GODREJ INDUSTRIES LIMITED · Godrej Industries Limited 4 NOTICE TO SHAREHOLDERS NOTICE is hereby...

Annual Report 2005 -2006

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GODREJ INDUSTRIES LIMITED

DIRECTORS

A.B. Godrej Chairman

J.N. Godrej

N.B. Godrej Managing Director

S.A. Ahmadullah

V.M. Crishna

K.K. Dastur

V.N. Gogate

K.N. Petigara

F.P. Sarkari

V.F. Banaji Executive Director & President (Group Corporate Affairs)

T.A. Dubash Executive Director & President (Marketing)

M. Eipe Executive Director & President (Chemicals)

M.P. Pusalkar Executive Director & President (Corporate Projects)

COMPANY SECRETARY

S.K. Bhatt

AUDITORS

Kalyaniwalla & Mistry, Chartered Accountants

Godrej Industries Limited

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REGISTERED OFFICE : Pirojshanagar,Eastern Express Highway,Vikhroli (East), Mumbai 400 079.Phone : 022-2518 8010, 2518 8020, 2518 8030Fax : 022-2518 8074, 2518 8066website : http:www.godrejinds.com

FACTORIES : Vikhroli Pirojshanagar, Eastern Express Highway,Vikhroli, Mumbai 400 079.Phone : 022 - 2518 8010, 2518 8020, 2518 8030Fax : 022 - 2518 8068/2518 8074

Valia Burjorjinagar,Plot No. 3, Village Kanerao,Taluka - Valia, District Bharuch,Gujarat 393 135.Phone : 02643 - 270756 to 270760Fax : 02643 - 270018

Wadala L.M. Nadkarni MargNear M.P. T. HospitalWadala (East), Mumbai 400 037.Phone : 022 - 2412 6320/23, 2414 6296Fax : 022 - 2412 6204/2416 4599

Mandideep Plot No. 5, New Industrial Area No. 1Mandideep, District Raisen,Bhopal - 462 046, MPPhone : 07480 - 233405-6Fax : 07480 - 233409

BRANCHES : Delhi 4th Floor, Delite Theatre Building,4/1, Asaf Ali Road, New Delhi 110 002Phone : 011 - 2326 1069/76Fax : 011 - 2326 1088

Kolkata Block GN, Sector-V,Salt Lake City, Kolkata 700 091.Phone : 033 - 2357 3556, 2357 3555Fax : 033 - 2357 3945

Chennai New No. 102, (Old No. 81),Chamiers Road,Chennai 600 028.Phone : 044 - 2431 5721/2431 5722Fax : 044 - 2431 5723

London 284A, Chase Road, Southgate,London N14 - 6HF., UKPhone : (004420) - 88860145Fax : (004420) - 88869424

BANKERS : Central Bank of IndiaState Bank of IndiaBank of IndiaHDFC Bank Ltd.Citibank N.A.

REGISTRARS : Computech Sharecap Ltd.147, Mahatma Gandhi Road,Opp. Jehangir Art Gallery, Fort,Mumbai 400 023.Phone : 022 - 2267 1824-26Fax : 022 - 2267 0380E-Mail : [email protected]

CONTENTS Page Nos.

Financial Highlights ............................................... 03

Notice ..................................................................... 04

Directors’ Report along with ManagementDiscussion and Analysis Report ............................ 11

Report on Corporate Governance ........................ 21

Shareholders' Information ...................................... 25

Auditors’ Report ...................................................... 27

Accounts ................................................................. 30

Consolidated Accounts ........................................... 53

Statement Pursuant to Section 212 ....................... 68

SUBSIDIARIES

Godrej Agrovet Limited ......................................... 69

Goldmohur Foods & Feeds Limited ...................... 79

Golden Feed Products Limited ............................. 85

Krithika Agro Farm Chemicals and EngineeringIndustries Private Limited ...................................... 90

Godrej Beverages & Foods Limited ..................... 93

Godrej Properties Limited ..................................... 100

Girikandra Holiday Homes & Resorts Limited .... 107

Godrej Realty Private Limited .............................. 110

Godrej Waterside Properties Private Limited ...... 113

Godrej Hicare Limited. ......................................... 115

Ensemble Holdings & Finance Limited ................ 121

Godrej International Limited ................................. 126

Godrej Global Mid East FZE ................................ 128

Godrej Global Solutions Limited .......................... 132

Godrej Global Solutions (Cyprus) Limited ............ 137

Godrej Global Solutions, Inc ................................ 141

Annual Report 2005 -2006

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Break-up of Total IncomeRs. Lac

Break-up of Total ExpenditureRs. Lac

Total Expenditure 2005-2006Total Income 2005-2006

GODREJ INDUSTRIES LIMITED – FINANCIAL HIGHLIGHTS(Rs. Lac)

2005-06 2004-05 2003-04 2002-03 2001-02

BALANCE SHEET

SOURCES OF FUNDS :

Shareholders’ FundsShare Capital 2919 2919 2919 2919 3699Reserves & Surplus 34216 30618 26197 21511 21030

Loan FundsSecured Loans 24911 22075 16814 14815 15051Unsecured Loans 7803 3557 4235 7432 13456Deferred Tax Liability 3818 2502 2972 3466 1347

73667 61671 53137 50143 54583

APPLICATION OF FUNDS :

Fixed Assets 28594 25100 25656 28130 29099Investments 37135 33577 26533 18646 14619Net Working Capital 5719 2868 739 2944 9987Miscellaneous Expenditure 2219 126 209 423 878

73667 61671 53137 50143 54583

INCOME AND PROFIT

Total Income 80270 82353 73355 67780 53465Expenditure other than Interest and Depreciation 69660 70117 64243 57737 43408

Profit before Interest, Depreciation and Tax 10610 12236 9112 10043 10057Interest (net) 2837 2582 580 2024 3218

Profit before Depreciation and Tax 7773 9654 8532 8019 6839Depreciation 2260 2148 2150 2211 2154

Profit before Tax and exceptional items 5513 7506 6382 5808 4685Exceptional items - expense/(income) (3106) — — — 624Provision for Current Tax 82 401 365 421 150

Net Profit after Tax 8537 7105 6017 5387 3911Provision for Deferred Tax 1417 (470) (494) 2119 923

Adjustment in respect of prior years - (income) 8 (2) (57) (153) (121)

Net Profit after taxes and adjustments 7112 7577 6568 3421 3109

Note : The figures for FY 2002-03 are not comparable with the previous year in view of the Schemes of Arrangement with Godrej ConsumerProducts Limited and Godrej Foods Limited, in FY 2001-02.


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NOTICE TO SHAREHOLDERSNOTICE is hereby given that the EIGHTEENTH ANNUAL GENERAL MEETING of the members of GODREJ INDUSTRIES LIMITED will beheld on Monday, July 24, 2006 at 4.30 P.M. at Y B Chavan Centre, Nariman Point, Mumbai – 400 021, to transact the following business:-

ORDINARY BUSINESS :

1. To consider and adopt the Audited Profit & Loss Account and Cash Flow Statement for the year ended March 31, 2006, the Balance Sheetas at that date, the Auditors’ Report thereon and the Directors’ Report along with Management Discussion and Analysis Report andStatement of Corporate Governance.

2. To declare dividend for the financial year ended March 31, 2006.3. To appoint a Director in place of Mr. J.N. Godrej, who retires by rotation and being eligible offers himself for re-appointment.4. To appoint a Director in place of Ms. T.A. Dubash, who retires by rotation and being eligible, offers herself for re-appointment.5. To appoint a Director in place of Mr. V.F. Banaji, who retires by rotation and being eligible offers himself for re-appointment.6. To appoint a Director in place of Mr. M. Eipe, who retires by rotation and being eligible offers himself for re-appointment.7. To appoint Auditors to hold office from the conclusion of this Annual General Meeting till the conclusion of the next Annual General

Meeting, and to authorize the Board of Directors of the Company to fix their remuneration. M/s. Kalyaniwalla & Mistry, CharteredAccountants, the retiring Auditors are eligible for re-appointment.

SPECIAL BUSINESS :

8. To consider and, if thought fit, to pass with or without modification(s), the following resolution as a SPECIAL RESOLUTION :-

RESOLVED THAT subject to the provisions of Sections 269, 309, Schedule XIII and other applicable provisions, if any, of the CompaniesAct, 1956, approval of the Company be and is hereby accorded for the re-appointment and remuneration payable to Ms. T.A. Dubash asa Whole-Time Director of the Company designated as Executive Director & President (Marketing), for a period of three years fromApril 1, 2007 to March 31, 2010 on the terms and conditions as contained in the Agreement to be entered into between the Companyand Ms. T.A. Dubash, a draft of which is placed before the meeting and for the purpose of identification, initialed by the Chairman.


RESOLVED THAT subject to the provisions of Sections 269, 309, Schedule XIII and other applicable provisions, if any, of the CompaniesAct, 1956, approval of the Company be and is hereby accorded for the re-appointment and remuneration payable to Mr. V. F. Banaji asa Whole-Time Director of the Company designated as Executive Director & President (Group Corporate Affairs) for a period of threeyears from April 1, 2007 to March 31, 2010, on the terms and conditions as contained in the Agreement to be entered into between theCompany and Mr. V. F. Banaji, a draft of which is placed before the meeting and for the purpose of identification, initialed by theChairman.


RESOLVED THAT subject to the provisions of Sections 269, 309, Schedule XIII and other applicable provisions, if any, of the CompaniesAct, 1956, approval of the Company be and is hereby accorded for the re-appointment and remuneration payable to Mr. M. Eipe as aWhole-Time Director of the Company designated as Executive Director & President (Chemicals), for a period of three years from April 1,2007 to March 31, 2010 on the terms and conditions as contained in the Agreement to be entered into between the Company andMr. M. Eipe, a draft of which is placed before the meeting and for the purpose of identification, initialed by the Chairman.


RESOLVED THAT subject to the provisions of Sections 269, 309, Schedule XIII and other applicable provisions, if any, of the CompaniesAct, 1956, approval of the Company be and is hereby accorded for the remuneration payable to Mr. M. P. Pusalkar as a Whole-TimeDirector of the Company designated as Executive Director & President (Corporate Projects), for a period of three years from April 1, 2007to March 31, 2010 on the terms and conditions as contained in the Agreement to be entered into between the Company and Mr. M. P.Pusalkar, a draft of which is placed before the meeting and for the purpose of identification, initialed by the Chairman.


RESOLVED THAT subject to the provisions of Section 314 and other applicable provisions, if any of the Companies Act, 1956, approvalof the Company be and is hereby accorded to the revision in remuneration payable to Mr. Pirojsha A. Godrej, son of Mr. A.B. Godrej,Chairman of the Company, with effect from April 1, 2006 on the terms and conditions as detailed in the Explanatory Statement hereto.

13. To consider and if deemed fit, to pass, with or without modification(s), the following resolution as an ORDINARY RESOLUTION:

RESOLVED THAT pursuant to Section 13, 16 and 94 and any other applicable provisions of the Companies Act, 1956, the provisionscontained in Articles of Association of the Company and any other applicable law for the time being in force and as may be amended fromtime to time and subject to such conditions and modifications, if any, as may be prescribed or imposed while granting such approvals,permissions and sanctions, if any, which may be agreed to, by the Board of Directors of the Company (which term shall be deemed toinclude any Committee which the Board may constitute, to exercise its powers including the powers conferred by this resolution), theexisting Equity Shares of the face value of Rs.6/- (Rupees Six) each in the Share Capital of the Company be sub-divided into 6 (Six) EquityShares of the face value Re.1 (Rupee one) each and consequently, the Equity Share Capital of the Company of Rs. 80,00,00,000/- (RupeesEighty Crore only) comprising of 13,33,33,333 (Thirteen Crore Thirty Three Lac Thirty Three Thousand Three Hundred Thirty Three) equityshares of Rs.6/- (Rupees Six) each be divided into 80,00,00,000 (Eighty crore) equity shares of the face value of Re.1 (Rupee one) each, witheffect from the ‘Record Date’ to be determined by the Board of Directors of the Company for the purpose.

Annual Report 2005-2006

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RESOLVED FURTHER THAT the issued, subscribed and fully paid–up Equity Share Capital of the Company, as on the Record Date thatmay be fixed by the Board of Directors of the Company (hereinafter referred to as “the Board” which expression shall be deemed toinclude any duly authorized committee thereof), be sub-divided from 4,86,41,942 equity shares of the face value of Rs. 6/- each into29,18,51,652 (Twenty nine crore eighteen lac fifty one thousand six hundred fifty two) equity shares of the face value of Re.1/- (Rupeeone) each.

RESOLVED FURTHER THAT the Board be and is hereby authorised to inform the Registrar and Transfer Agents of the Company and thedepositories to take necessary action to give effect to the above and also to issue new share certificates representing the sub-divided shareswith new distinctive numbers (except in case of shares held in the demat form), in the aforesaid proportion subject to the rules as laid downin the Companies (Issue of Share Certificates) Rules 1960 with an option to either exchange the new share certificates in lieu of cancellationof the old share certificates or without physically exchanging the share certificates, by treating the old share certificates, as deemed to becancelled or by credit of sub-divided equity shares in shareholders’ demat accounts in exchange of old share certificate/s.

RESOLVED FURTHER THAT the Board be and is hereby severally authorised to do all such acts, deeds, matters and things and executeall such documents, instruments and writings as may be required in the said connection and to delegate all or any of the powers hereinvested in them to give effect to the above.

14. To consider and if deemed fit, to pass, with or without modification(s), the following resolution as an ORDINARY RESOLUTION:

RESOLVED THAT pursuant to the provisions of Section 16 of the Companies Act, 1956 and any other provisions as may be applicable theexisting Memorandum of Association of the Company be altered by deleting the existing Clause V and substituting in place thereof thefollowing Clause as Clause V:

The Authorised Capital of the Company is Rs.180,00,00,000/- (Rupees One Hundred Eighty Crore) divided into 80,00,00,000 (Eightycrore) Equity Shares of Re.1/- (Rupee one) each, and 10,00,00,000 (Ten Crore) Unclassified Shares of Rs.10/-each.

15. To consider and if deemed fit, to pass, with or without modification(s), the following as SPECIAL RESOLUTION:

RESOLVED THAT pursuant to the provisions of Section 31 and other applicable provisions, if any, of the Companies Act, 1956 and theprovisions of any other law as may be applicable for the time being in force, the Articles of Association of the Company be altered bydeleting the existing Article 3 and substituting in place thereof the following as Article 3:

3. The Authorised share capital of the company is Rs.180,00,00,000/- (Rupees One Hundred Eighty Crore) divided into 80,00,00,000(Eighty crore) Equity Shares of Re.1/- (Rupee one) each, and 10,00,00,000 (Ten Crore) Unclassified Shares of Rs.10/- each with powerto the Board of Directors of the Company to divide the shares in the capital of the Company for the time being into several classestherein and to make such modifications therein as the Board may deem fit, and with power to increase or reduce the capital of theCompany and to divide the shares in the capital for the time being into several classes and to attach thereto respectively suchpreferential, deferred qualified or special rights, privileges or conditions as may be determined by or in accordance with the Articlesof Association of the Company and to vary modify, amalgamate or abrogate any such rights, privileges or conditions in such manneras may for the time being be provided by the Articles of Association of the Company and as may be thought expedient.

Notwithstanding anything contained herein, the Company shall be entitled to dematerialise its shares, debentures and other securitiespursuant to the Depositories Act, 1996 and to offer its shares, debentures and other securities for subscription in a dematerialised form.

By Order of the Board of DirectorsS. K. BHATT

Executive Vice-President(Corporate Services)

& Company SecretaryMumbai, May 26, 2006Registered Office :Pirojshanagar, Eastern Express Highway,Vikhroli (East), Mumbai 400 079.

NOTES :

1. The relative Explanatory Statement in respect of business under Item Nos. 8 to 15 set out in the Notice is annexed hereto.

2. A MEMBER ENTITLED TO ATTEND AND VOTE IS ENTITLED TO APPOINT A PROXY TO ATTEND AND ON POLL, TO VOTE INSTEADOF HIMSELF. SUCH A PROXY NEED NOT BE A MEMBER OF THE COMPANY. PROXIES IN ORDER TO BE EFFECTIVE MUST BERECEIVED BY THE COMPANY NOT LESS THAN 48 HOURS BEFORE THE MEETING. A PROXY SO APPOINTED SHALL NOT HAVEANY RIGHT TO SPEAK AT THE MEETING.

3. The Register of Members and Share Transfer Books of the Company will be closed from July 17, 2006 to July 24, 2006 (both daysinclusive) for ascertaining the names of the shareholders to whom the dividend which if declared at the Annual General Meeting ispayable. In respect of shares held in electronic form, the dividend will be payable on the basis of beneficial ownership as per detailsfurnished by National Securities Depository Ltd. and Central Depository Services (India) Ltd., for this purpose.

4. Those Members who have so far not encashed their dividend warrants for the below mentioned financial years, may claim or approachthe Company for the payment thereof as the same will be transferred to the ‘Investor Education and Protection Fund’ of the CentralGovernment, pursuant to Section 205C of the Companies Act, 1956 on the respective dates mentioned thereagainst. Please note that asper Section 205C of the Companies Act, 1956, no claim shall lie against the Company or the aforesaid Fund in respect of individual


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amounts which remain unclaimed or unpaid for a period of seven years from the date the dividend became due for payment and nopayment shall be made in respect of such claims.

Dividend for theFinancial Year ended Due date for transfer31.03.2000 01.07.2007

31.03.2001 28.07.2008

31.03.2002 14.08.2009

31.03.2003 25.08.2010

31.03.2004 26.07.2011

31.03.2005 26.07.2012

5. Members are requested to bring their copy of the Annual Report to the Annual General Meeting.

6. Members are requested to send in their queries at least a week in advance to the Company Secretary at the Registered Office of theCompany to facilitate clarifications during the meeting.

EXPLANATORY STATEMENT PURSUANT TO SECTION 173(2) OF THE COMPANIES ACT, 1956

Item nos.8 to 11

The tenure of the following Whole-time Directors with the Company will expire on March 31, 2007.

Ms. T.A. Dubash – Executive Director & President (Marketing)

Mr. V.F.Banaji – Executive Director & President (Group Corporate Affairs)

Mr. M. Eipe – Executive Director & President (Chemicals)

It is proposed to re-appoint Ms. T.A. Dubash, Mr. V.F. Banaji, and Mr. M. Eipe for a further period of three years from April 1, 2007 toMarch 31, 2010.

Mr. M.P. Pusalkar was reappointed by the Shareholders at their Meeting held on July 26, 2005, as a director liable to retire by rotation pursuantto Section 255 of the Companies Act, 1956. However, the approval of shareholders to the remuneration payable to him as a Whole-timeDirector will expire on March 31, 2007. Hence, it is proposed to approve his remuneration as a Whole-time Director for a period of threeyears from April 1, 2007 to March 31, 2010 along with the other Whole-time Directors.

The proposed remuneration and terms and conditions of appointment of each of the aforementioned Whole-time Directors are given below :-

1. Ms. T.A. Dubash, Mr. V.F.Banaji, Mr. M. Eipe and Mr. M.P. Pusalkar (hereinafter individually referred to as the Whole-time Director) shallperform their duties subject to the superintendence, control and direction of the Board of Directors of the Company.

2. Period of appointment of

Ms. T.A. Dubash – from 1/4/2007 to 31/3/2010

Mr. V.F. Banaji - from 1/4/2007 to 31/3/2010

Mr. M. Eipe – from 1/4/2007 to 31/3/2010

Mr. M.P. Pusalkar – from 1/4/2007 to 31/03/2010

3. In consideration of the performance of their duties, the Whole-time Directors, viz. Ms. T.A. Dubash, Mr. V.F. Banaji, Mr. M. Eipe andMr. M.P. Pusalkar shall be entitled to receive remuneration as stated hereinbelow:-

1. Fixed Compensation:

Fixed Compensation shall include Basic Salary and the Company’s Contribution to Provident Fund and Gratuity Fund.

The Basic Salary shall be in the range of Rs.1,70,000/- to Rs. 5,00,000/- per month, payable monthly. The Annual increments will bedecided by the Compensation Committee/Board of Directors depending on the performance of the Whole-time Director, the profitabilityof the Company and other relevant factors.

The Basic Salary approved for the year 2006-07 for each of the above Whole- time Director is within the range of Rs.1,70,000 –Rs.3,00,000 per month.

2. Performance Linked Variable Remuneration

Performance Linked Variable Remuneration according to the Scheme of the Company for each of the financial years as may be decidedby the Compensation Committee/Board of Directors of the Company based on Economic Value Added in the business and other relevantfactors and having regard to the performance of each of the Whole-time Director for each year.

3. Flexible Compensation:

In addition to the Fixed Compensation and PLVR, each Whole-time Director will be entitled to the following allowances, perquisites,benefits, facilities and amenities as per rules of the Company and subject to the relevant provisions of the Companies Act, 1956 (collectivelycalled “perquisites and allowances”).

These perquisites and allowances may be granted to each Whole-time Director in the manner as the Board may decide.


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� Housing as per rules of the Company (i.e. unfurnished residential accomodation and House Rent Allowance at applicable rate as perCompany’s rules OR House Rent Allowance as per Company’s rules);

� Furnishing at residence as per rules of the Company;

� Supplementary Allowance;

� Leave Travel Assistance in accordance with the rules of the Company;

� Payment/reimbursement of medical expenses for self and family in accordance with the rules of the Company.

� Payment/reimbursement of Food Vouchers, petrol reimbursement;

� Company cars with driver for official use, provision of telephone(s) at residence;

� Payment/reimbursement of telephone expenses;

� Housing Loan as per rules of the company, Contingency Loan as per rules of the company. These loans shall be subject to CentralGovernment approval, if any;

� Earned/privilege leave, on full pay and allowance, not exceeding 30 days in a financial year. Encashment/accumulation of leave willbe permissible in accordance with the Rules specified by the Company. Casual/Sick leave as per the rules of the Company;

� Such other perquisites and allowances as per the policy/rules of the Company in force and/or as may be approved by the Board fromtime to time.

The maximum cost to the Company per annum for the aggregate of the allowances listed above for each of the Whole-time Director shallbe Rs.25,00,000/- plus 63.33% of the annual basic salary. For the year 2006-07 the cost to the Company for all the heads of flexiblecompensation payable to each of the Whole-time Director is Rs.13,20,000/- plus 63.33% of annual basic salary. In addition to the above,the Whole-time Director will be eligible to encashment of leave, club facilities, group insurance cover, group hospitalisation cover, and/or any other allowances, perquisites and facilities as per the Rules of the Company.

Explanation

i) For the Leave Travel Assistance and reimbursement of medical and hospitalisation expenses, ‘family’ means the spouse and dependentchildren and dependent parents.

ii) Perquisites shall be evaluated at actual cost or if the cost is not ascertainable the same shall be valued as per Income Tax Rules.

4. Overall Remuneration

The aggregate of salary and perquisites as specified above or paid additionally in accordance with the rules of the Company in anyfinancial year, which the Board in its absolute discretion pay to the Whole-time Director from time to time, shall not exceed the limitsprescribed from time to time under Sections 198, 309 and other applicable provisions of the Companies Act, 1956 read with ScheduleXIII to the said Act as may for the time being, be in force.

5. Loans

(a) Granting of loans according to Company’s Scheme subject to Central Government’s approval, if applicable.

(b) Continuation of Loans already availed:

Contingency Loan to Mr. M.P. Pusalkar as on March 31, 2006 – Rs.24,999/-.

Notes :

I. Unless otherwise stipulated, for the purpose of the above, the perquisites shall be evaluated as per Income Tax Rules wherever actualcost cannot be determined.

II. Notwithstanding the foregoing, where in any Financial Year during the currency of the tenure of the Whole-time Director, the Companyhas no profits or its profits are inadequate, the remuneration by way of salary, commission and perquisites shall not exceed, the maximumlimits prescribed in Schedule XIII to the Companies Act, 1956 except with the approval of the Central Government.

III. The limits specified above are the maximum limits and the Compensation Committee / Board may in its absolute discretion pay to Whole-time Directors lower remuneration and revise the same from time to time within the maximum limits stipulated above.

IV. In the event of any re-enactment or re-codification of the Companies Act, 1956 or the Income Tax Act, 1961 or amendments thereto, theforegoing shall continue to remain in force and the reference to various provisions of the Companies Act, 1956 or the Income Tax Act,1961 shall be deemed to be substituted by the corresponding provisions of the new Act or the amendments thereto or the Rules andnotifications issued thereunder.

V. If at any time the Whole-time Director ceases to be in the employment of the Company for any cause whatsoever, she/he shall cease tobe Whole-time Director of the Company.

VI. Whole-time Directors are appointed by virtue of their employment in the Company and their appointment is subject to the provisions ofSection 283(1) of the Companies Act, 1956 while at the same time the Whole-time Directors are liable to retire by rotation. The appointmentis terminable by giving three months’ notice in writing on either side.

Draft of the agreements to be entered into with each of the above referred Whole-time Directors is available for inspection at the RegisteredOffice of the Company from 10.00 A.M. to 12.00 Noon, Monday to Friday (except public holidays) upto the date of the Annual GeneralMeeting.


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The particulars given above constitute the abstract of the terms of the agreement which is required to be given to every member under theprovisions of Section 302 of the Companies Act, 1956.

The Board of Directors of the Company recommends passing of the resolution as set out at Item no.8 to 11 of the Notice.

Ms. T.A. Dubash, Mr. V.F. Banaji, Mr. M. Eipe and Mr. M.P. Pusalkar may be deemed to be interested in the resolutions at Item no.8 to 11respectively. Mr. A.B. Godrej, being relative of Ms. T.A. Dubash, may be deemed to be interested in the resolution at item no.8. None of theother Directors of the Company are concerned or interested in the resolutions.

Item no.12

Mr. Pirojsha A. Godrej was appointed as an employee of the Company with effect from June 1, 2004. It is proposed to revise the remunerationpayable to Mr. Pirojsha A. Godrej with effect from April 1, 2006 on the following terms and conditions :-

1. Fixed Compensation:

Fixed Compensation shall include Basic Salary and the Company’s Contribution to Provident Fund and Gratuity Fund.

The Basic Salary shall be in the range of Rs. 20,000 to 75,000 per month, payable monthly. The Basic Salary as on April 1, 2006 isRs.25,000/- p.m.

2. Performance Linked Variable Remuneration

Performance Linked Variable Remuneration according to the Scheme of the Company.

3. Flexible Compensation:

In addition to the Fixed Compensation and PLVR, Mr. Pirojsha A. Godrej will be entitled to the following allowances, perquisites, benefits,facilities and amenities as per rules of the Company and subject to the relevant provisions of the Companies Act, 1956 (collectively called“perquisites and allowances”).

These perquisites and allowances may be granted to Mr. Pirojsha A. Godrej in the manner as the Board may decide.

� Housing as per rules of the Company (i.e. unfurnished residential accomodation and House Rent Allowance at applicable rate as perCompany’s rules OR House Rent Allowance as per Company’s rules);

� Furnishing at residence as per rules of the Company;

� Supplementary Allowance;

� Leave Travel Assistance in accordance with the rules of the Company;

� Payment/reimbursement of medical expenses for self and family in accordance with the rules of the Company.

� Payment/reimbursement of Food Vouchers, petrol reimbursement;

� Company car with driver for official use, provision of telephone(s) at residence;

� Payment/reimbursement of telephone expenses;

� Earned/privilege leave, on full pay and allowance, not exceeding 30 days in a financial year. Encashment/accumulation of leave willbe permissible in accordance with the Rules specified by the Company. Casual/Sick leave as per the rules of the Company;

� Such other perquisites and allowances as per the policy/rules of the Company in force and/or as may be approved by the Board fromtime to time.

The maximum limit of cost to the Company per annum for all the heads of flexible compensation payable to Mr. Pirojsha A. Godrej shallbe Rs.50,000/- plus 55% of the annual basic salary. For the year 2006-07 the cost to the Company under all the heads of flexiblecompensation payable to Mr. Pirojsha A. Godrej shall be Rs.3,06,000/- plus 55% of annual basic salary. In addition to the above, Mr.Pirojsha A. Godrej will be eligible to encashment of leave, group insurance cover, group mediclaim cover, and/or any other allowances,perquisites and facilities as per the Rules of the Company.

Notes:

1. Unless otherwise stipulated, for the purpose of the above, the perquisites shall be evaluated as per Income Tax Rules wherever actualcost cannot be determined.

2. The following shall not be included in the computation of perquisites :

(a) Provision for use of Company’s car with driver for official use.

(b) Provision of free telephone facilities or reimbursement of telephone expenses at residence including payment of local calls andlong distance official calls.

3. The Board in its absolute discretion can decide the designation/cadre of Mr. Pirojsha A. Godrej within the above salary range.

4. The limits specified above are the maximum limits and the Board may in its absolute discretion pay to Mr. Pirojsha A. Godrej, lowerremuneration and revise the same from time to time within the maximum limits stipulated above.

Mr. A.B. Godrej and Ms. T.A. Dubash being relatives may be deemed to be interested in the resolution. None of the other Directors of theCompany are concerned or interested in the resolution.


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Item nos.13 to 15

At present the Company’s paid up and listed equity Share Capital is Rs. 29,18,51,652/- which is divided into 4,86,41,942 equity shares ofRs.6/- each. The Board is of the view that the liquidity of the equity shares of the Company in the stock markets should be increased. Towardsthis end, it is proposed to reduce the nominal value of equity shares of the Company by sub-dividing the equity shares to make it moreaffordable to the retail investors. Therefore, it is proposed that the nominal value of equity shares of the Company be reduced from Rs. 6/- eachto Rs. 1/- each.

Consequent to the sub-division of shares, it is necessary to alter the Capital Clause of the Memorandum and Articles of Association of theCompany. The Ordinary Resolution in Item No. 14 and Special Resolution in Item No. 15 seek to make corresponding amendments in ClauseV of the Memorandum of Association and Article 3 of the Articles of Association of the Company to give effect to the above.

The Board of Directors believes that such issue is in the interest of the Company and therefore recommends the resolutions for your approval.

The Directors of the Company may be deemed to be interested in this Resolution to the extent of their respective shareholdings in theCompany.

The Board of Directors of the Company recommends the passing of the resolutions as set out at Items no. 13 to 15 of the Notice.

By Order of the Board of DirectorsS. K. BHATT

Executive Vice-President(Corporate Services)

& Company SecretaryMumbai, May 26, 2006Registered Office :Pirojshanagar, Eastern Express Highway,Vikhroli (East), Mumbai 400 079.

Details of the Directors seeking appointment/reappointment at the forthcoming Annual General Meeting (in pursuance of Clause 49 of theListing Agreement)

Mr. J.N. Godrej (57) : Mr. J.N. Godrej holds a bachelor’s degree in Mechanical Engineering and a masters’ degree in Business Administrationfrom the Illinois Institute of Technology, USA. He is a Director on the Board of the Company from 7-3-1988. He joined the Board of Directorsof Godrej & Boyce Mfg Co Ltd. (G&B) in 1974. He was appointed Managing Director of G&B in 1990 and became Chairman of the Board ofG&B in 2000. Mr. Godrej is President of World Wide Fund for Nature, India, Vice President of World Wide Fund for Nature-International, pastPresident of Confederation of Indian Industry and past President of the Indian Machine Tool Manufacturer’s Association.

Directorship in other Companies :Chairman & Managing Director: Godrej & Boyce Mfg Co Ltd.

Chairman: Geometric Software Solutions Co. Ltd., 3D PLM Software Solutions Ltd., Lawkim Ltd.

