BOARD OF DIRECTORS COMPANY SECRETARY AUDITORS … · Taneja Aerospace And Aviation Limited...

BOARD OF DIRECTORS

COMPANY SECRETARY

AUDITORS

BANKERS

REGISTERED OFFICE SHARE TRANSFER AGENTS

CORPORATE OFFICE WORKS

SALIL TANEJA

Chairman

B. R. TANEJA

R.J. JOSHI (w.e.f. August 1, 2008)

M/S HARESH UPENDRA& CO.

Chartered Accountants

Bank of India Bank of Baroda

Canara Bank State Bank of India

Belagondapalli Village, Thally Road, Sharepro Services (India) Pvt. Ltd

Denakanikotta Taluk, Krishnagiri 3, Chintamani Apartments, Lane No. 13,

V. G. Kale Path, 824/D Bhandarkar Road,

Pune - 411 004

Block 'B', 2nd Floor, Belagondapalli - 635 114,

Akshaya Commercial Complex, Thally Road, Denkanikottai Taluk,

26, Victoria Road,

Tamilnadu.

A. K. JAIN S. K. NEWLAY

J. P. SUREKA R. SURIE

C. S. KAMESWARAN

(Managing Director)

Dist.

Belagondapalli 635114, Tamil Nadu Off

Krishnagiri Dist.,

Bangalore - 560 047

Annual Report 2007-08

Annual General Meeting at

on , 2008 at 11.00 a.m.

Belagondapalli Village, Thally Road, Denakanikotta Taluk, Krishnagiri Dist.

Belagondapalli 635114, Tamil Nadu Tuesday, September 30

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Taneja Aerospace And Aviation LimitedTaneja Aerospace And Aviation LimitedTaneja Aerospace And Aviation LimitedTaneja Aerospace And Aviation LimitedTaneja Aerospace And Aviation Limited

DIRECTORS’ REPORT

To the Members of Taneja Aerospace and AviationLimited

Your Directors have the pleasure of presenting thenineteenth Annual Report 2007-08 and the AuditedAccounts for the nine months period ended March 31,2008.

FINANCIAL HIGHLIGHTS

(Rs in Lacs)

2007-08 2006-07(9 months period) (15 months period)

Gross Sales 1691.54 2281.58Operating Expenditure 1392.71 1430.55Finance Charges 147.41 259.69Depreciation 144.05 187.03Prior year Income (Net) (38.01) 0.65Provision for Taxation(including deferred andfringe benefit tax) 6.04 162.72Profit after tax (36.68) 242.24Cash Profit 105.82 429.27

Your Directors wish to report that during the nine monthsperiod ended on March 31, 2008 the Company registereda pre-tax profit of Rs 7.37 lacs (Previous year Rs 404.31lacs).

DIVIDEND

Your Directors do not recommend dividend for the periodunder review ended on March 31, 2008.

OPERATIONS

During the period under consideration , the revenuefrom Aerostructures and other Strategic Businessactivities of the Company was equal. Your Companycontinued to get regular orders for all the StrategicBusiness units.

FINANCE

During the period under consideration, your Companyhas repaid the long term debts to the consortiumbanks to improve its debts equity ratio and offset theadditional interest burden consequent to increase inthe interest rate during the same period.

PROJECTS

Construction of Runway with Night Landing andNavigational facilities are under implementation, takinginto consideration the requirements of Airbus A 320 andBoeing 737. In addition, civil work required for MROservices is nearing completion.

In the manufacturing front, the Company hassuccessfully commissioned certain Unique equipmentsto address the growing Domestic and Global Aviationrequirements.

The Company is also in the process of augmentingcertain additional facilities to meet the Global Standardsand Customers requirements.

RESEARCH & DEVELOPMENT

The Company has a continuous R & D program relatedto the indigenization of components for Civil and DefenceAircraft and to the design of modifications for aircraft oraircraft sub-system. The details of such R & D effortsare described in the Annexure I to this Report.

DIRECTORS

In accordance with the provisions of the Companies Act,1956 and the Articles of Association of the Company,Mr A K Jain, Mr S K Newlay and Mr J P Sureka retire byrotation and being eligible, offer themselves forre-appointment.

CHANGE OF REGISTERED OFFICE OF THECOMPANY

The Members are informed that the Company hasreceived an Order dated January 17, 2008 from theCompany Law Board, Western Region Bench, Mumbaiwith respect to the change of Registered Office of theCompany from the State of Maharashtra to the State ofTamil Nadu. The said Order has been taken on recordand confirmed by the Registrar of Companies,Coimbatore, Tamil Nadu on May 8, 2008. Accordinglythe Registered Office of the Company stand shifted toBelagondapalli Village,Thally Road, Denkanikotta Taluk,Kirshnagiri Dist., Belagondapalli – 635114, Tamil Naduw. e. f. May 08, 2008.

AUDITORS

Haresh Upendra & Co., Chartered Accountants retireas Statutory Auditors of the Company at the conclusionof the forthcoming Annual General Meeting and beingeligible, offer themselves for re-appointment. In respectof the Qualifications by the Auditors, it has beenexplained in relevent Accounting Policies and Notes onAccounts in Schedule 14, which are self explanatoryand therefore do not call for any further comments.

SUBSIDIARIES:

Your Company has the following subsidiaries as onMarch 31, 2008.

1) TAAL Infrastructure Private Limited, Chennai.

2) MM Infoproc Services Private Limited, Hosur.

3) First Airways Inc, Delaware , USA.

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Annual Report 2007-08Annual Report 2007-08Annual Report 2007-08Annual Report 2007-08Annual Report 2007-08

As required under Section 212 of the Companies Act,1956 the Balance Sheet, Profit and Loss Account,Directors Report and the Report of the Auditors of abovesubsidiaries are annexed to this report.

FIXED DEPOSITS

The Company has not accepted any Deposits from thepublic.

CORPORATE GOVERNANCE REPORT ANDMANAGEMENT DISCUSSION AND ANALYSIS

Pursuant to Clause 49 of the Listing Agreement with theStock Exchanges, a separate section on CorporateGovernance and Management Discussion and Analysistogether with a Certificate from the Auditors of theCompany on compliance, forming part of the Directors’Report is attached to this report.

DISCLOSURE PARTICULARS

The Particulars in respect of energy conservation,technology absorption and foreign exchange earningsoutgo, etc. as required under Section 217(1) (e) of theCompanies Act, 1956 are given in Annexure I to thisReport.

The particulars of employee as required under Section217 (2A) of the Companies Act, 1956 forming part ofthis Report are given in Annexure II to this Report.

DIRECTORS’ RESPONSIBILITY STATEMENT

As required by Section 217 (2AA) of the CompaniesAct, 1956 the Directors’ Responsibility Statement is givenhereunder:

i) that in the preparation of the annual accounts,the applicable accounting standards have beenfollowed along with proper explanation relatingto material departures.

ii) that the Directors have selected accountingpolicies (and applied them consistently) andmade judgments and estimates, that arereasonable and prudent so as to give a true andfair view of the state of affairs of the Companyfor the nine months period ended March 31,2008 and of the Loss of the Company as onthat date.

iii) that the Directors have taken proper andsufficient care for the maintenance of adequateaccounting records in accordance with theprovisions of the Companies Act, 1956 forsafeguarding the assets of the Company andfor preventing and detecting fraud and otherirregularities;

iv) that the Directors have prepared the annualaccounts on a going concern basis.

ACKNOWLEDGEMENT

The Board expresses its sincere gratitude for thecontinued support and guidance received by theCompany from the Government of India, Government ofMaharashtra and Tamil Nadu, the Reserve Bank of India,Stock Exchanges and other regulatory agencies. TheBoard would like to acknowledge the continued supportof its bankers, vendors, clients and investors. TheDirectors also wish to place on record their gratitudeand appreciation of the employees’ hard work, dedication,team work and professionalism in meeting theCompany’s objectives.

For and on behalf of the Board of Directors

Salil Taneja Chairman

PuneAugust 25, 2008

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MANAGEMENT DISCUSSIONAND ANALYSIS

Industry Structure and Development

The Company’s focus is on three aviation relatedactivities viz Aircraft Sales and Services; Aerostructures ( Manufacturing) and Airfield Services andMRO. Each activity is of an independent nature,however influenced by factors like Economic andIndustrial environment, Commercial Aviation businessclimate, Government policies, Defence Sectorrequirements, etc. except the fact, the activities arelikely to mature over medium to long term due totechnological reasons, the Company sees consistentgrowth in all the business activities.

Opportunities

Aircraft Sales

Aircraft coming to play an important businesstool in business growth amongst Indian industriescoupled with companies owning outdatedturboprops contemplating to replace with Modernbusiness jets and with Cessna dominating thelight and mid sized jet market world wide, yourCompany sees a good business opportunity toderive benefit from this situation.

Aerostructures

With the Indian space programs becoming launchpad for foreign satellites increasing the frequencyof space launches, your Company being a companyassociated with the Indian space Organization intheir programs can look forward to better volumesin Aerospace business. Similarly organization suchas Hindustan Aeronautics Limited ( HAL) with hugeorders in the basket are looking for support ofprivate enterprises’ to meet its growingrequirements. With its infrastructure, your Companysees tremendous business opportunities andbetter volumes in Aviation Business. With leadingIndian industrial houses being considered forparticipation in National Defence ProductionPrograms and Government’s Civil offset policynecessitating Global leading Aircraft Manufacturersto source their requirements from Indian enterprises,your Company is in advantageous situation to derivebetter benefits from these activities.

Airfield Services and MRO

Your Company is in a Unique Position withnecessary Maintenance Approvals, Dedicated

Hangers, Apron, Testing facilities and Manufacturingsupport giving one stop solution for AircraftMaintenance activities. The Runway with Nightlanding facilities to receive A 320 and Boeing 737series Aircraft will be ready shortly.In-Principle SEZ approval for Airport / Aviationsector business would give fill ip to yourCompany’s MRO park and Airport relatedactivities. Over all, your Company sees goodprospects in the medium to long term. Further, yourCompany’s credential as an AuthorizedRepresentative of Cessna for the maintenance ofCessna Aircraft in India is considered as a valueaddition and promotion tool to its Cessna AircraftSales activity in India.

Product wise Performance

The Product wise performance is as follows.

(Rs in Lacs)2007-08 2006-07

(9 months period) (15 months period)

Aero Structure 742.07 1136.69Agency Sales 382.27 452.92Air Management 315.80 432.88Total 1440.14 2022.49

Outlook

With Eleventh Five Year Plan targeting an average annualgrowth of 9 per cent, it is perceived that Indian Economyand Industrial performance would continue to maintainits current performance level in the years to come. Inthe General Aviation front, with the current trend asan indicator, the Company sees improvement inrequirement of Corporate Jets from the Industries fortheir business development and growth. Implementationof Government policy on offset program; increase inoutsourcing from Indian Defence and Aviation Sectorsto private enterprises; increase in space launches andsome of the defence development projects entering intoseries production, your Company sees tremendousbusiness opportunities for its manufacturing activities.With your Company’s quality system certification meetsthe requirements of the Standard AS 9100 B andfurther upgradation to be on par with Global AviationStandards, your Company sees good businessprospects with some of the Global Aviation relatedManufacturing Companies on long term basis in thenear future.

Risks and Concerns

Frequent increase in the Aviation fuel pricing andconsequent slow down in the Airline Operations coupledwith economic slow down can have an impact on the

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operations and revenues of the Company. Withrespect to export business of Aero structures,technology being high end - build up of confidenceand development of business relations meeting theirrequirements are taking longer time than thoughtearlier. Apart from these, the other risks relate tonatural disaster, economic and geopolitical problems.

Internal Control Systems and Adequacy

Responding to the growing business requirments theCompany is augmenting its internal control system withregard to Financial and Operating functions. TheCompany, however continues its efforts to strengthenthe same through periodical reviews.

Financial Performance

The Financial performance for the Nine months periodended March 31, 2008 as compared to the previousperiod is given below :

(Rs in Lacs)2007-08 2006-07

(9 months period) (15 months period)

Gross Sales 1691.54 2281.58Profit after Interestbut before depreciation 151.24 591.33Depreciation 144.05 187.03Prior year Income ( Net) (38.01) 0.65Provision for Income Tax(Including deferred andfringe benefit tax) 6.04 162.72Profit after Tax (36.68) 242.23Cash Profit 105.82 429.27

Material Developments in Human Resources /Industrial Relations.

The Company maintained cordial industrial relationswith its employees and entered into three years wagesettlement with its workers union. The Companycontinued to focus its Human Resources activities forbuilding suitable talent to meet future challenges.

Cautionary Statement

Statements in the Management Discussion and Analysisdescribing the Company’s projections, estimates,expectations or predictions are ‘forward-lookingstatements’ within the meaning of applicable securitieslaws and regulations. Actual results could differmaterially from those expressed or implied. Importantfactors that could make a difference to the Company’soperations include demand- supply conditions, rawmaterials prices, changes in Government regulations,tax regime, economic developments within the countryand other factors such as litigation and labournegotiations.



PuneAugust 25, 2008

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CORPORATE GOVERNANCE REPORT

COMPANY’S PHILOSOPY ON CODE OF GOVERNANCE

The Company has a strong value system comprising of honesty, integrity, secularity and equal opportunity for all.We at Taneja Aerospace And Aviation Limited (TAAL), strive to provide our stakeholders with maximum informationrelating to the affairs of the Company with an attempt to bring about total transparency in our working. We believethat good governance is the corner stone of any successful organization and we continuously endeavour to improveour standards of governance.

BOARD OF DIRECTORS

The composition of the Board of Directors, their attendance at Board Meetings held during the year and at the lastAnnual General Meeting as also the number of Directorships in other public companies and memberships in variouscommittees across all public companies as on March 31, 2008 are as follows:

* This does not include Directorships in Private Limited Companies, Foreign Companies and Companies underSection 25 of the Companies Act, 1956.

During the period under review four Board Meetings were held on

Sr. No. Date of Meeting

1. July 31, 2007

2. October 29, 2007

3. January 23, 2008

4. January 31, 2008

The composition of the Board is in conformity with the stipulations in Clause 49 of the Listing Agreement.

The Board has complete access to all the relevant information available within the Company.

Appointment/Re-appointment of Directors

In terms of the Articles of Association of the Company and the relevant provisions of the Companies Act, 1956,Mr. A K Jain, Mr. S K Newlay and Mr J P Sureka, retire by rotation in the ensuing Annual General Meeting and beingeligible, offer themselves for re-appointment.

