BLUE STAR LIMITED,

Anual Report
 BLUE STAR

Blue Star Establishments

Chandigarh

^ Gurgoon
• N0LU Delhi

Lucknouj
Jaipur
hanpur Guwahoti

flhrnedabod
• Bhopal Calcutta
Vadodoro
Sharuch

Dodra Nogpur
Bhubaneshujor
r Thone
Mumbai
Punc
Vishakhapatnom

Secundarabad

Panoji

• Bangalore

Chennai

hochi • Corporate Headquarters

• Manufacturing Facilities
Thiruvananthapuram

+ Regional Headquarters

• Soles <S Service Offices


NOTIC6
May 18, 2000
Blue Star Limited
Registered Office: Hasturi Buildings,
Mohan T RoVani Chowk, Jomshedji Tata
Rood, Mumbai 400 020.
NOTIC6 is hereby given that the 52^
Rnnual General Meeting of the Members
of the Company will be held at Jai Hind
College Hall, 23-24, Backbay
Reclamation, 'R' Road, Churchgate,
Mumbai 400 020, on Tuesday, Rugust
29, 2000 at 3.00 p.m. to transact the
following business:
Ordinary Business
I. To receive ond adopt the Directors'
Report, the audited Balance Sheet
as at and Profit & Loss Recount
for the financial year ended
March 31, 2000 and the Ruditor's
Report thereon.
2. To declare final dividend.
5. To appoint a Director in place of
Mr 6 H Molhotro who retires by
rotation, ond being eligible, offers
himself for reappointment.
4., To appoint a Director in place of
Mr Rtul C Choksey who retires by
rotation, and being eligible, offers
himself for reappointment.
5. To appoint Ruditors and to fix their
remuneration.
BLUE STAR
NOT6S FOR TH€ flTT€NTION OF
1. R M€MB€R €NTITl€D TO RTT6ND SHflR6HOLD€RS
FIND VOT6 RT TH€ MATING IS 1. Shareholders are requested to
eNTITUED TO RPPOINT R PROXV TO
forward their queries on the
rTTTCND RND VOT€ INST6RD OF Recounts for the financial year
HIM56LF ON R POLL ONLV RND TH€
ended March 31, 2000 to the
PROXV N66D NOT B€ R M6MB6R.
Registered Office of the Company
TH€ PROXV FORM SHOULD B€ at least 10 days in advance to
D€POSIT€D RT TH€ R€GIST6fl€D enable us to keep the information
OFFICE OF TH€ COMPRNV NOT LGSS ready at the Meeting.
THRN 48 HOURS 8€FORe TH€ TIMC
2. The Rnnuol Reports and Rttendance
FOR HOLDING TH6 M€€TING.
Slips mill not be distributed at the
2. The Register of Members ond the Rnnuol General Meeting.
Shore Transfer Books of the Shareholders attending the
Company will remain closed from Meeting are requested to bring the
Thursday, flugust 17, 2000 to
same along with them.
Thursday, Rugust 24, 2000 (both
days inclusive).
3. The final dividend declared at the
Rnnual General Meeting will be
paid on or after September 6,2000,
only to those Members whose
names appear on the Company's
Register of Members on
Rugust 24, 2000.
4. Members ore requested to file
Mandates and notify any change
in their address.
By order of the Board of Directors
K P T Kutty
Company Secretary
 BLUE STAR

flNNGOJRe TO DlfieCTORS' R6PORT - B

Information under Section 217(2R) of The Companies Ret, 1956 read with the Companies (Particulars of employees) Rules, 1975 ond forming part of the
Directors' Report for the period Rpril 1, 1999 to March 31, 2000

M^rre DesignationSi Ftemunerafcn Cpuatificofon 6p. Datecf Details of bst employment

^
(Vrs.) Nature Of Duties (Rupees) (Years) Joining employer Desigfiotion Period
ea
aflftQY® FOfl THC UJHOU Of M V6W:

RDVHNIflM 58 CHflifwiflN 5 cHieF execuTiue 2102567 B.SC.,S6,MBfl 33 l-Jul-69 RCfl INC., USfl INFOflMFtTIONSV5T£MS 1968-69
PROJeCT SPeCIRLIST

RDVflNISM 56 PReSIDeNTSVlCeCHRIRMFW 2102880 SB, SB, LL.B. 31 17-Mor-69

BflBUTGS 46 ececuTWE vice pResiDewr 1154720 6.TKH.. MBfl 21 l-Ncv-95 MRFLTD,MFORF1S /ytiffjiQi \ArifjiyrQ
v^ziNKjV"- rviniNrucn 1991-95

BRLflKRISHNflNPV 37 GfWF^WNf^ 1020913 MieCH. 13 28-Sep-95 HRUPP INDUSTRY LTD. ffiSOCIRTeMRWGeR 1994-95

BHRVeflN 42 v^ceFflesioeNT 895866 8.COM,FCR.FICLJfi.FCS 20 24-Jun-97 MflfflTWLINDUSTRieS GeNeRRLMflNRGeR-f^e 1991-97

COeiHOHUKflT 44 GaKRRLMRNRGefi 944908 B.COM., CR 18 S-Rpr-96 FUJITSU - ICIM LTD. R63L. INDUSTRY SOUJTICJ5 MGR 1995-96

DIXrrSflNTOSH 32 LfflDCOMSULTflNT 705873 B£ 11 16-Jul-97 GODR£JSBOYCeLTD. flSOTWWftGe* 1990-97

KflNWDSMEUn 30 flSSTPROJ6JMRNRGeR 694716 DeRe,DCM 7 l-Jun-98 PflTNl COMFUTC-R SVSTeMS FVT. LTD. sofTLUflReeNGiNeeR 1997-98

GSlBWIflRRVRN 33 Sfi.CONSULTflNT 1415727 ee.PGOST 10 9-Jun-97 OIL&NRTURflLGflSCORPN.LTD. aecuTive eNGiNeeR 1989-97

GeRRSUDHR 39 DeFUWGe^flimmGCfi 652450 B.e., DBM. 17 l5-Rpt-98 LCMUIR ReCORDS MRNRGeMeNT GeNeRRLMRNROefi 1995-98

INFWDflflVV 55 vice pResioeNT 899183 B.TeCH. 34 l-Dec-83 PT.TRIOS, INDONtSIR RSST.GeNeRALMfflJflGeR 1981-83

iveflsuResH 36 GROLPfflOmMmflGeR 475657 6.SC. (TC-CH) 10 4-Dec-89 UNHSCflUJflReiNNOVRTIONS SVSTCMS execujfve 1988-89

JflMDflflSRTISH 47 \I\K pReslK^fT 748562 BTeCH. 27 2-MC.-96 RCflLWLUeLTD.,MUMefll VICe PRC-SIDeNT 1995-96

mORRNRR 50 vice pResioeNT 871599 8.5C(€NGG). 28 l-Feb-73 MOTUJRWPLTD. SaeS6NGIN«R 1972-73

HlflPflLflNI RITfl 50 cfl

jn fyft icfloi A*Ofticy?ffl
^ja«aV"_ pvinyrvjtn 684375 s.e. 28 l-Sep-71

MRLHOTRRBK 61 aecunve DiReaofl 1791855 e.sc.(eNGG). 38 UMA

MUMHfflJKDIWfflDU 34 CMMRWXR 565078 e.e. 13 8-Rpr-96 FUJITSU -ICIM LTD. TeCHNlCaMWIRGeR 1986-96

PHRDKeSHIRiSH 37 DtKJWGeNmmmGeR 475305 B.e., M.S. 14 l-Sep-99 ORIGIN INFORMflTlOMTeCH. LTD. SR.PROJeCTMRNRGeR 1994-99

HUWWH 43 vice pflesioem 732366 B.COM, flCR, flC; 17 4-^-96 RRVMONDLTO. GeN.MGR(FIN)SCO.SeCReTFtfiV 1994-96

RflORSPRflKflSH 53 vicePBesioeNT 1075598 BTeCH 30 l-Dec-69

WODeePRK 34 SR.PROJeCTMflNRGeR 906188 B.e. 19 13-Feb-97 PfilCCSOFTUJflRfSaUTiONS PFO^MrWm 1996-97

RFMNDRflD 58 SRGeNemLMflNFeeR 631772 B.TSHMe.OIPOP.MGMT 34 23-CM-85 VOLTflS LIMIT® PRODUCTION MRNflGeR-R5£) 1971-85

RRYCHRNDBN 36 DeFurvGeNefiflLMmpoefl 711658 B.SC, MCR 10 l-flpr-99 SVNTa-eURC«LTO. PROJeCTMflNRGefl 1996-99

SflMBTflNIRSSRR 57 pResioeNT 2108316 e.TecH. 32 3Jul-95 FUJITSU -ICiM LTD. vice pflesioeNT 1978-95

SRNHRRflNS 53 vice pResioeNT 945968 e.e. 31 2)^-69

SRLUHN6VSflNJRY 37 Dv.GeNeRawwss 695234 B.COM. 15 7-flpr-98 FUJITSU - ICIM LTD. TO* 1993-94

SCTHN 39 Vice PReSIDCNT 957055 B.COM., Mflfl. 17 l-Mor-95 USHR INTeR WTIONflL LTD, DOHI MfflMMflNFGeR 1989-95

56THIMS 50 vice pfiesioeNT 849875 Be, PGDIT, MS, MBfl 27 57-NO/-97 PftM-PflCAAflCHINeSLTD. GeNeRFlMRNRGeR-MfG 1997

SHRHBHflRRT 43 VICePRCSIKNT 1905671 B.TeCH.. PGDSM MFM 19 21-Dec-92 BOOT5 PHflRMflOEUTICRlS LTD. SVSTeMS MRNflGSfl 1986-92

SiURSflNKRRRNN 53 vice pResioem" 1116305 6SC (6*56) 31 !9^^

TflUIHeDRRRSOKe 46 V1CC PfKSIKNT 1476637 M.SC 18 18-Jon-99 MRSCOTSVSTtMS MftMFlGIMGOIfleCTOfl 1997-99

THfWeflRflJSH 32 PROJKTMFWGtR 818481 B.e. 9 4-Rpr-94 sofRURRe TecHNiCRL seRvices, INC.CONSULTANT 1992-94
tare ftp DesignobonS FtarunercBon Qualification 6p. Dcteof DetGiteoflastempour n
(Yrs.) Nature Of Duties (Rupees) (Veors) Joining Employer Designation > i"
flSL
awovajfoflweipflflTOfmevew:
BHflGLUrmOHSH 41 GENEFRWTO 508036 M.SC. DCM 18 t-Mtay-98 PRTNICOMPuTC-RSV5T6MSPVr.LTD. RKSOftWW1. *F 1934 '0

BKHUPRFWIODV 60 MECHANIC 286181 NONMflTRIC 33 7-Jul-66

moampera 60 DGPflTCH CLERK 286505 STOW 42 2-Jon-57

CHRTTERJ6ED 54 [W/wcMNKWGER 868367 B.SCOK3G). 29 16-feb-76 T05HNILUF1LBROS.FVr.LTD. Sa€S€NGINft« 1971 70

tfV
CHfllflNISfWW j71
I fWQ Ar\QK ^/'P
nrrtrifVlrH'rTj^.n 150807 DEfiePDME 9 2ODec-89 -

CHffiYflMB 45 ^^ 382965 B.SC. DFM, DMM 21 22-D8C-80 SFtGflR SHIPPING CO. FCCOUNTFM I960

DESfflHEMFWT 52 DEIWC^^MflW«R 468350 Ph.D.(E€CS) 22 14-Da:-98 ZENrTHaOBftLCONSULTFWTS INDePeNDeNTCOTJSULTflNT 1991-94

DSrWUKHSflNJRY 40 DeFWCMMfWflGER 720672 6.SC., PGDST 19 1 5-flpr-85 TFfTfl BURROUGHS LTD. SYSTEMS flNftYST 1980-85

DILffiPT 47 SflGeNfRaMflNRGfR 447540 B£ 25 3-Jun-77 KRISHNFllNDUSTRieS BflflNCHMflNflGER 1975-77

XEHISUBHRSH 40 flSSiSTFWTMflNflG€R 178550 owe 17 01-Sep-flS -

WRMflRfflRPG 46 GamiWW3ffi 584416 MSC.DMS 2! 15-fV-98 GODREJSOflPS MflMFGEfi 1991-98

KflRNRNIBN 54 Sfi.GENEmL^RGeR 320417 e.TeCH. 32 30-flug-93 flFCO INDL. S CH6M. LTD. C€ - aeCTftlCFIL 1990-93

KfSJflPRflKFEH 43 STENOGRHPHefi 310146 B.fl. 17 02-FV-84 -

KRtSHNRNS Cu UtHJTV CjfcNtnr^ iwrHnC^Ti 581038 MR.MMS 40 05-S&P-58 '-

KLWflRNtUDflY « K
C ft /^fAlfQni ft|IQfc|fV 1£O
Jn VjQ T_nrTL PVn iFTjCn 619628 B.E., MMS 19 22-0*92 rOWmTESOUTIONS SELF€NROV6D 1991-92

LUWtNSPJISH JZ fTfNf-ftPi ftflflMfVyQ 127061 6.SC-, MtS 16 6FVT-98 NOCIL POLYMER WftftBER 1992-98

WflSUKHRNIMD 60 execunve VICE pflsiDeNT 1907421 6.SC 39 29^60 -

MEHTflNmESH 35 KPoTvee^flLMfmSER 193737 NWS 10 5-Jm>-96 OMfWlCONSLtTFWTS GeJ6RflLMflNflG01 1992-93

MOHRfflTFHFlSIT 42 ^PRESIDENT 241316 B.TCCH., MflM. 20 22-Jul-97 PflRHEDflVIS DIREGOR-HR 1996-97

WHYSHLUflNTS 60 stNiOfl execunve 403607 SSC 34 21-Dec-64 -

FflDTEMV 60 MKHfWC 290931 NONMFfffilC 44 17-Oct-66 rtfUWflTl S SONS FVT.LTD. fflRCCMfflONINGOPERflrCfi 1966

PEREIRR CLYDE 41 CUSTOMER SUPPOfiTtNGR. 74386 SSC 20 20-OC-82 TCL6V1STR ELECTRONICS LTD. Sfi. TeCHNICffl 1960-62

PMora* 43 REC6PTIONIST 104850 B.fl. 22 l6-flug-89 MURUGFWCVeRS6flSCOf6ULTF»ITS €XC<.OFflC€R 1989

flFOKWI 58 GfOJPPBOJEaMflNflGER 936221 M.SC. 15 23-OCI-96 DflTB5YST6MS5SefiVlCES SflFflOJKTMflNFlGER 1996

RflOSV 52 RReRMflNflGffi 234608 ae. 26 12-Jun-8! eJGlNEeft'S eNTERPRlSES P.LTD. LUORKSMf*IFK5ffl 1980

SHFHWSFWT 36 MRNflGER 173183 6.6. 13 1 0-flug-87 MU1WID ITON 5 STffiL TRfllNEE 1987

SUBfflMflNAMJ 45 GemWlNflGei 369764 M.SC. 6 26-Jul-83 INDOCHEMaeCTRONICSLTD SflL€S €NG(N€€fl 1981-83

SUNDflRFlMPV (SO Sfi.r^flOR 419959 B.COM 36 02-Se*>44 CflRONflSFHJCOM.LTD RCCOUNTSflSSBTRNT 1964

VINODKUMflflVN 35 F^^MRNRGER 398283 B.€. MMM, CFfl 22 20-Jui-88 INDOCHEMC-tSTfiONIGLTD SHLES ENGINEER 1981-83

LUflGLERL 60 WPNft391 610068 INT€R SC.. DME 37 03-CW-62

1. Remuneration includes salary, house rent assistance, employer's contribution to PF and superannuation, gratuity, leave travel assistance, group insurance premium, commission
where payable and other allowances/ benefits as applicable and 0)50 includes compensation paid under Voluntatv Retirement Scheme.
2. The nature of employment in ail coses is contractual.

