Blue - Star - LTD 500067 March 1999

9 9
Blue Star Establishments
• Corporate Headquarters
• Manufacturing Facilities
+ Regional Headquarters
• Sales & Service Offices

BLUE ST
Blue Star Establishments
•$• Gurgaon
• New Delhi
Lucknow
Kanpur • Guwahati
• Durgapur
Ahmedabad
Vadodara • Bhopal
Bharuch
Nagpur
Bhubaneshwar •
Pune
Secunderabad
• Bangalore
• Kochi
Corporate Headquarters
Manufacturing Facilities
Regional Headquarters
Sales & Service Offices

BLUE STAR
Board of Directors Bankers

Ashok M Advani The Hongkong & Shanghai
Chairman & Chief Executive
Banking Corporation Ltd.
Suneel M Advani
President & Vice Chairman ANZ Grindlays Bank Ltd.
Bal K Malhotra State Bank of India
Executive Director
Atul Choksey Oriental Bank of Commerce
Uday Kotak ABN-AMRO Bank
G Ramchandani Banque Nationale De Paris
Minoo R Shroff Bank of Baroda
Suresh N Talwar Abu Dhabi Commercial Bank Ltd.
Corporate Management
Ashok M Advani
Chairman & Chief Executive Auditors
Suneel M Advani
President & Vice Chairman K S Aiyar & Company, Mumbai
Bal K Malhotra
Executive Director
T G S Babu
Executive Vice President
R N Bhave Branch Auditors
Vice President — Information Technology & Systems R Venkatarama Aiyar & Company, Calcutta
H N Ganatra
Vice President — International Fraser & Ross, Chennai
V V Inamdar Mohinder Puri & Company, New Delhi
Vice President — ACPD, Western Region & Industrial Division
Satish Jamdar
Vice President — Dadra & Bharuch Plants
Arun Khorana
Vice President — Electronics Division
Registrars & Share Transfer Agents
A S Prakash Rao
Vice President — ACPD, Northern Region Intime Spectrum Registry Pvt. Ltd.
H. Rajaram 260-Shanti Industrial Estate
Vice President — Finance
Sarojini Naidu Road
Assar S Sambtani Mulund (West)
Vice President — International Software Division
Mumbai 400 080
S Sankaran
Vice President — ACPD, Southern Region
M S Sethi
Vice President — Thane Plant
Neeraj Seth Registered Office
Vice President — Commercial Equipment Division
Kasturi Buildings
N Sivasankaran
Vice President — ACPD Mktg. & Service Mohan T Advani Chowk
Jamshedji Tata Road
Mumbai 400 020
Company Secretary Telephone 2020868
K P T Kutty Fax 91-22-2025813
BLUE STAR
Board of Directors 1
Letter from the Chairman 3
Directors' Report 7
Dynamics of Blue Star's Growth 12
Auditors' Report 14
Balance Sheet 16
Profit & Loss Account 17
Schedules to the Accounts 18
Notes forming part of the Accounts 27
Cash Flow Statement 36
Accounts of Subsidiary Companies:

(i) USIN Internationa] Inc 39
(ii) Blue Star Tnfotech (UK) Limited 46
Business Review 50
BLUE STAR
renew our technology licensing agreement

to manufacture the latest range of York
centrifugal and water-cooled screw
chillers.
The project is currently under active

implementation at Thane. In order to
ensure world-class products, the plant has
undergone substantial relayout, the
manufacturing processes have been
modernised, the supply chain streamlined
and productivity levels greatly increased
ASHOK M. ADVANI Chairman & Chief Executive ^ eliminating redundant manpower and
enhancing skills through training. The
objective is for Thane-manufactured
chillers to match the technology and quality levels of imports
at a 10% lower cost to the customer. The first products are
expected to roll out within a few weeks.
Dear Shareholder:
The year 1 998-99 was the third successive year of slow growth Project Engineering & Execution
for the Indian economy and for Blue Star. Considering the Blue Star is generally acknowledged to have the finest team
external environment, your Company performed reasonably of airconditioning engineers in India. Their strengths have
well, showing modest positive growth in revenue and profits. been progressively enhanced over the years by installing
But behind the scenes, we were working seriously on a number CAD capability which now covers all our engineering
of fundamental strategic and structural changes. I would like establishments.
to share the major developments with you. To streamline material procurement and project execution
performance, your Company initiated an Enterprise Resource
New Technology Tie-up with York Planning (ERP) project with BaaN during the year. A
One of Blue Star's key competitive strengths in our core central dedicated cross-functional team has been set up to drive this
airconditioning business has been our 15-year strategic multi-crore project over the next two to three years. They
relationship and technical licensing arrangement with York have completed the initial phase of business process
International of USA. During the year there were extensive re-engineering and have begun testing the first pilot project
talks with York with the objective of strengthening this in the Western Region. Next year will see progressive
partnership. We looked at various options, before deciding to implementation of the entire system in the core
BLUE S T / R
Airconditioning Projects Division. When fully implemented, well for large, technically complex systems. But, there arc a
ERP will dramatically transform the way in which the central number of independent contractors and installers located in
airconditioning business is handled and is expected to result smaller towns, where Blue Star does not have a presence, who
in major benefits in terms of reduced costs, faster project have the capability to handle small and medium-sized jobs.
execution and higher productivity of resources. They can significantly extend the Company's market reach.
A small start was made last year by signing on a few

Energy Efficiency contractors as Blue Star's business associates. In the current
With electrical power being scarce and very expensive, year, this programme is being expanded.
consumers of electricity are acutely conscious of the need to
For ducted systems too, the same logic is applicable.
find ways to cut power consumption. In the field of
Increasingly, our marketing thrust has been to appoint systems
airconditioning which is a heavy user of electricity, the quest
dealers who are actively supported through training and
has been largely met by recent technological developments
technical backup by the Company. Expansion of the dealer
which have substantially improved the efficiency of
network gathered momentum last year resulting in healthy
airconditioning systems. These include new compressor
sales groivth without signficant increase in manpower or
designs such as screw compressors for large systems (150TR
marketing costs.
and up); scroll compressors in medium capacity applications
(5TR-20TR); variable speed drives for centrifugal chillers;
Contract Manufacturing
better heat exchangers using new types of copper tubing; and
Having made heavy investments in modern manufacturing
computer-optimised designs. All these have yielded
facilities at Dadra and Thane, your Company also explored
significant energy-efficiency improvements in our
contract manufacturing for the first time last year. These efforts
airconditioning products.
have fructified in three significant areas in the current year.
From the customer standpoint, the small higher initial cost is
First, window air conditioners are being manufactured by the
rapidly paid back through savings in the form of lower
Dadra Plant for a local airconditioner company which brands
electricity bills. As additional benefits, such technological
these products and sells them through their dealer network.
innovations also offer quieter and more reliable operation.
Blue Star has been the pioneer in India in introducing these Supplies have recently commenced.
new products and initial response from customers and The second new business initiative is to manufacture and
consultants has been most encouraging. brand ducted split airconditioncrsfor the tough Middle East
market. The first shipment has already been made.
Increasing Geographic Reach through
Affiliated Contractors & Dealers The third contract manufacturing tie-up is for polyurethane
Historically, Blue Star has largely relied on its own sales foam cold room panels for Kolpak of USA. This is an exciting
force for its central airconditioning business. This works project because Kolpak has provided technology and
BLUE STAR
manufacturing know-how to meet their exacting design and as this would result in enhanced shareholder value. That
quality specifications and have given a substantial buy-back basic decision still holds good though the time-frame for the
commitment for their Asian markets. Supplies are expected spin-off has got somewhat extended. Details of the progress
to commence within a few weeks. of the demerger are provided in the Directors' Report.
Besides the additional sales revenue provided by contract The other unrelated business of industrial projects is one in
manufacturing, there are at least two additional tangible which your Company has been involved for about two
benefits. First, it provides valuable inputs to improve product decades. Originally, it was thought that since Blue Star had
designs and quality standards. Secondly, the increased volume a good engineering team and project management skills in
reduces per unit manufacturing cost by spreading fixed the central airconditioning business, those strengths could
expenses over a higher production level. be profitably utilised in the field of industrial projects. But
experience has shown that the sheer diversity of projects
Business Focus with demanding technical requirements combined with
In recent times, it has become an accepted management axiom adverse contractual and financial terms tied up substantial
that business organisations should focus on their core financial and manpower resources without producing
competencies. Blue Star realised the wisdom of this adequate returns. We have, therefore, decided that after the
philosophy in the early '90s, well before the term "core remaining projects have been completed we will not bid for
competencies " was coined, when we exited from a number of such business. The funds released from this activity can
unrelated businesses such as refrigerators, EPABXs and significantly reduce borrowings, while the engineering
personal computers. There were substantial benefits from manpower can be profitably deployed in the airconditioning
freeing underutilised resources and scarce managerial talent and refrigeration field.
to focus on what we do best. It was as if a dead weight had
been removed from the corporate shoulders which reduced Shareholder Value
the drag on higher growth and profitability. The same lesson To summarise, last year, these new initiatives made significant
has been reinforced in the past couple of years with many progress towards improving Corporate performance and
Indian companies following a similar exit policy. enhancing shareholder value. Most of them are on-going
programmes which will result in the Company and the
Blue Star has defined its core businesses as airconditioning,
shareholders being well positioned to reap substantial future
refrigeration and distribution of professional electronics benefits as economic growth revives.
equipment. This leaves two major lines of business which are
outside the focus areas, namely, software and industrial
Yours sincerely,
projects.
As you are no doubt aware, last year, it was decided tliat the ASHOKM. ADVANI
software business should be spun-offinto a separate company July 28, 1999 Chairman & Chief Executive
BLUE STAR
BOARD OF DIRECTORS
From L to R: Uday Kotak, Suresh N Talwar, Minoo R Shroff, Ashok M Advani, Suneel M Advani,
Atul Choksey, G Ramchandani, Bal K Malhotra
BLUE STAR
Dividends
The Directors propose maintaining the equity
The Directors are pleased to present their 51st dividend at Rs. 3.50 per share. The dividend will
Annual Report and the Audited Accounts for the absorb Rs. 10.53 crores including Corporate Dividend
year ended March 31,1999. Tax. In view of the proposed spin-off of International
Software Division effective October 1,1998 profits of
Highlights of 1998-99 this division for the period October 1,1998 to March
* Despite continued business pressures, the 31,1999 have been set aside and not considered while
Company recorded a modest growth in total proposing the dividend.
income from Rs. 452.77 crores to Rs. 476.49 crores.
* Operating Profit increased by over 21% from Operating Results
Rs. 31.72 crores to Rs. 38.37 crores. With the continued slowdown in business and severe
* Gross Margins improved by 2.8%, equivalent to a competitive pressure on selling prices, there was a
net saving of Rs. 12.90 crores. corporate thrust on reducing material costs. Gross
margins improved from 23.0% to 25.8% through a
* Earnings per share increased to Rs. 6.00 compared
combination of value engineering and efficient
to Rs. 5.72 in the previous year.
procurement.
* Export earnings grew by 24% from Rs. 35.19 crores
Strict control of headcount kept the growth in
to Rs. 43.59 crores.
employee expenses at under 5% while Operating and
* Equity dividend is being maintained at 35%. General Expenses (excluding interest) increased by
10%. Due to substantially higher borrowings, interest
Summarised Financial Results costs went up by Rs. 4.31 crores, an increase of 77%
over the previous year.
April '98 April '97
March '99 March '98 A new technical licensing agreement was signed with
Rs. lakhs Rs. Lakhs York International for manufacturing the latest range
Total Income 47648.92 45277.31 of centrifugal and screw chillers at Thane.
Profit before interest, Financial Position

depreciation and
taxation 3837.29 3171.99 The Company has over the last few years made
Interest 986.44 555.80 substantial investments in fixed assets to support
Depreciation 1038.52 811.83 business operations. Due to slow collections in a tight
Provision for taxation 185.00 253.00 market the level of debtors also increased sharply. As
a result of both these factors loan funds increased by
Profit after taxation 1627.33 1551.36
Rs. 22.06 crores which remains a cause for concern.
Add: Balance brought
forward 1091.58 983.46
Transfer from Software Spin-off
Foreign Projects
Shareholders have approved a proposal for spin-off
Reserve 32,00
of the International Software Division into a separate
Total available for
Company, Blue Star Infotech Ltd., (BSIL). Lengthy
appropriation: 2750.9! 2534.82
Court proceedings have delayed implementation of
Less: General Reserve 500.00 400.00
948.40 948.40
the Scheme. The Petitions are now kept for final
Dividend
Corporate DMdend
hearing and High Court approval is expected shortly.
Tax 104.32 Upon the Scheme being implemented, the software
Balance earned forward 1198.19 1091.58 business will be deemed to have been transferred
effective October 1, 1998. Therefore, the profit of the
BLUE STAR
earning rose to Rs. 54.04 crores from Rs. 47.03 crores

Total Income
(R». In Crwec) in the previous year.
850
500
Subsidiary Companies
450
(1) USIN International Inc., USA
400
350
USIN International Inc. is a 100% subsidiary of
Blue Star Ltd., marketing software services
300
provided by the Company's International
250
Software Division. The Balance Sheet and the
200
Statement of Income and Retained Earnings of
150
USIN for the year ended March 31,1999 form part
100 of this Annual Report. Total Income during the
year ended March 31,1999 was US $ 6.023 Million
compared to $ 5.114 Million during the previous
year.
(2) Blue Star Infotech (UK) Ltd.

International Software Division for the period
A new Company was incorporated in UK as a
October 1, 1998 to March 31, 1999 has been set aside
subsidiary of USIN on September 1, 1998 to tap
and not considered for the purpose of declaration of
the software market in Europe. However, trading
dividend.
did not commence until April 1,1999. USIN being
Blue Star's Sales, Work Bills and Services and Profit a subsidiary of Blue Star, as per the provisions of
Before Tax figures for the accounting year ended the Companies Act 1956, the UK subsidiary also
March 31, 1999 include Rs. 17.20 crores and Rs. 4.00 becomes the subsidiary of Blue Star. The Balance
crores respectively for the period 1.10.98 to 31.3.99 Sheet and Profit & Loss account of Blue Star
of the International Software Division which, Infotech (UK) Ltd. form part of this Annual
upon approval from the Bombay High Court for Report. The operating loss during the seven
the Scheme of Arrangement, will be transferred months period ended March 31,1999 was £ 6,541.
to BSIL.
The book value of net assets as on October 1, 1998
which will be transferred to BSIL upon obtaining
(Rs. in Crores)
High Court approval were Rs. 7.67 crores. Blue
~J PROFIT BEFORE DEPRECIATION,
Star shareholders will receive one share of BSIL for • INTEREST & TAXES
• PROFIT AFTER TAX
every four Blue Star shares held by them. There will
be an equivalent reduction in their Blue Star
shareholding which will be effective after the High
Court approval.
Export & Foreign Exchange Earnings

The stagnation in the Middle-East markets and the
economic turmoil in Malaysia and neighbouring
countries have adversely affected the Company's
project exports which reduced to Rs. 8.97 crores
during the year, against Rs. 12.72 crores during
previous year. Software and other professional
and consultancy services recorded a 47%
growth during the year. Total Foreign Exchange
BLUE STAR
Directors
Forex Earnings
{Rs. in Crores}
Mr Uday Kotak and Mr G Ramchandani will retire
from the Board by rotation. Mr Uday Kotak and
Mr G Ramchandani, being eligible, offer themselves
for re-election.
Employees
The Company recognises the growing importance of
updating knowledge and skills to meet the challenges
in the emerging business environment. Several
training and development initiatives were taken at all
levels for achieving this objective. This included
programmes to develop technical, functional and
managerial skills.
During the year employee relations were cordial. As a
part of the ongoing restructuring exercise, the
Company offered a new Voluntary Retirement
Scheme during the year. This was accepted by 156 compliance has been completed. The products and
surplus employees which resulted in payment of services provided by the Company will not be
compensation of Rs. 6.30 crores. affected by Y2K problems. Y2K compliance will be
achieved by September, 1999 and the estimated
expenditure for this is Rs. 0.90 crores. The Company
Year 2000 (Y2K) Preparedness has formulated contingency plans to lessen the
The Company has made a comprehensive plan to impact of any unforeseen disruption in the system or
achieve Y2K compliance. The assessment of failure due to Y2K problems.
operations, process and functions with regard to Y2K
Disclosure of Particulars
Information as per Section 217(l)(e) and 217(2A)
of the Companies Act, 1956, read with the rules
Shareholders* Funds
(Rs. In Crores) made thereunder relating to conservation of
energy, technology absorption, foreign exchange
earnings and outgo and particulars of employees
respectively, are given in Annexures A and B forming
part of this report.
For and on behalf of the Board
ASHOK M ADVANI
Mumbai, July 28, 1999.

