Prajay Engineers Syndicate Ltd. AR 2008 09

Challenging the challenge

Activity Report and Financial Statements 2008-09PRAjAy EnginEERS SyndiCAtE LimitEd

Forward Looking StatementIn this Annual Report, we have disclosed forward-looking information to enable investors to comprehend our prospects and take informed investment decisions. This report and other statements - written and oral - that we periodically make, contain forward-looking statements that set out anticipated results based on the managements plans and assumptions. We have tried wherever possible to identify such statements by using words such as anticipate, estimate, expects, projects, intends, plans, believes, and words of similar substance in connection with any discussion of future performance.

We cannot guarantee that these forward-looking statements will be realised, although we believe we have been prudent in assumptions. The achievement of results is subject to risks, uncertainties and even inaccurate assumptions. Should known or unknown risks or uncertainties materialise or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected. Readers should bear this in mind.

We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

C ntEntS 2 Profile of the Board of Directors and Senior Management Team 4 Directors Report 8 Management Discussion and Analysis 16 Report on Corporate Governance 27 Standalone Financial Statements 27 Auditors Report

30 Balance Sheet

31 Profit and Loss Account

32 Schedules

52 Cash Flow Statement

53 Balance Sheet Abstract

54 Statement under section 212

55 Consolidated Financial Statements 55 Consolidated Auditors Report

56 Consolidated Balance Sheet

57 Consolidated Profit and Loss Account

58 Consolidated Schedules

75 Consolidated Cash Flow Statement

76 Notice

BOARD OF DIRECTORS

D. S. Chandramohan Reddy, Managing Director

D. Vijaysen Reddy, Executive Director

K. Ravi Kumar, Technical Director

Sumit Sen - Director, Sales and Marketing

N. Ravinder Reddy, Whole Time Director and Chief Financial Officer

Chakradhar Reddy, Independent Director

Vijay Kishore Mishra, Independent Director

N. Nageshwara Rao, Independent Director

Rudresh, Independent Director

HEAD - CORPORATE FINANCE

Santosh Rathi

REGISTERED OFFICE

4-1-2/4, Eden Garden Road,

Ramkote, Hyderabad 500 001

AUDITORS

Deloitte Haskins & Sells

Chartered Accountants

BANKERS

Indian Overseas Bank, Alwal Branch, Secunderabad.

The Hong Kong and Shanghai Banking Corporation Limited (HSBC), Somajiguda, Hyderabad.

Punjab National Bank, Mid Corp Branch, B. Hills, Hyderabad.

State Bank of India, Industrial Finance Branch, Somajiguda, Hyderabad.

State Bank of Mysore, Secunderabad.

Tamilnad Mercantile Bank Limited, Secunderabad.

State Bank of Bikaner and Jaipur, Secunderabad.

Tata Capital Limited

REGISTRAR AND SHARE TRANSFER AGENTS

Sathguru Management Consultants Private Limited

Plot No. 15, Hindi Nagar,

B/H Sai Baba Temple,

Punjagutta, Hyderabad 500 034

Tel: 91-040-23356507, 23350586, 23356975

Fax: 91-40-23354042

Email: [email protected]

LISTING

The Bombay Stock Exchange Limited

National Stock Exchange of India Limited

Corporate Information

2 | Annual Report 2008-09

Profile of the Board of Directors and Senior Management Team

D. S. Chandramohan Reddy, Managing Director

A commerce graduate, Mr. Reddy began his career as a civil sub contractor in the year 1974 till 1982 and gained wide experience in this period. He is the guiding force behind Prajay and has led the Company successfully from its humble beginnings to its present stature. He is involved with formulating Prajays overall vision and shaping its strategy. Alert to every opportunity and ready to accept all the challenges, he has been able to diversify the Companys activities into various fields, branding each with his dynamism.

D. Vijaysen Reddy, Executive Director

A qualified Chartered Accountant, Mr. Reddy is a widely respected figure in the construction industry. His rich experience drives the successful completion of projects at Prajay. He is also involved with the expansion strategy of the Company and is entrusted with the responsibility of identifying new ventures. He oversees the entire construction activities while his specialized training and broad vision helps energise the Prajay team.

K. Ravi Kumar, Technical Director

A qualified civil engineer, M. Tech and D. Arch., he brings a repository of technical expertise in construction and guides the adoption of progressive building practices to Prajay, steering innovation and quality in the Company.

Sumit Sen, Director - Sales and Marketing

A Post Graduate in Commerce and a diploma holder in Marketing and Personnel Management, he has served the Indian Air Force for 15 years and secured a diploma in Mechanical Engineering while in service. He is responsible for creating the sales strategy, identifying consumer trends and creating projects around these. He is also oversees the administrative functions. His expertise lies in appropriate pricing and financial structuring.

N. Ravinder Reddy, Whole Time Director and Chief Financial Officer

A Management graduate, he is responsible for the overall operations and also steers the hospitality division of the Company. His knowledge of contemporary management practices and financial systems is of immense help to the Company. He is driving the new initiatives of the Company in identifying and executing hotel projects.

Non-executive directorsVijay Kishore Mishra, Independent Director

A qualified chartered accountant, with 22 years of professional experience in the field of finance and taxation, Mr. Mishra guides the Company in matters of accounting and taxation harnessing his vast experience in these areas.

N. Nageshwar Rao, Independent Director

A renowned figure in the hospitality business, Mr. Rao helps the Company in shaping its strategy for the hotels division. It benefits from his rich experience and insight into the hospitality industry in the country.

Rudresh, Independent Director

An architect who has executed many widely-acclaimed projects in Bangalore, Mr. Rudreshs presence on the Board enables Prajay to strengthen its design capabilities and explore newer markets in and around Bangalore.

Prajay Engineers Syndicate Limited | 3

Chakradhar Reddy, Independent Director

A commerce graduate with more than 15 years experience in Government Contract works and civil works, including road construction, Mr. Reddys presence enables the Company to strengthen its compliance functions.

Senior ManagementSantosh Kumar Rathi, Head-Corporate Finance

A post graduate in commerce and a CAIIB, Mr. Rathi has rich banking experience at senior levels in various nationalised and private banks. He oversees the corporate finance functions of the Company and steers resource mobilisation. He is additionally responsible for maintaining investor relations.

Subid Sen, General Manager (Projects)

A Mechanical Engineer, Mr. Sen was a Wing Commander with the Indian Air Force. He has over 20 years of experience. He is responsible for overseeing the projects activities and ensuring timely execution.

Joseph Reverdo, General Manager (Operations)

With 30 years of experience in the hospitality industry, Mr. Reverdo has been associated with in a number of well-known establishments in the country and abroad, prior to joining Prajay where he is responsible for hospitality services.

Bhaskara Rao, General Manager (Accounts)

A graduate in commerce, member of ICWAI and a LLB degree-holder, Mr. Raos experience spans 25 years and various industries. He is in charge of a wide range of finance and accounting responsibilities, in addition to serving as a liaison with banks and maintaining statutory compliances.

C.N. Rao, Deputy General Manager (Accounts)

An Honours graduate in Commerce and a member of ICAI, Mr. Rao has wide industrial and banking experience of more than 19 years. He is responsible for liaisoning with banks, institutions and overall co-ordination in finance and accounts department.

Sujatha Rao, Deputy General Manager (Projects)

A diploma holder in architecture with 22 years of experience in construction industry in administering various projects from design to conceptualisation using latest technical methods, Ms. Rao is responsible for coordinating various projects, structural designs and other allied activities.

Madhavi Latha, Company Secretary

A qualified member of institute of company secretaries of India (ICSI) with 4 years of working experience in software and construction industry, Ms.Lathas experience of handling various issues under companies act, SEBI and listing agreement helps the company to have good compliance of corporate governance and other statues.


To

The Members,

Your Directors have pleasure in presenting the 15th Annual Report together with the Audited Accounts for the year

ended 31st March 2009.

FINANCIAL RESULTS

Your companys performance during the year as compared with that during the previous year is summarized below:

Rs. in Lacs

Particulars Year ended 31st March 2009 Year ended 31st March 2008

Standalone Consolidated Standalone Consolidated

Gross Turnover 8283.60 8285.82 34493.62 34542.62

Profit before interest and Depreciation 2296.12 2133.04 13881.45 13781.98

Depreciation 402.71 408.24 225.24 225.85

Profit before Tax 143.86 (273.64) 12747.52 12647.18

Provision for taxation 242.47 245.33 2460.87 2460.91

Profit after tax (98.61) (518.97) 10286.65 10186.27

Transfer to General Reserve 1030.00 1030.00

Dividend 1213.62 1213.62

EPS

Basic (0.25) (1.31) 37.46 37.10

Diluted (0.25) (1.31) 37.46 37.10

Against all odds viz. Subprime crisis in US, Credit crisis, market crashes, tight credit access, weaker growth and

recession in global markets especially in Realty sector in India, your Company could manage to report a gross turnover

of Rs. 8283.60 lacs against a turnover of Rs. 34493.62 Lacs for the previous year and made a profit before tax of

Rs. 143.86 lacs against profit before tax of Rs. 12747.52 Lacs for the previous year.