3. Relatives of Directors:
Mr Ftshok M Ftovani ond Mr Suneet M fldvoni are relatives.
 BLUE STAR

Board of Directors Corporate Management Bankers

flshok M fldvani flshok M fldvoni Th® Hongkong S Shanghai
Chairman 5 Chief Executive Chairman (5 Chief Executive
Banking Corporation Ltd.
Suneel M fldvoni Suneel M fldvoni flNZ Grindla^s Bonk Ltd.
President <5 Vice Chairman President 6? Vice Chairman
Stats Bank of India
Bal K Molhotra Bol K Malhotro Oriental Bank of Commerce
Executive Director €xecutive Director
RBN - flMRO Bank
fltul Chokseu T G S Sobu Bonqu© Nationals De Paris
Executive Vice President
Udau Kotak Sank of Baroda
H N Gonotro flbu Dhabi Commercial Bank Ltd.
G Romchondoni Vice President - international

Minoo R Shroff V V Inamdor fluditors

Vice President - UJestern Region 5
Suresh N Toiutar K S fliyar & Company, Mumbai
Industrial Division

Sotish Jomdor
Vice President - Manufacturing Branch fluditors
flrun Khorana R Venkatarama fliyar S Company.
Vice President - Electronics Division
Calcutta

RanojitMojumdor Fraser 5i Ross, Chennai

Vice President - Human Resources 5 Qualify
Mohinder Puri 5i Company, Neuj Delhi
fl 5 Prokosh floo
Vice President - Northern fteg/on
Registrars & Share
H Rajoram
Vice President - Finance
Transfer flgents
Intime Spectrum Registry Pvt. Ltd.
S Sonkaron
260 - Shanti industrial estate
Vice President - Southern Region
Sarojini Naidu Rood, Mulund (West)
Neeraj Seth Mumbai 400 080
Vice President - Telephone: 91-22-564 7731
Commercial Equipment Division Fax:91-22-5672693
N Sivosankoran
Vice President - ftCPD Mktg. <S Service
Registered Office
Kasturi Buildings
Company Secretary Mohan T fldvani Chowk
Jomshedji Tata Rood
K P T Hutty
Mumbai 400 020
Telephone: 91-22-2020868
Fox: 91-22-2025813
LUUJUJ . bl uestari ndia. com
Contents
Letter From the Chairman 3-4

Rnnexure to Letter from the Chairman 5

Board oF Directors 6

Directors' Report 7-9

Rnnexure to Directors' Report - 10-11

The Dynamics oF Blue Star's Growth 12-13

Ruditors' Report — 14-15

Balance Sheet 16

ProFit 6) Loss Recount - 17

Schedules to the Recounts - 18-25

Notes Forming part of the Recounts - - - - 26-33

Cash Flow Statement --- 34-35

Recounts oF Subsidiary Companies:

(i) USIN International Inc. - 36-43

(ii) Blue Star Infotech (UK) Limited 44-49

Business Review 50-62

Investor Si Shareholder Information 63-64


Letter from the
Chairman
Dear Shareholder:
1999-2000 was o year of transition for
Blue Star. The Company was busy
restructuring itself around its core
businesses - airconditioning and
refrigeration (RC&R), ond marketing of
professional electronics, industrial
equipment and services. The restructuring
process involved spinning off the
software business and winding up the
industrial projects activity.
The long awaited demerger of the
International Software Division (ISD) took
place on flpril 4,20X30 after a cumbersome
and extended lego! process of about 20
months. In spite of our best efforts to
expedite the procedure, the demerger
could not be achieved before the end of
the financial year, fls a result, the audited
accounts for the year ended
March 31, 2000 are for the consolidated
Company including ISD.
flshokMRdvani
Chairman 61 Chief C-xecuttve
In order to incorporate the effect of
demerger in the books of Blue Stor
Infotech Limited (BSIL) ond present a
complete report to its shareholders, the
financial year of BSIL has been extended
to 15 months ending June 30, 2000.
flccordingly, the flnnuol Report of BSIl
to be published will cover the period
npril 1, 1999 to June 30, 2000.
The New Blue Star
Last year, with die restructuring of the
Company under implementation, I had
dealt with the important question of
Blue Star's future without the divested
businesses of software services and
industrial projects. I was optimistic about
our prospects ond explained why I felt
that way, but I was not in a position to
offer tangible proof. The Company's
Financial results for 1999-2000 provide
supporting evidence in this regard,
The consolidated accounts of Blue Star
obviously do not provide separate
figures for software ond the other
FJ BLUE STAR
business of the Company. However, in
the interests of greater transparency we
hove shown segregated Profit & Loss
Recounts for the 12-month period, by way
of supplementary information annexed
to this letter. These show that:
* flfter several years of high growth,
the Company's software business
slowed down. This was mainly due
to a foil in US onsite revenue on
account of the US preoccupation
with the V2K problem; and
management's focus on the spinoff
of the software business. The
annual report of BSIL mill provide
additional analysis and details
regarding the software business.
* For Blue Star, excluding software,
Total Income was not much different
from the consolidated figures.
ISD accounted For 8% of the total
revenues.
* On the profit front, while software
accounted for 35% of the
consolidated Profit flfter Tax, the
 importont point to note is that the
©ntir© improvement in profit lost u©or
come from the non-software
businesses. Profit Before Tax
grew by a healthy 73% to
Rs.17.10 cror©s, ajhit© Profit flfter
Tax surged by 189% to
Rs.l5.14crores.
In any business, the key variables
affecting profits are sales volume,
value addition or gross margins and
the overall level of business
expenses. Lost year, with scope to
increase soles volume being
somewhat limited bu o slouj
economy, and expense control
already reasonably tight, the major
opportunity for better profit
performance wos to focus on higher
gross margins. This is especially so
since more than three-quarters of
the sales income is consumed by
material and other direct costs.
GFForts to drive down the cost of
sales ratio pervaded the entire
Company resulting in an
improvement in gross margin in the
non-software business by 2.7%
from 23.4% to 26.1%. The effect of
the higher gross margin was to
enhance profit by Rs.l 1.55 crores,
a remarkable achievement in a
sluggish economy, facing sever©
competitive pressures.
The income tax provision was only
11 % of profit becous© of good tax
planning. The tox holiday on Dadra
Plant was a major reason for the
modest tox liability and wiii provide
on effective tax shield in the current
yeor as well.
Improving Gross Margins
The Directors' Report briefly mentions the
thr©©-pronged strategy to enhance gross
margins. I would like to elaborate on this.
In airconditioning projects, products, and
the allied manufacturing activities, better
engineering ond design iu©r© combined
with reduced material procurement prices.
Generally lower market prices for raw
materials and components along with
scientific supply-chain management
techniques, resulted in significont cost
reductions. Manufacturing profits were
also favourably affected by o substantial
increase in capacity utilisation.
flfter-sales s©rvic© continues to be an
excellent business because it offers high
gross margins ond limited competitive
pressure. The key to success is meeting
customer expectations and building
customer loyalty through proactive
measures. Servic© was reorganised by
integrating it with sales for each line of
business. This provided better customer
support and our customers hove
generally been pleased with this
change. In the reorganisation, car© LUQS
taken to ensure that the focus on servic©
os o business was not diffused. Service
remains o profit centre with its own
strategy, resources and investments such
as the induction of marketing resources
into after-sales service; an extensive
trained network of service associates;
upgraded computerised systems
including servic© parts management.
These measures, which were explained
in my speech at last year's flnnual
General Meeting, resulted in significant
growth in servic© revenues and profits.
The third factor influencing the increase
in overall gross margin ond profit was
the sharp decline in billing in industrial
projects. In earlier years, low or even
negative gross margins on som© fixed
price contracts dragged down the
average gross margin :;f < ih : i<e":
profitability of the Coir c r , I il r ; 1
of these contracts h: un U<o
progressively complete- j nv iti. :h
negative factors reducn io; cy. :s! m: re r •
are now largely behir.J us en d fuLm
profits should improve further.
Shareholder Value
Investors hove definite viewr. about
shareholder value ond hove little
patience for corporate managements that
are not obi© to enhance the value of their
investment. Vour Board of Directors is
acutely conscious of its responsibility to
shareholders and regularly reviews the
Company's strategies ond performance.
In a highly volatile stock market, we
believe our prime responsibility is to
deliver superior financial results and we
expect that discerning investors will
recognise our performance in the long
run, especially with increased
communication through our website
ond other
channels.
Last year, the consolidated return on
average capital employed (ROCC-)
improved from 1 6.06% to 1 8.80% while
return on averag© shareholders funds
(RONLU) increased from 15.84% to
20.84%. These are respectable figures.
This yeor, with reduction of the equity
capital by 25% ofter the software
demerger, the profitobility ratios should
be even better becous© of a higher
numerator, viz. profits, in the non-
software businesses, and a lower
denominator, viz. capital employed.
Yours sincerely,
RSHOK M flDVRNI
June 30, 2000
 BLUE STAR

flnnexure to Letter from the Chairman

Profit & Loss Recount for the 12-month period ended A/torch 31, 2000

(Rupees in lakhs)

Blue Star Ltd. Software Blue Star Ltd.

excluding Business including
. Softujore Business Softujore Business
Income
Soles, LUork Bills & Services 42619.96 3696.47 46316.43

Commission 1179.33 - 1179.33

Other Income 581.57 17.46 599.03

44380.85 3713.93 48094.78

Expenditure

Cost oP Sales, UUork Bills & Services 31479.97 1575.45 33055.43

Employee Remuneration Si Benefits 4741.66 790.69 5532.35

Operating & General €xpenses 4493.16 394.62 4887.78

Depreciation 1027.42 117.57 1144.99

Interest 928.66 25.41 954.07

42670.87 2903.74 45574.62

Profit

Profit Before Taxation 1709.98 810.19 2520.17

Provision for Income Tax 193.00 - 193.00

Provision for UJeaith Tox 3.00 - 3.00

1 96.00 - 1 96.00

Profit flfter Taxation 1513.98 810.19 2324.17

 Board of Directors

flshok M Rdvani Sunsel M fldvani

Bol K Malhotra fltul C Choksey Uday Kotok G Romchondoni

Minoo R Shroff Suresh N Tolujor


DIRECTORS' R€PORT
The Directors are pleased to present
their 53rd Rnnual Report and the Rudited
Recounts For the year ended
March 31,2000.
HIGHLIGHTS Of
1999-2000
• In spite oF virtually no growth in the
total income oF Rs.480.95 crores, net
proFit increased by 43% From
Rs.l 6.27 crores to Rs.23.24 crores.
• The major gain was a sharp
improvement in gross margin by
2.8% to 28.6%.
• C-Qrnings per share increased to
Rs.8.58 compared to Rs.6.00 in the
previous year. These are based on
the original equity capital.
• Borrowings came down bu 22% From
Summarised financial Results
Totol Income
ProFit beFore interest, depreciation
and taxation
Interest
Depreciation
Provision For taxation
ProFit oFter taxation
Rdd : Balance brought forward
Transfer from Foreign
Projects Reserve
Total available For appropriation
Less: General Reserve
Dividend (Interim 5) Final)
Corporate Dividend Tax
Balance carried forward
BLUE STAR
Rs.82.49 crores to Rs.64.05 crores. March 31, 2000 hove been set aside and
• R total equity dividend oF Rs.S.OO not considered For payment of dividend.
per share has been declared on the
reduced capital. This is equivalent OP6RflTING R€SULTS
to 37.5% on the original capital Total income did not show signiFicant
versus 35% in the previous year. growth during the year. This was due to
a number of reasons - the continuing
DIVIDENDS economic slowdown, the weak Middle-
€ast market and the phasing out oF the
The Company has paid an interim
dividend @ Rs.4.50 per share on the Industrial Projects business.
reduced capital, after implementation oF But, stagnant revenues did not prevent
the Scheme oF firrangement. The Directors a remarkable improvement oF 43% in
now propose a Final dividend oF Rs.0.50 Profit Rfter Tax. The most significant
per share which, together with the interim factor boosting profitability was an
dividend, makes a total oF Rs.5.00 per improvement of more than 2.8% in gross
shore. This is equivalent to 37.5% on margins to 28.6%, which was achieved
the original capital, against 35% paid in through o conscious strategy covering:
the previous year. The dividend will focus on material cost reduction
absorb Rs.l 1.39 crores, including through RSD, value engineering
Corporate Dividend Tax. In view oF the and efficient procurement,
demerger of International Software emphasis on high volue addition
Division effective October 1, 1998, proFits activities such as manufacturing and
of this division For the yeor ended after-sales service,
minimisation of low margin
flpril '99 Rpril '98
March '00 March '99 businesses.
Rs. Lakhs Rs. Lakhs LUhot is most encouraging is that, this
was the second yeor in o row that such
48094.78 47648.92
a major cost reduction was achieved, in
spite of lower market prices brought
4619.23 3837.29 about by severe competition.
954.07 986.44
Interest cost was also modestly lower at
1144.99 1038.52 Rs.9.54 crores, largely because oF
1 96.00 185.00 declining interest rates.
2324.17 1627.33
1198.19 1091.58 FINRNCIRL POSITION
RFter the steep increase in borrowings
15.00 32.00
in the Financial year 1998-1999, several
3537.36 2750.91 measures were implemented to reduce
500.00 500.00 sundry debtors, inventories and other
1016.22 948.40 current assets. These yielded results
122.96 1 04.32 towards the end oF the year, because of
1198.19 which, year-end borrowings were brought
1898.18
doiun by more than Rs.l6 crores.
7
 Malaysian markets jc; r, y v?r
SCH6M6 Of Rs.37.14 crores and the ProFit BeFore Tax
For this period was Rs.8.10 crores. The encouraging. Exports c/ a. ^01 iit on- ^
flRRRNG€M€NT net assets of ISD as on 31.3.2000 were products and service . :-,~]o,.iUd l:
flfter Q lengthy legal process, the Rs.14.09 crores and the accumulated Rs.7.59 crores. The total r-a\e--g-\
Hon'ble High Court ot Bombay Finally proFit For the period 1.10.1998 to exchange earning durmq INC yeor
issued the Order conFirming the Scheme 31.3.2000 amounted to Rs. 12.10 crores. wos Rs.45.38 crores, compared to
of flrrongement on flpril 3, 2000. The These were tronsFerred to BSIL on Rs.54.04 crores in the previous year.
Order become eFfective From flpril 4. 2000.
flpril 4, 2000 oFter Filing it with the SUBSIDIRRV COMPflNI€S
Registrar oF Companies. Pursuant to the
Scheme, Blue Star shareholders ore R€DUCnON OF CflPITfll 1) USIN Internotional Inc.,
being allotted equity shores of Blue Stor fls Q part oF the Scheme oF flrrangement,
Infotech Limited in the ratio oF one equity the Hon'ble High Court approved
USfl
share For every four equity shares oF reduction oF capital From Rs.27.10 crores USIN International Inc. is a 100%
Blue Star Limited os on May 9, 2000. to Rs.20.32 crores. The Order confirming subsidiary oF Slue Stor Limited, marketing
Other Formalities in connection with the the reduction oF capital was registered soFtware services provided by the
implementation oF the Scheme have with the Registrar oF Companies on Company's International SoFtujare
already been< complied with, LUith the flpril 6, 2000, and accordingly, reduction Division. The Balance Sheet and the
allotment oF shares, the Scheme has has become eFfective from that date. The Statement oF Income and Retained
been completely implemented. new share certificates, resulting from the C-arnings oF USIN for the year ended
reduction oF capital, have been allotted March 31, 2000 form part oF this
Totol Income on May 18, 2000. flnnual Report. Total income during the
year ended March 31, 2000 was
(Rs. in Crores) The interim and Final dividend For the year
US $ 5.107 million, which generated a
< •
1999-2000 is payable on the redxed capital.
500- r-' loss oF US $ 0.22 million, compared to
w1 "3 ?
if .
<;
US $ 6.023 million and a profit oF
450- ^
6XPORT & FOR6IGN
US $ 0.07 million during the previous
400 - 6XCHRNG6 6RRNINGS year.
350 • Business conditions in the UftC- and

300- 2) Blue Star Infotech

Shareholders' funds
250 - _ (UK) Ltd.
(Rs. in Crores)
200 H
Blue Star InFotech (UK) Limited was
-o r- co o- Q incorporated in UK as a subsidiary of
o- o- o- q- o
u-i -p r^ 06 o-
o o- o- o- o- USIN on September 1, 1998 to tap the
soFtware market in C-urope. Houjever, the
Since the High Court approval For the
operations commenced only in the
Scheme oF flrrangement was received
financial year 1999-2000. USIN being a
aFter the end oF the Financial year, the
subsidiary oF Slue Star, as per the
Profit & Loss Recount and Balance Sheet
oF Blue Star Limited as on March 31, provisions oF The Companies Ret, 1956,

2000, include the Figures oF assets, the UK subsidiary also becomes a

subsidiary of Blue Star. The Balance
liabilities and proFits oF International
Sheet and ProFit & Loss Recount oF
SoFtware Division. The net sales/income
Blue Star Infotech (UK) Ltd., Form part of
from operations oF International SoFtware
this flnnual Report. Total Income during
Division For the year 1999-2000 was
 BLUE STAR

employee increased significantly

Profits
compared to the previous year. These
(Rs. in Crores) human resource development
I Profit Before Depreciotion. Interest & Toies programmes have been important in
I Profit Rfter Tax
improving corporate manpower
46.19 productivity. UUith the continued strict
control on adding manpower, total
employee strength declined marginally
from 2504 to 2489.