Director: Bajaj Auto Ltd., Godrej Agrovet Ltd., Godrej Foods Ltd., Godrej Sara Lee Ltd., Godrej Properties Ltd., Godrej Consumer ProductsLtd., Godrej Beverages & Foods Ltd., Godrej Upstream Ltd., Haldia Petrochemicals Ltd., Breach Candy Hospital Trust, Antrix Corporation Ltd.,Godrej Investments Pvt. Ltd., Tata Trustee Company Pvt. Ltd., Illinois Institute of Technology (India) Pvt. Ltd., Godrej (Malayasia) Sdn. Bhd.,Godrej (Singapore) Pte. Ltd., Godrej (Vietnam) Company Ltd., Godrej & Khimji (Middle East) LLC.

Committee position held:Chairman – Investor Grievances & Redressal Committee, Compensation Committee-Geometric Software Solutions Ltd.

Member – Audit Committee, Shareholders/Investors Grievances Committee-Bajaj Auto Ltd.

Member – Compensation Committee-Haldia Petrochemicals ltd.

Trustee – General Committee-Breach Candy Hospital Trust.

Ms. T.A. Dubash (37): Ms. T.A. Dubash, Executive Director & President (Marketing), is a graduate in Economics & Political Science from BrownUniversity, USA and has completed an Advanced Management Program from the Harvard Business School. She looks after the Group widemarketing function which involves:

� A supervisory role in all marketing initiatives, including being in charge of marketing of new initiatives of the Group.

� Heading a Marketing Council comprising of heads of marketing of all Group companies to capitalize on synergies such as sharing of bestpractices and development of standardized processes through training and knowledge management.

Directorship in other Companies :

Chairperson: Ensemble Holdings & Finance Ltd.,

Director: Tahir Properties Ltd., Girikandra Holiday Homes & Resorts Ltd.

Godrej Global Mideast FZE, Godrej Agrovet Ltd., Keyline Brands Ltd., Godrej Holdings Pvt. Ltd.

Committee position held:

Member: Shareholders Committee-Godrej Industries Ltd.


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V. F. Banaji (52): Mr. V.F. Banaji is B.A. from Nagpur University. His responsibilities as ED & President (Group Corporate Affairs) includeleadership of the Group HR function for Godrej Industries and Associate Companies as well as Corporate Strategy and CorporateCommunications.

Before joining the Company he was based in Paris as leader of ALSTOM’s global project for re-engineering key HR processes and supportingthem through the deployment of a state-of-the-art HR Management System. Prior to his international assignment, he worked as ExecutiveDirector (HR) for ALSTOM in India. His earlier career was with the Tatas, where his last assignment was as Head of the Corporate HR functionfor Telco (now Tata Motors).

Directorship in other Companies : Nil

Committee position held:Member – Shareholders Committee-Godrej Industries Ltd.

Mr. Mathew Eipe (53) : Mr. Mathew Eipe graduated in Chemical Engineering from the Indian Institute of Technology, Mumbai, in 1975. He isa Management graduate from the Indian Institute of Management, Kolkata. He joined the erstwhile Godrej Soaps Limited, as a ManagementTrainee in 1977. Currently, he heads the Chemicals, Medical Diagnostics and Estate businesses of the Company and is designated as ExecutiveDirector & President (Chemicals).

Mr. Eipe has been a member of the Committee of Administration of Basic Chemicals, Pharmaceuticals & Cosmetics Export Promotion Council(CHEMEXCIL) for the last two years.

Directorship in other Companies :

Director: Godrej Hicare Ltd., Ensemble Holdings & Finance Ltd.

Committee position held:

Member – Shareholders Committee-Godrej Industries Ltd.


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To the Shareholders,

Your Directors have pleasure in submitting the Annual Report alongwith the Audited Accounts for the year ended March 31, 2006.

REVIEW OF OPERATIONS

Your Company’s performance during the year as compared with thatduring the previous year is summarized below.

(Rs. lac)Year ended March 31,

2006 2005

Sales of products and services 74542 76335Other Income 5728 6018

Total Income 80270 82353Total Expenditure other than Interest andDepreciation 69660 70117

Profit before Interest, Depreciation and Tax 10610 12236Depreciation 2260 2148

Profit before Interest and Tax 8350 10088Interest and Financial Charges (net) 2837 2582

Profit before Tax 5513 7506Provision for Current Tax 82 401Profit after Current Tax 5431 7105Provision for Deferred Tax 1417 (470)

Profit after Current and Deferred Taxation 4014 7575Profit on sale of undertaking, extraordinaryitem (Net of tax) 3106 –Net Profit 7120 7575Adjustments in respect of prior years (8) 2Surplus brought forward 20082 15481Profit after Tax available for appropriation 27194 23058AppropriationYour Directors recommend appropriation as under:Dividend on Equity Shares 2432 1946Tax on distributed profits 341 273Transfer to General Reserve 711 758Surplus Carried Forward 23710 20082

Total Appropriation 27194 23058

The total income reduced by 1.8% from Rs. 82353 lac to Rs. 80270 lac.The Net Profit for the year was Rs.7120 lac as compared toRs. 7575 lac, in the previous year, a decrease of 5.95%.

DIVIDEND

The Board of Directors of your Company recommends a final dividendof Rs. 5/- per equity share of Rs. 6/- each, aggregating to Rs.2432 lac, asagainst final dividend of Rs. 4/- per equity share of Rs. 6/- each aggregatingto Rs. 1,945 lac in the previous year.

MANAGEMENT DISCUSSION & ANALYSIS

There is a separate section on Management Discussion and Analysis inthis Annual Report, which, inter alia, covers the following:

� Industry Structure and Developments� Discussion on financial performance with respect to operational

performance� Segment-wise performance� Human Resources and Industrial Relations� Opportunities and Threats� Internal Control Systems and their adequacy� Risks and Concerns� OutlookThe same is appended as Annexure A to the Directors’ Report.

DIRECTORS’ REPORTSUBSIDIARY AND ASSOCIATE COMPANIES

Your Company has interests in several industries including animal feeds,poultry and agro-products, property development, household insecticides,pesticides, tea, infotech, etc. through its subsidiary/associate companies.

Godrej Agrovet Limited (GAVL) : The Operations of the Company wasimpacted due to the detection of Avian influenza in some parts of thecountry and unfavourable raw material prices due to delayed monsoon.The cumulative effect was a marginal increase of 7% in total incomefrom Rs.56852 lac in the previous year to Rs.60556 for the year ended31.03.06. The Profit after Tax however declined sharply from Rs.1417lac to Rs.683 lac, a fall of 52%. As against a total dividend payment of88% last year GAVL declared a dividend of 40%.

GAVL has the following businesses viz. Animal feeds, Integrated poultrybusiness, Agri inputs, Oil palm plantations and Plant biotech. Theprolonged monsoon and detection of Avian influenza had its effect onthe operations of the Animal Feeds and Integrated poultry business of theCompany. As against this, the Agri Input business recorded a 40% growthin top line and a 49% growth in the bottom line. The ‘Aadhaar’ initiativeto provide a complete solution to Agri Sector opened 7 new centrestaking the total number of Aadhaars to 23. The Division also undertooka new initiative ‘Nature’s Basket’ in providing gourmet fresh fruits andvegetables through this retail chain. This initiative has also received agood response.

GAVL acquired a majority stake in Krithika Agro Farm Chemicals &Engineering Industries Pvt. Ltd., Orissa during the year. GAVL has alsoformed a Joint Venture in UAE in the poultry business with a 70% stakein the company which operates under the name of Al-Rahba InternationalTrading LLC which has commenced production in the second half of2005-06.

Goldmohur Foods and Feeds Limited (GFFL), a wholly owned subsidiaryof GAVL was also impacted by the prolonged monsoon and Avianinfluenza detected in some parts of the country. The Total Income wasmarginally lower at Rs.29,588 lac as against Rs.30,860 lac in the previousyear. The Profit after Tax however was Rs.538 lac as against Rs. 345 lacin the previous year. GFFL declared an interim dividend of 168% in thecurrent year as compared to interim dividend of 163% in the previousyear.

Golden Feed Products Limited (GFPL) commenced operations duringthe year. It acquired the shrimp feed marketing business of HigashimaruFeeds India Ltd. effective 31st October, 2005. The postponement of theshrimp farming season affected the business and GFPL reported a revenueof Rs. 346 lac and a loss of Rs. 140 lac for 2005-06.

Godrej Properties Limited (GPL) recorded an increase in Total Incomeof Rs. 2,862 lac from Rs. 4,185 lac in the previous year to Rs.7,046 lacin the current year. The Profit after Tax increased from Rs. 583 lac in theprevious year to Rs.1,339 lac, an increase of 130%. GPL has declaredan interim dividend of 96% as compared to 39.56% in the previousyear.

During the year, two commercial projects undertaken in Pune-GodrejEternia C & Godrej Castlemaine were completely sold out. Phase-I ofGodrej Collesium in Mumbai was also sold out. Commencement of PhaseII is in full swing and is expected to be completed by December, 2006.The Company also commenced a residential complex in Bangalorewhich was well received. The projects in Thane and Kalyan areprogressing as per schedule. The Company also acquired two privatecompanies viz., Casablanca Properties Pvt. Ltd. and BridgestoneProperties Pvt. Ltd. during the year and has changed their names toGodrej Realty Pvt. Ltd. and Godrej Waterside Properties Pvt. Ltd.respectively.

Godrej International Limited (GINL) has posted a net profit ofUS$ 382,566 in the current year as compared to US$ 399,262 in theprevious year. GINL has proposed a final ordinary dividend of 6 UScents per ordinary share of £1 aggregating to US$ 156,300 on the entire


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share capital including the increased share capital of about US$ 1.9million raised during the year, as against a final dividend aggregatingUS$ 150,500 in the previous year.

Godrej Global MidEast FZE (GGME), a 100% subsidiary of GINLregistered a Net Profit of AED 191167 as compared to AED 190379 inthe previous year. GGME has started exporting to Sudan and hopes toenter Pakistan soon.

Godrej Hicare Limited (GHL), a service company in the PestManagement business earned Total Income of Rs. 2112 lac as comparedto Rs. 1206 lac in the previous year recording growth of 75%. GHLrecorded a Profit after Tax of Rs. 104 lac as compared to loss of Rs.113lac in the previous year. During the year GHL acquired reticulationtechnology (for pre-construction anti-termite treatment) from Termguard,Australia and Thermal imaging camera for termite detection from FLIR,Sweden. The Company undertook a major quality initiative to enhanceservice delivery to customers. The Company has aggressive plans forgeographical expansion in the forthcoming year while continuing togrow in current markets by increasing service centers.

Godrej Global Solutions Ltd. (GGSL), a back-office transactionprocessing service company earned Total Income of Rs. 966.30 lac asagainst Rs. 290.57 lac in the previous year. During the year underreview, GGSL acquired through its US subsidiary Godrej GlobalSolutions, Inc, the business of Outsource Offshore Inc. a US basedhealthcare forms processing service provider. GGSL also acquired thedata conversion business of Softpage Data Conversion Private Ltd. Duringthe year GGSL has set up a state of the art service delivery capability atChennai and Navi Mumbai which can support customers in areas ofHealthcare such as Medical transcription, medical billing, claimsprocessing and document management services.

Godrej Beverages & Foods Ltd. (Formerly Godrej Tea Limited) (GBFL)earned a Total Income of Rs. 783 lac as compared to Rs. 1579 lac in theprevious year. GTL recorded loss of Rs. 1717 lac as compared to loss ofRs. 2142 lac in the previous year. W.e.f. the close of business hours onMarch 31, 2006 GBFL acquired Foods Division (excluding Wadalafactory) from Godrej Industries Ltd. under a slump sale agreement for atotal consideration of Rs.70 crore. Further, IL&FS Investment ManagersLtd. invested Rs.60 crore in the equity share capital of GBFL for a 40%stake in the Company. Post this acquisition, GTL changed its name toGBFL. Post the acquisition, GBFL is expected to perform better in thecoming years as its activities will broaden through both organic andinorganic growth and synergy.

Godrej Sara Lee Limited (GSLL) experienced a good year both in termsof sales & profits. The Total Income increased by 12% and Profit after Taxregistered an increase of 41% as compared to the previous year. TheCompany’s continuous focus on value engineering and cost reductionhas shown good results. The exports business of the company has morethan doubled during the year. The Company has launched Mini Jumbocoils under the brand “Good Knight” and Home fresheners under thebrand “Ambipur” during the year. The Company has remained a dominantplayer in household insecticide market with mat market share of 35%.

Godrej Consumer Products Limited (GCPL), a Company in which yourcompany holds 11.93% has declared dividends aggregating to 350% inthe current year as compared to 300% in the previous year. GCPL is afocused FMCG company. On a standalone basis GCPL earned a TotalIncome of Rs.66598 lac in the current year as compared to Rs. 56908lac in the previous year. GCPL’s PAT in the current year increased toRs.12070 lac as compared to Rs. 8606 lac in the previous year.

In October 2005, GCPL acquired 100% ownership interest in KeylineBrands Ltd. (UK) through a 100% subsidiary SPV structure. Keyline isone of U.K.’s admired FMCG companies engaged in the manufacture,marketing, sales and distribution of cosmetics and toiletries with a strongportfolio of brands and a well developed customer base in numeroussupermarket chains and discount stores. This transaction gives GCPLownership of several international brands and trademarks including‘CUTICURA’, ‘ERASMIC’ and ‘AAPRI’ in many countries. The Acquisitionenables GCPL to widen geographical presence and access trade channelsin key developed markets including Europe, Australia and Canada.

On a consolidated basis GCPL earned a Total Income of Rs.70849 lacand PAT of Rs.12080 lac for the year ended March 31, 2006

GCPL is aggressively pursuing organic and inorganic growth opportunitiesconsistent with EVA focus. The macro environment too is encouragingwith increasing spend being witnessed by both urban and rural consumers.GCPL is expected to continue delivering strong growth and stakeholdervalue.

FINANCIAL POSITION

The financial position of your Company continues to be sound. The loanfunds as at the end of the year is at Rs.32638 lac as compared toRs. 25575 lac as at the end of the previous year. Your Company continuesto hold the topmost rating of A1+ from ICRA for its commercial paperprogramme. The rating indicates that the prospect of timely repaymentof debt/obligation is the best.

MANUFACTURING FACILITIES

Chemicals Division :

The Chemicals Division of your Company has manufacturing facilities atVikhroli and Valia.

Valia :During the year under review, Export Oriented Unit (EOU) at Valiastarted commercial production. The factory has commissioned a“Pastillation plant” to cater to the domestic and international demand forlong chain fatty alcohol in pastille form. The Pastillation plant is a fullyautomated plant.

The factory won the National Award for Excellence in WaterManagement in Excellent Category in a competition organised by CII atHyderabad for effecting water recycling mechanism and conservationof natural resources.

Vikhroli :Various initiatives for de-bottlenecking, reducing costs and qualityimprovement has improved the throughput in the various plants.Considering the increasing demand for fractionated fatty acids, yourCompany has decided to increase the fractionation capacity at Vikhroli.During the year, the Vikhroli factory offered Voluntary Retirement Scheme(VRS) to the workers. 322 workers opted for VRS and as a result theworkers strength has reduced to 678.

The factories of the Chemicals Division at Vikhroli and Valia are alreadyISO 9001 certified for their quality management systems. Both factorieshave also been certified to be ISO 14001 compliant by BVQI for theirenvironment management system. Vikhroli factory has also been certifiedfor OHSAS 18001 standards by BVQI.

Foods Division :Foods Division had two manufacturing facilities; viz Wadala (Mumbai),and Mandideep near Bhopal.

On 14th March, 2006, your Company signed a slump sale agreement forthe Foods division with Godrej Tea Ltd. (Now known as Godrej Beverages& Foods Ltd.). As per the agreement, the foods division (except the Ediblefats Wadala factory) has been sold to Godrej Tea Ltd. with effect from theclose of working hours on 31st March, 2006. Post the restructuring Wadalafactory is renamed as the Veg Oils Division of Godrej Industries Ltd.The factory at Mandideep is certified under ISO-14001 standards.The Mandideep Factory was awarded the ‘Best Outsourced ManufacturerAward’ in culinary category for the year 2005 by Hindustan Lever Ltd.

RESEARCH AND DEVELOPMENT

During the year under review, amongst the achievements of R & D ofyour Company the notable ones include collaborative research approachwith detergent manufacturers to develop new generation detergentblends, developing the technology for the manufacture, transportationand storage of high active surfactant products and value addition tosome by-products manufactured by your Company so as to enter certainniche markets. R & D efforts of your Company also focused on increasingintellectual property by filing four new patent applications.


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INFORMATION SYSTEMS

The e-CRM (electronic customer relationship management) module isbeing extended to cover International Customers which reinforces theorganization’s commitment to provide top quality service to all itsstakeholders. The Chemicals Division has also put in place a knowledgeportal ensuring that important tacit knowledge amongst key employeesis retained and reused by the organization.

A number of new initiatives/modules have been added to the employeeportal ‘Godrejite’ for the benefit of employees. These include the onlineaccess for GOLD (Godrej Organisation for Learning & Development)and Legal Online, etc.

EMPLOYEE STOCK OPTION PLAN

The shareholders at their Extraordinary General Meeting held on1st December, 2005 had approved Godrej Industries Limited EmployeeStock Option Plan (GIL ESOP) for grant of 15,00,000 (Fifteen Lac) Optionsconvertible into 15,00,000 (Fifteen Lac) equity shares of the nominalvalue of Rs.6/- each to the employees/directors of the Company and/orits subsidiaries. To start with the Compensation Committee of the Companyin its meeting held on 14th February, 2006 approved the grant of Optionsto the members of the Group Management Committee (GMC) whichcurrently consists of Managing, Executive and Whole-Time Directors ofthe Company and/or its subsidiary companies. Details of the Optionsallotted under GIL ESOP, as also the disclosures in compliance withclause 12 of the Securities and Exchange Board of India (EmployeeStock Option Scheme and Employee Stock Purchase Scheme) Guidelines,1999 are set out in the Annexure B to this Report.

GROUP FOR INTERSE TRANSFER OF SHARES

As required under Clause 3(1)(e) of the Securities and Exchange Boardof India (Substantial Acquisition of Shares and Takeovers) Regulations,1997, persons constituting Group (within the meaning as defined in theMonopolies and Restrictive Trade Practices Act, 1969) for the purpose ofavailing exemption from applicability of the provisions of Regulation 10to 12 of the aforesaid SEBI Regulations are given in Annexure C attachedherewith and the said Annexure C forms part of this Annual Report.

ENVIRONMENT AND SOCIAL CONCERN

Your Company continues its efforts for the betterment of the environmentand conservation of scarce natural resources.

Your Company continued “Rain water harvesting” initiatives undertakenduring the previous year at its factories at Vikhroli and Valia and in thestaff quarters at Vikhroli. “Rain water harvesting” is a process by whichrain water is collected and channelised into tanks for domesticconsumption. So far 7655 Sq.Meter of roof area has been covered underthe rain water harvesting initiative and 13,300 M3 of water has beencollected at Vikhroli factory and staff quarters. This process has resultedin saving water and consequently, the costs, thereof.

To prevent pollution to environment, efforts are made to convert wastefrom the factories into an environment-friendly product and then disposeoff the same safely. Your Company continued its arrangement with TransThane Creek Waste Management Association for the treatment of solidwaste being generated at the Company’s factories at Vikhroli and Wadala.The Vikhroli factory has undertaken a project to convert the biodegradable waste into bio compost with the help of an NGO.

The factories focused on waste elimination and also continued theirenergy conservation measures.

Your Company also commissioned 5 windmills of 1.25 MW each in July-August, 2005 at Dhule in Maharashtra. Windmills generate electricityfrom wind energy and are encouraged for augmenting the powergeneration in the country on account of their non-polluting nature. Windpower producing clean energy is a potential candidate for CleanDevelopment Mechanism (CDM) benefits under the Kyoto Protocol ofUnited Nations Framework Convention on Climate Change (UNFCCC).Your Company has already got approval from the Ministry of Environmentand Forest for the project. Once approved by the UNFCCC, your

Company will be entitled to the benefits of CDM in the form of CertifiedEmission Reduction units (CERs) on the basis of power units generatedthrough windmills.

FIXED DEPOSITS

Your Company has stopped accepting Fixed Deposits from the public.Public Deposits of an aggregate amount of Rs. 180.09 lac which matured,have been repaid during the year.

DEPOSITORY SYSTEM

Your Company’s equity shares are available for dematerialisation throughNational Securities Depository Limited & Central Depository Services(India) Limited. As of 31st March, 2006, 99.39% of the equity shares ofyour Company were held in demat form.

SUB-DIVISION OF EQUITY SHARES

With a view to improve liquidity of Equity Shares of the Company onStock Markets, the Board of Directors of your Company has, subject toapproval of the Members in the forthcoming Annual General Meeting,recommended Sub-Division of Equity Shares of Rs.6/- each into EquityShares of Rs.1/- each. The Company will separately announce the recorddate for sub-division in due course.

DIRECTORS

In accordance with Article 127 of the Articles of Association of theCompany, Mr. J.N. Godrej, Ms. T.A. Dubash, Mr. M. Eipe andMr. V.F. Banaji retire by rotation at the ensuing Annual General Meeting.They are eligible and offer themselves for re-appointment.

AUDITORS

You are requested to appoint Auditors for the current year and fix theirremuneration. The retiring auditors, Kalyaniwalla & Mistry, CharteredAccountants, are eligible for re-appointment. A certificate from theAuditors has been received to the effect that their re-appointment, ifmade, would be within the limits prescribed under Section 224(1B) ofthe Companies Act, 1956.

Pursuant to directions from the Department of Company Affairs, P. M.Nanabhoy & Co., Cost Accountants, have been appointed as Cost Auditorsfor the year 2005-06. They are required to submit their report to theCentral Government within 180 days from the end of the accountingyear.

AUDIT COMMITTEE

The Audit Committee which was constituted pursuant to the provisions ofSection 292A of the Companies Act, 1956 and the listing agreement, hasreviewed the Accounts for the year ended 31st March, 2006. Themembers of the Audit Committee are Mr. F.P. Sarkari (Chairman),Mr. V. N.Gogate and Mr. S.A. Ahmadullah.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the provisions contained in Section 217(2AA) of theCompanies Act, 1956, the Directors of your Company confirm:

a. that in the preparation of the annual accounts, the applicableaccounting standards have been followed and no material departureshave been made from the same;

b. that such accounting policies have been selected and appliedconsistently, and such judgements and estimates have been madethat are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company at the end of the financial yearand of the profit or loss of the Company for that period.

c. that proper and sufficient care has been taken for the maintenanceof adequate accounting records in accordance with the provisionsof this Act for safeguarding the assets of the Company, for preventingand detecting fraud and other irregularities;

d. that the annual accounts have been prepared on a going concernbasis.


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CORPORATE GOVERNANCE

As required by the existing Clause 49 of the Listing Agreements with theStock Exchanges, a detailed report on Corporate Governance is includedin the Annual Report. The Auditors have certified the Company’scompliance of the requirements of Corporate Governance in terms ofClause 49 of the Listing Agreement and the same is annexed to theReport on Corporate Governance.

ADDITIONAL INFORMATION

Annexure D to this Report gives information in respect of Conservationof Energy, Technology absorption and Foreign Exchange earnings andoutgo, required under Section 217(1)(e) of the Companies Act, 1956,read with the Companies (Disclosure of Particulars in the Report of theBoard of Directors) Rules, 1988 and forms a part of the Directors’ Report.

Information as per Section 217(2A) of the Companies Act, 1956, readwith the Companies (Disclosure of Particulars in the Report of the Boardof Directors) Rules, 1988 forms a part of the Directors’ Report. As perthe provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, theReport and Accounts are being sent to the Shareholders of the Company,excluding the statement of particulars of employees u/s 217(2A) of the

Companies Act, 1956. Any shareholder interested in obtaining a copy ofthe same may write to the Company Secretary at the Registered officeof the Company.

The Notes to the Accounts referred to in the Auditors’ Report is self-explanatory and therefore does not call for any further explanation.

ACKNOWLEDGEMENT

Your Directors thank the Union Government, the Governments ofMaharashtra, Madhya Pradesh, Gujarat as also all the Governmentagencies, banks, financial institutions, shareholders, customers,employees, fixed deposit holders, vendors and other related organizations,who, through their continued support and co-operation, have helped aspartners in your Company’s progress.

For and on behalf of the Board of Directors

A.B. GodrejChairman

Mumbai, May 26, 2006


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ANNEXURE "A" FORMING PART OF THE DIRECTORS’ REPORTMANAGEMENT DISCUSSION AND ANALYSISINDUSTRY STRUCTURE AND DEVELOPMENTS

The Indian economy maintained its growth momentum in F.Y 2005-06thanks to industrial resurgence, moderate inflation, growth in internationaltrade, as well as, improving physical infrastructure. The index of industrialproduction and the growth trend for the last 2-3 years indicates anupswing in the economy and a steady growth of industry and servicessector. The positive investor sentiment, evidenced by rise in stock marketindices will also induce investment inflow into the country and augurswell for the economy.

The overall performance of your Company has been satisfactory. Exceptthe Chemicals division, most of the businesses performed better than theprevious year. The division-wise performance and outlook have beencovered separately in this report.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONALPERFORMANCE

The highlights of overall performance excluding extraordinary items areas follows:

Rs. LacParticulars 2005-06 2004-05Sales 74548 76335Total Income 80270 82353Profit Before Taxation 5513 7506Profit After Current Taxation 5431 7105Profit After Current & Deferred Taxation 4014 7575Earnings per Equity Share (Rupees) 8.24 15.58Profitability ratios are as follows:PBDIT/Total Income 13.22% 14.86%PBT/ Total Income 6.87% 9.11%PAT/ Total Income 8.87% 9.20%Return on Capital Employed 11.76% 17.58%Return on Net Worth 12.31% 24.31%Basic EPS (Rs.) 8.24 15.58The Financial risk ratios are as follows:Debt/Equity 0.94 0.77Interest coverage 2.94 3.91

SEGMENT PERFORMANCE (Rs. Lac)2005-06 2004-05

1. Segment RevenueChemicals 51178 54307Foods 21117 19197Estate 2282 2158Finance & Investments 4575 5823Others 1118 868Total 80,270 82,353

2. Segment Results (PBIT)Chemicals 4,760 6,230Foods (341) (857)Estate 1472 1361Finance & Investments 4575 5373Others (112) 115Total 10354 12222Less: Interest (Net) (2837) (2582)Less: Unallocated expenses (Net) (2004) (2134)Profit Before Tax 5513 7506

3. Segment Capital EmployedChemicals 24448 17732Foods 3277 4733Estate 2331 2750Finance & Investments 40239 36123Others 3413 304Unallocated (41) 30Total 73667 61672

CHEMICALS DIVISION

The Chemicals division operates in the oleo-chemicals and surfactantsindustries. The division has a blend of domestic and internationaloperations and continued its leadership position in the Indian market.With its strong manufacturing base and integrated systems, the divisionhas been able to manufacture quality products and offer them atcompetitive prices. The sales of the division dropped about 6% in valueterms during the year largely on account of a significant drop in theselling prices internationally, coupled with reduction in customs duty,which affected the domestic prices.

The products category-wise review follows:

Fatty Alcohol

Fatty Alcohol accounted for 47% of the turnover of the division. Thecategory declined 8% in value, both on account of lower selling pricesand lower volumes. Effective pricing strategies, customer relationshipsand initiatives in the areas of product development, packaging andlogistics, helped maintain good share in the domestic and internationalmarket, despite increased competition.

The division is now working with major multi nationals to become theirpreferred global supplier. The capacity expansion through an ExportOriented Unit (EOU) was achieved in late March 2006, which willincrease the capacity in this product category by about 60% and isexpected to increase the revenue in the coming year.

Glycerin

Glycerin accounted for 7% of the turnover of this division. Revenuedeclined 8% over last year, owing to the sharp decline in the internationalprice of refined glycerin, though there was a volume growth of over7%. Prices having bottomed out, the opportunity now lies in marketexpansion as glycerin could possibly substitute other polyols on accountof its competitive price.

Surfactants

Your Company is the pioneer, as well as, market leader in the productionof Alpha Olefin Sulphonate (AOS) in India, a surfactant used in severalwell-known shampoos and detergent brands in the country. Surfactantscontributed 10% to the turnover of Chemicals division. Sales of surfactantcategory declined 23% in volume and 20% in value terms on accountof the steep increase in the price and paucity of Alpha Olefin (AO)which is petroleum based raw material. The increased cost of AOS hasaffected the margin, as also the off-take.

The division is looking at alternative uses of the sulphonation capacityavailable and is exploring other value added products in this segment.

High AO prices have now made manufacture of oleo chemical AOviable and the division is planning to produce AO - C16 from vegetableoils in the coming year.

Fatty Acids

The fatty acids portfolio comprising stearic acid, oleic acid, as well as,specialty fatty acids accounted for about 35% of the turnover of the division.Continuous cost reduction and market development initiatives have helpedgrow this category by about 9% in volume and 3% in value terms. Thedivision is taking necessary steps to strengthen its position in this categoryand counter competition from imports, as well as, small players.

Other initiatives

The division has engaged Goldratt Consulting, well-known for their‘Theory of Constraints’, to apply these principles for business improvement.This is expected to benefit the division in terms of improved plantthroughput, better supply chain and project management.


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Outlook

The outlook for the coming year 2006-07 is mixed at this point in time.Internationally, new capacities have been announced for oleo chemicalfatty alcohols, which is likely to increase the availability. At the sametime, steep increase in the price of mineral oil is impacting petrochemicalfatty alcohol plants which are expected to be under cost and marginpressure, which may curtail output. The increase in bio-dieselmanufacturing capacity is expected to impact vegetable oil prices. Thestrong growth in demand for fast moving consumer goods (FMCG) andthe other industry segments that the division caters to, augurs well forthe products of the Chemicals division.

The business initiatives to strengthen distribution, improve supply chainand customer relationship management, backed by expansion in capacityare expected to help grow revenue, as well as, profits of the business.

FOODS DIVISION

The Foods Division recorded sales of Rs. 21,117 lac during the yearunder review as compared to Rs.19197 lac in the previous year clockinga growth of about 10%.

Industry Outlook

The Prices of Edible oils continued to show a bearish trend in view ofhigher domestic production and in spite of a growing demand for biodiesel in the international markets. Intense competition in the categoryand underutilization of plant capacities prevented a rise in selling prices.Heavy imports of cheap Sri Lankan Vanaspati impacted the domesticindustry adversely.

The Processed Foods Division saw the Fruit Juice category register goodgrowth rates in light of increasing consumer preference over carbonatedsoft drinks. In spite of a good mango crop, higher prices of pulp led tolower off takes and a pressure on margins.

There are two categories in this Division, viz., Edible Fats and ProcessedFoods.

Edible Fats Division

The turnover during the year under review was Rs. 14,228 lac. Intensecompetition by large players impacted this business. The divisioncontinued to focus on increasing margins and selling only in profitableareas. As a result, the growth in sales of edible oils and Vanaspati duringthe year was marginal.

Processed Foods Division

The turnover of products in this category was Rs. 5,985 lac as comparedto Rs. 4,223 lac during the previous year, recording a growth of 41%.

The Division produces and markets fruit drinks, fruit nectars and juicesin Tetrapak, undertakes processing for third parties and also sells fruitpulp. The fruit drinks category in Tetrapak saw intense competitivepressures with a number of new players launching their brands thisyear. In this scenario, the division focused on the trade sales segment toimprove the sale of “Jumpin” fruit drink.