For detailed analysis of the performance, please refer Managements Discussion and Analysis section of the Annual

Report.

DIVIDEND

Keeping in view the expansion plans & other significant capital expenditure programmes, your directors have, after due

deliberations, decided to plough back the funds available and hence, do not recommend any dividend for the financial

year 2008-09.

DEPOSITS

During the year under review, the company has not accepted any fresh deposits as per the provisions of Companies

Act, 1956 and Companies (Acceptance of deposits) Rules, 1975. There are no unclaimed or overdue deposits during the

year under review

Directors, Report


DIRECTORS

Sri Kartik Vijay Punjabi has resigned from the Board effective from 31st August 2009 and the board places on record

its appreciation for the valuable services rendered by him during his tenure.

In accordance with the provisions of the Companies Act, 1956, Sri D. Chakradhar Reddy, Sri Rudresh Veerabhadrappa,

Directors retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for

reappointment and therefore the board recommends their re-appointment at the ensuing Annual General Meeting.

The brief resume/details relating to Directors who are to be appointed / re-appointed are furnished in the Corporate

Governance section.

DIRECTORS RESPONSIBILITY STATEMENT

In compliance with Section 217(2AA) of the Companies Act, 1956, your Directors hereby confirm that:

(i) in the preparation of Annual Accounts for the financial year ended 31st March, 2009, the applicable accounting

standards had been followed along with proper explanation relating to material departures;

(ii) the Directors had selected such accounting policies and applied them consistently and made judgements 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 financial year and of the profit/loss of the Company for that period;

(iii) the Directors had taken proper and sufficient 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;

(iv) the Directors had prepared the annual accounts on going concern basis.

PARTICULARS OF SUBSIDIARY COMPANIES SEC. 212 OF THE COMPANIES ACT, 1956

The company has applied to the Central Government under Sec. 212(8) of the Companies Act, 1956 seeking an exemption

from attaching a copy of the Balance sheet, Profit & Loss account, Directors Report and Auditors Report of the

subsidiary companies and other documents required to be attached under sec. 212(1) of the Act to the balance sheet of

the company and the said approval is expected shortly. Accordingly the said documents are not being attached with

the balance sheet of the company.

Copies of the annual accounts of the companys subsidiaries can be sought by any investor of the company on making

a written request to the company at the registered office of the company in this regard. The annual accounts of the

subsidiary companies are also available for inspection to any investor at the companys registered office.

The financial data of the subsidiaries has been furnished along with the Statement pursuant to Sec. 212(1)(e) of the

Companies Act, 1956 forming part of Annual Report.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Accounting Standard AS-21 on consolidated financial statements, the audited consolidated

financial statements are attached to this Annual Report.

AUDITORS

The Statutory Auditors M/s. Deloitte Haskins & Sells, Chartered Accountants hold office until the conclusion of the

ensuing Annual General Meeting and being eligible, are recommended for re-appointment. A certificate from the

The Directors had taken proper and sufficient 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

( (


auditors has been received to the effect that the re-appointment, if made, would be within the limits as specified under

Sec. 224(1B) of the Companies Act, 1956.

REPORT ON CORPORATE GOVERNANCE

Committed to good corporate governance practices, your company fully conform to the standards set out by various

regulatory authorities and has implemented and complied with all of its major stipulations.

The Report on Corporate Governance along with the compliance certificate issued by Sri P. Konda Reddy, Practicing

Company Secretary in line with clause 49 of the Listing Agreement, are attached and forms part of this Report.

MANAGEMENT DISCUSSION & ANALYSIS REPORT

Pursuant to clause 49 of the listing agreement, a report on management discussion and analysis (MDA) for the year

under review is given in a separate section in this Annual Report.

CEOS DECLARATION AS REQUIRED UNDER CLAUSE 49 OF THE LISTING AGREEMENT

Declaration as required under Clause 49(1)(D)(ii) of the listing agreement with regard to compliance of code of conduct

of the company is annexed to this Report.

PARTICULARS OF EMPLOYEES

The details of the employees drawing remuneration exceeding the limits prescribed under the provisions of section

217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 are given in the

Annexure forming part of this Report.

EMPLOYEE RELATIONS

Employee relations were cordial during the year and the Board would like to place on record its appreciation to all the

employees of the Company for their dedicated services and performance.

CLARIFICATIONS TO THE OBSERVATIONS MADE IN AUDITORS REPORT:

Point No.4 (a) and (b):

a) As a result of economic slowdown and recession in realty sector the realizations from customers are slow.

b) Due to long term investment in such projects, no provision has been considered necessary.

Point no. vi of Annexure to Auditors Report:

The Audit Committee had elaborate discussions on the said point. The company will take all steps to see that the scope

and coverage of internal audit is increased to commensurate with the nature and size of the business of the company.

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

Particulars as prescribed under 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 are as follows:

Conservation of Energy & Technology Absorption:

Since your company does not own any manufacturing facility, the requirements pertaining to disclosure of particulars

relating to conservation of energy, research & development and technology absorption, as prescribed under the


Directors Report

Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, are not applicable. However,

adequate measures have been taken to conserve and reduce energy consumption.

Foreign Exchange Earnings and Outgo:

Foreign Exchange Earnings: Rs. 11.44 lacs

Foreign Exchange Outgo: Rs. 48.05 lacs

ACKNOWLEDGEMENTS

Yours directors take this opportunity to thank the Financial Institutions, Banks, regulatory authorities, Stock Exchanges

and the stakeholders for their continued co-operation and support to the company.

Your Directors also wish to record their appreciation for the continued co-operation and support received from the

customers, vendors, employees of the company at various levels.

For and on behalf of the Board

Place : Hyderabad D.S.Chandra Mohan Reddy

Date : 31st August, 2009 Chairman & Managing Director

ANNEXURE TO DIRECTORS REPORTStatement Pursuant to Section 217(2A) of the Companies Act, 1956 and the Companies ( Particulars of employees) Rules

1975, forming part of the Directors Report for the year ended 31-03-2009

Name Designa-tion

& Natureof Duties

Remu-neration (in lacs)

Qualifica-tions

Age(Years)

Experi-ence

(Years)

Dateof

Joining

Particu-lars

of previ-ous

Employ-ment

D. S. Chandra Mohan ReddyChairman

& M.D.42.46 B.Com. 54 35 April 94

Not Applicable

D Vijay Sen ReddyExe. Direc-

tor42.57 C.A. 51 27 April 94

Not Ap-plicable

N Ravinder ReddyDirector-

Operations31.50 MBA 36 14 Feb. 2000

Not Ap-plicable

Notes

1. Remuneration includes salary, allowances, commission payable, taxable Value of perquisites, wherever applicable.

2. The above directors at Sl. 1-2 are related to each other.

3. The nature of employment of above directors is contractual.

Yours directors take this opportunity to thank the Financial Institutions, Banks, regulatory authorities, Stock Exchanges and the stakeholders for their continued co-operation and support to the company.( (


INDUSTRY OVERVIEW

The real estate sector has witnessed tremendous growth in the last decade, especially during 2005-09. This growth is

attributable to the policy and regulatory initiatives of the government. Relaxation in FDI norms as well as rationalization

of a few taxes over this period has increased investor interest. Financiers on their part have supported the sector with

low interest rates.

The contribution of real estate construction activity to the GDP has increased from 5 per cent in 1996-97 to 6.5 per cent

in 2007-08. Further, the contribution of real estate services to the GDP has increased from 5.7 per cent to 7.6 per cent

during the same period. According to industry players, housing accounts for 4.5 per cent of the GDP with urban housing

accounting for 3.13 per cent.

Estimates suggest that the size of the Indian real estate sector is around $ 48 billion and is growing at the rate of 30 per

cent per annum. The sector is currently the second largest employer in the country after agriculture.

The IT and ITES sector alone is estimated to require 150 million sq ft of office space across urban India by 2010.

Organised retail is also responsible for the growth in commercial office space requirement. The organised retail

industry is likely to require an additional 220 million sq ft by 2010. Moreover, growth is not restricted to a few towns

and cities but is pan-India, covering nearly all tier-I and tier-II cities.

Almost 80 per cent of real estate developed in India is residential space, the rest comprising of offices, shopping malls,

hotels and hospitals. According to the Tenth Five-Year-Plan, there is a shortage of 22.4 million dwelling units. Thus,

over the next 10 to 15 years, 80 to 90 million housing dwelling units will have to be constructed with a majority of them

catering to middle- and lower-income groups.

Apart from the huge demand, India also scores on the construction front. A McKinsey report reveals that the average

profit from construction in India is 18 per cent, which is double the profitability for a construction project undertaken in

the US.

COMMERCIAL OFFICE SPACE

a) GROWTH DRIVERS

Significant growth in FDI coupled with growth in IT/ITES sector at 30 percent annually (Source: NASSCOM) has led

to the demand in commercial office space.

b) MARKET STRUCTURE

Market is dominated by a few large national developers with pan - India presence. Most of the regional players are

currently expanding to achieve a pan-India presence. There has been a shift in the type of operations from Sale

Model to lease and maintain model.