ChairmanMember

Committee positionsNo. ofDirectorships

in other publiccompanies*

LastAGM

BoardMeetings

CategoryName of theDirector

As on Date

For Nine Months periodJuly 1, 2007 toMarch 31, 2008attendance at

Mr. Salil Taneja Promoter Non 2 Yes 2 - -Executive Director

Mr. A K Jain Non ExecutiveIndependent Director 4 Yes 1 - 1

Mr. S K Newlay Non ExecutiveIndependent Director 1 Yes 2 - -

Mr. J P Sureka Non ExecutiveIndependent Director 4 Yes 1 1 -

Mr. Rakesh Surie Non ExecutiveIndependent Director — No - - -

Mr. B R Taneja Promoter NonExecutive Director 4 Yes 1 - -

Mr. C S Kameswaran Executive Director 3 Yes - - -

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Brief resume of the Directors proposed to be appointed/ re-appointed is given below:

Mr. A K Jain is an Industrialist with business interest infinancial services, mining and mineral processing or ironore, China clay, graphite, etc in Jharkhand and Orissa.He is also a Promoter Director of ISMT Limited

Mr. S K Newlay is Post Graduate in Science and CAIIB.He was associated with the Reserve Bank of India andserved as Chief General Manager of RBI College ofAgricultural Banking, Pune. He has been faculty memberof RBI Staff College, Chennai. He has wide experiencein financial analysis. He is also a Director of OrientalBank of Commerce.

Mr. J P Sureka is an industrialist based in Kolkata withbusiness interests in Steel. He is a Promoter Director ofISMT Limited and is also a Director in ShentraconChemicals Limited, and Prismo (India) Limited.

AUDIT COMMITTEE

The composition of the Audit Committee and attendenceof each Director is given hereunder :

Name of Chairman or No. of MeetingsDirector Member AttendedMr. S.K. Newlay Chairman 1(Independent)Mr. A.K. Jain Member 3(Independent)Mr. J.P. Sureka Member 3(Independent)

During the period under review, three meetings of AuditCommittee were held on

Sr. No. Date of Meeting

1 October 29, 2007

2 January 23, 2008

3 January 31, 2008

Mr. S K Newlay, the Chairman of the Audit Committeewas present at the last Annual General Meeting.

The terms of reference of the Audit Committee are inconformity with the provisions of Section 292A of theCompanies Act 1956 and the stipulations of Clause 49of the Listing Agreement with the Stock Exchanges.

MANAGERIAL REMUNERATION

a) Remuneration Committee:

The Remuneration Committee comprised of Mr. J PSureka, Chairman, Mr. A K Jain and Mr. S K Newlay asits members.

The Remuneration Committee is empowered to fix,review, and recommend the remuneration payable toWhole Time Directors.

During the period under review meeting of RemunerationCommittee was held on October 29, 2007 which wasattended by Mr. J P Sureka and Mr. A K Jain.

b) Remuneration Policy :

The remuneration of the Whole Time Directors is decidedby the Board of Directors based on the recommendationsof the Remuneration Committee, which inter-alia isbased on the criteria such as industry pattern,qualifications, experience, responsibilities, individualqualities and performance of Whole Time Directors.

The Company pays remuneration by way of salary,perquisites and allowance to its Whole Time Directors.No remuneration is paid by way of commission to anyNon-Executive Director.

The Company pays sitting fees of Rs. 5000/- each forattending Board Meeting and Rs 2500/- each forattending Committee Meeting by Non ExecutiveDirectors.

There has been no change in the Remuneration Policyof the Company.

c) Remuneration to Directors:

A Statement on the remuneration paid to the Whole TimeDirectors and Sitting Fees paid to Non ExecutiveDirectors during the nine months period ended on March31, 2008 is given below.

Name of Director Salary & SittingPerquisites p.a (Rs) fees (Rs)

Mr K Rustumji NA 12,500Mr S Taneja NA 10,000Mr A K Jain NA 35,000Mr S K Newlay NA 10,000Mr J P Sureka NA 35,000Mr R Surie NA -Mr B R Taneja NA 20,000Mr C S Kameswaran 16,34,550 NA

Note: Salary and perquisites include other allowances,contribution to Provident Fund and Superannuation,Leave Travel Allowance, medical reimbursement andaccommodation provided.

SHAREHOLDERS’/ INVESTORS’ GRIEVANCECOMMITTEEThis Committee is comprised of Mr. A.K. Jain, Mr. S.K.Newlay and Mr. J.P. Sureka. During the period underreview the Committee has held two meetings i.e. onOctober 29, 2007 and January 23, 2008.The attendance at the Committee Meetings is as under:

Name of Chairman or No. of MeetingsDirector Member AttendedMr. A.K. Jain Chairman 2Mr. S.K. Newlay Member 1Mr. J.P. Sureka Member 2

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During the period under review all the complaints/grievances that were received from the shareholders/investors, have been attended to and satisfactorilyresolved. No valid transfer/ transmission of shares werepending as on March 31, 2008.

The information about complaints received and theirdisposal is tabulated hereunder:

Nature of No. of Complaints No. of ComplaintsComplaints received during the redressed during the

period under review period under review

Non receipt of 02 02shares aftertransfer

Non receipt of 01 01demat credit

COMPLIANCE OFFICER:

Mr. R. J. Joshi, Company Secretary has been appointedas a Compliance Officer of the Company for complyingwith the requirements of the Listing Agreement with theStock Exchanges and requirements of SEBI (Prohibitionof Insider Trading), Regulations 1992 as amended fromtime to time.

CODE OF CONDUCT

The Board has laid down a code of conduct for all BoardMembers and Senior Management Personnel of theCompany. The code of conduct is posted on the websiteof the Company. (www.taal.co.in)

OTHER DISCLOSURES

Details of related party transaction are furnished in NoteNo 14 in part B of Schedule 14 under Notes on Accounts.

There were no instances of material non-compliancesand no strictures or penalties imposed on the Companyeither by SEBI, Stock Exchanges or any other statutoryauthorities on any matter related to capital market duringthe last three years.

CEO/CFO CERTIFICATION:

In accordance with Clause 49(V) of the ListingAgreement, the CEO and CFO have given their certificateto the Board.

MEANS OF COMMUNICATION

Quarterly and half yearly results: Published in FinancialExpress (English), Dinathanthi (Tamil) and website ofthe Company (www.taal.co.in) and on BSE website(bseindia.com – Scrip code 522229).

DESIGNATED EXCLUSIVE EMAIL ID OF THECOMPANYThe company has designated the following E-mail ID

exclusively for investor servicing:[email protected]

GENERAL MEETINGS

Location and time of General Meetings held in last 3years:

Year Type Date Venue Time No. of SpecialResolutions

passed

2006-07 AGM 28/2/08 Taj Blue Diamond, 11:00AM —Koregaon Road,

Pune 411001

2005-06 AGM 29/9/06 Taj Blue Diamond, 11:00 AM 2Koregaon Road,

Pune 411001

2004-05 AGM 29/9/05 Le Meridien, RBM 11:00 AM 1Road, Pune 411001

All special resolutions moved at the Annual GeneralMeeting (AGM) were passed unanimously on show ofhands.

Pursuant to the provisions of Section 192A of theCompanies Act, 1956, matter relating to the sale/transferof the Company’s Airport Business to the subsidiaryCompany which was dealt by Postal Ballot, was passedby majority of votes i.e. 99.94 per cent on February 28,2008. Mr. M B Kasodekar of MRM Associates, PractisingCompany Secreteries conducted the Postal Ballotexercise.

GENERAL SHAREHOLDERS INFORMATIONAGM Date and Time Tuesday September 30,2008-11.00 AM

Venue Belagondapalli Village, ThallyRoad, Denakanikotta Taluk,Krishnagiri District,Belagondapalli- 635114 Tamil Nadu

Financial Period July 1, 2007 - March 31, 2008

Date of Book Closure September 22, 2008 toSeptember 30, 2008

Listed on Stock Exchange PSE, BSE & LuxembourgStock Exchange

Security Code (BSE) 522229

ISIN No Allotted to INE 692C01020Equity Shares

Luxemburg Stock Exchange US 8753891089Security Code

Registered Office Belagondapalli Village, ThallyRoad, Denakanikotta Taluk,Krishnagiri District,Belagondapalli- 635114 Tamil Nadu

Address for Belagondapalli Village, ThallyCorrespondence Road, Denakanikotta Taluk,

Krishnagiri District,Belagondapalli- 635114 Tamil Nadu

Plant Location Belagondapalli Village, ThallyRoad, Denakanikotta Taluk,Krishnagiri District,Belagondapalli- 635114 Tamil Nadu

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REGISTRAR AND SHARE TRANSFER AGENT

In accordance with the Securities and Exchange Boardof India (SEBI) directive, the Company has appointedSharepro Services (India) Pvt Ltd as a common agentfor all investor services viz. processing of transfers, sub-division, consolidation and for rendering demat servicessuch as dematerialisation and rematerialisation ofshares, etc. Shareholders may contact the ShareTransfer Agent, on the following address:

As regards to the shareholding in electronic formshareholders are requested to write to their respectiveDepository Participant and provide Bank Mandatedetails, ECS particulars, etc, so as to facilitateexpeditious payment of Corporate Action, if any.

Outstanding GDRs/ ADRs / Warrants or anyConvertible instruments, conversion date and likelyimpact on equity:

The Company has no outstanding GDRs nor theCompany has issued any ADRs / Warrants during theperiod under review.



PuneAugust 25, 2008

Sharepro Services(India) Pvt Ltd

3, Chintamani Apartments,Lane No 13,Off V G Kale Path824/D, Bhandarkar RoadPune - 411 004Tel. +91-20-25662855/56e-mail: [email protected]

Sharepro Services(India) Pvt Ltd

Satam Estate, 3rd FloorAbove Bank of BarodaCardinal Gracious Road,Chakala, Andheri (E)Mumbai - 400 099Tel. +91-22-28348218Fax +91-22-28375646

Market Price Data

The performance of the Company’s scrip on the BSE ascompared to the BSE 500 Index is as under:Month Share Price BSE 500 Index

High Rs. Low Rs. High Low

July 2007 239.10 177.70 6174.49 5801.90

August 2007 179.70 145.00 5987.59 5457.00

September 2007 193.25 154.00 6773.54 6013.97

October 2007 172.10 119.50 7785.22 6764.77

November 2007 179.80 122.05 7999.53 7467.75

December 2007 234.70 159.00 8592.43 7995.62

January 2008 273.50 159.65 8882.28 6737.12

February 2008 195.00 141.50 7537.81 6629.64

March 2008 174.95 99.50 6751.98 5837.37

Dematerialization of Shares

Nearly 94.26 per cent of total Equity Capital is held indemat form with NSDL and CDSL as on March 31, 2008.

Share Transfer System

The Equity Shares of the Company are tradedcompulsorily in Demat Form on the Stock Exchanges.

Shares received for transfer in physical mode areprocessed and valid transfers are approved withinstipulated time frame.

Duly transferred share certificates are generallydispatched within 30 days from the date of receipt.

Pursuant to Clause 47 (c) of the Listing Agreement withthe Stock Exchanges, certificate on half yearly basishave been filed with the Stock Exchanges for duecompliance of share transfer formalities by the Company.

In terms of guidelines issued by SEBI, the SecretarialAudit Report for all the quarters have been filed with theStock Exchanges, which inter-alia gives details aboutthe reconciliation of Share Capital (both physical anddemat).

Distribution of Shareholding of the Company as onMarch 31, 2008:

Share holding No. of % to No. of % toof nominal Share Total Shares Totalvalue of Rs holder(s)

Up to 5,000 16953 95.236 2789673 11.190

5,001 10,000 345 1.938 545403 2.188

10,001 20,000 256 1.438 727341 2.917

20,001 30,000 88 0.494 436346 1.750

30,001 40,000 22 0.124 152766 0.613

40,001 50,000 33 0.185 320355 1.285

50,001 1,00,000 43 0.242 631819 2.534

1,00,001 and above 61 0.343 19327033 77.523

Total 17801 100.00 24930736 100.00

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DECLARATION REGARDING COMPLIANCE BYBOARD MEMBERS AND SENIOR MANAGEMENTPERSONNEL WITH THE COMPANY’S CODE OFCONDUCT, PURSUANT TO CLAUSE 49 OF THELISTING AGREEMENT

As required by Clause 49 (D) (ii) of the ListingAgreement, this is to confirm that the Company hasadopted a Code of Conduct for all Board Members andSenior Management of the Company. The Code isavailable on the Company’s website.

I confirm that the Company has in respect of financialyear March 31, 2008, received from the seniormanagement team of the Company and the Members

of the Board, a declaration of compliance with the Codeof Conduct as applicable to them.

For the purpose of this declaration, Senior ManagementTeam comprises of employees in the President andExecutive Vice President cadre as on March 31, 2008and Managing Director of the Company.

For Taneja Aerospace and Aviation Limited


PuneAugust 25, 2008

CERTIFICATE FROM AUDITORS REGARDINGCOMPLIANCE OF CONDITIONS OF CORPORATEGOVERNANCE

ToThe Members ofTaneja Aerospace and Aviation Limited

We have examined the compliance of conditions ofCorporate Governance by Taneja Aerospace and AviationLimited for the nine months period ended on March 31,2008, as stipulated in Clause 49 of the Listing Agreementof the said Company with Stock Exchange(s).

The compliance of conditions of Corporate Governanceis the responsibility of the management. Our examinationwas limited to procedures and implementation thereof,adopted by the Company for ensuring the complianceof the conditions of Corporate Governance. It is neitheran audit nor an expression of opinion on the financialstatements of the Company.

We certify that the Company has complied with theconditions of Corporate Governance as stipulated in theabove mentioned Listing Agreement.

On the basis of information and explanation given to usand as per the records maintained in the Company, westate that no investor grievances are pending for a periodexceeding one month against the Company.

We further state such compliance is neither anassurance as to the future viability of the Company northe efficiency or effectiveness with which themanagement has conducted the affairs of the Company.

For Haresh Upendra & CoChartered Accountants

HARESH B SHAH Partner

PuneAugust 25, 2008

10


AUDITOR’S REPORT


1. We have examined the attached Balance Sheet ofTaneja Aerospace and Aviation Limited (“thecompany”) as at 31st March 2008, and also the Profitand Loss Account and the Cash Flow Statementof the company for the period 1st July 2007 to 31st

March, 2008. These financial statements are theresponsibility of the Company’s Management. Ourresponsibility is to express an opinion on thesefinancial statements based on our audit.

2. We conducted our audit in accordance withauditing standards generally accepted in India.Those Standards require that we plan and performthe audit to obtain reasonable assurance aboutwhether the financial statements are free of materialmisstatements. An audit includes examining, on atest basis, evidence supporting the amounts anddisclosures in the financial statements. An auditalso includes assessing the accounting principlesused and significant estimates made by theManagement, as well as evaluating the overallfinancial statement presentation. We believe thatour audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report)Order, 2003 issued by the Central Government ofIndia in terms of sub-section (4A) of section 227 ofthe Companies Act, 1956, we enclose in theAnnexure a statement on the matters specified inparagraphs 4 and 5 of the said Order to the extentapplicable.

4. Further to our comments in the Annexure referredto in paragraph 3 above, we report that:

4.1 The Company’s method of valuation ofinventories is not in accordance with theAccounting Standard (AS) 2. Further, inthe absence of adequate supporting anddetailing, we are unable to verify andcomment on quantity and valuation ofinventory as certified by themanagement.

4.2 The difference between the actual salestax liability and discounted value is beingtreated as revenue expenditure in theyear in which it is paid. This accountingpractice is not in accordance withgenerally accepted accountingprinciples. (Refer Note No 9)

It is not possible to quantify (which may

be substantial) the exact impact of theparagraph 4.1 and 4.2 above on the profitof the year.

