Dear shareholders,

It gives me great pleasure to welcome you to the 29th Annual General Meeting of your Company. On behalf of all CMCites, I thank you all for your continued trust, encouragement and support to the Company.

During the year 2004-05, your Company recorded revenue earnings of Rs.782 crore, an increase of 2.5 per cent over the previous year. However, the profit after tax declined by 52.0 per cent to Rs.23 crore. In view of lower profit, your Board has recommended a dividend of 45 per cent compared to 55 per cent in the previous year. This results in an increase in payout from 20 per cent to 34 per cent of net profit.

The financial performance of your Company was impacted by increased competition from existing and new players in domestic market, putting pressure on pricing and margins, lower other income compared with previous year and Rs. 16 crore provisioning against dues from two international clients. The Company had to suspend the work for two international clients following their organizational restructuring, leading to uncertainty about recovery of dues from them. We are still working on these clients to retrieve maximum value from them. In addition, we have fine-tuned our processes for due-diligence, country and client risk analysis, risk mitigation and contracting. This includes political, economic and legal risk analysis of the countries, credit risk analysis of customers, and contractual terms to safeguard our business interests.

Let me take you through our approach for growth in each of our business segments.

Customer Services
CMC earns more than half of its revenue from hardware business, which has become very competitive, putting pressure on pricing and margins. We are strategically defocusing from "pure" equipment business and increasingly looking at transactions having significant value added services component. In addition, we are building up more annuity business to provide sustained stream of service revenue. Some of the areas of focus include advanced Storage and Server management, Network planning and design, Data center planning and management, Data security and privacy solutions, Business continuity services, etc. Appropriate tie-ups and alliances with technology partners have been put in place to build these capabilities. While retaining our leadership position in this segment in the domestic market, we are increasingly looking at global markets to provide these services.

Systems Integration
With the privatization of the Company, CMC no longer enjoys the status of preferred vendor to the Government clients, which has been the largest contributor to the Company's software services and solutions revenue. This has affected the volume and margins of Systems Integration SBU in the domestic market. However your Company has gained significant domain expertise, which is being leveraged to expand addressable market globally. The international revenue of the Company grew about 32 per cent in the last year. The Company has had successes in the areas of embedded systems, biometric solutions, and shipping, railways, securities, banking and insurance solutions in the international markets. Your Company is up-scaling its software solutions to meet the requirement of international markets. In addition, your Company is positioning itself to address opportunities in the areas of business intelligence and data warehousing solutions, supply chain and logistics management, testing and quality consulting services and complex application rollout services in both domestic and international markets.

IT Enabled Services
ITES-BPO is the fastest growing segment both in domestic and export markets. As per NASSCOM, it has grown by 49 per cent in 2004-05 to US$ 5.8 billion. Your Company has a track record of successfully completing some of the largest and most complex jobs like census and elections in India. Your Company is strongly positioning itself for similar large scale Digitization opportunities in the global market. Your Company is uniquely placed to offer integrated solutions involving diverse technologies like biometric solution, mobile application on hand-held devices, PKI infrastructure, associated networking solution and smart card based applications, which enables it to address some of the large global opportunities like national ID cards, health care, census etc.

Education & Training
Last year has been a turnaround year for IT education business, after three years of decline in the industry. E&T business of your Company registered a growth of 55 per cent over the previous year. As per NASSCOM, the IT software and service employee base has grown at a CAGR of 23.5 per cent and ITES-BPO employee base has grown at a CAGR of 52.6 per cent during last five years with the total industry employee base crossing the 1 million mark in 2004-05. The industry is expected to maintain this growth rate in 2005-06 also. This augurs well for E&T business of your Company, both in the retail and corporate segment as well as in providing advanced e-learning solutions. The Company is building up necessary capacity to address the growing business opportunity in this segment.

'Joint go to market approach' with TCS
CMC and TCS have drafted joint go to market approach to address opportunities both in domestic and international markets, as we believe that these two organizations together create a formidable combination to enhance value for both organizations as well as to the customers. CMC's strong domain expertise and technical skills in niche areas and strong service delivery chain in India and TCS's expertise in application development, excellent global execution and delivery capabilities, proven processes and global market reach creates an unbeatable combination for accelerated growth. This approach enables CMC to consolidate its dominance in domestic market, and increase internationalization. This approach has been very successful in the area of embedded solutions in the international markets, with CMC achieving more than 200 per cent growth in embedded service revenue in 2004-05 over the previous year. The TCS - CMC combination has won one of the largest IT outsourcing jobs from Ministry of Company Affairs, Government of India last year. We will leverage these wins to consolidate our dominance in this space.

I wish to assure you that the fundamentals of your Company remain very strong. We will continue to work on improving processes, consolidating the dominant position of your Company in domestic market and aggressive globalization. We are focusing to upscale all internal processes to achieve excellence in project execution and service delivery to meet global standards and to achieve accelerated growth. CMC Southern Region, which houses some of the major international clients of CMC, also achieved CMM Level 5 during the last year, the highest level of internationally recognized quality maturity level of an IT organization.

While pursuing the objective of growth, we wish to reinforce our commitment to five TATA values of Integrity, Understanding, Excellence, Unity and Responsibility will continue to direct the Company's sustained growth and businesses.

On your behalf and on behalf of the Board of Directors, I wish to thank the employees, customers, vendors, business associates, bankers, credit rating agency and the Government of India and State Governments for their continued support to the Company and its management.

Thank you

S Ramadorai
Chairman

Date: June 17, 2005
Place: Hyderabad

Note: This does not purport to be proceedings of the 29th AGM held on June 17, 2005