The employee relations scenario was

generally peaceful throughout the year.

the year ended March 31, 2000 was
£ 106,260, which resulted in a loss of
£ 47,995. This uias the Company's first
Pull year of operation and investments
were mode in marketing, which will begin
to show results only in the second and
third years.
Pursuant to the Scheme of flrrangement,
investments of Blue Star in USIN and
UK subsidiaries hove been transferred
to Blue Star Infotech Limited on
flpril 4, 2000. Hence, these companies
have become subsidiaries of Blue Star
Infotech Limited effective flpril 4, 2000.
DISCLOSURE OF
PRRTICULRRS
Information as per Section 217(1 )(e) and
217(2fl) of The Companies flct, 1956,
read with the rules made thereunder
relating to conservation of energy,
technology absorption, foreign exchange
earnings and outgo and particulars of
employees respectively, are given in
flnnexures fl and B forming part of this
report.
For and on behalf of the Board
RSHOKMRDVflNI
Chairman & Chief €xecutive
Mumbai
May 18, 2000

DIRECTORS
Mr Bal K Malhotro and Mr fltul C Choksey
will retire from the Board by rotation.
Being eligible, they both offer
themselves for re-election.

6MPLOV66S
During the year, the thrust on training
of employees on technical, functional
and managerial skill enhancement as well
os customer orientation was accelerated.
The average training mandays per
 TO improved power factor and saving d) Expenditure on fl f >

DIR6CTORS' R6PORT-R in cost of production.

Information pursuant to Companies

R€S€flRCH FIND
(Disclosure of particulars in the Report i) Capital
of the Board of Directors), Rules 1 988. D6V6LOPM6NT
ii) Recurring
a) Specific areas in which R & D carried

CONS6RVFITION OF out by the Company: Total 127.94 138.82

6N6RGV _ New product development, iv)Total R & D

a) Energy conservation measures
taken:
consumption at the
Company's factories is not o major
cost factor. Nevertheless, the
Company continued observing an
energy conservation drive during
1 999-2000. Introduction of energy
efficient electronic ballasts and
rationalisation of use of D.G. sets
that are energu saving devices, are
being introduced in Thane plant.
The advanced production and
process technologies hove enabled
the reduction of energy consumption
in Dadra plant. Controls
through shop- wise metering,
auto-illumination, etc.. have been
implemented. Use of chemical
additives has reduced diesel
consumption by over 1 5%.
b) Rdditional investments and
proposals, if any, being
implemented for reduction of
consumption of energu:
Investment for energu conservation
measures will be considered as and
when necessary.
c) Impact of measures taken :
There has been reduction in
electrical and fuel consumption,
extension of existing product range,
product design and process
engineering.
The Company has developed new
products which are more energy
efficient viz., new range of packaged
and split airconditioners, water
cooled scroll chillers and water
coolers for domestic and export
markets. Performance test facility for
10 to 200 TR packaged chillers has
been designed and installed.
Computer Rided Engineering
Systems have been introduced at
Dadra to speed up production
design and development.
b) Benefits derived as a result of the
above R & D:
Rvai lability of energy and
environment friendly products in the
Indian market. Computer Rided
Engineering Systems enable
improvement in quality of design
and reduce cycle time of product
development.
c) Future plan of action:
Future plan involves setting up and
upgrading the test facilities to
assure good quality products to the
customers.
expenditure
as a percentage
of total turnover 0.28% 0.30%
T6CHNOLOGV
flBSORPTION,
RDRPTRTION RND
INNOVRTION
a) Efforts made towards technology
absorption, adaptation and
innovation:
The Company has successfully
absorbed the Vork technology for
manufacture of CFC free centrifugal
and screw chillers.
Other technology absorption
measures are progressing as per
schedule. Indigenous sources for
import substitution are also being
developed where feasible. Efforts
also include adaptation of imported
technology to Indian conditions.
Where required, training is being
imparted to the technical staff.
b) Benefits derived as a result
of the above efforts:
Rvailability of environment friendly
airconditioning systems, increased
product range, improved quality and
product designs and cost reduction
are amongst the benefits derived.

10
 BLUE STAR

c) Information regarding imported

technology:

The following technologies were

imported during the uears
mentioned there ogoinst.

Room and packaged airconditioners

(1996), air handling units(1997),
centrifugal chillers using CFC free
R-l 23 as refrigerant (1998), screw
chillers using CFC free fi-22 os
refrigerant (1998) and panels and
door sections (1998).

Significant progress has been made

in absorbing the technologies.
Technologies in respect of
centrifugal and screw chillers hove
been absorbed.

MflJOR IT6MS OF
FOR6GN €XCHflNG€
6flflNINGS flND OUTGO
a) flctivities relating to exports.
Initiatives taken to increase
exports, developments of netu
export markets for products
and services and export plans:

Discussed in detail in the main

report.
b) Total foreign exchange used and
earned;

(fis.in lakhs)
1999-00 1998-99
Total foreign
exchange used 6865.95 5655.86
Total foreign
exchange earned 4538.50 5404.47
For and on behalf of the Board
RSHOKMflDVflNI
Chairman & Chief 6cecutive
Mumbai
Mag 18, 2000

11
 T H € D V N R A A I C S OF 6 L U €
* * 1 999-00 ** 1998-99 1997-98

OPeftflTING R€SULT5:

Totol Income Rs.in Crores 480.94 476.49 452.77

Profit before Tax 25.20 18.12 18.04

Tax 1.96 1.85 2.53

Profit after Tax 23.24 16.27 15.51

Dividend * 10.16 9.48 9.48

Retained Profit 11.85 5.75 5.08

Financial Position:

Paid up Capitol Rs.in Crores 27.10 27.10 27.10

Reserves 97.67 85.95 80.37

Shareholders' Funds 124.77 113.05 1 07.47

Borroujings 64.04 82.49 60.43

Total Funds employed 188.81 195.54 167.90

Net Fixed flssets & Investments Rs.in Crores 105.25 99.93 97.05

Net Working Capitol 78.68 88.18 67.44

Debt 6quity Ratio 0.51 0.73 0.56

Booh Value per C-quity Share Rs. 44.24 38.98 38.40

Bonus Share Ratio - -

Rights share Ratio - -

OTH6R INFORMATION:

Number of Shareholders Nos. 27399 23963 23318

Number of C-mployees 2489 2504 2619

PeflFORMflNCe INDICATORS:

C-arnings per Share Rs. 8.58 6.00 5.72

Dividend per Share Rs. *5.00 3.50 3.50

Return on Rverage Shareholders' Funds

(excluding Revaluation Reserve) % 20.84 15.84 15.94

* Dividend on reduced €quity Share Capital (Please refer to Note No. 8 of Notes to Recounts -Schedule "N").
** These are the consolidated figures for the Company including the figures of the International Software Division.
(Please refer to Note no. 9 of Notes to Recounts - Schedule "N".)

12
 BLUE STAR

STRR'S GROWTH
1996-97 1995-96 1994-95 1993-94 1992-93 1991-92 1990-91

440.85 408.91 318.82 247.54 222.77 215.78 1 85.62

23.21 35.48 22.10 9.29 4.52 4.19 4.70

8.43 10.30 5.72 3.25 0.40 0.50 0.45

14.78 25.18 16.38 6.04 4.12 3.70 4.25

9.48 8.12 3.51 2.49 1.64 1.29 1.14

4.35 17.06 12.87 3.19 2.48 2.41 3.11

27.10 27.10 10.05 9.95 7.20 7.20 7.20

75.47 71.27 51.56 39.47 29.61 27.33 25.13

102.57 98.37 61.61 49.42 36.81 34.53 32.33

32.96 10.18 15.65 17.44 30.87 30.36 25.47

135.53 108.55 77.26 66.86 67.68 64.89 57.80

73.60 46.00 37.81 26.69 25.78 25.92 25.81

61.88 62.45 38.93 39.00 50.60 36.75 31.20

0.32 0.10 0.26 0.36 0.87 0.94 0.81

37.84 36.26 60.79 48.51 49.92 45.34 44.26

- - 1 : 1 - - - 1 :1

- - - - 2:5 - -

20578 18004 15697 14692 12534 10770 9318

2799 2982 2661 2608 2683 2707 3248

5.45 10.85 16.30 6.07 5.79 5.19 5.98

3.50 3.50 3.50 2.50 2.30 1.80 1.60

15.96 35.01 35.08 18.00 15.91 15.76 20.56

13

To the Members of BLUE STAR LIMITED
Report on the Accounts for the year ended 31st March, 2000 in compliance with Section 227(2) of the Companies Act, 1956.
We have examined the attached Balance
Sheet and Profit and Loss Account
annexed thereto which are in agreement with
the Company's books of account and locally
audited Returns from the Branches.
1. As required by the Manufacturing and
Other Companies (Auditors' Report)
Order, 1988, issued by the Company
Law Board in terms of Section 227 (4A)
of the Companies Act, 1956, we annex
hereto a statement on the matters speci-
fied in paragraphs 4 and 5 of the said
Order.
2. Further to our comments in the
Annexure referred to in paragraph 1
above, we report that:
(a) We have obtained all the
information and explanations
which to the best of our knowledge
and belief were necessary for the
purposes of our audit.
(b) In our opinion, proper books of
account as required by law have
ANNEXURE TO THE AUDITORS' REPORT
(Referred to in paragraph I of our Report of even date on the Accounts for the year ended 31st March, 2000 of Blue Star Limited)
In our opinion, and on the basis of such
checks of the books and records as we con-
sidered appropriate and according to the
information and explanations given to us
during the normal course of audit, which
were necessary to the best of our knowledge
and belief, we report that:
fi) The Company has maintained proper
records showing full particulars in-
cluding quantitative details and
situation of fixed assets. These assets
have been physically verified by the
management at reasonable intervals
and no material discrepancies were
noticed on such verification.
14
AUDITORS' REPORT
been kept by the Company so far as
appears from our examination of
those books and proper returns
adequate for the purpose of our
audit have been received from the
Branches not visited by us. The
Branch Auditors' Reports have
been forwarded to us and
appropriately dealt with.
(c) In our opinion, and to the best of
our information the Balance Sheet
and Profit and Loss Acount comply
with the Accounting Standards
prescribed under section 211(3C)
of the Companies Act, 1956.
(d) Attention is invited to Note 9 in
respect of Demerger of the Inter-
national Software Division of the
Company on the effective date i.e.
4th April, 2000 and its effect on
these accounts.
(e) In our opinion, and to the best of
our information and according to
(ii) None of the fixed assets have been
revalued during the year.
(iii) The stocks of finished goods, stores,
spare parts and raw materials have
been physically verified during
the year by the management.
The frequency of verification is
reasonable.
(iv) The procedure of physical verifica-
tion of stocks followed by the
management are reasonable and
adequate in relation to the size of the
Company and the nature of its
business.
the explanations given to us, the
said accounts read together with
notes thereon give the information
required by the Companies Act,
1956 in the manner so required and
give a true and fair view:
1. in the case of Balance Sheet
of the state of affairs as at
31st March, 2000 and
2. in the case of Profit and Loss
Account, of the Profit of the
Company for the year ended
on that date.
For K S AIYAR & CO.
Chartered Accountants
Ramakrishna Prabhu
Partner
Mumbai, 18th May, 2000
(v) The discrepancies noticed on
physical verification of stocks as com-
pared to the book records were not
material.
(vi) On the basis of our examination of
stock records, the valuation of stocks is
fair and proper in accordance with the
normally accepted accounting prin-
ciples, and is on the same basis as in the
preceding year except for the valuation
of closing inventory of Finished Goods
lying in the manufacturing units of the
Company which now includes the ele-
ment of Excise Duty payable thereon as
detailed in note No. 4-
(vii) The Company has not taken any
loans, secured or unsecured from
companies, firms or other parties
listed in the register maintained pur-
suant to provisions of Section 301 of
the Companies Act, 1956. The provi-
sions of section 370 are not
applicable to a company with effect
from 31st October, 1998.
(viii) The Company has not given any
loans, secured or unsecured to Com-
panies, firms or other parties listed in
the register maintained pursuant to
the provisions of Section 301 of the
Companies Act, 1956. The provi-
sions of section 370 are not
applicable to a company with effect
from 31st October, 1998.
(ix) The parties to whom loans or ad-
vances in the nature of loan have
been given by the Company are
repaying the principal amount as
stipulated and are also regular
in the payment of interest where
applicable.
(x) There are adequate internal control
procedures commensurate with the
size of the Company and the nature
of its business with regard to pur-
chase of stores, raw materials
including components and in the
case of plant and machinery, equip-
ment and other assets and with
regard to the sale of goods.
(xi) The transaction of purchase of goods
and materials and sale of goods and
materials made in pursuance of con-
tracts or arrangements entered in the
registers maintained under Section
301 and aggregating during the year
to Rs. 50,000 or more in respect of
each party have been made at prices
for such goods or materials, and the
prices at which transactions for simi-
lar goods or materials have been
made with other parties.
(xii) The Company has a regular proce-
dure for the determination of
unserviceable or damaged stores, raw
materials, finished goods and traded
goods. Adequate provisions have
B L U E S T A R L I M I T E D
been made in the accounts for
the loss arising on the items so
determined.
(xiii) The Company has complied with the
provisions of Section 58A of the
Companies Act, 1956 and the Com-
panies (Acceptance of Deposits)
Rules, 1975 with regard to the
Deposits accepted from the public.
(xiv) The Company has maintained rea-
sonable records for the sale and
disposal of scrap. The Company does
not have any realisable by-product.
(xv) The Company has an internal
audit system commensurate with the
size and nature of its business.
(xvi) The Central Government under Sec-
tion 209(1) (d) of the Companies
Act, 1956 has prescribed the mainte-
nance of cost accounts and records
in respect of certain products manu-
factured by the Company. The
Company has prima facie made and
maintained such accounts and
records. We have broadly reviewed
the same, but have not made
a detailed examination of these
accounts and records with a view to
determine whether they are accurate
or complete.
(xvii) The Company is regular in deposit-
ing Provident Fund and Employees'
State Insurance dues with the appro-
priate authorities.
(xviii) No undisputed amounts payable in
respect of Income Tax, Sales Tax,
Customs Duty and Excise Duty were
outstanding, as at 31st March, 2000
for a period of more than six months
from the date they became payable.
(xix) The Company is not a sick industrial
company within the meaning of
Clause (0) of sub-section (!) of Sec-
tion 3 of Sick Industrial Companies
(Special Provisions) Act, 1985.
(xx) No personal expenses have been
charged to Profit & Loss Account.
(xxi) In respect of the service activities of
the Company:
(a) The Company has a reason-
able system of recording
receipts, issues and consump-
tion of materials and stores
commensurate with its size
and nature of business.
(b) Though allocation of man-
hours consumed is not made to
relative jobs, in our opinion,
control is exercised on the
total labour consumed on the
jobs.
(c) The Company has a reason-
able system of authorisation at
proper levels with necessary
control on the issue of stores.
The Company has a system of
internal control in this regard
commensurate with its size
and nature of business.
(xxii) In respect of the investment activi-
ties of the Company:
(a) The Company has not granted
any loans or advances on the
basis of security by way of pledge
of Shares, Debentures or other
similar securities.
(b) The Company has maintained
adequate records of transac-
tions and contracts having
regard to the size of these
operations. Such transactions
have been made in the
Company's own name and have
been recorded within a reason-
able time.
For K S AIYAR & CO.
Chartered Accountants
Ramakrishna Prabhu
Partner
Mumbai, 18th May, 2000
15
 BALANCE SHEET AS AT MARCH 31, 2000

As at
Schedule March 3 1,1999
Rupees in lakhs

SOURCES OF FUNDS
Share Capital A 27,09.71 27,09.71
Reserves & Surplus B 97,66.92 85,95.27
Shareholders' Funds 1,24,76.63 1,13,04.98
Secured Loans C 40, 12.04 25,62.03
Unsecured Loans D 23,92.67 56,87.10
Loan Funds 64,04.71 82,49.13
TOTAL 1,88,81.34 1,95,54.11

APPLICATION OF FUNDS
Fixed Assets
Gross Block 1,43,94.44 1,32,52.70
Depreciation 54,63.03 44,51.79
Net Block E 89,31.41 88,00.91
Capital Work-in- Progress 5,70.15 1,06.92
Investments F 10,23.52 10,85.44
Fixed Assets & Investments 1,05,25.08 99,93.27
Inventories 64,86.61 69,25.67
Sundry Debtors 78,12.78 80,03.46
Cash & Bank Balances 9,39.69 14,19.46
Loans & Advances 59,18.92 58,28.43
Total Current Assets, Loans & Advances G 2,11,58.00 2,21,77.02
Current Liabilities 1,20,52.88 1,22,38.08
Provisions 12,36.72 11,37.62
Less : Total Current Liabilities & Provisions H 1,32,89.60 1,33,75.70
Net Current Assets 78,68.40 88,01.32
Miscellaneous Expenditure
(to the extent not written off or adjusted) (See Note?) 4,87.86 7,59.52
TOTAL 1,88,81.34 1,95,54-11

Notes forming part of the Accounts N

Bal K Malhotra 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
RAMAKRISHNA PRABHU Suneel M Advani H. Rajaram Vice President - Finance
Partner President & Vice Chairman K P T Kutty Company Secretary
Mumbai : May 38, 2000 Mumbai : May 18, 2000

16
 PROFIT & LOSS ACCOUNT FOR THE PERIOD ENDED MARCH 31, 2000

Schedule ^^ifiSMfffll
'• - Rupee? in tajkhs
INCOME
Sales, Work Bills & Services (See Note 1) 4,63,16.43 4,60,87.26
Commission 11,79.32 10,81.53
Other Income I 5,99.03 4,80.13
4,80,94.78 4,76,48.92

