Chairman of Murugappa Group

Dear Shareholders,

The year 2014-15 was yet another challenging year for CUMI. While it started with an expectation of improvement in the economy globally and In India, It progressed very slowly In what can be termed at best a subdued growth.North America gained momentum largely through a supportive monetary policy In the US, while the economic revival In the Euro Zone was very slow. Falling crude oil prices had a mixed impact on countries. In India, a new majority government was elected to power with high expectations of framing policy to spur economic growth. Though the intent remains strong, such growth did not gather momentum during the year. Russia witnessed an unprecedented depreciation in its currency while the rest of the world witnessed subdued yet steady economic activity.The continuing volatility and uncertainty had a strong impact on CUMI,its associates and joint ventures in India and across the world.

Against this backdrop, CUMI, its subsidiaries, joint ventures and associate companies had a difficult year. Consolidated revenues declined by 3.6 per cent largely owing to currency translation losses caused by the depreciation of the Russian Rouble. Cost pressures In the geographies of India. Russia and South Africa, mainly on electricity, a vital input to the manufacturing process,triggered the need for a more focused efficiencydriveand a relentless cost management effort across the Company.The CUMI team rose to the occasion by using alternate matertals, Improving plant efficiencies and careful planning and monitoring of power utilisation.The practice of Total Productive Maintenance{lPM}took firmer roots with two of the Company's Coated Abrasives units, In Srlperumbudur and Maraimalai Nagar in India being awarded the 'TPM award for excellence-category A by the Japan Institute of Plant Maintenance • A commendable recognition achieved after a very rigorous evaluation. Other plants are well on their way towardssimilar and higher goals.These efforts have resulted In a 6 per cent growth in operating profits.

While operations and cost management were areas of primary focus at the business units, Investments In Research and Development, Applications Engineering and Customer Partnership programmes across CUMI were well supported. All these have resulted In an Increasing number of Intellectual property filings through the year. Simultaneously, with a view to ensure strong and sustained financial strength amid such uncertain and rapidly changing economic environment noncore land assets in India were sold.The proceeds from this were used to reduce debt obligations at the consolidated level.

As a matter of both,prudenceand continued future confidence, the dividend has been maintained at f 125 per share, thus continuing an unbroken dividend track record of 58 years.

Abrasives,CUMI's largest operating business witnessed muted sales growth in India. However, operating margins improved owing to Improved efficiency across the value chain and strong distributor and customer partnerships. Abrasives sales

in Russia declined owing to a significant downturn in the user industry activity.In China,the business was impacted by demand contraction and price competition, causing a relook at the business model and structure going forward. CUMI's subsidiary,Sterling Abrasives, which manufactures specialist conventional Abrasives and joint venture,Wendt India,which addresses Super Abrasives and Grinding machines had a year of profitable growth. Exports from all the operations showed a consistent uptrend.

Electrominerals in Russia,India and South Africa had a difficult year. Despite the currency depreciation in Russia, higher electricity costs and trade limitingfactors,VAW had a very good year. Lower customer offtake in Europe was compensated by improved sales within Russia with realignment of the product mix. The Indian operations focused on new product development in the SemiFriable,Sol gel and Alumina-zirconia range of products.The biggest challenge was in South Africa wherein increasing input costs rendered the Thukela plant in lsithebe unviable and hence causing a closure decision.The Electrominerals and the Refractories facilities will be relocated to the Edapally and Jabalpur manufacturing sites in India. The Bubble Zirconia plant of Foskor Zirconia did not operate consistently and will in due course be moved to India as well, as we believe that with greater levels of skill and technical attention the plant operations can improve significantly.

The Ceramics businesses had a mixed year.IndustrialCeramics did well both in the wear-resistant tiles and equipment in India and Australia,as well as in Metallised Ceramics with strong support from existing customers and increased acceptance from new customers across the world. The Refractories business had a difficult year both in dense and monolithic products with many firm customer contracts being postponed owing to the decline in their customer demand.This should see improvement progressively with orders already in place. The Polymer and Glass Fibre composite business made steady progress.During the year,the stake of Cellaris Israel,the joint venturepartner inCellaris Refractories India was purchased.The facility in Kochi,India will be refurbished to produce ultralight refractory materials and products. The Refractory Ceramic Fibre joint venture,Murugappa MorganThermal Ceramics and the Refractory Engineering venture,both in partnership with Morgan Advanced Materials,turned in excellent business and financial performances.

To support the Electrominerals businesses across CUMI and key customers of all CUMI operations, CUMI Europe was established in the Czech Republic. This will provide a good avenue for greater customer connect in the European region.

Capital Expenditure across all CUMIbusinesses largely focused on new products,improving quality standards,automationand enhancing Researchand Engineering capabilities.Partnerships that support the enhancement of technological expertise through academic and research institutions continued strongly

with a view towards providing newer product and service offerings to customers. CUMIcontinues its focus on training and development across the Organisation and geographies, thus reinforcing its strong commitment to people as its most valuable resource.Safety in the work place receives the highest attention from the Board and it has been a good year on this front as well.

Prudent management of working capital has resulted in the debt equity ratio being the lowest in the last decade.Finance and Information Technology teams at the corporate office and across all units have been quick to ensure compliance with rapidly changing regulations across the world, while supporting all the businesses in fulfilling their strategic intent and directions.

It has been another year of great challenge across businesses andtheentireCUMlteam very ably ledbyourManagingDirector K Srinivasan, together with leaders across units and geographies has done well to face such challenges with great commitment, conviction and courage.My sincere thanks and profound gratitude to every member,as we,at CUMI,believe that everyone's role is vital to the development and progress of the Company. Our Board has been of great support to the Company,its leadership and to me,personally,through their involvement expertise and wise counsel. I thank them for their guidance through the year.We are very pleased to welcome to the Board Mrs.Bharati Rao,a successful banker of outstanding merit. Her joining the Board gives us a very balanced perspective borne out by great experience.

To all our stakeholders,customers,suppliers,vendors,bankers and you- our valued shareholders,Iexpress our most grateful thanks for your unstinted support.

Over 60 years,CUMI has progressed from a small Abrasives business towards addressing opportunities in the field of material sciences.Today,teams of people,drawn from various businesses are working together alongside our leadership to craft a future path that will traverse new dimensions of materials science and technology. Hence from humble beginnings of just Making Materials Work For Man or Making Scarce Materials Go Farther,we at CUMI wish to progressively move towards"Making Materials Matterw.

Murugappa Group Abrasives & Ceramics Manufacturers