Bayer CropScience Ltd. Annual Report 2005 CropScience Limited Annual Report 2005 Bayer CropScience...

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Bayer CropScience Limited Annual Report 2005

Bayer CropScience LimitedAnnual Report 2005

Directors Dr. Vijay Mallya — Chairman

Mr. Yezdi H. Malegam

Mr. Johannes M. Dietsch

Mr. A. K. Ravi Nedungadi

Mr. Raj Kaul

Mr. Sharad M. Kulkarni

Mr. Stephan Gerlich — Managing Director

Ms. Christiane Kunze — Whole-time Director

General Counsel &Company Secretary Shirin V. Balsara

Members are requested to direct allcorrespondence relating to share matters to theCompany’s Registrars and Share Transfer Agents.

Members are requested to bring their copies of theAnnual Report to the Annual General Meeting.

Members are requested to send their queries, ifany, relating to the accounts of the Company, wellin advance, so that the necessary information canbe made available at the Meeting.

Bankers Bank of AmericaBNP ParibasCentral Bank of IndiaCitibank N.A.Deutsche BankHDFC Bank LimitedSociete GeneraleState Bank of IndiaUnion Bank of India

Auditors Price Waterhouse

Solicitors Crawford Bayley & Co.

Registered Bayer House, Central Avenue,Office Hiranandani Gardens, Powai,

Mumbai-400 076.Tel. No. 2571 1234Fax No. 2570 0147.

Registrars TSR Darashaw Limited (formerlyand Share Tata Share Registry Limited)Transfer Army & Navy Building,Agents 148, M. G. Road, Fort,

Mumbai-400 001.Tel. No. 6656 8484.Fax No. 6656 8494.

Factories (1) Kolshet Road,Thane-400 607, Maharashtra.

(2) Plot Nos. 6009 - 10 & 6301 - 10A,GIDC Industrial Estate,Ankleshwar 393 002, Gujarat.

(3) Plot Nos. 66/1 to 75/2, GIDCEstate, Himatnagar-383 001,Gujarat.

ContentsBoard of Directors 1

Notice 2

Directors’ Report 7

Corporate Governance 13

Management Discussion & Analysis Report 33

Auditors’ Report 41

Balance Sheet 46

Profit and Loss Account 47

Schedules forming part of the Balance Sheet 48

Schedules forming part of the Profit andLoss Account 52

Notes forming part of the Accounts 56

Cash Flow 70

Statement pursuant to Section 212 72

Subsidiary 73

Consolidated Financial Statement 85

Facts 108

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Notice to Shareholders

NOTICE is hereby given that the Forty Eighth Annual General Meeting of Bayer CropScience Limited will be held onMonday, 12th June, 2006 at 11.30 a.m. at “Yashwantrao Chavan Pratishtan Auditorium”, Y. B. Chavan Centre, NearMantralaya, Gen. J. Bhosale Marg, Mumbai - 400 021 to transact the following business:

ORDINARY BUSINESS:1. To receive, consider, approve and adopt the audited Balance Sheet as at 31st December, 2005 and the Profit and

Loss Account for the year ended on that date and the Report of the Directors and Auditors thereon.

2. To declare dividend on equity shares for the year ended 31st December, 2005.

3. To appoint a Director in place of Dr. Vijay Mallya, who retires by rotation and being eligible, offers himself forre-appointment.

4. To appoint a Director in place of Mr. A. K. Ravi Nedungadi, who retires by rotation and being eligible, offers himselffor re-appointment.

5. To appoint Auditors and to fix their remuneration.

SPECIAL BUSINESS:6. To consider and, if thought fit, to pass, with or without modification, the following Resolution as an Ordinary

Resolution:

“RESOLVED THAT Mr. Sharad M. Kulkarni who was appointed as an Additional Director of the Company from1st April, 2006 by the Board of Directors and holds office upto the date of this Annual General Meeting under Section260 of the Companies Act, 1956 (the Act) read with Article 117 (2) of the Articles of Association of the Company, butbeing eligible, offers himself for re-appointment and in respect of whom the Company has received a notice in writingunder Section 257 of the Act from a shareholder signifying his intention to propose Mr. Sharad M. Kulkarni as acandidate for the office of Director, be and is hereby appointed as a Director of the Company and whose term ofoffice shall be liable to determination by retirement of the Directors by rotation.”

7. To consider and, if thought fit, to pass, with or without modification, the following resolution as a Special Resolution:

“RESOLVED THAT pursuant to the provisions of Sections 198, 269, 309, 310, 311 and other applicable provisions ofthe Companies Act, 1956 and Schedule XIII thereto consent be and is hereby granted for the variation in the termsand conditions of the appointment of Mr. Stephan Gerlich, Managing Director with effect from 1st January, 2006 toinclude the following component:Long-Term Incentive : An amount decided as per the Global Policy of Bayer AG, Germany for Senior

Management.

RESOLVED FURTHER THAT Ms. Christiane Kunze,,,,, Whole-time Director or Shirin V. Balsara, Head – Legal &Company Secretary or Mr. Pradnesh Kamat, Manager – Secretarial, be and are hereby severally authorised to signand file such forms and documents as may be required and to do all such acts, deeds and things as may benecessary to give effect to the aforesaid resolution.”

8. To consider and, if thought fit, to pass, with or without modification, the following resolution as a Special Resolution:

“RESOLVED THAT pursuant to the provisions of Sections 198, 269, 309, Schedule XIII and other applicableprovisions, if any, of the Companies Act, 1956 and subject to the approval of the Central Government, if applicable,approval of the Company be and is hereby accorded to the appointment of Ms. Christiane Kunze as the Whole-timeDirector of the Company for a period of five years commencing from 1st April, 2006 upon and, subject to the terms,conditions and stipulations hereinafter mentioned and be paid and provided with the following remuneration,perquisites and amenities:

(a) Salary : (i) Rs. 1,50,076/- (Rupees One Lakh Fifty Thousand and Seventy Sixonly) per month.

(ii) An amount equivalent to Euro 9,778/- (Euro Nine ThousandSeven Hundred Seventy Eight only) per month in Indian Rupeesat the prevailing exchange rate.

(iii) Special Allowance – Rs. 30,015/- (Rupees Thirty ThousandFifteen Only) per month.

(b) Annual Increment : An amount as may be decided by the Board of Directors from time totime.

(c) Performance Award/Bonus/ : An amount as may be decided by the Board of Directors from time toIncentive/Ex-gratia time.

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(d) Long-Term Incentive : An amount decided as per the Global Policy of Bayer AG, Germanyfor Senior Management.

(e) Perquisites : As per the provisions of Sections 198 and 309 of the Companies Act,1956 and Schedule XIII to the said Act for the time being in force orany statutory modification or re-enactment thereof.

The perquisites (including allowances) payable are as follows:

(i) Housing ::::: The Company shall provide free furnished accommodation.

(ii) Home Travel Allowance ::::: An amount as may be decided by the Board of Directors from time totime in accordance with Bayer’s International Assignment Policy.

(iii) Club fees ::::: Entrance and annual fees of one club.

(iv) Children’s education expenses : Actual educational expenses shall be paid.

(v) Allowances/Reimbursement of : Actual expenses incurred on travel and on packing, forwarding,expenses incurred on joining loading/unloading as well as freight, insurance, customs duty,duty in India/returning to the clearing expenses, local transportation and installation expenses,Whole-time Director’s home relocation allowance, electrical appliances allowance in connectioncountry after completion of with the moving of personal effects for self and family for joiningtenure of her service duty in India may be allowed in case these have not been claimed

from the previous employer. After completion of the tenure, suchexpenses may be reimbursed if the Whole-time Director is finallyleaving the employment of the Company.

(vi) Retirement Benefits ::::: Retirement benefits under the Employee Benefit Programme/Schemeas per the rules of the Company.

(vii) Free use of Motor Car ::::: Free use of a motor car with chauffeur; alternatively the Companyshall bear all running, maintenance and repair expenses plus theremuneration of a chauffeur for her own car.

(viii) Earned/Privilege Leave : As per rules of the Company.

(ix) Encashment of Leave : Encashment of leave at the end of the tenure as per the rules of theCompany.

(x) Entertainment Expenses ::::: Reimbursement of entertainment expenses actually and properlyincurred in the course of legitimate business of the Company.

RESOLVED FURTHER THAT the remuneration, aforesaid, including expressly the benefits and amenities aforesaid,shall be paid and provided as minimum remuneration to Ms. Christiane Kunze subject to the approval of the CentralGovernment, if necessary, or any other authority notwithstanding the absence or inadequacy of profits in anyaccounting year of the Company during the tenure of her office as the Whole-time Director of the Company.

RESOLVED FURTHER THAT in the event of any relaxation made by the Government in the guidelines or ceiling onManagerial Remuneration during the period of this agreement, the remuneration (including “MinimumRemuneration”) payable to the Whole-time Director shall be increased as the Board may deem fit in accordance withthe guidelines or ceiling.

RESOLVED FURTHER THAT the Board, may subject to the requisite approvals, if required, of the CentralGovernment, increase, augment, vary and modify the remuneration payable and the benefits and amenities providedto Ms. Christiane Kunze including the monetary value thereof, upto the limits prescribed in that behalf under orpursuant to the Companies Act, 1956 or any statutory amendment, modification or re-enactment thereof from time totime in force and/or the guidelines for managerial remuneration issued by the Central Government from time to time,from the date of the statutory amendment, modification, re-enactment and/or the Guidelines coming into force.

RESOLVED FURTHER THAT so long as Ms. Christiane Kunze functions as Whole-time Director of the Company, sheshall not be paid any sitting fees for attending the meetings of the Board of Directors or Committee thereof.

RESOLVED FURTHER THAT Ms. Christiane Kunze shall not be liable to retire by rotation during her tenure asWhole-time Director of the Company.

RESOLVED FURTHER THAT Mr. Stephan Gerlich, Managing Director or Shirin V. Balsara, Head – Legal & CompanySecretary or Mr. Pradnesh Kamat, Manager – Secretarial, be and are hereby severally authorised to sign and filesuch forms and documents as may be required and to do all such acts, deeds and things as may be necessary togive effect to the aforesaid Resolution.”

Notice to Shareholders (Contd.)

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NOTES:

(a) A MEMBER ENTITLED TO ATTEND AND VOTE IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTEINSTEAD OF HIMSELF AND THE PROXY NEED NOT BE A MEMBER. The instrument appointing a proxy in order tobe effective shall be duly filled, stamped, signed and deposited at the Registered Office of the Company not lessthan 48 hours before the commencement of the meeting.

(b) The relevant Explanatory Statement pursuant to Section 173 of the Companies Act, 1956 (the Act), in respect ofthe business under Item Nos. 6 to 8 is annexed hereto and forms part of this Notice. The details under Clause 49 ofthe Listing Agreement with the Bombay Stock Exchange Limited, Mumbai, in respect of Directors seekingappointment/re-appointment at the Annual General Meeting forms part of the Corporate Governance Report.

(c) The Register of Members and Share Transfer Books of the Company will remain closed from Saturday, 27th May,2006 to Monday, 12th June, 2006 (both days inclusive).

(d) The dividend of Rs. 2.20 (22%) per Equity Share, as recommended by the Board of Directors, if declared at theensuing 48th Annual General Meeting to be held on 12th June, 2006, will be paid at par within 30 days of 12th June,2006:

• To those members who hold shares in physical form and whose names appear on the Company’s Register ofMembers as holders of Equity Shares on Monday, 12th June, 2006.

• In respect of Shares held in electronic form, to the beneficial owners of the Shares as at the close of businesshours on Saturday, 27th May, 2006, as per details to be furnished by National Securities Depository Limited andCentral Depository Services (India) Limited.

(e) The shareholders are requested to address all correspondence to TSR Darashaw Limited, the Registrars & ShareTransfer Agents of the Company at the following address:

TSR Darashaw Limited(Formerly Tata Share Registry Limited)Unit : Bayer CropScience Limited,Army & Navy Building,148, M. G. Road,Mumbai - 400 001.Tel. No. 6656 8484Fax No. 6656 8494E-mail : [email protected]

(f) Members holding shares in physical form are requested to notify/send the following to the Company’s Registrars andShare Transfer Agents on or before 26th May, 2006 to facilitate better service:

(i) any change in their address/mandate/bank details;

(ii) particulars of their bank account in case the same have not been sent earlier; and

(iii) share certificate(s) held in multiple accounts in identical names or joint accounts in the same order of names forconsolidation of such shareholdings into one account.

(g) Members holding shares in the dematerialised mode are requested to intimate all changes pertaining to their bankdetails, ECS, mandates, nominations, power of attorney, change of address/name, etc. to their Depository Participantonly and not to the Company’s Registrars and Share Transfer Agents. Changes intimated to the DepositoryParticipant will then be automatically reflected in the Company’s records which will help the Company and itsRegistrars and Share Transfer Agents to provide efficient and better service to the Members.

(h) The Members are requested to encash the Dividend Warrants immediately on its receipt, as pursuant tothe provisions of Section 205A(5) of the Companies Act, 1956 (the Act) dividends remaining unclaimed forseven years from the date they first became due for payment are now required to be transferred to the“Investor Education and Protection Fund” established by the Central Government under Section 205C ofthe Act. Members shall not be able to claim any unpaid dividend from the said Fund or the Companythereafter.

The dividend paid in the year 1999 is now due to be transferred to the Investor Education and ProtectionFund. The members are requested to encash the unclaimed dividend.

(i) Members can avail of the facility of nomination in respect of shares held by them by sending their nomination in theprescribed Form No. 2B duly filled in to the Company’s Registrars and Share Transfer Agents, quoting theirrespective Folio Nos., Certificate Nos. and Distinctive Nos.


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(j) Kindly forward all accounts related queries well in advance, so as to reach the Company atleast 10 days before theAnnual General Meeting.

(k) All documents referred to in the accompanying Notice and Explanatory Statement are open for inspection at theRegistered Office of the Company on all working days between 10.00 a.m. and 12.00 noon upto the date of theAnnual General Meeting.

By Order of the Board of Directors

SHIRIN V. BALSARAHead – Legal & Company Secretary

Mumbai, 18th April, 2006.

Registered Office:Bayer House,Central Avenue,Hiranandani Gardens,Powai,Mumbai - 400 076.


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Annexure to Notice

The following Explanatory Statement pursuant to Section 173(2) of the Companies Act, 1956 sets out all material factsrelating to the business mentioned at Item Nos. 6 to 8 in the accompanying notice dated 18th April, 2006.

EXPLANATORY STATEMENT

Item No. 6Mr. Sharad M. Kulkarni was appointed as an Additional Director of the Company with effect from 1st April, 2006 by theBoard of Directors and he holds office upto the date of this Annual General Meeting. A notice in writing under Section 257of the Companies Act, 1956, has been received from a Shareholder of the Company signifying his intention to proposeMr. Kulkarni as a candidate for the office of Director.

Mr. Kulkarni was an Alternate Director to Mr. J. M. Dietsch and has ceased to be his alternate with effect from 31st March,2006.

A brief profile of Mr. Kulkarni along with the required particulars is given in paragraph 4.3 of the Report on CorporateGovernance for the information of the members.

The Board recommends the appointment of Mr. Kulkarni as a Director of the Company. Except Mr. Kulkarni, none of theDirectors are concerned or interested in the passing of this resolution.

Item No. 7Mr. Stephan Gerlich was appointed as the Managing Director of the Company with effect from 14th September, 2004. Itis now, proposed to change the terms of his appointment with effect from 1st January, 2006 by including the payment oflong-term incentive by way of an amount decided as per the Global Policy of Bayer AG, Germany for Senior Management.

The agreement entered into with Mr. Gerlich is available for inspection at the Registered Office of the Company on allworking days between 10.00 a.m. and 12.00 noon upto the date of the Annual General Meeting. The terms ofappointment mentioned in the Notice shall be treated as an Abstract required under Section 302 of the Companies Act,1956.

Except Mr. Stephan Gerlich, no Director is concerned or interested in the passing of this resolution.

Item No. 8Ms. Christiane Kunze was appointed as a Director in casual vacancy, caused due to resignation of Mr. Johannes Frick,and the Whole-time Director of the Company with effect from 1st April, 2006.

A brief profile of Ms. Kunze along with the required particulars is given in paragraph 4.4 of the Report on CorporateGovernance for the information of members.

The terms and conditions of payment of remuneration to Ms. Christiane Kunze as the Whole-time Director of theCompany are within the limits as prescribed under Schedule XIII of the Companies Act, 1956.

The agreement entered into with Ms. Kunze is available for inspection at the Registered Office of the Company on allworking days between 10.00 a.m. and 12.00 noon upto the date of the Annual General Meeting. Abstract as requiredunder Section 302 of the Companies Act, 1956 has already been circulated to all the Members of the Company.

The Board recommends the appointment of Ms. Christiane Kunze as the Whole-time Director of the Company for aperiod of five years from 1st April, 2006. Except Ms. Christiane Kunze, no Director is concerned or interested in thepassing of this resolution.

By Order of the Board of Directors

SHIRIN V. BALSARAHead – Legal & Company Secretary

Mumbai, 18th April, 2006.

Registered Office:Bayer House,Central Avenue,Hiranandani Gardens,Powai,Mumbai - 400 076.

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Dear Members,

Your Directors have pleasure in presenting the Forty Eighth Annual Report on the business and operations of theCompany together with the audited Statements of Accounts and the Report of the Auditors for the year ended31st December, 2005.

FINANCIAL PERFORMANCERs. Million

Particulars 2005 2004

Sales and Other Operating Income 7,664.60 7,563.56

Other Income 391.38 261.72

Total Income 8,055.98 7,825.28

Profit before Interest and Depreciation, Prior Period, Exceptional Items and Taxation 1,116.06 885.07

Less: Interest 74.35 111.62

Profit before Depreciation, Prior Period, Exceptional Items and Taxation 1,041.71 773.45

Less: Depreciation 225.74 260.18

Profit for the year before Prior Period, Exceptional Items and Taxation 815.97 513.27

Add/(Less): Prior Period and Exceptional Items (Net) (69.13) 10.77

Profit for the Year before Taxation 746.84 524.04

Less: Provision for Taxation on Income 295.85 231.00

Less: Provision for Deferred Taxes 50.23 29.43

Less: Provision for Fringe Benefit Tax 29.29 —

Profit for the Year After Tax 371.47 263.61

Add: Profit & Loss balance Brought Forward 1,383.18 1,245.02

Amount available for Appropriation 1,754.65 1,508.63

Appropriations:

Proposed Dividend 86.90 86.90

Provision for Taxation on Proposed Dividend 12.19 12.19

Transferred to General Reserve 37.14 26.36

Profit & Loss Balance Carried Forward 1,618.42 1,383.18

Operations:The Company’s profit after tax increased to Rs. 371.47 million this year as compared to Rs. 263.61 million in the last year,an increase of 41%.

Dividend:The Board of Directors is pleased to recommend the payment of dividend of Rs. 2.20 per Equity Share of Rs. 10/- eachfor the year ended 31st December, 2005 subject to the approval of members (previous year Rs. 2.20 per Equity Share ofRs. 10/- each). The proposed dividend will absorb a sum of Rs. 86.90 million. Your Company has been consistentlypaying dividend at the above rate for the last four years. The Register of Members will remain closed from Saturday,27th May, 2006 to Monday, 12th June, 2006 (both days inclusive).

Exports:The Company is a recognised Export House. The export turnover during the year was Rs. 867.76 million compared toRs. 688.17 million achieved during the previous year.

Public Deposits:The Company discontinued its Fixed Deposit Scheme in the year 2003. A sum of Rs. 8,35,000/- relating to 26 depositsremained unclaimed as on 31st December, 2005. No interest is payable on such unclaimed deposits after the maturitydates.

Directors’ Report

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Insurance:The Company’s assets continue to be adequately insured against the risk of fire, riot, earthquake, terrorism and the risk ofloss of profits, among other things.

In addition to this coverage, a Statutory Public Liability Insurance Policy has been taken to cover public liability arising outof industrial accidents. Also, all the employees are covered against the risk of Hospitalisation and Personal Accident.

Subsidiary:The Board of the Subsidiary Company, Bayer Polychem (India) Limited, comprises of Mr. Stephan Gerlich, as Chairman,Mr. K. R. V. Subrahmanian, Independent Director, Mr. D. C. Shroff, Independent Director, Mr. Praveen Singh andMr. Johannes Frick. Mr. J. Frick will cease to be director from 31st March, 2006 and Ms. Christiane Kunze will beappointed as director with effect from 1st April, 2006.

The audited statement of accounts of the Subsidiary Company for the year ended 31st December, 2005 together withReports of the Directors and the Auditors and the Statement pursuant to Section 212 of the Companies Act, 1956 areattached.

The audited Consolidated Accounts and Cash Flow Statement, comprising of the Company and its wholly ownedSubsidiary Company, Bayer Polychem (India) Limited form part of this report. The Consolidated Accounts have beenprepared in accordance with the Accounting Standards (AS)-21 Consolidated Financial Statement issued by The Instituteof Chartered Accountants of India in this regard.

Directors Responsibility Statement:Pursuant to the provisions of Section 217 (2AA) of the Companies Act, 1956, the Directors confirm that, to the best of theirknowledge and belief:

1. in the preparation of the annual accounts, the applicable accounting standards have been followed;

2. appropriate accounting policies have been selected and applied consistently, and such judgements and estimateshave been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of theCompany as on 31st December, 2005 and of the profit of the Company for the year ended on 31st December, 2005;

3. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance withthe provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing anddetecting fraud and other irregularities; and

4. the annual accounts have been prepared on a going concern basis.

Responsible Care and Quality:Your Company accords high priority to health, safety and environment.

Your Company has achieved a landmark of “Zero Reportable Injuries” in the year 2005. This is the second consecutiveyear the Company has achieved zero reportable injuries. This includes all the three Manufacturing Units at Thane,Himatnagar and Ankleshwar. The Company celebrated National Safety Day and Fire Prevention Day with various activitiesthroughout the week to spread greater awareness amongst employees.

Ankleshwar plant was awarded with Safety Appreciation Certificate by Gujarat Safety Council for Accident free 10,00,000man hours.

Your Company, covering all the Manufacturing Units, all India business operations and supporting services, were auditedon Quality Management System by TUV India Pvt. Ltd. (TUV) and the Company was recommended continuance of theISO 9001:2000 certificate with inclusion of Development Activities.

The Environmental Management System for Himatnagar was audited by TUV and TUV recommended upgradationof Certificate from ISO 14001:1996 to ISO 14001:2004. The Environmental Management System for Thane was auditedby Det Norske Veritas (DNV) and DNV recommended recertification with upgradation from ISO 14001:1996 toISO 14001:2004.

TUV conducted Surveillance Audit of Environmental Management System at Ankleshwar and recommended continuanceof ISO 14001 Certificate.

Your Company continued to offer the spare capacity of incineration facility at Thane for disposal of hazardous wastesfrom other industries.

Continual improvement and sustainability resulted in conservation of energy, reduction in waste generation, recycling ofresources and cost savings.

Directors’ Report (Contd.)

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Social ResponsibilityYour Company remains committed to Social Responsibility by continuing to be involved in community projects.Emergency safety training in case of an earthquake was imparted to over 300 children from Balkum school. During thefloods in Mumbai in July 2005, food and utensils were provided to the flood-hit victims. Your Company providedemergency relief to those affected by the earthquake in Jammu & Kashmir in October 2005. The Company representativewent to Jammu and flagged off two trucks containing relief material to the Red Cross Society in Srinagar. Transport wasprovided to handicapped children for their annual picnic and donation of PCs was made to schools. Sub-officersstudying in the National Fire Service College, Nagpur who came to the Thane Factory for an industrial visit appreciatedthe facilities.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo:The information required under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure ofParticulars in the Report of the Board of Directors) Rules, 1988 with respect to these matters forms part of this Report andis annexed hereto.

Human Resources:Employee relations during the year were cordial. Developmental needs of the employees were chalked out and trainingwas imparted to them. Training for the field force in general management skills was conducted in conjunction withmanagement development programmes of the various management institutes.

Information pursuant to Section 217(2A) of the Companies Act, 1956The information as prescribed by Section 217(2A) of the Companies Act, 1956 read along with Companies (Particulars ofEmployees) Rules, 1975 as amended are set out as an annexure to the Directors’ Report. However, as per the provisionsof Section 219(1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to all the shareholdersexcluding the aforesaid annexure. Shareholders desirous of obtaining the same may write to the Company Secretary atthe Registered Office of the Company.

Bayer Mission & Values, REX II and Compliance TrainingThe Company undertook a nationwide training for its employees at all levels informing the importance of Bayer’s values,its mission and importance of compliance. The need, meaning, importance and benefits of the Bayer Values and therequirement for compliance of all laws both in letter and in spirit were explained to all.

As the parent company Bayer AG is listed on the New York Stock Exchange, it is required to comply with the provisionsof the Sarbanes – Oxley Act. It has, therefore, formulated a detailed process of compliance named REX II. Accordingly,every department of the Company initiated the process of formulating and documenting detailed procedures and policiesfor each and every area of activity. The process is ongoing and continuously reviewed and updated to meet currentrequirements.

Bayer worldwide has also initiated the process of Corporate Compliance which needs to be rolled out to all the Bayeremployees worldwide. The Company has, in compliance with this initiative rolled out the Corporate Compliance Trainingprogramme to all employees.

Code of Conduct & Whistle Blower PolicyIn compliance with the new Clause 49 of the Listing Agreement with the Bombay Stock Exchange Limited, the Companyhas formulated a Code of Conduct for the Directors. A Code of Business Conduct (for employees) and Whistle BlowerPolicy have also been formulated which have been cascaded to all the employees of the Company. For more detailskindly refer to the Report on Corporate Governance.

Corporate Governance:Your Company believes in transparency and has always maintained high level of Corporate Governance. As required byClause 49 of the Listing Agreement, a detailed Report on Corporate Governance is given as an Annexure to this Report.The Company is in full compliance with the requirements and disclosures that have to be made in this regard.A Certificate from a practising Company Secretary confirming compliance of the Corporate Governance requirements bythe Company is attached to the Report on Corporate Governance.

Management Discussion and Analysis Report:A detailed review of operations, performance and future outlook of the Company is given separately under the headManagement Discussion and Analysis Report.


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DirectorsMr. Johannes Frick ceased to be a Whole-time Director with effect from 13th October, 2005 and will cease to be aDirector of the Company with effect from 31st March, 2006. The Directors avail this opportunity to place on record theirrecognition and appreciation of the valuable contributions made by Mr. Frick, through his leadership and guidance, to theCompany.

Ms. Christiane Kunze has been appointed as a Director in casual vacancy, caused due to resignation of Mr. Frick, andWhole-time Director with effect from 1st April, 2006.

Mr. Sharad Kulkarni will cease to be an Alternate Director to Mr. Johannes M. Dietsch and has been appointed as anAdditional Director with effect from 1st April, 2006.

Dr. Vijay Mallya and Mr. A. K. Ravi Nedungadi retire by rotation and, being eligible, offer themselves for re-appointment.

A brief profile of the Directors seeking appointment/re-appointment is given under the Report on Corporate Governance.

Cost Audit:In accordance with the directive received from the Central Government, every year, an audit of the cost accounts relatingto insecticides manufactured by the Company is required to be conducted by an auditor with the requisite qualificationsas prescribed under Section 233B of the Companies Act, 1956.

The Company is also required to conduct cost audit for pharmaceuticals formulations which is manufactured by theCompany on job-work basis.

Your Board has appointed M/s. N. I. Mehta and Co., qualified Cost Accountants for the conduct of the audit ofInsecticides and Pharmaceutical Formulations for the year ending 31st December, 2006. The requisite approval for theirappointment from the Central Government is awaited.

Auditors:M/s. Price Waterhouse, Chartered Accountants, retire as Statutory Auditors at the conclusion of the ensuing AnnualGeneral Meeting and are eligible for re-appointment. The Company has received a letter from the retiring Auditors to theeffect that their appointment as Statutory Auditors, if made, will be within the limits prescribed under Section 224 (1B) ofthe Companies Act, 1956. The Audit Committee and the Board recommend the re-appointment of M/s. Price Waterhouse,as Statutory Auditors of the Company for the year 2006.

Acknowledgements:The Board of Directors places on record its sincere appreciation for the dedicated services rendered by employees at alllevels. We would like to express our grateful appreciation for the assistance and support extended by all governmentauthorities, financial institutions, banks, shareholders, suppliers and other business associates. We also acknowledge thecontinual support and guidance from Bayer AG — the parent company.

For and on behalf of the Board of Directors

DR. VIJAY MALLYAChairman

Mumbai, 23rd March, 2006


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Annexure to the Directors’ Report (Annexure I)

Information as per Section 217(1)(e) read with Companies (Disclosure of Particulars in the Report of the Board ofInformation as per Section 217(1)(e) read with Companies (Disclosure of Particulars in the Report of the Board ofInformation as per Section 217(1)(e) read with Companies (Disclosure of Particulars in the Report of the Board ofInformation as per Section 217(1)(e) read with Companies (Disclosure of Particulars in the Report of the Board ofInformation as per Section 217(1)(e) read with Companies (Disclosure of Particulars in the Report of the Board ofDirectors) Rules, 1988 and forming part of the Directors’ Report for the period ended 31st December, 2005.Directors) Rules, 1988 and forming part of the Directors’ Report for the period ended 31st December, 2005.Directors) Rules, 1988 and forming part of the Directors’ Report for the period ended 31st December, 2005.Directors) Rules, 1988 and forming part of the Directors’ Report for the period ended 31st December, 2005.Directors) Rules, 1988 and forming part of the Directors’ Report for the period ended 31st December, 2005.

I. CONSERVATION OF ENERGY

(a) Energy conservation measures taken1. Power factor for Thane factory was maintained above 0.95. This has resulted in savings of Rs. 1.05 million

by way of incentive. Also Time Of Day (TOD) tariff benefit of Rs. 0.48 million was received.2. Variable Frequency Drive (VFD) was installed on a reactor-stirrer in AC-3 plant (Ankleshwar).3. A detailed energy audit for Incinerator and Effluent Treatment plants was conducted at Thane factory.

(b) Additional Investment and proposals for energy conservation1. Energy audit of Active Ingredient plants at Ankleshwar.2. Gas engine generators capacity & thermal efficiency enhancement through optimisation at Ankleshwar

plant.3. Power factor improvement in electrical distribution network at Ankleshwar plant.4. Improvement in condensate recovery system for Ankleshwar plant.

(c) Impact of the measures at (a) and (b) above for reduction of Energy Consumption and consequentimpact on the cost of production of goods.The Company’s present system does not allow us to identify and hence determine precisely the reduction ofenergy consumption per unit and consequent impact on the cost of production of goods.

(d) Total energy consumption and energy consumption per unit of production as per Form A of theAnnexure to the Rules in respect of industries specified in the schedule thereto:

FORM AA. Power and Fuel Consumption

Current Year Previous Year(2005) (2004)

1. Electricity:

(a) Purchased:*Unit (KWH) 13,326,368 13,251,515Total Amount (Rs. Million) 51.73 50.83Rate/Unit (Rs.) 3.88 3.84

(b) Own Generation:**(i) Through diesel generator

Units (KWH) 26,978 31,319Units/litre of diesel oil 1.63 2.03Cost/Unit — No separate unit cost calculated

since generation is marginal

(ii) Through gas turbine/generator***Units 4,408,843 4,375,862Units/SM3 of gas 3.37 3.34Cost/unit 3.82 3.51

2. Coal (specify quality and where used):Quantity (tonnes) N.A. N.A.Total cost N.A. N.A.Average cost (Rs.) N.A. N.A.

3. Furnace oil + LSHS**Quantity (KI) 672 1,590Total amount (Rs. Million) 9.33 20.13Average rate (Rs./KI) 15,431 12,658

4. Others/internal generation (please give details)***Quantity (Sm3) — Natural Gas 1,634,493 1,618,612Total cost (Rs. Million) 14.40 14.34Rate/Unit (Rs.) 8.81 8.86

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B. Consumption per unit of productionSince the Company is a multi-divisional unit, producing a variety of products, proper allocation of energycannot be ascertained.

* Figures are total of Thane, Himatnagar and Ankleshwar plants.** Thane plant.

*** Ankleshwar plant.

II. TECHNOLOGY ABSORPTIONEfforts made in technology absorption as per Form B hereunderEfforts made in technology absorption as per Form B hereunderEfforts made in technology absorption as per Form B hereunderEfforts made in technology absorption as per Form B hereunderEfforts made in technology absorption as per Form B hereunder:

FORM BA. Research and Development (R & D)

1. Specific Areas:(a) True to the tradition of Bayer in Research & Development of new products, the year 2005 has been

encouraging due to a number of registrations secured and subsequent launch of excellent newproducts in Crop Protection, viz. Dadeci 5.625 EC – a combination insecticide for use in Rice, Calypso240 SC - Rice and Cotton insecticide, Protega 300 SC – Rice fungicide and Atlantis 3.6 WG - a broadspectrum oneshot herbicide for controlling weeds in wheat. The Company also received registration forOxadiargyl Technical and Ethoprophos Technical. The Company satisfied the requirement of NationalMRLs (Maximum Residue Limits) fixation process in crops (food commodities), a prerequisite forregistration of new agrochemical products.The Company, after dedicated research and spending resources in generating required scientific data,has submitted application for obtaining registration for the new products for future launch in the Indianmarket.

(b) In the field of Environmental Science, in the year 2005, the Company secured registration and launchedFicam 80 WP, a carbamate insecticide for indoor residual spray for control of mosquitoes, a vectorresponsible for transmission of malaria. This product will offer an excellent tool for resistancemanagement of mosquitoes in malaria control programme at a national level. Environmental Science, inits continued effort to register and introduce new products in the market, has been engaged ingenerating scientific data on new products.

2. Future Plans:With the ushering in of the new scenario of WTO and implementation of Patent Regime, the Company isplanning to accelerate the introduction of new and better products and technology in Crop Protection aswell as Environmental Science, to take advantage of patent protection.

Pursuing its philosophy of offering new and better cost-effective solutions to farmers for various crops tomanage pest/disease menace, the Company is evaluating a number of molecules for a variety of key crops.The Company receives the benefit of the continued Research & Developement efforts of the parent company –Bayer AG.

3. Expenditure on R & D (Rs.’000)(a) Capital NIL(b) Recurring 56,913(c) Total 56,913(d) Total R & D expenses are 0.85% of total turnover

III. FOREIGN EXCHANGE EARNINGS AND OUTGO(i) Information relating to exports is contained in the Directors’ Report.

(ii) Total foreign exchange used and earned:

Rs. Million

2005 20041. Foreign Exchange Earned 889.913 690.292

2. Foreign Exchange Outgo 1,552.506 1,201.175

Annexure to the Directors’ Report (Contd.)

13


Working to Create Value“Bayer is committed to create sustained value for its shareholders. We want toconvince through performance as well as open, fair and honest communication.”

– Werner Wenning, Chairman of the Board of Management of Bayer AG, Germany

1.0 PhilosophyThe Company’s philosophy of Code of Corporate Governance is aimed at assisting the top management in theefficient conduct of its business and fulfilling its obligations towards the Government, its shareholders, employeesand other stakeholders.

Over the years, the Company has shown a high level of commitment towards effective Corporate Governance andhas maintained high business ethics. The Company believes that its operations and actions must serve theunderlying goal of enhancing the interests of its stakeholders over a sustained period of time in a sociallyresponsible way.

In ensuring strict adherence to the Corporate Governance Code, the Company believes in the following principles:• Integrity• Accountability• Transparency• Confidentiality• Control• Social Responsibility

The Company believes that the practice of each of these principles leads to the creation of right corporate culturethat enables the Company to be managed and monitored in a manner geared to value creation with the ultimateobjective of realizing and enhancing shareholders’ values.

Your Company ensures that timely and accurate disclosure is made on all material matters regarding thecorporation including the financial situation, performance, ownership and governance of the Company. TheCompany believes that a strong and independent Board and transparent accounting policies will preserve thestakeholder value and enhance their trust and confidence.

Our corporate mission statement describes the future perspectives, strategy and values. We believe in practicinga set of values that form the basis of our actions and corporate culture.

Corporate Governance

Your Board believes that Corporate Governance is a powerful medium of sub-serving the long-term interests of itsstakeholders for the attainment of transparency, accountability and equity in all facets of its operations byenhancing and sustaining its corporate value through growth and innovation.

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1.1 Code of Conduct for DirectorsThe Company has been handed over by the various stakeholders in trust and the Board of Directors are thetrustees of these stakeholders and owe a responsibility to ensure that the organisation is managed in a mannerthat protects and furthers the interest of our stakeholders.