EXPENDITURE
Cost of Sales, Work Bills &. Services J 3,30,55.43 3,42,15.11
Employee Remuneration & Benefits K 55,32.35 49,33.15
Operating &. General Expenses L 48,87.77 46,63.37
Depreciation M 11,44.99 10,38.52
Interest (including Rs. 5,33.35 lakhs on Fixed Loans;
1998-99 :Rs. 2,21.56 lakhs) 9,54.07 9,86.44
4,55,74.61 4,58,36.59

PROFIT
PROFIT BEFORE TAXATION 25,20.17 18,12.33
Provision for Income Tax 1,93.00 1,82.00
Provision for Wealth Tax 3.00 3.00
1,96.00 1,85.00
PROFIT AFTER TAXATION 23,24.17 16,27.33
Add: Balance brought forward 11,98.19 10,91.58
Transfer from Foreign Project Reserve 15.00 32.00
PROFIT AVAILABLE FOR DISPOSAL 35,37.36 27,50.91

APPROPRIATIONS
Transfer to General Reserve 5,00.00 5,00.00
Interim Dividend (See Note 8} 9,14.60
Proposed Dividend 1,01.62 9,48.40
Corporate Dividend Tax 1,22.96 1,04.32
11,39.18 10,52.72
Balance carried forward 18,98.18 11,98.19

Notes forming part of the Accounts N

Bal K Malhotra Executive Director

AtuI 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
RAMAKRISHNA PRABHU Suneel M Advani H. Rajaram Vice President - Finance
Partner President & Vice Chairman K P T Kutry Company Secretary
Mumbai : May 18, 2000 Mumbai : May 18, 2000

B L U E S r A L I M I T E D 17
 SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2000

-JiiV-iiii! As at
3i, 2$|$'
A. SHARE CAPITAL
t 8 i«iakf $ ,
March 31, 1999
Rupees in lakhs

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 {See Note 8) 27,09.71 27,09.71

B. RESERVES & SURPLUS

General Reserve
Balance as on April 1, 1999 54,57.48 49,57.48
Add: Transfer from Profit & Loss Account 5,00.00 5,00.00
59,57.48 54,57.48
Foreign Projects Reserve
Balance as on April 1, 1999 1,58.50 1,90.50
Less: Transfer to Profit &. Loss Account 15.00 32.00
1,43.50 1,58.50
Revaluation Reserve
Balance as on April 1, 1999 7,45.22 7,61.30
Less: Reduction on Deduction/Adjustment 0.31 2.64
Depreciation transferred to
Profit &. Loss Account (See Schedule M) 13.03 13.44
7,31.88 7,45.22
(Balance carried forward) 68,32.86 63,61.20

18
 SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2000

As at
March 31, 1999,

B. RESERVES & SURPLUS (Contd.)

(Balance brought forward) 68,32.86 63,61.20
Capital Reserve
Subsidy from Government (See Note 12) 11.20 11.20
11.20 11.20

Share Premium Account 10,24.68 10,24.68

10,24.68 10,24.68

Profit & Loss Account

Balance carried forward 18,98.18 11,98.19
97,66.92 85,95.27

C. SECURED LOANS
From Banque Nationale de Paris Secured by hypothecation
of all movable assets other than stocks, book debts and assets
specifically hypothecated in favour of other lenders 5,00.00
From Housing Development Finance Corporation Secured
by Equitable Mortgage by deposit of title deeds of specific
immovable properties 5,92.00 7,40.00
ECB Loan from ABN AMRO Bank Secured by exclusive
charge by way of hypothecation of specified machinery
and equipment 12,75.60
11.90% Redeemable Debentures (Redeemable in July 2000)
Secured by Equitable Mortgage by deposit of title deeds of
specific immovable properties 20,00.00
From Banks, secured by hypothecation of stock-in-trade
and book debts 14,20.04 46.43
40,12.04 25,62.03

D. UNSECURED LOANS
14.6% Redeemable Debentures (redeemed on 20.5.99) 12,00.00
Fixed Deposits 6,45.52 4,74.55
Commercial Paper 14,00.00 22,00.00
Others 3,47.15 18,12.55
23,92.67 56,87-10

I _ U E S T A L I M I T E D 19
 SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2000

E. FIXED ASSETS
GROSS BLOCK DEPRECIATION NET BLOCK

Rupees in lakh? Rupees in laklis Rupees in lakhs

1

Land— Freehold
As at
31.3.1999

1,73.03
Additions

...
Deletions/
Transfers
_
iiHi
1,73.03
As at
31.3,1999

_
Additions

—
lA'letums/
Transfers

— 1,73.03
& it-°<
: 31.M999

1,73.03
_ —
— Leasehold 51.39 ... 51.39 7.10 0.52 „ 7.62 43.77 44.29
_
Buildings, Sheds & Roads 54.57.36 1.7939 56,36.75 8,91.52 2,74.01 - ! 1,65. 53 44,71.22 45,65.84

Plant & Machinery 48,98.05 4,38.36 1,15.20 52,21.21 21,12.93 5,07.71 75.4i 25,45.21 26,76.00 27,85.12

Furniture, Fittings
& Equipments 14,61.80 2,41.88 65.67 16,38.01 6,70.54 1,66.56 47.01 7,90.09 8.47.9Z 7,91.26

Vehicles 1,68.56 18.80 10.23 1,77.13 64.91 27.18 14.75 77.34 99.79 1,03.65
Computers 10,42.51 4,75.26 20.85 14,96.92 7,04.79 1,82.04 9.59 8,77.24 6,19.68 3,37.72
TOTAL— 31.3.2000 1,32,52.70 13,53.69 2,11.95 1,43,94.44 44,51.79 11,58.02 1,46.73 54,63.03 89,31.41 88,00.91
— 31.3.1999 1,03,80.49 29,99.23 1,27.02 1,32,52.70 34,85.79 10,51.96 85.96 44,51.79 88.00.91

As at
March3I,.1999
Rupees in lakhs
F. INVESTMENTS (AT COST)
In 7 year National Savings Certificates 0.04 0.04
In 2,68,450 (1998-99: 2,33,450) Units of Unit Trust of India
(Face Value Rs. 26.85 lakhs) 36,96 31.83
UNQUOTED:

TRADE INVESTMENTS
1,000 Fully Paid Equity Shares of Rs. 25 each in Jaihind
Co-operative Bank Ltd. 0.25
2,400 Fully Paid Equity Shares of Rs. 100 each in Ashok
Sunil & Company Private Ltd. 5.64 5.64
2,400 Fully Paid Equity Shares of Rs. 100 each in Arem
Compressors Private Limited 2.40 2.40
76,790 Fully Paid Equity Shares of Rs. 10 each
in Ravistar India Private Ltd. 7.68 7.68
3,67,500 Fully Paid Equity Shares of MR 1 each
in Arab Malaysian Blue Star SDN 49,97 49.97
2,94,000 Fully Paid Equity Shares of Rs. 10 each
in Rolastar Private Ltd. 29.40 29.40
INVESTMENT IN SUBSIDIARY COMPANY
1,00,000 Fully Paid Equity Shares of
US $ 1 each in USIN International Inc. 66.58 66.58
(Balance carried forward) 1,98.92 1,93.79
 SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2000

As at
March 3 1,1999
Rupees in lakhs
F. INVESTMENTS (AT COST) (Contd.)
(Balance brought forward) 1,98.92 1,93.79
INVESTMENT IN GOVERNMENT SECURITIES
599 Fully Paid 12.08% Government of India Compensation
(Project Exports to Iraq) Bonds, 2001. (Sold during the year) 59.90
—
QUOTED:
TRADE INVESTMENTS
24,98,824 Fully Paid Equity Shares
of Rs. 10 each in Yokogawa Blue Star Ltd. 8,19.25 8,19.25
(Aggregate Market Value Rs. 17,46.68 lakhs;
1998-99: Rs. 18,61.62 lakhs)
21,400 (1998-99: 50,000) Fully Paid Equity Shares of Rs. 10 each in
Ansal Housing & Properties Ltd. 5.35 12.50
(Aggregate Market Value Rs. 4-50 lakhs; 1998-99: Rs. 5.00 lakhs)
10,23.52 10,85.44

G. CURRENT ASSETS, LOANS & ADVANCES

(a) Inventories (as certified by the Management)
Raw Materials, Stores & Components (at cost) 18,10.16 18,84.23
Work-in-Progress (at cost) 35,53.05 39,98.99
Work-in-Progress (at contract value) 8,99.80 11,73.18
44,52.85 51,72.17
Less: Advance received thereagainst 10,79.11 13,02.59
33,73.74 38,69.58
Finished Goods (at cost or net realisable
value, whichever is lower) (See Note 4) 9,90.03 6,38.19
Goods in Transit (at cost) 2,57.49 4,75.76
Tools, Cylinders & Consumable Stores 50.16 48.39
Units, Bonds & Shares in hand (at lower of
cost or market value) (See Note 16) 5.03 9.52
64,86.61 69,25.67
(b) Sundry Debtors (Unsecured)
Considered Good:
Over six months 22,58.92 22,72.52
Others 55,53.86 57,30.94
Considered Doubtful:
Over six months 7.35 13.51
Less: Provided 7.35 13.51
78,12.78 80,03.46

L U E S T A R L I M I T E D 21
 SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2000

. - : \ > As-k As at
, |faf& 31/2000 March 3 1,1 999
' ]Uyiteiip*ipiiE* Rupees in lakhs

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

(c) Cash & Bank Balances:
Cash on hand (including Cheques on hand Rs. 14.09 lakhs;
1998-99: Rs. 95.94 lakhs) 67.75 2,38.04

With Scheduled Banks:

Current Account 1,79.93 1,96.91
Unclaimed Dividend Account 25.33 19.09
Deposit Account 6,19.11 9,27.81

With Unscheduled Banks;

1. Rafidain Bank
(Maximum balance during the year
Rs. 0,68 lakh; 1998-99: Rs. 0.68 lakh) 0.68 0.68
2. Rafidain Bank (Railway)
(Maximum balance during the year
Rs. 31.63 lakhs; 1998-99: Rs. 31.63 lakhs) 31.63 31.63
3. ABN Amro Abu Dhabi
(Maximum balance during the year
Rs. 3.49 lakhs; 1998-99: Rs. 3.42 lakhs) 2.88 3.41
4. Abu Dhabi Commercial Bank Ltd. A/c.
(Maximum balance during the year
Rs. 2.15 lakhs; 1998-99: Rs. Nil) 1.09 —
5. Abu Dhabi Commercial Bank Ltd. A/c
(Maximum balance during the year
Rs. 6.09 lakhs; 1998-99: Rs. 72.96 lakhs) — 6.09
6. Abu Dhabi Commercial Bank Ltd. A/c
(Maximum balance during the year
Rs. 13.19 lakhs; 1998-99: Rs. 8.47 lakhs) 8.74 5.79
7. Abu Dhabi Commercial Bank Ltd. A/c
(Maximum balance during the year
Rs. 12.10 lakhs; 1998-99: Rs. 13.65 lakhs) 1.05 2.06
8. Abu Dhabi Commercial Bank Ltd. A/c — 1
(Maximum balance during the year
Rs. 24-84 lakhs; 1998-99: Rs. 26.34 lakhs) 3.95 20.47
9. Abu Dhabi Commercial Bank Ltd. A/c — VII
(Maximum balance during the year
Rs. 0.46 lakh; 1998-99: Rs. 0.43 lakh) 0.43 0.45
10. Abu Dhabi Commercial Bank Ltd. A/c — VIII
(Maximum balance during the year
Rs. 30.02 lakhs; 1998-99: Rs. Nil) 30.02 —
11. Municipal Co-operative Bank Ltd.
(Maximum balance during the year
Rs. 0.10 lakh; 1998-99: Rs. 0.08 lakh) 0.10 0.08
(Balance carried forward) 9,72.69 14,52.51
 SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2000

!-.# T »^!*"f-*** «*t—*'•"' — •f«ri~-Hf«i""''".H-"

' -, ' : < • ' fA»jl«

;-';iWafchaiilW9f
• ° * j-Ri^i «| IJcfet
"J8£$!3$31L
G. CURRENT ASSETS, LOANS & ADVANCES (Contd.)
(c) Cash & Bank Balances (Contd.)
(Balance brought forward) 9,72.69 14,52.51
12. Jai Hind Co-operative Bank Ltd.
(Maximum balance during the year
Rs. 0.32 lakh; 1998-99: Rs. 0.27 lakh) 0.32 0.27
13. Municipal Co-operative Bank Ltd.
Deposit Account
(Maximum balance during the year
Rs. 0.15 lakh; 1998-99: Rs. 0.15 lakh) 0.15 0.15
9,73.16 14,52.93
Less: Provided * Cash &. Bank Balances 33.47 33.47
9,39.69 14,19.46

* Provision for Non-Repatriable Foreign Assets

(d) Loans & Advances
Unsecured and considered good:
Advance recoverable in cash or in kind or for
value to be received (See Note 10) 44,87.74 40,88.83
Advance towards Share application money for
Investment in Bluestar Infotech Ltd. 2,02.85 74.84
Deposits with Government and other bodies 12,28.33 16,64.76
59,18.92 58,28.43
2,11,58.00 2,21,77.02

H. CURRENT LIABILITIES & PROVISIONS

Sundry Creditors — Small Scale units (see note 11) 76.05 1,17.93
Sundry Creditors — Others 36,30.17 36,88.07
Acceptances 63.42 1,21.60
Other Liabilities 66,46.74 65,98.56
Advances against Contracts 14,67.89 16,84.95
Unclaimed Dividends 25.33 19.09
Interest accrued but not due 1,43.28 7.88
Current Liabilities 1,20,52.88 1,22,38.08
Provision for Leave Encashment 97.54 84.90
Interim Dividend 9,14.60
Proposed Dividend 1,01.62 9,48.40
Corporate Dividend Tax 1,22.96 1,04.32
11,39.18 10,52.72
Provisions 12,36.72 11,37.62
1,32,89.60 1,33,75.70
 SCHEDULES FORMING PART OF THE PROFIT & LOSS ACCOUNT FOR THE PERIOD ENDED MARCH 31, 2000

Period ended
March 31, 1999
Rupees in lakhs

I. OTHER INCOME
Profit on Sale of Assets 18.16 11.63
Interest (Tax deducted at source
Rs. 7.17 lakhs; 1998-99: Rs. 4.83 lakhs) 48.44 54.04
Provisions & Liabilities no longer required 1,75.87 1,11.56
Dividends (Tax deducted at source Rs. Nil; 1998-99: Rs. 7-94 lakhs) 95.26 96.25
Profit on sale of Investments 0.30
Exchange Rate Difference 32.53 25.54
Miscellaneous 2,25.36 1,76.45
Capital Receipts:
Exini Bank Grant 3.11
Grant for Ozone Project 4.C
5,99.03 4,80.13

COST OF SALES, WORK BILLS & SERVICES

Stock at commencement:
Raw Materials, Stores & Components 18,84.23 20,46.73
Work-in-Progress 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
Purchases &. Expenses 3,28,82.76 3,32,51.91
3,94,13.69 4,07,46.04

Less: Stock at Close:

Raw Materials, Stores & Components 18,10.16 18,84.23
Work-in-Progress (at cost) 35,53.05 39,98.99
Finished Goods {See Note 4) 9,90.02 6,38.19
Units, Bonds and Shares in hand (See Note 16) 5.03 9.52
63,58.26 65,30.93
(See Note 13) 3,30,55.43 3,42,15.11

K. EMPLOYEE REMUNERATION & BENEFITS

Salaries, Wages & Bonus 35,21.71 34,71.35
Provident Fund, Superannuation, Gratuity Fund
and Leave Encashment 6,79.32 3,80.66
Welfare & Training Expenses 13,31.32 10,81.14
55,32.35 49,33.15

24 S T A R L I M
 SCHEDULES FORMING PART OF THE PROFIT & LOSS ACCOUNT FOR THE PERIOD ENDED MARCH 31, 2000

;^iigpil Period ended

* «?*5ff;rw- . ~;~~f4« : ; : RujpeesHh lakhs

L. OPERATING & GENERAL EXPENSES

Rent 3,12.57 3,38.22
Lease Rentals 1,02.46 1,45.76
Rates & Taxes 25.08 22.89
Power 3,05.33 2,75.59
Insurance 54.40 52.24
Repairs & Maintenance
Premises 2,08.09 2,00.28
Machinery 1,02.50 68.47
Others 70.65 53.66
Payment to Auditors (including payment to
Branch Auditors)
Audit Fees 8.27 8.05
Other Services (including for Tax Audit
Rs. 1.56 lakhs; 1998-99: Rs. 0.85 lakh) 1.87 1.86
Reimbursement of Expenses 2.80 1.77
Directors' Fees 0.46 0.36
Non Executive Directors' Commission 13.15 9.50
Donations 9.21 —
Commission on Sales (other than salesmen) 3,01.55 1,87.16
Advertising &. Publicity 3,73.78 3,90.10
Transport & Travelling 10,36.92 10,29.91
Stationery & Printing 1,62.40 1,56.96
Other expenses 15,13.52 14,49.11
Non Recoverable Debts Written-off 2,34.29 2,56.08
Loss on Sale of Investments 4.34 —
Loss on assets sold or discarded 33.61 12.60
Research & Development 10.52 2.80
48,87.77 46,63.37

