Growing into the future

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Flexibility:Bamboo is a real symbol of fl exibility. It is used to make thousands of things including housing, airplane “skins”,

aphrodisiacs, blinds, brushes, crafts, desalination fi lters, fuel, fi shing poles, fl ooring, food, furniture, medicine, musical instruments,

ornaments, paper, rope, scaffolding, umbrellas, walking sticks, wind chimes and many, many, more.

The Bamboo is one of the most remarkable resource on the planet. Both sustainable and

plentiful, the Bamboo’s list of uses is endless. The Bamboo is strong, fl exible and beautiful, in

both its natural and fi nished states. It is an abundant resource that could benefi cially replace

many of the less sustainable materials now commonly used in our daily lives. Without a

doubt, the one plant that has the widest range of use and the widest spread of habitats

would have to be the Bamboo. It is a symbol of strength, fl exibility, tenacity and endurance.

Growth:Bamboo grows faster than any other plant on the planet, the

record being an incredible 47.6 inches in a 24 hour period. It has been recorded at 180 feet tall with a diameter of over a foot and

with walls, the thickness of which are an inch or more.

Gati was born out of a vision. An idea far ahead of its time, we revolutionised and redefi ned the Indian logistics industry by pioneering the concept of Express Distribution. Over the last 19 years, we have consolidated our leadership position and have set new benchmarks in service quality and customer satisfaction.

Gati has the largest fl eet of over 4000 vehicles on road. We have an extensive nationwide reach, delivering to 603 out of 611 districts. This is supported by state-of-the-art technological initiatives, web-centric value added services, seamless multi-modal network covering road, air, rail and sea and with Mechantronic warehousing facilities of 1.5 million sq. ft. across India.

It gives us immense pride to say that we have successfully stood the tests of time by transforming ourselvesin sync with the changing environment. Today, Gati has evolved as a leading Express Distribution & Supply Chain Management organization, providing innovative and cost-effective business solutions.

Gati is taking ambitious leaps in introducing new services, acquiring new businesses and rolling out a growth plan across the Asia Pacifi c region. The springboards of growth put in place this year will help us continue to dominate the market and retain the leadership position in the Express Distribution and Supply Chain Solutions business.

We have also established a market presence in the Asia Pacifi c region having offi ces in China (Shanghai & Beijing), Hong Kong, Singapore, Mauritius, Japan, Sri Lanka, Thailand, Dubai and Nepal. Gati now also has an extensive presence in the SAARC region.

Our business model is more aligned with our clients’ needs, which is why our core businesses have shown substantial growth to meet the evolving needs of the customer, and this has resulted in consolidation of services and in the development of infrastructure, thus propelling Gati to the forefront in our business segment.

Gati growing at an unmatched pace.

Ahead in Reach

Gati embarked on a Brand Makeover in 2006, the objective was to recognise the customer as the nucleus of our business. All our energies and resources were pooled together for achieving this one supreme goal. There was a substantial investment that went into this exercise and Gati’ites were trained to imbibe and deliver these Brand Values.

Every Gati’ite today claims complete ownership of providing the highest level of customer service. Our brand values speak of elegant customisation and sensitive streamlining of our resources to provide a premium value to the customer. We have adopted the Domino Discipline, which stands for precision, excellence and interconnectivity.

Our Brand Promise - “Ahead in Reach” drives us to realign our business processes, practices and infrastructure to deliver multi-modal connectivity and seamless distribution solutions across all our markets.

Our customer-centric attitude and commitment drives us to enhance our service levels and deliver the best value to the customer.

As a consequence of this branding exercise we strive to deliver cost-effective business solutions, futuristic distribution solutions and have raised the standard of effi ciency levels, which has impacted service levels effectively to ultimately deliver the best value to the customer. We consistantly seek excellence across our operations and this helps us harness the exciting opportunities unfolding in the Indian and Global markets.

Ahead in Technology

Technology has been one of the biggest strengths of Gati. We have leveraged Technology to introduce various important solutions like the state-of-the-art data center which ensures zero data loss and storage virtualisation.

In order to speed up decision making and data analysis, an Oracle based Business Intelligence and Data

Warehouse project has been set up, another strategic initiative which showcases Gati’s technology prowess.

Given the increase in the load and network traffi c, an alternate backup data link to the Head Offi ce Data Centre using RF technology has been provided.

Ahead in Quality and Customer Service

In the emerging competitive environment in India, Quality improvement aligned in line with the business objectives would be a key growth driver. During the year, after an external audit by the certifying authority NQAQSR, Gati has been recommended for continuation of the ISO 9001:2000 certifi cation.

Reinforcing our commitment to high standards of quality we conduct Internal Audits, ISO Training and Awareness programs regularly, to ensure that we continue to improve and enhance the quality of service delivery across our portfolio of services.

GATI – The Leader

Strength and Durability:In structural engineering tests, the Bamboo has a higher tensile strength than many alloys of steel (28,000 per square inch versus 23,000 for steel) and a higher compressive strength than many mixtures of concrete. Being able to withstand up to 52,000 pounds psi of pressure and possessing a weight-to-strength ratio that surpasses that of graphite, the Bamboo is the strongest growing woody plant on earth. It is used in ladders, scaffolding and construction.

1989 - 1995Launched Gati Desk-to-Desk Cargo, a new concept of door-to-door

service. On time, intact! Or your money back! At the time of launch, a Money Back Guarantee offer was given in case of delay in

delivering shipments.

Cash-On-Delivery (COD) - Gati started a unique value-added service called Cash-On-Delivery (COD) for the benefi t of customers.

Call Free Number - Gati was the fi rst in the logistics industry in India to introduce the concept of a Call Free Number.

Gati is dedicated to quality service and this obsession has helped us reach new milestones. With the initiation of Gati Cargo Management Services in 1989, a new revolution was started in the Indian Cargo Industry.

1997Looking at the big picture - Logistics

Gati introduced the concept of 3rd Party Logistics (3PL). It later

evolved to offering SCM solutions to customers in different verticals.

1999Gati International - Gati expanded to SAARC

region through tie-ups with the postal departments of Bhutan and Maldives.

P. D. Agarwal Learning Foundation: The P. D. Agarwal Development Centre was set up in Pune

exclusively for employee training and development.

2003Gati@web: Gati simplifi ed the internal processes and moved to Oracle

platform for faster and better communication.

Gati goes global with India-centric distribution solutions. Made a foray into Singapore, the international business hub, to widen its reach.

2005State-of-the-art Mechantronic warehouses with APL racking and

modern handling equipment in major cities across India.

2007Launched a joint Courier and Air Cargo Service with Air India, also with co-branding on the freighters.

Opening of Mega state-of-the-art Mechantronic Express Distribution Centre in Bangalore.

Gati acquired Zen Cargo Movers Pvt. Ltd., a Delhi based company which is engaged in the business of clearing house (CHA). Gati has acquired it for clearing the inbound international shipments.

Gati acquired Kausar India Ltd., which is in the business of transportation of perishable goods in refrigerated trucks.

Gati Milestones

Presence:The Bamboo can be found all over

the world in varied climates, from the cold mountainous regions to the hot tropical areas. They can be found in

North and South America, throughout East Asia, northern Australia, and southern Africa. There are some

fi fteen hundred species that are native to every continent except Europe.

1996Gati tied-up with Indian Airlines to facilitate speedier delivery of shipments using the air mode.

1998Gati launched its very own courier service - Suvidha, which was later called as IC Zipp Courier.

2001Gati Millennium Parcel Express - Gati launched the fi rst exclusive Cargo Train between Mumbai and Kolkata in association with Indian Railways.

2008Launched the Centralized Call Centre at Nagpur.

Launched the Millennium Parcel Express Train between KYN (Mumbai) and Guwahati.

Gati entered into a strategic alliance with General Logistics Systems (GLS) one of the three largest parcel service providers in Europe and launched Gati Europe Express.

Recognition• First logistics company in India to be

awarded ISO 9001 certifi cation.

• Voice of Customer Award for “The Best Logistics Company ‘03’ in a survey conducted by Frost & Sullivan.

• The Champion CIO award for less than Rs. 1000 crore category of the Enterprise Connect Award-2005.

• Amity HR-excellence award in 2005.

• Indira’s Super Achievers award for training and development in 2005.

• ‘Best Logistics Partner’ by HCL Infosystems for 2005-2006.

• Consumer SuperBrand status in the logistics category for 2006-2007.

• Nominated for the NDTV Business Leadership Awards 2006 in the logistics category.

• Our Managing Director & CEO Mr. Mahendra Agarwal has been awarded the “Entrepreneur of the year award” by Hyderabad Management Association in its 36th annual function in the year 2008.

2004Gati introduced mechanized racking systems in the automated warehouse at Panvel, Maharashtra.

2006Gati embarked on a brand makeover. This resulted in a new positioning and brand identity.

Environmental effects:It is believed that if the Bamboo were planted on a mass basis, it

could completely reverse the effects of global warming in just 6 years and provide a renewable source of food, building material

and erosion prevention.

The Future is now!

To be a company that achieves a reliable growth consistently, it has to be empowered by a vision. Gati continues to be driven by its vision of becoming the leader in Asia Pacifi c and a globally preferred provider of India-centric supply chain services and solutions. Our future strategies are, therefore, focussed on development of both domestic and international businesses.

Central Distribution Centre at NagpurWe have identifi ed Nagpur as the central location from where all its core activities will be coordinated. The hub and spoke model will be adopted and Nagpur will have a Central Distribution Centre serving as a central hub for both its surface express and air express operations. With this centre getting operational, the service levels across all locations will witness a remarkable enhancement, which will result in a higher level of customer satisfaction and consequent profi table growth.

Mechatronic WarehousingWith rapidly growing business needs, the demands for quality warehousing solutions are increasing by the day. In pursuit thereof, in June 2007, Gati has opened a Mega Mechantronic Express Distribution Center in Bangalore, besides 7 more Mechantronic Express Distribution Centers all around the country, in Ambala, Pune, Kolkata, Guwahati, Ludhiana, Panvel 1 and Panvel 2. The warehouse at Bangalore is a new-age, mega mechantronic express distribution centre that is designed to give customers a strong competitive advantage, and provide impetus to our growth.

We are in the process of setting up additional warehousing facilities in the North, East, Central, West and South Zones of India. This will signifi cantly boost our capacity to undertake business in greater volumes.

Wrapping India–FreightersThe Air freight market is a high-value niche business and the demand for this is growing steadily. Gati has entered this segment by partnering with Air India for running 3 Cargo Freighters on various routes, thus further enhancing its multi-modal connectivity to truly deliver seamless distribution solutions connecting businesses along the length and the breadth of the country, and India to the rest of the world.

Retail Logistics – Café DeliverTo tap the growing retail segment in logistics, Gati has launched Café Deliver, a retail logistics store in Hyderabad, Pune, Kolkata, Bangalore and Ahmedabad. This store will offer the customers the entire portfolio of services and a host of business facilities besides serving as a pickup centre. Besides enhancing brand visibility, these outlets will also provide convenience and accessibility to a host of services. Gati also plans to launch more such outlets in the next year across the country.

AI Gati CourierThe courier segment is a premiumand fast growing segment in the logistics market in India. Leveraging the strength of its delivery network and superior service quality, Gati is re-launching its courier product partnering Air India with an all new identity and positioning.

Gati Europe ExpressGati Limited entered into a strategic alliance in February, 2008 with General Logistics Systems (GLS), one of the three largest parcel service providers in Europe.This alliance allows Gati to successfully cater to its customer needs in India by delivering shipments to Europe.

With GLS infrastructure in Europe, their wide footprint and greater network fl exibilty, Gati’s customers will have access to superior parcel services in Europe.

With the launch of Gati Europe Express, a door-to-door service, Gati now opens up a huge business opportunity to its Indian customers to do business in Europe, a highly promising market.

The Cold Chain BusinessRecognizing the emerging need in the Food Processing Industry for Warehousing and movement of perishables, Gati has acquired Kausar India Limited, which has been in the business of transportation of perishable goods for the last 25 years. Currently, Kausar India Ltd has the largest Refrigerated Trucking capacity in India.

Gati InternationalGati International provides a global reach, along with a highly focussed expertise in India centric operations. The services we offer are freight forwarding – Air freight and Ocean freight (Inbound & Outbound), Custom Clearance – Imports & Exports (Air and Ocean), International Courier, Road movement to the SAARC nations, Express Distribution and Supply Chain Management.

Gati Coast-to-CoastWe have 4 vessels providing liner and break bulk services between Chennai. Andaman, Vishakhapatnam, Yangon and Ranong (Thailand), offering the most economical mode of transportation and the best multi-modal customized solutions. We have extended our reach far across the seas and along Indian coastlines and are a complete solutions provider in the Indian seas.

Corporate Social Responsibility

A growing economy like India also

faces social challenges like poverty,

population growth, corruption and

illiteracy. Therefore, it is imperative

for the Indian companies to create

an enabling environment for equitable

partnership between the civil society

and business. At Gati, we strongly feel

that corporate responsibility is one

such niche area of corporate behaviour

and governance, and we spare no

efforts to contribute generously and

consistently.

Gati as an organization, supports two

Government High Schools in Hyderabad

and Nagapattanam. The schools cater

to over 2000 young children.

A Community Health Clinic is run by

the company in Hyderabad to provide

affordable healthcare screenings to

truck drivers, other affi liated transport

workers and their families. This is

an initiative undertaken to safeguard

the healthcare needs of this high

risk group.

When Myanmar bore the brunt of

nature’s fury as one of the deadliest of

typhoons, Nargis struck Myanmar, Gati

stepped in to bring hope and relief.

Gati’s vessel MV Gati Prestige delivered

one lakh water purifying tablets and

20,000 packets of Oral Dehydration

Therapy (Electral) from Chennai to

Myanmar. All over the country, our

offi ces acted as collection centres

to allow the generous population of

India to send in their contributions in

the form of medicines, food, clothes

and other essential items. Gati

delivered it free of cost to Myanmar.

This philanthropic service from Gati

helped the people of Myanmar in their

time of need. Even through sources

like Singapore Indian Chamber of

Commerce and Industry (SICCI)

and Indian Association of Myanmar,

Gati contributed generously through

relief funds to meet the immediate

funding requirement of the people of

Myanmar.

Gati has a series of CSR activities,

contributing to improve the lives of

people by responding to their needs

even at the time of calamity. Our

commitment to be a Company with

compassion drives us to contribute

positively to the underprivileged class

in our society. We believe it is important

for an organization to channelize their

efforts in improving living standards

and to that end, every Gati’ite makes

a sincere effort on their own. After all,

few things in life are more redeeming

than bringing a smile for the one who

needs it the most.

A smile costs nothing, but gives much. It takes but a moment, but the memory of it usually lasts forever. None are so rich that can get along

without it. And none are so poor but that can be made rich by it.

Financial Highlights

Particulars 2007-08 2006-07 2005-06

Sales Rs. / Lakhs 55,207 45,737 45,612

Total Income Rs. / Lakhs 57,551 46,104 45,772

Gross Profi t Before Interest, Depreciation & Tax Rs. / Lakhs 5,574 4,888 4,033

Interest (Net) Rs. / Lakhs 973 577 422

Depreciation Rs. / Lakhs 1,457 1,110 865

Profi t Before Tax Rs. / Lakhs 3,144 3,201 2,746

Income Tax Rs. / Lakhs 766 865 739

Profi t After Tax Rs. / Lakhs 2,378 2,336 2,007

Equity Dividend % 40 40 35

Dividend Payout Rs. / Lakhs 677 579 496

Equity Share Capital Rs. / Lakhs 1,693 1,448 1,417

Reserves & Surplus

(Excl. Revaluation Reserves) Rs. / Lakhs 27,992 15,606 13,825

Net Worth Rs. / Lakhs 29,685 17,054 15,242

Gross Block Rs. / Lakhs 30,007 20,052 13,859

Net Block Rs. / Lakhs 30,290 22,542 14,296

Loan Rs. / Lakhs 22,382 18,987 7,160

Key Indicators

Particulars 2007-08 2006-07 2005-06

Equity Share Capital Rs. / Lakhs 1,693 1,448 1,417

Earning Per Share Rs. 2.99 3.28 3.28

Cash Earning Per Share Rs. 6.33 4.84 4.70

Sales Per Share Rs. 69.31 64.21 74.61

Book Value per share Rs. 37.27 23.94 24.93

Debt : Equity Ratio 0.75 1.11 0.47

PBDIT / Sales % 10.10 10.69 8.84

Net Profi t Margin % 4.31 5.07 4.38

Return on Networth % 10.04 19.45 19.22

Return on Capital Employed % 8.55 12.27 14.38

Note:1. Figures of 2005 - 06 are inclusive of fuel station division.

Contents

Board of Directors .......... 01

Management Team .......... 02

Notice to Shareholders .......... 03

Directors’ Report .......... 05

Report on Corporate Governance .......... 13

Management Discussion & Analysis .......... 21

Auditor’s Report .......... 24

Balance Sheet .......... 29

Schedules to the Accounts .......... 31

Board of Directors

K. L. ChughChairman

Mahendra AgarwalManaging Director & CEO

Dr. Ram S TarnejaDirector

Dr. P. Sudhakar ReddyDirector

N. SrinivasanDirector

T. S. RaoDirector

Sunil Kumar AlaghDirector

Anoop Kishore SethDirector

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Management Team

Mahendra AgarwalManaging Director & CEO

Anil AtriChief Sales & Marketing Offi cer

Ashok KumarChief GTS

Ashwani Kumar JoshiChief HR Offi cer

G. S. Ravi KumarChief Information Offi cer

M. Maheen KannuHead - Retail Business

Nirmal Kumar PandeyChief Law Offi cer

Peter H JayakumarChief Risk Management Offi cer

Pushpa JosephHead - Marketing Services &Brand Communication

Rajeev ChopraCountry Manager - International Business

Sameer KhatriChief International Business Offi cer

T. KumaranChief Coast-to-Coast

Yogesh V. KhamarHead - Facilities Management Group

Chief Finance Offi cer and Company SecretaryA. S. Sandhu

AuditorsM/s. R. S. Agarwala & Co.,Chartered Accountants

Legal AdvisorsM/s. Kanga & Co., Mumbai

BankersState Bank of IndiaICICI BankAXIS Bank

G AT I A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8 0 2

Notice is hereby given that the 13th Annual General Meeting of the Shareholders of the Company will be held on Wednesday, the 22nd October 2008 at 11.00 A.M. at Hotel Taj Krishna, Road No.1, Banjara Hills, Hyderabad – 500 034 to transact the following business:

Ordinary Business1. To receive, consider and adopt the Balance Sheet as at June 30, 2008, the Profi t & Loss Account for the year ended on

that date and the reports of Directors and Auditors thereon.

2. To declare a dividend on Equity Shares.

3. To appoint a Director in place of Dr. Ram S. Tarneja, who retires by rotation and being eligible, offers himself forre-appointment.

4. To appoint a Director in place of Mr. T. S. Rao, who retires by rotation and being eligible, offers himself forre-appointment.

5. To appoint Statutory and Branch Auditors to hold offi ce from conclusion of this meeting until the conclusion of next Annual General Meeting and to fi x their remuneration.

Registered Offi ce: By Order of the Board1-7-293, M. G. Road, for GATI LIMITEDSecunderabad – 500 003.