4.3 Finance charges paid to a bank duringthe year amounting to Rs. 100 lakhtowards the past claim for interest waiveris directly debited to the Profit and LossAppropriation Account instead ofcharging the same to Profit and LossAccount, which is not in accordence withgenerally accepted accounting principles(Note No. 8)

4.4 The Company has not provided forEmployee Benefits in accordance withAS 15 (Revised). (Refer Note No.10).

Consequent to points 4.3 and 4.4 above,the profit for the period would have beenlower by around Rs. 131 lakh.

4.5 Company has recognised revenue forlong term fixed price contract onpercentage completion method as perAS-7 “Construction Contract”. TheCompany has not maintained contractwise cost and other details as a result nodisclosures as required under AS7 ismade.

5. Subject to our comments in paragraph 4 aboveand our comments in the annexed report,

a) We have obtained all the information andexplanations, which to the best of ourknowledge and belief were necessary for thepurpose of our audit;

b) in our opinion proper books of accounts asrequired by law have been kept by thecompany so far appears from our examinationof books;

c) the Balance Sheet, Profit and Loss Accountand Cash Flow Statement dealt with by ourreport are in agreement with books ofaccounts;

d) in our opinion, the Balance Sheet, Profit andLoss Account and Cash Flow Statement dealtwith by the report comply with the accountingstandards referred to in sub-section (3C) ofsection 211 of Companies Act, 1956

e) on the basis of written representationsreceived from the Directors as on March 31,2008 and taken on record by the Board of

11


Directors, we report that none of the Directorsis disqualified as on March 31, 2008 frombeing appointed as a director in terms ofclause (g) of sub-section (1) of section 274 ofthe Companies Act, 1956; and

f) in our opinion and to the best of our informationand according to the explanations given tous, the said accounts read with the schedulesthereto and the notes thereon give informationrequired by the Companies Act, 1956, in themanner so required and give a true and fairview in conformity with the accountingprinciples generally accepted in India:

(i) in the case of Balance Sheet, of the stateof affairs of the Company as at 31stMarch, 2008;

ANNEXURE TO THE AUDITOR’S REPORT(Referred to in paragraph 3 of our report of even date)

(i)a. The company has maintained proper records

showing full particulars, including quantitativedetails and situation of fixed assets.

b. According to the information and explanationgiven to us, the fixed assets were physicallyverified by the management in accordance withthe programme of verification, which in ouropinion is reasonable having regard to size ofthe Company and the nature of its assets. Thediscrepancies noticed on physical verificationwere not material and have been dealt with inthe books of account.

c. According to the information and explanationsgiven to us, the company has not disposed offmajor part of fixed asset during the period underaudit, which would affect the going concern ofthe company.

(ii)a. The company has not produced any

physical verification report of inventory forthe year under audit. Hence we are unableto give our comments on the conductionof physical verification of inventory bymanagement at reasonable intervals andadequacy of the procedures for the same.

b. Further, we draw your attention to itemno.4.1 of our main Audit Report which isself explanatory.

(ii) in case of Profit and Loss Account, of theloss for the period ended on that date;and

(iii) in the case of Cash Flow Statement, ofthe cash flows for the period ended onthat date.

For HARESH UPENDRA & CO.Chartered Accountants,

HARESH B. SHAH

Partner

Membership No. : 32208Pune, June 30, 2008

(iii) In respect of unsecured loans granted to companiescovered in Register maintained under Section 301of the Companies Act, 1956 and according to theinformation and explanation given to us-

a. During the year, the Company has grantedadvances aggregating to Rs.875 lakh toCompany / Companies covered in the Registermaintained under Section 301 of the CompaniesAct, 1956. At the year end, the aggregateadvances outstanding from these companieswere Rs.600 lakh (excluding interest on it). Themaximum balance outstanding during the yearis Rs.2807 lakh.

Further, company has made advance of aroundRs.300 lakhs to one of the companies coveredin the Register maintained under Section 301of the Companies Act, 1956 as shareapplication. However till date, no shares havebeen allotted.

b. As explained to us, the advance is repayableon demand. In our opinion and according tothe information and explanations given to us,the rate of interest and other terms andconditions on which advance have been grantedto companies, firms or other parties listed inthe Register maintained under Section 301 ofthe Companies Act, 1956 are not, prima facie,prejudicial to the interest of the company.

c. As the advance is repayable on demand, weare unable to comment on regularity of receiptof principal and interest amount.

d. No loan or interest can be termed as overdue

12


in absence of time of repayment and thus thequestion of taking reasonable step for recoveryof principal amount and interest there on doesnot arise.

e. During the year, the Company has takenadvances aggregating to Rs.1175 lakh from oneof the companies covered in the Registermaintained under Section 301 of the CompaniesAct, 1956. At the year end, the aggregateamount outstanding was Rs.300 lakh(excluding interest on it). The maximumbalance outstanding during the year is Rs.1100lakh.

f. As explained to us, the advance is repayableon demand. In our opinion and according tothe information and explanations given to us,the rate of interest and other terms andconditions of advance taken by the company;are prima facie not prejudicial to the interest ofthe company;

g. As the advance is repayable on demand, weare unable to comment on the regularity ofrepayment of principal and interest amount.

(iv)(iv)(iv)(iv)(iv) In our opinion and according to the informationIn our opinion and according to the informationIn our opinion and according to the informationIn our opinion and according to the informationIn our opinion and according to the informationand explanations given to us, there are certainand explanations given to us, there are certainand explanations given to us, there are certainand explanations given to us, there are certainand explanations given to us, there are certainweaknesses in in ternal contro l in s tores,weaknesses in in ternal contro l in s tores,weaknesses in in ternal contro l in s tores,weaknesses in in ternal contro l in s tores,weaknesses in in ternal contro l in s tores,purchase procedure and in account ing ofpurchase procedure and in account ing ofpurchase procedure and in account ing ofpurchase procedure and in account ing ofpurchase procedure and in account ing ofrevenue of the company.revenue of the company.revenue of the company.revenue of the company.revenue of the company. Based on checkingcarried out and the explanations given to uswe are of the opinion that there is continuingfailure to correct major weakness in theinternal control system of inventory andpurchase procedure.

(v)a) To the best of our knowledge and belief and

according to the information and explanationsgiven to us, we are of the opinion that thetransactions that need to be entered into theRegister maintained under Section 301 of theCompanies Act, 1956 have been so entered.

b) In our opinion and according to explanationsgiven to us, transactions made in pursuanceof contracts or arrangements entered in theRegister maintained under Section 301 of theCompanies Act, 1956 and exceeding the valueof Rupees five lakh have been made at priceswhich are reasonable having regard to prevailingmarket prices at the relevant time subject toour comments contained in clause (iii) (b).

(vi) As per explanation given to us, the Company has

not accepted any deposits from public to whichthe provisions of section 58A and 58AA of theCompanies Act, 1956 and the Companies(Acceptance of Deposits) Rules, 1975 would apply.Therefore, the provisions of clause 4 (vi) of theCompanies (Auditor’s Report) Order, 2003 are notapplicable to the company.

(vii)(vii)(vii)(vii)(vii) Based on our observat ion, we are of theBased on our observat ion, we are of theBased on our observat ion, we are of theBased on our observat ion, we are of theBased on our observat ion, we are of theopinion that company does not have internalopinion that company does not have internalopinion that company does not have internalopinion that company does not have internalopinion that company does not have internalaudit system commensurate with the size andaudit system commensurate with the size andaudit system commensurate with the size andaudit system commensurate with the size andaudit system commensurate with the size andnature of business of the compnature of business of the compnature of business of the compnature of business of the compnature of business of the companyanyanyanyany.....

(viii) The Central Government has not prescribed themaintenance of the Cost Record u/s 209(1) (d) ofthe Companies Act, 1956 and hence the provisionsof clause 4 (viii) of the Companies (Auditor’s Report)Order, 2003 are not applicable to the company.

(ix)a) According to the information and explanations

given to us, the Company has been generallyregular in depositing undisputed statutory duesincluding provident fund, investor education andprotection fund, income-tax, sales tax, wealthtax, service tax, customs duty, excise duty,cess and other material statutory dues withthe appropriate authorities during the year.

b) According to the information and explanationsgiven to us, no undisputed amounts payable inrespect of income tax, wealth tax, sales tax,customs duty, excise duty, cess and othermaterial statutory dues, were in arrears, as at31st March, 2008 for a period of more than sixmonths from the date they became payable,except.

Name of Nature of Amount Period toStatute Dues (Rs.in Lakh) which it relates

The Income Tax 11.45 lakh Apr-06 toTax Act, deducted June-071961 but not

paid

c) According to the explanation and informationgiven to us, there are no dues of Income tax/Sales tax/Wealth tax/Service tax/Custom duty/Excise duty/cess which have not beendeposited on account of any dispute

(x) The Company does not have any accumulatedlosses. The company has not incurred any cashlosses during the period covered by our audit andin the immediately preceding financial year.

(xi) According to the records of the company examined

13


by us and the information and explanation given tous, the company has not defaulted in repaymentof dues of any financial institutions or bank. Thecompany is paying the interest on the Bank Loansthat have been computed and provided in theaccounts based on restructuring scheme asapproved by banks subject to continuance ofcompliance of conditions of scheme.

(xii) According to the explanations given to us, thecompany has not granted loans and advances onthe basis of security by way of pledge of shares,debentures and other securities.

(xiii) In our opinion and according to the information andexplanations given to us, the Company is not achit fund or a nidhi/mutual benefit fund/society.Therefore, the provisions of clause 4 (xiii) of theCompanies (Auditor’s Report) Order, 2003 are notapplicable to the company.

(xiv) In our opinion and according to the information andexplanations given to us, the Company is notdealing in or trading in shares, securities,debentures and other investments. Accordingly, theprovisions of clause 4 (xiv) of the Companies(Auditor’s Report) Order, 2003 are not applicableto the company.

(xv) In our opinion and according to the information andexplanations given to us, the Company has notgiven any guarantee for loans taken by others frombank or financial institution. Hence, the provisionsof clause 4 (xv) of the Companies (Auditor’s Report)Order, 2003 are not applicable to the company.

(xvi) As per the information and explanations given tous, the Company has not raised any term loanduring the year under audit and hence clause 4(xvi) of the Companies (Auditor’s Report) Order,2003 is not applicable to the company.

(xvii) According to information and explanation given tous, and on an overall examination of the Balance

Sheet of the Company, we report that no fundsraised on short-term basis have been used for long-term investment.

(xviii)According to information and explanation given tous, during the period covered by our audit report,the company has not made preferential allotmentof equity shares to parties and companies coveredin the Register maintained under Section 301 ofthe Companies Act, 1956.

Further, the advance as appearing in preceding yearbalance sheet of Rs.173.25 lakh has been forfeitedby the company since the applicant has notexercised the option within the allowable time limit.The forfeited amount has been credited to theSecurities Premium Account.

(xix) In our opinion and according to the information andexplanations given to us, the Company has notissued any secured debentures during the periodof our audit. Therefore, clause 4 (xix) of theCompanies (Auditor’s Report) Order, 2003 is notapplicable to the company.

(xx) The company has disclosed the end use of thefunds raised through Preferential issue by way ofnotes on accounts and we have verified the same.

(xxi) To the best of our knowledge and belief andaccording to the information and explanations givento us, no fraud on or by the Company has beennoticed or reported during the course of our audit.


HARESH B. SHAHPartner

Membership No.: 32208Pune, June 30, 2008

14


BALANCE SHEET AS AT MARCH 31, 2008

Schedule As at As atMarch 31, 2008 June 30, 2007

Rs. Rs.SOURCES OF FUNDS

SHAREHOLDERS FUNDSShare Capital 1 12,46,53,680 12,46,53,680Reserves and Surplus 2 75,83,80,419 75,47,23,887

Advance against Preferential Allotment - 17,325,000

LOAN FUNDS 3a) Secured Loans 6,31,82,824 13,89,51,817b) Unsecured Loans 11,55,91,409 89,83,392

DEFERRED TAX LIABILITY (Refer Note 5) 4,44,65,972 4,31,83,066

Total 1,10,62,74,304 1,08,78,20,842APPLICATION OF FUNDS

FIXED ASSETSGross Block 4 54,70,87,282 50,94,71,490Less: Accumulated Depreciation 13,56,76,520 12,12,71,207

NET BLOCK 41,14,10,762 38,82,00,283CAPITAL WORK IN PROGRESS 14,67,56,204 4,00,91,968INVESTMENT 5 9,90,89,970 3,99,92,525DEFERRED TAX ASSET (Refer Note 5) 50,07,127 37,85,844CURRENT ASSETS , LOANS AND ADVANCES

a) Inventories 6 19,86,75,403 19,02,24,363b) Sundry Debtors 7 10,85,71,079 12,49,34,286c) Cash and Bank Balances 8 7,44,37,174 3,44,70,597d) Loans and Advances 9 21,25,67,328 37,47,00,220

59,42,50,985 72,43,29,466

Less: CURRENT LIABILITIES & PROVISIONS 10 15,18,30,675 11,15,54,976NET CURRENT ASSETS 44,24,20,311 61,27,74,490MISCELLANEOUS EXPENDITURE 15,89,929 29,75,732

(To the extent not written off) 1,10,62,74,304 1,08,78,20,842Accounting Policies And Notes On Accounts 14

The Schedules referred to herein form an integral part of the accounts

As per our report of even dateFor Haresh Upendra & Co For and on behalf of the Board of DirectorsChartered Accountants

Haresh B.Shah Salil Taneja C S KameswaranPartner Chairman Managing DirectorMembership No.: 32208

Place: Pune Place: PuneDate: June 30, 2008 Date: June 30, 2008

15


PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED MARCH 31, 2008

Schedule March 31, 2008 June 30, 2007(9 months) (15 months)

Rs. Rs.

INCOMESales and Other Income 11 16,91,54,408 22,81,58,313

EXPENDITUREManufacturing and Other Expenses 12 13,92,71,339 14,30,55,707

Operating Profit (Before Interest and Depreciation) 2,98,83,069 8,51,02,606Finance Charges 13 1,47,41,413 2,59,69,334Depreciation 1,44,05,313 1,87,03,032

Profit Before Tax Exceptional Items and Prior Period Items 7,36,344 4,04,30,240Provision for Taxation

Current Tax - 19,37,952Deferred Tax (Net) 61,623 2,26,00,994Fringe Benefit Tax 5,41,886 7,89,629MAT Credit Entitlement - (90,56,605)

Profit after tax but before Prior Period Items 1,32,835 2,41,58,270Prior Period Income/(Expense)(Net) [Refer Note No.13(vi)] 38,01,301 64,988

Profit after tax (36,68,466) 2,42,23,258Balance brought forward 8,64,01,874 6,21,78,616Exceptional Items [Refer Note No. 8] (1,00,00,000) -

Balance carried to Balance Sheet 7,27,33,409 8,64,01,874

Earning Per Share [Refer Note 6] 0.01 1.02

Accounting Policies and Notes On Accounts 14The Schedules referred to herein form an integral part of the accounts




16


CASH FLOW STATEMENT FOR THE PERIOD ENDED MARCH 31, 2008

March 31,2008 June 30, 2007(9 months) (15 months)

Rs. Rs. Rs. Rs.

