within oneyear.

v) INTER CORPORATE DEPOSITS 100 32,306Amounts aggregating to Rs. 100 thousand(previous year Rs. 30,306 thousand) arerepayable within one year.

vi) EXTERNAL COMMERCIAL BORROWINGS

FROM BANK 26,203 41,258Loans aggregating to Rs. 13,101 thousand(previous year Rs. 13,751 thousand) arerepayable within one year.

TOTAL 629,355 1,168,239



69

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PUNJ LLOYD LIMITED

70

SCHEDULE E: PREOPERATIVE EXPENDITURE(PENDING ALLOCATION)Opening Balance 18,645 –Add : Expenditure Incurred during the yearPower and Fuel 8 51Repair and Maintenance - Others 4 3Hire Charges 41 –Insurance 1,474 –Salaries, Wages and Bonus 4,145 2,352Contribution to Providend & Other Funds 7 2Workmen and Staff Welfare 93 156Rent – 6Fee & Taxes 63 8Consultancy/Professional Charges 38 647Travelling and Conveyance 7 25Interest on Term Loan 19,402 14,816Bank/Financial Charges 1,302 –Others 2,618 579

29,202 18,645Balance Carried Forward 47,847 18,645

SCHEDULE F : INVESTMENTS(Long Term)I - SUBSIDIARY COMPANIES

A) UNQUOTEDPUNJ LLOYD INC. 8,493 8,493200,000 (previous year 200,000) equity shares of USD 1 each.PUNJ LLOYD INTERNATIONAL LIMITED 4,452 4,452100,000 (previous year 100,000) equity shares of USD 1 each.SPECTRA INFRASTRUCTURES LIMITED 115,002 115,00211,500,200 (previous year 11,500,200) equity shares ofRs. 10 each.PUNJ LLOYD INSULATIONS LIMITED 2,552 2,55225,520 (previous year 25,520) equity shares of Rs. 100 each.SPECTRANET LIMITED 17,061 17,0611,706,102 (previous year 1,706,102) equity shares ofRs. 10 each.ATNA INVESTMENTS LIMITED 39,922 39,922399,221 (previous year 399,221) equity shares of Rs. 100 each.PUNJ LLOYD KAZAKHSTAN - LLP 362,798 4,058US Dollars 8,213,448 (previous year 83,800) being 100%of the amount of Charter Capital.Out of the above, USD 3,789,648 amount of chartercapital paid other than cash.PUNJ LLOYD (MALAYSIA) SDN, BHD 44,141 44,1413,661,255 (previous year 3,661,255) equity shares of1.00 RM. each.PLN CONSTRUCTIONS LIMITED 30,896 30,8962,000,000 (previous year 2,000,000) equity shares ofRs. 10 each.SPECTRA PUNJAB LIMITED 8,000 8,000900,000 (previous year 900,000) equity shares of Rs. 10 each.PT PUNJ LLOYD INDONESIA 170,900 10,9107,805 (previous year 605) equity shares of USD 500 each. 804,217 285,487


Schedules to the Accounts for the year ended March 31, 2006(Amount in INR ‘000)



71


B) QUOTED

SPECTRA PUNJ LLOYD LIMITED 48,675 48,6754,867,500 (previous year 4,867,500) equity shares ofRs. 10 each.II - TRADE

UNQUOTED

RAJAHMUNDRY EXPRESSWAY LIMITED 36,975 36,9753,697,500 (previous year 3,697,500) equity shares ofRs. 10 each.Of the above,1,885,000 shares (Previous year 1,885,000)are pledged with bank.ANDHRA EXPRESSWAY LIMITED 36,975 36,9753,697,500 (previous year 3,697,500) equity shares ofRs. 10 each.Of the above, 1,885,000 shares (previous year 1,885,000)are pledged with bank.

NORTH KARNATAKA EXPRESSWAY LIMITED 75,724 75,7247,572,400 (previous year 7,572,400) equity shares ofRs.10 each.THIRUVANANTHAPURAM ROAD DEVELOPMENT 250 250COMPANY LIMITED25,000 (previous year 25,000) equity shares of Rs. 10 each.

149,924 149,924III - NON-TRADE

A) UNQUOTED

BISTRO HOSPITALITY (P) LIMITED 28,782 32,8002,878,200 (previous year 3,280,000) equity shares ofRs.10 each.RFB LATEX LIMITED 5,200 5,200200,000 (previous year 200,000) equity shares of Rs.10 each.AROOSHI ENTERPRISES (P) LIMITED 5,985 5,985598,500 (previous year 598,500) equity shares of Rs.10 each.GLOBAL HEALTH PRIVATE LIMITED 200,000 –8,000,000 (previous year Nil) equity shares of Rs.10 each(Rs. 1.45 paid up).JACOB BALLAS CAPITAL INDIA (P) LIMITED – 19,000Nil (previous year 1,900,000) equity shares of Rs.10 each. 239,967 62,985

B) QUOTED

BERGER PAINTS LIMITED 2,888 2,887115,500 (previous year 115,500) equity shares of Rs. 2 each. 2,888 2,887

1,245,671 549,958LESS: DIMINUTION IN THE VALUE OF INVESTMENTS 1,586 1,376TOTAL 1,244,085 548,582a) Aggregate Cost of Quoted Investments 51,563 51,562b) Aggregate Cost of Unquoted Investments 1,192,522 497,020

(Net of provisions)c) Aggregate market value of quoted investments 58,544 53,503

(In the absence of recent market quotation of SpectraPunj Lloyd Limited, latest quotation has been consideredfor market value)

d) (Refer Note 17, 18, 19 and 21 of Schedule ‘O’)



SCHEDULE F : INVESTMENTS (CONTINUED)


PUNJ LLOYD LIMITED

72


SCHEDULE G : CURRENT ASSETS, LOANS AND ADVANCES

A. CURRENT ASSETSi) INVENTORIES:

Spares, Stores and Consumables 548,512 559,401Scrap 27,149 11,268Stock in Trade (Equipments) 3,521 4,123Work in Progress - Projects 5,682,671 3,392,634

6,261,853 3,967,426ii) SUNDRY DEBTORS: (Unsecured)*

Debts Outstanding for a Period ExceedingSix MonthsConsidered Good 1,560,159 1,178,580(Includes retention money Rs. 207,371 thousand(previous year Rs. 233,566 thousand))Considered Doubtful – 8,300OTHER DEBTSConsidered Good 2,224,675 2,002,509(Includes retention money Rs. 26,100 thousand(previous year Rs. 122,388 thousand)) 3,784,834 3,189,389Less: Provision for Doubtful Debts – 8,300*(Includes Rs. 26,040 thousand (previous yearRs. 49,876 thousand) due from subsidiaries) 3,784,834 3,181,089

iii) CASH AND BANK BALANCESa) Cash in Hand 11,136 21,374b) Ccheques in Hand 5,024 –c) Balances with Scheduled Banks

- In Current Accounts 102,777 62,428- In EEFC Accounts 2,100 10,077- In Fixed Deposits 14,885 27,527(Receipts pledged with banks for Rs. 14,885thousand against guarantees (previous yearRs. 27,527 thousand))

d) BALANCES WITH NON-SCHEDULED BANKS(Refer Note 9 of Schedule ‘O’)- In Current Accounts 583,157 30,258- In Fixed Deposits 13,680 151,727(Receipts pledged with banks Rs. 13,680thousand against guarantees (previous yearRs. 7,329 thousand) 732,759 303,391

iv) OTHER CURRENT ASSETSa) Interest Receivable 39,701 26,606b) Insurance Claims Receivable 19,102 22,239c) Export Benefits Receivable 46,875 –d) Receivable against Sale of Investments 4,225 4,225

109,903 53,070B LOANS AND ADVANCES:

(Unsecured, Considered Good)a) Loan to Employees * 1,908 3,569b) Loan to A Subsidiary 323,349 26,274c) Inter Corporate Deposits 14,500 22,743d) Advances Recoverable in cash or in

kind or for value to be received 671,660 779,974



73


e) Due from Subsidiaries 54,605 76,275f) Advances for Proposed Investments 130,001 13,104g) Security Deposits 69,738 23,282h) Balance with Custom/Excise Department 61,981 2,428i) Advance Income Tax/Tax Recoverable

(Net of Provisions) 422,127 346,362j) Sales Tax Recoverable 201,567 132,770

1,951,436 1,426,781

TOTAL 12,840,785 8,931,757

* Included in loan to employees are:Due from an officer of the Company 350 410Maximum amount outstanding during the year 410 470

SCHEDULE H : CURRENT LIABILITIES AND PROVISIONS

(A) CURRENT LIABILITIES

Acceptances 365,052 288,659

Sundry Creditors 2,251,118 1,606,955(Refer Note 23 of Schedule ‘O’)Due to Subsidiaries 101,919 158,324Advance Billings 210,033 11,396Unearned Income 47,223 42,389Security Deposits 112,126 126,940Advances from Clients 843,453 454,139Interest accrued but not due on loans 5,593 6,770Other Liabilities 93,600 81,275

4,030,117 2,776,847(B) PROVISIONS

For Tax (Net of Taxes Paid) 95,694 32,061For Fringe Benefit Tax (Net of Taxes Paid) 4,350 –For Gratuity 18,803 5,766For Leave Encashment 27,632 16,847For proposed dividend (including tax on dividend) 59,544 20,796

206,023 75,470

TOTAL 4,236,140 2,852,317

SCHEDULE I : MISCELLANEOUS EXPENDITURE(To the extent not written off or adjusted)

DEFERRED REVENUE EXPENDITUREBalance as per Last Year – 46,103Less: Written Off to Profit and Loss Account – – 46,103 –

TOTAL – –


SCHEDULE G : CURRENT ASSETS, LOANS ANDADVANCES (CONTINUED)







PUNJ LLOYD LIMITED

74


Year ended Year ended March 31, 2006 March 31,2005

SCHEDULE J : SALES & CONTRACTS REVENUEContracts Revenue (Including Export benefitsRs. 165,502 thousand (previous Year Nil)) 13,283,724 13,821,543Income from Hire Charges 46,169 72,372Management Services 47,318 98,202Sales (Net of Discounts)- Exports 543 13,955- Others 3,823 4,366 6,980 20,935Internet Services (Net of Discounts Rs. 592,104thousand (previous year Rs. 665,850 thousand)) 300,572 281,234TOTAL 13,682,149 14,294,286

SCHEDULE K : OTHER INCOMERent (Gross, tax deducted at source Rs. 478 Thousand(Previous year Rs. 445 thousand)) 2,128 2,128INTEREST (Gross, tax deducted at source Rs. 1,938 thousand(Previous year Rs. 653 thousand)) 54,461 90,515DIVIDEND ON LONG TERM INVESTMENTS 6,085 5,128INSURANCE CLAIMS 43,301 37,224PROFIT ON SALE OF NON TRADE LONGTERM INVESTMENTS 47,758 122,892PROFIT ON SALE OF FIXED ASSETS 11,115 –INCOME ON TRANSFER OF BENEFICIAL RIGHTS ININVESTMENT IN SHARES – 20,300(Refer Note 21 of Schedule ‘O’)PROFIT ON SALE OF SPARES, STORES AND CONSUMABLES 6,048 –UNSPENT LIABILITIES AND PROVISIONS WRITTEN BACK 92,474 82,904BAD DEBTS RECOVERED – 57,606FOREIGN EXCHANGE FLUCTUATION (NET) 36,545 –OTHERS 48,298 81,165TOTAL 348,213 499,862

SCHEDULE L : MATERIALS CONSUMED ANDCOST OF GOODS SOLDMaterial Consumed 4,491,410 3,722,556Cost of Goods Sold-equipmentsOpening Stock 4,123 11,151Add: Purchases 1,709 1,546

5,832 12,697Less: Closing Stock 3,521 4,123

2,311 8,574Amortisation/Depletion in the Value of Inventory 23,290 43,870TOTAL 4,517,011 3,775,000

SCHEDULE M : OPERATING ANDADMINISTRATIVE EXPENSESOperatingContractor Charges 2,976,837 2,652,317Site/Connectivity Expenses 422,866 884,322Power and Fuel 523,998 698,494Repair and Maintenance

- Buildings 9,087 17,005- Plant and Machinery 31,878 70,745








75


- Others 26,184 72,695Freight & Cartage 360,008 452,667Hire Charges 666,602 1,157,630

5,017,460 6,005,875PersonnelSalaries, Wages and Bonus 1,199,617 1,513,009Contribution to Provident & Other Funds 80,882 53,108Gratuity 1,136 807Workmen and Staff Welfare 104,623 156,711

1,386,258 1,723,635Administration and EstablishmentBad Debts/Advances Written Off 59,829 37,407Less: Provision made in previous year, now reversed 8,300 –

51,529 37,407Rent 89,605 64,734Insurance 178,275 78,354Directors’ Sitting Fee 190 100Travelling and Conveyance 190,827 201,476Fee & Taxes 201,045 123,065Consultancy/Professional Charges 390,976 539,054Commission on Internet Services 10,487 7,824Provision for Doubtful Debts – 8,300Diminution in Value of Long Term Investments 210 1,376Loss on Sale of Short Term Investments 19 –Loss on Sale of Fixed Assets (Net) – 57,287Donations (Refer Note 14 of Schedule ‘O’) 14,144 14,155Auditors Remuneration (Including to Branch Auditors)

- Audit Fee 5,079 6,315- Audit Fee for ConsolidatedFinancial Statements 2,381 –- Certificates 199 33- Tax Audit Fee – 176- Other Services 2,593 –- Out of Pocket Expenses 185 –

Others 223,764 339,5261,309,979 1,441,775

TOTAL 7,765,226 9,208,692

SCHEDULE N : FINANCIAL CHARGESInterest on:Term Loans 295,491 583,614Debentures 789 2,004Others 171,713 152,357

467,993 737,975Bank/Financial Charges 125,313 321,793(Including Prepayments Rs. 1,899 thousand(previous year Rs. 11,899 thousand))Foreign Exchange Fluctuation (Net) – 1,823

TOTAL 593,306 1,061,591


SCHEDULE M : OPERATING AND ADMINISTRATIVEEXPENSES (CONTINUED)





PUNJ LLOYD LIMITED

76

SCHEDULE O : SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS

1. Nature of operations

Punj Lloyd Limited is a Company registered under Indian Companies Act 1956. The Company is primarily engaged in thebusiness of engineering & construction in the oil & gas sector and infrastructure sector. The Company’s focus on customersatisfaction through compliance with the high standards of health, safety and environment, makes it a leading player in themarkets in which it operates. The Company also provides broadband services on its optical fiber network.

2. Statement of significant accounting policies

(a) Basis of preparation

The Company maintains its accounts on accrual basis following the historical cost convention, (except for the revaluation ofcertain fixed assets), and in accordance with Accounting Standards referred to in section 211 (3C) of the Companies Act,1956 and other requirements of the Act. The accounting policies have been consistently applied by the Company andexcept for the changes in accounting policy disclosed in Note No. 10 below, are consistent with those used in previous year.

(b) Use of estimates

The preparation of financial statements is in conformity with generally accepted accounting principles requires managementto make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingentliabilities as at the date of the financial statements and reported amounts of revenues and expenses during the reportingperiod. Actual results could differ from these estimates.

(c) Fixed assets

Fixed assets are stated at cost, (other than some fixed assets which are stated at values as determined by the valuer), lessaccumulated depreciation and impairment losses, if any. Cost comprises the purchase price and any attributable cost ofbringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition of fixed assetswhich takes substantial period of time to get ready for its intended use are also included to the extent they relate to theperiod till such assets are ready to be put to use.

The carrying amount of fixed assets are reviewed at each balance sheet date if there is any indication of impairment basedon internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverableamount. The recoverable amount is the greater of the asset’s net selling price and value in use. In assessing the value in use,the estimated future cash flows are discounted to their present value at the weighted average cost of capital.

(d) Method of depreciation

i) Depreciation on the fixed assets is charged on straight line method, at the rates specified in Schedule XIV to theCompanies Act, 1956, (except to the extent stated in paras ii, iii and vii below), which are based on the useful livesof the assets. In case of revalued assets, the difference between depreciation on original cost and revalued amount istransferred from revaluation reserve to profit and loss account.

ii) Depreciation on the following fixed assets of Internet Service division is charged on straight line method at the rates,based on useful lives of the assets as estimated by the management, which are equal to or higher than the ratesspecified by Schedule XIV.

Asset Description Depreciation Rate

Plant and machinery 10%

Networking equipment* 10%

Office equipment 10%

Ducts and optical fiber cables* 4.75%

* Included under Plant & Machinery.

iii) Depreciation on the following fixed assets of Oman branch is charged on straight line method at the rates, based onuseful lives of the assets as follows, which are higher than the rates specified in Schedule XIV to the Companies Act,1956 :

Asset Description Useful Lives of Assets

Plant and machinery 6 to 7 years

Furniture and fixtures 3 to 7 years

77


iv) Amount added to assets on account of foreign exchange fluctuation is depreciated prospectively over the remaininguseful lives of the respective assets.

v) No amortization is made for leasehold land, which is under perpetual lease.

vi) Assets costing less than Rs. 5,000 each are depreciated @ 100%.

vii) Depreciation on Company’s share of fixed assets of an unincorporated joint venture is provided on straight-linemethod at the following rates based on their useful lives as estimated by the management of the joint venture.


Buildings 10%

Plant & Machinery 20%

Vehicles 20%

Furniture, fixtures & office equipments 20%

viii) Intangibles

(a) Goodwill arising on acquisition of the Internet Service Division is depreciated using the straight-line methodover a period of five accounting years.

(b) Depreciation is provided on different softwares used by the Company based on the nature and useful lives ofthese softwares as mentioned below:

(i) Softwares of project division are depreciated @ 16.21%.

(ii) Softwares of internet service division are depreciated @ 20%.

(iii) Softwares of an unincorporated joint venture are depreciated @ 33-1/3%.

(c) Depreciation on technical know how capitalized in Internet Service Division of the Company is provided@ 20%, based on its expected useful life as assessed by the management.

(e) Preoperative Expenditure pending allocation

Expenses incurred in relation to construction of capital assets in respect of entities which are yet to commence commercialoperations are carried forward to be capitalized at the time of commencement of commercial operations.

(f) Investments

Investments that are readily realizable and intended to be held for not more than a year are classified as current investments.All other investments are classified as long-term investments. Current investments are carried at lower of cost and fairvalue determined on an individual investment basis. Long-term investments are carried at cost, after providing for anydiminution in value, if such diminution is other than temporary in nature.

(g) Inventories

i) Stock in trade (Equipments), Stores, Spares and Consumables are valued at lower of cost and net realizable value.Cost is determined on weighted average basis.

ii) Work in progress related to projects is valued at net realizable value.

iii) Scrap is valued at net realizable value.

iv) Scaffoldings (included in Stores, Spares and Consumables) are valued at cost less amortization/charge based ontheir useful life, which is estimated at 10 years.

Net realizable value is the estimated selling price in the ordinary course of business less estimated costs to make thesale.

(h) Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and therevenue can be reliably measured.

i) Revenue from long term construction contracts is recognized on the percentage of completion method. Percentageof completion is determined as a proportion of cost incurred to date to the total estimated contract cost. However,profit is not recognized unless there is reasonable progress on the contract. In case the total cost of a contract, based

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on technical and other estimates, is expected to exceed the corresponding contract value, such expected loss isprovided for. The effect of any adjustment arising from revisions to estimates is included in the income statement ofthe year in which revisions are made. The revenue on account of extra claims and the expenditure on account ofliquidated damages on construction contracts are accounted for at the time of acceptance/ settlement by the customersdue to uncertainties attached thereto. Similarly, insurance claims are accounted for on settlement with insurers.

ii) Revenue from long term construction contracts executed in joint ventures under work sharing arrangements isrecognized on the same basis as similar contracts independently executed by the Company. Revenue in joint venturesunder profit sharing arrangements is recognized to the extent of the Company’s share in joint ventures.

iii) Internet Service revenues comprise of revenues from registration, installation and provision of Internet services.Registration fee and installation charges are recognized on the admission of customer and completion of servicesrespectively. Service revenue from Internet access is recognized pro-rata, calculated on the basis of provision ofservices or time duration of contract, as may be applicable.

iv) Revenue from sale of equipment is recognized when the significant risks and rewards of ownership of the goodshave passed to the buyer.

v) Revenue from hire charges is accounted for in accordance with the terms of agreements with the customers.

vi) Interest revenue is accounted for on a time proportion basis taking into account the amount outstanding and therate applicable.

vii) Dividend revenue is recognized when the shareholders’ right to receive payment is established by the balance sheetdate.

viii) Duty Free Credit Entitlements are accounted for based on the exports made during the year.

(i) Foreign currency translation

Foreign currency transactions

i) Initial Recognition

Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amountthe exchange rate between the reporting currency and the foreign currency at the date of the transaction.

ii) Conversion

Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried interms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of thetransaction.

iii) Exchange Differences

Exchange differences arising on the settlement of monetary items or on reporting Company’s monetary items atrates different from those at which they were initially recorded during the year, or reported in previous financialstatements, are recognized as income or as expenses in the year in which they arise, except those arising frominvestments in non-integral foreign operations. Exchange differences arising on account of fixed assets acquiredfrom outside India is capitalized.