BLUE STAR
Information pursuant to Companies (Disclosure of Room Airconditioners has been designed and
particulars in the Report of the Board of Directors), installed.
Rules, 1988.
(b) Benefits derived as a result of the above R & D:
Conservation Of Energy Availability of energy and environment friendly
products in the Indian market. Tapping of export
(a) Energy conservation measures taken: market to increase sales.
Energy consumption at the Company's factories
is not a major cost factor. Nevertheless, the (c) Future plan of action:
Company continued observing an energy Future plan involves setting up and upgrading
conservation drive during 1998-99. Introduction the test facilities to assure good quality products
of energy efficient electronic ballasts and to the customers. R&D infrastructure of
rationalisation of use of D.G. sets are energy CAE (Computer Aided Engineering) will be
saving devices being introduced in Thane plant. strengthened.
The advanced production and process
(d) Expenditure on R & D :
technologies have enabled to reduce energy
consumption in Dadra plant. Controls through (Rs lakhs]
shopwise metering, autoillumination, etc., have
1998-99 1997-98
been implemented.
(b) Additional investments and proposals, if any,
being implemented for reduction of consumption
of energy:
Investment for energy conservation measures
will be considered as and when necessary.
(c) Impact of measures taken:
There has been reduction in electrical
consumption, improved power factor and saving Technology Absorption,
in cost of production.
Adaptation And Innovation
Research And Development (a) Efforts made towards technology absorption,
adaptation and innovation:
(a) Specific areas in which R & D carried out by the
Company: Technology absorption measures are progressing
as per schedule. Indigenous sources for import
New product development, extension of existing
substitution are also being developed where
product range, product design and process
feasible. Efforts also include adaptation of
engineering.
imported technology to Indian conditions. Where
The Company has developed new products required, training is being imparted to the
which are more energy efficient viz., Packaged technical staff.
Airconditioners & Hermetic Chillers using
Scroll Compressors. Products for the export (b) Benefits derived as a result of the above efforts:
market have been developed. Packaged Air- Improvement in quality, adaptation of imported
conditioners for telecommunication sector have technology, improved product designs and cost
been developed. Performance Test facility for reduction are amongst the benefits derived.
10
(c) Information regarding imported technology: export markets for products and services and
The following technologies were imported export plans:
during the years mentioned there against. Discussed in detail in the main report,
Reciprocating Liquid Chillers (1994), Evaporators (b) Total foreign exchange used and earned:
and Condensing Units (1994), Room and
Packaged Airconditioners (1996), Air Handling (Rs lakhsj
Units (1997), Centrifugal Chillers using CFC-free 1998-99 1997-98
R-123 as refrigerant (1998), Screw Chillers using
Total foreign
CFC free R-22 as refrigerant (1998) and Panels
exchange used 5655.86 4077.27
and Door Sections (1998).
Total foreign
Significant progress has been made in absorbing exchange earned 5404.47 4703.08
the technologies. Centrifugal Chillers and Screw
Chillers absorbing new technologies will be
available in the market shortly.
For and on behalf of the Board
Major Items Of Foreign Exchange Ashok M Advani

Earnings And Outgo Chairman & Chief Executive
(a) Activities relating to exports, initiatives taken Mumbai

to increase exports, developments of new July 28,1999.
11
THE D Y N A M I C S OF BLUE S T A R ' S G R O W T H
**1 998-99 1997-98
OPERATING RESULTS:
Total Income Rs. in Crores 476.49 452,77
Profit before Tax 18,12 18.04
Tax 1.85 2.53
Profit after Tax 16.27 15.51
Dividend *9.48 9.48
Retained Profit 5.75 5.08
—
FINANCIAL POSITION:
Paid up Capital Rs. in Crores 27.10 27.10
Reserves 85.95 80.37'
Shareholders' Funds 113.05 107.47
Borrowings 82.49 60.43
Total Funds Employed 195.54 167.90
1 Net Fixed Assets & Investments Rs. in Crores 99.93 97,05

1 Net Working Capita! 88.18 67.44
I Debt Equity Ratio 0.73 0.56

1 Book Value per Equity Share Rs. 38.98 38.40
1
I Bonus Share Ratio
I
1 Rights Share Ratio
I ,—,
E OTHER INFORMATION:
1
I Number of Shareholders Nos. 23963 23318 ;
I Number of Employees 2504 2619
1
• •
I PERFORMANCE INDICATORS:
I Earnings per Share Rs. 6.00 5.72
I Dividend per Share Rs. *3.50 3.50
Return on Average Shareholders' Funds
(excluding Revaluation Reserve) 15.84 15.94
Proposed
These are the consolidated figures for the Company including International Software Division.
(Please refer Note No. 9 of Notes to Accounts — Schedule : 'N").
BLUE STAR
1996-97 1995-96 1994-95 1993-94 1992-93 1991-92 1990-91 1989-90 1

tm
I
440.85 408.91 318.82 247.54 222.77 215.78 185.62 174.96 1
23.21 35.48 22.10 9.29 4.52 4.19 4.70 5.95 1
8.43 10.30 5.72 3.25 0.40 0.50 0.45 1.23 1
14.78 25.18 16.38 6.04 4.12 3.70 4.25 4.72 1
9.48 8.12 3.51 2.49 1.64 1.29 1.14 1.07 1
4.35 17.06 12.87 3.19 2.48 2.41 3.11 3.65 1
27.10 27.10 10.05 9.95 7.20 7.20 7.20 3.64 1

" 75.47 71.27 51.56 39.47 29.61 27.33 25.13 25.88 1
102.57 98.37 61.61 49.42 36.81 34.53 32.33 29.53
32.96 10,18 15.65 17.44 30.87 30.36 25.47 24.49
135.53 108.55 77.26 66.86 67.68 64.89 57.80 54.02
73.60 46.00 37.81 26.69 25.78 25.92 25.81 22.14
61,88 62.45 38.93 39.00 50.60 36.75 31.20 31.88
0.32 0.10 0.26 0.36 0.87 0.94 0.81 0.83

37.84 36.26 60.79 48.51 49.92 45.34 44.26 82.85
__ — 1:1 — __ — 1:1 —
— — — — 2:5 — — —
20578 18004 15697 14692 12534 10770 9318 8410

2799 2982 2661 2608 2683 2707 3248 3219
I
5.45 10.85 16.30 6.07 5.79 5.19 5.98 13.26

3.50 3.50 3.50 2.50 2.30 1.80 1.60 3,00 1
15.96 35.01 35.08 18.00 15.91 15.76 20.56 27.26
13
To the Members of BLUE STAR LIMITED
Report on the Accounts for the year ended 31st March, 1999 in compliance with Section 227(2) of the Companies Act, 1956.
We have examined the attached Balance (b) in our opinion, proper books of (3C) of the Companies Act, 1956
Sheet and Profit and Loss Account account as required by law have and give the information required
annexed thereto which are in agreement with been kept by the Company so far as in the manner so required and give
the Company's books of account and locally appears from our examination of a true and fair view:
audited Returns from the Branches. those books and proper returns ad-
1. in the case of Balance Sheet,
equate for the purpose of our audit
1. As required by the Manufacturing and of the state of affairs as at
have been received from the
Other Companies (Auditors' Report) 31st March, 1999 and
Branches not visited by us. The
Order, 1988, issued by the Company
Branch Auditors' Reports have 2. in the case of Profit and Loss
Law Board in terms of Section 227 (4A)
been forwarded to us and Account, of the Profit of thea
of the Companies Act, 1956, we annex
appropriately dealt with. Company for the year ended
hereto a statement on the matters speci-
on that date.
fied in paragraphs 4 and 5 of the said (c) In our opinion, and to the best of
Order. our information and according to
the explanations given to us, the
2. Further to our comments in the
said accounts read together with
Annexure referred to in paragraph 1
Note No. 9 regarding demerger of
above, we report that:
International Software Division of For K S AIYAR & CO.
(a) we have obtained all the the Company and note No. 10 re- Chartered Accountants
information and explanations garding fraud at Bharuch unit of
Mani A. Aiyar
which to the best of our knowledge the factory and other notes thereon
Partner
and belief were necessary for the comply with the Accounting Stan-
purposes of our audit. dards prescribed under Section 211 Mumbai, 29th July, 1999
(Referred to in paragraph I of our Report of even date on the Accounts for the year ended 31st March, 1999 of Blue Star Limited)
In our opinion, and on the basis of such The stocks of finished goods, stores, component stores have been
checks of the books and records as we consid- spare parts and raw materials have established on the basis of year end
ered appropriate and according to the been physically verified during the physical count, it is not possible to
information and explanations given to us year by the management. The fre- determine the discrepancies if any, in
during the normal course of audit, which quency of verification is reasonable. view of the comments in (vi) below.
were necessary to the best of our knowledge The procedures of physical verifica-
and belief, we report that; On the basis of our examination of
tion of stocks followed by the stock records, the valuation of stocks
management are reasonable and ad- is fair and proper in accordance with
(i) The Company has maintained proper
equate in relation to the size of the the normally accepted accounting
records showing full particulars in-
Company and the nature of its busi- principles, and is on the same basis as
cluding quantitative details and
ness. in the preceding year except in the
situation of fixed assets. These assets
have been physically verified by the The discrepancies noticed on physi- case of Bharuch unit where stock .
management at reasonable intervals cal verification of stocks as compared records have not been maintained.
and no material discrepancies were to the book records were not mate- properly owing in part to a change
noticed on such verification. rial except, that in the case of the over to new software.
Bharuch unit, where the stock
(ii) None of the fixed assets have been records were to be updated and The Company has not taken any
revalued during the year. closing stocks of raw-material and loans, secured or unsecured from
14
companies, firms or other parties unserviceable or damaged stores, raw (xx) No personal expenses have been
listed in the register maintained pur- materials, finished goods and traded charged to Profit & Loss Account.
•^ suant to provisions of Section 301 of goods. Adequate provisions have
the Companies Act, 1956. We have been made in the accounts for the (xxi) In respect of the service activities of
been informed that there are no loss arising on the items so deter- the Company:
companies under the same manage- mined.
(a) The Company has a reason-
ment within the meaning of Section
able system of recording
370 (1-B) of the Companies Act. (xiii) The Company has complied with the receipts, issues and consump-
provisions of Section 58A of the tion of materials and stores
(viii) The Company has not given any Companies Act, 1956 and the Com-
loans, secured or unsecured to Com- commensurate with its size
panies (Acceptance of Deposits) and nature of business.
panies, firms or other parties listed in Rules, 1975 with regard to the
the register maintained pursuant to Deposits accepted from the public. (b) Though allocation of man-
the provisions of Section 301 of the
hours consumed is not made to
Companies Act, 1956. We have been
(xiv) The Company has maintained rea- relative jobs, in our opinion,
informed that there are no compa-
sonable records for the sale and control is exercised on the
nies under the same management
disposal of scrap. The Company does total labour consumed on the
within the meaning of Section 370
not have any realisable by-product. jobs.
(1 -B) of the Companies Act.
(ix) The parties to whom loans or ad- (xv) The Company has an internal (c) The Company has a reason-
vances in the nature of loan have audit system commensurate with the able system of authorisation at
been given by the Company are re- size and nature of its business. proper levels with necessary
paying the principal amount as control on the issue of stores.
stipulated and are also regular The Company has a system of
(xvi) The Central Government under Sec-
in the payment of interest where tion 209(1) (d) of the Companies internal control in this regard
applicable. Act, 1956 has prescribed the mainte- commensurate with its size
nance of cost accounts and records and nature of business.
(x) There are adequate internal control in respect of certain products manu-
procedures commensurate with the (xxii) In respect of the investment activi-
factured by the Company. The ties of the Company:
size of the Company and the nature Company has prima facie made and
of its business with regard to pur- maintained such accounts and (a) The Company has not granted
chase of stores, raw materials records except as referred in clause any loans or advances on the
including components (except in No. (vi) above. We have broadly re- basis of security by way of pledge
case of Bharuch Unit where such viewed the same, but have not made of Shares, Debentures or other
controls need to be strengthened as a detailed examination of these ac- similar securities.
referred to in Clauses (v & vi) above counts and records with a view to
and for the reasons stated in note determine whether they are accurate (b) The Company has maintained
No. 10), and in the case of plant and or complete. adequate records of transac-
machinery, equipment and other as- tions and contracts having
sets and with regard to the sale of (xvii) The Company is regular in deposit- regard to the size of these
goods. ing Provident Fund and Employees' operations. Such transactions
(xi) The transaction of purchase of goods State Insurance dues with the appro- have been made in the
and materials and sale of goods and priate authorities. Company's own name and have
materials made in pursuance of con- been recorded within a reason-
tracts or arrangements entered in the (xviii) No undisputed amounts payable in able time.
registers maintained under Section respect of Income Tax, Sales Tax,
301 and aggregating during the year Customs Duty and Excise Duty were
to Rs. 50,000 or more in respect of outstanding, as at 31st March, 1999
each party have been made at prices for a period of more than six months
for such goods or materials, and the from the date they became payable.
prices at which transactions for simi- ForKSAIYAR&CO.
lar goods or materials have been (xix) The Company is not a sick industrial Chartered Accountants
made with other parties. company within the meaning of
Clause (O) of sub-section (1) of Sec- Mani A. Aiyar
(xii) The Company has a regular proce- tion 3 of Sick Industrial Companies Partner
dure for the determination of (Special Provisions) Act, 1985. Mumbai, 29th July, 1999
15 L U E S T A R L I M I T E D
BALANCE SHEET AS AT MARCH 31, 1999
As at As at
Schedule March 31, 1999 March 31, 1998
Rupees in lakhs Rupees in lakhs
SOURCES OF FUNDS
Share Capital A 27,09.71 27,09.71
Reserves & Surplus B 85,95.27 80,36.73
Shareholders' Funds 1,13,04.98 1,07,46.44
Secured Loans C 25,62.03 25,89.10
Unsecured Loons D 56,87.10 34,54.87
Loan Funds 82,49.13 60,43.97
TOTAL 1,95,54.11 1,67,90.41
APPLICATION OF FUNDS
Fixed Assets
Gross Block 1,32,52.70 1,03,80.49
Depreciation 44,51-79 34,85.79
Net Block E 88,00.91 68,94.70
Capital Work-in-Progress 1,06.92 17,56.55
Investments F 10,85.44 10,53.43
Fixed Assets & Investments 99,93.27 97,04.68
Inventories 69,25.67 73,45.25
Sundry Debtors 80,03.46 68,02.67
Cash ck Bank Balances 14,19.46 9,33.22
Loans & Advances 58,45.09 59,82.30'
Total Current Assets, Loans & Advances G 2,21,93.68 2,10,63.44
Current Liabilities 1,22,38.08 1,32,16.27
Provisions 11,37.62 11,02.41
Less : Total Current Liabilities & Provisions H 1,33,75.70 1,43,18.68
Net Current Assets 88,17.98 67,44-76
Miscellaneous Expenditure
(to the extent not written off or adjusted) (See Note?) 7,42.86 3,40.97
TOTAL 1,95,54.11 1,67,90.41
Notes forming part ot the Accounts N
Bal K Maihotra Executive Director

Atul Choksey Director
As per our Report Minoo R Shroff Director
For K S AIYAR & CO. Ashok M Advani Suresh N Talwar Director
Chartered Accountants Chairman & Chief Executive Uday Kotak Director
G Ramchandani Director
MANI A. AIYAR Suneel M Advani H. Rajaram Vice President - Finance
Partner President & Vice (Chairman K P T Kutty Company Secretary
16
PROFIT & LOSS ACCOUNT FOR THE PERIOD ENDED MARCH 31, 1999
Period ended Period ended

March 31, 1999 March 31, 1998
INCOME
Sales, Work Bills 4,60,87.26 4,30,98.50
Commission 10,81.53 12,50.16
Other Income 4,80.13 9,28.65
4,76,48.92 4.52,77.31
EXPENDITURE
Cost of Sales, Work Bills & Service. 3,42,15.11 3,31,71.86
Employee Remuneration & B e n e f i t - 49,33.15 47,10.23
Operating & General Expenses 56,49.81 47,79.03
Depreciation 10,38.52 8,11.83
4,58,36.59 4.34,72.95
PROFIT
PROFIT BEFORE TAXATION 18,12.33 18,04.36
Provision tor Income Tax 1,82.00 2,50.00
Provision for Wealth Pax 3.00 3.00
1,85.00 2,53.00
PROFIT AFTER TAXATION 16,27.33 15,51.36
Add: Balance brought forward 10,91.58 9,83.46
Transfer trom Foreign Project Reserve 32.00
PROFIT AVAILABLE FOR DISPOSAL 27,50.91 25,34.82
APPROPRIATIONS
5,00.00 4,00.00
9,48.40 9,48.40
1,04.32 94.8-f
10,52.72 10,43.24
11,98.19 10,91.58
Bal K Malhotra Ex jcmii'e Director

Atul Chokscy l)i rector
As per our Report Minoo R Shroff Di ~ec [Di-
For K S AIYAR & CO. Suresh N Talwar Di rector
-C'unered Accountants Uday Kotak Di rector
G Ramchandani Di •ector
MANI A. AIYAR Suneel M Advani H. Rajaram \'i e President - Finance
•/dinner President & Vice Chairman K P T Kutty C( mpany Secretary
17
SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 1999
As at As at
March 31, 1999 March 31, 1998
A. SHARE CAPITAL
Authorised
10,000 7.8% Cumulative Preference Shares of Rs. 100 each 10.00 10.00
2,97,40,000 Equity Shares of Rs. 10 each 29,74.00 29,74-00
16,000 Unclassified Shares of Rs. 100 each 16.00 16.00
30,00.00 30,00.00
Issued
2,70,97,102 Equity Shares of Rs. 10 each 27,09.71 27,09.71
27,09.71 27,09.71
Subscribed & Paid Up

Equity Shares of Rs. 10 each:
70,47,543 Shares fully paid in cash 7,04.75 7,04-75
1,400 Shares allotted as fully paid pursuant to a
contract without payment being received in cash 0.14 0.14
2,00,43,909 Shares allotted as fully paid up
Bonus Shares by Capitalisation
of Reserves and Share Premium 20,04.39 20,04-39
4,250 Shares allotted as fully paid up on
conversion of 425 — 7.8% Cumulative
Preference Shares of Rs. 100 each in terms of
the prospectus dated June 24, 1969 0.43 0.43-
2,70,97,102 27,09.71 27,09.71
B. RESERVES & SURPLUS

General Reserve
Balance as on April 1, 1998 49,57.48 45,57.48
Add: Transfer from Profit & Loss Account 5,00.00 4,00.00
54,57,48 49,57.48
Foreign Projects Reserve

Less: Transfer to Profit & Loss Account 32.00 —
1,58.50 1,90.50
(Carried forward) 56,15.98 51,47.98
18
As at As at
March 31, 1999 March 31, 1998
B. RESERVES & SURPLUS (Contd.)
(Brought forward) 56,15.98 51,47.98
Revaluation Reserve
Less: Reduction on Deduction/Adjustment 2,64 3.82
13.44 14.30
7,45.22 7,61.30
Capital Reserve
Subsidy from Government (See Note 12) 11.20 11.19
11.20 11.19
Share Premium Account 10,24.68 10,24.68