This year the division invested in brand building activities (e.g. mediaadvertising) on Xs and Sofit which was essential to improve sales in thehighly competitive segment of the beverages market. This helped ingrowing the sales value of Xs by 39% and of “Sofit” by 18%. Thedivision launched two new flavours under its ‘SOFIT’ brand viz., KesarPista and Malt Chocolate, for which the response has been good.

The division saw a good growth over last year in third party processingof pulp/squash/jam at the Mandideep Factory. The factory was alsoadjudged ‘Best Outsourced Manufacturer- Culinary category’ byHindustan Lever Limited.

Over all, the focus of the Division continued to be predominantly onimproving profitability in both the above categories during the year byfocusing on high margin products, restricting sale to profitable areas,

tight control on working capital usage and engaging the NationalProductivity Council for productivity improvements at the Mandideepfactory. This division too is applying the relevant principles of Theory ofConstraints to improve its business.

Restructuring

On 14th March, 2006, your company signed an agreement with GodrejTea Ltd. (now known as Godrej Beverages & Foods Ltd.) for the sale ofthe Foods division. As per the agreement, the foods division (except theEdible fats Wadala factory) has been sold to Godrej Tea Ltd. for aconsideration of Rs 70 crore with effect from close of working hours of31st March, 2006. Post the restructuring, Wadala factory is renamed asthe Veg Oils Division of Godrej Industries Ltd.

Future Outlook

As per the above restructuring, the Vegoils division of Godrej IndustriesLtd is expected to sell oil in bulk and also carry out processing for thirdparties.

Estate Management

Mumbai continues to be perceived as a suitable location with good infrastructure and availability of skilled manpower by the BPO sector. Increasein real estate prices and the rentals has made the CBD area less affordableand the suburbs are now more in demand. Your Company continues toeffectively utilize the available space by giving the unutilized space onleave and licence basis to reputed corporates for their back officeoperations. The green environment and good infrastructure with closeproximity to the CBD, airport and surburbs are major advantages makingVikhroli a preferred location. The total income from this business for theyear was about Rs. 2,280 lac as compared to Rs.2,166 lac previous yearan increase of 5%.

Medical Diagnostics

The Medical Diagnostics Division is in the business of distribution ofdiagnostic equipment and consumables to the medical community. Thisdivision achieved a turnover of Rs.958 lac for the year, recording agrowth of 19% in value terms over the previous year. The focus of theDivision was on implementation of rigorous sales and operation planning(S&OP) process and reduction in Net Working Capital.

The division plans to increase its product portfolio by introduction of anew range of Biochemistry Analysers. The Division also plans to extendits sales activities to SAARC countries, particularly Sri Lanka andBangladesh.

FINANCE AND INVESTMENTS

Dividend income for the year was Rs. 2,275 lac (previous year Rs.2,236lac) and profit on sale of investment Rs. 2120 lac (mainly arising out of1% stake sold in Godrej Consumer Products Limited).

Your Company invested Rs.866 lac in its 100% subsidiary GodrejInternational Limited which is into international trading to strengthen itsbase. Your Company also invested in Boston Analytics LLC (a KPO inresearch and analysis) for a stake of 18.5%.

Your Company sold its stake in Godrej Remote Services Ltd. which wasinto medical transcription business to CBay Systems Ltd. and alsoconsolidated its stake in CBay systems Ltd. Your Company now holds16.63% stake in CBay Systems Ltd.

HUMAN RESOURCES, INDUSTRIAL RELATIONS

Industrial Relations at all locations were cordial. At the Chemicals’ plantin Vikhroli a restructuring exercise was initiated and as a result workersstrength has reduced by 32%. Following restructuring exercise, longterm settlement was signed with the workers amicably settling all thepending industrial disputes. Similar long term settlement was also signedwith the Valia unit.


17

Your Company formed the Godrej Industries Limited Employees’ GroupGratuity Trust to manage the gratuity funds. Rs. 12 crore of the gratuityliability of the company has been funded and has been invested in thegroup gratuity schemes of reputed insurance companies. The investmentshave yielded an average return of 11.8% p.a. for the period endedMarch 31, 2006.

The total number of persons employed in your Company as onMarch 31, 2006 was 1711.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your Company has a proper and adequate system of Internal Controls, toensure that all assets are safeguarded and protected against loss fromunauthorised use or disposition and that transactions are authorised,recorded and reported correctly.

Recently, the Corporate Audit and Assurance Department of yourCompany got certified under ISO 9001: 2000. It issues well documentedoperating procedures and authorities with adequate built-in controls atthe beginning of any activity and any time there is a major change.

The internal control is supplemented by an extensive programme ofinternal, external audits and periodic review by the management.Consequent to the amendment in Clause 49 of the Listing Agreement bySEBI, the Corp Audit and Assurance Dept. facilitated formaldocumentation, implementation and review of Internal Controls at alllocations.

The system is designed to adequately ensure that financial and otherrecords are reliable for preparing financial information and other dataand for maintaining accountability of assets.

OPPORTUNITIES AND THREATS

Increased global demand fuelled by growth in end-user industries coupledwith your Company’s standing for consistent quality and product deliverycustomized to the needs of the clients, provides good opportunity forgrowth for the Chemicals division. At the same time, new capacityaddition in the industry is likely to increase competition from the supplyside.

In the Medical Diagnostics Division, the opportunity is the large growingmiddle class medically aware consumer and the increasing focus onmedical insurance. Threat could be obsolescence of technology / productswhich are more than 10 years old.

RISKS AND CONCERNS

Your Company had undertaken a comprehensive review of its riskmanagement process and has put a risk management framework inplace. The review involved understanding the existing risk managementinitiatives, zero-based identification and assessment of risks in the variousbusinesses as also the relative control measures and developingappropriate risk response strategy for various risks identified whilekeeping in mind the risk appetite of the organization. A risk committeehas been constituted to periodically review the risks and developappropriate response strategies to ensure achievement of company’sobjectives.

The commodity based businesses are likely to be affected by vagaries ofthe weather, demand for edible oil, oilseed production, etc. The businessis exposed to commodity price risks relating to raw materials whichaccount for the largest portion of the costs of both these businesses. TheChemicals business growth will also depend on the growth of end userindustries like polymer, detergent, cosmetics and personal care.

As a significant employer and chemical producer, to ensure occupationalsafety, employment standards, production safety, and environmentalprotection, your Company maintains strict safety, health, environmentalprotection and quality control programs to monitor and control theseoperational risks.

Macro economic factors including economic and political developments,natural calamities which affect the industrial sector generally wouldalso affect the businesses of your Company. Legislative changes resultingin a change in the taxes, duties and levies, whether local or central,also impact business performance and relative competitiveness of thebusinesses.

CAUTIONARY STATEMENT

Some of the statements in this management discussion and analysisdescribing the Company’s objectives, projections, estimates andexpectations may be ‘forward looking statements’ within the meaning ofapplicable laws and regulations. Actual results might differ substantiallyor materially from those expressed or implied. Important developmentsthat could affect the Company’s operations include a downtrend in industry,significant changes in political and economic environment in India, taxlaws, import duties, litigation and labour relations.


18

As per the Securities & Exchange Board of India (Employee Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines, 1999 followinginformation is disclosed in respect of Godrej Industries Limited Employee Stock Option Plan :

Sr. No. Heading Particulars

a. Options granted 3,50,000

b. The pricing formula Market Price plus Interest at such rate not being less thanthe Bank Rate then prevailing, compoundable on an annualbasis for the period commencing from the date of Grant ofthe Option and ending on the date of intimating Exercise ofthe Option to the Company

c. Options vested NIL

d. Options exercised NIL

e. The total number of shares arising as a result of exercise of option 3,50,000 equity shares of nominal value of Rs.6/- each

f. Options lapsed NIL

g. Variation of terms of options NIL

h. Money realized by exercise of options NIL

i. Total number of options in force 3,50,000

j. Employee wise details of options granted to:i) senior managerial personnelii) any other employee who receives a grant in any one year of option As per attached statement

amounting to 5% or more of option granted during that year.iii) identified employees who were granted option, during any one year, NIL

equal to or exceeding 1% of the issued capital (excluding outstandingwarrants and conversions) of the company at the time of grant

k. Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of There is no fresh issue of shares hence, not applicable.option calculated in accordance with Accounting Standard (AS) 20‘Earnings Per Share’.

l. Where the company has calculated the employee compensation cost using the The company has calculated the employee compensationintrinsic value of the stock options, the difference between the employee cost using the intrinsic value of stock options. Had the faircompensation cost so computed and the employee compensation cost that shall value method been used, in respect of stock options grantedhave been recognized if it had used the fair value of the options, shall be disclosed. the employee compensation cost would have been higherThe impact of this difference on profits and on EPS of the company shall by Rs. 2.06 crore, Profit after tax lower by Rs. 2.06 crorealso be disclosed. and basic EPS would have been lower by Rs. 0.42

m. Weighted-average exercise prices and weighted-average fair values of Exercise price Rs. 392.35 plus interest as mentioned inoptions shall be disclosed separately for options whose exercise price either pricing formulaequals or exceeds or is less than the market price of the stock. Fair Value Rs. 175.99

n. A description of the method and significant assumptions used during the year The fair value of the options granted on 14th Feb 2006 hasto estimate the fair values of options, including the following weighted-average been calculated using Black–Scholes Options pricinginformation: formula and the significant assumptions made in this regard

are as follows:

i) risk-free interest rate 7.11%

ii) expected life 4 years

iii) expected volatility 65%

iv) expected dividends 1.27%Rs. 5 per share

v) the price of the underlying share in market at the time of option grant Rs. 392.35

ANNEXURE B FORMING PART OF THE DIRECTORS’ REPORT

Statement attached to Annexure B to the Directors’ Report for the year ended 31st March, 2006.

Name of senior managerial persons to whom stock options have been granted Number of options granted

Mr. Mathew Eipe 50,000Mr. Visty Banaji 50,000Mr. Mohan Pusalkar 50,000Mr. C. K. Vaidya 50,000Mr. Hoshedar Press 50,000Mr. Milind Korde 50,000Mr. A. Mahendran 50,000

}


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The following is the list of persons constituting Group (within the meaning as defined in the Monopolies and Restrictive Trade Practices Act, 1969) for thepurpose of availing exemption from applicability of the provisions of Regulation 10 to 12 of Securities and Exchange Board of India (SubstantialAcquisition of Shares and Takeovers) Regulations, 1997 (“the said Regulations”), as provided in Clause 3(1)(e) of the said Regulations:

ANNEXURE "C" FORMING PART OF THE DIRECTORS’ REPORT

30 Krithika Agro Farm Chemicals & Engineering Industries Pvt. Ltd.

31 Aadhaar Retailing Ltd.

32 Mercury Mfg. Co. Ltd.

33 Godrej Efacec Automation & Robotics Ltd.

34 Godrej Upstream Ltd.

35 Godrej Holdings Pvt. Ltd.

36 Cartini India Ltd.

37 Godrej (Vietnam) Co. Ltd.

38 J T Dragon Pte Ltd.

39 Mr Adi B Godrej

40 Mrs Parmeshwar A Godrej

41 Ms Nisa A Godrej

42 Mr Pirojsha A Godrej

43 Mrs Tanya A Dubash

44 Mr Jamshyd N Godrej

45 Mrs Pheroza J Godrej

46 Ms Raika J Godrej

47 Mr Navroze J Godrej

48 Mr Nadir B Godrej

49 Mrs Rati N Godrej

50 Mst. Burjis N Godrej

51 Mst. Sohrab N Godrej

52 Mst. Hormuzd N Godrej

53 Mr Vijay M Crishna

54 Mrs Smita V Crishna

55 Ms Freyan V Crishna

56 Ms Nyrika V Crishna

57 Mr Rishad K Naoroji

1 Godrej & Boyce Mfg. Co. Ltd.2 Godrej Consumer Products Ltd.3 Ensemble Holdings & Finance Ltd.4 Godrej Hicare Ltd.5 Godrej Agrovet Ltd.6 Goldmohur Foods & Feeds Ltd.7 Golden Feed Products Ltd.8 Godrej Properties Ltd.9 Girikandra Holiday Homes & Resorts Ltd.10 Godrej Beverages & Foods Ltd.11 Godrej Global Solutions Ltd.12 Godrej Global Solutions (Cyprus) Limited13 Godrej Global Solutions, Inc.14 Godrej International Ltd.15 Godrej Global Mid East FZE16 Swadeshi Detergents Ltd.17 Vora Soaps Ltd.18 Godrej Foods Ltd.19 Tahir Properties Ltd.20 Bahar Agrochem & Feeds Pvt. Ltd.21 Prashant Metal Forming Industries Pvt. Ltd.22 Godrej Investments Pvt. Ltd.23 Godrej Infotech Ltd.24 Godrej (Malaysia) Sdn Bhd25 Godrej (Singapore) Pte Ltd.26 Godrej Appliances Ltd.27 Lawkim Ltd.28 Godrej Realty Pvt. Ltd.29 Godrej Waterside Properties Pvt. Ltd.

INFORMATION PURSUANT TO SECTION 217(1)(e) OF THE COMPANIESACT, 1956, READ WITH THE COMPANIES (DISCLOSURE OFPARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES,1988 IN RESPECT OF CONSERVATION OF ENERGY, TECHNOLOGYABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO

A. Conservation of Energy

I. (A) Energy Conservation measures undertaken:

� Installation of Vapor Absorption Chilling System at Flakersreplacing mechanical chillers to get power saving.

Installation of Vapor Absorption Chilling System in AOS plant inplace of conventional mechanical chilling system to get powersaving.

� Automation of High Pressure Boiler by installing PLC based controlsalong with Variable Frequency drive in pump and blowers toincrease efficiency as well as power saving.

ANNEXURE 'D' FORMING PART OF THE DIRECTORS’ REPORT� Installation of UP FLOW Anaerobic Sludge Blanket reactor to

reduce COD load on affluent water without surface aerators.

� Energy Audit by CII and implementation of 32 projects suggestedthereat

� Installation of Suzlon make 5 wind mills of 1.25 MW capacity &commissioning of power generation at Dhulia.

� Installation of 15 variable frequency drives (VFD) on CoolingTower Fans.

� Installation of power factor correction Panel to improve powerfactor (PF) to 0.99

� Installation of energy-efficient motors in Plants.

� Installation of 400 KVA UPS to maximize use of MPSEB power toreduce run of DG Set.

� Installation of power factor correct (PF) panel to improve powerfactor.

� Energy audit by National Productivity Council


20

(B) Proposed energy conservation measures� Recovery of flash steam from Co-generation Plant Blow down.

This steam will be used to heat Boiler feed water in deaerator.� Scheduled monitoring of stacks of all furnaces to further improve

efficiency.� Improvement in heat recovery of steam condensate collection

from tank farms.� Energy saving light fixtures� Energy efficient motors� VFD for process Pumps in Plants

II. Impact of measures on reduction of energy consumption andconsequent impact on the cost of production of goods:-

Saving in energy costs during the period under consideration.

III. Details of energy consumption

The details of energy consumption are given below. These detailscover the operations of your Company’s factories at Vikhroli, Valia,Wadala and Mandideep.

a) Power and Fuel consumptionThis Year Previous Year

Electricityi) Purchased

Units (kWh in lac) 198.78 166.45Total Amount (Rs. in lac) 1037.53 849.27Rate per Unit (Rs.) 5.22 5.10

ii) Own generated through D.G. SetsUnits (kWh in lac) 19.83 47.10Cost (Rs. in lac) 131.65 239.83Rate per unit (Rs.) 6.64 5.09

iii) Own generated through SteamTurbine Generator -Co-generationUnits (KWh in lac) 277.91 269.91Cost (Rs. in lac) 988.29 900.87Rate per Unit (Rs.) 3.56 3.34Fuel Oil (LSHS, FO and LDO)Total Quantity (KL) 4510.42 3994.67Total Amount (Rs. in lac) 802.68 565.67Rate per unit (Rs. per litre) 17.80 14.16Natural GasTotal Quantity (SM3 lac) 401.30 341.50Total Amount (Rs. in lac) 3460.90 2738.6Rate per unit (Rs. per SM3) 8.62 8.02PitchesTotal Quantity (MT) 650.09 294.00Total Cost (Rs. in lac) 44.67 21.40Rate per unit (Rs. per MT) 6870.67 7278.91

b) Consumption per unit of production

Natural Gas Electricity Furnace Oil Pitches

(SM3/MT) (kWh/MT) (Litre/MT)

2005-06 2004-05 2005-06 2004-05 2005-06 2004-05 2005-06 2004-05

Fatty Acid 77.78 78.12 93.41 86.88 10.04 5.34 8.79 4.931

Fatty Alcohol 94.77 79.88 408.29 369.11 6.86 3.93 – –

Alpha Olefin

Sulphonate 49.33 47.92 104.61 90.82 8.99 5.86 1.14 0.45

Fruit Juice/ Pulp – – 149.42 70.49 36.20 15.27 – –

Oils/Vanaspati – – 182.49 160.36 77.52 74.00 6.64 –

Glycerin 458.40 524.18 588.72 610.02 53.01 32.37 25.85 13.56

B. Technology Absorption, Adaptation and Innovation

I. Specific areas in which R&D carried out by the Company -

During the year under review, Research & Development efforts inthe following areas strengthened the Company’s operations throughtechnology absorption, adaptation and innovation :

a. Oils & Fatty Acids

b. Fatty Alcohols

c. Surfactants

d. Glycerin

e. Product Application Group

f. Fruit Juices/ Soymilk

2. Benefits derived as a result of the above R&D -

a. Collaborative research with detergent manufacturers todevelop new generation detergent blends.

b. Developing the technology for the manufacture, transportation& storage of high active surfactant products.

c. Expansion of Odour Profiling capabilities by incorporating/outsourcing the use of instrumental analytical tools.

d. Focus on adding value to some of the by-products, in order toenter niche markets – Fatty Acid Esters.

e. Patent applications for four processes

3. Future Plan of Action -

a. Developing different variants of surfactant products.

b. Developing speciality surfactants for niche markets.

c. Developing cost effective, mixed active detergentformulations.

d. Focus on adding value to some of our existing products –Glycerol Derivatives.

No technology has been imported during the year.

4. Expenditure on R&D ThisYear Previous YearRs. lac Rs. lac

(a) Capital Nil Nil(b) Recurring 139.39 108.38(c) Total 139.39 108.38(d) Total R & D expenditure as a

percentage of total sales turnover 0.19% 0.14%

C. Foreign Exchange earnings and outgo:

The Chemicals Division’s exports were Rs. 17561 lac in the currentyear (including deemed exports of Rs. 2889 lac) as compared to Rs.17570 lac in the previous year (including deemed exports Rs. 2716lac) to. The Company continues to export refined glycerin, fatty alcoholand other chemicals to over 50 countries including U.S.A., U.A.E.,Japan, South Africa, Germany, U.K., France, Malaysia, China,Australia, Mexico, Singapore and Srilanka.

ThisYear Previous YearRs. lac Rs. lac

Foreign exchange used 26049 18091

Foreign exchange earned 15150 15373


21

Clause 49 of the listing agreement with the Indian Stock Exchangesstipulates the norms and disclosure standards that have to be followedon the corporate governance front by listed Indian companies.

The Company is a part of the Godrej Group which has established areputation for honesty and integrity. The Company’s philosophy ofcorporate governance is to achieve business excellence by enhancingthe long term welfare of all its stakeholders. We believe that corporategovernance is much more than Rules, Boards, Committees. It is aboutcreating outperforming organisations, i.e. organizations that consistentlysucceed in the marketplace against competition and thereby enhancethe value of all its stakeholders.BOARD OF DIRECTORSa) Board Structure

The Board of Directors of Godrej Industries Limited (GIL) comprisesthirteen Directors, which include one Managing Director and fourWhole-Time Executive Directors. The remaining eight are Non-Executive Directors, with five of them being Independent Directors.The details are given in Table 1.

b) Board meetings held & Directors’ attendance recordThe Board meets atleast once in a quarter to consider among otherbusiness, quarterly performance of the company and financial results.To enable the Board to discharge its responsibilities effectively andtake informed decisions, the necessary information is made availableto the Board. During the year six Board meetings were held onMay 30, 2005, July 26, 2005 October 24, 2005, December 13,2005, January 31, 2006 and March 7, 2006. The details are givenbelow.Table 1: Details about GIL’s Board of Directors & meetings attendedby the Directors during the yearName of Category Board Board Whether Director- NumberDirector meet- meetings attended ships of Chair-

ings attended last AGM held in manship/held during public member-

during the comp- ship inthe year anies other

year incorpo- Boardrated Commit-

in India tees as atas at the year

year end end

Chairm- Mem-anship bership

A.B. Godrej Chairman – Non-Executive 6 6 Yes 12(3) 3 1J.N. Godrej Non-Executive 6 4 Yes 14 (5) 1 3N.B. Godrej Managing Director 6 6 Yes 13(4) 4 3S.A. Ahmadullah Non-Executive -

Independent 6 6 Yes 3(1) Nil 1V.M. Crishna Non-Executive 6 2 No 7(2) Nil NilK.K. Dastur Non-Executive -

Independent 6 5 Yes 6(2) 2 NilV.N. Gogate Non-Executive -

Independent 6 6 Yes 1(1) Nil 1K.N. Petigara Non-Executive -

Independent 6 6 Yes 6(1) Nil 2F.P. Sarkari Non-Executive -

Independent 6 5 Yes 3(1) 2 1V.F. Banaji Whole-time 6 5 No 1(1) 1 1T.A. Dubash Whole-time 6 5 Yes 5(1) Nil 1M. Eipe Whole-time 6 4 Yes 3(1) Nil 1M.P. Pusalkar Whole-time 6 6 Yes 2(2) 1 2

Notes :

1. Figures in ( ) denote listed companies.

2. Board Meetings held during the year represent the no. ofmeetings held during the tenure of that Director.

None of the Directors is a member of more than 10 Board-levelcommittees, or a Chairman of more than five such committees, asrequired under Clause 49 of the listing agreement.

c) Information supplied to the Board

Among others, this includes:

� Annual operating plans and budgets, capital budgets, and anyupdates thereon,

REPORT ON CORPORATE GOVERNANCE� Quarterly results of the Company,� Minutes of meetings of audit committee and other committees,� Information on recruitment and remuneration of senior officers

just below the Board level,� Materially important show cause, demand, prosecution and

penalty notices,� Fatal or serious accidents or dangerous occurrences,� Any materially significant effluent or pollution problems,� Any materially relevant default in financial obligations to and

by the Company or substantial non-payment for goods sold bythe Company,

� Any issue which involves possible public or product liabilityclaims of a substantial nature,

� 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,� Significant development in the human resources and industrial

relations front,� Sale of material nature of investments, subsidiaries, assets, which

is not in the normal course of business,� Quarterly details of foreign exchange exposure and the steps

taken by management to limit the risks of adverse exchangerate movement,

� Risk assessment and minimization procedures, and� Non-compliance of any regulatory, statutory nature or listing

requirements as well as shareholder services such as non-payment of dividend and delays in share transfer.

The Board of GIL is regularly presented with all information underthe above heads, whenever applicable. These are submitted eitheras part of the agenda papers well in advance of the Board meetingsor are tabled in the course of the Board meetings.

d) Directors with materially significant related party transactions,pecuniary or business relationship with the Company

Except for drawing remuneration, none of the Directors have anyother materially significant related party transactions, pecuniary orbusiness relationship with the Company.

e) Remuneration of Directors: sitting fees, salary, perquisites andcommissions and Number of Shares held by Non-Executive Directors

The details of remuneration package of Directors and theirrelationships with each other are given in Table 2. The number ofshares held and dividend paid are given in Table 3.

Table 2 : Remuneration in Rupees paid or payable to Directors forthe year ended March 31, 2006Name of Director Relationship with Sitting Commission Salary Perquisites Provident Total

Directors fees on profits Fund

A. B. Godrej Brother of N.B.GodrejFather of T.A. Dubash 240000 Nil Nil Nil Nil 240000

J. N. Godrej None Nil Nil Nil Nil Nil NilN. B. Godrej Brother of A.B.Godrej Nil Nil 7381877 340000 489600 8211477S. A. Ahmadullah None 160000 Nil Nil Nil Nil 160000V. M. Crishna None 40000 Nil Nil Nil Nil 40000K. K. Dastur None 100000 Nil Nil Nil Nil 100000V . N. Gogate None 160000 Nil Nil Nil Nil 160000K. N. Petigara None 140000 Nil Nil Nil Nil 140000F. P. Sarkari None 120000 Nil Nil Nil Nil 120000V. F. Banaji None Nil Nil 6990186 414432 302400 7707018T. A. Dubash Daughter of A.B.Godrej Nil Nil 4666877 94467 295200 5056544M. Eipe None Nil Nil 5498193 383957 374400 6256550M. P. Pusalkar None Nil Nil 4374888 313727 204480 4893095


22

Notes :

Salary to Mr. N.B. Godrej, Mr. V.F. Banaji, Ms. T. A. Dubash,Mr. M. Eipe and Mr. M.P. Pusalkar includes a performancelinked variable remuneration of Rs. 853877, Rs. 3390210,Rs. 853877 and Rs. 846693 and Rs. 1475000 respectively for theyear ended March 31, 2006 payable in 2006-07.

The service contracts of the Whole-Time Directors are for a periodof three years with a notice period of three months.

Table 3: Number of shares held by Non-Executive Directors anddividend paidName of Shares held as on Dividend paid duringNon-Executive Director March 31, 2006 the year (Rupees)

F.P. Sarkari 3265 13060

S.A. Ahmadullah 1000 4000

V.M. Crishna 75013 300052

V.N. Gogate 313 1252

K.K. Dastur 351 1404

f) Committees of the Board

Audit Committee

GIL’s audit committee comprises of three Independent & Non-ExecutiveDirectors. They are Mr. F.P. Sarkari (Chairman), Mr. S.A. Ahmadullah andMr. V.N. Gogate. Mr. F.P. Sarkari is the Chairman of the Committee. Mr.Sarkari is a qualified Chartered Accountant and is knowledgeable infinance, accounts and Company Law. All the members of the committeeare eminent professionals and draw upon their experience and expertiseacross a wide spectrum of functional areas such as finance and corporatestrategy. Minutes of each of the audit committee meetings are placedbefore the Board meetings. Mr. S.K. Bhatt, Executive Vice-President(Corporate Services) & Company Secretary acts as secretary to the auditcommittee. The audit committee met four times during the year. Table 4gives the attendance record.

Table 4: Attendance record of audit committee members

Name of Director No. of meetings held Meetings attended

Mr. F.P. Sarkari 4 4

Mr. S.A. Ahmadullah 4 4

Mr. V.N. Gogate 4 4

The Audit Committee of GIL performs the following functions :

� Overview of the Company’s financial reporting process and thedisclosure of its financial information to ensure that the financialstatement is correct, sufficient and credible.

� Recommending the appointment and removal of external auditor,fixation of audit fee and approval for payment for any other services.

� Reviewing with management the annual financial statements beforesubmission to the board, focusing primarily on

� Matters required to be included in the Directors ResponsibilityStatement to be included in the Boards Report in terms of Clause(2AA) of Section 217 of the Companies Act, 1956.

� Any changes in accounting policies and practices.� Major accounting entries based on exercise of judgement by the

management.� Qualifications in draft audit report.� Significant adjustments arising out of audit.� The going concern assumption.� Compliance with accounting standards.� Compliance with stock exchanges and legal requirements

concerning financial statements.� Any related party transactions, i.e. transactions of the Company

of material nature, with promoters or the management, theirsubsidiaries or relatives, etc. that may have potential conflictwith the interests of Company at large.

� Reviewing with the management, external and internal auditors, theadequacy of internal control systems.

� Reviewing the adequacy of internal audit function including thestructure of internal audit department, staffing and seniority of theofficial heading the department, reporting structure coverage andfrequency of internal audit.

� Discussing with internal auditors any significant findings and followingit up.

� Reviewing the findings of any internal investigations by the internalauditors into matters where there is suspected fraud or irregularity orfailure of internal control systems of a material nature and reportingthe matter to the Board.

� Discussing with external auditors before the audit commences, natureand scope of audit as well as conducting post-audit discussion toascertain any area of concern.

� Reviewing the Company’s financial and risk management policies.

� Looking into the reasons for substantial defaults in payment todepositors, debenture holders, shareholders (in case of non-paymentof declared dividend) and creditors.

� Reviewing the functioning of Whistle Blower mechanism.

Compensation Committee

Setting up of a Compensation Committee for determining a company’spolicy on remuneration packages for Executive Directors constitutes anon-mandatory provision of Clause 49. GIL set up its RemunerationCommittee on February 22, 2002 to review the human resources policiesand practices of the Company and, in particular, policies regardingremuneration of Whole-Time Directors. The committee discusses humanresources policies such as compensation and performance of management.The Remuneration Committee was renamed as Compensation Committeeby the Board of Directors at its meeting held on October 24, 2005.

GIL’s Compensation Committee consists of the following directors: Mr. S.A.Ahmadullah (Chairman and Independent Director); Mr. N.B. Godrej(Managing Director); Mr. V.N. Gogate (Independent Director) and Mr. K.N.Petigara (Independent Director). During the year ended March 31, 2006,the committee met four times. The attendance details are given in Table 5.

Table 5: Attendance record of Compensation Committee members

Name of Director No. of meetings held Meetings attended

Mr. S.A. Ahmadullah 4 4

Mr. V.N. Gogate 4 4

Mr. K.N. Petigara 4 4

Mr. N.B. Godrej 4 2

Mr. S.K. Bhatt, Executive Vice-President (Corporate Services) & CompanySecretary acts as the secretary to the Committee.

GIL has adopted EVA as a tool for driving performance, and has linkedimprovements in EVA to performance linked variable remuneration (PLVR)of Managing Director, Whole-Time Directors, managers and officers ofthe company.

Shareholders Committee

Among other functions, this committee looks into redressal of shareholdercomplaints regarding transfer of shares, non-receipt of balance sheet andnon-receipt of declared dividends, as required in clause 49 of the ListingAgreement. The committee consists of the following members:Mr. A.B. Godrej (Chairman), Mr. V.F. Banaji, Ms. T.A. Dubash, Mr. M. Eipe andMr. M.P. Pusalkar. During the year, 18 meetings of the Committee were held.Mr. S.K. Bhatt, Executive Vice-President (Corporate Services) & CompanySecretary acts as secretary to the Committee.Name and designation of Compliance OfficerMr. S. K. Bhatt, Executive Vice-President (Corporate Services) & CompanySecretary.


23

Number of complaints regarding shares for the year endedMarch 31, 2006

Complaints outstanding as on April 1, 2005 Nil

Complaints received during the year ended March 31, 2006 94

Complaints resolved during the year ended March 31, 2006 94

Complaints outstanding as on March 31, 2006 Nil

There are no pending share transfers as on March 31, 2006.

MANAGEMENT

a) Management discussion and analysis

This annual report has a detailed chapter on management discussionand analysis.

b) Disclosures by management to the Board

All details relating to financial and commercial transactions whereDirectors may have a potential interest are provided to the Board,and the interested Directors neither participate in the discussion, nordo they vote on such matters.

DISCLOSURES

Whistle Blower Policy

With a view to establish a mechanism for protecting the employees reportingunethical behaviors, frauds, violation of Company’s Code of Conduct, theBoard of Directors has adopted a Whistle Blower Policy. During the year2005-06, no personnel has been denied access to the Audit Committee.