Exchange differences arising on a monetary item that, in substance, forms part of Company’s net investment in anon-integral foreign operation are accumulated in a foreign currency translation reserve in the financial statementsuntil the disposal of the net investment, at which time they are recognized as income or as expenses.

iv) Forward Exchange Contracts

The premium or discount arising at the inception of forward exchange contracts is amortized as expense or incomeover the life of the contract. Exchange differences on such contracts are recognized in the statement of profit andloss in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forwardexchange contract is recognized as income or as expense for the year.

79


Translation of integral and non-integral foreign operation

The financial statements of an integral foreign operation are translated as if the transactions of the foreign operationhave been those of the Company itself.

In translating the financial statements of a non-integral foreign operation for incorporation in financial statements,the assets and liabilities, both monetary and non-monetary, of the non-integral foreign operation are translated atthe closing rate; income and expense items of the non-integral foreign operation are translated at average exchangerates for the period. All resulting exchange differences are accumulated in a foreign currency translation reserve untilthe disposal of the net investment.

On the disposal of a non-integral foreign operation, the cumulative amount of the exchange differences which havebeen deferred and which relate to that operation are recognized as income or as expenses in the same period inwhich the gain or loss on disposal is recognized.

(j) Retirement and other employee benefits

i) Retirement benefits in the form of provident fund and superannuation / pension schemes are charged to Profit andLoss Account of the year when the contributions to the respective funds are due.

ii) The Company has taken an insurance policy under group gratuity scheme with Life Insurance Corporation of Indiato cover the gratuity liability of the employees of project division and amount paid/payable in respect of presentvalue of liability for past services is charged to Profit and Loss Account on the basis of actuarial valuation at the endof the financial year. In respect of employees of ISP division, gratuity liability is accrued and provided for on the basisof an actuarial valuation made at the end of each financial year.

iii) Liability for leave encashment is provided for on actuarial valuation done at the end of the financial year except incase of the overseas branches, where liability is provided on actual basis for leaves standing to the credit of employees.

(k) Income taxes

Tax expense comprises of current, deferred and fringe benefit tax. Current income tax and fringe benefit tax is measuredat the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act and in theoverseas branches as per the respective tax laws. Deferred income tax reflects the impact of current year timing differencesbetween taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferredtax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date.Deferred tax assets and deferred tax liabilities across various countries of operation are not set off against each other asthe Company does not have a legal right to do so. Deferred tax assets are recognized only to the extent that there isreasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can berealized. If the Company has carry forward of unabsorbed depreciation and tax losses, deferred tax assets are recognisedonly if there is virtual certainty that such deferred tax assets can be realized against future taxable profits. Unrecognizeddeferred tax assets of earlier years are re-assessed and recognized to the extent that it has become reasonably certain thatfuture taxable income will be available against which such deferred tax assets can be realized.

(l) Lease transactions

Where the Company is the lessee

Finance Leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownershipof the leased item, are capitalized at the lower of the fair value and present value of the minimum lease payments at theinception of the lease term and disclosed as leased assets. Lease payments are apportioned between the finance chargesand reduction of the lease liability based on the implicit rate of return. Finance charges are charged directly againstincome. Lease management fees, legal charges and other initial direct costs are capitalized. If there is no reasonablecertainty that the Company will obtain the ownership by the end of the lease term, capitalized leased assets are depreciatedover the shorter of the estimated useful life of the asset or the lease term.

Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, areclassified as operating leases. Operating lease payments are recognized as an expense in the Profit and Loss Account ona straight line basis over the lease term.

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Where the Company is the lessor

Assets given under operating leases are included in fixed assets. Lease income is recognised in the Profit and Loss Accounton a straight-line basis over the lease term. Costs, including depreciation are recognised as expense in the Profit and LossAccount. Initial direct costs such as legal costs, brokerage costs, etc. are recognised immediately in the Profit and LossAccount.

(m) Accounting for joint ventures

Accounting for joint ventures undertaken by the Company has been done as follows :

Type of Joint Venture Accounting Treatment

Jointly Controlled Operations Company’s share of revenues, expenses, assets and liabilities areincluded in the financial statements as Revenues, Expenses, Assetsand Liabilities respectively.

Jointly Controlled Entities Company’s investment in joint ventures is reflected as investmentand accounted for in accordance with para (f) above.

(n) Segment reporting policies

Identification of segments

The Company’s operating businesses are organized and managed separately according to the nature of products andservices provided, with each segment representing a strategic business unit that offers different products and servesdifferent markets. The analysis of geographical segments is based on the areas in which major operating divisions of theCompany operate.

Unallocated items

General corporate income and expense items are not allocated to any business segment.

(o) Earnings per share

Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders bythe weighted average number of equity shares outstanding during the year. Partly paid equity shares are treated as afraction of an equity share to the extent that they were entitled to participate in dividends relative to a fully paid equityshare during the reporting year. The weighted average number of equity shares outstanding during the reported yearsare adjusted for the events of bonus issue.

For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholdersand the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutivepotential equity shares.

(p) Provisions

A provision is recognized when an enterprise has a present obligation as a result of past event and it is probable that anoutflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made.Provisions are not discounted to its present value and are determined based on best estimate required to settle theobligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the currentbest estimates.

(q) Employee Stock Options

The Company accounts for stock compensation expenses, if any, arising on employee stock option based on the fair valuemethod.

3 SEGMENT INFORMATION

Business Segments:

As of March 31, 2006, the Company organized its operations into two major businesses: Engineering & Construction andInternet Services. A description of the types of products and services provided by these segments is given in Note on Natureof Operations.

81


Further information about above segments is given below:

Rs. in ‘000

Engineering & Internet Services Corporate unallocable Totalconstruction expenses

2005-06 2004-05 2005-06 2004-05 2005-06 2004-05 2005-06 2004-05

External Segment Revenue 13,550,943 14,286,472 323,407 332,603 156,012 305,305 14,030,362 14,924,380

Less: Internal Segments – 232 – – – – – 232

Segment Revenue 13,550,943 14,286,240 323,407 332,603 156,012 305,305 14,030,362 14,924,148

Segment Results 1,933,579 1,261,567 (45,818) (94,651) (1,324,842) (1,051,973) 562,919 114,943

Segment Assets 15,413,365 11,374,341 921,573 1,414,267 3,184,543 1,162,515 19,519,481 13,951,123

Segment Liabilities 3,618,907 2,514,146 128,527 120,321 5,076,818 6,485,077 8,824,252 9,119,544

Capital Expenditure 1,599,981 610,520 24,638 14,798 195,695 109,841 1,820,314 735,159

Depreciation/Amortisation 339,928 485,997 70,435 70,459 181,537 161,363 591,900 717,819

Non Cash Expenses – 9,676 – – 210 – 210 9,676

Reconciliation of Reportable Segments with the Financial Statements

Revenues Results Assets Liabilities

2005-06 2004-05 2005-06 2004-05 2005-06 2004-05 2005-06 2004-05

Total of reportable segments 14,030,362 14,924,148 562,919 114,943 19,519,481 13,951,123 8,824,252 9,119,544

Less : Corporate –unallocated : Taxes – – (211,449) (33,511) – – – –

As per segment 14,030,362 14,924,148 351,470 81,432 19,519,481 13,951,123 8,824,252 9,119,544

As per Financial Statements 14,030,362 14,924,148 351,470 81,432 19,519,481 13,951,123 8,824,252 9,119,544

Geographical Segments*:

Although the Company’s major operating divisions are managed on a worldwide basis, they operate in two principal geographicalareas of the world, in India, its home country, and the other countries.

The following table presents revenue and debtors regarding geographical segments for the year ended March 31, 2006 andMarch 31, 2005.

Sales Revenue by Debtors (including retention money) byGeographical Market Geographical Market

2005-06 2004-05 2005-06 2004-05Rs. in ‘000 Rs. in ‘000 Rs. in ‘000 Rs. in ‘000

India 9,673,404 8,852,080 2,679,425 2,394,708

Other countries 4,356,958 6,072,068 1,105,409 786,381

14,030,362 14,924,148 3,784,834 3,181,089

* The Company has common assets for servicing Domestic Market and Overseas Markets. Hence, separate figures for assets/additions to assetscannot be furnished.

4 Names of related parties

Subsidiary Companies Spectra Punj Lloyd LimitedPunj Lloyd Insulations LimitedPunj Lloyd(Malaysia)SDN, BHDPunj Lloyd IncPunj Lloyd International LimitedPunj Lloyd Kazakhstan LLPSpectra Infrastructure LimitedAtna Investments Limited

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Spectra Net Limited

Spectra Punjab Limited

PT Punj Lloyd Indonesia

Spectra Net Holdings Limited

PLN Construction Limited (w.e.f October 25, 2004)

Joint Ventures Thiruvananthpuram Road Development Company Limited

Punj Lloyd - Limak JV

Punj Lloyd - Progressive Construction JV

Persys-Punj Lloyd JV

Punj Lloyd-PT Punj Lloyd Indonesia JV

Punj Lloyd - Sunil Hi-tech Engineers JV (w.e.f April 29, 2005)

Rajamundry Expressway Limited (Upto January 31, 2005)

Andhra Expressway Limited (Upto January 31, 2005)

North Karnataka Expressway Limited (Upto March 19, 2005)

PLN Construction Limited (Upto October 24, 2004)

Associates Bistro Hospitality Private Limited

Jacob Ballas Capital India Private Limited (Upto December 31, 2004)

Vadodara Halol Toll Road Company Limited (Upto March 19, 2005)

Key Managerial Personnel

Atul Punj Chairman & Managing Director

V.K. Kaushik Joint Managing Director and Chief Operating Officer

Luv Chhabra Director Finance & Corporate Affairs

Uday Punj Wholetime Director (upto December 30, 2005)

Mahinder Prakash Wholetime Director (upto October 31, 2004)

P.K. Gupta Wholetime Director (upto July 19, 2005)

V.K. Sud Wholetime Director (upto July 19, 2005)

Tarwinder Singh Wholetime Director (upto December 30, 2005)

H.K. Kaul Wholetime Director (from July 19, 2005 to December 30, 2005)

Relatives of Key Managerial Personnel

S.N.P. Punj - Father of Chairman and Managing director

Arti Singh - Sister of Chairman and Managing director

Saroj Gupta - Wife of a Director (upto July 19, 2005)

Paresh Gupta - Son of a Director (upto July 19, 2005)

Enterprises over which relatives of Key Managerial Personnel are exercising significant influence.

Punj Business Centre – owned by father of Chairman and Managing Director

M. Parkash-HUF - A Director’s HUF (Upto October 31, 2004)

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Subsidiaries Joint Ventures Associates Key Enterprisesmanagement over which Total

personnel relatives ofor their Key Managerialrelatives Personnel are

excercisingsignificant influence

(Rs. in ‘000) (Rs. in ‘000) (Rs. in ‘000) (Rs. in ‘000) (Rs. in ‘000) (Rs. in ‘000)

2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005INCOME

Contract RevenuePLN Construction Limited 51,521 28,343 - - - - - - - - 51,521 28,343Thiruvananthapuram Road DevelopmentCompany Limited - - 67,279 284,256 - - - - - - 67,279 284,256Andhra Expressway Limited - - - 431,636 - - - - - - - 431,636North Karnataka Expressway Limited - - - 900,799 - - - - - - - 900,799Vadodra Halol Toll Road Limited - - - - - 18,541 - - - - - 18,541Sales - ExportPunj Lloyd Kazakhstan LLP 543 13,955 - - - - - - - - 543 13,955RentSpectra Punj Lloyd Limited 782 782 - - - - - - - - 782 782PLN Construction Limited 720 720 - - - - - - - - 720 720Spectra Net Limited - 3,600 - - - - - - - - - 3,600Punj Lloyd Insulations Limited 626 626 - - - - - - - - 626 626Hire ChargesSpectra Punj Lloyd Limited 29,307 13,382 - - - - - - - - 29,307 13,382PLN Construction Limited - 8,427 - - - - - - - - - 8,427Punj Lloyd Kazakhstan LLP - 34,304 - - - - - - - - - 34,304Management FeesPunj Lloyd Kazakhstan LLP - 112,527 - - - - - - - - - 112,527InterestPunj Lloyd Kazakhstan LLP 7,347 - - - - - - - - - 7,347 -OthersPunj Lloyd (Malaysia) Sdn. Bhd. - 6,327 - - - - - - - - - 6,327PLN Construction Limited 5,616 11,980 - - - - - - - - 5,616 11,980Spectra Net Limited - 2,216 - - - - - - - - - 2,216Dividend income from long term investmentsPLN Construction Limited - - - 4,500 - - - - - - - 4,500

EXPENDITURE

Contractors ChargesPunj Lloyd Insulations Limited 52,019 28,397 - - - - - - - - 52,019 28,397PT Punj Lloyd Indonesia 294,476 - - - - - - - - - 294,476 -Punj Lloyd International - 3,390 - - - - - - - - - 3,390Spectra Punj Lloyd Limited - 22,927 - - - - - - - - - 22,927PLN Construction Limited 19,729 - - - - - - - - - 19,729 -Material ConsumedPunj Lloyd Insulations Limited 10,145 1,142 - - - - - - - - 10,145 1,142Hire ChargesSpectra Punj Lloyd Limited 34,810 53,358 - - - - - - - - 34,810 53,358Financial ChargesPunj Lloyd Inc. - 409 - - - - - - - - - 409Consultancy/Professional ChargesPunj Lloyd International 54,950 - - - - - - - - - 54,950 -SNP Punj - - - - - - 60 60 - - 60 60Managerial RemunerationV. K. Kaushik - - - - - - 6,673 3,895 - - 6,673 3,895Luv Chhabra - - - - - - 6,666 3,759 - - 6,666 3,759Uday Punj - - - - - - 4,508 3,247 - - 4,508 3,247Mahinder Prakash - - - - - - 160 1,928 - - 160 1,928P. K. Gupta - - - - - - 1,579 2,422 - - 1,579 2,422V. K. Sud - - - - - - 2,044 2,312 - - 2,044 2,312Tarwinder Singh - - - - - - 2,778 1,882 - - 2,778 1,882H. K. Kaul - - - - - - 1,582 - - - 1,582 -RentPunj Business Center - - - - - - - - 22,527 22,827 22,527 22,827M. Prakash HUF - - - - - - - - - 300 - 300Saroj Gupta - - - - - - - 91 - - - 91Arti Singh - - - - - - - 40 - - - 40Paresh Gupta - - - - - - - 104 - - - 104

RELATED PARTY DISCLOSURES

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2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005

ASSETS

Inventory SoldPunj Lloyd Kazakhstan LLP 6,048 - - - - - - - - - 6,048 -Fixed Assets SoldPT Punj Lloyd Indonesia 33,720 - - - - - - - - - 33,720 -Punj Lloyd Kazakhstan LLP 126,633 - - - - - - - - - 126,633 -Fixed Assets PurchasedSpectra Punj Lloyd Limited 2,219 2,242 - - - - - - - - 2,219 2,242Share issue expensesJacob Ballas Capital India Private Limited - - - - - 34,275 - - - - - 34,275Investment made during the yearPLN Construction Limited - 20,896 - - - - - - - - - 20,896PT Punj Lloyd Indonesia 159,990 109 - - - - - - - - 159,990 109Thiruvananthapuram Road DevelopmentCompany Limited - 250 - - - - - - - - - 250Andhra Expressway Limited - - - 17,000 - - - - - - - 17,000Rajamundry Expressway Limited - - - 13,000 - - - - - - - 13,000Punj Lloyd Kazakhstan LLP 358,740 - - - - - - - - - 358,740 -Investment sold during the yearRajahmundry Expressway Limited - - - 108,025 - - - - - - - 108,025Andhra Expressway Limited - - - 108,025 - - - - - - - 108,025North Karnataka Expressway Limited - - - 173,636 - - - - - - - 173,636Jacob Ballas Capital India Private Limited - - - - - 1,000 - - - - - 1,000Bistro Hospitality Private Limited - - - - 4,018 - - - - - 4,018 -

OTHERS

Bank Guarantees Issued during the yearPT. Punj Lloyd Indonesia 1,245,522 - - - - - - - - - 1,245,522 -Thiruvananthapuram Road Development - - - 25,000 - - - - - - - 25,000Company LimitedBank Guarantees redeemed during the yearPunj Lloyd Kazakhstan LLP - 27,137 - - - - - - - - - 27,137Corporate Guarantees Issued during the yearSpectra Punj Lloyd Limited 36,691 15,368 - - - - - - - - 36,691 15,368Punj Lloyd Kazakhstan LLP 450,314 1,687,258 - - - - - - - - 450,314 1,687,258Punj Lloyd Insulations Limited 30,000 - - - - - - - - - 30,000 -PT. Punj Lloyd Indonesia 1,358,424 1,254,548 - - - - - - - - 1,358,424 1,254,548Corporate Guarantees redeemed during the yearPunj Lloyd Kazakhstan LLP 1,309,849 - - - - - - - - - 1,309,849 -Bistro Hospitality Private Limited - - - - - 16,000 - - - - - 16,000Share application money givenPunj Lloyd Kazakhistan LLP - 13,104 - - - - - - - - - 13,104Andhra Expressway Limited - - - 111,000 - - - - - - - 111,000Rajamundry Expressway Limited - - - 119,000 - - - - - - - 119,000Thiruvananthapuram Road DevelopmentCompany Limited 130,001 - - - - - - - - - 130,001 -BALANCE OUTSTANDING AS AT MARCH 31, 2006Receivable/(payables)Spectra Net Limited 9,606 11,038 - - - - - - - - 9,606 11,038Spectra Punj Lloyd Limited (4,564) (63,372) - - - - - - - - (4,564) (63,372)Punj Lloyd Insulations Limited (14,239) (8,924) - - - - - - - - (14,239) (8,924)PT Punj Lloyd Indonesia (20,535) 5,068 - - - - - - - - (20,535) 5,068Punj Lloyd (Malaysia) Sdn. Bhd. (58,735) (44,141) - - - - - - - - (58,735) (44,141)Punj Lloyd Inc. 15,779 6,976 - - - - - - - - 15,779 6,976Punj Lloyd International (11,126) (5,244) - - - - - - - - (11,126) (5,244)Punj Lloyd Kazakhistan LLP 13,318 39,377 - - - - - - - - 13,318 39,377PLN Construction Limited 49,224 47,509 - - - - - - - - 49,224 47,509Thiruvananthapuram Road DevelopmentCompany Limited - - 9,481 87,114 - - - - - - 9,481 87,114

RELATED PARTY DISCLOSURES (CONTINUED)

85






2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005LoansPunj Lloyd Kazakhstan LLP 323,349 - - - - - - - - - 323,349 -Spectra Net Holding Limited (8,500) - - - - - - - - - (8,500) -InvestmentsPunj Lloyd Inc. 8,493 8,493 - - - - - - - - 8,493 8,493Punj Lloyd International Limited 4,452 4,452 - - - - - - - - 4,452 4,452Spectra Infrastructure Limited 115,002 115,002 - - - - - - - - 115,002 115,002Punj Lloyd Insulations Limited 2,552 2,552 - - - - - - - - 2,552 2,552Spectranet Limited 17,061 17,061 - - - - - - - - 17,061 17,061Atna Investments Limited 39,922 39,922 - - - - - - - - 39,922 39,922Punj Lloyd Kazakhistan LLP 362,798 4,058 - - - - - - - - 362,798 4,058Punj Lloyd (Malaysia) Sdn. Bhd. 44,141 44,141 - - - - - - - - 44,141 44,141PLN Construction Limited 30,896 30,896 - - - - - - - - 30,896 30,896Spectra Punjab Limited 8,000 8,000 - - - - - - - - 8,000 8,000PT Punj Lloyd Indonesia 170,900 10,910 - - - - - - - - 170,900 10,910Spectra Punj Lloyd Limited 48,675 48,675 - - - - - - - - 48,675 48,675Thiruvananthapuram Road DevelopmentCompany Limited - - 250 250 - - - - - - 250 250Bistro Hospitality Private Limited - - - - 28,782 32,800 - - - - 28,782 32,800Bank GuaranteesPt. Punj Lloyd Indonesia 1,496,138 250,616 - - - - - - - - 1,496,138 250,616Punj Lloyd - Progressive Construction JV - - 154,640 154,640 - - - - - - 154,640 154,640Thiruvananthapuram Road DevelopmentCompany Limited - - 25,000 25,000 - - - - - - 25,000 25,000Corporate GuaranteesSpectra Punj Lloyd Limited 142,274 105,583 - - - - - - - - 142,274 105,583Punj Lloyd Kazakhstan LLP 902,736 1,762,271 - - - - - - - - 902,736 1,762,271Punj Lloyd Insulations Limited 52,500 22,500 - - - - - - - - 52,500 22,500PT. Punj Lloyd Indonesia 3,827,721 2,469,297 - - - - - - - - 3,827,721 2,469,297Bistro Hospitality Private Limited - - - - 68,000 68,000 - - - - 68,000 68,000

RELATED PARTY DISCLOSURES (CONTINUED)

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5 Interest in joint ventures:

The Company’s interest and share in joint ventures in the jointly controlled entities/operations are as follows:

a) List of joint ventures

S. Name of Joint Ventures Description of Nature of Project Ownership Country ofNo. Interest Interest Incorporation

Or residence

1 Thiruvananthapuram Road Jointly Controlled Thiruvananthapuram City 50% IndiaDevelopment Company Limited Entity Improvement

2 Punj Lloyd-Progressive Jointly Controlled 6 Laning of Jaipur By pass See Note (a) **Constructions JV Operations

3 Persys-Punj Lloyd JV Jointly Controlled Construction of Elevated See Note (a) **Operations Viaduct from Kirti Nagar

to Tilak Nagar, Delhi

4 Punj Lloyd-PT Punj Lloyd Jointly Controlled 36" Uran-Trombay See Note (a) **Indonesia JV Operations Jawahardweep oil pipeline

and 30" oil pipeline fromTee off at Sheva South toJNPT Project

5 Punj Lloyd - Limak JV Jointly Controlled Construction of Baku 50% **Operations Tiblisi Ceyhan Crude Oil

Pipeline Project in Turkey

6 Punj Lloyd - Sunil Hi-tech Jointly Controlled Civil, Structural & See Note (a) **Engineers JV Operations Architectural Works for

1000 MW Raigarh ThermalPower Plant

7 Rajamundry Expressway Jointly Controlled 4 Laning of a Section See Note (b) IndiaLimited (REL)* Entity of NH-5

8 Andhra Expressway Jointly Controlled 4 Laning of a Section See Note (b) IndiaLimited (AEL)* Entity of NH-5

9 PLN Construction Jointly Controlled HDD Operations in India See Note (b) IndiaLimited (PLN)* Entity

10 North Karnataka Expressway Jointly Controlled 4 Laning of Belgaum- See Note (b) IndiaLimited (NKEL)* Entity Maharashtra Border

on NH-4* Only for part of the year ended March 31, 2005** Country of Incorporation not applicable, as these are Unincorporated Joint Ventures

Note: (a) The Company has entered into Joint Ventures with :(i) Progressive Constructions Limited for 6 Laning of Jaipur By-pass,(ii) Persys SDN,BHD for Construction of Elevated Viaduct from Kirti Nagar to Tilak Nagar, Delhi,(iii) PT Punj Lloyd Indonesia for laying of 36" Uran-Trombay Jawahardweep oil pipeline and 30" oil pipeline from Tee

off at Sheva South to JNPT Project.(iv) Sunil Hitech Engineers Limited for execution of Civil, Structural & Architectural Works for 1000 MW Raigarh

Thermal Power Plant at Raigarh, Chhattisgarh.As per joint venture agreements, the scope & value of work of each partner has been clearly defined and accepted bythe clients. The Company’s share in Assets, Liabilities, Income and Expenses are duly accounted for in the accounts ofthe Company in accordance with such division of work and therefore does not require separate disclosure. However,joint venture partners are jointly & severally liable to clients for any claims in these projects.