Management Discussion and Analysis


c) OUTLOOK

Commercial market is expected to grow at CAGR of 20 per cent to 22 per cent over the next five years. IT/ITeS is

expected to require in excess of 250 million square feet of commercial office space by 2012-13.

( (

RESIDENTIAL SPACE

a) GROWTH DRIVERS

Rapid urbanization is a major contributor whereby urban population is expected to touch 590 million by 2030.

Decreasing household is another growth driver with the average increase in the number of nuclear families is

estimated to be over 300 million (middle class population). Increasing working age population (almost 64% in 16-64

age group) and increasing income levels i.e. per capita GDP increased by 66 per cent in last five years - have also

led to increase in demand.

b) MARKET STRUCTURE

Market is highly fragmented and unorganized. Regional players are expanding to achieve pan-India presence.

Rapid urbanization is a major contributor whereby urban population is expected to touch 590 million by 2030. Decreasing household is another growth driver with the average increase in the number of nuclear families is estimated to be over 300 million.


c) OUTLOOK

Currently there is a shortage close to 25 million units predominantly in middle and low income group. This sector is

expected to grow at CARG of 18 per cent to 19 per cent by 2010.

RETAIL SPACE

a) GROWTH DRIVERS

Rising consumerism with doubling of disposable income, growth in organised retailing and entry of international

retailers are the main growth drivers for this sector.

b) MARKET STRUCTURE

Market is largely dominated by unorganised retail. Winds of change are now sweeping this sector with large

corporate houses entering the organised retail sector and International retail brands tying up with Indian partners.

c) OUTLOOK

FDI norms are likely to be relaxed in the next two to three years opening up the market further. Organised retail is

expected to grow at around 30 per cent. Share of organised retail by sales is expected to reach 10 per cent by 2010.

By 2012, 323 million square feet of new retail space will be required.


HOSPITALITY SPACE

a) GROWTH DRIVERS

India is now increasingly being recognized as a medical tourism destination. Playing host to Commonwealth

games in 2010 will open Indias chances in international events. Amidst the countless ways that India can capture

world attention as a tourist paradise, there also exists a dynamic business opportunity as a splendid venue for

international conferences and conventions of no less than global standards. India is in a continual process of

upgrading its MICE (Meetings, Incentives, Conferences & Exhibitions) facilities. There are multiple plans on the

anvil for more world-class convention centres, airports that contest with the best in the world and efforts to team

the famous Indian hospitality with customisation as per a visitors requirement. All of this spells a definite boom

for this sector.

b) MARKET STRUCTURE

Besides existing hotel operators scaling up their operations, several corporate houses have forayed into this

sector such as Reliance. Developers are now tying up with major international chains and have set up RE funds to

finance their ventures.

c) OUTLOOK

Indian tourism industry is expected to grow by eight per cent per annum over the next ten years. Service

apartments, hospitals and wellness spas are gaining popularity. International hotel chains have big expansion plans

for India.


( (Indian tourism industry is expected to grow by eight per cent per annum over the next ten years. Service apartments, hospitals and wellness spas are gaining popularity. International hotel chains have big expansion plans for India.


GOVERNMENT INITIATIVES

The government has introduced many progressive reform measures to unlock the potential of the sector and also

meet increasing demand levels. The stimulus package announced by the government, coupled with the Reserve Bank of

Indias (RBI) move allowing banks to provide special treatment to the real estate sector, is likely to impact the Indian real

estate sector in a positive way. RBI has decided to extend exceptional concessional treatment to the commercial real

estate exposure and restructured it to 30th June, 2009.

Urban Land (Ceiling and Regulation) Act, 1976 (ULCRA) repealed by increasingly larger number of states.

Minimum capital investment for wholly-owned subsidiaries and joint ventures stands at US$ 10 million and US$ 5

million, respectively.

Full repatriation of original investment after three years.

51 per cent FDI allowed in single-brand retail outlets and 100 per cent in cash-and-carry through the automatic

route.

The Union Ministry of Commerce & Industry has initiated steps to reduce the time taken to develop special

economic zones (SEZs) by simplifying procedures to get the tax-free industrial enclaves notified.

Developers will now be able to get their land classified as an SEZ at the initial stage of approval by submitting legal

documents that prove land ownership.

AFFORDABLE HOUSING ON THE RISE

A decline in property prices, falling interest rates and stability in the job market has helped the sector gain momentum

once again. As developers realised that affordability was the key to lure buyers, they experimented with no frills

smaller apartment sizes. Projects that were launched in this segment received a good response, which indicated that

homebuyers were waiting for a good opportunity to make an entry.

Global property consultancy firm Knight Frank has estimated that affordable housing requirement would be in excess

of 2 million units across key cities in India and 80% of demand is expected to originate from the 3-5 lakh income group.

It is seen that real estate sector is realigning its focus towards affordable housing and is estimated to reach a whopping

market size of over Rs. 3 lakh crore by 2011. With the sixth pay commission being implemented, those government

employees who could not participate in the earlier real estate cycle will now be participants in the market. This, along

with private sector employees who had postponed purchasing homes due to uncertainty in the market, would also be

scouting for good bargains.

REVIVAL OF HYDERABAD REALTY

Hyderabads real estate market has remained flat for the last eight months. But no more, it is showing signs of a

recovery. And there are three major reasons for this revival.

First: An election result that gave a clear mandate against bifurcation of Andhra Pradesh. The congress government

is against splitting the state into Andhra and Telangana. And this has prompted investors to resume investing in real

estate.

The second: Easing of interest rates

Third: Withdrawal of the 5% stamp duty on property up to 1,200 square feet.

The builders did their part. They reduced prices by 15-25%, and altered the product mix, giving buyers better choice and

perceived value for money.


COMPANY OVERVIEW

Hyderabad based Prajay Engineers Syndicate Limited (Prajay) is one of the leading players in construction and hotel

industry set up by a first generation entrepreneur. With more than 75 projects under its belt and over 6.7 mn square

feet of development through past twenty years, Prajay is scaling new heights each year in the field of construction.

The entire retail value chain is being addressed by Prajay encompassing housing, hospitality and land development.

Prajay enjoys an early mover advantage i.e. strategic locations were identified far ahead of the competition and

properties were purchased at very low prices. It owns large properties near some of the major infrastructure projects

coming up in Hyderabad and its outskirts. Prajay has a land bank which gives it the opportunity to come up with

competitive prices. In line with this, Prajay has come up with sub-Rs 10 lakh, two-bedroom homes near Shamirpet on

the outskirts of Hyderabad.

The companys existing land bank was being used, which gave it the flexibility of pricing. As the real estate sector has

been hit hard in Hyderabad in the past one year, affordable homes is one concept that will work.

FORTHCOMING PROJECTS

PRAJAY VIRGIN COUNTY

Subsequent to the economic meltdown, subprime crisis and the collapse of Lehman Brothers, the real estate market

slowed down in general and development around the Rajiv Gandhi International Airport was adversely affected. In

view of this the Company decided to adopt a more cautious approach to the development of this project until a more

favourable market scenario appears.

PRAJAY WATERFRONT CITY

The project has been launched with successful booking of 147 villas till Jan. 2009. However the break out of Satyam

news and subsequent recession in Indian Economy has led to a stand still position in sales and thus the last quarter

of the year had affected the entire sales. The market has started picking up and the project has been witnessing

construction of around 200 units.

PRAJAY MEGAPOLIS

The site has been under the process of development and basement excavation. The company plans to launch the

project for sales in November 2009.

PRAJAY MAHESHWARAM TOWNSHIP

Various plans have been under discussion and finalisation. A leading housing finance company has appraised the

proposal for Rs.105 crores and also approved 57% of the funding requirements. The company is in process of tying up

the balance and move forward for launching of the project for construction.

PRAJAY WINDSOR PARK

The project has started seeing the development and is expected to be launched for sale in the current financial year.

PRAJAY GULMOHAR

The project has started seeing the development and is expected to be launched for sale in the current financial year.


( (Prajay enjoys an early mover advantage i.e. strategic locations were identified far ahead of the competition and properties were purchased at very low prices. It owns large properties near some of the major infrastructure projects coming up in Hyderabad and its outskirts.


PRAJAY VELOCITY MALL

The project could not see the permissions for high rise development and hence the model is being redesigned and discussed. The project shall see the developments thereafter.

SEGMENTAL ANALYSIS

RESIDENTIAL

Companys premier residential project Prajay Water Front city has been soft launched in the current year and received a warm response from the market. The project received its financing tie up from HSBC and moves at a steady pace barring few initial hiccups. The project has seen a sale of Rs.2210.26 lakhs during the financial year 2008-09. Celebrity Villas an another premier project of the company has also contributed an equal amount of Rs.2596.85 lakhs. This 2 projects have been the major contributor to the revenue of stream of the company.