Details of compliance with mandatory requirementParticulars Clause of Compliance Status

Listing Agreement Yes / No

I. Board of Directors 49 I(A) Composition of Board 49 (IA) Yes(B) Non-executive Directors’ compensation & disclosures 49 (IB) Yes(C) Other provisions as to Board and Committees 49 (IC) Yes(D) Code of Conduct 49 (ID) YesII. Audit Committee 49 (II)(A) Qualified & Independent Audit Committee 49 (IIA) Yes(B) Meeting of Audit Committee 49 (IIB) Yes(C) Powers of Audit Committee 49 (IIC) Yes(D) Role of Audit Committee 49 II(D) Yes(E) Review of Information by Audit Committee 49 (IIE) YesIII. Subsidiary Companies 49 (III) YesIV. Disclosures 49 (IV)(A) Basis of related party transactions 49 (IV A) Yes(B) Board disclosures 49 (IV C) Yes(C) Proceeds from public issues, rights issues, 49 (IV D) Not Applicable

preferential issues etc. at present(D) Remuneration of Directors 49 (IV E) Yes(E) Management 49 (IV F) Yes(F) Shareholders 49 (IV G) YesV. CEO/CFO Certification 49 (V) YesVI. Report on Corporate Governance 49 (VI) YesVII. Compliance 49 (VII) Yes

Details of Non-compliance

There has not been any non-compliance by the Company and no penaltiesor strictures were imposed on the Company by the Stock Exchanges orSEBI or any statutory authority, on any matter related to capital markets.

Declaration by Managing Director

The declaration by the Managing Director stating that all the BoardMembers and senior management personnel have affirmed theircompliance with the said code of conduct for the year endedMarch 31, 2006, is annexed to the Corporate Governance Report.

SHAREHOLDERS

a) Disclosures regarding appointment or re-appointment of Directors

According to the Articles of Association of GIL, at every annual generalmeeting of the Company one-third of the Directors are liable to retireby rotation. Thus, Mr. J.N. Godrej, Mr. V.F. Banaji, Ms. T.A. Dubash

and Mr. M. Eipe shall retire at this Annual General Meeting of theCompany and being eligible, offer themselves for re-election.

Information about the Directors who are being appointed/ re-appointedis given as an annexure to the Notice of the AGM.

b) Communication to shareholders

All vital information relating to the Company and its performance,including quarterly results, official press releases are posted on theweb-site of the Company. The Company’s web-site address iswww.godrejinds.com. The quarterly and annual results of theCompany’s performance are published in leading English dailies likeEconomic Times, Business Standard, Business Line, etc.

c) Investor grievances

As mentioned before, the Company has constituted a ShareholdersCommittee to look into and redress Shareholders and investorcomplaints. Mr. S.K. Bhatt, Executive Vice-President (CorporateServices) & Company Secretary is the compliance officer.

d) Share transfer

GIL has outsourced its share transfer function to M/s. ComputechSharecap Ltd., which is registered with the SEBI as a Category 1Registrar and Transfer Agent.

e) Details of non-compliance

There has been no instance of GIL not complying with any matterrelated to capital markets.

f) General body meetings

Year Venue Date Time

2002-03 Y.B. Chavan Centre, August 25, 2003 3.00 P.M.Nariman Point,Mumbai 400 021.

2003-04 - do - July 26, 2004 4.00 P.M.

2004-05 - do - July 26, 2005 4.00 P.M.

g) Postal Ballot

During the year, pursuant to the provisions of Section 192A of theCompanies Act, 1956 read with the Companies (Passing of theResolution by Postal Ballot) Rules 2001, certain resolutions were passedby shareholders by postal ballot results of which were announced onFebruary 2, 2006. The Notice of postal ballot was mailed to allshareholders along with postage prepaid envelopes. Mr. BharatShemlani, Chartered Accountant, had been appointed as scrutinizerfor the postal ballots, who submitted his report to the Chairman,Mr. A.B. Godrej. The details of the postal ballots are given below :-

Sr. Date of Nature Item Total no. No. of No. of No. ofNo. announcement of of votes votes in votes invalid

of results resolution polled favour against votes% %

1. February 2, 2006 Ordinary To sell, lease or otherwise 1080 99.96 0.02 0.02dispose of the whole,or substantially the wholeof the Foods Divisionof the Company;

2. February 2, 2006 Special To invest in securities of 1107 99.98 0.01 0.01and/or place intercorporatedeposits with and/or invest indebentures of and/or giveguarantee(s) to and/or makeloans or any other form of debt to Godrej Upstream Limitedunder Section 372A of theCompanies Act, 1956, inaddition to the current limits,a further sum of Rs.10 crore;

3 February 2, 2006 Special To invest in securities of and/or 1074 99.96 0.02 0.02place intercorporate depositswith and/or invest in debenturesof and/or give guarantee(s) toand/or make loans or any otherform of debt to View Group LPunder Section 372A of theCompanies Act, 1956, a sumof Rs.14 crore.


24

Auditors’ Certificate on Corporate Governance

To the Members of,Godrej Industries Limited

We have examined the compliance of conditions of Corporate Governance by Godrej Industries Limited for the year ended on March 31, 2006, asstipulated in Clause 49 of the Listing Agreement of the said Company with the stock exchanges.

The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to a review ofprocedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of Corporate Governance. It isneither an audit nor an expression of opinion on the financial statements of the Company.

In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditionsof Corporate Governance stipulated in Clause 49 of the above mentioned Listing Agreement.

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

For and on behalf ofKALYANIWALLA & MISTRY

Chartered Accountants

V. R. MehtaPartner

Mumbai, May 26, 2006. Membership No. 32083

Declaration by Managing Director

I, N.B. Godrej, Managing Director of Godrej Industries Limited (GIL), hereby confirm pursuant to clause 49(1)(D) of the listing agreement that :

The Board of Directors of GIL has laid down a code of conduct for all Board members and senior management of the Company. The said code ofconduct has also been posted on the Company’s website viz. www.godrejinds.com.

All the Board members and senior management personnel have affirmed their compliance with the said code of conduct for the year endedMarch 31, 2006.

N.B. Godrej

Managing Director

Mumbai,May 26, 2006


25

Annual General Meeting

Date : July 24, 2006Time : 4.30 P.M.Venue : Y.B. Chavan Centre, General Jagannath Bhosale Marg,

Nariman Point, Mumbai 400 021.

Financial Calendar

Financial year: April 1 to March 31

For the year ended March 31, 2006, results were announced on:

� July 26, 2005 : First quarter

� October 24, 2005 : Half year

� January 31, 2006 : Third quarter

� May 26, 2006 : Fourth quarter and annual

Record Date/Book Closure

A dividend of Rs. 5/- per share of Rs. 6/- each has been recommendedby the Board of Directors of the Company. For payment of dividend, thebook closure is from July 17, 2006 to July 24, 2006 (both days inclusive).

Listing information

The Company’s equity shares are listed on The Bombay Stock ExchangeLtd., The National Stock Exchange of India Ltd. and the Calcutta StockExchange Association Ltd.

Name of the Stock Exchange Stock code

The Bombay Stock Exchange Ltd. (BSE) 500164

The National Stock Exchange of India Ltd. (NSE) GODREJIND

The Calcutta Stock Exchange Association Ltd. 17038 (for physical)10017038 (for demat)

The ISIN Number of GIL on both NSDL and CDSL is INE233A01027.

The Company had applied to the Calcutta Stock Exchange AssociationLtd. for voluntary delisting of equity shares under the Securities andExchange Board of India (Delisting of Securities) Guidelines, 2003. Thepermission for delisting is awaited.

Stock Data

Tables 1 and 2 respectively give the monthly high and low prices andvolumes of equity shares of GIL at BSE and the NSE for the year endedMarch 31, 2006. Chart A compares GIL’s share price at the BSE versusthe sensex.

Table 1 : Monthly high and low prices and trading volumes of equityshares of GIL at BSE for the year ended March 31, 2006

Month High Low Volume traded(Rs.) (Rs.) (No. of Shares)

April-05 126.00 104.00 606612

May-05 278.80 116.10 9150145

June-05 248.90 201.50 2567483

July-05 262.00 225.00 893303

August-05 253.00 215.15 292735

September-05 284.00 225.00 594544

October-05 279.90 214.15 241317

November-05 271.00 220.00 128074

December-05 417.00 250.50 5336337

January-06 397.00 344.65 346736

February-06 434.00 360.05 497743

March-06 674.00 396.65 979933

SHAREHOLDERS’ INFORMATION

Note :

High and low are in rupees per traded share. Volume is the total monthlyvolume of trade (in numbers) in equity shares of GIL on the BSE.

Table 2 : Monthly high and low prices and trading volumes of equityshares of GIL at NSE for the year ended March 31, 2006

Month High Low Volume traded(Rs.) (Rs.) (No. of Shares)

April-05 123.30 106.60 984844May-05 267.95 123.60 26359665June-05 238.80 205.45 7658630July-05 249.40 225.40 1981097August-05 247.45 229.50 713266September-05 272.75 232.35 1120630October-05 273.85 219.45 376538November-05 260.35 225.10 243094December–05 399.05 258.95 11921783January–06 384.85 365.75 751313February-06 415.30 365.95 853984March-06 643.05 442.45 1713153

High and low are in rupees per traded share. Volume is the total monthlyvolume of trade (in numbers) in equity shares of GIL on the NSE.

Chart A - GIL share performance compared to the BSE Sensex forFY 2005-2006

Distribution of shareholding

Tables 3 and 4 give the distribution pattern of shareholding of GIL bysize class and ownership respectively as on March 31, 2006.

Table 3 : Distribution of shareholding by size class as on March 31, 2006Number of Number of Shareholders Number of Shareholdingshares shareholders % shares held %

1 - 500 12754 91.87% 1065043 2.19%

501 - 1000 523 3.77% 385558 0.79%

1001 - 2000 290 2.09% 390640 0.80%

2001 - 3000 113 0.81% 278064 0.57%

3001 - 4000 33 0.24% 116544 0.24%

4001 - 5000 24 0.17% 109414 0.22%

5001 - 10000 56 0.40% 393088 0.81%

10001 & above 89 0.64% 45903591 94.37%

Total 13882 100.00% 48641942 100.00%


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Table 4 : Distribution of shareholding by ownership as onMarch 31, 2006

Category (as being reported to stock Shares held % of holdingexchanges) (Nos.)

Promoter’s holding

Promoters 4300780 88.40%

Persons deemed to act in concertwith promoters – –%

Institutional investors

Mutual funds & UTI 148505 0.31%

Banks, financial institutions &insurance companies 77929 0.16%

Foreign institutional investors 590024 1.21%

Others

Private corporate bodies 1182751 2.43%

Indian public 3501471 7.20%

NRI/OCBs 140482 0.29%

Total 48641942 100.00%

Shares held in physical and dematerialised form

As on March 31, 2006, 99.39 per cent of GIL’s shares were held indematerialised form and the remaining 0.61 per cent in physical form.The break up is listed below:No. of Folios No. of Folios No. of Shares No. of Total Totalin Physical in Demat in Physical shares Folios SharesMode Mode Mode in Demat

Mode

4605 9277 297791 48344151 13882 48641942

Share Transfer

Share transfers and related operations for GIL are conducted byComputech Sharecap Ltd., which is registered with the SEBI as a Category1 Registrar.

Investor correspondence should be addressed to:

Computech Sharecap Ltd.147, M.G. Road, Opp. Jehangir Art Gallery,Mumbai 400 023.Tel : 022-22671824/22671825E-mail : [email protected] : 022-22670380


27

REPORT OF THE AUDITORS TO THE MEMBERS OF GODREJ INDUSTRIES LIMITED

1. We have audited the attached Balance Sheet of Godrej IndustriesLimited as at March 31, 2006 and also the Profit and Loss Accountand Cash Flow Statement of the Company for the year ended onthat date, both annexed thereto. These financial statements are theresponsibility of the Company’s management. Our responsibility isto express an opinion on these financial statements based on ouraudit.

2. We conducted our audit in accordance with the Auditing Standardsgenerally accepted in India. Those Standards require that we planand perform the audit to obtain reasonable assurance about whetherthe financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financialstatement presentation. We believe that our audit provides areasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003, issuedby the Central Government in terms of Section 227(4A) of theCompanies Act, 1956, we give in the Annexure a statement on thematters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to in paragraph3 above, we report that:

a) We have obtained all the information and explanations, whichto the best of our knowledge and belief were necessary for thepurpose of our audit.

b) In our opinion, proper books of account as required by lawhave been kept by the Company so far as appears from ourexamination of these books and proper returns adequate forthe purposes of our audit have been received from the branchesnot visited by us. The Branch Auditor’s Report has beenforwarded to us and has been appropriately dealt with.

c) The Balance Sheet, Profit and Loss Account and Cash FlowStatement dealt with by this report are in agreement with thebooks of account and with the audited returns from the branches.

d) In our opinion, the Balance Sheet, Profit and Loss Account andCash Flow Statement dealt with by this report comply with theAccounting Standards referred to in sub-section (3C) of Section211 of the Companies Act, 1956.

e) Reference is invited to Note 8 (b) of Schedule 22- Notes toAccounts, regarding the recoverability of advances given tocertain individuals amounting to Rs. 1,033 lac being contingentupon the transfer and/or disposal of the shares pledged againstthe loan. The said shares were lodged for transfer whichapplication was rejected and the Company has preferred anappeal to the Company Law Board. The impact thereof on theprofit for the year could not be ascertained.

f) In our opinion and to the best of our information and accordingto the explanations given to us, the said accounts subject toparagraph (e) above, and read with the notes thereon, give theinformation required by the Companies Act, 1956, in the mannerso required and give a true and fair view in conformity withthe accounting principles generally accepted in India:

i) in the case of the Balance Sheet, of the state of affairs ofthe Company as at March 31, 2006;

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

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

5. On the basis of the written representations received from the directorsof the Company as on March 31, 2006 and taken on record by theBoard of Directors, we report that none of the directors of theCompany is disqualified as on March 31, 2006 from being appointedas a director in terms of clause (g) of sub-section (1) of Section 274of the Companies Act, 1956.

For and on behalf ofKalyaniwalla & MistryChartered Accountants

V.R. MehtaPartner

M. No.: 32083Mumbai, May 26, 2006


28

1. (a) The Company is generally maintaining proper records showingfull particulars, including quantitative details and situation offixed assets, except in case of certain continuous process plantswhere item-wise values are not available and in case offurniture, fittings and equipment at Vikhroli where the recordsmaintained show quantitative details with their situation andvalues based on valuation by an approved valuer.

(b) The Company has a program for physical verification of fixedassets at periodic intervals. In our opinion, the period ofverification is reasonable having regard to the size of theCompany and the nature of its assets. No material discrepanciesbetween the book records and physical inventory were reportedfor the assets verified during the year.

(c) In our opinion, the fixed assets disposed off during the yearwere not substantial and do not effect the going concernassumption.

2. (a) The management has conducted physical verification ofinventory at reasonable intervals during the year.

(b) In our opinion, the procedures of physical verification ofinventory followed by the management are reasonable andadequate in relation to the size of the Company and the natureof its business.

(c) The Company is maintaining proper records of inventory. Thediscrepancies noticed on verification between physicalinventories and book records were not material in relation tothe operations of the Company and the same have been properlydealt with in the books of account.

3. (a) The Company had granted unsecured loans to three companieslisted in the register maintained under Section 301 of theCompanies Act, 1956, of which one loan of Rs. 47.80 lac wereoutstanding at the year end. The maximum amount of loansgranted to the said companies during the year was Rs. 128.28lac.

(b) In our opinion and according to the information and explanationsgiven to us, the rate of interest and other terms and conditionsof loans given are, prima facie, not prejudicial to the interest ofthe Company.

(c) The loans outstanding at the year end are at call and have notbeen recalled during the year. The companies are generallyregular in payment of interest.

(d) There are no overdue amounts exceeding Rs. one lac.

(e) The Company has not taken any loans, secured or unsecured,from companies, firms or other parties listed in the registermaintained under Section 301 of the Companies Act, 1956.

4. In our opinion and according to the information and explanationsgiven to us, having rearded to the explanation that some of theitems purchased are of a special nature and suitable alternativesources do not exist for obtaining comparable quotations, there is

an adequate internal control system commensurate with the size ofthe Company and the nature of its business, for the purchase ofinventory and fixed assets and for the sale of goods and services. Inour opinion and according to the information & explanation givento us, there is no continuing failure to correct major weaknesses inthe internal control system.

5. (a) Based on the audit procedures applied by us and according tothe information and explanations provided by the management,we are of the opinion that the particulars of contracts orarrangements referred to in Section 301 of the Act have beenentered in the register required to be maintained under thatsection.

(b) In our opinion and according to the information and explanationsgiven to us, having regard to the explanation that some of theitems are of a special nature and their prices cannot be comparedwith alternative quotations, the transactions made in pursuanceof contracts or arrangements entered in the register maintainedunder Section 301 of the Companies Act, 1956 and exceedingthe value of Rs. 5 Lac in respect any party during the year, havebeen made at prices which are reasonable having regard to theprevailing market prices at the relevant time.

6. In our opinion and according to the information and explanationsgiven to us, the Company has complied with the directives issued bythe Reserve Bank of India and the provisions of Section 58A and58AA or any other relevant provisions of the Act and the rules framedthere under in respect of the deposits accepted from the public.

7. The Company has an internal audit system, which in our opinion, iscommensurate with the size of the Company and the nature of its business.

8. We have broadly reviewed the books of account maintained by theCompany in respect of manufacture of vanaspati pursuant to theorder passed by the Central Government for maintenance of costrecords under Section 209(1) (d) of the Companies Act, 1956, and areof the opinion that prima facie the prescribed accounts and recordshave been maintained. We have not, however, made a detailedexamination of the records with a view to determine whether theyare accurate or complete. To the best of our knowledge and accordingto the information given to us, the Central Government has notprescribed maintenance of cost records under Section 209 (1) (d) ofthe Companies Act, 1956 for any other products of the Company.

9. (a) According to the records examined by us, the Company isgenerally regular in depositing undisputed statutory dues includingProvident Fund, Investor Education and Protection Fund,Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax,Service Tax, Customs Duty, Excise Duty, cess and other statutorydues applicable to it with the appropriate authorities.

(b) According to the information and explanations given to us andthe records examined by us, there are no dues of Income Tax,Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Dutyor cess which have not been deposited on account of anydispute, other than those stated hereunder:

ANNEXURE TO THE AUDITOR’S REPORT

Referred to in Paragraph (3) of our report of even date on the accounts of Godrej Industries Limited for the year ended March 31, 2006.


29

Name of statute Amount Rs. in lac Period to which the Forum where disputeamount relates is pending

Central Excise Act, 1944 43.32 1999 – 2000 Assistant Commissioner0.87 2003 – 2005 Assistant Commissioner

393.40 1992 – 1997 Commissioner (Appeals)0.09 1994 – 1999 CEGAT

241.20 1978 – 1983 High Courts87.39 1997 – 1999 High Courts

683.33 1986 – 1998 The Supreme Court of India

Customs Act, 1962 8.77 1978 – 1983 Assistant Commissioner111.88 1987 – 1993 Commissioner of Customs26.28 2003 – 2004 Dy. Commissioner

109.12 1978 – 1993 High Court570.86 1991 – 1992 High Court

8.23 1978 – 1979 CESTAT

Income Tax Act, 1961 50.53 1992 – 1995 ITAT518.53 1996 – 2001 ITAT70.62 1985 – 1991 High Court

1084.95 1995 – 1996 High Court

Central Sales Tax Act, 1956 0.16 1997 – 1998 Appellate TribunalSales Tax 19.60 1998 – 2005 Sales Tax Officer

68.19 2003 – 2004 Commissioner (Appeals)14.15 1996 – 2002 Dy. Commissioner1.83 1998 – 1989 Sales Tax Tribunal

30.55 1990 – 1992 Sales Tax Tribunal62.39 1994 – 1996 Sales Tax Tribunal

OthersStamp Duty 182.23 2000 Controlling Revenue AuthorityMunicipal Taxes 815.61 1984 – 2005 The Bombay High CourtEntry Tax 28.85 1997 – 2003 Tribunal

5,232.96

10. The Company has no accumulated losses as at the end of the financialyear and it has not incurred any cash losses in the current andimmediately preceding financial years.

11. According to the information and explanations given to us and basedon the documents and records produced to us, the Company has notdefaulted in repayment of dues to a financial institution, bank ordebenture holders as at the balance sheet date.

12. The Company has maintained adequate documents and records inrespect of loans and advances granted on the basis of security byway of pledge of shares and other securities, except that the sharesin question have not been transferred in the name of the Companyas stated in note 8(b) of Schedule 22- Notes to Accounts.

13. In our opinion and according to the information and explanationsgiven to us, the nature of activities of the Company does not attractany special statute applicable to chit fund and nidhi/ mutual benefitfund/ societies.

14. In our opinion, the Company has maintained proper records of thetransactions and contracts in respect of investments purchased andsold during the year and timely entries have been made therein.The investments made by the Company are held in its own nameexcept for the shares referred to in note (a) of Schedule 6.

15. According to the information and explanations given to us and therecords examined by us, it is our opinion that the terms andconditions of the guarantees given by the Company for loans takenby others from banks or financial institutions are not prejudicial tothe interest of the Company.

16. According to the information and explanations given to us and therecords examined by us, on an overall basis, the term loans havebeen applied for the purpose for which the loans were obtained.

17. On the basis on an overall examination of the balance sheet andcash flows of the Company and the information and explanationsgiven to us, we report that the Company has not utilized the fundsraised on short-term basis for long-term investment.

18. The Company has not made any preferential allotment of shares toparties or companies covered in the register maintained under section301 of the Companies Act, 1956.

19. The Company did not issue any debentures during the year.

20. The Company has not raised any money through a public issueduring the year.

21. Based on the audit procedures performed and information andexplanations given by the management, we report that no fraud onor by the Company has been noticed or reported during the year.

For and on behalf ofKalyaniwalla & MistryChartered Accountants

V.R. MehtaPartner

M. No.: 32083Mumbai, May 26, 2006


30

This Year Previous YearSchedule Rs. lac Rs. lac Rs. lac

BALANCE SHEET AS AT MARCH 31, 2006

SOURCES OF FUNDS

1. Shareholders’ Funds

(a) Share capital 1 2918.52 2918.52

(b) Reserves & surplus 2 34216.68 30617.83

37135.20 33536.352. Loan Funds

(a) Secured loans 3 24910.89 22075.67

(b) Unsecured loans 4 7803.24 3557.13

32714.13 25632.803. Deferred Tax Liability 3818.00 2502.00

TOTAL 73667.33 61671.15

APPLICATION OF FUNDS

4. Fixed Assets 5

(a) Gross block 53640.20 49728.83

(b) Less : Depreciation/Impairment 25568.23 26192.14

(c) Net block 28071.97 23536.69

(d) Capital work-in-progress 522.38 1563.09

28594.35 25099.78

5. Investments 6 37134.67 33577.28

6. Current Assets, Loans and Advances

(a) Inventories 7 11892.38 10751.76

(b) Sundry debtors 8 5806.56 8604.44

(c) Cash and bank balances 9 1259.63 1377.88

(d) Loans and advances 10 7688.73 4132.23

26647.30 24866.31Less : Current Liabilities and Provisions

(a) Liabilities 11 15726.32 17050.24

(b) Provisions 12 5202.03 4948.28

20928.35 21998.52

Net Current Assets 5718.95 2867.79

7. Miscellaneous Expenditure 13 2219.36 126.30(To the extent not written off or adjusted)

TOTAL 73667.33 61671.15

Significant Accounting Policies 21

Notes to Accounts 22

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

As per our Report attached Signatures to Balance Sheet and Schedules 1 to 13, 21 and 22

For and on behalf of A.B. Godrej N.B. Godrej M. Eipe M.P. PusalkarKalyaniwalla & Mistry Chairman Managing Director Executive Director Executive DirectorChartered Accountants & President (Chemicals) & President (Corporate Projects)

V. R. Mehta S.K. Bhatt V. SrinivasanPartner Executive Vice President (Corporate Executive Vice PresidentMumbai, May 26, 2006 Services) & Company Secretary (Finance & Estate)


31

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006

INCOMETurnover (gross) 80054.20 82198.93Less: Excise duty 5505.94 5863.69

Turnover (net) 74548.26 76335.24Other Income 14 5721.62 6017.78

80269.88 82353.02

EXPENDITUREMaterials consumed and purchase of goods 15 50228.83 50794.93Expenses 16 20627.41 20204.43Inventory change 17 (1196.08) (882.46)Interest and financial charges (net) 18 2837.43 2581.67Depreciation 2259.43 2148.43(Net of transfer from Revaluation ReserveRs. 168.43 lac, Previous year Rs. 223.80 lac) 74757.02 74847.00

Profit before Taxation and Extraordinary Items 5512.86 7506.02

Profit from continuing operations before tax 5813.39 8022.03Income tax – current tax — (401.00)

– fringe benefit tax (67.44) —– deferred tax (1479.00) 444.00

Profit from continuing operations after tax 4266.95 8065.03Loss from discontinuing operations before tax (300.53) (516.01)Income tax – current tax — —

– fringe benefit tax (14.24) —– deferred tax 62.00 26.00

Loss from discontinuing operations after tax (252.77) (490.01)

Profit after Taxation and before Extraordinary Items 4014.18 7575.02Extraordinary Items (Net of Tax) 19 3105.80 —Prior Period adjustments (net) 20 (7.56) 2.20

Net Profit 7112.42 7577.22Surplus brought forward 20081.61 15480.67

Amount Available For Appropriation 27194.03 23057.89

APPROPRIATIONSProposed Dividend - Final 2432.10 1945.68Tax on distributed profits 341.10 272.88Transfer to General Reserve 711.24 757.72Surplus carried forward 23709.59 20081.61

TOTAL 27194.03 23057.89

Basic & Diluted Earnings per share before Extraordinary Items 8.24 15.58Basic & Diluted Earnings per share after Extraordinary Items 14.62 15.58(refer note 19)Significant Accounting Policies 21Notes to Accounts 22


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

As per our Report attached Signatures to Profit and Loss Account and Schedules 14 to 22




32

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006

A. Cash Flow from operating Activities :

Profit before tax 5512.86 7506.02

Adjustments for :

Depreciation 2259.43 2148.43

Foreign exchange 294.21 939.30

Profit on sale of investments (2155.37) (3491.26)

(Profit) / Loss on sale of fixed assets (309.13) 123.78

Dividend income (2212.91) (2236.06)

Interest income (508.39) (115.87)

Interest expense 2430.95 1745.16

Voluntary retirement compensation paid (2685.07) (100.42)

Deferred expenditure written off 592.01 182.75

Provision for diminution in value of investments — 450.02

Provision for doubtful debts and sundry balances written back (net) (2.87) (87.96)

Others (0.42) 2.99

Operating profit before working capital changes 3215.30 7066.88

Adjustments for :

Inventories (2693.82) 192.59

Trade and other receivables 1463.87 (1443.92)

Trade payables 23.70 (807.91)

Cash generated from operations 2009.05 5007.64

Direct taxes paid (604.30) (547.32)

Direct taxes refund received 124.08 139.70

Net Cash from operating activities 1528.83 4600.02

B. Cash Flow from investing activities :

Purchase of fixed assets (9503.94) (2799.64)

Proceeds from sale of fixed assets 1339.31 197.25

Purchase of investments (51582.27) (57714.35)

Proceeds from sale of investments 50167.75 53425.24

Intercorporate deposits / Loans (net) (500.02) 456.50

Interest received 497.56 138.25

Dividend received 2275.33 2236.06

Net Cash used in investing activities beforeextraordinary item (7306.28) (4060.69)

Proceeds from sale of Undertaking (Refer Note 3) 4000.00 —

Net Cash used in investing activities afterextraordinary item (3306.28) (4060.69)

This Year Previous YearRs. lac Rs. lac


33


As per our Report attached Signatures to Cash Flow Statement



C. Cash Flow from financing activities :

Proceeds from borrowings 39331.95 23560.07

Repayments of borrowings (32515.29) (17995.22)

Bank overdrafts (net) (62.36) (1920.40)

Interest paid (2631.58) (1703.81)

Dividend paid (1951.09) (1473.49)

Tax on distributed profits (272.88) (186.97)

Net Cash from financing activities 1898.75 280.18

Net increase in cash and cash equivalents 121.30 819.51

Cash and cash equivalents (Opening Balance) 1377.88 558.37

Less : Cash and cash equivalents transferred to

Godrej Beverages & Foods Limited 239.55 —

Cash and cash equivalents (Closing Balance) 1259.63 1377.88

Notes:

1. Cash and Cash equivalents

Cash on hand and balances with banks 1266.79 1384.97

Effect of exchange rate changes (7.16) (7.09)

Cash and cash equivalents 1259.63 1377.88

2. To finance working capital requirements, the Company’s Bankers have sanctioned a total fund-based limit of Rs. 5,800 lac. Of this, limitsutilised as on March 31, 2006 is Rs. 1,518.44 lac.

3. The Foods Division (except Wadala Factory) was sold for a consideration of Rs. 7,000 lac. Out of the total consideration, Rs. 4,000 lac hasbeen received in cash and the balance receivable by way of allotment of equity shares in Godrej Beverages & Foods Ltd.

4. The figures of previous year have been regrouped wherever necessary.


34

SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006This Year Previous Year

Rs. lac Rs. lac

This Year Previous YearRs. lac Rs. lac Rs. lac

SCHEDULE 1 : SHARE CAPITALAUTHORISED:13,33,33,333 Equity shares of Rs.6 each 8000.00 8000.0010,00,00,000 Unclassified Shares of Rs.10 each 10000.00 10000.00

18000.00 18000.00

ISSUED, SUBSCRIBED AND PAID UP:4,86,41,942 Equity shares of Rs.6 each fully paid 2918.52 2918.52

2918.52 2918.52

Of the above,(i) 3,12,00,398 shares are held by Godrej & Boyce Mfg. Co. Limited, the holding Company(ii) 2,59,24,636 shares are alloted for consideration other than cash pursuant to schemes of amalgamation/arrangement(iii) 1,59,50,953 shares are alloted as fully paid bonus shares by way of capitalisation of Securities premium account.

