Ladies & Gentlemen:

It is a pleasure to welcome you to the 60th Annual General Meeting of your Company.

CORPORATE PERFORMANCE FOR 2007-08

I expect you would have read the Annual Report for 2007-08 that provides detailed information on a truly exceptional year. Virtually all measures of financial performance improved by a substantial amount over 2006-07, a year that had already set very high standards. All these achievements convinced the Board of Directors to raise the dividend from Rs 3.00 to Rs 7.00 per equity share. I am sure shareholders would have appreciated this decision.

BUSINESS SCENE

The last few years were kind to the world economy. Growth was healthy and India benefited from this benign global situation. But sustained economic growth led to a number of excesses in international financial markets. Asset prices were progressively driven up to irrational levels, especially real estate and stock i.e. share prices. The real estate bubble eventually burst last August as a result of the so-called ‘sub-prime mortgage crisis’ in the US, which was so serious that it nearly caused the collapse of the international banking system. The ramifications of this development are still reverberating globally.

While it is not my intention to go into a detailed analysis of the financial and economic crisis, I must explain the economic fallout in India and its impact on Blue Star. After 4 years of exceptional GDP growth, the effects of the sub-prime problem began to be felt in January 2008. The BSE Sensex, having reached a peak of 21207, started a downward correction along with real estate prices. At the same time, inflation began to climb alarmingly, especially food, metal and fuel prices. The RBI tightened credit to try to curb inflation, but without much success. All these developments affected business confidence and consumer spending.

This trend has continued in Q1 of 2008-09. Increasing inflation, tighter credit and a deteriorating foreign exchange situation have changed the economic and business outlook in India. Business growth has slowed in some sectors, impacting profitability, and a widespread mood of uncertainty has crept in regarding the future.

UNAUDITED FINANCIAL RESULTS FOR Q1 2008-09

In such a scenario, I am happy to announce Blue Star’s unaudited financial results for Q1 2008-09. Total Income increased by 37% to Rs 632.54 crores and Net Profit by 63% to Rs 36.42 crores. Order Inflow grew from Rs 687 crores to Rs 985 crores, an increase of 38%. The unfilled order position as on June 30, 2008 reached a comfortable level of Rs 1410 crores, an increase of 43% compared to last year.

Under normal business conditions I would confidently expect this very good revenue and profit growth to continue, but as I have explained, the economic picture is volatile, with the future filled with uncertainties. In this situation, it is very difficult to look beyond a few months. I must clarify that I am not pessimistic about the future. I expect Blue Star to continue to grow this year, but it would not be wise to attempt a more precise year-end forecast 8 months in the future.

BLUE STAR AND CORPORATE SOCIAL RESPONSIBILITY

Two years ago, I had talked about Blue Star’s approach to Corporate Social Responsibility (CSR) and mentioned the areas of energy efficiency and eco-friendly refrigerants as two priority issues that we were addressing. Since then, our thinking on CSR has broadened and taken more definite shape.

We have chosen 3 broad areas to focus our CSR activities:

1. Energy Conservation

This is comprised of two segments:

• Providing Energy Efficient Products and Services.
• Other Energy Conservation Measures.

2. Environmental Protection

3. Community Service

Let me explain the progress we have made:

1(a) Energy Efficient Products & Services:

Energy efficiency of our products remains a corner-stone of our research and development efforts. Here are some examples:

• Blue Star differentiates itself by designing and developing innovative and energy efficient products. Your Company is the first manufacturer in India to develop and launch Variable Refrigerant Flow (VRF) airconditioning systems with digital scroll technology. These intelligent airconditioning systems are able to reduce electricity consumption by upto 30%.
• We are committed to the energy labeling programme initiated by Bureau of Energy Efficiency and all our wall mounted split airconditioners are now star-rated.
• Blue Star is playing a leading role in promoting the concept of Green Buildings in India. We have on our rolls as many as 30 accredited energy auditors and 3 of them are accredited in LEED (Leadership in Energy & Environmental Design) for Green Building services. Using these resources, Blue Star offers a variety of services to save power and conserve other natural resources in new as well as existing buildings.

1(b) Other Energy Conservation Measures:

Conservation goes beyond using efficient products. A huge amount of energy is wasted nationally due to sheer ignorance and lack of awareness. Our plans include:

• Helping deserving institutions such as hospitals and colleges to save power by conducting free walk-through energy audits. To start with, we propose to cover 150 institutions in this financial year.
• Creating awareness of Energy Conservation and Environmental Protection by delivering lectures, sharing experiences and conducting workshops among schools, colleges and public associations such as Rotary Clubs and Lions Clubs. A number of employees of Blue Star will participate in this programme. Our plan is to conduct 500 awareness programmes in this financial year.
• Initiating selected projects within Blue Star including conversion of selected offices into Green Buildings.

2. Environmental Protection: This is a vast area where many organisations, institutions and individuals are involved in different ways. Our activities include:

• Contributing in the technical domain by being at the cutting edge of refrigeration technology in the use of eco-friendly refrigerants like R134(a) and R410(a) in our products.
• We intend to get broader involvement of our people by using bio-degradable material, recycling waste and conserving water in our factories and offices.
• We plan to support deserving environmental protection projects in the public domain. The support would include both financial and volunteer involvement.

3. Community Service: The third leg of our CSR plans is to serve the local community in the vicinity of our manufacturing facilities. To start with, we are taking up two projects to help the desperately needy rural people around our new plant at Wada in Maharashtra: (a) vocational training (b) basic healthcare services.

We have made a modest start in CSR. Even this limited effort has generated a great deal of interest throughout the Company and a desire in many of our employees to play a role. We are still in the early stages of CSR. As we gain experience, the activities will expand quickly in the years to come.

Acknowledgements: 
I thank all Blue Starites and business partners for their commitment and hard work for the Company. I am also grateful for the capable guidance of my colleagues on the Board, as well as to our customers for their valued patronage. And last but not least, my special thanks to you, our shareholders, for your confidence in your Company.

July 28, 2008 
Mumbai