Notes

1. The Company has only one business segment viz. Polystyrene as Primary Segment.
2. a) The results for the quarter ended September 30, 2008 includes loss due to Foreign Exchange fluctuation amounting to Rs. 264.58 lacs as against a gain of Rs. 298.26 lacs for the corresponding quarter in the previous year.
   b) In view of high volatility in Foreign Exchange, foreign currency monetary items outstanding at the quarter end are valued at transaction rate, instead of quarter end rate, whereby loss on foreign exchange of Rs.2256.20 lacs is not provided resulting in overstatement of profit to that extent. This method of valuation of Foreign Currency monetary item is not in consonance with AS 11 issued by ICAI and the accounting policy followed by the Company hitherto. The loss on account of foreign exchange, if any, will be provided at the end of the accounting year.
3. Tax expenses includes Fringe Benefit Tax and short provision in respect of earlier years (Rs.22.03 lacs).
   Current Tax/Deferred Tax if any, will be provided at the end of the accounting year.
4. Investor complaints during the quarter:
   Opening Balance : NIL; Received during the quarter :34; Pending as on 30.09.2008: NIL.
5. The Statutory Auditors of the Company have conducted a 'Limited Review' of the Financial Results for the
   quarter ended 30th September 2008.
6. Figures of the previous year/quarter are regrouped where necessary.
7. This statement was taken on record by the Board of Directors at the meeting held on October,17 2008.

Dear Members,

It gives me great pleasure to welcome you all to the 19th Annual General Meeting of your Company. The Annual Accounts and the Directors’ Report for the year ended June 30, 2008 have been with you for sometime now and I am sure that you have perused them. I hope it will give you all a clear idea of the working of the Company during the year under review.

The Financial crisis in the West has now touched the Indian economy. Banking sector is facing liquidity squeeze resulting in credit restrictions to the industry and increased interest rates. This could have an adverse impact on the industrial production and the bottom line of the industry.

The previous year 2007-08 was governed by high prices of crude oil leading to high prices of your Company’s raw materials viz. Styrene Monomer and Polybutadiene Rubber. The current year has however, seen a slide in crude oil prices and subsequently in all the building blocks and polymers including Styrene Monomer and Polystyrene. The slide witnessed in the last 6 weeks has been approx 40% from the peak and it continues. Melt down in last few weeks has been very sharp resulting in industry as a whole incurring huge inventory losses. Your Company is no exception and would have to pass through this phase.

The Indian rupee has weakened by over 10% against the US Dollar in the last one month, thus increasing rupee obligations in respect of raw material purchase liabilities and outstanding loans. Turmoil in the global economy and fear of major economies going into recession, combined with the aforesaid factors, make the current year one of the most challenging ones ever faced by your Company.

There however, is a silver lining to this cloud of economic uncertainties. Polystyrene demand which has witnessed a negligible CAGR of 0.4% in last five years may see healthy growth with drop in prices. We are of the opinion that lower prices would push demand particularly with changing consumption pattern seen in last one year. In the long run the lower raw material prices would be beneficial for the industry’s welfare.

Secondly, with the Rupee remaining weak your Company would get advantage of better value addition in Rupee terms including on the sales in the domestic market. With the projects for the value added products going on stream very shortly the new revenue streams will put the Company on vibrant growth path.

The demand for Polystyrene in the domestic market during 2007-08 grew by 7.5% backed by increased consumption of processed and pre-packed food, consumer durables and growth of large format retail stores. In the current year due to continuous slide in the prices, demand so far has been sluggish. In the July – September’08 quarter demand as compared to the corresponding quarter of the previous year has been low by 18%. However, we expect that with the prices stabilizing at lower levels the demand in the second half of the year may grow @ 10%. Improved demand at lower price levels would help improve capacity utilisation of your Company which is currently operating at 57% of its installed capacity.

With the implementation of projects for value added products, 10% of your Company’s turnover would comprise of value added products during the period January, 2009 to June 2009 and about 15% in the year 2009 - 2010. This will help in providing cushion to your Company from the cyclical changes in the Polystyrene and Styrene business.

Your Company’s effort to add new countries, customers and distributors for its exports continues. Your Company enjoys the status of a reliable supplier to many customers in 94 countries. Continuous addition of new markets and distribution channels help in getting better sales revenues and net back as it provides flexibility to move away from very price competitive markets to better priced markets and thus avoid distress exports. Emphasis continues on export of value added products which has received very good response from Middle East and South East Asian markets. Share of these markets in your Company’s exports of value added products has increased to 79% in the last three months from 63% in the previous year.

