Dear shareholders,

It gives me great pleasure to welcome you to the 30th 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 2005-06, your company recorded revenue of Rs.858 crore, an increase of 10 per cent over the previous year. The profit after tax increased to Rs. 44 crore, a growth of 91 per cent over the previous year. Operating Profit increased to Rs. 44 crore, a growth of 12 per cent over the previous year. The Earnings per share has further improved to Rs.29.12 from Rs.15.22 in the previous year. In view of the improved financial results, your Board has recommended an increase in the dividend rate to 50 per cent compared to 45 per cent in the previous year.

The company, as you are aware, has been undergoing major transformations in its marketing approach, market segments, business mix, internal processes and systems to improve its revenue mix, profitability and value addition to customers. While this is an ongoing process and is being continuously improved upon, I am happy to share with you the progress and some of the significant results experienced through these initiatives.

Last year I shared with you CMC's "Joint go to market approach" with TCS to capitalise on CMC's own strengths combined with the breadth and depth of TCS global reach and capabilities. I am happy to inform that synergy between TCS and CMC has grown with a 122 per cent increase in synergy revenue to Rs. 255 crore. The combination of infrastructure and managed services capabilities of CMC and software application capabilities of TCS has enabled us to present strong value propositions to clients and win some significant deals in BFSI segment. Synergy between CMC and TCS has enabled CMC to double its revenue from embedded systems and also win a prestigious managed service project from a utility Company in UK. We are fine-tuning the engagement model and have put a formal process in place to review the functioning of synergy between TCS and CMC with a view to leverage our successes to accelerate growth.

During the year 2005-06, the company has been focusing on improvement in efficiency and productivity to accelerate growth and improve profitability of the company. The company has achieved an important milestone in improving its internal systems for "Data based decision making" by rolling out an end to end world class digitisation system (Ultimatix) from TCS.

This will bring about uniformity in methods of measurement and control of business vitals across the company and is one more example of TCS's best practices being made available to the company. Business review systems have been streamlined based on the system, and an operational review board has also been constituted for this purpose. The Ultimatix system facilitates a closer monitoring and review of person power utilisation. These and other process improvement initiatives have started bringing benefits to the company and enabled people productivity improvement by 18 per cent and expansion in operating margins by 50 basis points in last quarter.

The company has undertaken an elaborate exercise to re-engineer its revenue mix towards higher value added business with a view to increase profitability. The company has fine-tuned the process of customer and project evaluation to focus on customers and projects with high growth potential and higher profitability. Simultaneously, the company is periodically evaluating all its offerings, to focus on solutions and services with relative cost advantage and high profitability, scalability and replicability, and value enhancement for the customer. The Company has started realising benefits in 2005-06 as evidenced by increase in share of service revenue from 50 per cent to 54 per cent.

Last year I talked to you about emerging opportunities in the areas of IT Enabled Services and Education and Training, and your Company's unique position to capitalise on the same. I am happy to inform you that both these segments have grown significantly in revenue and profitability. We see some good opportunities in IT Enabled Services segments in the Global market, which should help CMC in improvement in revenue mix towards value added services. In addition to IT Enabled Services and Education and Training, your company is revamping its offerings in the IT infrastructure space, and software products and solutions to align with emerging customer needs, rapidly changing technology landscape and it is potential for our future growth and profitability.

Before I end, I wish to reinforce our commitment to five TATA values of Integrity, Understanding, Excellence, Unity and Responsibility.

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, 2006
Place: Hyderabad

Note: This does not purport to be proceedings of the 30th AGM held on 27 June, 2006