Highlights

• Gross revenue in Q4 of FY ’06 at INR 5299.9 million shows an increase of 25.6% over Q4 of FY ’05, and 20.6% on a sequential basis.
• EBITDA at INR 1073.4 million grew 65.0% over Q4 of FY ’05 and is stable on a sequential basis.
• EBITDA margin (excluding other income) at 18.3 % in Q4 of FY ’06 is substantially higher than 13.6% in Q4 of FY ’05, but is marginally lower on a sequential basis due to higher than normal skew towards CDR/RW formats during the quarter. Improving product mix, firming CDR/RW prices and softening of input costs should help margins revert to normal levels during FY07.
• The company is set to launch of a series of next generation formats throughout FY ’07 with a potential “first to market” position in most of them. These formats should also drive future margin improvement.
• The company achieved a profit before tax of INR 34.6 million compared to pre-tax loss of INR 292.9 million in Q4 of FY ’05.
• The company achieved a profit after tax (post deferred tax) of INR 3.5 million during Q4 of FY ’06.

• According to TSR, Moser Baer is the largest manufacturer of CDR/RW and second largest of DVDR/RW formats in the world.
• Gross revenue for FY ’06 at INR 17319.1 million is an increase of 27.8% over FY ’05, representing the recovery in volumes and impact of expanded capacity during the year.
• EBITDA at INR 4132.4 million grew by 6.1% over FY05. EBITDA margin reflects the acute pressure from rising input prices and inadequate increase in selling prices for most part of the year.
• A key highlight of the year is that operating performance turned around from Q2 of FY’06 as industry variables started to improve and as company’s various programs on efficiency improvement got implemented.
• The company achieved a profit after tax (including deferred tax impacts) of INR 53.3 million in FY06.

1. Considering the nature of the Company’s business, its activities and location of production facilities, the internal financial reporting, element of risks and returns and its predominant product being storage media, there are no business and geographical segments within the meaning of Accounting Standard 17 – Segment Reporting, issued by the Institute of Chartered Accountants of India.
2. There were no outstanding complaints from the shareholders at the beginning of the quarter and all the 10 complaints received from the shareholders during the quarter have been replied to satisfactorily.
3. During the quarter, the Company has established a subsidiary company which will function as 'developer' of Special Economic Zones, as earlier approved by the Board of Directors.
4. The above results for the quarter ended March 31, 2006 were reviewed by the Audit Committee and were taken on record by the Board of Directors in their meeting held on April 27, 2006.

REVIEW OF OPERATIONS

Demand and Pricing:
Subsequent to the difficult market environment over the past two years, the global optical storage media industry is now on a steady path to recovery, driven by consolidation of capacity, continued growth in consumer demand and signs of softening of prices for key inputs. The company further consolidated its position and according to Techno System and Research (TSR), Japan, has emerged as the largest and second largest manufacturer of CDR/RW and DVDR/RW format respectively.

The company continues its efforts to gradually revert to normal levels of operational & financial performance, as reflected in a profit before tax of INR 34.6 million in 4QFY06 against a loss of INR 292.9 million in 4QFY05. While the company’s production volumes rose marginally, shipment volumes for optical media rose sharply by 29% on a sequential basis. Though, DVDR/RW shipment volumes continue to grow at a fast clip, it’s the sharp recovery in CDR/RW shipments which has also contributed to this robust growth in optical media shipments. As anticipated by us, the global demand-supply equilibrium has been restored in CDR/RW space, resulting in a sharp 23% sequential growth in CDR/RW media shipments for the company.

“The steady improvement in market variables and our increasing order books have enabled us to achieve record levels of optical media shipments in 4QFY06. The recovery in CDR/RW media market pricing in the latter part of the quarter is the other positive. However, higher than normal skew towards CDR/RW formats has subdued operating performance during the period. We expect the trend to start reverting back to normal operating and financial levels in the medium term driven by increasing DVDR/RW contribution, improving CDR/RW pricing, rising production efficiencies and softening of input costs.” Said Mr Ratul Puri, Director, Moser Baer India Ltd, said.

Costs:
One of the key positive developments during the quarter is the softening in market purchase price of polycarbonate (PC). The company expects substantial reductions in PC price in 2Q calendar 2006, the impact of which should reflect in the company’s operating performance from 3Q calendar 2006. This should help the company expand margins in the current year.

The company continues to drive extensive cost reduction programs, with a focus on DVD formats, resulting in increasing manufacturing efficiencies. We have been able to research, design and co-develop equipment which improves process yields, enabling us to re-set internal benchmarks for production cost reduction.