Availability of Styrene Monomer is expected to ease, with plants with total capacities of 1.2 million tpa are partly commissioned recently and the balance likely to be commissioned by first quarter 2009 in Saudi Arabia and Kuwait. By end 2009 total additional capacity of 1.8 tpa of Styrene Monomer would be operational in this region. This additional capacity of 1.8 million tons p.a. alongwith current capacity in this region of 2.0 million tpa would provide enough Styrene in the region from where Styrene Monomer with freight advantage can be sourced. This will not only ease availability of Styrene Monomer but also improve terms of pricing, credit and safeguards against volatility etc. Improved availability shall also help in better inventory management. With the likely implementation of Indo – ASEAN FTA in January 2009, duty free imports of Styrene Monomer from ASEAN region would further help the Polystyrene Industry in India.

Projects for your Company’s move into value added products are progressing as per schedule.

SPECIALITY POLYMER PRODUCTS (SPS)

The Kneader line with a capacity of 6000 TPA has been commissioned and trial runs have commenced. The Twin Screw Extruder line also with a capacity of 6000 TPA has been received. The equipment will be operational in this month. These two lines will increase the capacity of SPS products to 25000 TPA. The response from various market segments including overseas market for SPS products is encouraging. Post TS16949 certification, encouraging response has been received for your Company’s products from automotive producers and OEM suppliers.

EXPANDED POLYSTYRENE (XPS)

XPS Board is an important insulation medium for buildings all over the world due to increasing awareness of environmental protection. Your Company is setting up plant of 5000 TPA for producing XPS Board at its existing plant site in Maharashtra. This plant will be the first of its kind in India and will adopt green technology in line with the Company’s commitment towards protecting the environment. The required machinery has been received at site and civil work for housing the equipment is in progress. This plant is expected to be commissioned by December 2008.

EXPANDABLE POLYSTYRENE (EPS)

The first phase of the EPS project at Chennai for 6000 TPA plant has been completed and the trial runs of various grades have commenced. The trial run production has been well received by the market. Actions have been initiated to enhance this capacity to 20000 tons per annum. The same will be operational by December 2008.

CUP GRADE EPS BEADS

Your Company has signed an MOU with Nova Chemicals Inc., U.S.A. for licensing technology for Cup Grade EPS Beads. The Company has thus joined a very select group of entities having access to this very restricted technology. The MOU also envisages product off take by Nova for a certain number of years and allows your Company to export the product to certain markets in addition to sales within India. The technical discussions are under progress. Barring unforeseen circumstances the plant with an annual capacity of 20,400 tons is expected to be commissioned by end 2010.

SPECIAL ECONOMIC ZONE

Land acquisition for your Company’s Sector Specific Special Economic Zone for plastic processing sector through MIDC is progressing well and baring unforeseen circumstances it is to be expected that by March 2009 same should be in the possession of your Company.

AMALGAMATION OF SPPL

The Amalgamation of SPL Polymers Limited with your Company has been completed. Equity shares of your Company have been allotted to the eligible members of erstwhile SPL Polymers Limited resulting in an increase in your Company’s paid-up share capital by Rs.86.37 lacs.

I am extremely grateful to my fellow members of the Board for their valuable guidance. I convey my appreciation to executives, staff and workmen for the unstinted support extended by them. I, on behalf of the Board of Directors sincerely appreciate the encouragement and co-operation received by the Company from customers, bankers, shareholders and suppliers during the entire period.

Thank you.

M.P. TAPARIA
Chairman.

Date : Date: October 17, 2008

This does not purport to be a record of the proceedings of the Annual General Meeting.

Your Directors take pleasure in presenting the Nineteenth Annual Report together with Audited Accounts of your Company for the year ended June 30, 2008.

1. FINANCIAL RESULTS

1. SPL Industrial Park Limited: The company has been floated to implement the SEZ project.
2. SPL Industrial Support Services Limited: This Company has been floated to render support services to units which may be set up in the proposed SEZ.

Your Company has invested Rs.4.94 lacs each in these Companies on incorporation. Though these Companies have not yet undertaken any activities, the statement pursuant to Section 212 of the Companies Act, 1956 is attached hereto. Accounts of the subsidiaries for the year ended March 31, 2008 are also attached.

8. CONSOLIDATED ACCOUNTS

In accordance with the requirements of Accounting Standards AS21 issued by the Institute of Chartered Accountants of India, the consolidated accounts of your Company and its two subsidiaries are annexed to this Annual Report.

9. DIRECTORS’ RESPONSIBILITY STATEMENT

1. in the preparation of the annual accounts, applicable accounting standards have been followed, with proper disclosure of any departures;
2. the accounting policies are consistently applied and reasonable, prudent judgement and estimates are made so as to give a true and fair view of the state of affairs of the Company at the end of the financial year;
3. that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
4. that the Directors have prepared the accounts on a going concern basis.

10. CORPORATE GOVERNANCE

Your Company continued to implement Corporate Governance practices during the period in line with the requirements of Clause 49 of the Listing Agreement with the Stock Exchanges. A separate section titled ‘Corporate Governance’ has been included in this annual report. The compliance of ‘Corporate Governance’ conditions has also been certified by the Auditors and the same is annexed to the report on Corporate Governance.

12. FIXED DEPOSIT SCHEME

The outstanding fixed deposits as on June 30, 2008