The Board of Directors have pleasure in presenting herewith their 77th Annual Report together with the Audited Accounts of the company for the year ended 31st December, 2014.

In terms of the circular no. 08/2014 dated 4th April, 2014 issued by the Ministry of Corporate Affairs and considering the commencement of the financial year before 1st April, 2014, the Company has principally prepared the Balance Sheet, Statement of Profit and Loss, the schedules and notes thereto and the Directors' Report in accordance with the relevant provisions of the Companies Act, 1956, Schedules and Rules made there under.

OPERATIONS AND FINANCIAL RESULTS The sales revenues of the Company for the year under review marginally increased to Rs.11,263.37 M as against Rs.11,168.23 M in the previous year. With other income moving up to Rs.329.14 M as against Rs.289.38 M for the previous year, the total income of the Company for 2014 was at Rs.11,592.51 M (2013:Rs.11,457.61 M). Consequently, the overall profitability for the year under review showed a modest increase. The financial performance of the Company for the year 2014 was as under:-

                                                       (Rs. in Million)

Particulars                    2014                                2013

Gross profit for the year after meeting all operating 2,398.10 2,237.91 expenses but before depreciation and amortisation, finance costs and taxation

Less:

     a) Finance Costs         12.44                   27.81

     b) Depreciation and
        amortisation          214.62                 207.81

                                        227.06                   235.62

    Profit before tax                 2,171.04                 2,002.29

Less: Provision for taxation

     a) Income tax           721.69                   676.41

     b) Deferred tax         (19.97)                  (28.46)

                                       701.72                   647.95

Profit after taxation                1,469.32                 1,354.34

Considering the need to conserve resources for the Company's ongoing capital expenditure programme, the Board of Directors of the Company do not recommend any dividend on the equity shares for the year ended 31st December 2014.

APPROPRIATIONS

The Board did not consider transfer of any amount to General Reserve. Accordingly the net profit after tax for the year amounting to Rs.1,469.32 M (2013:Rs.1,354.34 M) is retained in the Profit and Loss account whereby the net surplus in the Profit and Loss account as at 31st December 2014 stood at Rs.6,735.59 M (Rs. 5,266.27M as at 31st December, 2013).

PROSPECTS

In the light of the current political climate, anticipated policy reforms and the projected economic recovery, the Company looks forward to a year slightly better than the year under review barring unforeseen contingencies.

The Company will continue to invest in expansion of its capacities where required and for enhancing the effectiveness of its factories mainly for enhancing the manufacturing efficiency besides development of infrastructure to achieve optimum productivity in line with the proposed capital expenditure for the current year.

FOREIGN EXCHANGE EARNINGS AND OUTGO

Details of foreign exchange spent and earned are given in Note No.s.37 and 38 respectively forming part of the Accounts.

CONSERVATION OF ENERGY

Energy conservation is pursued with considerable focus and commitment by the Management. Over a period of time, the Company has been replacing the roofs of its factories with FRP sheets so as to provide sufficient natural light during the day dispensing with the need for electrical lights. Asbestos roofs are replaced by sandwich aluminum panel sheets in Dapodi. Most of the sheets are also replaced in Satara. Turbo ventilators in the factories maintain fresh air at ambient temperature all the time. The lighting system at all places carry energy efficient fittings to reduce energy consumption. Power factor panels in the circuit not only ensure quality power for the factory sites without wastage of energy but also result in considerable savings in the energy bills. The Company made a capital investment of Rs. 12 M on energy conservation equipment during the year under review besides taking steps to curb diesel consumption.

ABSORPTION OF TECHNOLOGY

The Company has been periodically introducing newer models of decanters, separators and heat exchangers while phasing out their older models for a variety of applications with suitable technological inputs from the Principals. The Company's operations are based on three key technologies; Heat Transfer, Separation and Fluid Handling which are provided by the Company's Principals. Over the last few years, technology absorption in respect of separators, heat exchangers and decanters for a variety of applications has been successful leading to local supply of certain high value critical components. As the research and development activities are centralized with the Principals, the Company does not incur expenditure on research and development.

DIRECTORS

Mr. Ray Field and Mr. Henrik Holm retire by rotation and being eligible, offers themselves for re-election.