HOSPITALITY

The hospitality business continued to report a steady growth registering a steady 8 percent growth to reach a consolidated Rs.1460.12 lakhs as against the revenue of Rs.1335.85 lakhs in corresponding previous year. The higher turnover was a result of a better occupancy rate.

FINANCIAL ANALYSIS

OPERATIONS AND SALES REVENUE

The year under review saw the worst phase of bottoming out of real estate sector in the entire country. Hyderabad market was also affected in line with the nation. Triggered by global recession, Job scarcity, retrenchments, the demands in residential sector, started looking southwards. The companys performance also looked down in line with other similar companies due to multiplicity of these reasons.

The sales revenues of the company has come down from Rs.34493.62 lakhs to Rs.8283.60 lakhs i.e. by 75.99% over the last years sales revenue. This was also had a severe effect on profitability of the company. Despite such fall in sales, the company could manage to meet its all fixed expenditure successfully. The company could also keep all its accounts with Banks performing.

Of the total revenues earned, construction and property development segment contributed a significant portion of Rs.6744.52 lakhs in 2008-09 which is lesser by Rs.26,321.53 lakhs over the corresponding previous year. On the other hand, the turnover in hospitality segment looked up registering a total revenue of Rs.1374.29 lakhs in 2008-09 as against the recognized revenue of Rs.1272.91 lakhs during corresponding previous year.

PROFITS AND RATIOS

As a result of slowdown, the companys operating profit declined to Rs.143.86 lakhs in 2008-09 as against Rs.12747.52 lakhs last year. The company posted a net loss after tax at Rs.98.61 lakhs in 2008-09 as against profit of Rs.10286.65 lakhs last year. Operating profit to sales stood at 1.74% while net loss to sales stood at 1.19%. The company paid total interest on its finances to the extent of Rs.1749.55 lakhs as against Rs.908.69 lakhs during corresponding previous year.

EARNINGS PER SHARE

Prajays basic earnings per share stood at -0.25 in 2008-09 over last years Rs.37.46 on an expanded equity base and due to higher interest outgo in the present year.


SHARE CAPITAL & NETWORTH

The paid up share capital of the company stood at the same level for the last 2 consecutive years. All warrants and FCCBs stand fully converted. Reserves and surplus of the company has marginally declined to Rs.56,403.30 lakhs in 2008-09 from Rs.56,501,91 during corresponding previous year i.e. 2007-08, mainly due to losses in current year. This has brought down the companys networth to Rs.60372.88 lakhs as against Rs.60471.49 lakhs during previous year.

LOANS

The Company continued to get the support from bankers and financial institutions and its total secured loan portfolio has improved to Rs.13,554.02 lakhs as against Rs.10609.50 lakhs during last year. The company has kept all its repayment obligations on time and the companys all accounts continued to remain performing assets with their bankers. The companys gearing ratio stood at a comfortable level of 0.22:1.

OUTLOOK

The realty prices in Hyderabad are gradually recovering given the positive sentiments that have regained momentum. We expect that the demand will pick up rapidly and as one of the most well positioned companies in Hyderabad, we stand to gain from this rise in offtake. The outlook therefore is decidedly positive.

INTERNAL CONTROL SYSTEMS

Prajay continued to have competent internal procedures, commensurate with the growth of the Company and its nature of operations. The Company continues to follow the highest safety and internal control standards as expected by Indian GAAP. The Company has made all necessary required reporting to RBI, SEBI, and the stock exchanges in a timely manner. The Companys internal audit has been carried out by M/s Mahesh and Varaprasad, a chartered accountant firm and the external audit has been carried out by M/s Deloitte Haskins & Sells as the external auditor.

Similarly, the Audit Committee of the Company continued to be headed by an independent non executive Chartered Accountant director. The committee and the internal chartered accountant firm covered all operational areas and their reports and remarks have been discussed in the meeting of Audit Committee and the Board Meetings.

The audit committee and the Internal Auditor firm did not find any fault with the internal control system and its adequacy. The Company has been found maintaining accurate records, showing full details including quantitative details. The management has carried proper verification of its fixed assets at reasonable intervals as prescribed by Indian GAAP. The Company has an audit committee, an executive committee, a shareholders/investors grievance committee, a remuneration committee and also a share allotment committee. All these committees meet as per the provisions of the Companies Act and listing agreement and their decisions, suggestions and recommendations have been put up before the Board for approval and implementation.

HUMAN CAPITAL

Prajays human capital continues to contribute to the growth of the Company with its motivated team increased its employees strength over the past year. It has about 700 employees on roll which includes about 80 percent engineers.The Company introduced new welfare measures and benefits for its contributing team. A group life insurance scheme was installed as a social measure to protect the interest of the family of employees. All employees and directors are covered under this scheme. The Company also has plans to implement a Mediclaim policy to cover the medical expenses of the employees.


( (We expect that the demand will pick up rapidly and as one of the most well positioned companies in Hyderabad, we stand to gain from this rise in offtake. The outlook therefore is decidedly positive.


COMPANYS PHILOSOPHY ON CODE OF GOVERNANCE

A Corporate Governance code is of substantial importance in todays economic environment not just for the benefit of

the company but to restore the public confidence in corporate organisations.

Corporate governance is the application of best management practices, compliance of law and adherence to ethical

standards to achieve the companys objective of enhancing shareholder value and discharge of social responsibility.

The corporate governance structure in the company assigns responsibilities and entrusts authority among different

participants in the organisation viz. the Board of Directors, the Senior Management, Employees etc.

Your companys essential character revolves around values based on transparency, integrity, professionalism and

accountability. The company continusously endeavours to improve upon these aspects on an ongoing basis. The

existing corporate governance structure besides ensuring greater management accountability and credibility,

facilitates increased autonomy of business, performance discipline and development of business leaders, leading to

increased public confidence.

BOARD OF DIRECTORS:

COMPOSITION:

The Board consists of Executive, Non-Executive and Independent Directors. Non-Executive Directors include

Professional Directors. Presently, the Board consists of 10 Directors with 2 Promoter Directors and is in conformity

with clause 49 of the listing agreement (position as at 31.03.2009).

The board is a blend of executive and non-executive directors with vast experience in various fields viz. construction,

architecture, marketing, management and finance. The board also provides leadership, strategic guidance, objective

and independent view of the Companys management while discharging its fiduciary responsibilities thereby ensuring

that the management adheres to high standards of ethics, transparency and disclosure.

Report on Corporate Governance


The following table gives the composition of the companys Board, their category, designation, other Directorships and

memberships of committees held by each of them:

TABLE 1:

Name of the Director Category Designation Other Director

ships

Commit-tee

Member-ships

Chairman-ships in

Commit-tees

D.S.Chandra Mohan Reddy Promoter & Executive Director

Chairman & Managing Director

16 Nil Nil

D.Vijay Sen Reddy Promoter & Executive Director

Executive Director 19 1 Nil

K.Ravi kumar Executive Director Director-Technical NIL Nil NilN.Ravinder Reddy Executive Director Director-Operations 13 1 NilSumit Sen Executive Director Director-Marketing

& sales 3 Nil Nil

D.Chakradhar Reddy Non-Executive Director Independent

Director NIL 1 1

Vijay Kishore Mishra Non-Executive DirectorIndependent

Director 3 Nil 1

N.Nageshwara Rao Non-Executive DirectorIndependent

Director 1 Nil Nil

Rudresh Non-Executive DirectorIndependent

Director NIL Nil Nil

Karthik Vijay Punjabi Non-Executive DirectorIndependent

Director 1 Nil Nil

None of the directors are holding Chairmanships/Memberships of committees in other Companies as on 31.03.2009.

MEETINGS

As per the listing Agreement, the Board of Directors must meet at least four times a year, with a maximum time gap of

four months between any two meetings.

During the financial year 2008-09, the Board of Directors met 11 (Eleven) times on the following dates: 18th April 2008,

23rd May 2008, 2nd June 2008, 30th June 2008, 31st July 2008, 16th August 2008, 30th August 2008, 30th October

2008, 29th December 2008, 31st January 2009 and 27th February 2009.

The company is in compliance with the provisions of the listing agreement on the gap between two Board Meetings.

Details of Directors and their attendance at the board meetings and at the last annual general meeting are given in

Table 2.


TABLE 2: DIRECTORS ATTENDANCE AT BOARD MEETINGS & LAST AGM:

Name of the Director No. of Board Meet-ings Attended

Attendance at the last AGM held on

29.09.2008

D.S.Chandra Mohan Reddy 11 Yes

D.Vijay Sen Reddy 11 Yes

K.Ravi Kumar 11 Yes

N.Ravinder Reddy 11 Yes

Sumit Sen 11 Yes

D.Chakradhar Reddy 09 Yes

Vijay Kishore Mishra 11 Yes

N.Nageshwara Rao 05 No

Kartik Vijay Punjabi 03 No

Rudresh Veerabhadrappa 03 No

Brief resume of the directors being appointed / re-appointed at the ensuing annual general meeting, nature of

expertise in specific functional areas and names of companies in which they hold directorships and their membership

of committees of the board are furnished hereunder:

Sri D. Chakradhar Reddy (Director):

Sri Chakradhar Reddy is a commerce graduate with more than 15 years of vast experience in Government contract

works and civil works including road construction works. His experience adds to the companys construction teams

expertise and also enables the company to adhere to corporate compliances.