10,24.68 10,24.68
Profit & Loss Account

Balance carried forward 11,98.19 10,91.58
85,95.27 80,36.73
C. SECURED LOANS
5,00.00 _
From Housing Development Finance Corporation
Secured by Equitable Mortgage by deposit of title deeds of
specific immovable properties 7,40.00 5,62.00
ECB Loan from ABN AMRO Bank Secured by exclusive
charge by way of hypothecation of specified machinery
and equipment 12,75.60 11,88,00
46.43 8,39.10
25,62.03 25,89.10
19
As at As at
March 31, 1999 March 31, 1998
Rupees in lakhs Rupees in lakta
D. UNSECURED LOANS
14-6% Redeemable I V l v n t u a - (redeemable on 20.5.99) 12,00.00 _
Fixed Depo>it-i 4,74.55 4,30.50
Commercial Papei 22,00.00 2C.50.0C
Others 18,12.55 9,74-37

56,87.10 54,54.87
E. FIXED ASSETS
NET BLOCK
As at
31.3.99
1,73.03
44.29
45.65.84
31,22.84
7,91.26
1,03.65
20
SCHEDULES EORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 1999
As at As at
March 31, 1999 March 31, 1998
F. INVESTMENTS (AT COST)

0.04 0.04
31.83 31.83
UNQUOTED:
TRADE INVESTMENTS
1.000 F u l l y Paid E q u i t y Share> o f R s . 25 each in h
Co-operative Bank Ltd. 0.25 0.25
2,400 Fullv Paid Equity Shares ot Rs. 100 eadi in .
S u n i l ex Compam Private Ltd. 5.64 5.64
2,400 F u l l v Paid Equity Sh res n| Rs. 100 cadi hi
Compressors P r i v a t r Limit 2.40 2.40
76,/90 F u l l v Paid Equit\ Shares oi'Rs. 10 each
in R a v i s t a r India Private Ltd, 7.68 7.68
3,67,500 F u l l v Paid E q u i t y Shares of MR 1 each
in Arab Malayan Blue Star SON 49.97 49.97
2,94,000 F u l l y Paid E q u i t y Shares of Rx 10 each
in Rolastar P r i v a t e L t d , 29.40 29.40
INVESTMENT IN SUBSIDIARY COMPANY
66.58 34-57
INVESTMENT IN GOVERNMENT SECURITIES
59.90 59.90
QUOTED:
TRADE INVESTMENTS
24,9^,824 F u l l y Paid E q u i t y Share^
ot Rs. 10 each in "t o k n ^ a w u Blue S t a r L t d . 8,19.25 8,19.25
(A<".'re«nte M a r k e t V a l u e Rs. IS,61.62 lakhv.
Ns>7'^ ; Rs. 16,41.97 l a k h s )
12.50 12.50
10,85.44 10,53.43-
21
As at As at
March 31, 1999 March 31,1998
G. CURRENT ASSETS, LOANS & ADVANCES
(a) Inventories (as certified by the Management)
Raw Materials, Stores & Components (at cost) 18,84.23 20,46.73
Work-in-Progress {at cost) 39,98.99 47,18.17
Work-in-Progress {at contract value) 11,73.18 11,68.50
51,72.17 58,86.50
Less: Advance received thereagainst 13,02.59 16,75.09
38,69.58 42,11-58
Finished Goods (at cost or net realisable
value, whichever is lower) 6,38.19 7,08.05
Goods in Transit (at cost) 4,75.76 2,80.87
Tools, Cylinders & Consumable Stores 48.39 76.84
Units, Bonds & Shares in hand (at lower of
cost or market value) (See Note 16) 9.52
69,25.67 73,45.25
(b) Sundry Debtors (Unsecured)
Considered Good:
Over six months 22,72.52 17,20.90
Others 57,30.94 50,81.77
Considered Doubtful:
Over six months 13.51 12.65
Less: Provided 13.51 12.65
80,03.46 68,02.67
(c) Cash & Bank Balances:
Cash on hand (including Cheques on hand Rs, 95.94 lakhs;
1997-98: Rs. 1,31,20 lakhs) 2,38.04 1,9.3.79
With Scheduled Banks:
Current Account 1,96.91 4,19.95
Unclaimed Dividend Account 19,09 16.64
Deposit Account 9,27.81 2,84.86
With Unscheduled Banks:
1. Rafidairi Bank
(Maximum balance during the year
Rs. 0.68 lakh; 1997-98: Rs. 0.68 lakh) 0.68
31.63 31.63
Bank of America A/c — 11
Rs. 0.25 lakh; 1997-98: Rs. 0.25 lakh)
4. ABN Amro Malaysia A/c — I
Rs. 0.21 lakh; 1997-98: Rs. 10.32 lakhs)
(Balance carried forward) 14,14.16 M8.01
22
As at As at
March 31, 1999 March 31, 1998
G. CURRENT ASSETS, LOANS & ADVANCES (Contd.)
(c) Cash & Bank Balances (Contd.)
(Balance brought forward) 14,14.16 9,48.01
3.41 1.12
6.09
7. Abu Dhabi Commercial Bank Ltd. A/c
Rs. 8.48 lakhs; 1997-98: Rs. Nil) 5.79
Rs. 13.65 lakhs; 1997-98: Rs. Nil) 2.06
Rs. 0.78 lakh; 1997-98: Rs. 8.59 lakhs) 0.78
10. Abu Dhabi Commercial Bank Ltd. A/c — I
Rs. 26,34 lakhs; 1997-98: Rs. 25.06 lakhs) 20.4? 1.73
11. Abu Dhabi Commercial Bank Ltd. A/c — II
Rs. 2.64 lakhs; 1997-98: Rs. 25.55 lakhs) 2.64
12. Abu Dhabi Commercial Bank Ltd. A/c — VII
Rs. 0.45 lakh; 1997-98: Rs. 16.45 lakhs) 0.45 0.44
13. Abu Dhabi Commercial Bank Ltd. A/c — VIII
Rs.11.54 lakhs; 1997-98: Rs. 12.99 lakhs) 11.54
14- Municipal Co-operative Bank Ltd.
Rs. 0.08 lakh; 1997 : Rs. 0.06 lakh) 0.08 0.06
Jai Hind Co-operative Bank Ltd.
{Maximum balance during the year
Rs. 0.27 lakh; 1997 :Rs. 0.22 lakh) 0.2? 0.22
16. Municipal Co-operative Bank Ltd.
Deposit Account
Rs. 0.15 lakh; 1997-98: Rs. 0.15 lakh) 0.15 0.15
14,52.93 9,66.69
Less: Provided * Cash & Bank Balances 33.4? 33.47
14,19,46 9,33.22
Provision for Non-Repatriable Foreign Assets
23
SCHEDULES FORMING PART OP THE BALANCE SHEET AS AT MARCH 31, 1999
As at As at
March 31, 1999 March 31, 1998
G. CURRENT ASSETS, LOANS & ADVANCES (Contd.)

(d) Loans &. Advances
L'n-;eaired and considered j>ood:
Advance recoverable in cash or in kind or for
value to be received 41,05.49 48,12.41
Advance towards Share application money tor
Inves'ment in Bluestar Intotech Ltd. 74.84 —
Advance towards Share application money for
Investment in S t o r k Comprimo Blue Star Jt. Vent. ire — 25.00
Deposits with Government and other hodies 16,64.76 11,44-89
58,45.09 59,82.30
2,21,93.68 2,10,63.42
H. CURRENT LIABILITIES & PROVISIONS

Sundry Creditors — Small Scale units (see note 1 1 ) 1,17.93 —
Sundry Creditors --•• Others 36,88.07 46,67.54
Acceptances 1,21.60 1,28.38
Other L i a b i l i t i e s 65,98.56 65,26.38
Advances against Contracis 16,84.95 18,69.89
Unclaimed D i v i d e n d - 19.09 16.64
Interest accrued but not due 7.88 7.44
Current Liabilities 1,22,38.08 1,32,16.27
Provision trr Leave E n c a s h m e n t 84.90 59.17

Proposed Dividend 9,48.40 9,48.40
Corporate Dividend Tax 1,04.32 94.84
10,52.72 10,43.24
Provisions 11,37.62 11,02,41
1,33,75.70 1,43,18.68
24
SCHEDULES FORMING PART OF THE PROFIT & LOSS ACCOUNT FOR THE PERIOD ENDED MARCH 31, 1999

March 31, 1999 March 31, 1998
I. OTHER INCOME
Profit on Sale of Assets 11.63 20.09
Interest (Tax deducted at source
Rs. 4.85 lakhs; 1997-98: Rs 10.56 lakhs) 54.04 2,77.94
ProviMons c* Liabilities no longer requited 1,11.56 1,39.06
Hividends ( Fax dedticted at source
Rs. 7.94 l a k h , ; 1997-98: Rs. N i l ) 96.25 45.08
Profit on sale of I n v e ^ m e n t s 4.55
Exchange Rate Ditreience 25.54 3.52
Miscellaneous 1,76.45 2,91.96
Capital Receipts:
4.66 1,46.45
4,80.13 9,28.65
J. COST OF SALES, WORK BILLS & SERVICES

Stock at commencement:
Raw Materials, Stores &. Components 20,46.73 18,25.52
Work-in-Progress 47,18.17 43,44.65
l a n i s h f d CJoods 7,08,05 6,27.21
^ U n i t s , Bond* and Share-- in hand (See Note 16) 21.18 21.77
Purchases & Expenses 3,32,51.91 3,38,46.84
4,07,46.04 4,06,65.99
Less: Stock at Close:

Ra\v M a t e r i a l s , Store> Ck Components 18,84.23 20,46.73
Work-m-Pro»rev> (at cost) 39,98.99 47,18.17
Finished Goods 6,38.19 7,08.05
Units, Bonds and Shares in hand (See Note 16) 9.52 21.18
65,30.93 74,94.13
3,42,15.11 3,31,71.86
K. EMPLOYEE REMUNERATION & BENEFITS

Salaries, Wages & Bonus 34,71.35 32,55.18
Provident F u n d , Superannuation, Gratuity Fund
and Leave Encashment 3,80.66 5,57.74
Welfare & Training Expense* 10,81.14 8,97.31
49,33.15 47,10.23
SCHEDULES FORMING PART OF THE PROFIT £ LOSS ACCOUNT FOR THE PERIOD ENDED MARCH 31, 1999

March 31, 1999 March 31, 1998
L. OPERATING & GENERAL EXPENSES

Rent 3,38.22 3,41.63
Lease Rentals 1,45.76 1,76.59
Races & Taxes 22.89 18.31
Power 2,75.59 2,44.81
Insurance 52.24 50.28
Repairs & Maintenance
Premises 2,00.28 1,66.41
Machinery 68.47 50.01
Others 53.66 40.73
Interest (Including Rs. 2,21.56 lakhs on Fixed Loans;
1997-98: Rs. 2,09.73 lakhs) 9,86.44 5,55.80
Payment to Auditors (including payment to
Branch Auditors)
Audit Fees 8.05 7.28
Other Services (including for Tax Audit
Rs. 0.85 lakh; 1997-98: Rs. 0.85 lakh) 1.86 1-43
Reimbursement of Expenses 1.77 0.61
Directors' Fees 0.36 0.38
Non Executive Directors' Commission 9.50 9.50
Donations 3.00
—
Commission on Sales (other than salesmen) 1,87.16 1,41-81
Advertising & Publicity 3,90.10 4,24-61
Transport & Travelling 10,29.91 9,37.39
Stationery & Printing 1,56.96 1,63.83
Other expenses 14,49.11 13,38.28
Non Recoverable Debts Written-off 2,56.08 86.15
Loss on assets sold or discarded 12.60 18.10
Research & Development 2.80 2.09
56,49.81 47,79.03
M. DEPRECIATION
Depreciation on Fixed Assets 10,51.96 8,26.13
Less: Transferred from Revaluation Reserve 13.44 14-30
Depreciation charged to Profit and Loss Account 10,38.52 8,11.83
26
NOTES FORMING PART OF THE ACCOUNTS
N. NOTES FORMING PART OF THE ACCOUNTS
2. Fixed Assets and Capital W.I.P.:

(a) Fixed Assets are stated at cost, except for certain land, buildings and plant & machinery which are at their revalued
cost.
(b) Expenditure incurred during the construction period is included in Capital W.I.P. and the same is allocated to
respective Fixed assets on completion of the construction.
(c) Expenditure incurred upto the date of final implementation for becoming Y2K compliant including IT Strategy project,
which in the earlier year was considered as deferred revenue expenditure and ERP expenses, is included in Capital WIP and
will be treated in the accounts appropriately on completion of the project.
3. Revenue Recognition:
(a) On construction contracts —-
(i) In respect of divisible contracts, revenue is recognised in respect of supplies as and when supplies are completed and in
respect of erection and commissioning, on the Percentage Completion Method, except that in case of Packaged
Airconditioning Division products, the Completed Contract Method is applied.
(ii) In respect of indivisible contracts, revenue is recognised on the Percentage Completion Method, based on the billing
schedules agreed with the customers. The relevant cost is recognised in accounts in the year of recognition of the_
revenue. Profit so recognised is adjusted to ensure that it does not exceed the estimated overall contract margin. If
there is a loss on contract, then the same is provided fully. The total costs of the contract are estimated, based on
technical and other estimates.
4. Depreciation/Amortisation:
(a) Depreciation is charged at rates applicable under Schedule XIV of Companies Act, 1956, on written down value of
(b) Depreciation on net increase due to Revaluation has been calculated on straight line method over the residual life of
asset and is charged to Revaluation Reserve.
5. Inventory Valuation and Treatment of Costs;

(a) Basis of Valuation:
(i) Raw materials, stores, components, goods-in-transit are valued at cost after providing for obsolescence,
{ii) Work-in-Progress relating to manufacturing activity is valued at cost.
(iii) In case of construction contracts, Contract Work-in-Progress awaiting customer acceptance is valued at
proportionate contract value and the balance work-in-progress is valued at cost. All products of Packaged Air-
conditioning Division products are stated at cost.
(iv) Finished goods are valued at lower of cost or net realisable value.
(v) Service kits and demonstration stock are amortised over a period of five years.
(vi) Bonds, Units & Shares held as stock-in-trade are valued at lower of cost or market value.
27
KJSSilitG PAR! OF-ft* ACCOUNTS
(b) Basis of Allocation of Expenditure and Determination of Cost:

(i) Direct Expenses identifiable to a speciiic job are debited to that job. Indirect Expenses are not allocated to jobs but
charged as period cost in the year it is incurred.
(ii) Depreciation on Assets used specifically and exclusively for a job contract is charged to the respective job and finally
charged to cost of sales.
6. R & D Expenditure:
Revenue expenses are charged off in the year of expenditure and capital expenses are capitalised.
7. Foreign Exchange Transactions:

(a) Income and expenses in foreign exchange are accounted at the average rate prevailing during the month of
transaction.
(b) Income and expenses on foreign projects are accounted at average rate for the year.
(c) Assets purchased are capitalised at rates prevailing on date of purchase.
(d) Balances in foreign bank accounts, Exchange Earners' Foreign Currency Account and Current Assets and Current
Liabilities in respect of foreign projects are translated into Indian Rupees at rates prevailing at the year end.
(e) Exchange differences in respect of liabilities incurred to acquire fixed assets are adjusted to the carrying amount of such
fixed assets.
8. Deferred Revenue Expenditure:

(a) Payment of compensation to employees who have retired under Early Voluntary Retirement Scheme is amortised over a
period of 3 years. Balance amount is carried forward as "Miscellaneous Expenditure (to the extent not written off or
adjusted)".
(b) The expenses incurred on Advertisement and Publicity campaign for launch of new products are charged off over a
period of 12 months to the Profit and Loss Account representing the estimated benefit that accrues to the Company during
the year.
(c) Technical knowhow fees apportioned to manufacturing processes are treated as revenue expenditure to be deferred and
amortised over a period of six years.
9. Retirement Benefits:
Liabilities of the Company on account of gratuity and leave encashment, on retirement are ascertained by actuarial valuation.
The amount of gratuity liability so ascertained is paid to the Gratuity Fund and necessary provision is made towards leave
encashment liability.
10. Excise/Customs Duty:

(a) Excise Duty is accounted at the stage of removal of goods from the manufacturing units.
(b) Customs Duty is accounted in the year the goods are cleared from Customs Bonded Warehouse.
11. Investments:
Long term investments are valued at cost subject to reduction made for permanent diminution in value.
12. Contingent Liabilities:

Contingent liabilities are disclosed after a careful evaluation of the facts and legal aspects of the matter involved.
28
II OTHER NOTES
1. Sales/Work bills include:
- A portion of Work-in-Progress valued at contract values, net effect of the same computed as under:
(Rs. in lakhs)
Work done to be billed
-At close (1997-98 Rs. 1168.50 lakhs) 1173.18
Less: At commencement (1997-98 Rs. 1201.16 lakhs) 1168.50
4.68
2. Contingent Liabilities
31.3.1999 31.3.1998
(Rs. in lakhs) (Rs. in lakhs)
(a) Claims against the Company not acknowledged as debts 9.72 83.41
(Net of tax) (6.32) (54.22)
(b) Sales tax demands under appeal 883.64 906.35
(Net of tax) (574.36) (589.13)
(c) Excise duty claims not acknowledged as debts 608.67 605.04
(Net of tax) (395.64) (393.28)
(d) Corporate Guarantee given on behalf of other Bodies Corporate 119.40 120.00
(Net of tax) (77.61) (78.00)_
3. (a) Estimated amount of Contracts remaining to be executed on Capital account and not provided for Rs. 46.84 lakhs
{1997-98: Rs. 193.39 lakhs).
(b) Future obligation on Lease rentals are Rs. 170.72 lakhs (1997-98: Rs. 298.01 lakhs) on account of assets taken on lease.
4. In accordance with Accounting Policy No. 10(a) regarding Excise Duty, the amount of estimated Excise Duty on
Finished Stocks lying in the manufacturing units at the year-end is Rs. 13.57 lakhs (1997-98: Rs. 24-61 lakhs). However, there
is no effect on the profit for the year.
5. In accordance with Accounting Policy No. 10(b), the estimated amount of Customs Duty on imported materials lying
in Customs Bonded Warehouse is Rs. 13.96 lakhs (1997-98: Rs. 44.63 lakhs). However, there is no effect on the profit for
the year.
6. (a) The following Fixed Assets were revalued by the valuers Messrs S R Batliboi Consultants Pvt. Ltd. The net amounts
written up on revaluation are shown below:
As at 1.7.1985 As at 1.4:1989
Land (Freehold) 86.55 17.69
Land (Leasehold) 19.39 16.71
Buildings 330.07 522.87
Plant & Machinery 181.63 —
617.64 557.27-
(b) Depreciation on increase due to revaluation in accordance with Accounting Policy No. 4(b) results in an additional charge
of depreciation of Rs. 13.44 lakhs (1997-98: Rs. 14.30 lakhs) and an equivalent amount has been transferred to the
Profit & Loss Account from Revaluation Reserve.
29
7. (a) fi) In accordance with Accounting Policy No. 8 (a) regarding Early Voluntary Retirement Scheme an amount of
Rs. 630.24 lakhs (1997-98: Rs. 279.92 lakhs) is carried forward under the head "Miscellaneous Expenditure (to the
extent not written off or adjusted)".
(ii) During the year EVRS was amortised from the month of payment instead of considering full year of the payment as per
the past practice. The impact of this change has resulted in increasing the profit for the year by Rs. 128.83 lakhs.
(b) In accordance with Accounting Policy No. 8(c) regarding Technical Knowhow related to manufacturing processes, an
amount of Rs. 112.62 lakhs (1997-98: Rs. 41.67 lakhs) is carried forward under the head "Miscellaneous Expenditure (to
the extent not written off or adjusted)".
8. Discrepancies noticed during the course of audit between physical stock and book records at Bharuch units, caused due to the
new software system for financial accounting purposes, are not material and have been properly dealt with in the
accounts for the year. Internal controls to ensure non-recurrence of such discrepancies are being strengthened.
9. The net sales/income from operations and Profit Before Tax figures of the Company for the Accounting Year ended 31.3.99
include Rs. 1720.37 lakhs and Rs. 399.62 lakhs respectively for the period 1.10.98 to 31.3.99 of the International Software
Division. Besides the following assets and liabilities as at 30.9.98 of the same division are included in the above Balance
Sheet.
(Rs. in lakhs)
Net Fixed Assets 171.28
Capital WIP 46.28
Investments 66.57
Sundry debtors 489.08
Cash and Bank Balances 1.48
Loans and Advances 194.78
Current Liabilities and Provision 202.70
which under the Scheme of Arrangement approved by the Shareholders of the Company and upon approval of the Bombay
High Court will be transferred to Blue Star Infotech Ltd. With effect from 01.10.98.
*
10. During the year at the Bharuch unit of the company, a fraud resulting in misappropriation of funds was detected. Necessary
action including registering the case with the police authorities and other agencies have been instituted by the Company. Efforts
are on by the Company to crystalise the amounts invovled and deal with the non-recoverable amount in the Accounts
subsequently. The Company has subsequently strengthened the internal control systems at the Bharuch unit to ensure non-
recurrence of such events.
11. (a) There is no amount remaining unpaid to Small Scale Suppliers within the meaning of "The Interest on Delayed
Payments to Small Scale & Ancillary Undertakings Act".
(b) The undertakings from whom amounts outstanding for more than 30 days in respect of small scale undertakings where such
dues exceed Rs. 1 lakhs are as under:
(i) Ravistar Pvt. Ltd., (ii) D. S. Engineering & Mech. Works, (iii) Mihir Engineering Ltd., (iv) Servex Engineering &
Fabrications (P) Ltd., (v) Fitrite Industries, (vi) Prijaai Works, (vii) Technoman, (viii) Airtech, (ix) Akik Insupack,
(x) Elvee Electricals, (xi) J. K. Insulation, (xii) J. B. Sawant Engg., (xiii) Malde Paper Box Industries, (xiv) Narendra
Engineering, (xv) Trigon Metal Sections, (xvi) Vijay Steel Corporation, (xvii) Yogeshwar Engineering.
(c) The above information has been compiled in respect of parties to the extent to which they could be identified as small scale
and ancillary undertakings on the basis of information available with the company.
12. Subsidy from Government of Gujarat for setting up of new projects at Bharuch, is repayable only in the event of nonfulfilment
of the conditions laid down.
30
13. Amounts debited during the year to Work-in-Progress which are/to be transferred to Cost of Sales include the following:
1998-99 1997-98
Salaries, Wages & Bonus 68.64 68.83
Employee Welfare & Training 0.99 2.45
Rent 16.35 18.96
Interest 17.42 4.69
Power 2.83 0.39
Insurance 82.38 92.58
Repairs & Maintenance 1.41 0.01
Transport & Travelling 219.37 234.31
Stationery & Printing 13.70 22.42
Commission on Sales (other than Salesmen) 23.26 66.07
Depreciation 0,47 0.52
Other Expenses 1304.95 2876.08
14. Managerial Remuneration to Whole-time Directors included in the Profit & Loss Account:
1998-99 1997.-98
(a) Salaries 20.70 18.48
(b) Commission 20.70 18.48
(c) Contribution to Provident Fund & Superannuation Scheme 5.18 4.62
(d) Other Perquisites 22.39 12.01
Total 68.97 53.59
15. Computation of Directors' Commission:

1998-99 1997-98
Profit before tax as per Profit and Loss Account 1812.33 1804-36
Add: Directors' Remuneration 78.47 63.09
Provision for doubtful debts/advances 31.17 —
Loss on sale of Fixed Assets 12.59 18.10
1934.56 1885.55
Less: Capital Receipts 4.66 146.45
Less: Profit on sale of Fixed Assets 11.63 20.09
Net Profit for the purpose of Directors' Commission 1918.27 1719.01
Maximum Commission payable upto 10% of the above to
Whole-time Directors 191.83 171.90
Commission payable to the Whole-time Directors as per contract
of service 20.70 18.48 '
Maximum commission payable upto 1% of the above Net Profits
to the Non-Executive Directors 19.18 17.19 -
Commission paid to Non-Executive Directors 9.50 9.50
31
16. Statement showing investments held as stock in trade
Investments Type of Opening Balance Purchases during Sales during Closing Balance
Security year year
Nos. Value Nos. Value Nos. Value Nos. Value

(Rs. in (Rs. in (Rs. in (Rs. in
lakhs) lakhs) lakhs) lakhs)
Morgan Stanley Shares Shares 1,45,900 8.75 — — 1 ,45,900 8.75 — —

Mastergain-92 Mutual Fund Units 3,600 0.35 - _. _ — 3,600 0.35
Master Plus Mutual Fund Units 99,600 12.08 _ — 24,100 2.91 75,500 9.17
Total 2,49,100 21.18 - — 1,70,000 11.66 79,100 9.52
17. The previous year's figures hereabove as well as in the Additional Information hereimder have been regrouped/rearranged
wherever necessary to conform to this year's groupings.
ADDITIONAL INFORMATION PURSUANT TO THE PROVISIONS OF PARAGRAPHS 3 & 4 OF PART II OF

SCHEDULE VI OF THE COMPANIES ACT, 1956
A. PARTICULARS IN RESPECT OF EACH CLASS OF GOODS MANUFACTURED

(Figures in brackets refer to previous year)
Class of Goods
Refrigeration & Air Number 43110 2213

Conditioning Equipment (43110) (1630)
Packaged Airconditioners 7000 63 128

(7000) (148) (63)
Industrial Packaged Chillers 4

(14) (4)
Shell & Tube Condensers & Coolers 3000 51

(3000) (63)
Air Handling Units 2240 63

(2240) (111)
Finned Condensers & Evaporators
EPABX Equipment Lines 50000 100

(50000) (100)
Analytical Instruments 150 I 1

(150) (1) (1)
Environmental Test Chambers 250 15
(250) (15) (1)
Note: Plant and machinery, installed is for general purpose and not meant exclusively for any particular product group.
32
B. PARTICULARS IN RESPECT OF GOODS TRADED
(Figures in brackets refer to previous year)
Opening Stock Purchases Closing Stock Sales
Class of Goods Unit Qty Value Qty Value Qry Value Qty Value
(Rs. in lakhs) (Rs. in lakhs) (Rs. in lakhs) (Rs. in lakhs)
Airconditioning & Number 2501 402.04 20311 5202.11 2018 320.96 20794 6072.10
Refrigeration Equipment (1637) (273.751 (23425) (6105.66) (2501) (402.04) (22561) (8046.98)
Central Aircoriditioning Worth — 13.14 — 225.23 3.97 - 306.78
Plant (Sales contracts) (-) (5.61) (— » (214-46) (-) (13.14) (-) (246.21)
Electronics & Other Worth — 50.76 1600.59 — 27-12 — 1846.53
Appliances, Equipment, (-) (260.92) (-) (1745.88) (-) (50.76) (-) (2189.18)
Instruments, etc.
Spares & Components Worth — 594.45 — 655.64 — 576.84 1297.17
1-) (252.99) (-) (611.25) (-) (594.45) (-) (1232.47)
Total 1060.39 7683.57 928.89 9522.58

(793.27) (8677.25) (1060.39) (11714-85)
Notes:
(i) Purchases are inclusive of own products.
(ii) Value of spares and components used for work bills and services are not included in purchases.
(Rs. in lakhs)
C. Gross Income from services rendered: 5365.48
(Figures in brackets refer to previous year) (4940.91)
D. Particulars of Raw Materials & Components Consumed:

{Figures in brackets refer to previous year)
Value
(a) Raw Materials Consumed: Unit Quantity (Rs. in lakhs)
Non-Ferrous Metals Tonne 499 799.82

(330) (637.74)
Steel Tonne 2006 721.80

(1701) (450.02)
Compressors Number 29952 1853.68

(24952) (1611.34)
Compressor Components Worth 476.31

(557.72)
Others (items individually not exceeding 10% of total) Worth 4224.94

(4297.57)
8076.55
(7554.39)
33
(b) Raw Materials & Components Consumed:
% of total Value
Consumption (Rs. in lakhs)
Imported (at landed cost) 31.00 2465.85
(23.00) (1731.45)
Indigenous 69.00 5610.70
(77.00) (5822.93)
100.00 8076.55
(100.00) (7554.38)
E. Value of Imports on CIF Basis:

1998-99 1997-98
(a) Raw Materials 513.20 468.55
(fo) Components 1153.58 783.27
(c) Capital goods 68.94 473.17
(d) Spares 32.67 31.10
(e) Samples 2.09 1.35
(f) Finished Goods 2286.99 1068.68
4057.47 2826.12
F. Expenditure incurred in Foreign Exchange:

(a) Royalty & Know-how 139.04 255.46 *
(b) Others 1459.35 995.70
1598.39 1251.16'*
G. Earnings in Foreign Exchange:

(a) Export of goods on F.O.B. basis 615.45 306.65
(b) Project Exports 897.18 1272.12
(c) Royalty, Know-how, Professional & Consultation fees 2846.57 1939.97
(d) Other Income:
Commission 1045.27 1179.28
Others 5.06
5404.47 4703.08
34
BALANCE SHEET ABSTRACT AND COMPANY'S GENERAL BUSINESS PROFILES — PART IV
I. REGISTRATION DETAILS
- Registration No. I 0| 0) 6l 8l 7|_0| State Code
Balance Sheet Date |3| 1| |0| 3| | 91 9|
Date Month Year
II. CAPITAL RAISED DURING THE YEAR (AMOUNT IN RS. THOUSANDS)
Public Issue Rights Issue
N I L
Bonus Issue Private Placement
WML
III. TOSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS
(AMOUNT IN RS. THOUSANDS) Total Assets
Total Liabilities (Net of Current Liabilities)
9|5|5|4\\\l |l|9|5|5|4|Tn
SOURCES OF FUNDS
Paid-up Capital Reserves & Surplus
MM |2|7|0|9|7|1 |8|5|9|5|2|7|
Secured Loans Unsecured Loans
2|5|6|2|0|3 5 1 6 1 8 | 7 | 110
• APPLICATIONS OF FUNDS
Net Fixed Assets (including Capital WIP) Investments
8|9|0l7|8|3 |1|0|8|5|4R
Net Current Assets Miscellaneous Expenditure
8 8 1 7 9 8 7|4|2|8|6
Accumulated Losses
IV. PERFORMANCE OF COMPANY (AMOUNT IN RS, THOUSANDS)

Turnover Total Expenditure
4 7 6 4 8 9 2 4|5|8|3|6|5T9
+ - Profit/Loss Before Tax Profit/Loss After Tax
Tlshlzhh" 1 6 2 7 3 3
Earning Per Share in Rs. Dividend rate %
,00 3|5|
V. GENERIC NAMES OF THREE PRINCIPAL PRODUCTS/SERVICES OF COMPANY
(AS PER MONETARY TERMS)
Item Code No. (ITC Code) Product Description
4 1 5 0 0 |C|0|N|D|1|T|
|M|A|C|H|I|N|£|S
Item Code No. (ITCCode) Product Description
R E F R I G E R|A|T|I|0|N|
HMOF
'item Code No. (ITCCode) Product Description
9|8|0|1|0|0|0|1 I|N|D|U|S|T|R|I |P|R10|]|E|C|TTS1
35
CASH FLOW STATEMENT FOR THE PERIOD ENDED 31ST MARCH, 1999 IN ACCORDANCE WITH THE
REQUIREMENT UNDER CLAUSE 32 OF THE LISTING AGREEMENT OF THE BOMBAY STOCK EXCHANGE
-
31,3.99 31.3.98
Rs. in lakhs Rs. in lakhs Rs. in lakhs Rs. in lakhs
[A] Cash Flows from Operating Activities
Net profit More tax and extraordmarv items 18,07.67 16,57.91

Depreciation 10,38.52 8,11.83
Foreign Exchange 9.47 6.03
Investments/Others -3,35.68 -3,35.24
Interest/Dividend -1,50.29 -3,23.02
Interest charged 9,86.44 5,55.80
15,48.46 7,15.40
Operating profit before working capital change^ 33,56.13 23,73.31
Adjustment lor:
Trade and (it her receivables -11,77.04 -29,55.22
Inventories 4,19.59 -3,22.77
Trade payahles -10,08.70 13,43.63
-17,66.15 -19,34.36
Cash generated from operations 15,89.98 4,38-95
Direct taxes paul -65.00 -94.00
Interest paid -9,86.00 -5,58.72
-10,51.00 -6,52.72
Net Cash from Operating Activities 5,38.98 -2,13.77
[B] Cash Flow from Investing Activities

•
Purchase of Fixed Assets -12,62.00 -25,61.02

Sale of Fixed Assets 20.24 34.14
Purchase of Investments (Net) -81.85 -25.05
Sale of Investments 12.18
—
Interest received 93.18 2,82.98
Dividend received 96.25 45.08
Net Cash used in Investing Activities -11,34.18 -22,11,69

Balance carried forward -5,95.20 -24,25.46
36
CASH FLOW STATEMENT FOR THE PERIOD ENDED 31ST MARCH, 1999 IN ACCORDANCE WITH THE
REQUIREMENT UNDER CLAUSE 32 OF THE LISTING AGREEMENT OF THE BOMBAY STOCK EXCHANGE

31.3.99 31,3.98
Rs. in lakhs Rs. in lakhs Rs. in lakhs Rs. in lakhs
Balance brought forward -5-9SJ20 -24,25.46
[C] Cash Flow from Financing Activities

Proceeds from Long Term Borrowings (Net) 21,17.57 26,31.54
Dividend Paid -10,40.79 : -10,38.92
Grant from Ozone Project- 4.66 1,46.44
Net Cash from Financing Activities 10,81.44, 17,39.06
Net Increase in Cash & Cash Equivalents 4,86,24 -6,86.40
Cash & Cash Equivalents — Opening Balance 9,33,22 16,19.62
Cash & Cash Equivalents — Closing Balance 14,19.46 9,33.22
Ashok M Advani Bal K Malhotra hwcutive Director

Chairman & Chief Executive Atul Choksev Director
Minoo R Shroff Director
Suresh N Talwar Director
Uday Kotak Director
Su'neel M Advani G Ramchandani Director
President & Vice Chairman H. Rajaram Vice President - Finance
K P T Kutt
Mumhai : lulv 28. 1999 >' Company Secretary
AUDITORS' CERTIFICATE
\Ve have examined the above cash flow statement of BLUE STAR LIMITED tor the period ended 3 hi March, 1999. The Statement has been
prepared by the Company in accordance with the listing agreement Clause 32 with the Bombay Stock Exchange and is based on and in
igreement with the corresponding Protit and Loss Account and the Balance Sheet of the Company covered by our report of 29th July. 1999 to
he Members of the Company.
Eor K S AIYAR & CO-

Chartered Accountants
Mani A. Aiyar
Partner
37
STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956
RELATING TO SUBSIDIARY COMPANY
1. Name of the Subsidiary Company USIN International, USA Blue Star Infotech (UK) Limited
2. Financial Year of the Subsidiary March 31, 1999 March 31, 1999
3. (a) No. of shares held in Subsidiary 10,000 shares
Company on the above date of £1 each
(b) Extent of Holding 100%

4- The net aggregate of profits less losses of the
Subsidiary Company as far as it concerns the
members of the Holding Company.
(i) Not dealt with in the Holding
Company's Account
(a) For the Financial Year of the
Subsidiary £6,541 (Loss)
(b) For the Previous Financial Years,

since it became the Holding
Company's Subsidiary US $ 64,482
(ii) Dealt with in the Holding Company's
Accounts:
(a) For the Financial Year of the
Subsidiary
(b) For the Previous Financial Years,
since it became the Holding
Company's Subsidiary
Note: Blue Star Infotech (UK) Limited is a wholly owned subsidiary of USIN International, USA; a subsidiary of Blue Star Limited.
The Company was incorporated on September 1, 1998.
Ashok M Advani
Suneel M Advani K P T Kutty