Future trends
The trend of gradual recovery and improving industry conditions should continue as we enter a new financial year. While CDR/RW pricing should remain firm in the medium term, DVDR/RW prices will follow the cost curve, enabling us to maintain healthy margins in the optical media business. The revenue share of higher margin DVDR/RW formats is expected to rise to over 60% by 4QFY07, thereby aiding margin expansion.

The company continues to strive to move away from the commodity price curve by offering value added products to its customers and also create product niches. The share of value added products, like the lighscribe, hardcoat, etc, is expected to double over the year.

The race is on to successfully develop and commercialize the next generation format in the industry, namely the Blue Disk (BD) or the HDDVD. An early mover advantage in the next generation formats is a critical success factor as CDR/RW segment starts to mature.

Over the past three years, the company has invested significantly in its R&D programs targeted at developing the next generation formats in optical media space by leveraging its core skills in base material engineering, thin film coating, precision sputtering and deep UV mastering technologies. Starting from 1QFY07, the company plans to launch a series of next generation formats, in conjugation with drive and recorder availability, and expects to be first to market in a majority of these formats. The four products which we believe will have a significant market potential in the future are DVDR Dual Layer, HDDVD-R (recordable) and RE (re-writable), HDDVD Dual layer, and BD-R and RE.

“The company has developed a unique patented technology, specifically for advanced generation of BD formats which will not only enable lower manufacturing costs, but also allow the consumer greater ease of interchangeability of media across different drives. This is expected to give us a significant competitive edge in the next generation format race.” Mr Brian Bartholomuez, Senior Vice President Strategic Initiatives, Moser Baer India Ltd, said.

The company has also begun collaborative efforts with companies in the Holographic technology domain in order to work on media and related development for the future disk with capacities up to 200GB and beyond.

“In a fast evolving market landscape and increasing competition, companies will increasingly use technology to differentiate themselves and not only launch innovative products, but also do so through more efficient manufacturing. We have embarked on a strategy to transform into a technology developer and innovator from a technology recipient. We believe that this will widen the gap between us and second-tier players. With proprietary technology and a possible first to market position in the next generation formats, we are well placed to further enhance our global leadership position.” Mr Yogesh Mathur, Group Chief Financial Officer, Moser Baer India Ltd, said.

Medium term Revenue Guidance: The Company continues to expect a three year CAGR of 25-35% in its revenues. Most of the growth in revenues is expected to come from the DVD segment and roll-out of next generation technology formats.

Expansion Plans
During FY06, the company spent USD 87million to expand capacity to 2.8 billion units per annum.

Status of Photovoltaic (PV) Cell project.
The project is on a fast track to implementation and will be executed in Moser Baer Photo Voltaic Ltd, which have already been established and capitalized. The company is targeting a capacity of 80 MW by Year 2007 with an initial project cost of INR 260 crore ($58 million). The contracts for supply of equipment and technology for cell and module making have already been executed. The company has also secured part of its short term requirements of raw materials and is working towards closing medium to long term sourcing agreements.

“The global PV business is estimated to grow five-fold to a USD 40 billion opportunity by 2010 – thereby presenting us with an exciting growth opportunity. The strategy is to leverage existing core competencies and R&D to develop cutting edge manufacturing efficiencies and identify and participate in emerging technologies to establish an early mover advantage and competitive edge. We remain on track to start commercial production by 3QFY07.” Mr Ravi Khanna, Chief Executive Officer, Moser Baer Photo Voltic Ltd, said. This business also being significantly less capital-intensive than our existing business should improve our overall return on capital, he added.

Key Appointments
In line with the strategy to emerge as a global technology manufacturing company having a multi faceted growth strategy, the company significantly strengthened its management over the past year. Some of the key appointments include Mr Girish Baluja as COO (Chief Operating Officer), Mr Yogesh Mathur as GCFO (Group Chief Financial Officer), Mr Sandeep Muju as Vice President Business excellence and Mr Ravi Khanna as Chief Executive, Moser Baer Photo Voltaic

About the Company
Moser Baer, headquartered in New Delhi, India, was established in 1983. The Company has successfully developed cutting edge technologies for recordable optical media, constantly innovating and introducing new products and process. An emphasis on high quality products and services has enabled Moser Baer to emerge as one of India's leading technology companies, with more than a 16% share of the global recordable optical media market. The company currently has over 5,000 full-time employees and has multiple manufacturing facilities in the suburbs of New Delhi, The company services it’s customers through 6 marketing offices and subsidiaries/affiliates in India, the US, Europe and Japan.

Disclaimer
Certain statements in this release concerning future growth prospects involve risks and uncertainties, especially those relating to future industry outlook and our ability to manage growth and intense competition within the Industry. Actual market conditions and our performance may differ from our guidance. This estimate is based on current market trends. Among other factors, a sharp and sustained strengthening of the Indian Rupee and a significant weakening in global demand could adversely impact the company’s earnings.