A. CASH FLOW FROM OPERATING ACTIVITIESProfit before tax, exceptional & prior period items 736,344 4,04,30,240

Adjustment for:Depreciation (Net) 1,44,05,313 1,87,03,032Prior period Items (38,01,301) 64,988Interest paid 1,47,41,413 2,59,69,334Interest Received (1,42,62,852) (2,07,17,668)Dividend Received (35,744) -

Operating Profit before Working Capital Changes 1,17,83,173 6,44,49,926Adjustments For:

Trade and other receivables 17,84,96,099 (33,12,77,554)Inventories (84,51,040) (2,48,27,363)Trade Payables 4,02,75,699 1,26,71,188Decrease/(Increase) inDeferred Revenue Expenditure 13,85,798 (20,54,011)

Cash Generated from Operations 22,34,89,728 (28,10,37,814)Direct Taxes Paid (5,41,886) -

Net cash flow from Operating Activities 22,29,47,842 (28,10,37,814)

B. CASH FLOW FROM INVESTING ACTIVITIESPurchase of Fixed Assets/Cap WIP (14,42,80,027) (17,71,28,350)Investment in Equity (5,90,97,445) (3,99,71,250)

Net Cash Used in Investing Activities (20,33,77,472) (21,70,99,600)

C. CASH FLOW FROM FINANCING ACTIVITIESProceeds from Issue of Share Capital - 36,35,52,803Interest Received 1,42,62,852 2,07,17,668Addition/(Repayment) of Loans 3,08,39,024 (1,39,33,517)Dividend Received 35,744Payment of Interest (1,47,41,413) (2,59,69,334)Exceptional Items [Refer Note No.8] (1,00,00,000)

Net Cash flow from Financing Activities 2,03,96,207 34,43,67,620Net increase in Cash and Cash Equivalents 3,99,66,577 (15,37,69,794)Cash and Cash Equivalents as at 01-07-2007 (01-04-06) 3,44,70,597 18,82,40,391Cash and Cash Equivalents as at 31-03-2008 (30-6-2007) 7,44,37,174 3,44,70,597Net Increase in Cash and Cash Equivalents 3,99,66,577 (15,37,69,794)




17


SCHEDULES TO BALANCE SHEET

As at As atMarch 31, 2008 June 30, 2007

Rs. Rs.

SCHEDULE - 1 : SHARE CAPITALAuthorised Capital4,00,00,000 (Previous year 4,00,00,000)Equity Shares of Rs.5/- Each 20,00,00,000 20,00,00,000

10,00,000 (Previous year 10,00,000) - 15%Redeemable Cumulative PreferenceShares of Rs.50/- Each 5,00,00,000 5,00,00,000

25,00,00,000 25,00,00,000Issued, Subscribed & Paid - Up2,49,30,736 (Previous year 2,49,30,736Equity Shares of Rs.5/- Each (Refer Note 3) 12,46,53,680 12,46,53,680

12,46,53,680 12,46,53,680

SCHEDULE - 2 : RESERVES AND SURPLUSCapital Reserve 5,83,000 583,000Securities Premium Account 64,27,50,466Add: Forfeiture of Advance againstPreferential Allotment (Refer Note 3) 1,73,25,000 66,00,75,466 64,27,50,466Revaluation Reserve 2,49,88,545 2,49,88,546Balance in Profit & Loss account 7,27,33,409 8,64,01,875

75,83,80,419 75,47,23,887

SCHEDULE - 3 : LOAN FUNDS A. SECURED LOANS

(Refer Note 2 & 12)I Term Loan From Bank 1,45,32,656 8,34,28,692II Working Capital Borrowings from Banks 4,79,56,000 5,44,68,372III Hire Purchase 6,94,168 10,54,753

6,31,82,824 13,89,51,817

B. UNSECURED LOANSI Inter Corporate Deposits 11,00,00,000 -II Interest Free Sales tax Loan 55,91,409 89,83,392 (Refer Note 9)

11,55,91,409 89,83,392

18


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19


SCHEDULES TO BALANCE SHEET (CONTINUED)As at As at

March 31, 2008 June 30, 2007Rs. Rs.

SCHEDULE - 5 : INVESTMENTS (At Cost)A Short Term (Quoted and Trade)

115 (Previous Year 115) Equity shares ofABG Shipyard Ltd @ Rs. 185/- per share 21,275 21,275(Market value of shares on Mar 31, 2008 wasRs. 84,508/- Previous Year Rs.50,474/-)

B Long Term (Un-quoted and Trade)18,335 Shares ( Previous Year 9335) ofAcademy of Carver Aviation Pvt. Ltd Rs. 100/- each 6,12,93,375 3,99,71,250

C In Subsidiary Companies (Fully paid up)9,50,000 Shares (Previous Year Nil) ofFirst Airways Inc., USA of USD 1/- each 3,76,95,32010,000 Shares (Previous Year Nil) ofMM Infoproc Services Pvt. Ltd Rs.10/- each 70,00010,000 Shares (Previous Year Nil) ofTAAL Infrastructure Pvt. Ltd. of Rs.10/- each 10,000

9,90,89,970 3,99,92,525SCHEDULE - 6 : INVENTORIES

(As certified by the management)(I) Aircraft Parts & Components 12,00,93,971 12,77,29,363(II) Work - In - Progress 6,43,38,717 4,82,52,285(III) Finished Goods [Refer Note 20 (c)] 1,42,42,715 1,42,42,715

19,86,75,403 19,02,24,363SCHEDULE - 7 : SUNDRY DEBTORS -UNSECURED AND CONSIDERED GOOD

Over Six Months 3,21,80,071 5,75,77,341Other Debts 7,63,91,008 6,73,56,945

10,85,71,079 12,49,34,286SCHEDULE - 8 : CASH AND BANK BALANCES

Cash Balance 42,425 37,369Bank Balance With Scheduled Banks

Current Account 1,04,31,299 1,86,61,894Deposit Account 6,39,63,451 1,00,00,000

Cheque in Transit 57,71,334

7,44,37,174 3,44,70,597SCHEDULE - 9 : LOANS AND ADVANCES

UNSECURED AND CONSIDERED GOODI Advances Recoverable in Cash or

in kind or for value to be received 4,74,13,343 6,52,55,784II Intercorporate Deposits 9,38,72,115 25,20,00,000III Advance Tax (including TDS) 3,31,49,196 2,75,91,647IV Deposits 3,81,32,674 2,98,52,789

21,25,67,328 37,47,00,220

SCHEDULE - 10 : CURRENT LIABILIITES & PROVISIONSCurrent Liabilities Sundry Creditors 2,17,93,962 2,67,11,152 Other Liabilities 13,00,36,713 8,48,43,824

15,18,30,675 11,15,54,976

20


SCHEDULES TO PROFIT AND LOSS ACCOUNT

March 31, 2008 June 30, 2007(9 months) (15 months)

Rs. Rs. Rs. Rs.

Schedule - 11 : IncomeSale of Products and Services 14,40,13,866 20,22,49,437Other Income 2,51,40,542 2,59,08,876

16,91,54,408 22,81,58,313Schedule - 12 : Expenditure

1 Raw Materials Consumed [Refer Note 20 (d)]Opening Stock 12,77,29,363 11,42,91,000Add: Purchases 4,58,86,221 5,13,61,075

17,36,15,584 16,56,52,075Less: Closing Stock 12,00,93,971 12,77,29,363

5,35,21,613 3,79,22,7122 Reduction / ( Accretion) to Work in

process and finished goodsAdded / ( Deducted)(I) Opening Stock 6,24,95,000 5,11,06,000(II) Less: Closing Stock 7,85,81,432 (1,60,86,432) 6,24,95,000 (1,13,89,000)

3 PersonnelSalaries and Wages 5,78,97,120 7,48,15,796[Refer Note No 13 (iv)]Provident & Other Funds 13,06,291 16,00,252Welfare Expenses 25,68,760 27,77,246

6,17,72,171 7,91,93,294

4 Rent, Rates, Taxes & Insurance 83,26,832 53,30,297 [Refer Note No 13 (ii)]

5 Operation and Other FundsAircraft Fuel charges 6,19,881 36,94,531Electricity Charges 21,57,884 29,14,641Repairs & Maintenance 10,39,393 8,95,377Other Direct Expenses [Refer Note 13 (iii)] 1,10,69,866 11,29,299Travelling And Conveyance 65,51,816 83,85,257Communication Expenses 11,18,154 13,12,202Auditors Remuneration [Refer Note 13 (i)] 3,22,384 4,43,006Selling Expenses 31,43,002 1,01,08,207Office Expenses 27,75,256 25,14,133Other Expenses [Refer Note 13 (v)] 2,13,449 6,01,751Foreign Exchange Variation Loss 23,20,500Defereed Revenue Expenditure written off 4,05,570

3,17,37,155 3,19,98,404

TOTAL 13,92,71,339 14,30,55,707

Schedule - 13 : Interest & other financial chargesInterest on Fixed Loans 1,10,26,286 1,50,01,860Interest and other Financial Charges 37,15,127 93,72,974 - 1,47,41,413 15,94,500 2,59,69,334

21


SCHEDULE 14

SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS

A. SIGNIFICANT ACCOUNTING POLICIES

1. BASIS FOR PREPARATION OF FINANCIAL STATEMENTS :i) The financial statements have been prepared to comply in all material aspects with the mandatory Accounting

Standards issued by the Institute of Chartered Accountants of India and the relevant provisions of the CompaniesAct, 1956.

ii) The financial statements have been prepared under the historical cost convention on an accrual basis

2. USE OF ESTIMATESThe preparation of financial statements are in conformity with generally accepted accounting principles in Indiawhich requires the Management to make estimates and assumptions considered in the reported amounts ofassets and liabilities (including contingent liabilities) as of the date of financial statements and the reportedincome and expenses during the reported period. Example of such estimates includes provision for doubtfuldebts, employee benefits, provision for income tax, proportionate completion in case of fixed price long termlabour contracts, useful lives of fixed assets, etc. The management believes that the estimates used in preparationof the financial statements are prudent and reasonable. Future results could differ from these estimates.

3. FIXED ASSETSi) Fixed assets are stated at cost less accumulated depreciation. Cost comprises the purchase price including

taxes, duties, freight and other incidental expenses related to acquisitions & installation of the concernedassets but excluding CENVAT benefit. Considering the nature of business activity the Runway has beentreated as Plant and depreciation has been provided accordingly.

ii) All indirect expenses incurred on project implementation including interest cost on funds deployed for theproject (net of income earned) are treated as incidental expenditure during construction and subsequentlycapitalized.

4. DEPRECIATIONDepreciation on all assets is provided on pro-rata basis from the month of addition / deduction on straight linemethod for Building and Plant Machinery and on written down value method on all other assets at rates prescribedunder Schedule XIV of the Companies Act, 1956.

5. FOREIGN CURRENCY TRANSACTIONSi) Initial Recognition: Transactions denominated in foreign currencies are recorded at the exchange rates prevailing

on the date of the transaction.ii) Conversion: At the year end, monetary items denominated in foreign currencies other than those covered by

forward contracts are converted into rupee equivalents at the year-end exchange rates.iii) Forward Exchange Contracts: In respect of transactions covered by forward exchange contracts, the difference

between the forward rate and the exchange rate at the date of the transaction is recognized as income orexpense over the life of the contract.

iv) Exchange Differences: All exchange differences arising on settlement/conversion on foreign currencytransactions are included in the Profit and Loss Account.

v) Foreign Entities: Assets and Liabilities of foreign entities are translated into rupee equivalents using year-endspot foreign exchange rates. Revenues and expenses are translated monthly at average exchange rates.Exchange difference arising on the consolidation of non-integral foreign operations is credited/debited to“Foreign Currency Translation Reserve Account”.

6. PROVISION FOR EMPLOYEE BENEFITSi) Retirement benefits in the form of provident fund/pension scheme and superannuation/Annuity schemes are

accounted on accrual basis and charged to profit and loss account of the year.ii) Provision for Gratuity is made on estimated basis based on actuarial valuation.iii) Provision for leave encashment is done considering the actual leave standing to the credit of each employee

at the year end subject to maximum 120 days.

22


7. LEASESOperating lease payments are recognized as an expense in the profit and loss account on a straight-line basisover the lease term.

8. INVESTMENTSInvestments that are readily realizable and intended to be held for not more than a year are classified as currentinvestments. All other investments are classified as long-term investments.i) Current investments are carried at lower of cost and fair value determined on an individual investment basis.ii) Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a

decline other than temporary in the value of the investments.

9. REVENUE RECOGNITIONi) Sale of Aircraft is accounted after completion of following two aspects -

a) Part Advance is received from the customer against confirmed orderb) Test Flight of aircraft is carried out after DGCA approval for the same

ii) A sale of fractional Aircraft is accounted only after receipt of substantial payment from a customer.

iii) Commission from agency business of sale of aircraft is accounted on proportionate basis consideringcompletion of major service and time period of delivery.

iv) Revenue from long-term fixed price contracts to manufacture aero structures, spares, etc. is recognizedbased on stage of completion determined with referance to completion of a physical proportion of the contractwork.

v) Training fees received, being non-refundable, is accounted in the year of receipt.

10. INVENTORIESi) Stock of raw materials, bought out items and certain components and finished goods are valued at cost.

Stock of certain aero structures, components and work in progress are valued at lower of the cost and netrealizable value based on technical estimate even though in traditional basis of valuation, it may be consideredas slow moving and/or obsolete. Stores and Spares are stated at cost and loose tools are stated at cost ordepreciated value. In determining the cost of raw materials, components, stores, spares and loose tools, thefirst in first out (FIFO) method is used at weighted average cost. Cost of work in progress and manufacturedfinished products include material cost, labour and factory overheads on the basis of full absorption costing.

ii) In case of aircraft under manufacture and Work In Progress includes attributable profits. Progress paymentsreceived against such contract are shown as deduction from work in progress.

11. TAXATIONProvision for current tax including fringe benefit tax is made on the basis of relevant provisions of the Income TaxAct, 1961.The deferred tax resulting from timing difference between book and taxable profit is accounted for using tax ratesand tax laws that have been enacted or substantively enacted as at the Balance Sheet date. The deferred taxasset is recognised and carried forward only to the extent there is a reasonable certainty that the asset will berealised in the future.

12. SEGMENT REPORTINGThe Company is primarily engaged in manufacturing, selling of products and services connected with aviationand therefore have only one business segment. Further the economic environment in which the Companyoperates is significantly similar as is not subject to materially different risks and returns.

13. CONTINGENCIES AND EVENTS OCCURRING AFTER THE DATE OF BALANCE SHEETi) Accounting for contingencies arising out of contractual obligation, are made only on the basis of mutual

acceptances.ii) Material events occurring after the date of Balance Sheet upto the date of adoption of the accounts, are

considered in preparation and presentation of financial statements.

23


14. IMPAIRMENT OF ASSETSWhere there is an indication that an asset is impaired, the recoverable amount if any, is estimated and theimpairment loss is recognized to the extent carrying amount exceeds recoverable amount.

