Ladies & Gentlemen,

It gives me great pleasure to welcome you to the 62nd Annual General Meeting of your Company.

BUSINESS SCENE

After two difficult years, the Indian economy seems to be on a recovery path for the last few months. So far the growth momentum is still modest but most macro-economic indicators have been picking up. Though the general mood is positive, future GDP growth in India will be influenced by a number of factors like the overall performance of the monsoons, the global economic situation and the Reserve Bank's monetary policy. Most economic forecasters expect 2010-11 growth to be higher than last year, with the second half significantly better than the first. But as we have seen time and again, economics is not a precise science, so we must be ready for unforeseen developments.

CORPORATE PERFORMANCE

The Annual Report provides a comprehensive picture of Blue Star's results last year. You would have noticed that Net Profit grew by 17% enabling the Board of Directors to raise the equity dividend from 7 per share to 8. I trust this decision has been appreciated by shareholders.

At the Board Meeting held this morning the Directors have reviewed and approved the financial results for the 1st quarter of 2010. Total Income from Operations has grown by 25% to 664 crore, but profit has not been able to keep pace. Due to pressure on margins and higher expenses, Net Profit has declined to 37.15 crore from 41.17 crore last year.

Q1 results have been viewed seriously by the Management and a number of decisions taken to improve the financial performance. The Carry Forward Order position as on June 30, 2010 is reasonable at 1976 crore, a 15% increase over last year. Overall, I remain hopeful that the business results will show an improvement during the remainder of the year.

ACQUISITIONS

A few years ago we recognised a new trend in large central airconditioning jobs of customers increasingly preferring an integrated mechanical, electrical, plumbing and fire-fighting (MEP) contractor rather than several independent vendors. As India's leading central airconditioning company, Blue Star could not ignore such a fundamental shift in the market which could disrupt the existing stand-alone business while opening up major new business opportunities in the MEP space. We decided to enter the MEP field, but we lacked important skills and relevant experience.

Trying to build these capabilities in-house would be very slow and time consuming. Accordingly, we tried the inorganic i.e. acquisition route. After looking at various options, we bought Naseer Electricals two years ago and began offering integrated mechanical and electrical (M&E) services. That business has now been successfully integrated and rolled out across the country.

Last year we started the next phase of developing plumbing and fire-fighting contracting skills inhouse and are currently executing several projects. Simultaneously, we also began looking for a strategic acquisition in order to leverage the growth opportunities available. In this connection, we opened a dialogue with D. S. Gupta Construction Pvt. Ltd., India's largest independent plumbing and fire-fighting contractor which had a turnover of 130 crore last year.

The negotiations with D.S. Gupta Construction Pvt. Ltd. were fruitful and on May 31, 2010, Blue Star announced an agreement to buy their plumbing and fire-fighting contracting business. The deal involves a lumpsum consideration of 80 crore and certain performance-linked future payments. Closure of the transaction was expected this month. I am happy to announce that virtually all the formalities have been completed and closure will take place in the next week or two after which Blue Star will take over the on-going plumbing and fire-fighting contracts of D.S. Gupta Construction Pvt. Ltd.

With this acquisition, Blue Star will be able to offer full MEP capability as well as stand-alone electrical, plumbing and fire-fighting contracting services. We will retain a strong position in a much bigger, fast-growing MEP market.

ACKNOWLEDGEMENTS

I must convey my sincere thanks to all our employees and business partners for their enthusiasm, professionalism and dedicated contribution to the Company's performance. I also thank my colleagues on the Board for their wise counsel and guidance. We truly value the continued patronage of our esteemed customers. And, of course, I remain grateful to you, our faithful shareholders, for your continuing confidence in our Company.

ASHOK M. ADVANI

July 26, 2010
Mumbai