At the core of Corporate Governance is the role of the Board of Directors in overseeing how management servesthe long-term interests of shareowners and other stakeholders. An active, informed, independent and involvedBoard is essential for ensuring Bayer’s integrity, transparency and long-term strength.

The Company believes that at the core of Corporate Governance is the role of the Board of Directors inoverseeing how management serves the long-term interests of shareowners and other stakeholders. Further,adoption of a Code of Conduct will send a strong message regarding the importance of ethical behaviour atBayer and the protection of investors’ interests. With this in mind and also with a view to ensure compliance ofClause 49 of the Listing Agreement, The Bayer CropScience Code of Conduct for Directors was approved andadopted by the Board at its meeting held on 24th March, 2005.

1.2 Code of Business ConductThe success of the Bayer Group is based on many factors. Among the most important – along with our technicalexpertise – is our employees’ sense of responsibility. Bayer is committed to conducting its operations not only incompliance with law but also according to ethical principles as our success is also very much the result of ourvalues, which we are constantly working to reinforce and communicate to our employees, shareholders andclients.

The Code of Business Conduct applicable to all employees of the Company was approved by the Board at itsmeeting held on 24th April, 2005 and was disseminated to all employees.

The Company has also rolled out the Corporate Compliance Training Programme of Bayer AG to all employees ofthe Company to further increase the standards of compliance and governance.

1.3 Whistle Blower PolicyThe Bayer Group of Companies in India has a tradition of conducting business based on high values, principlesand beliefs. Our commitment is towards reaching the goals with utmost respect for human values and to serve theinterests of Bayer with integrity. Good Corporate Governance entails that the interest of the employees, theshareholders and the society in general be protected at all times.

The management realises that this is possible only if there exists an open and transparent culture wherein theconcerns of the employees at all levels can be raised and expressed without fear of retribution. To achieve thisobjective, this Policy was formulated which will enable the employees to report their concerns, which would belooked into by the Audit Committee comprising of Mr. S. M. Kulkarni, Mr. Y. H. Malegam and Mr. A. K. R.Nedungadi (all independent directors).

Corporate Governance (Contd.)

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The Board approved the Bayer Whistle Blower Policy at its meeting held on 24th March, 2005. The policy aims at:

• Encouraging the employees to feel confident in raising serious concerns.

• Providing ways for employees to raise their concerns.

• Ensuring that the employees get a response to their concerns.

• Reassuring the employees that if the concerns are raised in good faith, they will be protected fromvictimisation.

• Initiating action, where necessary, to set right the concern so raised.

• Provide for direct access to the Chairman of the Audit Committee in exceptional cases.

1.4 Sexual Harassment PolicyBayer’s quest for competitive excellence consists of our commitment to lawful and ethical conduct and adheringto Bayer’s values. Integrity, honesty and respect for people remain some of our core values. The Company iscommitted to provide a safe and conducive work environment, free of sexual harassment, to its employees andexpects them to combine “Expertise with Responsibility”.

The Bayer Prevention of Sexual Harassment Policy has been formed to prohibit, prevent or deter the commissionof acts of sexual harassment at workplace and to provide the procedure for the redressal of complaints pertainingto sexual harassment. A three member Complaints Committee, headed by a woman (Shirin V. Balsara, Head –Legal & Company Secretary) has been constituted; and to prevent the possibility of any undue pressure orinfluence from senior levels, the Complaints Committee consists also of Ms. Charu Singh as an outside neutralrepresentative. Mr. Ganesh Kamath, Head – Internal Audit is the third Committee member.

No matter has been referred to the Committee till date.

All the above Codes/Policies have been disseminated and are accessible to the Company’s employees on theCompany’s intranet and its website www.bayer.co.in

1.5 Risk ManagementRisk management is the process whereby organizations methodically address the risks attached to their activitieswith the goal of achieving each activity and across the portfolio of all activities.

Risk Management is a practice with processes, methods and tools for managing risks. It provides a disciplinedenvironment for proactive decision making to:• assess continuously what could go wrong (risks)• determine which risks are important to deal with• implement strategies to deal with those risks

Mr. Ganesh Kamath, Head – Internal Audit has been appointed as the Risk Management Champion for reportingthe assessments made with regard to various risks, the manner of handling the risks, adequacy of mitigatingfactors, identify deviations and to recommend a corrective course of action.

2.1 Board of DirectorsYour Board of Directors have a primary role of trusteeship to protect and enhance shareholder value throughstrategic supervision of the Company by providing direction and exercising appropriate controls. All statutory,significant and material information is placed before the Board. Your Board includes eminent professionals whohave excelled in their respective areas of specialisation and comprises individuals from management, finance,accounts and other fields.

Presently the Board consists of total of eight Directors (including one Alternate Director) of which one is anExecutive Director and seven are Non-Executive Directors. Mr. Johannes Frick will cease to be a Director of theCompany with effect from 31st March, 2006. Ms. Christiane Kunze has been appointed as a Director in casualvacancy, caused due to the resignation of Mr. Frick, and as Whole-time Director of the Company with effect from1st April, 2006. Mr. S. M. Kulkarni will cease to be an Alternate Director to Mr. Johannes Dietsch with effectfrom 31st March, 2006 and has been appointed as an Additional Director with effect from 1st April, 2006.The composition of the Board with effect from 1st April, 2006 will consist of two Executive Directors and sixnon-Executive Directors. The Chairman of the Board is an Independent Director. The number of IndependentDirectors constitutes one half of the total number of Directors.

The Managing Director and three other Directors are from the Promoter Group. The remaining four areNon-Executive Independent Directors. Apart from drawing sitting fees, none of the Independent Directors haveany other material pecuniary relationship or transactions with the Company, its Promoters, its Management or itssubsidiaries, which in the judgement of the Board would affect the independence or judgement of the Directors.


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The Company has not entered into any materially significant transactions with its promoters, directors,management or their relatives that may have potential conflict with the interests of the Company at large.

Except Dr. Vijay Mallya who holds 53 shares in the Company, none of the Directors hold any shares in theCompany.

Details of the composition of the Board and changes therein during the year, category of the Director, number oftheir other directorships and committee memberships are given below:

Table 1: Constitution of the Board — as on 31st December, 2005:

Sr. Name of Director Status Age Directorship Relationship withNo. @ (years) Tenure other Directors

1. Dr. Vijay Mallya, Chairman NED-(I) 50 2 years None

2. Mr. Yezdi H. Malegam NED-(I) 72 16 years and 8 months None

3. Mr. Johannes M. Dietsch* NED 43 4 years and 9 months None

4. Mr. A. K. Ravi Nedungadi NED-(I) 48 2 years None

5. Mr. Raj Kaul* NED 63 1 year and 3 months None

6. Mr. Sharad M. Kulkarni** NED-(I) 66 11 years and 4 months None(Alternate to Mr. J. M. Dietsch)

7. Mr. Stephan Gerlich* MD 47 2 years and 6 months None

8. Mr. Johannes Frick*+ NED 41 3 years and 2 months None

@ Status:

MD – Managing Director. NED – Non-Executive Director.

NED (I) – Non-Executive and Independent Director.

* Represents the Promoter Group.

** Mr. S. M. Kulkarni will cease to be an alternate director to Mr. J. M. Dietsch with effect from 31st March, 2006 and hasbeen appointed as an additional director with effect from 1st April, 2006.

+ Mr. Johannes Frick ceased to be the Wholetime Director with effect from 13th October, 2005, and will cease to be aDirector of the Company with effect from 31st March, 2006. Ms. Christiane Kunze has been appointed as a director in thecasual vacancy, caused due to the resignation of Mr. Frick, and as Whole-time Director of the Company with effect from1st April, 2006.

Table 2: Directorship in other companies/committee position as on 31st December, 2005:

Sr. Name of Director No. of other No. of other CommitteeNo. Directorships Memberships

Chairman Memberships

1. Dr. Vijay Mallya, Chairman 50 1 NIL

2. Mr. Yezdi H. Malegam 12 5 4

3. Mr. Johannes M. Dietsch 10 NIL NIL

4. Mr. A. K. Ravi Nedungadi 14 NIL 4

5. Mr. Raj Kaul 3 NIL NIL

6. Mr. Sharad M. Kulkarni (Alternate to Mr. J. M. Dietsch) 12 2 4

7. Mr. Stephan Gerlich, Managing Director 6 NIL 1

8. Mr. Johannes Frick 4 NIL NIL

Notes:

1. Directorships mentioned above include alternate directorships and directorships in private companies and foreigndirectorships.

2. The details mentioned above are for companies other than Bayer CropScience Limited.3. Committee details consists only of Audit, Remuneration and Shareholders’ Grievance Committees.


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2.2 RESPONSIBILITIES

2.2.1 Managing DirectorMr. Stephan Gerlich, Managing Director of the Company, is also the Country Speaker for the Bayer Group in India.He is responsible for the overall management of the Company. As the Managing Director, he periodically apprisesthe Board about the performance of the Company.

2.2.2 Whole-time DirectorMs. Christiane Kunze is appointed as Whole-time Director with effect from 1st April 2006. She is responsible forthe function which includes Accounts, Taxation, Treasury, Financial Services, Secretarial & Legal and InformationTechnology.

2.2.3 Independent DirectorsThe independent directors play a vital role in decision making at the Board Meetings and bring to the Companytheir wide experience in the fields of Corporate Management, Accounts, Finance and Taxation.

Independent Directors constitute one half of the strength of the Board. The Audit Committee consists entirely ofNon-Executive Independent Directors. Independent Directors have unfettered and complete access to allinformation within the Company.

3.1 Board ProcedureThe annual calendar of meetings is agreed upon at the beginning of each year. The meetings are governed by adetailed Agenda. All issues included in the agenda are backed up by detailed notes and comprehensivebackground information and are circulated in advance to the Directors to enable the Board to take informeddecisions. The Managing Director/Country Head – BCS briefs the Board on the overall performance of theCompany. The Chairman of the Audit Committee briefs the Board on important matters discussed at the meetingsof the Audit Committee. The Shareholders’/Investors’ grievances received and resolved are also placed before theBoard.

3.2 Information given to the BoardThe Board has complete access to all information within the Company. The information regularly provided to theBoard includes:

• Annual operating plans and budgets and updates.

• Capital budgets and updates.

• Quarterly results for the Company and its operating divisions or business segments.

• Minutes of meetings of audit committee and other committees of the board.

• Information on recruitment and remuneration of senior officers just below the board level, includingappointment or removal of Chief Financial Officer and the Company Secretary.

• Show cause, demand, prosecution notices and penalty notices, which are materially important.

• Fatal or serious accidents, dangerous occurrences, any material effluent or pollution problems.

• Any material default in financial obligations to and by the Company, or substantial non-payment for goodssold by the Company.

• Any issue, which involves possible public or product liability claims of substantial nature, including anyjudgement or order which, may have passed strictures on the conduct of the Company or taken an adverseview regarding another enterprise that can have negative implications on the Company.

• Details of any joint venture or collaboration agreement.

• Transactions that involve substantial payment towards goodwill, brand equity or intellectual property.

• Significant labour problems and their proposed solutions. Any significant development in HumanResources/Industrial Relations front like signing of wage agreement, implementation of Voluntary RetirementScheme etc.

• Sale of material nature, of investments, subsidiaries, assets, which is not in normal course of business.

• Quarterly details of foreign exchange exposures and the steps taken by management to limit the risks ofadverse exchange rate movement, if material.

• Non-compliance of any regulatory, statutory or listing requirements and shareholders service such asnon-payment of dividend, delay in share transfer etc.

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3.3 Attendance Record of the Directors at Meetings of the Board and of the MembersSix Board Meetings were held during the year 2005, the details of which are as under:

Sr. Date of Meeting For the Quarter No. of days from Maximum daysNo. previous Board permitted as per

Meeting Clause 49

1. 9th February, 2005 January – March 103

2. 24th March, 2005 January – March 43

3. 28th April, 2005 April – June 35 120 days

4. 22nd June, 2005 April – June 55 (4 months)

5. 28th July, 2005 July – September 36

6. 27th October, 2005 October – December 91

The maximum time gap between any two meetings is much less as compared to the mandatory requirement ofnot more than 120 days (four months) as per Clause 49.

The Annual General Meeting was held on 22nd June, 2005. The attendance of the Directors at the Board andAnnual General Meetings held during the year 2005 is as under:

Sr. Director Board Attendance RemarkNo. Meetings Board AGM held

held in Meeting onDirector's 22.06.2005

tenure

1. Dr. V. Mallya 6 5 Yes –

2. Mr. Y. H. Malegam 6 4 Yes –

3. Mr. S. M. Kulkarni 6 5 Yes –

4. Mr. S. Gerlich 6 5 Yes –

5. Mr. J. Frick 6 4 No Ceased to be a Whole-time Director with effectfrom 13th October, 2005.

6. Mr. J. M. Dietsch 6 N. A. N. A. Mr. S. M. Kulkarni is an Alternate Director toMr. Dietsch.

7. Mr. A. K. R. Nedungadi 6 5 Yes –

8. Mr. R. Kaul 6 2 Yes –

4.0 DIRECTORS SEEKING APPOINTMENT/RE-APPOINTMENTDr. Mallya and Mr. Nedungadi retire by rotation and being eligible, have offered themselves for re-appointment.Ms. Kunze has been appointed as a Whole-time Director of the Company and Mr. Kulkarni has been appointed asan Additional Director with effect from 1st April, 2006 and seek your approval at the ensuing Annual GeneralMeeting.

Particulars of the above directors of the Company, seeking appointment/re-appointment are as under.

4.1 Dr. Vijay MallyaDr. Mallya, who is a Doctorate in Business Administration, is an Independent Director and Chairman of yourCompany.

He is the Chairman of the United Breweries Group, a multi-national business conglomerate of over 60 companieswhich has wide business interests from spirits to airlines. He has received several professional awards both inIndia and overseas including been nominated as a Global Leader for Tomorrow by the World Economic Forum.

He is a keen sportsman and is an ardent aviator and yachtsman of distinction. Dr. Mallya has also contributedgenerously to various charities and foundations in several countries.

As on 31st December, 2005, he is on the Board of Directors of the following companies:• Kingfisher Airlines Limited, Bangalore• Aventis Pharma Limited, Mumbai• Herbertsons Limited, Mumbai

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• Kamsco Industries Private Limited, Kolkata• Mallya Private Limited, Kolkatta• Mangalore Chemicals & Fertilizers Limited, Bangalore• Millenium Alcobev Private Limited, Chennai• McDowell & Company Limited, Bangalore• Pharma Trading Company Private Limited, Kolkata• Shaw Wallace & Company Limited, Kolkata• Shaw Wallace Financial Services Limited, Kolkata• Shaw Wallace Distilleries Limited, Mumbai• Shaw Wallace Breweries Limited, Mumbai• The Gem Investment & Trading Company Private Limited, Kolkata• United Breweries Limited, Bangalore• United Breweries (Holdings) Limited, Bangalore• United East Bengal Football Team Private Limited, Kolkata• United Mohun Bagan Football Team Private Limited, Kolkata• United Racing and Bloodstock Breeders Limited, Bangalore• Motor Sports Association of India, Mumbai• Shaw Wallace Executives’ Welfare & Benefit Company• Catamaran Corporation Inc., USA• Connectics Pte Ltd., Singapore• Jenson & Nicholson (Singapore) Pte Ltd., Singapore• Kingfisher America Inc., USA• Imbali Holdings (Pty) Ltd., South Africa• Lake Kyle Holdings (Pty) Ltd., South Africa• Mabula Game Reserve (Pty) Ltd., South Africa• Mabula Investments (Pty) Ltd., South Africa• Marinscope Inc., USA• McDowell Nepal Limited, Nepal• Mendocino Brewering Company, USA• Millionaire Media & Ecom S.A. (Pty) Ltd., South Africa• Pacific Blitz Inc. USA• Specialty Beer Investments Inc., USA• The Cape Milner SA (Pty) Ltd., South Africa• UB Emirates LLC, Dubai• UB Gulf FZE, Dubai• UB Holdings SA (Pty) Ltd., South Africa• UB Resorts Holdings SA (Pty) Ltd., South Africa• UB Resorts Management SA (Pty) Ltd., South Africa• UB South Africa (Pty) Ltd., South Africa• UB Textiles (South Africa) (Pty) Ltd., South Africa• UBICS Inc., USA• UBICS (Pty) Ltd., South Africa• UBSN Limited, U.K.• United Breweries of America Inc., USA• United Breweries & Distilleries (Pacific) Pte Ltd., Singapore• United National Breweries (SA) Ltd., South Africa• United Wineries of America, USA• Vantage Investments Pte Ltd., Singapore• Wotan Pte Ltd., Singapore

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In addition to being a Committee Member of the Federation of Indian Chambers of Commerce and Industry, heholds the Fellowship of The Institute of Directors, U.K. and is a Member of the World Economic Forum, Geneva,Switzerland.

He is the Chairman of the Remuneration Committee of Millenium Alcobev Private Limited, Chennai.

4.2 Mr. A. K. Ravi NedungadiMr. Nedungadi is a Chartered and a Cost Accountant by profession. He joined the UB Group in 1980 as head ofCorporate Treasury. From 1982, he was designated as the Group Finance Director of UB International Limited,United Kingdom – an International Paint Major with operations in 25 countries around the world and played a leadrole in getting various constituents listed on major International Stock Exchanges.

In April 1997, he returned to India to head Finance at McDowell & Co. Limited, the flagship company of the UBGroup, and then moved on to the position of President and CFO of the UB Group in October 1999.

He has been conferred the “Udyog Ratna Award” by the Institute of Economic Studies in Delhi.

As on 31st December, 2005, he is on the Board of Directors of the following companies:

• Millenium Alcobev Private Limited, Chennai

• Aventis Pharma Limited, Mumbai

• United Breweries Limited, Bangalore

• McDowell Nepal Limited, Nepal

• Idea Streamz Consultants Pvt. Ltd., New Delhi

• Triumph Distillers & Vintners Pvt. Ltd., Mumbai

• Kingfisher Airlines Limited, Banglore

• Wotan Pte Limited, Singapore

• Pie Education Limited, New Delhi

• Millenea Vision Advertising (P) Limited, New Delhi

• Shaw Wallace & Company Limited, Kolkata

• Shaw Wallace Financial Services Limited, Kolkata

• Shaw Wallace Distilleries Limited, Mumbai

• Shaw Wallace Breweries Limited, Mumbai

He is also a Member of various committees in the following companies:

Sr. No. Name of the Company Committee Position Held

1. Aventis Pharma Limited Audit Member

2. Bayer CropScience Limited Audit Member

3. United Breweries Limited Share Transfer Member

4. Aventis Pharma Limited Shareholders’ Grievance Member

5. Shaw Wallace & Company Limited Remuneration Member

6. Shaw Wallace Financial Services Limited Audit Member

4.3 Mr. Sharad KulkarniMr. Kulkarni is a Corporate and Business Advisor to several Indian and International companies. He has had adistinguished international career spanning over 40 years as head of major Indian and multinational companies inwide ranging areas of businesses from information technology to biotechnology, financial services to venturefunds, industrial products to speciality chemicals, construction to property development.

He is associated with several educational institutions such as Vidyaprathishthan-Baramati and University ofPune’s School of Management. He is involved with several NGOs in the city and acts as Trustee of researchcentres, charitable trusts and hospital councils.

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As on 31st December, 2005, he is on the Board of Directors of the following companies:

• LANXESS ABS Limited

• Hindustan Construction Company Limited

• KEC International Limited

• Raychem RPG Limited

• RPG Enterprises

• Global Procurement Consultants Limited (EXIM Bank Subsidiary)

• Hilltop Holdings Limited

• Indiaco Ventures Limited

• Travel Voyages Limited

• Protect Insurance Services Limited

• Hincon Realty Ltd.

• J. M. Financial Trustee Company Ltd.

He is also a Chairman/Member of various committees in the following companies:

Sr. No. Name of the Company Committee Position Held

1. LANXESS ABS Limited Audit Chairman

2. Hindustan Construction Co. Ltd. Audit Chairman

3. Bayer CropScience Limited Shareholders’ Grievance Chairman

4. Bayer CropScience Limited Audit Chairman

5. KEC International Limited Audit Member

6. KEC International Limited Shareholders’ Grievance Member

7. KEC International Limited Remuneration Member

8. LANXESS ABS Limited Remuneration Member

4.4 Ms. Christiane KunzeMs. Kunze has done Management Economics from University of Cologne, Germany and began her career withthe Internal Audit Department at Bayer AG (1989 to 1994). She then moved to Bayer Sp Z o o, Poland as Directorof Finance and Administration (1994 to 1998) and then back to Bayer AG in Corporate Projects CompensationSystems (1998-2002). Her last assignment was with Bayer S.A., Columbia where she was responsible for LocalService – Andean Region, BG-LS.

5.0 REMUNERATION OF DIRECTORSThe Company has not formed any Remuneration/Compensation Committee, the same being non-mandatory.

5.1 Remuneration to Non-Executive DirectorsThe Non-Executive Directors do not draw any remuneration from the Company. Non–Executive IndependentDirectors are entitled to sitting fees for every meeting of the Board and Audit Committee attended.Non–Executive Independent Directors are paid Rs. 20,000/- for attending Board Meeting and Rs. 10,000/- forAudit Committee Meeting. The Board has at its Meeting held on 27th October, 2005, increased the sitting feespayable to the members of the Audit Committee from Rs.10,000/- to Rs. 20,000/-.

5.2 Sitting fees paid during the year ended 31st December, 2005(Rs. In Lakhs)

Sr. No. Director Fees paid for attending Board and Committee Meetings

1. Dr. V. Mallya 1.00

2. Mr. Y. H. Malegam 1.50

3. Mr. S. M. Kulkarni 1.70

4. Mr. A. K. R. Nedungadi 1.30

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5.3 Remuneration paid to Managing/Executive DirectorsMr. Gerlich, Managing Director is paid remuneration as per his agreement with the Company, which has beenapproved by the Board. The members had approved the same at the last Annual General Meeting of theCompany held on 22nd June, 2005.

Mr. Frick, Director was paid remuneration for part of the year as per the agreement entered into by him with theCompany. This agreement has been approved by the Board and also by the members at the ExtraordinaryGeneral Meeting held on 18th March, 2004.

Details of the remuneration paid during the year 2005(All figures in Rupees)

Sr. Director Position Salary & Perquisites Total ContractNo. Allowances Period

1. Mr. Gerlich Managing Director 7,917,898 8,682,012 16,599,910 04.09.2004 to 13.09.2009

2. Mr. Frick* Whole-time Director 8,779,693 2,675,049 11,454,743 12.11.2003 to 13.10.2005

*****Part of the yearMs. Kunze has been appointed as a Whole-time Director of the Company with effect from 1st April, 2006 and will be paidremuneration from the said date.

5.4 Service contract, notice period and severance feesMr. Gerlich was appointed as the Managing Director of the Company w.e.f. 14th September, 2004. Hisemployment is contractual for a period of five years and terminable by six months’ notice on either side.

Mr. Frick ceased to be the Whole-time Director of the Company w.e.f. 13th October, 2005. His employment wascontractual for a period of five years and terminable by six months’ notice on either side. His agreement wasterminated with effect from 13th October, 2005.

Ms. Kunze has been appointed as the Whole-time Director of the Company w.e.f. 1st April, 2006. Her employmentis contractual for a period of five years and terminable by six months’ notice on either side.

The Company does not have a scheme for stock options, either for the Directors or its employees. There is noseverance fees paid to the Managing Director or Whole-time Director.

6.0 COMMITTEES OF THE BOARD

6.1 Audit CommitteeThe Audit Committee comprises of all Non-Executive Independent members as under:

Sr. No. Name Designation Category

1. Mr. S. M. Kulkarni Chairman Non-Executive Independent

2. Mr. Y. H. Malegam Member Non-Executive Independent

3. Mr. A. K. R. Nedungadi Member Non-Executive Independent

The Committee held six meetings during the year 2005 on 23rd March, 2005, 27th April, 2005, 21st June, 2005,26th July, 2005, 25th October, 2005 and 1st December, 2005. The attendance at the meetings was as under:

Sr. No. Name Number of Audit Committee No. of CommitteeMeetings held in Director’s tenure Meetings attended

1. Mr. S. M. Kulkarni 6 6

2. Mr. Y. H. Malegam 6 6

3. Mr. A. K. R. Nedungadi 6 3

The Managing Director, Chief Financial Officer and the Heads of Corporate Accounting and Internal Audit arepermanent invitees to all Audit Committee meetings. The Statutory Auditors are also invited to attend themeetings. The Company Secretary acts as the Secretary to the Committee.

The Audit Committee acts as a link between the Statutory and the Internal Auditors on the one side and the Boardof Directors of the Company on the other side.

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The role of the Audit Committee includes the following:

1. Oversight of the Company’s financial reporting process and the disclosure of its financial information toensure that the financial statement is correct, sufficient and credible.

2. Recommending to the Board, the appointment, re-appointment and, if required, the replacement or removalof the statutory auditor and the fixation of audit fees.

3. Approval of payment to statutory auditors for any other services rendered by the statutory auditors.4. Reviewing, with the management, the annual financial statements before submission to the board for

approval, with particular reference to:(a) Matters required to be included in the Director’s Responsibility Statement to be included in the

Board’s report in terms of clause (2AA) of section 217 of the Companies Act, 1956.(b) Changes, if any, in accounting policies and practices and reasons for the same.(c) Major accounting entries involving estimates based on the exercise of judgment by management.(d) Significant adjustments made in the financial statements arising out of audit findings.(e) Compliance with listing and other legal requirements relating to financial statements.(f) Disclosure of any related party transactions.(g) Qualifications in the draft audit report.

5. Reviewing, with the management, the quarterly financial statements before submission to the board forapproval.

6. Reviewing, with the management, performance of statutory and internal auditors, and adequacy of theinternal control systems.

7. Reviewing the adequacy of internal audit function, if any, including the structure of the internal auditdepartment, staffing and seniority of the official heading the department, reporting structure coverage andfrequency of internal audit.

8. Discussion with internal auditors any significant findings and follow-up thereon.9. Reviewing the findings of any internal investigations by the internal auditors into matters where there is

suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting thematter to the Board.

10. Discussion with statutory auditors before the audit commences, about the nature and scope of audit as wellas post-audit discussion to ascertain any area of concern.

11. To look into the reasons for substantial defaults in the payment to the depositors, debentureholders,shareholders (in case of non-payment of declared dividends) and creditors.

12. To review the functioning of the Whistle Blower mechanism.13. Carrying out any other function as is mentioned in the terms of reference of the Audit Committee.

The minutes of the meetings of the Audit Committee are placed before the Board of Directors.

6.2 Shareholders’/ Investors’ Grievance CommitteeThe Company had initially in March 2001 constituted a Shareholders’/Investors’ Grievance Committee of theBoard of Directors under the Chairmanship of Mr. S. M. Kulkarni, a Non-Executive Independent Director to attendto and redress the grievances received from the shareholders of the Company.

Meetings and attendance during the year

S. No. Name of the Shareholders’/Investors’ Grievance No. of CommitteeDirector Committee Meetings held in Meetings attended

Director’s tenure

1. Mr. S. M. Kulkarni 5 5

2. Mr. S. Gerlich 5 4

3. Mr. J. Frick 5 4

At the Board Meeting held on 23rd March 2006, the Committee was reconstituted with effect from 1st April 2006and the composition is as under:

S. No. Name Designation Category

1. Mr. S. M. Kulkarni Chairman Non-Executive Independent

2. Mr. S. Gerlich Member Managing Director

3. Ms. C. Kunze Member Whole-time Director

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During the year, the Company received seven grievances which were attended to and resolved to the satisfactionof the shareholders. The details of the same were also placed before the Board.

A comparative statement of the various complaints received and resolved by the Company during the last year isgiven below:

2005Nature of Complaints

Received Resolved

Non-receipt of Share Certificates duly transferred 1 1

Non-receipt of dividend warrant 2 2

Non-receipt of Annual Report 0 0

Letters from SEBI 2 2

Letters from Stock Exchange 0 0

Letters referred by Reserve Bank of India/Department of Company Affairs 0 0

Letters referred by other Government bodies 2 2

6.3 Share Transfer CommitteeIn compliance with the amended Clause 49 of the Listing Agreement and in order to expedite the process of sharetransfer, power to approve share transfers has been delegated to officials of the Company and the existing sharetransfer committee stands dissolved with effect from 24th March, 2005.

Further, a sub-committee has been constituted for attending matters relating to issue of duplicate sharecertificates, transmission of shares etc. With effect from 1st April, 2006 the composition of the said committee isas under:

S. No. Name Designation Category

1. Mr. Stephan Gerlich Chairman Managing Director

2. Ms. Christiane Kunze Member Whole-time Director

3. Ms. Shirin V. Balsara Member Head – Legal & Company Secretary

6.4 Remuneration/Compensation Committee [a non-mandatory requirement]The Company does not have a remuneration committee.

7.0 COMPLIANCE OFFICERShirin V. Balsara, Head – Legal & Company Secretary, is the Compliance Officer of the Company since21st October, 2003.

8.0 SHAREHOLDER INFORMATION

8.1 Annual General MeetingDate of AGMDate of AGMDate of AGMDate of AGMDate of AGM : 12th June, 2006.

Venue and timeVenue and timeVenue and timeVenue and timeVenue and time : Yashwantrao Chavan Pratisthan Auditorium, Y. B. Chavan Centre,Gen. J. Bhosale Marg, Mumbai 400 021 at 11.30 a.m.

8.2 Dates of Book ClosureThe Register of Members and Share Transfer Books of the Company will remain closed from Saturday, 27th May,2006 to Monday, 12th June, 2006 (both days inclusive).

8.3 Proposed Date of Dividend PaymentThe dividend of Rs. 2.20 (22%) per Equity Share, as recommended by the Board of Directors, if declared at theensuing 48th Annual General Meeting to be held on 12th June, 2006, will be paid at par within 30 days of12th June, 2006:

(a) To those members who hold shares in physical form and whose names appear on the Company’s Registerof Members as holders of Equity Shares on Monday, 12th June, 2006.


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(b) In respect of Shares held in electronic form, to the beneficial owners of the Shares as at the close ofbusiness hours on Saturday, 27th May, 2006, as per details to be furnished by National SecuritiesDepository Limited and Central Depository Services (India) Limited.

8.4 Financial CalendarThe financial calendar of the Company is from 1st January to 31st December.

8.5 Board Meetings for Quarterly Results(Tentative and subject to change)

Quarter ending 31st March, 2006 : Mid April 2006.

Half year ending 30th June, 2006 : End July 2006.

Third quarter ending 30th September, 2006 : End October 2006.

Year ending 31st December, 2006 : On or before 31st March, 2007.

Annual General Meeting for the year ending 31st December, 2006 : On or before 30th June, 2007.

8.6 Registered OfficeBayer CropScience LimitedBayer House, Central Avenue,Hiranandani Gardens,Powai, Mumbai 400 076.

8.7 Listing of Equity Shares on Stock ExchangesThe Company is listed with the Bombay Stock Exchange Limited and has paid the annual listing fees.

8.8 Stock CodeBombay Stock Exchange Limited : 506285Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai 400 023.

Demat International Security Identification Number (ISIN) : INE462A01022in NSDL and CDSL for equity shares.

8.9 Stock PerformanceStock performance of the Company on the Bombay Stock Exchange Limited from 1st January, 2005 to31st December, 2005.


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8.10 Stock Price Data

The monthly high and low prices of the Company’s shares on the Bombay Stock Exchange Limited,Mumbai (BSE) during the year 2005 was as under:

Month Share Prices (Rs.)

High Low

January 276.00 233.20

February 298.90 242.00

March 270.00 196.00

April 221.00 195.00

May 228.45 160.00

June 236.50 185.15

July 240.00 188.50

August 257.90 198.50

September 323.65 235.00

October 316.00 210.15

November 255.00 217.00

December 275.00 227.50

8.11 Registrars & Share Transfer Agents:Tata Share Registry Limited (TSRL) acts as the Registrars and Transfer Agents of the Company. You arerequested to note that the name of TSRL is changed to TSR Darashaw Limited consequent to the acquisition of51% stake by Darashaw Holdings in TSRL. Share transfers, dividend payment, requests for duplicates,revalidation, transmission and other investor related requests are attended by TSRL at :

TSR Darashaw Ltd. (Formerly Tata Share Registry Limited)(Unit – Bayer CropScience Limited)Army & Navy Building,148, Mahatma Gandhi Road,Mumbai-400 001E-mail : [email protected] : www.tsrdarashaw.com

Contact Persons: Ms. Madhuri Narang and Ms. Chithra Sridhar

Investors may also contact the following TSRL branch offices:

1. TSR Darashaw Ltd. 2. TSR Darashaw Ltd.503, Barton Centre, 5th Floor, Tata Centre, 1st Floor,84, Mahatma Gandhi Road, 43, Chowringhee Road,Bangalore-560 001. Kolkata-700 071.Tel. : 080-2532 0321, Fax : 080-2558 0019 Tel. : 033-2288 3087, Fax : 033-2288 3062E-mail : [email protected] E-mail : [email protected]

3. TSR Darashaw Ltd. 4. TSR Darashaw Ltd.Bungalow No. 1, “E” Road, Plot No. 2/42, Sant Vihar,Northern Town, Bistupur, Ansari Road, Daryaganj,Jamshedpur-831 001. New Delhi-110 002.Tel.: 0657-242 6616, Fax: 0657-242 6937 Tel. : 011-2327 1805, Fax : 011-2327 1802E-mail : [email protected] E-mail : [email protected]

8.12 Share Transfer SystemThe shares of the Company, being in the compulsory demat list, are transferable through the depository system.Shares in physical form are processed by TSR Darashaw Ltd. (TSR), Registrars & Share Transfer Agents of theCompany and approved by the Company.

Share Transfers in physical form can be lodged with TSR at the abovementioned address. If the documents arecomplete in all respects, transfers are normally processed within 20 days from the date of receipt. To expedite theprocess of share transfer, powers to approve share transfers have been delegated to the officials of theCompany.


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8.13 Distribution of shareholding as on 31st December, 2005

Range of Number of Number of Percentage of shareShares Shareholders Shares amount to total

1 – 500 18,952 20,35,440 5.15

501 – 1,000 861 6,49,412 1.64

1,001 – 2,000 408 6,03,213 1.53

2,001 – 3,000 114 2,84,139 0.72

3,001 – 4,000 38 1,34,569 0.34

4,001 – 5,000 36 1,68,509 0.43

5,001 – 10,000 64 4,54,527 1.15

10,001 and above 66 3,51,68,938 89.04

Total 20,539 3,94,98,747 100.00

Shareholding Pattern as on 31st December, 2005 as per Clause 35 of Listing Agreement

Sr. Category of Shareholders No. of Percentage ofNo. shares held Shareholding

A. Promoters’ Holding

1. Promoters(a) Indian Promoter** 6,54,850 1.66(b) Foreign Promoters* 2,74,31,812 69.45

2. Persons acting in concert 0 0.00

Sub-Total 2,80,86,662 71.11

B. Non-Promoters’ Holding

3. Institutional Investors

(a) Mutual Funds & UTI 1,75,966 0.45

(b) Banks, Financial Institutions, Insurance 28,85,635 7.31Companies (Central/State Govt. Institutions,Non-Govt. Institutions)

(c) Foreign Institutional Investors * 5,17,536 1.31

Sub-Total 35,79,137 9.06

4. Others

(a) Private Corporate Bodies 35,90,666 9.09

(b) Indian Public 39,96,861 10.12

(c) NRIs/OCBs* 2,44,902 0.62

(d) Independent Directors and their Relatives(NRI)*** 53 0.00

(e) Trust 466 0.00

Sub-Total 78,32,948 19.83

Grand Total 3,94,98,747 100.00

* Total Foreign Holding is 2,81,94,303 i.e. 71.38% of total paid-up capital.

** Indian Promoter is a 100% subsidiary of the Foreign Promoter.

*** 53 shares are held by an Independent Director who is a Non-Resident and the shares are included in Foreign Holdings.


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8.14 Dematerialisation of Shares and LiquidityAs per the notification received from Securities Exchange Board of India, the shares of the Company are tradedcompulsorily in dematerialised form with effect from 21st March, 2000. Your Company has signed an Agreementwith both the Depositories in the country, viz. National Securities Depository Limited and Central DepositoryServices (India) Limited whereby the shareholders have an option to get the shares dematerialised with any of theDepositories.