SCHEDULE 2 : RESERVES AND SURPLUSSecurities Premium AccountAs per last balance sheet 8.51 8.51Capital Investment Subsidy ReserveAs per last balance sheet 25.00 25.00Revaluation ReserveAs per last balance sheet 3031.76 3256.59Less : Depreciation on revalued component and

deduction due to sale/discard of fixed assets (740.37) (224.83)

2291.39 3031.76Capital Redemption ReserveAs per last balance sheet 3125.00 3125.00General ReserveAs per last balance sheet 4345.95 4301.33Add : Transferred from profit & loss account 711.24 757.72Less : Accumulated impairment loss as on April 1, 2004 — (713.10)

5057.19 4345.95Profit & Loss Account 23709.59 20081.61

34216.68 30617.83

SCHEDULE 3 : SECURED LOANSTerm loans from banks 23392.45 20494.87Bank overdrafts, packing credit, etc. 1518.44 1580.80

24910.89 22075.67

Particulars of securities (refer note 4)

SCHEDULE 4 : UNSECURED LOANSFixed deposits — 101.72Short term loans from banks 5803.24 3455.41

Other loans from banks 2000.00 —

7803.24 3557.13

Amount repayable within one year 7803.24 3557.13


35

SCHEDULE 5 : FIXED ASSETSRs. lac

ASSETS GROSS BLOCK DEPRECIATION/IMPAIRMENT NET BLOCK

As on Deductions/ As on Upto Deductions/ For the Upto As on As on01.04.2005 Additions Adjustments 31.03.2006 31.03.2005 Adjustments Year 31.03.2006 31.03.2006 31.03.2005

Tangible AssetsLand 252.90 50.00 33.35 269.55 21.48 1.88 1.64 21.24 248.31 231.42Buildings 8961.76 952.82 1683.12 8231.46 2307.80 263.28 241.26 2285.78 5945.68 6653.96Plant & Machinery 36588.54 9516.74 4563.09 41542.19 21985.58 2511.33 1869.98 21344.23 20197.96 14602.96Research Centre 113.51 — — 113.51 43.41 — 3.30 46.71 66.80 70.10Furniture & Fixtures 1117.84 52.62 57.63 1112.83 635.49 21.71 61.86 675.64 437.19 482.35Office & Other Equipments 1034.34 46.58 83.41 997.51 472.24 55.53 51.96 468.67 528.84 562.10Vehicles 631.69 61.13 83.77 609.05 294.88 35.03 50.33 310.18 298.87 336.81Intangible AssetsTrademarks 754.00 — 291.00 463.00 314.17 150.35 75.40 239.22 223.78 439.83Assets acquired underFinance LeaseVehicles 274.25 58.80 31.95 301.10 117.09 12.66 72.13 176.56 124.54 157.16TOTAL - This Year 49728.83 10738.69 6827.32 53640.20 26192.14 3051.77 2427.86 25568.23 28071.97 23536.69

- Previous Year 48949.68 1402.49 623.34 49728.83 24117.03 297.12 2372.23 26192.14Capital Work-in-Progress 522.38 1563.09

TOTAL 28594.35 25099.78

1. Land includes leasehold land of Rs.126.72 lac (Previous Year Rs.136.18 Lac) which is being amortised over the period of lease.2. Buildings, Plant & Machinery and Research Centre at Vikhroli Factory were revalued on 30th June, 1992 on the basis of a Valuation Report submitted by professional valuers.3. Depreciation for the year includes Rs.168.43 Lac (Previous Year Rs.223.80 Lac) being depreciation on revalued component of the fixed assets.4. Gross block deductions includes Rs. 571.94 lac (Previous Year Rs.1.03 lac) being the revalued component of assets sold/discarded during the year.5. Buildings include Rs.0.01 lac (previous year Rs.0.01 lac) being the value of investment in shares of Co-operative Housing Society.6. Buildings include Rs. 1701.74 lac (previous year Rs. 2651.08 lac) being the cost of equity shares in Tahir Properties Ltd., representing the right of the Company to

three (previous year five) flats in the property.7. Accumulated depreciation includes impairment loss of Rs. 509 lac on plant & machinery in an earlier year.8. Capital work-in-progress is net of impairment loss of Rs. 204.10 lac provided on an infructuous asset under construction.

SCHEDULE 6 : INVESTMENTS

Investee Company/Institutions Face Number AmountValue Qty. Acquired Sold Qty. As on As on

as on during during as on Notes 31.03.06 31.03.05(Rs.) 01.04.05 Year Year 31.03.06 Rs. lac Rs. lac

LONG TERM INVESTMENTS - At CostA. TRADE INVESTMENTS

Equity Shares : Fully PaidBharuch Eco-Aqua Infrastructure Ltd. 10 4,40,000 — — 4,40,000 44.00 44.00Preference Shares : Partly PaidGodrej Foods Ltd. 10 50,00,000 — — 50,00,000 (b) 450.00 450.00(8% Redeemable Cumulative, 2012)Tahir Properties Ltd. (Class-A) 100 25 — — 25 (b) 0.02 0.02

B. OTHER INVESTMENTS :Equity Shares : Fully PaidQuoted :Godrej Consumer Products Ltd. 4 73,24,027 — 5,90,000 67,34,027 10,730.01 11670.12Unquoted :Compass Connections Ltd. £0.25 13,692 — — 13,692 124.55 124.55Gharda Chemicals Ltd. 100 114 — — 114 (a) 11.57 11.57Godrej Sara Lee Ltd. 4 51,07,125 — — 51,07,125 4,729.79 4729.79Swadeshi Detergents Ltd 10 2,09,370 — — 2,09,370 191.33 191.33Avestha Gengraine Technologies Pvt. Ltd. 10 1,05,500 14,744 — 1,20,244 516.76 450.25Tahir Properties Ltd. (Partly Paid) 100 25 — — 25 (b) 0.01 0.01Boston Analytics LLC (Partly Paid) $1 — 78,250 — 7,81,250 (b) 258.76 —Common Stock :Unquoted :C Bay Systems Ltd. $0.01 9,03,798 31,87,275 — 40,91,073 (c) 4,062.82 845.70Convertible Debentures :Unquoted :Avestha Gengraine Technologies Pvt. Ltd. 10000000 — 3 — 3 300.00 —Government SecuritiesUnquoted :Kisan Vikas Patra — — — — — — 0.32Shares in Co-operative Societies - Fully PaidUnquoted :The Saraswat Co-op Bank Ltd 10 1,000 — — 1,000 0.10 0.10

Balance carried forward 21419.72 18517.76


36


SCHEDULE 7 : INVENTORIES(at lower of cost and net realisable value)Stores and spares 1156.47 526.57Raw materials 5300.52 5192.87Work-in-progress 1961.02 1126.27Finished goods 3474.37 3906.05

11892.38 10751.76

SCHEDULE 8 : SUNDRY DEBTORS(Unsecured)Debts outstanding over six monthsConsidered good — 1.67Considered doubtful 233.99 262.05

233.99 263.72Other debtsConsidered good 5806.56 8602.77Considered doubtful — 33.53

5806.56 8636.30

Less : Provision for doubtful debts 233.99 295.58

5806.56 8604.44

Investee Company/Institutions Face Number AmountValue Qty. Acquired Sold Qty. As on As on

as on during during as on Notes 31.03.06 31.03.05(Rs.) 01.04.05 Year Year 31.03.06 Rs. lac Rs. lac

Balance brought forward 21419.72 18517.76

C. INVESTMENTS IN SUBSIDIARY COMPANIES :Equity Shares: Fully PaidUnquoted:Ensemble Holdings & Finance Ltd. 10 37,70,160 — — 37,70,160 1318.14 1318.14Godrej Agrovet Ltd. 10 41,12,956 — — 41,12,956 3377.34 3377.34Godrej Global Solutions Ltd. 10 5,76,96,500 — 1,00,23,761 4,76,72,739 (b),(d) 5589.65 5379.65Godrej International Ltd. £1 15,05,000 11,00,000 — 26,05,000 1826.94 960.83Godrej Beverages & Foods Ltd. 10 97,49,996 — 1,25,000 96,24,996 963.22 975.72(formerly Godrej Tea Ltd.)Godrej Hicare Ltd. 10 31,07,100 35,40,000 — 66,47,100 (b) 364.83 193.23Godrej Properties Ltd. 10 50,73,965 1,90,680 — 52,64,645 4027.61 3836.46Godrej Remote Services Ltd. 10 77,12,642 — 77,12,642 — — 771.25

38887.45 35330.38Less : Provision for diminution in value of Investments (1752.78) (1753.10)

37134.67 33577.28

Aggregate Book Value of InvestmentsQuoted 10730.01 11670.12Unquoted 26404.66 21907.16

37134.67 33577.28

Market Value of Quoted Investments 48875.57 22708.15

NOTES :(a) The said shares have been refused for registration by the investee company.(b) Uncalled liability on partly paid shares

- Tahir Properties Ltd. - Equity - Rs. 80 per share- Boston Analytics LLC - Equity - USD 440,000- Godrej Foods Ltd. - Preference - Re. 1 per share- Tahir Properties Ltd. - Preference - Rs. 30 per share- Godrej Global Solutions - Equity - Rs. 3 per share on 60 lac shares- Godrej Hicare Ltd. - Equity - Rs. 6 per share on 30.4 lac shares.

(c) Preferred Stock - series E & F has been converted into Common Stock during the year.(d) Reduction of shares held pursuant to Capital Reduction under a Scheme of Arrangement.


37


SCHEDULE 9 : CASH AND BANK BALANCESCash and cheques on hand 19.37 19.62Balance with Scheduled banks– on current accounts 386.71 621.10– on deposit accounts (refer note 7) 853.55 737.16

1259.63 1377.88

SCHEDULE 10 : LOANS AND ADVANCES(Unsecured and considered good unlessotherwise stated)Loans and Advances (refer note 8) 1091.34 1127.86Loans to GIL ESOP Trust 556.50 —Advances recoverable in cash or in kind or for valueto be received (net of provision for doubtful advancesRs. 382.41 lac, previous year Rs.656.49 lac) 1663.15 1302.54Consideration Receivable from Godrej Beverage & Foods Ltd. for sale of Foods Division 3000.00 —Intercorporate deposits– Subsidiary companies — 46.48– Others 41.80 51.80Deposits and balances with– Customs & excise authorities 849.59 1008.60– Others 486.35 564.76Advance payment of taxes — 30.19(Net of Provision for tax, Previous year Rs. 1220 lac)

7688.73 4132.23SCHEDULE 11 : CURRENT LIABILITIES(refer note 9)Acceptances — 1429.49Sundry creditors– due to small scale industrial undertakings 56.82 72.05– others 13750.58 12101.83

13807.40 12173.88Advances from customers 305.13 964.05Sundry deposits 555.64 951.76Investor Education & Protection Fund *– Unclaimed dividend 46.29 51.70– Unpaid Matured Deposits 24.80 103.17– Interest accrued on above 0.20 58.70Other liabilities 829.03 1224.50Interest accrued but not due on loans 157.83 92.99

15726.32 17050.24* There is no amount due and outstanding to be credited to the InvestorEducation and Protection Fund.

SCHEDULE 12 : PROVISIONSProposed dividend 2432.10 1945.68Provision for tax on distributed profits 341.10 272.88Provision for retirement benefits 2388.08 2729.72Provision for taxation 40.75 —(Net of Advance Tax Rs. 1270.25 lac)

5202.03 4948.28SCHEDULE 13 : MISCELLANEOUS EXPENDITURE(To the extent not written off or adjusted)Deferred revenue expenditureVoluntary retirement compensationBalance at the beginning of the year 126.30 208.63Add : Expenditure Incurred during the year 2685.07 100.42Less : Amortised during the year (592.01) (182.75)

2219.36 126.30


38


SCHEDULE 14 : OTHER INCOMEInterest :– Government Securities — 16.90– Debentures 9.62 —– Income tax refund 140.56 8.10– Deposits (refer Note 17) 307.00 —Dividend– from subsidiary companies 508.20 646.66– from long term investments 1704.71 1589.40Profit on sale of fixed assets (Net) 309.13 —Profit on sale of long term investments 2120.35 3422.22(refer Note 17)Profit on sale of current investments 35.02 69.04Miscellaneous income (refer Note 17) 587.03 265.46

5721.62 6017.78

SCHEDULE 15 : MATERIALS CONSUMED AND PURCHASE OF GOODSRaw materials consumed :Stocks at the commencement of the year 5192.87 6096.76Add : Purchases (net) 40385.71 44007.83

45578.58 50104.59Less : Stocks as at the close of the year 5300.52 5192.87

Raw Materials consumed during the year 40278.06 44911.72Purchase of goods for resale 9950.77 5883.21

50228.83 50794.93

SCHEDULE 16 : EXPENSESSalaries, wages and allowances 5772.39 6004.11Contribution to provident fund and other funds 326.13 354.20Employee welfare expenses 636.19 513.37Stores and spares consumed 631.87 814.31Power and fuel 4164.79 3569.68Processing charges 80.85 456.75Rent 295.90 236.69(refer Note 16)Rates and taxes 389.57 447.83Repairs and maintenence– Machinery 882.25 1200.36– Buildings 263.65 247.19– Other assets 402.36 431.63Insurance 133.90 135.89Freight 2012.54 1606.78Commission 282.86 383.90Discount 456.93 203.06Advertisement and publicity 250. 96 154.04Sales promotion 47.93 97.55Selling and distribution expenses 1108.67 772.78Bad debts written off 170.79 0.57Provision for doubtful debts and advances 10.87 7.00Provision for depletion in value of investments — 450.02Loss on sale of fixed assets — 123.78Excise duty on inventory change 284.99 (50.70)Foreign exchange loss 182.62 809.09Miscellaneous expenses 2376.48 1812.28Less : Expenses recovered under cost sharing agreement for use of common facilities (538.08) (577.73)

20627.41 20204.43


39

SCHEDULE 17 : INVENTORY CHANGEStocks at the commencement of the year– Finished goods 3906.05 3113.51– Work-in-progress 1126.27 1036.35

5032.32 4149.86Stock adjustment on sale of Foods Division (793.01) —Less : Stocks at the close of the year :

– Finished goods (3474.37) (3906.05)– Work-in-progress (1961.02) (1126.27)

(5435.39) (5032.32)

(Increase)/Decrease in Inventory (1196.08) (882.46)

SCHEDULE 18 : INTEREST AND FINANCIAL CHARGES (Net)Interest paid– on fixed loans 1702.34 817.65– on bank overdrafts 114.71 121.46– other interest 485.72 497.72

2302.77 1436.83Less : Interest during construction period capitalised 265.47 14.25Less : Interest received

– on loans & deposits 33.13 56.41– on Customer balances, etc. 18.08 34.46

51.21 90.87

Net Interest 1986.09 1331.71Brokerage and other financial charges 393.65 322.58Foreign exchange loss 457.69 927.38

2837.43 2581.67

SCHEDULE 19 : EXTRAORDINARY ITEMSProfit on sale of Foods division 3510.80 —

Less : Taxation on above

– current tax (506.00) —

– deferred tax 101.00 —

3105.80 —

SCHEDULE 20 : PRIOR PERIOD ADJUSTMENTSExcess provision for Income-tax 42.52 2.20

Dividend for previous year 62.42 —

Provision for pension payments (112.50) —

(7.56) 2.20

This Year Previous YearRs. lac Rs. lac Rs. lac


40

SCHEDULE 21 : SIGNIFICANT ACCOUNTING POLICIES

1. Accounting ConventionThe financial statements are prepared under the historical costconvention, on the accrual basis of accounting, in accordance withthe generally accepted accounting principles in India, and theAccounting Standards issued by the Institute of Chartered Accountantsof India.

2. Fixed AssetsFixed Assets are stated at cost or as revalued as the case may be,less accumulated depreciation. Cost includes expenses related toacquisition and installation of the concerned assets. Exchangedifferences arising on account of repayment and year end translationof foreign currency liabilities relating to acquisition of fixed assetsfrom a country outside India is adjusted to the carrying cost of therespective assets.Fixed Assets acquired under finance lease are capitalised at thelower of their face value and present value of the minimum leasepayments.

3. Intangible AssetsThe cost of acquisition of trade marks is amortised equally over aperiod of ten years.

4. Asset ImpairmentThe Company reviews the carrying values of tangible and intangibleassets for any possible impairment at each balance sheet date. Animpairment loss is recognized when the carrying amount of anasset exceeds its recoverable amount. In assessing the recoverableamount, the estimated future cash flows are discounted to theirpresent value at appropriate discount rate.

5. Borrowing CostsBorrowing costs that are directly attributable to the acquisition /construction of the underlying fixed assets are capitalised as a partof the respective asset, upto the date of acquisition / completion ofconstruction.

6. InvestmentsLong term investments are carried at cost. Provision for diminution,if any, in the value of each long term investment is made to recognisea decline, other than of a temporary nature. The fair value of a longterm investment is ascertained with reference to its market value,the investee’s assets and results and the expected cash flows fromthe investment.

Current investments are carried at lower of cost and fair value.7. Inventories

Inventories are valued at lower of cost and net realisable value.Cost is computed on weighted average basis and is net of modvat.Finished goods and work in progress include cost of conversion andother costs incurred in bringing the inventories to their presentlocation and condition. Provision is made for the cost of obsolescenceand other anticipated losses, wherever considered necessary.

8. Provisions and Contingent LiabilitiesProvisions are recognised in the accounts in respect of presentprobable obligations, the amount of which can be reliably estimated.Contingent Liabilities are disclosed in respect of possible obligationsthat arise from past events but their existence is confirmed by theoccurrence or non occurrence of one or more uncertain futureevents not wholly within the control of the Company.

9. Foreign Exchange TransactionsTransactions in foreign currency are recorded at the exchange ratesprevailing on the date of the transaction. Monetary assets andliabilities denominated in foreign currency are translated at theperiod end exchange rates. Forward exchange contracts, remainingunsettled at the period end, backed by underlying assets or liabilities

are also translated at period end exchange rates. Premium ordiscount on forward exchange contracts is amortised over the periodof the contract and recognized as income or expense for the period.Exchange gains / losses are recognised in the Profit and Loss Accountexcept for exchange differences relating to fixed assets acquiredfrom a country outside India, which are adjusted in the cost of theasset. Non Monetary foreign currency items like investments inforeign subsidiaries are carried at cost and expressed in Indiancurrency at the rate of exchange prevailing at the time of makingthe original investment.

10. Revenue RecognitionSales are recognised when goods are supplied and are recordednet of returns, trade discounts, rebates, sales taxes and excise duties.Income from processing operations is recognised on completion ofproduction / dispatch of the goods, as per the terms of contract.Export incentives receivable under the Duty Entitlement Pass BookScheme and Duty Drawback Scheme are accounted on accrualbasis.Dividend income is recognised when the right to receive the sameis established.Interest income is recognised on a time proportion basis.Income on assets given on operating lease is recognised on a straightline basis over the lease term.

11. Research and Development ExpenditureRevenue expenditure on Research and Development is charged tothe Profit and Loss Account of the year in which it is incurred.Capital expenditure incurred during the year on Research andDevelopment is included under as additions to fixed assets.

12. DepreciationLeasehold land is amortised equally over the lease period. Leaseholdimprovements are amortised over five years.Depreciation is provided on the straight line method at the ratesspecified in Schedule XIV to the Companies Act, 1956, except forcomputer hardware which is depreciated over its estimated usefullife of 4 years.Depreciation on assets acquired during the year is provided for thefull accounting year and no depreciation is charged on the assetssold/discarded during the year, except in case of major additionsand deductions exceeding rupees one crore in which case,proportionate depreciation is provided.Depreciation on the revalued component is provided on the straightline method based on the balance useful life of the assets as certifiedby the valuers. Such depreciation is withdrawn from RevaluationReserve and credited to Profit and Loss Account.

13. Retirement BenefitsRetirement benefits to employees comprise payments under definedcontribution plans like provident fund and family pension as well aspayments under defined benefit schemes like leave encashmentbenefit on retirement and gratuity to eligible employees. Paymentsunder defined contribution plans are charged to revenue. The liabilityin respect of defined benefit schemes is provided on the basis of anactuarial valuation at the end of each financial year.

14. Incentive PlansThe Company has a scheme of Performance Linked VariableRemuneration (PLVR) which rewards its employees based onEconomic Value Addition (EVA). The PLVR amount is related to actualimprovement made in EVA over the previous year when comparedwith expected improvements. The EVA awards flow through a notionalbank whereby only the prescribed portion of the bank is distributedeach year and the balance is carried forward. The amount distributedout of the notional bank is charged to profit and loss account. Thenotional bank is held at risk and charged to EVA of future years andis payable at that time, if future performance so warrants.


41

15. HedgingImport of crude palm oil by the Company is being hedged by futurescontract on offshore Commodities Exchange. Gains or losses onsettled contracts is recognized in the profit and loss account and isincluded in the cost of materials consumed. Futures contracts notsettled as on the Balance Sheet date are marked to market andlosses, if any, are recognized in the profit and loss account, whereas,the unrealized profit is ignored.

16. Deferred Revenue ExpenditureThe compensation payable under the Voluntary Retirement Schemes,the benefit of which is expected to accrue in future is deferred overits payback period. The compensation is generally amortised overthree to five years depending on the pay back period.

17. Taxes on Income

Current tax is the amount of tax payable on the assessable incomefor the year determined in accordance with the provisions of theIncome Tax Act, 1961.Deferred tax is recognized on timing differences, being thedifferences between the taxable income and accounting income

that originate in one period and are capable of reversal in one ormore subsequent periods. Deferred tax assets on unabsorbed taxlosses and tax depreciation are recognized only when there is virtualcertainty of their realisation and on other items when there isreasonable certainty that sufficient future taxable income will beavailable against which such deferred tax assets can be realised.The tax effect is calculated on the accumulated timing differencesat the year end based on the tax rate and laws enacted or substantiallyenacted on the balance sheet date.

18. Segment ReportingThe Accounting Policies adopted for segment reporting are in line withthe Accounting Policies of the Company. Segment assets include alloperating assets used by the business segments and consist principallyof fixed assets, debtors and inventories. Segment liabilities include theoperating liabilities that result from the operating activities of thebusiness. Segment assets and liabilities that cannot be allocated betweenthe segments are shown as part of unallocated corporate assets andliabilities respectively. Income / Expenses relating to the enterprise as awhole and not allocable on a reasonable basis to business segmentsare reflected as unallocated corporate income / expenses.

1. Background

The Company was incorporated under the Companies Act, 1956 onMarch 7, 1988 under the name of Gujarat-Godrej InnovativeChemicals Limited. The business and undertaking of the erstwhileGodrej Soaps Limited was transferred to the Company under ascheme of amalgamation with effect from April 1, 1994 and theCompany’s name was changed to Godrej Soaps Ltd. Subsequently,under a scheme of arrangement the Consumer Products division ofthe Company was demerged with effect from April 1, 2001 into aseparate Company, Godrej Consumer Products Limited (GCPL) andthe vegetable oils and processed foods manufacturing business ofGodrej Foods Ltd. was transferred to the Company with effect fromJune 30, 2001. The Company’s name was changed to Godrej IndustriesLimited on April 2, 2001.The Company is engaged in the businesses of manufacture andmarketing of oleo-chemicals, their precursors and derivatives, bulkedible oils, trading in medical diagnostic products, estatemanagement and investment activities.

2. Contingent Liabilities

This year Previous YearRs. lac Rs. lac

a) Claims against the Companynot acknowledged as debts :i) Excise duty demands relating

to disputed classification, postmanufacturing expenses,assessable values, etc. whichthe Company has contested andis in appeal at various levels 1537.41 3386.52

ii) Customs Duty demands relatingto less charge, differentialduty, classification, etc. 844.53 1062.93

iii) Sales Tax demand relating topurchase tax on Branch Transfer/Non availability of C Forms, etc.at various levels 207.13 200.96

iv) Octroi demand relating toclassification issue on import ofPalm Stearine and interest thereon 844.46 722.01

v) Stamp duties claimed on certainproperties which are underappeal by the Company 182.23 182.23

vi) Income Tax demands againstwhich the Company haspreferred appeals 1724.64 586.85

vii) Industrial relations mattersunder appeal 518.06 486.08

viii) Others 217.26 262.58b) Guarantees issued by banks,

excluding guarantees issued inrespect of matters reported in(a) & (b) above 1558.31 1789.77

c) Guarantees given by theCompany in respect of credit/guarantee limits sanctioned bybanks to subsidiary and othercompanies 3085.00 5385.00

d) Uncalled liability on partly paidshares/debentures 579.15 440.03

3. Capital Commitments


Estimated value of contracts remainingto be executed on capital account,to the extent not provided 133.99 2059.91

4. Secured Loans

a) Term loans from banks are secured by first charge by way ofequitable mortgage of the immovable properties including land,building and plant & machinery at Vikhroli and Valia factory.

b) Working capital facilities sanctioned by banks are secured byhypothecation of stocks and book debts.

c) The Company had during the year raised Rs. 3,000 lac (Previousyear Rs. 1,000 lac) against the issue of commercial paper. Theamount outstanding there against as on March 31, 2006 is Rs. Nil.

SCHEDULE 22 : NOTES TO ACCOUNTS


42

5. Investments

a) CBay Systems Limited, USA (CBay USA) has carried out anorganizational restructuring during the year, consequent towhich, all the businesses of CBay Group have been consolidatedunder CBay Systems Limited, India (CBay India), a whollyowned subsidiary. The Shares of CBay India have beendistributed in specie on a pro-rata basis to all the stockholdersof CBay USA under the above scheme. The Indian Stockholderswill be allotted the shares in CBay India on receipt of approvalfrom the Reserve Bank of India (RBI). No effect has been givento the aforesaid scheme in the accounts, pending approval ofRBI and allotment of shares in CBay India.

b) As per the share purchase agreement dated October 29, 2004,the Company had agreed to sell its entire holding (77,12,642equity shares) in Godrej Remote Services Limited, a subsidiarycompany to CBay Systems Limited, USA for a consideration ofRs. 842.81 lac, to be satisfied by issue of 7,04,691 commonstock of CBay Systems Limited, USA (par value USD 0.01 percommon stock) valued at USD 2.6 per common stock. Theagreement was conditional upon receipt of approval fromForeign Investment Promotion Board (FIPB) and the ReserveBank of India (RBI). The sale of the subsidiary company wascompleted during the year on receipt of the necessaryapprovals in July 2005. The profit on sale amounting to Rs. 71lac is included under Profit on sale of long term investments,an exceptional item.

c) The Company has acquired and sold the following investmentsduring the year:

Mutual Funds - Liquid Funds - Growth PlanThis Year Previous Year

No. of Purchase No. of PurchaseUnits Cost Units Cost

Rs. lac Rs. lac

Birla Cash Plus Liquid 3,93,85,339 4365.00 34,54,371 600.00Prudential ICICI Liquid 3,18,68,947 4912.00 2,76,48,845 4445.00KMMF Liquid 9,19,66,703 12598.00 7,57,03,162 9791.00Templeton India Liquid — — 7,08,398 9994.00ING Vysya Liquid 5,29,34,599 5608.00 5,88,05,678 6364.00SBI Magnum Liquid 13,07,93,874 14271.00 11,41,25,847 11990.00Deutsche Insta CashPlus Fund 45,66,794 500.00 — —JMMF Liquid 3,74,97,975 4047.00 4,74,84,632 4970.00


6. Sundry Debtors

Sundry Debtors includes amount duefrom a Company under the samemanagement :

Godrej Consumer Products Ltd. 175.45 19.60

7. Cash and Bank Balances

Balances with Scheduled Banks inDeposit Accounts include deposits heldby bank as security against guaranteesissued 18.50 36.04

8. Loans and Advances

a) Loans and Advances include an amount of Rs. Nil (Previousyear Rs. 0.45 lac) due from directors. Maximum balance duringthe year Rs. 0.45 lac (Previous year Rs. 5.61 lac).

b) Loans and Advances include Rs. 1033 lac (Previous yearRs. 1033 lac) advanced by the Company to certain individualsagainst pledge by way of deposit of equity shares of GhardaChemicals Ltd. The Company has enforced its security andlodged the shares for transfer in its name, however, the transferapplication has been rejected by Gharda Chemicals Ltd. andthe Company has filed an appeal before the Company LawBoard against the rejection. Interest on the aforesaid loan andadvances amounting to Rs. 315 lac was accrued upto March31, 2000 and has been fully provided for, no interest is beingaccrued thereafter. The recoverability of the advance iscontingent upon the transfer and / or disposal of the said shares.In the opinion of the management, the value of the said sharesis greater than the amount of the loans.

Maximumbalance

during theyear This year Previous year

Rs. lac Rs. lac Rs. lac

c) Loans and Advances tosubsidiary companies

i) Ensemble Holdings& Finance Ltd. 35.00 — 11.00

iii) Godrej Hicare Ltd. 35.48 — 35.48

d) Loans and Advances toassociate companies

i) Swadeshi DetergentsLtd. 57.80 47.80 57.80

e) Loans and Advances wherethere is no repaymentschedule or repayment isbeyond seven years :

i) D. Kavasmanekand Others 1033.00 1033.00 1033.00(refer (b) above)

f) Consideration receivablefor sale of Foods divisions :

Godrej Foods &Beverages Ltd. asubsidiary Company 7000.00 3000.00 —

9. Liabilities

a) No amount has been claimed from the Company under theInterest on Delayed Payments to Small Scale and AncillaryIndustrial Undertakings Act, 1993.

b) The names of small scale industrial undertakings to whom anamount is outstanding for more than 30 days are as under:Akshay Inorganics S. P. FabricatorsAmelon Synthetics Corporation Shree Diamond Silicates Co.Jayant Packing Industry Viraj Packging Pvt. Ltd.Neo Fab

c) The above information regarding small scale industrialundertakings has been determined to the extent such partieshave been identified on the basis of information available withthe Company, and has been relied upon by the Auditors.

SCHEDULE 22 : NOTES TO ACCOUNTS (contd.)


43

10. Employee Stock Option Plans

The Company has during the year instituted an Employee StockOption Plan (GIL ESOP) approved by the Board of Directors andthe shareholders on October 24, 2005 and December 1, 2005respectively. The Plan provides for the allotment of 15,00,000 optionsconvertible into 15,00,000 equity shares to eligible employees ofthe participating companies. The compensation committeecomprising independent members of the Board of Directorsadministers the plan.

The scheme is administered by an independent ESOP Trust whichhas purchased shares equivalent to the number of options grantedfrom the market, out of the finance provided by the participatingcompanies to the Trust.

The number and weighted average exercise price of options granted,exercised and forfeited are as under:

No. of Wt. averageOptions exercise price

Options outstanding atthe beginning of the year — —Options granted 350,000 392.35

(plus interest)Less : Exercised — —Forfeited / expired — —Options outstanding at the year end 350,000 392.35

(plus interest)

The options granted shall vest after three years from the date ofgrant of option, provided the employee continues to be inemployment and the option is exercisable within two years aftervesting.

The employee share based payment plans have been accountedbased on the intrinsic value method and no compensation expensehas been recognized since the market price of the underlying shareat the grant date is the same / less than the exercise price of theoption, the intrinsic value being Nil.

Had the fair value method of accounting been used, the employeecompensation cost would have been Rs. 204 lac.

11. Incentive Plans

There is no positive amount carried forward in notional bank as onMarch 31, 2006, after distribution of PLVR for the FY 2005-06(Previous year Rs. 947.72 lac).

12. Leases

a) The Company has entered into leave and licence agreementsin respect of its commercial and residential premises. Theseare not non-cancellable and range between 11 months to 35months and are renewable by mutual consent on mutuallyacceptable terms. Leave and licence arrangements being similarin substance to operating leases, the particulars of the premisesunder leave and licence arrangement are as under:


Gross carrying amount of premises 2857.79 3816.04Accumulated depreciation 995.81 957.72Depreciation for the period 115.71 120.20

b) Finance Leases:

The Company has acquired vehicles under Finance Lease. Liabilityfor minimum lease payment is secured by hypothecation of thevehicles acquired under the lease. The minimum lease paymentsoutstanding as on March 31, 2006, in respect of vehicles acquiredunder lease are as under:

Period Total Un-matured Present valueminimum Interest of minimum

lease payments lease paymentsoutstanding as on

March 31, 2006Rs. Lac Rs. Lac Rs. Lac

Within one year 86.87 13.06 81.76Later than one yearand not later thanfive years 65.59 9.74 54.72

152.46 22.80 136.4813. Deferred Tax

Major components of deferred tax arising on account of timingdifferences as at the year end are:Assets This Year Previous Year

Rs. lac Rs. lacProvision for retirement benefits 294 806Provision for doubtful debts/advances 209 307VRS Expenses 77 —Others 210 228

790 1,341LiabilitiesDepreciation 4,608 3,798VRS Expenses — 45

4,608 3,843Net Deferred Tax Liability 3,818 2,502

14. Hedging Contracts

a. Reserve Bank of India has permitted the Company to hedge itsexposure on Crude Palm Oil on offshore exchanges to the extentof its imports. Accordingly, the Company is hedging import ofcrude palm oil on the Malaysian Commodities Exchange byway of futures contracts. The particulars of the futures contractsfor the year are as under:

This Year Previous Year

Details Purchase Sale Purchase Sale

Total number of contracts enteredduring the year 2 2 12 11

Number of units (25 MT per unit)under above contracts 60 60 595 595

Future contracts not settledas on March 31, 2006 — — — —

Number of units under above contracts — — — —

b. The Company uses forward exchange contracts to hedge itsforeign exchange exposure in accordance with its forex policyas determined by a Forex Committee. The particulars of theforward exchange contracts for the year are as under:



Total number of contractsentered during the year 171 77 184 36

Foreign currency value coveredUS Dollar (million) 101.25 33.68 105.48 20.59Euros (million) — 3.34 — 0.18

Total number of contractsoutstanding as at the year end 54 20 39 12


44



Foreign currency valueUS Dollar (million) 37.30 13.00 39.61 5.84Euros (million) — 0.94 — —

Uncovered Foreign exchangeexposure as at the year endUS Dollar (million) 12.41 — 16.92 —

15. Discontinuing Operations:During the year, in terms of the agreement dated March 14, 2006with Godrej Tea Limited (now known as Godrej Beverages & FoodsLimited), the Foods Division (except the Wadala factory) was soldfor a consideration of Rs. 7,000 lac with effect from close of workinghours on March 31, 2006. Of the total consideration, Rs. 4,000 lachas been received in cash and the balance Rs. 3,000 lac isreceivable by way of allotment of 68,75,000 equity shares of Rs. 10each at a premium of Rs. 33.64 per share.