(b) (i) AEL & REL have ceased to be jointly control entities w.e.f. January 31, 2005. Prior to this date, ownership interestof the Company was 50%.

(ii) NKEL has ceased to be jointly control entity w.e.f. March 19, 2005. Prior to this date, ownership interest of theCompany was 42%.

(iii) PLN has ceased to be jointly control entity w.e.f. October 24, 2004. Prior to this date, ownership interest of theCompany was 50%.

87


b) Financial interest in jointly controlled entitiesRs. in ‘000

Company’s Share of

S. No Name of Joint Ventures Assets Liabilities Income Expenditure Tax Capital ContingentEntity Commitments Liabilities

1 Thiruvananthapuram Road 471,266 471,016 - - - @ -Development Company Limited (353,877) (353,627) (-) (-) (-) (-) (-)

2 Rajamundry Expressway Limited* - - - - - - -(-) (-) (-) (-) (-) (-) (-)

3 Andhra Expressway Limited* - - - - - - -(-) (-) (-) (-) (-) (-) (-)

4 PLN Construction Limited * - - - - - - -(-) (-) (-) (-) (-) (-) (-)

5 North Karnataka Expressway - - - - - - -Limited * (-) (-) (-) (-) (-) (-) (-)

* Only for part of the year ended March 31, 2005

Notes

1) Figures in bracket relate to previous year

2) In respect of jointly controlled entity, the Company’s share of Assets, Liabilities, Income and Expenditure have been includedon the basis of unaudited financial statements received from the joint venture.

@ Capital Commitments - Estimated amount of contracts remaining to be executed on capital account and not provided for(net of advances) Rs. 593,485 thousand (previous year Rs. 667,920 thousand).

6. Capital Commitments2005-06 2004-05

Rs. in ‘000 Rs. in ‘000

Estimated amount of contracts remaining to be executed 581,445 48,859on capital account and not provided for (net of advances)

7. Contingent liabilities not provided for :2005-06 2004-05

Rs. in ‘000 Rs. in ‘000

a) i) Bank Guarantees given by the Company 322,175 331,332

ii) Bank Guarantees given on behalf of subsidiaries and joint ventures 1,377,163 154,640

b) Liquidated damages deducted by customers not accepted by the Companyand pending final settlement.(Refer Note 11 (b) below) 449,558 447,451

c) Corporate Guarantees given on behalf of subsidiaries, joint ventures and associates 4,993,231 4,427,651

d) Differential amount of custom duty in respect of machinery importedunder EPCG Scheme. 89,483 67,126

7,231,610 5,428,200

e) Estimated future investments in joint venture & other companies in terms of respective shareholder agreements amountingin aggregate to Rs. 1,220,049 thousand (previous year Rs. 170,050 thousand).

f) (i) Sales tax demand on the material components of the works contracts pending with Sales Tax Authorities and HighCourt amounting to Rs. 141,866 thousand (previous year Rs. 121,504 thousand)*

(ii) Sales tax demand for non submission of statutory forms aggregating to Rs. 66,006 thousand (previous yearRs. 62,337 thousand)*

(iii) Sales tax demand for disallowance of deduction on purchase aggregating to Rs. 43,619 thousand (previous yearRs. 3,645 thousand)*

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(iv) Sales Tax liability of Rs. 31,146 (previous year Nil) for purchases against sales tax forms not accepted by department*

(v) Sales tax demand of Rs. 21,178 thousand (previous year Rs. 21,214 thousand) in respect of Internet Service Divisionregarding taxability of internet services. The same is contested by the company in view of similar matter decided bythe Hon’ble Supreme Court of India in the case of Bharat Sanchar Nigam Ltd & another Vs Union of India & otherswherein it was held that internet services are not taxable as goods.*

g) The Company has not acknowledged as debt a claim lodged by one of its suppliers amounting to Rs. 5,082 thousand(previous year Rs. 5,082 thousand) on account of services rendered in earlier years. The matter is under arbitration.*

*Based on favourable decisions in similar cases/legal opinions taken by the Company/consultations with solicitors, themanagement believes that the Company has a good chance of success in above mentioned cases and hence, no provisionthere against is considered necessary.

8. Details of assets acquired on hire purchase and finance leases

2005-06 2004-05Rs. in ‘000 Rs. in ‘000

Gross block at the end of year 359,207 182,938

Written down value at the end of year 324,415 144,904

Details of payments made during the period :

Principal 43,967 172,042

Interest 9,343 46,452

The break-up of minimum hire purchase payments outstanding as at March 31, 2006 is as under

As at March 31, 2006

Principal Interest TotalRs. in ‘000 Rs. in ‘000 Rs. in ‘000

Payable within one year 78,811 18,971 97,782

Payable after one year but before end of fifth year 213,031 28,447 241,478

291,842 47,418 339,260



Payable within one year 36,235 6,655 42,890

Payable after one year but before end of fifth year 30,211 1,984 32,195

66,446 8,639 75,085

The hire purchase term is between 3 to 5 years. There is no escalation clause in the hire purchase agreements. Also there is norestriction imposed by the hire purchase agreements.

9. Particulars of balances with non Scheduled banks with whom the Company had dealings during the year are as follows:

Name of bank Balance as at March 31, 2006 Balance as at March 31, 2005

Rs. In ‘000 Maximum balance Rs. In ‘000 Maximum balanceduring the year during the year

(Rs in ‘000) (Rs in ‘000)

Balances in Current Accounts:

Hongkong & Shanghai Banking 198 206 203 211Corporation, Jakarta

Standard Chartered Bank, Jakarta 553 554 535 541

Mashreq Bank Abu Dhabi 1,069 33,628 17,049 49,978

Mashreq Bank – Fuji Proj 167 169 – –

Dubai Islamic Bank – Current Account 55 6,737 – –

Dubai Islamic Bank – General Account 539 608 – –

National Bank of Abu Dhabi – USD 5,445 22,420 – –

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Name of bank Balance as at March 31, 2006 Balance as at March 31, 2005

Rs. In ‘000 Maximum balance Rs. In ‘000 Maximum balanceduring the year during the year

(Rs. in ‘000) (Rs. in ‘000)

National Bank of Abu Dhabi - AED 42,345 46,284 – –

Mashreq Bank – Qatar 771 16,085 1,155 22,477

Mashreq Bank – Oman – – 1,758 66,508

Garanti Bank-Turkey 268 137,738 9,456 29,487

UCO Bank- Singapore 220,749 239,499 – –

UCO Bank- Singapore 308,700 402,865 – –

Bank of Comerce & Development Tripoli- Libya 1,370 6,667 – –

SBI, Singapore 928 8,909 102 128,237

Balances in Fixed Deposits :

Mashreq Bank Abu Dhabi 13,680 59,910 59,910 59,910

State Bank of India, Singapore – 91,817 91,817 92,581

10. During the year, the Company has accounted for the credit on account of Duty Free Credit Entitlement on the revenuesearned in foreign exchange on accrual basis as against the hitherto followed practice of accounting for the same on receiptbasis in earlier years. Consequent to this change, the Company has accrued an additional income of Rs. 106,134 thousandduring the year.

As a result of the above, profit for the year before tax has gone up by Rs. 106,134 thousand.

11. (a) The Company had executed two projects of Sulphur Recovery Units (SRU) of Indian Oil Corporation Limited (IOCL) attheir refineries at Mathura and Vadodara in an earlier year on back to back basis for Petrofac International Limited (PIL)who was the main contractor. IOCL had withheld payments from PIL on account of duties and taxes and PIL had in turnwithheld Rs. 297,734 thousand (previous year Rs. 296,214 thousand) in an earlier year, which are outstanding as debts atthe close of the period. PIL had gone into arbitration against IOCL and lodged claims for recovery of above amount alongwith interest and also some other claims amounting to Rs.387,034 thousand (previous year Rs 387,034 thousand). Theseclaims of Rs. 387,034 thousand have not been accounted for in the books except to the extent stated in Note 13 below.Pending outcome of arbitration, amount withheld by PIL is being carried forward under sundry debtors. The Companyhas been legally advised that in terms of the contract, it is entitled to receive the above amount and hence, the same isconsidered good of recovery.

(b) The Company had executed a pipeline project at Dahej- Vijaypur for Gas Authority of India Limited (GAIL) in an earlieryear. GAIL had withheld Rs. 423,707 thousand (previous year Rs. 422,591 thousand) as liquidated damages and Rs.40,441 thousand (previous year Rs. 40,297 thousand) towards other deductions, which the Company is disputing. Also,the Company has filed some other claims with GAIL amounting to Rs. 999,004 thousand (previous year Rs. 999,004thousand). These claims have not been accounted for in the books. The Company had gone into arbitration against GAILfor recovery of amount withheld as liquidated damages & other deductions and claims of the Company. Pending outcomeof arbitration, amount withheld for liquidated damages & other deductions are being carried forward under sundrydebtors. The Company has been legally advised that there is no justification in imposition of liquidated damages andother deductions by GAIL and hence the above amount is considered good of recovery.

(c) The Company had executed a pipeline project for Petronet MHB Limited in an earlier year. The customer had withheldRs. 4,440 thousand (previous year Rs. 4,440 thousand) from the running bills, which are being carried forward undersundry debtors. The customer had also not certified the final bill amounting to Rs. 64,000 thousand (previous yearRs.64,000 thousand) which is being carried forward under work in progress. The Company had raised claims forRs. 517,387 thousand (previous year Rs. 517,387 thousand), which are not accounted for in the books. For recovery ofthe said amounts, which are being disputed by the customer, the Company has initiated Arbitration proceedings. Theoutstanding amounts are considered good of recovery.

12. The Company in the previous year had raised variation orders of Rs. 1,490,000 thousand (previous year Rs. 1,468,000 thousand)on Spie Capag-Petrofac International Limited (SCPIL) with whom the Company had entered into a contract for construction ofpipelines in Georgia. SCPIL had raised debit notes of Rs. 477,400 thousand (previous year Rs. 466,700 thousand) on theCompany. These variations orders and debit notes are being disputed and have not been agreed between the management ofthe Company and SCPIL. However, the ultimate outcome of the dispute cannot presently be determined by the Company.Accordingly these variation orders and debit notes have not been recorded in these financial statements. An amount of

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Rs. 378,016 thousand including Rs. 301,016 thousand in respect of invoices raised and Rs. 77,000 thousand in respect of debitnotes (previous year Rs. 281,100 thousand and Rs. 75,500 thousand respectively) is withheld by SCPIL in view of the disputes.This amount is being carried forward under sundry debtors and is considered good of recovery.

SCPIL has purported to serve a notice of suspension to the Company by letter dated February 22, 2005 and a notice ofintention to Terminate Subcontract Agreement for Default dated March 28, 2005. The Company does not accept that thegrounds for service of the Notices are valid.

13. As stated in Note 11 (a) above, the Company has initiated the arbitration proceedings for recovery of withheld amounts andother claims including interest. The arbitration proceedings are in advanced stages and the Company has been advised legallythat it is entitled to the recovery of amount withheld as stated in Note 10(a) alongwith interest. Accordingly, the Company,during the year, has taken a credit for interest of Rs. 14,632 thousand (previous year Rs. 65,659 thousand) on conservativeestimated basis on the aforesaid withheld amount.

14. The Company in the previous year had made commitment to give donation to Pt. Kanhya Lal Dayawanti Punj CharitableSociety amounting to Rs. 55,580 thousand in a phased manner over a period of two years vide a resolution passed in themeeting of Board of Directors dated December 20, 2004. Out of above, the Company has contributed Rs. 14,980 thousand(previous year Rs. 3,230 thousand) till the close of the year.

15. The disclosures as per provisions of Clauses 38, 39 and 41 of Accounting Standard 7 issued by Institute of Chartered Accountantsof India are as under:

2005-06 2004-05Rs. in ‘000 Rs. in ‘000

a) Contract revenue recognised as revenue in the period Clause 38 (a) 13,118,222 13,821,543

b) Aggregate amount of costs incurred and recognised profits up to thereporting date on Contract under progress Clause 39 (a) 28,932,256 19,639,742

c) Advance received on Contract under progress Clause 39 (b) 826,695 449,347

d) Retention amounts on Contract under progress Clause 39 (c) 148,219 205,520

e) Gross amount due from customers for contract work as an asset Clause 41(a) 5,682,671 3,392,634

f) Gross amount due to customers for contract work as a liability Clause 41 (b) 210,033 11,396

16. (a) The Company alongwith one of its subsidiaries, Atna Investments Limited have invested Rs. 53,313 thousand in equityshares of Spectranet Limited (SNL), a subsidiary company engaged in the business of providing Cable TV services. Also,another subsidiary of the Company, Spectra Infrastructure Ltd, has also given share application amounting to Rs. 45,791thousand to SNL. SNL has been incurring losses and a substantial portion of its networth has been eroded. However,based on valuation of SNL done by a valuer and in view of this being a long term strategic investment, the managementdoes not feel the necessity of making a provision against the above investment at this stage.

(b) The Company has invested Rs. 8,000 thousand in equity shares of Spectra Punjab Limited (SPL), a subsidiary company,which in earlier years had laid down optical fiber cable and ducts network in the State of Punjab for providing broad bandservices. Also, another subsidiary of the Company, Spectra Infrastructure Ltd, has also given share application amountingto Rs. 52,175 thousand to SPL. SPL operations remain suspended presently. However, the Company proposes to use itsown internet service network to restart the operations of SPL. Based on the valuation of assets of SPL done by a valuer, themanagement does not feel the necessity of making a provision against the above investment at this stage.

17. The shareholders of the Punj Lloyd (Malaysia) SDN, BHD (a subsidiary company incorporated in Malaysia) at an Extraordinarygeneral meeting held on 25th April, 2005, passed a special resolution for the voluntary winding up in accordance with theprovisions of the Companies Act of that country. Accordingly, adjustments had been made in the previous year to the valuesof the assets of that entity so as to adjust their carrying amounts to their estimated realisable amounts and to provide forfurther liabilities which may arise.

18. The Company has decided to wind up its subsidiary Punj Lloyd Inc., USA w.e.f. 31st December, 2005. The process of windingup is being carried out in accordance with laws of that Country. Losses arising on winding up have already been provided forin the financial statements.

19. The Company has invested Rs. 200,000 thousand in the Share Capital of Global Health Private Limited (GHPL) comprising of23.88% of the Share Capital of GHPL. The Shareholders and Subscription agreement provides that GHPL shall issue furthershares to other shareholders and the Company’s holding in GHPL shall get diluted to 16%. GHPL has made the allotment ofshares to other shareholders after the date of Balance Sheet and the Company’s shareholding in GHPL is reduced to 16%. The

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Company does not have any significant influence in the operations of GHPL and accordingly the investment in GHPL is notconsidered as investment in Associates.

20. Current Assets include Rs. 4,225 thousand recoverable pursuant to agreements for sale of 1,28,400 shares of PanasonicBattery India Company Limited (Formerly known as Lakhanpal National Limited) entered into on March 27,1992, which aresubject matter of a dispute in the Honourable High Court at Bombay, wherein the Company has been restrained from transferringthese shares till the final disposal of the suit. These shares remain in the possession of the Company and the market valuethereof at close of the year is Rs. 9,309 thousand (previous year Rs. 6,259 thousand).

21. During the previous year, the Company had entered into agreements to sell its investments in the shares of certain Companiesof the cost of Rs. 111,974 thousand and had received advances representing consideration for the future sale of shares (asdefined in the above agreements) in these companies, including all accretions thereto till the date of sale. Through the aboveagreements to sell, the Company had agreed to give all the powers and rights in these shares to purchasers. In terms of theabove arrangement, the Company in the previous year had accounted for Rs. 20,300 thousand, being the amount received inexcess of book vale of shares (for all the companies) as income on transfer of the powers and rights in the underlying shares topurchasers and the balance consideration of Rs. 111,974 thousand equivalent to the amount of investment in above sharesappearing in the books is shown as deposit under Current Liabilities to be adjusted against the sale of shares in the abovecompanies on the date of sale.

22. The Company in an earlier year had entered into an Assets Sale Agreement for sale of its certain fixed assets relating to ISPundertaking. The sale tax liability on such transaction is subject to determination by the relevant authorities for which anapplication is pending adjudication. The amount of such liability is indeterminable at present. As per agreement with thebuyer, any such sale tax liability is to be borne by the buyer. Consequently, aforesaid sale tax liability on such transactions hasnot been provided for. (previous year - Nil)

23. The small scale and ancillary undertakings have been identified by the Company from the available information, which hasbeen relied upon by the auditors. According to such identification and in the opinion of the management, there is no amountpayable to such undertakings at the close of the year. (previous year Rs. Nil)

24. EARNING PER SHARE

Basic Earnings

2005-06 2004-05

a) Calculation of weighted average number of equity shares of Rs. 10 each

Number of equity shares at the beginning of the period 24,317,127 20,644,800

Equity shares at the end of the period 52,219,836 24,317,127

Weighted average number of equity shares outstanding during the period 43,521,676 35,301,822

(taking into consideration issue of bonus shares in terms of para 24 of AS-20)

b) Net Profit after tax available for equity share holders (Rupees in thousand) 351,470 81,432

c) Basic earning per share 8.07 2.31

Diluted Earnings

2005-06 2004-05

a) Calculation of weighted average number of equity shares of Rs. 10 each

Number of equity shares at the beginning of the period 24,317,127 20,644,800

Equity shares at the end of the period 52,219,836 24,317,127

Weighted average number of equity shares outstanding during the period 45,993,514 N.A

(taking into consideration issue of bonus shares in terms of para 24 of AS-20)

b) Net Profit after tax available for equity share holders (Rupees in thousand) 351,470 81,432

c) Diluted earning per share 7.64 –*

* During the previous year, the Company had issued 917,628 of preference shares convertible into equity shares at a later date. However, theconversion price being not determinable at that time, diluted earning per share could not be computed.