The conversion of the shares from physical form to electronic form is known as Dematerialisation. Theshareholder desiring to dematerialise the shares has to open a demat account with a Depository Participant (DP)of his choice. Many nationalised banks, private sector undertakings are offering this facility. After opening thedemat account, the shareholder has to handover the physical share certificates along with the Demat RequestForm to his Depository Participant who, in turn, will forward the documents to the Registrars and Share TransferAgents (TSR) both physically and electronically. On receipt of the physical documents and electronic requestrouted through the Depository, TSR shall dematerialise the shares and give a credit into your demat accountmaintained with the DP.

As of 31st December 2005, 36.88% of the shares issued by the Company have been dematerialised.

8.15 Outstanding GDRs/ADRs/Warrants or any Convertible Instruments, conversion date and likely impacton equityNot Applicable

8.16 Plant Locations(a) Kolshet Road

Thane 400 607, Maharashtra.

(b) Plot Nos. 6009 - 10 & 6301 - 10AGIDC Industrial Estate,Ankleshwar 393 002, Gujarat.

(c) Plot Nos. 66/1 to 75, G.I.D.C. Estate,Dist. Sabarkantha,Himatnagar 383 001, Gujarat.

8.17 Address for correspondence:Investors and shareholders can correspond with

(1) The Company at the following address:

Secretarial & Legal DepartmentBayer CropScience LimitedBayer House, Central Avenue,Hiranandani Gardens,Powai, Mumbai 400 076.Tel. : (91-22) 2571 1391Fax : (91-22) 2570 0147E-mail : [email protected] : www.bayer.co.in

(2) The Registrars & Share Transfer Agents of the Company at their following address:

TSR Darashaw Ltd.(Unit – Bayer CropScience Limited)Army & Navy Building,148, Mahatma Gandhi Road,Mumbai-400 001Tel. : (91-22) 6656 8484Fax : (91-22) 6656 8494E-mail : [email protected] : www.tsrdarashaw.com

All information/requests for share transfers, dematerialisation, transmissions, change of address, non-receipt ofdividend warrants, duplicate/missing share certificates and other matters connected therewith may please beaddressed to the Companies Registrars and Share Transfer Agents at the address mentioned above.


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9.0 OTHER DISCLOSURES

9.1 Details of Annual General Meetings/Extraordinary General Meetings

Details of Annual General Meetings held in the last 3 years

Year Location Date Time

2004 Yashwantrao Chavan Pratishtan Auditorium, 22nd June, 2005 11.30 a.m.Y. B. Chavan Centre, Gen. J. Bhosale Marg,Mumbai - 400 021

2003 –do– 3rd June, 2004 11.30 a.m.

2002 –do– 12th June, 2003 11.00 a.m.

Details of Extraordinary General Meeting/Court Convened Meeting held in the last 3 years

Year Type of Meeting Location Date Time

2004 Extraordinary Yashwantrao Chavan Pratishtan Auditorium, 18th March, 2004 12 noonGeneral Meeting Y. B. Chavan Centre, Gen. J. Bhosale Marg,

Mumbai 400 021

2003 Court Convened –do– 5th August, 2003 10.00 a.m.Meeting

9.2 Special resolutions passed in the General Meetings held in previous 3 years(i) Amalgamation of Bayer Cropscience India Limited with the Company – passed with majority (99.99% of

value of Equity Shares) (Court Convened Meeting held on 5th August, 2003).

(ii) Sub-division of shares of the Company – passed unanimously (Court Convened Meeting held on5th August, 2003).

(iii) Increase in Authorised Share Capital of the Company – passed with majority (99.99% of value of EquityShares) (Court Convened Meeting held on 5th August, 2003).

(iv) Change in name of the Company from Bayer (India) Limited to Bayer CropScience Limited – passedunanimously (EGM held on 18th March, 2004).

(v) Relocating the Statutory Register, Records and copies of all annual returns to the premises ofTata Consultancy Services – passed unanimously (EGM held on 18th March, 2004).

(vi) Relocating the Statutory Register, Records and copies of all annual returns to the premises ofTata Share Registry Limited – passed unanimously (AGM 22nd June, 2005).

9.3 Postal BallotDuring the year under review, no resolutions were put through by Postal Ballot.

9.4 Related party disclosuresThe Company has not entered into any transaction of a material nature with the promoters, directors, themanagement, their relatives or its subsidiaries etc. that may have potential conflict with the interests of theCompany. Transactions with related parties as per the requirements of Accounting Standards 18 are disclosed inNotes to Accounts.

9.5 Code of Conduct for Prevention of Insider TradingPursuant to the requirements of SEBI (Prohibition of Insider Trading) Regulations, 1992, as amended, theCompany has adopted a “Code of Conduct for Dealing in Securities” at the meeting of the Board of Directors heldon 25th July, 2002. The Company has from time to time updated the Code as per the requirements of SEBI.

9.6 Details of non-complianceThere was no non-compliance by Bayer CropScience Limited on any matters related to capital markets during thelast three years.

9.7 Means of communicationFinancial results: The quarterly, half-yearly and annual results of the Company are published in widely circulatednewspapers, viz. The Financial Express and the Loksatta. These are also submitted to Stock Exchange inaccordance with Listing Agreement.


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Website: The results are also regularly posted on the Company’s website: www.bayer.co.in. The annual report isalso available on the website in a user-friendly and downloadable manner. Apart from this official news releases,Codes of Conduct, Whistle Blower Policy, shareholding patterns, board structure etc are also available on theCompany’s website.

SEBI EDIFAR: The financial results, shareholding pattern, corporate governance – clause 49 compliance report,etc. of the Company are periodically uploaded on SEBI’s website:www.sebiedifar.nic.in.

Since the half-yearly financial results are published in leading newspapers as well as displayed on the website, thesame are not seperatly sent to the shareholders of the Company.

9.8 Office of the Chairman etc.Your Company maintains the office of Chairman at Hoechst House, 5th floor, Nariman Point,Mumbai-400 021.

10.0 Compliance with the Non-Mandatory Requirements of Clause 49 of the Listing Agreement.The Company has complied with the mandatory requirements of Clause 49 of the Listing Agreement relating toCorporate Governance, as detailed above. With regard to Non-Mandatory Requirements of Clause 49, you maykindly note the following:

1 – The Board(i) Maintenance of Non-Executive Chairman’s office and reimbursement of expenses incurred in

performance of duties.The Company contributes towards the maintenance of the Non-Executive Chairman’s office.

(ii) Tenure of Independent Director may not exceed nine years.The Company presently does not have any policy for the tenure of Independent Directors.

2 – Remuneration CommitteeThe Company has not formed a Remuneration Committee.

3 – Shareholders’ RightA half-yearly declaration of financial performance including summary of the significant events inlast six months, may be sent to each household of shareholders.

The Company publishes its quarterly, half yearly and yearly financial results in leading newspapers inEnglish and Marathi. The same are also available on the website of Bombay Stock Exchange Limited(www.bseindia.com), Sebi EDIFAR (https://sebiedifar.nic.in) and also on the Company’s website(www.bayer.co.in). Hence these are not seperatly sent to each household of shareholders.

4 – Audit QualificationNot applicable to the Company.

5 – Training of Board MembersTraining of Board Members with regard to the business profile of the Company, risk profile of the businessand responsibilities of Directors.

New Non-Executive Directors are given an overview of the Company’s operations, group structure,subsidiaries, Company’s constitution, Board procedure etc. The Audit Committee and Board are regularlyupdated about major risks and steps taken to mitigate the risks. Directors are also updated on businessrelated issues and new initiatives.

6 – Mechanism for evaluating Non-Executive Board Members.The Independent Directors play a key role of governance, control and guidance. However, presently theCompany does not have any mechanism for evaluating the performance of its Non-Executive Directors.

7 – Whistle Blower PolicyThe Company has formulated the Bayer Whistle Blower Policy. Kindly refer to point 1.3 of this Report forfurther details.


DR. VIJAY MALLYAChairman

Mumbai, 23rd March, 2006.


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CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER &CHIEF FINANCIAL OFFICER OF THE COMPANY

I, Stephan Gerlich, Vice-Chairman & Managing Director (Chief Executive Officer & Chief Financial Officer) to the best ofmy knowledge and belief, hereby certify that:

1. I have reviewed the Balance Sheet as at 31st December, 2005, Profit & Loss Account for the year ended on thatdate along with all its schedules, notes to accounts as well as cash flow statements and directors report for theyear and based on my knowledge and information confirm that:(a) these statements do not contain any materially untrue statement or omit to state any material fact or contain

statements that may be misleading(b) these statements together present true and fair view of the Company affairs and are in compliance with

existing accounting standards, applicable laws and regulations.

2. Based on my knowledge and information, there are no transactions entered into by the Company during the yearwhich are fraudulent, illegal or violative of the Company’s Code of Conduct.

3. I along with the Company’s other certifying officers accept responsibility for establishing and maintaining internalcontrols and have evaluated the effectiveness of internal control systems of the Company and have disclosed tothe Auditors and the Audit Committee, deficiencies in the design or operation of internal controls, if any, of whichI am aware and the steps we have taken or propose to take to rectify these deficiencies.

4. The Company’s other certifying officers and I, are responsible for establishing and maintaining disclosure controlsand procedures for the Company, and we have :(a) designed such disclosure controls and procedures to ensure that material information relating to the

Company, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; and

(b) evaluated the effectiveness of the Company’s disclosure, controls and procedures.

5. I along with the Company’s other certifying officers, have indicated to the Auditors and the Audit Committee of theCompany, the following:(a) Significant changes in internal control during the year,(b) Significant changes in accounting policies during the year and that the same have been disclosed in the

notes to the financial statements; and(c) Instances of significant fraud of which they have become aware and the involvement therein, if any, of the

management or an employee having a significant role in the Company’s internal control system.

6. I affirm that we have not denied any personnel access to the audit committee of the Company (in respect ofmatters involving alleged misconduct) and I have provided protection to ‘whistle blowers’ from unfair terminationand other unfair or prejudicial employment practices; and

7. I further declare that all Board members and senior managerial personnel have affirmed compliance with theCode of Conduct for the year under review.

Stephan GerlichVice-Chairman & Managing DirectorChief Executive Officer & Chief Financial Officer

Place : MumbaiDate : 23rd March, 2006


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CORPORATE GOVERNANCE COMPLIANCE CERTIFICATE

To the Members of Bayer CropScience Limited

We have examined the compliance of conditions of Corporate Governance by Bayer CropScience Limited, for theFinancial Year of the Company ended on 31st December, 2005, as stipulated in Revised Clause 49 of the ListingAgreement of the said Company with the Stock Exchange, Mumbai made applicable to all listed companies with effectfrom 1st April, 2006.

The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination waslimited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of theconditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements ofthe Company.

In our opinion and to the best of our information and according to the explanations given to us, we certify that theCompany has complied with the conditions on Corporate Governance as stipulated in the abovementioned ListingAgreement.

We state that no investor grievances are pending for a period exceeding one month against the Company as per therecords maintained by the Shareholders’/Investors’ Grievance Committee.

We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiencyor effectiveness with which the management has conducted the affairs of the Company.

For J. P. AssociatesCompany Secretaries

Nilesh PradhanPartnerC. P. No. 3659

Place : MumbaiDate : 28th February, 2006


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Management Discussion & Analysis Report

1.0 OVERVIEWIndia’s economy is on the fulcrum of an ever increasing growth curve, with positive indicators such as a stable 8%annual growth, rising foreign exchange reserves of more than US$ 150 billion, a booming capital market with thepopular “Sensex” index topping the majestic 10,000 mark, flowing foreign direct investment in excess of US$ 10billion, and a remarkable 25 percent surge in exports.

Agriculture is an integral part of the Indian economy as it is the means of livelihood of almost two thirds of theworkforce in the country. Though it is the most important part of the Indian economy, it is highly dependent on thevagaries of weather. The performance of agriculture in a particular year has cascading effect on other industriesand overall development of the economy.

In 2005, delay in arrival of monsoon during the month of June affected the sowing of major Kharif crops. Thoughthe monsoon was considered as normal with a marginal deviation of -2%, the distribution of rainfall was erraticand uneven leading to excessive rainfall in southern and western parts of the country. Unprecedented rains fromthe month of July lead to floods in the important agricultural states like Gujarat, Maharashtra, Andhra Pradesh,Tamil Nadu and parts of Madhya Pradesh causing damage to life, property and crops. As a result the agriculturalsector did not meet the expectations, though it still surpassed 2004 levels.

The Country’s food grain production is estimated to be at 209 million tonnes compared to 204.6 million tonnes in2004. The overall agricultural growth is estimated at 2.3% for 2005-06 compared to 1.1% of 2004 but lower thanthe forecast of 4%.

2.0 INDUSTRY STRUCTURE AND DEVELOPMENT

2.1 Crop ProtectionThe Crop Protection industry is engaged in manufacturing of Insecticides, Fungicides and Herbicides whichprotects crops from pests and improves crop productivity. The two main activities in this industry aremanufacturing of technical grade pesticides and formulations which are finished products used by the endconsumer. Technical grade pesticides are manufactured indigenously as well as imported. Out of more than 145agrochemicals registered in India, more than 85 of technical grades are locally manufactured. The Indian CropProtection Industry is highly fragmented with the presence of large manufacturers operating on a national leveland several small and regional players. The channel partners include distributors and dealers which are spreadacross the length and breadth of the country.

The Indian Crop Protection market is highly dependent on insecticides (65% of total agrochemical market), whichis in sharp contrast to developed countries that have high dependence on herbicides. The growth in theagrochemical industry has direct correlation with the monsoon situation and development of pest complex.

In the year 2005, the Crop Protection industry has shown a decline of 12% over the previous year. The key factorsthat affected the industry were increase of Bt Cotton acreages to almost double over previous year leading topoor pest infestation of Cotton bollworms, loss of sprays due to excess rains in south and western parts of Indiaand steep price erosion in wheat herbicides segment.

2.2 Environmental ScienceDuring the year 2005, the Vector Control (VC) segment witnessed heavy price erosion due to stiff competitionfrom generic companies. In the Professional Pest Control (PPC) segment with the entry of a major corporate,which is investing heavily in creating customer awareness, the entire industry has grown significantly. YourCompany has entered into a supply agreement with most of the key players in this industry.

3.0 ACTIVITIESThe total turnover for the year ended 31st December, 2005 amounted to Rs. 7,664.60 million as compared toRs. 7,563.56 million for the last year and profit after tax amounted to Rs. 371.47 million as against Rs. 263.61million for the last year.

3.1 Crop ProtectionBayer CropScience is working towards protecting the crops from damage by weeds, pests, insects and fungus,both pre and post harvest. Your Company is involved in advisory services to farmers by individual and masscontact through technically qualified trained field personnel. Your Company offers complete solution to farmers tosecure good harvest in almost all the crops across the country.

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In the year 2005, the Company’s business was primarily affected by high acceptability of Bt cotton leading to lowdemand for cotton bollworm insecticides and price erosion in CNI group of Insecticides due to generic pressure.Inspite of unfavourable circumstances, your Company has increased its market share to 16% with the help of widerange of crop protection chemicals and presence in diverse crop-pest segments. Your Company continued topost growth in key chemistries of CNI group of Insecticides, Fiproles, Thiodicarb, Fungicides and also in rice &soya herbicides.

During the year your Company obtained registration of 3 new products viz. “Calypso”, “Drado” & “Protega” andfull registration of “Atlantis” which was previously under provisional registration. These products have beensuccessfully launched and are expected to provide steady growth to overall business performance in the comingyears.

3.2 Environmental ScienceIn the Vector Control (VC) segment, Bayer secured major orders for its synthetic Pyrethroids from most of its keycustomers. ‘Baytex’, the age old tried and tested mosquito larvicide, performed well despite stiff competition fromgenerics.

In the Professional Pest Control (PPC) segment Bayer was able to consolidate its position by entering into apartnership programme with key players in the industry. The launch of ‘Maxforce’ brand of cockroach gels,‘Responsar’ for general disinfestations and ‘Premise’ a new generation termicide has given immense strength tothe Company.

4.0 OPPORTUNITIES, THREATS & RISKS

4.1 Crop ProtectionWith increasing levels of consumer awareness and regulatory requirements, your Company is continuouslyengaged in developing a wide range of environmentally safe products which can meet the future requirements.

Emergence of new pest complex in different crops has opened up growth avenues resulting in less dependenceon one or two segments. Increasing scarcity of farm labour will create additional demand for Herbicides. Apartfrom field crops, there will be additional demand for crop protection chemical in fruits & vegetables segments.This has especially given an additional advantage to your Company which has a wide product range.

Your Company is likely to benefit once there is a complete compliance of the Indian Patents Act. This Act will giveexclusive marketing rights to the Company and will ensure better profitability.

4.2 Environmental ScienceWith the entry of generic players in the VC segment the only way to sustain the Company’s market share is todifferentiate by launching new generation formulations and newer products. Bayer has been successful insecuring the complete registration of ‘Ficam’ (a different chemistry product for Indoor Residual Spray to aidcontrol of adult mosquitoes). This product is expected to contribute significantly in the mid-term. In the PPCsegment Bayer has improved its position considerably by launching a new product, ‘Maxforce Gold’ (a specialtygel for cockroach control). The sales of all the new products launched in the recent past were beyondexpectations, which show a high degree of acceptance at the customer level.

The risk of small local companies copying and launching Bayer specialty products do exist. This, however, ismitigated by the fact that Bayer has a pool of highly trained and well motivated human resource, apart fromexcellent and highly committed distribution network.

5.0 OUTLOOK

5.1 Crop ProtectionThe Indian Crop Protection market in the coming year will largely depend on the normalcy of monsoon, itsdistribution, commodity prices and impact of genetically modified crops. With cyclical nature of demand inpesticide industry, it is expected to recover to its previous level with slight segmentwise adjustments.

In future, growth in crop protection market is likely to come from the smaller segments. The present portfolio andthe products in the pipeline will give the Company scope to develop these segments into significant business. Inthe year 2006, your Company is expecting registration of 3 new products which shall bring additional revenuesfrom new crop-pest segments.

Management Discussion & Analysis Report (Contd.)

35


5.2 Environmental ScienceApart from the recent product launches, Bayer is in a position to launch 2 more products in 2006, which will helpleverage its leadership position in both the VC & PPC segments. A clear strategy is in place to tackle obstaclesand ensure the realisation of growth plans.

6.0 SEGMENT WISE PERFORMANCERs. (Million)

Particulars Year ended Year ended31st December, 2005 31st December, 2004

1. Segment Revenue

Segment – Pesticides 7,664.60 7,563.56

Total 7,664.60 7,563.56

Sales & Other Operating Income 7,664.60 7,563.56

2. Segment Results

Segment – Pesticides 888.15 623.75

Total 888.15 623.75

Add/(Less):

(i) Interest (Net) (72.18))))) (110.48)

(ii) Other un-allocable income/(expenses) (net) — —

Profit for the year before Prior Period, Exceptional Itemsand Taxation 815.97 513.27

Add/(Less): Prior Period and Exceptional items (Net) (69.13) 10.76

Total Profit Before Tax 746.84 524.03

7.0 INTERNAL CONTROL SYSTEMSThe Company’s internal control systems are adequate and are regularly reviewed by the statutory and internalauditors. The internal audit is conducted at regular intervals at various locations of the Company and covers allkey areas. All audit observations and follow-up actions are discussed with the management and the AuditCommittee and reviewed regularly.

8.0 MATERIAL DEVELOPMENTS IN HUMAN RESOURCES AND INDUSTRIAL RELATIONSThe Company has successfully implemented its restructuring plan, revised the service conditions of the officersand introduced performance based salary. The industrial relations situation continues to be cordial andharmonious. The Company had offered Voluntary Retirement Scheme (VRS) to the employees at the ThaneFactory. A total of 52 employees had opted for the aforesaid VRS. The Company conducted 98 trainingprogrammes primarily to enhance the skills of its workforce.

The contributions and initiatives made by all employees towards achieving improved productivity, flexibility inoperations and overall business performance of the Company is commendable.

Cautionary StatementThe statements in the “Management Discussion and Analysis Report” section describes the Company’s objectives,projections, estimates, expectations and predictions, which may be “forward looking statements” within the meaning ofthe applicable laws and regulations. The annual results can differ materially from those expressed or implied, dependingupon the economic and climatic conditions, Government policies and other incidental factors.

Management Discussion & Analysis Report (Contd.)

36

1 Bayer Algerie S.P.A. Algeria

2 Bayer S.A. Argentina

3 Farmanet S.A. Argentina

4 Bayer Australia Limited Australia

5 Bayer CropScience Cotton Pty. Ltd. Australia

6 Bayer CropScience Holdings Pty. Ltd. Australia

7 Bayer CropScience Pty. Limited Australia

8 Bayer CropScience Seeds Pty. Ltd. Australia

9 Bayer CropScience Superannuation Pty. Ltd. Australia

10 Cotton Growers Services Pty. Ltd. Australia

11 C-Qentec Diagnostics Pty. Ltd. Australia

12 Laserlite Australia Pty. Ltd. Australia

13 UIM Agrochemicals Pty. Ltd. Australia

14 UIM Consolidated Ltd. Australia

15 Bayer Austria Gesellschaft m.b.H. Austria

16 Bayer CropScience Ltd. Bangladesh

17 Bayer Antwerpen Comm.V Belgium

18 Bayer BioScience N.V. Belgium

19 Bayer CropScience s.a.-n.v. Belgium

20 Bayer S.A.-N.V. Belgium

21 Bayer Sheet Europe N.V. Belgium

22 Immobiliere Avenue Louise et Rue de Livourne S.A. Belgium

23 Indaver N.V. Belgium

24 Innogenetics NV Belgium

25 Bayer CropScience Boliviana Ltda Bolivia

26 Bayer Pharma d.o.o. Sarajevo Bosnia & Herzegowina

27 Baydiag Ltda. Brazil

28 Bayer CropScience Ltda. Brazil

29 Bayer S.A. Brazil

30 Farmaco Ltda. Brazil

31 Nunhems do Brasil Comercio de Sementes Ltda Brazil

32 Previbayer Sociedade de Previdencia Privada Brazil

33 Tribel Trat de Resid Indust B Roxo S/A Brazil

34 Bayer Bulgaria EOOD Bulgaria

35 Bayer CropScience Cameroun SARL Cameroon

36 2283247 CANADA INC. Canada

37 3099351 CANADA INC. Canada

38 Bayer Canadian Holdings Inc. Canada

39 Bayer CropScience Holdings Inc. Canada

40 Bayer CropScience Inc. Canada

41 Bayer Inc. Canada

42 Schein Pharmaceutical Canada, Inc. Canada

43 Bayer S.A. Chile

44 Nunhems Chile S.A. Chile

45 Asia Sunseeds Co. Ltd. China

46 Bayer (China) Limited China

47 Bayer (Sichuan) Animal Health Co. Ltd. China

48 Bayer Coatings Systems Shanghai Co. Ltd. China

49 Bayer CropScience Hangzhou Company Ltd. China

50 Bayer Guangyi Panel Co. Ltd. China

51 Bayer Healthcare Co. Ltd. China

52 Bayer Jinling Polyurethane Company Ltd. China

53 Bayer MaterialScience Trading (Shanghai) Company ChinaLimited

54 Bayer Polymers Shanghai Co. Ltd. China

55 Bayer Polyurethanes (Shanghai) Co. Ltd. China

56 Bayer Technology Services (Shanghai) Co. Ltd. China

57 BCS Tianjin Company Ltd. China

58 Hennecke Maruka (Shanghai) Limited China

59 Bayer CropScience SA Columbia

60 Bayer S.A. Columbia

61 Cropsa Ltda. Columbia

62 Bayer S.A. Costa Rica

63 Bayer d.o.o. Croatia

64 Bayer Pharma d.o.o. Croatia

65 Quimicas Unidas S.A. Cuba

66 AgrEvo Middle East (Cyprus) Ltd. Cyprus

67 Kyrgyz Agra Investment Company Ltd. Cyprus

68 BAYER S.R.O. Czech Republic

69 BCS CR s.r.o. Czech Republic

70 Bayer A/S Denmark

71 Tectrade A/S Denmark

72 Bayer S.A. Dominican Republic

73 BCS, S.A. Dominican Republic

74 Bayer S.A. Ecuador

75 Bayer Middle East, Ltd. Egypt

76 Egytrade for Import and Export Ltd. Egypt

77 Bayer, S.A. El Salvador

78 Corporacion Bonima S.A. de C.V. El Salvador

79 Bayer Oy Finland

80 Suomen Tectrade Oy Finland

81 Bayer CropScience France S.A.S. France

82 Bayer CropScience Holding SA France

83 Bayer CropScience Nufarm SA France

84 Bayer CropScience S.A. France

85 Bayer Diagnostics S.A. France

86 Bayer Environmental Science S.A.S. France

87 Bayer Pharma SAS France

88 Bayer Polyols S.N.C. France

89 Bayer S.A.S. France

90 Bayer Sante Familiale SAS France

91 GIE AIFOR France

92 Hubwoo.com France

93 MultiPUR S.A.S.U. France

94 Novance SA France

95 Nunhems France S.A.R.L. France

96 Philagro Holding SA France

97 PYCO SA France

98 Societe de Conditionnement Bayer S.A.R.L. France

99 Societe Immobiliere de Gaillard d’Economie Mixte France(SIGEM)

100 Societe Immobiliere Distri S.A. France

101 1. BBSV GmbH Germany

102 1. BCrSV GmbH Germany

103 1. BPOV GmbH Germany

104 2. BHCV GmbH Germany

105 AF Personalpartner GmbH Germany

106 Agreva GmbH Germany

107 AgrEvo Verwaltungsgesellschaft mbH Germany

108 AI Anti-Infectives Research & Development GmbH Germany& Co. KG

109 AI Anti-Infectives Research & Development GermanyVerwaltungs-GmbH

Bayer CropScience is a part of the Bayer Group which operates worldwide in the areas of HelathCare, CropScience and MaterialScience. The name of Bayer Group Companies inIndia and Worldwide are as under

Sr. Company name Country

No


No

Bayer Group Companies in India and Worldwide

37


110 ALiZ GmbH & Co. KG Germany

111 Apovia AG Germany

112 Ausbildungsinitiative Rheinland GmbH Germany

113 BAYDEG Kautschukchemikalien GmbH Germany

114 Bayer 04 Immobilien GmbH Germany

115 Bayer 04 Leverkusen Fußball GmbH Germany

116 Bayer 04 Leverkusen Sportförderung GmbH Germany

117 Bayer 04 Mobilien GmbH Germany

118 Bayer AG Germany

119 Bayer Beteiligungsverwaltungsgesellschaft mbH Germany

120 Bayer BioScience GmbH Germany

121 Bayer Bitterfeld GmbH Germany

122 Bayer Business Services GmbH Germany

123 Bayer Chemicals AG Germany

124 Bayer CropScience Aktiengesellschaft Germany

125 Bayer CropScience Beteiligungsgesellschaft mbh Germany

126 Bayer CropScience Deutschland GmbH Germany

127 Bayer CropScience GmbH Germany

128 Bayer CropScience GermanyVermögensverwaltungsgesellschaft mbH

129 Bayer Gastronomie GmbH Germany

130 Bayer Generikaprodukte GmbH Germany

131 Bayer Gesellschaft für Beteiligungen mbH Germany

132 Bayer HealthCare AG Germany

133 Bayer Industry Services Geschäftsführungs-GmbH Germany

134 Bayer Industry Services GmbH & Co. OHG Germany

135 Bayer Innovation GmbH Germany

136 Bayer Innovation Ventures GmbH Germany

137 Bayer International Services G.m.b.H. Germany

138 Bayer MaterialScience AG Germany

139 Bayer MaterialScience Customer Services GermanyGeschäftsführungs-GmbH

140 Bayer MaterialScience Customer Services GmbH Germany

141 Bayer Sheet Europe GmbH Germany

142 Bayer Technology Services GmbH Germany

143 Bayer Unterstützungskasse GmbH Germany

144 Bayer Verwaltungsgesellschaft für Anlagevermögen Germanym.b.H.

145 Bayer Vital GmbH Germany

146 Bayer-Handelsgesellschaft mbH Germany

147 Bayer-Kaufhaus GmbH Germany

148 Bayfin GmbH Germany

149 BaySecur GmbH Germany

150 BaySports-Travel GmbH Germany

151 Baywoge GmbH Germany

152 BioM Aktiengesellschaft Munich BioTech Development Germany

153 Bioregion Halle-Leipzig Management GmbH Germany

154 BKV Beteiligungs- und GermanyKunststoffverwertungsgesellschaft mbH

155 BÜFA Polyurethane GmbH & Co. KG Germany

156 BÜFA Polyurethane Verwaltungs GmbH Germany

157 CaseTech Geschäftsführungs-GmbH Germany

158 CaseTech GmbH & Co. KG Germany

159 Chemion Logistik GmbH Germany

160 Chemische Fabrik Altherzberg GmbH Germany

161 Chemische Fabriken Oker und Braunschweig AG Germany

162 CPI ChemiePark-Institut GmbH Germany

163 Dritte BV GmbH Germany

164 Drugofa GmbH Germany

165 DV Dämmstoffe GmbH Germany

166 Dynevo GmbH Germany

167 Ehrfeld Mikrotechnik BTS GmbH Germany

168 Eigenjagd Logemann/Wolff GbR Germany

169 EPUREX Films Geschäftsführungs-GmbH Germany

170 EPUREX Films GmbH & Co. KG Germany

171 Erste K-W-A Beteiligungsgesellschaft mbH Germany

172 Euroservices Bayer GmbH Germany

173 Exatec Geschäftsführungs-GmbH Germany

174 Exatec GmbH & Co. KG Germany

175 Farbenfabriken Bayer GmbH Germany

176 Faserwerke Hüls GmbH Germany

177 GE Bayer Silicones GmbH & Co. KG Germany

178 GE Bayer Silicones Holding GmbH Germany

179 GE Bayer Silicones Verwaltungs-GmbH Germany

180 Gebr. Borchers AG Germany

181 Generics Holding GmbH Germany

182 GENUS Grundstücks- und Vermietungsgesellschaft GermanymbH & Co.KG

183 Gerhard Peter GmbH Germany

184 GeWoGe Gesellschaft für Wohnen und GermanyGebäudemanagement mbH

185 GIGAS Grundstücks-Vermietungsgesellschaft mbH Germany

186 GIGAS Grundstücks-Vermietungs-GmbH & Co., GermanyObjekt Monheim KG

187 Ginger GmbH Germany

188 GP Grenzach Produktions GmbH Germany

189 Gründer- und Innovationszentrum Leverkusen GmbH Germany

190 H. C. Starck GmbH Germany

191 H.C. Starck Ceramics Geschäftsführungs-GmbH Germany

192 H.C. Starck Ceramics GmbH & Co. KG Germany

193 H.C. Starck Hermsdorf GmbH Germany

194 H.C. Starck Hermsdorf Vermögensverw. GermanyGeschäftsführungs GmbH

195 H.C. Starck Hermsdorf Vermögensverwaltungs-GmbH Germany& Co. KG

196 Hennecke GmbH Germany

197 Hi-BIS GmbH Germany

198 Hild Samen GmbH Germany

199 IPW Sicherheitsdienst GmbH Germany

200 ISF Internationale Schule Frankfurt-Rhein-Main GmbH Germany& Co. KG

201 ISF Internationale Schule Frankfurt-Rhein-Main GermanyVerwaltungs-GmbH

202 Job@ctive GmbH Germany

203 KG III Augusta Grundstücksverwaltungsgesellschaft GermanymbH & Co.

204 Konsortium Hennecke GmbH, W+K Industrie Technik GermanyGmbH & Co. GbR

205 KVP Pharma+Veterinär-Produkte GmbH Germany

206 LensWista GmbH Germany

207 LION Bioscience AG Germany

208 Molypress Deutschland GmbH Germany

209 Niedersächs. Ges. zur Endablagerung von GermanySonderabfall mbH

210 Pallas Versicherung Aktiengesellschaft Germany

211 Probis GmbH Germany

212 Salzgewinnung Westfalen Verwaltungs GmbH Germany

213 Salzgewinnungsgesellschaft Westfalen mbH & Co. KG Germany

214 Sauerstoff- und Stickstoffrohrleitungsgesellschaft mbH Germany


No


No

Bayer Group Companies in India and Worldwide (Contd.)