M. DEPRECIATION
Depreciation on Fixed Assets 11,58.02 10,51.96
Less: Transferred from Revaluation Reserve 13.03 13.44
Depreciation charged to Profit and Loss Account 11,44.99 10,38.52

LUE S T A R L I M I T E D 25
 NOTES FORMING PART OF THE ACCOUNTS

N. NOTES FORMING PART OF THE ACCOUNTS

I SIGNIFICANT ACCOUNTING POLICIES
1. The Company follows the historical cost convention in the preparation of accounts except in the case of certain fixed assets
which have been revalued.
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 and
ERF expenses, are included in Capital WIP and will be treated in the accounts appropriately on completion of the project.
(d) Expenditure incurred on inhouse development of software at International Software Division of the Company is included
in Capital WIP and will be treated appropriately on the software becoming commercially viable.
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 the 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.
(b) Warranty liability on account of after sale services is accounted on accrual basis to the extent ascertained, liability
unascertainable is accounted on cash basis.
(c) Service income is recognised on accrual basis.
(d) Claims recoverable are accrued only to the extent admitted by the parties.
4. Depreciation/Amortisation:
(a) Depreciation is charged at rates applicable under Schedule XIV of Companies Act, 1956, on written down value of
assets.
(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.
(c) Technical know-how fees are amortised over a period of six years from the year in which they become payable.
5. Inventory Valuation and Treatment of Costs:
(a) Basis of Valuation:
(i) 'Raw materials, stores, components are valued at weighted average rate after providing for obsolescence.
(ii) Goods-in-transit are valued at cost.
(iii) Work-in-Progress relating to manufacturing activity is valued at cost.
(iv) 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.
(v) Finished goods are valued at lower of cost or net realisable value.
(vi) Service kits and demonstration stock are amortised over a period of five years.
(vii) Bonds, Units & Shares held as stock-in-trade are valued at lower of cost or market value.
(b) Basis of Allocation of Expenditure and Determination of Cost:
(i) Direct Expenses identifiable to a specific job are debited to that job. Indirect Expenses are not allocated to jobs but
charged as period cost in the year it is incurred.
 NOTES FORMING PART OF THE ACCOUNTS

(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)",
fb) 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.
(d) The expenses incurred for Brand Equity image building are treated as revenue expenditure to be deferred and amortised
over a period of 3 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 liability on closing stock of finished goods lying at the manufacturing units is accounted based on the
estimated duty payable as at the close of the year.
(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.
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:

1999-2000 1998-99
(Rs. in lakhs) (Rs. in lakhs)
Work done to be billed
-At close 899.80 1173.18
Less: At commencement 1173.18 1168.50
(273.38) 4-68

B L U E S T A R L I M I T E D
27
*'
 NOTES FORMING PART OF THE ACCOUNTS

2. Contingent Liabilities
31.3.2000 31.3.1999
(Rs. in lakhs) (Rs. in lakhs)
(a) Claims against the Company not acknowledged as debts 147.99 9.72
(Net of tax) (91.01) (6.32)
(b) Sales tax demands under appeal 875.60 883.64
(Net of tax) (538.50) (574.36)
(c) Excise duty claims not acknowledged as debts 612.75 608.67
(Net of tax) (376.84) (395.64)
(d) Corporate Guarantee given on behalf of other Bodies Corporate 109.40 119.40
(Net of tax) (67.28) (77.61)
3. (a) Estimated amount of Contracts remaining to be executed on Capital account and not provided for Rs. 73.81 lakhs
(1998-99: Rs. 46.84 lakhs),
(b) Future obligation on Lease rentals are Rs. 77.46 lakhs (1998-99: Rs. 170.72 lakhs) on account of assets taken on lease.
4. In accordance with the revised guidelines issued by the Institute of Chartered Accountants of India on accounting of Excise
duty the Accounting Policy No. 10(a) has been amended. The estimated amount of Excise Duty liability on Finished Stocks
lying at the manufacturing units at the close of the year amounting to Rs. 52.56 lakhs (1998-99: Rs. 13.57 lakhs) has been
included in the valuation of Finished goods stock. This liability was hitherto accounted upon clearance of finished goods from
the manufacturing units. However, this change does not have any impact 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. 2.14 lakhs (1998-99: Rs. 13.96 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
(Rs. in lakhs) (Rs. in lakhs)
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 the increase arising due to revaluation in accordance with Accounting Policy No. 4(b) results in
an additional charge of depreciation of Rs. 13.03 lakhs (1998-99: Rs. 13.44 lakhs) and an equivalent amount has been
transferred to the Profit & Loss Account from Revaluation Reserve.
7. (a) In accordance with Accounting Policy No. 8(a) regarding Early Voluntary Retirement Scheme an amount of Rs. 311.48
lakhs (1998-99: Rs. 630.24 lakhs) is carried forward under the head "Miscellaneous Expenditure (to the extent not written
off or adjusted)".
(b) In accordance with Accounting Policy No. 8 (c) regarding Technical Knowhow related to manufacturing processes, an
amount of Rs. 89.84 lakhs (1998-99: Rs. 112.62 lakhs) is carried forward under the head "Miscellaneous Expenditure (to
the extent not written off or adjusted)".
(c) In accordance with Accounting Policy No. 8(d) regarding Brand Equity expenditure, an amount of Rs. 86.54 lakhs
(1998-99: Rs. 16.66 lakhs) is carried forward under the head "Miscellaneous Expenditure (to the extent not written off or
adjusted)".
8. Pursuant to the Scheme of Arrangement between the Company and Blue Star Infotech Limited for the demerger of the Interna-
tional Software Division with effect from 1.10.1998, approved by the Bombay High Court Vide Order dated 3rd April, 2000,
registered and recorded by the Registrar of Companies, Maharashtra, on 4th April, 2000, the paid-up equity capital of the
Company stands reduced from Rs. 2709.71 lakhs to Rs. 2032.28 lakhs. The effect of such a reduction shall be incorporated in
the Accounts of the Company in the subsequent Financial Year. The Board of Directors at the meeting held on April 7, 2000,

B L U L S T A R L I M
 NOTES FORMING PART OF THE ACCOUNTS

has decided to pay Interim Dividend @ 45% on the reduced share capital of Rs. 2032.28 lakhs and accordingly the Company has
provided for the same in the Accounts for the Financial Year ended 1999-2000.
9. The net sales/income from operations and Profit Before Tax figures of the Company for the Accounting Year ended 31.3.2000
include Rs. 3713.92 lakhs and Rs. 810.18 lakhs respectively of the International Software Division (Previous Year Rs. 1720.37
lakhs and Rs. 399.62 lakhs respectively being an amount representing 6 months figures for the period 1.10.98 to 31.3.99).
Besides, the following assets and liabilities as at 31st March, 2000 of the said division are included in the above Balance Sheet.
(Rs. in lakhs)
Net Fixed Assets 390.17
Capital WIP 58.49
Investments 66.58
Sundry debtors 560.93
Cash and Bank Balances 456.30
Loans and Advances 171.24
Current Liabilities and Provisions 293.42
Reserves & Surplus 1209.80
These Assets and liabilities are to be transferred to M/s. Blue Star Infotech Ltd. under the Scheme of Arrangement for the
demerger of the International Software Division of the Company. The same has been approved by the shareholders and the
High Court of Bombay. The effective date for this transfer is 4th April, 2000 being the date when the Court Order is
registered with the Registrar of Companies, Maharashtra.
10. During the preivous year, a fraud resulting in misappropriation of funds was detected at the Bharuch unit of the Company. The
Company has since crystalised the amount of misappropriation involved of Rs. 70.58 lakhs and accordingly provided for the
same in the accounts for the year.
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 lakh are as under:
(i) Anfilco Ltd, (ii) John Engg. Co., (iii) Mihir Engineering Ltd., (iv) Navtech Enterprises, (v) Brasso Matic Pvt. Ltd,
(vi) Prijaai Works, (vii) Technoman, (viii) Airtech, (ix) Tropical Industries, (x) Elvee Electricals, (xi) J. K. Insulation,
(xii) ]. B. Insulation, (xiii) J. B. Sawant Engg., (xiv) Malde Paper Box Industries, (xv) Narendra Engineering, (xvi) Trigon
Metal Sections.
(c) The above information has been compiled to the extent 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.
13. Amounts debited during the year to Work-in-Progress which are/to be transferred to Cost of Sales include the following:
1999-00 1998-99
(Rs. in lakhs) (Rs. in lakhs)
Salaries, Wages & Bonus 39.07 68.64
Employee Welfare & Training 1.14 0.99
Rent 12.33 16.35
Interest 24.12 17.42
Power 0.25 2.83
Insurance 47.48 82.38
Repairs & Maintenance 0.80 1.41
Transport & Travelling 144.45 219.37
Stationery & Printing 9.22 13.70
Commission on Sales (other than Salesmen) 31.69 23.26
Depreciation 0.38 0.47
Other Expenses 1093.21 1304-95

B L U E S T A R L I M I T E D 29
 NOTES FORMING PART OF THE ACCOUNTS

14. Managerial Remuneration to Whole-time Directors included in the Profit & Loss Account:
1999-00 1998-99
(Rs. in lakhs) (Rs. in lakhs)

(a) Salaries 22.74 20.70

(b) Commission 28.43 20.70
(c) Contribution to Provident Fund & Superannuation Scheme 5.68 5.18
(d) Other Perquisites 10-54 22.39
Total 67.39 68.97

15. Computation of Directors' Commission:

1999-00 1998-99
(Rs. in lakhs) (Rs. in lakhs)

Profit before tax as per Profit and Loss Account 2520.17 1812.33
Add: Directors' Remuneration 80.54 78.47
Provision for doubtful debts/advances 31.17
Loss on sale of Fixed Assets 33.60 12.59
2634.31 1934.56
Less: Capital Receipts 3.12 4.66
Less: Profit on sale of Fixed Assets 18.16 11.63
Net Profit for the purpose of Directors' Commission 2613.03 1918.27
Maximum Commission payable upto 10% of the above to
Whole-time Directors 261.30 191.83
Commission payable to the Whole-time Directors as per contract
of service 28.43 20.70
Maximum commission payable upto 1% of the above Net Profits
to the Non-Executive Directors 26.13 19.18
Commission paid to Non-Executive Directors 13.15 9.50

16. Statement showing investments held as stock in trade

Investments Type of Opening Balance Purchases during Sales during Closing Balance
Security the year the year

Nos. Value Nos. Value Nos. Value Nos, Value

(Rs. in (Rs. in (Rs. in (Rs. in
lakhs) lakhs) lakhs) lakhs)

Mastergain-92 Mutual Fund Units 3,600 0-35 — — — — 3,600 0.35

Master Plus Mutual Fund Units 75,500 9.17 — — 37,300 4.49 38,200 4.68

Total 79,100 9.52 — — 37,300 4.49 41,800 5.03

17. The previous year's figures hereabove as well as in the Additional Information hereunder have been regrouped/rearranged
wherever necessary to conform to this year's groupings.

u r- STAR M I T F D
 NOTES FORMING PART OF THE ACCOUNTS

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 Unit Installed Actual Opening Value Closing Value
Capacity Production (Rs. in lakhs) (Rs. in lakhs)

Refrigeration & Air Number 43,110 36,185 2,021 311.11 3,847 611.12
Conditioning Equipment (43,110) (24,595) (2,213) (337.59) (2,021) (311.11)
Packaged Airconditioning 7,000 4,067 128 68.80 192 214.44
(7,000) (3,102) (63) (68.04) (128) (68.80)
Industrial Packaged Chillers " 300 452 4 27-58 5 24-98
(300) (283) (4) (47.93) (4) (27-58)
Shell & Tube Condensers & Coolers 3,000 639 22 130.56 65 56.56
(3,000) (773) (51) (106.56) (22) (130.56)
Air Handling Units 2,240 1,151 63 1.67 34 9.57
(2,240) (1,325) (111) (41.98) (63) (1.67)
Finned Condensers & Evaporators 11,080 1,165 100 20.23 94 25.44
(11,080) (837) (132) (33.64) (100) (20.23)
EPABX Equipment Lines 50,000 100 1.05 55 0.64
(50,000) (-) (100) (1.08) (100) (1-05)
Analytical Instruments Sets 150 1 0.33 1 -0.33
(150) (-) (1) (0-33) (1) (0.33)
Environmental Test Chambers 250 35
(250) (15) (-) (-) (-) (-)
Note: Plant and machinery installed is for general purpose and not meant exclusively for any particular product group.

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 Qty Value Qty Value
(Rs. in lakhs) (Rs. in lakhs) (Rs. in lakhs) (Rs. in Lakhs)

Airconditioning & Number 2,018 320.96 28,711 5,822.03 3,995 635.79 26,734 6,712.07
Refrigeration Equipment (2,501) (402.04) (20,311) (5,202.11) (2,018) (320.96) (20,794) (6,072.10)
Central Airconditioning Worth — 3.97 — 629.37 — 13.52 - 861.16
Plant (Sales contract) (-) d-3.14) (_) (225.23) (-) (3-97) (_) (306.78)
Electronics & Other Worth — 27,12 - 1,750.22 — 24.50 — 2,048.31
Appliances, Equipment, (-) (50.76) (— ) (1,600.59) (-) (27.12) (-) (1,846.53)
Instruments, etc.
Spares & Components Worth - 576.84 — 644.78 - 464.59 — 977-33
(-) (594-45) (-) (655.64) (-) <576.84) (— ) (1,297.17)

Total 928,89 8,846.40 1,138.40 10,598.87

(1,060.39) (7,683.57) (928.89) (9,522.58)

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: 5,961.38
(Figures in brackets refer to previous year) (5,365.48)

L U E S T A R L I M I T E D 31
 NOTES FORMING PART OF THE ACCOUNTS

D. Particulars of Raw Materials & Components Consumed:

(Figures in brackets refer to previous year) Value
(a) Raw Materials Consumed: Quantity (Rs. in lakhs)

Non-Ferrous Metals Tonne 499 912.79

(499) (799.82)
Steel Tonne 1639 611.24
(2006) (721.80)
Compressors Number 36182 2319.70
(29952) (1853.68)
Compressor Components Worth 348.44
(476.31)
Others (items individually not exceeding 10% of total) Worth 6072.57
(4224.94)
10264.74
(8076.55)

(b) Raw Materials &. Components Consumed:

% of total Value
Consumption (Rs. in lakhs)
Imported {at landed cost) 31.89 3273.32
(31.00) (2465.85)
Indigenous 68.11 6991.42
(69.00) (5610.70)
100.00 10264.74
(100.00) (8076.55)
E. Value of Imports on GIF Basis:
1999-00 1998-99
(Rs. in lakhs) (Rs. in lakhs)
(a) Raw Materials 677.46 513.20
(b) Components 1265.26 1153,58
(c) Capital goods 196.40 68.94
(d) Spares 34.41 32.67
(e) Samples 3.43 2.09
(f) Finished Goods 2973.84 2286.99
5150.80 4057.47
F. Expenditure incurred in Foreign Exchange:
(a) Airconditioning/Refrigeration Projects abroad
(b) Royalty & Know-how 147.78 139.04
(c) Others 1567.37 1459.35
1715.15 1598.39
G. Earnings in Foreign Exchange:
(a) Export of goods on F.O.B. basis 427.73 615.45
(b) Project Exports 331.74 897.18
(c) Royalty, Know-how, Professional & Consultation fees 2653.83 2846.57
(d) Other Income:
Commission 1112.02 1045.27
Others 13.18
4538.50 5404-47
 CASH FLOW STATEMENT FOR THE PERIOD ENDED 31ST MARCH, 2000 IN ACCORDANCE WITH THE
REQUIREMENT OF THE LISTING AGREEMENT WITH THE STOCK EXCHANGES

Rs. in s. m l

[A] Cash Flows from Operating Activities

Net profit before tax and Capital Receipts 25,17.05 18,07.67
Depreciation 11,44.99 10,38.52
Foreign Exchange 5.24 9.47
Investments/Others 2,54.03 -3,35.68
Interest/Dividend -1,43.70 -1,50.29
Interest charged 9,54.07 9.86.44
22,14.63 15,48.46
Operating profit before working capital changes 4731.68 33,56.13

Adjustment for:
Trade and other receivables 94.82 -11,77.04
Inventories 4,39,06 4,19.59
Trade payables -3,26.84 -10,08.70
207.04 -17.66.15
Cash generated from operations 49,38.72 15,89.98
Direct taxes paid -60.00 -65.00
Interest paid -8,18.67 -9,86.00
-8,78.67 -10,51.00
Net Cash from Operating Activities 40,60.05 5,38.<

[B] Cash Flow from Investing Activities

Purchase of Fixed Assets -17,83.30 -12,62.00
Sale of Fixed Assets 42.13 20.24
Purchase of Investments -66.09 -81.85
Sale of Investments 54.02
Interest received 40.07 93.18
Dividend received 95.26 96.25
Net Cash used in Investing Activities -16,17.91 -11.34-18
(Balance carried forward} 24,42.14 -5,95.20

34 T I- D
 CASH FLOW STATEMENT FOR THE PERIOD ENDED 31ST MARCH, 2000 IN ACCORDANCE WITH THE
REQUIREMENT OF THE LISTING AGREEMENT WITH THE STOCK EXCHANGES

Period ended
31.3.1999
Rs. in lakhs Rg. in Jafehs

(Balance brought forward) 24,42.14 -5,95.20

[C] Cash Flow from Financing Activities
Proceeds from Long Term Borrowings -18,78.55 21,17.57
Dividend Paid -10,46.48 -10,40.79
Capital Receipt: Grant from Exim Bank/Ozone Project 3.12 4.66
Net Cash used in/from Financing Activities -29,21.91 10,81.44
Net Decrease/Increase in Cash & Cash Equivalents 4,86.24
Cash & Cash Equivalents — Opening Balance 9,33.22
Cash & Cash Equivalents — Closing Balance 14,19.46

Ashok M Advani Bal K Malhotra Executive Director

Chairman & Chief Executive Atul Choksey Director
Minoo R Shroff Director
Suresh N Talwar Director
Uday Kotak Director
Suneel M Advani G Ramchandani Director
President & Vice Chairman H. Rajaram Vice President - Finance
K P T Kutty Company Secretary
Mumbai: May 18, 2000

We have examined the above cash flow statement of BLUE STAR LIMITED for the period ended 31st March, 2000. The Statement has
been prepared by the Company in accordance with the listing agreement required by the Stock Exchanges and is based on and in agreement
with the corresponding Profit and Loss Account and the Balance Sheet of the Company covered by our report of 18th May, 2000 to the
Members of the Company.