President & Vice Chairman Company Secretary
Mumbai : July 28, 1999
38
INDEPENDENT AUDITORS' REPORT
June 21, 1999 We conducted our audit in accordance with USIN International, Inc. (a wholly-owned
generally accepted auditing standards. Those subsidiary of Blue Star Limited), as of March
Board of Directors standards require that we plan and perform 31, 1999 and 1998, and the results of its
USIN International, Inc. the audit to obtain reasonable assurance operations and its cash flows for the years
(a wholly-owned su of about whether the financial statements are then ended in conformity with generally
Blue Star Limited) free of material misstatement. An audit in- accepted accounting principles.
San Jose, California cludes examining, on a test basis, evidence
supporting the amounts and disclosures in
We have audited the accompanying balance the financial statements. An audit also
sheets of USIN International, Inc. (a wholly- includes assessing the accounting principles
owned subsidiary of Blue Star Limited), as of used and significant estimates made by
March 31, 1999 and 1998, and the related management, as weli as evaluating the over-
-statements of income and retained earnings, all financial statement presentation. We
and cash flows for the years then ended. believe that our audit provides a reasonable
These financial statements are the responsi- basis for our opinion..
bility of the Company's management. Our
responsibility is to express an opinion on In our opinion, the financial statements
these financial statements based on our referred to above present fairly, in all
audit. material respects, the financial position of BRACH, NEAL, DANEY & SPENCE, LLP
.39
BALANCE SHEETS AS AT MARCH 31, 1999 AND 1998
As at As ar
March 31, 1999 March 3 1, 1998
US$ us$
ASSETS
Current Assets:
Cash 294,841 226,394
Accounts receivable, trade 764,735 886,508
Employee and consultant a d v a n c e s 25,314 50,174
Shareholder advances 277,423 221,209
Customer advaiice> 2,328 4,677
Prepaid expenses 1,455 4,041
Current portion ot notes receivable, consultants 15,683 11,284
Total Current Assets 1,381,779 1,404,287
Equipment, at cost:
50,216 53,921
11,662 11,554
61,878 65,475
(47,042) (49,166)
14,836 16,309
Other Assets:
Note's receivable, consultants, less current
portion of $ 15,685 at March 31, 1999 and
$ 11,284 at March > 1 , 1998 9,167 4,183
Deposits 2,092 2,092 .
Investment in affiliated uuupany 17,050
28,309 6,275 '
1,424,924 1,426,871
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Note payable, ABN-AMRO Bank 600,000
Account 1 ^ payable, trade 37,452 62,460
Accounts payable, shareholder 398,925 1,140,647
Accrued expenses 78,664 58,852
Income taxes payable 6,624 6,951
Total Current Liabilities 1,121,665 1,268,910
Commitments and Contingencies
Stockholders' Equity:
Common stock, $1 par value, 1,000,000 Shares
.iutaonzed, 100,000 shares at March 31, 1999 and
25,000 shares at March M, 1998 issued and outstanding 100,000 25,000
Retained earnings 203,259 132,961
303,259 157,961-
1,424,924 1,426,871
40
STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE YEARS ENDED
MARCH 31, 1999 AND 1998
Year ended Year ended

Note March 31, 1999 March 31, 1998
US$ US$
Sales 6 6,023,137 5,114,454

Cost of sales 7 5,367,868 4,596,665
Gross Profit 655,269 517,789

Selling, general and administrative expenses 7 556,381 473,481
Operating income 98,888 44,308
Other Income (Expense);

Miscellaneous income 9,889 4,210
Interest expense (27,589) —
Loss on disposal of equipment (890) —
(18,590) 4,210
Income before provision for income taxes 80,298 48,518
Provision for income taxes 4 10,000 12,000
Net Income 70,298 36,518

Retained earnings, beginning of year 132,961 96,443
Retained earnings, end of year 203,259 132,961
41
STATEMENT OF CASH FLOWS FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
Year ended Year ended.

March 31, 1999 March 31, 1998
US$ US$
Cash Flows from Operating Activities:
Net Income 70,298 36,518
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Depreciation and amortization 7,522 7,135
Loss on disposal of equipment 890
(Increase) decrease in operating assets: —
Accounts receivable, trade 121,773 (985)
Employee and consultant advances 24,860 (15,341) •
Shareholder advances (56,214) 1,720,231
Customer advances 2,349 6,356
Prepaid expenses 2,586 (976)
Increase (decrease) in operating liabilities:
Accounts payable, trade (25,008) 11,258
Accounts payable, shareholder (741,722) (1,741,400)
Accrued expenses 19,812 30,799
Income taxes payable 02?) 4,321
Total adjustments (643,479) 21,398
Net cash provided (used) by operating activities (573,181) 57,916.
Cash Flows from Investing Activities:
Purchase of equipment (6,939) (5,354)
Notes receivable, consultants (21,800) (11,800).
Payments on notes receivable, consultants 12,417 8,403
Investment in affiliated company (17,050) . —
Net cash (used) by investing activities (33,372) (8,751)
Cash Flows from Financing Activities:

Proceeds from notes payable, ABN-AMRO Bank 600,000 „
Issuance of common stock 75.000 —
Net cash provided by financing activities 675,000 —
Net increase in cash 68,447 49,165
Cash, beginning of year 226,394 177,229
Cash, end of year 294,841 226,394
Supplemental Disclosure of Cash Flow Information:

1. Accounting Policy - The Company considers all highly liquid investments with a maturity of three months or less when purchased to be
"cash equivalent".
2. The following cash payments were made during the years ended March 31, 1999 and 1998 for:
1999
US$
Interest 27,589
Income taxes 10,307
See accountants' report and accompanying notes to financial statements.
42
NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
1. Business Description and Summary of Significant Accounting Policies:

Business Description:
The Company (a California Corporation) was formed in April, 1991 and provides software programming services and grants credit to U.S.
Companies.
As of the financial statement date, the Company's outstanding stock is considered to be whollyowned by Blue Star Limited (an Indian
corporation). Blue Star Limited is currently in the process of transferring its software business to Blue Star Infotech Limited in a spin-off
transaction which is to be effective retroactively on October 1, 1998, after approval from the Bombay High Court. As of the proposed
retroactive date of October 1, 1998, all assets and liabilities will be included as part of the proposed spin-off into Blue Star Infotech
Limited. The common stock of USIN International, Inc. also forms part of the assets to be transferred but will be transferred to Blue Star.
Infotech Limited after the Bombay High Court approval arid requisite government and statutory permissions.
The accrual basis accounting policies adopted by the Company are consistent with generally accepted accounting principles. The signifi-
. cant policies are as follows:
Concentration of Credit Risk:

The Company maintains its cash in commercial checking and money market accounts. Periodically throughout the year, cash is main-
tained at the bank in excess of insured (FDIC) amounts of $ 100,000.
Accounts Receivable:
The Company uses the allowance method to account for bad debts. Management has determined that no allowance for uncollectible
accounts is deemed necessary at March 31, 1999 and 1998.
Equipment:
Equipment is reflected at cost and is depreciated over their estimated useful lives using accelerated methods of
depreciation. All repair and maintenance costs are expensed as incurred.
Investment in Affiliated Company:

This investment represents a 100% ownership interest in Blue Star Infotech (UK) Limited (a corporation) which began business
- September 1, 1998. Blue Star Infotech (UK) Limited (a Corporation) had no sales for the period ended March 31, 1999 and net equity of
approximately $ 6,000 at March 31, 1999.
Income Taxes:
Income taxes are provided for tax effects of transactions reported in the financial statements and consist of taxes
currently due plus deferred taxes. Deferred taxes are recognized for differences between the basis of assets and liabilities for financial
statement and income tax purposes.
Estimates:
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual
results could differ from those estimates.
Year 2000 Compliance:

The Company is in the process of conducting a comprehensive review of its computer systems to identify the systems that could be
affected by the "Year 2000" issue and is developing an implementation plan to resolve the issue. The Year 2000 problem is the result of
computer programs being written using two digits rather than four to define the applicable year. Any of the Company's programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a major system
failure or miscalculations. The Company presently believes i:hat, with modifications to existing software and converting to new software,
the Year 2000 problem will not pose significant operational problems for the Company's computer systems as so modified and converted.
However, if such modifications and conversions are not completed timely, the Year 2000 problem may have a material impact on the
operations of the Company.
Reclassifications:
Certain reclassifications have been made to the 1998 financial statements presentation to conform to the 1999 presentation.
2, Notes Receivable, Consultants:

The notes receivable, consultants consisted of the following:
1999
US$
24,850
(15,683)
9,167
3. Note Payable, ABN-AMRO Bank:

In J u n e 1998 the Company entered into an agreement with ABN-AMRO Bank that provides for an $ 810,000 line of credit which matures
on J u n e 2 1 , 1999. Interest is at the bank's prime lending rate plus 1% {currently at 8.75%). The loan is guaranteed by Blue Star Limited
(the parent company of USIN International, Inc.). At March 31, 1999, there were borrowings outstanding of $ 600,000.
As of J u n e 2 1, 1999, this note ha> been paid in full. The Company is currently in the process of negotiating a new line of credit agreement
with ABN-AMRO Bank.
1999
US$
9,000
1,000
10,000 12,000.
5. Commitments and Contingencies:

Effective January 1, 1998, the Company entered into a 36-month noncancellahle operating lease agreement for office space in San Jose,
C a l i f o r n i a . Total facility lease expense (including \ariable common area expenses) was $ 48,021 and $ 32, 874 tor March 31, 1999 and
1998. respectively.
F u t u r e m i n i m u m rental commitments (excluding variable common area expenses) tor the noncancellahle operating lease are as follows;
Year ending March 31, US $
44
6. Significant Customers:
The Company had sales to three customers in 1999 and two in 1998 which amounted to approximately S 2,747,700 and $ 2,063,600 of
<;ross revenues, respectively. Sales to these major customers represented 45% and 40% ot total sales and accounted for approximately
S 264,400 and $ 382,300 of accounts receivable at March 31, 1999 and 1998, respectively.
7. Related Party:
During 1995, 100% of the Company's outstanding stock was acquired by Blue Star Limited (an Indian Corporation).
Included in the March 3 1 , 3999 and 1998 financial statements are the following transactions with Bine Star Limited.
1999
US$
Consulting services purchased 4,441,099
Management service tee^ 122,217
Advance^ receivable 277,423
Accounts payable 398,925
45
DIRECTORS' REPORT AUDITORS' REPORT
The directors present their report and The Year 2000 issue does create risk for the To The Shareholders of Blue Star Infotech
financial statements for the period ended company from third parties with whom we (UK) Limited
31 March 1999. deal on financial and business transactions.
We have audited the financial statements on
As a result of this we cannot be certain of
Principal Activities and Review of the pages 4 to 8 which have been prepared under
avoiding business disruption in areas where
Business the historical cost convention and the
we do not have a direct relationship. accounting policies set out on page 6.
The principal activity of the company is that
The directors do not consider that the intro- Respective Responsibilities of Directors
of computer software consultants. However,
duction of the Euro will have any significant and Auditors
trading did not commence until 1 April 1999.
impact on the company. As described on page 2 the company's direc-
Results and Dividends tors are responsible for the preparation of
Auditors! financial statements. It is our responsibility
The results for the period are set out on
Jeffreys Henry were appointed auditors to the to form an independent opinion, based on
page 4.
company and in accordance with section 385 our audit, on those statements and to rep'ort
Directors of the Companies Act 1985, a resolution pro- our opinion to you.
The following directors have held office since posing that they be re-appointed will be put Basis of Opinion
lSeptemherl998: to the Annual General Meeting. We conducted our audit in accordance with
S M Advani Directors' Responsibilities Auditing Standards issued by the Auditing
Company law requires the directors to pre- Practices Board. An audit includes examina-
(Appointed 1 September 1998)
pare financial statements for each financial tion, on a test basis, of evidence relevant to
S P Advani the amounts and disclosures in the financial
year which give a true and fair view of the
(Appointed 1 September 1998) statements. It also includes an assessment of
state of affairs of the company and of the
A S Sambtani the significant estimates and judgements
profit or loss of the company for that period.
(Appointed 1 September 1998) made by the directors in the preparation of
In preparing those financial statements, the
the financial statements, and of whether the
Hallmark Registrars Limited directors are required to:
accounting policies are appropriate to
(Appointed 1 September 1998 and resigned — select suitable accounting policies and the company's circumstances, consistently
1 September 1998) then apply them consistently; applied and adequately disclosed.
Directors' Interests -— make judgements and estimates that are We planned and performed our audit so as to
reasonable and prudent; obtain all the information and explanations
The directors' beneficial interests in the
which we considered necessary in order to
shares of the company were as stated below: — prepare the financial statements on the
provide us with sufficient evidence to give
going concern basis unless it is inappro-
Ordinary Shares of reasonable assurance that the financial state-
priate to presume that the company will
£ 1 each ments are free from material misstatement,
continue in business.
31-3-99 1-9-98 whether caused by fraud or other irregularity
The directors are responsible for keeping or error. Informing our opinion we also
S M Advani — —
proper accounting records which disclose evaluated the overall adequacy of the
S P Advani — —
with reasonable accuracy at any time the presentation of information in the financial
A S Sarnbtani — —
financial position of the company and to statements.
S M Advani also served on the board of the enable them to ensure that the financial Opinion
ultimate parent undertaking Blue Star Ltd. statements comply with the Companies Act In our opinion the financial statements give a
which is registered in India. 1985. They are also responsible for safe- true and fair view of the state of the
guarding the assets of the company and company's affairs as at 31 March 1999 and of
Millennium Policy and the Euro its loss for the period then ended and have
hence for taking reasonable steps for the
The period to the Year 2000 presents prevention and detection of fraud and other been properly prepared in accordance with
companies using any form of electronic the Companies Act 1985.
irregularities.
system with the opportunity to ensure they Jeffreys Henry
are not vulnerable to a potentially significant Chartered Accountants
problem to the business environment. Registered Auditors
By order of the board
26 Apnf 1999
We have carried out a review which has
shown that the company is well on the way to S M Advani Finsgate, 5-7 Cranwood Street
ensure that the company's computer opera- Director London
tions are Year 2000 compliant. 26 April 1999 EC1V9EE
46
PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED 31 MARCH 1999
7 Months ended
31 March 1999
Notes £
Administrative Expenses (6,541)
Loss on Ordinary Activities before Taxation (6,541)

Tax on Loss on Ordinary Activities
Loss on Ordinary Activities after Taxation (6,541)
The Profit and Loss Account has been prepared on the basis that all operations are continuing operations.
There are no recognised gains and losses other than those passing through the Profit and Loss Account.
BALANCE SHEETS AS AT 31 MARCH 1999
1999
Notes
Fixed Assets
Tangible Assets 1329
Current Assets
Debtors 1,215
Cash at Bank and in hand 4,138
5,353
Creditors: Amounts falling due within one year (3,423)
Net Current Assets 1,930

Total Assets Less Current Liabilities 3,459
Capital and Reserves

Called up Share Capital 10,000
Profit and Loss Account (6341)
Shareholders' Funds — Equity Interests 3,459
The financial statements were approved by the Board on 26 April 1999.
S M Advani
Director
47
NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 MARCH 1999
1. Accounting Policies
1.1 Accounting Convention
The financial statements are prepared under the historical cost convention
1.2 Tangible Fixed Assets and Depreciation
Tangible fixed assets are stated at cost less depreciation. Depreciation is provided at rates calculated to write off the cost less estimated residual
value ot each asset over its expected useful life, as follows:
Fixtures, fittings & equipment 15% Straight Line
1.3 Deferred taxation
Deferred taxation is provided at appropriate rates on all timing differences using the liability method only to the extent that, in the opinion of
the directors, there is a reasonable probability that a liability or asset will crystallise in the foreseeable future.
Operating loss
1999
£
82
750
4. Tangible Fixed Assets

Fixtures,
fittings &
equipment
.t
1,611
1,61-1
Depreciation
At I September 1998
Charge for the period 82
82
Net book value
At 31 March 1999 1,529
5. Debtors
Other Debtors 1,215
6. Creditors: Ai»,o'ints falling due within one year

Accruals and Deterred Income 3,423
7. Share Capital
Authorised
50,000 Ordinary Shares of I 1 each 50,000
Allotted, called up and fully paid

10,000 Ordinary Shares of £ 1 each 10,000
NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 MARCH 1999
Statement of movements on Profit and Loss Account

Profit and
Loss Account
£
Retained loss for the period (6,541)
Reconciliation of movements in Shareholders' Funds

1999
£
Loss tor the Financial Period (6,541)
Proceeds from Issue of Share 10,000
Net addition to Shareholders' Funds 3,459
Opening Shareholders1 Funds
Closing Shareholders 1 Funds 3,459
10. Employees
Number of Employees
There were no employees during the period apart from the directors
11. Control
The ultimate controlling party of Blue Star Infotech (UK) is Blue Star Limited which is India's leading provider of airconditioning and
refrigeration products, systems and services, and the immediate parent undertaking is USIN Inc, a company incorporated in the United States of
America.
DETAILED TRADING AND PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED 31 MARCH 1999
7 Months ended
31 March 1999
£
Administrative Expenses (6,541)