August 1, 2008 A. S. SANDHU Chief Finance Offi cer & Company Secretary

Notes:

1. A Member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote instead of himself/herself. The instrument appointing proxy should, however be deposited at the registered offi ce of the company not less than 48 hours before the commencement of the meeting. A proxy need not be a member.

2. Shareholders are requested to bring their copy of Annual Report to the meeting. In accordance with the recommendation of SEBI, only abridged standalone and consolidated annual accounts for the year ended 30th June, 2008 are circulated. Any member desirous of having a copy of detailed accounts may apply to the Secretary of the Company and copies thereof will be available for reference at the venue and date of the Annual General Meeting.

3. The Company has already notifi ed closure of Register of Members and the Transfer Books from 18th October, 2008 to 22nd October, 2008 (both days inclusive) for payment of dividend on Equity Shares. In respect of shares held in electronic form, the dividend will be paid on the basis of benefi cial ownership as per details furnished by the Depositories for this purpose.

4. Pursuant to the provision of Section 205A of the Companies Act, 1956 as amended, dividend for the fi nancial year ended 30th June, 2001, and thereafter, which remain unpaid or unclaimed for a period of seven years will be transferred to the Investor Education and Protection Fund of the Central Government. Shareholders who have not encashed the dividend warrant(s) so far for the fi nancial year ended 30th June, 2001 or any subsequent fi nancial years are requested to make their claim to the Offi ce of the Registrar and Transfer Agents, M/s. Karvy Computershare Private Limited. It may also be noted that once the unclaimed dividend is transferred to the Central Government, as above, no claim shall lie in respect thereof.

5. a) The members who are holding shares in physical form are requested to intimate any change in their address with Pin Code immediately either to the Company or to the Registrar & Transfer Agent and quote folio number in all correspondence.

b) The members who are holding shares in demat form are requested to intimate any change in their address with Pin Code immediately to the Depository Participant.

Notice to Shareholders

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G AT I A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8 0 4

6. Shareholders holding shares in electronic form may kindly note that their Bank Account details as furnished by their Depositories to the Company will be printed on their Dividend Warrants as per the applicable regulations of the Depositories and the Company will not entertain any direct request from such shareholders for deletion of /change in such Bank details. Further instructions, if any, already given by them in respect of shares held in physical form will not be automatically applicable to shares held in the electronic mode. Shareholders who wish to change such Bank Account details are therefore requested to advise their depository Participants about such change with complete details of Bank Account.

7. The members who have not surrendered their old share certifi cates (Issued by the then M/s. Transport Corporation of India Limited, now known as TCI Industries Ltd., the transferor Company, under the Scheme of Arrangement) are requested to surrender their old share certifi cates to M/s. TCI Industries Limited, Mukesh Textile Mills, N. A. Sawant Marg, Colaba, Mumbai – 400 005 to obtain their new share certifi cates of 4 Companies including this Company.

8. The shares of the Company are at present listed at Bombay Stock Exchange Limited and National Stock Exchange of India Ltd.

9. The shares of the company have been compulsorily dematerialised with effect from 28.08.2000 and to give effect to the same, the Company has entered into a tripartite agreement with NSDL and CDSL. M/s. Karvy Computershare Private Limited, which has its offi ce at Plot No. 17-24, Vittal Rao Nagar, Madhapur, Hyderabad – 500 081 are Registrar and Share Transfer Agents for electronic connectivity.

10. Members are requested to utilise the Electronic Clearing System (ECS) for receiving dividend and may accordingly advise the Company/their Depository Participants in case of their holding in physical/electronic form alongwith relevant particulars.

11. At the ensuing Annual General Meeting, Dr. Ram S. Tarneja and Mr. T. S. Rao retire by rotation and being eligible offer themselves for re-appointment. The information or details pertaining to these directors, to be provided in terms of Clause 49 of the listing agreement with the stock exchanges, are furnished in the Report on Corporate Governance.

Registered Offi ce: By Order of the Board1-7-293, M. G. Road, for GATI LIMITEDSecunderabad – 500 003.

August 1, 2008 A. S. SANDHU Chief Finance Offi cer & Company Secretary

Directors’ Report

Your Directors take pleasure in presenting their Report for the year ended 30th June, 2008.

Financial Results (Rs. in lakhs)

2007-08 2006-07

Income 57,550 46,104

Profi t before interest, depreciation and taxation 5,574 4,888

Interest 973 577

Depreciation 1,457 1,110

Profi t before tax 3,144 3,201

Provision for tax 766 865

Profi t for the year 2,378 2,336

Balance brought forward from previous year 726 415

Balance available for appropriation 3,104 2,751

Appropriations

Proposed Dividend 677 579

Tax on Dividend 115 98

Tonnage Tax Reserve 454 171

General Reserve 1,000 1,177

Balance carried forward 858 726

3,104 2,751

DividendThe Directors recommend a dividend of 40% on enhanced capital of Rs. 1693.11 Lakhs for the year ended 30th June, 2008 (previous year 40% on capital of Rs.1447.71 Lakhs). The dividend will absorb a sum of Rs. 792 Lakhs (Rs. 677 Lakhs previous year), including tax on dividend of Rs. 115 Lakhs (Rs. 98 Lakhs previous year). The appropriation towards Tonnage Tax Reserve relates to Coast to Coast division in accordance with the requirement of Income Tax.

Indian EconomyThe Indian logistic sector is at the beginning of a strong growth path. The global logistics market is currently valued at $3.43 trillion with a growth of 7.5% per year. The current size of the Indian logistics industry is $90 billion estimated to grow over $125 billion by 2010 at 16% per year (sources : www.northbridgeasia.com).

Logistics costs in India are estimated to be around 13% of the GDP, which comes to around US$94 billion in 2007-08. However, India’s spending on logistics industry is much higher than the developed economies like the US (9%) and Japan (10%). Domestic air cargo traffi c has been growing at CAGR of 12.80% from 2001-02 to 2007-08, whereas international air cargo traffi c has been moving at CAGR of 13% during the same period. During 2007-08, total air cargo traffi c is estimated to be over 1.56m tonnes against 1.4m tonnes during 2007-08, registering a growth rate of 14.65%.

Review of OperationsDuring the year, your company achieved a turnover of Rs. 57,550 Lakhs as against Rs. 46,104 Lakhs in the previousyear, showing a growth of 24.83 percent. The Net Profi t after Tax is Rs. 2,378 Lakhs as against Rs. 2,336 Lakhs in theprevious year.

During the year, your Company has up-graded Gati Distribution Centre at Pallavaram in Chennai, and new premises for Express Distribution Centre on Pataudi Road for servicing Delhi & NCR as well as Gati Distribution Warehouse at Dodballapur in Bangalore have been completed. During the coming fi nancial year, your Company has plan to commission 2nd Mega Mechantronic Express Distribution Centre at Hyderabad, besides 5 more facilities i.e. Central Distribution

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Centre cum Express Distribution Center at Nagpur and Express Distribution Centres in Mumbai-at Bhiwandi & Andheri, Ambala & Chennai. Further, the Company is in the process of setting up additional Logistics facilities in the current fi nancial year in the Northern, Eastern, Central, Western and Southern Zones. Your Company is also focussing on setting-uphigh-tech mechantronic warehouses as a Leading 3rd party Service provider for SCM-cum-Express Distribution in the Industry, to have a competitive position and provide cost-effective and effi cient services to its customers.

During the year under review, your Company has accounted Mark to Market (MTM) derivative loss of Rs.1,508 Lakhs as per announcement on “Accounting for Derivatives” issued by the Institute of Chartered Accountants of India. However, the actual gain/loss would be determined only on settlement of the relevant contracts. Managing foreign exchangecurrency has become a challenge specially when the global market is fl uctuating. Your Company has not entered into any speculative foreign currency transactions. The Company is developing own expertise and also uses outside expertise to mitigate the risk.

Subsidiaries & International BusinessThe Indian Economy is growing and is amongst the fastest growth economies of the world. Logistics and Supply Chain Management (SCM) are emerging areas of opportunity in the current economic environment in India. With a vision to become the leader in Asia Pacifi c and a globally preferred provider of India-centric supply chain services and solutions, your company has established 100% wholly owned subsidiary namely Gati Holdings Limited at Mauritius and sixstep-down subsidiaries namely Gati Asia Pacifi c Pte. Ltd., at Singapore, Gati Hong Kong Ltd. at Hong Kong, Gati China Holdings Limited at Mauritius, Gati Cargo Express (Shanghai) Co. Limited at Shanghai, Gati Middle East FZE at Dubai in previous year and Gati Japan Limited at Japan during the year. Apart from the above International subsidiaries, your Company has also incorporated Gati Skyways Ltd. and Gati Import Export Trading Ltd. as Wholly Owned Subsidiaries during the year. These will brand your Company a global footprint and help in growth of the Company’s logistics business.

Zen Cargo Movers Private Ltd.Your Company has acquired 97.24% Equity Share Capital of Zen Cargo Movers Private Ltd., a Delhi based company. Zen Cargo Movers is engaged in the business of Clearing House (CHA). Your Company has acquired the aforesaid Company for clearing the inbound international consignment. Zen Cargo Movers Private Ltd has become subsidiary of your Company due to above acquisition.

Acquisition of Kausar India Ltd. (KIL)On 14th December, 2007, your Company has acquired 73.72% outstanding Equity Share Capital of Kausar India Ltd (KIL) a company listed with Ludhiana and Delhi Stock Exchanges for an aggregate amount Rs. 1,991 Lakhs. KIL is engaged in transportation of perishable goods in refrigerated trucks. Kausar has 94 refrigerated trucks as of today. Your Company would tap back-end retail logistic opportunity through this acquisition. The total income of the Company was Rs. 2,177 Lakhs as on 30th June, 2008. KIL has become subsidiary of your Company due to above acquisition.

Accounts of SubsidiariesThe Company has obtained permission from the Central Government under Section 212(8) of the Companies Act, 1956 vide their letter no. 47 /529 /2008-CL-III dated 12th August, 2008 and accordingly the individual Annual Accounts of all the Indian and International subsidiaries for the year ended 30th June, 2008 has not been attached to the Annual Report. Copies of these annual accounts and related detailed information will be made available to the holding and subsidiary company’s investors, seeking such information at any point of time. Further the annual accounts of the subsidiary companies will also be kept for inspection by any investor at the registered offi ce of the company and also at the venue during the Annual General Meeting.

Abridged Annual AccountsIn accordance with the suggestion of SEBI, abridged standalone and consolidated annual accounts for the year ended 30th June, 2008 are being circulated while detailed accounts will be made available on request.

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IT Initiatives:During the fi nancial year 2007-08, your Company launched following signifi cant IT initiatives:

Business Intelligence (BI) and Data Warehouse (DW)Business Intelligence & Data Warehouse programme was successfully launched. The data will be available on dashboards to the Senior Management for quick & informed decision-making. Also, BI & DW provides option in analysing the data, slicing & dicing of information, providing customised reports.

Warehouse Management SolutionsA new Warehouse Management Solutions has been launched. This is a totally web-based, zero-foot print software. This software has advance features with respect to entire Warehouse Management and also capability of Activity Based Billing. This will allow the customers to view their stock across the warehouses in the country.

Centralized Call CenterCentralized call center at Nagpur has been set up. It uses Avaya 8300 ACD (Automatic Call Distribution) to handle the customer calls. This solution is highly scalable and can be increased to handle upto 400 agents based on the need, in order to provide the status of shipments an Interactive Voice Response (IVR) system has been launched. The IVR has twooptions - English & Hindi to begin with.

All the above initiatives will help the company to achieve improved customer satisfaction, faster decision making, higher productivity & effi ciency and reduce costs.

Future Prospects

FreighterIndian Air Freight market, presently estimated at 600,000 tons is growing approximately @7.2% p.a. consistent with growth of Indian Economy. It is expected that soon India will be a key player in Air Cargo Market. Looking at the growth in domestic air market and concomitant investments being made to develop commensurate infrastructure, the Company has launched the service of freighters. This cargo confi gured Air Cargos Boeing 737 (200S) are connecting Delhi – Mumbai – Bangalore – Chennai which are modal points for reaching into the hinterland of Northern, Western and Southern part of India. Your company has taken this initiative to increase the future growth by providing door-to-door multimodal services to the Indian Trade and Commerce. Keeping in view that it’s a new business, the business plan envisages an operating loss in the initial period of stabilization with satisfactory growth and profi ts in the years ahead.

AI GatiYour company has also re-launched courier business by launching AI Gati, courier services. This market segment is overRs. 1,300 Crores in the organized sector. This sector has been growing at approximately 17% p.a. This market is directly linked with Banking, Financial Services and Insurance apart from marketing services and other industries and will provide your Company with additional growth opportunity.

Europe ExpressYour company has recently entered into a Strategic Sales Alliance with General Logistics System (GLS) of Europe. GLS is part of Royal Mail with revenue of 1.6 billion Euros with the presence in 36 countries direct or indirect and is positioned as Europe’s third largest logistic Company. This gives your company a valuable opportunity to penetrate the European Market with its brand and to capitalize on growing opportunity between India and Europe with their service capabilities and strong brand presence in Europe. This will also give your company an opportunity to provide services for the European customers of GLS into India.

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Super 3CK (Customer Convenience Center Kiosk) Gati has ventured into a Super 3CK model to cater retail customers at 23 places. This places Gati within Arms Length Reach of retail customers thereby providing Gati a great growth opportunity.

Coast-to-CoastYour company’s shipping logistics is a recognized leader in the Bay of Bengal and Andaman Sea region. The part of existing fl eet of ships is being replaced by much younger and higher tonnage. The Company has added a new cargo vessel 8150 DWT to the existing three vessels during the year. This division is on a satisfactory growth trajectory. This division provided valuable timely support for Tsunami rehabilitation program in Andaman and Nicobar region and actively provided support to Myanmar “NARGIS” victims.

Equity Share CapitalYour Company has made the following allotment of shares during the year:

• 30,86,185 Equity Shares of Rs. 2/- each to Mahendra Investment Advisors Private Limited and The Infrastructure Fund of India LLC at Rs. 84.61 each at a cash premium of Rs. 82.61/- per share on Conversion of Warrants.

• 3,28,950 Equity Shares of Rs. 2/- each to the employees of the Company under Employee Stock Option Scheme(Plan III-2005) at Rs. 31.20 each at a cash premium of Rs. 29.20 per share.

• 17,86,800 Equity Shares of Rs. 2/- each to Lehman Brothers International at Rs. 125/- each at a cash premium ofRs. 123/- per share on conversion of USD 5 Million FCCBs.

• 2,99,850 Equity Shares of Rs. 2/- each to the employees of the Company under Employee Stock Option Scheme (Plan I-2003)at Rs. 7.10 each at a cash premium of Rs. 5.10 per share.

• 1,40,000 Equity Shares of Rs. 2/- each to the Non-Promoter Directors of the Company under Employee Stock OptionScheme (Plan II-2004) at Rs. 12.24 each at a cash premium of Rs. 10.24 per share.

• 66,28,000 Equity Shares of Rs. 2/- each to Mahendra Invetsment Advisors Private Limited, Mahendra Kumar Agarwal and The Infrastructure Fund of India LLC at Rs. 90/- each at a cash premium of Rs. 88/- each on Conversion of Warrants.

Consequently as on 30th June 2008, the Company has share capital of Rs. 1693.11 Lakhs comprising of 8,46,55,330 Equity Shares of Rs. 2/- each fully paid up as compared to previous year Rs. 1447.71 Lakhs comprising of 7,23,85,545 Equity Shares of Rs. 2/- each.

FCCBsYour company has raised USD 20 million (INR 8,934 Lakhs) by issuing zero-coupon unsecured Foreign CurrencyConvertible Bonds due 2011 convertible into ordinary equity shares. Out of USD 20 Mn, your Company has converted USD 5 Mn into Equity Shares of Rs. 2/- each at a premium of Rs. 123/- per Share on 21st January, 2008. The proceeds from the FCCBs have been utilized for meeting capital expenditure in Warehousing, Shipping, Information Technology, Fleet growth and Investment in wholly owned subsidiaries as mentioned in the Offer Circular.

Fixed DepositsFixed Deposits from the public and shareholders stood at Rs. 730.86 Lakhs at the end of the year. There were no overdue deposits. There were 113 unclaimed deposits totaling Rs. 44.54 Lakhs as on 30th June, 2008. Out of these, 84 unclaimed deposits aggregating to Rs. 30.59 Lakhs were renewed/repaid till date. Reminders have been sent to those depositors who have not yet claimed their deposits.

DirectorsDr. Ram S. Tarneja and Mr. T. S. Rao. retire by rotation at the conclusion of this Annual General Meeting and being eligible offerthemselves for reappointment.

Mr. Anoop Kishore Seth has been appointed as nominee Director of The Infrastructure Fund of India LLC on 21.01.2008 inplace of Mr. Philip Stuart Garling who has resigned from your Board of Directors on 08.01.2008. Your Board placed on record the contribution made by Mr. Philip Stuart Garling during his tenure as Director.

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Directors’ Responsibility StatementPursuant to the requirement under section 217(2AA) of the Companies Act, 1956 with respect to the Directors’ Responsibility Statement, it is hereby confi rmed:

1. That in the preparation of the Accounts for the Financial Year ended 30th June, 2008, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

2. That the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the fi nancial year and of the profi t and loss of the Company for the year under review;

3. That the Directors have taken proper and suffi cient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. That the Directors have prepared the accounts for the fi nancial year ended 30th June, 2008 on a ‘going concern’ basis.

AuditorsThe Auditors M/s. R. S. Agarwala & Co., Chartered Accountants, hold offi ce until the conclusion of this Annual General Meeting and are eligible for re-appointment.

Energy, Technology and Foreign ExchangeThe information required under the Companies Act (Disclosure of particulars in the report of Board of Directors) Rules, 1988 is given in the Annexure – I.

PersonnelParticulars of employees required under section 217(2A) of the Companies Act, 1956 are set out in the Annexure to the Directors’ Report. However, as per the provisions of Section 219(1) (b) (iv) of the Companies Act, 1956, the report and the accounts are being sent to all shareholders of the company excluding the aforesaid information. Any shareholder interested in obtaining such particulars may write to the Company Secretary at the Registered Offi ce of the Company.

Corporate GovernancePursuant to Clause 49 of the Listing Agreement, a report on Corporate Governance is given in Annexure – III.

AcknowledgmentYour directors would like to place on record their grateful appreciation for the wholehearted and sincere co-operation your company has received from the customers, banks, government authorities, fi xed depositors and shareholders. Your directors also wish to place on record their deep sense of appreciation for the devoted service of the management team, employees and associates of the company.

For and on behalf of the Board Place: Secunderabad, K. L. ChughDate: August 1, 2008 Chairman

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Annexure – I

In accordance with the requirement of Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of

particulars in the Report of the Board of Directors) Rules, 1988, particulars regarding conservation of Energy, Technology

Absorption and Foreign Exchange Earning and Outgo are given hereunder:

A) Conservation of Energy

All company owned vessel are under planned maintenance schedule and run at optimum speed to conserve fuel and

maintain speed. Also all underwater cleaning and application of anti-fouling in the dry-dock has been done as per the makers

guidelines.

In the Express Distribution and Supply Chain Division, the following measures were taken:

1. Vehicles were purchased carefully in compliance with all latest regulations relating to pollution control and Bharat

Stage (Euro) norms i.e. EII & above.