The Foods Division is a separate segment as per AS 17, SegmentReporting. The carrying amounts of the total assets disposed, thetotal liabilities settled and the amounts of revenues and expenses inrespect of the ordinary activities attributable to the discontinuedoperations for the current financial year are as under:

Rs. in lacContinuing Discontinuing TotalOperation Operation

(Foods Division)

2005-06 2004-05 2005-06 2004-05 2005-06 2004-05

Turnover 54,226 57,174 20,322 19,161 74,548 76,335

OtherIncome 5,487 5,962 235 56 5,722 6,018

OperatingExpenses 51,372 52,845 20,548 19,420 71,920 72,265

Operating Profit 8,341 10,291 9 (203) 8,350 10,088

Interest 2,527 2,269 310 313 2,837 2,582

Profit / (loss)before tax 5,814 8,022 (301) (516) 5,513 7,506

Income Tax (1,547) 43 48 26 (1,499) 69

Profit / (loss)after tax 4,267 8,065 (253) (490) 4,014 7,575

Total Assets 94,596 76,825 5,079 6,845 94,596 83,670

Total Liabilities 54,687 47,743 1,589 2,390 54,687 50,133

Cash Flow

from operatingactivity 219 6,559 1,310 (1,959) 1,529 4,600

from investingactivity (2,843) (3,934) (463) (127) (3,306) (4,061)

from financingactivity 2,724 (1,602) (825) 1,882 1,899 280

Note :The total assets and liabilities as on March 31, 2006, excludes the assets and libility of the FoodsDivision which have been sold as at the close of working hours on March 31, 2006


16. TurnoverTurnover includes: This Year Previous Year

Rs. lac Rs. lac

i) Processing charges 2,003.93 2,125.86

ii) Export Incentives 554.42 573.27

iii) Licence fees and service charges 2,194.51 2,148.27

4,752.86 4,847.4017. Exceptional Items


i) Included under Other Income- Profit on sale of long term

investments 2,119.81 3,422.22

- Reversal of provision forclaims payable on culmination ofdisputes 175.00 —

- Interest received on depositplaced against aboveclaim on execution ofdecree 307.00 —

ii) Payment to Mumbai Port Trust forregularization of lease included inRent paid. 89.00 —

18. Profit and Loss Account

a) The amount of exchange loss on account of fluctuation of therupee against foreign currencies and the net charges for forwardforeign exchange contracts added to the carrying amount offixed assets during the year is Rs. 0.42 lac (Previous yearRs. 0.90 lac). The exchange difference included in the Profitand Loss Account is a loss of Rs. 640.31 lac (Previous yearRs. 1,736.08 lac). The exchange difference in respect of forwardexchange contracts to be recognised in subsequent accountingperiods is Rs. 24.68 lac (Previous year Rs. 715.88 lac).

b) Research and Development Expenditure of revenue naturecharged to the Profit & Loss Account amounts to Rs. 139.39 lac(Previous year Rs. 108.38 lac).

This Year Previous Year19. Earnings per share:

a. Calculation of weighted average number of equity sharesNumber of shares at the beginning of the year Nos. 4,86,41,942 4,86,41,942Number of equity shares outstanding at the end of the year Nos. 4,86,41,942 4,86,41,942Weighted average number of equity shares outstanding during the year Nos. 4,86,41,942 4,86,41,942

b. Net profit after tax excluding extraordinary items Rs. lac 4,006.62 7,577.22c. Net profit after tax available for equity shareholders (including extraordinary items) Rs. lac 7,112.42 7,577.22d. Basic and diluted earnings per share of Rs.6 each excluding extraordinary Items Rupees 8.24 15.58e. Basic and diluted earnings per share of Rs.6 each including extraordinary Items Rupees 14.62 15.58

Note : There is no impact on basic as well as diluted earnings per share on account of the ESOP implemented during the year, as the schemedoes not envisage any fresh issue of share capital.


45


20. Segment InformationInformation about primary business segments Rs. lac

Chemicals Foods Estate Finance & Investments Others Total

This Year Previous Year This Year Previous Year This Year Previous Year This Year Previous Year This Year Previous Year This Year Previous Year

Revenue

External Sales 51177.71 54306.55 21116.55 19197.24 2282.52 2158.44 4574.90 5822.96 1118.20 867.83 80269.88 82353.02

Add : Unallocated Income — — — — — — — — — — — —

Total Income 51177.71 54306.55 21116.55 19197.24 2282.52 2158.44 4574.90 5822.96 1118.20 867.83 80269.88 82353.02

Results

Segment result before

interest and tax 4760.35 6230.43 (341.38) (856.81) 1471.62 1361.05 4574.90 5372.94 (111.58) 114.87 10353.91 12222.48

Unallocated expenses (2003.63) (2134.79)

Interest Expense (net) (2837.42) (2581.67)

Profit before tax 5512.86 7506.02

Taxes (1498.68) 69.00

Profit after taxes and

before extraordinary items 4014.18 7575.02

Add : Extraordinary Items

(Net of taxes) 3105.80 —

Add/(Less) : Prior period items (7.56) 2.20

Net Profit 7112.42 7577.22

Segment Assets 44348.01 34793.82 3701.03 8628.96 2768.09 3699.98 40283.49 36151.10 3495.06 365.62 94595.68 83,639.48

Unallocated Assets — 30.19

Total Assets 94595.68 83669.67

Segment Liabilities 19899.83 17062.14 423.86 3896.27 437.17 950.20 44.86 27.85 81.88 62.06 20887.60 21998.52

Unallocated Liabilities 36572.88 28134.80

Total Liabilities 57460.48 50133.32

Total Cost incurred

during the year to

acquire segment assets 7276.38 915.21 297.77 426.08 12.72 61.20 3,557.39 7,494.02 3,151.82 — 14296.08 8,896.51

Segment depreciation 1784.09 1741.79 239.82 240.22 128.06 133.06 — 450.02 107.46 33.36 2259.43 2598.45

Information about Secondary Business Segments

Revenue by Geographical markets

India 65120.34 66979.67

Outside India 15149.54 15373.35

Total 80269.88 82353.02

Carrying Amount of Segment assets

India 94595.68 83669.67

Outside India — —

Total 94595.68 83669.67

Notes:

1. The Company has disclosed Business Segment as the primary segment. Segments have been identified taking into account the nature of the products, the different

risks and returns, the organisational structure and the internal reporting system.

2. Chemicals segment includes Oleo Chemicals such as Fatty Alcohols, Fatty Acids, Alfa Olefin Sulphonates and Refined Glycerin.

Foods segment includes refined vegetable oils and vanaspati, fruit and vegetable puree, pulp juices and fruit beverages.

Estate segment comprises the business of giving premises on leave and license basis.

Finance and Investments segment comprises of investment in subsidiaries, associate companies and other investments.

3. The geographical segments are as follows :

– Sales in India represent sales to customers located in India

– Sales outside India represent sales to customers located outside India.


46

21. Related Party Disclosures

List of Related Parties and Relationshipsa) Parties where control exists

Godrej & Boyce Mfg. Co. Ltd., the holding company.Subsidiary companies:Ensemble Holdings & Finance Ltd.Godrej Agrovet Ltd.Goldmohur Foods & Feeds Ltd.Golden Feed Products Ltd.Godrej Global Solutions Ltd.Godrej Global Solutions (Cyprus) LimitedGodrej Global Solutions, Inc.Godrej International Ltd.Godrej Global Mideast FZEGodrej Properties Ltd.Girikandra Holiday Homes & Resorts Ltd.Godrej Hicare Ltd.Godrej Beverages & Foods Ltd.(formerly known as Godrej Tea Ltd.)Godrej Realty Pvt. Ltd.Godrej Waterside Properties Pvt. Ltd.Krithika Agro Farm Chemicals & Engineering Industries Pvt. Ltd.Fellow Subsidiaries:Godrej Appliances Ltd.Godrej Foods Ltd.Godrej Infotech Ltd.

Mercury Mfg. Co. Ltd.Godrej (Malaysia) Sdn. Bhd.Godrej (Singapore) Pte. Ltd.JT Dragon Pte. Ltd.

b) Other related parties with whom the Company hadtransactions:

Associate / Joint Venture CompaniesGodrej SaraLee Ltd.Godrej Upstream Ltd.

Key Management PersonnelMr. A. B. Godrej - Chairman (Non-Executive)Mr. N. B. Godrej - Managing DirectorMs. T. A. Dubash - Executive Director & President

(Marketing)Mr. Mathew Eipe - Executive Director & President

(Chemicals)Mr. V. Banaji - Executive Director & President

(Group Corporate Affairs)Mr. M. P. Pusalkar - Executive Director & President

(Corporate Projects)Enterprises over which key management personnel exercisesignificant influenceGodrej Consumer Products Ltd.Swadeshi Detergents Ltd.


47


c) Transactions with Related PartiesRs. lac

Enterprisesover which

KeyManagement

Relative PersonnelAssociate/ Key of Key exercise

Holding Subsidiary Fellow Joint Venture Management Management significantNature of Transaction Company Companies Subsidiaries Companies Personnel Personnel influence Total

Sale of Goods 17.08 1.53 — 12.50 — — 890.83 921.94Previous Year 22.14 0.59 904.96 3.18 — — — 930.87Sale of Fixed Assets 0.05 1.40 — — — — 264.19 265.64Previous Year — — 1.46 — — — — 1.46Sale of undertaking (Foods Division) — 7000.00 — — — — — 7000.00Previous Year — — — — — — — —Purchase of goods & equipment 30.77 0.14 695.87 6.69 — — 1,033.81 1767.28Previous Year 60.60 263.54 1086.77 11.49 — — — 1422.40Commission received — 30.01 2.50 19.78 — — 23.15 75.44Previous Year — — 21.05 4.50 — — — 25.55Recovery of establishment &Other Expenses 1.43 271.58 12.52 229.64 — — 815.74 1330.91Previous Year 13.82 362.57 898.07 216.83 — — 0.06 1491.35Establishment & other exps paid 228.68 19.60 10.50 14.03 — — 89.66 362.47Previous Year 225.68 26.31 112.17 7.35 — — 0.13 371.64Sale of Investments — — — — — — — —Previous Year 4950.00 — — — — — — 4,950.00Purchase of Investments — 190.68 — — — — — 190.68Previous Year — — — — — — 10.20 10.20Interest received — 1.18 — — — — 4.99 6.17Previous Year — 33.47 — — — — 5.85 39.32Interest paid — — — — — — — —Previous Year — — — — 0.27 — — 0.27Dividend income — 508.20 25.28 536.25 — — 1,007.66 2077.39Previous Year — 646.66 562.72 1010.33 — — — 2219.71Dividend paid 1,248.02 — — — 47.61 424.41 — 1720.04Previous Year 936.01 2.97 — — 75.60 272.64 — 1287.22Remuneration — — — — 330.85 — — 330.85Previous Year — — — — 402.01 — — 402.01Finance provided including loans & equitycontributions — 1,294.46 — (3.30) — — (10.00) 1,281.16Previous Year — 4,292.37 (3.08) (24.10) — — — 4265.19Finance repaid during the year — 103.48 — — — — — 103.48Previous Year — 1,558.50 — — — — 8.00 1,566.50Guarantees & collaterals given — (2,300.00) — — — — — (2,300.00)Previous Year — (700.00) — 1,350.00 — — — 650.00Balance Outstanding as on March 31, 2006Receivables 1.42 3016.15 — 18.54 — — 222.25 3258.36Previous Year 69.12 91.92 19.76 10.67 — — — 191.47Payables 0.01 113.57 — 42.60 — — 102.85 259.03Previous Year 4.33 198.98 61.80 35.29 — — 0.11 300.51Guarantees Outstanding — 667.00 1,000.00 1,350.00 — — — 3017.00Previous Year — 2,967.00 1,000.00 1,350.00 — — — 5317.00


48

d) The significant Related Party transactions are as under:Rs. lac Rs. lac

Nature of Transaction Amount Nature of Transaction Amount

Sale of goods Interest received- Godrej Consumer Products Ltd. 890.83 - Swadeshi Detergents Ltd. 4.99

Sale of fixed assets Finance repaid during the year- Godrej Consumer Products Ltd. 264.19 - Ensemble Holdings & Finance Ltd. 68.00

- Godrej Hicare Ltd. 35.48Sale of undertaking (Foods Division)- Godrej Beverages & Foods Ltd. 7,000.00 Guarantees & collaterals given

- Godrej Beverages & Foods Ltd. (2,800.00)Purchase of goods & equipment - Godrej Global Solutions Ltd. 500.00- Godrej Consumer Products Ltd. 1,033.81- Godrej Foods Ltd. 692.34 Dividend income

- Godrej Consumer Products Ltd. 1,007.66Commission received - Ensemble Holdings & Finance Ltd. 306.67- Godrej Consumer Products Ltd. 23.15- Godrej Beverages & Foods Ltd. 24.85 Dividend paid- Godrej Upstream Ltd. 19.78 - Godrej & Boyce Mfg. Co. Ltd. 1,248.02

Recovery of establishment & other expenses Remuneration- Godrej Consumer Products Ltd. 815.74 - Mr. N. B. Godrej 82.11- Godrej Saralee Ltd. 229.64 - Ms. T. A. Dubash 50.57- Godrej Agrovet Ltd. 175.10 - Mr. Mathew Eipe 62.56

- Mr. V. F. Banaji 77.07Establishment & other exps paid - Mr. M. P. Pusalkar 48.93- Godrej & Boyce Mfg. Co. Ltd. 228.68- Godrej Consumer Products Ltd. 89.66 Finance provided including loans & equity contributions

Purchase of Investments - Godrej Global Solutions Ltd. 210.00- Ensemble Holdings & Finance Ltd. 190.68 - Godrej International Ltd. 866.15

- Godrej Hicare Ltd. 171.60

This Year Previous YearRs. lac Rs. lac Rs. Lac

22. Computation of Profits under Section 349of the Companies Act, 1956Profit for the year after tax as per Profit & Loss Account 7112.42 7575.52Add : Depreciation as per accounts 2259.43 2148.43Managerial Remuneration 330.85 402.01Profit/(loss) on sale of assets under Section 349 294.00 (127.31)Provision for doubtful debts/advances anddepletion in value of investments 10.87 457.02Provision for Tax (including tax on extraordinary items) 1903.68 (69.00)

4798.83 2811.15

11911.25 10386.67Less : Depreciation under Section 350of the Companies Act, 1956 2240.45 2093.73Profit/(loss) on sale of assets as per books 309.13 (123.78)Profit on sale of investments 2155.37 3491.26Profit on sale of Foods division 3510.80 —

8215.75 5461.21

Net Profit for the purpose of Directors’ Remuneration 3695.50 4925.46

Managerial remuneration to Managing and Executive Directors@ 10% of the net profits 369.55 492.55

Managerial remuneration paid/payable 330.85 402.01


49



23. Managerial RemunerationSalaries and allowances 289.12 342.48Contribution to Provident Fund 16.66 13.64Estimated Monetary value of perquisites 15.47 39.44Directors’ Fees 9.60 6.45

TOTAL 330.85 402.01

24. Auditors’ RemunerationAudit fees (including Rs. 0.92 lac tobranch auditors, Previous Year Rs. 0.98 lac) 30.92 25.48Tax audit fees 5.50 4.50Certification and other services 7.65 11.47Tax Consultation and representation 9.20 3.15Consultation and management services 4.30 2.99Out of pocket expenses 0.71 0.13

TOTAL 58.28 47.72

25. Turnover (Net)

This Year Previous YearItem Unit Quantity Value Quantity Value

Rs. lac Rs. lac

Fatty Acids MT 56110 17447.97 51369 17014.51Glycerin MT 8997 3491.25 8390 3796.68Alpha Olefin and its precursorsand derivatives MT 62657 28311.15 71967 31517.63Oils & Vanaspati MT 38048 14461.23 27597 13652.66Fruit & Vegetable Puree, Pulp & Juices MT 4285 1724.44 3951 1616.33Fruit beverages and fruit based products KL 8586 2289.06 8645 2264.50Soya Milk MT 631 249.29 591 224.64Medical Diagnostic Products 958.02 803.33Others 5615.85 5444.96

TOTAL 74548.26 76335.24

26. Inventories - Finished Goods

March 31, 2006 March 31, 2005 March 31, 2004Item Unit Quantity Value Quantity Value Quantity Value

Rs. lac Rs. lac Rs. lacFatty Acids MT 2278 817.98 1665 629.54 2245 878.39Glycerin MT 638 236.59 202 90.16 121 63.46Alpha Olefin and its precursors andderivatives MT 5710 2,300.62 1649 499.65 1867 723.39Oils & Vanaspati MT — — 1075 509.64 1098 575.99Fruit & Vegetable Puree, Pulp & Juices MT — — 5338 1714.67 1576 343.99Fruit beverages and fruit based products KL — — 748 165.04 650 153.89Soya Milk MT — — 68 15.45 — —Medical Diagnostic Products 119.18 180.20 307.60Others — 101.70 66.80

TOTAL 3474.37 3906.05 3113.51


50

29. Licensed, Installed and Utilised Capacity

Item Unit Licensed Installed Capacity ActualCapacity Production

This Previous This PreviousYear Year Year Year

SCHEDULEDFatty Acids MT } 32000 32000 46307 37014Glycerin MT } 8280 8280 9434 8448Alpha Olefin and its precursors }and derivatives MT } 35000 35000 66933 72699Soaps MT } 26381 26381 10338 10944Cosmetics MT } 1200 1200 – –Fruit Beverages & Fruit }based products KL } 30000 30000 18467 46509Fruit & Vegetable Puree, } N.APulp & Juices. MT } 5000 5000 3222 8581Refined Oils & Vanaspati MT } 38700 38700 10099 14390Dietetic & Geriatic foods MT } 250 250 4155 –U.H.T./Sweetened Flavoured Milk KL } 1800 1800 1182 1,136Instant Tea/Coffee Plant MT } 3000 3000 879 690Synthetic Detergents MT } 11250 11250 14699 16888Hydrogen (Captive consumption) NM3 } 1224000 1224000 518091 411412Oxygen (By-Product) NM3 } 612000 612000 259046 205706

Notes :

a) The Licensed capacities are not applicable in view of the exemption from licensing granted under Notification SO 477(E) dated July 25,1991, issued under the Industries (Development & Regulation) Act, 1951

b) Alpha Olefin and its precursors and derivatives includes Fatty Alcohols and A.O. Sulphonates.

c) Installed capacity excludes the installed capacity for manufacture of intermediates which are intended to be used for internal consumptionto manufacture A.O and its precursors and derivatives.

d) Production of A.O and its precursors and derivatives include 14,919 MT produced under process contracts for third parties.


27. Raw Materials ConsumedThis Year Previous Year

Unit Quantity Value Quantity ValueRs. lac Rs. lac

Oils & Fats MT 126174 31036.70 126151 32793.15Chemicals and Catalysts MT 19942 4550.73 21314 4546.98Fruit Pulp & Concentrates KL 1070 1073.90 5170 2639.87Packing Materials, etc. 3616.73 4931.72

TOTAL 40278.06 44911.72

Raw materials consumption includes consumption for production of captively consumed items.

28. Purchase of Goods

This Year Previous YearUnit Quantity Value Quantity Value

Rs. lac Rs. lac

Fatty Acids MT 134 42.63 1002 380.73Oils & Vanaspati MT 29063 8910.68 11914 4,292.97Pulp MT 1011 473.88 254 112.18Medical Diagnostic Products 461.33 379.51Others 62.25 717.82TOTAL 9950.77 5883.21


51



30. Value of Imports on CIF Basis (includesonly Imports directly made)Raw materials 23326.81 15240.87Goods for resale 50.13 1136.45Stores & spares 290.72 270.46Capital goods 731.15 36.89

TOTAL 24398.81 16684.67

31. Expenditure in Foreign CurrencyInterest 352.82 833.15Travelling expenditure 83.98 80.37Other expenditure 399.93 353.17Expenses for Foreign Branch:- Salaries and allowance 87.17 84.91- Rent 20.80 21.96- Others 38.07 32.64

TOTAL 982.77 1406.20

This year Previous yearRs. lac Rs. lac

32. Value of Consumption of % %Raw Materials & SparesRaw MaterialsImported (including dutycontent) 26138.87 65 28354.38 63Indigenous 14139.19 35 16557.34 37

40278.06 100 44911.72 100

SparesImported (includingduty content) 240.15 38 373.04 46Indigenous 391.72 62 441.27 54

631.87 100 814.31 100


33. Dividends Remitted inForeign Currency(subject to deduction of tax,as applicable)Final Dividend forFinancial Year 2004-05 to6 shareholders on 1110 shares 0.04 0.01

TOTAL 0.04 0.01


34. Earnings in Foreign ExchangeExport of goods (F.O.B. :this year Rs.14150.42 lac 15082.08 15309.42previous year Rs.14793.04 lac)Dividend 65.80 62.21Others 1.66 1.72

TOTAL 15149.54 15373.35

35. Interest in Joint Ventures:The Company’s interests, as a venturer, in jointly controlled entitiesare:Name Countries Principal Percentage of

of activities OwnershipIncorporation interest as at

31st March, 2006Godrej India Household 20.00%SaraLee Ltd. Insectisides

The Company’s interests in Joint Venture are reported as Long TermInvestments (Schedule “6”) and stated at cost less provision, if any,for permanent diminution in value of such investments. TheCompany’s share of each of the assets, liabilities, income andexpenses, etc. related to its interests in this joint venture are:


I. ASSETS1. Fixed Assets 967.17 862.072. Investments — —3. Current Assets,

Loans and Advancesa) Inventories 898.23 894.18b) Sundry Debtors 375.64 255.10c) Cash and Bank Balances 577.36 865.31d) Other Current Assets 0.22 0.24e) Loans and Advances 463.50 378.54

II. LIABILITIES1. Loan Funds

a) Secured Loans 70.98 96.19b) Unsecured Loans — —

2. Current Liabilitiesand Provisionsa) Liabilities 1251.71 1640.83b) Provisions 127.05 52.64

3. Deferred Tax- Net 21.02 23.03

III. INCOME1. Turnover

(Net of excise) 8911.43 9757.502. Other Income 152.84 124.16

IV. EXPENSES1. Material consumed

and purchase of goods 4970.02 4837.662. Expenses 2724.80 4039.403. Inventory change 119.20 (43.57)4. Depreciation 91.38 137.115. Interest 12.12 20.556. Provision for Taxation 117.79 63.77

V. OTHER MATTERS1. Contingent Liabilities 207.02 262.352. Capital Commitments 2.48 0.52

36. Figures for the previous year have been regrouped wherevernecessary.


52


37. Additional information as required under part IV of Schedule VI to the Companies Act, 1956

1. Registration DetailsRegistration No : 97781State Code : 11Balance Sheet Date : 31/3/2006

2. Capital raised during the year (Amount in Rs. lac)Public Issue : NilRights Issue : NilBonus Issue : NilPrivate Placement (Preference) : Nil

3. Position of mobilisation and deployment of funds(Amount in Rs. lac)Total Liabilities : 73,667.33Total Assets : 73,667.33Sources of Funds

Paid-up Capital : 2,918.52Reserves & Surplus : 34,216.68Secured Loans : 24,910.89Unsecured Loans : 7,803.24Deferred Tax Liability : 3,818.00

Application of FundsNet Fixed assets : 28,594.35Investments : 37,134.67Net Current Assets : 5,718.95Misc. Expenditure : 2,219.36Accumulated Losses : —

4. Performance of Company (Amount in Rs. lac)Turnover (Income from Operations) : 74,548.26Total Expenditure(Net of Other Income) : 69,035.40Profit/(Loss) before tax : 5,512.86Profit/(Loss) after tax : 4,014.18Earning per Share inRs. (on an annualised basis) : 8.24Dividend rate % : 83.33%Generic Names of three principalproducts/services of CompanyItem Code No. : 38.23 *Product description : Fatty Acids/Fatty AlcoholsItem Code No. : 15.16 *Product description : Vanaspati/Refined OilsItem Code No. : 22.02 *Product description : Fruit Drinks

(*represents Heading No. of the Harmonized Commodity Description and Coding System)

REPORT OF THE AUDITORS TO THE BOARD OF DIRECTORS OF THE GODREJ INDUSTRIES LIMITEDON CONSOLIDATED FINANCIAL STATEMENTS

1. We have audited the attached Consolidated Balance Sheet ofGodrej Industries Limited and its subsidiaries as at March 31, 2006,and also the Consolidated Profit and Loss Account and theConsolidated Cash Flow Statement for the year then ended, bothannexed thereto. These consolidated financial statements are theresponsibility of Godrej Industries Limited’s management. Ourresponsibility is to express an opinion on these financial statementsbased on our audit.

2. We conducted our audit in accordance with the auditing standardsgenerally accepted in India. Those standards require that we planand perform the audit to obtain reasonable assurance whether thefinancial statements are free of material misstatements. An auditincludes, examining on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit alsoincludes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audit providesa reasonable basis for our opinion.

3. We did not audit the financial statements of some subsidiaries andjoint ventures whose financial statements reflect the Group’s shareof total assets of Rs. 7,326 lakhs as at March 31, 2006 and theGroup’s share of total revenues of Rs. 25,348 lakhs and net cashoutflow amounting to Rs. 38 lakhs for the year ended on that dateas considered in the consolidated financial statements. Thesefinancial statements have been audited by other auditors whosereports have been furnished to us and our opinion, insofar as itrelates to the amounts included in respect of the subsidiaries andjoint ventures is based solely on the report of the other auditors.

4. As stated in Note 2 of Schedule 21 to the Consolidated FinancialStatements, a joint venture whose Financial Statements reflect theGroup’s share of total assets of Rs. 703 lakhs as at March 31, 2006and the Group’s share of total revenues of Rs. 242 lakhs and netcash inflow amounting to Rs. 70 lakhs and associates insofar as itrelates to the Group’s share of the associates’ net profit of Rs. 56lakhs for the year ended on that date have not been audited andhave been considered in the consolidated financial statements basedsolely on the un audited seprate financial statements certified bythe management.

5. We report that the consolidated financial statements have beenprepared by the management of Godrej Industries Limited in

accordance with the requirements of Accounting Standard (AS) 21– Consolidated Financial Statements, Accounting Standard (AS) 23– Accounting for Investments in Associates in Consolidated FinancialStatements and Accounting Standard (AS) 27 – Financial Reportingof Interests in Joint Ventures issued by the Institute of CharteredAccountants of India.

6. Reference is invited to note 10 of Schedule 21- Notes to Accounts,regarding the recoverability of advances given to certain individualsamounting to Rs. 1033 lakh being contingent upon the transferand/or disposal of the shares pledged against the loan. The saidshares were lodged for transfer which application was rejectedand the Company has preferred an appeal to the Company LawBoard. The impact thereof on the profit for the year could not beascertained.

7. Based on our audit and on consideration of the reports of otherauditors on separate financial statements, and the management’scertification of the unaudited financial statements, in our opinion,the consolidated financial statements, subject to the observations inpara (6) above, give a true and fair view in conformity with theaccounting principles generally accepted in India:

a) in case of the Consolidated Balance Sheet, of the consolidatedstate of affairs of the Godrej Industries Limited Group as atMarch 31, 2006;

b) in case of the Consolidated Profit and Loss Account, of theconsolidated results of operations for the year ended on thatdate; and

c) in case of the Consolidated Cash Flow Statement, of theconsolidated cash flows for the year ended on that date.