38

215 SIRENADE PHARMACEUTICALS AG Germany

216 Solavista GmbH & Co. KG Germany

217 Solavista Verwaltungs GmbH Germany

218 Sportrechte Vermarktungs- und Verwertungs-GmbH Germany& Co. oHG

219 Staxera GmbH Germany

220 STAXERA Holding GmbH & Co. KG Germany

221 STAXERA Holding Verwaltungsgesellschaft mbH Germany

222 Stefes Import/Export GmbH Germany

223 SuNyx GmbH Germany

224 SuNyx Surface Nanotechnologies GmbH Germany

225 Tecpol Technologieentwicklungs GmbH Germanyfür ökoeffiziente Polym.

226 TravelBoard GmbH Germany

227 Vierte BV GmbH Germany

228 WFL Wirtschaftsförderung Leverkusen GmbH Germany

229 Wohnstätte Krefeld, Wohnungs-Aktiengesellschaft Germany

230 Wolff Cellulosics Geschäftsführungs-GmbH Germany

231 Wolff Cellulosics GmbH & Co. KG Germany

232 Wolff Walsrode Aktiengesellschaft Germany

233 Zweite K-W-A Beteiligungsgesellschaft mbH Germany

234 Abuakwa Formulation Plant Limited Ghana

235 Bayer Hellas AG Greece

236 Bayer S.A. Guatemala

237 Comercial Interamericana, S.A. Guatemala

238 Miles, S.A. Guatemala Branch Guatemala

239 Bayer S.A. de C.V. Honduras

240 Comercial Interamericana, S.A. de C.V. Honduras

241 Aventis CropScience China Ltd. Hong Kong

242 Bayer Far East Service Co. Ltd. Hong Kong

243 Bayer HealthCare Limited Hong Kong

244 Bayer MaterialScience Limited Hong Kong

245 BAYER HUNGARIA Kft. Hungary

246 CSEBER Csomagoloeszköz Begyüjtesi Rendszer Kht Hungary

247 Nunhems Hungary Kft. Hungary

248 Bayer CropScience Limited India

249 Bayer Diagnostics India Limited India

250 Bayer MaterialScience Private Limited India

251 Bayer Pharmaceuticals Private Limited India

252 Bayer Polychem (India) Limited India

253 Bilag Industries Private Ltd. India

254 Hybrid Rice International Pvt. Ltd. India

255 Nunhems Seeds Private Ltd. India

256 Proagro Hybrid International Ltd. India

257 Proagro Seed Company Pvt. Ltd. India

258 PT Bayer Indonesia Indonesia

259 PT Bayer Kimia Farmasindo Indonesia

260 PT Bayer MaterialScience Indonesia Indonesia

261 Bayer Iranchemie AG Iran

262 Bayer CropScience Ireland Limited Ireland

263 Bayer Diagnostics Europe Ltd. Ireland

264 Bayer Diagnostics Manufacturing Limited Ireland

265 Bayer Limited Ireland

266 Medica II L.P. Israel

267 Mediterranean Seeds Ltd. Israel

268 Millenium Materials Technologies Fund II Ltd. Israel

269 Palthough Industries (1998) Ltd. Israel

270 Polygal Plastics Industries Ltd. Israel

271 Visible Genetics Israel Ltd. Israel

272 3R ASSOCIATI S.p.A. Italy

273 Agriformula Srl Italy

274 Axxam Srl Italy

275 Baycare S.r.l. Italy

276 Bayer Biologicals S.r.l. Italy

277 Bayer CropScience S.r.l. Italy

278 Bayer Diagnostics S.r.l. Italy

279 Bayer Healthcare Srl Italy

280 Bayer MaterialScience S.r.l. Italy

281 Bayer S.p.A. Italy

282 Bayer Sheet Europe S.p.A. Italy

283 Consorzio Dafne Italy

284 Deltapur S.p.A. Italy

285 GE Bayer Silicones S.r.l. Italy

286 Nunhems Italy S.r.l. Italy

287 Pharbenia S.r.l. Italy

288 Bayer CropScience Cote D’Ivoire SA Ivory Coast

289 Rhone-Poulenc (Caribbean) Ltd. Jamaica

290 Bayer CropScience K.K. Japan

291 Bayer Ltd. Japan

292 Bayer Medical Ltd. Japan

293 Bayer Yakuhin, Ltd. Japan

294 DIC Bayer Polymer Ltd. Japan

295 H.C. Starck Ltd. Japan

296 MEG-MARUKA KAKOUKI CO. & LTD. Japan

297 Sumika Bayer Urethane Co., Ltd. Japan

298 Teijin-Bayer Polytec Ltd. Japan

299 Bayer CropScience LLP Kazakhstan

300 AgrEvo East Africa Ltd. Kenya

301 Bayer East Africa Ltd. Kenya

302 Bayer Kenya Ltd. Kenya

303 Kyrghyz Agro Investment Kirghistan

304 Bayer CropScience Ltd. Korea Republic

305 Bayer Korea Ltd. Korea Republic

306 Bayer Sewon Ltd. Korea Republic

307 INDURISK RÜCKVERSICHERUNG AG Luxemburg

308 Aventis CropScience Malawi Ltd. Malawi

309 Bayer (Malaysia) Sdn. Bhd. Malaysia

310 Bayer CropScience (Malaysia) Sdn, Bhd, Malaysia

311 Bayer CropScience (OHQ) (Malaysia) Sdn. Bhd. Malaysia

312 Bayer Environmental Health (Malaysia) Sdn. Bhd. Malaysia

313 Bayer HealthCare S.A. Morocco

314 Bayer Immobiliere Maroc SARL Morocco

315 Bayer Maghreb S.A. Morocco

316 Sunseeds Holding Ltd. Mauritius

317 Bayer de Mexico, S.A. de C.V. Mexico

318 Bayer IMSA, S.A. de C.V. Mexico

319 Industrias Gustafson, S.A. de C.V. Mexico

320 Nunhems Mexico S.A. de C.V. Mexico

321 Myanmar Aventis CropScience Ltd. Myanmar

322 Bayer Namibia (Proprietary) Limited Namibia

323 AgrEvo Benelux B.V. Netherlands

324 Bayer B.V. Netherlands

325 Bayer Capital Corporation B.V. Netherlands

326 Bayer CropScience B.V. Netherlands

327 Bayer Polyurethanes B.V. Netherlands

328 Biogenetic Technologies B.V. Netherlands


No


No


39


329 GE Bayer Silicones B.V. Netherlands

330 Innovative Dutch Electro Ceramics Pilot Production NetherlandsB.V.

331 Lyondell Bayer Manufacturing Maasvlakte VOF Netherlands

332 Nunhems BV Netherlands

333 Nunhems Netherlands B.V. Netherlands

334 OMNEXUS N.V. Netherlands

335 Plant Genetics System International NV Netherlands

336 Visible Genetics B.V. Netherlands

337 Zilip Pharma B.V. Netherlands

338 Bayer New Zealand Limited New Zealand

339 Bayer S.A. Nicaragua

340 Corp. Farmaceutica Interamericana, S.A. Nicaragua

341 Bayer AS Norway

342 Bayer CropScience (Private) Limited Pakistan

343 Bayer DAS (Private) Limited Pakistan

344 Bayer Pakistan (Private) Limited Pakistan

345 BCS (Private) Limited Pakistan

346 Chemdyes Pakistan (Private) Limited Pakistan

347 Bayer Panama, S.A. Panama

348 Bayer S.A. Panama

349 Bayer S.A. Paraguay

350 Bayer S.A. Peru

351 CROPSA S.A.C. Peru

352 Bayer CropScience, Inc. Philippines

353 Bayer Philippines, Inc. Philippines

354 BAYER SP.Z.O.O. Poland

355 Nunhems Poland Sp.Zo.o. Poland

356 Bayer CropScience (Portugal)-Produtos para a PortugalAgricultura, Lda

357 Bayer Portugal S.A. Portugal

358 Bayhealth Comercializacao de Produtos PortugalFarmaceuticos Unipessoal Lda.

359 CENTROFARMA-Industria e Comercio de Prod. PortugalFarmaceuticos, Lda.

360 Bayer Puerto Rico Inc. Puerto Rico

361 BCS Romania Srl Romania

362 SC Bayer SRL Romania

363 BAYER A/O Russia

364 OOO Bayer CropScience Russia

365 ZAO Rhone-Poulenc AO Russia

366 Bayer d.o.o. Serbia & Montenegro

367 Bayer Environmental Health Singapore Private SingaporeLimited

368 Bayer South East Asia Pte. Ltd. Singapore

369 Hennecke-Maruka Asia Pte. Ltd. Singapore

370 Bayer, spol. s.r.o. Slovakia

371 Bayer CropScience d.o.o. (Slovenia) Slovenia

372 Bayer Pharma d.o.o. Slovenia

373 AgrEvo South Africa (Pty.) Ltd. South Africa

374 Bayer (Proprietary) Limited South Africa

375 Bayer Animal Health (Pty.) Ltd. South Africa

376 Coopers Environmental Health Pty. Ltd. South Africa

377 Milborrow Animal Health (Proprietary) Limited South Africa

378 Mincape (Pty.) Ltd. South Africa

379 Rustenburg Chrome Mine Holdings (Pty.) Ltd. South Africa

380 Wenkem SA (Proprietary) Limited South Africa

381 Aguas Industriales de Tarragona, S.A. (AITASA) Spain

382 Avantcoat S.L. Spain

383 Bayer CropScience S.L. Spain

384 Bayer Hispania, S.L. Spain

385 Bayer Polimeros S.L. Spain

386 BAYHEALTH S.L. Spain

387 Bayropharm Medica, S.L. Spain

388 BAYROPHARM S.L. Spain

389 BaySystems Iberia, S.L. Spain

390 Consorci D’aigües de Tarragona Spain

391 DISALFARM, S.A. Spain

392 Euroservices Bayer S.L. Spain

393 Nunhems Spain, S.A. Spain

394 Quimica Farmaceutica Bayer, S.A. Spain

395 Racks de la zona Sur, C.B. Spain

396 Sociedad Espanola de materiales Plasticos, S.A. Spain

397 Vapeltar, A.I.E. Spain

398 Swaziland Agricultural Supplies Limited Swaziland

399 Bayer AB Sweden

400 H.C. Starck AB Sweden

401 Bayer (Schweiz) AG Switzerland

402 Bayer Consumer Care AG Switzerland

403 Bayer International S.A. Switzerland

404 Chemie-Beteiligungsaktiengesellschaft Switzerland

405 EMP-Estrusione Materiali Plastici S.A. Switzerland

406 Bayer CropScience Taiwan Ltd. Taiwan

407 Bayer Polyurethanes Taiwan Ltd. Taiwan

408 Bayer Taiwan Company Ltd. Taiwan

409 CropScience Tanzania Limited Tanzania

410 AgrEvo (Thailand) Limited Thailand

411 Bayer CropScience (Thailand) Company Limited Thailand

412 BAYER THAI COMPANY LIMITED Thailand

413 H.C. Starck Co. Ltd. Thailand

414 RHONE-POULENC AGRO (THAILAND) COMPANY ThailandLIMITED

415 Bayer Ilac Fabrikalari Anonim Sireti Turkey

416 Bayer Kimya Üretim ve Hizmet Limited Sirketi Turkey

417 Bayer Türk Kimya Sanayi Limited Sirketi Turkey

418 Nunhems Tohumculuk Limited Sirketi Turkey

419 CropScience Uganda Limited Uganda

420 Bayer Ltd. Ukraina

421 Ukrinterzukor JV Ltd. Ukraina

422 Bayer ACI Limited United Kingdom

423 Bayer ACSH Limited United Kingdom

424 Bayer AEH Limited United Kingdom

425 Bayer AGCO Limited United Kingdom

426 Bayer Agriculture Limited United Kingdom

427 Bayer CropScience Holdings United Kingdom

428 Bayer CropScience Limited United Kingdom

429 Bayer CropScience Nufarm Limited United Kingdom

430 Bayer Diagnostics Manufacturing (Sudbury) Limited United Kingdom

431 Bayer Diagnostics Manufacturing Limited United Kingdom

432 Bayer Public Limited Company United Kingdom

433 Bayer UK Limited United Kingdom

434 FBC Industrial Chemical Ltd. United Kingdom

435 H.C. Starck (West Horndon) Ltd. United Kingdom

436 H.C. Starck Ltd. United Kingdom

437 pbi Home & Garden Limited United Kingdom

438 Reldy Ltd. United Kingdom

439 Scipher plc United Kingdom


No


No


40


No


No


440 Stapleford Services Ltd. United Kingdom

441 Trustee of the CropScience Pension Fund Ltd. United Kingdom

442 TWINAGRO LIMITED United Kingdom

443 Visible Genetics UK Ltd. United Kingdom

444 Accelrys, Inc. United States

445 Aderis Pharmaceuticals, Inc. United States

446 AEROVANCE, INC. United States

447 Avigen Inc. United States

448 Bayer Consumer Care LLC United States

449 Bayer Corporate and Business Services LLC United States

450 Bayer Corporation United States

451 Bayer Cotton Seed International Inc. United States

452 Bayer CropScience Holding Inc. United States

453 Bayer CropScience Inc. United States

454 Bayer CropScience LLC United States

455 Bayer CropScience LP United States

456 Bayer HealthCare LLC United States

457 Bayer MaterialScience LLC United States

458 Bayer Pharmaceuticals Corporation United States

459 BayOne Urethane Systems LLC United States

460 Baypo I LLC United States

461 Baypo II LLC United States

462 BAYPO Limited Partnership United States

463 BaySystems North America LLC United States

464 BIPPO Corporation United States

465 Burril Agbio Capital Fund II, Limited Partnership United States

466 Burrill Agbio Capital Fund Annex Limited Partnership United States

467 Burrill Agbio Capital Fund Limited Partnership United States

468 BURRILL BIOTECHNOLOGY CAPITAL FUND United States

469 Burrill Life Sciences Capital Fund, L.P. United States

470 Burrill Nutraceuticals Capital Fund Limited Partnership United States

471 ChemConnect. Inc United States

472 ChromaDex Inc. United States

473 CMEA Ventures II, L.P. United States

474 Company 113 Corporation United States

475 Cooper Land Company of New Jersey, Inc. United States

476 CuraGen Corporation United States

477 Deerfield Urethane, Inc. United States

478 DYSTAR HOLDING COMPANY United States

479 Exatec, LLC United States

480 H. C. Starck Inc. United States

481 H.C. Starck Holding Inc. United States

482 H.C.S.T. Corp. United States

483 InPhase Technologies, Inc. United States

484 NGEN Enabling Technologies Fund, LP United States

485 NGEN II, L.P. United States

486 Nunhems USA, Inc. United States

487 Onyx Pharmaceuticals, Inc. United States

488 Oxford Bioscience Partners II Limited Partnership United States

489 Paratek Pharmaceuticals, Inc. United States

490 Pharmacopeia Drug Discovery Inc. United States

491 PharmaNetics, Inc United States

492 PO JV, LP United States

493 Scynexis, Inc. United States

494 Sheffield Plastics Inc. United States

495 STWB Inc. United States

496 Talecris BioTherapeutics Holdings Corp. United States

497 The SDI Divestiture Corporation United States

498 Viterion TeleHealthcare LLC United States

499 Bayer S.A. Uruguay

500 Bayer S.A. Venezuela

501 Bayer Vietnam Ltd. Vietnam

502 Bayer CropScience Zimbabwe (Private) Limited Zimbabwe

503 Bayer Zimbabwe (Private) Limited Zimbabwe

Any other subsidiary of Bayer AG worldwide (existing or incorporated hereafter)

41

Bayer CropScience Limited [Formerly Bayer (India) Limited] Annual Report 2005

1. We have audited the attached Balance Sheet of Bayer CropScience Limited (formerly Bayer (India) Limited)(the Company) as at December 31, 2005 and the related Profit and Loss Account and Cash Flow Statement for theyear ended on that date annexed thereto, which we have signed under reference to this report. These financialstatements are the responsibility of the Company’s Management. Our responsibility is to express an opinion on thesefinancial statements based on our audit.

2. We have conducted our audit in accordance with auditing standards generally accepted in India. Those Standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statementsare free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by the Management, as well as evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003 as amended by the Companies (Auditor’s Report)(Amendment) Order, 2004, issued by the Central Government of India in terms of sub-section (4A) of Section 227 of‘The Companies Act, 1956’ of India (the Act) and on the basis of such checks of the books and records of theCompany as we considered appropriate and according to the information and explanations given to us, we give inthe Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to in Paragraph 3 above, we report that:

(a) We have obtained all the information and explanations, which to the best of our knowledge and belief werenecessary for the purposes of our audit;

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as appearsfrom our examination of those books;

(c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreementwith the books of account;

(d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this reportcomply with the accounting standards referred to in sub-section (3C) of Section 211 of the Act;

(e) On the basis of written representations received from the Directors, as on December 31, 2005 and taken onrecord by the Board of Directors, none of the Directors is disqualified as on December 31, 2005 from beingappointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Act;

(f) In our opinion and to the best of our information and according to the explanations given to us, the said financialstatements together with the notes thereon and attached thereto give in the prescribed manner the informationrequired by the Act and give a true and fair view in conformity with the accounting principles generally acceptedin India:

(i) in the case of the Balance Sheet, of the state of affairs of the Company as at December 31, 2005;

(ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and

(iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Natraj RamkrishnaPartnerMembership Number: F-32815For and on behalf of

Place : Mumbai Price WaterhouseDate : March 23, 2006 Chartered Accountants

AUDITORS’ REPORTTO THE MEMBERS OF BAYER CROPSCIENCE LIMITED [FORMERLY BAYER (INDIA) LIMITED]

42

[Referred to in paragraph 3 of the Auditors’ Report of even date to the members of Bayer CropScience Limited (formerlyBayer (India) Limited) on the financial statements for the year ended December 31, 2005]

1. (a) The Company is maintaining proper records showing full particulars including quantitative details and situation ofits fixed assets.

(b) The fixed assets are physically verified by the Management according to a phased programme designed tocover all the items over a period of three years, which in our opinion, is reasonable having regard to the size ofthe Company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has beenphysically verified by the Management during the year and no material discrepancies between the book recordsand the physical inventory have been noticed.

(c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assetshas not been disposed of by the Company during the year.

2. (a) The inventory (including stocks with third parties) has been physically verified by the Management during theyear. In our opinion, the frequency of verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventory followed by the Management are reasonableand adequate in relation to the size of the Company and the nature of its business.

(c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining properrecords of inventory. The discrepancies noticed on physical verification of inventory as compared to bookrecords were not material.

3. (a) The Company has granted unsecured loans to two companies covered in the register maintained under Section301 of the Act. The maximum amount involved during the year and the year-end balance of such loansaggregates Rs. 64,500 (‘000s) and Rs. Nil, respectively.

(b) In our opinion, the rate of interest and other terms and conditions of the aforesaid unsecured loans granted bythe Company are not prima facie prejudicial to the interest of the Company.

(c) In respect of the aforesaid unsecured loans granted by the Company, the companies are repaying the principalamounts as stipulated and are also regular in payment of interest, where applicable.

(d) In respect of the aforesaid unsecured loans granted by the Company, there is no overdue amount more thanRupees One Lakh.

(e) The Company has taken unsecured loans from three companies covered in the register maintained underSection 301 of the Act. The maximum amount involved during the year and the year-end balance of such loansaggregates Rs. 410,000 (‘000s) and Rs. 170,000 (‘000s), respectively.

(f) In our opinion, the rate of interest and other terms and conditions of the aforesaid unsecured loans taken by theCompany, are not prima facie prejudicial to the interest of the Company.

(g) In respect of the aforesaid unsecured loans taken by the Company, the Company is regular in repaying theprincipal amounts as stipulated and is also regular in payment of interest, where applicable.

4. In our opinion and according to the information and explanations given to us, having regard to the explanationthat certain items purchased are of special nature for which suitable alternative sources do not exist for obtainingcomparative quotations, there is an adequate internal control system commensurate with the size of theCompany and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods andservices. Further, on the basis of our examination of the books and records of the Company, and according tothe information and explanations given to us, we have neither come across nor have been informed of anycontinuing failure to correct major weaknesses in the aforesaid internal control system.

5. (a) In our opinion and according to the information and explanations given to us, the particulars of contracts orarrangements referred to in Section 301 of the Act have been entered in the register maintained under thatSection.

(b) In our opinion and according to the information and explanations given to us, the transactions made inpursuance of contracts or arrangements entered into the register in pursuance of section 301 of the Actand exceeding the value of Rupees Five Lakhs in respect of each party during the year have been made atprices which are reasonable having regard to the prevailing market prices at the relevant time except fortransactions which according to Management are of special nature and for which no comparative prices areavailable.

6. The Company has not accepted any deposits from the public during the year within the meaning of Sections58A and 58AA of the Act and the rules framed thereunder.

ANNEXURE TO THE AUDITORS’ REPORTPage 1 of 2

43


7. In our opinion, the Company has an internal audit system commensurate with its size and nature of its business.

8. We have broadly reviewed the books of account maintained by the Company in respect of products where,pursuant to the Rules made by the Central Government of India, the maintenance of cost records has beenprescribed under clause (d) of sub-section (1) of Section 209 of the Act and are of the opinion that prima facie,the prescribed accounts and records have been made and maintained. We have not, however, made a detailedexamination of the records with a view to determine whether they are accurate or complete.

9. (a) According to the information and explanations given to us and the records of the Company examined by us, inour opinion, the Company is generally regular in depositing the undisputed statutory dues including providentfund, investor education and protection fund, employees’ state insurance, income tax, sales-tax, wealth tax,service tax, customs duty, excise duty, cess and other material statutory dues as applicable with the appropriateauthorities in India.

(b) According to the information and explanations given to us and the records of the Company examined by us,there are no dues of custom duty, wealth-tax, service tax and cess as at December 31, 2005 which have notbeen deposited on account of any dispute. Refer Annexure A for particulars of dues of income tax, sales tax andexcise duty as at December 31, 2005 which have not been deposited on account of dispute.

10. The Company has no accumulated losses as at December 31, 2005 and it has not incurred any cash losses inthe financial year ended on that date or in the immediately preceding financial year.

11. According to the records of the Company examined by us and the information and explanations given to us, theCompany has not defaulted in repayment of dues to any banks as at the Balance Sheet date. Further, there areno dues payable to financial institutions or debenture holders as at Balance Sheet date.

12. The Company has not granted any loans and advances on the basis of security by way of pledge of shares,debentures and other securities.

13. The provisions of any special statute applicable to chit fund/ nidhi/ mutual benefit fund/ societies are notapplicable to the Company.

14. In our opinion, the Company is not a dealer or trader in shares, securities, debentures and other investments.

15. In our opinion and according to the information and explanations given to us, the Company has not given anyguarantee for loans taken by others from banks or financial institutions during the year.

16. In our opinion and according to the information and explanations given to us, the term loans have been appliedfor the purposes for which they were obtained.

17. On the basis of an overall examination of the Balance Sheet of the Company, in our opinion and according to theinformation and explanations given to us, there are no funds raised on a short term basis which have been usedfor long term investments.

18. The Company has not made any preferential allotment of shares to parties and companies covered in theregister maintained under Section 301 of the Act during the year.

19. The Company has not issued any debenture during the year.

20. The Company has not raised any money by public issue during the year.

21. During the course of our examination of the books and records of the Company, carried out in accordance withthe generally accepted auditing practices in India, and according to the information and explanations given tous, we have neither come across any instance of material fraud on or by the Company, noticed or reportedduring the year, nor have we been informed of any such case by the Management.

Natraj RamkrishnaPartnerMembership Number: F-32815For and on behalf of

Place : Mumbai Price WaterhouseDate : March 23, 2006 Chartered Accountants

ANNEXURE TO THE AUDITORS’ REPORT[Referred to in paragraph 3 of the Auditors’ Report of even date to the members of Bayer CropScience Limited (formerlyBayer (India) Limited) on the financial statements for the year ended December 31, 2005]

Page 2 of 2

44

Name of the Statute Nature of Dues Amount Forum where(Rs. in ’000s) dispute is pending

1. Excise DutyThe Central Excise Act, Clearance of other finished goods as 753 The Assistant Commissioner1944 waste without payment of excise duty for of Central Excise

the period October 1986 to January 1991.

Denial of Modvat Credit on account of 212 The Custom, Excise andinvalid documents for the Year 1994 Service Tax Appellateand 1995. Tribunal

Non reduction of MRP on reduction in 30,176 The Assistant Commissionerrate of excise duty for the period March of Central Excise1997 to June 1998.

Denial of Modvat credit on account of 1,416 The Assistant Commissionerinvalid documents and penalty thereon of Central Excisefor the Years 1994, 1995 and 1996.

Denial of Modvat credit on paper and 652 The Commissioner ofpaperboard. Central Excise (Appeals)

Denial of Modvat credit on the furnace 1,058 The Commissioner ofoil and penalty thereon for the period 1995. Central Excise (Appeals)

Denial of Modvat credit on the furnace 1,270 The Commissioner ofoil and penalty thereon for the period Central Excise (Appeals)April 1998 to December 2003 and for theperiod January 2004 and June 2004.

Dispute on valuation of goods for the 5,751 The Custom, Excise andperiod September 2000 to December Service Tax Appellate2001 and penalty thereon. Tribunal

Dispute on classification of goods with 1,000 The Supreme Court of Indiainterest and penalty thereon for the periodJune 2000 to March 2001.

Dispute on classification of goods with 8,441 The Custom, Excise andinterest and penalty thereon for the Service Tax Appellateperiod April 2001 to February 2003 and Tribunal.for the period 2004-2005.

Sub Total 50,729

2. Income TaxThe Income Tax Act, Disallowance of certain expenses for the 382 Income Tax Appellate1961 Assessment Year 2001-2002. Tribunal

Dispute over treatment of consideration 28,373 Income Tax Appellatereceived towards sale of marketing rights Tribunalof Household Insecticide Business forthe Assessment Year 2002-2003.

Disallowance of certain expenses and 16,397 The Commissioner ofunutilised modvat credit for the Assessment Income Tax (Appeals)Year 2003-2004.

Disallowance of certain expenses for the 548 Income Tax AppellateAssessment Year 1993-1994. Tribunal

Disallowance of excise duty on closing stock 12,423 The Commissioner offor the Assessment Year 1998-1999. Income Tax (Appeals)

Treatment of income arising on transfer of 15,132 Income Tax AppellateMarketing Rights and disallowance of some Tribunalexpenses for the Assessment Year 2001-2002.

Disallowance under rule 6B and 6D of the 339 Income Tax AppellateIncome Tax Act and denial of set off of Tribunalunabsorbed depreciation for the AssessmentYear 1996-1997.

Dispute over higher interest charged u/s 234 B 2,117 Additional Commissionerfor the Assessment Year 1997-1998. of Income tax.

Disallowances of Expenses with respect to 275 Income Tax Appellatetechnical Know-how and higher valuation of TribunalClosing stock for the AssessmentYear 1999-2000.

Sub Total 75,986

Annexure A[Referred to in paragraph (9) (b) of our annexure to the Auditors’ Report of even date to the members of BayerCropScience Limited [formerly Bayer (India) Limited] on the financial statements for the year ended December 31, 2005]

Page 1 of 2

45


Name of the Statute Nature of Dues Amount Forum where(Rs. in ’000s) dispute is pending

3. Sales TaxThe Central Sales Non submission of various forms for the 9,367 Deputy CommissionerTax Act,1956 Year 1999-2000, 2000-2001, 2001-2002. (Appeals), West Bengal

Non-receipt of declaration forms for the 163 Assessing Authority,Year 2002-2003. KeralaDisallowance/ Non submission of various 16,610 The High Court offorms for the Assessment Year 2003-2004. Tamil NaduDisallowance/ Non submission of various 120 Assessing Authority,forms for the Assessment Year 2000-2001. Uttar PradeshDisallowance/ Non submission of various 273 Deputy Commissionerforms for the Assessment Year 2003-2004. Sales Tax, DelhiDisallowance/ Non submission of various 6,504 Deputy Commissionerforms for the Years 1999-2000, 2000-2001, Commercial Taxes,2002-2003. West Bengal

The West Bengal Enhancement of taxable turnover and 8,279 Assistant CommissionerSales Tax Act, 1994 disallowance of certain claims made by the of Commercial taxes

Company for the period 2002.Disputes over trading stock and disallowance 5,503 Deputy Commissionerof discounts. (Appeals), West BengalDisallowance of Discount and non submission 267 Appellate Authority,of Form ‘C’. KeralaDisallowance in respect of sales returns 393 Deputy Commissioner(withdrawal) of goods and discount for the Commercial Taxes,Year 1999-2000. West BengalNon submission of various forms for the 1,570 West Bengal CommercialYear 1996. taxes Appellate & Revisional

Board, West BengalThe Bihar Finance Disallowance of Discount for the 460 Joint Commissioner ofAct, 1981 Year 1999-2000. Commercial Tax (Appeal)The Kerala General Disallowance/ Non submission of supporting 239 Assistant CommissionerSales Tax Act, 1963 for payment of taxes for the Assessment (Assessment), Kerala

Years 1977-1978, 1979-1980 and from1980-1981 to 1984-1985.

The Kerala General Disallowance/ Non submission of supporting 35 The Kerala AppellateSales Tax Act, 1963 for payment of taxes for the Assessment Tribunal

Year 1994-1995.Sales tax and registration fees for the 204 The Kerala AppellateYear 1999-2000. TribunalEnhancement of gross taxable turnover for 26 Deputy Commissioner,the Assessment Year 1999-2000 and Appeals, Kerala2000-2001 and penalty thereon.Disallowance of Stock transfer for the 70 Deputy Commissioner,Year 1997-1998. Appeals, Kerala

The Assam General Interest and Penalty imposed for the 145 The Superintendent of Taxes,Sales Tax Act, 1993 Year 1999-2000. GuwahatiThe Punjab General Tax and penalty imposed on stock transfers 1,155 The Sales Tax Tribunal forSales Tax Act, 1948 effected vide invoice dated November 25, 2000. the State of PunjabThe Rajasthan Sales Tax and penalty on non submission of stock 1,085 The Rajasthan Tax Board,Tax Act, 1994 transfer forms in the Year 1999. AjmerThe Karnataka Sales Disallowance of Branch transfer due to non 32 Assessing Officer,Tax Act, 1957 submission of F Form for 2001-2002. BangaloreThe Delhi Sales Tax Stock transfer of rubber chemicals from 688 Deputy Commissioner SalesAct, 1975 consignment agent to Bayer Polychem (India) Tax, Delhi

Limited disallowed and penalty thereon for2003-2004.

The Uttar Pradesh Disallowances of various claims and penalty 839 Assessing Authority,Trade Tax Act, 1948 thereon for 2002-2003. Uttar PradeshThe Bombay Sales Tax Purchase tax levied on Anilene oil disputed for 222 The Sales Tax AppellateAct, 1959 Assessment Years 1986-1987 to 1991-1992. Tribunal, MaharashtraTamil Nadu Sales Enhancement of taxable turnover and 42,691 The High Court ofTax Act, 1959 penalty thereon. Tamil Nadu

Sub Total 96,940

Total 223,655

Annexure A[Referred to in paragraph (9) (b) of our annexure to the Auditors’ Report of even date to the members of BayerCropScience Limited [formerly Bayer (India) Limited] on the financial statements for the year ended December 31, 2005]

Page 2 of 2

46

Balance Sheet as at December 31, 2005 Rupees ’000s

Schedule As at As at31.12.2005 31.12.2004

SOURCES OF FUNDS

SHAREHOLDERS’ FUNDSShare Capital 1 394,987 394,987Reserves and Surplus 2 2,461,650 2,189,265

2,856,637 2,584,252

LOAN FUNDSSecured Loans 3 195,798 173,789Unsecured Loans 4 964,760 602,300

1,160,558 776,089

4,017,195 3,360,341

APPLICATION OF FUNDS

FIXED ASSETS 5Gross Block 3,265,927 2,893,741Less: Depreciation/ Amortisation 1,712,221 1,543,636

Net Block 1,553,706 1,350,105Capital Work-In-Progress 79,546 87,971

1,633,252 1,438,076

INVESTMENTS 6 40,043 120,131

DEFERRED TAX ASSET (NET) 15,041 65,270(Refer Notes 1(h) and 5 of Schedule 22)

CURRENT ASSETS, LOANS AND ADVANCESInventories 7 1,760,648 1,339,316Sundry Debtors 8 1,682,436 1,507,199Cash and Bank Balances 9 309,711 525,918Other Current Assets 10 34,550 5,940Loans and Advances 11 618,455 601,620

4,405,800 3,979,993

Less: CURRENT LIABILITIES AND PROVISIONSCurrent Liabilities 12 1,794,472 1,870,841Provisions 13 282,469 372,288

2,076,941 2,243,129

NET CURRENT ASSETS 2,328,859 1,736,864

4,017,195 3,360,341

Notes to Accounts 22

Schedules referred to above form an integral part of the Balance Sheet.

This is the Balance Sheet referred to in our report of even date.

Natraj RamkrishnaPartnerMembership No.: F-32815For and on behalf ofPrice WaterhouseChartered Accountants

Place : Mumbai,Date : March 23, 2006

For and on behalf of the BoardChairman Dr. Vijay MallyaManaging Directors Stephan GerlichDirectors Y. H. Malegam

Raj KaulA. K. R. Nedungadi


Shirin V. BalsaraHead – Legal &Company Secretary

47


Profit and Loss Account for the year ended December 31, 2005 Rupees ’000s

Schedule Year Ended Year Ended31.12.2005 31.12.2004

INCOMESales (Refer Note 1 (e) of Schedule 22) 7,561,333 7,417,343Less: Excise Duty 872,826 867,529

6,688,507 6,549,814Other Operating Income 14 103,271 146,219Other Income 15 391,375 261,724

7,183,153 6,957,757

EXPENDITUREMaterials Consumed 16 3,186,045 3,154,618Cost of Traded Goods Sold 17 510,242 633,736Employee Cost 18 572,110 658,081Other Expenses 19 1,900,609 2,053,397Finance Charges 20 74,352 111,617Depreciation 225,743 260,181

6,469,101 6,871,630Less: Recoveries from Group Companies 165,603 263,522

6,303,498 6,608,108Add/ (Less): (Increase)/ Decrease in Stock 21 63,688 (163,617)

6,367,186 6,444,491

PROFIT BEFORE PRIOR PERIOD,EXCEPTIONAL ITEMS AND TAXATION 815,967 513,266

Add:Prior Period Item — 18,748Less: Exceptional Items — Voluntary Retirement Scheme 69,128 7,979

PROFIT FOR THE YEAR BEFORE TAXATION 746,839 524,035

Taxation— Current Tax (Refer Note 4 of Schedule 22) 295,852 231,000

[including for earlier years Rs. 82,652 (Previous Year Rs. 10,150)]— Deferred Tax (Refer Notes 1(h) and 5 of Schedule 22) 50,229 29,431

[including for earlier years Rs. 3,273 (Previous Year Rs. 49,864)]— Fringe Benefit Tax 29,288 375,369 —

PROFIT AFTER TAX 371,470 263,604Add: Balance brought forward 1,383,183 1,245,024

AMOUNT AVAILABLE FOR APPROPRIATION 1,754,653 1,508,628

APPROPRIATIONSProposed Dividend 86,897 86,897Provision for Tax on Proposed Dividend 12,188 12,188Transfer to General Reserve 37,147 26,360Balance carried to Balance Sheet 1,618,421 1,383,183

1,754,653 1,508,628

Earnings Per Share before Prior Period and Exceptional Itemafter Taxation - Basic and Diluted (Net of Tax) 10.57 6.48Earnings Per Share after Prior Period and Exceptional Itemafter Taxation - Basic and Diluted (Net of Tax)(Refer Note 24 of Schedule 22) 9.40 6.67


Schedules referred to above form an integral part of the Profit and Loss Account.

This is the Profit and Loss Account referred to in our report of even date.



For and on behalf of the Board

Chairman Dr. Vijay MallyaManaging Directors Stephan GerlichDirectors Y. H. Malegam

Raj KaulA. K. R. Nedungadi



48

Schedules forming part of the Balance Sheet as at December 31, 2005 Rupees ’000s

As at As at31.12.2005 31.12.2004

SCHEDULE 1

SHARE CAPITAL

Authorised:

46,300,000 (Previous Year 46,300,000) Equity Shares of Rs. 10 each 463,000 463,000

Issued, Subscribed and Paid-up:39,498,747 (Previous Year 39,498,747)Equity Shares of Rs. 10 each, fully paid-up 394,987 394,987

Notes:(a) Of the above, 12,632,500 (Previous Year 12,632,500) Equity Shares of Rs. 10 each

are allotted as fully paid-up Bonus Shares by way of capitalisation of Capital Reserve,Premium received on Shares and General Reserve.

(b) 28,086,662 (Previous Year 28,086,662) Equity Shares of Rs. 10 each are held byBayer AG, Germany, the Ultimate Holding Company and its subsidiaries.

(c) Pursuant to the Scheme of Amalgamation of erstwhile Bayer Cropscience IndiaLimited with the Company, 23,278,747 Equity Shares of Rs. 10 each have beenissued and allotted as fully paid-up to the shareholders of erstwhile BayerCropscience India Limited without payment being received in cash.

SCHEDULE 2

RESERVES AND SURPLUS

General ReserveAs per last Balance Sheet 801,964 775,604Add: Transfer from Profit and Loss Account 37,147 26,360

839,111 801,964Investment Allowance Utilised Reserve 4,118 4,118Profit and Loss Account 1,618,421 1,383,183

2,461,650 2,189,265

SCHEDULE 3

SECURED LOANS

Loan from Banks 195,000 162,228(Secured by Pari Passu charge by hypothecation of Stocks and Book Debts)[Due within a year Rs. 195,000 (Previous Year Rs. 162,228)]

Lease Liability 798 11,561(Secured on the underlying leased assets)[Due within a year Rs. 798 (Previous Year Rs. 10,677)](Refer Note 18 of Schedule 22)

195,798 173,789

SCHEDULE 4

UNSECURED LOANS

Loan from Banks 782,960 400,000[Includes interest accrued and due Rs. 2,709 (Previous Year Rs. Nil)][Due within a year Rs. 782,960 (Previous Year Rs. Nil)]

Inter-Corporate Deposits 170,000 190,500[Due within a year Rs. 170,000 (Previous Year Rs. 190,500)]

Loan from Others 11,800 11,800

964,760 602,300

49


Schedules forming part of the Balance Sheet as at December 31, 2005

SCHEDULE 5

FIXED ASSETS(Refer Notes 1(b) and 1 (k) of Schedule 22)

Rupees ’000s

AssetsCost Depreciation/Amortisation

Net Book Value(Refer Notes 1 and 2 below) (Refer Notes 2 and 3 below)

As at Additions/ Deletions/ As at As at For the year/ Deletions/ As at Net Block Net Block 01.01.2005 Adjustments Adjustments 31.12.2005 01.01.2005 Adjustments Adjustments 31.12.2005 31.12.2005 31.12.2004

Owned AssetsIntangibles

Goodwill 93,256 — — 93,256 62,217 31,039 — 93,256 — 31,039

Technical Know-how 15,633 — — 15,633 15,633 — — 15,633 — —

Sub-total 108,889 — — 108,889 77,850 31,039 — 108,889 — 31,039

Tangibles

Freehold Land 5,789 3,236 — 9,025 — — — — 9,025 5,789(Refer Note 1 below)

Leasehold Land 9,100 — — 9,100 2,266 121 — 2,387 6,713 6,834

Buildings 835,125 43,724 44,259 834,590 207,459 32,138 9,709 229,888 604,702 627,666(Refer Note 1 below)

Plant and Machinery 1,326,161 361,465 30,757 1,656,869 932,718 121,899 25,923 1,028,694 628,175 393,443

Office Equipment &Computers 396,249 55,719 90,780 361,188 206,715 54,082 45,557 215,240 145,948 189,534

Furniture & Fixtures 80,644 41,066 2,483 119,227 57,058 9,230 2,241 64,047 55,180 23,586

Vehicles 78,509 66,387 14,258 130,638 30,956 13,123 8,978 35,101 95,537 47,553

Sub-total 2,731,577 571,597 182,537 3,120,637 1,437,172 230,593 92,408 1,575,357 1,545,280 1,294,405

Total 2,840,466 571,597 182,537 3,229,526 1,515,022 261,632 92,408 1,684,246 1,545,280 1,325,444

Leased Assets

Computers 53,275 — 16,874 36,401 28,614 12,330 12,969 27,975 8,426 24,661

Total 53,275 — 16,874 36,401 28,614 12,330 12,969 27,975 8,426 24,661

Capital Work-In-progress includes Capital Advances 79,546 87,971

Grand Total 2,893,741 571,597 199,411 3,265,927 1,543,636 273,962 105,377 1,712,221 1,633,252 1,438,076

Previous Year 2,916,479 322,427 345,165 2,893,741 1,387,243 276,465 120,072 1,543,636 — —————

NOTES:

1. The Company has agreed to transfer certain portion of the land (book value Rs. 1,153) and Building (written down value Rs. 103,047) located at Kolshet, Thane,Maharashtra to Lanxess India Private Limited vide Memorandum Of Understanding dated November 18, 2004, consequent to the divestment of chemical business,globally. This transfer has not been effected as at the year-end pending approval from the Collector of Thane.