2. The periodical maintenance of Company’s vehicles was done as per manufacturer’s prescribed norms to ensure

optimium fuel consumption.

3. Drivers’ training programmes are being organized and conducted periodically to improve their driving skills and better

fuel effi ciency of vehicle.

4. Initiated DIP i.e., Drivers Information Package which would educate them about Do’s & Don’ts, RIC (Route Information

card) & Check list to be followed before departing the vehicle.

B) Foreign Exchange earning and outgo

The particulars of earning and expenditure in foreign exchange during the year are given as additional information in

Schedule 21 to Notes on Accounts.

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Annexure II

S. No. Description Plan 2003 Plan 2006 Plan 2007

1 No. of shares available under GATI ESOS 32,17,500 17,82,500 17,55,720

2 Total no. of options granted during the year Nil 11,28,000 Nil

3 Total no. of options accepted during the year Nil 7,51,300 Nil

4 Pricing formula At a discount of 25% on the average of the weekly high and low of the closing prices for the Company’s Equity Shares quoted on the Bombay stock Exchange and/or National Stock Exchange during the four weeks preceding the date of grant of the options.

5 Options Vested during FY 2007-08 7,68,800 Nil Nil

6 Options Exercised during FY 2007-08 7,68,800 Nil Nil

7 Options Lapsed during FY 2007-08 1,15,050 1,78,420 Nil

8 Variation of terms of options Nil Nil Nil

9 Money realised by exercise of options 1,41,05,775/- Nil Nil

10 Grant price Plan –2006 (on 12.12.2007) There are no options grant-ed under this scheme during the year

Rs. 93.50 There are no options grant-ed under this scheme during the year

11 Total no. of options in force as on 30th June 2008 8,47,000 19,71,580 17,55,720

12 Grant details to members of Senior Management Team Nil 5,00,000 Nil

13 No. of associates holding 5% or more of the total number of options granted during the year

Nil Nil Nil

14 No. of associates with 1 % or more of paid up capital Nil Nil Nil

15 Diluted EPS as per Accounting Standard 20 Rs. 2.88 Rs. 2.88 Rs. 2.88

16 i) Method of calculation of employee compensation cost The company has calculated the employee compensation cost using the intrinsic value of the stock options.

ii) Difference between the employee compensation cost so computed at (i) above and the employee compensation cost that shall have been recognised if it had used the fair value of the options

Rs. 75,34,278

iii) The impact of this difference on profi ts and on EPS of the company Profi t after Tax (PAT) Less: AdditionalEmployee Compensation cost based on fair value Adjusted PAT Adjusted EPS

Rs. 23,78,02,681

Rs. 75,34,278

Rs. 23,02,68,403Rs. 2.79

iv) Weighted average exercise price and fair value of Stock Options granted:

Stock Options grantedon

Weighted average exercise price (in Rs.)

Weighted average Fair value (in Rs.)

Closing market price at BSE on the date of grant (in Rs.)

12.12.2007 93.50 134.13 123.30

Details of Stock Options Pursuant to SEBI Guidelines on Stock Options: GATI Employee Stock Option Schemes

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v) Description of the method and signifi cant assumptions used during the year to estimate the fair value of the options, including the following weighted average information

The Black Scholes option-pricing model was developed for estimating fair value of traded options that have no vesting restrictions and are fully transferable. Since option-pricing models require use of substantive assumptions, changes therein can materially affect fair value of options. The option pricing models do not necessarily provide a reliable measure of fair value of options.

vi) The main assumptions used in the Black Scholes option-pricing model during the year were as follows:

Risk free interest rateExpected life of options from the date(s) of grantExpected volatilityDividend yield

------------

7.74 %4 years3.49 %1.50 %

S. No. Description Plan 2003 Plan 2006 Plan 2007

For and on behalf of the Board Place: Secunderabad, K. L. ChughDate: August 1, 2008 Chairman

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Report on Corporate Governance

Company’s PhilosophyGati’s Philosophy on Corporate Governance focus on the attainment of highest standards of transparency, accountability, ethics and equity with management fl exibility, empowerment and responsiveness in the interest of Shareholders, Customers, Employees, Business Associates and the Society at large.

Board of DirectorsThe Board of Directors comprises of 8 directors.

Composition and Category of Directors

Name Category and Designation

Mr. K. L. Chugh Independent Non-Executive Director- Chairman

Mr. Mahendra Agarwal Promoter and Managing Director

Dr. Ram S. Tarneja Independent Non-Executive Director

Mr. N. Srinivasan Independent Non-Executive Director

Dr. P. S. Reddy Independent Non-Executive Director

Mr. T. S. Rao Independent Non-Executive Director

Mr. Sunil Kumar Alagh Independent Non-Executive Director

Mr. Anoop Kishore Seth* Nominated by The Infrastructure Fund of India LLC

* Appointed as Director w.e.f. 21st January, 2008 as nominee of The Infrastructure Fund of India LLC in place ofMr. Philip Stuart Garling who resigned on 08.01.2008.

Attendance of each Director at the Board Meetings, last Annual General Meeting and Number of other Directorshipand Chairmanship/Membership of Committees in various companies:

Director AttendanceParticulars

No. of other Directorships andCommittee Membership / Chairmanship*

BoardMeetings Last AGM

OtherDirectorships

CommitteeMemberships

CommitteeChairmanships

Mr. K. L. Chugh 6 Yes 4 - 1

Mr. Mahendra Agarwal 6 Yes 3 1 -

Dr. Ram S. Tarneja 6 Yes 12 8 5

Mr. N. Srinivasan 5 Yes 14 9 2

Dr. P. S. Reddy 4 Yes 1 - -

Mr. T. S. Rao 6 Yes 1 - -

Mr. Sunil Kumar Alagh 4 Yes 4 1 2

Mr. Philip Garling 2 No - - -

Mr. Anoop Seth* 3 No 7 - -

* Excluding Private Limited Companies and Companies registered under Section 25 of the Companies Act, 1956.

Number of Board Meetings held and the dates on which heldDuring the fi nancial year 2007-08, the Board of Directors met Six times on 2nd Aug., 2007, 25th Aug, 2007, 13th Oct., 2007, 21st Jan., 2008, 23rd Apr., 2008 & 25th June, 2008.

The maximum time gap between the meetings was not more than four calendar months.

Annexure III

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Brief Resume of the Directors seeking re-appointmentDr. Ram S. Tarneja is holding Ph.D degree from Cornell University. He retired as Managing Director of Bennett Coleman & Co. Ltd., (The Times of Indian Publications) in 1991 and continues as a member on their Board.

Prior to joining Bennett Coleman & Company Ltd., in 1970, he was Director Personnel of Group Companies in Kolkata for about 10 years. He was Director of Graduate Department of Business Administration, Duquesne University,Pittsburgh, USA.

Dr. Tarneja has considerable amount of pioneering work to his credit on subjects like professional management and Corporate Governance. He is on the Board of NESCO Ltd., Otis Elevator Company (I) Ltd., Jolly Board Ltd., Bharat Gears Ltd., Phillips Carbon Black Ltd., Housing Development Finance Corporation Ltd., Transcorp International Ltd., Phoenix Township Ltd., SOWIL Ltd., Givo Ltd. He is the Chairman of Audit Committee of Bharat Gears Ltd., Bennet Coleman &Co. Ltd. and Engineering Projects (I) Ltd. He is also the Chairman of Remuneration Committee of Givo Ltd., and Chairman of Investors Grievance Committee of HDFC Ltd.

Mr.T. S. Rao, IPS (Retd.) topped Andhra University in Post Graduate degree in Mathematics and was recipient of a Gold Medal and had also scored the highest percentage of marks in the annals of the University. He taught in the University for two years before joining the IPS. He retired as the Director-General of Andhra Pradesh Police, after holding all the top posts in the Dept. He was awarded the prestigious President of India Medal for distinguished services. He was also the recipient of Unity Award for maintaining Communal Harmony and effectively maintaining Law & Order in the twin cities as Commissioner of Police and also the outstanding Civil Servant Award while serving as the DGP of Andhra Pradesh.

He was the President of Andhra Pradesh Shuttle Badminton Association for eight years and also Chairman of Roots Education Society, Hyderabad. He was Chairman of Sulakshana Circuits, a Hi-Tech Electronic Industry, Director Arsin Systems Ltd, a Software Company and also advisor to ITC Agro-Tech Limited for two years. He is Director on the Board of Gati Skyways Ltd. He is also on the Advisory Board of Alpha Foundation.

Code of ConductThe Board of Directors of the Company has laid down a code of conduct for all Board Members and designated Senior Management of the Company. The code of conduct is available on the website of the Company www.gati.com. All Board members and senior management personnel have affi rmed compliance with the code of conduct. A declaration signed by the Managing Director to this effect is enclosed at the end of this report.

Audit CommitteeThe Board of Directors has constituted the Audit Committee to assist the Board in discharging its responsibilities effectively. The constitution of the Audit Committee also meets with the requirements of Section 292A of the Companies Act, 1956, SEBI Regulations and the Listing Agreements with the Stock Exchanges.

Composition and Terms of Reference

The Board has constituted Audit Committee comprising three independent Non-Executive Directors namely Mr. N. Srinivasan (Chairman), Mr. T. S. Rao and Dr. Ram S. Tarneja.

The terms of reference to the Committee covers accounting matters, fi nancial reporting, internal controls and the matters as contained in Section 292A of the Companies Act, 1956 and Clause 49 of the Listing Agreement with Stock Exchanges.

Meetings and attendance during the year

During the year under review, the Audit Committee met Four times on 1st Aug., 2007, 12th Oct., 2007, 21st Jan., 2008,22nd April, 2008. All the Directors were present at all the meetings.

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Compensation & HR Committee

Composition and other details

The Board has constituted Compensation & HR Committee comprising four independent non-executive directors namely, Mr. K. L. Chugh (Chairman), Dr. Ram S. Tarneja, Dr. P. S. Reddy and Mr. Sunil Alagh.

Terms of reference

The Committee will evaluate compensation and benefi ts for Executive Director(s) and to frame policies and systems of the Employee Stock Option Scheme and look after the issues relating to major HR policies.

Attendance during the year

During the year the Committee met four times on 2nd August, 2007, 13th October, 2007, 12th December, 2007 and 21st January, 2008. Mr. K. L. Chugh, Dr. Ram S. Tarneja, Mr. Sunil Alagh were present for all the meetings and Dr. P. S. Reddy attended three meetings.

Details of Remuneration paid to Directors during the yeara) Mr. Mahendra Agarwal, Managing Director & CEO

Particulars Rs. in lakhs

Salary 87.00

EL Encashment 2.40

Commission 20.00

PF Contribution / Superannuation Funds 15.95

Rent-free accommodation / perks 3.93

TOTAL 129.28

b) Non-Executive Directors

The sitting fees paid for the year ended 30th June, 2008 to the Directors, including Committee Meetings is as follows:

Name Amount (Rs.) Name Amount (Rs.)

Mr. K. L. Chugh 1,60,000 Mr. T. S. Rao 2,60,000

Dr. Ram S. Tarneja 2,20,000 Dr. P. S. Reddy 1,40,000

Mr. N. Srinivasan 1,90,000 Mr Sunil Kumar Alagh 1,20,000

Mr. Philip Garling 40,000 Mr. Anoop Seth 60,000

The Commission paid for the year ended 30th June, 2007 to the Directors is as follows:

Name Amount (Rs.) Name Amount (Rs.)

Mr. K. L. Chugh 4,80,000 Dr. P. S. Reddy 2,90,000

Dr. Ram S. Tarneja 2,90,000 Mr. Sunil Kumar Alagh 2,90,000

Mr. N. Srinivasan 3,60,000 Mr. Philip Garling 2,90,000

Mr. T. S. Rao 2,90,000

The Company has made provision of Rs. 22.90 Lakhs for commission payable to all the Non-Executive Directors for the year ended 30th June, 2008.

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Investors’ Grievance Committee

Constitution and Composition

The Committee was constituted comprising of the following directors as members: Mr. T. S. Rao (Chairman), Mr. Mahendra Agarwal and Dr. P. S. Reddy

Compliance Offi cer

Mr. A. S. Sandhu, Chief Finance Offi cer & Company Secretary

Terms of Reference

The Committee was constituted to look into the Investors’ complaints and to redress the same expeditiously. The Committee meets as and when there are any complaints from investors. The Company Secretary is the Compliance Offi cer.

In order to expedite the process of share transfers, the Board has delegated the powers to offi cers of the Company. The delegated authority is attending to share transfer formalities at least once a fortnight, as required.

Details of complaints for the year 2007-08

S. No.S. No. Nature of ComplaintNature of Complaint ReceivedReceived DisposedDisposed PendingPending

1 Non-receipt of Dividend Warrants 18 18 NilNil

2 Non-receipt of Share certifi cates after transfer/split/consolidation 29 29 NilNil

80 requests for transfers were pending for approval as on 30th June, 2008 which were dealt by 10.07.2008. Two requests for dematerialisation were pending for approval as on 30th June, 2008 which was dealt with by 10.07.2008.

General Body MeetingsLocation and time for the General Body Meetings held in the last three fi nancial years:

Year AGM/ EGM Date Venue Time

2004 2005 AGM 22nd September, 2005

Hotel Taj Residency, Road No. 1, Banjara Hills, Hyderabad – 500 034

11.00 A.M.

2005 - 2006 AGM 11th October, 2006 Novotel & HICC Complex (Near Hi-tech city), P.O. Bag 111, Cyberabad Post Offi ce,Hyderabad – 500 081

10.30 A.M.

2006 - 2007 AGM 13th October, 2007 Hotel Taj Residency, Road No. 1, Banjara Hills, Hyderabad – 500 034

10.30 A.M.

Details of Postal BallotNo postal ballots were used for voting at these meetings in respect of special resolution passed.

DisclosuresDisclosures on materially signifi cant related party transactions, i.e. transactions of the Company of material nature, with its promoters, the Directors or the Management, their subsidiaries or relatives, etc., that may have potential confl ict with the interest of the Company at large.

None. However, we have disclosed the related party transactions and others in Notes to Accounts.

Details of non-compliance by the Company, penalties, strictures imposed on the company by the Stock Exchanges or SEBI, or any statutory authority, on any matter related to capital markets, during the last three years.None

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Means of Communication

Results

The quarterly, half-yearly un-audited fi nancial results and annual audited results are published in national level english newspaper(s) as well as regional language newspaper circulating in Andhra Pradesh. The results are also displayed on the Company’s website: www.gati.com

Management Discussion and AnalysisManagement Discussion and Analysis forms part of the Annual Report.

General Information for ShareholdersDate, Time and Venue of Annual General Meeting : 22.10.2008 at 11.00 am at Hotel Taj Krishna, Road No.1, Banjara Hills, Hyderabad – 500 034

Financial Calendar for 2008-2009 (Tentative)Annual General Meeting : October, 2009Results for the quarter ended 30 September, 2008 : Last week of October, 2008Results for the quarter ended 31 December, 2008 : Last week of January, 2009Results for the quarter ended 31 March, 2009 : Last week of April, 2009

Book Closure DatesFrom 18.10.2008 to 22.10.2008 (both days inclusive) for the purpose of the Annual General Meeting and payment of dividend, if approved by the members.

Dividend Payment Date The dividend, if approved by the members will be paid within the statutory time limit.

Listing on Stock ExchangesThe Company’s Shares are listed on The Bombay Stock Exchange Limited, Mumbai and The National Stock Exchange of India Limited, Mumbai. The FCCBs bonds are listed with Singapore Stock Exchange Ltd (SGX-ST).

The listing fee for the year 2008-09 has been paid to all the above stock exchanges.

Stock Code

a) Trading Scrip code Bombay Stock Exchange : 32345 Trading Scrip ID Bombay Stock Exchange : GATICOR Trading Scrip code Bombay Stock Exchange (Demat Segment) : 532345 Trading Scrip ID Bombay Stock Exchange (Demat Segment) : GATIDM

b) Demat ISIN Numbers in NSDL & CDSL for Equity Shares : INE 152B01027

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Share price performance in comparison to broad based indices - BSE Sensex/NSE Nifty*

ParticularsGati Share Price v/s BSE Gati Share Price v/s NSE

Share Price(Rs.) BSE Sensex Share Price(Rs.) NSE Nifty

As on 1 July, 2007 97.75 14,685.16 98.25 4,318.30

As on 30 June, 2008 73.35 13,461.60 72.50 4,040.55

% Change (24.96) (8.33) (26.21) (6.43)

* Total Equity as on 30.06.2007 was 7,23,85,545 and as on 30.06.2008 was 8,46,55,330 of Rs.2/- each.

Registrar and Share Transfer AgentsM/s Karvy Computershare Private Limited(Unit Gati Limited)Plot No.17 – 24, Vittalrao Nagar, Near Image Hospitals, Madhapur,Hyderabad - 500 081. E-mail: mohsin@karvy.com

Share Transfer SystemThe Company has a Registrar and Share Transfer Agent. Share transfers, if documents are found to be in order, are registered and returned in the normal course within two weeks from the date of receipt of the documents. Request for dematerialisation of shares are processed and confi rmation given to the respective depositories i.e, National Securities Depositories Limited (NSDL) and Central Depository Services (India) Limited (CDSL) within seven days.

Distribution Schedule as on 30 June, 2008

No. of Shares No.ofShareholders

%of totalShareholders No. of Shares % to Total Capital

Upto 5000 31916 98.64 5470422 6.46

5001 10000 206 0.64 747916 0.88

10001 20000 99 0.31 725203 0.86

20001 30000 25 0.08 309920 0.37

30001 40000 22 0.07 386448 0.46

40001 50000 14 0.04 325732 0.38

50001 100000 29 0.09 1038552 1.23

100001 and above 46 0.14 75651137 89.36

TOTAL 32357 100.00 84655330 100.00

Monthly high / low stock quotations at BSE & NSE

NSE BSE

Month High Low High LowJuly 2007 119.70 90.10 119.00 92.05

August 2007 118.00 95.50 111.90 95.00

September 2007 115.00 103.00 116.00 105.00

October 2007 114.00 92.65 114.00 99.10

November 2007 149.00 102.15 148.00 100.50

December 2007 185.35 115.00 184.90 118.50

January 2008 216.00 120.65 215.20 121.90

February 2008 142.00 106.65 142.00 107.10

March 2008 131.00 83.10 123.00 81.00

April 2008 135.45 92.00 134.40 91.60

May 2008 114.00 96.00 114.50 96.00

June 2008 98.50 73.00 98.65 71.00

(Amount in Rs.)

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Distribution of Shareholding as on 30 June, 2008

Category No. of Shares % Shareholding

Company Promoter / Promoter Group 41723769 49.29

Mutual Funds / UTI 1088972 1.29

Financial Institutions / Banks 66015 0.08

Foreign Institutional Investors 6477036 7.65

Non-Resident Indians 347682 0.41

Overseas Corporate Bodies 10477120 12.38

Bodies Corporate 5929817 7.00

General Public 18544919 21.91

TOTAL 84655330 100.00

Dematerialisation of sharesOver 97.79% of the total shares have been dematerialised upto 30th June, 2008. Trading in Equity Shares of the Company is permitted only in dematerialised form w.e.f. 28th August, 2000, as per notifi cation issued by the Securities and Exchange Board of India (SEBI).