For K S AIYAR & CO.

Chartered Accountants

RAMAKRISHNA PRABHU
Partner
Mumbai: 18th May, 2000

B L U E S T A R L I M I T E D 35
 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, UK
2. Financial Year of the Subsidiary March 31,2000 March 31,2000
3. (a) No. of shares held in Subsidiary 1,00,000 shares 10,000 shares
Company on the above date of US $ 1 each of £1 each

(b) Extent of Holding 100% ! 00% (See Note below)

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 US $222,175 (Loss) GBP 47,995 (Loss)

{b) For the Previous Financial Years,

since it became the Holding
Company's Subsidiary US$134,780 GBP 6,541 (Loss)
(ii) Dealt with in the Holding Company's
Account:
(a) For the Financial Year of the
Subsidiary Nil Nil
(b) For the Previous Financial Years,
since it became the Holding
Company's Subsidiary Nil Nil

Note: Blue Star Infotech (UK) Limited is wholly owned subsidiary of USIN International, Inc, USA; a subsidiary of Blue Star Limited.

Ashok M Advani
Chairman & Chief Executive

Suneel M Advani K P T Kutty

President & Vice Chairman Company Secretary
Mumbai: May 18,2000

May 16, 2000
Board of Directors
USIN International, Inc.
(a wholly-owned subsidiary of
Blue Star Limited)
San Jose, California
We have audited the accompanying balance
sheets of USIN International, Inc. (a wholly-
owned subsidiary of Blue Star Limited), as
of March 31, 2000 and 1999, and the
related statements of operations and retained
deficit, and cash flows for the years then
ended. These financial statements are
the responsibility of the Company's
management. Our responsibility is to express
an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with
generally accepted auditing standards. Those
USIN INTERNATIONAL
= U B S I DIA R Y Oh BIUE
INDEPENDENT AUDITORS' REPORT
standards require that we plan and perform
the audit to obtain reasonable assurance
about whether the financial statements are
free of material misstatement. An audit
includes examining, on a test basis, evidence
supporting the amounts and disclosures in
the financial statements. An audit also
includes assessing the accounting principles
used and significant estimates made by
management, as well as evaluating the
overall financial statement presentation. We
believe that our audit provides a reasonable
basis for our opinion.
As more fully disclosed in Note 9 to the
financial statements, the Company's policy is
to prepare its financial statements on the
basis of accounting principles generally
accepted in India. The Company has a
controlling interest in another company and
consolidated financial statements have not
been prepared. Accounting principles
NC
STAR L. I M I f f T )
generally accepted in the United States, in
our opinion, require that consolidated
financial statements be prepared where one
company has a controlling interest in one or
more other companies.
In our opinion {except for the effects of the
matters discussed in the preceding
paragraph), the financial statements referred
to above present fairly, in all material
respects, the financial position of USIN
International, Inc. (a wholly-owned
subsidiary of Blue Star Limited), as of
March 31, 2000 and 1999, and the results of
its operations and its cash flows for the years
then ended in conformity with accepted
principles generally accepted in the United
States.
BRACK, NEAL, DANEY & SPENCE, LLP
37
 BALANCE SHEETS AS AT MARCH 31,2000 AND 1999

Note

ASSETS
Current Assets:
Cash 299,399 294,841
Accounts receivable, trade 815,727 764,735
Employee and consultant advances 21,574 25,314
Shareholder advances 265,510 277,423
Customer advances 3,479 2,328
Prepaid expenses 6,848 1,455
Current portion of notes receivable, consultants 22,507 15,683
Refundable income taxes 26,077
Total Current Assets 1,461,121 1,381,779
Equipment, at cost:
Machinery and equipment 69,435 50,216
Furniture and fixtures 17,468 11,662
86,903 61,878
Less: accumulated depreciation (59,453) (47,042)
27,450 14,836
Other Assets:
Notes receivable, consultants, less current portion uf
$ 22,507 at March 31, 2000 and $ 15,683 at March 31, 1999 7,352 9,167
Due from Blue Star Infotech (UK), unsecured 54,689
Deposits 2,092 2,092
Investment in affiliated company 17,050 17,050
Other investments 500
Deferred taxes 79,714
161,397 28,309
1,649,968 1,424,924

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Note payable, ABN-AMRO Bank 810,000 600,000
Accounts payable, trade 51,367 37,452
Accounts payable, shareholder 630,878 398,925
Accrued expenses 76,639 78,664
Income taxes payable 6,624
Total Current Liabilities 1,568,884 1,121,665
Commitments and Contingencies 5, 6, 7 and 8
Stockholders' Equity:
Common stock, $1 par value, 1,000,000 Shares
authorized, 100,000 shares issued and outstanding 100,000 100,000
Retained earnings (deficit) (18,916) 203,259
81,084 303,259
1,649,968 1,424,924

See accountants' report and accompanying notes to financial statements.

N C
38
 STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE YEARS ENDED
MARCH 31, 2000 AND 1999

Note

Sales 5,107,407 6,023,137

Cost of sales 4,626,456 5,367,868
Gross Profit 480,951 655,269
Selling, general and administrative expenses 776,910 556,381
Operating income (loss) (295,959)

Other Income (Expense):

Interest income 9,997
Miscellaneous income 8,035 9,889
Interest expense (33,848) (27,589)
Loss on disposal of equipment (890)
(22,216) (18,590)
Income (loss) before provision for income taxes (318,175) 80,298
Provision for income taxes (96,000) 10,000
Net Income (loss) (222,175) 70,298
Retained earnings, beginning of year 203,259 132,961

Retained earnings (deficit), end of year (18,916) 203,259

See accountants' report and accompanying notes to financial statements.

USIN I N T E R N A T I O N A L I N C .
(A WHOLL Y-OWNT D .SUBSIDIARY OF F4 I U T STAH -IMIIhD)
39
 STATEMENT OF CASH FLOWS FOR THE YEARS ENDED MARCH 31, 2000 AND 1999

Year ended
March 31,1099
US$
Cash Flows from Operating Activities:
Net Income (loss) (222,175) 70,298
Adjustments to reconcile net income (loss) to net cash provided
(used) by operating activities:
Depreciation and amortization 12,411 7,522
Loss on disposal of equipment
(Increase) decrease in operating assets:
Accounts receivable, trade (50,992) 121,773
Employee and consultant advances 3,740 24,860
Shareholder advances 11,913 (56,214)
Other assets (6,545) 4,935
Refundable income taxes (26,077)
Deferred taxes (79,714)
Increase (decrease) in operating liabilities:
Accounts payable, trade 13,915 (25,008)
Accounts payable, shareholder 231,953 (741,722)
Accrued expenses (2,025) 19,812
Income taxes payable (6,624) (327)
Total adjustments 101,955 (643,479)
Net cash (used) by operating activities (120,220) (573,181)
Cash Flows from Investing Activities:
Purchase of equipment (25,025) (6,939)
Notes receivable, consultants (62,360) (21,800)
Payments on notes receivable, consultants 57,351 12,417
UK note, unsecured (54,688)
Other investments (500) (17,050)
Net cash (used) by investing activities (85,222) (33,372)
Cash Flows from Financing Activities:
Proceeds from notes payable, ABN-AMRO Bank 860,000 600,000
Repayments note payable, ABN-AMRO Bank (650,000)
Issuance of common stock 75,000
Net cash provided by financing activities 210,000 675,000
Net increase in cash 4,558 68,447
Cash, beginning of year 294,841 226,394
Cash, end of year 299,399 294,841

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, 2000 and 1999 f o r :
2000 1999
US $ US $
Interest 33,848 27,589
Income taxes 25,752 10,307

See accountants' report and accompanying notes to financial statements.

 NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED MARCH 31, 2000 AND 1999

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 wholly-owned by Blue Star Limited (an Indian
corporation). Blue Star Limited has transferred to Blue Star Infotech Limited as of April 7, 2000 the Company's outstanding stock
hitherto wholly owned by Blue Star Limited pursuant to the Scheme of Arrangement between Blue Star Limited and Blue Star Infotech
Limited for the demerger of the International Software Division, with effect from October 1, 1998, approved by the honorable Bombay
High Court on April 3, 2000, registered and recorded by the Registrar of Companies, Maharashtra, being the requisite Government and
statutory body on April 6, 2000. The requisite permission from the Reserve Bank of India to transfer the ownership of the Company's
outstanding stock shall be obtained shortly. However, this is only a matter of procedure and does not vitiate the transfer already carried
out in view of the approval obtained from the Bombay High Court.
The accrual basis accounting policies adopted by the Company are consistent with generally accepted accounting principles. The
significant 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
maintained 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, 2000 and 1999.

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.

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.

2, Notes Receivable, Consultants:

The notes receivable, consultants consisted of the following:
2000 1999
us$ US$
Consultants (five separate notes), no interest, unsecured,
due through December 2001 29,859 24,850
Less Current portion (22,507) (15,683)
7,352 9,167

U S I N I N T E R N A T I O N A L INC.
|A WHf'H L Y - O W N F D SUBSIDIARY OF filUT hIAH UMITFD)
41
 NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED MARCH 31, 2000 AND 1999

The aggregate principal maturities of the note;, receivable for the next two years art' as follows:
Year ending March 3 1 ,

2001 22,507
2002 7.352
29,859

3. Note Payable, ABN-AMRO Bank:

In November 1999 the Company entered into an agreement with ABN-AMRO Bank that provides for an $ 810,000 line of credit which
matures on June 16, 2000. Interest is at the bank's prime lending rate (currently at 9%). The loan is guaranteed by Blue Star Limited (the
parent company of USIN International, Inc.).

4. Income Taxes:
The Company utilizes Statement of Financial Standard (SFAS) No. 109. "Accounting for Income Taxes," which requires the use of the
liability method of accounting for deferred income taxes.
The Company's total deferred tax liabilities, deferred tax assets, and asset valuation allowances at March 31, 2000 and 1999 are as
follows:

2000 1999
US $ US $
Total deferred tax assets 79,714 —
Less valuation allowance — —
79,714
Total deferred tax (liabilities) —
Net deferred tax (liabilities) 79,714

These amounts have been presented in the Company's financial statements as follows;
Current deferred tax asset (liabilities) 79,714

Non-current deferred tax (liabilities)

A summary of the components of income tax expense is as follows:

Federal:
Current (97,000) 9,000
State:
Current 1,000 1,000
(96,000) 10,000

The company believes that deferred tax assets will be fully utilized based upon future reversals of existing taxable temporary taxable
differences, future earnings or available tax strategies. Accordingly, there was no valuation allowance on deferred tax assets at
March 31,2000.

5. Commitments and Contingencies:

Effective January 1, 1998, the Company entered into a 36-month noncanceliable operating lease agreement for office space in San Jose,
California. Total facility lease expense (including variable common area expenses) was $ 48,103 and $ 48,021 for March 31, 2000 and
1999, respectively,

42
 NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED MARCH 31, 2000 AND 1999

Future minimum rental commitments (excluding variable common area expenses) for the noncancellable operating lease are as follows:
Year ending March 31, US $

2001 34.571

6. Operating Leases - Equipment:

The Company has two operating leases which were entered into in 1999. The terms are for 36 and 60 months with monthly payments of
$239 and $86 per month.
Future minimum equipment rental commitments are as follows:
Year ending March 31, US $

2001 3,887
2002 3,887
2003 3,887
2004 1,027
2005 257
12,945
•H

7. Significant Customers:
The Company had sales to two customers in 2000 and three customers in 1999 which amounted to approximately $ 2,341,668 and
$ 2,747,700 of gross revenues, respectively. Sales to these major customers represented 46% and 45% of total sales and accounted for
approximately $ 444,534 and $ 264,000 of accounts receivable at March 31, 2000 and 1999, respectively.

8. Related Party:
During 1995, 100% of the Company's outstanding stock was acquired by Blue Star Limited (an Indian Corporation).
Included in the March 31, 2000 and 1999 financial statements are the following transactions with Blue Star Limited.

2000 1999
US $ US $
Consulting services purchased 4,089,788 4,441,099

Management service fees

Advances receivable

Accounts payable

9. Investment in Affiliated Company:

The investment listed includes $ 17,050 (at cost), which the Company holds a 100% interest in Blue Star Infotech (UK) Limited (a
corporation). USIN International, Inc. is a wholly-owned subsidiary of Blue Star Limited, an Indian corporation. Consolidated financial
statements have not been prepared in order to meet the requirements of Indian accounting principles. Blue Star Infotech (UK) Limited
(a corporation) had sales of approximately $170,000 and $ 0 for the periods ended March 31, 2000 and 1999, respectively, and net equity
(deficit) of approximately $(71,000) and $6,000 for the years ended March 31, 2000 and 1999, respectively.

10. Subsequent Event:

Subsequent to March 31, 2000, the Company received a notice from the Internal Revenue Service indicating that it will perform an
audit of Form 1120 for the year ended March 31, 1998. Due to the uncertainty of the nature and length of this audit, potential liability to
the Company, if any, cannot be reasonably estimated at this time. Therefore, no such amounts have been recorded in these financial
statements.