2. Additions/Deletions to fixed assets and Depreciation for the year/on deletions includes adjustments on account of reclassification within the above categories of FixedAssets aggregating Rs. 94,443 and Rs. 48,219 respectively.

3. Depreciation on Leased assets for the year includes depreciation for earlier years Rs. Nil (Previous Year Rs. 16,284)

50


As at As at31.12.2005 31.12.2004

SCHEDULE 6

INVESTMENTS

LONG TERM, At Cost(Refer Notes 1(c) and 21 of Schedule 22)

TRADE, UNQUOTEDInvestment in Subsidiary:50,000 (Previous Year 50,000) Equity Shares of Rs. 10 each, fully paid-up inBayer Polychem (India) Limited 500 500

NON-TRADE:

UNQUOTED4,900 (Previous Year 4,900) Equity Shares in Bharuch Enviro InfrastructureLimited of Rs. 10 each, fully paid-up 49 49

209,880 (Previous Year 190,800) Equity Shares in Bharuch Eco AcquaInfrastructure Limited of Rs. 10 each, fully paid-up 2,099 1,908

QUOTED287,350 (Previous Year 287,350) Equity Shares in Bayer Diagnost icsIndia Limited of Rs. 10 each, fully paid-upMarket value Rs. 154,953 (Previous Year Rs. 106,032) 25,330 25,330

120,646 (Previous Year 120,646) 6.75% Tax Free US64 Bonds of Rs. 100 eachMarket value Rs. 12,554 (Previous Year Rs. 12,065) 12,065 12,065

CURRENTNil (Previous Year 1,024,054) units of Rs. 10 each in HSBC Mutual Fund –Floating rate fundMarket value Rs. Nil (Previous Year Rs. 10,254) — 10,254

Ni l (Previous Year 4,331,713) uni ts of Rs. 10 each in Bi r la Sun Li feMutual Fund - Dividend reinvestmentMarket value Rs. Nil (Previous Year Rs. 45,150) — 45,000

Nil (Previous Year 2,498,487) units of Rs. 10 each in J M Financial MutualFund - Daily DividendMarket value Rs. Nil (Previous Year Rs. 25,025) — 25,025

40,043 120,131

Note: Aggregate Market value of Quoted Investments Rs. 167,507(Previous Year Rs. 118,097).

SCHEDULE 7

INVENTORIES

(Refer Note 1(d) of Schedule 22)

Stores and Spares 47,336 20,269

Stock-in-Trade:

Raw Materials 413,237 195,344

Packing Materials 68,895 60,732

Semi-Finished Goods 197,251 107,503

Finished Goods 677,132 830,568

Traded Goods 274,896 68,277

Goods in Transit 81,901 56,623

1,760,648 1,339,316

51



As at As at31.12.2005 31.12.2004

SCHEDULE 8

SUNDRY DEBTORS

Debts outstanding for a period exceeding six months

Considered Good 35,513 180,140

Considered Doubtful 275,058 352,572

310,571 532,712

Less: Provision for Doubtful Debts 275,058 352,572

35,513 180,140Other Debts

Considered Good 1,646,923 1,327,059

1,682,436 1,507,199

Sundry Debtors:

Secured 94,082 129,512

Unsecured 1,588,354 1,377,687

1,682,436 1,507,199

SCHEDULE 9

CASH AND BANK BALANCES

Cash on Hand 491 953

With Scheduled Banks:

In Current Accounts 183,070 57,810

In Deposit Accounts* 6,807 6,807

In Unclaimed Dividend Accounts 2,563 2,507

In Cash Credit Accounts 116,780 457,841

* Deposits with bank aggregating Rs. 4,807 (Previous year Rs. 4,807)taken for the purpose of Earnest Money Deposits.

309,711 525,918

SCHEDULE 10

OTHER CURRENT ASSETS

Fixed assets held for sale (valued at Cost or Net Realisable Value whicheveris lower) 34,550 5,940

34,550 5,940

52


As at As at31.12.2005 31.12.2004

SCHEDULE 11

LOANS AND ADVANCES(Unsecured – considered good unless stated otherwise)

Advances recoverable in cash or in kind or for value to be receivedConsidered Good [Includes due from a Company in which Directors areinterested Rs. 6,341(Previous Year Rs. 4,567)] 208,037 252,432Considered Doubtful 15,443 2,558

223,480 254,990Less: Provision for Doubtful Advances 15,443 2,558

208,037 252,432Deposits

Considered Good 111,625 112,708Considered Doubtful 9,925 9,454

121,550 122,162Less: Provision for Doubtful Deposits 9,925 9,454

111,625 112,708Balance with Excise, Customs and Port Authorities 116,604 23,793Advance payment of Income-tax 182,189 212,687(Net of Provision for Taxation Rs. 2,067,473 (Previous Year Rs. 1,771,621)

618,455 601,620

SCHEDULE 12

CURRENT LIABILITIES

Sundry Creditors:Due to Small Scale Industrial Undertakings(Refer Note 8 of Schedule 22) 10,113 13,520Due to Creditors other than Small Scale Industrial Undertakings 1,567,808 1,615,806

Interest accrued but not due 3,997 2,629Investor Education and Protection Fund shall be creditedby the following amounts:

Unclaimed Dividends* 2,563 2,507Unclaimed Public Deposits* 855 975

Deposits from Agents, Dealers and Customers 78,423 129,512Due to Subsidiary Company 11,688 29,320Other Liabilities 119,025 76,572

1,794,472 1,870,841

* There are no amounts as at year end which are due to be creditedto Investor Education and Protection Fund.

SCHEDULE 13

PROVISIONS

Proposed Dividend 86,897 86,897Tax on Proposed Dividend 12,188 12,188Leave Encashment 50,023 63,277Gratuity 25,493 38,664Pension 8,181 6,854Fringe Benefit Tax [Net of Advance Tax Rs. 10,730 (Previous Year Rs. Nil)] 18,558 —Direct Tax Matters (Refer Notes 1(j) and 9 of Schedule 22) 48,558 107,371[Net of Advance Tax Rs. 104,775 (Previous Year Rs. 45,962)]Indirect Tax Matters (Refer Notes 1(j) and 9 of Schedule 22) 25,700 50,166Commercial and Other Matters (Refer Note 1(j) and 9 of Schedule 22) 6,871 6,871

282,469 372,288

53


Schedules forming part of the Profit and Loss Account for the year ended Rupees ’000sDecember 31, 2005

Year Ended Year Ended31.12.2005 31.12.2004

SCHEDULE 14

OTHER OPERATING INCOME

Commission — Indenting Business and others 14,315 2,937(Tax deducted at source Rs. 269 — Previous Year Rs. 56)

Manufacturing Services rendered 71,500 135,026(Tax deducted at source Rs. 1,581 — Previous Year Rs. 2,735)

Export Incentives 17,456 8,256

103,271 146,219

SCHEDULE 15

OTHER INCOME

Interest Received (Tax deducted at source Rs. 63 — Previous Year Rs. 439) 2,165 1,135

Dividend Income

Long-term 2,299 2,155

Current 3,821 2,118

6,120 4,273

Profit on Assets sold/ discarded (Net) 169 58,641

Profit on sale of Investments 251 2,365

Rent Income (Tax deducted at source Rs. 1,784 — Previous Year Rs. 1,632) 8,088 8,088

Insurance Claims 1,127 563

Bad Debts recovered 1,010 2,185

Foreign Exchange Fluctuations (Net) — 3,430

Provisions No Longer Required Written Back 197,975 136,301

Common Facility Charges 127,649 —(Tax deducted at source Rs. 3,507 — Previous Year Rs. NIL)

Miscellaneous (Tax deducted at source Rs. 3,946 — Previous Year Rs. 1,181) 46,821 44,743

391,375 261,724

SCHEDULE 16

MATERIALS CONSUMED*

Raw Materials:

Opening Stock 195,344 221,529

Add: Purchases 3,087,495 2,830,210

3,282,839 3,051,739

Less: Closing Stock 413,237 195,344

2,869,602 2,856,395


3,186,045 3,154,618

* Includes Rs. 21,914 (Previous Year Rs. 14,965) on account of Write off/write downs in carrying values of Raw Materials and Packing Materials.

54



SCHEDULE 17

COST OF TRADED GOODS SOLD*

Opening Stock 68,277 103,095Add: Purchases 716,861 598,918

785,138 702,013Less: Closing Stock 274,896 68,277

510,242 633,736

* Includes Rs.1,891 (Previous Year Rs. 54,447) on account of Write off/ writedowns in carrying values of Traded Goods.

SCHEDULE 18

EMPLOYEE COST

Payments to and Provisions for:Salaries, Wages, Bonus and Allowances 474,251 515,896Contribution to Provident, Gratuity, Superannuation and Other Funds 64,652 107,143Staff Welfare Expenses 33,207 35,042

572,110 658,081

SCHEDULE 19

OTHER EXPENSES

Stores and Spares consumed 28,242 31,345Power, Fuel and Water charges 173,330 160,397Freight and Clearing charges 247,872 185,143Rent 71,045 73,080Rates and Taxes 29,652 17,989Job work charges 131,353 122,314Insurance 17,147 21,882Excise Duty 1,300 72,863Loss on Asset held for sale — 48,549Repairs and Maintenance :

Plant and Machinery 18,373 24,454Buildings 34,441 8,913Others 29,302 110,273

82,116 143,640Travelling and Conveyance 143,562 129,430Communication 81,143 70,829Printing and Stationery 10,921 12,338Directors’ Sitting Fees 550 610Auditors’ Remuneration (Refer Note 6 of Schedule 22) 3,413 2,994Advertisement and Publicity 322,549 231,031Legal and Professional Fees 116,037 127,559Discounts 175,397 202,361Commission : Others 40,286 34,076Donations 207 11,000Bad Debts/ Advances Written Off 116,199 9,743Less: Withdrawn from Provision for Doubtful debts 115,389 3,713

810 6,030Compensation 29,600 —Provision for Doubtful Debts/ Advances 51,231 190,224Foreign Exchange Fluctuations (Net) 437 —Miscellaneous 142,409 157,713

1,900,609 2,053,397

55




SCHEDULE 20

FINANCE CHARGES

Interest on

Debentures — 1,644

Loan from Banks 40,726 56,211

Others 16,559 29,022

Bank Charges 17,067 24,740

74,352 111,617

SCHEDULE 21

DECREASE/ (INCREASE) IN STOCKS*

Opening Stock

–Semi-Finished 107,503 81,358

–Finished 830,568 693,096

938,071 774,454Closing Stock

–Semi-Finished 197,251 107,503

–Finished 677,132 830,568

874,383 938,071

63,688 (163,617)

* Includes Rs. 25,584 (Previous Year Rs. 123,623)on account of Write off/ write downs in carrying values of Finished Goods.

56

Schedules Annexed to the Balance Sheet as at December 31, 2005 and Profit and Loss Account for the year ended on that date.

SCHEDULE 22 – NOTES TO ACCOUNTS

1. SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of AccountingThese financial statements have been prepared under historical cost convention from the books of account maintained on an accrualbasis in conformity with accounting principles generally accepted in India and comply with the Accounting Standards issued byThe Institute of Chartered Accountants of India and referred to in Section 211(3C) of the Companies Act, 1956, of India (the Act).

(b) Fixed Assets and Depreciation/ AmortisationFixed Assets are stated at cost of acquisition less depreciation. Cost comprises of cost of acquisition, cost of improvements and anyattributable cost of bringing the asset to its working condition for intended use.

Owned Assets:Depreciation on tangible assets is provided on Straight Line Method at the following rates, which are higher than or equal to the ratesprescribed in Schedule XIV of the Act.

Assets Rates (%)Buildings 3.50/5.00

Plant and Machinery 8.33/10.34

Office Equipment 10.00

Computers 20.00

Furniture and Fixtures 10.00

Vehicles 12.50

Leasehold land is amortised over the period of lease. Depreciation on assets costing Rs. 5,000 or less is provided at the rate of 100%in the year of acquisition of the assets.

Goodwill is amortised over a period of three years.

Leased Assets:Assets acquired under finance lease are stated at the present value of the minimum lease payments inclusive of all direct attributablecost of bringing the same to their working conditions. Leased assets (Computers) are depreciated over the period of its useful life offive years.

(c) InvestmentsLong term Investments are stated at cost and provision is made for diminution, other than temporary, in value of investments. Currentinvestments are valued at lower of cost or market value/ net asset value.

(d) InventoriesInventories are stated at cost or net realisable value, whichever is lower.

Cost of raw materials, packing materials and traded goods are determined on Weighted Average Method.

Cost of finished goods and semi-finished goods include cost of raw materials and packing materials, cost of conversion and othercosts incurred in bringing the inventories to the present location and condition.

(e) Revenue RecognitionSales are accounted for, inclusive of excise duty but excluding sales tax, rebates and trade discount.

Revenue is recognised when the property and all significant risks and rewards of ownership are transferred to the buyer or nosignificant uncertainty exists regarding the amount of consideration that is derived from the sale of goods.

Interest Income is accounted on accrual basis and dividend income is accounted when right to receive payment is established.

(f) Foreign Currency TransactionsForeign currency transactions are accounted at the exchange rates prevailing on the date of the transactions. Gains and losses, if any,at the year-end in respect of foreign currency assets and liabilities not covered by forward contracts, are recognised in the Profit andLoss Account. Exchange differences arising on repayment of liabilities incurred for the purpose of acquiring fixed assets are adjustedwith the carrying amount of the respective fixed assets.

Forward Premia in respect of forward exchange contracts are recognised over the life of the contract.

(g) Retirement BenefitsThe Company has created Employees Group Gratuity Fund which has taken a Group Gratuity-Cum-Life Insurance Policy from theLife Insurance Corporation of India (LIC). Gratuity is provided on the basis of premium on the above policy as intimated by LIC.The adequacy of accumulated fund balance available with LIC has been compared with actuarial valuation obtained at the year-endand shortfall, if any, has been provided for in the financial statement.

Contributions to Provident Fund, Employees’ State Insurance Corporation and Superannuation Funds are accounted for on actualliability basis and is charged to Profit and Loss Account.

Provision for leave encashment and pension is determined and accrued on the basis of actuarial valuation.

57



(h) Deferred Taxation

Deferred Tax is recognised, subject to the consideration of prudence, on timing differences being the difference between taxableincome and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. DeferredTax Asset is not recognised unless there are timing differences, the reversal of which will result in sufficient income or there is virtualcertainty that sufficient future taxable income will be available against which such deferred tax asset can be realised.

(i) Borrowing Costs

Borrowing cost directly related to the acquisition or construction of an asset is capitalised as part of the cost of that asset. Otherborrowing costs are charged to the Profit and Loss Account.

(j) Provision and Contingent Liabilities

Provisions are recognised when the Company has a legal and constructive obligation as a result of a past event, for which it isprobable that a cash outflow will be required and a reliable estimate can be made of the amount of the obligation.

Contingent Liabilities are disclosed when the Company has a possible obligation or a present obligation and it is probable that a cashoutflow will not be required to settle the obligation.

(k) Impairment of Assets

The Company assesses at each Balance Sheet date whether there is any indication that an asset may be impaired. If any suchindication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or recoverableamount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to itsrecoverable amount. The reduction is treated as an impairment loss and is recognised in the Profit and Loss Account. If at the BalanceSheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessedand the asset is reflected at the recoverable amount.

2. Estimated amount of contracts net of advances remaining to be executed on capital account and not provided for Rs. 10,560 (‘000)[Previous Year Rs. 60,952 (‘000)].

3. Contingent Liabilities not provided for:Rupees in '000s

As at As atParticulars December 31, December 31, Remark

2005 2004(a) In respect of Bank Guarantees 20,407 49,496 Pertains to guarantees issued in favour

of various statutory bodies and customauthorities. The Company does notforesee any outflow in this regard.

(b) Counter Guarantee by the Company 2,967 2,967 Pertains to guarantees issued in favourof Gujarat Industrial DevelopmentCorporation. The Company does notforesee any outflow in this regard.

(c) Claims against the Company not 7,832 11,168 Pertains to litigation/ claims against theacknowledged as debts Company by customers/ vendors/ labour.(to the extent ascertainable) The Company has strong grounds of

appeal and does not foresee anyoutflow in this regard.

(d) In respect of non-fulfillment of 63,995 — Represents export obligation againstExport obligation advance licenses acquired by the

Company and the Company does notforesee any outflow in this regard.

(e) In respect of Excise and Custom matters 43,998 299,714 Pertains to litigations/ disputes with(f) In respect of Sales tax matters 100,838 17,352 various tax/ custom and excise

(g) In respect of Income-tax matters* 110,951 161,289authorities. The Company has filedappeal against the demand. TheCompany does not expect anyoutflow in this regard.

(h) Demand raised by Ministry of Chemicals 27,581 27,581 Demand dated October 25, 1990, forand Fertilisers, Department of Chemicals payment to the credit of the Drug Pricesand Petro-Chemicals. The Company has Equalisation Account, being thefiled a writ petition in the Hon’able High difference between the pooled priceCourt of Mumbai, challenging this and the retention price on thedemand. production of Chloroquine Phosphate

from 1979-1980 upto December 14,1988. The Company does notforesee any outflow in this regard.

*As at December 31, 2005, Advance Income Tax of Rs. 83,523 ('000), attributable towards this is included under the head ‘Advancepayment of Income Tax’ in Schedule 11 ‘Loans & Advances.’

SCHEDULE 22 – NOTES TO ACCOUNTS (Contd.)

58



4. Having regard to the requirement of uniform accounting year-end for taxation purposes, the ultimate taxation liability, if any, of theCompany can be determined only on the basis of the taxable income for the year ending on March 31, 2006.

5. Deferred Tax

During the year, the Company has accounted for Deferred Tax in accordance with the Accounting Standard 22 – "Accounting forTaxes on Income" issued by the Council of The Institute of Chartered Accountants of India.

The Deferred tax balances are set out below:Rupees in '000s

Particulars As at As atDecember 31, December 31,

2005 2004Deferred Tax AssetsProvision for Doubtful Debts/ Advances/ Deposits 101,123 129,015VRS Expenses 83,336 96,794Disallowances u/s. 43B 33,680 47,623Others 4,759 40,891

222,898 314,323

Deferred Tax LiabilityDepreciation 205,238 248,998Others 2,619 55

207,857 249,053

Net Deferred Tax Assets 15,041 65,270

6. Auditors' Remuneration

Rupees in '000s

Particulars For the year For the yearended ended

December 31, December 31,2005 2004

(a) Audit Fees– for statutory audit 1,200 1,200– for limited review 600 400

(b) Tax Accounts and Tax Audit 825 619(c) Other Services 600 775(d) Reimbursement of out-of-pocket expenses 188 —

Total 3,413 2,994

7. Research and Development Expense

Research and Development Revenue Expenses 56,913 38,963

8. Dues to Small Scale Industrial Undertakings for more than 30 days include amounts payable to:• Agarwal Containers Private Limited• Agarwal Packaging Private Limited• Ameet Polyfilm Private Limited• Award Packaging• Bago Cans Private Limited• Balkrishna Polymers• Bescoat• Caps & Container Industries• Corru-Cartons (I) Private Limited• Dimple Drums and Barrels Private Limited• Empire Packages (P) Limited• Euro Containers• Gaurav Composite Containers

59




• Grip Tight Packing (I) Private Limited• Holloware Manufacturing Syndicate• Ideal Printers Private Limited• Impact Metals Limited• Ishan Industries• Kajay Remedies Private Limited• Kinetic Chemicals• Marvin Chem Corporation• Mumbai Co-op. Industries Limited• Okara Trade Parcel Carriers• Olympic Chemicals• Payal Industries• Pest Control India Limited• Prasad Plastic & Engg Work• Pruthvi Industries• Rajpura Printing Press• Ravira Polyplast Industries• Real Hydrofit & Co.• Standard Pesticides Private Limited• Unitop Chemicals Limited• Vijay Enterprises• Yagnesh Printing Company Private Limited

9. Disclosure of Provisions Rupees in ‘000s

S. Particulars Income Tax Indirect Tax Commercial &No. (net of Other Matters

advance tax)1 Balance as on January 1, 2005 107,371 50,166 6,8712 Additional provision during 2005 — — —3 Advance Tax payment during 2005 58,813 — —4 Provision used during 2005 — 4,988 —5 Provision reversed during 2005 — 19,478 —6 Balance as on December 31, 2005 48,558 25,700 6,871

Direct and Indirect taxProvisions in this category represents estimates made for probable liabilities arising out of pending disputes/ litigations withvarious tax authorities. The outflow with regard to the said matter depends on the exhaustion of remedies available to the Companyunder the law and hence the Company is not able to reasonably ascertain the timing of the outflow.

Commercial and other mattersProvisions in this category represent estimates made for probable liabilities/ claims arising out of commercial transaction withvendors. The outflow with regard to the said matter depends on the exhaustion of remedies available to the Company under the lawand hence the Company is not able to reasonably ascertain the timing of the outflow.

10. Managerial Remuneration:Rupees in ‘000s

Particulars For the year For the yearended ended


(a) Directors’ Sitting Fees 550 610

(b) Salaries and Allowances 28,449 28,284

Total 28,999 28,894

Note:The computation of profits under Section 309(5) of the Companies Act, 1956 is not required to be given, as no commission is payableto the Directors.

8. Dues to Small Scale Industrial Undertakings for more than 30 days include amounts payable to: (Contd.)

60


SCHEDULE 22 – NOTES TO ACCOUNTS (Contd.)11. Non-Convertible Debentures issued and redeemed during the year Rs. Nil [Previous Year Rs. 650,000 (‘000)].

12. Remittance in foreign currency on account of dividend on equity shares:Rupees in ‘000s

Particulars Number of For the year For the yearnon-resident ended endedshareholders December 31, December 31,

2005 2004

Net amount of final dividend for the year ended December 31, 2004 on 27,433,252Equity Shares 5 60,353 —

Net amount of final dividend for the year ended December 31, 2003 on 27,433,252Equity Shares 5 — 60,353

The above information pertains only to those shareholders where direct remittances are made by the Company.

13. Information given under clause 3(i)(a), 3(ii), 4-C, 4-D(c), of part II of Schedule VI to the Act.

(a) Turnover of goods produced/ purchased

Class of Goods Unit of Quantity ValueMeasurement Rupees in ’000s

(a) Active Ingredients Tons 2,594 794,879(2,246) (635,970)

(b) Formulations(1) Powders Tons 20,550 2,311,134

(20,313) (1,953,261)

(2) Liquids KL 9,136 4,183,519(10,560) (4,827,164)

(3) Tablets ‘000 Nos. 641 3,701(51) (948)

(4) Others 268,100

7,561,333(7,417,343)

Notes:Figures shown in brackets are in respect of previous year.

(b) Opening and Closing stock of goods produced/ purchased:

Class of Goods Opening Stock Closing StockUnit of Value Rupees Value Rupees

Measurement Quantity in ’000s Quantity in ’000s

(a) Active Ingredients Tons 278 70,957 451 95,295Tons (238) (122,812) (278) (70,957)

(b) Formulations(1) Powders Tons 2,535 288,596 1,256 211,489

Tons (4,137) (174,365) (2,535) (288,596)

(2) Liquids KL 1,582 537,694 1,463 644,178KL (1,527) (496,577) (1,582) (537,694)

(3) Tablets ‘000 Nos. 223 1,598 137 1,066‘000 Nos. (442) (2,437) (223) (1,598)

898,845 952,028(796,191) (898,845)

Notes:(1) The Closing Stock stated above are after adjustments for free goods, breakages/ damages and expired goods. The difference in

closing stock figures derived from opening stock, production, purchases and sales would be due to above factors.

(2) Opening and Closing stock do not include Semi-finished goods.

(3) Figures shown in brackets are in respect of previous year.

61



SCHEDULE 22 – NOTES TO ACCOUNTS (Contd.)(c) Installed Capacity and Actual Production

Class of Goods Unit of Installed ActualMeasurement Capacity Production

(a) Active Ingredients Tons 6,345 2,767(Refer note 2 and 5 below) Tons (7,260) (2,366)

(b) Formulations(Refer note 2, 3, 5 and 6 below)(1) Powders Tons 7,650 19,364

Tons (19,850) (18,381)(2) Liquids KL 10,025 8,807

KL (10,025) (10,980)(3) Tablets ‘000 Nos. 6,200 92

‘000 Nos. (6,200) (225)

Notes:(1) The installed capacities are as per the certificate given by the Management of the Company on which auditors have relied.(2) Actual production does not include quantities of goods used for captive consumption.(3) Includes quantities manufactured by others on Lease/ Job work basis.(4) Figures shown in brackets are in respect of previous year.(5) Being multipurpose plants, installed capacity is variable in view of different product mix produced in the plant.(6) Actual production in terms of 100% active ingredient aggregates to 7,014 (Previous Year 7,684).

(d) Purchase of Traded goods

Class of Goods 2005 2004Unit of Quantity Value Quantity Value

Measurement Rupees in ‘000s Rupees in ‘000s

(a) Liquids KL 358 506,909 98 404,346(b) Solids Tons — — 991 193,412(c) Tablets 000 Nos. 489 207 558 1,160(d) Others — 209,745 — —

Total 716,861 598,918

(e) Raw Materials Consumed

Raw Materials Consumed 2005 2004Quantity Value Quantity Value

Tons Rupees in ‘000s Tons Rupees in ‘000s

Imidacloprid 117 228,891 71 212,062

Fenoxyprop-p-ethyl 13 58,057 37 173,716

Endosulfan 824 179,194 776 166,505

Thiodicarb 261 184,473 207 150,738

DETCL 1,314 143,215 1,514 161,794

Deltamethrine 19 105,610 28 156,050

Fipronil TC 1*20KG Box WW 32 156,840 — —

Be-cisthemetic acid 4 25,330 7 44,890

Others 1,787,992 1,790,640

Total 2,869,602 2,856,395

Value of all imported and indigenous Raw Materials, Spare parts, Components and other items consumed

2005 2004Raw Materials Spares, Raw Materials Spares,

Components Componentsand other and other

items itemsRupees Rupees Rupees Rupeesin ‘000s % in ‘000s % in ‘000s % in ‘000s %

Imported 1,285,053 45 733 3 1,341,947 47 4,153 13Indigenous 1,584,549 55 27,509 97 1,514,448 53 27,192 87

Total 2,869,602 100 28,242 100 2,856,395 100 31,345 100

62


Rupees in ‘000s

Particulars For the For theyear ended year ended


14. Value of Imports on C.I.F. basis

Raw and Packing Materials 1,364,190 1,091,160


Stores, Spares and Components 10,266 3,592

Capital Goods 64,094 7,796

15. Export of Goods on F.O.B. Basis 867,764 688,173

16. Earnings in Foreign Currency

Indenting Commission and Others 5,321 —

Reimbursements from Group Companies 16,828 2,119

17. Expenditure in Foreign Currency

Travelling 6,674 7,328Other Expenses 104,218 68,634

18. Finance LeaseThe Company has acquired Computers under finance lease. Minimum Lease payment outstanding as at December 31, 2005 in respect ofthese assets are as under:

Rupees in ‘000s

Particulars Minimum Future Lease Rentals

Less than Between More than Total1 Year 1 to 5 Years 5 Years

Total Minimum lease payments outstanding as at December 31, 2005 823 — — 823

Interest not due 25 — — 25

Present Value of Minimum Lease Payments* 798 — — 798

*Included under Schedule 3 - Secured Loans.

19. Segment ReportingIn accordance with Accounting Standard 17 – ‘‘Segment Reporting” issued by The Institute of Chartered Accountants of India, the Companyhas determined its business segment as “Pesticides”. Since 100% of the Company’s business is from Pesticides, there are no other primaryreportable segments.

Rupees in ‘000s

Secondary Segmental Reporting For the For theyear ended year ended

December 31,,,,, December 31,2005 2004

1. Segmental Revenue

(a) Segment – Local 6,743,221 6,875,389

(b) Segment – Exports 921,383 688,173

Total 7,664,604 7,563,562

2. Segmental Assets (excluding Deferred Tax Assets)

(a) In India 5,880,160 5,295,558

(b) Outside India 198,935 242,642

Total 6,079,095 5,538,200

3. Capital Expenpditure during the year in India 468,729 269,576

SCHEDULE 22 – NOTES TO THE ACCOUNTS (Contd.)

63



20. Related Party Transaction

(i) Ultimate Holding Company Bayer AG, Germany

(ii) Subsidiary Company Bayer Polychem (India) Limited

(iii) Parties under common control:

• Bayer (China) Limited, Beijing

• Bayer (Malaysia) Sdn. Bhd., Shah Alam

• Bayer (Proprietary) Limited, Isando

• Lanxess ABS Limited (formerly Bayer ABS Limited) (upto January 31, 2005)

• Bayer CropScience AG

• Bayer CropScience GmbH

• Bayer CropScience K.K., Tokyo

• Bayer CropScience LP, Triangle Park

• Bayer CropScience Pty. Limited, Australia

• Bayer CropScience SA, France

• Bayer CropScience Limited, Bangladesh

• Bayer CropScience Limited, Seoul

• Bayer Diagnostics India Limited, Baroda

• Lanxess Distribution Service GmbH, Leverkusen (formerly Bayer Distribution Service GmbH)

• Bayer East Africa Limited, Nairobi

• Bayer Environment Science SA, France

• Bayer Business Services GmbH

• Bayer MaterialScience Private Limited, Mumbai.

• Bayer Health Care Company Limited

• Bayer MaterialScience AG

• Bayer Pakistan (Private) Limited, Karachi

• Bayer Pharmaceuticals Private Limited, Mumbai

• Bayer South East Asia Pte Limited, Singapore

• Bayer Thai Company Limited, Bangkok

• Bayer Türk Kimya Sanayi Limited Sti., Istanbul

• Bayer Vietnam Limited

• Bilag Industries Private Limited, Gujarat

• Hybrid Rice International Private Limited, Hyderabad

• Nunhems Proagro Seeds Private Limited, Gurgaon

• Proagro Seed Company Private Limited, Hyderabad

• PT Bayer Urethanes Indonesia, Jakarta

• Lanxess India Private Limited (upto January 31, 2005)

(iv) Key Management Personnel

Mr. S. Gerlich (From September 14, 2004) Managing Director

Mr. P. G. L. Dupont (upto September 13, 2004) Managing Director

Mr. J. Frick (Upto October 13, 2005) Wholetime Director


64


SCHEDULE 22 – NOTES TO ACCOUNTS (Contd.)(v) The transactions with and outstanding balances of related parties are furnished below

Rupees in ’000s

Nature of Transaction Parties referred to Parties referred to Parties referred toin (i) above in (ii) above in (iii) above Total

2005 2004 2005 2004 2005 2004 2005 2004

Purchase of Goods

Bayer CropScience AG — — — — 1,072,047 522,588 1,072,047 522,588

Bayer CropScience SA — — — — 44,534 414,268 44,534 414,268

Bilag Industries Private Limited — — — — 618,611 350,628 618,611 350,628

Others — — — — 70,550 97,327 70,550 97,327

Total — — — — 1,805,742 1,384,811 1,805,742 1,384,811

Sale of Goods

Bayer CropScience AG — — — — 659,664 29,705 659,664 29,705


Lanxess DistributionServices GmbH — — — — — 153,046 — 153,046

Others — — — — 109,992 76,954 109,992 76,954

Total — — — — 818,957 503,196 818,957 503,196

Sale of Services

Bayer Polychem (India) Limited — — — 63,238 — — — 63,238

Bayer PharmaceuticalsPrivate Limited — — — — 71,500 70,040 71,500 70,040

Others — — — — — 1,749 — 1,749

Total — — — 63,238 71,500 71,789 71,500 135,027

Dividend Received

Bayer Diagnostics India Limited — — — — 2,299 2,155 2,299 2,155

Total — — — — 2,299 2,155 2,299 2,155

Dividend Paid

Bayer AG 18,200 18,200 — — — — 18,200 18,200



Bayer CropScience GmbH — — — — 16,923 16,923 16,923 16,923

Bayer MaterialScience PrivateLimited — — — — 1,441 1,441 1,441 1,441

Total 18,200 18,200 — — 43,592 43,592 61,792 61,792

Purchase of Services

Bayer Polychem (India)Limited — — 33,870 32,621 — — 33,870 32,621

Total — — 33,870 32,621 — — 33,870 32,621

Interest Income

Bayer Polychem (India) Limited — — 212 48 — — 212 48

Bayer PharmaceuticalsPrivate Limited — — — — — 93 — 93

Total — — 212 48 — 93 212 141


65



SCHEDULE 22 – NOTES TO ACCOUNTS (Contd.)(v) The transactions with and outstanding balances of related parties are furnished below (Contd.)

Rupees in ’000s


2005 2004 2005 2004 2005 2004 2005 2004

Interest Expense

Lanxess ABS Limited — — — — — 2,476 — 2,476

Bayer Diagnostics IndiaLimited — — — — 2,071 7,956 2,071 7,956

Hybrid Rice InternationalPrivate Limited — — — — 463 3,737 463 3,737

Bayer MaterialScience PrivateLimited — — — — 646 — 646 —

Others — — — — 8 290 8 290

Total — — — — 3,188 14,459 3,188 14,459

Commission Expense

Bayer CropScience AG — — — — 3,884 — 3,884 —

Total — — — — 3,884 — 3,884 —

Commission Income

Bayer CropScience AG — — — — 4,367 — 4,367 —

Total — — — — 4,367 — 4,367 —

Cost Sharing Recoveries/Expenses Reimbursementby other Companies

Bayer AG — 2,226 — — — — — 2,226



Lanxess India Private Limited — — — — 8,752 62,890 8,752 62,890

Proagro Seed CompanyPrivate Limited — — — — 35,333 34,334 35,333 34,334


Others — — — — 55,797 29,362 55,797 29,362

Total — 2,226 3,815 45,251 172,475 216,045 176,290 263,522

Cost Sharing Payments/Expenses Reimbursementto other Companies

Bayer AG 6,131 2,479 — — — — 6,131 2,479

Bayer Business ServicesGmbH — — — — 12,068 19,251 12,068 19,251

Bayer Polychem (India)Limited — — — 19,329 — — — 19,329

Bayer CropScience Pty. Limited — — — — 40,286 51,025 40,286 51,025

Bayer MaterialScience PrivateLimited — — — — 438 27,712 438 27,712

Bayer South East Asia Pte.Limited — — — — 38,468 41,712 38,468 41,712

Others — — — — 5,892 20,234 5,892 20,234

Total 6,131 2,479 — 19,329 97,152 159,934 103,283 181,742


66


Outstanding Receivablesnet of Payables


Lanxess India Private Limited — — — — — 106,028 — 106,028


Lanxess ABS Ltd. — — — — — 3,312 — 3,312

Bayer Diagnostics IndiaLimited — — — — 1,016 149 1,016 149


Proagro Seed CompanyPrivate Limited ————— — ————— — 3,0293,0293,0293,0293,029 8,358 3,0293,0293,0293,0293,029 8,358

Others — — — — 7,581 13,028 7,581 13,028

Total — — — — 40,845 174,466 40,845 174,466

Outstanding Payables netof Receivables



Bayer South East AsiaPte Limited — — — — 68,841 39,471 68,841 39,471

Bilag Industries Private Limited — — — — 48,597 54,553 48,597 54,553

Others — — — — 53,010 113,793 53,010 113,793

Total — — 10,885 14,007 271,462 388,303 282,347 402,310

Sale of Fixed Assets

Lanxess India PrivateLimited — — — — — 31,547 — 31,547

PT Bayer Urethanes Indonesia — — — — — 9,544 — 9,544

Bayer CropScience Limited,Seoul — — — — 4,913 — 4,913 —

Bayer Turk Kimya SanayiLimited — — — — 4,074 — 4,074 —

Total — — — — 8,987 41,091 8,987 41,091

Inter Company DepositGiven


Lanxess ABS Ltd. — — — — — 80,000 — 80,000

Total — — 18,500 5,000 — 80,000 18,500 85,000

SCHEDULE 22 – NOTES TO ACCOUNTS (Contd.)(v) The transactions with and outstanding balances of related parties are furnished below (Contd.)