Sri Rudresh Veerabhadrappa (Director):

Sri Veerabhadrappa is an Architect with more than 25 years of experience in construction industry. He has executed

many widely-acclaimed projects in Bangalore. Mr. Rudreshs presence on the board helps the board to strengthen its

design capabilities and explore newer markets in and around Bangalore.

BOARD COMMITTEES

To have proper control of the affairs of the company, the board can delegate its certain powers to one or more

committees. The committees shall have such number of members as may be required and discharge such duties as

are delegated by the board. All the decisions / recommendations of the committees are placed before the Board for

information and/or their approval.

The following are the committees of the board

A. AUDIT COMMITTEE:

The role of Audit committee includes the following:

Overseeing the companys financial reporting process and disclosure of its financial information.

Recommending the appointment of statutory Auditors and fixation of their remuneration.

Reviewing and discussing with the statutory auditors and internal auditors about the internal audit system.


Reviewing the adequacy and independence of the internal audit function, and observations of the internal auditor.

Reviewing the risk management mechanisms of the company.

Reviewing the quarterly and half yearly financial results and the annual financial statements before they are

submitted to the board of directors.

Reviewing major accounting policies and practices and adoption of applicable accounting standards.

The Audit Committee consists of 3 (three) Non executive Directors, all of whom are independent, namely, Sri Vijay

Kishore Mishra (Chairman), Sri N. Nageswara Rao and Sri D. Chakradhar Reddy (members).

The meetings of the Audit Committee were held on 25th April 2008, 30th June 2008, 31st July 2008, 30th October 2008

and 31st January 2009 and all the members were present.

B. REMUNERATION COMMITTEE

The Remuneration Committee consists of 3 Non-Executive Directors, namely, Sri Vijay Kishore Mishra, Sri N.

Nageswara Rao and Sri D. Chakradhar Reddy, all of whom are independent directors.

Remuneration Committee of the Board reviews, assesses and recommends the appointment of executive and non-

executive directors and reviews their remunerations package.

Details of remunerations paid to Executive Directors for the year ended March 31, 2009 are as follows:

Rs.

Name of the Director Salary Commission Perquisites Total

D.S.Chandra Mohan Reddy 42,00,000 NIL 46,880 42,46,880

D.Vijay Sen Redddy 42,00,000 NIL 57,149 42,57,149

K.Ravi Kumar 18,00,000 18,00,000

N.Ravinder Reddy 31,50,000 NIL NIL 31,50,000

Sumit Sen 10,50,000 10,50,000

There was no occasion for Remuneration Committee to meet at any time during the year under review.

Shareholding of Non-Executive Directors

The following are the details of the shares held by Non-Executive Directors as on 31st March 2009

Sl. No. Name of the Director No. of shares held

1 Vijay Kishore Mishra 36,500

2 Kartik Vijay Punjabi 90,000

3 D. Chakradhar Reddy Nil

4 N. Nageswara Rao Nil

5 Rudresh Veerabhadrappa Nil



C. SHAREHOLDERS / INVESTORS GRIEVANCE COMMITTEE

The terms of reference of the shareholders / investors grievance committee are as follows:

Redressal of shareholders / investors complaints,

Allotment, transfer / transmission of shares or any other securities and issue of duplicate share certificates and

new certificates on split / consolidation / renewal etc.

The Share Transfer and Investors Grievance Committee presently comprises 2 Executive Directors namely Sri D.Vijay

Sen Reddy, Sri. N.Ravinder Reddy and a Non-Executive Director Sri.D.Chakradhar Reddy. The Committee is headed by

Sri.D.Chakradhar Reddy, Non-Executive Director. Sri N.Ravinder Reddy is the Compliance officer of the company.

The committee attends to the shareholders / investors grievances / correspondence expeditiously. All the

complaints pending at the beginning of the year were resolved. During the year under review, 106 investor requests

/ correspondence were received which were all resolved and no requests were pending as on 31st March, 2009. The

Committee approves share transfers in physical form, if any, once in fortnight.

GENERAL BODY MEETINGS:

Particulars of past 3 AGMS:

FinancialYear

Venue Date & Time Special Resolution Passed

2007-08 Prajay Corporate House 1-10-63 & 64,Begumpet,Hyderabad 500 016.

29.09.2008 at 3.00 P.M.

1. To revise the remuneration of Sri D.S. Chandra Mohan Reddy, Chairman and Managing Director.

2. To revise the remuneration of Sri D. Vijay Sen Reddy, Executive Director

3. To revise the remuneration of Sri N. Ravinder Reddy, Director Operations

4. To revise the remuneration of Sri Sumit Sen, Director Marketing

5. To revise the remuneration of Sri K. Ravi Kumar, Director Technical

2006-07 Prajay Corporate House1-10-63 & 64,Begumpet,Hyderabad 500 016.

26.09.2007at 11.30 A.M.

1. To alter Articles of Association to modify the capital clause.

2. To consider and approve payment of commission to Chairman & Managing Director

3. To consider and approve payment of commission to Executive Director

4. To consider and approve payment of commission to Director - Operations

2005-06 Prajay Corporate House1-10-63 & 64,Begumpet,Hyderabad 500 016.

29.09.2006at 3.00 P.M.

NIL

During the year ended 31st March 2009 no special resolution was passed by the company through postal ballot and no

special resolution is proposed to be passed by postal ballot at the ensuing annual general meeting.


Particulars of Extra-Ordinary General Meetings:

Financial Year Venue Date & Time Special Resolution Passed2008-09 Prajay Corporate House

1-10-63 & 64,Begumpet,Hyderabad 500 016.

15.05.2008at 4.00 P.M.

1. To appoint statutory auditors

DISCLOSURES:

A. MATERIALLY SIGNIFICANT RELATED PARTY TRANSACTIONS

During the year, there were no transactions of material nature with related parties that had potential conflict with the

interests of the company. Related party transactions have been disclosed in the Notes to Accounts in the financial

statements as at March 31, 2009.

B. RISK MANAGEMENT

The company has laid down well defined procedures to appraise the board of directors about the risk assessment and

minimization procedures and the same are reviewed periodically.

C. REMUNERATION OF NON-EXECUTIVE DIRECTORS

No remuneration was paid to Non-Executive Directors during the year.

MEANS OF COMMUNICATION:The un-audited quarter and / or half-yearly financial results are published in the news papers and are usually published

in Financial Express (English) and Andhra Prabha (Telugu). The annual / half yearly / quarterly results are displayed on

the website of the company www.prajayengineers.com.

GENERAL SHAREHOLDER INFORMATION:

(i) ANNUAL GENERAL MEETINGS

Day, Date Time Venue

Tuesday29th September 2009

3.00 P.M. Prajay Corporate House, 1-10-63 & 64, Chikoti Gardens, Begumpet, Hyderabad 500016.

(ii) FINANCIAL CALENDAR

Tentative calendar of events for the year 2009-2010 (financial year) is as under

Event Period

Financial year 1st April 2009 to 31st March 2010First Quarter details July 2009Second quarter details October 2009Third quarter details January 2010Last quarter details April 2010



(iii) DATE OF BOOK CLOSURE

25th September 29th September 2009 (both days inclusive)

(iv) LISTING ON STOCK EXCHANGES

The equity shares of the company are listed on Bombay Stock Exchange Limited and National Stock Exchange of India

Limited. The Company has paid listing fee to both the exchanges for the year 2009-2010. The company has also paid

custodial fee to both the depositories on the basis of no. of folios maintained by them as on 31st March 2009.

(v) STOCK CODE / SYMBOL

The Stock Code of the Company (BSE) : 531746

The Stock Code of the Company (NSE) : PRAENG

ISIN No. for companys equity shares in Demat Form : INE505C01016

Depositories Connectivity : NSDL and CDSL

(vi) STOCK MARKET DATA FOR THE YEAR 2008-09

Monthly high and low quotations and volume of shares traded on the Bombay Stock Exchange Limited

Month High(Rs.)

Low(Rs.)

Volume traded in month

April, 2008 299.00 260.10 2231203May, 2008 275.00 213.10 165047June, 2008 221.90 100.30 1469376July, 2008 103.40 52.45 15117190August,2008 76.35 58.25 11522297September, 2008 64.70 33.50 2859312October, 2008 36.00 18.00 4640981November, 2008 24.35 17.50 3592782December, 2008 28.20 17.50 3166365January, 2009 25.75 16.20 1089644February,2009 18.25 14.70 567725March, 2009 15.55 12.50 2040892

(vii) RELATIVE STOCK PERFORMANCE IN COMPARISON TO BSE SENSEX:

111st Apr2008

16th May2008

30th Jun2008

11th Aug2008

24th Sep2008

10th Nov2008

26th Dec2008

10th Feb2009

30th Mar2009

69

127

185

243

301Prajay Engineers Syndicate

Sensex


(viii) RTA AND SHARE TRANSFER SYSTEM:

The Companys Shares are required to be traded in the Stock Exchanges compulsorily in Dematerialized mode.