Operating Loss (6,541)
SCHEDULE OF DISTRIBUTION COSTS AND ADMINISTRATIVE EXPENSES FOR THE PERIOD ENDED 31 MARCH 1999
7 Months ended
31 March 1999
£
Administrative expenses
Rent re -licences and other 2,812
Repairs and maintenance 64
Legal and prof fees-allowable 1,059
Accountancy 1,750
Audit fees 750
Bank charges 24
Depreciation on FF & E
6,541
49
BLUE STAR
The Airconditioning Projects Division handles

engineering, procurement and construction work for
Blue Star Limited is a multi faceted organisation with
turnkey projects of large central airconditioning plants.
its core strength in the airconditioning and refrigeration
(AC&R) business. Established in 1943, the Company is The Packaged Airconditioning Division manufactures,
recognised as India's largest central airconditioning markets and supports ducted systems, mini split
company, with the widest available range of airconditioners and window airconditioners.
airconditioning and refrigeration products, systems The Commercial Equipment Division manufactures,
and services. markets and supports a wide range of commercial
In over five decades of existence, Blue Star's name has equipment with emphasis on refrigeration.
acquired a strong brand equity for superior AC&R
The Electronics Division markets and supports high
technology and engineering capability. Recent
technology professional electronic and industrial
benchmarking studies conducted by the Company in
equipment imported from internationally-renowned
USA, Middle East and Far East show that the Blue Star
manufacturers.
range of products comes up to world standards. Also,
The International Software Division provides internet/
surveys of airconditioning consultants and end users
e-commerce, HP 3000/ MPE and BaaN ERP services to^
in India have ranked Blue Star number one in
clients in USA, Europe and Japan.
engineering design, installation and project
management capability. The Industrial Division undertakes engineering,
Our operations are structured into 6 Business Divisions procurement and construction projects for tankages,
and 3 Production Facilities : pipelines and electrification in refineries, petrochemical

complexes, steel plants, etc.
Business Divisions Location of
During the year under review, the total income increased
Production Facilities
from Rs. 453 crores to Rs. 476 crores, a modest
Airconditioning Projects Thane
5% growth. However, continuing attention to cost
Packaged Airconditioning Dadra
reduction, operational efficiency and tax planning
Commercial Equipment Bharuch
enabled profit after tax to grow from Rs. 15.5 crores to
Electronics Rs. 16.3 crores. All the business divisions contributed
Industrial to this growth in a difficult business environment,
International Software reflecting a stagnant economy and an unstable
Services
political scenario.
50
BLUE STAR
The revenue contributions from each Division are

shown below: (30
Tons and above)
Lines of Business
9% Blue Star has been the market leader in Central

Airconditioning for the last 8 years with a current market
share of 38%. During the last 3 years we have increased
our market share by 4% in a market which remained
stagnant at around Rs. 365 crores.
Central Airconditioning
Market Shares
Airconditioning Commercial Equipment
Revenues are generated through a mix of 13%

manufacturing, projects and construction, marketing
of imported equipment, international software exports
and customer service with approximately 95% of the
sales obtained from industrial, commercial and
institutional customers.
Blue Stjr Voltes Carrier • EIA Suvidha
Mix of Revenues
We command a 50% market share of airconditioning

for the highly demanding software industry where
equipment reliability and indoor air quality are very
important. In the pharma and power segments, our
products are preferred because they incorporate the latest
M nuractunng Projects & Construction Software Exports
fij-Jtomer Service •. '• Imported Equipment Marketing
technology from York International, USA, our strategic
partners.
The business mix of airconditioning is shown below:
As part of our ongoing effort to offer products
Airconditioning Business Mix
incorporating contemporary technology to the Indian
market, we have entered into a fresh technology
agreement with York International for manufacturing
their latest range of centrifugal and screw chillers. We
expect to introduce these two products in the local
market during the next few weeks.
We also manufacture Double Skin Air Handling Units

with technology from Climatrol, Italy.
51
BLUE STAR
We have an exclusive arrangement with LG

Cable and Machinery Ltd., South Korea to
market their latest series of vapour
absorption chillers. These machines are
well suited for applications where steam or
waste heat is available. Similarly, at places
where electrical power is at a premium, the
direct fired machines, which run on
pipeline gas or oil, are a boon to Indian
customers.
Some of the major national and international

projects recently executed by us in Central
Airconditionirig are Bharatiya Reserve
Bank Note Mudran Pvt. Ltd., Mysore and
Salboni; All India Institute of Medical
Sciences, New Delhi; Ramco Systems,
Chennai; Samtel Colour Ltd., Ghaziabad; Dr
Reddy's Laboratories, Hyderabad and
Emirates National Oil, Dubai.
52
BLUE STAR
ducted systems with the power-saving scroll

(5 -20 Tons) compressors in many establishments, including the
prestigious Oberoi Grand, Calcutta. We expect 50% of
During the year under review we continued to display
the future sales of packaged airconditioners to be of scroll
leadership in this product line and introduced several
designs. Two new products are planned for introduction
redesigned and improved products including a major
in the year 1999-2000 to sustain the competitive
new product. This was the packaged airconditioner,
advantage in the office and commercial segments.
completely re-engineered for the launch of the scroll
compressor in India. This product has already begun The Indian market for ducted systems grew by
to revolutionise this market, and has captured a approximately 15% during 1998-99. This was due to
significant market share in the few months after launch. strong growth in the software and the retailing
industries, which partially compensated for the
stagnant demand from other corporate and industrial
segments. Our ducted systems business grew by 25%
resulting in an increase in market share from 31% to
33% extending our leadership position to this market
also.
Ducted Systems
Market Shares
10%
33%
Comfortable dining at Copper Chimney- Mumbai
These new packaged airconditioners fitted with scroll

compressors are significantly more reliable because 29%
of only three moving parts within the I Carrier Voitas W Arntrex Others
compressor, compared to 15 moving

parts in reciprocating compressors. The
scroll compressors are also eight times
quieter. We have re-engineered
the complete system to ensure a saving
of upto 25% on energy cost to the
customer.
We ran a series of promotional

programmes to increase awareness
amongst customers and consultants on
the new generation packaged
airconditioning system with scroll
compressors. We have already installed
Banking in cool comfort
53
BLUE STAR
Blue Star has historically focused on large offices and designed for silent operation. The units are available
commercial customers. But with the continued in 1.5 ton and 2 ton capacities. The controls are
growth of ducted systems applications in the software designed for wired remote operation as preferred by
industry, and the fast expanding retailing segment, users in commercial establishments and infra red
we have in the last two years, appointed competent wireless remote for the personal end user. The sale of
systems dealers in all the major cities in India, to these units has rapidly overtaken other models and these
expand our geographic reach and cater to smaller models are today the frontline products in our mini
establishments. This has resulted in increased split range.
business and market share. We will continue the
expansion of our dealer network to provide good Verticool
quality solutions across the country. This is a trim floor standing model to meet
airconditioning requirements for open spaces. This
product is available in 3 ton capacity. The unit was
redesigned to have a minimal footprint and decor to
blend with a variety of interior designs. It is ideal for
(I- 3 Tons)
banks, offices, showrooms, etc. Installation of this model
This market segment registered a growth of 25% and is easy and quick, unlike the conventional ducted
we maintained our market share of 9% in mini splits. systems.
Mini Split Airconditioner

Market Shares
3%!!i9%
14%
(1- 2 Tons)
42%
The window airconditioner was upgraded with the
latest technology, i.e. permanently lubricated motors,
22%
polyester powder coating and improved heat-exchanger
Carrier Voltas Sift Blue Star Amtrex I vldeocon
Godrej Others coils. The refrigeration system and air flow system were
redesigned to get a higher Energy Efficiency Ratio (EER)
With more and more showrooms and commercial
and silent operation.
establishments emphasising on comfortable conditions
for employees as well as customers, we widened our The window airconditioner is primarily an appliance
product range to cater to the requirements of this and does not use our core strength of engineering
segment. Our existing products were upgraded and new capability, except in manufacturing. Therefore, while
products introduced. we maintain a presence in this market in order to offer a
full range, our main thrust is to become a contract
Wall Mounted Units manufacturer for other window airconditioner
These sleek wall mounted indoor units are designed companies. A major contract manufacture account
to blend easily with any interior decor in showrooms, was finalised in the year under review and shipments
hotels and offices. They are easy to install and are have begun.
54
BLUE STAR
Water Coolers
The Indian water cooler market grew marginally by
about 5%-10% during the year under review, but we
We market a wide range of Commercial Refrigeration increased our market share to 35% by enhancing and
Equipment such as water coolers, deep freezers, improving our distribution network. Besides, our water
prefabricated cold rooms and ice cubers. The traditional coolers which are popular in the Middle East, continue
to give us a significant amount of export business every
water coolers and the new mineral water dispensing
year against international competition - a testimony to
models are designed by our in-house R & D and are
our technological capability in harsh ambient
manufactured in our Bharuch Plant. The chart below
conditions.
gives a brief summary of the other refrigeration products
which are manufactured and marketed with state-of-
the-art technology from our business partners abroad: Water Cooler
Market Shares
Products Business Partners 42%

Deep Freezers Vestfrost, Denmark
Prefabricated totd Rooms KoJpak, USA 23%

with PUF panels
Refrigeration Units for Heatcraft, USA
Cold Rooms
ice Cube Making Machines Manitowoc, USA
Blue Star
The recently launched mineral water dispensing

models have been well received by the market and,
together with the newer models of water coolers that
have been launched, we expect to continue to
increase our share of the market.
Multinational food
chains use Blue Star
Cold rooms and
Deep freezers
55
BLUE STAR
New range of Deluxe Water Coolers
Recently launched Mineral Water Dispensers
56
BLUE STAR
Cold Storage at Bangalore Airport
Deep Freezers room business also grew by 30% and is expected to

Our deep freezer business grew by 30% with more expand further with increasing awareness of the
ice cream manufacturers such as Amul, Vadilal, benefits of refrigerating food, vegetables, fruits
Kwality and Walls, and fast food chains including Me and horticulture products through cold chains, to
Donalds, Dominos and Kentucky Fried Chicken (KFC) prevent wastage.
realising the benefits of the quality and reliability of We recently executed four major projects to set up
our deep freezers, backed by our countrywide perishable cargo handling refrigerated facilities at
network for service support.
Bangalore, Pune, Hyderabad and Chennai airports.
Cold Rooms In the coming years significant growth is expected in

The total cold room market in India is estimated at the ice cream manufacturing, horticulture, fast food
about Rs.100 crores and at the moment we are the only chains, restaurants and pharmaceutical segments.
recognised corporate player in this business having Our deep freezers and cold rooms are ideally
technology tie-ups with Kolpak, USA for PUF panels positioned and well proven for these growing
and Heatcraft, USA for refrigeration units. Our cold markets.
57
BLUE STAR
from, after the warranty period is over. A majority of

our airconditioning and refrigeration customers enter
(Non-Refrigeration) into annual maintenance contracts and we expect
Blue Star is also in the business of marketing and support this to grow significantly in the coming years.
of commercial kitchen and laundry equipment for the Consequently, we are making substantial investments
hospitality segment imported from world renowned in training, development of our dealers, maintenance
business associates. The chart below summarises our equipment, spare parts, computers and communication
products and business associates abroad : facilities to improve the quality of response and service
Products Business Partners to our customers. Specialised equipment for
Commercial Kitchen Equipment Efectrolux Foodservice, applications such as duct cleaning is being acquired to
Sweden
provide superior service to our customers who recognise
Commercial Laundry Equipment Bectrolux Wascatcc
the need for better indoor air quality.
Sweden
Orydeaning Equipment DonJnHnternationai SpA
Italy Customer Relations Management
Finishing Equipment Pony Sp\ Italy We have installed Computer Systems to handle
The hospitality sector is expected to grow significantly customer database management and service operation
in the coming years. Several upcoming hotels and resorts management at all locations to improve customer service.
provide a good opportunity for the range of commercial We have also introduced customer response desks in
kitchen and laundry products marketed by us. all our major offices to help customers get prompt
support, as well as to conduct satisfaction surveys over
the telephone.
By the end of this year we plan to have a round-the-
clock service facility for the software industry and
Blue Star's customer support goes well beyond expand the same to other market segments in a phased
attending to routine maintenance of airconditioning manner.
and refrigeration systems and products. During the
year under review programmes like "Operation Summer
Preparation" were conducted by the airconditioning
Thane Plant
service group which involved exhaustive preventive We have recently signed a technology transfer
maintenance to ensure uptime, operational efficiency agreement with York International for manufacturing
for power savings, uniform air distribution and high energy-efficient and environment friendly CFC free
centrifugal chillers and water cooled screw chillers at
indoor air quality, apart from cooling efficiency. All
the Thane Plant. These new products will be launched
this results in extended life of the airconditioning
in the market in the next few weeks.
system. By virtue of our nationwide network of service
centres and dealers, we are geared to provide quality The plant also manufactures PUF panels for
service to our customers across the country. prefabricated cold rooms and mortuary chambers
through a technology transfer and buyback agreement
At present we offer a variety of service products for
with the internationally renowned Kolpak of USA. The
varying customer needs such as comprehensive refrigeration units for these cold rooms and mortuary
maintenance or labour only, with options like chambers are manufactured with technology from
twenty-four hour response for our customers to choose Heatcraft, USA.
58
BLUE STAR
with Rheem
Manufacturing Co.,
USA and are in line
with Rheem's world-
class manufacturing
facilities. This plant
manufactures
window, non-ducted
and ducted splits,
and packaged
airconditioners from
1-15 Ton capacities.
The Dadra plant uses
Screw Chiller
state-of-the-art
manufacturing
In order to keep abreast of changing market needs equipment to ensure that the products have 100%
the Thane plant is going through a complete consistent quality and reliability. Products coming
modernisation including process re-engineering,
out of Dadra plant are rigorously tested in the
relayout of the plant, and facilities to improve
psychrometric/calorimetric test facility as per
material handling and minimise non-value adding
Bureau of Indian Standards and ASHRAE
activities. In addition, the supply chain management
(American Society for Heating, Refrigeration and
systems are being revamped with the help of external
Airconditioning Engineers) standards .
consultants in order to reduce costs, enhance product
quality and improve timeliness of delivery. Because of its recognised world-class capability the
The above initiative, including new investments in Dadra Plant has been sought out by other
plant and machinery, will enable the Thane Plant to airconditioner companies to undertake contract
become a production unit of world class standards. manufacture orders for them. First shipments have
been made to these customers - one in India and the
BaaN ERP (Enterprise Resource Planning) software has
already been installed in Thane and Dadra and is in other in the Middle East.
the process of implementation at Bharuch. This will
enable the company to substantially improve the overall Bharuch Plant
operations through better decision making, production The Bharuch plant manufactures a wide range of
planning and manufacturing process resulting in water coolers for the local and export markets. Double
increased productivity and on-time delivery. Skin Air Handling units for central airconditioning
plants are manufactured in collaboration with
Dadra Plant Climatrol, Italy and Environmental Test Chambers
The highly automated Dadra plant was commissioned in collaboration with Tenney, USA. This plant is fully
in July 1997 with an investment of Rs.25 crores. The equipped with modern machines for fabrication and
factory design, machinery and manufacturing powder coating, PUF insulation and modern
processes have been set up in technical collaboration assembly lines for various products.
59
BLUE STAR
R & D Activities
To stay ahead in product design, quality and reliability
our R&D unit has strengthened its infrastructure of
Computer Aided Design and Engineering. Scroll
packaged and ducted split airconditioners as well as
scroll chillers (upto 30 ton capacity) were developed to
ensure energy savings and higher reliability. Besides,
quality improvement was carried out in the existing
products in order to improve the aesthetics, performance
and noise levels. Some products such as Verticool, split
units, product coolers for cold rooms and air handling
units were re-engineered in response to changing
market needs. To reduce product costs in a competitive
market a major thrust was given to value engineering
through our "Design For Manufacture" programme.
A new test facility was built up at Dadra for

performance testing of room and mini split
airconditioners conforming to Indian and American
Refrigeration Institute standards.
The Electronics Division comprises of several product

groups catering to diverse target markets. Their These lines of business address refineries,
common thread is that they are complex products and petrochemicals, pulp & paper, minerals & metals,
systems, generally of high technology and large value. Pharmaceuticals, advanced research labs, power plants,
They require graduate engineers for marketing and banks, defence and the space industry. Companies
support. These specialised products are from world- represented include Neles Controls, Finland for rotary
renowned manufacturers, usually leaders in their control valves; Hitachi Medical Corporation, Japan
respective fields. for CT Scanners, Magnetic Resonance Imaging (MRI)
The lines of business of the Electronics Division are : and Ultrasound Scanners; Krautkraemer, Germany
a) Material Testing Machines for non destructive testing machines; Racal Air Tech,
b) Industrial Products and Systems UK for Data Communication and Data Security
c) Communication Equipment & Instruments products; and JEOL, Japan for Electron Microscopes,
d) Analytical Instruments NMR, GC-MS, etc.
e) Medical Electronics It is worth noting that in its 45 years of existence, this
f) Customer Service Division has produced a profit every single year, with
60
BLUE STAR
minimal investment in land, buildings and

machinery. Its strength lies in its intellectual capital
of highly trained electronics engineers.
The software export business was started in 1983 and
The business mix of the Electronics Group is given
has completed 15 years in 1998. It is headquartered in
below:
Mumbai, at the Santa Cruz Electronics Export
Electronics Division Promotion Zone (SEEPZ).
Business mix
21s This business is in the process of being spun-off into a
^aorarae
10%. separate company, Blue Star Infotech Limited (BSIL).
The spin-off will be effective retrospectively from
Otober 1, 1998. The key financial figures for the
24% International Software Division (ISD) for 1998-99 were:
Rs. Crores
12% 14%
Sales 32.80
:
: Material Testing Machines Analytical Instruments
Industrial Products and systems Medical Electronics Profit before
i Communication Equipment & instruments Interest & Taxes 8.73
Customer Service
During the year under review the Data Communication Although BSIL will be closely linked with Blue Star, it
and Instruments department secured good orders from will, as a separate entity, have greater flexibility and
the banking sector and the Testing Machines focus and the opportunity to grow faster and more
aggressively. This spin-off will:
department executed major project orders for the defence
sector. However, the overall market scenario for • Give existing shareholders of BSL a direct stake in a
professional electronic products was dull due to the fast growing sunrise industry at no additional cost
to them
absence of large projects in various industrial sectors,
and due to the imposition of trade sanctions after the • Enable the new company to avail of the substantial
nuclear tests in May 1998. concessions available under the Income Tax Act
• Allow BSIL to offer its key employees a lucrative
Since these hi-tech products have to be backed by
stock option plan in order to attract and retain them.
extensive customer support, each line of business has
BSIL will be permitted to use the BSL brand name and
highly trained and experienced professionals to
BSL's contacts without any royalty or other payment
install and maintain the systems. Customer support
to BSL.
engineers are trained at our business associates'
factories abroad, to keep them updated with the latest US Subsidiary
technological developments on the products and are USIN International Inc., located in San Jose, (California)
provided with the latest service facilities. The is a wholly owned subsidiary of Blue Star Limited and
Customer Service group focuses on customer represents and markets ISD's services in USA.
satisfaction through quick response, guaranteed USIN was formed in March 1991. In March 1995,100%
uptime and annual maintenance contracts. of USIN's outstanding stock - 25,000 shares of US$1
61
BLUE STAR
each - were acquired by Blue Star. Following Reserve Business Growth