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25. Deferred Tax Liability (Net)Rs in ‘000

Deferred Tax Current Year Deferred TaxAsset/(Liability) (Charge)/ Asset/(Liability)as at April 01, Credit as at March 31,

2005 2006

Deferred Tax Liabilities

Differences in depreciation and other differences in block ofFixed assets as per Income Tax & Financial Books (541,340) 39,752 (501,588)

Effect of expenditure not debited to Profit & Loss Account butallowable in Income Tax (43,646) (22,344 ) (65,990)

Difference in carrying value of Scaffolding as per Income Tax& Financial Books – (6,793) (6,793)

Deferred Tax Assets

Effect of expenditure debited to profit & Loss Account in thecurrent year but allowable in following years under Income Tax 15,417 (5,734) 9,683Provision for Doubtful Debts & Advances 505 (505) –

Disallowance u/s 40(a)(i) – 6,496 6,496

Deferred Tax Liability (Net) (569,064) 10,872 (558,192)

26. During the year, the Company has converted 917,628 preference shares of Rs.10 each into 3,098,296 equity shares of Rs.10each. The Company has capitalized the premium on the conversion by Rs. 21,807 thousand out of Securities Premium Account.

27. During the year, the Company has issued 16,449,239 bonus shares in the ratio of 3:5 to the existing shareholders on September30, 2005 in terms of resolution passed by the Board of Directors on September 30, 2005. For this purpose, the Company hascapitalized Rs.164,492 thousand out of General Reserve.

28. (a) During the year, the Company has made Initial Public Offering (IPO) of 9,172,937 Equity Shares of Rs 10 each for cash atpremium of Rs. 690 per share, comprising of 8,355,174 Equity Shares freshly issued by the Company and 817,763 EquityShares offered for sale by the Selling Shareholders.

(b) Expenses of Rs. 305,097 thousand incurred in connection with the public issue have been adjusted against SecuritiesPremium Account in terms of Section 78 of the Companies Act, 1956

(c) Initial Public Offer (IPO) fund utilization: The Company spent Rs 4,800,927 thousand out of fresh issue of share capital ofRs. 5,848,621 thousand as per the terms of Prospectus dated December 19, 2005

Rs. in ‘000

Particulars Projected Utilisation as per Actual as on Marchthe Prospectus dated 31, 2006

December 19, 2005

Investment in Capital Equipment Up to 1,500,000 705,230

Prepayment of Debts Up to 3,000,000 3,064,170

Equity Investment in Infrastructure Projects, WOS and JVs Up to 500,000 203,510

General Corporate Purposes 522,921 522,920

Offer related expenses 325,700 305,097

Total 5,848,621 4,800,927

Unspent amount of Rs. 1,047,694 thousand is lying in Company’s Cash Credit bank accounts and is shown under WorkingCapital Loan Account from banks.

Unspent IPO proceeds will be used for Equity Investment in Infrastructure Projects, WOS and JVs and Capital Equipment as perthe prospectus.

29. During the year, the Company has introduced Employee Stock Option Scheme (ESOP) named “Stock Option Plan, 2005”, theRemuneration Committee of the Company, on November 11, 2005, has approved grant of 800,000 stock option. The Companyhas determined Rs. 482.16 per share as fair value of the Company’s share as at the date of grant.

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Under ESOP, the Company has granted option(s) equivalent to 800,000 equity shares of the face value of Rs. 10 each atRs. 630 each share (i.e. at 10% discount to the Initial Public Offer (IPO) price) to each of the eligible employees of theCompany. As at March 31, 2006, 643,489 options have been granted to the eligible employees. The stock options shall vestin the ratio of 10%, 20%, 30% and 40% at the end of one, two, three and four years respectively from the date of grant. Theexercise period is three years from the date of vesting. As on March 31, 2006, no stock options have been vested.

30. The following are the details of loans and advances of the Company outstanding at the end of the year in terms ofSecurities & Exchange Board of India’s circular dated January 10, 2003:

(Rs. in ‘000)

Outstanding amount Maximum amountas at outstanding during

the year

March 31, March 31, March 31, March 31,2006 2005 2006 2005

Loans and Advances to Subsidiaries(including accrued interest)

Punj Lloyd Kazakhstan LLP 330,696 26,274 330,696 26,274

All the above loans and advances are repayable on demand.

31. Prior period items debited/(credited) to respective account heads aggregate to Rs. 33,585 thousand (net debit) (previous yearRs. 58,832 thousand (net debit)).

32. The Company has terminated the management services agreement with its subsidiary Punj Lloyd Kazakhstan-LLP w.e.f.April 01, 2005, and accordingly no income in respect thereof has been recorded for the year.

33. Following Non-Trade Investments have been Purchased and Sold during the year:

Sr. Description Units Purchased SoldNo (Rs.’000) (Rs.’000)

Units of Mutual Funds of -

1) Reliance Liquidity Fund - Weekly Dividend Reinvestment Option 18,042,816.246 180,628 180,522

2) Birla Mutual Fund - BCP - Instl. Prem - Weekly Dividend – Reinvestment 14,007,667.581 140,530 140,439

3) DSP Merrill Lynch Liquidity Fund - Weekly Dividend Option 180,440.075 180,653 180,568

4) Prudential ICICI Institutional Liquid Plan - Super Weekly DividendReinvestment Liquidity Fund 5,011,304.95 50,136 50,161

5) JM High Liquidity Fund – Weekly Dividend Reinvestment 4,992,834.685 50,153 50,146

6) Kotak Liquid (Institutional Premium) - Weekly DividendReinvestment Fund 20,110,615.897 201,865 201,957

7) UTI Liquid Cash Institutional - Weekly Income Option Reinvestment 197,887.520 201,422 201,575

Grand Total 62,543,566.954 1,005,387 1,005,368

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34. Additional information pursuant to the provisions of paragraphs 3, 4c and 4d of part (ii) of Schedule VI to the Companies Act,1956.a. Purchases, Sales and Stocks of Equipments in Internet Service Division.

Amount in INR ‘000

Opening Stock Purchases Sales Internal Closing StockConsumption

Qty in Nos. Value Qty in Nos. Value Qty in Nos. Value Qty in Nos. Value

Analog STB 137 1,044 – – – – 137 – –(137) (1,117) (-) (-) (-) (-) (-) (137) (1,044)

Keyboards 95 210 – – – – 95 – –(95) (209) (-) (-) (-) (-) (-) (95) (209)

Digital STB 3 81 – – – – 3 – –(3) (83) (-) (-) (-) (-) (-) (3) (81)

Cable Modem 90 488 212 596 90 349 31 181 789(187) (1,873) (179) (668) (82) (537) (194) (90) (488)

ADSL Router 126 684 382 966 205 714 88 215 698(20) (165) (368) (1,200) (261) (1,438) (1) (126) (684)

ADSL Modem – – 3 104 3 122 – – –(-) (-) (-) (-) (-) (-) (-) (-) (-)

Cable Router 9 49 21 315 3 218 – 27 118(145) (1,972) (19) (421) (14) (414) (141) (9) (49)

Transceivers 63 445 458 1,569 230 1,859 31 260 896(99) (1,704) (285) (1,747) (141) (1,789) (180) (63) (445)

Radios 18 974 9 498 3 247 8 16 872(39) (3,815) (25) (1,875) (16) (1,712) (30) (18) (974)

Mast 4 114 1 38 1 38 – 4 121(5) (177) (1) (34) (2) (28) (-) (4) (114)

Vertex 1501 Router – – – – – – – – –(1) (14) (-) (-) (-) (-) (1) (-) (-)

Firewall – – – – – – – – –(1) (22) (-) (-) (1) (24) (-) (-) (-)

Antena 9 34 – – 2 11 – 7 27(-) (-) (13) (71) (4) (36) (-) (9) (34)

Other – – – 10 – 267 – – –(-) (-) (1,667) (257) (1,667) (1,002) (-) (-) (-)

Note:1) Sales of goods in Project Division comprise of large number of items of different nature and specifications and hence it is

not practicable to furnish information in respect thereof. The cost of such sales has been included under materials consumed.2) Figures in bracket are for previous year.

b. Materials Consumed

These comprise miscellaneous items meant for execution of projects. Since these items are of different nature andspecifications, it is not practicable to disclose the quantitative information in respect thereof.

c. Imported and indigenous materials consumedRs in ‘000 Percentage

2005-06 2004-05 2005-06 2004-05

A) Imported 498,639 118,170 11.04 3.13

B) Indigenous 4,018,372 3,656,830 88.96 96.87

4,517,011 3,775,000 100.00 100.00

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35. Supplementary statutory information:

a. Directors Remuneration2005-06 2004-05

Rs. in ‘000 Rs. in ‘000

Salaries 15,940 16,726Commission to whole time directors (including Rs 4,318 7,614 –thousand relating to previous year)Perquisites* 666 809Contribution to Superannuation fund 981 1,061Contribution to Provident fund 789 849

25,990 19,445

* Does not include the value of leave encashment and gratuity since it is determined through actuarial valuation for all employeesincluding directors.

b. Computation of net profit in accordance with Section 349 of the Companies Act, 1956, for calculation of commissionpayable to directors

2005-06 2004-05Rs. in ‘000 Rs. in ‘000

Profit before tax as per Profit & Loss Account 562,919 114,943Add:Directors Remuneration 25,990 19,445

Directors’ sitting fees 190 100Loss on sale of Fixed Assets – (57,287)Provision for diminution in the value of Investments 210 1,376

Less:Profit on sale of Investments 47,739 122,892Profit on sale of Fixed Assets 11,115 –

Net Profit for the year in accordance with Section 198 & 349 of the Act 530,455 70,259Commission payable @ 0.5% to 2% and subject to individual ceiling 3,296 –attached, on prorata basis.

c. Earnings in foreign currency (Accrual basis)

Management Fees 47,318 112,527Hiring Charges – 143,020Exports at F.O.B. Value 543 13,955Professional, Consultation Fees and others – 17,385Interest Received 11,239 15,599Insurance Claims 38,263 –Sale of Spares, stores and consumables 6,048 –Contract Revenue (including foreign branches Rs. 4,245,165 thousand 5,010,012 6,232,325(previous year Rs. 6,051,965 thousand))Others 13,635 20,050

5,127,058 6,554,861

d. Expenditure in foreign currency2005-06 2004-05

Rs. in ‘000 Rs. in ‘000

Travelling * 27,166 16,510

Project Expenses* 323,659 98,852

Bandwidth Charges* 35,602 4,682

Foreign Branch Expenses 3,679,529 5,145,542

Interest 3,132 6,970

Others* 22,756 2,947

4,091,844 5,275,503

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*On cash basis

e. Value of imports calculated on CIF basis*

2005-06 2004-05Rs. in ‘000 Rs. in ‘000

a) Stores, spares and other materials 485,354 172,163

b) Capital goods 445,811 –

931,165 172,163

* excluding foreign branches

f. Net dividend remitted in foreign exchange

2005-06 2004-05

Period to which it relates 01-Apr-04 to 01-Jul-03 to31-Mar-05 31-Mar-04

Number of non-resident shareholders 2 1

Number of equity shares held on which dividend was due 10,158,826 9,461,429

Amount remitted in Rs. (‘000) (US$ 168,415.55 (previous year US$ 275,050)) 7,619 11,827

36. Previous year’s figures have been regrouped where necessary to conform to this year’s classification.


For S. R. Batliboi & Co.Chartered Accountants

per Raj Agrawal Dinesh Thairani Anil Agarwal Luv Chhabra Atul PunjPartner Company Chief Financial Director Finance Chairman &Membership No. 82028 Secretary Officer & Corporate Affairs Managing Director


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Cash Flow Statement for the year ended March 31, 2006

Year ended Year endedMarch 31, 2006 March 31, 2005

A Cash Flow From Operating ActivitiesProfit Before Tax 562,919 114,943Adjustment For –Depreciation/Amortisation (Including Goodwill) 591,900 717,819Miscellaneous Expenditure written off – 46,103(Profit)/Loss on Sale of Fixed Assets (Net) (11,115) 57,287(Profit) on Sale of Non Trade Long Term Investments (net) (47,758) (143,192)Interest Income (54,461) (90,515)Waiver of Funded Interest – (130,000)Dividend on Long Term Investments (6,085) (5,128)Depletion in Value of Long Term Investment 210 1,376Amortisation/Depletion in Value of Inventory – 8,227Foreign Exchange Fluctuation (Net) (2,369) 1,823Interest 467,993 737,975Bad Debts/Advances written off/liabilities written off/written back (Net) (32,645) (45,497)Provision for doubtful Debts and Advances (Net) – 8,300Operating Profit Before Working Capital Changes 1,468,589 1,279,521Movement In Working Capital(Increase)/Decrease in Sundry Debtors (659,058) (1,290,278)(Increase)/Decrease in Loans and Advances (453,407) 294,839(Increase)/Decrease in Other Current Assets (43,738) (22,239)(Increase)/Decrease in Inventories (2,294,428) (1,187,561)Increase/(Decrease) in Current Liabilities and Provisions 1,370,742 (24,679)

(611,299) (950,397)Direct Tax Refunds/(Paid) (Net) (232,659) (120,319)Net Cash Used in Operating Activities (843,958) (1,070,716)

B Cash Flow from Investing ActivitiesPurchase of Fixed Assets (1,820,316) (720,342)Purchase of Investments (718,730) (56,158)Proceeds from Sale of Investments 70,776 568,877Proceeds from Sale of Fixed Assets 240,891 164,134Dividend Received 6,085 5,128Interest Received 41,365 69,233Net Cash Used in/from Investing Activities (2,179,929) 30,872

C Cash Flows from Financing ActivitiesIncrease/(Decrease) in Share Capital 83,552 45,881Share issue Expenses (305,097) (39,060)Increase in Premium on issue of Share Capital 5,765,070 2,239,122Increase/(Decrease) in Short Term Working Captial Loans 682,495 (484,425)Increase/(Decrease) in Secured Term Loans (1,752,310) (792,314)Redemption of Debentures (12,120) (12,120)Increase/(Decrease) in Unsecured Loans (526,763) 860,502Increase/(Decrease) in Deferred Payments – (65)Interest Paid (469,170) (752,460)Dividend Paid (18,238) (25,809)Net Cash from Financing Activities 3,447,419 1,039,252Net Increase in Cash and Cash Equivalents (A+B+C) 423,533 (592)Exchange Fluctuation Reserve 5,836 (5,519)Cash and Cash Equivalents at the beginning of the year 303,391 309,502Cash and Cash Equivalents at the end of the year 732,759 303,391Components of Cash and Cash EquivalentsCash in Hand 11,136 21,374Cheque in Hand 5,024 –Balance with Scheduled BanksIn Current Accounts 102,777 62,428In EEFC Accounts 2,100 10,077In Fixed Deposits 14,885 27,527Balances with Non Scheduled BanksIn Current Accounts 583,157 30,258In Fixed Deposits 13,680 151,727

732,759 303,391

1 The Cash Flow Statement has been prepared under indirect method as set out in accounting standard-3 on Cash Flow Statement issued by TheInstitute of Chartered Accountants of India.

2 Negative figures have been shown in brackets .

As per our report of even dateFor S. R. Batliboi & Co.Chartered Accountantsper RAJ AGRAWAL DINESH THAIRANI ANIL AGARWAL LUV CHHABRA ATUL PUNJPartner Company Secretary Chief Financial Director Finance Chairman and ManagingMembership No. 82028 Officer and Corporate Affairs DirectorPlace : New DelhiDate : June 27, 2006


PUNJ LLOYD LIMITED

98

INFORMATION PURSUANT TO PART IV OF SCHEDULE VI OF COMPANIES ACT, 1956

I. Registration Details

Registration No. : 3 3 3 1 4 State Code : 5 5

Balance Sheet Date : 3 1 0 3 0 6

Date Month Year

II. Capital raised during the year (Rupees in thousand)Public Issue Rights Issue

83,552 NIL

Bonus Issue Private Placement*

164,492 30,983* Refer Note 26 in Schedule ‘O’

III. Position of Mobilisation and Deployment of Funds (Rupees in thousand)

Total Liabilities Total Assets

19,519,481 19,519,481

Sources of Funds : Paid-up Capital Total Reserves & Surplus

522,198 10,113,488

Secured Loans Unsecured Loans

3,460,109 629,355

Deferred Tax Liability

558,192

Application of Funds : Net Fixed Assets Capital Work in Progress

4,614,973 819,639

Investments Net Current Assets

1,244,085 8,604,645

Misc. Expenditure

NIL

IV. Performance of Company (Rupees in thousand)

Turnover Total Expenditure

14,030,362 13,467,443

Profit/(Loss) Before Tax Profit/(Loss) After Taxand Extraordinary items and Extraordinary items

562,919 351,470

Basic Earning Per Share (Rs.) Dividend Rate (%)

8.07 10

V. Generic Name of Three Principal Products/Services of Company as per monetary termsItem Code No. I.T.C. CodeProduct Description Construction, project related activities & engineering services and

internet services

For and on behalf of the Board of Directors

DINESH THAIRANI ANIL AGARWAL LUV CHHABRA ATUL PUNJCompany Secretary Chief Financial Director Finance Chairman and Managing Director

Officer and Corporate Affairs

99


AUDITORS’ REPORT TO THE BOARD OF DIRECTORS OF PUNJLLOYD LIMITED ON THE CONSOLIDATED FINANCIALSTATEMENTS OF PUNJ LLOYD LIMITED, ITS SUBSIDIARIES,JOINT VENTURES AND ASSOCIATES

1. We have audited the attached consolidated Balance Sheetof Punj Lloyd Limited (the Company), its subsidiaries, jointventures and associates (the Punj Lloyd Group) as at March31, 2006, the Consolidated Profit and Loss Account andthe Consolidated Cash Flow Statement for the year endedon that date. These financial statements are theresponsibility of the Company’s management and havebeen prepared by the management on the basis of separatefinancial statements and other financial informationregarding components. Our responsibility is to express anopinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditingstandards generally accepted in India. Those Standardsrequire that we plan and perform the audit to obtainreasonable assurance about whether the financialstatements are free of material misstatement. An auditincludes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements.An audit also includes assessing the accounting principlesused and significant estimates made by management, aswell as evaluating the overall financial statementpresentation. We believe that our audit provides areasonable basis for our opinion.

3. We report that the consolidated financial statements havebeen prepared by the Company’s management inaccordance with the requirements of Accounting Standard(AS) 21 ‘Consolidated Financial Statements’, AccountingStandard (AS) 23 ‘Accounting for Investments in Associatesin Consolidated Financial Statements’ and AccountingStandard (AS) 27 ‘Financial Reporting of Interests in JointVentures’, issued by the Institute of Chartered Accountantsof India.

4. We did not audit the financial statements of subsidiaries ofthe Company, whose financial statements reflect total assetsof Rs. 5,313,290 thousand as at March 31, 2006, totalrevenues of Rs. 3,922,580 thousand and cash flowsamounting to Rs. 240,909 thousand for the year thenended. We also did not audit the financial statements ofjoint ventures of the Company, whose financial statementsreflect total assets of Rs. 473,454 thousand (beingproportionate share of Punj Lloyd Group) as at March 31,2006, the total revenues of Rs. Nil thousand (beingproportionate share of Punj Lloyd Group) and cash flowsamounting to Rs. 4,623 thousand (being proportionateshare of Punj Lloyd Group) for the year then ended.

The financial statements and other financial information ofsubsidiaries and joint ventures (except forThiruvananthapuram Road Development Company Limitedwhose unaudited financial statements reflecting total assetsof Rs. 471,266 thousand (being proportionate share of PunjLloyd Group) as at March 31, 2006, total revenues of Rs. Nil(being proportionate share of Punj Lloyd Group) and cash

flows amounting to Rs. 4,525 thousand (being proportionateshare of Punj Lloyd Group) for the year then ended, have beenincluded in consolidation as mentioned in Note No. 1 inSchedule O to the financial statements) have been auditedby other auditors, whose reports have been furnished tous and, our opinion, in so far as it relates to the amountsincluded in respect of these subsidiaries and joint ventures,is based solely on the reports of the other auditors.

5. a) Included in sundry debtors is an amount of Rs. 301,016thousand (previous year Rs. 281,100 thousand ) relatedto contract work with Spie Capag- Petrofac InternationalLimited (SCPIL) in Georgia branch. Additionally sundrydebtors include an amount of Rs. 77,000 thousand(previous year Rs. 75,500 thousand) from SCPIL forexpenses incurred on behalf of SCPIL. Further, as statedin Note 8 in Schedule ‘O’ to the financial statements,the terms of the related contract are currently in dispute.Accordingly, the branch auditors were unable to satisfythemselves as to the recoverability of the sundry debtorsamounting to Rs. 378,016 thousand (previous year Rs.356,600 thousand ). Also, as stated in Note 8 in Schedule‘O to the financial statements, the Company has raisedvariation orders of Rs. 1,490,000 thousand (previous yearRs.1,468,000 thousand) on SCPIL and SCPIL have raiseddebit notes of Rs. 477,400 thousand (previous year Rs.466,700 thousand) on the Company. These variationorders and debit notes are being disputed and have notbeen agreed between the Company and SCPIL. However,the ultimate outcome of the dispute cannot presently bedetermined by the Company. Because of the significanceof this matter, we do not express an opinion on the impactof the above uncertainty on the financial statements.Our previous year audit report was also qualified inrespect of the same matter.

b) As stated in Note 9 in Schedule ‘O’ to the financialstatements, the Company has taken a credit for interestof Rs.14,632 thousand (in addition to credit taken of Rs.65,659 thousand in previous year) on the amountwithheld by a customer, which is not in accordance withAccounting Standard 9 on Revenue Recognition. Ourprevious year audit report was also qualified in respectof the same matter.

6. Without qualifying our opinion, we draw attention to Note7 in Schedule ‘O’ to the financial statements regardingdeductions made/amounts withheld by some customersaggregating to Rs. 766,322 thousand (previous yearRs. 778,711 thousand) on various accounts which are beingcarried as sundry debtors. The Company is also carryingWork-in-Progress inventory of Rs. 64,000 thousand(previous year Rs. 64,000 thousand) relating to one of thesecases. The ultimate outcome of the above matters cannotpresently be determined although the Company is of theview that such amounts are recoverable and hence noprovision is required there against.

PUNJ LLOYD LIMITED

100

Without considering para 5 (a) above, the impact whereof onthe Company’s profits is not presently ascertainable, had theimpact of para 5 (b) above been considered, profit for theyear after tax would have been Rs. 501,353 thousand insteadof Rs. 554,618 thousand and reserves & surplus at the end ofthe year would have been Rs. 10,639,837 thousand insteadof Rs. 10,693,102 thousand. Had the impact of para 5 (b)above been considered in the preceding year, profit for theyear ended March 31, 2005 would have been Rs. 963,957thousand instead of Rs.1,006,061 thousand and reserves &surplus at the end of the year would have been Rs. 4,807,421thousand instead of Rs. 4,849,525 thousand.

7. Subject to our comments in para 4, above regarding inclusionin consolidation of unaudited financial statements of a jointventure and also our comments in para 5 (a) & (b) above, inour opinion and to the best of our information andaccording to the explanations given to us, the said accountsgive the information required by the Companies Act, 1956,in the manner so required and give a true and fair view inconformity with the accounting principles generallyaccepted in India;

a) In the case of the Consolidated Balance Sheet, of thestate of affairs of the Punj Lloyd Group as at March31, 2006;

b) In the case of the Consolidated Profit and LossAccount, of the profit of the Punj Lloyd Group for theyear then ended; and

c) In the case of Consolidated Cash Flow Statement, ofthe cash flows of the Punj Lloyd Group for the yearthen ended.

For S.R. BATLIBOI & CO.Chartered Accountants

per RAJ AGRAWALPartnerMembership No: 82028


101


As at As atSchedules March 31, 2006 March 31, 2005

Consolidated Balance Sheet as at March 31, 2006





SOURCES OF FUNDSShareholders’ Funds

Capital A 522,198 252,347Reserves & Surplus B 10,693,102 4,849,525

11,215,300 5,101,872Minority Interest 9,200 16,544

Loan Funds CSecured Loans 4,905,715 5,998,422Unsecured Loans 643,880 1,188,287

5,549,595 7,186,709Deferred Tax Liability 606,532 618,384(Refer Note 22 in Schedule ‘O’)TOTAL 17,380,627 12,923,509

APPLICATION OF FUNDS

Fixed Assets DGross Block 9,069,623 7,413,438Less : Accumulated Depreciation 3,279,763 2,762,093Net Block 5,789,860 4,651,345

Capital Work in Progress IncludingCapital Advances 1,230,222 481,437Preoperative Expenditure(Pending Allocation) E 155,814 7,175,896 98,426 5,231,208

Investments F 415,615 258,971

Deferred Tax Asset 456 –(Refer Note 22 in Schedule ‘O’)Current Assets, Loans and Advances G

Inventories 8,042,764 5,509,848Sundry Debtors 4,024,405 3,364,417Cash and Bank Balances 1,106,454 431,801Other Current Assets 111,338 53,971Loans and Advances 2,179,038 1,928,046

15,463,999 11,288,083Less: Current Liabilities and Provisions H

Liabilities 5,387,108 3,708,250Provisions 288,483 146,754

5,675,591 3,855,004Net Current Assets 9,788,408 7,433,079

Miscellaneous Expenditure I 251 251(to the extent not written off or Adjusted)TOTAL 17,380,627 12,923,509Significant Accounting Policies & Notesto Consolidated Accounts OThe Schedules Referred to above form an integralpart of the Consolidated Balance Sheet


PUNJ LLOYD LIMITED

102

Consolidated Profit and Loss Account for the year ended March 31, 2006

Year ended Year endedSchedules March 31, 2006 March 31, 2005



per RAJ AGRAWAL DINESH THAIRANI ANIL AGARWAL LUV CHHABRA ATUL PUNJPartner Company Secretary Chief Financial Director Finance Chairman & ManagingMembership No. 82028 Officer and Corporate Affairs Director


INCOMESales & Contracts Revenue J 16,846,459 17,900,099Other Income K 317,239 439,160Profit on Sale of Investments in Associates 2,185 150,561Profit on Disposal of Interest in Joint Ventures – 583,524Waiver of Funded Interest – 130,000

17,165,883 19,203,344EXPENDITUREMaterials Consumed and Cost of Goods Sold L 5,506,656 4,824,058Operating and Administrative Expenses M 9,430,468 10,963,925Financial Charges N 794,063 1,333,350Miscellaneous Expenditure Written Off – 48,075Depreciation/Amortisation 633,397 872,386Less : Transferred from Revaluation Reserve (29,697) (33,330)

603,700 839,05616,334,887 18,008,464

PROFIT BEFORE TAX 830,996 1,194,880PROVISION FOR TAXCurrent Tax 289,501 189,870Deferred Tax Charge/(Credit) (Including Creditof Rs. 34,506 thousand of Earlier Years) (13,014) 3,905Fringe Benefit Tax 14,985 –Total Tax Expense 291,472 193,775PROFIT AFTER TAX 539,524 1,001,105Add: Share in Profits of Associates 7,754 2,583PROFIT BEFORE MINORITY’S SHARE 547,278 1,003,688Add: Share of Loss Transferred to Minority 7,340 2,373PROFIT FOR THE YEAR 554,618 1,006,061Balance Brought Forward from Previous Year 1,912,600 851,530Transfer from Debenture Redemption Reserve 50,120 83,305

Transfer from Foreign Project Utilised Reserved 12,500 15,000

PROFIT AVAILABLE FOR APPROPRIATIONS 2,529,838 1,955,896AppropriationsTransferred to General Reserve 40,000 22,500Proposed Dividend 52,220 18,238Tax on Proposed Dividend 7,324 2,558

99,544 43,296SURPLUS CARRIED TO BALANCE SHEET 2,430,294 1,912,600Earning Per Share (Nominal Value Per Share Rs. 10)Basic (in Rupees) 12.74 28.50Diluted (in Rupees) (Refer Note 16 of Schedule ‘O’) 12.06 *Significant Accounting Policies & Notes toConsolidated Accounts OThe Schedules Referred to above form an integralpart of the Consolidated Profit and Loss Account


103



SCHEDULE A : SHARE CAPITALAUTHORISED60,000,000 (previous year 30,000,000) equity shares ofRs. 10 each 600,000 300,00020,000,000 preference shares of Rs. 10 each 200,000 200,000

800,000 500,000ISSUED, SUBSCRIBED AND PAID UP52,219,836 (previous year 24,317,127) equity shares ofRs. 10 each, fully paid up. 522,198 243,171Nil (previous year 917,628) zero percent convertiblepreference shares of Rs.10 each, fully paid up. – 9,176OF THE ABOVEi) 136,700 equity shares were allotted as fully paid up

pursuant to a contract without payments beingreceived in cash.

ii) 28,615,239 (previous year 12,166,000) equity sharesof Rs.10 each fully paid up were issued as bonusshares by capitalisation of profits.

iii) During the year, the Company has converted917,628 zero percent convertible preference sharesof Rs.10 each into 3,098,296 equity shares of Rs. 10each. (Refer Note 17 in Schedule O)

TOTAL 522,198 252,347

SCHEDULE B : RESERVES & SURPLUSCAPITAL RESERVEBalance as per last account 15,444 8,930Addition during the year – 6,514Less: Adjusted against Sale of Investment 5,118 10,326 – 15,444

SECURITIES PREMIUM ACCOUNTBalance as per last account 2,539,174 339,112Additions during the year 5,765,070 2,239,122

8,304,244 2,578,234Less : Utilised during the yearConversion of Preference Shares 21,807 39,060Share Issue Expenses 305,097 –(Refer Note 17 and 19 B in Schedule ‘O’) 7,977,340 2,539,174

ASSET REVALUATION RESERVEBalance as per last account 122,529 155,859Less:Adjustment on Account of Depreciation on

Revalued Amount of Assets 29,697 33,330Less:Adjustment on Account of Sale/Disposal of

Revalued Assets 7,483 –85,349 122,529

GENERAL RESERVEBalance as per last account 193,040 170,540Add :Transfer from Profit and Loss Account 40,000 22,500Less: Utilised during the year (For issue of Bonus Shares) 164,492 –(Refer Note 18 in Schedule ‘O’) 68,548 193,040

FOREIGN PROJECT UTILIZED RESERVEBalance as per last account 105,000 112,500Add : Transfer from Foreign Project Reserve – 7,500

105,000 120,000Less : Transfer to Profit and Loss Account 12,500 15,000

92,500 105,000





PUNJ LLOYD LIMITED

104


SCHEDULE B : RESERVES & SURPLUS (CONTINUED)DEBENTURE REDEMPTION RESERVEBalance as per last account 50,120 133,425Less : Transfer to Profit & Loss Account 50,120 83,305

– 50,120EXCHANGE FLUCTUATION RESERVE ACCOUNT 28,745 (88,382)PROFIT AND LOSS ACCOUNT BALANCE 2,430,294 1,912,600TOTAL 10,693,102 4,849,525

SCHEDULE C : LOAN FUNDSSECURED LOANS:A) ON SHORT TERM WORKING CAPITAL LOAN ACCOUNT

FROM BANKS 3,085,993 2,392,570Out of the above.i) Rs. 473,813 thousand is secured by way of first charge

on pari passu basis on current assets (excluding bookdebts) and second charge on pari passu basis on fixedassets of the project division of the Company andfurther secured by personal guarantee of Chairman& Managing Director of the Company.

ii) Rs. 17,352 thousand is secured by way of first chargeon pari passu basis on current assets (excluding bookdebts) and second charge on paripassu basis on fixedassets of the project division of the Company.

iii) Rs. 1,167,175 thousand is secured by way ofexclusive charge on the receivables of the specificprojects financed by the bank, first pari passu chargeon the current assets of the project division(excluding receivables) and pari passu second chargeon the movable assets of the project division of theCompany and further secured by personal guaranteeof Chairman & Managing Director of the Company.

iv) Rs. 594,681 thousand in respect of a foreignsubsidiary is secured by lien over the subsidiary’strade receivables and some part of building, land,inventory, machinery and motor vehicles. The loanis further secured by corporate guarantee of theparent Company.

v) Rs. 443,568 thousand in respect of a foreignsubsidiary is secured by hypothecation of equipmentand machinery. The loans are further secured bycorporate guarantee of the parent company.

vi) Rs.43,510 thousand in respect of certain Indiansubsidiaries is secured by hypothecation by way ofcharge on inventories both on hand and in transit,book debts, other receivables (both present andfuture) and charge on all the fixed assets of thesubsidiaries except those acquired under hirepurchase agreements. The loans are further securedby corporate guarantee of the parent company.





105




vii) Rs. 28,106 thousand in respect of an Indiansubsidiary is secured by hypothecation of raw-materials, work in progress, finished goods andsundry debtors. The loan is further collaterallysecured by way of hypothecation of plant andmachinery of the subsidiary.

viii) Rs. 2,063 thousand in respect of an Indian subsidiaryis secured by hypothecation by way of charge oninventories both on hand and in transit, book debts,other receivables (both present and future) of theCompany. The loan is further secured by corporateguarantee of the parent company.

ix) Rs. 315,725 thousand in respect of a joint venture issecured by -- tangible and movable properties (including plant

and machinery) both present and future.- annuity revenues and receivables (excluding

bonus for early completion).- all project agreements, all guarnatees,

perforamce guarantees or bonds, letters of credit,applicable Permits, plant rights, titles, approvals,permits, clearances and interest under the projectAgreement.

- intangible assets including but not limited togoodwill.

- all bank accounts including Trust and RetentionAccount and all monies from time to timedeposited therein and all permitted Investmentsor other securities representing all amountscredited to the Trust and Retention Account.

B) ON TERM LOAN ACCOUNT1) FROM BANKS 1,435,951 3,222,513Out of the above,i) Rs. 546,620 thousand is secured by way of exclusive

charge on the equipment purchased out of theproceeds of loan.

ii) Rs. 120,000 thousand is secured by way of first paripassu charge on movable fixed assets of the projectdivision of the Company.

iii) Rs. 262,500 thousand is secured by way of first paripassu charge on movable assets of the project divisionof the Company and personal guarntee of Chairman& Managing Director of the Company.

iv) Rs. 235,648 thousand is secured by way of exclusivecharge on the land and building of corporate officebeing built at Gurgaon.

v) Rs. 171,192 thousand is secured by way of pari passufirst charge on the existing and future movable fixedassets of the project division of the Company,



PUNJ LLOYD LIMITED

106



paripassu second charge on current assets of theproject division of the Company (excludingreceivables of the Company) and further secured bypersonal guarantee of Chairman & ManagingDirector of the Company.

vi) Rs. 99,991 thousand is secured by way of secondpari passu charge on the movable fixed assets of theproject division of the Company and further securedby personal guarantee of Chairman & ManagingDirector of the Company.

II. FROM OTHERS 61,914 272,705

i) Rs. 61,914 thousand is secured by first andexclusive charge by way of hypothecation oncertain specific equipments of the Companyfinanced through the loan.

III. HIRE PURCHASE CREDITORS

FROM OTHERS 291,842 66,447(Secured by exclusive charge by way of hypothecationon certain specific equipments)

IV. EXTERNAL COMMERCIAL BORROWINGSFROM BANK 30,015 44,187(Secured by exclusive charge on the equipment of theCompany financed through the loan.)

TOTAL 4,905,715 5,998,422

UNSECURED LOANS:i) On Short Term Working Capital Loan Account :-

From Banks 190,506 332,695ii) On Term Loan Account :- From Banks 404,775 750,000iii) Intercorporate Deposits 5,069 37,034iv) External Commercial Borrowings :- From Bank 26,203 41,258v) 10% Unsecured Redeemable Non-convertible Debentures – 12,120

(Redeemable at par in five equal annual installmentsStarting from the end of third year i.e. November 26,2001)

vi) 12% Unsecured Redeemable Non-convertible Debentures – 14,000(Redeemable at par in four equal annual installmentsstarting from July 1, 2002)

vii) From Others 17,327 1,180

TOTAL 643,880 1,188,287



107

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PUNJ LLOYD LIMITED

108


SCHEDULE E :PREOPERATIVE EXPENDITURE (PENDING ALLOCATION)Opening Balance 98,426 494,285Add: Expenditure incurred during the yearPower And Fuel 8 51Hire Charges 41 –Repair & Maintenance- Others 4 3Salaries, Wages and Bonus 4,145 60,733Contribution to Providend & Other Funds 7 156Workman and Staff Welfare 93 –Supervision Expenses 992 1,234Fees & Taxes 66 18Incorporation Cost – 2,500Travelling and Conveyance 7 355Rent – 5Insurance 1,474 5,476Security Trusteeship – 446Legal Fees – 2,849Consultancy/Professional Charges 71 701Project Development Fees 3,941 68,591Other Expenses 2,790 2,634Upfront Fees – 9,481Arrangers Fees – 11,230Commitment Fees – 476Interest on Term Loans 42,410 256,909Bank/Financial Charges 1,344 9,063Less:Interest Income 5 57,388 30 432,881

155,814 927,166Less: Transferred to Fixed Assets – (828,740)Balance Carried Forward 155,814 98,426

SCHEDULE F : INVESTMENTSLONG TERMQUOTED NON TRADEJCT ELECTRONICS LTD. 13 13600 (previous year 600) Equity Shares of Rs. 10 each,fully paid.CONTINENTAL CONSTRUCTION LTD. 34 343,000 (previous year 3,000) Equity Shares of Rs. 10 each,fully paid.MAX INDIA LTD 9 9500 (previous year 500) Equity Shares of Rs. 10 each,fully paid.KIRLOSKAR PNEUMATICS CO. LTD. 20 201,000 (previous year 1,000) Equity Shares of Rs. 10 each,fully paid.DAEWOO MOTORS I LTD. 366 36611,000 (previous year 11,000) Equity Shares of Rs. 10 each,fully paid.





109



HINDUSTAN OIL EXPLORATION LTD. 190 1904,600 (previous year 4,600) Equity Shares of Rs. 10 each,fully paid.

MATSUSHITA LAKHANPAL BATTERY INDIA LTD. 45 451,300 (previous year 1,300) Equity Share of Rs. 10 fully paid.

BERGER PAINTS LIMITED 2,888 2,888115,500 (previous year 115,500) Equity Shares of Rs. 2each fully paid.

UNQUOTED TRADE

RAJAHMUNDRY EXPRESSWAY LTD. 40,689 40,6893,697,500 (previous year 3,697,500) Equity Shares ofRs. 10 each fully paid of the above 1,885,000 (previousyear 1,885,000) shares are pledged with a bank.

ANDHRA EXPRESSWAY LTD. 42,820 42,8203,697,500 (previous year 3,697,500) Equity shares ofRs. 10 each fully paidOf the above, 1,885,000 (previous year 1,885,000)shares are pledged with a bank.

NORTH KARNATAKA EXPRESSWAY LIMITED 75,724 75,7247,572,400 (previous year 7,572,400) Equity Shares ofRs.10 equity shares fully paid up.

UNQUOTED (NON-TRADE)

TRITON CORPORATION LTD. (Formerly Stencil ApparelBrands Ltd.) 60 606,000 (previous year 6,000) Equity Shares of Rs. 10each fully paid.

RFB LATEX LTD. 5,200 5,200200,000 (previous year 200,000) Equity Shares of Rs.10each fully paid.

AROOSHI ENTERPRISES (P) LTD. 5,985 5,985598,500 (previous year 598,500) Equity Shares of Rs. 10each fully paid.

GLOBAL HEALTH PRIVATE LIMITED 200,000 –8,000,000 (previous year Nil) Equity Share of Rs. 10 each(Rs. 1.45 paid up)

INVESTMENTS IN ASSOCIATES

UNQUOTED TRADE

BISTRO HOSPITALITY (P) LIMITED 28,782 32,8002,878,200 (previous year 3,280,000) Equity Shares ofRs.10 each fully paidAdd: Share in opening accumulated profits 5,361 4,105Add: Share in profits for current year 7,858 1,256Less: Profits attributable to stake sold during the year (657) –

41,344 38,161




PUNJ LLOYD LIMITED

110



JACOB BALLAS CAPITAL INDIA (P) LIMITED – 19,000Nil (previous year 1,900,000) Equity Shares of Rs. 10each fully paidAdd: Share in opening accumulated profits 26,986 26,896Add: Share in profits/(loss) for current year – 1,434Less: Profits attributable to stake sold during the year (26,986) (1,345)

– 45,985CITY VISION (P) LTD. 823 82341,160 (previous year 41,160) Equity Shares of Rs. 10each fully paid.Add: Share in opening accumulated losses (823) (823)

– –SHITUL ENGINEERING (P) LTD. 785 7857,850 (previous year 7,850) Equity Shares of Rs. 100each fully paidAdd: Share in opening accumulated profits/(losses) (18) 87Add: Share in profits/(loss) for current year (101) (105)

666 767SATELLITE VISION (P) LTD.* 3,750 3,750150,000 (previous year 150,000) Equity Shares of Rs. 10each fully paid.

GAITRY CABLE NETWORK PVT. LTD.* 49 494,900(previous year 4,900) equity shares of Rs. 10each fully paid

SUNSTAR NETWORK & TECHNOLOGIES LTD. 2,530 2,53010,159 (previous year 10,159) Equity Shares of Rs. 10each fully paid.Add: Share in opening accumulated profits/(losses) (2,530) (2,530)

– –

DOTCOM HOLDINGS (P) LTD. 49 494,900 (previous year 4,900) Equity Shares of Rs. 10each fully paidAdd: Share in opening accumulated losses (34) (33)Add: Share in (loss) for current year (3) (1)

12 15LESS: DIMINUTION IN THE VALUE OF INVESTMENTS (4,249) (3,799)

TOTAL 415,615 258,971

a) Aggregate Cost of Quoted Investments 3,565 3,565b) Aggregate Cost of Unquoted Investments 412,050 255,406c) Aggregate market value of Quoted Investments 11,561 5,836

* As indicated in Note 1(vii) in Schedule ‘O’, theseassociates are not being consolidated in the absence ofavailability of audited financial statements of these entities.



111



SCHEDULE G : CURRENT ASSETS, LOANS AND ADVANCES

A. CURRENT ASSETS

i) INVENTORIES:Raw Materials 13,293 2,450Spares, Stores and Consumables 764,228 676,164Scrap 27,149 18,268Stock in Trade (Equipments) 3,521 4,123Work in Progress Projects 7,234,573 4,808,843

8,042,764 5,509,848ii) Sundry Debtors (Unsecured)

Debts Outstanding for a period Exceeding Six MonthsConsidered Good 1,608,834 1,247,829Considered Doubtful 57,099 13,944Other DebtsConsidered Good 2,415,571 2,116,588

4,081,504 3,378,361Less : Provision for Doubtful Debts 57,099 13,944

4,024,405 3,364,417iii) CASH & BANK BALANCES

a) Cash in Hand 27,132 39,098b) Cheques in Hand 5,024 –c) Balances with Scheduled Banks

- In Current Accounts 134,373 97,257- In EEFC Accounts 2,100 10,078- In Fixed Deposits 27,120 126,787

d) Balances with Non-Scheduled Banks- In Current Accounts 874,179 81,987- In Fixed Deposits 36,526 76,594

1,106,454 431,801iv) OTHER CURRENT ASSETS

a) Interest Receivable 41,137 27,508b) Insurance Claims Receivable 19,101 22,238c) Export Benefit Receivable 46,875 –d) Receivable against Sale of Investments 4,225 4,225

111,338 53,971B. LOANS AND ADVANCES:

(Unsecured, Considered Good)a) Loans to Employees 2,031 15,879b) Intercorporate Deposits 20,776 35,562c) Advances Recoverable in Cash or in kind or

for value to be received 1,250,484 1,255,016d) Security Deposits 71,922 25,630e) Balance with Custom/Excise Department 61,981 2,428f) Advance Income Tax/Tax Recoverable

(Net of Provisions) 424,035 364,852g) Sales Tax Recoverable 347,809 228,679

2,179,038 1,928,046

TOTAL 15,463,999 11,288,083



PUNJ LLOYD LIMITED

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SCHEDULE H : CURRENT LIABILITIES AND PROVISIONS

(A) CURRENT LIABILITIESAcceptances 365,052 288,659Sundry Creditors 3,231,392 2,213,295Advance Billings 243,392 11,396Unearned Income 47,223 42,389Security Deposits 112,126 126,970Advances from Clients 1,165,155 799,736Interest accrued but not due on Loans 5,593 7,102Other Liabilities 217,175 218,703

5,387,108 3,708,250(B) PROVISIONS

For Tax (Net of Taxes Paid) 176,222 102,372For Fringe Benefit Tax (Net of Taxes Paid) 4,918 –For Gratuity 18,959 6,016For Leave Encashment 28,840 17,570Proposed Dividend (Including Tax on Dividend) 59,544 20,796

288,483 146,754

TOTAL 5,675,591 3,855,004

SCHEDULE I : MISCELLANEOUS EXPENDITURE(To the extent not written off or adjusted)

(A) PRELIMINARY EXPENDITUREBalance as per last year 251 1,921Less: Adjustments on Disposal of Joint Ventures – (1,574)Add: Addition during the year – 92Less: Written off during the year – (188)

251 251(B) DEFERRED REVENUE EXPENDITURE

Balance as per last year – 47,887Less: Written off during the year – – (47,887) –

TOTAL 251 251



113



SCHEDULE J : SALES & CONTRACTS REVENUE

Contracts Revenue (Including Export IncentivesRs. 165,502 Thousand (Previous Year Nil)) 16,147,489 17,035,308Bonus Income (in respect of Highway Construction& Operation Activities) – 303,963Annuity Income (in respect of Highway Construction& Operation Activities) – 177,614Income from Leased Assets 1,854 7,904Income from Hire Charges 89,112 66,958Management Services 41,825 –Sales (Net of Discounts)

- Exports – 13,955- Others 265,607 265,607 13,163 27,118

Internet Services (Net of Discounts Rs. 592,104 Thousand,previous year Rs. 665,850 Thousand)

300,572 281,234

TOTAL 16,846,459 17,900,099

SCHEDULE K : OTHER INCOME

Interest 50,187 105,785Dividend on Long Term Investments 6,093 636Insurance Claims 43,301 37,224Profit on Sale of Non Trade Long Term Investments 22,633 –Profit on Sale of Spares, Stores and Consumables 6,048 –Unspent Liabilities & Provisions Written Back 93,211 141,916Bad Debts Recovered – 57,606Foreign Exchange Fluctuation (Net) 45,919 20,468Others 49,847 75,525

TOTAL 317,239 439,160

SCHEDULE L : MATERIALS CONSUMED ANDCOST OF GOODS SOLD

Material Consumed 5,481,055 4,771,846Cost of Goods Sold - EquipmentsOpening Stock 4,123 11,152Add: Purchases 1,709 1,313

5,832 12,465Less: Closing Stock 3,521 4,123

2,311 8,342Amortisation/Depletion in the value of inventory 23,290 43,870

TOTAL 5,506,656 4,824,058







PUNJ LLOYD LIMITED

114


SCHEDULE M : OPERATING ANDADMINISTRATIVE EXPENSES

OPERATINGContractor Charges 3,498,387 3,724,209Site/Connectivity Expenses 452,249 847,554Power and Fuel 608,195 685,878Repair and Maintenance

- Buildings 9,141 17,928- Plant and Machinary 42,061 75,611- Others 31,479 74,346

Freight & Cartage 400,748 530,400Hire Charges 791,555 1,068,351

5,833,815 7,024,277PERSONNELSalaries, Wages and Bonus 1,657,697 1,909,675Contribution to Provident & Other Funds 83,123 55,481Gratuity 1,136 807Workmen and Staff Welfare 120,017 159,340

1,861,973 2,125,303Administration and EstablishmentBad Debts/Advances Written Off 63,370 38,227Less: Provision made in Previous Year, now Reversed 8,300 –

55,070 38,227Rent 97,118 109,497Insurance 191,497 106,088Directors’ Sitting Fees 190 100Travelling and Conveyance 219,539 288,755Fee & Taxes 247,844 220,962Consultancy/Professional Charges 446,036 508,716Comission on Internet Services 10,487 7,824Diminution in the Value of Long Term Investments 449 –Provision for Doubtful Debts 58,222 14,304Loss on Sales of Short Term Investments 19 –Loss on Sale of Fixed Assets (Net) 34,641 60,624Donations (Refer Note 10 of Schedule ‘O‘) 14,144 14,155Others 359,424 445,093

1,679,610 1,776,118

TOTAL 9,430,468 10,963,925

SCHEDULE N : FINANCIAL CHARGESINTEREST ON:Term Loans 295,751 779,632Debentures 1,209 4,044Others 329,735 182,872

626,695 966,548Bank/Financial Charges 167,368 366,802

TOTAL 794,063 1,333,350





115


SCHEDULE O:

A. SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO CONSOLIDATED ACCOUNTS

1. Basis of preparation

The Company maintains its accounts on accrual basis following the historical cost convention, (except for the revaluation ofcertain fixed assets), and in accordance with Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956and other requirements of the Act. The accounting policies have been consistently applied by the Company and except for thechanges in accounting policy disclosed in Note No. 6 of Notes to Accounts below, are consistent with those used in previousyear.

2. Principles of Consolidation

The Consolidated Financial Statements relate to Punj Lloyd Limited (hereinafter referred to as the “Company”) and its groupcompanies (hereinafter referred to as the “Punj Lloyd group”). In the preparation of these Consolidated Financial Statements,investments in Subsidiaries, Associate companies and Joint Venture entities have been accounted for in accordance with AS 21(Accounting for Consolidated Financial Statements), AS 23 (Accounting for Investments in Associate Companies) and AS 27(Financial Reporting of Interests in Joint Ventures) respectively issued by the Institute of Chartered Accountants of India. TheConsolidated Financial Statements are prepared on the following basiss:-

a. Subsidiary companies are consolidated on a line-by-line basis by adding together the book values of the like items ofassets, liabilities, income and expenses after eliminating all significant intra-group balances and intra-group transactionsand also unrealised profits or losses, except where cost cannot be recovered.

b. Interests in the assets, liabilities, income and expenses of the Joint Ventures are consolidated using proportionateconsolidation method. Intra group balances, transactions and unrealised profits/losses have been eliminated to the extentof Company’s proportionate share, except where cost cannot be recovered.

c. The difference of the cost to the Company of its investment in Subsidiaries and Joint Ventures over its proportionate sharein the equity of the investee company as at the date of acquisition of stake is recognised in the financial statements asGoodwill or Capital Reserve, as the case may be.

d. Minorities interest in net profits of consolidated subsidiaries for the year is identified and adjusted against the income inorder to arrive at the net income attributable to the shareholders of the Company. Their share of net assets is identifiedand presented in the Consolidated Balance Sheet separately. Where accumulated losses attributable to the minorities arein excess of their equity, in the absence of the contractual obligation on the minorities, the same is accounted for by theholding company.

e. Investments in Associates are accounted for using the equity method. The excess of cost of investment over the proportionateshare in equity of the Associate as at the date of acquisition of stake has been identified as Goodwill and included in thecarrying value of the Investment in the Associate. The carrying amount of the investment is adjusted thereafter for thepost acquisition change in the share of net assets of the Associate. However, the share of losses is accounted for only tothe extent of the cost of investment. Subsequent profits of such Associates are not accounted for unless the accumulatedlosses (not accounted for by the Company) are recouped. For the purpose of equity accounting, consolidated financialstatements of Associates have been used.

f. As far as possible, the consolidated financial statements have been prepared using uniform accounting policies for liketransactions and other events in similar circumstances and are presented, to the extent possible, in the same manner asthe Company’s separate financial statements. Differences in accounting policies have been disclosed separately.

g. The financial statements of the entities used for the purpose of consolidation are drawn up to same reporting date as thatof the Company i.e. year ended 31st March, 2006 except to the extent stated in Note No. 1(i) and 1(ii) of Notes toAccounts below.

3. Use of estimates

The preparation of financial statements is in conformity with generally accepted accounting principles which requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosureof contingent liabilities as at the date of the financial statements and reported amounts of revenues and expenses during thereporting period. Actual results could differ from these estimates.

4. Fixed Assets

Fixed assets are stated at cost, (other than some fixed assets which are stated at values as determined by the valuer), lessaccumulated depreciation and impairment losses, if any. Cost comprises the purchase price and any attributable cost of

PUNJ LLOYD LIMITED

116

bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition of fixed assets whichtakes substantial period of time to get ready for its intended use are also included to the extent they relate to the period tillsuch assets are ready to be put to use.

The carrying amount of fixed assets are reviewed at each balance sheet date if there is any indication of impairment based oninternal/external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverableamount. The recoverable amount is the greater of the asset’s net selling price and value in use. In assessing the value in use, theestimated future cash flows are discounted to their present value at the weighted average cost of capital.

5. Method of depreciation

i) In respect of Indian Companies comprised within the group, depreciation on the fixed assets is charged on straight linemethod, at the rates specified in Schedule XIV to the Companies Act, 1956, (except to the extent stated in Para ii , iii andvii below), which are based on the useful lives of the assets. In case of revalued assets, the difference between depreciationon original cost and revalued amount is transferred from revaluation reserve to Profit and Loss Account.

ii) Depreciation on the following fixed assets of Internet Service division is charged on straight line method at the rates,based on useful lives of the assets as estimated by the management, which are equal to or higher than the rates specifiedin Schedule XIV.


Plant and machinery 10%

Networking equipment* 10%

Office equipment 10%

Ducts and optical fiber cables* 4.75%

*Included under Plant & Machinery

iii) Depreciation on the following fixed assets of Oman branch is charged on straight line method at the rates, based onuseful lives of the assets as follows, which are higher than the rates specified in Schedule XIV to the Companies Act, 1956

Asset Description Useful Lives of Assets

Plant and machinery 6 to 7 year

Furniture and fixtures 3 to 7 year

iv) Amount added to assets on account of foreign exchange fluctuation is depreciated prospectively over the remaininguseful lives of the respective assets.

v) No amortization is made for leasehold land, which is under perpetual lease.

vi) Assets costing less than Rs. 5,000 each are depreciated @ 100%.

vii) Depreciation on Company’s share of fixed assets of an unincorporated joint venture is provided on straight-line methodat the following rates based on their useful lives as estimated by the management of the joint venture.


Buildings 10%

Plant & Machinery 20%

Vehicles 20%

Furniture, fixtures & office equipments 20%

viii) In case of foreign companies comprised within the group, depreciation is being provided for on straight-line basis so asto write off the assets over their useful lives, as estimated by the management, which range from 3 to 20 years. (22.53%of total Net Block of fixed assets as at March 31, 2006 and 18.52% of total depreciation expenditure)

ix) Intangibles

(a) Depreciation is provided on different software used by the Group based on the nature and useful lives of thesesoftware, which range from 3 to 6 years.

(b) Depreciation on technical know how capitalised in Internet Service Division of the Company is provided at 20%,based on its expected useful life as assessed by the management.

117


6. Preoperative Expenditure pending allocation

Expenses incurred in relation to construction of capital assets in respect of entities which are yet to commence commercialoperations are carried forward to be capitalised at the time of commencement of commercial operations. Other expenses notrelated to construction of capital assets are carried forward under Deferred Revenue Expenditure, to be written off after thecommencement of commercial operations.

7. Investments

Investments that are readily realisable and intended to be held for not more than a year are classified as current investments.All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair valuedetermined on an individual investment basis. Long-term investments are carried at cost, after providing for any diminution invalue, if such diminution is other than temporary in nature.

8. Inventories

i) Stock in trade (Equipments), Stores, Spares and Consumables are valued at lower of cost and net realisable value. Cost isdetermined on weighted average basis.

ii) Work in progress related to projects is valued at net realizable value.

iii) Scrap is valued at net realisable value.

iv) Scaffoldings (included in Stores, Spares and Consumables) are valued at cost less amortisation/charge based on theiruseful life, which is estimated at 10 years.

Net realisable value is the estimated selling price in the ordinary course of business less estimated costs to make the sale.

9. Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenuecan be reliably measured.

i) Revenue from long term construction contracts is recognised on the percentage of completion method. Percentage ofcompletion is determined as a proportion of cost incurred to date to the total estimated contract cost. However, profit isnot recognised unless there is reasonable progress on the contract. In case the total cost of a contract, based on technicaland other estimates, is expected to exceed the corresponding contract value, such expected loss is provided for. Theeffect of any adjustment arising from revisions to estimates is included in the income statement of the year in whichrevisions are made. The revenue on account of extra claims and the expenditure on account of liquidated damages onconstruction contracts are accounted for at the time of acceptance/ settlement by the customers due to uncertaintiesattached thereto. Similarly, insurance claims are accounted for on settlement with insurers.

ii) Revenue from long term construction contracts executed in joint ventures under work sharing arrangements is recognisedon the same basis as similar contracts independently executed by the Company. Revenue in joint ventures under profitsharing arrangements is recognised to the extent of the Company’s share in joint ventures.

iii) Internet Service revenues comprise of revenues from registration, installation and provision of Internet services. Registrationfee and installation charges are recognised on the admission of customer and completion of services respectively. Servicerevenue from Internet access is recognised pro-rata, calculated on the basis of provision of services or time duration ofcontract, as may be applicable.

iv) Revenue from sale of equipments is recognized when the significant risks and rewards of ownership of the goods havepassed to the buyer.

v) Revenue from hire charges is accounted for in accordance with the terms of agreements with the customers.

vi) Interest revenue is accounted for on a time proportion basis taking into account the amount outstanding and the rateapplicable.

vii) Dividend revenue is recognised when the shareholders’ right to receive payment is established by the balance sheet date.

viii) In respect of certain joint ventures of the Company engaged in activities of construction of highway on Build, Operateand Transfer (Annuity) basis, revenue is recognised as under-

Annuity income as per the concession agreements entered into by the entities with National Highway Authority of India(NHAI) is accounted on accrual basis.

Bonus income from NHAI as per the concession agreements for completion of the projects before the scheduled dates ofcompletion is accounted for on accrual basis.

PUNJ LLOYD LIMITED

118

ix) Duty Free Credit Entitlements are accounted for based on the exports made during the year.

10. Miscellaneous Expenditure to the extent not written off

i) Preliminary Expenditure

In the case of certain subsidiaries/joint ventures, Preliminary Expenses are being amortised over a period of 5 years fromthe date of commencement of commercial operations. In the case of subsidiaries/joint ventures where the commercialoperations have not commenced, such expenses will be amortised after commencement of commercial operations.

ii) Deferred Revenue Expenditure

In respect of a subsidiary of the Company, fees paid to Registrar of Companies for increase in Authorised Share Capitalprior to year ended 31st March, 2001 was considered as Deferred Revenue Expenditure and is being charged off to Profit& Loss Account in five equal installments.

11. Foreign Currency Translations

Foreign Currency Transactions

i) Initial Recognition

Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount theexchange rate between the reporting currency and the foreign currency at the date of the transaction.

ii) Conversion

Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms ofhistorical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction.

iii) Exchange Differences

Exchange differences arising on the settlement of monetary items or on reporting Company’s monetary items at ratesdifferent from those at which they were initially recorded during the year, or reported in previous financial statements, arerecognised as income or as expenses in the year in which they arise except those arising from investments in non-integralforeign operations. Exchange differences arising on account of fixed assets acquired from outside India is capitalized.

Exchange differences arising on a monetary item that, in substance, forms part of Company’s net investment in a non-integral foreign operation are accumulated in a foreign currency translation reserve in the financial statements until thedisposal of the net investment, at which time they are recognised as income or as expenses.

iv) Forward Exchange Contracts

The premium or discount arising at the inception of forward exchange contracts is amortised as expense or income overthe life of the contract. Exchange differences on such contracts are recognised in the statement of profit and loss in theyear in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchangecontract is recognised as income or as expense for the year.

12. Translation of integral & non integral foreign operations

The financial statements of an integral foreign operation are translated as if the transactions of the foreign operation have beenthose of the Company itself.

In translating the financial statements of a non-integral foreign operation for incorporation in financial statements, the assetsand liabilities, both monetary and non-monetary, of the non-integral foreign operation are translated at the closing rate;income and expense items of the non-integral foreign operation are translated at average exchange rates for the period, allresulting exchange differences are accumulated in a foreign currency translation reserve until the disposal of the net investment.

On the disposal of a non-integral foreign operation, the cumulative amount of the exchange differences which have beendeferred and which relate to that operation are recognised as income or as expenses in the same period in which the gain orloss on disposal is recognized.

13. Retirement and Other Employee Benefits

i) Retirement benefits in the form of provident fund and superannuation/pension schemes are charged to Profit and LossAccount of the year when the contributions to the respective funds are due.

ii) The Company has taken an insurance policy under group gratuity scheme with Life Insurance Corporation of India tocover the gratuity liability of the employees of project division and amount paid/payable in respect of present value ofliability for past services is charged to Profit and Loss Account on the basis of actuarial valuation at the end of the financial

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year period. In respect of employees of ISP division and Indian Subsidiaries, gratuity liability is accrued and provided foron the basis of an actuarial valuation made at the end of each financial year.

iii) Liability for leave encashment is provided for on actuarial valuation done at the end of the financial year except in case ofthe overseas branches, where liability is provided on actual basis for leaves standing to the credit of employees.

iv) In respect of overseas group companies, contributions made towards retirement/employee benefits, in accordance withthe relevant applicable local laws, are charged to Profit and Loss Account.

14. Income Taxes

Tax expense comprises of current, deferred and fringe benefit tax. Current income tax and fringe benefit tax is measured atthe amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act and in the overseascompanies as per the respective tax laws. Deferred income tax reflects the impact of current year timing differences betweentaxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measuredbased on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets anddeferred tax liabilities across various countries of operation are not set off against each other as the Company does not have alegal right to do so. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient futuretaxable income will be available against which such deferred tax assets can be realised. If the Company has carry forward ofunabsorbed depreciation and tax losses, deferred tax assets are recognised only if there is virtual certainty that such deferredtax assets can be realised against future taxable profits. Unrecognised deferred tax assets of earlier years are re-assessed andrecognised to the extent that it has become reasonably certain that future taxable income will be available against which suchdeferred tax assets can be realised.

15. Lease Transactions

Where the Company is the lessee

Finance Leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of theleased item, are capitalised at the lower of the fair value and present value of the minimum lease payments at the inception ofthe lease term and disclosed as leased assets. Lease payments are apportioned between the finance charges and reduction ofthe lease liability based on the implicit rate of return. Finance charges are charged directly against income. Lease managementfees, legal charges and other initial direct costs are capitalised. If there is no reasonable certainty that the Company will obtainthe ownership by the end of the lease term, capitalised leased assets are depreciated over the shorter of the estimated usefullife of the asset or the lease term.

Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, are classifiedas operating leases. Operating lease payments are recognised as an expense in the Profit and Loss Account on a straight linebasis over the lease term.

Where the Company is the lessor

Assets given under operating leases are included in fixed assets. Lease income is recognised in the Profit and Loss Account ona straight-line basis over the lease term. Costs, including depreciation are recognised as an expense in the Profit and LossAccount. Initial direct costs such as legal costs, brokerage costs, etc. are recognised immediately in the Profit and Loss Account.