A Committee of Directors has been constituted to approve the transfer, transmission, issue of duplicate share

certificates and allied matters. The Share Transfer Agents, M/s. Sathguru Management Consultants Pvt. Ltd., have

adequate infrastructure to process the above matters

Physical shares received for dematerialization are processed and completed within a period of 21 Days from the date

of receipt, provided they are in order in all respects.

(ix) DISTRIBUTION OF SHAREHOLDING AS ON 31st MARCH, 2009:

Category No. of shareholders No. of shares % of total shareholdingPhysical

(A)Demat

(B)Physical

(A)Demat

(B)Physical

(A)Demat

(B)

1-5000 332 13490 74233 2141752 0.19 5.405001-10000 98 1556 86600 1306974 0.22 3.2910001-20000 11 746 15500 1133373 0.04 2.8520001-30000 13 244 31200 635482 0.08 1.6030001-40000 2 112 7500 404754 0.02 1.0240001-50000 3 129 13700 616925 0.03 1.5550001-100000 3 139 23100 1054473 0.06 2.66100001-above 3 184 324700 31825510 0.82 80.17

Grand Total (A+B) 17065 39695776 100

(x) LIST OF TOP 10 BENEFICIARY HOLDERS (NSDL & CDSL) AS ON 31.03.2009

S. No. Folio No. First Holder Name No. of equity shares

% on share capital

1. IN30016710041997 MERLIN SECURITIES LIMITED 5336134 13.442. IN30102221067113 D VIJAY SEN REDDY 2276990 5.743. IN30005410007065 COPTHALL MAURITIUS INVESTMENT LIMITED 2244616 5.654. IN30016710012569 DEUTSCHE SECURITIES MAURITIUS LIMITED 2067762 5.215. IN30005410015153 MERRILL LYNCH CAPITAL MARKETS ESPANA S.A. S.V. 1971609 4.976. 1203070000068021 RAVINDAR REDDY NANDI 1964700 4.957. IN30005410009054 CITIGROUP GLOBAL MARKETS MAURITIUS PRIVATE LIMITED 1952569 4.928. IN30102221067120 D.S. CHANDRAMOHAN REDDY 1746760 4.409. IN30014210626257 SWISS FINANCE CORPORATION (MAURITIUS) LIMITED 1233420 3.1110. IN30102221067105 D HYMAVATHI REDDY 898800 2.26



(xi) DISTRIBUTION OF SHAREHOLDING AS ON 31st MARCH, 2009

Category No. of Shares held Percentage of Shareholding

A. Promoters holding1. Promoters Indian Promoters 6492136 16.35 Foreign Promoters Nil Nil2. Persons acting in Concert Nil Nil

Sub-total 6492136 16.35B. Non Promoters Holding

3. Institutional Investorsa) Mutual Funds and UTI Nil Nilb) Banks, Financial Institutions, Insurance Companies (Cen-

tral/ State Gov.Institutions/ Non-Govt. Institutions)Nil Nil

c) FIIs 18172919 45.78Sub-total 18172919 45.78

4. Non-Institutionsa) Private Corporate Bodies 2782452 7.01b) Indian Public 9432125 23.76c) NRIs/OCBs 577044 1.46d) Any other (Directors & Relatives) 2239100 5.64

Sub-totalGrand Total 39695776 100.00

(xii) DEMATERIALIZATION OF SHARES AND LIQUIDITY

Details of Shares Dematerialized as on 31st March, 2009

Particulars No. of Shares % of Share Capital

NSDL 31921725 80.41

CDSL 7197518 18.13

Physical 576533 1.46

Total 39695776 100%

(xiii) No GDRs/ ADRs/Warrants or any convertible instruments are pending for conversion as on 31st March 2009.

(xiv) ADDRESS FOR CORRESPONDENCE

All communications with regard to transfer, transmission, dividend, demat etc., should be addressed to Companys

Registrar and Transfer Agents, whose address is given below:

REGISTRAR AND TRANSFER AGENTS

M/s. Sathguru Management Consultants (P) Limited

Plot No.15, Hindi Nagar,

Panjagutta, Hyderabad -500 034.

Tel: 91-040-23356507, 23350586, 23356975

Fax: 040-40040554

Email: [email protected]


PRACTICING COMPANY SECRETARYS CERTIFICATE ON COMPLIANCE OF CONDITIONS OF COR-PORATE GOVERNANCE

To the members of Prajay Engineers Syndicate Limited

I have examined the compliance of the conditions of corporate governance by Prajay Engineers Syndicate Limited, for

the year ended 31st March, 2009, as stipulated in clause 49 of the listing agreement of the said company with the stock

exchanges.

The compliance of the conditions of corporate governance is the responsibility of the management. My examination

was limited to a review of the procedures and implementation thereof, adopted by the company for ensuring compli-

ance with the conditions of corporate governance. It is neither an audit nor an expression of opinion on the financial

statements of the company.

In my opinion and to the best of my information and according to the explanation given to me, I certify that the compa-

ny has complied with the conditions of corporate governance as stipulated in the above mentioned listing agreement.

I further state that such compliance is neither an assurance as to the future viability of company nor the efficiency or

effectiveness with which the management has conducted the affairs of the company.

P. Konda Reddy

Company Secretary in Practice

Place : Hyderabad Membership No. : 4384

Date : 31st August, 2009

DECLARATION

This is to confirm that the company has adopted a code of conduct for its board of directors and senior management

personnel. The code is available on the companys website.

I confirm that pursuant to the provisions of Clause 49(I)(D)(ii) of the Listing Agreement, all the board members and

senior management personnel have affirmed compliance with the code of conduct and ethics for the financial year

ended 31st March, 2009.

Place : Hyderabad D. Vijay Sen Reddy

Date : 31st August, 2009 Chief Executive Officer

Unclaimed Dividend:

Shareholders who have not yet encashed their dividend for the years 2004-05, 2005-6, 2006-07 and 2007-08 may

approach the Company for re-validation, issue of duplicate warrants etc. Dividend which remains unpaid / unclaimed

over a period of 7 years from the date of declaration shall be transferred to the Investor Education and Protection Fund

as per law.



CHIEF EXECUTIVE OFFICER (CEO) AND CHIEF FINANCIAL OFFICER (CFO) CERTIFICATION

We, D. Vijay Sen Reddy, Chief Executive Officer and N. Ravinder Reddy, Chief Financial Officer, of M/s. Prajay Engineers

Syndicate Limited, certify that:

1. We have reviewed the financial statements and the cash flow statement for the year ended 31st March, 2009 and

to the best of our knowledge and belief:

a) these statements do not contain any materially untrue statement or omit any material fact or contain state-

ments that might be misleading;

b) these statements together present a true and fair view of the companys affairs and are in compliance with

existing accounting standards, applicable laws and regulations.

2. There are, to the best of our knowledge and belief, no transactions entered into by the company during the year

which are fraudulent, illegal or violative of the companys code of conduct.

3. We accept responsibility for establishing and maintaining internal controls for financial reporting and that we have

evaluated the effectiveness of internal control systems of the company pertaining to financial reporting and there

were no deficiencies in the design or operation of such internal controls.

4. We have indicated to the auditors and the Audit Committee

a) That there were no significant changes in internal control during the year

b) There were no significant changes in accounting policies during the year

c) There were no instances of significant fraud during the year

D. Vijay Sen Reddy

Chief Executive Officer

N. Ravinder Reddy

Chief Financial Officer

Place : Hyderabad

Date : 31st August, 2009


To The Members of Prajay Engineers Syndicate Limited

1. We have audited the attached Balance Sheet of Prajay Engineers Syndicate Limited, as at March 31, 2009 and also the Profit and Loss Account and the Cash Flow Statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the companys management. Our responsibility is to express an opinion on these financial 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditors Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956 we enclose in Annexure a statement on the matters specified in paragraphs 4 and 5 of the said order.

4. Attention is drawn to the following:

a. Note B. 17 (a) of Schedule 18, in respect of Sundry Debtors, unsecured considered good outstanding for a period of more than six months amounting to Rs.30635.67 lacs. For the reasons stated therein we are unable to comment on the realizations of the aforesaid debtors.

b. Note B. 17 (b) of Schedule 18, in respect of advances amounting to Rs. 7974.94 lacs given towards purchase of land/ development, outstanding from earlier years in respect of which no provision has been made for reasons stated therein.