Bank of India approval, USIN's share capital was Revenue in the financial year 98-99 at i\s.3?_.S croiv^
enhanced by US$75,000 to US$100,000 in November recorded an increase of 61% over the previous year. PB1T
1998. USIN has a line of credit of US$ 900,000 at Rs.8.73 crores (27% of sales) recorded an increase ol
guaranteed by BSL. 94% over the previous year.
UK Subsidiary Business Growth

Blue Star Infotech (UK) Limited was incorporated as a
wholly owned subsidiary of USIN in London in
September 1998 to market ISO's services in the UK. Paid
up capital is UK £ 10,000.
Development Facilities
ISD has two software development centers - at SEEPZ PBIT
in Mumbai and in Bangalore - equipped with modern
communications facilities including high speed internet
links and video conferencing. These two centers
aggregate 26,000 square feet of work space, and house Business Strategy
a pool of over 280 software professionals who provide
Overall, ISO's business strategy has been to build long
software services for onsite requirements and offshore
term relationships and work with globally known
turnkey projects for international customers.
corporations.
Services Offered Key customers and relationships are :

• Software Services Vendor for Hewlett-Packard, USA
ISD provides the following services in USA, Europe and
(15 years) - offshore and on-site
Japan:
• Software Services Vendor for 3M, Europe (9 years) -
Internet / e-commerce Applications integration and
offshore and on-site
Web enabling.
• Medical Imaging Software Development Center for
Client / Server Multi-tier applications development, Hitachi Medical Corporation, Japan (3 years) in
migration and porting. Mumbai
HP 3000 / MPE / IX Legacy applications maintenance, • BaaN International Consulting Partner
re-engineering and Web enabling. • Microsoft Certified Solutions Provider
BaaN ERP Implementation and consultancy. • Sun Development Connection
ISD consciously decided not to address the Y2K Geographic Break-up

business; this was seen to be a short term opportunity Having started with a 100% US-focused business, the
and not a strategic line of business. As a result, ISD bulk of ISD's revenue (59%) continues to be obtained
has neither benefited from the Y2K problem, nor will from USA. Business from Japan has grown to a
it be affected by the adverse consequences of the Y2K substantial 17%, largely on account of increased medical
opportunity fading away as we approach the imaging projects at the Hitachi Medical Corporation
millennium and pass it. Center at Seepz, Mumbai. Domestic revenue is derived
62
BLUE STAR
primarily from rupee billing for Hewlett-Packard (HP) Customer Satisfaction

for offshore projects executed at our HP Excellence
ISD uses a formal customer evaluation feedback
Center at Bangalore, plus domestic ERP BaaN
system to measure customer satisfaction on four key
implementation and consulting assignments.
attributes:
• Quality of deliverables
Geographic Break-up
• Timeliness
17% • Cost-effectiveness
• Commitment to customer satisfaction
During 1998-99, ISD received an overall rating of
3.3 out of 4, where 4 represents "Most Preferred
Vendor" status.
59%
What our customers say:
US «I UK/Europe S* Japan India Hitachi Medical Corporation (HMCJ, Ultrasound
Division (Japan)
"It was the first time for HMC Ultrasound design
Offshore Focus
department to ask to develop software to the foreign
The cost effective offshore development model
software company. BSL has successfully implemented
continues to be attractive to customers; ISD has offshore
Ultrasound Measurement software. One of the important
projects at Mumbai from customers such as Business
Engine Corporation and AC Software from USA; 3M, points was good communication between both parties and
Racal and Tecnomen from Europe; and Hitachi Medical BSL's excellent cooperation."
Corporation from Japan. ISO's HP Excellence Center at (Toshi Kawano, Senior Engineer, Ultrasound Design
Bangalore is largely dedicated to offshore projects for Department)
Hewlett-Packard Company.
Tecnomen (Finland)
Offshore Focus "Blue Star has made several successful deliveries
43% to us!"
(Matti Salmi, Project Manager, Notification Strategies Goup)
1997-98
"BSL can do difficult jobs independently. Needs very little
57%
guidance."
(Hannu Vuori, Project Manager, Baseline Systems Group)
33%
Business Engine Software Corporation (USA)
"It's a great achievement and unlike anything we've

1998-99
ever done before. This effort required coordination
67% between the off-shore team in India and the team here
Offshore On Site
in Ontario, which is always a big challenge. Both teams
have been working extremely hard and making great
During 1998-99, offshore work increased to 67% of personal sacrifices to meet this goal. We want to thank
the total, from 57% during 1997-98. the Ontario team as well as the team in Bombay for the
63
BLUE STAR
extraordinary effort and positive attitudes they've shown Quality

for the past several months and to congratulate them on a
The ISO 9001 pre-assessment audit was completed
job well done!".
by Bureau Veritas Quality International (BVQI) in
(Laurie Bradshaw, Program Manager, Project China Cat)
January 1999; subsequently, the certification audit at
Growth Prospects Mumbai was completed in J u l y 1999; f o r m a l
certification is expected in September 1999.
Indian software exports grew at a compounded annual
growth rate (CAGR) of around 50% in the past five
years; during the last 3 years, TSD's CAGR has also been Employee Care
50%. National Association of Software and Service
As a caring employer, we lay stress on alleviating
Companies (NASSCOM) expects a CAGR of around
urban hardships in matters of accommodation,
55% over the next three years. Even at this level, Indian
transportation, communication and quality of life.
software exports will constitute a mere 1 % of the globa 1
We focus on continuous technological upgradation
software and services business! Consequently, the
of our employees and our office equipment and
market opportunity for the foreseeable future, for all
facilities to provide a comfortable and pleasing work
practical purposes, is virtually unlimited. environment. Experienced professionals are
ISD, with its geographical spread of customers and the provided PCs at home, with Internet access.
mix of service offerings in Internet/e-commerce To encourage the quality culture and achievement
applications, Client/Server systems, HP/MPE services, orientation we have ongoing schemes for
and ERP implementation and consulting, is well Achievement Awards, which are regularly presented
positioned to address this market opportunity. to outstanding employees.
In tune with the changing aspirations of our young
employees we have a relaxed dress code and flexible
Moving up the Value Chain working hours, while servicing the needs of our
During the year, ISD moved further up the value chain international business spanning multiple time zones.
by completing a number of complex projects requiring The level of attrition of software professionals has,
specialist skills and using sophisticated technology. through a variety of measures, been progressively
reduced and is now slightly better than the industry
• Web based knowledge repository for R&D labs. average.
Implementation of the new Employee Stock Option
• Medical imaging software for Ultrasound and MRI
Scheme will further enhance BSIL's capability to
scanners
attract and retain top class technical as well as
• Smart card based security and authentication systems managerial talent.
• Web enabled application software for managing of Recruitment of fresh engineers as well as experienced
environment, health and safety requirements professionals continues according to plan. Over the
last three years, the number of software staff has
during product development life cycle.
grown from 129 to 282, or a CAGR of just 30%,
• Messaging systems for mobile communications compared to the revenue CAGR of 50% over the same
providers period.
• Resource management software using component

object methodology ' All charts and tables are based on research conducted bv Blue Star Ltd.
64
BLUE STAR
August 27, 1999
Dear Shareholder:
Sub: Proposed Spin-Off of the Software Business
About a year ago, / had written you a letter explaining the proposal to spin-off our /nternationa/
Software Division (ISO) into a separate company, Blue Star Infotech Limited (BSIL). This was
followed by an Extraordinary General Meeting on November 13,1998 to pass the necessary resolutions
and it was hoped that the legal and procedural formalities would be completed smoothly so that BSIL
could be listed on the Bombay Stock Exchange by March '99.
That time estimate proved to be over-optimistic because the lengthy process is not yet concluded. This
delay is due to a number of developments:
1. The Blue Star Workers' Union raised various technical and procedural objections at the EGM and
subsequently in the High Court. The primary objective of the Union seems to be to somehow
delay the spin-off apparently to put pressure on the Management to agree to their other pending
demands. Management strongly feels that the two issues are unrelated and there is no legal or
moral justification for the Union's action. However, since the matters have been taken to the
Courts, it will be left to the Courts to resolve them.
Regarding the demerger, the Union's objections regarding settlement of creditors were rejected by
the High Court in June '99, except a direction to secure a small part of their claim by way of
a Bank Guarantee. The Court then took up the Scheme of Arrangement for hearing. The Union
has once again asked for time to file objections and also tried to drag in other unrelated issues.
2. The financial institutions (GIC, LIC and UTI) wanted an independent valuation report in order
to satisfy themselves that the basis for the scheme was valid. This was done by Ratan S. Mama
& Company, Chartered Accountants, Mumbai, in December 1998. While they gave their no-
objection letter to the spin-off in January '99, they subsequently imposed certain conditions to it.
Senior Blue Star representatives had several meetings with the institutions to resolve all remaining
doubts. The issues were finally cleared by the financial institutions on July 30, 1999.
3. The High Court has followed a meticulous procedure to ensure that the interests of all creditors
and interested parties are properly safeguarded. Several of these procedures are normally waived
considering the nature of the scheme and the financial strength of the Company. To be quite
honest, when I gave you the original time estimate, I had not envisaged that the normal Court
process including Court vacation and routine adjournments would be so extended.
These are the main reasons why the spin-off formalities have been delayed. We are moving ahead
but at a slower pace than we would like. Much remains to be done. After the hearing, the High Court
will pass its order and the Company will file this with the Registrar of Companies. The Board will then
fix the Record Date which will be followed by the allotment and issuing of shares. Thereafter, BSIL
will apply to the Stock Exchange for listing.
It is difficult to estimate precisely how long it will take to get the shares issued and listed. Since there
are many unpredictable factors, I can only assure you that we will push actively to complete the
process as soon as possible, hopefully within the next few months. In any case, subject to Court
directions, the terms of the demerger will be adhered to, specifically with regard to retrospective effect
from October 1, 1998.
In the meantime, our software business is continuing as before. For the first quarter ended
June 30, 1999, Net Sales amounted to Rs 851 lakhs (last year Rs 715 lakhs) and Profit Before Tax
was Rs 201 lakhs (last year Rs 266 lakhs). The first quarter results are not proportionate to the
estimated annual turnover and profits. The main reasons are: our foreign clients' short-term focus on
Y2K compliance, keeping aside their other software requirements temporarily; management
preoccupation with formalities and reorganisation of the business structure to ensure a smooth transition
after spin-off; additional expenses for new manpower and expanded infrastructural facilities in Bangalore
and Seepz; and business development expenses.
It is interesting to note that ISD had consciously decided not to address the Y2K business; this was ,
seen to be only a short term opportunity and not a strategic line of business. As a result, ISD has
neither benefited from the Y2K problem, nor will it be affected by the adverse consequences of the
Y2K opportunity fading away as we approach the millennium and pass it.
We still have aggressive sales targets in mind. To strengthen the sales and marketing activities, senior
managers have been recruited in Mumbai and in Blue Star's wholly-owned US subsidiary, USIN
International, which should result in a renewal of rapid growth in the latter half of the year. In short,
our plans are firmly in place and we are moving ahead actively.
I thank you for your patience and understanding.
Yours sincerely,
ASHOK M. ADVANI
Blue Star Limited, Kastwi Buildings, Mohan T. Advani Chowk, J. Tata Road, Mumbai 400 020.
BLUE STAR BLUE STAR LIMITED
Registered Office:
Kasturi Buildings
Mohan T Advani Chowk
Jamshedji Tata Road
Mumbai 400 020
NOTICE July 28, 1999
- NOTICE is hereby given that the 51st After Article 52, the following Company shall, in the manner and
Annual General Meeting of the Members of Article be inserted as Article within the time prescribed, issue to
the Company will be held at Jai Hind 52A. the beneficial owner the required
- College Hall, 23-24, Backbay Reclamation, Certificates of Securities.
'A' Road, Churchgate, Mumbai 400 020, on
52A Dematerialisation of Securities If a person opts to hold his security
Tuesday, September 28, 1999 at 3.00 p.m.
to transact the following business: with a depository, the Company shall
Definitions
intimate such depository the details of
1. For the purpose of this Article:- allotment of the security, and on
A. Ordinary Business receipt of the information, the
• 'Beneficial Owner1 shall mean
1. To receive and adopt the depository shall enter in its record the
beneficial owner as defined in
Directors' Report, the audited name of the allottee as the beneficial
clause (a) of sub-section(l) of
Balance Sheet as at and Profit & owner of the security.
Section 2 of the Depositories Act,
Loss Account for the financial 1996;
year ended March 31, 1999 and Securities in depositories to be in
• 'Depositories Act, 1996' shall fungible form
the Auditor's Report thereon.
include any statutory modifica-
2. To declare dividend. tion or re-enactment thereof; and 4- All securities held by a depository shall
• 'Depository' shall mean a Deposi- be dematerialised and be in fungible
3. To appoint a Director in place of form. Nothing contained in Sections
Mr Uday Kotak who retires by tory as defined in clause (e) of
sub-section (1) of Section 2 of the 153, 153A, 153B, 187B, 187C and
rotation, and being eligible, offers 372A of the Act shall apply to a
himself for reappointment. Depositories Act, 1996.
depository in respect of the securities
4- To appoint a Director in place of Dematerialisation of Securities held by it on behalf of the beneficial
Mr G Ramchandani who retires owners.
by rotation, and being eligible, 2. Notwithstanding anything contained
offers himself for reappointment. in these Articles, the Company shall Rights of depositories and beneficial
be entitled to Dematerialise its securi- owners
5. To appoint Auditors and to fix ties and to offer securities in a
their remuneration. dematerialised form pursuant to the 5. (a) Notwithstanding anything to the
Depositories Act, 1996. contrary contained in the Act or
these Articles, a depository shall
B. Special Business
Options for Investors be deemed to be the registered
6. To consider and, if thought fit, to owner for the purposes of effect-
pass with or without modifica- 3. Every person subscribing to securities ing transfer of ownership of
tion, as a Special Resolution, the offered by the Company shall have the security on behalf of the benefi-
following: option to receive security certificates cial owner.
or to hold the securities with a
"RESOLVED that pursuant to depository. Such a person who is the (b) Save as otherwise provided in (a)
Sec. 31 and other applicable beneficial owner of the securities can above, the depository as the regis-
provisions, if any, of the at any time opt out of depository, if tered owner of the securities shall
Companies Act 1956, the Articles permitted by the law, in respect of any not have any voting rights or any
of Association of the Company be securities in the manner provided other rights in respect of the
altered in the following manner: by the Depositories Act, and the securities held by it.
B L U E S T A R L I M I T E D
(c) Every person holding securities of der the Depositories Act, 1996, shall NOTES:
the Company and whose name is be deemed to be the Register
entered as a beneficial owner in and Index of Members and Security 1. The relative Explanatory Statement
the records of the depository shall holders for the purpose of these pursuant to Section 173 of the.
be deemed to be a member of the Articles." Companies Act, 1956 in respect of
Company. The beneficial owner Special Business under Items 6 to 8
of securities shall be entitled above is annexed hereto.
7. To consider and, if thought fit, to
to all the rights and benefits and
pass with or without modification, 2. A MEMBER ENTITLED TO
be subjected to all the liabilities
as a Special Resolution, the ATTEND AND VOTE AT THE
in respect of his securities which
following: MEETING IS ENTITLED TO
are held by a depository.
APPOINT A PROXY TO
"RESOLVED that pursuant to the ATTEND AND VOTE INSTEAD
Service of documents provisions of Section 309 and other OF HIMSELF ON A POLL ONLY
applicable provisions, if any, of the AND THE PROXY NEED NOT
6. Notwithstanding anything in the Act Companies Act 1956, the consent of BE A MEMBER. THE PROXY
or these Articles to the contrary, the Company be and it is hereby ac- FORM SHOULD BE DEPOSITED
where securities are held in a corded to the payment of commission AT THE REGISTERED OFFICE
depository, the record of the beneficial to the Directors (other than the OF THE COMPANY NOT LESS
ownership may be served by such wholetime Directors) not exceeding THAN 48 HOURS BEFORE THE
depository on the Company by means 1% (one percent) per annum of the TIME FOR HOLDING THE
of electronic mode or by delivery of net profits of the Company, calculated MEETING.
floppies or discs. in accordance with the provision
of the said Act or Rs. 25 Lakhs, 3. The Register of Members and the
Transfer of Securities
whichever is less, such commission Share Transfer Books of the Company
7. Nothing contained in Section 108 being divisible amongst the aforesaid will remain closed from Thursday,
of the Act or these Articles shall Directors in such proportion and in September 9, 1999 to Thursday,
apply to a transfer of securities such manner as may be decided by the September 23, 1999 (both days
effected by a transferor and Board of Directors of the Company inclusive).
transferee both of whom are entered as for a period of five financial years
beneficial owners in the record of a of the Company commencing from 4. The dividend declared at the Annual
depository. the financial year ending March 31, General Meeting will be paid on or
2000." after October 11, 1999, only to those
Allotment of securities dealt with in a Members whose names appear on the
depository 8. To consider and, if thought fit, to pass Company's Register of Members on
with or without modification, as a September 23, 1999.
8. Notwithstanding anything in the Act
Special Resolution, the following:
or these Articles where securities are 5. Members are requested to file Man-
dealt with by a Depository, the dates and notify any change in their
"RESOLVED that pursuant to
Company shall intimate the details address.
Section 163 and other applicable
thereof to the depository immediately
provisions, if any, of the Companies
on allotment of such securities. 6. It is notified for the information of the
Act, 1956, the Company's Register of
Members, Index of Members and members concerned that the un-
Distinctive numbers of securities held
copies of all its Annual Reports claimed dividends for the financial
in a depository
prepared under Section 159 of the said years upto 1994-95 have been trans-
Act together with copies of certificates ferred by the Company to the General
9. Nothing contained in the Act or these
and documents required to be Revenue Account of the Central
Articles, regarding the necessity of
annexed thereto under Section 161 of Government and the same can be
having distinctive numbers for securi-
the said Act be kept on and from claimed by such members from the
ties issued by the Company shall apply
October 1, 1999 at the Office of the Registrar of Companies, Maharashtra,
to securities held with a depository.
Company's Registrar and Share Trans- Mumbai.
Register and Index of Beneficial Owner fer Agents, Intime Spectrum Registry By Order of the Board of Directors
Pvt. Ltd., 260, Shanti Industrial
10. The Register and Index of beneficial Estate, Sarojini Naidu Road, Mulund K. P. T. KUTTY
owners maintained by a depository un- (W),Mumbai400080." Company Secretary
INFORMATION UNDER SECTION 217(2A) OF THE COMPANIES ACT, 1956 READ WITH THE COMPANIES (PARTICULARS OF EMPLOYEES) RULES, 1975 AND FORMING PART OF THE DIRECTORS' REPORT
FOR THE PERIOD APRIL 1, 1998 TO MARCH 31,1999
Derails of last employment
Designation
INFORMATION SYSTEMS
PROJECT SPECIALIST
55 PRESIDENT & VICE CHAIRMAN
15 EXECUTIVE VICE PRESIDENT MRF LTD., MADRAS GENERAL MANAGER 1991-95
35 SR. PROJECT MANAGER KRUPP INDUSTRIES (I) LTD. ASSOCIATE MANAGER 1994-95
40 GENERAL MANAGER PATNI COMPUTER SYSTEMS PVT. LTD. REGIONAL MANAGER
41 VICE PRESIDENT MAFATLAL INDUSTRIES GENERAL MANAGER