Outstanding GDRs/ADRs/Warrants or any convertible instruments, conversion date and likely impacton equityThe Company has allotted USD 20 Million FCCBs on 5th December, 2006. Out of this, USD 5 Million has been converted into Equity Shares on 21st January, 2008. The balance USD 15 Million are still pending for conversion as on date of this report.

Plant LocationsNot Applicable

Investor Correspondence

For Shares held in physical & Demat form Karvy Computershare Pvt. Ltd.,(Unit Gati Limited)Plot No.17 - 24, Vittalrao Nagar,Near Image Hospitals, Madhapur,Hyderabad – 500 081Tel: 040 - 2342 0815 - 20E-mail : mohsin@karvy.com

Any Query on Annual ReportGati LimitedSecretarial Department1-7-293, M G Road,Secunderabad – 500 003Tel Nos. 040 - 2784 4284 / 3788Email: com_sec_dept_ho@gati.com

For any other queries: cs_dept_ho@gati.com

1 9 A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8

TO THE MEMBERS OF GATI LIMITED.

We have examined the compliance of the conditions of Corporate Governance by Gati Limited for the year ended30th June, 2008, as stipulated in Clause 49 of the Listing Agreement of the said Company with Stock Exchanges.

The compliance of conditions of Corporate Governance is the responsibility of the Management. Our examination has been limited to a review of the procedures and implementation thereof, adopted by the Company for ensuring compliance with the conditions of Corporate Governance as stipulated in the said Clause. It is neither an audit nor an expression of opinion on the Financial Statements of the Company.

In our opinion and to the best of our information and according to the explanations given to us, and based on the representations made by the Directors and the Management, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in Clause 49 of the above mentioned Listing Agreement.

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

For R. S. Agarwala & Co. Chartered Accountants

Camp : Secunderabad R. S. AgarwalaDate : August 1, 2008 Partner Membership No.F-5534

Auditors’ Certifi cate on Corporate Governance

As provided under Clause 49 of the Listing Agreement with the Stock Exchanges, the Board Members and the Senior Management Personnel have confi rmed compliance with the Code of Conduct for Board of Directors and Senior Management for the year ended 30th June, 2008.

For GATI LIMITED Place : Secunderabad Mahendra AgarwalDate : August 1, 2008 Managing Director & CEO

Declaration

G AT I A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8 2 0

Industry Structure & DevelopmentIndia is being recognized as ‘Destination Future’ for the logistics service providers all over the world. Indian players are also gearing up and positioning themselves differently by providing a wide spectrum of logistics services. The Indian logistic sector is at the beginning of a strong growth path. The global logistics market is currently valued at $3.43 trillion with a growth of 7.5% per year. The current size of the Indian logistics industry is $90 billion estimated to grow over $125 billion by 2010 at 16% per year (sources : www.northbridgeasia.com)

Logistics costs in India are estimated to be around 13% of the GDP, which comes to around US$94 billion in 2007-08. However, India’s spending on logistics industry is much higher than the developed economies like the US (9%) and Japan (10%). Domestic air cargo traffi c has been growing at CAGR of 12.80% from 2001-02 to 2007-08, whereas international air cargo traffi c has been moving at CAGR of 13% during the same period. During 2007-08, total air cargo traffi c is estimated to be over 1.56m tonnes against 1.4m tonnes during 2007-08, registering a growth rate of 14.65%. According to the Planning Commission, India’s air cargo movements would grow at over CAGR of 11.5% from 2007-08 to 2011-12

The logistics companies at present provide services from transportation to warehousing and inventory management. But, in near future, they will have to expand their products basket to include new value – added services, such as packaging, labelling and reverse logistics.

Constraints and ChallengesThe biggest challenge the logistics companies in India face is that they need to quickly imbibe latest technologies and uncork new services to cater to corporates seeking to outsource their logistics needs. Logistics costs will fall in the future, following improvements in infrastructure. There are over 180 ports, 65,000 KM of National Highways, 14,000 KM of inland navigable waterways, 63,000 KM of rail networks and 7,517 KM coastline. Massive investments are expected in all these sectors (sources: www.northbridgeasia.com)

With the collective economic interaction of growing per capita disposable incomes, fast growing manufacturing & organized retailing sectors, increasing external merchandise trade, infrastructure investments by the Government and 3PL capex plans, both India’s logistics industry & 3PL sector of logistics market are set to witness explosive growth in the next 5 years.

OpportunitiesDespite all the challenges faced by the logistics industry, it contributed a hefty 13% to the country’s GDP in 2007-08. The logistics market is likely to grow at a CAGR of 8% during the next fi ve years. Chemicals, metals, FMCG, cement, textiles and pharma have been identifi ed as the top fi ve contributors to logistics revenues.

To facilitate the country’s economic development, the government plans to invest $17 billion in transport infrastructure by 2010. At present, bottlenecks and delays are endemic within the country’s road, air and sea networks. Escalating imports and exports have led to congestion at India’s docks, with ship turnaround time at the country’s twelve major ports taking up to three and half days. Plans to overcome these problems include new container terminals at several locations throughout India, and an ambitious project to dredge the channel between Sri Lanka and India, thereby signifi cantly reducing transit times for ships with a draft of more than 12.8 m. The government is also building 10,000 km of new roads.

There are no major players in the Indian logistics market, only a few small players who provide some service to dedicated clients. A certain amount of fl exibility could signifi cantly boost India’s logistics market, which is presently governed by rules and regulations and has not yet achieved its growth potential.

Threats, Risks and ConcernBeing a dominant player in Asia Pacifi c and a globally preferred provider of India centric supply chain services and solutions, Gati faces competitions from both Indian as well as international companies. However, Gati’s wide reach and competitive cost has helped in mitigating adverse impact of generic industry risk factors.

Foreign exchange rate volatility has an impact on the business and on the foreign currency debt. However, the Company is developing own expertise and also uses outside expertise to mitigate the risk considerably. The logistics industry is characterized by the presence of numerous unorganized players who give stiff competition to the company at local and regional level.

In order to speed up the decision-making and data analytical capability of the Senior Management Team, an Oracle based Business Intelligence & Data Warehouse Project has been introduced.

Management Discussion and Analysis

2 1 A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8

Operational PerformanceGati widened its reach to 603 districts in India (out of 611 districts). During the year under review, your Company has up-graded Gati Distribution Centre at Pallavaram in Chennai, and new premises for Express Distribution Centre on Pataudi Road for servicing Delhi & NCR as well as Gati Distribution Warehouse at Dodballapur in Bangalore have been completed. During the coming fi nancial year, your Company has plan to commission 2nd Mega Mechantronic Express Distribution Centre at Hyderabad, besides 5 more facilities i.e. Central Distribution Centre cum Express Distribution Center at Nagpur and Express Distribution Centres in Mumbai-at Bhiwandi & Andheri , Ambala and Chennai. Further the Company is in the process of setting up additional Logistics facilities in the current fi nancial year in the Northern, Eastern, Central, Western and Southern Zones. Your Company is also focussing on setting-up high-tech mechantronic warehouses as a Leading 3rd party Service provider for SCM-cum-Express Distribution in the Industry, to have a competitive position and provide cost-effective and effi cient services to its customers.

Outlook and Future StrategiesThe Company continues to be driven by its vision of becoming the leader in Asia Pacifi c and a globally preferred provider of India-centric supply chain services and solutions. The Company’s future strategies are focused on development of both domestic and international businesses by building new strategic relationship and incorporating subsidiaries abroad, process improvement, better cost management, innovative products and services and establishment of state-of-the-art warehouses.

Gati’s Vision• Be the leader in Asia Pacifi c and a globally preferred provider of India-centric supply chain services and solutions.

• Delight the customers with quality services by setting new trends through innovation and technology.• Be the most preferred organization for all its stakeholders.• Be a responsible corporate citizen with unwavering commitment to environmental protection and conservation.

Gati’s Pledge“Caring for our customers’ precious objects with Domino Discipline, we promise to stay ahead in reach in service quality, wide network, technology, automation and in being high caliber Gati’ites and responsible business partners.”

Gati Domino CampaignGati launched its TV commercial “Domino Campaign” in Oct., 2007. The objective of the campaign is to change market perception and project Gati as an Express Distribution and Supply Chain Management Company. The campaign ran on premium business channels as NDTV and CNBC from Oct., 2007 to Feb., 2008. The campaign was well received across target group largely high profi le corporates.

The Company continues to be driven by its vision of becoming the leader in Asia Pacifi c and a globally preferred provider of India-centric supply chain services & solutions. The Company’s future strategies are focused on development of both domestics & international businesses by building new strategic relationship and incorporating subsidiaries abroad, process improvement, better cost management, innovative products & services and establishment of state-of-the-art warehouses.

Business OverviewDuring the year under review, your company achieved a turnover of Rs. 57,550 Lakhs, as against Rs. 46,104 Lakhs in the previous year, showing a growth of 24.83 percent. The Net Profi t after Tax is Rs. 2,378 Lakhs as against Rs. 2,336 Lakhs in the previous year.

The following are the segment wise Revenue fi gures of the Company for the year under review:

Division 2007-08 2006-07

Express Distribution & Supply Chain 47,971 39,418

Coast-to-Coast (Shipping) 7,235 6,319

Other Income 2,344 367

Total 57,550 46,104

(Amount in Rs. lakhs)

G AT I A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8 2 2

Award/AchievementOur Founder MD and CEO Mr. Mahendra Agrawal, has been awarded the “Entrepreneur of the year award” by Hyderabad Management Association in its 36th Annual Function.

Internal Management Control Systems & their AdequacyAs a diversifi ed enterprise, your company provides services at a number of locations across India and Asia Pacifi c. Your Company has always had a system-based approach to risk management and a well-defi ned framework of checks and balances, to ensure effective internal controls.

Your company has the view that internal control is an essential concomitant of the principal of governance that management freedom should be exercised within appropriate checks and balances. Your Company has in place adequate systems of internal control, commensurate with its size and the nature of operations. Your Company also has a well defi ned organisational structure, documented policy guidelines, predefi ned delegation of power with authority levels for approving revenue as well as capital expenditure.

Risk Assessment and MitigationYour company has a Risk Management Team consisting of professionally qualifi ed accountants and functional specialists who are empowered to examine/audit the adequacy, relevance and effectiveness of the control systems, compliance with policies, plans and statutory requirements. The audit is based on the Risk Management Plan, which is revisited each year using the Risk based approach in consultation with the statutory auditors and the Audit Committee. The Audit Committee approves the Risk Management Plan and is reviewed on regular basis. The Vigilance team, which has a presence in the fi eld, supports the Risk Management Team

The Audit committee also reviews the reports of the Risk Management team and suggestions for improvement are discussed. The suggestions of the Audit Committee are taken up and any progress on the same are reported to the Audit committee on a regular basis.Human ResourcesWe strongly believe our employees, fondly called Gati’ites, are our key strength and we owe a major part of our success to them. Our Pledge states “Ahead in Reach” and symbolizes creating high caliber Gati’ites. Human Resources support and active participation is vital for the effective performance of Business Chain Group and overall Organization. Total manpower of the organization as on 30th June, 2008 is 2,869 regular employees and 468 trainees i.e., 3,337 across the levels.

Every care is being taken to ensure that Statutory requirements are met and being complied with on time. Internal Communication amongst Gati’ites has improved with the extensive usage of Intranet. Online Performance Management System has been in use for the last 4 cycles. We are in the process of automating the rest of the HR processes like training, PMS 360o, reimbursements.

We have a tie up with Asian School of Business Management, Bhubaneswar for the one year “Post Graduate Programme in Logistics and Supply Chain Management”. This tie up ensures availability of trained resource.

The Training & Development group has been rechristened as “Learning and Development” group and the team has been strengthened with functional specialists who would understand the training needs better for developing custom developed modules. Huge investments continue to be made for not only attracting but also developing and retaining our human capital over the long term. The top team has also undergone PDP tests with continuous coaching from external consultants.

ESOS V Scheme was launched during the year and the response was good. This remains one of the retention tools.

Talent Acquisition: The focus on key talent acquisition for critical positions continues, which will certainly bring the benefi t in the years to come. The Company lays emphasis on hiring bright talented people. The Management trainees were selected from the premium B schools. Other trainees were selected from tier 3 cities, rural/semi urban areas that give an opportunity to such persons and also as a strategy for retention. Various initiatives taken would take us forward in meeting our vision of being a preferred employer for talented youth

During the year, your company after surveillance audit by the certifying authority NQAQSR, has been recommended for continuation of the ISO 9001:2000 certifi cation.

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Auditor’s Report

TO THE MEMBERS OF GATI LIMITED

We have audited the attached Balance Sheet of Gati Limited as at 30th June, 2008, the annexed Profi t and Loss Account and the Cash Flow Statement of the Company for the year ended on the date, in which are incorporated the audited accounts of the Coast-to-Coast Division and the branch in Nepal as audited by other auditors.

1. These fi nancial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these fi nancial statements based on our audit.

2. We conducted our audit in accordance with auditing standards, generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatements. An audit also includes examining on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. An audit also includes assessing the accounting principles used and signifi cant estimates made by management as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditors’ Report) Order, 2003 (as amended) issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956 and on the basis of such checks as we considered appropriate and according to the information and explanations given to us during the course of audit, we enclose in the Annexure hereto a statement on the matters specifi ed in paragraphs 4 & 5 of the said Order.

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

i) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our audit.

ii) In our opinion, proper books of accounts as required by law have been kept by the Company so far, as it appears from our examinations of the books and proper returns adequate for the purpose of our audit have been received from the branches not visited by us. The Branch Auditor’s Reports have been forwarded to us and appropriately dealt with.

iii) The Balance Sheet, Profi t and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account and returns from the branches.

iv) In our opinion, the Profi t and Loss Account, the Balance Sheet and the Cash Flow Statement comply with the accounting standards referred to in section 211 (3C) of the Companies Act, 1956.

v) On the basis of written representation received from the directors as on 30th June, 2008 and taken on record by the Board of Directors, none of the Directors is disqualifi ed as on 30th June, 2008 from being appointed as a director under section 274(1) (g) of the Companies Act, 1956.

vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the notes and accounting policies thereon give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a) In the case of Balance Sheet of the state of affairs of the Company as at 30th June, 2008.

b) In the case of Profi t and Loss Account, of the profi t of the Company for the year ended on that date and

c) In the case of Cash Flow Statement, of the cash fl ows for the year ended on that date

For R. S. Agarwala & Co. Chartered Accountants

Camp : Secunderabad Date : August 1, 2008 R. S. Agarwala Partner Membership No. F-5534

G AT I A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8 2 4

1. The Company has maintained records showing full particulars including quantitative details and situation of fi xed assets like land, building, vehicles, plant and machinery, computers etc. We are informed that a test physical verifi cation of these assets was carried out by the management during the year and no material discrepancies were noticed. The management has informed us that in respect of other fi xed assets like furniture and fi ttings, offi ce equipments, having regard to their numbers and the numerous locations where these exist, maintenance of detailed records and reconciliation of their value in general ledger is not feasible.

2. During the year, the Company has not disposed off a substantial part of its fi xed assets.

3. Physical verifi cation was conducted by the management in respect of inventories at reasonable intervals. The Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verifi cation. The procedures followed by the management for such physical verifi cation are in our opinion, reasonable and adequate in relation to the size of the Company and the nature of its business.

4. (a) The Company has granted unsecured loans to two companies covered in the register maintained under Section 301 of the Act. The maximum amount involved during the year aggregates to Rs. 930 Lakhs which was fully repaid during the year.

(b) In our opinion, the rate of interest and other terms and conditions of such loans are not prima facie prejudicial to the interest of the Company.

(c) There are no stipulations as to the dates for repayment of principal and/or interest

(d) The Company has not taken any loans secured or unsecured from companies, fi rm or other parties covered in the register maintained under Section 301 of the Companies Act, 1956.

5. There is an adequate internal control system commensurate with the size and nature of the Company’s business for the purchase of inventories, fi xed assets and for the sale of services. During the course of our audit no major weakness has been noticed in the internal control system, nor have we been informed of any such instance.

6. (a) To the best of our knowledge and belief and according to the information and explanations given to us, the particulars of contracts or arrangements that need to be entered into the register in pursuance of Section 301 of the Act, have been so entered

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements entered into the register in pursuance of Section 301 of the Act, have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

7. The Company has complied with the provision of Sections 58A, 58AA and other relevant provisions of the Companies Act, 1956 and the rules framed thereunder with regard to deposits accepted from the public.

8. The Company has appointed fi rms of Chartered Accountant at certain places to do the Internal audit regularly. The in-house internal audit department of the Company conducts internal audit at other places. The internal audit system is commensurate with the size and nature of Company’s business.

9. The Central Government has not prescribed the maintenance of Cost records under Section 209 (1)(d) of the Companies Act, 1956 in respect of any activities of the Company.

10. (a) According to the information and explanations given to us and the records of the Company examined by us in our opinion, the Company is generally regular in depositing the undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income-tax, wealth tax, service tax, customs duty and other material statutory dues as applicable with the appropriate authorities.

(b) According to the information and explanations given to us and the records of the Company examined by us, there are no statutory dues as at the year end which have not been deposited on account of a dispute.

11. The Company has no accumulated losses as at 30th June, 2008 and has not incurred any cash losses in the fi nancial year ended on that date or in the immediately preceeding fi nancial year.

12. According to the records of the Company examined by us and the information and explanations given to us, the Company has not defaulted in repayment of dues to any fi nancial institution or bank or debenture holders as at the balance sheet date.

Annexure to Auditors’ Report Referred to inparagraph 3 of our reports of even date.

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13. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

14. The provisions of any special statue applicable to chit fund/nidhi/mutual benefi t fund/societies are not applicable to the company.

15. In our opinion, the Company is not a dealer or trader in shares, securities, debentures and other investments. The investments in shares, securities, debentures etc are held by the Company in its own name.

16. In our opinion, and according to the information and explanation given to us, the terms and conditions on which the Company has given guarantee for loans taken by others from banks or fi nancial institutions, are not prima facie prejudicial to the interest of the Company.

17. In our opinion, and according to the information and explanations given to us, on an overall basis the term loans have been applied for the purpose for which they were obtained.

18. On the basis of an over all examination of the balance sheet of the Company, in our opinion and according to the information and explanations given to us, funds raised on short-term basis, have not been used for the long-term investment.

19. The company has not made any preferential allotment of shares during the year.

20. There are no secured debentures issued during the year.

21. The company has not raised any money by public issue during the year.

22. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud on or by the Company, noticed or reported during the year, nor have we been informed of such cases by the management.

For R. S. Agarwala & Co. Chartered Accountants

Camp : Secunderabad Date : August 1, 2008 R. S. Agarwala Partner Membership No. F-5534

G AT I A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8 2 6

Financial Results

Balance Sheet as on 30th June 2008

Schedules 1 to 13 and Schedule 21 referred to above, form part of the Balance Sheet

In terms of our Report of even date attached For and on behalf of the Board

For R. S. Agarwala & Co. A. S. Sandhu K. L. Chugh Mahendra AgarwalChartered Accountants Chief Finance Offi cer Chairman Managing Director & CEO & Company Secretary

R. S. Agarwala N. SrinivasanPartner Director

Camp: Secunderabad SecunderabadAugust 1, 2008 August 1, 2008

(Amount in Rs. Lakhs)

Schedule 30th June, 2008 30th June, 2007

Sources Of FundsShareholders’ FundsShare Capital 1 1,693.11 1,447.71 Reserves & Surplus 2 28,685.10 16,300.76

30,378.21 17,748.47 Loan FundsSecured Loans 3 11,208.67 6,755.91 Unsecured Loans 4 11,173.36 12,231.04

22,382.03 18,986.95

Deferred Tax Liability 5 748.37 606.37

Total Funds Employed 53,508.61 37,341.79

Application Of FundsFixed AssetsGross Block 6 30,007.10 20,052.33 Less: Depreciation 6,012.82 4,700.48 Net Block 23,994.29 15,351.85 Capital Work-in-Progress 6,295.29 7,190.61

30,289.58 22,542.46

Investments 7 5,580.43 3,237.46

Current Assets, Loans and AdvancesInventories 8 276.14 152.96 Sundry Debtors 9 11,098.41 7,133.83 Cash and Bank Balances 10 1,223.43 4,120.06 Loans and Advances 11 13,718.36 3,342.58

26,316.34 14,749.43 Less: Current Liabilities and ProvisionsLiabilities 12 4,891.37 1,952.90 Provisions 13 3,786.37 1,234.66 8,677.74 3,187.56 Net Current Assets 17,638.60 11,561.87

Total Assets (Net) 53,508.61 37,341.79

Notes on Accounts 21

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Profi t and Loss Account for the year ended 30th June, 2008

(Amount in Rs. Lakhs)

Schedule 30th June, 2008 30th June, 2007

IncomeFreight & Warehousing 14 55,206.74 45,737.29Other Income 15 2,344.24 366.36Total 57,550.98 46,103.65

ExpenditureOperating Expenses 16 36,613.28 29,719.65Personnel Expenses 17 7,030.66 5,777.17Administrative Expenses 18 5,253.39 4,334.44Advertisement Expenses 840.79 746.37Repairs & Maintenance Expenses 19 730.57 637.23Interest (Net) 20 972.92 577.38Depreciation (Net) (Note 2) 1,457.46 1,110.33Total 52,899.07 42,902.57

Profi t Before Tax & Exceptional Items 4,651.90 3,201.08

Exceptional Items (Note 5) (1508.24) - -

Profi t Before Tax 3,143.66 3,201.08

Provision for TaxCurrent Tax 554.87 780.13Deferred Tax 142.00 24.00Fringe Benefi t Tax 68.76 60.99Profi t for the Year 2,378.03 2,335.96Balance Brought Forward From Previous Year 726.31 415.37

Balance Available for Appropriation 3,104.34 2,751.33

APPROPRIATIONSProposed Dividend 677.24 579.08Tax on Dividend 115.10 98.42Tonnage Tax Reserve 454.33 170.80General Reserve 1,000.00 1,176.72Balance Carried to Balance Sheet 857.67 726.31

3,104.34 2,751.33

Earning per Share 2.99 3.28Notes on Accounts 21

Schedules 14 to 21 referred to above form part of the Profi t and Loss Account

In terms of our Report of even date attached For and on behalf of the Board

For R. S. Agarwala & Co. A. S. Sandhu K. L. Chugh Mahendra AgarwalChartered Accountants Chief Finance Offi cer Chairman Managing Director & CEO & Company Secretary

R. S. Agarwala N. SrinivasanPartner Director

Camp: Secunderabad SecunderabadAugust 1, 2008 August 1, 2008

G AT I A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8 3 0

(a) Transferred to Profi t and Loss Account being depreciation provided on revalued amount.

(b) On vesting of Stock options, Conversion of Warrants and FCCBs.

(c) Provision for pro-rata premium on redemption of FCCBs.

Schedules to the Accounts

(Amount in Rs. Lakhs)

30th June, 2008 30th June, 2007

(1) Share CapitalAuthorised100,000,000 Equity Shares of Rs. 2 each 2,000.00 2,000.0010,00,000 Redeemable Preference Shares of Rs. 100 each 1,000.00 1,000.00

3,000.00 3,000.00

Issued, Subscribed and Paid-up:846,55,330 (Previous Year - 723,85,545) Equity Shares of Rs. 2 each fully paid up: 1,693.11 1,447.71

Of the above:125,09,495 shares were allotted for consideration other than cash as per the Scheme of Arrangement.

139,27,500 shares were issued as fully paid bonus shares by capitalisation of share premium.

During the year following shares were issued:

7,68,800 shares on vesting of Employees Stock Options97,14,185 shares on Conversion of Warrants17,86,800 shares on conversion of FCCBs.

The Company has granted options under the Companies Employees’ Stock Options Scheme and 28,18,580 options (including 1,05,000 options to non-promoter Directors) are outstanding as on 30th June, 2008. Of this 7,71,034 options will vest in 2008-09, 11,59,752 options in 2009-10, 6,65,554 options in 2010-11 and 2,22,240 options in 2011-12.

Balance on1st July, 2007 Additions Deductions 30th June,

200830th June,

2007

(2) Reserves & Surplus

Capital Reserves:

Revaluation Reserve 694.53 - 1.27 (a) 693.26 694.53

Securities Premium 8,410.21 10,753.35 (b) 436.04 (c) 18,727.52 8,410.21

Employees’ Stock Option 144.66 91.89 (d) 47.76 (e) 188.80 144.66

Others 1.25 438.48 (f) - 439.73 1.25

9,250.65 11,283.73 485.07 20,049.31 9,250.65

Revenue Reserves:

General Reserve 5,600.00 1,000.00 (g) - 6,600.00 5,600.00

Shipping Business Reserve (utilised) 350.00 - - 350.00 350.00

Tonnage Tax Reserve 373.80 454.33 (g) - 828.13 373.80

Profi t and Loss Account 857.67 726.31

6,323.80 1,454.33 - 8,635.79 7,050.11

15,574.45 12,738.06 485.07 28,685.10 16,300.76

3 1 A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8

Schedules to the Accounts

(Amount in Rs. Lakhs)

30th June, 2008 30th June, 2007

(3) Secured Loans

Term Loans:

From Banks

Against fi rst charge by way of Mortgage/Hypothecation of specifi ed fi xed assets and other assets acquired there against (repayable within one year - Rs. 1,145.13 lakhs; previous year -Rs. 1,083.29 lakhs)

5,947.99 3,704.68

Secured by hypothecation of Motor Trucks, Motor Cars and Computer equipments acquired there against (Repayable within one year - Rs. 318.13 lakhs; previous year - Rs. 311.55 lakhs) 858.25 920.05

From Others

Secured by hypothecation of specifi ed immovable asset 89.83 91.94

(Repayable within one year - Rs. 4.34 lakhs; previous year - Rs. 6.29 lakhs)

Working Capital Loans

From Banks 4,312.60 2,039.24

Secured against fi rst charge by way of hypothecation of all current assets, including book debts, stocks and equitable mortgage of specifi ed immovable assets of the Company and of third parties

11,208.67 6,755.91

In addition, loans to the extent of Rs. 10,249.04 lakhs are also guaranteed by theManaging Director (Promoter)

(4) Unsecured Loans

Fixed Deposits 730.86 1,000.95

Advances against Convertible Warrants 0.00 1,296.09

Foreign Currency Convertible Bonds (FCCB) 6,442.50 8,934.00

Short Term Loans and Advances

From Banks(a) 4,000.00 1,000.00

(a) Guraranteed by the Managing Director (Promoter) to the extent of Rs. 2,500 lakhs

11,173.36 12,231.04

(5) Deferred Tax Liability At 1st July, 2007 Current Year

Difference between book and Tax Depreciation 606.37 142.00 748.37 606.37

(d) In respect of options granted under the Companies Employees’ Stock Options Scheme and in accordance with the guidelines issued by Securities and Exchange Board of India the accounting value of options (based on market value of share on the date of grant of options minus the option price) is accounted as deferred employees compensation, which is amortised on a straight line basis over the vesting year. Consequently salaries, wages and bonus includes Rs. 91,89,929/- (Previous Year - Rs. 101,09,889/-), being amortisation of deferred employee compensation after adjusting for reversal on account of options left.

(e) Transferred to Securities Premium on vesting of 7,68,800 options during the year.

(f) Transfer to Capital reserve on forfeiture of 48,72,000 convertible warrants.

(g) Transferred from Profi t and Loss Account.

G AT I A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8 3 2

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3 3 A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8

Schedules to the Accounts

(Amount in Rs. Lakhs)

30th June, 2008 30th June, 2007

(7) Investments (At Cost)

Long term - Non-trade

Fully Paid-up Equity Shares

Quoted16,00,300 of TCI Finance Ltd. of Rs. 10/- each 143.89 143.89

Unquoted1,87,50,000 of Gati Infrastructure Ltd. of Rs. 10/- each 1,875.00 1,875.0018,000 shares of ITAG Infrastructure Ltd. of Rs. 10/- each 1.80(Allotted during the year)Long Term - TradeSubsidiaries28,24,919 of Gati Holdings Ltd. of 1 $ (USD) each 1,261.96 1,126.56(3,39,951 shares allotted during the year)8,60,000 of Trymbak Commercial & Trading Pvt. Ltd. of Rs. 10/- each 86.00 13.31(7,26,920 shares allotted during the year)3,65,000 of Ocimum Commercial & Trading Pvt. Ltd. of Rs. 10/- each 36.50 1.11(3,53,843 shares allotted during the year)10,75,000 of Sumeru Commercial & Trading Pvt. Ltd. of Rs. 10/- each 107.50 37.59(6,99,114 shares allotted during the year)1,55,000 of Newatia Commercial & Trading Pvt. Ltd. of Rs. 10/- each 15.50 3.12(1,23,817 shares allotted during the year)27,32,532 of Kausar India Ltd. of Rs. 10/- each 1,990.38(Acquired during the year)50,000 shares of Gati Import Export Trading Ltd. of Rs. 10/- each 5.00(Allotted during the year)3,52,163 shares of Zen Cargo Movers Pvt. Ltd. of Rs. 10/- each 35.22(Acquired during the year)50,000 Shares of Gati Skyways Ltd. of Rs. 10/- each 5.00(Allotted during the year)

3,543.06 1,181.69Government Securities (Unquoted)3 11.50% PSEB-2010 Bonds of Rs. 5 lakhs each 15.74 15.745 12.20% HPRIDC Bonds of Rs. 1 lakh each 0.95 2.373 11% GEB Bonds of Rs. 1 lakh each - 2.97

16.68 21.08

Share Application Money 0.00 15.80

5,580.43 3,237.46

Market value of quoted investments 310.29 438.48

(8) Inventories

(As taken, valued and certifi ed by the Management)

Stores & Spare Parts (at cost) 276.14 152.96

(9) Sundry Debtors (Unsecured - Considered Good)Outstanding for more than six months 276.15 151.48Others 10,822.26 6,982.35

11,098.41 7,133.83Includes Rs. 192.94 lakhs due from subsidiaries (Previous year Rs. 55.67 lakhs)

G AT I A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8 3 4

Schedules to the Accounts

(Amount in Rs. Lakhs)

30th June, 2008 30th June, 2007

(10) Cash and Bank BalancesCash in Hand 40.91 78.77Cheques in Hand 386.55 235.06Remittance in Transit 323.16 347.88With Scheduled Banks:In Current Accounts 203.57 321.97In Deposit Accounts (a) 210.02 3,093.96In Unpaid Dividends Accounts 54.00 42.08With Non-Scheduled Banks

Bhutan National Bank - Rs. 0.39 lakhs (maximum balance Rs. 5.86 lakhs) 5.23 0.34Everest Bank Limited - Rs. 2.73 lakhs (maximum balance Rs. 3.93 lakhs)SCB, Singapore - Rs. 2.11 lakhs (maximum balace Rs. 152.03 lakhs)

a) Some of the Fixed Deposit Receipts are deposited with banks against guarantees issued1,223.43 4,120.05

(11) Loans and Advances (Unsecured - Considered Good)

Loans 1,000.00 1,000.00Advances Recoverable in Cash or in Kind or for Value to be Received (a) 2,495.20 1,336.74Advances and Deposits 1,424.35 781.90Consideration for assignment of right to a ship under construction receivable 7,688.10Tax Deducted at Source 1,110.71 223.94

13,718.36 3,342.58(a) Includes Rs. 148.32 lakhs due from Subsidiary Companies (previous year - 220.84 lakhs)

(12) LiabilitiesSundry Creditors 1,365.86 633.72Due For purchase of ship under construction 1,655.00 -Subsidiary Companies 93.25 3.92Other Liabilities 1,152.69 783.23Interest Accrued on Loans 37.25 46.24Security Deposits 533.33 443.71Unpaid/Unclaimed Dividends 54.00 42.08There are no amounts pending to be transferred to Investor Education and Protection Fund 4,891.37 1,952.90

(13) ProvisionsTaxation (Net of Payments) 506.63 (2.23)Gratuity and Leave Encashment 160.12 176.39Premium on redemption of Foreign Currency Convertible Bonds 819.03 383.00Provision for Derivative 1,508.24Proposed Dividend 677.24 579.08Tax on Dividend 115.10 98.42

3,786.37 1,234.66

(14) Freight & WarehousingFreight, Miscellaneous Charges, etc. (a) 47,346.43 38,898.26

(Tax deducted - Rs. 784.44 lakhs,; previous year - Rs. 76.83 lakhs)

Warehousing Charges (Tax deducted - Rs. 44.55 lakhs; previous year - Rs. 24.35 lakhs) 625.48 519.71

Shipping Freight, Charter Hire, Miscellaneous Charges (a) 7,234.84 6,319.32

(Tax deducted - Rs. 26.97 lakhs; previous year - Rs.1.35 lakhs)

(a) Includes Demurrage of Rs. 320.55 lakhs; previous year - Rs. 238.42 lakhs)

55,206.74 45,737.29

3 5 A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8

Schedules to the Accounts(Amount in Rs. Lakhs)

30th June, 2008 30th June, 2007

(15) Other IncomeRent 15.60 15.30(Tax deducted - Rs. 2.33 lakhs; previous year - Rs. 0.12 lakhs)Miscellaneous Income 209.56 345.33Profi t on assignment of right to a ship under construction 1,815.51Difference in Exchange (Net) (a) 303.56 5.73a) Includes Rs. 269.44 lakhs on re-statement of foreign currency monetary items 2,344.24 366.36

(16) Operating ExpensesFreight 29,531.91 23,591.79Vehicles’ Trip Expenses 1,252.32 782.40Tyres & Tubes 38.39 22.57Warehouse Rent 242.15 131.41Other Operating Expenses 1,396.10 1,663.52Claims for Loss & Damages (Net) 51.43 100.83Commission 4.44 3.06Vehicles’ Taxes 48.62 34.89Vehicles’ and Ships Insurance 108.03 91.37Power, Fuel and Water Expenses 1,145.63 1,113.69Stores & Spare Parts Consumed 218.83 162.92Port & Survey Expenses 2,575.42 2,021.20

36,613.28 29,719.65

(17) Personnel ExpensesSalaries, Wages & Bonus* 6,146.09 5,154.65Gratuity 79.91 48.26Contribution to Provident & Other Funds 241.61 204.16Contribution to Employees’ State Insurance 48.98 53.48Other Personnel Expenses 514.06 316.62*(includes Leave encashment) 7,030.66 5,777.17

(18) Administrative ExpensesRent 1,109.41 792.73Rates and Taxes 23.21 8.39Insurance (includes Rs. 20 lakhs towards Keyman Insurance Policy) 127.52 128.26Telephone Expenses 255.81 245.65Printing and Stationery 310.47 373.66Travelling Expenses 605.45 604.04Legal Expenses 43.24 55.43Offi ce Maintenance and Repairs 715.00 582.66Miscellaneous Expenses 1,853.58 1,289.88Remuneration to Directors:

Salaries & Allowances 89.40 71.77Commission 42.90 42.90Fees 11.90 8.00

Remuneration to Auditors:For Audit 12.15 8.00For Tax Audit 3.00 2.88For Certifi cation 1.00 2.67

Bad Debts and irrecoverable Balances Written Off (Net) 10.24 77.91Charity & Donations 39.12 38.80Loss on sale of Fixed Assets (Net) - 0.81

5,253.39 4,334.44

G AT I A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8 3 6

Schedules to the Accounts

(Amount in Rs. Lakhs)

30th June, 2008 30th June, 2007

(19) Repairs & Maintenance ExpensesTrucks 181.95 71.64Other Vehicles 88.44 78.71Plant & Machinery 26.77 30.08Buildings 17.65 12.79Computers 157.58 203.63Ships 76.42 86.91Dry Docking 181.76 153.47

730.57 637.23

(20) InterestFixed Loans 967.13 617.67Debentures 62.52 67.31Fixed Deposits 72.41 97.10Others 78.31 49.90

1,180.37 831.98Less: Interest Received (a) 207.45 254.60(Tax Deducted - Rs. 32.07 lakhs; previous year - Rs. 25.70 lakhs) 972.92 577.38(a) Includes Rs. 4.15 lakhs from Investments in Government Securities, previous year Rs. 2.14 lakhs)

21. Notes on Accounts1. Remuneration To Directors

Managing Director & CEOSalaries & Allowances 89.40 71.78

Commission 20.00 20.00

Money value of Perquisites 3.60 1.80

Contribution to Provident/Superannuation Funds 15.94 12.82

Other DirectorsCommission 22.90 22.90

Fees 11.90 8.00

163.74 137.30Computation of net profi t in accordance with Section 309(5) of the Companies Act, 1956

Profi t before Tax 3,143.66 3,201.00

Add:

Depreciation as per accounts 1,457.46 1,110.33

Directors’ Remuneration/Commission 163.74 137.30

Sub-Total 4,764.86 4,448.63Less: 18.92

Depreciation under Section 350 1,457.46 1,110.33

Net profi t computed in accordance with Section 309(5) 3,307.40 3,319.38Commission payble to Non Whole Time Directors - 1% 33.07 33.00

Restricted to 22.90 23.00

The above does not include contribution to Gratuity Fund and provision for encashable leave which is actuarially calculated on an overall basis.

2. The Net Depreciation charged for the year is arrived at as follows:Depreciation for the year 1,458.73 1111.60

Deduct: Transfer from Revaluation Reserve being depreciation provided on revalued amount

1.27 1.27

Net Depreciation charged in Profi t and Loss Account 1,457.46 1110.33

3 7 A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8

5. Pursuant to the announcement on “Accounting of Derivatives” by the Institute of Chartered Accountants of India, Mark-to-Market losses on the derivative instruments outstanding as at June 30, 2008 aggregate to Rs. 1508.24 lakhs is charged to profi t and loss account as an exceptional item.

6. In the opinion of the Board of Directors, the current assets, loans and advances have a value on realisation in the ordinary course of business atleast equal to the amount at which they are stated.

7. Earning per sharesNo of equity shares outstanding (Nos. in lakhs) 846.55 723.86Net profi t after tax available for equity shareholders (Rs. in lakhs) 2,378.03 2,335.96Basic earnings per share of Rs. 2/- each (Rs.) 2.99 3.28Diluted earnings per share of Rs. 2/- each (Rs.) 2.88 2.92The Equity Shares of Rs.10/- each have been sub-divided into 5 Equity Shares of Rs. 2/- eachpursuant to the resolution passed by the Shareholders at their Extra-Ordinary General Meeting held on 25th February, 2006.