Rupees in ’000s


2005 2004 2005 2004 2005 2004 2005 2004


67




Inter Company DepositTaken

Lanxess ABS Ltd. — — — — — 1,293,000 — 1,293,000

Bayer MaterialScience PrivateLtd. — — — — 330,000 45,000 330,000 45,000

Hybrid Rice InternationalPrivate Limited — — — — 203,000 — 203,000 —

Bayer Diagnostics IndiaLimited — — — — 10,000 40,000 10,000 40,000

Total — — — — 543,000 1,378,000 543,000 1,378,000

Inter Company PayableBalances

Hybrid Rice InternationalPrivate Limited — — — — — 50,500 — 50,500

Bayer Diagnostics IndiaLimited — — — — — 140,000 — 140,000

Bayer MaterialScience PrivateLtd. — — — — 170,000 — 170,000 —

Total — — — — 170,000 190,500 170,000 190,500

Provisions/ Payment made to Directors

Related Party Designation Nature of Transaction 2005 2004

Mr. S. Gerlich (from September 14, 2004) Managing Director Remuneration 16,994 4,272Mr. P. G. L. Dupont (upto September 13, 2004) Managing Director Remuneration — 7,999Mr. J. Frick (upto October 13, 2005) Wholetime Director Remuneration 11,455 16,013

Total 28,449 28,284

21. Current Investments bought and sold during the year

Particulars No. of Units

ABN Amro Mutual Fund 4,506,773Alliance Capital Mutual Fund 43,553,257Birla Mutual Fund 16,451,716Deutsche Mutual Fund 31,807,165DSP Merrill Lynch Mutual Fund 3,048,915Grindlays Mutual Fund 5,678,935HSBC Mutual Fund 1,034,980J. M. Mutual Fund 2,500,126Kotak Mahindra Mutual Fund 3,278,678LIC Mutual Fund 17,018,681Prudential ICICI Mutual Fund 12,247,371Reliance Mutual Fund 26,305,658Tata Mutual Fund 2,758,534UTI Mutual Fund 340,696

22. With effect from April 5, 2004, the name of the Company has been changed from Bayer (India) Limited to Bayer CropScience Limited.

(v) The transactions with and outstanding balances of related parties are furnished below (Contd.)Rupees in ’000s


2005 2004 2005 2004 2005 2004 2005 2004


68


SCHEDULE 22 – NOTES TO ACCOUNTS (Contd.)23. Loans and Advances in the nature of Loans to subsidiaries

Rupees in ‘000s

As at December 31, 2005 As at December 31, 2004

Name of the Company Particulars Balance Maximum Balance MaximumOutstanding amount Outstanding amount

outstanding outstandingduring the year during the year

Bayer Polychem (India) Limited Inter Corporate Deposit — 15,000 — 5,000

24. Earnings Per Share:

Rupees in ‘000s



Profit before Prior Period and Exceptional Items and after Taxation 417,330 255,872

Profit after Prior Period and Exceptional Items and after Taxation 371,470 263,604

Weighted average number of equity shares outstanding at year end 39,498,747 39,498,747

Nominal value Per Equity Share (in Rupees) 10 10

Earnings Per Share before Prior Period and Exceptional Item and after Taxation[Basic and Diluted] (in Rupees) 10.57 6.48

Earnings Per Share after Prior Period and Exceptional Item and after Taxation[Basic and Diluted] (in Rupees) 9.40 6.67

25. Refer Annexure for additional information pursant to Part IV of Schedule VI of the Companies Act, 1956.

26. Previous Year’s figures have been regrouped wherever necessary.

Signatures to the Schedules forming part of the Balance Sheet and Profit and Loss Account and to the above Notes.




Chairman Dr. Vijay Mallya

Managing Director Stephan Gerlich

Directors Y. H. Malegam

Raj Kaul

A. K. R. Nedungadi




69


Notes forming part of the Balance Sheet as at December 31, 2005 and Profit and Loss Account for the year ended December 31, 2005

Additional Information pursuant to Part IV of Schedule VI to the Companies Act, 1956, of India.

Balance Sheet Abstract and Company's General Business Profile:

I. Registration DetailsRegistration No. : 11173State Code : 11Balance Sheet Date : 31.12.2005

II. Capital Raised during the year (Amount in Rs. Thousands)Public issue : NilRights issue : NilBonus issue : NilPrivate Placement : Nil

III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands)Total Liabilities (including shareholder's funds) : 4,017,195Total Assets : 4,017,195

Sources of FundsPaid up Capital : 394,987Reserves & Surplus : 2,461,650Secured Loans : 195,798Unsecured Loans : 964,760

Application of FundsNet Fixed Assets : 1,633,252Investments : 40,043Net Current Assets* : 2,343,900Miscellaneous Expenditure : Nil*Including Deferred Tax Assets Rs. 15,041 (’000s)

IV. Performance of the Company (Amount in Rs. Thousands)Total Income : 7,183,153Total Expenditure : 6,436,314+/– Profit/ Loss Before Tax : 746,839+/– Profit/ Loss After Tax : 371,470Earning Per Share in Rs. ** : 9.40Dividend Rate % : 22%** After Prior Period and Exceptional Items and Taxation

V. Generic Names of Three Principal Product(s)/ Service(s) of the Company(as per Monetary terms)

Item Code No. (ITC Code) : 380810.11

Product Description : IMIDACLOPRID


Product Description : TRIAZOPHOS


Product Description : METHYL PARATHION







Raj Kaul

A. K. R. Nedungadi

70

CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2005Rupees in ’000s


A. Cash flow from Operating activities:

Net Profit before Prior Period, Exceptional Items and Taxation 815,967 513,266

Adjustments for:

Depreciation 225,743 260,181

Interest Expense 57,285 86,877

Interest Income (2,165) (1,135)

Dividend Income (6,120) (4,273)

Profit on Fixed Assets sold/ discarded (Net) (169) (58,641)

Loss on Asset held for sale — 48,549

Profit on sale of Investments (Net) (251) (2,365)

Bad Debts/ Advances Written off (Net of recovery) 115,189 7,558

Provision for Bad & Doubtful Debts/ Advances (64,158) 186,511

Liability no longer required written back (197,975) (136,301)

Provision for Gratuity, Leave Encashment & Pension (25,098) (4,642)

Inventory Write off/ write down 49,389 151,670 193,035 575,354

Operating Profit before Working Capital changes 967,637 1,088,620

Adjustments for changes in Working Capital:

(Increase)/ Decrease in Sundry Debtors (212,915) 320,906

(Increase)/ Decrease in Other Receivables (63,890) 736,027

(Increase)/ Decrease in Inventories (470,721) (320,658)

Increase/ (Decrease) in Trade and Other Payables/ Provisions 89,439 (658,087) (6,871) 729,404

Cash generated from Operations 309,550 1,818,024

Taxes Paid (334,832) (271,489)

Payment under Voluntary Retirement Scheme (72,595) (4,512)

(407,427) (276,001)

Net Cash from/ (used in) Operating activities (97,877) 1,542,023

B. Cash flow from Investing activities:

Purchase of Fixed Assets (458,985) (242,844)

Proceeds from Sale of Fixed Assets 19,371 144,215

Proceeds from Sale of Investments 2,293,251 4,152,365

Purchase of Investments (2,212,912) (4,230,000)

Interest Received 5,303 1,354

Dividend Received 6,120 3,994

Net Cash used in Investing activities (347,852) (170,916)

C. Cash flow from Financing activities:

Proceeds from/ (Repayment of) short term borrowings 384,469 (1,487,729)

Interest Paid (55,917) (84,903)

Dividend Paid (86,842) (86,971)

Dividend Tax Paid (12,188) (11,134)

Net Cash from/ (used in) Financing activities 229,522 (1,670,737)

71


Net Decrease in Cash & Cash Equivalents (216,207) (299,630)

Cash and Cash Equivalents at the beginning of the year 525,918 825,548

Cash and Cash Equivalents at the end of the year 309,711 525,918

Cash and Cash Equivalents comprise

Cash on hand 491 953

Balance with Scheduled Banks – in Unclaimed dividend account 2,563 2,507

Balance with Scheduled Banks – in other accounts 306,657 522,458

309,711 525,918

Notes:

1. The above Cash Flow Statement has been prepared under the "Indirect Method" set out in Accounting Standard-3 on Cash Flow Statementsissued by The Institute of Chartered Accountants of India.

2. Figures in brackets indicate cash outgo.

3. Previous Year’s figures have been reclassified to conform to the current years presentation.

4. Taxes paid includes TDS deducted by third parties aggregating to Rs. 11,087 (Previous Year Rs. 5,604).

This is the Cash Flow Statement referred to in our report of even date.

CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2005 (Contd.)Rupees in ’000s









Raj Kaul

A. K. R. Nedungadi


72

Statement Pursuant to Section 212 of the Companies Act, 1956 relating to Subsidiary Companies

1. Name of the Subsidiary Company : Bayer Polychem (India) Limited

2. Financial Year of the Subsidiary : 31st December, 2005

3. (a) No. of Shares held in Subsidiary Company on theabove date: Equity : 50,000 Shares of Rs. 10/- each

(b) Extent of Holding : 100%

4. The Net Aggregate Profits less Losses of Subsidiary Companyas far as it concerns the Members of the Holding Company:

(i) Not dealt with in the Holding Company’s Account: (Rs. ’000)

(a) Of the Subsidiary for the Year Ended 31.12.05 : 12,003 Profit

(b) For the previous Financial Years since it became theHolding Company’s Subsidiary : 26,040 Profit

(ii) Dealt with in the Holding Company’s Accounts:

(a) For the Financial Year of the Subsidiary : Nil

(b) For the previous Financial Years since it becamethe Holding Company’s Subsidiary : Nil

5. Change in the interest of the Holding Company between the end ofthe Financial Year of the Subsidiary and the end of HoldingCompany’s Financial Year : Not Applicable

6. Material changes between the end of the Financial Year of theSubsidiary and the end of the Holding Company’s Financial Yearin respect of the Subsidiary’s:

(i) Fixed Assets : Not Applicable

(ii) Investments : Not Applicable

(iii) Moneys lent by the Subsidiary : Not Applicable

(iv) Moneys borrowed by the Subsidiary : Not Applicable







Raj Kaul

A. K. R. Nedungadi

73

Annual Report 2005

Directors’ Report

Bayer Polychem (India) Limited

Your Directors have pleasure in presenting the Third Annual Report with the auditedstatements of Accounts alongwith the Report of the Auditors for the year ended 31stDecember, 2005.

Financial Performance:

Rs. Million Rs. Million2005 2004

Sales and other Operating Income 107.58 916.36

Other Income 2.87 2.34

Total Income 110.45 918.70

Gross Profit before interest and depreciation 29.12 78.22

Less: Interest 1.79 2.50

Gross Profit before depreciation 27.33 75.72

Less: Depreciation 7.30 23.79

Profit for the year before extra-ordinary items 20.03 51.93

Less: Extra-ordinary items — 30.81

Profit for the year before taxation 20.03 82.74

Less: Provision for Taxation on Income 7.40 53.53

Less: Provision for Deferred Taxes 0.33 (21.72)

Less: Provision for Fringe Benefit Tax 0.30 —

8.03 31.81

Profit for the year after Tax 12.00 50.92

Profit/(Loss) carried forward from previous period 26.04 (24.89)

Profit/(Loss) carried to Balance Sheet 38.04 26.04

Operations:

The gross total turnover for the year ended 31st December, 2005 amounted to Rs. 107.58million as compared to Rs. 916.36 million for the last year and profit after tax amounted toRs. 12.00 million as against Rs. 50.92 million for the previous year.

Dividend:::::

Your Directors do not recommend any dividend for the period under review.

Fixed Deposits:

The Company has not accepted any deposits during the year.

Corporate Governance:

The Company is a 100% subsidiary of Bayer CropScience Limited but is not its “materialnon-listed Indian subsidiary”. As per Clause 49 of the listing agreement “material non-listed Indian subsidiary” means an unlisted subsidiary, incorporated in India, whoseturnover or net worth (i.e. paid up capital and free reserves) exceeds 20% of theconsolidated turnover or net worth respectively, of the listed holding company and itssubsidiaries in the immediately preceding accounting year. The turnover of the Companyis 2% of its holding company and the net worth of the Company is 1% of its holdingcompany. Hence the provision relating to appointment of a independent director of theholding company on the Board of the Company is not applicable.

However, the Board of the Company comprise of two independent Directors; Mr. K. R. V.Subrahmanian and Mr. D. C. Shroff.

The financial statements and investments made by the Company are reviewed by theAudit Committee and the Board of Directors of Bayer CropScience Limited, the 100%holding Company. The minutes of the Board meetings of the Company are also placed atthe Board meeting of the holding company.

The Company, based on the recommendation of Bayer CropScience Limited, has alsoformulated Code of Conduct for Directors, Code of Business Conduct for its employees,Whistle Blowing Policy and a Sexual Harassment Policy. The above policies have beendisseminated to all concerned.

Directors’ Responsibility Statement:

The Directors confirm that:

• in the preparation of the annual accounts, the applicable accounting standards havebeen followed;

• they have selected such accounting policies and applied them consistently and madejudgements and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as on 31st December, 2005 and of theprofit or loss of the Company for the year ended 31st December, 2005;

• proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act, 1956, forsafeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;

• the annual accounts are prepared on a going concern basis.

Share Capital:

The entire share capital of the Company of Rs. 5,00,000/- is held by Bayer CropScienceLimited.

Board of Directors:

Mr. Johannes Frick will cease to be a Director of the Company with effect from31st March, 2006. The Directors avail this opportunity to place on record their recognitionand appreciation of the valuable contributions made by Mr. Frick, through his leadershipand guidance, to the Company.

Ms. Christiane Kunze has been appointed as Director in casual vacancy caused due toresignation of Mr. Frick with effect from 1st April, 2006.

Pursuant to Sections 255 and 256 and Article 132 of the Articles of Association of theCompany, Ms. Christiane Kunze and Mr. D. C. Scroff, Directors retire by rotation andbeing eligible, offer themselves for re-appointment.

Particulars of Employees Information pursuant to Section 217(2A) of theCompanies Act, 1956:

With regard to the provision of Section 217(2A) of the Companies Act, 1956 read alongwith Companies (Particulars of Employees) Rules, 1975 there was no employee drawingsalary more than the stipulated limit during the year ended 31st December, 2005.

Energy Conservation, Technology Absorption and Foreign Exchange Earningsand Outgo:

As the Company is not engaged in any manufacturing activities, the disclosurerequirements relating to conservation of energy and technology absorption as requiredunder Section 217 (1)(e) of the Companies Act, 1956 read with Companies (Disclosure ofParticulars in the Report of the Board of Directors) Rules, 1988 does not apply.

Details of Foreign Exchange Earnings and Outgo are as under:

Foreign Exchange Earnings : Rs. 22.32 Million

Foreign Exchange Outgo : Rs. 21.01 Million

Auditors:

M/s. Price Waterhouse, Chartered Accountants, retire as Statutory Auditors at theconclusion of the ensuing Annual General Meeting and are eligible for re-appointment.The Company has received a letter from the retiring Auditors to the effect that theirappointment as Statutory Auditors, if made, will be within the limits prescribed underSection 224 (1B) of the Companies Act, 1956. The Board recommend the re-appointmentof M/s. Price Waterhouse, as Statutory Auditors of the Company for the year 2006.

Personnel:

The Board wishes to place on record its appreciation of the dedication and commitmentof the employees of your Company, at all levels.


STEPHAN GERLICHChairman

Mumbai, 22nd March, 2006

Annexure to the Directors’ Report(Annexure I)

Information as per Section 217(1)(e) read with Companies (Disclosure ofParticulars in the Report of the Board of Directors) Rules, 1988 and forming partof the Directors’ Report for the period ended 31st December, 2005.

I. CONSERVATION OF ENERGY — NOT APPLICABLE

II. TECHNOLOGY ABSORPTION : Not Applicable

III. Foreign Exchange Earnings and Outgo:

Foreign Exchange Earnings : Rs. 22.32 Million

Foreign Exchange Outgo : Rs. 21.01 Million

74


Auditors’ Report to the Members of Bayer Polychem (India) Limited

1. We have audited the attached Balance Sheet of Bayer Polychem (India) Limited (the Company) as at December 31, 2005, and the related Profit and Loss Account and Cash FlowStatement for the year ended on that date annexed thereto, which we have signed under reference to this report. These financial statements are the responsibility of the Company’sManagement. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We have conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Management, as well as evaluating the overall financialstatement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003, as amended by Companies (Auditor’s Report) (Amendment) Order, 2004, issued by the Central Government of India interms of sub-section (4A) of Section 227 of the Companies Act, 1956, of India (the Act) and on the basis of such checks of books and records of the Company as we consideredappropriate and according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to in Paragraph 3 above, we report that:

(a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

(c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

(d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C)of Section 211 of the Act;

(e) On the basis of written representations received from the Directors, as on December 31, 2005 and taken on record by the Board of Directors, none of the Directors is disqualifiedas on December 31, 2005 from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Act;

(f) In our opinion and to the best of our information and according to the explanations given to us, the said financial statements together with the notes thereon and attached thereto,give in the prescribed manner the information required by the Act and give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) in the case of the Balance Sheet, of the state of affairs of the Company as at December 31, 2005;

(ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and

(iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Natraj RamkrishnaPartnerMembership No. F-32815For and on behalf ofPrice Waterhouse

Place : Mumbai Chartered AccountantsDate : March 22, 2006

75

Annual Report 2005

(Referred to in Paragraph 3 of the Auditors' Report of even date to the members of Bayer Polychem (India) Limited on the financial statements for the year ended December 31, 2005)

(i) (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) The fixed assets of the Company have been physically verified by the Management during the year and no material discrepancies between the book records and the physicalinventory have been noticed. In our opinion, the frequency of verification is reasonable.

(c) In our opinion, and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed of by the Company during the year.

(ii) (a) The inventory (excluding stocks with third parties) has been physically verified by the Management during the year. In respect of inventory lying with the third parties, these havebeen confirmed by them. In our opinion, the frequency of verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventory followed by the Management are reasonable and adequate in relation to the size of the Company and thenature of its business.

(c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on physicalverification of inventory as compared to the book records were not material.

(iii) (a) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 301 of the Act.

(b) The Company has taken an unsecured loan from a company covered in the register maintained under Section 301 of the Act. The maximum amount involved during the year andthe year-end balance of such loan aggregates Rs. 15,000 (‘000) and Rs. Nil, respectively.

(c) In our opinion, the rate of interest and other terms and conditions of the aforesaid unsecured loan taken by the Company are not prima facie prejudicial to the interest of theCompany.

(d) In respect of the aforesaid unsecured loan taken by the Company, the Company is regular in repaying the principal amounts as stipulated and is also regular in payment ofinterest.

(iv) In our opinion and according to the information and explanations given to us, having regard to the explanation that certain items purchased are of special nature for which suitablealternative sources do not exist for obtaining comparative quotations , there is an adequate internal control system commensurate with the size of the Company and the nature of itsbusiness for the purchase of inventory, fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the Company, andaccording to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in theaforesaid internal control system.

(v) (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in Section 301 of the Act have been enteredin the register required to be maintained under that section.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered into the register inpursuance of Section 301 of the Act and exceeding the value of Rupees Five Lakhs, in respect of any party during the year, no comparison of prices could be made as thetransactions of purchase and sale of services, according to Management, were of special nature.

(vi) The Company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the rules framed thereunder.

(vii) In our opinion, the Company has an internal audit system commensurate with its size and nature of its business.

(viii) We have broadly reviewed the books of account maintained by the Company in respect of products where, pursuant to the Rules made by the Central Government of India, themaintenance of cost records has been prescribed under clause (d) of sub-section (1) of Section 209 of the Act and are of the opinion that prima facie, the prescribed accounts andrecords have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

(ix) (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the Company is regular in depositing the undisputedstatutory dues including provident fund, income-tax, sales tax, service tax, customs duty, excise duty, cess and other material statutory dues, as applicable, with the appropriateauthorities in India.

(b) According to the information and explanations given to us and the records of the Company examined by us, there are no dues of income tax, sales tax, wealth tax, service tax,customs duty, excise duty and cess which have not been deposited on account of any dispute.

(x) According to the records of the Company examined by us and the information and explanations given to us, the Company has not defaulted in repayment of dues to any banks asat the Balance Sheet date. Further, there were no dues payable to financial institution or debenture holders as at the Balance Sheet date.

(xi) The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xii) In our opinion, and according to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutionsduring the year.

(xiii) The Company has not obtained any term loans.

(xiv) On the basis of an overall examination of the Balance Sheet of the Company, in our opinion and according to the information and explanations given to us, there are no funds raisedon a short term basis which have been used for long term investment.

(xv) The Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Act during the year.

(xvi) During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according tothe information and explanations given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year, nor have we beeninformed of such case by the Management.

(xvii) The clauses (iii)(b), (iii)(c), (iii)(d), (x), (xiii), (xiv), (xix) and (xx) of paragraph 4 of the Companies (Auditor’s Report) Order 2003, as amended by Companies (Auditor’s Report)(Amendment) Order, 2004, are not applicable in the case of the Company for the current year, since in our opinion there is no matter which arises to be reported in the aforesaidorder.

Natraj RamkrishnaPartnerMembership No. F-32815For and on behalf ofPrice Waterhouse

Place : Mumbai Chartered AccountantsDate : March 22, 2006

Annexure to the Auditors’ Report

76


Balance Sheet as at December 31, 2005Rupees ’000s

Schedule As at As atDecember 31, December 31,

2005 2004SOURCES OF FUNDS

SHAREHOLDERS’ FUNDS

Share Capital 1 500 500

Reserves and Surplus 2 38,043 26,040

LOAN FUNDS

Unsecured Loans 3 44,000 22,450

DEFERRED TAX LIABILITY (NET) 8,008 7,675(Refer Note 10 on Schedule 20)

Total 90,551 56,665


FIXED ASSETS 4

Gross Block 72,750 71,318

Less: Depreciation 18,792 12,310

Net Block 53,958 59,008

Capital Work-In-Progress — 45

53,958 59,053

INVESTMENTS 5 — 7,500

CURRENT ASSETS, LOANS ANDADVANCES

Inventories 6 17,600 17,821

Sundry Debtors 7 18,640 35,889

Cash and Bank Balances 8 5,468 31

Loans and Advances 9 23,894 16,244

65,602 69,985

Less:

CURRENT LIABILITIES AND PROVISIONS

Current Liabilities 10 23,864 61,303

Provisions 11 5,145 18,570

29,009 79,873

NET CURRENT ASSETS 36,593 (9,888)

Total 90,551 56,665


The Schedules referred to herein form integral part of the Balance Sheet.


Profit and Loss Account for the year ended December 31, 2005Rupees ’000s

Schedule For the year For the yearended ended


INCOME

Sales 86,321 863,203

Less: Excise Duty (12,611) (46,217)

Net Sales 73,710 816,986

Other Operating Income 12 33,870 99,371

Other Income 13 2,869 2,339

110,449 918,696

EXPENDITURE

Materials Consumed 14 43,815 327,314

Cost of Traded Goods Sold 15 3,216 241,878

Increase in Stocks 16 (2,701) (10,423)

Employee Costs 17 17,581 69,851

Other Expenses 18 19,420 211,864

Finance Charges 19 1,788 2,497


90,415 866,766

PROFIT BEFORE EXTRAORDINARYITEM AND TAXATION 20,034 51,930

Add : Extraordinary Item(Profit on sale of businesses) — 30,808

PROFIT BEFORE TAXATION 20,034 82,738

Provision For Taxation

— Current Tax [Including charge forprior year Rs. Nil (Previous YearRs. 3,533)] 7,400 53,533

— Deferred Tax Charge/ (Credit)[Including charge/ (Credit) forprior year Rs. 1,596(Previous Year Rs. (15,895))] 333 (21,723)(Refer Note 2 G and 10 onSchedule 20)Fringe Benefit Tax 298 —

8,031 31,810

PROFIT AFTER TAXATION 12,003 50,928Profit and Loss Account balance broughtforward from Previous Year 26,040 (24,888)

PROFIT AND LOSS ACCOUNT BALANCECARRIED TO BALANCE SHEET 38,043 26,040

Earning per share beforeExtraordinary item 240 935(Basic and Diluted) (Rs.) (Net of Tax)Earning per share afterExtraordinary item 240 1,019(Basic and Diluted) (Rs.) (Net of Tax)(Refer Note 14 on Schedule 20)


The Schedules referred to herein form integral part of the Profit and Loss Account.



Stephan GerlichChairman

D. C. ShroffDirector

Place : MumbaiDate : March 22, 2006









77

Annual Report 2005

SCHEDULE 4

FIXED ASSETS(Refer Note 2A and 2 I on Schedule 20) Rupees ’000s

Assets Cost Depreciation Net Book Value

As at Deductions/ As at As at For On As at As at As at01.01.2005 Additions Adjustments 31.12.2005 01.01.2005 the year Deductions 31.12.2005 31.12.2005 31.12.2004

Plant &Machinery 59,524 2,632 27 62,129 8,001 6,157 4 14,154 47,975 51,523

Office Equipment 3,810 252 939 3,123 838 436 441 833 2,290 2,972

Computers 767 55 17 805 396 198 17 577 228 371

Furniture &Fixtures 7,197 — 524 6,673 3,071 502 352 3,221 3,452 4,126

Vehicles 20 — — 20 4 3 — 7 13 16

Total 71,318 2,939 1,507 72,750 12,310 7,296 814 18,792 53,958 59,008

Previous Year 227,485 6,254 *162,421 71,318 12,002 23,785 23,477 12,310

Capital Work-in-Progress — 45

Total 53,958 59,053

* Includes fixed assets transferred to Bayer Rubber Chemicals Private Limited (now Lanxess India Private Limited) and Bayer MaterialScience Private Limited on account of Sale ofBusinesses.

As at As atDecember 31, December 31,

2005 2004

SCHEDULE 6

INVENTORIES(Refer Note 2 C on Schedule 20)




Traded Goods 717 103

Goods-in-Transit 519 2,704

17,600 17,821


2005 2004

SCHEDULE 5

INVESTMENTS (At Cost)

(Current, Non-trade and Quoted) — —(Refer Note 2 B and 4 on Schedule 20)

Tata Mutual Fund — Liquid Fund — 7.500[Nil (Previous Year 677,970 units ofRs. 10 each, Market Value Rs. 7,555)]

— 7,500

Rupees ’000s


2005 2004SCHEDULE 1

SHARE CAPITAL

Authorised:50,000 (Previous Year 50,000)Equity Shares of Rs.10 each 500 500

Issued, Subscribed and Paid up:50,000 (Previous Year 50,000)Equity Shares of Rs.10 each 500 500

500 500

Of the above 50,000(Previous Year 50,000)Equity Shares are held byBayer CropScience Limited,the Holding Company andits nominees.


2005 2004SCHEDULE 2


Profit and Loss Account 38,043 26,040

38,043 26,040

Rupees ’000s

Schedules forming part of the Balance Sheet as at December 31, 2005


2005 2004SCHEDULE 3

UNSECURED LOANS

Overdraft from Banks — 22,450

Inter Corporate Deposits from aGroup Company 44,000 —[Repayable within one year Rs. 44,000(Previous Year Nil)]

44,000 22,450

Rupees ’000s Rupees ’000s

78



2005 2004SCHEDULE 7

SUNDRY DEBTORS

Debts outstanding for a period exceedingsix months

— Considered Good — 3,360— Considered Doubtful — —

— 3,360

Other Debts— Considered Good * 18,640 32,529

18,640 35,889

*Includes Rs. 2,284 (Previous YearRs. 175) due from a private companyin which a director of the Company isa director.

Of the above:— Secured — —— Unsecured 18,640 35,889

18,640 35,889

SCHEDULE 8


Cash on Hand 67 6Cheques on Hand — 15Balance with Scheduled Banks :— Current Account 129 10— Cash Credit Account 5,272 —

5,468 31

SCHEDULE 9

LOANS AND ADVANCES(Unsecured — considered good unlessotherwise stated)

Advances Recoverable in cash or in kind orfor value to be received 15,498 8,760Deposits 417 5,163Balance with Excise and Customs Authorities 412 2,321Advance Tax 7,567 —[Net of Provision for Taxation Rs. 63,853(Previous Year Rs. Nil)]

23,894 16,244

SCHEDULE 10

CURRENT LIABILITIES

Sundry Creditors

— Due to Small Scale Industrial Undertakings 1,267 67(Refer Note 11 on Schedule 20)

— Others 20,091 44,229

21,358 44,296Other Liabilities 1,703 1,694Due to Holding Company 803 15,313

23,864 61,303

SCHEDULE 11

PROVISIONS

Income Tax [Net of Advance Tax andTax Deducted at Source Rs. Nil(Previous Year Rs. 42,141)] — 14,312

Fringe Benefit Tax [Net of Advance Tax Rs. 161(Previous Year Rs. Nil)] 137 —

Leave Encashment 5,008 4,258

5,145 18,570

For the year For the yearended ended


SCHEDULE 12


Commission — Indenting Business — 66,750

Manufacturing Services rendered 33,870 32,621

33,870 99,371

SCHEDULE 13

OTHER INCOME

Interest Income 25 533[Tax deducted at Source: Rs. Nil(Previous Year Rs. 93)]

Dividend on Investments 86 638

Profit on Sale of Investments — 87

Insurance Claims 1,632 —

Scrap Sales — 343

Miscellaneous 1,126 738

2,869 2,339

SCHEDULE 14

MATERIALS CONSUMED

Raw Materials:


Add: Purchases 35,659 326,550

42,648 368,066Less: Adjustment on account of transfer of

business to Bayer Rubber ChemicalsPrivate Limited (now Lanxess IndiaPrivate Limited) (Stock as onJune 30, 2004) — 46,621


36,562 314,456

Packing Materials Consumed 7,253 12,858

43,815 327,314

SCHEDULE 15

COST OF TRADED GOODS SOLD

Opening Stock 103 34,762

Add: Purchases 3,830 239,615

3,933 274,377

Less: Adjustment on account of transfer ofbusiness to Bayer Rubber ChemicalsPrivate Limited (now Lanxess IndiaPrivate Limited) (Stock as onJune 30, 2004) — 24,861

Less: Adjustment on account of transferof business to Bayer MaterialSciencePrivate Limited (Stock as onOctober 1, 2004) — 7,535

Less: Closing Stock 717 103

3,216 241,878

Schedules forming part of the Balance Sheet as atDecember 31, 2005

Schedules forming part of the Profit and Loss Account forthe year ended December 31, 2005

Rupees ’000sRupees ’000s

79

Annual Report 2005

For the year For the yearended ended


SCHEDULE 16

INCREASE IN STOCKS

Opening Stock— Semi-Finished — 12,189— Finished 5,847 83,888

5,847 96,077Less: Adjustment on account of

transfer of business to BayerRubber Chemicals Private Limited(now Lanxess India Private Limited)(Stock as on June 30, 2004)

— Semi-Finished — 9,308— Finished — — 91,345

5,847 (4,576)Less: Closing Stock— Semi-Finished — —— Finished 8,548 5,847

8,548 5,847

(2,701) (10,423)

SCHEDULE 17

EMPLOYEE COSTS

Salaries, Wages, Bonus and Allowances 15,711 57,022Contribution to Provident and Other Funds 1,803 11,479Staff Welfare Expenses 67 1,350

17,581 69,851

SCHEDULE 18

OTHER EXPENSES

Stores and Spares consumed 640 1,510Power, Fuel and Water — 14,687Cost Sharing Expenses 4,423 11,506Freight and Clearing Charges 1,167 22,308Rent 469 4,627Rates and Taxes 549 637Excise duty 1,070 (9,982)Processing Charges 2,175 98,916Insurance 202 2,353Repairs and Maintenance :— Machinery 54 2,638— Others 261 1,080

315 3,718Travelling and Conveyance 2,468 7,312Communication 359 1,859Printing and Stationery 104 529Directors’ Sitting Fees 60 30Auditors’ Remuneration 1,154 1,019(Refer Note 5 on Schedule 20)Advertisement and Publicity 99 1,636Rebates and Discounts — 17,301Commission 292 13,284Donations 36 37Bad Debts — 6,275Less: Provision for Doubtful Debts — (5,592)

— 683Provision for Doubtful Debts — 3,309Legal and Professional fees 2,175 11,680Foreign Exchange Loss (Net) 63 145Loss on assets sold/ discarded 683 242Miscellaneous Expenses 917 2,518

19,420 211,864

SCHEDULE 19

FINANCE CHARGESInterest on— Inter Corporate Deposits 1,603 218— Others 24 583Finance Charges 161 1,696

1,788 2,497

Schedules forming part of the Balance Sheetas at December 31, 2005 and Profit and Loss Accountfor the year ended on that date

Schedules forming part of the Profit and Loss Account forthe year ended December 31, 2005

Rupees ’000s

SCHEDULE 20

NOTES TO ACCOUNTS

1. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

These financial statements have been prepared under historical cost conventionfrom the books of account maintained on accrual basis in conformity withaccounting principles generally accepted in India and comply with theAccounting Standards issued by The Institute of Chartered Accountants of Indiaand referred to in Section 211(3C) of the Companies Act, 1956 of India (the ‘Act’)


A. Fixed Assets and Depreciation

(i) Fixed Assets are stated at cost less depreciation. Cost comprises ofcost of acquisition, cost of improvements and any attributable cost ofbringing the asset to its working condition for intended use.

(ii) Depreciation on Fixed Assets has been provided on Straight LineMethod at the following rates which are higher than or equal to the ratesprescribed under Schedule XIV of the Act.

Asset Category % p.a.Plant and Machinery 8.33/10.34Office Equipment 10.00Computers 20.00Furniture and Fixtures 10.00Vehicles 12.50

B. Investments

Current Investments are valued at lower of cost or market value/ net assetvalue.

C. Inventories

(i) Inventories are valued at lower of cost or net realisable value.

(ii) Cost of raw materials, packing materials and traded goods aredetermined on weighted average method.

(iii) Cost of finished goods and semi-finished goods include cost of rawmaterials and packing materials, cost of conversion and other costsincurred in bringing the inventories to the present location and condition.

D. Revenue Recognition

Sales are accounted for, inclusive of Excise Duty but excluding Sales Tax.

Revenue is recognised when the property and all the significant risks andrewards of ownership are transferred to the buyer or no significantuncertainty exists regarding the amount of consideration that is derived fromthe sale of goods.

Interest income is accounted on an accrual basis and Dividend income isaccounted when right to receive payment is established.

E. Foreign Currency Transactions

Foreign currency transactions are accounted at the exchange ratesprevailing on the date of transactions. Gains and losses, if any, at the year-end in respect of foreign currency assets and liabilities, are recognised in theProfit and Loss Account. Exchange differences arising on repayment ofliabilities incurred for the purpose of acquiring fixed assets are adjusted withthe carrying amount of respective fixed assets.

F. Retirement Benefits

(i) The Company has created an Employees Group Gratuity Fund which hastaken a Group Gratuity - Cum - Life Insurance Policy from the LifeInsurance Corporation of India (LIC). Gratuity is provided on the basis ofpremium paid on the above policy as intimated by LIC. The adequacy ofaccumulated fund balance available with LIC has been compared withactuarial valuation obtained at the year-end and shortfall/ excess, if any,has been provided for/ considered as prepaid.

(ii) Contribution to Company’s Provident fund and Superannuation fund areaccounted on actual liability basis and is charged to Profit and LossAccount.

(iii) Provision for leave encashment on retirement is determined and accruedon the basis of actuarial valuation.

G. Deferred Tax

Deferred tax is recognised, subject to consideration of prudence, on timingdifferences, being the difference between the taxable income and accountingincome that originate in one period and are capable of reversal in one ormore subsequent periods. Deferred tax asset is not recognised unless thereare timing differences, the reversal of which will result in sufficient income orthere is virtual certainty that sufficient future taxable income will be availableagainst which such deferred tax assets can be realised.

80


H. Provisions and Contingent Liabilities

Provisions are recognised when the Company has a legal and constructiveobligation as a result of a past event, for which it is probable that a cashoutflow will be required and a reliable estimate can be made of the amount ofthe obligation.

Contingent liabilities are disclosed when the Company has a possibleobligation or a present obligation and it is probable that a cash outflow willnot be required to settle the obligation.

I. Impairment of Assets

The Company assesses at each Balance Sheet date whether there is anyindication that an asset may be impaired. If any such indication exists, theCompany estimates the recoverable amount of the asset. If such recoverableamount of the asset or recoverable amount of the cash generating unit towhich the asset belongs is less than its carrying amount, the carrying amountis reduced to its recoverable amount. The reduction is treated as animpairment loss and is recognised in the Profit and Loss Account. If at theBalance Sheet date there is an indication that a previously assessedimpairment loss no longer exists, the recoverable amount is reassessed andthe asset is reflected at the recoverable amount.