Viraf R. MehtaPartner

Mumbai, May 26, 2006 Membership No.: 32083

Godrej Industries Limited – Consolidated Accounts

53


54


CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2006

SOURCES OF FUNDS1. Shareholders’ Funds

(a) Share capital 1 2918.52 2912.58(b) Share Application Money 6000.00 –(c) Reserves & surplus 2 33481.41 32177.16

42399.93 35089.742. Minority Interest 3625.67 3390.953. Loan Funds

(a) Secured loans 3 29982.41 27970.40(b) Unsecured loans 4 27140.40 12295.52

57122.81 40265.924. Deferred Tax Liability 3876.13 2409.81

TOTAL 107024.54 81156.42

APPLICATION OF FUNDS5. Fixed Assets 5

(a) Gross block 77659.89 67005.18(b) Less : Depreciation/Impairment 32997.46 32523.15

(c) Net block 44662.43 34482.03(d) Capital work-in-progress 2274.89 1819.61

46937.32 36301.646. Goodwill (on consolidation) 11275.93 10967.947. Investments 6 24100.96 17479.538. Current Assets, Loans and Advances

(a) Inventories 7 28500.97 22617.01(b) Sundry debtors 8 23052.69 20744.80(c) Cash and bank balances 9 9106.59 5343.11(d) Other Current Assets 24.96 –(e) Loans and advances 10 17212.32 16320.73

77897.54 65025.65Less : Current Liabilities and Provisions(a) Liabilities 11 49278.68 43302.23(b) Provisions 12 6127.98 5455.60

55406.67 48757.83Net Current Assets 22490.87 16267.81

9. Miscellaneous Expenditure 13 2219.46 139.49(To the extent not written off or adjusted)

TOTAL 107024.54 81156.42




As per our Report attached Signatures to Balance Sheet and Schedules 1 to 13, 20 and 21




55

CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006

INCOMETurnover (gross) 209816.33 200999.17Less : Excise Duty 5519.15 5863.69Turnover (net) 204297.18 195135.48Other Income 14 6319.73 4781.82

210616.91 199917.30

EXPENDITUREMaterials consumed and cost of sales 15 150164.44 142231.77Expenses 16 46763.12 43866.10Inventory change 17 (2220.73) (784.23)Interest and financial charges (net) 18 4528.44 3496.47Depreciation 3766.77 3360.55(Net of transfer from Revaluation ReserveRs. 168.43 lac, Previous year Rs. 223.80 lac)

203002.04 192170.66

Profit Before Tax 7614.87 7746.64Provision for taxation- Current Tax 1197.49 1359.87- Fringe benefit Tax 114.85 –- Deferred Tax 1242.82 (718.79)

Profit For The Year After Taxation 5059.71 7105.56Prior Period adjustments (net) 19 (14.38) 4.17

5045.33 7109.73Share of Loss in Associates (78.09) (137.70)

Profit before Minority Interest 4967.24 6972.03Share of Minority Interest (67.47) (504.91)

Profit After Minority Interest 4899.77 6467.12Surplus brought forward 17913.78 15317.18

Profit Available For Appropriation 22813.55 21784.30

APPROPRIATIONS:Dividend on Equity Shares– Interim 106.15 209.00– Final 2552.25 2044.86Tax on distributed profits 683.27 547.10Transfer to General Reserve 1251.61 1069.56Surplus carried forward 18220.27 17913.78

TOTAL 22813.55 21784.30

Basic and Diluted Earnings per share (Face Value Rs. 6 per share) 10.09 12.05(refer note 17)



This Year Previous YearSchedule Rs. lac Rs. lac


As per our Report attached Signatures to Profit & Loss Account and Schedules 14 to 21




56

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006

A. Cash Flow from operating activities :Profit before tax 7614.87 7746.65Adjustments for :Depreciation 3766.77 3360.55Foreign exchange 119.45 946.54Profit on sale of investments (2299.64) (3458.14)Loss/(Profit) on sale of fixed assets (373.81) 182.24Dividend income (1299.75) (580.27)Interest income (945.81) (746.62)Interest expense 4352.16 3214.73Voluntary retirement compensation paid (2685.07) (100.42)Deferred expenditure written off 704.02 209.22Provision for diminution in value of investments (364.79) 531.76Provision for doubtful debts and sundry balances written off (net) (6.04) (99.86)Others 264.97 (273.48)Operating profit before working capital changes 8847.33 10932.90Adjustments for :Inventories (5828.97) 1043.25Trade and other receivables (7115.65) (2545.85)Trade payables 8257.31 2590.17Cash generated from operations 4160.02 12020.47Direct taxes paid (1554.31) (1392.52)Direct taxes refund received 125.75 140.11Net Cash from operating activities 2731.46 10768.06

B. Cash Flow from investing activities :Purchase of fixed assets (16143.97) (5270.97)Proceeds from sale of fixed assets 1523.12 687.69Acquisition of new businesses (1246.10) –Purchase of investments (57587.86) (56076.53)Proceeds from sale of investments 54265.71 53425.25Intercorporate deposits/Loans (net) 1289.31 457.08Interest received 953.84 795.29Dividend received 1284.18 583.21Net Cash used in investing activities (15661.77) (5398.98)

C. Cash Flow from financing activities :Proceeds from share capital 6579.40 –Proceeds from issue of debentures 1154.46 –Proceeds from borrowings 55685.42 25812.12Repayments of borrowings (37498.41) (21935.24)Bank overdrafts (net) (2135.52) (3379.95)Interest paid (4587.88) (3227.87)Dividend paid (2036.10) (1571.79)Tax on distributed profits (467.58) (448.82)Net Cash from/(used) in financing activities 16693.79 (4751.55)Net increase in cash and cash equivalents 3763.48 617.53Cash and cash equivalents (Opening Balance) 5343.11 4725.58Cash and cash equivalents (Closing Balance) 9106.59 5343.11(including share in jointly controlled entities - Rs. 675.15 lac)

Notes :This Year Previous Year

Rs. lac Rs. lac

1. Cash and Cash equivalents.Cash on hand and balances with banks 9113.75 5343.23Effect of exchange rate changes (7.16) (0.12)Cash and cash equivalents 9106.59 5343.11

2. The above cash flow statement includes share of cash flows from jointly controlled entities as under:a. Net cash from operating activities 680.73b. Net cash used in investing activities (642.92)c. Net cash used in financing activities (353.35)


As per our Report attached Signatures to Cash Flow statement




57

SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT AND LOSSACCOUNT FOR THE YEAR ENDED MARCH 31, 2006 This Year Previous Year

Rs. lac Rs. lacSCHEDULE 1 : SHARE CAPITALAuthorised:13,33,33,333 Equity shares of Rs. 6 each 8000.00 8000.0010,00,00,000 Unclassified Shares of Rs. 10 each 10000.00 10000.00

18000.00 18000.00Issued, Subscribed and Paid-up:

4,86,41,942 Equity shares of Rs. 6 each fully paid 2918.52 2912.582918.52 2912.58

Of the above 3,12,00,398 shares are held by Godrej & Boyce Mfg. Co. Limited, the holding Company

SCHEDULE 2 : RESERVES AND SURPLUSAs at Additions Deductions As at

1.4.2005 31.03.2006Securities Premium Account 1099.27 – 0.10 1099.17

1099.16 0.11 – 1099.27Capital Investment Subsidy Reserve 80.42 – 0.03 80.39

65.97 14.45 – 80.42Revaluation Reserve 3031.76 – 740.37 2291.39

3256.59 – 224.83 3031.76Special Reserve u/s. 451C of RBI Act, 1934 – 117.39 – 117.39Capital Redemption Reserve 3125.00 – – 3125.00

3125.00 – – 3125.00General Reserve 6309.90 1251.61 – 7561.51

6152.34 1069.56 912.00 6309.90Foreign Exchange Fluctuation Reserve 12.29 23.29 – 35.58

12.29 – – 12.29Profit & Loss Account 17913.79 306.48 – 18220.27

15317.18 2596.61 – 17913.79Share in Jointly Controlled Entities 604.73 345.98 – 950.71

706.87 – 102.14 604.73Total Reserves – This Year 32177.16 2044.75 740.50 33481.41 – Previous Year 29723.11 3680.73 1238.97 32164.87

SCHEDULE 3 : SECURED LOANSTerm loans from financial institutions 565.68 1155.98Term loans from banks 27577.29 23303.20Bank overdrafts 1768.46 3415.03Share in jointly controlled entities 70.98 96.19

29982.41 27970.40SCHEDULE 4 : UNSECURED LOANSFixed deposits 158.59 471.45Intercorporate deposits 1828.10 3663.10Short term loans from banks 21777.87 7691.41Other loans from banks 2337.17 –Sales tax deferment facility – 316.43Share in jointly controlled entities 1038.67 153.13

27140.40 12295.52

SCHEDULE 5 : FIXED ASSETS Rs. lac

ASSETS GROSS BLOCK DEPRECIATION/IMPAIRMENT NET BLOCK

As on Deductions/ As on Upto Deductions/ For the Upto As on As on1.4.2005 Additions Adjustments 31.03.2006 31.03.2005 Adjustments Year 31.03.2006 31.03.2006 31.03.2005

Tangible AssetsLand 1303.87 130.00 24.18 1409.69 60.50 16.30 3.82 48.02 1361.67 1243.37Buildings 11430.62 1246.01 1265.25 11411.38 2988.99 314.75 359.73 3033.97 8377.41 8441.63Plant & Machinery 43849.60 11553.81 3178.38 52225.03 24636.36 2,564.15 2523.21 24595.42 27629.61 19213.24Research Centre 150.39 – – 150.39 59.25 – 5.05 64.30 86.09 91.14Furniture & Fixtures 1483.35 198.82 73.69 1608.48 831.93 42.07 106.61 896.47 712.01 651.42Office & Other Equipments 1403.91 261.32 285.31 1379.92 733.16 208.43 124.44 649.17 730.75 670.75Vehicles 1264.62 316.54 232.93 1348.23 631.62 130.22 154.02 655.42 692.81 633.00Trees Development Cost 454.69 – – 454.69 209.22 – 30.33 239.55 215.14 245.47Intangible AssetsTechnical Know-how Fees 200.00 – – 200.00 195.69 – 4.29 199.98 0.02 4.31Goodwill – 1116.02 – 1116.02 – – 182.73 182.73 933.29 –Trademarks 3211.99 450.00 152.27 3509.72 995.82 150.35 261.03 1106.50 2403.22 2216.17Assets Acquired Under Finance LeasePlant & Machinery 52.31 442.11 – 494.42 – – 20.99 20.99 473.43 52.31Vehicles 274.25 69.74 31.95 312.04 117.09 12.66 72.13 176.56 135.48 157.16Share in jointly controlled entities 1925.59 162.49 48.20 2039.88 1063.52 26.52 91.38 1128.38 911.50 862.07TOTAL - This Year 67005.19 15946.86 5292.16 77659.89 32523.15 3465.45 3939.76 32997.46 44662.43 34482.04

- Previous Year 65238.97 3786.87 2020.65 67005.18 29845.11 906.30 3584.34 32523.15Capital Work-in-Progress 2274.89 1819.61TOTAL 46937.32 36301.65

1. Land includes leasehold land of Rs.291.75 lac (Previous Year Rs.232.16 lac) which is being amortised over the period of lease.2. Buildings, Plant & Machinery and Research Centre at Vikhroli Factory were revalued on 30th June, 1992 on the basis of a Valuation Report submitted by professional valuers.3. Depreciation for the year includes Rs.168.43 Lac (Previous Year Rs.223.80 Lac) being depreciation on revalued component of the fixed assets.4. Buildings includes Rs.0.01 lac (Previous Year Rs.0.01 lac) being the value of investment in shares of Co-operative Housing Society.5. Buildings include Rs. 1701.74 lac (Previous year Rs. 2651.08 lac) being the cost of equity shares in Tahir Properties Ltd., representing the right of the Company to three (previous year five) flats in the property.6. Accumulated depreciation includes impairment loss of Rs. 707.90 lac on plant & machinery in an earlier year.7. Capital work-in-progress is net of impairment loss of Rs. 204.10 lac provided on an infructuous asset under construction.



58

SCHEDULE 6 : INVESTMENTSFACE NUMBER AMOUNT

Investee Company/Institutions VALUE Qty Acquired Sold Qty As on As onAs on During During As on Notes 31.03.06 31.03.05

(Rs.) 01.04.05 Year Year 31.03.06 Rs. lac Rs. lac

LONG TERM INVESTMENTS - At costA. TRADE INVESTMENTS

Equity Shares : Fully PaidBharuch Eco-Aqua Infrastructure Ltd. 10 4,40,000 – – 4,40,000 44.00 44.00Preference Shares : Partly PaidGodrej Foods Ltd. 10 50,00,000 – – 50,00,000 (b) 450.00 450.00(8% Redeemable CumulativePreference Shares, 2012)Tahir Properties Ltd. (Class-A) 100 25 – – 25 (b) 0.02 0.02

B. OTHER INVESTMENTSEquity Shares : Fully PaidQuoted :Godrej Consumer Products Ltd. 4 73,24,027 – 5,90,000 67,34,027 10730.01 11670.12Godrej Foods Ltd. 1 14,84,864 – 14,84,864 – – 13.64Others – – – – 1.19 1.08Equity Shares : Fully PaidUnquoted :Associate CompaniesCompass Connections Ltd. £0.25 13,692 – – 13,692 159.18 142.99Godrej Upstream Ltd. 10 9,000,000 – – 9,000,000 457.06 591.86Swadeshi Detergents Ltd. 10 2,09,370 – – 2,09,370 50.28 49.54Creamline Dairy Products Ltd. 10 23,90,911 – – 23,90,911 1014.23 971.88Creamline Nutrients Ltd. 10 3,51,352 – – 3,51,352 95.96 90.79Polychem Hygiene Laboratories Pvt. Ltd. 10 4,55,000 – – 4,55,000 170.98 178.72Personalitree Academy Ltd. 10 3,89,269 – – 3,89,269 68.24 68.24Other CompaniesGharda Chemicals Ltd. 100 114 – – 114 (a) 11.57 11.57Avestha Gengraine Technologies Pvt. Ltd. 10 1,05,500 70,244 – 1,75,744 767.13 450.25karROX Technologies Ltd. 10 2,50,000 – – 2,50,000 100.50 100.50Krithika Agro Farm Chemicals & Engg. Inds. Ltd. 10 – 7,600 7,600 0.76 –Tahir Properties Ltd. (Partly Paid) 100 25 – – 25 (b) 0.01 0.01Boston Analytics LLC (Partly Paid) $1 – 7,81,250 – 7,81,250 (b) 258.76 –Common Stock :Unquoted :C Bay Systems Ltd. $0.01 13,98,798 31,87,275 – 45,86,073 (c) 5430.14 2177.23Preferred Stock: Fully PaidUnquoted :Verseon LLC - Class A preferred units $1.90 – 13,15,789 – 13,15,789 1142.34 –Convertible Debentures :Unquoted :Avestha Gengraine Technologies Pvt. Ltd. 10000000 – 3 – 3 300.00 –Government SecuritiesUnquoted :Kisan Vikas Patra – – – – – – 0.32National Saving Certificate 92,000 – – – – 1.37 0.92Indira Vikas Patra 2,000 – – – – 0.01 0.03Shares in Co-operative Societies - Fully PaidUnquoted :Sachin Industrial Co-op. Society 500 3 – – 3 0.02 0.02The Saraswat Co-op. Bank Ltd. 10 2,000 – – 2,000 0.20 0.20

Investment in partnership FirmView Group LP 1368.01 802.44Current InvestmentsUnits of Mutual Fund :UnquotedTempleton India Treasury Fund 160.29 200.55Kotak Liquid Scheme 63.53 30.33Franklin Templeton Mutual Fund – 0.69Prudential ICICI Liquid Plan 2.06 –Grindlays Floating Rate Fund 1800.00 –Magnum Institutional Income Fund-Savings Growth 23.00 –

24670.85 18047.94Less: Provision for diminution in value of Investments (569.89) (568.41)

24100.96 17479.53Aggregate Book Value of InvestmentsQuoted 10731.20 11684.84Unquoted 13369.76 5794.69

24100.96 17479.53Market Value of Quoted Investments 48875.57 22958.08

Notes :a ) The said shares have been refused for registration by the investee companyb) Uncalled liability on partly paid shares:

- Tahir Properties Ltd. - Equity - Rs. 80 per share.- Boston Analytics LLC - Equity - USD 440,000- Godrej Foods Ltd. - Preference - Re. 1 per share.- Tahir Properties Ltd. - Preference - Rs. 30 per share.

c ) Preferred Stock - series E & F has been converted into Common Stock during the year.


59

SCHEDULE 11 : CURRENT LIABILITIESAcceptances 3843.20 6176.37Sundry creditors 27983.12 24966.50Advances from customers 9174.61 5231.65Sundry deposits 1865.90 2049.12Investor Education & Protection Fund– Unclaimed Dividend 46.29 51.70– Unpaid Matured Deposits 65.15 139.24– Interest accrued on above 0.20 58.70Other liabilities 4504.59 2876.41Interest accrued but not due on loans 168.21 107.76Share in jointly controlled entities 1627.41 1644.78

49278.68 43302.23

SCHEDULE 12 : PROVISIONSProposed dividend 2658.37 2044.86Provision for tax on distributed profits 473.16 305.83Provision for taxation — 23.36(Net of advance tax,Previous year Rs. 3205.94 lac)Provision for retirement benefits 2869.40 3028.91Share in jointly controlled entities 127.05 52.64

6127.98 5455.60

SCHEDULE 13 : MISCELLANEOUSEXPENDITURE

(To the extent not written off or adjusted)Deferred revenue expenditure– Voluntary retirement compensation 2219.46 126.30– Preliminary Expenses — 9.59– Others — 3.60

2219.46 139.49

SCHEDULE 14 : OTHER INCOMEInterest :– Government Securities — 16.90– Debentures 9.62 —– Income tax refund 140.83 8.10– Deposits (refer note 15) 486.54 53.05Dividend 1237.33 580.27Profit on sale of fixed assets (Net) 373.81 —Profit on sale of long term investments(refer note 15) 2299.64 3458.14Provision for depletion in value oflong term investments written back 364.89 —Provision for doubtful debts andadvances written back — 3.05Miscellaneous income (refer note 15) 1253.00 538.15Share in jointly controlled entities 154.07 124.16

6319.73 4781.82

SCHEDULE 7 : INVENTORIES(at lower of cost and net realisable value)Stores and spares 1594.27 670.80Raw materials 12829.31 10306.42Construction work-in-progress 2316.09 1928.28Work-in-progress 3607.67 1509.69Finished Goods 7134.83 6892.88Share in jointly controlled entities 1018.80 1308.94

28500.97 22617.01

SCHEDULE 8 : SUNDRY DEBTORS(Unsecured)Debts outstanding over six monthsConsidered good 2115.24 1492.28Considered doubtful 522.90 536.20

2638.14 2028.48Other debtsConsidered good 20450.21 19001.66

23088.35 21030.14Less : Provision for doubtful debts (522.90) (536.20)

22565.45 20493.94Share in jointly controlled entities 487.24 250.86

23052.69 20744.80

SCHEDULE 9 : CASH AND BANK BALANCESCash and cheques on hand 218.84 138.48Balances with scheduled banks– on current accounts 2917.49 1685.51– on deposit accounts 5295.11 2528.41Share in jointly controlled entities 675.15 990.71

9106.59 5343.11

SCHEDULE 10 : LOANS AND ADVANCES(Unsecured and considered good unlessotherwise stated)Loans and Advances (refer note 9) 4152.72 2166.54Loans to GIL ESOP Trust 742.00 —Advances recoverable in cash orin kind or for value to be received(net of provision for doubtful advancesRs. 382.41 lac,Previous Year Rs. 934.18 lac) 8642.30 8545.54Intercorporate deposits– Associate companies 41.80 2148.69– Others — 55.76Deposits and balances with– Customs & excise authorities 850.90 1008.65– Others 1834.65 1951.90Advance payment of taxes 153.75 —(Net of provision for tax ofRs. 3863.58 lac)Share in jointly controlled entities 794.21 443.65

17212.32 16320.73



SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS (contd.)


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SCHEDULE 15 : MATERIALSCONSUMED AND COST OF SALESRaw materials consumed :Stocks at the commencement of the year 10306.42 11610.63Add : Purchases (net) 125106.17 121494.78

135412.59 133105.41Less : Stocks as at the close of the year 12829.30 10306.42Raw Materials consumed during the year 122583.29 122798.99Cost of Sales - Property DevelopmentStocks at the commencement of the year 1928.28 2406.54Add : Construction Expenditure during the year 4640.33 2135.31

6568.61 4541.85Less : Stocks as at the close of the year 2316.09 1928.28

4252.52 2613.57Purchase of goods for resale 18085.57 11981.55Share in jointly controlled entities 5243.06 4837.66

150164.44 142231.77SCHEDULE 16 : EXPENSESSalaries, wages and allowances 10318.84 9995.87Contribution to provident fundand other funds 601.90 608.71Employee welfare expenses 981.81 826.33Stores and spares consumed 1242.06 1526.50Power and fuel 5988.09 5068.20Processing charges 3795.24 3838.17Rent (refer note 15) 728.76 527.02Rates and taxes 560.80 692.40Repairs and maintenance– Machinery 1046.90 1363.37– Buildings 294.61 261.55– Other assets 519.84 453.54Insurance 243.23 222.02Freight 3535.04 2718.63Commission 3355.81 3107.74Discount 467.55 203.06Advertisement and publicity 1465.11 1427.64Sales promotion 303.84 280.52Selling and distribution expenses 1465.84 819.63Bad debts written off 620.33 630.88Provision for doubtful debts and advances 40.78 —Provision for depletion in the value oflong term investments 0.10 449.98Loss on Sale of Fixed Assets — 182.24Excise duty on inventory change 284.99 (50.70)Foreign Exchange loss 182.62 809.09Miscellaneous expenses 5654.87 3864.31Share in jointly controlled entities 3064.16 4039.40

46763.12 43866.10SCHEDULE 17 : INVENTORY CHANGEStocks at the commencement of the year

Finished goods 6892.88 6137.86Work-in-progress 1509.69 1340.45Share in jointly controlled entities 757.55 897.58

9160.12 8375.89Less : Stocks at the close of the year :

Finished goods 7134.83 6892.88Work-in-progress 3607.67 1509.69Share in jointly controlled entities 638.35 757.55

11380.85 9160.12(Increase)/Decrease in Inventory (2220.73) (784.23)



SCHEDULE 18 : INTEREST AND FINANCIALCHARGES (Net)

Interest paid– on debentures and fixed loans 2289.97 1019.42– on bank overdrafts 441.92 755.63– on Inter Corporate Deposits 190.10 176.40– other interest 1093.59 770.29

4015.58 2721.74Less : Interest during constructionperiod capitalised 265.47 14.25Less : Interest received– on loans & deposits 39.19 285.90– on Customer balances, etc. 18.08 43.74– projects and landlords 225.23 335.77– others 26.32 3.16

308.82 668.57

Net Interest 3441.29 2038.92Brokerage and other financial charges 602.05 507.24Foreign exchange loss 457.69 927.38Share in jointly controlled entities 27.41 22.93

4528.44 3496.47SCHEDULE 19 : PRIOR PERIOD

ADJUSTMENTSExcess provision for Income-tax 35.70 4.17Provision for pension payments (112.50) —Dividend for previous year 62.42 —

(14.38) 4.17


SCHEDULE 20 : SIGNIFICANT ACCOUNTING POLICIES

a) Accounting Convention

The financial statements are prepared under the historical costconvention, on the accrual basis of accounting, in accordance withthe generally accepted accounting principles in India and theAccounting Standards issued by the Institute of Chartered Accountantsof India.

b) Fixed Assets

Fixed Assets are stated at cost or as revalued as the case may be, lessaccumulated depreciation. Cost includes all expenses related toacquisition and installation, of the concerned asset. Exchange differencesarising on account of repayment and year end translation of foreigncurrency liabilities relating to acquisition of fixed assets from a countryoutside India, are adjusted to the carrying cost of the respective assets.

Fixed Assets acquired under finance lease are capitalised at the lowerof their face value and present value of the minimum lease payments.

c) Intangible Assets

The cost of acquisition of trademarks is amortised equally over aperiod of four to fifteen years depending on the expected utilisation.

d) Asset Impairment

The Company reviews the carrying values of tangible and intangibleassets for any possible impairment at each balance sheet date. Animpairment loss is recognized when the carrying amount of anasset exceed its recoverable amount. In assessing the recoverableamount, the estimated future cash flows are discounted to theirpresent value based on appropriate discount rates.

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e) Borrowing Costs

Borrowing costs that are directly attributable to the acquisition /construction of the underlying fixed assets are capitalised as a partof the respective asset, upto the date of acquisition / completion ofconstruction.

f) Investments

Long term investments are carried at cost. Provision for diminution,if any, in the value of each long term investment is made to recognisea decline, other than of a temporary nature. The fair value of a longterm investment is ascertained with reference to its market value,the investee’s assets and results and the expected cash flows fromthe investment.

Current investments are carried at lower of cost and fair value.

g) Inventories

Inventories are valued at lower of cost and net realisable value.Cost is computed on weighted average basis and is net of modvat.Finished goods and work-in-progress include cost of conversionand other costs incurred in bringing the inventories to their presentlocation and condition. Provision is made for the cost of obsolescenceand other anticipated losses, wherever considered necessary.

Construction work-in-progress is valued at cost. Construction work-in-progress includes cost of land, premium for development rights,construction costs, allocated interest and expenses incidental to theprojects undertaken by the Company.

h) Provisions and Contingent Liabilities

Provisions are recognised in the accounts in respect of presentprobable obligations, the amount of which can be reliably estimated.

Contingent Liabilities are disclosed in respect of possible obligationsthat arise from past events but their existence is confirmed by theoccurrence or non occurrence of one or more uncertain futureevents not wholly within the control of the Company.

i) Foreign Exchange Transactions

Transactions in foreign currency are recorded at the exchange ratesprevailing on the date of the transaction. Monetary assets andliabilities denominated in foreign currency are translated at theperiod end exchange rates. Forward exchange contracts, remainingunsettled at the period end, backed by underlying assets or liabilitiesare also translated at period end exchange rates. Premium ordiscount on forward exchange contracts is amortised over the periodof the contract and recognised as income or expense for the period.Exchange gains/losses are recognised in the Profit and Loss Accountexcept for exchange differences relating to fixed assets acquiredfrom a country outside India, which are adjusted in the cost of theasset. Non Monetary foreign currency items like investments inforeign subsidiaries are carried at cost and expressed in Indiancurrency at the rate of exchange prevailing at the time of makingthe original investment.

j) Revenue Recognition

Sales are recognised where goods are supplied and are recordednet of returns, trade discounts, rebates, sales taxes and excise duty.

Income from processing operations is recognised on completion ofproduction / dispatch of the goods, as per the terms of contract.

Export incentives receivable under the Duty Entitlement Pass BookScheme and the Duty Drawback Scheme are accounted on accrualbasis.

Revenue from construction activity is recognised on “Percentage ofCompletion Method” of accounting. As per this method, revenue inProfit & Loss Account at the end of the accounting year is recognised


in proportion to the actual cost incurred as against the total estimatedcost of projects under execution with the Company.

Determination of revenues under the percentage of completionmethod necessarily involves making estimates by the Company,some of which are of a technical nature, concerning, where relevant,the percentages of completion, costs to completion, the expectedrevenues from the project/activity and the foreseeable losses tocompletion. Such estimates have been relied upon by the auditors.

Dividend income is recognised when the right to receive the sameis established.

Interest income is recognised on a time proportion basis.

Income on assets given on operating lease is recognised on a straightline basis over the lease term.

k) Depreciation

Leasehold land is amortised equally over the lease period. Leaseholdimprovements are amortised over five years.

Depreciation is provided on the straight line method at the ratesspecified in Schedule XIV to the Companies Act, 1956, except insome subsidiary companies, where depreciation has been providedon the written down value method. The impact of the differingmethod of depreciation has not been ascertained but is not likely tobe material. Computer hardware is depreciated over its estimateduseful life of 4 years.

Depreciation on assets acquired during the year is provided for thefull accounting year and no depreciation is charged on the assetssold/discarded during the year, except in case of major additionsand deductions exceeding rupees one crore in which case,proportionate depreciation is provided.

Depreciation on the revalued component is provided on the straightline method based on the balance useful life of the assets as certifiedby the valuers. Such depreciation is withdrawn from RevaluationReserve and credited to Profit and Loss Account.

l) Retirement Benefits

Retirement benefits to employees comprise payments under definedcontribution plans like provident fund and family pension as well aspayments under defined benefit schemes like leave encashmentbenefit on retirement and gratuity to eligible employees. Paymentsunder defined contribution plans are charged to revenue. The liabilityin respect of defined benefit schemes is provided on the basis of anactuarial valuation at the end of each financial year.

m) Deferred Revenue Expenditure

The compensation payable under the Voluntary Retirement Schemes,the benefit of which is expected to accrue in future is deferred overits payback period. The compensation is generally amortised overthree to five years depending on the pay back period.

Preliminary Expenses and Share issue expenses are amortised inten equal instalments.

n) Hedging

Import of crude palm oil by the Company are being hedged byfutures contract on offshore Commodities Exchange. Gains or losseson settled contracts is recognised in the profit and loss account andis included in the cost of materials consumed. Futures contracts notsettled as on the Balance Sheet date are marked to market andlosses, if any, are recognised in the profit and loss account, whereas,the unrealised profit is ignored.

o) Taxes on Income

Current tax is the amount of tax payable on the assessable incomefor the year determined in accordance with the provisions of theIncome Tax Act, 1961.

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reporting date as of the Company i.e. year ended March 31, 2006,except in respect of Personalitree Academy Ltd., an associatecompany whose accounts for the year ended March 31, 2006 havenot been received till date. The investment not being significantand fully provided for in the previous year, there is no impact onthe profit & loss account.

The accounts of Al Rahba International Trading Ltd., a joint venturecompany with Godrej Agrovet Ltd., Compass Connections Ltd., UK,Creamline Dairy Products Ltd., Creamline Nutrients Ltd. andPolychem Hygiene Laboratories Pvt. Ltd., associate companies havenot been audited for the year ended March 31, 2006 as of date andhave been consolidated on the basis of the accounts as certified bytheir respective management.

3. Information on subsidiaries, joint ventures and associates :

(a) The subsidiary companies considered in the consolidatedfinancial statements are :

S. No. Name of the Company Country of Percentage of HoldingIncorporation This Previous

Year Year1. Godrej Agrovet Ltd. India 57.80% 57.78%2. Goldmohur Foods & Feeds Ltd. India 57.80% 57.78%

(100% subsidiary ofGodrej Agrovet Ltd.)

3. Golden Feed Products Ltd. India 57.80% 57.78%(100% subsidiary ofGodrej Agrovet Ltd.)

4. Godrej Properties Ltd. India 82.88% 82.85%5. Girikandra Holiday Homes &

Resorts Ltd. India 82.88% 82.85%(100% subsidiary of GodrejProperties Ltd.)

6. Godrej Realty Pvt. Ltd. India 42.27% —(51% subsidiary of GodrejProperties Ltd.)

7. Godrej Waterside PropertiesPvt. Ltd. India 82.88% —(100% subsidiary of GodrejProperties Ltd.)

8. Godrej Hicare Ltd. India 85.91% 86.44%9. Godrej Remote Services Ltd. India — 99.99%10. Ensemble Holdings &

Finance Ltd. India 99.95% 99.95%11. Godrej International Ltd., UK U.K. 100.00% 100.00%12. Godrej Global Mid-East FZE,

UAE U.A.E. 100.00% 100.00%(100% subsidiary ofGodrej International Ltd.)

13. Godrej Beverage & Foods Ltd. India 70.00% 70.91%14. Godrej Global Solutions Ltd. India 100.00% 100.00%15. Godrej Global Solutions

(Cyprus) Ltd. Greece 100.00% —(100% subsidiary ofGodrej Global Solutions Ltd.)

16. Godrej Global Solutions Inc U.S.A. 100.00% —(100% subsidiary ofGodrej Global Solutions Ltd.)

Note:

Krithika Agro Farm Chemicals & Engineering Pvt. Ltd., a company in whichGodrej Agrovet Ltd. acquired a 76% interest during the year is excludedfrom consolidation as the control is intended to be temporary since GodrejAgrovet Ltd. intends to dispose of its holding in the near future.


1. Principles of Consolidation:

The consolidated financial statements relate to Godrej IndustriesLimited, the holding company, its majority owned subsidiaries, JointVentures and Associates (collectively referred to as Group). Theconsolidation of accounts of the Company with its subsidiaries hasbeen prepared in accordance with Accounting Standard (AS) 21‘Consolidated Financial Statements’. The financial statements of theparent and its subsidiaries are combined on a line by line basis andintra group balances, intra group transactions and unrealized profitsor losses are fully eliminated.In the consolidated financial statements, ‘Goodwill’ represents theexcess of the cost to the Company of its investment in the subsidiariesand/or joint ventures over its share of equity, at the respective dateson which the investments are made. Alternatively, where the shareof equity as on the date of investment is in excess of cost ofinvestment, it is recognised as ‘Capital Reserve’ in the consolidatedfinancial statements.Minority interest in the net assets of consolidated subsidiaries consistsof the amount of equity attributable to the minority shareholders atthe respective dates on which investments are made by the Companyin the subsidiary companies and further movements in their share inthe equity, subsequent to the dates of investment as stated above.Investments in Joint Ventures are dealt with in accordance withAccounting Standard (AS) 27 ‘Financial Reporting of Interests inJoint Ventures’. The Company’s interest in jointly controlled entitiesare reported using proportionate consolidation, whereby theCompany’s share of jointly controlled assets and liabilities and theshare of income and expenses of the jointly controlled entities arereported as separate line items.Investments in Associates are dealt with in accordance withAccounting Standard (AS) 23 ‘Accounting for Investments inAssociates in Consolidated Financial Statements’ issued by the Instituteof Chartered Accountants of India. Effect has been given to thecarrying amount of investments in associates using the ‘Equitymethod’. The Company’s share of the post acquisition profits orlosses is included in the carrying cost of investments.