B. NOTES ON ACCOUNTS

1. Provisions and ContingenciesProvisions are recognized when the company has a legal and constrictive obligation as a result of past event,for which it is probable that a cash outflow will be required and a reliable estimate can be made of the amountof obligation.(a) Bank Guarantees Rs.5,09,32,964 /- (Previous year Rs.7,03,57,819/-),(b) Indemnity issued to customers Rs.80,00,000/- (Previous Year Rs.8,78,50,000/-)(c) EPCG obligation to be fulfilled Rs. 74,00,833 (Previous Year Rs.74,00,833)(d) Capital commitment towards the new project is Rs.25,07,000/- (Previous Year Rs.1,31,91,788)(e) Forfeiture of advance from a customer Rs.1,00,00,000/- (Previous year 1,00,00,000)

2. (a) Term Loans from Banks are secured by a first mortgage and charge on all the immovable properties,present and future, of the Company and first charge by way of hypothecation of all present and futuremovables excluding book debts subject to prior charges created / to be created in favour of bankers onstock of raw materials, semi finished and finished goods, consumables stores and such other movablesas may be agreed for securing the borrowings for Working Capital Requirements and further guaranteedby counter guarantee of promoter Company.

(b) Working Capital Loan from the Banks is secured against hypothecation of Stocks & Book Debts on pari-passu and second charge on Immovable properties and further guaranteed by counter guarantee of PromoterCompany.

(c) Hire Purchase Finance is secured against assets bought on hire purchase basis.

3. Out of the proceeds of preferential allotment of 23,50,000 equity shares of Rs.5/- each on a preferential basisat a premium of Rs.150/- per share during 2006-07, the Company expended Rs 27,03,77,885/- (previous yearRs.9,42,27,803/-) on the objects of the issue including repayment of secured loans and Rs.9,38,72,115/-(previous year Rs.25,20,00,000/-) representing temporary surplus funds, were deployed in Inter CorporateDeposits at interest rates higher than bank deposit rate.

4. The Company has during the year capitalised following expenses to New Project, based on managementestimation:

Sr. No. Particulars Amount 2007-08 Amount 2006-07(9 months) (15 months)

Rs. Rs.1 Personnel Expenses (including Salary of

Managing and Joint Managing Directors) 19,27,762 2,93,74,1752 Office Expenses 64,273 9,60,7683 Communication Expenses 43,564 12,32,9314 Electricity Expenses 74,277 27,21,2035 Traveling Expenses 2,87,254 36,54,038

TOTAL 23,97,130 3,79,43,114

5. The Deferred Tax Liability arising on account of timing differences as at the year end and provided by theCompany is as follows:

Particulars Amount 2007-08 Amount 2006-07(9 months) (15 months)

Rs. Rs.a) Deferred Tax Asset (Unabsorbed Tax Depreciation) 50,07,127 37,85,844b) Deferred Tax Liability 4,44,65,972 4,31,83,066c) Net Deferred Tax Liability 3,94,58,845 3,93,97,222

24


6. Computation of Earning Per ShareParticulars Amount 2007-08 Amount 2006-07

(9 months) (15 months)Rs. Rs.

Profit/ (Loss) after tax available for equity shareholders* 1,32,835 2,42,23,259Adjusted Weighted Average number of Equity Sharesof Nominal value of Rs.5/- each. 2,49,30,736 2,35,78,329Computation of EPS – Basic** (in Rs) 0.01 1.02

*Net profit/ (Loss) on stand alone basis before prior period items of Rs. 38.01 lakh and Exceptional item ofRs. 100 lakh.**Diluted EPS same as Basic as there are no outstanding potential equity shares as on date.

7. Revenue on long term fixed price contracts for supply of certain sets of components and assemblies isrecognized on the basis of stage of completion of manufacture of such sets of components and assembliesat its contract price. The profit/loss (if any) from such contract can not be determined due to non-availabilityof cost and other details contract wise.

8. The Company has charged Rs.100 lakh to Profit and Loss Appropriation Account representing financecharges paid towards payment of the claim for past interest differential.

9. The Company has accounted interest free sales tax liability to reflect the discounted present value of futurepayments. Actual liability is Rs.1,78,59,310/- (Previous year Rs. 2,12,51,293/-). The difference betweenthe actual liability and the discounted value of Rs.9,39,987/- (Previous year Rs. 10,67,763/-) has beentreated as revenue expenditure in the current year.

10. In the absence of ascertainment of liability as per AS 15 “Employee Benefits” the company has provided forgratuity and leave salary liabilities as at 31st March 2008 on total cost basis. Shortfall or surplus in theprovision of these liabilities, if any, based on the calculation as per AS 15 will be adjusted during the year2008-09.

11. During the year, Company had acquired an Aircraft on Lease Agreement from a US based Lease FinanceCompany covering a period of 120 months. Based on the legal opinion obtained by the Company, the leasehas been accounted in the books as Operating Lease. The monthly lease rent installments are being madein USD at the rates applicable on the due dates of payment. The fixed monthly lease installments for 3months in the current year was USD 1,65,102 (INR 66,14,997).

The payments under lease for the future period are:

Not later than one year USD 6,60,410Later than one year and not later than 5 years USD 26,41,639Later than 5 years USD 31,36,946

There are no transactions in the nature of sub-lease.

12. The Term Loans repayable within one year is Rs.1,61,09,460/- (Previous Year Rs.1,61,09,460/-) and WorkingCapital Term Loan repayable within one year is NIL (Previous Year Rs.2,00,22,200/-)

13. (i) Auditors Remuneration includesParticulars Amount 2007-08 Amount 2006-07

(9 months) (15 Months)Rs. Rs.

i. Audit Fees 1,86,140 1,48,080ii. Tax Audit Fees 76,216 74,040iii. Taxation 16,854 1,12,240iv. Other Services - 41,250v. Out of Pocket Expenses 43,174 67,456

Total 3,22,384 4,43,066

25


(ii) Rent, Rates Taxes and Insurance includes

Particulars Amount 2007-08 Amount 2006-07(9 months) (15 Months)

Rs. Rs.

Rent 21,05,250 10,37,915Insurance 26,81,519 10,78,876Rates and Taxes 32,39,753 32,13,506

(iii) Other Direct Expenses includes


Rs. Rs.

Air Charter Services - 78,050Airport Charges 79,092 6,26,305Insurance – Aircraft 6,02,176 3,08,980Inflight Expenses 921 22,031Calibration Expenses 1,54,813 93,933Structuring fee and others 36,17,867 -Operating Lease Payment 66,14,997 -

Total 1,10,69,866 11,29,299

(iv) Details of Managerial Remuneration (including the amount capitalised)


Rs. Rs.

Remuneration 14,22,700 30,92,072LTA - 1,36,000Provident Fund 77,880 2,16,000Superannuation 1,98,480 2,70,000

Total 16,99,060 37,14,072

(v) Details of Other Expenses


Rs. Rs.

Consultancy charges 1,35,181 3,66,591Agriculture Expenses 7,000 19,540Small amounts Written off/write Back (52,907) 25,350Sitting Fees 1,24,175 1,90,270

Total 2,13,449 6,01,751

(vi) Details of Prior period items

Particulars Amount 2007-08(9 months)

Rs.

Reversal of excess interest income recognised in earlier years 14,14,207Interest expense relating to earlier years 7,37,768Other revenue expenditures relating to earlier years 16,49,326

Total 38,01,301

26


14. Disclosure in respect of related parties pursuant to Accounting Standard 18

A. Related Parties

Sr. No. Particulars Name of the Party1. Subsidiaries (Direct Holding) First Airways Inc.

M M Infoproc Services Pvt. Ltd.TAAL Infrastructure Pvt. Ltd.

2. Associates ISMT Ltd.Indian Seamless Enterprises Ltd.Knox Investments Pvt. Ltd.Kovid Investments Pvt. Ltd.Indseam Services Ltd.TAAL Technolgies Pvt. Ltd.Academy of Carver Aviation Pvt. Ltd.

3. Key Management Personnel Mr. C S KameswaranMr Salil Taneja

B. Transactions with the Related Parties :

Sr. Particulars Subsidiaries Associates Key ManagementNo. Personnel1 Inter-corporate Deposit granted

during the year 15,00,00,0002. Other advances (Net) (1,65,366)3. Other Services 62,18,2004. Sitting Fees 1,24,1755. Interest paid (13,90,218)6. Interest Received 1,23,75,4037. Balance payable by TAAL 4,20,00,0008 Balance Receivable by TAAL 17,58,99,6809. Investment in equity of

First Airways Inc. 3,76,95,32010 Investment in equity of

M M Infoproc Services Pvt. Ltd. 70,00011 Investment in equity of

TAAL Infrastructure Pvt. Ltd. 10,00012 Investment in equity of Academy

of Carver Aviation Pvt. Ltd. 2,14,15,00013. Advance for share application 3,00,00,000

15. The Company has sent balance confirmation letters to the debtors and creditors as appearing in the booksof accounts. Confirmation from few have been received. The remaining balance in debtors and creditorsaccount are subject to confirmations.

16. As informed to us by management, company owes no dues, which are outstanding for more than 45 daysas at 31.03.2008 to any “Micro, Small and Medium Enterprises” as required under “Micro, Small and MediumEnterprise Development Act 2006”

17. The provision for all known liabilities is adequate in the opinion of the Board.

18. Current Assets, Loans and Advances are of the value stated if realised in the ordinary course of business.

19. Previous year figures have been regrouped / recast, wherever necessary.

20. ADDITIONAL INFORMATION PURSUANT TO THE PROVISIONS OF PARAGRAPHS 3,4C AND 4D OFPART-II OF SCHEDULE VI OF THE COMPANIES ACT, 1956.

27


a) LICENSED AND INSTALLED CAPACITY AND ACTUAL PRODUCTION.Description Capacity Production

Licensed InstalledLight Transport Aircraft 2008 2007 2008 2007P68C NA 24 24 1 0Thorp - - - - -Aircraft Parts - - - - -Labour Work - - - - -

b) PARTICULARS IN RESPECT OF SALES / INCOMEQuantity (Nos) Value (Rs)

2008 2007 2008 2007Light Transport Aircraft 1 1 2,90,00,000 1,60,00,000Aircraft Sales Commission 3,82,26,513 4,52,92,317Air Management - - 3,15,80,321 4,32,88,322Aero-Structures and others - - 4,52,07,032 97668888Total 14,40,13,866 20,22,49,527

c) Details of finished goods in nos. (Light Transport Aircraft)Quantity (Nos.) Value (Rs.)2008 2007 2008 2007

Opening Stock 0.5 0.5 14,242,715 1,30,00,000Closing Stock 0.5 * 0.5 14,242,715 14,242,715*One Half share of the aircraft was sold in earlier year.

d) Value of Raw Materials and Components consumed during the year.Percentage (%) Value (Rs.)2008 2007 2008 2007

Imported 40 40 2,13,97,846 1,50,10,011Indigenous* 60 60 3,21,23,767 229,12,701Total 100 100 5,35,21,613 3,79,22,712

2007-08 2006-07(15 months) (15 months)

Amount Rs. Amount Rs.e) Earnings in foreign currency

i) Export of Goods 40,26,012 43,851ii) Commission 3,82,26,513 4,52,92,317

f) Expenditure in foreign currencyTravelling Expenses 2,01,666 10,07,560Professional fees 1,34,832 -Structuring fees 20,63,842 -Lease Rent 66,14,997 -Others 18,79,847 -

g) CIF VALUE OF IMPORTS OF RAW MATERIALS,SPARES, ETC. 2,13,97,846 1,76,60,273




28


BALANCE SHEET ABSTRACT

THE INFORMATION RELATING TO THE BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE AS PER PARTIV OF SCHEDULE VI TO THE COMPANIES ACT, 1956.

I. Registration Details

Registration No. 0 0 1 4 4 6 0 State Code 1 8

Balance Sheet 3 1 0 3 2 0 0 8

Date Date Month Year

II. Capital Raised during the year (Amount in Rs. Thousands)

Public Issue N I L Rights Issue N I L

Bonus Issue N I L Private Issue N I L

III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands)

Total Liabilities 1 1 0 6 2 7 4 Total Assets 1 1 0 6 2 7 4

Sources of Funds

Paid-up Capital 0 1 2 4 6 5 4 Reserves & Surplus 0 7 5 8 3 8 0

Secured Loans 0 0 6 3 1 8 3 Unsecured Loans 0 1 1 5 5 9 1

Deferred Tax Libility 0 0 4 4 4 6 6 Advance for preferential Allotment N I L

Application of Funds

Net Fixed Assets 0 5 5 8 1 6 7 Investment 0 0 9 9 0 9 0

Deferred Tax Asset 0 0 0 5 0 0 7

Net Current Assets 0 4 4 2 4 2 0 Misc. Expenditure 0 0 0 1 5 9 0

IV. Performance of the Company (Amount in Rs. Thousands)

Turnover # 0 1 6 9 1 5 4 Total Expenditure 0 1 6 8 4 1 8

Profit Before Tax 0 0 0 0 7 3 6 Profit After Tax - 0 0 3 6 6 8

Earning Per Share in Rs. (0.01) Dividend Rate % N I L*including other income

V. Generic Names of Three Principal Products / Services of Company (as per monetary terms)

Item Code No. (ITC Code) 8,80,230.00

Product Description Light Transport Aircraft

Item Code No. (ITC Code) NOT APPLICABLE

Product Description NOT APPLICABLE

Item Code No. (ITC Code) NOT APPLICABLE

Product Description NOT APPLICABLE



Place: Pune Place: PuneDate: August 25, 2008 Date: August 25, 2008

29


Statement pursuant to Section 212(3) of the Companies Act 1956, relating to Subsidiary Companies

Sr Particulars TAAL Infrastructure M M Infoproc Services First Airways No Private Limited Private Limited Inc.

1) Financial Period ended March 31, 2008 March 31, 2008 March 31, 2008

2) Holding Company’s interest 100% 100% 100%

3) Shares held by the Holding 10,000 Equity shares 10,000 Equity shares 9,50,000 EquityCompany in the Subsidiary of Rs. 10/- each of Rs. 10/- each shares of $ 1 each

4) The net aggregate of profit or Loss of Rs.348/- Loss of Rs.281/- Loss of Rs.1,53,440/-losses of the subsidiary forthe current period so far asit concerns the members ofthe holding company

(a) Dealt with or provided for in the Loss of Rs.348/- Loss of Rs.281/- Loss of Rs.1,53,440/-accounts of the Holding Company

(b) Not dealt with or provided for in the NA NA NAaccounts of the Holding Company

5) The Net aggregate of profits or losses NA NA NAfor the previous financial years of thesubsidiary so far as it concerns themembers of the Holding Company

(a) Dealt with or provided for in NA NA NAthe accounts of the Holding Company

(b) Not dealt with or provided for in the NA NA NAaccounts of the Holding Company

30


DIRECTORS’ REPORT

Dear Shareholders,

Your Directors present the Second Annual Reporttogether with the audited accounts for the year endedMarch 31, 2008.

1. FINANCIAL RESULTS

During the year under review, the Company hasincurred a nominal loss of Rs. 348/-.