5. Subject to paragraph 4(a) and further to our comments in the Annexure referred to in paragraph 3 above, we report that:

a. we have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

b. in our opinion, proper books of accounts as required by law have been kept by the Company so far as appears from our examination of those books;

c. the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

d. in our opinion, the Balance Sheet, Profit & Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

e. for recognizing profit on construction project under an agreement to sell, stage of completion is determined as a proportion that contract costs incurred for the work performed bear to the estimated total costs. Further, expected loss on contracts is recognized when it is probable that the total contracts costs will exceed the total contract revenue. This practice is being consistently followed by the Company. For this purpose, total project costs incurred, and cost to completion of projects which is arrived at by the management based on current technical data, forecast and estimate of net expenditure to be incurred in future including for contingencies, etc, which being technical matters have been relied upon by us.

f. in our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with accounting principles generally accepted in India:

i) in the case of the Balance Sheet, of the state of affairs of the company as at 31st March, 2009;

ii) in the case of the Profit and Loss Account, of the loss for the year ended on that date; and

iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

6. On the basis of written representations received from the directors, as on 31st March, 2009 and taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on 31st March, 2009 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956;

For Deloitte Haskins & Sells Chartered Accountants

Place : Hyderabad Ganesh BalakrishnanDate : 30th June, 2009 Partner

Membership No.201193

Auditors, Report


Annexure to the Auditors Report[Referred to in paragraph (3) of the Auditors Report of even date to the members of Prajay Engineers Syndicate Limited]

The nature of the Companys business/ activities during the year is such that clauses (vi), (xii), (xiii), (xiv), (xix) of paragraph 4 of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

i. In respect of its fixed assets:

(a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

(b) As explained to us all the fixed assets are physically verified by the management in a phased periodical manner, which in our opinion is reasonable, having regard to the size of the Company and the nature of its assets. According to the information and explanation given to us, no material discrepancies were noticed on such verification.

(c) The fixed assets disposed off during the year, in our opinion, do not constitute substantial part of the fixed assets of the Company and such disposal has, in our opinion, not affected the going concern status of the Company.

ii. (a) The inventories in respect of hotels and resorts have been physically verified by the management at the year end. In our opinion the frequency of verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and nature of its business.

(c) On the basis of our examination of the records of inventory, in our opinion, the Company is maintaining proper records of inventory and the discrepancies noticed on physical verification between the physical stocks and the book records were not material in relation to the operations of the Company.

iii. (a) According to the information and explanations given to us, the Company has not granted any loan secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956 and accordingly clauses iii (b) to iii (d) of paragraph 4 of CARO are not applicable.

(b) According to the information and explanations given to us, the Company has taken unsecured loan from two parties covered in the register maintained under Section 301 of the Companies Act, 1956. The Maximum amount of loan outstanding during the year was Rs. 3718.42 lakhs and balance as at the year end is Rs.1357.75 lakhs.

(c) In our opinion and according to the information and explanations given to us, the rates of interest and other terms and conditions of such loans are not, prima facie, prejudicial to the interest of the Company

(d) In respect of the loan taken, the principal and the interest amounts were repaid at the due dates during the year and there are no overdue amounts.

iv. In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business for the purchase of inventories and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control system.

v. (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in Section 301 of the Companies Act, 1956 have been entered in the register required to be maintained under that section.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements and exceeding the value of rupees five lacs in respect of any party during the year have been made at prices, which are reasonable having regard to the prevailing market prices at the relevant time.

vi. The Company has an internal audit system, the scope and coverage of which needs to be increased to make it commensurate with its size and nature of the business of the Company.

vii. We are informed that the Central Government has not prescribed maintenance of cost records under clause (d) of sub-section (1) of Section 209 of the Companies Act, 1956.

viii. (a) According to the records of the Company, the Company is generally regular in depositing undisputed statutory dues including provident fund, employees state insurance, income tax, sales tax, wealth tax, service tax, customs duty, excise duty, cess and other material statutory dues applicable to it. There are no arrears of the aforesaid dues as at 31st March, 2009 outstanding for a period of more than six months from the date they became payable except in respect of Income Tax dues amounting to Rs.1051.21 lacs and Dividend Tax of Rs.168.66 lacs.

There are no dues towards investor education and protection fund.

(b) As at 31st March, 2009 according to the records of the company and the information and explanations given to us, there are no dues of income tax, sales tax, wealth tax, service tax, customs duty, excise duty and cess matters that have not been deposited on account of any dispute.


ix. The Company does not have accumulated losses as at 31st March, 2009 and has not incurred cash losses during the financial year ended on that date and in the immediately preceding financial year.

x. In our opinion and according to the information and explanations given to us, the company during the year has not defaulted in repayment of dues to banks and financial institutions. There are no debentures as on the balance sheet date.

xi. According to the information and explanations given to us, the Company has not given any guarantees for loans taken by others from banks or financial institutions.

xii. In our opinion and according to the information and explanations given to us, the term loans were applied for the purposes for which they were obtained.

xiii. Based on the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, in our opinion, there are no funds raised on short term basis which have been used for long term investments.

xiv. The Company has not made preferential allotment of shares to the parties and companies covered in the register maintained under Section 301 of the Act during the year.

xv. The Company has not raised any money through a public issue during the year.

xvi. To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year.

For Deloitte Haskins & Sells Chartered Accountants

Place : Hyderabad Ganesh BalakrishnanDate : 30th June, 2009 Partner

Membership No.201193


Balance Sheet as on 31st March, 2009

per our report attached For and on behalf of the Board

for Deloitte Haskins & Sells D.S. Chandra Mohan ReddyChartered Accountants Chairman and Managing Director

Ganesh Balakrishnan D.Madhavi Latha D.Vijay Sen ReddyPartner Company Secretary Executive Director

Place : HyderabadDate: 30th June, 2009

Rs. in lacs

Schedules As on 31-03-09

As on 31-03-08

I SOURCES OF FUNDS

Shareholders' FundsShare Capital 1 3,969.58 3,969.58 Reserves and Surplus 2 56,403.30 56,501.91

Loan FundsSecured Loans 3 13,554.02 10,609.50 Unsecured Loans 4 2,866.75 147.07

Deferred Tax Liability (Net) 304.82 427.22 (Refer Note B.10 on Schedule 18)ToTAl 77,098.47 71,655.28

II APPLICATION OF FUNDS

Fixed Assets 5Gross Block 6,245.60 5,002.32 Less: Depreciation 1,184.57 800.86 Net Block 5,061.03 4,201.46 Capital Work in Progress including capital advances 2,267.77 2,011.57

7,328.80 6,213.03

Investments 6 9,937.76 7,649.27

Current Assets, Loans and AdvancesInventories 7 31,493.27 30,441.98 Sundry Debtors 8 31,969.04 35,237.04 Cash and Bank Balances 9 872.63 283.43 Loans and Advances 10 11,935.65 12,756.73

76,270.59 78,719.18 Less: Current Liabilities and Provisions 11Current Liabilities 14,097.44 16,341.21 Provisions 2,341.24 4,584.99

16,438.68 20,926.20

Net Current Assets 59,831.91 57,792.98

ToTAl 77,098.47 71,655.28

Significant Account Policies and Notes to the Accounts 18

Schedules 1 to 18 annexed hereto form an integral part of the accounts


Profit and Loss Account for the year ended 31st March, 2009

per our report attached For and on behalf of the Board

for Deloitte Haskins & Sells D.S. Chandra Mohan ReddyChartered Accountants Chairman and Managing Director

Ganesh Balakrishnan D.Madhavi Latha D.Vijay Sen ReddyPartner Company Secretary Executive Director

Place : HyderabadDate: 30th June, 2009

Rs. in lacs

Schedules Year Ended 31-03-09

Year Ended 31-03-08

I Income

Sales and Services 12 8,204.66 34,401.90 Other Income 13 78.94 91.72

8,283.60 34,493.62 II Expenditure

Cost of Land, Plots and Constructed Properties 14 3,516.07 17,946.36 Direct Cost Hotels & Resorts 440.52 371.37 Employee Cost 15 751.33 1,365.51 Establishment and Other Expenses 16 1,279.56 928.93 Interest and Finance Charges 17 1,749.55 908.69 Depreciation and Amortisation 402.71 225.24

8,139.74 21,746.10

III Profit before Tax 143.86 12,747.52

Provision for Tax- Current Tax (includes interest aggregting to Rs. 242.46 lacs ) 350.29 2,247.22 - Deferred Tax (122.40) 203.40 - Fringe Benefit Tax 14.58 10.25

242.47 2,460.87

IV Profit/ (Loss) after Tax (98.61) 10,286.65

Balance brought forward from previous year 16,613.47 8,570.44

Amount available for appropriation 16,514.86 18,857.09

V Appropriations

Proposed Dividend - 992.39 Dividend including tax of earlier year - 52.57 Tax on Dividend - 168.66 Transfer to General Reserve - 1,030.00

Balance Carried to Balance Sheet 16,514.86 16,613.47

Earnings per share (in Rs.)Basic (0.25) 37.46 Diluted (0.25) 37.46

Significant Account Policies and Notes to the Accounts 18

Schedules 1 to 18 annexed hereto form an integral part of the accounts


Rs. in lacs

As on 31-03-09

As on 31-03-08

SCHEDULE 1

Share Capital

Authorised

50,000,000 (31.03.2008: 50,000,000) Equity Shares of Rs. 10 each 5,000.00 5,000.00

Issued, Subscribed and Paid up

39,695,776 (31.03.2008: 39,695,776) Equity Shares of Rs. 10 each 3,969.58 3,969.58

3,969.58 3,969.58 Of the above:

2,972,787 shares have been allotted pursuant to a contract without payments being received in cash.