U S I N I N T E R N A T I O N A L I N C . .,
(A W l I O L . L V O W N FT) S U BSI Ol AH Y Ol" BLUE SIAPi IIMITFDi
 DIRECTORS' REPORT
The directors present their report and
financial statements for the yeui ended
31 March 2000.
Principal Activities and Review of the
Business
The principal activity of the company is that
of computer software consultancy.
The company commenced its activities from
July 1999. The main focus of business has
been software consultancy services on HP
platforms.
The necessary infrastructure has been
established for future growth.
Results and Dividends
The results for the year are set out in the
Profit and Loss Account.
Directors
The following directors have held office since
1 April 1999:
S M Advani
S P Advani
A S Sambtani
Directors' Interests
The directors' beneficial interests in the
shares of the company were as stated
below:
Ordinary Shares of
£ 1 each
31-3-2000 1-4-1999
S M Advani — —
S P Advani — —
A S Sambtani — —
S M Advani also served on the board of the
ultimate parent undertaking Blue Star Ltd.
which is registered in India.
Millennium Policy and the Euro
The Year 2000 issue presented companies
using any form of electronic system with the
opportunity to ensure that they were not
vulnerable to a potentially significant
problem to the business environment.
We have carried out a review which has
shown that the company's computer
operations are Year 2000 compliant, and
there have been no adverse effects to date.
44
The Veai 2000 issue does create risk for the
company from third parties with whom we
deal on financial and business transactions.
As a result of this we cannot be certain of
avoiding business disruption in areas where
we do not have a direct relationship.
However, no problems have been
encountered to date.
The directors do not consider that the
introduction of the Euro will have any
significant impact on the company.
Auditors
Jeffreys Henry were appointed auditors to the
company and in accordance with section 385
of the Companies Act 1985, a resolution
proposing that they be re-appointed will be
put to the Annual General Meeting.
Directors' Responsibilities
Company law requires the directors to
prepare financial statements for each
financial year which give a true and fair view
of the state of affairs of the company and of
the profit or loss of the company for that
period. In preparing those financial
statements, the directors are required to:
— select suitable accounting policies and
then apply them consistently;
— make judgements and estimates that are
reasonable and prudent;
— prepare the financial statements on the
going concern basis unless it is
inappropriate to presume that the
company will continue in business.
The directors are responsible for keeping
proper accounting records which disclose
with reasonable accuracy at any time the
financial position of the company and to
enable them to ensure that the financial
statements comply with the Companies Act
1985. They are also responsible for
safeguarding the assets of the company and
hence for taking reasonable steps for the
prevention and detection of fraud and other
irregularities.
By order of the board
S M Advani
Director
16 May 2000
AUDITORS' REPORT
To The Shareholders of Blue Star Infotech
(UK) Limited
We have audited the financial statements on
pages 4 to 9 which have been prepared under
the historical cost convention and the
accounting policies set out on page 6.
Respective Responsibilities of Directors
and Auditors
As described on page 2 the company's
directors are responsible for the preparation
of financial statements. It is our respon-
sibility to form an independent opinion,
based on our audit, on those statements and
to report our opinion to you.
Basis of Opinion
We conducted our audit in accordance with
Auditing Standards issued by the Auditing
Practices Board. An audit includes examina-
tion, on a test basis, of evidence relevant to
the amounts and disclosures in the financial
statements. It also includes an assessment of
the significant estimates and judgements
made by the directors in the preparation of
the financial statements, and of whether the
accounting policies are appropriate to the
company's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to
obtain all the information and explanations
which we considered necessary in order to
provide us with sufficient evidence to give
reasonable assurance that the financial
statements are free from material
misstatement, whether caused by fraud or
other irregularity or error. In forming our
opinion we also evaluated the overall
adequacy of the presentation of information
in the financial statements.
Opinion
In our opinion the financial statements give a
true and fair view of the state of the
company's affairs as at 31 March 2000 and of
its loss for the year then ended and have been
properly prepared in accordance with the
Companies Act 1985.
Jeffreys Henry
Chartered Accountants
Registered Auditors
16 May 2000
Finsgate, 5-7 Cranwood Street
London
EC1V9EE
 PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH 2000

1999
Notes

Turnover 2 106,260
Administrative expenses (152,058) (6,541)
Operating loss 3 (45,798) (6,541)
Interest payable and similar charges 4 (2,197)
Loss on ordinary activities before taxation (47,995) (6,541)
Tax on loss on ordinary activities 5
Loss on ordinary activities after taxation 10 (47,995) (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 SHEET AS AT 31 MABCH 2000

Notes
£-•

Fixed assets
Tangible assets 6 3,258 1,529
Current assets
Debtors 7 74,151 1,215
Cash at bank and in hand 25,465 4,138
99,616 5,353
Creditors: amounts falling due within one year 8 (147,410) (3,423)
Net Current (liabilities)/assets (47,794) 1,930
Total assets less current liabilities (44336) 3,459
•MMB

Capital and reserves

Called up share capital 9 10,000 10,000
Profit and loss account 10 (54,536) (6,541)
Shareholders' funds - equity interests 11 (44,536) 3,459

The financial statements were approved by the Board on 16 May 2000

S M Advani
Director

BLUE STAR INFOTECH (UK) LIMITED

!A WfK.ll I Y - O W N M ) S I I Ei iil P IAFIY OF U^IN IN T b HNAT1ONAI. INC USA) 45
 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2000

1. Accounting Policies
1.1 Accounting Convention
The financial statements ;ire prepared under the historical cost convent ion.
The financial statements have been prepared by the directors on a going concern basis as the parent company US1N International Inc. has
indicated its continuing support for the foreseeable future in ensuring the company is able to meet its obligations as they fall due. The financial
statements do not include any adjustments that would result from a withdrawal of i his support.
1.2 Turnover
Turnover represents amounts receivable for goods and services net of VAT and trade discounts.
1.3 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 of each asset over its expected useful life, as follows:
Fixtures, fittings & equipment 15% Straight Line
1.4 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.
2. Turnover
The total turnover of the company for the year has been derived from its principal activity wholly undertaken in the United Kingdom.
3. Operating loss
2000 1999
£ £
Operating Loss is stated after charging:
Depreciation of tangible Assets 458 82
Auditors' Remuneration 1,400 750

4- Interest payable
2000 1999
£ £
On amounts payable to group companies 2,197 —

5. Taxation
The company has estimated losses of £55,453 (1999 -£7,103) available for carry forward against future trading profits.
No taxation is chargeable due to the loss incurred in the year.
6. Tangible fixed assets
Fixtures,
fittings &
equipment
£
Cost
At 1 April 1999 1,611
Additions 2,187

At 31 March 2000

Depreciation
At 1 April 1999
Charge for the year

At 31 March 2000

Net book value

At 31 March 2000

At 31 March 1999
 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2000

7- Debtors
2000 1999
£ £
Trade debtors 34,868
Amounts owed by parent and fellow subsidiary undertakings 38,719
Other debtors 1,215
Prepayment and accrued income 564
•MM HMHH

74,151 1,215

8. Creditors: amounts falling due within one year

2000 1999
£ £
Trade creditors 98,743
Amounts owed to parent and fellow subsidiary undertakings 33,400
Taxes and social security costs 6,994
Other creditors 5,818
Accruals and deferred Income 2,455 3,423
••••• ••••
147,410 3,423

9. Share capital
2000 1999
£ £
Authorised
50,000 Ordinary shares of £1 each 50,000 50,000
••••• MMMMB
Allotted, called up and fully paid
10,000 Ordinary shares of £1 each 10,000 10,000

10. Statement of movements on profit and loss account

Profit and
loss account
£
Balance at April 1999 (6,541)
Retained loss for the year (47,995)

Balance at 31 March 2000 (54,536)

11. Reconciliation of movements in shareholders' funds

2000 1999
£ £
Loss for the financial year (47,995) (6,541)
Proceeds from issue of shares 10,000

Net (depletion in)/addition to shareholders' funds (47,995) 3,459

Opening shareholders' funds 3,459
MMMMI ••Ml

Closing shareholders' funds (44,536) 3,459

47
 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2000

12. Employees
Number of employees
The average monthly number of employees (including directors) during the veai was:
2000 1999
Number Number
1

Employment costs
£
Wages and salaries 28,135

13. Control
As of the date of the financial statement, the company's outstanding stock is wholly owned by USIN International Inc., a company incorporated in
the United States of America which is a wholly owned subsidiary of Blue Star Limited (an Indian Corporation) which is India's leading provider of
air-conditioning and refrigeration products, systems and services.
Pursuant to the Scheme of Arrangement between Blue Star Limited and Blue Star Infotech Limited, for the demerger of the International Software
Division with effect from 1 October 1998, approved by the Honorable High Court, Mumbai on 3 April 2000, registered and recorded by the Registrar
of Companies, Maharashtra, being the requisite Government and statutory body on 6 April 2000, Blue Star Infotech India Limited becomes the
ultimate controlling company of Blue Star Infotech (UK) Limited. This however does not alter the status of USIN International Inc., a company
incorporated in the United States of America from being the immediate parent undertaking.
14- Related party transactions
During the year in the normal course of business, subcontractors' fees of £95,915 were paid to the ultimate parent company Blue Star Limited. In
addition, in the normal course of business, interest of £2,197 was paid to the parent company USIN International Inc.
Included in amounts owed by parent undertaking is an amount owed by the ultimate parent company Blue Star Limited of £38,719.
Included in trade creditors is an amount due to the ultimate parent company Blue Star Limited of £95,915.
Included in amounts due to parent undertaking is an amount due to the parent company USIN international Inc. of £33,400.

0ETAI» HADING AND PEO» tm 1088 ACCOUNT Kft HH BAt 31 MAtCfi 2000

Turnover
Sales
Administrative expenses (6,541)
Operating loss (45,798) (6,541)
Interest payable
Loan interest paid

Loss before taxation (6,541)

LUE STAR INFOTECH (UK) LIMITED

 SCHEDULE OF DISTRIBUTION COSTS AND ADMINISTRATIVE EXPENSES FOR THE YEAR ENDED 31 MARCH 2000

r^'.V^fistfi"
> - ' • ; . , • ; *ff :
I : , , - • - • a* •

Administrative expenses
Wages and salaries 28,135
Subcontractors' fees 95,915 —
Accommodation for employees 7,650 —
Rent relicences and other 4,320 2,812
Repairs and maintenance 79 64
Printing, postage and stationery 622 —
Advertising 1,410 —
Seminar, exhibition & conference costs 2,421 —
Telephone 3,812 —
Computer running costs 334 —
Travelling expenses 3,345 —
Legal and professional 140 1,059
Accountancy 1,740 1,750
Audit fees 1,400 750
Bank charges 139 24
Sundry expenses 138 —
Depreciation on FF & E 458 82
152,058 6,541

BLUE STAR INFOTECH ( U K ) LIMITED

49

BUSIN€SS R6/I61JU
Blue Star Limited is India's largest central
airconditioning company. LLIe serve a
large number of corporate and
commercial customers with central flC
plants, packaged airconditioners,
ductable split airconditioners, split
airconditioners and window
airconditioners.
LUe have also established leadership in
the field of commercial refrigeration and
in the manufacture ond installation of a
aiide range of commercial refrigeration
equipment ranging from water coolers to
cold rooms.
LUith the software business spun off into
a separate company, namely SLUG 5TRR
INFOTCCH LIMIT6D, the core businesses
of Blue Star ore airconditioning,
refrigeration and distribution of
professional electronic equipment.
Operational Structure
Operations are structured into four
business divisions with three production
facilities.
corporate and comme c i : :i r< n<r
installation ond commissioning of large
central airconditioning plants. Rssearch as well as c tu I z~< >C"BX
have confirmed the tr< w. i:c s br<r
The Packaged flirconditioning Division
equity that Blue St-.T < ^ j < ^ intr
manufactures and markets a full range
of packaged airconditioners, ducted split Revenue Breakup
oirconditioners, mini split airconditioners
and window airconditioners.
The Commercial (Equipment Division
manufactures, markets, and supports o
wide range of commercial refrigeration 16%
equipment including mater coolers, deep
freezers and cold rooms. It olso deals in
commercial kitchen and laundry 30%
equipment. • Manufacturing
• Projects Si Construction
The Electronics Division represents many d Customer Service
D Softujare Exports
internationally renowned manufacturers
• Imported Equipment Marketing
for hi-tech professional electronic and
industrial equipment and services.
Lines of Business
Financial Highlights
fls stated in our last flnnuol Report, we
have phased out our Industrial Projects
business, which had locked up financial
ond manpower resources mithout
providing adequate returns. In view of
the above, and in the view of the 69%
economic slowdown, total income did not
 BLUE STAR

The business mix of our oirconditioning Some of the prestigious airconditioning projects executed by Slue Star...
business is represented in the chart given
beloui:

Airconditioning Business Mix

10%
6%

57%
27%

LUipro Systems, Hyderabad

• Central • Ducted
D Mini Split flCs D UJindouj RCs

C€NTRflL
RECONDITIONING
Blue Star continues to be the market
leader in central airconditioning. The
estimated market for 1999-2000 was
Rs.430 crores as ogoinst Rs.365 crores
for 1998-1999.

Our order booking has grown to

Rs. 151 crores, as against Rs. 139 crores
in the previous financial year, and our
market shore is estimated at 35%. The
software, pouter, healthcare ond
pharmaceutical industries, where we
©njou preference by customers,
contributed to our growth.

Specifically in the software industry, we

enjoy market share in excess of 50% for
central airconditioning and ducted
systems. Blue Star is an acknowledged
leader in this segment, on account of its
expertise in indoor air quality, air
distribution and energy efficiency
requirements. Rpart From this, we offer
efficient 24-hour after-sales service. LUith
the phenomenal growth of the software
industry, our airconditioning business is
also poised for good growth.
Cochin International ftirport. Cochin

51
 BLUE STAR

LUe hove successfully launched our
centrifugal and screw chillers in technical
collaboration ujith Vork International, U5R,
our strategic partner. LUe have olso
developed low range screw chillers to
supplement the Vork range. In addition,
we launched our double skin air handling
units (HHUs) in collaboration with
Gimatral, Italy.
that are coming up in smaller towns
across the country, resulting in growing
demand for oirconditioning. To increase
our geographical reach, we are rapidly
expanding our network of authorised
dealers. These dealers are Blue Star's
extended arms, and are well trained by
us in equipment selection, installation
and maintenance.
LUe carried out the a • ; • • >
Ispahani Center, a Ic.-g-
complex at Chennai. : j j c ;
completed the aircono
Cochin international Riroort,
first private sector airport in the, country.
For this job, we have supplied three
400-ton centrifugal chillers and three
50-ton reciprocating chillers.

Central Reconditioning Market During the year under review, we

Shares
demonstrated our expertise in central
airconditioning by successfully executing
several prestigious projects. One such
DUCT6D SVST6MS
During the year under review, we further
consolidated our leadership in this

35% project was the airconditioning of

software development and training Ducted Sustems Market Shares
facilities for LUipro Systems, Hyderabad
involving 1500 work stations and
22%
6 training halls. The total area covered 33%
15% was 1,86,000 square feet.
6%
• Blue Star
• Voltos flnother prestigious project was the
D Carrier
D€TR 20%
• Suvidho
• KPC/MCQ airconditioning of the world-class
H Others
• flBB/FLRKT software development facility for Infosys
Driven by consumerism and the Technologies Limited, at Pune, with Vork
consequent expansion of commercial range of screw chillers and double skin
• BluaStor QVoltas
establishments, there are many small RHUs. The facility comprises 4 software
d flmtrex
and medium sized offices and showrooms development blocks and 2 dining blocks.

Cool comfort provided bt/ Blue Star at Lawrence (S Mayo, Chennoi

52
 BLUE STAR

Hongkong and Shanghai Banking Corporation, Mumboi, oirconditioned by Blue Star

Buddy's Family Entertainment Centre, Mumbai, airconditioned by Blue Star

product line. The introduction of
revolutionary packaged airconditioners
Fitted with scroll compressors was an
overwhelming success, and Blue Star is
seen as the pioneer in introducing this new
technology, which offers a minimum power
saving of 10% to customers, fls much as
60% of the packaged airconditioners sold
by us now are scroll models.
LU© hold a market share of 33% in
ducted systems and expect to improve
this further in the coming years.
Thanks to our dealerisation initiatives,
we have improved ourreach and today, we
are catering to many commercial
establishments such as showrooms,
jewelers, restaurants, etc.
The Department of Telecommunications
(DOT) is a major user of packaged
airconditioners, and we have developed
special models suited to DOT
applications. UJe hove gained a
significant share of DOT's business, and
are a major player in the entire telecom
airconditioning segment.
MINI SPLIT
RIRCONDITION6RS
LUe achieved a growth of 25% in this
product segment, and our market share
is estimated at 8%. Corporate and
commercial establishments are the major
buyers in this product category and the
market offers excellent opportunities For
Blue Star.
Mini split airconditioners require a high
degree of competence in installation and
after-sales service. Therefore, Blue Star
with its airconditioning expertise, is in o
Fine position to grow Further as a
signiFicant player.
Mini Split flirconditioners
Market Shares
24%
35%
13%
20%
• Blue Star • Carrier D Voltes
D flmtrex • Others
TURBO SPLIT
RIRCONDITIONeRS
flpart From manuFacturing and marketing
the conventional Floor mounted split RCs,
wall mounted split RCs and verticools,
we are the First in the country to introduce
ceiling mounted turbo split
airconditioners which are powerful units
For commercial spaces such as show
rooms, departmental stores
restaurants. This model is equipped with
3-phase compressors For power savings,
54
and is available in 3-tons capacity. There
is no False ceiling required, and the
system can be installed over the
aieekend, which makes it attractive for
commercial customers.
WINDOW
RIRCONDITION€RS
LUith the market in this product category
opening up in Q big way, we have
leveraged our brand equity to produce
a groaith oF approximately 40% during
the Financial year 1999-2000 and
improved our market share to 5%. Our
products are well engineered and offer
long MFe, apart From being energy
efficient.
Window flirconditioners
Market Shares
19%
21%
11%
8%
• Blue Star • Carrier Dflmtrex
DVoltos • Videocon HGodrsj
• Usho S National • Samsung
• LG a Others
LUe shall continue to focus on corporate
and commercial customers who expect
much more than a "box". Slue Star adds
value in terms of heat load estimation,
proper equipment selection, eFFicient
installation, prompt and customer-friendly
after-sales service. Blue Star's window
and airconditioners are contemporary
products with improved aesthetics. TLUO
new models oF window airconditioners
are under developing -t < nd ,h:!l b
launched during the s< :er.d c a-ier t -
2000-2001. LUe are ah ,> expo dingOu
dealer network in orcv-jr to penetrate,
up-country towns.
UJith the above strategics, we expect to
participate in the groujth opportunities
offered by the market place.
COMM6RCIRL
R6FRIG6RRTION
€OUIPM€NT
Our Commercial Refrigeration Equipment
business continued to grow at o
significant rate, ond all the product lines
namely mater coolers, deep Freezers,
prefabricated cold rooms, and ice-cube
making machines grew. The range of
products which are manufactured and
marketed by us with state-of-the-art
technology is detailed in the chart given
below:
Products Business
Partners
Deep Freezers VestFrost,
Denmark
Prefabricated Kolpak, USn
Cold Rooms
Refrigeration Units HeatcraFt, USR
Ice Cubers Manitowoc, USfl
WRT€R COOLERS
The Indian woter cooler market grew
marginally by about 7% during the year
under revieuj, but uje increased our
market share to 41% from 35%. Our
thrust on expanding the dealer network
ond penetrating newly emerging markets
paid us good dividends, flfter o lapse of
a feui years, we have regained our
number one position in this segment.
From a low of 4407 nos. of water coolers
sold during the year 1994-1995, we hove

UUdter Coolers Market Shares expand our market share. The domestic
product range has been upgraded in line
with our export models and we have
recently launched all stainless steel body
39% water coolers.
41%
The market for mineral water dispensers
is growing, and we hove entered into
O€M arrangement with most of the
mineral water suppliers who buy these
20% products in bulk quantities.
I Blue Star •Voltas DShrirom
D€6P FR66Z6RS
UJe registered a growth of 40% in the
tripled our sales to reach 13600 nos. deep freezers business, with most of the
during 1999-2000. ice-cream manufacturers and fost food
The Middle €ast market continues to give chains showing o preference for Slue Star
us significant amount of export business products. LUe have also penetrated the
and we shall continue our efforts to chicken and fish storage segments.
BLUE STAR
Our deep freezers hove a higher holding
time which means that even when power
foils, the produce stored inside the deep
Freezer stays good upto 12 hours.
Furthermore, deep freezers offered by
us offer power savings upto 70% in
comparison with other products available
in the market.
COLD ROOAAS
Cold rooms are custom-built products and
are designed for storing perishables at
accurate temperature, humidity and air
circulation conditions. Slue Star
manufactures cold rooms, in technical
collaboration with Heatcraft, U5R for
refrigeration units and Kolpak for
prefabricated PDF panels. LUe possess
Deep Freezers supplied to Nicholas Piromol
55
high level of competence in terms of
design, manufacture, installation and
after-sales service. UJe have supplied
and installed cold rooms for o variety of
applications in horticulture, sericulture,
floriculture, poultry, dairy, food,
hospitality and pharmaceutical
industries.