8. During the year 2006-07 the Company has issued Foreign Currency Convertible Bonds (FCCB) of a face value of US $ 1000 each aggregating to US $ 20 million. As per the terms of the issue, the holders have an option to convert the FCCB into Ordinary Shares at an conversion rate of Rs.125 per Ordinary Share at a fi xed exchange rate conversion ofRs. 44.67 = US $ 1, from 20th Dec., 2006 to 5th Nov., 2011. The conversion price will be reset periodically to the average closing price of the shares on the reset date, and it has been presently reset at Rs. 112.50 per share. Unless previously converted, the Company will redeem these bond at 147.88 per cent of the principal amount on 6th Dec., 2011. During the year FCCB of US $5 million was converted and 1786800 shares were alloted.

9. Net proceeds received on issue of FCCB has been fully utilised for the specifi ed purpose.10. The company is in the process of compiling relevant information from suppliers for their

status under Micro, Small and medium Enterprises Development Act, 2006. Since the relevant information is not readily available, the disclosure regarding the unpaid amount and interest paid and payable could not be given.

11. Loans & Advances includes advance given to Subsidary Companies Rs. 148.32 lakhs (maximum balance - Rs. 167.42 lakhs)

12. Estimated amount of contracts remaining to be executed on capital account & not provided for 5,264.82 6,189.4113. Previous year’s fi gures have been regrouped/rearranged wherever necessary.

30th June, 2008 30th June, 2007

3. Tax provision in these accounts has been made considering the working results for the year ended 30th June, 2008

The actual tax liability will be determined on the basis of tax accounting year ended 31st March 2008 (Assessment Year 2008-09).

4. The Company issued 15,71,185 convertible warrants on 2nd Mar., 2006 & 25,00,000 convertible warrants on 16th Sept., 2006 at Rs. 84.61 per warrant on preferential basis to The Infrastructure Fund of India LLC and Mahendra Investment Advisors Pvt. Ltd. Further the company also issued 34,50,000 convertible warrants, 70,00,000 convertible warrants and 10,50,000 convertible warrant at Rs. 90.00 per warrant on preferential basis toMr. Mahendra Agarwal, Mahendra Investment Advisor Pvt. Ltd., & The Infrastructure Fund of India LLC respectively on 23rd Oct., 2006. Each warrant is convertible at the option of the warrant holder within an aggregate time period of 18 months from the date of allotment. Out of 95,00,000 convertible warrants allotted to Mahendra Investment Advisor Pvt. Ltd. 9,85,000 convertible warrants were converted into equity shares on 29th Mar., 2007. During the year, out of 95,00,000 convertible warrants allotted to Mahendra Investment Advisors Pvt. Ltd. 15,15,000 convertible warrants were converted into equity shares on1st Sept., 2007 24,93,000 convertible warrants were converted into equity shares on31st Mar., 2008, 18,50,000 convertible warrants were converted into equity shares on 22nd Apr., 2008 & balance 26,57,000 convertible warrants were forfeited and the forfeited amount has been transferred to Capital Reserve. Out of 26,21,185 convertible warrants issued to The Infrastructure Fund of India LLC, 15,71,185 warrants were converted into equity shares on 1st Sept., 2007 and balance warrants on 22nd Apr., 2008. Out of 34,50,000 convertible warrants issued to Mr. Mahendra Agarwal, 12,35,000 convertible warrants were converted into equity shares on 22 Apr., 2008 and balance 22,15,000 warrants were forfeited and the forfeited amount has been transferred to capital Reserve.

Schedules to the Accounts

(Amount in Rs Lakhs)

G AT I A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8 3 8

(Amount in Rs. Lakhs)

30th June, 2008 30th June, 200714. Contingent Liability not provided for in respect of

Income Tax demands under dispute Guarantees and Counter Guarantees outstanding

Nil 44.751,665.97 1,006.30

15. Related Party DisclosuresRelated parties with whom transactions have taken place during the year

i) Directors/Key Management Personnel:Mr. Mahendra Agarwal (Managing Director & CEO)

ii) Associates Subsidiaries

1. Gati Intellect Systems Ltd. 1. Gati Holdings Ltd.2. TCI Finance Ltd. 2. Gati Asia Pacifi c Pte. Ltd.3. Giri Roadlines & Commercial Trading Pvt. Ltd. 3. Gati Hong Kong Ltd.4. Jubilee Commercials & Trading Pvt. Ltd. 4. Gati China Holdings Ltd.5. Gati Infrastructure Ltd. 5. Gati Middle East FZE Ltd.6. Gati Shipping Ltd. 6. Gati Cargo Express (Shanghai) Co. Ltd.7. Gati Cargo Management Services Ltd. 7. Gati Japan Ltd.8. TCI Hi-ways Pvt. Ltd. 8. Newatia Commercial & Trading Pvt. Ltd.9. TCI Industries Ltd. 9. Trymbak Commercial & Trading Pvt. Ltd.10. Mahendra Kumar Agarwal & Sons (HUF) 10. Ocimum Commercial & Trading Pvt. Ltd.11. ITAG Infrastructure Ltd. 11. Sumeru Commercial & Trading Pvt. Ltd.12. Gati (Thailand) Ltd. 12. Kausar India Ltd. 13. Gati Import Export Trading Ltd. 14. Zen Cargo Movers Pvt. Ltd. 15. Gati Skyways Ltd.

(Amount in Rs. Lakhs)

S. No. Nature of Transaction 30th June, 2008 30th June, 2007

Associates Subsidiaries

A ExpenditureRent 40.38 - 40.38 11.80

Freight & Other Charges 106.00 158.13 264.13 349.18

Port Expenses 62.30 - 62.30 130.12

Key Management PersonnelRemuneration - - 108.94 86.39

B ReceiptsFreight & Other Charges - 142.72 142.72 101.25

Interest 21.52 - 21.52 41.04

Rent 66.65 6.04 72.69 149.50

C Finance & InvestmentInvestments 1.80 2361.36 2,363.16 1231.76

Loans - Given 80.41 850.00 930.41 125.00

Loan - Repaid - - - 325.00

Advances given/(Repaid) - (93.85) (93.85) 221.09

D Balance as on 30th June, 2008Investments 2020.69 3543.05 5,563.74 3200.58

Share Application Money - - - 15.80

Sundry Debtors - 192.94 192.94 55.67

Loans and Advances - 148.32 148.32 242.18

Sundry Creditors 158.14 93.25 251.39 3.92

Advances towards Fixed Assets - - - 461.00

Corporate Guarantees 12.20 1653.77 1,665.97 1006.30

3 9 A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8

30th June, 2008 30th June, 200716 Segment Information

Primary Business SegmentExpress Distribution & Supply Chain: Covers integrated cargo services – Road,Rail & Air Transportation.

Coast-to-Coast (Shipping): Covers Sea Transportation

1. Segment Revenue (net sale/income)a) Express Distribution & Supply Chain 48,004.38 39,417.97b) Coast-to-Coast (Shipping) 7,234.84 6,356.24

Total 55,239.21 45,774.21

Less: Inter-Segment Revenue 32.48 36.92

Net sales/income from operations 55,206.74 45,737.29

2. Segment Results Profi t before tax and interest from each Segmenta) Express Distribution & Supply Chain 4,223.92 4,313.38b) Coast-to-Coast (Shipping) 3,232.63 1,022.26

Total 7,456.55 5,335.64

Less: i Interest (Net of Income) 972.92 577.38ii Other un-allocable expenditure net of un-allocable income 1,831.73 1,557.18Add: Unallocable incomes/Losses (1,508.24)

Total Profi t Before Tax 3,143.66 3,201.08

3. Other InformationSegment Assetsa) Express Distribution & Supply Chain 36,196.98 28,052.27b) Coast-to-Coast (Shipping) 20,408.94 8,239.62

Unallocated Corporate Assets 5,580.43 4,237.46

Total Assets 62,186.35 40,529.35

Segment Liabilitiesa) Express Distribution & Supply Chain 24,111.24 20,483.13b) Coast-to-Coast (Shipping) 7,696.90 2,297.75

Total Liabilities 31,808.14 22,780.88

(Amount in Rs. Lakhs)

Schedules to the Accounts

The company operates mainly in India and therefore there are no separate geographical segments.

30th June, 2008 30th June, 2007

17. Additional Information pursuant to the Provisions of Paragraphs 3 & 4 of Part ll of Schedule VI to the Companies Act, 1956

I. Value of Imported and Indigeneous Stores & Spare Parts Consumed during the year

% Rs. in Lakhs

Imported 67.69 171.56 171.56 52.18

Indigeneous 32.31 81.88 81.88 120.88

100.00 253.44 253.44 173.06II. Expenditure in Foreign Currency

Travelling Expenses 148.96 121.79

P & I Insurance 36.44 43.10

Port Expenses 60.66 1,005.63

G AT I A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8 4 0

30th June, 2008 30th June, 2007Charter Hire Nil 336.07Repairs 185.49 144.52Professtional Fee 333.79 399.76Interest Nil 15.52Miscellaneous 135.49 600.49

III. Value of Imports on C.I.F. BasisSpare Parts 175.15 52.18Capital Goods 5,268.04 1,264.21

IV. Earnings in Foreign CurrencyFreight 6,369.83 3,486.24Interest 56.30 132.31

(Amount in Rs. Lakhs)

Schedules to the Accounts

18 Accounting Policies

Recognition of Income & Expenditure

a) Income and expenditure are generally recognised on accrual basis in accordance with the applicable accounting standards and provision is made for all known losses and liabilities.

b) In Express Distribution & Supply Chain Division, Freight Income is accounted when goods are delivered by the Company to customers. In Coast-to-Coast Division, Freight Income is accounted when ships sail.

c) Freight expenses are accounted when hired vehicles deliver goods to the Company at destination.

d) Having regard to the size of operations and the nature and complexities of the company’s business, freight received/paid in advance is accounted as income/expenses on payment and interdivisional transfers are eliminiated.

e) Year-end liability in respect of claims for loss and damages is provided as calculated by claims recovery agents.

Gratuity and Leave Encashment

A provision for gratuity liability to employees is made on the basis of actuarial valuation and paid to the approved Gratuity Fund and a provision for leave encashment is made on the basis of actuarial valuation.

Provident Fund

Provident fund contribution is remitted to appropriate authority.

Superannuation Fund

Superannuation fund contribution is remitted to approved trust fund.

Fixed Assets

a) Fixed assets are stated at cost and/or at revaluation.

b) Dry docking and other expenses at the time of acquisition of ships are capitalised.

c) Depreciation on the amount added to Fixed Assets on revaluation is adjusted by transfer of equivalent amount from revaluation reserve created on revaluation of Fixed Assets to Profi t and Loss Account.

Depreciation

Depreciation is provided on straight line method at rates specifi ed in Schedule XlV to the Companies Act, 1956.

Depreciation on addition/deductions is calculated prorata from/to the date of addition/deduction.

Investments

Investments are stated at cost.

Foreign Exchange Transaction

Foreign currency traansactions are recorded at the average rate for the month. Period end balances of monetary foreign currency assets and liabilities are restated at the closing rate. The exchange difference arising from restatement or settlement is recognised in the Profi t & Loss Account.

4 1 A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8

Schedules to the Accounts

Taxation

Income Tax

Provision for tax is made for both current and deferred taxes. Provision for current income tax is made on the current tax rates based on the working results of the year. The company provides for deferred tax based on the tax effect of timing differences resulting from the recognition of items in the accounts and in estimating its current tax provision. The effect on deferred taxes of a change in tax rate is recognised in the year in which the change is effected.Fringe benefi t tax is provided in accordance with the Income Tax Act,1961.

Impairment of Assets

Impairment of Assets are assessed at each balance sheet date and loss is recognised whenever the recoverable amount of an asset is less than its carrying amount.

Signatures to Schedules “1” to “21”

In terms of our Report of even date attached For and on behalf of the Board

For R. S. Agarwala & Co. A. S. Sandhu K. L. Chugh Mahendra AgarwalChartered Accountants Chief Finance Offi cer Chairman Managing Director & CEO & Company Secretary

R. S. Agarwala N. SrinivasanPartner Director

Camp: Secunderabad SecunderabadAugust 1, 2008 August 1, 2008

G AT I A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8 4 2

(Amount in Rs. Lakhs)

Cash Flow Statement

For the year ended 30th June, 2008 30th June, 2007

A. Cash Flow from Operating Activities:

Net Profi t before Tax 4,651.90 3,201.08

Depreciation 1,457.46 1,110.33

Loss on Sale of Fixed Assets 0.00 0.81

Effect of exchange difference (303.56) (5.73)

Interest Payments 1,180.37 831.98

Interest Received (207.45) (254.60)

Operating Profi t before Working Capital Changes 6,778.72 4,883.87

Adjustment for:

Increase/Decrease in Trade and other Receivables (3,964.57) (1,701.68)

Increase/Decrease in Trade Payables and other Liabilities 2,922.21 1,305.88

Increase/Decrease in Inventories (123.18) 50.49

Loans & Advances (10,375.78) (391.59)

Interest on Borrowings (1,180.37) (831.98)

Tax Paid (114.77) (960.26)

Net Cash from Operating Activities (6,057.75) 2,354.73

B. Cash Flow from Investing Activities

Purchase of Fixed Assets (Including Capital Advances) (9,488.49) (9,470.05)

Sale of Assets 284.16 111.10

Increase in Investments (2,344.38) (1,247.57)

Redemption of Investments in Government Securities 1.42 1.71

Interest Received 207.45 254.60

Net Cash from Investing Activities (11,339.85) (10,350.21)

C. Cash Flow from Financing Activities

Receipt/Repayment of Secured Loans 4,452.77 2,619.67

Receipt/repayment of Short term Unsecured Loans (619.20) 9207.67

Increase in Equity (including ESOS) 11,041.34 (463.47)

Dividend Paid (Including Tax) (677.50) (565.67)

Net Cash from Financing Activities 14,197.41 10,798.20

Effect of exchange difference 303.56 5.73

Net Increase in Cash & Cash Equivalent (A+B+C) (2,896.64) 2,808.45

Cash & Cash Equivalent - Opening Balance 4,120.06 1,311.61

Cash & Cash Equivalent - Closing Balance 1,223.43 4,120.06

4 3 A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8

In terms of our Report of even date attached For and on behalf of the Board

For R. S. Agarwala & Co. A. S. Sandhu K. L. Chugh Mahendra AgarwalChartered Accountants Chief Finance Offi cer Chairman Managing Director & CEO & Company Secretary

R. S. Agarwala N. SrinivasanPartner Director

Camp: Secunderabad SecunderabadAugust 1, 2008 August 1, 2008

Balance Sheet Abstract and Company’s General Business Profi le

As per Part IV, Schedule VI of the Companies Act, 1956 :

I. Registration Details

Registration No. 2 0 1 2 1 State Code 0 1

Balance Sheet Date 3 0 - 0 6 - 2 0 0 8

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 Placement N I L

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

Total Liabilities 5 3 5 0 8 6 1 Total Assets 5 3 5 0 8 6 1

Sources of Funds

Paid-up Capital 1 6 9 3 1 1 Reserves and Surplus 2 8 6 8 5 1 0

Secured Loans 1 1 2 0 8 6 7 Unsecured Loans 1 1 1 7 3 3 6

Defferred Tax Liability 7 4 8 3 7

Application of Funds

Fixed Assets 3 0 2 8 9 5 8 Investments 5 5 8 0 4 3

Net Current Assets 1 7 6 3 8 6 0 Miscellaneous Expenditure N I L

Accumulated Losses N I L

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

Turnover* 5 7 5 5 0 9 8 Total Expenditure 5 2 8 9 9 0 7 (*includes other income)

Profi t before Tax + 3 1 4 3 6 6 Profi t after Tax + 2 3 7 8 0 3

Earning Per Share Rs. 2 . 9 9 Dividend % 4 0 (Annualised)

V. Generic Name of Three Principal Products/Services of the Company

Item Code No. (ITC Code) N I L

Product Description Express Distribution & Supply Chain and Shipping Services

G AT I A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8 4 4

In terms of our Report of even date attached For and on behalf of the Board

For R. S. Agarwala & Co. A. S. Sandhu K. L. Chugh Mahendra AgarwalChartered Accountants Chief Finance Offi cer Chairman Managing Director & CEO & Company Secretary

R. S. Agarwala N. SrinivasanPartner Director

Camp: Secunderabad SecunderabadAugust 1, 2008 August 1, 2008

S.No. Name of Subsidiary Company Financial year of

subsidiary ended on

Number of equity shares held by Gati

Limited and/or its

subsidiaries

Extent of interest of

Gati Limited in the capital

of the subsidiary

Net aggregate amount of profi ts or

losses of the subsidiary so far as it

concerns the members of Gati Limited dealt with or

provided for in the accounts of

Gati Limited

Net aggregate amount of profi ts or

losses of the subsidiary so far as it

concerns the members of Gati Limited

and is notdealt with in the accounts

of Gati Limited

For the fi nancial year endedon 30th June, 2008

1 Gati Holdings Ltd. 30th June, 2008

2824881 shares of USD 1 each

100% held by Gati Ltd.

Nil Loss of USD0.07 Mn

2 Gati Asia Pacifi c Pte Ltd. 30th June, 2008

781204 shares of SGD 1 each

100% held by Gati Holdings

Ltd.

Nil Loss of SGD0.54 Mn

3 Gati Hong Kong Ltd. 30th June, 2008

204586 shares of HKD 1 each

100% held by Gati Holdings

Ltd.

Nil Loss of HKD 0.60 Mn

4 Gati China Holdings Ltd. 30th June, 2008

1236000 shares of USD 1 each

100% held by Gati Holdings

Ltd.

Nil Loss of USD 0.006 Mn

5 Gati Cargo Express (Shanghai) Co. Ltd.

30th June, 2008

1365294 shares of USD 1 each

100% held by Gati China

Holdings Ltd.

Nil Loss of RMB1.22 Mn

6 Gati Japan Ltd. 30th June, 2008

49063 shares of USD1 each

100% held by Gati Holdings

Ltd.

Nil Nil

7 Gati Middle East Fze. Ltd. 30th June, 2008

272702 shares of USD 1 each

100% held by Gati Holdings

Ltd.

Nil Loss of AED0.34 Mn

8 Newatia Commercial & Trading Pvt. Ltd.

30th June, 2008

10000 shares of Rs.10 each

100% held by Gati Ltd.

Nil Profi t ofRs. 1.02 Mn

9 Trymbak Commercial & Trading Pvt. Ltd.

30th June, 2008

10000 shares of Rs.10 each

100% held by Gati Ltd.

Nil Profi t ofRs. 2.25 Mn

10 Ocimum Commercial & Trading Pvt. Ltd.

30th June, 2008

10000 shares of Rs.10 each

100% held by Gati Ltd.

Nil Profi t ofRs. 0.43 Mn

11 Sumeru Commercial & Trading Pvt. Ltd.

30th June, 2008

10000 shares of Rs.10 each

100% held by Gati Ltd.

Nil Profi t ofRs. 5.49 Mn

12 Kausar India Ltd. 30th June, 2008

10000 shares of Rs.10 each

73.72% held by Gati Ltd.

Nil Loss ofRs. 18.80Mn

13 Zen Cargo Movers Pvt. Ltd. 30th June, 2008

10000 shares of Rs.10 each

97.24% held by Gati Ltd.