3. The provision for taxation for the year has been computed on the basis of theresults for the year ended December 31, 2005 although the ultimate tax liabilitywill be determined on the basis of the results for the year ending on March 31,2006 relevant to the assessment year 2006-2007.

4. Current Investments bought and sold during the year:

No. of Units

ING Vysya Mutual Fund 928,237

Total 928,237

5. Auditors’ Remuneration:For the year ended For the year endedDecember 31, 2005 December 31, 2004

Rupees in ’000s Rupees in ’000s

Audit Fees 400 400

Tax Accounts and Tax Audit 425 319

Other Services 300 300

Reimbursement of out-of-pocket expenses 29 —

Total 1,154 1,019

6. Information given under Clause 3(i)(a), 3(ii), 4-C, 4-D(c), of part II of Schedule VIto the Act.

(a) Turnover of goods produced/ purchased

Class of Goods Unit of For the year ended For the year endedMeasure- December 31, December 31,

ment 2005 2004

Quantity Value Quantity ValueRupees Rupeesin ’000s in’000s

Rubber Chemicalsand Intermediates Tons — — 6,304 669,540

Chemicals Tons — — 1,531 108,296

Material Science Tons — — 561 144,904

Health Care:

– Tablets ‘000 Nos. 1,086 12,786 1,155 10,903

– Liquids Litres 100,015 45,198 68,470 30,982

– Injectables Litres 5,987 11,712 4,764 7,705

– Powder Kg. 29,363 14,334 19,746 9,257

– Collars Nos. 9,724 2,291 7,626 1,998

– Spray Litres — — 702 323

Others — — — 3,036

Total 86,321 986,944

Notes:– The previous year information of quantities sold includes quantities of

finished goods transferred to Lanxess India Private Limited and BayerMaterialScience Private Limited (formerly Bayer Industries PrivateLimited) on account of sale of business. The sales value of the previousyear includes value of finished goods transferred to Lanxess IndiaPrivate Limited and Bayer MaterialScience Private Limited (formerlyBayer Industries Private Limited) aggregating Rs. 123,741 (’000s).

– Sales figures include issue of free goods.

(b) (i) Consumption of Raw Materials :

Raw Materials Unit of Quantity ValueMeasurement Rupees in ’000s

Drontal Plus Tab – Bulk ’000 Nos. 724 5,514(820) (5,154)

Enrofloxacin 100% Kg. 7,341 9,838(5,426) (6,127)

Flumetherin Kg. 338 7,451(288) (6,293)

Toltrazuril Kg. 139 4,814(80) (3,349)

Aromatic Amines Tons — —(1,946) (109,928)

Ketones Tons — —(1,231) (60,737)

Others 8,945(122,868)

Total 36,562(314,456)

Notes:

(a) The values of consumption of raw materials have been arrived at onthe basis of opening stock plus purchases less closing stock. Theconsumption therefore includes nominal adjustment for write offsand the effects of reduction of stock items to realisable value.

(b) Figures shown in brackets are in respect of previous year.

(b) (ii) Value of Imported and Indigenous Raw materials consumed :

For the year ended For the year endedDecember 31, 2005 December 31, 2004

Value % Value %Rupees in ’000s Rupees in ’000s

Imported 22,947 63 127,144 40Indigenous 13,615 37 187,312 60

Total 36,562 100 314,456 100

(c) Opening and Closing stock of goods produced/ purchased :

Class of Goods Unit of As at As atMeasure- December 31, 2005 December 31, 2004

mentQty. Value Qty. Value

Rupees Rupeesin '000s in '000s

Health Care:– Tablets ‘000 Nos. 286 1,181 312 1,378– Liquids Litres 11,915 6,222 7,495 2,613– Injectables Litres 689 929 353 1,464– Powder Kg. 3,135 844 2,064 416– Collars Nos. 698 89 410 79

Total 9,265 5,950

Note:The closing stocks stated above are after adjustments for breakages/damages and date expired goods. The difference in closing stock figures ifderived from opening stock, production and sales would be due to abovefactors.

(d) Purchases of Traded goods :

Class of Goods Unit of For the year For the yearMeasure- ended ended

ment December 31, 2005 December 31, 2004

Qty. Value Qty. ValueRupees Rupeesin ’000s in ’000s

Rubber Chemicalsand Intermediates Tons — — 335 46,368Chemicals Tons — — 1,412 86,294Material Science Tons — — 533 105,772Health Care:– Tablets ’000 Nos. 3 1,130 — —– Collars Nos. 14,050 2,700 5,801 1,181

Total 3,830 239,615

Schedules forming part of the Balance Sheet as at December 31, 2005 and Profit and Loss Account for the year ended on that date

81

Annual Report 2005

(e) Installed Capacity and Actual Production:

Class of Goods Unit of Installed ActualMeasurement Capacity Production

Refer Note (d) Refer Note (f) below below

Rubber Chemicalsand Intermediates Tons — —

(—) (5,287)Health Care– Formulation

(i) Tablets ‘000 Nos. 300,000 1,349(Refer Note (e) below) (225,000) (1,350)

(ii) Creams/Orals/Ointments ‘000 Nos. 4,000 —————(Refer Note (e) below) (4,000) (—)

Notes:

(a) Installed capacity figures are given for single shift working basis.

(b) Installed capacity is as per the certificate given by the Management ofthe Company on which the Auditors have relied.

(c) Figures shown in brackets are in respect of Previous Year.

(d) The rubber chemicals, fibres and chemical business of the Company hasbeen sold to Bayer Rubber Chemicals Private Limited (now LanxessIndia Private Limited), with effect from the closing hours of June 30,2004, and accordingly, there is no installed capacity in respect of theRubber Chemicals and Intermediates Division.

(e) The actual production figure does not include the following itemsmanufactured on job work basis for other parties:

Product Name Unit of QuantityMeasurement

Tablets ‘000 Nos 225,475(200,771)

Creams/ Orals/ Ointments ‘000 Nos 2,720(3,364)

(f) The actual production figure does not include the following itemsmanufactured by other parties on a job work basis for the Company:

Product Name Unit of QuantityMeasurement

– Liquids Litres 104,435(75,080)

– Injectables Litres 6,323(4,615)

– Powder Kg. 30,893(22,459)

For the year ended For the year endedDecember 31, 2005 December 31, 2004


7. Value of imports calculatedon CIF basis



Stores, Spares & Components 106 67

8. Expenditure in foreign currency

Travelling and Conveyance 426 1,340

9. Earnings in foreign currency

Exports of goods calculatedon FOB basis 19,940 306,427

Indenting Commission — 66,364

Reimbursement of expenses 2,382 1,115

10. The Company has recognised the following Deferred Tax Assets/ Liabilities:

Particulars As at December 31, As at December 31, 2005 2004


Deferred Tax Assets

Disallowances u/s 43B 1,686 1,543

Others 5 —

Total 1,691 1,543

Deferred Tax Liability


Total 9,699 9,218

Net Deferred Tax Liability 8,008 7,675

11. The names of small-scale industrial undertakings (as identified by theManagement) to whom the Company owes for a period exceeding 30 days as atthe Balance Sheet date are given below:

– Flex Art– H I Tech Plastics– Mumbai Co-operative Industries Limited– Ravira Polyplast Industries– Shree Rubber Plast Company Private Limited– The Ideal Printers Private Limited

12. Related Party Disclosures (as identified by the Management):

(i) Where Control Exists

Bayer AG, Germany – Ultimate Holding Company

Bayer CropScience Limited – Holding Company

(ii) Parties under Common Control

Bayer Diagnostics India Limited

Bayer MaterialScience Private Limited

Bayer Pharmaceuticals Private Limited

Bayer (Malaysia) Sdn. Bhd., Malaysia

Bayer (Pty) Limited, South Africa

Bayer South East Asia Pte. Limited, Singapore

Bayer Antwerpen N.V., Belgium

Bayer Limited, Japan

Bayer MaterialScience AG, Germany

Bayer MaterialScience LLC, U.S.A.

Bayer Philippines Inc., Philippines

Bayer Chemicals AG, Germany

Bayer Chemicals Corporation, U.S.A.

Bayer (China) Limited, China

Bayer Faser GmbH, Germany

Bayer Healthcare AG, Germany

Bayer Iranchemie AG, Iran

Bayer International SA, Schweiz

Bayer SA, Brazil

Bayer Shanghai Pigment Company Limited, Shanghai

Bayer Taiwan Company Limited, Taiwan

Bayer Thai Company Limited, Thailand

Bayer Vietnam Limited, Vietnam

Bayer MaterialScience Limited, Hongkong

Hybrid Rice International Private Limited

Lanxess ABS Limited (Up to 31st January, 2005)

Lanxess India Private Limited (Up to 31st January, 2005)

Lanxess International Trading Shanghai Company Limited, China (Up to 31stJanuary, 2005)

Lanxess Distribution GmbH, Germany (Up to 31st January, 2005)

Proagro Seed Company Private Limited

Borchers GmbH, Germany

H.C. Starck GmbH, Germany

Hennecke, Sank Augustin, Germany

PT Bayer Urethanes, Indonesia

PT Bayer Kimia Farmasindo, Indonesia

Rhein Chemie Rheinau GmbH, Germany

Sumika Bayer Urethane Company Limited, Japan

Wolff Cellulosics, Germany


82


(iii) The following transactions were carried out with related parties during the current year:Rupees in ’000s

Particulars Parties referred Parties referred Totalto in (i) above to in (ii) above

2005 2004 2005 2004 2005 2004Purchase of Goods/ MaterialsBayer HealthCare AG — — 18,100 14,377 18,100 14,377Bayer Taiwan Company Limited — — 1,920 8,313 1,920 8,313Bayer Antwerpen N.V. — — — 21,596 — 21,596Bayer MaterialScience AG — — — 91,547 — 91,547Others — — — 57,140 — 57,140Total — ————— 20,020 192,973 20,020 192,973Sale of Finished GoodsBayer Antwerpen N.V. — — — 17,141 — 17,141Bayer MaterialScience AG — — ————— 86,998 — 86,998Others — — ————— 17,250 — 17,250Total — ————— ————— 121,389 — 121,389Sale of ServicesBayer CropScience Limited (Exclusive ofService Tax Rs. 860 (Previous Year Nil)) 33,870 32,621 — — 33,870 32,621Total 33,870 32,621 — ————— 33,870 32,621Purchase of ServicesBayer CropScience Limited — 63,109 — — — 63,109Total — 63,109 — — — 63,109Interest IncomeProagro Seed Company Private Limited — — — 92 — 92Total — ————— — 92 — 92Interest ExpensesBayer CropScience Limited 212 48 — — 212 48Hybrid Rice International Private Limited — — 1,391 — 1,391 —Bayer MaterialScience Private Limited — — — 143 — 143Proagro Seed Company Private Limited — — — 27 — 27Total 212 48 1,391 170 1,603 218Commission IncomeBayer AG — 18,294 — — — 18,294Lanxess Distribution GmbH — — — 21,953 — 21,953Bayer International SA — — — 9,776 — 9,776Others — — — 12,820 — 12,820Total — 18,294 — 44,549 — 62,843Commission ExpenseBayer (Malaysia) Sdn. Bhd. — — — 364 — 364Bayer SA — — — 1,340 — 1,340Bayer Thai Company Limited — — — 257 — 257Bayer (China) Limited — — — 303 — 303Others — — — 212 — 212Total — ————— — 2,476 — 2,476Other IncomeBayer MaterialScience Private Limited — — — 128 — 128Total — ————— — 128 — 128Lease Rental ExpenseBayer CropScience Limited 249 — — — 249 —Total 249 — — — 249 —Inter Corporate Deposit GivenProagro Seed Company Private Limited — — — 82,000 — 82,000Total — ————— — 82,000 — 82,000Inter Corporate Deposit TakenBayer CropScience Limited 18,500 5,000 — — 18,500 5,000Hybrid Rice International Private Limited — — 82,000 — 82,000 —Bayer MaterialScience Private Limited — — — 45,000 — 45,000Proagro Seed Company Private Limited — — — 8,000 — 8,000Total 18,500 5,000 82,000 53,000 100,500 58,000Cost Sharing recoveries/ Expenses Reimbursed by other CompaniesBayer CropScience Limited — 19,329 — — — 19,329Bayer MaterialScience Private Limited — — 116 5,023 116 5,023Bayer Healthcare AG — — 2,382 736 2,382 736Lanxess ABS Limited — — — 2,354 — 2,354Others — — — 1,148 — 1,148Total — 19,329 2,498 9,261 2,498 28,590Cost Sharing Payments/ Expenses Reimbursed to other CompaniesBayer CropScience Limited 3,677 45,380 — — 3,677 45,380Bayer Pharmaceuticals Private Limited — — 2,229 1,312 2,229 1,312Bayer MaterialScience Private Limited — — — 15,586 — 15,586Others — — 445 6,799 445 6,799Total 3,677 45,380 2,674 23,697 6,351 69,077Sale of BusinessLanxess India Private Limited — — — 665,000 — 665,000Bayer MaterialScience Private Limited — — — 48,858 — 48,858Total — ————— — 713,858 — 713,858Outstanding Receivable net of PayableBayer CropScience Limited 10,885 14,007 — — 10,885 14,007Bayer MaterialScience Private Limited — — 2,284 — 2,284 —Total 10,885 14,007 2,284 ————— 13,16913,16913,16913,16913,169 14,007Outstanding Payable net of ReceivableBayer Healthcare AG — — 3,079 4,584 3,079 4,584Bayer Pharmaceuticals Private Limited — — 564 661 564 661Bayer MaterialScience Private Limited — — — 9,771 — 9,771Lanxess India Private Limited — — — 3,875 — 3,875Others — — — 626 — 626Total — ————— 3,643 19,517 3,6433,6433,6433,6433,643 19,517Inter Corporate Deposit PayableHybrid Rice International Private Limited — — 44,000 — 44,000 —Total — ————— 44,000 ————— 44,000 —————


83

Annual Report 2005

13. Segment Reporting:In the previous year, the following segments were identified considering thenature of the products/ services, deferring risks and returns and the internalfinancial reporting systems:

• Rubber

• Chemicals

• MaterialScience

• Healthcare

During previous year, the Company had sold its rubber chemicals, fibres andchemical business to Bayer Rubber Chemicals Private Limited (now LanxessIndia Private Limited) with effect from July 1, 2004 and its material sciencebusiness to Bayer MaterialScience Private Limited (formerly Bayer IndustriesPrivate Limited) with effect from October 1, 2004. Accordingly ‘Healthcare’segment has been considered as the primary segment for disclosure.

Rupees in ’000s

Particulars Rubber Chemicals Material Health Total Science Care

Revenue

Segment Revenue — — — 107,580 107,580(542,353) (121,614) (162,944) (89,446) (916,357)

IIIIInter-segment Revenue — — — — —

External Revenue — — — 107,580 107,580(542,353) (121,614) (162,944) (89,446) (916,357)

Segment Results — — — 21,711 21,711(19,182) (12,292) (7,162) (14,547) (53,183)

Less:Interest and Financial Charges — — — — 1,788

— — — — (2,497)

Add:Interest and Dividend Income — — — — 111

— — — — (1,171)

Add:Unallocable Income (net of — — — — —unallocable expenses) — — — — (73)

Profit Before Taxation and — — — — 20,034Extraordinary Item — — — — (51,930)

Other InformationSegment Assets — — — 119,560 119,560

— — — (136,538) (136,538)

Segment Liabilities — — — 73,009 73,009(excluding Deferred — — — (102,323) (102,323)Tax Liabilities)

Segment Capital Expenditure — — — 2,894 2,894(3,230) (93) (2,676) (255) (6,254)

Segment Depreciation — — — 7,296 7,296(16,227) (110) (704) (6,744) (23,785)

Note:Figures in bracket relate to previous year.

Rupees in ’000s

Particulars 2005 2004

GEOGRAPHICAL SEGMENTS

Revenue

India 87,350 631,419

Outside India 20,230 284,938

Total Revenue 107,580 916,357

Assets

India 118,381 136,538

Outside India 1,179 —

Total Assets 119,560 136,538

14. Disclosure of Earnings per share

Particulars For the year For the year ended ended

December 31, 2005 December 31,2004

Profit for the yearbefore ExtraordinaryItems, after Tax (Rs. ’000s) 12,003 46,743

Profit for the yearafter ExtraordinaryItems, after Tax (Rs. ’000s) 12,003 50,928

Number of Equity Shares 50,000 50,000

Nominal value of an equity share (Rs.) 10 10

Earning per share before ExtraordinaryItems, after Tax (Rs.) 240 935

Earning per share after ExtraordinaryItems, after Tax (Rs.) 240 1,019

15. Refer annexure for additional information pursuant to part IV of Schedule VI of theAct.

16. In view of sale of polymer businesses comprising of Rubber Chemicals, Fibres &Chemicals and Material Science businesses in previous year, the figures of thecurrent year are not comparable with that of the previous year.

17. Previous year figures have been re-grouped/ re-classified to conform with thecurrent year’s presentation.

The Schedules 1 to 20 referred to herein above form an integral part of the financialstatements.


Natraj Ramkrishna Stephan GerlichPartner ChairmanMembership No: F-32815For and on behalf ofPrice Waterhouse D. C. ShroffChartered Accountants Director

Place : Mumbai Place : MumbaiDate : March 22, 2006 Date : March 22, 2006


84


Rupees ’000sFor the For the

Year Ended Year EndedDecember 31, December 31,

2005 2004A. Cash flow from Operating activities:

Net Profit before ExtraordinaryItem and Taxation 20,034 51,930Adjustment for:

Depreciation 7,296 23,785Loss on sale of Fixed Assets 683 242Unrealised Foreign Exchange Gain (30) (4,305)Profit on sale of Investments — (87)Dividend Income (86) (638)Interest Income (25) (533)Interest Expense 1,627 801Provision for Doubtful Debts — 3,309Bad Debts — 683Provision for Leave Encashment 750 4,223

10,215 27,480Operating Profit before WorkingCapital changes 30,249 79,410Adjustments for Changes inWorking Capital:

(Increase)/ Decrease inSundry Debtors 17,247 368,455(Increase)/ Decrease inOther Receivables (83) 39,282(Increase)/ Decrease inInventories 221 185,463(Increase)/ Decrease inTrade Payables andOther Liabilities (37,406) (848,545)

(20,021) (255,345)

Cash Generated from Operations 10,228 (175,935)Direct taxes (paid)/ received (29,441) (33,692)Profit on Sale of Businesses — 30,808

Net Cash used in Operating activities (19,213) (178,819)

B. Cash flow from Investing activities:Purchase of Investments (10,000) (327,500)Sale of Investments 17,500 320,087Short term deposits received — 140,000Short term deposits repaid — (140,000)Purchase of Fixed assets (2,894) (6,254)Sale of Fixed assets 10 155,361Interest received 25 533Dividend received 86 638Net Cash from Investing activities 4,727 142,865

C. Cash flow from Financing activities:Proceeds from Short Term Borrowing 21,550 22,450Interest paid (1,627) (801)

Net Cash from Financing activities 19,923 21,649

Net Increase/ (Decrease) in Cash& Cash Equivalents 5,437 (14,305)Cash & Cash Equivalents –Opening Balance 31 14,336Cash & Cash Equivalents –Closing Balance 5,468 31Cash & Cash Equivalents Comprise

Cash 67 6Cheques on hand — 15Balance with Scheduled Banks 5,401 10

5,468 31

Notes:(1) The above cash flow statement has been prepared under the “Indirect Method” as set

out in the Accounting Standard – 3 on Cash Flow Statements issued by The Instituteof Chartered Accountants of India.

(2) Figures in brackets indicate cash outgo.(3) Previous year figures have been reclassified to conform to the current years

presentation.

This is the Cash Flow Statement referred to in our report of even date


Natraj Ramkrishna Stephan GerlichPartner ChairmanMembership No.: F-32815For and on behalf ofPrice Waterhouse D. C. ShroffChartered Accountants Director

Place : Mumbai Place : MumbaiDate : March 22, 2006 Date : March 22, 2006

Cash Flow Statement for the year ended December 31, 2005Additional Information pursuant to Part IV of Schedule VI tothe Companies Act, 1956, of India.

Balance Sheet Abstract and Company’s General Business Profile:

I. Registration Details

Registration No. : 142216

State Code : 11

Balance Sheet Date, Month, Year : 31.12.2005

II. Capital Raised during the year (Amount in Rs. Thousands)

Public issue : Nil

Right issue : Nil

Bonus issue : Nil

Private Placement : Nil

III. Position of Mobilisation and Deployment (Amount in Rs. Thousands)of Funds

Total Liabilities (including Shareholder’s Funds) : 90,551

Total Assets : 90,551

Sources of Funds

Paid Up Capital : 500

Reserves & Surplus : 38,043

Secured Loans : Nil

Unsecured Loans : 44,000

Application of Funds

Net Fixed Assets : 53,958

Investments : Nil

+/– Net Current Assets* : 36,593

Miscellaneous Expenditure : Nil

Accumulated Losses : Nil

* Excluding Deferred Tax Liability Rs. 8,008 (000’s)

IV. Performance of the Company (Amount in Rs. Thousands)

Total Income : 110,449

Total Expenditure : 90,415

+/– Profit/ Loss Before Tax : 20,034

+/– Profit/ Loss After Tax : 12,003

Earning Per Share in Rs. : 240

Dividend % : Nil

V. Generic Names of Principal Product(s)/Service(s) of Company(as per Monetary terms)


Product Description : DRONTAL PLUS TAB


Product Description : FLUMETHERIN


Product Description : TOLTRAZURIL





85


AUDITOR’S REPORT TO THE BOARD OF DIRECTORS OF BAYER CROPSCIENCELIMITED (FORMERLY BAYER (INDIA) LIMITED) ON THE CONSOLIDATED FINANCIALSTATEMENTS OF BAYER CROPSCIENCE LIMITED AND ITS SUBSIDIARY

1. We have audited the attached Consolidated Balance Sheet of Bayer CropScience Limited (formerly Bayer (India)Limited) (the Company) and Bayer Polychem (India) Limited (the subsidiary) as at December 31, 2005, theConsolidated Profit and Loss Account and the Consolidated Cash Flow Statement for the year ended on thatdate annexed thereto, which we have signed under reference to this report. These Consolidated FinancialStatements are the responsibility of the Company’s Management. Our responsibility is to express an opinion onthese Consolidated Financial Statements based on our audit.

2. We have conducted our audit in accordance with auditing standards generally accepted in India. ThoseStandards require that we plan and perform the audit to obtain reasonable assurance about whether theFinancial Statements are prepared, in all material respects, in accordance with an identified financial reportingframework and are free of material misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the Financial Statements. An audit also includes assessing theaccounting principles used and significant estimates made by the Management, as well as evaluating the overallFinancial Statement Presentation. We believe that our audit provides a reasonable basis for our opinion.

3. We report that Consolidated Financial Statements have been prepared by the Company in accordance with therequirements of Accounting Standard 21, Consolidated Financial Statements, issued by The Institute ofChartered Accountants of India and on the basis of the separate audited Financial Statements of the Companyand its subsidiary included in the Consolidated Financial Statements.

4. On the basis of the information and explanations given to us and on consideration of the separate audit reportson individual audited Financial Statements of the Company and its aforesaid subsidiary, in our opinion, theConsolidated Financial Statements give a true and fair view in conformity with the accounting principlesgenerally accepted in India:

(i) in the case of the Consolidated Balance Sheet, of the consolidated state of affairs of the Company and itssubsidiary as at December 31, 2005;

(ii) in the case of the Consolidated Profit and Loss Account, of the consolidated results of operations of theCompany and its subsidiary for the year ended on that date; and

(iii) in the case of the Consolidated Cash Flow Statement, of the consolidated cash flows of the Company andits subsidiary for the year ended on that date.

Natraj RamkrishnaPartnerMembership Number: F–32815For and on behalf ofPrice WaterhouseChartered Accountants


Bayer CropScience Limited [Formerly Bayer (India) Limited]

86

Schedules referred to above form an integral part of the Balance Sheet.








Raj Kaul

A. K. R. Nedungadi



Balance Sheet as at December 31, 2005 (Consolidated) Rupees ’000s

Schedule As at As at31.12.2005 31.12.2004

SOURCES OF FUNDS

SHAREHOLDERS’ FUNDS

Share Capital 1 394,987 394,987Reserves and Surplus 2 2,499,693 2,215,305

2,894,680 2,610,292

LOAN FUNDS

Secured Loans 3 195,798 173,789Unsecured Loans 4 1,008,760 624,750

1,204,558 798,539

4,099,238 3,408,831


FIXED ASSETS 5Gross Block 3,338,677 2,965,059Less: Depreciation/ Amortisation 1,731,013 1,555,946

Net Block 1,607,664 1,409,113Capital Work-In-Progress 79,546 88,016

1,687,210 1,497,129

INVESTMENTS 6 39,543 127,131

DEFERRED TAX ASSET (NET) 7,033 57,595(Refer Note 5 of Schedule 23)

CURRENT ASSETS, LOANS AND ADVANCES

Inventories 7 1,778,248 1,357,137

Sundry Debtors 8 1,693,335 1,498,455

Cash and Bank Balances 9 315,179 525,949

Other Current Assets 10 34,550 5,940

Loans and Advances 11 637,599 617,864

4,458,911 4,005,345

Less: CURRENT LIABILITIES AND PROVISIONS

Current Liabilities 12 1,805,845 1,887,511

Provisions 13 287,614 390,858

2,093,459 2,278,369

NET CURRENT ASSETS 2,365,452 1,726,976

4,099,238 3,408,831


87



Profit and Loss Account for the year ended December 31, 2005 (Consolidated) Rupees ’000s

Year Ended Year EndedSchedule 31.12.2005 31.12.2004

INCOME

Sales 7,647,654 8,280,546Less: Excise Duty 885,437 913,746

6,762,217 7,366,800Other Operating Income 14 103,271 150,297Other Income 15 393,863 263,514

7,259,351 7,780,611

EXPENDITURE

Materials Consumed 16 3,229,860 3,478,703Cost of Traded Goods Sold 17 513,458 875,549Employee Cost 18 589,691 725,220Other Expenses 19 1,882,742 2,130,225Finance Charges 20 75,928 114,066Depreciation 233,039 283,966

6,524,718 7,607,729Less: Recoveries from Group Companies 162,355 218,274

6,362,363 7,389,455Add/ (Less): (Increase)/ Decrease in Stock 21 60,987 (174,040)

6,423,350 7,215,415

PROFIT BEFORE PRIOR PERIOD, EXCEPTIONAL/ EXTRAORDINARY 836,001 565,196ITEMS AND TAXATION

Add : Prior Period Item — 18,748Less: Exceptional/ Extraordinary Item 22 69,128 (22,829)

PROFIT FOR THE YEAR BEFORE TAXATION 766,873 606,773Taxation — Current Tax (Refer Note 4 of Schedule 23) 303,252 284,533

[including for earlier years Rs. 82,652 (Previous Year Rs. 13,683)] — Deferred Tax (Refer Note 5 of Schedule 23) 50,562 7,708

[including for earlier years Rs. 4,869 (Previous Year Rs. 33,969)] — Fringe Benefit Tax 29,586 383,400 —

PROFIT AFTER TAX 383,473 314,532Add: Balance brought forward 1,409,223 1,220,136

AMOUNT AVAILABLE FOR APPROPRIATION 1,792,696 1,534,668

APPROPRIATION

Proposed Dividend 86,897 86,897Provision For Tax on Proposed Dividend 12,188 12,188Transfer to General Reserve 37,147 26,360Balance carried to Balance Sheet 1,656,464 1,409,223

1,792,696 1,534,668

Earnings Per Share before Prior Period and Exceptional/ Extraordinary Itemafter Taxation – Basic and Diluted (Net of Tax) 10.87 7.66Earnings Per Share after Prior Period and Exceptional/ Extraordinary Itemafter Taxation – Basic and Diluted (Net of Tax)(Refer Note 16 of Schedule 23) 9.71 7.96


Schedules referred to above form an integral part of the Profit and Loss Account.








Raj Kaul

A. K. R. Nedungadi


88

Schedules forming part of the Balance Sheet as at December 31, 2005 (Consolidated) Rupees ’000s

As at As at31.12.2005 31.12.2004

SCHEDULE 1

SHARE CAPITAL

Authorised:46,300,000 (Previous Year 46,300,000) Equity Shares of Rs. 10 each 463,000 463,000

Issued, Subscribed and Paid-up :39,498,747 (Previous Year 39,498,747) Equity Shares of Rs. 10 each, fullypaid-up 394,987 394,987

Notes:

(a) Of the above, 12,632,500 (Previous Year 12,632,500) Equity Shares of Rs. 10each are allotted as fully paid-up Bonus Shares by way of capitalisation of CapitalReserve, Premium received on Shares and General Reserve.

(b) 28,086,662 (Previous Year 28,086,662) Equity Shares of Rs. 10 each are held byBayer AG, Germany, the Ultimate Holding Company and its Subsidiaries.

(c) Pursuant to the Scheme of Amalgamation of erstwhile Bayer CropScience IndiaLimited with the Company, 23,278,747 Equity Shares of Rs. 10 each have beenissued and allotted as fully paid-up to the Shareholders of erstwhile BayerCropScience India Limited without payment being received in cash.

SCHEDULE 2


General ReserveAs per last Balance Sheet 801,964 775,604Add: Transfer from Profit and Loss Account 37,147 26,360

839,111 801,964

Investment Allowance Utilised Reserve 4,118 4,118

Profit and Loss Account 1,656,464 1,409,223

2,499,693 2,215,305

SCHEDULE 3

SECURED LOANSLoan from Banks 195,000 162,228(Secured by Pari Passu charge by hypothecation of Stocks and Book Debts)[Due within a year Rs. 195,000 (Previous Year Rs. 162,228)]

Lease Liability 798 11,561(Secured on the underlying leased assets)[Due within a year Rs. 798 (Previous Year Rs. 10,677)](Refer Note 10 of Schedule 23)

195,798 173,789

89



As at As at31.12.2005 31.12.2004

SCHEDULE 4

UNSECURED LOANSLoan from Banks 782,960 422,450[Includes interest accrued and due Rs. 2,709 (Previous Year: Rs. Nil)][Due within a year Rs. 782,960 (Previous Year Rs. 22,450)]

Inter Corporate Deposits 214,000 190,500[Due within a year Rs. 214,000 (Previous Year Rs. 190,500)]

Loan from Others 11,800 11,800

1,008,760 624,750

SCHEDULE 5

FIXED ASSETSRupees ‘000s

Cost Depreciation/AmortisationAssets (Refer Notes 1 and 2 below) (Refer Notes 2 and 3 below) Net Book Value

As at Additions/ Deletions/ As at As at For the year/ Deletions/ As at Net Block Net Block01.01.2005 Adjustments Adjustments 31.12.2005 01.01.2005 Adjustments Adjustments 31.12.2005 31.12.2005 31.12.2004

Owned Assets

Intangibles

Goodwill 93,256 — — 93,256 62,217 31,039 — 93,256 — 31,039

Technical Know-how 15,633 — — 15,633 15,633 — — 15,633 — —

Sub-total 108,889 — — 108,889 77,850 31,039 — 108,889 — 31,039

Tangibles

Freehold Land 5,789 3,236 — 9,025 — — — — 9,025 5,789(Refer Note 1 below)

Leasehold Land 9,100 — — 9,100 2,266 121 — 2,387 6,713 6,834

Buildings 835,126 43,724 44,259 834,591 207,459 32,138 9,709 229,888 604,703 627,667

Plant and Machinery 1,385,685 364,097 30,784 1,718,998 940,720 128,056 25,927 1,042,849 676,149 444,965

Office Equipment & 400,826 56,026 91,736 365,116 207,948 54,716 46,015 216,649 148,467 192,878Computers

Furniture & Fixtures 87,841 41,066 3,007 125,900 60,129 9,732 2,593 67,268 58,632 27,712

Vehicles 78,528 66,387 14,258 130,657 30,960 13,126 8,978 35,108 95,549 47,568

Sub-total 2,802,895 574,536 184,044 3,193,387 1,449,482 237,889 93,222 1,594,149 1,599,238 1,353,413

Total 2,911,784 574,536 184,044 3,302,276 1,527,332 268,928 93,222 1,703,038 1,599,238 1,384,452

Leased Assets

Computers 53,275 — 16,874 36,401 28,614 12,330 12,969 27,975 8,426 24,661

Total 53,275 — 16,874 36,401 28,614 12,330 12,969 27,975 8,426 24,661

Capital Work-in-Progress includes Capital Advances. 79,546 88,016

Grand Total 2,965,059 574,536 200,918 3,338,677 1,555,946 281,258 106,191 1,731,013 1,687,210 1,497,129

Previous Year 3,143,964 328,681 *507,586 2,965,059 1,399,244 300,250 143,548 1,555,946 — —

Notes:1 The Company has agreed to transfer certain portion of the land (book value Rs. 1,153) and Building (written down value Rs. 103,047) located at Kolshet,

Thane, Maharashtra to Lanxess India Private Limited vide Memorandum Of Understanding dated November 18, 2004, consequent to the divestment ofchemical business, globally. This transfer has not been effected as at the year-end pending approval from the Collector of Thane.

2 Additions/ Deletions to fixed assets and Depreciation for the year/ on deletions includes adjustments on account of reclassification within the above categoriesof Fixed Assets aggregating Rs.94,443 and Rs.48,219 respectively.

3 Depreciation on Leased assets for the year includes depreciation for earlier years Rs. Nil (Previous Year Rs. 16,284).* Includes fixed assets transferred to Bayer Rubber Chemicals Private Limited (now Lanxess India Private Limited) and Bayer MaterialScience Private Limited on

account of sale of businesses.

90


As at As at31.12.2005 31.12.2004

SCHEDULE 6

INVESTMENTS

LONG TERM, AT COST

NON TRADE:

UNQUOTED

4,900 (Previous Year 4,900) Equity Shares in Bharuch Enviro 49 49Infrastructure Limited of Rs. 10 each, fully paid-up

209,880 (Previous Year 190,800) Equity Shares in Bharuch Eco Acqua 2,099 1,908Infrastructure Limited of Rs. 10 each, fully paid-up

QUOTED

287,350 (Previous Year 287,350) Equity Shares in Bayer Diagnostics 25,330 25,330India Limited of Rs. 10 each fully paid-upMarket value Rs. 154,953 (Previous Year Rs. 106,032)120,646 (Previous Year 120,646) 6.75% Tax Free US64 Bonds ofRs. 100 eachMarket value Rs. 12,554 (Previous Year Rs. 12,065) 12,065 12,065

CURRENT

Nil (Previous Year 1,024,054) units of Rs. 10 each in HSBC Mutual — 10,254Fund – Floating rate fundMarket value Rs. Nil (Previous Year Rs. 10,254)

Nil (Previous Year 4,331,713) units of Rs. 10 each in Birla Sun Life Mutual — 45,000Fund – Dividend reinvestmentMarket value Rs. Nil (Previous Year Rs. 45,150)

Nil (Previous Year 677,970) units of Tata Mutual Fund – Liquid Fund of — 7,500Rs. 10 eachMarket value Rs. Nil (Previous Year Rs. 7,554)

Nil (Previous Year 2,498,487) units of Rs. 10 each in J. M. Financial — 25,025Mutual Fund – Daily DividendMarket value Rs. Nil (Previous Year Rs. 25,025)

39,543 127,131

Note: Aggregate Market value of Quoted Investments Rs. 167,507(Previous Year Rs. 118,097)

SCHEDULE 7

INVENTORIES

Stores and Spares 47,336 20,269

Stock-in-Trade:



Semi-Finished Goods 197,251 107,503



Goods in Transit 82,420 59,327

1,778,248 1,357,137

91



As at As at31.12.2005 31.12.2004

SCHEDULE 8

SUNDRY DEBTORS

Debts outstanding for a period exceeding six months

Considered Good 35,513 183,500

Considered Doubtful 275,058 352,572

310,571 536,072

Less: Provision for Doubtful Debts 275,058 352,572

35,513 183,500Other Debts:

Considered Good* 1,657,822 1,314,955

1,693,335 1,498,455

* Includes Rs. 2,284 (Previous Year Rs. 175) due from a privatecompany in which a director of the Company is a director

Sundry Debtors

Secured 94,082 129,512

Unsecured 1,599,253 1,368,943

1,693,335 1,498,455

SCHEDULE 9


Cash on Hand 558 959

Cheques on Hand — 15

With Scheduled Banks:

In Current Accounts 183,199 57,820

In Deposit Accounts* 6,807 6,807

In Unclaimed Dividend Accounts 2,563 2,507

In Cash Credit Accounts 122,052 457,841

* Deposits with bank aggregating Rs. 4,807 (Previous Year Rs. 4,807)taken for the purpose of Earnest Money Deposits.