Ms. Susanne Pahlen Aklundh was appointed as an Additional Director with effect from 6th November 2014. As an Additional Director, Ms. Susanne PahlenAklundh holds office upto the date of the ensuing Annual General Meeting and being eligible, offers herself for appointment as Director afresh.

Mr. Goran Mathiasson was appointed as an Additional Director with effect from 6th November, 2014. As an Additional Director, Mr. Goran Mathiasson holds office upto the date of the ensuing Annual General Meeting and being eligible, offers himself for appointment as Director afresh.

Mr. Ravi Krishnamurthi was appointed as an Additional Director with effect from 18th March, 2015. As an Additional Director, Mr. Ravi Krishnamurthi holds office upto the date of the ensuing Annual General Meeting and being eligible, offers himself for appointment as Director afresh.

Mr. Ashwani Gupta was appointed as an Additional Director with effect from 18th March, 2015. As an Additional Director, Mr. Ashwani Gupta holds office upto the date of the ensuing Annual General Meeting and being eligible, offers himself for appointment as Director afresh.

Pursuant to Companies Act, 2013, Ms. Susanne Pahlen Aklundh is appointed as a Woman Director while Mr. Ravi Krishnamurthi and Mr. Ashwani Gupta are appointed as Independent Directors and shall not be liable to retire by rotation. Mr. Ravi Krishnamurthi and Mr. Ashwani Gupta, have furnished declarations to the Company under Section 149(7) of the Companies Act, 2013, confirming that they meet the criteria prescribed for independent directors under Section 149(6) of the said Act.

Mr. Jan Hedemann who was appointed as the Managing Director of the Company with effect from 7th October, 2013 for a period of 3 years, requested for early retirement which was accepted by the Board with effect from 31st December, 2014. The Board while acknowledging the contribution made by Mr. Hedemann to the development of the Company during his short tenure as a member of the Board, placed on record their appreciation of the services rendered by Mr. Jan Hedemann for over three decades of his association with Alfa Laval Group of companies.

Mr. Lars Dithmer who was appointed as an Additional Director with effect from 1st January, 2015, was appointed as the Managing Director of the Company with effect from the same date subject to necessary statutory approvals. As an Additional Director, Mr. Lars Dithmer holds office upto the date of the ensuing Annual General Meeting and being eligible, offers himself for appointment as Director afresh.

Mr. KB Gorane was reappointed by the Board of Directors of the Company at their meeting held on 18th March, 2015 as a Wholetime Director with the designation Director-Operations with effect from 21st June 2015 subject to necessary statutory approvals.

Mr. Manoj Barve who was the Director-Finance of the Company was redesignated as Chief Financial Officer of the Company with effect from 16th February, 2015 in terms of Section 203 of the Companies Act, 2013 on the existing terms of remuneration. Consequently, Mr. Manoj Barve ceased to be a Director with effect from 16th February, 2015.

AUDIT COMMITTEE

The Board of Directors of the Company at their meeting held on 18th March, 2015 reconstituted the Audit Committee as required under Section 177(3) of the Companies Act, 2013. The Committee comprises of 3 Non-executive Directors with Independent Directors forming a majority as under-

Mr. Henrik Holm, Chairman of the Committee (Non-Independent Director)

Mr. Ravi Krishnamurthi, Member (Independent Director)

Mr. Ashwani Gupta, Member (Independent Director)

Mr. V. Chandrasekhar, Company Secretary, shall act as the Secretary to the Committee.

The Managing Director, Director-Operations, Chief Financial Officer, Head-Corporate Finance, Internal Auditors and the Statutory Auditors are permanent invitees to the Audit Committee Meetings.

The terms of reference for the Audit Committee shall be those as already specified by the Board of Directors of the Company and those as may be specified by the Board from time to time including interalia approval of related party transactions, scrutiny of inter-corporate loans and investments and evaluation of internal financial controls and risk management systems.