Nil Loss ofRs. 0.14 Mn

14 Gati Import Export Trading Ltd. 30th June, 2008

10000 shares of Rs.10 each

100% held by Gati Ltd.

Nil Loss ofRs. 0.08 Mn

15 Gati Skyways Ltd. 30th June, 2008

10000 shares of Rs.10 each

100% held by Gati Ltd.

Nil Loss ofRs. 0.01Mn

Statement Pursuant to Section 212 (e) of the Companies Act, 1956 Relating to Subsidiary Companies

4 5 A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8

Con

vert

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to In

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ati H

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(6

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(68.

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apan

Ltd

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ati M

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(40.

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(38.

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)-

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Pvt

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G AT I A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8 4 6

TO THE BOARD OF DIRECTORS OF GATI LIMITED

We have audited the attached Consolidated Balance Sheet of Gati Limited (the Parent Company) and its subsidiary companies collectively called the ‘Gati Group’ as on 30th June, 2008, the Consolidated Profi t & Loss Account and the Consolidated Cash Flow Statement for the year ended on that date annexed thereto. These Financial Statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these fi nancial statements based on our audit.

1. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. An audit also includes assessing the accounting principles used and signifi cant estimates made by management, as well as evaluating the overall fi nancial statements presentation. We believe that our audit provides a reasonable basis for our opinion.

2. The fi nancial statements of the Branches, Subsidiary and Associate Companies have been audited by others auditors whose reports have been furnished to us and our opinion is based solely on the reports so furnished.

3. We report that the consolidated fi nancial statements have been prepared by the Company’s management in accordance with the requirements of the Accounting Standard (AS-21), Consolidated Financial Statements, issued by the institute of Chartered Accountants of India.

Based on our audit and on consideration of reports of other auditors on separate fi nancial information of the components, and to the best of our information and according to the explanations given to us, we are of the opinion that the attached Consolidated Financial Statements, read together with paragraph 2 above, give a true and fair view in conformity with the accounting principle generally accepted in India.

a) In the case of Consolidated Balance Sheet of the state of affairs of the Gati Group as at 30th June, 2008,

b) In the case of Consolidated Profi t and Loss Account of the profi t of the Gati Group for the year ended on thatdate, and

c) In the case of Consolidated Cash Flow Statement of the cash fl ows of the Gati Group for the year ended onthat date.

For R. S. Agarwala & Co. Chartered Accountants

Camp : Secunderabad Date : August 1, 2008 R. S. Agarwala Partner Membership No. F-5534

Auditors’ Report

4 7 A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8

Consolidated Balance Sheet as on 30th June, 2008

(Amount in Rs. Lakhs)

Schedule 30th June, 2008 30th June, 2007

SOURCES OF FUNDSShareholders’ FundsShare Capital 1 1,693.11 1,447.71 Reserves & Surplus 2 28,049.24 16,018.35

29,742.35 17,466.06 Loan FundsSecured Loans 3 12,238.85 6,786.65 Unsecured Loans 4 11,379.03 12,231.04

23,617.89 19,017.69 Minority Interest 177.45 -Deferred Tax Liability 5 748.37 606.37

Total Funds Employed 54,286.06 37,090.12

APPLICATION OF FUNDSGoodwill on consolidation 1,603.55 117.71Fixed AssetsGross Block 6 32,436.69 20,133.69 Less: Depreciation 6,852.47 4,713.99 Net Block 25,584.21 15,419.70 Capital Work-in-Progress 6,295.29 7,190.61

31,879.50 22,610.31

Investments 7 2,035.67 2,052.00

Current Assets, Loans and AdvancesInventories 8 346.20 220.93 Sundry Debtors 9 12,121.36 7,589.11 Cash and Bank Balances 10 1,639.12 4,821.62 Loans and Advances 11 13,881.31 3,275.63

27,987.99 15,907.29 Less: Current Liabilities and ProvisionsLiabilities 12 5,357.40 2,441.24 Provisions 13 3,863.26 1,236.45 9,220.66 3,677.69 Net Current Assets 18,767.34 12,229.60 Translation Assets - 80.50Total Assets (Net) 54,286.06 37,090.12

Notes on Accounts 22

Schedules 1 to 13 and Schedule 22 referred to above, form part of the Consolidated Balance Sheet

In terms of our Report of even date attached For and on behalf of the Board

For R. S. Agarwala & Co. A. S. Sandhu K. L. Chugh Mahendra AgarwalChartered Accountants Chief Finance Offi cer Chairman Managing Director & CEO & Company Secretary

R. S. Agarwala N. SrinivasanPartner Director

Camp: Secunderabad SecunderabadAugust 1, 2008 August 1, 2008

G AT I A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8 4 8

(Amount in Rs. Lakhs)

Consolidated Profi t and Loss Account for the year ended 30th June, 2008

Schedule 30th June, 2008 30th June, 2007

IncomeFreight & Warehousing 14 60,153.18 46,904.78Sales 11,530.65 9,892.22Other Income 15 2,430.67 417.28Total 74,114.50 57,214.28

ExpenditureCost of Sales 16 11,311.25 9,739.10Operating Expenses 17 40,695.62 30,821.30Personnel Expenses 18 7,565.41 6,073.20Administrative Expenses 19 5,643.44 4,441.78Advertisement Expenses 855.01 746.52Repairs & Maintenance Expenses 20 754.53 637.23Interest (Net) 21 1,132.91 587.01Depreciation 1,855.42 1,120.98Total 69,813.59 54,167.12

Profi t Before Tax & Exceptional Items 4,300.91 3,047.16

Exceptional Items (Note 4) (1,508.24)

Profi t Before Tax 2,792.67 3,047.16

Provision for TaxCurrent Tax 602.65 819.27Deferred Tax 142.00 24.00Fringe Benefi t Tax 70.47 61.16Profi t for the year 1,977.55 2,142.73

Balance Brought Forward From Previous Year 443.90 326.19

Balance Available for Appropriation 2,421.45 2,468.92

APPROPRIATIONSProposed Dividend 677.24 579.08Tax on Dividend 115.10 98.42Tonnage Tax Reserve 454.33 170.80General Reserve 1,000.00 1,176.72Balance Carried to Balance Sheet 174.78 443.90

2,421.45 2,468.92Earning per Share 2.48 3.01Notes on Accounts 22

Schedules 14 to 22 referred to above, form part of the Consolidated Profi t and Loss Account

In terms of our Report of even date attached For and on behalf of the Board

For R. S. Agarwala & Co. A. S. Sandhu K. L. Chugh Mahendra AgarwalChartered Accountants Chief Finance Offi cer Chairman Managing Director & CEO & Company Secretary

R. S. Agarwala N. SrinivasanPartner Director

Camp: Secunderabad SecunderabadAugust 1, 2008 August 1, 2008

4 9 A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8

(Amount in Rs. Lakhs)

Schedules to the Consolidated Accounts

30th June, 2008 30th June, 2007

(1) Share Capital

Authorised100,000,000 Equity Shares of Rs. 2 each 2,000.00 2,000.0010,00,000 Redeemable Preference Shares of Rs. 100 each 1,000.00 1,000.00

3,000.00 3,000.00Issued, Subscribed and Paid-up:846,55,330 (previous year - 723,85,545) Equity Shares of Rs. 2 each fully paid up: 1,693.11 1,447.71

Of the above:125,09,495 shares were allotted for consideration other than cash as per the Scheme of Arrangement.

139,27,500 shares were issued as fully paid bonus shares by capitalisation of Share premium.

During the year following shares were issued:

7,68,800 shares on vesting of Employees’ Stock Options

97,14,185 shares on Conversion of Warrants

17,86,800 shares on conversion of FCCBs

The company has granted options under the Companies Employees stock options Scheme and 2818580 options (including 105000 options to non-promoter Directors) are outstanding as at 30th June 2008. Of this 771034 options will vest in 2008-09, 1159752 options in 2009-10, 665554 options in 2010-11 and 222240 options in 2011-12.

Balance on1st July, 2007 Additions Deductions 30th June,

200830th June,

2007

(2) Reserves & Surplus

Capital Reserves:

Revaluation Reserve 694.52 - 1.27 (a) 693.26 694.52

Securities Premium 8,410.21 10,753.35 (b) 436.04 (c) 18,727.52 8,410.21

Employees’ Stock Option 144.67 91.89 (d) 47.76 (e) 188.80 144.67

Translation Reserve 47.03 (f) 47.03

Others 1.25 438.48 (g) - 439.72 1.25

Total 9,250.65 11,330.75 485.07 20,096.33 9,250.65

Revenue Reserves:

General Reserve 5,600.00 1,000.00 (h) - 6,600.00 5,600.00

Shipping Business Reserve (utilised) 350.00 - - 350.00 350.00

Tonnage Tax Reserve 373.80 454.33 (h) - 828.13 373.80

Profi t and Loss Account - - - 174.78 443.90

Total 6,323.80 1,454.33 - 7,952.91 6,767.70

Grand Total 15,574.45 12,785.08 485.07 28,049.24 16,018.35

(a) Transferred to Profi t and Loss Account being depreciation provided on revalued amount.

(b) On vesting of Stock Options, Conversion of Warrants and FCCBs.

(c) Provision for pro-rata premium on redemption of FCCBs.

G AT I A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8 5 0

(d) In respect of options granted under the Companies Employees Stock Options Scheme and in accordance with the guidelines issued by Securities and Exchange Board of India the accounting value of options (based on market value of share on the date of grant of options minus the option price) is accounted as deferred employees compensation which is amortised on a straight line basis over the vesting year. Consequently salaries, wages and bonus includes Rs. 91,89,929/- (Previous Year Rs. 101,09,889/-), being amortisation of deferred employee compensation after adjusting for reversal on account of options left.

(e) Transferred to Securities Premium on vesting of 768800 options during the year.

(f) In respect of translation of Foreign Currency into Indian Rupees.

(g) Transfer to Capital reserve on forfeiture of 4872000 convertible warrants.

(h) Transferred from Profi t and Loss Account.

(Amount in Rs. Lakhs)

Schedules to the Consolidated Accounts

30th June, 2008 30th June, 2007

(3) Secured Loans

TERM LOANS :From BanksAgainst fi rst charge by way of Mortgage/Hypothecation of specifi ed fi xed assets and other assets acquired there against(Repayable within one year - Rs. 1,145.13 lakhs; previous year - Rs. 1,083.29 lakhs)

6,978.17 3,704.68

Secured by hypothecation of Motor Trucks, Motor Cars and Computer equipments acquired there against(Repayable within one year - Rs. 318.13 lakhs; previous year - Rs. 311.55 lakhs)

858.25 950.79

From OthersSecured by hypothecation of specifi ed immovable asset(Repayable within one year - Rs. 4.34 lakhs; previous year - Rs. 6.29 lakhs)

89.83 91.93

Working Capital LoansFrom BanksSecured against fi rst charge by way of hypothecation of all current assets including book debts, stocks and equitable mortgage of specifi ed immovable assets of the Company and of third parties

4,312.60 2,039.24

12,238.85 6,786.65 In addition, loans to the extent of Rs. 10,249.04 lakhs are also guaranteed by the Managing Director (Promoter)

30th June, 2008 30th June, 2007

(4) Unsecured Loans

Fixed Deposits 897.46 1000.95Advances against Convertible Warrants 0.00 1296.09Foreign Currency Convertible Bonds (FCCB) 6,442.50 8,934.00

Short Term Loans and Advances

From Banks (a) 4,000.00 1,000.00From Others 39.07(a) Guraranteed by the Managing Director (Promoter) to the extent of Rs. 2,500 lakhs

11,379.03 12,231.04

At 1st July, 2007 Current Year 30th June,

200830th June,

2007(5) Deferred Tax Liability

Difference between book and Tax Depreciation 606.37 142.00 748.37 606.37

5 1 A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8

Sche

dule

s to

the

Con

solid

ated

Acc

ount

s

(Am

ount

in R

s. La

khs)

6. F

ixed

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G AT I A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8 5 2

(Amount in Rs. Lakhs)

Schedules to the Consolidated Accounts

30th June, 2008 30th June, 2007

(7) Investments (At Cost)

Long term - Non-tradeFully Paid-up Equity SharesQuoted16,00,300 of TCI Finance Ltd. of Rs. 10/- each. 143.89 143.89

100 shares of State Bank of India Ltd. 0.10

Unquoted1,87,50,000 of Gati Infrastructure Ltd. of Rs.10/- each 1,875.00 1,875.00

Gati Thailand Ltd. - 12.03

Government Securities (Unquoted)3 11.50% PSEB-2010 Bonds of Rs. 5 lakhs each 15.74 15.74

5 12.20% HPRIDC Bonds of Rs. 1 lakhs each 0.95 2.37

3 11% GEB Bonds of Rs. 1 lakhs each 2.97

16.68 21.082,035.67 2,052.00

Market value of quoted investments 311.40 438.48

(8) Inventories(As taken, valued and certifi ed by the Management)Diesel, Petrol, etc. (at lower of cost and net realisable value) 44.18 25.82Stores & Spare Parts (at cost) 302.02 195.11

346.20 220.93

(9) Sundry Debtors (Unsecured - Considered Good)Outstanding for more than six months 310.57 181.38Others 11,810.79 7,407.73

12,121.36 7,589.11(10) Cash And Bank Balances

Cash in Hand 231.21 112.40Cheques in Hand 386.55 235.06Remittance in Transit 323.16 347.88With Scheduled Banks:In Current Accounts 382.47 989.90In Deposit Accounts (a) 256.52 3,093.96In Unpaid Dividends Accounts 54.00 42.08With Non-Scheduled Banks

Bhutan National Bank - Rs. 0.39 lakhs (maximum balance - Rs. 5.86 lakhs) 5.23 0.34Everest Bank Limited - Rs. 2.73 lakhs (maximum balance - Rs. 3.93 lakhs)SCB, Singapore - Rs. 2.11 lakhs (maximum balace Rs. 152.03 lakhs)

1,639.12 4,821.62a) Some of the Fixed Deposit Receipts are deposited with banks against guarantees

issued

(11) Loans And Advances (Unsecured-Considered Good)Loans 1,048.70 1,046.68Advances Recoverable in Cash or in Kind or for Value to be Received 2,366.58 1,173.88Advances and Deposits 1,636.34 831.13Consideration for assignment of right to a ship under construction receivable 7,688.10

Tax Deducted at Source 1,141.59 223.94

13,881.31 3,275.63

5 3 A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8

(Amount in Rs. Lakhs)

Schedules to the Consolidated Accounts

30th June, 2008 30th June, 2007

(12) Liabilities

Sundry Creditors 1,877.43 918.50Due For purchase of vessel under construction 1,655.00Other Liabilities 1,200.39 990.71Interest Accrued on Loans 37.25 46.24Security Deposits 533.33 443.71Unpaid/Unclaimed Dividends 54.00 42.08There are no amounts pending to be transferred to Investor Education andProtection Fund

5,357.40 2,441.24

(13) ProvisionsTaxation (Net of Payments) 573.41 (0.44)Gratuity and Leave Encashment 170.23 176.39Premium on redemption of Foreign Currency Convertible Bonds 819.03 383.00Provision for Derivatives 1,508.24Proposed Dividend 677.24 579.08Tax on Dividend 115.10 98.42

3,863.26 1,236.45

(14) Freight & WarehousingFreight, Miscellaneous Charges, etc. (a) 52,292.87 40,065.75(Tax deducted - Rs. 784.44 lakhs; previous year - Rs. 76.83 lakhs)Warehousing Charges 625.48 519.71(Tax deducted - Rs. 44.55 lakhs; previous year - Rs. 24.35 lakhs)

Shipping Freight, Charter Hire, Miscellaneous Charges (a) 7,234.84 6,319.32(Tax deducted - Rs. 26.97 lakhs; previous year - Rs. 1.35 lakhs)(a) Includes Demurrage of Rs. 320.55 lakhs; previous year - Rs. 238.42 lakhs,)

60,153.18 46,904.78

(15) Other IncomeRent 15.60 15.30(Tax deducted - Rs. 2.33 lakhs; previous year - Rs. 0.12 lakhs)Miscellaneous Income 295.91 377.15Profi t on assignment of right to a ship under construction. 1,815.51Profi t on sale of other Assets 0.09Difference in Exchange (Net) (a) 303.56 24.83a) Includes Rs. 269.44 lakhs on translation of foreign currency monetary items 2,430.67 417.28

(16) Cost of SalesOpening Stock 67.94 52.37Purchases 11,309.66 9,728.88

11,377.60 9,781.25Less: Closing Stock 66.35 42.15

11,311.25 9,739.10

(17) Operating ExpensesFreight 33,584.82 24,597.45Vehicles’ Trip Expenses 1,252.32 782.40Tyres & Tubes 39.79 22.57Warehouse Rent 242.37 131.41Other Operating Expenses 1,415.14 1,759.51

G AT I A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8 5 4

Schedules to the Consolidated Accounts

(Amount in Rs. Lakhs)

30th June, 2008 30th June, 2007

Operating Expenses

Claims for Loss & Damages (Net) 51.43 100.83Commission 4.44 3.06Vehicles’ Taxes 49.10 34.89Vehicles’ and Ships Insurance 108.48 91.37Power, Fuel and Water Expenses 1,153.47 1,113.69Stores & Spare Parts Consumed 218.83 162.92Port & Survey Expenses 2,575.42 2,021.20

40,695.62 30,821.30

(18) Personnel ExpensesSalaries, Wages & Bonus (includes leave encashment) 6,626.77 5,416.00Gratuity 109.83 69.59Contribution to Provident & Other Funds 243.65 204.16Contribution to Employees’ State Insurance 54.87 53.47Other Personnel Expenses 530.28 329.98

7,565.41 6,073.20

(19) Administrative ExpensesRent 1,129.70 795.73Rates and Taxes 28.85 11.75Insurance (includes Rs. 20 lakhs towards Keyman Insurance Policy) 130.72 129.01Telephone Expenses 282.43 246.58Printing and Stationery 355.73 374.51Travelling Expenses 609.77 604.32Legal Expenses 76.28 55.73Offi ce Maintenance and Repairs 736.13 585.06Miscellaneous Expenses 2,055.07 1,384.23Remuneration to Directors:

Salaries & Allowances 97.80 71.77Commission 42.90 42.90Fees 11.90 8.00

Remuneration to Auditors:For Audit 18.12 8.00For Tax Audit 3.78 3.78For Certifi cation 1.00 2.89

Bad Debts and irrecoverable Balances Written Off (Net) 14.14 77.91Charity & Donations 49.12 38.80Loss on sale of Fixed Assets (Net) - 0.81

5,643.44 4,441.78

(20) Repairs & Maintenance ExpensesTrucks 190.10 71.64

Other Vehicles 96.11 78.71

Plant & Machinery 34.91 30.08

Buildings 17.65 12.79

Computers 157.58 203.63

Ships 76.42 86.91

Dry Docking 181.76 153.47

754.53 637.23

5 5 A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8

(Amount in Rs. Lakhs)

Schedules to the Consolidated Accounts

30th June, 2008 30th June, 2007

(21) Interest

Fixed Loans 1,128.83 617.67Debentures 62.52 67.31Fixed Deposits 72.41 97.10Others 78.31 59.53

1,342.07 841.61Less: Interest Received (a) 209.16 254.60(Tax deducted - Rs. 32.07 lakhs; previous year - Rs. 25.70 lakhs) 1,132.91 587.01(a) Includes Rs. 4.15 lakhs from Investments in Government Securities; previous year - Rs. 2.14 lakhs)

22. Notes on Accounts

1 The Consolidated Financial statements include results of all the subsidaries and associates of Gati Ltd.

Name of the Company Country of origin % of share holding Consolidated as

Newatia Commercial & Trading Pvt. Ltd. India 100% held by Parent Subsidary

Trymbak Commercial & Trading Pvt. Ltd. India 100% held by Parent Subsidary

Ocimum Commercial & Trading Pvt. Ltd. India 100% held by Parent Subsidary

Sumeru Commercial & Trading Pvt. Ltd. India 100% held by Parent Subsidary

Kausar India Ltd. India 73.72% held by parent Subsidary

Gati Import Export Trading Ltd. India 100% held by Parent Subsidary

Zen Cargo Movers Pvt. Ltd. India 97.24% held by Parent Subsidary

Gati Skyways Ltd. India 100% held by Parent Subsidary

Gati Holdings Ltd. (GHL) Mauritius 100% held by Parent Subsidary

Gati Asia Pacifi c Pte Ltd. Singapore 100% held by GHL Subsidary

Gati Hong Kong Ltd. Hongkong 100% held by GHL Subsidary

Gati China Holdings Ltd. (GCHL) Mauritius 100% held by GHL Subsidary

Gati Middle East FZE Ltd. UAE 100% held by GHL Subsidary

Gati Cargo Express (Shanghai) Co. Ltd. China 100% held by GCHL Subsidary

Gati Japan Ltd. Japan 100% held by GHL Subsidary

ITAG Infrastructure Ltd. India 30% held by Parent Associate

1) The Financial Statements of Kausar India Ltd. are prepared for the period 1st April, 2007 to 30th June, 2008.