2. PARTICULARS OF EMPLOYEES

There are no employees drawing salaries in excessof limits prescribed under Section 217(2A) of theCompanies Act, 1956 read with Companies(particulars of employees) Rules, 1975 as amendedand hence no information is furnished thereto.

3. DIRECTORS’ RESPONSIBILITY STATEMENT :

As per Section 217 (2AA) of the Companies Act,1956, Directors hereby state as under:

that in the preparation of the annual accounts, theapplicable accounting standards have been followed.

that the Directors have selected such accountingpolicies as mentioned in Schedule 4 and appliedthem consistently and made judgements andestimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of thecompany for the financial year ended March 31,2008 and of the loss of the company for that year;

that the Directors have taken proper and sufficientcare for the maintenance of adequate accountingrecords in accordance with the provisions of theCompanies Act, 1956 for safeguarding the assetsof the company and for preventing and detectingfraud and other irregularities;

that the Directors have prepared the annual accountson a going concern basis.

4..... CONSERVATION OF ENERGY, TECHNOLOGYABSORPTION, FOREIGN EXCHANGE EARNINGSAND OUTGO

Your Directors have nothing to report on theaforesaid matters as your company is not engagedin manufacturing , has no foreign collaboration,and has not exported or imported any goods orservices.

5. DEPOSITS

The Company has not accepted any deposits fromthe Public.

6. APPOINTMENT OF DIRECTORS OF THECOMPANY

During the year Mr. Salil Taneja was appointed asAdditional Director of the Company to hold officeuntil Second Annual General Meeting of theCompany. You are requested to consider hisappointment as the Director of the Company.

Mrs. Rajashree C Mahajan retires by rotation andbeing eligible offers herself for re-appointment.

7. AUDITORS

The Auditors M/s. D D Karve & Co., CharteredAccountants, retire at the conclusion of the SecondAnnual General Meeting and being eligible offerthemselves for re-appointment.

On behalf of the Board of Directors

N V Karbhase Rajashree C MahajanDirector Director

Dated : May 25, 2008Pune

TAAL INFRASTRUCTURE PVT LTD

31


AUDIT REPORT

The Members ofTAAL INFRASTRUCTURE PRIVATE LIMITED

We have audited the attached Balance Sheet of TAALINFRASTRUCRURE PRIVATE LIMITED as at 31st March,2008 for the year ended on that date annexed thereto.These financial statements are the responsibility of theCompany’s Management. Our responsibility is toexpress an opinion on these financial statements basedon our audit.

We conducted our Audit in accordance with auditingstandards generally accepted in India. Those standardsrequired 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 accountingprinciples used and significant estimates made bymanagement, as well as evaluating the overall financialstatements presentation. We believe that our auditprovides a reasonable basis for our opinion.

The requirement of the Companies (Auditor’s Report)Order 2003 (the order) are not applicable to the companyin terms of Paragraph 1 (2)(iv) of the order as:

I. The Paid up Capital and reserves of theCompany are less than Rupees fifty Lacs

II. The Company has not accepted any publicdeposits

III. The Company does not have loan outstandingten Lacs Rupees or more from any bank orfinancial institution and

IV. The Company does not have turnover exceedingRupees five Crore.

We further state that

1. We have obtained all the information andexplanation which to the best of our knowledgeand belief were necessary for the purpose ofour audit.

2. In our opinion, proper books of accounts asrequired by law have been kept by the company

so far as appears from our examination of thosebooks

3. The Balance Sheet dealt with in this Report arein agreement with the Books of Account.

4. In our opinion, financial statements are preparedon the basis of applicable accounting standardsprescribed under section 211(3C) of theCompanies Act, 1956.

5. On the basis of written representation receivedfrom the directors, none of the directors isdisqualified as on March 31, 2008 from beingappointed as a director under section (1) ofsection 274 of the Companies Act, 1956.

6. In our opinion and to the best of our informationand according to the explanations given to us,the said accounts, read together with notesthereon, gives the information required by theCompanies Act, 1956 in the manner so requiredand give a true and fair view.


a. In the case of the Balance Sheet, of thestate of affairs of the Company as atMarch 31, 2008 and

b. In case of the Profit and Loss Account, ofthe Loss of the Company for the year endedon that date.

FOR D.D KARVE & CO.Chartered Accountants

D.D KARVEProprietor

Membership No. 30232


32


BALANCE SHEET AS AT 31ST MARCH 2008.

Schedule As at As atMarch 31, 2008 March 31, 2007

Rs. Rs.

SOURCES OF FUNDSShare Capital 1 1,00,000 1,00,000Share Application Money - -Unsecured Loan 10,000 -

TOTAL 1,10,000 1,00,000

APPLICATION OF FUNDSCURRENT ASSETS LOANS & ADVANCES

Cash & Bank Balances 2 9,652 -

MISCELLANEOUS EXPENDITURE 3 1,00,000 1,00,000(To the extent not written off)

Profit and Loss Account 348 -TOTAL 1,10,000 1,00,000

NOTES FORMING PART OF ACCOUNTS 4

As per our Report of even dateD.D. Karve & Co.Chartered Accountants For and on behalf of the Board of Directors

D.D. Karve N V Karbhase Rajashree C MahajanProprietor Director Director


33


PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2008.

Schedule For the Year Ended For the Year EndedMarch 31, 2008 March 31, 2007

Rs. Rs.

INCOMEExcess provision written back - -

TOTAL - -

EXPENDITUREBank Charges 348 -Preoperative Expenses W/off - -

TOTAL 348 -

Loss for the year 348 -

Balance brought forward from the previous year - -

348 -

BALANCE TRANSFERRED TO BALANCE SHEET 348 -





34


SCHEDULES TO THE BALANCE SHEET

As at As atMarch 31, 2008 March 31, 2007

Rs. Rs.

SCHEDULE - 1 : SHARE CAPITALAuthorised Capital10000 ( Previous year 10000) 1,00,000 1,00,000Equity share of Rs.10/- each

Issued,Subscribed & Paid Up10000 ( Previous year 10000) 1,00,000 1,00,000Equity share of Rs.10/- each

1,00,000 1,00,000

SCHEDULE - 2 : CASH AND BANK BALANCESBalance with Scheduled banks 9,652 -

9,652 -

SCHEDULE - 3 : MISCELLANEOUS EXPENDITUREPre-Operative Expenses - 1,00,000

- 1,00,000

SCHEDULE - 4 : NOTES FORMING PART OF ACCOUNTS

NOTES TO ACCOUNTS AND ACCOUNTING POLICIES:

1. The Accounts are prepared on historical cost and on going concern basis.

2. The Accounting policies not specifically referred to otherwise are consistent with the generally acceptedaccounting principles. In applying the accounting policies, consideration has been given to prudence,substance over form and materiality.

3. The Company has not yet started its Commercial operations.

4. The previous year’s figures pertain to the period commencing from the date of incorporation that is July 21,2006 upto March 31,2007.

5. Figures have been rounded off to the nearest rupee.




35


DIRECTORS’ REPORT

Dear Shareholders,

Your Directors present the First Annual Report togetherwith the audited accounts for the period commencingfrom June 12, 2007 to March 31, 2008.

1. Financial Results

The Company being in its year of inception has notcommenced its operations. During the period underreview, the Company has incurred a nominal loss ofRs. 281/-

2. Particulars of Employees

There are no employees drawing salaries in excessof limits prescribed under Section 217(2A) of theCompanies Act, 1956 read with Companies(particulars of employees ) Rules, 1975 as amendedand hence no information is furnished thereto.

3. Directors’ Responsibility Statement :

As per Section 217 (2AA) of the Companies Act,1956, Directors hereby state as under:

that in the preparation of the annual accounts, theapplicable accounting standards have been followed.

that the Directors have selected such accountingpolicies as mentioned in Schedule 4 of and appliedthem consistently and made judgements andestimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of thecompany at the end of the financial period ended onMarch 31, 2008 and of the Loss of the company forthat period;

that the Directors have taken proper and sufficientcare for the maintenance of adequate accountingrecords in accordance with the provisions of theCompanies Act,1956 for safeguarding the assets ofthe company and for preventing and detecting fraudand other irregularities;

that the Directors have prepared the annual accountson a going concern basis.

4..... CONSERVATION OF ENERGY, TECHNOLOGYABSORPTION, FOREIGN EXCHANGE EARNINGSAND OUTGO

Your Directors have nothing to report on theaforesaid matters as your company is not engagedin manufacturing, has no foreign collaboration, andhas not exported or imported any goods or services.

5. Deposits

The Company has not accepted any deposits fromthe Public.

6. Appointment of Directors of the Company

Mr. N V Karbhase and Mrs. Rajashree Mahajan wereappointed as Additional Directors in the First Meetingof the Board of Directors held on February 18, 2008to hold the office until the First Annual GeneralMeeting of the Company. You are requested toconsider their appointment.

Mr. Murali Ramkrishnan and Mr. Murali NerurPasupathy, first Directors of the Company tenderedtheir resignation in the first Meeting of the Board ofDirectors held on February 18, 2008. The Boardacknowledged their contribution towards theformation and working of the Company and took theirresignations on record.

7. Auditors

M/s. D D Karve & Co., Chartered Accountants,were appointed as Statutory Auditors in the firstMeeting of the Board of Directors held on February18, 2008 to hold the office until the First AnnualGeneral Meeting of the Company. They being eligibleoffer themselves for re-appointment. You arerequested to appoint them as Statutory Auditors ofthe Company for the forthcoming Accounting Year2008-2009.

On behalf of the Board of Directors

N V Karbhase Rajashree C MahajanDirector Director


M M INFOPROC SERVICES PRIVATE LIMITEDRegd Office: Belagondapalli, Thally Road, Denkanikotta,

Belagondapalli, Krishnagiri, TAMIL NADU 635114

36


AUDIT REPORT

The Members ofM M INFOPROC SERVICES PRIVATE LIMITED

We have audited the attached Balance Sheet of M MINFOPROC SERVICES PRIVATE LIMITED as atMarch 31, 2008 for the year ended on that date annexedthereto. These financial statements are the responsibilityof the Company’s Management. Our responsibility is toexpress an opinion on these financial statements basedon our audit.

We conducted our Audit in accordance with auditingstandards generally accepted in India. Those standardsrequired 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 accountingprinciples used and significant estimates made bymanagement, as well as evaluating the overall financialstatement presentation. We believe that our auditprovides a reasonable basis for our opinion.

The requirement of the Companies (Auditor’s Report)Order 2003 (the order) are not applicable to the companyin terms of Paragraph 1 (2)(iv) of the order as:

I. The Paid up Capital and reserves of theCompany are less than Rupees fifty Lacs

II. The Company has not accepted any publicdeposits

III. The Company does not have loan outstandingten Lacs Rupees or more from any bank orfinancial institution and

IV. The Company does not have turnoverexceeding Rupees five Crore.

We further state that

1. We have obtained all the information andexplanation which to the best of our knowledgeand belief were necessary for the purpose ofour audit.

2. In our opinion, proper books of accounts asrequired by law have been kept by the company

so far as appears from our examination of thosebooks

3. The Balance Sheet dealt with in this Report arein agreement with the Books of Account.

4. In our opinion, financial statements are preparedon the basis of applicable accounting standardsprescribed under section 211(3C) of theCompanies Act, 1956.

5. On the basis of written representation receivedfrom the directors, none of the directors isdisqualified as on 31st March 2008 from beingappointed as a director under section (1) ofsection 274 of the Companies Act, 1956.



a. In the case of the Balance Sheet, of thestate of affairs of the Company as atMarch 31, 2008 and

b. In case of the Profit and Loss Account, ofthe Loss of the Company for the year endedon that date.

FOR D.D KARVE & CO.Chartered Accountants

D.D KARVEProprietor

Membership No. 30232


37


BALANCE SHEET AS AT 31ST MARCH 2008

Schedule As atMarch 31, 2008

Rs.

SOURCES OF FUNDSShare Capital 1 1,00,000Share Application Money -Unsecured Loan -

TOTAL 1,00,000

APPLICATION OF FUNDSCURRENT ASSETS LOANS & ADVANCESCash & Bank Balances 2 99,719

Miscellaneous Expenditure(To the extent not written off) -

Profit and Loss Account 281TOTAL 1,00,000





38


PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2008

Schedule For the Year EndedMarch 31, 2008

Rs.

INCOMEExcess provision written back -

TOTAL -

EXPENDITUREBank Charges 281Preoperative Expenses W/off -

TOTAL 281

Loss for the year 281Loss / Profit after taxation 281Balance brought forward from the previous year -

281

BALANCE TRANSFERRED TO BALANCE SHEET 281





39


SCHEDULES TO THE BALANCE SHEET

As atMarch 31, 2008

Rs.

SCHEDULE - 1 : SHARE CAPITALAuthorised Capital10000 ( Previous year 10000) 1,00,000Equity share of Rs.10/- each

Issued,Subscribed & Paid Up10000 ( Previous year 10000) 1,00,000Equity share of Rs.10/- each

1,00,000

SCHEDULE - 2 : CASH AND BANK BALANCESBalance with Scheduled banks 99,719

99,719

SCHEDULE - 3 : NOTES FORMING PART OF ACCOUNTS

NOTES TO ACCOUNTS AND ACCOUNTING POLICIES:

1. The Accounts are prepared on historical cost and on going concern basis.

2. The Accounting policies not specifically referred to otherwise are consistent with the generally acceptedaccounting principles. In applying the accounting policies, consideration has been given to prudence, substanceover form and materiality.

3. The Company has not yet started its Commercial operations.

4. The Balance Sheet pertains to the period commencing from the date of incorporation that is June 12, 2007 uptoMarch 31, 2007.

5. Figures have been rounded off to the nearest rupee.




40


FIRST AIRWAYS INC. (A DEVELOPMENT STAGE ENTERPRISE)FINANCIAL STATEMENTS MARCH 31, 2008

BALANCE SHEET(All amounts in United States Dollar, unless otherwise stated)

As atMarch 31, 2008

ASSETSCurrent assetsCash and cash equivalents 19,396Aircraft purchase option-current 92,674

Total current assets 1,12,070

Aircraft purchase option-non current 8,34,063

Total assets 9,46,133

LIABILITIES AND EQUITYStockholdres’ equity

Common stock of $ 1 par1,000,000 share authorized950,000 shares issued and outstanding 9,50,000Accumulated deficit (3,867)

Total stockholders’ equity 9,46,133

Total liabilities and stockholders’ equity 9,46,133

CPAAmerican counts on CPAs

Report of Independent Accountants

Board of DirectorsFirst Airways Inc.

We have audited the accompanying balance sheet ofFirst Airways Inc as at March 31, 2008 and the relatedstatements of income, stockholders’ equity and cashflow for the period November 21, 2007 to March 31, 2008.These financial statements are the responsibility of theCompany’s management. Our responsibility is toexpress an opinion on these financial statements basedon our audit.