SCHEDULE 2

Reserves and Surplus

Share Premium

As per last Balance Sheet 37,889.36 4,181.03 Add: Amount received during the year - 33,708.33*

37,889.36 37,889.36 General Reserve

As per last Balance Sheet 1,999.08 969.08 Add: Transfer from Profit and Loss Account - 1,030.00

1,999.08 1,999.08

Balance in Profit & Loss Account 16,514.86 16,613.47

56,403.30 56,501.91

* on conversion of Foreign Currency Convertible Bonds Rs. 26,554.89 lacs and on conversion of share warrants Rs.7,153.44 lacs.

Schedules annexed to and forming part of the Accounts


SCHEDULE - 3

Secured Loans

Cash Credit from Banks 3,491.93 3,328.44

Secured by way of first charge on the project assets of the Company which includes land and other assets relating to specified projects.

Term Loans From:

- Indian Overseas Bank 1,432.29 3,035.78

Secured by way of first charge on project assets of the Company which includes land and other assets relating to specified projects and current assets of the Hospitality Division.

- HSBC 4,435.02 - Secured by way of equitable mortgage of the plotted land with common areas at Murharipally village in the project Water Front City and exclusive charge over recoverables of Water Front City.

- State Bank of India 1400.00* - - State Bank of Mysore 300.00* - - State Bank of Saurashtra 210.00* - - State Bank of Bikaner and Jaipur 300.00* - - The Tamilnad Mercantile Bank Limited 210.00* - - Punjab National Bank 380.00* -

* Secured by way of first joint mortgage/ charge on the entire project assets of Princeton Towers and second charge on current assets of the Princeton Towers project.

- Andhra Pradesh State Financial Corporation - 130.55 Secured by way of assignment of developer rights of 64% in the specified project and first charge on the project assets of the Company which includes land and other assets relating to the specified project.

- Tata Capital Limited 800.00 1,700.00

Secured by way of equitable mortgage of the immovable property situated at Kukatpally Village.

- L&T Infrastructure Finance Company Limited - 2,000.00

Secured by pledge of shares held by Mr. Chandra Mohan Reddy and Mr. Vijay Sen Reddy aggregating to Rs. 50 crores.

- Life Insurance Corporation 26.74 26.74Secured against the Keyman Insurance Policy.

- Interest Accrued and Due 56.06 -

Other Loans:

Hire Purchase 511.98 387.99 Secured by hypothecation of vehicles and equipments acquired out of the said loan.

13,554.02 10,609.50

Schedules annexed to and forming part of the Accounts contd...

Rs. in lacs

As on 31-03-09

As on 31-03-08



SCHEDULE - 4

Unsecured Loans

From Subisidiary * 1270.76 -

Short Term:

- From Director 86.99 - - Hyderabad Steel Traders 1,328.57 - - Overdraft from Bank 57.29 -

Other than Short Term:

- Kotak Mahindra Bank 20.64 44.57 [Repayable within one year Rs. 20.64 lacs (31.03.2008 - Rs. 23.93 lacs)]- Prajay Financial Services Limited 77.50 77.50 - Others 25.00 25.00

2,866.75 147.07

* Prajay Properties Private Limited - Rs. 1270.76 lacs

Rs. in lacs

As on 31-03-09

As on 31-03-08

SCHEDULE-5Fixed Assets

Cost Depreciation And Amortisation Net Block

Particulars As on31st

March2008

Additions Deductions As on31st

March2009

As on31st

March2008

For TheYear

on Deduction

As on31st

March2009

As on31st

March2009

As on31st

March2008

Land-Free hold 430.85 - - 430.85 - - - - 430.85 430.85

Buildings 1,831.19 512.18 - 2,343.37 201.63 44.91 - 246.54 2,096.83 1,629.56

Lease Hold Improvements 401.35 27.97 - 429.32 22.84 110.03 132.87 296.45 378.51

Plant & Machinery 1,604.95 492.30 0.96 2,096.29 375.27 154.14 0.72 528.69 1,567.60 1,229.68

Furniture & Fixtures 249.21 91.14 340.35 48.39 40.47 - 88.86 251.49 200.82

Computers 72.06 11.97 - 84.03 35.20 10.32 - 45.52 38.51 36.86

Vehicles 412.71 143.78 35.10 521.39 117.53 42.84 18.28 142.09 379.30 295.18

5,002.32 1,279.34 36.06 6,245.60 800.86 402.71 19.00 1,184.57 5,061.03

As at March 31, 2008 5,398.43 1,525.14 1,921.25 5,002.32 599.98 225.24 24.36 800.86 4,201.46

Note: Plant & Machinery costing Rs. 589.44 lacs (31.03.2008: Rs. 573.52 lacs) and Vehicles costing Rs.349.06 lacs (31.03.2008: Rs. 242.62 lacs) have been acquired on hire purchase, the legal ownership of which will be transferred to the Company after the final payment.



SCHEDULE - 6

Investments

Long Term (at cost)

A. Non Trade - Quoted

Indian Overseas Bank9,500 Equity Shares of Rs.10 each, fully paid 2.28 2.28

B. Trade - Unquoted

Prajay Urban Private Limited1,000 Equity Shares of Rs.10 each, fully paid 0.10 0.10

C. In Subsidiary Companies - Unquoted

Prajay Developers Private Limited10,000 Equity Shares of Rs.10 each, fully paid - 1.00

Prajay Properties Private Limited *50,000 Equity Shares (31.03.2008: 10,000) of Rs.10 each, fully paid 5.00 1.00

Prajay Land Capital Private Limited *50,000 Equity Shares (31.03.2008: 10,000) of Rs.10 each, fully paid 5.00 1.00

Dillu Cine Enterprises Private Limited5,000 Equity Shares of Rs.1,000 each, fully paid 1,100.00 1,100.00

Prajay Holdings Private Limited9,99,900 Equity Shares (31.03.2008: 1,000,000) of Rs.10 each, fully paid 99.99 100.00

Prajay Realty Private Limited10,000 Equity Shares of Rs.10 each, fully paid 1.00 -

Prajay Holdings Private Limited6,44,38,944 Preferential Shares of Rs.10 each, fully paid 6,443.89 6,443.89

D. Investments in Capital of Partnership Firm

Prajay Binjusaria Estates 2,280.50 -

9,937.76 7,649.27

Notes:(i) Aggregate of Quoted Investments

Cost 2.28 2.28 Market Value 4.32 12.84

(ii) Aggregate of Unquoted Investments (Cost) 7,654.98 7,646.99

* Pledged with Lehman Brothers Capital Private Limited towards loan taken by Prajay Properties Private Limited and Prajay Land Capital Private Limited.

Rs. in lacs

As on 31-03-09

As on 31-03-08


Rs. in lacs

As on 31-03-09

As on 31-03-08


SCHEDULE - 7

Inventories

Land at Cost 15,105.87 18,385.25

Constructed Properties- Land and construction work in progress - at cost 16,360.92 12,031.66

Hotel & Resorts- Food and Beverages - at cost 26.48 25.07

31,493.27 30,441.98

SCHEDULE - 8

Debtors

Unsecured, considered good

Outstanding for more than six months 30,635.67 14,335.58 Other Debts 1,333.37 20,901.46

31,969.04 35,237.04

SCHEDULE - 9

Cash and Bank Balances

Cash on Hand 18.96 178.86

Balance with Scheduled Banks

On Current Account 751.21 59.10 On Escrow Account 84.11 - On Deposit Account 18.35 45.47

Balance with Non Scheduled Banks - -

872.63 283.43


Rs. in lacs

As on 31-03-09

As on 31-03-08


SCHEDULE - 10

Loans & Advances(Unsecured considered good unless otherwise specified)

Advances to Subsidiaries 286.61 3,167.28

Advances recoverable in cash or in kind or for value to be received 1,841.62* 1,177.68

Advance for purchase of land/ development 8,720.31 7,754.11

Advance Tax (including tax deducted at source) 1,087.11 657.66

11,935.65 12,756.73

Maximum amount outstanding during the year from subsidiaries:

Prajay Developers Private Limited - Rs. Nil (31.03.2008 - Rs. 2183.85 lacs)Prajay Holdings Private Limited - Rs. Nil (31.03.2008 - Rs. 6443.89 lacs)Prajay Land Capital Private Limited - Rs. 286.61 lacs (31.03.2008 - Rs. 153.85 lacs)Prajay Properties Private Limited - Rs. 2171.92 lacs (31.03.2008 - Rs. 867.08 lacs)Dillu Cine Enterprises Private Limited - Rs. 10.69 lacs (31.03.2008 - Rs. 9.44 lacs)

* includes deposit with Director - Rs. 500 lacs (31.03.2008 - Rs. Nil)

SCHEDULE - 11

Current Liabilities and Provisions

C

Documents

Prajay Engineers Syndicate Ltd. AR 2008 09