CORPORATE SOCIAL RESPONSIBILITY (CSR) COMMITTEE

The Board of Directors at their meeting held on 24th April, 2014 confirmed the constitution of Corporate Social Responsibility Committee" as required under Section 135 of the Companies Act, 2013. The Committee presently comprises of 3 Directors including an independent director as under-

Mr. Henrik Holm, Member (Non-Independent Director Mr. KB Gorane, Member (Non-Independent Director) Mr. Ravi Krishnamurthi, Member (Independent Director)

During the year under review, the Committee has formulated and recommended a CSR policy which was approved by the Board of Directors of the Company at their meeting held on 28th August, 2014 and the same is placed on the Company's website www.alfalaval. com. On the recommendation of the CSR Committee, the Company has chosen Sanitation and Hygiene, Education and Healthcare as the focus areas. The Company has joined hands with implementing agencies to take forward the programme of activities in the chosen areas. The CSR Committee will monitor the CSR Policy and the progress on the projects from time to time especially in relation to the amount spent on the activities. The annual report on CSR activities will be included in the Directors' report for the current year and onwards.

Mr. V. Chandrasekhar, Company Secretary, shall act as the Secretary to the Committee.

NOMINATION AND REMUNERATION COMMITTEE

The Board of Directors of the Company at their meeting held on 18th March, 2015 constituted the Nomination and Remuneration Committee as required under Section 178(1) of the Companies Act, 2013. The Committee comprises of 4 Non-executive Directors including 2 Independent Directors as under:-

Mr. Ray Field, Member (Non-Independent Director)

Mr. Henrik Holm, Member (Non-Independent Director)

Mr. Ravi Krishnamurthi, Member (Independent Director)

Mr. Ashwani Gupta, Member (Independent Director)

Mr. V. Chandrasekhar, Company Secretary, shall act as the Secretary to the Committee.

STAKEHOLDERS RELATIONSHIP COMMITTEE

The Board of Directors of the Company at their meeting held on 18th March, 2015 constituted the Stakeholders Relationship Committee as required under Section

178(5) of the Companies Act, 2013. The Committee comprises of 2 Non-executive Directors as under:-

Mr. Ray Field, Member (Non-Independent Director)

Mr. Henrik Holm, Member (Non-Independent Director)

Mr. V. Chandrasekhar, Company Secretary, shall act as the Secretary to the Committee.

WHISTLE BLOWER POLICY

The Company is committed to provide an open, honest and transparent working environment whereby it expects its employees and Business Associates to report breaches, or suspected breaches, of the law, Alfa Laval Business Principles, policies and/or any violation of Alfa Laval's Code of Conduct. In this direction, the Company has adopted the Whistle Blower Policy with effect from 16th February, 2015 in line with Section 177(9) of the Companies Act, 2013. The Whistle Blower Policy broadly provides a detailed process for reporting, handling and investigation of reported violations and for providing necessary protection to the whistle blowers besides measures for preventing retaliation against whistle blowers. The details of the Whistle Blower Policy is available on the Company's website www.alfalaval. com.

DIRECTORS' RESPONSIBILITY STATEMENT

The Board of Directors confirm that:-

In the preparation of the annual accounts for the year ended 31st December, 2014, the applicable accounting standards had been followed along with proper explanation relating to material departures;

The accounting policies, which have been selected, have been applied consistently and judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st December, 2014 and of the profit of the Company for the year ended on that date;

Proper and sufficient care have been taken 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;

The annual accounts for the year ended 31 st December, 2014 have been prepared on a going concern basis;

Proper systems are in place to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

EMPLOYEES

Employee relations continue to be cordial. The Board wishes to place on record their appreciation for the services rendered by the employees of the Company at all levels.

Information as per Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, forms part of this Report. However, the Report and Accounts are being sent to all shareholders of the Company excluding the information relating to the statement of particulars of employees. Any shareholder interested in obtaining such particulars may write to the Company Secretary for a copy.

AUDITORS

The Auditors, M/s. BSR & Associates LLP, Chartered Accountants, were appointed as the Auditors of the Company at the 76th Annual General Meeting of the Company held on 19th June, 2014 to hold office till the conclusion of the 81st Annual General Meeting of the Company. The matter relating to such appointment is being placed before the Members for their ratification at the ensuing Annual General Meeting.

ACKNOWLEDGEMENT

The Board places on record their appreciation of the contribution of the customers, suppliers and all other stakeholders towards the performance of the Company during the year under review.

                         For and on behalf of the Board of Directors,

Lars Dithmer                                             K. B. Gorane
Managing Director                                 Director-Operations