The cold room market in India is estimated

at about Rs.120 crores and at the
moment, we ore the largest corporate
ployer in this business. UJe achieved a
groujth of over 50% in our refrigerated

56

cold room business. UJe enjoy Q market
shore of 34% ond expect to improve the
market share Further in the coming years,
with increasing awareness of the
benefits of refrigerating food,
vegetables, fruits ond horticulture
products through cold chains, to prevent
wastage.
In the coming years, significant growth
is expected in the ice-cream
manufacturing, horticulture, fast food
chains, restaurants and health care
segments. Our cold rooms are ideally
positioned and well proven for these
growing markets.
fllRCONDITIONINGflND
R€FRIG€fiflTION S6RVIC6S
Various customer satisfaction surveys
reveol that our service standards are the
best in the industry. This is o competitive
advantage and marketing differentiator,
which has built considerable brand equity
for Blue Star. UJe hove now laid out a
programme to take service to the next
level, and achieving world-class
after-sales service is one of the corporate
thrust areas.
flfter-sales service is much more than
trouble shooting ond repairing. Rpart
from plant maintenance, over-hauling,
refurbishing and retrofit services,
Blue Star offers regular preventive
maintenance and enhancement services.
Thus, the life of the equipment is
enhanced and our customers save money
through pouuer savings.
Recognising the above fact, there are
more ond more customers who are
entering into comprehensive onnuol
maintenance contracts with us. The
revenue from our service business
operation recorded a growth of 17%. Our
customers, pleased with the quality of
our service, gave us glowing testimonials
(Page 60).
During the year under review, we
commissioned a state-of-the-art Service
Operations Management Software at al I
mojor cfties for on-line customer call
monitoring ond this has resulted in
improved response time and operational
efficiency.
6L6CTRONICS DIVISION
Blue Star markets o wide range of
products, systems and services in the
field of professional electronics. These
are complex products and systems,
generally of high technology and large
value. Blue Star represents world-
renowned manufacturers, usually leaders
in their respective fields.
The lines of business of electronics
Division are:
* Material Testing Machines
* Industrial Products and Systems
* Communication
Equipment & Instruments
*flnalyticalInstruments
* Medical electronics
"A" Servicing of Professional electronic
equipment
These lines of business address
refineries, petrochemicals, pulp & paper,
minerals & metals, pharmaceuticals,
advanced research labs, power plants,
bonks, defence ond the space industry.
Companies represented include Neles
BLUE STAR
Controls, Finland for rotary control valves;
Hitachi Medical Corporation, Japan forCT
scanners. Magnetic Resonance Imaging
(MRI) systems ond ultrasound scanners;
Kroutkraemer, Germany for nan
destructive testing machines; Racal flir
Tech, UK for data communication and
data security products; and JC-Ol, Japan
for electron microscopes, NMR, GC-MS
etc.
In the 46 years of its existence, the
electronics Division has kept pace with
the technological advance elsewhere in
the world. It is worth noting that this
Division has produced a profit every
single year with minimal investment in
land, buildings and machinery ond its
strength lies in its intellectual capital. The
business mix of the electronics Group is
given below:
electronics Division Business Mix
11%
12%
46%
12%
• Material Testing Machines
•flnaluticaiInstruments
D Industrial Products S Systems
D Medical Electronics
• Communication Equipment & Instruments
• Customer Service
During the year under review, we
developed capabilities to address
end-to-end solutions in the growing
market of e-business, specifically in the
area of doto security in banking and
security of payment in B2B transactions.
57

PRODUCTION FRCILITI6S
Thone Plant
The plant manufactures a wide rang© of
chillers for central airconditioning
opplicotion. It also manufactures PUF
panels For prefabricated cold rooms and
mortuary chambers, through a technology
transfer and buyback agreement ujith the
internationally renowned Kolpah of USfl.
The refrigeration units for these cold
rooms and mortuaru chombers are also
manufactured in this plant.
In order to enhance the productivity and
quality standards in line with changing
market needs, o technology upgradation
and modernisation programme, including
process re-engineering has been
completed. For reducing costs and improving
cycle times, a new supply chain
management system has been put in place.
The plant recorded 36% growth in
production during 1999-2000 over the
previous year.
RBI BLUE STAR
DoclrQ Plant
The plant at Dadr., w h ; r h
commissioned in Juli,, 1V97 ,u:
investment of Rs. 25 crorss, is regarded
as the best manufacturing facility in the
country for airconditioning products. The-
product range manufactured by this plant
includes packaged oirconditioning
systems, ducted split airconditioners, mini
split aircond it loners and window
airconditioners. The plant manufactures

products not only under the Blue Stor
brand nome, but olso for other OEMs
for domestic and export markets.
The plant uses state-of-the-art
manufacturing equipment to ensure that
the products manufactured have 100%
consistent quality ond reliability. The
products are rigorously tested in the
psychrometric / calorimetric test Facility
as per Bureau of Indian Standards and
RSHRflC (flmerican Society for Heating,
Refrigeration and Reconditioning
engineers) standards.
The plant recorded 1 9% grouuth in
production during 1999-2000 over the
previous year.
Bhoruch Plant
ft wide range of water coolers for local
and export markets ore manufactured at
our Bhoruch Plant. Double skin air
handling units for central RC plants in
collaboration with Climatrol, Italy and
Environmental Test Chambers in
collaboration with Tenny, USfl are olso
manufactured in this Plant.
The plant recorded 35% growth in
production during 1999-2000 over the
previous year.
R & D ncnvmes
R & D in airconditioning ond refrigeration
focused on introduction of neuu products
during the year 1999-2000. It also
focused on quality improvement in the
existing products in order to improve
aesthetics, performance, reliability and
noise levels. In order to moke the
products competitive in the marketplace,
an extensive value-engineering
programme was implemented across
various product categories.
The new products introduced include CFC
free centrifugal chillers and screw chillers
under license from Vork Internotionol
USfl; a range of hermetic water-cooled
scroll chillers; low height fan coil units;
and a family of floor mounted ond ceiling
suspended compact air handling units.
LUe also introduced new models of
ducted split units for export markets and
turbo split RCs for large commercial space
application. LUe designed and produced
window ftCs for O€M customers. LUe
launched a new range of stainless steel
water coolers for domestic and export
markets. Rnother important product
development by our R & D team is the
refrigeration unit for cold room
applications.
fl new testing facility for reciprocating
packaged chillers upto 200 TR was set
up at Thone. The facility is suitable for
testing of air-cooled as well as water
cooled chillers.
INFORMflTION
T6CHNOLOGV
LUith developments in information
technology and the internet creating new
business paradigms and radically
transforming the way business is done
around the globe, Blue Star embraced
this dramatic opportunity to enter the new
millennium as a modern, IT-driven
organization. LUe made major
investments in upgrading our IT and
communications infrastructure and in
state-of-the-art software packages for
improving operational efficiency, on-time
delivery and customer satisfaction.
Several steps were taken towards the
corporate goal to transform Blue Star
into a 'brick & click' company for
exploiting our traditional strengths
through the power of IT, and the
BLUE STAR
internet. These include 'Enterprise
Resources Planning' (€RP) software for
our manufacturing units, as well as for
airconditioning projects business; Service
Operations Management Sofbuare at all
major after-sales service locations; Sales
Force flutomation Software; and eCRM
for our soles divisions.
The internet has opened many exciting
new opportunities in e-commerce and we
intend to exploit these.
HUMRN R6SOURC6S
In building Blue Star's brand equity as
customer focused professionals, we have
recognised that it is our people who play
the most vital role in the customer value
chain, In a business such os ours, which
involves design, engineering, site
coordination and field servicing, people
are our most important resource and their
continuous training and development is
critical.
flccordingly, we have several training
modules for company-wide training. The
total number of training mandays during
the review period was 5650. The training
programme titled "Towards Customer
Satisfaction" is acknowledged as one of
the finest programmes not only by our
employees but also by several industry
experts.
In order to develop our young managers
for shouldering higher levels of
responsibilities in the future, we have a
customised "Leadership Development
Programme".
LUe have maintained control on the total
head count which came down from 2504
to 2489 mainly due to retirements and
resignations. LUe continue to focus on
overall productivity improvement.
59
 Procter&Gamble
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tort! qgi,-r 7V-™i Otnm. Or. P tfoin ««,« Wumliur - *«'W( fW 4WMWW fui, fl!l-49KI!6}

TO WHOM SOEVER IT MAY CONCERN

Wit ft W e«(0> (hu Mft. flft,. SWf Um(i«rf Aw HtfUllrd & epaunmmnrt Slut Mar
air caaditienm af fi/osjs ritftKa/Ojftrs timOnf, fnfom ford, KIIMT Kourf,
Banfalart.

ABB-: Sandwp Duto / mn Tt»kurt» They have executed tfit wor* canun<iuMJ> in a shaft span o/Hint unjtr trrt:ri Hmt
constraints.

Sub: Air CondMontng WWfc* for our P«*dna and Cantowt Ar*u

OMT Mr. Dtflta / Mr. ThMtuttt

t wouM Kto » ttk» Wi opporturtty to congniuiM* you «nd your »*m of anglowrt for**
9000wo*don*on*• *rConflBterinoo»«wabov*arM* u»n««tton<rfth»Sno*. 1«.STR Advisor - 3ufnulrHTlure
aw* e not. 5,5 TR n»e**>» in our nwmrfBeairaiB •»•» «•» *>"• viBwut dteiurWnuow
operation* and in full oo-anftmtion w«H our job* beksg carfM out (or tteoompMtortafttM
project WK( met sH our wrfaty r«quii«m«ntt.

Yo«tf tartwrtitp wx* (rtS«6vw rttt made tfito «u« mat lh» work gttt twrnpteWJ or nm* wxl in
a mamar that tra m*M our iwads,

br Proctor * O*«W» todtt Umitad

Manatwr - Technical Sy»t*ms


6LU6 STflR BfiRND €QUI7V
R recent study conducted by us among
existing and potential customers and
consultants reveals that as a brand,
Blue Star stands for "Customer Focused
Professionalism", offering
Functional ond psychological values to
the customers: state-of-the-art products
which are best in their class in terms of
aesthetics ond performance, high class
engineering calibre, project management
competence - all packaged in a total
solutions approach ujhich is customer
friendly.
BLUE STAR
Public Service Booklet on Power Savings
BLUE STAR
many
lAJaA it a bad movie or baa, cdrconaitloninq.
0
You code) bt ihon of vital oxygen In the cinema hall and not even reallte dm jour headache li due to poor airconditioning. That1! why alreoodlliortng
protarionali from Blue Star a* a lot of qutWons. And rower them. )s then i continuouf inflow of freA air? li then • balance: between people, apacei
and Urcondltioning vemx? Doet the into ilr from the room get complMely exhausted outHn addition, ar* you laving at lain (0% on electricity bHb!
Clll Blue Star and let iJJ deilgn a can-effective alrcondnloning lyinm according to your nved. Then forget about everything «!». Especially hudachH!
BREATHE EASY -»»..™,M—«*«„„>
Blue Star's campaign highlighting airconditioning expertise
Reconditioning is much more than cooling; During the year under review, we
it involves indoor oir quality, air published a public service booklet entitled
distribution, energy efficiency, reliability "The Slue Star Guide to Power Savings
and long life. Blue Star's leadership is in Reconditioning".
built on the foundation of airconditioning In order to strengthen our image as
expertise and its ability to add value to oirconditioning & refrigeration experts
customers, developed over many years with a strong customer focus, an
under local operating and environmental advertising campaign was launched which
conditions. LUe have undertaken several educates customers on the need for good
initiatives to enhance our brand equity. airconditioning, and the ill-effects of bod
Our endeavour to create a customer airconditioning.
friendly and efficient purchase
experience is reflected in the by-line
adopted by us - "Breathe 6asy".
61
BLU€ STRR UU€6 SIT€ in-depth information on comfort enables customers t:< fYio ; • Jl lhf<
oirconditioning, indoor air quality and tonnage requirement xi'l ;< 0 7 in
During the year under revieuj, Blue Star
benefits of refrigeration opart from cool airconditioner best suite-, j to lie -pf.cd;-
launched its new website
tips on how to bring down energy costs.
ujww-blue5torindio.com. The unique
It also contains a section on Investor
feature of the website is its "Information
Relations where investors con log on and
library" educating the viewer on various
get their queries replied through e-mail.
facets of airconditioning ond
refrigeration, along with answers to many The aiebsite also carries on
frequently asked questions. It provides airconditioning capacity calculator, which
 BLUE STAR

INV6STOR flND SHflR€HOlD€R INFORMATION

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 fldvani Chowk Sarojini Naidu Road
Jamshedji Tata Road Mulund (UUest)
Mumboi 400 020 Mumbai 400 080
Tel: 91 -22-2020868 Tel: 91 -22-5647731, 56272716, 5684590, 5684591
Fax: 91 -22-2025813 Fax: 91 -22-5672693
ujujLU-bluestarindio.com

Shore transfer documents mill also be accepted at

Intime Spectrum Registry FVt. Ltd. Intirne Spectrum Registry Fvt Ltd.
Daujor House, (2nd Floor) Near flmar Cinema
Near Central Cinema LU.T. Patil Marg, Chembur
Fort, Mumbai 400 091 Mumbai 400 071

DemoteriolisQtion
The Company has mode arrangements for dematerialisation of its shares through National Securities Depositories Limited
(NSDL) and Central Depository Services (India) Ltd. (CDSL). Since the Company shores are traded in Demat mode, the shareholders
are requested to dematerialise their shareholding.

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 on ongoing aujareness of the Company's performance among its shareholders and the
financial community. The Company ujekomes 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 ot the above address.

Blue Star's Shareholders

Rs of 31st March, 2000, the Company has approximately 27399 registered shareholders, flpproximately 46 per cent of the
Company's shares ore held by individual investors. The Promoters and Group Companies hold approximately 38 per cent of the
shares ujhile Institutions and Body Corporate hold the balance shares.

Stock fecchange Listings

Bombay Stock C-xchange
Notional Stock C-xchange

63
INVESTOR flND SHflR€HOlD€R INFORA/lflTION (CONTD.)

Market Capitalisation (Rs. Crores)

31.3.98 31.3.99 31.3.00

Slue Star Share Prices

250 -i 233.9
206.35
200 - 190

un 150 -
CJ>
a. 100 -
cc
50 - 56 62.5 69 70.05 64.5 69 2
-
51.95 52.1 55.3

flpr- May- Jurv Jul- Rug- Ssp- Oct- Nov- Dec- Jan- Feb- Mor-
99 99 99 99 99 99 99 99 99 00 00 00

HIGH LOLU

*Note: fill charts and tables ore based on research conducted by Blue Star Ltd.