We conducted our audit in accordance with auditingstandards generally accepted in the United States ofAmerica as established by the Auditing Standards Boardof the American Institute of Certified Public Accountants.Those standards require that we plan and perform theaudit to obtain reasonable assurance about weather thefinancial statements are free of material misstatement.An audit includes consideration of internal control overfinancial reporting as a basis for designing auditprocedures that are appropriate in the circumstances,

FIRST AIRWAYS INC.(A Development Stage Enterprise)

but not for the purpose of expressing an opinion on theeffectiveness of the Company’s internal control overfinancial reporting, Accordingly,we express no suchopinion. An audit also includes examining, on a testbasis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includesassessing the accounting principles used and significantestimates made by the management, as well asevaluating the overall financial statement presentation.We believe that our audit provides a reasonable basisfor our opinion.

In our opinion, the financial statements referred to abovepresent fairly in all material respects,the financial positionof the Company as at March 31, 2008 and the result ofits operations for the period November 21, 2007 to March31, 2008, in conformity with the accounting principlesgenerally accepted in the United States of America.

Mumbai, IndiaJune 21, 2008

First Airways Inc.(A Development Stage Enterprise)Financial StatementsMarch 31, 2008

41



STATEMENT OF INCOME(All amounts in United States Dollar, unless otherwise stated)

For the period endedMarch 31,2008

Cost and expensesSelling, general and adminstrative expenses 3,867Total cost and expenses 3,867

(Loss) before income tax (3,867)

Income taxes —

Net (loss) (3,867)

STATEMENTS OF STOCKHOLDERS’ EQUITYFor the period November 20, 2007 to March 31, 2008(All amounts in United States Dollar, unless otherwise stated)

Common stock authorized 10,00,000 10,00,000 - - - -

Common stock subscribed - - 9,50,000 9,50,000 - 9,50,000

Net(loss) during the period - - - - (3,867) (3,867)

Balance as of March 31, 2008 10,00,000 10,00,000 9,50,000 9,50,000 (3,867) 9,46,133

Particulars Common stock Accumulateddeficit

Totalstockholder’s

equity Authorized Issued & outstanding

Shares Value Shares Value

STATEMENT OF CASH FLOWS(All amounts in United States Dollar, unless otherwise stated)

For the period endedMarch 31,2008

Cash flows from operating activitiesNet (loss) (3,867)

Adjustments to reconcile net(loss) toNet cash (used in)operating activities —

Changes in operating assets and liabilitiesNet cash used in operating activities (3,867)

Cash flows from investing activitiesPurchase of Aircraft purchase option (9,26,737)Net cash used in investing activities (9,26,737)

Cash flows from financing activitiesProceeds from issue of 950,000 9,50,000common stock at $ 1 parNet cash flows from financing activities (9,50,000)

Net increase in cash and cash equivalents 19,396Cash and cash equivalents at the end of the year 19,396

42



NOTES TO FINANCIAL STATEMENTS(All amounts in United States Dollar, unless otherwise stated)NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the preparation of the accompanying financial statementsis as follows:

a) Organization and nature of businessFirst Airways Inc. (“First Airways” or “the Company”) was incorporated on November 21,2007 in the state ofDelaware. It is a wholly owned subsidiary of Taneja Aerospace and Aviation Limited, (“TAAL”) a Companyincorporated in India.First Airways Inc. was set-up to establish, maintain,provide, and operate air services and chartered services forcarriage of passengers,mails,documents,parcels and freight by airplanes,aircrafts or other means of transport inUSA or elsewhere.

b) Basis of preparation1) The accompanying financial statements are prepared under the historical cost convention on accrual basis of

accounting in accordance with the accounting and reporting requirements of generally accepted accountingprinciples in the United States of America (‘US GAAP’) to reflect the financial position,results of operation andcash flow.All amounts are stated in United States dollars,except as otherwise specified.The financial statements are prepared for the period November 21,2007 to March 31,2008.

2) According with statements of Financial Accounting Standard(“SFAS”) 7, an enterprise shall be considered tobe in the development stage if it is devoting substantially all of its efforts towards establishing a new businessand either of the following conditions exists:a. Planned principal operations have not commenced.b. Planned principal operations have commenced,but there has been no significant revenue therefrom.As at March 31,2008 First Airways Inc. has devoted most of its efforts for raising capital and starting upoperations.

c ) Use of estimatesIn preparing the Company’s financial statements in conformity with accounting principles generally accepted inthe United States of America, management is required to make estimates and assumptions that affect thereported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of thefinancial statements, and the reported amounts of revenue and expenses during the reporting period. Actualresults could differ from those estimates.

d) Cash and cash equivalentsThe Company considers all highly liquid securities with maturity at the time of purchase of three months or lessto be cash. As of March 31,2008, the Company had no such instruments.

e) Aircraft purchase optionsAircraft purchase options are recorded at cost on the date of acquisition.Aircraft purchase option is amortized over the following estimated useful lives or the legal life, which ever is lowerwith a mid quarter convention:

Assets Estimated useful lifeAircraft purchase option 120 months

f) Income taxesThe Company accounts for income taxes in accordance with statements of Financial Accounting Standard No.109(“SFAS No. 109”), “Accounting for Income Taxes,” which requires recognition of deferred tax assets andliabilities for the expected future tax consequences of events that have been included in the financial statementsor tax returns. Under this method,deferred tax assets and liabilities are determined based on the differences

43


between the financial statements and tax bases of assets and liabilities,using enacted tax rates in effect for theyear in which the differences are expected to reverse. Valuation allowances are established when necessary toreduce deferred tax assets to amounts expected to be realized.

NOTE B – CASH AND CASH EQUIVALENTSCash and cash equivalents comprise the following:

As at March 31,2008

Balance in National City Bank 19,396

NOTE C – AIRCRAFT PURCHASE OPTIONAs at March 31,2008

Aircraft purchase option-current position 92,674Less: Accumulated amortization —

92,674Aircraft purchase option- non current portion 834,063Total 926,737

On December 11,2007 the Company purchased an Aircraft purchase option vide option agreement(“agreement”) forCessna aircraft 525A; Serial Number 525A-0373 (“aircraft”) from Cessna Finance Corporation (“CFC”). The saidaircraft is leased to TAAL (the parent Company) vide aircraft lease No. 01-0043297-0010559-01(“aircraft lease”),dated of December 11, 2007,for a term of 120 months. As per the agreement,the Company has an option topurchase the Cessna aircraft subject to aircraft lease on any monthly lease rental payment date or on the last dayof the term of lease. In the event this option is exercised,the Company shall,on or before the date of purchase,payCFC the Stipulated Loss Value of the aircraft plus all other sums then due under the aircraft lease or under any otheragreements, which will be considered as the “Purchase Option Price”. As per the agreement , the stipulated LossValue at the end of the 120 months lease term in $ 1,279,929.The Company is estimating the use of the Aircraft purchase option at the end of the 120 month lease term with mid-quarter convention. Amortization for the period ended March 31, 2008 was $ Nil as the aircraft was put to use onFebruary 20,2008.

NOTE D – SELLING, GENERAL AND ADMINISTRATIVE EXPENSESSelling, general and administrative expenses comprise the following:

For the year ended,March 31,2008

Bank charges 95Delaware franchise tax 334Professional fees 3,438Total 3,867

NOTE E – INCOME TAXESThe following is the summary of items giving rise to deferred tax assets:

As at March 31, 2008Non curent deferred tax assets

Net operating loss carry forwards 580

Non current deferred tax assets,net 580Less: Valuation allowance (580)

NilThe Company has federal net operating losses as at March 31, 2008 of approximately $ 3,867.The net operatinglosses expire over 2028.This being the first year of operations and also as the Company has not recorded nettaxable income the net deferred tax assets are not considered to be realizable. The Company has recorded avaluation allowance of $ 580 as at March 31, 2008 to reduce the deferred tax assets to their net realizable value.

NOTE F – STOCKHOLDERS’ EQUITYThe company’s authorized share capital comprised of 1,000,000 common shares at par of $ 1 each as of March 31,2008, of which all 950,000 common shares were issued and outstanding as of March 31, 2008

44


AUDITOR’S REPORT ON CONSOLIDATEDFINANCIAL STATEMENTS


1. We have audited the attached consolidatedbalance sheet of TANEJA AEROSPACE ANDAVIATION LIMITED (“the Company”) and itssubsidiaries (the Company and its subsidiariesconstitute “the Group”) as at 31st March 2008and also the consolidated profit and loss accountand the consolidated cash flow statement for theperiod ended on that date both annexed thereto.These financial statements are the responsibilityof the company’s management and have beenprepared by the management on the basis ofseparate financial statements and other financialinformation regarding components. Ourresponsibility is to express an opinion on thesefinancial statements based on our audit.

2. We conducted our audit in accordance with thegenerally accepted auditing standards in India.Those standards require that we plan and performthe audit to obtain reasonable assurance aboutwhether the financial statements are free ofmaterial misstatement. An audit includesexamining, on a test basis, evidence supportingthe amounts and disclosures in the financialstatements. An audit also includes assessing theaccounting principles used and significantestimates made by management, as well asevaluating the overall financial statementpresentation. We believe that our audit providesa reasonable basis for our opinion.

3. We did not audit the financial statements ofcertain subsidiaries, whose financial statementsreflect total assets (net) of Rs.380 lakh as at 31stMarch, 2008, the total revenue of Rs. NIL and netcash inflows amounting to Rs.8.9 lakh for the yearthen ended. These Financial statements and otherfinancial information have been audited by otherauditors, whose report have been furnished to usand our opinion is based solely on the reports ofother auditors.

4. Further to our comments in the Annexure referredto in paragraph 3 above, we report that:

4.1 The Company’s method of valuation ofinventories is not in accordance with theAccounting Standard (AS) 2. Further, inthe absence of adequate supporting anddetailing, we are unable to verify andcomment on quantity and valuation of

inventory as certified by themanagement.

4.2 The difference between the actual salestax liability and discounted value is beingtreated as revenue expenditure in theyear in which it is paid. This accountingpractice is in not in accordance withgenerally accepted accountingprinciples. (Refer Note No.9 of standalonefinancial statement).It is not possible to quantify (which maybe substantial) the exact impact of theparagraph 4.1 and 4.2 above on the profitof the year.

4.3 Finance charges paid to bank during theyear amounting to Rs. 100 lakh towardsthe past claim for interest waiver isdirectly debited to the Profit and LossAppropriation Account instead ofcharging the same to Profit and LossAccount, which is not in accordence withgenerally accepted accounting principles(Note No. 8 of standalone financialstatement).

4.4 The Company has not provided forEmployee Benefits in accordance withAS 15 (Revised). (Refer Note No.10 ofstandalone financial statement).Consequent to points 4.3 and 4.4 above,the profit for the period would have beenlower by around Rs. 131 lakh.

4.5 Company has recognised revenue forlong term fixed price contract onpercentage completion method as perAS-7 “Construction Contract”. Thecompany has not maintained contractwise cost and other details as a result nodisclosures as required under AS 7 ismade.

5. Subject to the matters referred to in paragraphs3 & 4 above :

a) We report that the consolidated financialstatements have been prepared by themanagement in accordance with therequirements of Accounting Standard (AS) 21,Consolidated Financial Statements,Accounting Standard (AS) 23, Accounting forInvestments in Associates in ConsolidatedFinancial Statements and AccountingStandard (AS) 27, Financial Reporting ofInterests in Joint Ventures, issued by the

45


Institute of Chartered Accountants of India.

b) Based on our audit and on consideration ofreport of other auditors on separate financialstatements and on the other financialinformation of the components, and to thebest of our information and according toexplanations given to us, we are of the opinionthat the attached consolidated financialstatements give a true and fair view inconformity with the accounting principlesgenerally accepted in India:

i) in the case of the consolidated balancesheet, of the state of affairs of TAAL Groupas at 31st March, 2008;

ii) in the case of consolidated profit and lossaccount, of the loss for the period endedon that date; and

iii) in the case of the consolidated cash flowstatement, of the cash flows for the periodended on that date.


HARESH B. SHAHPartner

Membership No.: 32208Pune, June 30, 2008

46


CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2008

Schedule As atMarch 31, 2008

Rs.SOURCES OF FUNDS

SHAREHOLDERS FUNDSShare Capital 1 12,46,53,680Reserves and Surplus 2 75,86,68,713

Advance for Preferential Allotment -

LOAN FUNDS 3a) Secured Loans 6,31,82,824b) Unsecured Loans 11,56,01,409

DEFERRED TAX LIABILITY (Refer Note 5) 4,44,65,972

Total 1,10,65,72,598

APPLICATION OF FUNDSFIXED ASSETS

Gross Block 4 54,70,87,282Less: Accumulated Depreciation 13,56,76,520

NET BLOCK 41,14,10,762CAPITAL WORK IN PROGRESS 14,67,56,204INVESTMENT 5 6,13,14,650DEFERRED TAX ASSET (Refer Note 5) 50,07,127CURRENT ASSETS , LOANS AND ADVANCES

a) Inventories 6 19,86,75,403b) Sundry Debtors 7 10,85,71,079c) Cash and Bank Balances 8 7,53,22,773d) Loans and Advances 9 21,25,67,330

59,51,36,585Less: CURRENT LIABILITIES & PROVISIONS 10 15,18,30,675NET CURRENT ASSETS 44,33,05,912MISCELLANEOUS EXPENDITURE 3,87,77,944

(To the extent not written off)Total 1,10,65,72,598

Accounting Policies And Notes On Accounts 14The Schedules referred to herein form an integral part of the accounts




47


CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED MARCH 31, 2008

Schedule March 31, 2008

Rs.

INCOMESales & other Income 11 16,91,54,408

EXPENDITUREManufacturing and Other Expenses 12 13,94,24,779

Operating Profit(Before Interest and Depreciation) 2,97,29,630Finance Charges 13 1,47,42,042Depreciation 1,44,05,313

Profit before Tax, Exceptional Items and Prior Period Items 5,82,275Provision for TaxationCurrent Tax -Deferred Tax (Net) 61,623Fringe Benefit Tax 5,41,886

Profit after Tax but before Prior Period Items (21,234)Prior Period Income/(Expense) (Net) (38,01,301)

Profit after Tax (38,22,535)Balance brought forward 8,64,01,874Exceptional Items (1,00,00,000)

Balance carried to Balance Sheet 7,25,79,340

Earning Per Share before prior period items (Refer Note 6) NIL

Accounting Policies And Notes On Accounts 14The Schedules referred to herein form an integral part of the accounts




48


CONOLIDATED CASH FLOW STATEMENT FOR THE PERIOD ENDED March 31, 2008

March 31,2008

Rs. Rs.A. CASH FLOW FROM OPERATING ACTIVITIESProfit before tax, exceptional & prior period items 5,82,275

Adjustment for:Depreciation (Net) 1,44,05,313Prior period Items (38,01,301)Interest paid 1,47,42,042Interest Received (1,42,62,852)Dividend Received (35,744)

Operating Profit before Working Capital Changes 1,16,29,733Adjustments For:

Trade and other receivables 17,84,96,097Inventories (84,51,040)Trade Payables 4,02,75,699Decrease/(Increase) in Deferred Revenue Expenditure (3,58,02,212)

Cash Generated from Operations 18,61,48,277Direct Taxes Paid (5,41,886)

Net cash flow from Operating Activities 18,56,06,391

B. CASH FLOW FROM INVESTING ACTIVITIESPurchase of Fixed Assets/Cap WIP (14,42,80,027)Investment in Equity (2,13,22,125)Capital Reserve (on consolidation) 1,20,000Foreign Currency Transaction Reserve 3,22,362

Net Cash Used in Investing Activities (16,51,59,790)

C. CASH FLOW FROM FINANCING ACTIVITIESInterest Received 1,42,62,852Addition/(Repayment) of Loans 3,08,49,024Dividend Received 35,744Payment of Interest (1,47,42,042)Exceptional Items [Refer Note No. 8] (1,00,00,000)

Net Cash flow from Financing Activities 2,04,05,578Net increase in Cash and Cash Equivalents 4,08,52,179

Cash and Cash Equivalents as at 01-07-2007 (01-04-06) 3,44,70,597Cash and Cash Equivalents as at 31-03-2008 (30-6-2007 7,53,22,773NET INCREASE IN CASH AND CASH EQUILENTS 4,08,52,176




49


SCHEDULES TO CONSOLIDATED BALANCE SHEET

As atMarch 31, 2008

Rs.