- FINANCE
DESHMUKH S G 39 DY. GENERAL MANAGER SYSTEMS ANALYST
DILEEP T 4? SR. GENERAL MANAGER BRANCH MANAGER 1975-7?
INAMDAR V V 51 VICE PRESIDENT ASST. GENERAL MANAGER 1981-8)
JAMDAR SATISH 46 VICE PRESIDENT VICE PRESIDENT 1995-%
KHORANA A 49 VICE PRESIDENT SALES ENGR. 1972-73
MALHOTRA B K 60 EXECUTIVE DIRECTOR
MANSUKHANI M D 59 EXECUTIVE VICE PRESIDENT
MOHAPATRA ASIT 41 VICE PRESIDENT DIRECTOR - HR 1996-9?
MUKHERJEE KBYENDU 13 GENERAL MANAGER TECHNICAL MANAGER - 1986-%
MFG. SOLUTIONS
RAO A S PRAKASH 52 VICE PRESIDENT
RAO DC n SR. PROJECT MANAGER PROJECT LEADER 1996-9?
RAO KIRON 17 GROUP PROJECT MANAGER SR. PROJECT MANAGER 19%
S4MBTANI ASSAR 56 VICE PRESIDENT VICE PRESIDENT 1978-95
SANKARAN S 52 VICE PRESIDENT
SHAH BHARAT P M SR. GENERAL MANAGER BOOTS PHARMACEUTICALS LTD. SYSTEMS MANAGER 1986-92
USHA INTERNATIONAL LTD., DELHI MARKETING MANAGER 1989-95

SOFTWARE TECHNICAL SERVICES INC., USA CONSULTANT 1992-94
WRO-GE MEDICAL SYSTEMS LTD. ZONAL MANAGER 1990-93
EMPLOYED FOR THE PART OF THE YEAR :

ASHAR R L SR. SALES REPRESENTATIVE TRIUMPH INDIA CORPN., MUMBAI SALESMAN 197S-72
ATKARIG K DRIVER
BHANDARKAR S M MANAGER INDIAN DRUGS & PHARMA LTD, MUMBAI ACCOUNTANT 1971-71
BHATT A V SERVICE ENGINEER
BHENGURA S S ENGINEER THE INDIAN TOOLS MACHINES, MUMBAI TRAINEE 1976
BORTHWICK RONALD V AC&R TECHNICIAN FERNS ENGINEERING WORKS, MUMBAI SERVICE MECHANIC 1970-72
CHURI P G SR. GENERA: MANAGER CROMPTON GREAVES LTD., MUMBAI PROD. SUPERINTENDENT 1965-82
DEVRURKAR N M SEMI-SKILLED
GULATI R C SR. MANAGER COMMERCIAL BHARAT CARBON STENOGRAPHER 1959-60
IYER MAN! A SR. TECHNICIAN INDIAN AIRLINES, MUMBAi PACKING DEPARTMENT
KAMBLE N V HELPER MILITARY CAMP COBBLER 1961-66
KASHID U ] SR. GENERAL MANAGER SHIVA VACUUM CLEANERS, AHMEDABAD APPRENTICE SUPERVISOR 1962
Name
KESWAN1 NISHA H 45 COMMERCIAL OFFICER 555.276 SSC 14 lC-Sip-79 - -

MENON C P MUKUNDAN 36 REGIONAL MANAGER 182,869 B.TECH. 13 i7-)un-85 - -
PAROCHA R D 35 CLERK 568,93 FYj.C. 16 i-jul-86 MOHAN T. APVAN1 & ASSOCIATES, MUMBAI JR. CLERK 1985-86
PATHAK K L 60 MANAGER - CONSTRUCTION 4!5.496 B.E. 32 25-]ul-66 - -
_
PAWAR TUKARAM 51 SEMI SKILLED 935,415 SSC 26 l-Ncv-72 -
POSTWALLA DINOO 51 ACCOUNTS EXECUTIVE 41C.969 3.COM., DiP. 28 i-Mat-56 CALICO CHEMICALS & PLASTICS, ML'MBAl SR. AUDIT ASSISTANT 1979-86
PUR1 PREM 48 AREA MANAGER 668,181 BA 11 2- Aug. 7 3 LAL IMLL KANPUR DESIGNING TRAINEE 1971-73
RAMAL1NGAM C N 5C VICE PRESIDENT i.27l,94i 3E. M.SC, (ENGG.! 38 5-Arr-?6 GEC OF INDIA LTD, MADRAS ASST. MANAGER 1966-76
RATHOD M B 50 CARPENTER 242,220 IV STD 45 l-Oci-62 M.G. M1STRV, MUMBAI APPRENTICE CARPENTER 1953-6C
SAREEN R K 52 SR. MANAGER 756,012 B.A. 31 l-Sep-72 MARTIN BURN, DELHI SUPERVISORY ASSISTANT 1968-72
SHETTY NEELAM 41 DATA ENTRY OPERATOR 680,588 B.A. 18 21-May-84 CENTAUR HOTEL, MUMBAI TELEPHONE OPERATOR 1983-S4
SHINGE G P 50 SR. TECHNICIAN 996,727 SSC 29 IS- Apr- 74 SURFACTANT PVT LTD ASSISTANT 1968-69
SONAWANE D B K AC&R TECHNICIAN 383,674 NIL )8 l-Mai-68 GURDAYAL SINGH, MUMBAI ASST. FITTER 1966-68
SONAWANE P G 5? SEMI SKILLED 546.461 VII STD. 18. l-Jul-60 - -
SONTAKE S V 39 CUSTOMER COORDINATION OFFICER 559,492 B.COM., DBM 14 B-Jul-84 - -
SUBRAMANIAN K G S 54 SR. ACCOUNTS EXECUTIVE 633.515 SSC 26 l-]un-76 POLESTAR ELECTRICALS PVT. LTD., MUMBAI OFFICE ASST./SALES MANAGER 1972-76
VYAS SAM1R M 37 ENGINEER 116,858 B.E. i4 lO-Aug-84 - -
WAMANRB 54 HELPER 753.724 VII STD. 29 l-Feb-71
NOTES:
1. REMUNERATION INCLUDES SALARY, HOUSE RENT ASSISTANCE, EMPLOYER'S CONTRIBUTION TO PF AND SUPERANNUATION, GRATUITY, LEAVE TRAVEL ASSISTANCE, GROUP INSURANCE PREMIUM, COMMISSION WH$E
PAYABLE AND OTHER ALLOWANCES/BENEFITS AS APPLICABLE AND ALSO INCLUDES COMPENSATION PAID UNDER VOLUNTARY RETIREMENT SCHEME.
1. THE NATURE OF EMPLOYMENT IN ALL CASES IS CONTRACTUAL.
3. RELATIVES OF DIRECTORS:
MR ASHOK M ADVANI AND MR SUNEEL M ADVANI ARE RELATIVES.
ANNEXURE TO NOTICE
"Explanatory Statement as required by Section 173 of the Companies Act, 1956.
As required by Section 173 of the Compa- inspection by the members of the Company All the Directors (except the Wholetime
nies Act, 1956, the following Explanatory at its Registered Office between 11.00 a.m. Directors) are concerned or interested in
Statements set out all material facts relat- and 1.00 p.m. on any working day of the passing the above resolution.
ing to Special Business mentioned in the Company.
accompanying Notice dated July 28, 1999. Item No. 8
None of the Directors of the Company
In view of the introduction of depository
Item No. 6 are concerned or interested in passing this
system and considering the future prospects
resolution.
With the introduction of Depositories Act, for share registry work, M/s. Consolidated
1996, the Securities Exchange Board of Item No, 7 Share Services Pvt. Ltd., who are the Share
India has notified a list of companies for Transfer Agents of the Company, have de-
compulsory dematerialisation. This is likely At the Annual General Meeting held on cided to join with other two Share Transfer
to be extended to other listed companies August 18, 1995, a Special Resolution was Agents and form a new Company under
also. Besides, as per the Depositories Act, passed approving the payment of commis- the name of INTIME SPECTRUM
1996, the Company has to provide for sion to Non-Executive Directors of the REGISTRY PRIVATE LIMITED. In
dematerialisation of its securities, if any Company for five financial years com- view of this, effective October 1, 1999 the
shareholder makes such a request. In view mencing from the financial year ended Register of Members, Index of Members
of the above, the Company has entered into March 31, 1995. This approval needs to be and copies of all Annual Returns prepared
an agreement with National Securities renewed for payment of commission from under Section .159 of the Act will be
Depositories Limited (NSDL) for enrolling the financial year ending March 31, 2000 kept at the office of Intime Spectrum
as a member and providing facilities for onwards. Registry Pft. Ltd. at 260, Shanti Industrial
holding securities in a dematerialised form. Estate, Sarojini Naidu Road, Mulund (W),
Since the Company seeks services of Non-
Mumbai 400 080.
As a result of the Depositories Act, 1996 Executive Directors besides attending
, and the depository system, some of the Board Meetings, it is just and equitable to Pursuant to Section 153 of the Companies
provisions of the Companies Act, 1956, continue compensating them by payment of Act, 1956, this needs the approval of the
relating to the issue, holding, transfer and commission based on the net profits of the shareholders by a Special Resolution. The
transmission of shares and other securities Company. It is therefore, proposed that the Board therefore, recommends the proposed
have been amended to facilitate implemen- payment of commission to Non-Executive resolution for your approval.
tation of the new system. In view of these Directors be continued for a further period
amendments, the Articles of Association of of five financial years commencing from the None of the Directors of the Company are
the Company have to be suitably amended financial year ending March 31, 2000. The concerned or interested in passing this
to conform to the requirements under the amount payable to each Director will be resolution.
Depositories Act, 1996. decided by the Board every year within the
overall commission not exceeding 1% of By Order of the Board of Directors
As per Section 31 of the Companies Act, the net profit of the Company or Rs. 25
K. P. T. KUTTY
1956, it is necessary to pass a Special lakhs whichever is less as may be decided by
Company Secretary
Resolution for amending the Articles of the Board.
Association of the Company. The Board BLUE STAR LIMITED
therefore, recommends the proposed Pursuant to Section 309 of the Companies
Kasturi Buildings
resolution for your approval. Act, 1956, it is necessary to take the
Mohan T Advani Chowk
approval of shareholders for payment of
Jamshedji Tata Road
A copy of the Memorandum and Articles of commission to Directors. The proposed
Mumbai 400 020
Association of the Company together with resolution is therefore, recommended for
the proposed alterations is available for approval. July 28, 1999
FOR THE ATTENTION OF SHAREHOLDERS

1. Shareholders are requested to forward their queries on the Accounts for the financial year ended March 31, 1999 to the Registered Office of the
Company at least 10 days in advance to enable us to keep the information ready at the Meeting.
2. , The Annual Reports and Attendance Slips will not be distributed at the Annual General Meeting. Shareholders attending the
Meeting are requested to bring the same along with them.
BLUE STAR
Shareholder Inquiries
Questions concerning your folio, share certificates, dividend, address changes, consolidation of certificates, lost
certificates and related matters should be addressed to Blue Star Ltd. directly or their share transfer agents.
Blue Star Limited Intime Spectrum Registry Pvt. Ltd.
Kasturi Buildings 260, Shanti Industrial Estate
Mohan T Advani Chowk Sarojini Naidu Road/ Mulund (West)
Jamshedji Tata Road . _ , . .__ ___
AT u - x n n m n Mumbai 400 080.
Mumbai 400 020 Tel :
Tel • 0091-22-2020868 5647731,5672716,5684590,5684591
Fax : 0091-22-2025813 Fax : 5672693
Share transfer documents will also be accepted at

Intime Spectrum Registry Pvt. Ltd. Intime Spectrum Registry Pvt. Ltd.
Dawar House, (2nd Floor) Shree Ganeshindustrial Estate (1st Floor)
197 D.N. Road XT A ~
^ , _ Near Amar Cinema
Near Central Camera
WT Patil Mar
Fort, Mumbai 400 091. - S' Chembur
Mumbai 400 071.
Dematerialisation
Considering the convenience of the shareholders and investors, the Company has made arrangements for
dematerialisation of its shares through National Securities Depositories Limited (NSDL). In view of the
proposed scheme of arrangement and reduction of capital, shareholders are requested to dematerialise their
shareholding, so that exchange of share certificates upon reduction of capital can be done promptly through
their demat accounts.
Investor Relations Programme
Blue Star Limited has an active investor relations programme directed to both individual and institutional
investors. The Company's investor relations mission is to maintain an ongoing awareness of the Company's
performance among its shareholders and the financial community. The Company welcomes inquiries from its
investors, large or small, as well as from members of the financial community.
For further information please contact Blue Star's Investor Relations Department at the above address.
Blue Star's Shareholders
As of 31st March, 1999, the Company has approximately 23,963 registered shareholders. Approximately 46 per
cent of the Company's shares are held by individual investors. The Promoters and Group Companies hold
approximately 38 per cent of the shares while Institutions and Body Corporate hold the balance shares.
Stock Exchange Listings

Bombay Stock Exchange
National Stock Exchange
Blue Star Share Prices
120
HIGH LOW
110
100
90 82.00
80 74.60
t
TO
60
=> '
50
40
30 37.00
20
10
Apr 98 May 98 Jun98 Jul98 Aug98 Sep98 Oct98 Nov98 Dec 98 Jan 99 Feb99 Mar 99

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9 9

Blue Star Establishments

• Sales & Service Offices

Blue Star Establishments

Sales & Service Offices

Board of Directors Bankers

Letter from the Chairman 3

Dynamics of Blue Star's Growth 12

Profit & Loss Account 17

Schedules to the Accounts 18

Notes forming part of the Accounts 27

Cash Flow Statement 36

Accounts of Subsidiary Companies:

renew our technology licensing agreement

The project is currently under active

A small start was made last year by signing on a few

Profit before interest, Financial Position

earning rose to Rs. 54.04 crores from Rs. 47.03 crores

(2) Blue Star Infotech (UK) Ltd.

Export & Foreign Exchange Earnings

For and on behalf of the Board

Mumbai, July 28, 1999.

Major Items Of Foreign Exchange Ashok M Advani

(a) Activities relating to exports, initiatives taken Mumbai

**1 998-99 1997-98

Total Funds Employed 195.54 167.90

1 Net Fixed Assets & Investments Rs. in Crores 99.93 97,05

I Debt Equity Ratio 0.73 0.56

1996-97 1995-96 1994-95 1993-94 1992-93 1991-92 1990-91 1989-90 1

27.10 27.10 10.05 9.95 7.20 7.20 7.20 3.64 1

0.32 0.10 0.26 0.36 0.87 0.94 0.81 0.83

20578 18004 15697 14692 12534 10770 9318 8410

5.45 10.85 16.30 6.07 5.79 5.19 5.98 13.26

15.96 35.01 35.08 18.00 15.91 15.76 20.56 27.26

Notes forming part ot the Accounts N

Bal K Maihotra Executive Director

Period ended Period ended

Bal K Malhotra Ex jcmii'e Director

Subscribed & Paid Up

B. RESERVES & SURPLUS

Foreign Projects Reserve

Share Premium Account 10,24.68 10,24.68

Profit & Loss Account

Commercial Papei 22,00.00 2C.50.0C

Others 18,12.55 9,74-37

F. INVESTMENTS (AT COST)

INVESTMENT IN SUBSIDIARY COMPANY

INVESTMENT IN GOVERNMENT SECURITIES

G. CURRENT ASSETS, LOANS & ADVANCES (Contd.)

H. CURRENT LIABILITIES & PROVISIONS

Provision trr Leave E n c a s h m e n t 84.90 59.17

Period ended Period ended

J. COST OF SALES, WORK BILLS & SERVICES

Less: Stock at Close:

K. EMPLOYEE REMUNERATION & BENEFITS

Period ended Period ended

L. OPERATING & GENERAL EXPENSES

N. NOTES FORMING PART OF THE ACCOUNTS

2. Fixed Assets and Capital W.I.P.: