Dear Shareholders,

One more eventful year in the life of your company has been completed. The year began on a note of strong optimism. The first half saw great expansion in the capital markets overall. Domestic and international environment was very buoyant. The second half saw a marked decline in sentiment as a number of factors came together to transform the business mood from euphoria to one of bearish sentiment.

First, the sub-prime crisis surfaced hitting financial institutions badly creating a negative impact on credit appetite. Close on its heels came the unprecedented increase in the cost of crude oil. Commodity prices saw unprecedented increase causing food riots in some parts of the world. India could not remain insulated from these global inflationary pressures. Inflation increased sharply, doubling & almost trebling in the last few months, Reserve Bank of India sought to bring inflation control. Interest rates increased, hitting investments. Coupled to this there was a fear of political instability at the Centre. The capital markets in India declined by around 35%.

I am glad to report that because of the prudent and cautious approach adopted by your company we were not negatively impacted by this downturn. As I had promised in my last year’s report, the financial resources available with your company from the sale of our Telecom holding remain in tact and has been invested cautiously.

Despite the temporary recessionary trend, the overall outlook remains positive. The fundamentals of Indian economy continue to be strong, even though GDP growth may slowdown to around 7%. However, the present credit crunch and decline in valuations, present an opportunity for your company to invest in new opportunities at attractive valuations.

Fortunately our principal media subsidiary, Indusind Media and Communication Limited (IMCL), is in a business segment which continues to enjoy strong growth, bucking the negative trend in the rest of the sector. After being consolidated into a single media entity last year it has shown positive performance and continue to show good results in second year running.

Media Sector Outlook

The outlook for the media sector continues to be very positive. India remains the leading pay TV market in Asia with superior growth prospects indicating a huge upside for the future. But at the same time competition and increasing cost and slow implementation of regulations, present near term risks. Market analyst forecast the Indian TV market to grow from 78 million homes to 137 million homes by 2012 and 164 million homes by 2017 which represents a growth of 82 -85%.

Cable subsidiary will have a share of 67% of all TV homes giving a very bright outlook for the future of IMCL whose core strength is in cable distribution.

By comparison, the DTH operators are jostling for market share in a small segment of the TV market. This is causing them to incur huge losses. The management is following new technology that has IPTV /VOIP to ensure that we do not miss the bus in the new emerging opportunities.

On the Regulating front there have been several positive developments. They will further strengthen IMCL’s position in the days to come. Some such are: TRAI’s recommendations to allow cable companies to enter IPTV services; to allow cable TV MSOs; to increase FDI cap to 74% from the existing 49%; to allow ISPs to provide internet telephony (IMCL holds a national ISP licence which will allow it to provide internet telephony nationally); National Long Distance providers are now permitted to connect to ISPs through public internet etc.

There has been extensive consultations going on between TRAI, the Government and the cable industry through the MSO alliance in which IMCL played a leading role, for further liberalization to enable the MSO’s to provide triple play (voice, video and data).

IMCL performance

IMCL expanded its cable network to new cities and towns in the North, West and South. It also speeded up digitalization of its network in those cities and towns which falls under the Government’s digitalization program and to TRP towns.

It has put renewed thrust in expanding its Broadband/Internet business by reorganizing its marketing and technical operations. It plans to take advantage of the latest liberalization by the Government to enter the new opportunities such as IPTV, Headend in the sky (HITS) etc. Its ultimate goal is to become a triple play service provider in voice, video and data.

IMCL has the unique advantage of having extensive fibre optic networks in several cities like Delhi, Bangalore, Mumbai, Ahmedabad, Vadodara and has plan to expand to other cities. With this strong infrastructure that has been built, IMCL is positioned to provide a full suite of services to its customers and is ahead of competition in this regards.

Real Estate

During the year, your Company has entered into an option agreement with a Developer to develop the property at Bangalore Navaratna Agrahare in the BAIPPA Zone near the new Devanhali Airport.. Your Company intends to encash the present land Bank to create business propositions with strategic partnerships and to undertake new projects by identifying good opportunities in this sector.

Finally, as I promised in my last year’s report, your company will continue to look for new opportunities to incubate new businesses but will do so judiciously, after weighing all the risks factors. We will be able to announce plans for new initiatives in the near future. However, we need to proceed with caution during the present turbulent times. But we will ensure that we do not miss any good opportunities that may come along so that we maximize returns to our shareholders.