315,179 525,949

SCHEDULE 10

OTHER CURRENT ASSETS

Fixed Assets held for sale (Valued at Cost or Net Realisable Valuewhichever is lower) 34,550 5,940

34,550 5,940

92


As at As at31.12.2005 31.12.2004

SCHEDULE 11

LOANS AND ADVANCES(Unsecured – considered good unless stated otherwise)Advances recoverable in cash or in kind or for value to be received

Considered Good [Includes due from a Company in which Directors areinterested Rs. 6,341 (Previous Year Rs. 4,567)] 218,785 261,192Considered Doubtful 15,443 2,558

234,228 263,750Less: Provision for Doubtful Advances 15,443 2,558

218,785 261,192Deposits

Considered Good 112,042 117,871Considered Doubtful 9,925 9,454

121,967 127,325Less: Provision for Doubtful Deposits 9,925 9,454

112,042 117,871Balance with Excise, Customs and Port Authorities 117,016 26,114Advance payment of Income-tax 189,756 212,687[Net of Provision for Taxation Rs. 2,131,326 (Previous Year Rs. 1,771,621)]

637,599 617,864

SCHEDULE 12

CURRENT LIABILITIESSundry Creditors

Due to Small Scale Industrial Undertakings 11,380 13,587Due to Creditors other than Small Scale Industrial Undertakings 1,587,899 1,660,035

Interest accrued but not due 3,997 2,629Investor Education and Protection Fund shall be credited by the followingamounts:

Unclaimed Dividends* 2,563 2,507Unclaimed Public Deposits* 855 975

Deposits from Agents, Dealers and Customers 78,423 129,512Other Liabilities 120,728 78,266

1,805,845 1,887,511

* There are no amounts as at year end which are due to be credited toInvestor Education and Protection Fund.

SCHEDULE 13

PROVISIONSIncome Tax [Net of Advance Tax Rs. Nil (Previous Year Rs. 42,141)] — 14,312Proposed Dividend 86,897 86,897Tax on Proposed Dividend 12,188 12,188Leave Encashment 55,031 67,535Gratuity 25,493 38,664Pension 8,181 6,854Fringe Benefit Tax [Net of Advance Tax Rs. 10,891 (Previous Year Rs. Nil)] 18,695 —Direct Tax Matters (Refer Note 15 of Schedule 23) 48,558 107,371[Net of Advance Tax Rs. 104,775 (Previous Year Rs. 45,962)]Indirect Tax Matters (Refer Note 15 of Schedule 23) 25,700 50,166Commercial and Other Matters (Refer Note 15 of Schedule 23) 6,871 6,871

287,614 390,858

93


Schedules forming part of the Profit and Loss Account for the year ended December 31, 2005 (Consolidated) Rupees ’000s


SCHEDULE 14


Commission — Indenting Business and others 14,315 69,687(Tax deducted at source Rs. 269 — Previous Year Rs. 56)

Manufacturing Services rendered 71,500 72,354(Tax deducted at source Rs. 1,581 — Previous Year Rs. 2,735)

Export Incentives 17,456 8,256

103,271 150,297

SCHEDULE 15

OTHER INCOME

Interest Received (Tax deducted at source Rs. 63 — Previous Year Rs. 532) 1,978 1,620

Dividend Income

Long-term 2,299 2,155

Current 3,907 2,756

6,206 4,911

Profit on Assets sold/ discarded (Net) — 58,399

Profit on sale of Investments 251 2,452

Rent Income (Tax deducted at source Rs. 1,784 — Previous Year Rs. 1,632) 8,088 8,088

Insurance Claims 2,759 563

Bad Debts recovered 1,010 2,185

Foreign Exchange Fluctuations (Net) — 3,285

Provisions no Longer Required written back 197,975 136,301

Common Facility Charges 127,649 —(Tax deducted at source Rs. 3,507 — Previous Year Rs. Nil)

Scrap Sales — 343

Miscellaneous (Tax deducted at source Rs. 3,946 — Previous Year Rs. 1,181) 47,947 45,367

393,863 263,514

SCHEDULE 16

MATERIALS CONSUMED*

Raw Materials:


Add: Purchases 3,123,154 3,153,531

3,325,487 3,416,576

Less: Adjustment on account of transfer of business to Bayer RubberChemicals Private Limited (Now Lanxess India Private Limited)(Stock as on June 30, 2004) — 46,621


2,906,164 3,167,622


3,229,860 3,478,703

* Includes Rs. 21,914 (Previous Year Rs. 14,965) on account of Write off/write downs in carrying values of Raw Materials and Packing Materials.

94



SCHEDULE 17

COST OF TRADED GOODS SOLD*Opening Stock 68,380 137,857Add: Purchases 720,691 838,468

789,071 976,325Less: Adjustment on account of transfer of business to Bayer RubberChemicals Private Limited (Now Lanxess India Private Limited) — 24,861(Stock as on June 30, 2004)Less: Adjustment on account of transfer of business to Bayer MaterialScience Private Limited (Formerly Bayer Industries Private Limited)(Stock as on October 1, 2004) — 7,535Less: Closing Stock 275,613 68,380

513,458 875,549

* Includes Rs. 1,891 (Previous Year Rs. 54,447) on account of Write Off/write downs in carrying values of Traded Goods.

SCHEDULE 18

EMPLOYEE COSTPayments to and Provisions for:

Salaries, Wages, Bonus and Allowances 489,962 572,918Contribution to Provident, Gratuity, Superannuation and Other Funds 66,455 116,641Staff Welfare Expenses 33,274 35,661

589,691 725,220

SCHEDULE 19

OTHER EXPENSESStores and Spares consumed 28,882 32,581Power, Fuel and Water charges 173,330 175,769Cost Sharing Expenses 1,424 11,506Freight and Clearing charges 249,039 207,005Rent 71,265 77,707Rates and Taxes 30,201 18,496Job work charges 99,658 92,109Insurance 17,349 24,236Excise Duty 2,370 62,881Loss on Asset held for sale — 48,549Repairs and Maintenance:

Plant and Machinery 18,427 27,092Buildings 34,441 8,913Others 29,563 111,044

82,431 147,049Travelling and Conveyance 146,030 136,742Communication 81,502 72,675Printing and Stationery 11,025 12,864Directors’ Sitting Fees 610 640Auditors’ Remuneration (Refer Note 6 of Schedule 23) 4,567 4,013Advertisement and Publicity 322,648 232,667Legal and Professional Fees 118,212 139,234Discounts 175,397 219,662Commission: Others 40,578 47,360Donations 243 11,037Bad Debts/ Advances Written Off 116,199 16,018Less: Withdrawn from Provision for Doubtful debts 115,389 9,306

810 6,712Compensation Expenses 29,600 —Provision for Doubtful Debts/ Advances 51,231 193,533Loss on assets sold/ discarded 514 —Foreign Exchange Fluctuations (Net) 500 —Miscellaneous 143,326 155,198

1,882,742 2,130,225

95




SCHEDULE 20

FINANCE CHARGES

Interest on

Debentures — 1,644

Loan from Banks 40,726 56,211

Others 17,974 29,775

Bank Charges 17,228 26,436

75,928 114,066

SCHEDULE 21

DECREASE/ (INCREASE) IN STOCKS*

Opening Stock

– Semi-Finished 107,503 93,547

– Finished 836,415 776,984

943,918 870,531

Less: Adjustment on account of transfer of business to Bayer RubberChemicals Private Limited (Now Lanxess India Private Limited)(Stock as on June 30, 2004)

– Semi-Finished — 9,308

– Finished — 91,345

943,918 769,878

Closing Stock

– Semi-Finished 197,251 107,503

– Finished 685,680 836,415

882,931 943,918

60,987 (174,040)

* Includes Rs. 25,584 (Previous Year Rs. 123,623) on account of Write off/ writedowns in carrying values of Finished Goods.

SCHEDULE 22

EXCEPTIONAL/ EXTRAORDINARY ITEMS

Profit on sale of business — (30,808)

Voluntary Retirement Schemes 69,128 7,979

69,128 (22,829)

96

Schedules Annexed to the Consolidated Balance Sheet as at December 31, 2005 and Consolidated Profit and LossAccount for the year ended on that date.

SCHEDULE 23 — NOTES TO ACCOUNTS


(a) Basis of AccountingThese financial statements have been prepared under historical cost convention from the books of account maintained on anaccrual basis in conformity with accounting principles generally accepted in India and comply with the Accounting Standardsissued by The Institute of Chartered Accountants of India and referred to in Section 211(3C) of the Companies Act, 1956, ofIndia (the Act).

(b) Basis of Consolidation:(i) The Consolidated Financial Statements include Financial Statements of Bayer CropScience Limited [formerly Bayer

(India) Limited] ('the Company') for the year ended December 31, 2005 and the Financial Statements of Bayer Polychem(India) Limited for the year ended December 31, 2005. The Consolidated Financial Statements have been prepared onthe following basis:The Financial Statements of the Company and its Subsidiary Company have been combined on a line-by-line basisby adding together the book values of the like items of assets, liabilities, income and expenses, after fully eliminatingintra-group balances and the intra-group transactions resulting in unrealised profits or losses.The Consolidated Financial Statements have been prepared using uniform accounting policies for like transactions andother events in similar circumstances and are presented to the extent possible, in the same manner as the Company'sseparate Financial Statements.

(ii) Subsidiary Company considered in the Consolidated Financial Statements is:

Name of the Company Country of % voting % votingIncorporation power held as power held

at 31st Dec, 2005 as at 31st Dec, 2004

Bayer Polychem (India) Limited India 100% 100%

(c) Other significant Accounting Policies:These are set out in the Notes to Accounts under 'Significant Accounting Policies' of the respective Financial Statements of theCompany and the Subsidiary Company.

2. Estimated amount of contracts net of advances remaining to be executed on capital account and not provided for Rs. 10,560 ('000)[Previous Year Rs. 60,952 ('000)].

3. Contingent Liabilities not provided for:Rupees in '000s

Particulars As at As at RemarkDecember 31, December 31,

2005 2004(a) In respect of Bank Guarantees 20,407 49,496 Pertains to guarantees issued in favour

of various statutory bodies and customauthorities. The Company does notforesee any outflow in this regard.

(b) Counter Guarantee by the Company 2,967 2,967 Pertains to guarantees issued in favourof Gujarat Industrial DevelopmentCorporation. The Company does notforesee any outflow in this regard.

(c) Claims against the Company not 7,832 11,168 Pertains to litigation/ claims against theacknowledged as debts Company by customers/ vendors/ labour.(to the extent ascertainable) The Company has strong grounds of

appeal and does not foresee anyoutflow in this regard.

(d) In respect of non fulfillment of 63,995 — Represents export obligation againstExport obligation advance licenses acquired by the

Company and the Company does notforesee any outflow in this regard.

(e) In respect of Excise and Custom matters 43,998 299,714 Pertains to litigations/ disputes with(f) In respect of Sales tax matters 100,838 17,352 various tax/ custom and excise

(g) In respect of Income-tax matters* 110,951 161,289authorities. The Company has filedappeal against the demand. TheCompany does not expect anyoutflow in this regard.

(h) Demand raised by Ministry of Chemicals 27,581 27,581 Demand dated October 25, 1990, forand Fertilisers, Department of Chemicals payment to the credit of the Drug Pricesand Petro-Chemicals. The Company has Equalisation Account, being thefiled a writ petition in the Hon’able High difference between the pooled priceCourt of Mumbai, challenging this and the retention price on thedemand. production of Chloroquine Phosphate

from 1979-1980 upto December 14,1988. The Company does notforesee any outflow in this regard.

*As at December 31, 2005, Advance Income Tax of Rs. 83,523 ('000), attributed towards this is included under the head ‘Advancepayment of Income Tax’ in Schedule 11 ‘Loans & Advances.’

97



SCHEDULE 23 — NOTES TO ACCOUNTS (Contd.)

4. Having regard to the requirement of uniform accounting year end for taxation purposes, the ultimate taxation liability, if any, of theCompany can be determined only on the basis of the taxable income for the year ending on March 31, 2006.

5. Deferred Tax

During the year, the Company has accounted for Deferred Tax in accordance with the Accounting Standard 22 – "Accounting forTaxes on Income" issued by the Council of The Institute of Chartered Accountants of India.

The Deferred tax balances are set out below:Rupees in '000s

Particulars As at As atDecember 31, December 31,

2005 2004Deferred Tax Assets

Provision for Doubtful Debts/ Advances/ Deposits 101,123 129,015VRS Expenses 83,336 96,794Disallowances u/s 43B 35,366 49,166Others 4,764 40,891

224,589 315,866

Deferred Tax Liability


Others 2,619 55

217,556 258,271

Net Deferred Tax Assets 7,033 57,595

6. Auditors' Remuneration:

Rupees in '000s

For the For theParticulars year ended year ended


(a) Audit Fees

– for statutory audit 1,600 1,600

– for limited review 600 400(b) Tax Accounts and Tax Audit 1,250 938(c) Other Services 900 1,075(d) Reimbursement of out-of-pocket expenses 217 —

Total 4,567 4,013

7. Research and Development Expense

Research and Development Revenue Expenses 56,913 38,963

8. Managerial Remuneration:

Particulars

(a) Directors' Sitting Fees 610 640(b) Salaries and Allowances 28,449 28,284

Total 29,059 28,924

Note:The Computation of profits under Section 309(5) of the Companies Act, 1956 is not required to be given, as no commission ispayable to the Directors.

9. Non-Convertible Debentures issued and redeemed during the year Rs. Nil [Previous Year Rs. 650,000 ('000)].

98

10. Finance Lease

The Company has acquired Computers under finance lease. Minimum Lease payment outstanding as at December 31, 2005 inrespect of these assets are as under:

Rupees in '000s

Minimum Future Lease Rentals

Particulars Less than Between More than Total1 Year 1 to 5 Years 5 Years

Total Minimum lease payments outstanding as atDecember 31, 2005 823 — — 823

Interest not due 25 — — 25

Present Value of Minimum Lease Payments * 798 — — 798

* Included under Schedule 3 – Secured Loans.

11. Segment ReportingRupees in '000s

Primary Segmental Reporting

Particulars December 31, December 31,2005 2004

1. Segment Revenue(a) Segment – Pesticides 7,664,604 7,500,389(b) Segment – Rubber — 542,353(c) Segment – Healthcare 86,321 57,392(d) Others — 330,709

Total 7,750,925 8,430,843Less: Inter segment revenue — —

Sales and other Operating Income 7,750,925 8,430,843

2. Segment Results(a) Segment – Pesticides 879,535 557,664(b) Segment – Rubber — 92,887(c) Segment – Healthcare 15,055 7,891(d) Others — 19,127

Operating Profit 894,590 677,569Add/ (Less):I. Interest (Net) (58,589) (86,010)II. Other Un-allocable Expense (Net) — (26,363)

Total Profit Before Prior Period and Exceptional/ Extraordinary Items 836,001 565,196Prior Period Income — 18,748Extraordinary Income/ (Expense) (69,128) 22,829

Profit for the Year before Taxation 766,873 606,773

3. Segment Assets(excludes Deferred Tax Asset)(a) Segment – Pesticides 6,077,792 5,521,888(b) Segment – Rubber — —(c) Segment – Healthcare 107,872 107,717(d) Others — —(e) Unallocated Corporate — —

Total Assets 6,185,664 5,629,605

4. Segment Liabilities(a) Segment – Pesticides 3,225,811 2,966,910(b) Segment – Rubber — —(c) Segment – Healthcare 72,206 109,998(d) Others — —(e) Unallocated Corporate — —

Total Liabilities 3,298,017 3,076,908



99




Rupees in '000s


5. Capital Expenditure during the year(a) Segment – Pesticides 468,729 269,576

(b) Segment – Rubber — 3,230

(c) Segment – Healthcare 2,894 255

(d) Others — 2,769

Total 471,623 275,830

6. Depreciation and Amortisation(a) Segment – Pesticides 225,743 260,181

(b) Segment – Rubber — 16,227

(c) Segment – Healthcare 7,296 6,744

(d) Others — 814

Total 233,039 283,966

Secondary Segmental Reporting

Secondary segment is reported based on geographical locations viz. Local and Exports

Rupees in '000s


1. Segmental Revenue

(a) Segment – Local 6,809,312 7,457,732


Total 7,750,925 8,430,843

2. Segmental Assets

(a) Segment – Local 5,985,550 5,386,963


Total 6,185,664 5,629,605

12. Related Party Transaction

(i) Ultimate Holding Company Bayer AG, Germany

(ii) Parties under common control:

Bayer (China) Limited, Beijing

Bayer (Malaysia) Sdn. Bhd., Shah Alam

Bayer (Proprietary) Limited, Isando

Lanxess ABS Limited (formerly Bayer ABS Limited) (upto January 31, 2005)

Bayer CropScience AG

Bayer CropScience GmbH

Bayer CropScience K.K., Tokyo

Bayer CropScience LP, Triangle Park

Bayer CropScience Pty Limited, Australia

Bayer CropScience SA, France

Bayer CropScience Limited, Bangladesh

Bayer CropScience Limited, Seoul

Bayer Diagnostics India Limited, Baroda

100



Lanxess Distribution Service GmbH, Leverkusen (formerly Bayer Distribution Service GmbH)(upto January 31, 2005)

Bayer East Africa Limited, Nairobi

Bayer Environment Science SA, France

Bayer Business Services GmbH

Bayer MaterialScience Private Limited, Mumbai

Bayer Health Care Company Limited

Bayer MaterialScience AG

Bayer Pakistan (Private) Limited, Karachi

Bayer Pharmaceuticals Private Limited, Mumbai

Bayer South East Asia Pte Limited, Singapore

Bayer Thai Company Limited, Bangkok

Bayer Türk Kimya Sanayi Limited Sti., Istanbul

Bayer Vietnam Limited

Bilag Industries Private Limited, Gujarat

Hybrid Rice International Private Limited, Hyderabad

Nunhems Proagro Seeds Private Limited, Gurgaon

Proagro Seed Company Private Limited, Hyderabad

PT Bayer Urethanes Indonesia, Jakarta

Lanxess India Private Limited (upto January 31, 2005)

Bayer (Pty) Limited, South Africa

Bayer Antwerpen N.V., Belgium

Bayer Limited, Japan

Bayer MaterialScience LLC, U.S.A.

Bayer Philippines, Inc., Philippines

Bayer Chemicals AG, Germany

Bayer Chemicals Corporation, U.S.A.

Bayer Faser GmbH, Germany

Bayer Healthcare AG, Germany

Bayer Iranchemie AG, Iran

Bayer International SA, Schweiz

Bayer SA, Brazil

Bayer Shanghai Pigment Company Limited, Shanghai

Bayer Taiwan Company Limited, Taiwan

Bayer MaterialScience Limited, Hongkong

Lanxess International Trading Shanghai Company Limited, China (upto January 31, 2005)

Borchers GmbH, Germany

H.C. Sttarck GmbH, Germany

Hennecke, Sankt Augustin, Germany

Pt. Bayer Kimia Farmasindo, Indonesia

Rhein Chemie Rheinau GmbH, Germany

Sumika Bayer Urethane Company Limited, Japan

Wolff Cellulosics, Germany

(iii) Key Management Personnel

Mr. S. Gerlich (From September 14, 2004) Managing Director

Mr. P. G. L. Dupont (upto September 13, 2004) Managing Director

Mr. J. Frick (upto October 13, 2005) Whole Time Director

(ii) Parties under common control: (Contd.)

101




Purchase of Goods

Bayer HealthCare AG — — 18,100 14,377 18,100 14,377

Bayer Taiwan Company Limited — — 1,920 8,313 1,920 8,313

Bayer Antwerpen N.V. — — — 21,596 — 21,596

Bayer CropScience AG — — 1,072,047 522,588 1,072,047 522,588

Bayer MaterialScience AG — — — 91,547 — 91,547

Bayer CropScience SA — — 44,534 414,268 44,534 414,268

Bilag Industries Private Limited — — 618,611 350,628 618,611 350,628

Others — — 70,550 154,467 70,550 154,467

Total — — 1,825,762 1,577,784 1,825,762 1,577,784

Sale of Goods

Bayer Antwerpen N.V. — — — 17,141 — 17,141

Bayer CropScience AG — — 659,664 29,705 659,664 29,705

Bayer MaterialScience AG — — — 86,998 — 86,998


Lanxess Distribution Services GmbH — — — 153,046 — 153,046

Others — — 109,992 94,204 109,992 94,204

Total — — 818,957 624,585 818,957 624,585

Sale of Services

Bayer Pharmaceuticals Private Limited — — 71,500 70,040 71,500 70,040

Others — — — 1,749 — 1,749

Total — — 71,500 71,789 71,500 71,789

Dividend Received

Bayer Diagnostics India Limited — — 2,299 2,155 2,299 2,155

Total — — 2,299 2,155 2,299 2,155

Dividend Paid

Bayer AG 18,200 18,200 — — 18,200 18,200



Bayer CropScience GmbH — — 16,923 16,923 16,923 16,923

Bayer MaterialScience Private Limited — — 1,441 1,441 1,441 1,441

Total 18,200 18,200 43,592 43,592 61,792 61,792

Interest Income

Proagro Seed Company Private Limited — — — 92 — 92

Bayer Pharmaceuticals Private Limited — — — 93 — 93

Total — — — 185 — 185

Other Income

Bayer MaterialScience Private Limited — — — 128 — 128

Total — — — 128 — 128

(iv) The transactions with and outstanding balances of related parties are furnished belowRupees in ’000s

Nature of Transaction Parties referred to in Parties referred to inTotal(i) above (ii) above

2005 2004 2005 2004 2005 2004

102



(iv) The transactions with and outstanding balances of related parties are furnished below (Contd.)Rupees in ’000s


2005 2004 2005 2004 2005 2004

Interest Expense

Lanxess ABS Limited — — — 2,476 — 2,476


Hybrid Rice International Private Limited — — 1,854 3,737 1,854 3,737

Bayer MaterialScience AG — — — 143 — 143

Bayer MaterialScience Private Limited — — 646 ————— 646 —————

Proagro Seed Company Private Limited — — — 27 — 27

Others — — 8 290 8 290

Total — — 4,579 14,629 4,5794,5794,5794,5794,579 14,629

Commission Expense

Bayer (Malaysia) Sdn. Bhd. — — — 364 — 364

Bayer SA — — — 1,340 — 1,340

Bayer Thai Company Limited — — — 257 — 257

Bayer (China) Limited — — — 303 — 303

Bayer CropScience AG — — 3,884 — 3,884 —

Others — — — 212 — 212

Total — — 3,884 2,476 3,884 2,476

Commission Income

Bayer CropScience AG — — 4,367 — 4,367 —————

Bayer AG — 18,294 — — — 18,294

Lanxess Distribution GmbH — — — 21,953 — 21,953

Bayer International S.A. — — — 9,776 — 9,776

Others — — — 12,820 — 12,820

Total — 18,294 4,3674,3674,3674,3674,367 44,549 4,367 62,843

Cost Sharing Recoveries/ ExpensesReimbursement by other Companies

Bayer AG — 2,226 — — — 2,226

Bayer Healthcare AG — — 2,382 736 2,382 736

Lanxess ABS Limited — — 1,625 2,354 1,625 2,354


Lanxess India Private Limited — — 8,752 62,890 8,752 62,890

Proagro Seeds Company Private Limited — — 35,333 34,334 35,333 34,334

Bayer Pharamaceuticals Private Limited — — 37,413 12,740 37,413 12,740

Others — — 54,172 30,510 54,172 30,510

Total — 2,226 174,973 225,306 174,973 227,532

Cost Sharing Payments/ ExpensesReimbursement to other Companies


Bayer AG 6,131 2,479 — — 6,131 2,479

Bayer Business Services GmbH — — 12,068 19,251 12,068 19,251

Bayer CropScience Pty Limited — — 40,286 51,025 40,286 51,025

Bayer MaterialScience Private Limited — — 438 43,298 438 43,298

Bayer South East Asia Pte Limited — — 38,468 41,712 38,468 41,712

Others — — 6,337 27,033 6,337 27,033

Total 6,131 2,479 99,826 183,631 105,957 186,110

103




Outstanding Receivables netof Payables


Lanxess India Private Limited — — — 102,153 — 102,153



Bayer Diagnostics India Limited — — 1,016 149 1,016 149

Bayer MaterialScience Private Limited — — 8,624 — 8,624 —

Proagro Seed Company Private Limited — — 3,029 8,358 3,029 8,358

Others — — 7,581 13,028 7,581 13,028

Total — — 42,565 165,363 42,565 165,363

Outstanding Payables netof Receivables

Bayer Healthcare AG — — 3,079 4,584 3,079 4,584

Bayer MaterialScience Private Limited — — — 5,204 — 5,204

Lanxess India Private Limited — — — — — —————


Bayer South East Asia Pte Limited — — 68,841 39,471 68,841 39,471

Bilag Industries Private Limited — — 48,597 54,553 48,597 54,553

Others — — 53,010 114,419 53,010 114,419

Total — — 274,541 398,717 274,541 398,717

Sale of Fixed Assets

Lanxess India Private Limited — — — 31,547 — 31,547

PT Bayer Urethanes Indonesia — — — 9,544 — 9,544

Bayer CropScience Limited, Seoul — — 4,913 — 4,913 —————

Bayer Turk Kimya Sanayi Limited — — 4,074 — 4,074 —————

Total — — 8,987 41,091 8,987 41,091

Inter Company Deposit Given

Proagro Seed Company Private Limited — — — 82,000 — 82,000


Total — — — 162,000 — 162,000

Inter Company Deposit Taken

Lanxess ABS Limited — — — 1,293,000 — 1,293,000


Hybrid Rice International Private Limited — — 285,000 — 285,000 —————

Proagro Seed Company Private Limited — — — 8,000 — 8,000


Total — — 625,000 1,431,000 625,000 1,431,000

Inter Company Payable Balances

Hybrid Rice International Private Limited — — 44,000 50,500 44,000 50,500

Bayer Diagnostics India Limited — — — 140,000 — 140,000

Bayer MaterialScience Private Limited — — 170,000 — 170,000 —

Total — — 214,000 190,500 214,000 190,500

Sale of Business

Lanxess India Private Limited — ————— — 665,000 — 665,000

Bayer MaterialScience Private Limited — ————— — 48,858 — 48,858

Total — ————— — 713,858 — 713,858

(iv) The transactions with and outstanding balances of related parties are furnished below (Contd.)Rupees in ’000s


2005 2004 2005 2004 2005 2004

104

(v) Provisions/ Payment made to DirectorsRupees in ’000s

Related Party Designation Nature of Transaction 2005 2004

Mr. S. Gerlich (from September 14, 2004) Managing Director Remuneration 16,994 4,272

Mr. P. G. L. Dupont (upto September 13, 2004) Managing Director Remuneration — 7,999

Mr. J. Frick (upto October 13, 2005) Whole Time Director Remuneration 11,455 16,013

Total 28,449 28,284

13. Current Investments bought and sold during the year

Particulars No. of Units

ABN Amro Mutual Fund 4,506,773

Alliance Capital Mutual Fund 43,553,257

Birla Mutual Fund 16,451,716

Deutsche Mutual Fund 31,807,165

DSP Merill Lynch Mutual Fund 3,048,915

Grindlays Mutual Fund 5,678,935

HSBC Mutual Fund 1,034,980

J.M. Mutual Fund 2,500,126

Kotak Mahindra Mutual Fund 3,278,678

LIC Mutual Fund 17,018,681

Prudential ICICI Mutual Fund 12,247,371

Reliance Mutual Fund 26,305,658

Tata Mutual Fund 2,758,534

UTI Mutual Fund 340,696

ING Vysya Mutual Fund 928,237

14. With effect from April 5, 2004, the name of the Company has been changed from Bayer (India) Limited to Bayer CropScience Limited.

15. Disclosure of ProvisionsRupees in ’000s

S. No. Particulars Income Tax Indirect Tax Commercial &(net of advance tax) Other Matters

1 Balance as on January 1, 2005 107,371 50,166 6,871

2 Additional provision during 2005 — — —

3 Advance payment of tax 58,813 — —

4 Provision used during 2005 — 4,988 —

5 Provision reversed during 2005 — 19,478 —

6 Balance as on December 31, 2005 48,558 25,700 6,871

Direct and Indirect tax

Provisions in this category represents estimates made for probable liabilities arising out of pending disputes/ litigations with various taxauthorities. The outflow with regard to the said matter depends on the exhaustion of remedies available to the Company under the law andhence the Company is not able to reasonably ascertain the timing of the outflow.

Commercial and other matters

Provisions in this category represent estimates made for probable liabilities/ claims arising out of commercial transaction with vendors.The outflow with regard to the said matter depends on the exhaustion of remedies available to the Company under the law and hence theCompany is not able to reasonably ascertain the timing of the outflow.



105


16. Earnings Per ShareRupees in ’000s



Profit before Prior Period and Extraordinary/ Exceptional Item and after Taxation 429,333 302,615

Profit after Prior Period and Extraordinary/ Exceptional Item and after Taxation 383,473 314,532

Weighted average number of equity shares outstanding at year end 39,498,747 39,498,747

Nominal value Per Equity Share (in Rupees) 10 10

Earnings Per Share before Prior Period and Extraordinary Item 10.87 7.66and after Taxation [Basic and Diluted] (in Rupees)

Earnings Per Share after Prior Period and Extraordinary Item 9.71 7.96and after Taxation [Basic and Diluted] (in Rupees)

17. The figures of the current year are not comparable with that of the previous year in view of sale of Material Science business and Polymerbusiness (comprising of Rubber Chemicals, Fibres & Chemicals) by the Subsidiary Company in the previous year.

18. Previous Year's figures have been regrouped wherever necessary.



Signatures to the Schedules forming part of the Balance Sheet and Profit and Loss Account and to the above Notes







Raj Kaul

A. K. R. Nedungadi



106

Cash Flow Statement For The Year Ended December 31, 2005 — Consolidated

Rupees ‘000s


A. Cash flow from Operating activities :

Net Profit before Prior Period, Exceptional Itemsand Taxation 836,001 565,196

Adjustments for :


Interest Expense 58,700 87,630

Interest Income (1,978) (1,620)

Dividend Income (6,206) (4,911)

Loss/ (Profit) on Fixed Assets sold 514 (58,399)

Loss on Assets held for sale — 48,549

Profit on sale of Investments (Net) (251) (2,452)

Debts/ Advances Written off (Net of recovery) 115,189 8,241

Provision for Bad & Doubtful Debts/ Advances (64,158) 189,820

Liability no longer required written back (197,975) (136,301)

Provision for Gratuity, Leave Encashment & Pension (24,348) (420)

Inventories written off/ written back 49,389 193,035

Unrealised foreign exchange gain (30) (4,305)

161,885 602,833

Operating profit before Working Capital changes 997,886 1,168,029

Adjustments for changes in Working Capital:

(Increase)/ Decrease in Sundry Debtors (232,558) 703,368

(Increase)/ Decrease in Other Receivables (59,223) 775,311

(Increase)/ Decrease in Inventories (470,500) (135,195)

Increase/ (Decrease) in Trade and Other Payables/ Provisions 84,175 (869,423)

(678,106) 474,061

Cash generated from Operations 319,780 1,642,090

Taxes Paid (364,275) (304,689)

Payment under Voluntary Retirement Scheme (72,595) (4,512)

Profit on Sale of Business — 30,808

(436,870) (278,393)

Net cash from/ (used in) Operating activities (117,090) 1,363,697

B. Cash flow from Investing activities :

Purchase of Fixed Assets (461,879) (249,098)

Proceeds from Sale of Fixed Assets 19,381 299,576

Proceeds from Sale of Investments 2,310,751 4,472,453

Purchase of Investments (2,222,912) (4,557,500)

Interest Received 5,116 1,346

Dividend Received 6,206 4,632

Net cash used in Investing activities (343,337) (28,591)

C. Cash flow from Financing activities :

Proceeds from/ (Repayment) of short term borrowings 406,019 (1,465,280)

Interest Paid (57,332) (85,656)

Dividend Paid (86,842) (86,971)

Dividend Tax Paid (12,188) (11,134)

Net cash from/ (used in) Financing activities 249,657 (1,649,041)

107


Cash Flow Statement For The Year Ended December 31, 2005 — Consolidated (Contd.)

Rupees ‘000s


Net Decrease in Cash and Cash Equivalents (210,770) (313,935)

Cash and Cash Equivalents at the beginningof the year 525,949 839,884

Cash and Cash Equivalents at the end of the year 315,179 525,949

Cash and Cash Equivalents comprise

Cash on hand 558 974

Balance with Scheduled Banks – in other accounts 312,058 522,468

Balance with Banks – Unclaimed dividend account 2,563 2,507

315,179 525,949

Notes:

1. The above Cash flow statement has been prepared under the “Indirect Method” set out in Accounting Standard – 3 on Cash FlowStatements issued by The Institute of Chartered Accountants of India.

2. Figures in brackets indicate cash outgo.

3. Previous Year’s figures have been reclassified to conform to the current years presentation.

4. Taxes paid includes TDS deducted by third parties aggregating to Rs. 11,087 (Previous Year Rs. 5,604).

This is the Cash Flow Statement referred to in our report of even date.








Raj Kaul

A. K. R. Nedungadi


108

Million RupeesMillion RupeesMillion RupeesMillion RupeesMillion Rupees 1996 1997 1998 1999 2000 2001 2002 2003+ 2004@ 2005

Sales & OtherOperating Income * 4,169.73 4,434.97 4,810.63 5,486.81 5,602.93 6,496.39 5,803.49 8,722.96 7,377.01 7,534.00

Exports (404.31) (512.82) (550.68) (513.83) (506.83) (458.42) (545.87) (845.46) (688.17) (921.38)

Pre-tax Profit 147.65 152.38 161.50 85.44 95.54 162.33 277.75 472.04 524.04 746.84

Dividend 40.55 40.55 40.55 40.55 32.44 32.44 35.68 86.90 86.90 86.90(%) (25.00) (25.00) (25.00) (25.00) (20.00) (20.00) (22.00) (22.00) (22.00) (22.00)

Share Capital 162.20 162.20 162.20 162.20 162.20 162.20 162.20 394.99 394.99 394.99

Reserves and Surplus 529.79 583.56 638.85 653.63 690.54 604.34 718.84 2,024.75 2189.27 2,461.65

Borrowings 1,512.00 1,455.71 1,788.66 1,895.04 2,113.65 1,566.53 1,475.72 2,263.82 776.09 1,160.56

Gross Block 1,676.72 1,800.87 1,894.12 2,056.74 2,245.29 2,443.02 2,562.62 2,972.27 2981.71 3,345.48

Net Block 1,018.87 1,037.36 1,030.19 1,140.17 1,236.88 1,342.91 1,379.54 1,585.02 1438.08 1,633.25

Net Current Assets 1,147.41 1,126.41 1,521.29 1,501.46 1,670.99 1,075.75 1,051.24 2,963.97 1736.86 2,328.86

Expenditure onEmployees 352.59 371.55 428.10 496.21 570.38 579.98 591.17 653.24 658.08 572.11

Number of Employees 1,742 1,789 1,831 1,816 1,513 1,441 1,316 1,059 1,024 984

Rupees

Earnings Per Share 66.83 # 60.65 # 61.83 # 39.27 # 21.96 # 75.28 # 132.00 18.17 6.48 10.57[on the basis of profitsexcluding extra-ordinaryitems (net of tax)]

Book Value per Share 426.63 459.78 494.11 502.97 525.74 472.59 543.18 61.26 65.43 72.32

Share Price at StockExchange — High 2,350.00 2,495.00 2,061.25 2,916.00 1,594.95 1,160.00 1,998.00 2,200.00 317.00 323.65

— Low 1,320.00 1,300.00 1,121.00 1,450.00 425.10 341.35 880.10 2198.30 $ 135.35 160.00

Number ofShareholders 11,555 11,232 11,539 13,390 12,541 11,494 10,502 20,972 20,552 20,539

* Sales for the Years 2004 and 2005 are gross of discount.

# Revised based on profits excluding extraordinary items (net of tax).

+ Includes the figures of erstwhile Bayer CropScience India Limited on account of amalgamation, with effect from April 01, 2003 and excludesthe transfer of non-cropscience business to wholly owned subsidiary Bayer Polychem (India) Limited with effect from November 01, 2003 andthe sale of consumer care division to S.C. Johnson Private Limited with effect from June 01, 2003.

$ The shares of the Company were sub-divided from a face value of Rs. 100/- per share to Rs. 10/- per share, pursuant to the Scheme ofAmalgamation between the Company and erstwhile Bayer CropScience India Limited.

@ Figures have been regrouped wherever necessary.

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