2) The accounts of the Subsidiaries/Associate companies have been audited by the respective statutory auditors and the fi nancial statements of these companies have been considered in consolidation.

3) The consolidated fi nancial statements have been prepared on the following principles:

a) In respect of subsidary company, the fi nancial statements have been consolidated on a line by line basis by adding together the book values of like items of Assets , Liabilities, Income and expenses, after fully eliminating intra-group balances and unrealised profi ts/losses on Intragroup transactions as per Accounting Standard 21 “Consolidated Financial Statement”.

b) Incase of foreign subsidaries being non-integral foreign operations, revenue items are consolidated at the average rate prevailing during the year. All assets and liabilities are converted at the rate prevailing at the end of the year.Any exchange difference arising on consolidation is recognises as “Translation Reserve/Asset”.

c) The excess of cost to the company of its investment in subsidary and Associate is recognised in the fi nancial statements as goodwill, which is tested for impairment on every Balance Sheet date.

The excess of company’s share of equity and reserves of the subsidary and associate companies over the cost of acquisition is treated as capital reserve.

G AT I A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8 5 6

Schedules to the Consolidated Accounts

2. Tax provision in these accounts has been made considering the working results for the year ended 30th June, 2008. The actual tax liability will be determined on the basis of tax accounting year ended 31st March, 2008 (Asst. Year 2008-09).

3. The Company issued 15,71,185 convertible warrants on 2nd March, 2006 and 25,00,000 convertible warrants on 16th Sept., 2006 at Rs. 84.61 per warrant on preferential basis to The Infrastructure Fund of India LLC and Mahendra Investment Advisors Pvt. Ltd. Further, the company also issued 34,50,000, 70,00,000 and 10,50,000 convertible warrants at Rs. 90/- per warrant on preferential basis to Mr. Mahendra Agarwal, Mahendra Investment Advisor Pvt. Ltd. and The Infrastructure Fund of India LLC respectively on 23rd October, 2006. Each warrant is convertible at the option of the warrant holder within an aggregate time period of 18 months from the date of allotment. Out of 95,00,000 convertible warrants allotted to Mahendra Investment Advisor Pvt. Ltd. 9,85,000 convertible warrants were converted into equity shares on 29th March, 2007. During the year, out of 95,00,000 convertible warrants allotted to Mahendra Investment Advisors Pvt. Ltd., 15,15,000 convertible warrants were converted into equity shares on 1st September, 2007, 24,93,000 convertible warrants were converted into equity shares on 31st March, 2008, 18,50,000 convertible warrants were converted into equity shares on 22nd April, 2008 and balance 26,57,000 convertible warrants were forfeited and the forfeited amount has been transferred to Capital Reserve. Out of 26,21,185 convertible warrants issued to The Infrastructure Fund of India LLC, 15,71,185 warrants were converted into equity shares on 1st September, 2007 and balance warrants on 22nd April, 2008. Out of 34,50,000 convertible warrants issued to Mr. Mahendra Agarwal, 12,35,000 convertible warrants were converted into equity shares on 22 April, 2008 and balance 22,15,000 warrants were forfeited and the forfeited amount has been transferred to Capital Reserve.

(Amount in Rs. Lakhs)

30th June, 2008 30th June, 2007

4. Pursuant to the announcement on “Accounting of Derivatives” by the Institute of Chartered Accountants of India, Mark-to-Market losses on the derivative instruments outstanding as at June 30, 2008 aggregate to Rs. 1508.24 lakhs is charged to profi t and loss account as an exceptional item.

5. In the opinion of the Board of Directors, the current assets, loans and advanceshave a value on realisation in the ordinary course of business atleast equal to the amount at which they are stated.

6. Earning per sharesNo. of equity shares outstanding (Nos. in lakhs) 846.55 723.86Net profi t after tax available for equity shareholders (Rs. in lakhs) 1,977.55 2,142.73Basic earnings per share of Rs. 2/- each (Rs.) 2.48 3.01Diluted earnings per share of Rs. 2/- each (Rs.) 2.40 2.68The Equity Shares of Rs. 10/- each have been sub-divided into 5 EquityShares of Rs. 2/- each pursuant to the resolution passed by the Shareholders at their Extra-Ordinary General Meeting held on 25th February, 2006

7. During the year 2006-07 the Company issued Foreign Currency Convertible Bonds (FCCB) of a face value of US $ 1000 each aggregating to US $ 20 million. As per the terms of the issue, the holders have an option to convert the FCCB into Ordinary Shares at an conversion rate of Rs. 125 per Ordinary Share at a fi xed exchange rate conversion of Rs. 44.67 = US $ 1, from 20th December, 2006 to 5th November, 2011. The conversion price will be reset periodically to the average closing price of the shares on the reset date, and it has been presently reset at Rs. 112.50 per share. Unless previously converted, the Company will redeem these bond at 147.88 per cent of the principal amount on 6th December, 2011. During the year FCCB of US $ 5 million was converted and 1786800 shares were alloted.

8. Net proceeds received on issue of FCCB has been fully utilised for the specifi ed purpose.

9. The company is in the process of compiling relevant information from suppliers for their status under Micro, Small and Medium Enterprises Development Act, 2006. Since the relevant information is not readily available, the disclosure regarding the unpaid amount and interest paid and payable could not be given.

10. Estimated amount of contracts remaining to be executed on capital account and not provided for

5,264.82 6,189.41

11. Previous year’s fi gures have been regrouped/rearranged wherever necessary

12. Contingent Liability not provided for in respect of

Income Tax demands under dispute Nil 44.75

Guarantees and Counter Guarantees outstanding 1,665.97 1,006.30

5 7 A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8

(Amount in Rs. Lakhs)

Schedules to the Consolidated Accounts

S.No. Nature of Transaction 30th June, 2008 30th June, 2007

Associates SubsidiariesA Expenditure

Rent 40.38 - 40.38 11.80

Freight & Other Charges 106.00 158.13 264.13 349.18

Port Expenses 62.30 - 62.30 130.12

Key Management Personnel

Remuneration - - 108.94 86.39

B Receipts

Freight & Other Charges - 142.72 142.72 101.25

Interest 21.52 - 21.52 41.04

Rent 66.65 6.04 72.69 149.50

C Finance & Investment

Investments 1,875.00 - 1,875.00 250.00

Share Application Money - - - 15.80

Advances given/(Repaid) - (93.85) (93.85) -

D Balance as at 30th June, 2008

Investments 1,875.00 - 1,875.00 1,825.00

Sundry Debtors - 192.94 192.94 -

Loans and Advances - 148.32 148.32 242.18

Sundry Creditors 158.14 93.25 251.39 -

Advances towards Fixed Assets - - - 461.00

Corporate Guarantees 12.20 1,653.77 1,665.97 1,006.30

13. Related Party DisclosuresRelated parties with whom transactions have taken place during the year

i) Directors/Key Management Personnel:Mr. Mahendra Agarwal (Managing Director & CEO)

ii) Associates Subsidiaries

1. Gati Intellect Systems Ltd. 1. Gati Holdings Ltd.2. TCI Finance Ltd. 2. Gati Asia Pacifi c Pte. Ltd.3. Giri Roadlines & Commercial Trading Pvt. Ltd. 3. Gati Hong Kong Ltd.4. Jubilee Commercials & Trading Pvt. Ltd. 4. Gati China Holdings Ltd.5. Gati Infrastructure Ltd. 5. Gati Middle East FZE. Ltd.6. Gati Shipping Ltd. 6. Gati Cargo Express (Shanghai) Co. Ltd.7. Gati Cargo Management Services Ltd. 7. Gati Japan Ltd.8. TCI Hi-ways Pvt. Ltd. 8. Newatia Commercial & Trading Pvt. Ltd.9. TCI Industries Ltd. 9. Trymbak Commercial & Trading Pvt. Ltd.10. Mahendra Kumar Agarwal & Sons (HUF) 10. Ocimum Commercial & Trading Pvt. Ltd.11. ITAG Infrastructure Ltd. 11. Sumeru Commercial & Trading Pvt. Ltd.12. Gati (Thailand) Ltd. 12. Kausar India Ltd. 13. Gati Import Export Trading Ltd. 14. Zen Cargo Movers Pvt. Ltd. 15. Gati Skyways Ltd.

G AT I A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8 5 8

Schedules to the Consolidated Accounts

30th June, 2008 30th June, 200714. Segment Information

Primary Business SegmentExpress Distribution & Supply Chain: Covers integrated cargo services – Road,Rail & Air Transportation.

Coast-to-Coast (Shipping): Covers Sea Transportation

1. Segment Revenue (Net Sale/Income)

a) Express Distribution & Supply Chain 52,950.83 40,585.46b) Coast-to-Coast (Shipping) 7,234.84 6,356.24c) Fuel Stations (subsidary Company) 11,530.65 9,892.22

Total 71,716.31 56,833.92

Less: Inter-Segment Revenue 32.48 36.92Net sales/income from operations 71,683.83 56,797.00

2. Segment Results Profi t before tax and interest from each Segment

a) Express Distribution & Supply Chain 6,101.83 4,058.66b) Coast-to-Coast (Shipping) 1,022.00 1,022.26c) Fuel Stations (subsidary Company) 142.00 110.43

Total 7,265.83 5,191.35

Less: i Interest (Net of Income) 1,132.91 587.01 ii Other un-allocable expenditure net of un-allocable income 1,832.00 1,557.18Add: Unallocable incomes/Losses (1,508.24)

Total Profi t Before Tax 2,792.67 3,047.16

3. Other Information

Segment Assets

a) Express Distribution & Supply Chain 38,888.68 29,111.88b) Coast-to-Coast (Shipping) 20,408.94 8,239.62c) Fuel Stations (subsidary Company) 569.88 423.91Unallocated Corporate Assets 2,035.67 4,237.46

Total Assets 61,903.16 42,012.87

Segment Liabilities

a) Express Distribution & Supply Chain 25,729.70 20,256.25b) Coast-to-Coast (Shipping) 7,696.90 2,297.15c) Fuel Stations (subsidary Company) 160.31 297.01

Total Liabilities 33,586.91 22,850.41

(Amount in Rs. Lakhs)

The company operates mainly in India and therefore there are no separate geographical segments

5 9 A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8

30th June, 2008 30th June, 2007

Secondary Business Segment

1. Segment Revenue (Net Sale/Income)

a) India 69,939.75 55,683.74

b) International 4,423.47 1,300.88

Total 74,363.22 56,984.62

Less: Inter-Segment Revenue 248.72 46.78

Net sales/income from operations 74,114.50 56,937.84

2. Segment Results

Profi t Before Tax and interest from each segment

a) India 7,544.35 5,462.26

b) International (278.52) (270.91)

Total 7,265.83 5,191.35

Less: i Interest (Net of Income) 1,132.91 587.01

ii Other un-allocable expenditure 1,832.00 1,557.18

Add: Unallocable incomes/Losses (1,508.24)

Total Profi t Before Tax 2,792.67 3,047.16

3. Other Information

Segment Assets

a) India 58,704.72 36,715.80

b) International 1,162.78 1,059.62

Unallocated Corporate Assets 2,035.67 4,237.45

Total Assets 61,903.16 42,012.87

Segment Liabilities

a) India 33,138.54 22,395.59

b) International 448.37 454.82

Total Liabilities 33,586.91 22,850.41

(Amount in Rs. Lakhs)

Schedules to the Consolidated Accounts

G AT I A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8 6 0

Schedules to the Consolidated Accounts

15. ACCOUNTING POLICIES

Recognition of Income & Expenditure

a) Income and expenditure are generally recognised on accrual basis in accordance with the applicable accounting standards and provision is made for all known losses and liabilities.

b) In Express Distribution & Supply Chain Division, Freight Income is accounted when goods are delivered by the Company to customers. In Coast-to-Coast Division, Freight Income is accounted when ships sail.

c) Freight expenses are accounted when hired vehicles deliver goods to the Company at destination.

d) Having regard to the size of operations and the nature and complexities of the company’s business, freight received/paid in advance is accounted as income/expenses on payment and interdivisional transfers are eliminiated.

e) Year-end liability in respect of claims for loss and damages is provided as calculated by claims recovery agents.

Gratuity and Leave EncashmentA provision for gratuity liability to employees is made on the basis of actuarial valuation and paid to the approved Gratuity Fund.

Provident FundProvident fund contribution is remitted to appropriate authority.

Superannuation FundSuperannuation fund contribution is remitted to approved trust fund.

Fixed Assetsa) Fixed assets are stated at cost and/or at revaluation.

b) Dry docking and other expenses at the time of acquisition of ships are capitalised.

c) Depreciation on the amount added to Fixed Assets on revaluation is adjusted by transfer of equivalent amount from revaluation reserve created on revaluation of Fixed Assets to Profi t and Loss Account.

DepreciationDepreciation is provided on straight line method at rates specifi ed in Schedule XlV to the Companies Act, 1956.

Depreciation on addition/deductions is calculated prorata from/to the date of addition/deduction.

InvestmentsInvestments are stated at cost.

Foreign Exchange TransactionForeign currency traansactions are recorded at the average rate for the month. Period end balances of monetary foreign currency assets and liabilities are restated at the closing rate. The exchange difference arising from restatement or settlement is recognised in the Profi t & Loss Account.

TaxationIncome Tax & Foreign TaxProvision for tax is made for both current and deferred taxes. Provision for current income tax is made on the current tax rates based on the working results of the year. The company provides for deferred tax based on the tax effect of timing differences resulting from the recognition of items in the accounts and in estimating its current tax provision. The effect on deferred taxes of a change in tax rate is recognised in the year in which the change is effected.Fringe benefi t tax is provided in accordance with the Income Tax Act,1961. With regard to the Foreign Subsidiaries taxation (if any) is provided based on the law of the respective Countries.

Impairment of AssetsImpairment of Assets are assessed at each balance sheet date and loss is recognised whenever the recoverable amount of an asset is less than its carrying amount.

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Schedules to the Consolidated Accounts

Accounting policies of SubsidariesSignifi cant accounting policies followed by subsidaries, to the extent, different and unique from parent.

Gati Holdings Ltd.

a) Depreciation:Depreciation on fi xed assets is calculated on a straight-line basis over the estimated useful life of the assets as follows.

Computer 3 Years

Furniture and fi ttings 3 - 4 Years

Offi ce equipment 3 - 4 Years

Motor vehicles 7 years

b) Basis of preparationThe consolidated fi nancial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS), including International Accounting Standards (IAS) and interpretations issued by the IAS Board.

Signatures to Schedules “1” to “22”

G AT I A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8 6 2

In terms of our Report of even date attached For and on behalf of the Board

For R. S. Agarwala & Co. A. S. Sandhu K. L. Chugh Mahendra AgarwalChartered Accountants Chief Finance Offi cer Chairman Managing Director & CEO & Company Secretary

R. S. Agarwala N. SrinivasanPartner Director

Camp: Secunderabad SecunderabadAugust 1, 2008 August 1, 2008

Consolidated Cash Flow Statement

(Amount in Rs. Lakhs)

30th June, 2008 30th June, 2007

A. Cash Flow from Operating Activities:Net Profi t before Tax 4,300.91 3,047.15Depreciation 1,855.42 1,120.98Loss on Sale of Fixed Assets 0.81Effect of exchange difference (303.56) (24.83)Interest Payments 1,342.07 841.61Interest Received (209.16) (254.60)Operating Profi t before Working Capital Changes 6,985.68 4,731.12Adjustment for:

Increase/Decrease in Trade and other Receivables (4,532.25) (2,030.81)Increase/Decrease in Trade Payables and other Liabilities 2,910.00 1,737.45Increase/Decrease in Inventories (125.27) (17.48)Loans & Advances (10,605.68) (377.89)Interest on Borrowings (1,342.07) (841.61)Tax Paid (99.27) (997.77)Net Cash from Operating Activities (6,808.87) 2,203.01

B. Cash Flow from Investing ActivitiesPurchase of Fixed Assets (Including Capital Advances) (11,962.55) (9,496.70)Sale of Assets 837.93 112.35Increase in Investments 16.33 (250.00)Redemption of Investments in Government Securities 1.42 1.71Interest Received 209.16 254.62Net Cash from Investing Activities (10,897.71) (9,378.02)

C. Cash Flow from Financing ActivitiesReceipt/repayment of Secured Loans 5,452.20 2,616.29Receipt/repayment of Short term Unsecured Loans (413.53) 9,207.67Increase in Equity (including ESOS) 9,778.83 (463.47)Dividend Paid (including Tax) (677.50) (565.67)

Net Cash from Financing Activities 14,140.01 10,794.82

Effect of exchange difference 384.06 (135.04)

Net Increase in Cash & Cash Equivalent (A+B+C) (3,182.51) 3,484.77

Cash & Cash Equivalent - Opening Balance 4,821.62 1,336.85Cash & Cash Equivalent - Closing Balance 1,639.12 4,821.62

This is the Consolidated Cash Flow Statement referred to in my report of even date

In terms of our Report of even date attached For and on behalf of the Board

For R. S. Agarwala & Co. A. S. Sandhu K. L. Chugh Mahendra AgarwalChartered Accountants Chief Finance Offi cer Chairman Managing Director & CEO & Company Secretary

R. S. Agarwala N. SrinivasanPartner Director

Camp: Secunderabad SecunderabadAugust 1, 2008 August 1, 2008

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Regd. & Head Offi ce:Gati Limited1-7-293, M.G. Road, Secunderabad - 500 003. A.P. IndiaTel: 91-40-27844284, 27843788 Fax: 91-40-27894284

Call Free No: 180-0-180-4284, Mobile No: 98603 54284, www.gati.com

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