16. Segment Reporting policies

Identification of segments

The group’s operating businesses are organised and managed separately according to the nature of products and servicesprovided, with each segment representing a strategic business unit that offers different products and serves different markets.The analysis of geographical segments is based on the areas in which major operating divisions of the group operate.

Unallocated items

General corporate income and expense items are not allocated to any business segment.

17. Earnings per share

Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders by theweighted average number of equity shares outstanding during the year. Partly paid equity shares are treated as a fraction of anequity share to the extent that they were entitled to participate in dividends relative to a fully paid equity share during thereporting year. The weighted average number of equity shares outstanding during the reported years are adjusted for theevents of bonus issue.

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For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholdersand the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potentialequity shares.

18. Provisions

A provision is recognised when an enterprise has a present obligation as a result of past event and it is probable that an outflowof resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are notdiscounted to its present value and are determined based on estimate required to settle the obligation at the balance sheetdate. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

19. Employee Stock Option

The Company accounts for sock compensation expenses, if any, arising on the employee stock option based on the fair valuemethod.

B. NOTES TO THE ACCOUNTS

1. The Punj Lloyd Group comprises of the following entities:-

Name of the Company Country of % of voting % of votingIncorporation power held as at power held as at

March 31, 2006 March 31, 2005

a) Subsidiaries

Spectra Punj Lloyd Limited India 98.00 98.00

Punj Lloyd Insulations Limited India 100.00 100.00

Spectra Infrastructure Limited India 100.00 100.00

Atna Investments Limited India 100.00 100.00

Spectra Punjab Limited India 100.00 100.00

PLN Construction Limited(w.e.f. October 24, 2004) India 100.00 100.00

Spectra Net Limited India 73.34 73.34

Punj Lloyd (Malaysia) SDN,BHD(Refer Note No (i)) Malaysia 100.00 100.00

Punj Lloyd Inc (Refer Note No (ii)) U.S.A 100.00 100.00

Punj Lloyd International Limited British Virgin Islands 100.00 100.00

Punj Lloyd Kazakhstan, LLP Kazakhstan 100.00 100.00

PT Punj Lloyd Indonesia Indonesia 100.00 100.00

b) Step down Subsidiary

Spectranet Holdings Limited(Subsidiary of Spectra Net Limited) India 73.34 73.34

c) Joint Ventures- Jointly Controlled Entities/Operations

i) Jointly Controlled Entities

Rajamundry Expressway Ltd. (REL)(upto January 31, 2005) India – –

Andhra Expressway Ltd. (AEL)(upto January 31, 2005) India – –

North Karnataka Expressway Ltd. (NKEL)(upto March 19, 2005) India – -

PLN Construction Limited (PLNC)(upto October 24, 2004) India – –

Thiruvananthapuram Road DevelopmentCompany Limited (Refer Note No (iii) India 50.00 50.00

Asia Drilling Services Limited (Joint Venture ofPunj Lloyd International Ltd.) Mauritius 50.00 50.00

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Name of the Company Country of % of voting % of votingIncorporation power held as at power held as at

March 31, 2006 March 31, 2005

ii) Jointly Controlled Operations

Punj Lloyd – Progressive Constructions JV Refer Note No. (v) Refer Note No. (iv) Refer Note No. (iv)

Persys-Punj Lloyd JV Refer Note No. (v) Refer Note No. (iv) Refer Note No. (iv)

Punj Lloyd – PT Punj Lloyd Indonesia JV Refer Note No. (v) Refer Note No. (iv) Refer Note No. (iv)

Punj Lloyd – Limak JV Refer Note No. (v) 50.00 50.00

Punj Lloyd – Sunil Hi tech Engineers JV Refer Note No. (v) Refer Note No. (iv) Refer Note No. (iv)(w.e.f. April 29, 2005)

d) Associates

i) Associates of Holding Company

Bistro Hospitality Pvt. Limited India 35.10 40.00((Refer Note No. (vi))

Jacob Ballas Capital India Private Limited India – –(upto December 31, 2004)

Vadodara Halol Toll Road Co. Limited India – –(upto March 19, 2005)

ii) Associate of a Subsidiary

Gaitry Cable Network Private Limited India 49.00 49.00(Associate of Spectra Net Limited(Refer Note No. (vii)))

iii) Associates of a Step down Subsidiary

City Vision Pvt. Ltd. India 49.00 49.00

Shitul Engineering Pvt. Ltd. India 49.00 49.00

Sunstar Network & Technologies Pvt. Ltd. India 49.98 49.98

Dot Com Holdings Pvt. Ltd. India 49.00 49.00

Satellite Vision Pvt. Ltd. (Refer Note No. (vii)) India 49.00 49.00

i) At an Extraordinary General Meeting held on 25th April, 2005, the shareholders of the Punj Lloyd (Malaysia) SDN, BHD (asubsidiary incorporated in Malaysia) passed a special resolution for the voluntary winding up in accordance with the provisionsof the Companies Act of that country. Accordingly, adjustments had been made in the previous year to the values of the assetsof that entity so as to adjust their carrying amounts to their estimated realisable amounts and to provide for further liabilitieswhich may arise. The unaudited financials of the subsidiary drawn on 25th April, 2005 have been consolidated in thesefinancial statements.

ii) The Company has decided to wind up its subsidiary Punj Lloyd Inc., USA w.e.f. 31st December, 2005. The process of windingup is being carried out in accordance with laws of that country. The unaudited financials of the subsidiary drawn on31st December, 2005 have been consolidated in these financial statements and the losses arising on winding up have alreadybeen provided for.

iii) Management approved unaudited financial statements of the joint venture entity prepared as at 31st March, 2006 have beenconsidered for consolidation purposes. These unaudited financial statements reflect (to the extent of the Group’s proportionateshare) total assets aggregating Rs. 471,266 thousand as at 31st March, 2006 (previous year Rs. 353,877 thousand) and totalrevenues Nil (previous year Nil) and cash flows aggregating Rs. 4,525 thousand (previous year Rs. 17,519 thousand) respectivelyfor the year ended 31st March, 2006.

iv) As per the joint venture agreements, the scope and value of work of each partner has been clearly defined and accepted by theclients. The Company’s share in Assets, Liabilities, Income and Expenses are duly accounted for in the accounts of the Companyin accordance with such division of work. However, joint venture partners are, jointly and severally, liable to clients for anyclaims in these projects.

v) Country of Incorporation not applicable, as these are Unincorporated Joint Ventures.

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vi) Management approved unaudited financial statements have been considered for consolidation purposes. The consolidatedProfit & Loss Account includes profit of Rs. 7,858 thousand (previous year Rs. 2,689 thousand) (being the proportionate shareof the Punj Group) from the entity.

vii) In the absence of availability of financial statements of these entities, these have not been consolidated as at 31st March, 2006.The Group has provided for diminution in the value of investments to the extent of its cost of investment in these entitiesaggregating Rs. 3,799 thousand (previous year Rs. 3,799 thousand) as at 31st March, 2006.

2. Segment Information

Business Segments

The group’s operating businesses are organised and managed separately according to the types of products/services provided.The identified reportable segment is engineering and construction business. The others segment includes operation andmaintenance of highways on annuity basis, manufacture and sale of ready mix concrete, internet services, equipment hireservices, and cable TV operations. Segmental information is disclosed as under:

(Amount in INR ’000)

Engineering & Others Corporate unallocable TotalConstruction expenses

For the For the For the For the For the For the For the For theyear ended year ended year ended year ended year ended year ended year ended year endedMarch 31, March 31, March 31, March 31, March 31, March 31, March 31, March 31,

2006 2005 2006 2005 2006 2005 2006 2005

External Segment Revenue 16,700,863 17,794,417 329,495 418,680 135,525 1,066,499 17,165,883 19,279,596

Internal Segments – 232 – 76,020 – – – 76,252

Segment Revenue 16,700,863 17,794,185 329,495 342,660 135,525 1,066,499 17,165,883 19,203,344

Segment Results 2,449,202 1,812,601 (73,771) (103,256) (1,544,435) (514,465) 830,996 1,194,880

Segment Assets 20,293,432 13,954,931 995,552 1,527,351 1,767,233 1,296,231 23,056,217 16,778,513

Segment Liabilities 4,909,738 3,182,538 126,843 204,945 6,804,337 8,289,158 11,840,918 11,676,641

Capital Expenditure 2,120,061 984,365 25,002 1,663,120 195,695 109,841 2,340,758 2,757,326

Depreciation/Amortisation 491,120 414,064 80,836 413,254 31,744 11,738 603,700 839,056

Non Cash Expenses 41,378 9,694 16,844 7,688 449 1,091 58,671 18,473

Reconciliation of Reportable Segments with Financial Statements

Revenues Results Assets Liabilities

For the For the For the For the For the For the For the For theyear ended year ended year ended year ended year ended year ended year ended year endedMarch 31, March 31, March 31, March 31, March 31, March 31, March 31, March 31,

2006 2005 2006 2005 2006 2005 2006 2005

Total of Reportable Segments 17,165,883 19,203,344 830,996 1,194,880 23,056,217 16,778,513 11,840,918 11,676,641

Less : Corporate – – (291,472) (193,775) – – – –unallocated: Taxes

Add : Share in profits – – 7,754 2,583 – – – –of associates

Add : Share of losses – – 7,340 2,373 – – – –transferred to minority

As per Segment 17,165,883 19,203,344 554,618 1,006,061 23,056,217 16,778,513 11,840,918 11,676,641

As per Financial Statements 17,165,883 19,203,344 554,618 1,006,061 23,056,217 16,778,513 11,840,918 11,676,641

Geographical Segments*:

Although the Company’s major operating divisions are managed on a worldwide basis, they operate in two principal geographicalareas of the world, in India, its home country, and the other countries.

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The following table presents revenue and debtors regarding geographical segments for the year ended 31st March, 2006 and31st March, 2005.

Sales Revenue by Debtors (including retention money) byGeographical Market Geographical Market

2005-06 2004-05 2005-06 2004-05Rs. in ‘000 Rs. in ‘000 Rs. in ‘000 Rs. in ‘000

India 9,830,331 8,777,407 2,764,592 2,348,254

Other countries 7,335,552 10,425,937 1,259,813 1,016,163

17,165,883 19,203,344 4,024,405 3,364,417

* The Company has common assets for servicing Domestic Market and Overseas Markets. Hence, separate figures for assets/additions to assetscannot be furnished.

As at March 31, 2006 As at March 31, 2005

Punj Lloyd Joint Punj Lloyd JointLimited & Ventures Limited & Ventures

Susbsidiares Subsidiaries

3. Capital Commitments Rs. In ‘000 Rs. in ‘000 Rs. in ‘000 Rs. in ‘000

Estimated amount of contracts remaining to be 581,445 593,485 48,859 667,920executed on capital account and not provided for(net of advances)

4. Contingent liabilities to the extent not provided for :

a) Bank Guarantees given by the Company 401,793 – 549,441 –

b) Liquidated damages deducted by customers notaccepted by the Company and pending finalsettlement (Refer Note No. 7(b) below) 449,558 – 447,451 –

c) Corporate Guarantees given on behalf of associates 68,000 – 68,000 –

d) Differential amount of customs duty in respect ofmachinery imported under EPCG Scheme. 108,180 – 84,637 –

e) Estimated future investments in other companies in terms of respective shareholder agreements amounting in aggregateto Rs. 1,180,000 thousand (previous year nil).

f) i) Sales tax demand on the material components of the works contracts pending with Sales Tax Authorities and HighCourt amounting to Rs. 141,866 thousand (previous year Rs. 121,504 thousand).*

ii) Sales tax demand for non-submission of statutory forms aggregating to Rs. 66,006 thousand (previous yearRs. 62,337 thousand).*

iii) Sales tax demand for disallowance of deduction on purchase aggregating to Rs. 43,619 thousand (previous yearRs. 3,645 thousand).*

iv) Sales Tax liability of Rs 31,146 thousand (previous year Nil) for purchases against sales tax forms not accepted bydepartment.*

v) Sales tax demand of Rs. 21,178 thousand (previous year Rs. 21,214 thousand) in respect of Internet Service Divisionregarding taxability of internet services. The same is contested by the Company in view of similar matter decided bythe Hon’ble Supreme Court of India in the case of Bharat Sanchar Nigam Ltd. and another Vs. Union of India andothers wherein it was held that internet services are not taxable as goods.*

g) The Company has not acknowledged as debt a claim lodged by one of its suppliers amounting to Rs. 5,082 thousand(previous year Rs. 5,082 thousand) on account of services rendered in earlier years. The matter is under arbitration.*

* Based on favourable decisions in similar cases/legal opinions taken by the Company/consultations with solicitors, themanagement believes that the Company has a good chance of success in above mentioned cases and hence, noprovision there against is considered necessary.

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5. Details of assets acquired on hire purchase and finance leases

As at March As at March31,2006 31, 2005

Rs. in ‘000 Rs. in ‘000

Gross block at the end of period 359,207 182,938

Written down value at the end of period 324,415 144,904

Details of payments made during the period:

Principal 43,967 172,042

Interest 9,343 46,452

The break-up of minimum hire purchase payments outstanding as at 31st March, 2006 is as under



Payable within one year 78,811 18,971 97,782Payable after one year but before end of fifth year 213,031 28,447 241,478

291,842 47,418 339,260



Payable within one year 36,235 6,655 42,890Payable after one year but before end of fifth year 30,211 1,984 32,195

664,446 8,639 75,085

The hire purchase term is between 3 to 5 years. There is no escalation clause in the hire purchase agreement. Also there is norestriction imposed by the hire purchase agreement.

6. During the year, the Company has accounted for the credit on account of Duty Free Credit Entitlement on the revenuesearned in foreign exchange on accrual basis as against the hitherto followed practice of accounting for the same on receiptbasis in earlier years. Consequent to this change, the Company has accrued an additional income of Rs. 106,134 thousandduring the year.

As a result of the above, profit for the year before tax is higher by Rs. 106,134 thousand.

7. a) The Company had executed two projects of Sulphur Recovery Units (SRU) of Indian Oil Corporation Limited (IOCL) attheir refineries at Mathura and Vadodara in an earlier year on back to back basis for Petrofac International Limited (PIL)who was the main contractor. IOCL had withheld payments from PIL on account of duties and taxes and PIL had in turnwithheld Rs. 297,734 thousand (previous year Rs. 296,214 thousand) in an earlier year, which are outstanding as debts atthe close of the year. PIL had gone into arbitration against IOCL and lodged claims for recovery of above amount alongwith interest and also some other claims amounting to Rs. 387,034 thousand (previous year Rs. 387,034 thousand).These claims of Rs. 387,034 thousand have not been accounted for in the books except to the extent stated in Note 9below. Pending outcome of arbitration, amount withheld by PIL is being carried forward under sundry debtors. TheCompany has been legally advised that in terms of the contract, it is entitled to receive the above amount and hence, thesame is considered good of recovery.

b) The Company had executed a pipeline project at Dahej- Vijaypur for Gas Authority of India Limited (GAIL) in an earlieryear. GAIL had withheld Rs. 423,707 thousand (previous year Rs. 422,591 thousand) as liquidated damages andRs. 40,441 thousand (previous year Rs. 40,297 thousand) towards other deductions, which the Company is disputing.Also, the Company had filed some other claims with GAIL amounting to Rs. 999,004 thousand (previous year 999,004thousand). These claims have not been accounted for in the books. The Company had gone into arbitration against GAILfor recovery of amount withheld as liquidated damages and other deductions and claims of the Company. Pendingoutcome of arbitration, amount withheld for liquidated damages and other deductions are being carried forward undersundry debtors. The Company has been legally advised that there is no justification in imposition of liquidated damagesand other deductions by GAIL and hence the above amount is considered good of recovery.

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c) The Company had executed a pipeline project for Petronet MHB Limited in an earlier year. The customer had withheldRs. 4,440 thousand (previous year Rs. 4,440 thousand) from the running bills, which are being carried forward undersundry debtors. The customer had also not certified the final bill amounting to Rs.64,000 thousand (previous year Rs.64,000 thousand) which is being carried forward under work in progress. The Company had raised claims for Rs. 517,387thousand (previous year Rs. 517,387 thousand), which are not accounted for in the books. For recovery of the saidamounts, which are being disputed by the customer, the Company has initiated Arbitration proceedings. The outstandingamounts are considered good of recovery.

8. The Company in the previous year had raised variation orders of Rs. 1,490,000 thousand (previous year Rs. 1,468,000 thousand)on Spie Capag-Petrofac International Limited (SCPIL) with whom the Company had entered into a contract for construction ofpipelines in Georgia. SCPIL had raised debit notes of Rs. 477,400 thousand (previous year Rs. 466,700 thousand) on theCompany. These variations orders and debit notes are being disputed and have not been agreed between the management ofthe Company and SCPIL. However, the ultimate outcome of the dispute cannot presently be determined by the Company.Accrdingly these variation orders and debit notes have not been recorded in these financial statements. An amount ofRs. 378,016 thousand including Rs. 301,016 thousand in respect of invoices raised and Rs. 77,000 thousand in respect ofdebit notes (previous year Rs. 281,100 thousand and Rs. 75,500 thousand respectively) is withheld by SCPIL in view of thedisputes. This amount is being carried forward under sundry debtors and is considered good of recovery.

SCPIL has purported to serve a notice of suspension to the Company by letter dated 22nd February, 2005 and a notice ofintention to Terminate Subcontract Agreement for default dated March 28, 2005. The Company does not accept the groundsfor service of the notice are valid.

9. As stated in Note 7(a) above, the Company has initiated the arbitration proceedings for recovery of withheld amounts andother claims including interest. The arbitration proceedings are in advanced stages and the Company has been advised legallythat it is entitled to the recovery of amount withheld as stated in Note 7 (a) alongwith interest. Accordingly, the Company,during the year, has taken a credit for interest of Rs. 14,632 thousand (previous year Rs. 65,659 thousand) on conservativeestimated basis on the aforesaid withheld amount.

10. The Company in the previous year had made commitment to give donation to Pt. Kanhya Lal Dayawanti Punj CharitableSociety amounting to Rs. 55,580 thousand in a phased manner over a period of two years vide a resolution passed in themeeting of Board of Directors dated December 20, 2004. Out of above, the Company has contributed Rs. 14,980 thousand(previous year Rs. 3,230 thousand) till the close of the year.

11. The disclosures as per provisions of Clause 38,39 and 41 of Accounting Standard 7 issued by Institute of Chartered Accountantsof India are as under:

As at As atMarch 31, March 31,

2006 2005Rs. in ‘000 Rs. in ‘000

a) Contract revenue recognised as revenue in the period (Clause 38 (a)) 15,981,987 17,035,308

b) Aggregate amount of costs incurred and recognised profits up to the 37,885,853 26,033,180reporting date on Contracts under progress (Clause 39 (a))

c) Advance received on Contracts under progress (Clause 39 (b)) 1,147,872 808,339

d) Retention amounts on Contract under progress Clause 39 (c) 148,458 210,491

e) Gross amount due from customers for contract work as an asset 7,234,573 4,808,843(Clause 41(a))

f) Gross amount due to customers for contract work as a liability 243,392 11,396Clause 41 (b)

12. (a) One of the subsidiaries of the Company, Spectra Punjab Limited, had in earlier years laid down optical fiber cable andducts network in the State of Punjab for providing internet services. Spectra Punjab operations remain suspended presently.However, the holding Company proposes to use its own internet service network to restart the operations of SpectraPunjab Limited. Accordingly the accounts of the subsidiary have been prepared on a going concern basis.

(b) Spectra Punjab Limited is yet to commence the commercial operations of providing Internet Services. Accordingly, incidentalexpenses for the project up to 31st March, 2006 amounting to Rs. 2,851 thousand (excluding Rs. 1,000 thousand beingconsideration paid for services under joint venture agreement) is carried forward as pre-operative expenditure, to becapitalised or treated as deferred revenue expenditure in accordance with generally accepted accounting principles atthe time of commencement of commercial operations.

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13. Current Assets include Rs. 4,225 thousand recoverable pursuant to agreements for sale of 1,28,400 shares of PanasonicBattery India Company Limited (Formerly known as Lakhanpal National Limited) entered into on 27th March, 1992, which aresubject matter of a dispute in the Honourable High Court at Bombay, wherein the Company has been restrained from transferringthese shares till the final disposal of the suit. These shares remain in the possession of the Company and the market valuethereof at close of the year is Rs. 9,309 thousand (previous period Rs. 6,259 thousand).

14. During the previous year, the Company had entered into agreements to sell its investments in the shares of certain Companiesof the cost of Rs. 111,974 thousand and had received advances representing consideration for the future sale of shares (asdefined in the above agreements) in these companies, including all accretions thereto till the date of sale. Through the aboveagreements to sell, the Company had agreed to give all the powers and rights in these shares to purchasers. In terms of theabove arrangement, the Company in the previous year had accounted for Rs. 20,300 thousand, being the amount received inexcess of book vale of shares (for all the companies) as income on transfer of the powers and rights in the underlying shares topurchasers and the balance consideration of Rs. 111,974 thousand equivalent to the amount of investment in above sharesappearing in the books is shown as deposit under Current Liabilities to be adjusted against the sale of shares in the abovecompanies on the date of sale.

