7th August, 2013

Dear Members,

It is 3.30 p.m. and the requisite quorum is present and I now call the meeting to order.

I welcome you to the 32nd Annual General Meeting of your Company. The Annual Report 2012-13 was sent to all shareholders earlier and I am sure you have received your copy.

Global and Domestic economic trends

I need not elaborate how the world economy is going through challenging times. India’s economy has not been spared the pain either and to add to our woes the steps initiated by the Government and the Reserve Bank of India (RBI) to check inflation have not yielded the desired results. Not surprisingly, figures for GDP growth are being revised southwards by the Government from time to time. Moreover, the depreciating Rupee has lost nearly 12% against the dollar since the start of FY14 and dipping foreign currency reserves are also ringing alarming bells. It is imperative that the Government initiates urgent steps to keep under check the current account deficit and fiscal deficit on one hand and on the other put in place constructive policy initiatives in FDI, tax incentives, liberal import-export benefits and to strictly implement various beneficial policies announced for SEZs / FTWZs to boost growth.

The year gone by

After profitable operations for the first two quarters posting a profit of Rs. 20 crore, your Company's operations drastically declined with profitability turning negative in the third and fourth quarter resulting in a loss of Rs. 14 crore for the year ended 31 March, 2013. The main reasons for this are:

• No consistent policy/framework for FTWZ
• Stoppage of trans-shipment cargo from Mumbai Port to FTWZ
• Delay in settlement of duty drawback claims
• No availability of customs EDI system in FTWZ
• Import General Manifest approval for FTWZ

Your Management has already initiated a dialogue with the Government for removing these bottlenecks and the follow up is being pursued vigorously. Hopefully, these issues will be resolved amicably soon. A comprehensive Customer Awareness Program undertaken by your Company is also expected to yield positive results.

In the last fiscal a heavy interest burden was affecting the cash flow and therefore impacting the normal day-to-day operations of the Company. Therefore, in the context of tepid sales and potential revenues and unchanged fixed costs like interest burden, office rentals and employee costs to name a few, your Management chose to bite the bullet and introduced cost cutting measures like terminating a few lease arrangements, substantially reducing rentals and rationalizing employee resources. While these measures have yielded encouraging results to a certain extent, unfounded rumors about the affairs of the Company and its Management have affected your Company's share price in the market. However, your Management strongly believes in the prospects of your Company and has voluntarily infused funds for operations by way of subscription to warrants @ Rs.145 per warrant and continues to do so.

Corporate Debt Restructuring (CDR)

As a result of vague government policies, the sanctioned facilities for Phase II at the Khurja FTWZ were withdrawn in the middle of project implementation even though we had already invested a huge amount into the project. Taking into account these critical factors, your Management considered it absolutely necessary and advisable to undertake a Corporate Debt Restructuring (CDR) exercise.

Your Management's proposal for debt restructuring was well received by the Banks. After a detailed appraisal of all aspects of the business affairs of the Company and its Management, including a technical evaluation of the feasibility of your Company's business, valuation of the assets of your Company and your Company's capability to fulfil its future commitments on repayments and mainly faith in your Management, the Banks unanimously approved a CDR package recently and we will be completing the documentation process shortly. This package, when implemented, will grant a reprieve to your Company with moratorium and deferred payments, allowing cash flows to be ploughed back into the business. We can now concentrate more on the business than on immediate repayment obligations.

I must also inform you that before approving the CDR package the banks had appointed a reputed independent firm of Chartered Accountants to go into allegations regarding the financial affairs and management of your Company. The CA firm has completed its investigations and submitted its report directly to the Banks and I am happy to inform you that all allegations have been verified to be false. However, the Banks have suggested certain improvements in our internal control system regarding receivables and the necessary corrective measures have already been put in place. I am indeed grateful to the Banks for appreciating the true facts and supporting your Company and Management. With the Banks reposing total faith in the future of your Company and the integrity of your Management, we are now in a position to utilize the available cash flows for day-to-day operations to turn around the business.

In the last fiscal other Businesses like Rail and Industrial & Distribution Hub also suffered due to the unexpected increase in Rail Haulage charges by approximately 30%, non-implementation of GST by the Government, delays in policy especially with regards to FDI in Retail and the general economic slowdown. These two businesses have also been approved under CDR scheme and the Management is confident that with the benefits accruing from CDR, losses in the Rail and Industrial & Distribution Hub business will soon be a thing of the past.

Current Year Trend 2014-15

While I am not authorized to share numbers at this stage in view of the Board Meeting to be held next week to consider the unaudited financial results for the first quarter ending June 2013, I can only indicate that our efforts at cost cutting, improving business by bringing in new customers and the concept of Warehousing Receipt as a Negotiable Instrument have started to yield results. I am confident that the pending regulatory issues will also be resolved during the year so that business growth is ensured.

Dear Shareholders, my fellow Directors on the Board and I can assure you that all necessary efforts are being taken to turn around the fortunes of your Company and make it scale new heights. On behalf of Management, I thank you for your support and reposing your faith in your Company and its Management.

Acknowledgment

On behalf my colleagues on the Board I wish to express our sincere thanks to the Banks and all stakeholders for their understanding and cooperation during this difficult period. I also want to thank all our employees, both past and present, at all levels for their dedication and integrity. Last but not the least, our heartfelt thanks to all shareholders and members of the Arshiya family whose continued faith and trust in the Company and its Management has been a great source of strength in helping us regain lost ground.

Thank You,

Ajay S Mittal
Group Chairman & Managing Director
Arshiya Limited