SCHEDULE - 1 : SHARE CAPITALAuthorised Capital4,00,00,000 Equity Shares of Rs.5/- Each 20,00,00,000

10,00,000 - 15% Redeemable Cumulative PreferenceShares of Rs.50/- Each 5,00,00,000

25,00,00,000Issued, Subscribed & Paid - Up2,49,30,736 Equity Shares of Rs.5/- Each(Refer Note 3) 12,46,53,680

12,46,53,680

SCHEDULE - 2 : RESERVES AND SURPLUSCapital ReserveAdd : Capital Reserve (on Consolidation) 7,03,000Securities Premium Account 64,27,50,466Add : Forfeiture of Advance for 1,73,25,000 66,00,75,466

Preferential AllotmentRevaluation Reserve 2,49,88,545Foreign Currency Translation Reserve 3,22,362Balance in Profit & Loss account 7,25,79,340

75,86,68,713

SCHEDULE - 3 : LOAN FUNDSA. SECURED LOANS

(Refer Note 2 & 12)I Term Loan From Bank 1,45,32,656II Working Capital Borrowings from Banks 4,79,56,000III Hire Purchase 6,94,168

6,31,82,824B. UNSECURED LOANS

I Inter Corporate Deposits 11,00,00,000II Interest Free Sales tax Loan 55,91,409 (Refer Note 9)III Others 10,000

11,56,01,409

50


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51


SCHEDULES TO CONSOLIDATED BALANCE SHEET (CONTINUED)

As atMarch 31, 2008

Rs.SCHEDULE - 5 : INVESTMENTS (At Cost)

A Short Term (Quoted and Trade)115 (Previous Year 115) Equity shares ofABG Shipyard Ltd @ Rs. 185/- per share 21,275(Market value of shares on Mar 31, 2008 wasRs. 84508/- )

B Long Term (Un-quoted and Trade)18,335 Shares of Academay ofCarvar Aviation Pvt. Ltd Rs. 100/- Each) 6,12,93,375

6,13,14,650

SCHEDULE - 6 : INVENTORIES(As certified by the management)(I) Aircraft Parts & Components 12,00,93,971(II) Work - In - Progress 6,43,38,717(III) Finished Goods (Refer Note 20 C) 1,42,42,715

19,86,75,403

SCHEDULE - 7 : SUNDRY DEBTORS -UNSECURED AND CONSIDERED GOODOver Six Months 3,21,80,071Other Debts 7,63,91,008

10,85,71,079

SCHEDULE - 8 : CASH AND BANK BALANCESCash Balance 42,425Bank Balance With Scheduled Banks

Current Account 1,13,16,898Deposit Account 6,39,63,450

7,53,22,773

SCHEDULE - 9 : LOANS AND ADVANCESUnsecured and considered goodI Advances Recoverable in Cash or in kind

or for value to be received 4,74,13,345II Intercorporate Deposits 9,38,72,115III Advance Tax (including TDS) 3,31,49,196IV Deposits 3,81,32,674

21,25,67,330

SCHEDULE - 10: CURRENT LIABILIITES & PROVISIONSCurrent LiabilitiesSundry Creditors 2,17,93,962Other Liabilities 13,00,36,713

15,18,30,675

52


SCHEDULES TO CONSOLIDATED PROFIT AND LOSS ACCOUNTMarch 31, 2008

Rs. Rs.

Schedule - 11 : IncomeSale of Products and Services 14,40,13,866Other Income 2,51,40,543

16,91,54,408

Schedule - 12: Expenditure1 Raw Materials Consumed (Refer Note 20 d)

Opening Stock 12,77,29,363Add: Purchases 4,58,86,221

17,36,15,584Less: Closing Stock 12,00,93,971

5,35,21,613

2 Reduction / (Accretion) to Work inprocess and finished goodsAdded / (Deducted)(I) Opening Stock 6,24,95,000(II) Less: Closing Stock 7,85,81,432 (1,60,86,432)

3 PersonnelSalaries and Wages 5,78,97,120[Refer Note No 13 (iv)]Provident & Other Funds 13,06,291Welfare Expenses 25,68,760

6,17,72,171

4 Rent, Rates, Taxes & Insurance 83,26,832(Refer Note No 13(ii))

5 Operation and Other FundsAircraft Fuel charges 6,19,881Electricity Charges 21,57,884Repairs & Maintainance 10,39,393Other Direct Expenses (Refer Note 13 (iii)) 1,10,69,866Travelling And Conveyance 65,51,816Communication Expenses 11,18,154Auditors Remuneration (Refer Note 13(i)) 3,22,384Selling Expenses 31,43,002Office Expenses 29,28,695Other Expenses (Refer Note 13 (iii)) 2,13,449Foreign Exchange Variation Loss 23,20,500Defereed Revenue Expenditure written off 4,05,570

3,18,90,595 TOTAL 13,94,24,779

Schedule - 13: Interest & other financial charges Interest on Fixed Loans 1,10,26,286 Interest and other Financial Charges 37,15,756

1,47,42,042

53


SCHEDULE - 14 : NOTES TO THE CONSOLIDATED ACCOUNTS

A. Significant Accounting Policies:

1. Principles of Consolidation

The consolidated financial statements of Taneja Aerospace And Aviation Limited and its subsidiaries areprepared under the historical cost convention on accrual basis in accordance with Accounting Standardsissued by the Institute of Chartered Accountants of India and the relevant portions of the Companies Act,1956. Consolidation is done on line by line basis by adding together the book values of like items of assets,liabilities, income and expenses after, fully eliminating intra-group transactions resulting in unrealised profitand losses.

The names of the subsidiary companies, Country of Incorporation, Proportion of Ownership Interest andreporting dates considered in the Consolidated Financial Statements are:

Name of the company Country of Proportion of Reporting dateIncorporation ownership

interest of TAALFirst Airways Inc. *** USA 100% 31-03-2008MM Infoproc Services Pvt. Ltd.** India 100% 31-03-2008TAAL Infrastructure Pvt. Ltd* India 100% 31-03-2008

*** On November 21, 2007, TAAL formed a wholly subsidiary – First Airways Inc. in state of Delaware, USAwith an investment of Rs.3,76,95,320/- (USD 9,50,000). The Company has been set-up to establish, maintain,provide, and operate air services and chartered services for carriage of passengers, mails, documents,parcels and freight by airplanes, aircrafts or other means of transport in USA or elsewhere. According toStatement of Financial Accounting Standard (SFAS) 7, as at March 31, 2008 First Airways Inc. has beenclassified as a Development Stage Enterprise since it devoted most of its efforts for raising capital andstarting up operations.

** In February 2008, the company has acquired 10,000 fully paid Equity Shares of Rs.10 each in MMInfoproc Services Private limited, Coimbatore, Tamil Nadu for Rs.70,000/-. As a result, MM Infoproc ServicesPvt. Ltd. has become wholly owned subsidiary of the Company. The Company is yet to commence itsoperation.

*In March 2008, the company has acquired 10,000 fully paid Equity shares of 10/- each in TAAL InfrastructurePrivate Limited, Chennai, Tamil Nadu for Rs.10,000/-. As a result, TAAL Infrastructure Private Limited hasbecome wholly owned subsidiary of the Company. The Company is yet to commence its operation.

The excess of cost to the Company of its investment in the subsidiary company over the parents’ portion ofequity is recognised in the consolidated financial statements as goodwill. The excess of Company’s shareof equity of the subsidiary company over the cost of acquisition is treated as capital reserve.

2. Other Accounting Policiesa) They are as set out in the notes to accounts of the parent company - Taneja Aerospace And Aviation

Limited.

b) Foreign currency transactions:

The operations of the foreign subsidiary are not considered as an integral part of the operations of theparent company. Hence, all monetary and non monetary assets and liabilities have been translated atthe exchange rate prevailing as on 31st March 2008.Income and expenditure have been translated at the average rate of the exchange prevailing for thesubsidiary’s financial year. Gains and losses arising out of the translation are carried to “Foreign ExchangeTranslation Reserve.”

54


3. Accounting policies other than those adopted by the parent company for the consolidated financialstatements

3.1 Aircraft purchase optionAircraft purchase options are recorded at cost on the date of acquisition.

Aircraft purchase option is amortized over the following estimated useful lives or the legal life, whicheveris lower with a mid quarter convention:

Assets Estimated useful lifeAircraft purchase option 120 months

B. OTHER NOTES1. Comparative figures for the previous years are not given as the subsidiary companies are acquired/formed

during the period under audit only.

2. The effect of acquisition of subsidiary companies:The acquisition of MM Infoproc Services Pvt. Ltd. and TAAL Infrastructure Pvt. Ltd. and formation of FirstAirways Inc. has resulted in:a) An increase of Rs.2,98,294/- (Previous year NIL) in the financial position as on 31st March, 2008 as

compared to 31st March,2007.b) a decrease of Rs.1,54,069/- (Previous year NIL) in group profit for the year ended on 31st March

2008 as compared to the year ended on 31st March 2007.c) MM Infoproc Services Pvt. Ltd. was acquired for a consideration of Rs.70,000/-. Capital Reserve of

Rs.30,000/- is recognised in the consolidated financial statements being the excess of equity ofRs.1,00,000/- over consideration paid as on the date of acquisition.

d) TAAL Infrastructure Pvt. Ltd. was acquired for a consideration of Rs.10,000/-. Capital Reserve of Rs.90,000/- is recognised in the Consolidated Financial Statements being the excess of equity of Rs.1,00,000/-over consideration paid as on the date of acquisition.

3. Aircraft Purchase OptionIn December, 2007 the First Airways Inc. (a wholly owned subsidiary of TAAL) purchased an “AircraftPurchase Option” vide option agreement (“agreement”) for Cessna aircraft 525A; Serial Number 525A-0373(“aircraft”) from Cessna Finance Corporation (“CFC”). The said aircraft is leased to TAAL (the parent company)vide aircraft lease No. 01-0043297-0010559-01(“aircraft lease”), dated of December 11, 2007, for a term of120 months.

As per the agreement, the Company has an option to purchase the Cessna aircraft subject to aircraft leaseon any monthly lease rental payment date or on the last day of the term of the lease. In the event this optionis exercised, the Company shall, on or before the date of purchase, pay CFC the Stipulated Loss Value ofthe aircraft plus all other sums then due under the aircraft lease or under any other agreements, which willbe considered as the “Purchase Option Price”.

As per the agreement, the Stipulated Loss Value at the end of the 120 month lease term is $ 1,279,929. TheCompany is estimating the use of the Aircraft purchase option at the end of the 120 month lease term withmid-quarter convention. Amortization for the period ended March 31, 2008 was $Nil as the aircraft was putto use on February 20, 2008.

The same has been disclosed in balance sheet of foreign subsidiary books as follows:

As at March 31, 2008Aircraft purchase option - current portion $ 92,674Less : Accumulated amortization $ -

$ 92,674Aircraft purchase option - non current portion $ 8,34,063Total $ 9,26,737

55


Since, the payment for Aircraft Purchase Option is a sunk cost and non refundable irrespective of whetherthe option is exercised or not, in preparation of consolidated financial statements of TAAL, the entirepayment of around Rs.370.88 lakh for Aircraft Purchase Option (current as well as non current portion) hasbeen considered as “Deferred Revenue Expenditure” to be written off over lease period of 120 monthscommencing from next financial year.

Further, based on the legal opinion obtained by the company, the lease transaction has been accounted bythe company as an “Operating Lease”. The monthly operating lease payments are recognized as an expensein the profit and loss account on a straight-line basis over the lease term.

4. Earning per ShareComputation of Earning Per ShareParticulars Amount 2007-08

Rs.Profit/ (Loss) after tax available for equity shareholders* (21,234)Adjusted Weighted Average number of Equity Sharesof Nominal value of Rs.5/- each. 2,49,30,736Computation of EPS – Basic** (in Rs) NIL

*Net profit/ (Loss) on stand alone basis excluding prior period items of Rs. 38.01 lakh and Exceptional itemof Rs. 100 lakh.**Diluted EPS same as Basic as there are no outstanding potential equity shares as on date.




56


Pleaseaffix

15 Ps.RevenueStamp

I/We, ................................................................................... of ...........................................................

in the State of .............................................................. being a member / members of Taneja Aerospace

And Aviation Limited hereby appoint .............................................................................................. of

.......................................................... or failing him/her ............................................................. of

............................................... or failing him / her ......................................................... as my / our

proxy to attend and vote for me / us and on my / our behalf, at the 19th Annual General Meeting of the

Company to be held on Tuesday, September 30, 2008 at Belagondapalli Village, Thally Road, Denakanikotta

Taluk, Krishnagiri District, Belagondapalli- 635114 Tamil Nadu at 11.00 AM and at any adjournment thereof.

In witness thereof I/We put my / our hand this ............................. day of September, 2008

L.F. No. / DP ID / Client ID / ............................................

No. of Shares held ..........................................................

Date ................................................................................

Note: The proxy must be deposited with the Registered Office of the Company not less than 48hours before the time fixed for holding the meeting.A proxy need not be a Member. TheProxy Form should be signed across the Revenue Stamp as per specimen signature(s)registered with the Company.

TANEJA AEROSPACE AND AVIATION LIMITEDRegistered Office : Belagondapalli Village, Thally Road, Denkanikotta Taluk, Krishnagiri District,

Belagondapalli-635114 ,Tamil Nadu

PROXY

TANEJA AEROSPACE AND AVIATION LIMITEDBelagondapalli Village, Thally Road, Denkanikotta Taluk, Krishnagiri District,

Belagondapalli-635114 ,Tamil Nadu

ATTENDANCE SLIP

19th Annual General MeetingL.F. No./DP ID/ Client ID/ .............................

Mr./Mrs./Miss.........................................................................................................................

I/We certify that I/ We am / are a registered Shareholder/ Proxy for the registered Shareholder of the

Company.

I hereby record my/our presence at the 19th Annual General Meeting of the Company held on Tuesday,

September 30, 2008 at Belagondapalli Village, Thally Road, Denakanikotta Taluk, Krishnagiri District,

Belagondapalli- 635114 Tamil Nadu at 11:00AM.

................................

Member’s/ Proxy’s Signature

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