15. The Company in an earlier year had entered into an Assets Sale Agreement for sale of its certain fixed assets relating to ISPundertaking. The sale tax liability on such transaction is subject to determination by the relevant authorities for which anapplication is pending adjudication. The amount of such liability is indeterminable at present. As per agreement with thebuyer, any such sale tax liability is to be borne by the buyer. Consequently, aforesaid sale tax liability on such transactions hasnot been provided for. (previous year - Nil)

16. EARNING PER SHARE

Basic Earnings2005-06 2004-05

a) Calculation of weighted average number of equity shares of Rs. 10 eachNumber of equity shares at the beginning of the period 24,317,127 20,644,800Equity shares at the end of the period 52,219,836 24,317,127Weighted average number of equity shares outstanding during the period 43,521,676 35,301,822(taking into consideration issue of bonus shares in terms of para 24 of AS-20)

b) Net Profit after tax available for equity shareholders (Rupees in thousand) 554,618 1,006,061

c) Basic earning per share 12.74 28.50

Diluted Earnings

a) Calculation of weighted average number of equity shares of Rs. 10 eachNumber of equity shares at the beginning of the period 24,317,127 20,644,800Equity shares at the end of the period 52,219,836 24,317,127Weighted average number of equity shares outstanding during the period 45,993,514 N.A(taking into consideration issue of bonus shares in terms of para 24 of AS-20)

b) Net Profit after tax available for equity shareholders (Rupees in thousand) 554,618 1,006,061

c) Diluted earning per share 12.06 –*

* During the previous year, the Company had issued 917,628 of preference shares convertible into equity shares at a later date. However, theconversion price being not determinable at that time, diluted earning per share could not be computed.

17. During the year, the Company has converted 917,628 preference shares of Rs.10 each into 3,098,296 equity shares of Rs.10each. The Company has capitalised the premium on the conversion by Rs. 21,807 thousand out of Securities Premium Account.

18. During the year, the Company has issued 16,449,239 bonus shares in the ratio of 3:5 to the existing shareholders on30th September, 2005 in terms of resolution passed by the Board of Directors on 30th September, 2005. For this purpose, theCompany has capitalized Rs. 164,492 thousand out of General Reserve.

19. (a) During the year, the Company has made Initial Public Offering (IPO) of 9,172,937 Equity shares of Rs. 10/- each for cashat premium of Rs. 690/- per share comprising of 8,355,174 Equity shares freshly issued by the Company and 817,763Equity shares offered for sale by the Selling Shareholders.

(b) Expenses of Rs. 305,097 thousand incurred in connection with the public issue of the Company have been adjustedagainst Securities Premium Account in terms of Section 78 of the Companies Act, 1956.

(c) Initial Public Offer (IPO) fund utilisation: The Company spent Rs. 4,800,927 thousand out of fresh issue of share capital ofRs. 5,848,621 thousand as per the terms of Prospectus dated December 19, 2005.

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Rs. in ‘000

Particulars Projected Utilisation as per Actual as onthe Prospectus dated March 31, 2006

December 19, 2005

Investment in Capital Equipment Up to 1,500,000 705,230Prepayment of Debts Up to 3,000,000 3,064,170Equity Investment in Infrastructure Projects, WOS and JVs Up to 500,000 203,510General Corporate Purposes 522,921 522,920Offer related expenses 325,700 305,097

Total 5,848,621 4,800,927

Unspent amount of Rs. 1,047,694 thousand is lying in the Company’s Cash Credit bank accounts and is shown under WorkingCapital Loan Account from banks.

Unspent IPO proceeds will be used for Equity Investment in Infrastructure Projects, WOS and JVs and Capital Equipment as perthe prospectus.

20. During the year, the Company has introduced Employee Stock Option Scheme (ESOP) named “Stock Option Plan, 2005”, theRemuneration Committee of the Company, on November 11, 2005 has approved grant of 800,000 stock option. The Companyhas determined Rs. 482.16 per share as fair value of the Company’s share as at the date of grant.

Under ESOP, the Company has granted, option(s) equivalent to 800,000 equity shares of the face value of Rs. 10 each atRs. 630 each share (i.e. at 10% discount to the Initial Public Offer (IPO) price) to each of the eligible employees of theCompany. As at 31st March , 2006, 643,489 options have been granted to the eligible employees. The stock options shall vestin the ratio of 10%, 20%, 30% and 40% at the end of one, two, three and four years respectively from the date of grant. Theexercise period is three years from the date of vesting. As on 31st March, 2006, no stock options have been vested.

21. Prior period items debited/(credited) to respective account heads aggregate to Rs. 33,585 thousand (net debit) (previous yearRs. 58,832 thousand (net debit)).

22. Deferred Tax Liability (Net)

Punj Lloyd & subsidiaries

Deferred Tax Current Period Deferred TaxAsset/(Liability) (Charge)/Credit Asset/(Liability)

as at April 01, as at March 31,2005 2006

Rs. in ‘000 Rs. in ‘000 Rs. in ‘000

Differences in depreciation in block of fixed assets as per (591,843) 41,759 (550,084)Income Tax and Financial Books

Effect of expenditure not debited to Profit and Loss Account (43,646) (22,080) (65,726)but allowable in Income Tax

Difference in carrying value of Scaffolding as per Income – (6,793) (6,793)Tax & Financial Books

Effect of expenditure debited to Profit and Loss Account in the 15,417 (5,734) 9,683current year but allowable in following years under Income Tax

Deduction u/.s 35D – 6,496 6,496

Employee Retirement Benefits 156 (129) 27

Provision for Doubtful Debts & Advances 505 (505) –

Foreign currency translation 1027 (706) 321

Net Deferred Tax Liability (Net) (618,384) 12,308 (606,076)

23. The Company has invested Rs. 200,000 thousand in the Share Capital of Global Health Private Limited (GHPL) comprising of23.88% of the Share Capital of GHPL. The Shareholders and Subscription agreement provides that GHPL shall issue furthershares to other shareholders and the Company’s holding in GHPL shall get diluted to 16%. GHPL has made the allotment ofshares to other shareholders after the date of Balance Sheet and the Company’s shareholding in GHPL is reduced to 16%. TheCompany does not have any significant influence in the operations of GHPL and accordingly the investment in GHPL is notconsidered as investment in Associates.

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24. Related Party DisclosuresThe information given below is only in respect of transactions entered into by the Company during the year with related parties:-Names and Description of Related Partiesi) Joint Ventures of the Company

a) Jointly Controlled Entities1) Rajamundry Expressway Limited (upto January 31, 2005)2) Andhra Expressway Limited (upto January 31, 2005)3) Thiruvananthapuram Road Development Company Limited4) PLN Construction Limited (upto October 24, 2004)5) North Karnataka Expressway Limited (upto March 19, 2005)6) Asia Drilling Services Limited

b) Jointly Controlled Operations1) Punj Lloyd - Limak JV2) Punj Lloyd - Progressive Construction JV3) Persys-Punj Lloyd JV4) Punj Lloyd - PT Punj Lloyd Indonesia JV5) Punj Lloyd - Sunil Hitech Engineers ( w.e.f. April 29, 2005)

ii) Associates of the Holding Company1) Bistro Hospitality Private Limited2) Jacob Ballas Capital India Private Limited (upto December 31, 2004)3) Vadodara Halol Toll Road Co. Ltd. (upto March 19, 2005)

iii) Associate of a Subsidiary1) Gaitry Cable Network Pvt. Limited

iv) Associates of a Step down Subsidiary1) City Vision Pvt. Ltd.2) Shitul Engineering Pvt. Ltd.3) Sunstar Network & Technologies Ltd.4) Dot Com Holding Pvt. Ltd.5) Satellite Vision Pvt. Ltd.

v) Key Managerial Personnel of the Punj Lloyd Group1) Atul Punj Chairman & Managing Director2) V. K. Kaushik Joint Managing Director and Chief Operating Officer3) Luv Chhabra Director Finance & Corporate Affairs4) Mahinder Prakash Wholetime Director (upto October 31, 2004)5) Uday Punj Wholetime Director (upto December 30, 2005)6) P. K. Gupta Wholetime Director (upto July 19, 2005)7) V. K. Sud Wholetime Director (upto July 19, 2005)8) Tarwinder Singh Wholetime Director (upto December 30, 2005)9) H.K. Kaul Wholetime Director (from July 19, 2005 to December 30, 2005)10) J. B. Dewan Wholetime Director11) Adil Vadoliwala General Director12) Sandeep Garg Chief Operating Officer13) V. P. Sharma Wholetime Director14) A. Rajendra Wholetime Director15) Arvind Pasricha Manager16) K. Ramchand Managing Director17) Ravindra Kansal Managing Director

vi) Relatives of Key Managerial Personnel

1) S. N. P. Punj - Father of Chairman and Managing Director2) Arti Singh - Sister of Chairman and Managing Director3) Saroj Gupta - Wife of a Director (upto July 19, 2005)4) Paresh Gupta - Son of a Director (upto July 19, 2005)

vii) Enterprises over which relatives of Key Managerial Personnel are exercising significant influence.

1) M. Parkash-HUF - A Director’s HUF (Upto October 31, 2004)2) Punj Business Centre - owned by father of Chairman and Managing Director

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Joint Ventures Associates Key management personnel Enterprises over which Totalor their relatives relatives of Key Managerial

personnel are exercisingsignificant influence

(Rs. in ‘000) (Rs. in ‘000) (Rs. in ‘000) (Rs. in ‘000) (Rs. in ‘000)

2006 2005 2006 2005 2006 2005 2006 2005 2006 2005

INCOMEContract RevenueThiruvananthapuram Road DevelopmentCompany Limited 67,279 284,256 – – – – – – 67,279 284,256Andhra Expressway Limited – 215,818 – – – – – – – 215,818North Karnataka Expressway Limited – 522,463 – – – – – – – 522,463PLL_Limak – – –Vadodra Halol Toll Road Limited – – – 12,154 – – – – – 12,154V.K. Kaushik – – – – 656 – – – 656 –EXPENDITUREConsultancy/Professional chargesSNP Punj – – – – 60 60 – – 60 60Managerial RemunerationV. K. Kaushik – – – – 6,673 3,895 – – 6,673 3,895Luv Chhabra – – – – 6,666 3,759 – – 6,666 3,759Uday Punj – – – – 4,508 3,247 – – 4,508 3,247Mahinder Prakash – – – – 160 1,928 – – 160 1,928P. K. Gupta – – – – 1,579 2,422 – – 1,579 2,422V. K. Sud – – – – 2,044 2,312 – – 2,044 2,312Tarwinder Singh – – – – 2,778 1,882 – – 2,778 1,882H. K. Kaul – – – – 1,582 – – – 1,582 –Punj Lloyd Insulations LimitedJ. B. Dewan – – – – 1,276 1,083 – – 1,276 1,083Punj Lloyd Kazakhstan LLPAdil Vadoliwala – – – – 921 897 – – 921 897Spectra Net LimitedArvind Pasricha – – – – 535 461 – – 535 461Pt Punj Lloyd IndonesiaAtul Punj – – – – 13,385 13,500 – – 13,385 13,500V. P. Sharma – – – – 3,792 2,966 – – 3,792 2,966A. Rajendra – – – – 113 1,699 – – 113 1,699RentPunj Business Center – – – – – – 22,527 22,827 22,527 22,827M. Prakash HUF – – – – – – – 300 – 300Saroj Gupta – – – – – 91 – – – 91Arti Singh – – – – – 40 – – – 40Paresh Gupta – – – – – 104 – – – 104Subscription –Atna Investments Limited –Punj Business Center – – – – – – 5 – 5 –Punj Lloyd Insulations LimitedPunj Business Center – – – – – – 5 – 5 –S. N. Punj – – – – – – – 10 – 10Share issue expensesJacob Ballas Capital India Private Limited – – – 34,275 – – – – – 34,275Investment Sold during the yearRajamundry Expressway Limited – 108,025 – – – – – – – 108,025Andhra Expressway Limited – 108,025 – – – – – – – 108,025North Karnataka Expressway Limited – 173,636 – – – – – – – 173,636Jacob Ballas Capital India Private Limited – 1,344 – 1,000 – – – – – 2,344Bistro Hospitality Private Limited – – 4,018 – – – – – 4,018 –OTHERSBank Guarantees Issued during the yearThiruvananthapuram Road Development Company Limited – 25,000 – – – – – – – 25,000Corporate Guarantees redeemed during the yearBistro Hospitality Private Limited – – – 16,000 – – – – – 16,000BALANCE OUTSTANDING AS AT MARCH 31, 2006Receivable/(payables)Thiruvananthapuram Road Development Company Limited 9,481 87,114 – – – – – – 9,481 87,114Loan from a DirectorV. K. kaushik – – – – 37 – – – 37 –Investments –Bistro Hospitality Private Limited – – 41,344 38,161 – – – – 41,344 38,161Shitul Engineering (P) Ltd. – – 666 767 – – – – 666 767DotCom Holding (P) Ltd. – – 12 15 – – – – 12 15Satellite Vision (P) Ltd. – – 3,750 3,750 – – – – 3,750 3,750Bank GuaranteesPunj Lloyd - Progressive Construction JV 154,640 154,640 – – – – – – 154,640 154,640Andhra Expressway Limited – 59,000 – – – – – – – 59,000Vodhara Halol Toll Road Limited – 73,000 – – – – – – – 73,000Thiruvananthapuram Road Development Company Limited 25,000 25,000 – – – – – – 25,000 25,000Corporate GuaranteesBistro Hospitality Private Limited – – 68,000 68,000 – – – – 68,000 68,000

RELATED PARTY DISCLOSURE

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25. Details of the Company’s share in Joint Ventures included in the Consolidated Financial Statements are as follows:

Particulars As at As atMarch 31, 2006 March 31, 2005

Sources of Funds

Reserves & Surplus* (34) 137,631

Loan Funds

Secured Loans 315,724 201,218

Total 315,690 338,849

Application of Funds

Capital Work-in-Progress Including Capital Advances 308,731 219,091

Preoperative Expenditure Pending Allocation 105,115 77,068

Current Assets, Loans & Advances

Sundry Debtors 3,214 24,450

Cash and Bank Balances 22,169 20

Loans and Advances 95 17,629

25,478 42,099

Less: Current Liabilities & Provisions

Current Liabilities 25,290 78,906

Net Current Assets 188 (36,807)

Miscellaneous Expenditure 92 92

(To The Extent Not Written Off Or Adjusted)

Total 414,126 259,444

* After elimination of Share Capital, Inter Company transactions and balances and adjustment of accounting policies aggregating Rs.132,475

thousand (previous year Rs. 79,406 thousand)

Particulars Year ended Year endedMarch 31, 2006 March 31, 2005

Income

Sales & Contracts Revenue – 504,899

Other Income – 862

Total – 505,761

Expenditure

Materials Consumed and Cost of Goods Sold – 3,981

Project and Administrative Expenses 5,228 55,269

Financial Charges (5) 167,178

Miscellaneous Expenditure Written Off – 1,640

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Particulars Year ended Year endedMarch 31, 2006 March 31, 2005

Depreciation/Amortization – 153,177

Total 5,223 381,245

Profit Before Tax (5,223) 124,516

Current Tax – 6,750

Deferred Tax – 256

Profit After Tax (5,223) 117,510

26. Previous year comparatives

1) Previous year’s figures have been regrouped where necessary to conform to this year classification.

2) Figures pertaining to Subsidiaries, Joint Ventures and Associate companies have been reclassified wherever considerednecessary to bring them in line with the holding company’s financial statements. Further, as indicated Note 1 above,several changes had taken place in the group structure during the previous year. Accordingly, the current year figures arenot strictly comparable with previous year figures.


For S. R. BATLIBOI & CO. For and on behalf of the Board of DirectorsChartered Accountants

per RAJ AGRAWAL DINESH THAIRANI ANIL AGARWAL LUV CHHABRA ATUL PUNJPartner Company Chief Financial Director Finance Chairman andMembership No. 82028 Secretary Officer and Corporate Affairs Managing Director


PUNJ LLOYD LIMITED

132

Consolidated Cash Flow Statement for the year ended March 31, 2006


A Cash Flow From Operating Activities

Profit before Tax 830,996 1,194,880

Adjustment for -

Depreciation/Amortisation 603,700 839,056

Miscellaneous Expenditure written off – 48,075

Loss on Sale of Fixed Assets (Net) 34,641 60,624

(Profit) on Sale of Investments (Net) (22,614) –

Profit on Disposal of Interest in Joint Ventures – (583,524)

Profit on Disposal of Interest in Associates (2,185) (150,561)

Interest Income (50,187) (105,785)

Waiver of Funded Interest – (130,000)

Dividend on Long Term Investments (6,093) (636)

Diminution in Value of Long Term Investment 449 –

Amortisation/Depletion in Value of Inventory – 8,227

Interest 626,695 966,548

Bad Debts/Advances written off/liabilities written off/written back (Net) (29,841) (108,949)

Provision for Doubtful Debts and Advances (Net) 58,222 14,304

Operating profit before working capital changes 2,043,783 2,052,259

Movement in Working Capital

(Increase)/Decrease in Sundry Debtors (777,064) (1,332,709)

(Increase)/Decrease in Loans and Advances (196,328) (657,125)

(Increase)/Decrease in Other Current Assets (43,738) (22,025)

(Increase)/Decrease in Inventories (2,532,916) (2,641,652)

Increase/(Decrease) in Current Liabilities and Provisions 1,797,792 1,477,576

(Increase)/Decrease in Miscellaneous Expenditure Not written off – (92)

291,529 (1,123,768)

Direct Tax Refunds/Paid (Net) (287,459) (236,748)

Net Cash used in Operating Activities 4,070 (1,360,516)

B Cash Flow from/(used in) Investing Activities

Purchase of Fixed Assets (2,556,357) (2,247,180)

Purchase of Investments (200,000) (25,908)

Proceeds from Sale of Investments 70,757 683,325

Proceeds from Sale of Fixed Assets 71,349 169,896

Dividend Received 6,093 636

Interest Received 36,557 84,106

Net Cash used in Investing Activities (2,571,601) (1,335,125)


133


C Cash Flows from Financing Activities

Increase/(Decrease) in Share Capital 83,552 45,881

Share Issue Expenses (305,097) (39,060)

Increase in Premium on Issue of Share Capital 5,765,070 2,239,122

Increase/(Decrease) in Short Term Working Captial Loans 693,422 (305,083)

Increase/(Decrease) in Secured Term Loans (1,786,130) 824,775

Redemption of Debentures (26,120) (24,120)

Increase/(Decrease) in Unsecured Loans (518,286) 853,342

Increase/(Decrease) in Deferred Payments – (65)

Interest Paid (628,205) (964,682)

Dividend Paid (18,238) (25,809)

Net Cash from Financing Activities 3,259,968 2,604,301

Net Increase in cash and cash equivalents (A+B+C) 692,437 (91,341)

Exchange Fluctuation Reserve (17,784) (17,210)

Cash and cash equivalents at the beginning of the year 431,801 540,418

Cash and cash equivalents in respect of subsidiary acquired – 1,983

during the year

Cash and cash equivelents in respect of joint venture disposed – (2,049)

off during the year

Cash and cash equivalents at the end of the year 1,106,454 431,801

Components of cash and cash equivalents

Cash in Hand 27,132 39,098

Cheque in Hand 5,024 –

Balance with Scheduled Banks

In Current Accounts 134,373 97,257

In EEFC Accounts 2,100 10,078

In Fixed Deposits 27,120 126,787

Balances with Non Scheduled Banks

In Current Accounts 874,179 81,987

In Fixed Deposits 36,526 76,594

1,106,454 431,801

1 The Cash Flow Statement has been prepared under indirect method as set out in Accounting Standard-3 on Cash FlowStatement issued by The Institute of Chartered Accountants of India.

2 Negative figures have been shown in brackets.

Consolidated Cash Flow Statement for the year ended March 31, 2006

As per our report of even dateFor S. R. BATLIBOI & CO.Chartered Accountantsper RAJ AGRAWAL DINESH THAIRANI ANIL AGARWAL LUV CHHABRA ATUL PUNJPartner Company Secretary Chief Financial Director Finance Chairman and ManagingMembership No. 82028 Officer and Corporate Affairs DirectorPlace : New DelhiDate : June 27, 2006



PUNJ LLOYD LIMITED

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Cautionary Statement

Statements made in this Annual Report describing the Company’s objectives, projections, estimate, expectations may be “Forward-looking statements” within the meaning of applicable securities laws & regulations. Actual results could differ from those expressedor implied. Important factors that could make a difference to the Company’s operations include economic conditions affectingdemand supply and price conditions in the domestic & overseas markets in which the company operates, changes in the governmentregulations, tax laws & other statutes & other incidental factors.

Concept, Research and Content by LOTUS KNOWLWEALTH PVT. LTD.

e-mail : [email protected]

Designing, Typesetting and Printing at Repro India Ltd., Mahape, Navi Mumbai

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