2. The financial statements of the subsidiaries, joint ventures andassociates used in the consolidation are drawn upto the same

Deferred tax is recognised on timing differences, being thedifferences between the taxable income and accounting incomethat originate in one period and are capable of reversal in one ormore subsequent periods. Deferred tax assets on unabsorbed taxlosses and tax depreciation are recognized only when there is virtualcertainty of their realisation and on other items when there isreasonable certainty that sufficient future taxable income will beavailable against which such deferred tax assets can be realised.The tax effect is calculated on the accumulated timing differencesat the year end and based on the tax rate and laws enacted orsubstantially enacted on the balance sheet date.

p) Segment Reporting

The Accounting Policies adopted for segment reporting are in line withthe Accounting Policies of the Company. Segment assets include alloperating assets used by the business segments and consist principallyof fixed assets, debtors and inventories. Segment liabilities include theoperating liabilities that result from the operating activities of thebusiness. Segment assets and liabilities that cannot be allocated betweenthe segments are shown as part of unallocated corporate assets andliabilities respectively. Income / Expenses relating to the enterprise as awhole and not allocable on a reasonable basis to business segmentsare reflected as unallocated corporate income / expenses.


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(b) Interests in Joint Ventures:S. No. Name of the company Country of Percentage of

Incorporation Ownership InterestThis PreviousYear Year

i) Godrej SaraLee Ltd. India 20.00% 20.00%ii) Godrej SaraLee

Bangladesh Pvt. Ltd. Bangladesh 20.00% 20.00%iii) Godrej SaraLee

Sri Lanka Pvt. Ltd. Sri Lanka 20.00% 20.00%iv) Al Rahba International

Trading Limited (held by U.A.E. 70.00% —Godrej Agrovet Ltd.)

v) ACI Godrej AgrovetPvt. Ltd. (held by Bangladesh 50.00% 50.00%Godrej Agrovet Ltd.)

(c) Investments in Associates:S. No. Name of the company Country of Percentage of holdings

Incorporation This year Previous year

i) Swadeshi Detergents Ltd. India 41.08% 41.08%

ii) Godrej Upstream Ltd. India 40.43% 40.43%(held by Godrej GlobalSolutions Ltd.)

iii) Compass Connections Ltd. U.K. 20.74% 21.16%

iv) Personalitree Academy Ltd. India 26.00% 26.00%(held by Ensemble Holdings& Finance Ltd.)

v) Creamline Dairy Products Ltd. India 26.00% 26.00%(held by Godrej Agrovet Ltd.)

vi) Creamline Nutrients Ltd. India 26.00% 26.00%(held by Godrej Agrovet Ltd.)

vii) Polychem Hygiene LaboratoriesPvt. Ltd. India 26.00% 26.00%(held by Godrej Agrovet Ltd.)

4. The accounting policies of certain subsidiaries, joint ventures &associates especially regarding the method of depreciation,amortisation of technical know-how and accounting for retirementbenefits are not in consonance with the group accounting policies.No effect has been given in the consolidated financial statementson account of such differing accounting policies, where the impactis not expected to be material.

5. The break-up of Investment in Associates is as under:Rs. in lac

Cost of Goodwill Share in Provision CarryingAcquisition included profits/ for cost of

in cost of (loss) of diminution Invest-acquisition associatesin the value ments

post ofacquisition investments

(i) SwadeshiDetergents Ltd. 191.34 91.48 (141.05) 50.28 Nil

(ii) Godrej Upstream Ltd. 900.00 95.27 (442.94) — 457.06(iii) Compass

Connections Ltd. 124.54 80.56 34.63 — 159.17(iv) Personalitree

Academy Ltd. 110.28 42.84 (42.04) 68.24 Nil

(v) Creamline DairyProducts Ltd. 950.16 364.53 64.07 — 1014.23

(vi) Creamline Nutrients Ltd. 87.84 33.89 8.12 — 95.96

(vii) Polychem HygieneLab. Pvt. Ltd. 162.75 88.99 8.23 — 170.98

Total 2526.91 797.56 (510.98) 118.52 1897.40

6. Contingent LiabilitiesThis Year Previous Year

Rs. lac Rs. laca) Claims against the Company not

acknowledged as debts:i) Excise duty demands relating to 1537.41 3386.52

disputed classification, postmanufacturing expenses,assessable values, etc. which theCompany has contested and is inappeal at various levels.

ii) Customs Duty demands relating to 844.53 1036.65less charge, differential duty,classification, etc.

iii) Sales Tax demand relating to 512.37 532.21purchase tax on Branch Transfer/Non availability of C Forms, etc.at various levels.

iv) Octroi demand relating to 844.46 722.01classification issue on import ofPalm Stearine and interest thereon.

v) Stamp duties claimed on certain 182.23 182.23properties which are under appealby the Company

vi) Income Tax demands against which 1785.83 726.95the company has preferred appeals

vii) Industrial relations mattersunder appeal 518.06 486.08

viii) Others 704.18 649.69b) Guarantees issued by banks, excluding 2062.14 2207.42

guarantees issued in respect of mattersreported in (a) above

c) Guarantees given by the Company in 15269.59 14855.00respect of credit/guarantee limitssanctioned by banks to subsidiaryand other companies.

d) Uncalled liability on partly paid 673.97 534.85shares/debentures

e) Share in Jointly Controlled Entities 207.02 262.357. Capital Commitments

Estimated value of contracts remaining 688.61 3105.92to be executed on capital account,to the extent not providedShare in Jointly Controlled Entities 2.48 0.52

8. Investmentsa) CBay Systems Limited, USA (CBay USA) has carried out an

organizational restructuring during the year, consequent towhich, all the businesses of CBay Group have been consolidatedunder CBay Systems Limited, India (CBay India), a whollyowned subsidiary. The Shares of CBay India have beendistributed in specie on a pro-rata basis to all the stockholdersof CBay USA under the above scheme. The Indian Stockholderswill be allotted the shares in CBay India on receipt of approvalfrom the Reserve Bank of India (RBI). No effect has been givento the aforesaid scheme in the accounts, pending approval ofRBI and allotment of shares in CBay India.

b) As per the share purchase agreement dated 29th October, 2004,the Parent Company had agreed to sell its entire holding(7712642 equity shares) in Godrej Remote Services Limited , asubsidiary company to CBay Systems Limited, USA for aconsideration of Rs. 842.81 lac, to be satisfied by issue of 704691common stock of CBay Systems Limited, USA (par value USD0.01 per comon stock) valued at USD 2.6 per common stock.The agreement was conditional upon receipt of approval fromForeign Investment Promotion Board (FIPB) and the ReserveBank of India (RBI). The sale of the subsidiary company was


64

SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS (contd.)completed during the year on receipt of the necessaryapprovals in July 2005. The profit on sale amounting to Rs. 71lac is included under Profit on sale of long term investments,an exceptional item.

9. Deferred TaxMajor components of Deferred Tax arising on account of timingdifferences as at March 31, 2006 are :


AssetsProvision for retirement benefits 324.14 806.00Provision for doubtful debts/advances 295.09 399.24Business Losses 1338.33 1123.50VRS Expenses 77.00 (45.00)Others 346.20 334.95Share in Jointly Controlled Entities 35.53 60.17

2416.29 2723.86LiabilitiesDepreciation 6214.53 5005.47Deferred Revenue Expenditure 21.34 —Share in Jointly Controlled Entities 56.55 83.20

6292.42 5133.67Net Deferred Tax Liability 3876.13 2409.81

10. Loans and Advances :Loans and Advances include Rs. 1033 lac (Previous Year Rs. 1033lac) advanced by the Company to certain individuals against pledge,by way of deposit, of equity share of Gharda Chemicals Ltd. TheCompany has enforced its security and lodged the shares for transferin its name, however, the transfer application has been rejected byGharda Chemicals Ltd. and the Company has filed an appeal beforethe Company Law Board. Interest on the aforesaid loans and advancesamounting to Rs. 315 lac was accrued upto March 31, 2000 and hasbeen fully provided for, no interest is being accrued thereafter. Therecoverability of the advance is contingent upon the transfer and/ ordisposal of said shares. In the opinion of the management, the valueof the said shares is greater than the amount of the loans and advances.

11. Employee Stock Option Plans :

The Parent Company has during the year instituted an EmployeeStock Option Plan (GIL ESOP) approved by the Board of Directorsand the shareholders on 24th October, 2005 and 1st December,2005 respectively. The Plan provides for the allotment of 15,00,000options convertible into 15,00,000 equity shares to eligible employeesof the participating companies. The compensation committeecomprising of independent members of the Board of Directorsadministers the plan.The scheme is administered by an independent ESOP Trust whichhas purchased shares equivalent to the number of options grantedfrom the market, out of the finance provided by the participatingcompanies to the Trust.The number and weighted average exercise price of options granted,exercised and forfeited are as under:

No. of Wt. averageOptions exercise price

Options outstanding at thebeginning of the year — —Options granted 350000 392.35

(plus interest)Less: Exercised — —

Forfeited/expired — —Options outstanding at the year end 350000 392.35

(plus interest)

The options granted shall vest after three years from the date ofgrant of option, provided the employee continues to be inemployment and the option is exercisable within two years aftervesting.

The employee share based payment plans have been accountedbased on the intrinsic value method and no compensation expensehas been recognized since the market price of the underlying shareat the grant date is the same / less than the exercise price of theoption, the intrinsic value being Nil.

Had the fair value method of accounting been used, the employeecompensation cost would have been Rs. 204 lac.

12. Leases :

a) The group has entered into leave and licence agreements inrespect of its commercial and residential premises. These arenot non-cancelable and range between 11 months to 35 monthsand are renewable by mutual consent on mutually acceptableterms. Leave and licence arrangements being similar insubstance to operating leases, the particulars of the premisesunder leave and licence arrangement are as under:


Gross carrying amount of premises 3357.79 4253.85

Accumulated depreciation 995.81 965.30

Depreciation for the period 115.71 120.58

b) The total of future minimum lease payments under noncancelable operating leases for each of the following periods :

Period Minimum future Jointlylease rentals controlled

entitiesRs. lac Rs. lac

Within one year 177.34 5.35

Later than one year and not laterthan five years 221.07 57.46

Later than five years — 2.40

Total 398.41 65.21

Amount recognised during the year 182.76 61.09

c) Finance Leases :The group has acquired assets under Finance Lease. Liabilityfor minimum lease payment is secured by hypothecation of thevehicles acquired under the lease. The minimum lease paymentsoutstanding as on March 31, 2006, in respect of vehiclesacquired under lease are as under :

Period Total Unmatured Present valueminimum Interest of minimum

lease payments leaseoutstanding as on payments

March 31, 2006Rs. lac Rs. lac Rs. lac

Within one year 86.87 13.06 81.76Later than one yearand not later than five years 65.59 9.74 54.72

152.46 22.80 136.48

13. Hedging :a) Reserve Bank of India has permitted the Parent Company to

hedge its exposure on Crude Palm Oil on offshore exchangesto the extent of its imports. Accordingly, the Company is hedgingimport of crude palm oil on the Malaysian Commodities


65

Exchange by way of futures contracts. The particulars of thefutures contracts for the year are as under:

This Year Previous YearDetails Purchase Sale Purchase Sale

Total number of contracts enteredduring the year 2 2 12 11

Number of units (25 MT per unit)under above contracts 60 60 595 595

Future contracts not settledas on March 31, 2006 — — — —

Number of units under above contracts — — — —

b. The Group uses forward exchange contracts to hedge its foreignexchange exposure in accordance with its forex policy asdetermined by a Forex Committee. The particulars of theforward exchange contracts for the year are as under:

This Year Previous YearDetails Purchase Sale Purchase Sale

Total number of contracts enteredduring the year 179 77 184 36Foreign currency value coveredUS Dollar (million) 103.30 33.68 105.48 20.59Euros (million) – 3.36 – 0.18Total number of contractsoutstanding as at the year end 54 20 39 12Foreign currency valueUS Dollar (million) 37.30 13.00 39.61 5.84Euros (million) – 0.94 – –Uncovered Foreign exchangeexposure as at the year endUS Dollar (million) 15.10 – 17.50 0.20

14. Turnover

This year Previous YearTurnover includes: Rs. lac Rs. lac

i) Processing charges 2003.93 2125.86

ii) Export Incentives 554.42 573.27

iii) Licence fees and service charges 2561.11 2191.75

iv) Project/DevelopmentManagement Fees 767.40 515.02

v) Share in jointly controlled entities 9308.70 9757.50

15195.55 15163.40

15. Exceptional Items

This Year Previous YearRs. Lac Rs. Lac

i) Included under Other Income

- Profit on sale of long terminvestments 2119.81 3422.22

- Reversal of provision for claimspayable on culmination of disputes 175.00 —

- Interest received on depositplaced against above claim onexecution of decree 307.00 —

ii) Payment to Mumbai Port Trustfor regularization of lease includedin Rent paid. 89.00 —

16. Profit & Loss Account

The amount of exchange loss on account of fluctuation of the rupeeagainst foreign currencies and the net charges for forward foreignexchange contracts added to the carrying amount of fixed assetsduring the year is Rs. 0.42 lac (Previous year Rs. 0.90 lac). Theexchange difference included in the Profit & Loss Account is a lossof Rs. 669.94 lac (Previous year Rs. 1806.29 lac). The exchangedifference in respect of forward exchange contracts to be recognisedin subsequent accounting periods is Rs. 24.68 lac (Previous year Rs.739.48 lac).

17. Earnings Per ShareThis Year Previous Year

a. Calculation of weighted averagenumber of equity sharesNumber of shares at the beginningof the year Nos. 48542952 48542952

Number of equity shares outstandingat the end of the year Nos. 48641942 48542952

Weighted average number of equityshares outstanding during the year Nos. 48570344 48542952

b. Net profit after tax available forequity shareholders Rs. lac 4899.77 6467.14

c. Basic and diluted earnings per shareof Rs.6 each Rupees 10.09 13.32

18. Related Party Disclosures

List of Related Parties and Relationships

a) Parties where control exists

Godrej & Boyce Mfg. Co. Ltd., the holding company.

Fellow Subsidiaries:

Godrej Appliances Ltd.

Godrej Foods Ltd.

Godrej Infotech Ltd.

Mercury Mfg. Co. Ltd.

Godrej (Malaysia) Sdn. Bhd.

Godrej (Singapore) Pte. Ltd.

JT Dragon Pte. Ltd.

b) Other related parties with whom the Company had

transactions:

Associate/Joint Venture Companies

Godrej SaraLee Ltd.

Godrej Upstream Ltd.

Key Management Personnel

Mr. A. B. Godrej - Chairman (Non-Executive)

Mr. N. B. Godrej - Managing Director

Ms. T. A. Dubash - Executive Director & President

(Marketing)

Mr. Mathew Eipe - Executive Director & President(Chemicals)

Mr. V. Banaji - Executive Director & President(Group Corporate Affairs)

Mr. M. P. Pusalkar - Executive Director & President(Corporate Projects)

Enterprises over which key management personnel exercise

significant influence

Godrej Consumer Products Ltd.

Swadeshi Detergents Ltd.



66

c) Transactions with Related Parties Rs. lacNature of Transaction Holding Fellow Associate/ Key Relative of Key Enterprises

Company Subsidiaries Joint Venture Management Management over which KeyCompanies Personnel Personnel Management

Personnelexercise

significantinfluence Total

Sale of Goods 20.17 — 12.50 — — 976.74 1009.41Previous Year 22.14 904.96 3.18 — — — 930.28Sale of Fixed Assets 0.05 — — — — 264.19 264.24Previous Year — 1.46 — — — — 1.46Purchase of goods and equipment 30.77 695.87 6.69 — — 1262.28 1995.61Previous Year 60.60 1086.77 11.49 — — — 1158.86Commission received — 2.50 19.78 — — 23.15 45.43Previous Year — 21.05 4.50 — — — 25.55Recovery of establishment andOther Expenses 1.48 12.52 229.64 — — 816.13 1059.77Previous Year 13.82 898.07 216.83 — — 0.06 1128.78Establishment & other exps paid 230.49 10.50 14.03 — — 89.91 344.93Previous Year 225.68 112.17 7.35 — — 0.13 345.33Sale of Investments — — — — — — —Previous Year 4950.00 — — — — — 4950.00Purchase of Investments — — — — — — —Previous Year — — — — — 10.20 10.20Interest received — — — — — 4.99 4.99Previous Year — — — — — 5.85 5.85Interest paid — — — — — — —Previous Year — — — 0.27 — — 0.27Dividend income — 25.28 536.25 — — 1,007.66 1569.19Previous Year — 562.72 1010.33 — — — 1573.05Dividend paid 1248.02 — — 47.61 424.41 — 1720.04Previous Year 936.01 — — 75.60 272.64 — 1284.25Remuneration — — — 330.85 — 330.85Previous Year — — — 402.01 — 402.01Finance provided including loans& equity contributions 0.42 — (3.30) — — (10.00) (12.88)Previous Year — (3.08) (24.10) — — — (27.18)Finance repaid during the year — — — — — — —Previous Year — — — — — 8.00 8.00Guarantees & collaterals given — — — — — — —Previous Year — — 1350.00 — — — 1350.00Balance Outstanding as on March 31, 2006Receivables 1.42 — 18.54 — — 222.25 242.21Previous Year 69.12 19.76 10.67 — — — 99.55Payables 2.81 — 42.60 — — 103.93 149.34Previous Year 4.33 61.80 35.29 — — 0.11 101.53Guarantees Outstanding — 1000.00 1350.00 — — — 2350.00Previous Year — 1000.00 1350.00 — — — 2350.00

d ) The significant Related Party transactions are as under:Nature of Transaction Rs. lacSale of goods- Godrej Consumer Products Ltd. 890.83Sale of fixed assets- Godrej Consumer Products Ltd. 264.19Purchase of goods & equipment- Godrej Consumer Products Ltd. 1,262.28- Godrej Foods Ltd. 692.34Commission received- Godrej Consumer Products Ltd. 23.15- Godrej Upstream Ltd. 19.78Recovery of establishment & other expenses- Godrej Consumer Products Ltd. 815.74- Godrej Saralee Ltd. 229.64

Nature of Transaction Rs. lacEstablishment & other exps paid- Godrej & Boyce Mfg. Co. Ltd. 228.68- Godrej Consumer Products Ltd. 89.66Dividend income- Godrej Consumer Products Ltd. 1,007.66Dividend paid- Godrej & Boyce Mfg. Co. Ltd. 1,248.02Remuneration- Mr. N. B. Godrej 82.11- Ms. T. A. Dubash 50.57- Mr. Mathew Eipe 62.56- Mr. V. F. Banaji 77.07- Mr. M. P. Pusalkar 48.93


67

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the

pri

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to a

ccou

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atur

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the

pro

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s, t

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iffer

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risk

s an

d re

turn

s, t

he o

rgan

isat

iona

l st

ruct

ure

and

the

inte

rnal

rep

ortin

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stem

.

2.C

hem

ical

s se

gmen

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clud

es t

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usin

ess

of O

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hem

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s su

ch a

s Fa

tty A

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, Fa

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and

Alfa

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nd R

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Ani

mal

Fee

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gmen

t in

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es t

he b

usin

ess

of c

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und

feed

for

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poul

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acq

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ani

mal

s. F

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men

tin

clud

es t

he b

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ess

of r

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and

van

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ruit

and

vege

tabl

e pu

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pul

p, j

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s an

d fr

uit

beve

rage

s. E

stat

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the

bus

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s of

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com

mer

cial

& r

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nd g

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and

licen

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asis

. H

ouse

hold

Inse

ctic

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seg

men

t in

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es t

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usin

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of h

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sol

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and

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inc

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s in

vest

men

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n su

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asso

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and

oth

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incl

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Med

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puts

, In

tegr

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Palm

Pla

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and

ene

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gene

ratio

n th

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3.Th

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as

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- Sa

les

in I

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rep

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to

cust

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Ind

ia.

- Sa

les

outs

ide

Indi

a re

pres

ent

sale

s to

cus

tom

ers

loca

ted

outs

ide

Indi

a.


68

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69

DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED ON MARCH 31, 2006To The Shareholders

Your Directors have pleasure in submitting their Report along with the audited Accounts for the financial yearended on March 31, 2006.

Financial Results

Your Company’s performance during the year as compared with that during the previous year is summarised below: -

For the year For the yearended ended

31/3/2006 31/3/2005Rs. lac Rs. lac

Total Income 60555.90 56851.81

Profit Before Taxation (PBT) 761.23 1949.63Less : Provision for Taxation 78.70 532.45Profit After Taxation (PAT) 682.53 1417.18Balance brought forward from previous year 2696.74 2132.13

Total 3379.27 3549.31

Appropriations:Interim Dividend – 391.53Final Dividend 284.75 234.92Tax on Dividend 39.94 84.12General Reserve 70.00 142.00Balance Carried Forward to Balance Sheet 2984.58 2696.74

Total 3379.27 3549.31

Review of Operations

The year under review was one of the toughest years your company has experienced. Adverse environmentalfactors put heavy pressure on costs while announcement of Avian Influenza impacted sales growth. Many newinitiatives and investments made during the year also impacted the bottom line, which declined by 52%compared to previous year. The top line grew by about 7% compared to previous year. The business-wiseperformance is reviewed hereunder:

ANIMAL FEEDS

The Animal Feeds Business continued to operate under challenging external environment. The prolongedmonsoon had its impact on key raw materials such as de-oiled rice bran, maize resulting in increased costfor your Company, which could not be passed on to the customers due to increased competition. Avianinfluenza detected in Western parts of the country impacted the Poultry Feed sales of your Company. GoldenFeed Products Limited, a subsidiary of your company, acquired the Shrimp Feed Marketing business ofHigashimaru Feeds (India) Limited, with effect from October 31, 2005.

INTEGRATED POULTRY BUSINESS

The detection of Avian Influenza had severe impact on off take of the poultry products. However, your Companyhas been able to control the cost by continuing to achieve breakthrough performance in its breeding business.Your Company’s new TV Commercial for Real Good Chicken drew in new customers and helped the businessreport good growth in the face of such adversities.

AGRICULTURAL INPUTS

The Agri Inputs Division has continued to show excellent performance with growth in the top line of 40% andgrowth in the bottom line of 49%. Aadhaars have been positioned as centres of “Khushion ka, Khushhali ka”,i.e. centres of Happiness and Prosperity. Your Company plans to have strategic tie-ups with other corporatesfor bringing this vision to fruition. Recently, an MOU was signed with Apollo Pharmacy, a member of ApolloHospital group to bring Health solutions to the customers of Aadhaar. Similar efforts are on to find partners forFinance/Credit needs, Insurance and a host of other critical requirements. We draw inspiration from the appealmade by our Honorable President to bring Urban Amenities to Rural India. The product offering at Aadhaarshas also been considerably expanded and includes most items of daily needs. Nine new Aadhaars were openedduring the year taking the total to 23. Your Company’s initiative in retailing of fresh foods, especially fresh fruitsand vegetables through “Nature’s Basket” has been expanding. The Company has opened two more storesduring the year in Mumbai.

OIL PALM PLANTATIONS

During the year, the Division has brought over 3500 Hectares under Oil Palm. Your Company receivedallocation of fresh area in Andhra Pradesh for development of Oil Palm. An MOU has been signed withGovernment of Mizoram for development of Oil Palm in that State. The development activities in the state ofGujarat and Mizoram have started. Your Company acquired majority stake in “Krithika Agro Farm Chemicalsand Engineering Industries Pvt. Ltd,”, which has its presence in the Oil Palm cultivation activities in the stateof Orissa.

PLANT BIOTECH BUSINESS

The Plant Biotech Division has introduced Banana plants in the states of UP and Bihar. It has also undertakenan ambitious plan to help substantially increase the yield of Sugarcane.

FINANCE AND INFORMATION SYSTEMS

Despite overall hardening of interest rates in the economy, your Company was able to reduce the cost of fundsduring the year by efficient treasury operations. The Company’s Commercial Paper programme continues tocarry the Apex rating of A1 + from ICRA for Rs 15 crore. However, after detection of Avian Influenza, ICRAhas put your Company’s rating under “rating watch with developing implication”. IT continues to play a crucialrole in the operations of your Company. During the year, your Company provided IT solutions for the retailbusinesses.

OTHER INITIATIVES

Your Company has invested in one more 1.25 MW windmill, which was commissioned during the first quarterof the year at Dhule, Maharashtra. The Maharashtra State Electricity Distribution Company Ltd has agreed topurchase all the power produced by this Windmill on terms attractive to your Company.

DIVIDEND

Your Directors recommend a Final Dividend for 2005-06 amounting to Rs. 4.00 per share of face value of Rs.10/-each i.e.40% (Previous year – Interim 55%, Final 33%).

FIXED DEPOSITS

Your Company has not accepted any public deposits during the financial year under review.

HOLDING COMPANY

Your Company continues to be a subsidiary of Godrej Industries Limited as defined under Section 4(1)(b) of theCompanies Act, 1956.

SUBSIDIARY COMPANIES

Your Company continues to be the holding Company of Goldmohur Foods and Feeds Ltd (GFFL), Golden FeedProducts Ltd (GFPL).

By virtue of acquisition of 76% stake in the equity share capital of “Krithika Agro Farm Chemicals andEngineering Industries Pvt. Ltd.” (Krithika) as stated elsewhere in this report, Krithika Agro Farm Chemicalsand Engineering Industries Pvt. Ltd has become a subsidiary of your Company with effect from April 27, 2005.

Your Company has advanced an amount of Rs.42.05 lacs to Krithika during the current year. The Auditors intheir Report have stated that they are unable to comment on the recoverability of the said loan. The Board ofDirectors feel that the said loan is recoverable in view of the proposed oil palm plantation activities to be carriedout by Krithika in Orrisa.

The audited Balance Sheet of GFFL, GFPL and Krithika as at 31st March, 2006 together with their audited Profit& Loss Account, Directors’ Report and Auditors’ Report is attached to the Balance Sheet and Profit & LossAccount of your Company.

Also annexed hereto is the Statement required under Section 212(1) of the Companies Act, 1956 relating toGFFL, GFPL and Krithika.

JOINT VENTURES

ACI Godrej Agrovet Pvt Ltd, your Company’s Joint Venture with ACI in Bangladesh has commissioned its FeedMill in October, 2005. The feeds have been receiving very good response. The hatchery has also beencommissioned and is expected to add significant value in the coming years. Your company has acquiredmanagement control in Al Rahba International Trading LLC, United Arab Emirates for carrying on the businessof Poultry. This Joint Venture has 70% (stake in profit and 45% stake in equity) participation from your Company.This Joint Venture has already commenced production during the second half of the year 2005-06.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGSAND OUTGO

The information in respect of these matters, required under Section 217(1)(e) of the Companies Act, 1956, readwith the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 and formingpart of this Report, is annexed hereto (Annexure - A).

DIRECTORS

Dr. S.L. Anaokar and Ms. Tanya Dubash, Directors retire by rotation at the ensuing Annual General Meetingin accordance with Article 124 of the Articles of Association of the Company and the provisions of the CompaniesAct, 1956 and being eligible offer themselves for reappointment.

AUDITORS

You are requested to appoint Auditors for the current year and fix their remuneration. The retiring AuditorsM/s. Kalyaniwalla & Mistry, Chartered Accountants, Mumbai are eligible for re-appointment.


The additional information required to be given under the Companies Act, 1956, has been laid out in theSchedules attached to and forming part of the Accounts. The Notes to the Accounts referred to the Auditors’Report are self-explanatory and therefore do not call for any further explanation .

AUDIT COMMITTEE

Pursuant to the provisions of Section 292-A of the Companies Act, 1956, your Company has constituted the AuditCommittee of the Board of Directors.

During the year, the Audit Committee was reconstituted in view of the resignation of Mr. N.B. Godrej, aMember and the Chairman of the Committee. The reconstructed Audit Committee comprises of the followingDirectors of the Company :-

(1) Mr. K.N. Petigara – Chairman(2) Dr. S.L. Anaokar – Member(3) Mr. C.K. Vaidya - Member

The Audit Committee, pursuant to the terms of reference specified by the Board from time to time has maderecommendations to the Board in respect of internal control systems, half-yearly & annual financial statements,standard accounting principles, Risk Management polices, etc. The Board of Directors has since accepted therecommendations of the Audit Committee.

RESPONSIBILITY STATEMENT

Pursuant to the provisions contained in section 217(2AA) of the Companies Act, 1956, the Directors of yourCompany confirm :-

a) that in the preparation of the annual accounts, the applicable accounting standards have been followedand no material departures have been made from the same ;

b) that they have selected such accounting policies and applied them consistently and made judgmentsand estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs ofthe Company at the end of the financial year and of the profit or loss of the Company for that period ;

c) that they have taken proper and sufficient care for the maintenance of adequate accounting records inaccordance with the provisions of this Act for safeguarding the assets of the Company for preventing anddetecting fraud and other irregularities ;

d) that they have prepared the annual accounts on a going concern basis.

HUMAN RESOURCES

Your company continues to focus on development of Human Resources. The industrial relations at all unitscontinued to be cordial. The Board would like to place on record its sincere appreciation for the unstintedsupport it continues to receive from all associates.

PARTICULARS OF EMPLOYEES

Details of the employees covered under the provisions of Section 217(2A) of the Companies Act, 1956 read withthe Companies (Particulars of Employees) (Amendment) Rules, 2002, are attached (ANNEXURE B)


C.K. Vaidya A.B. GodrejManaging Director Director

Mumbai, May 25, 2006.

Godrej Agrovet Limited


70

ANNEXURE ‘A’ANNEXURE FORMING PART OF THE DIRECTORS’ REPORT

INFORMATION PURSUANT TO SECTION 217(1)(e) OF THE COMPANIES ACT, 1956, READ WITH THECOMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES,1988 IN RESPECT OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGNEXCHANGE EARNINGS & OUTGO :

A) Conservation of EnergyThe Companies continues its policy of encouraging energy conservation measures. The regular reviewof energy consumption and the systems installed to control utilization of energy is undertaken. Someof the measures adopted by your Company towards conservation of energy were as follows :-1. Pneumatic system for main plant change to elevator system2. Pipeline of higher diameter provided for the boiler to the pellet mill3. Adequate steam straps provided4. Provision of automatic control meters and capacitors5. Replacement of 40W tube lights with 36W fluorescent candle lamps.

B) Technology absorption, Adaptation and InnovationI. During the year under review, in-house research in quality systems and standards was continuously

carried out. Some of the key measures undertaken are follows :-(a) Hammer Mill design change.(b) Post conditioning tank design change .(c) Use of CNG in place of HSD(d) Circulation of sludge water through centrifugal separator

II. The benefits derived as a result of various measures undertaken are as follows :-(a) Better quality while grinding and saving in time

(b) Reduction in process loss, improvement in efficiency in respect of post grinding operations (c) Clean fuel, low fuel cost, zero storage, zero volatile losses (d) Improved oil extraction rate at oil palm mill(e) Improvement in energy efficiency and power factory

III. The Company’s expenditure on R&D is given below :-Expenditure on R & D

2005-2006 2004-2005Rs. lac Rs. lac.

(a) Capital – 0.31(b) Recurring 90.31 107.30(c) Total 90.31 107.61(d) Total R & D expenditure as 0.15% 0.19 %

a percentage of total turnoverC . Foreign Exchange earnings and outgo

I. Your Company’s efforts to export agricultural inputs (Vipul – liquid, Achook, Nimin) to SouthAsian countries continued during the year. The efforts to export agricultural inputs to othercountries are continuing.

2005-2006 2004-2005Rs. lac Rs. lac

II. Foreign exchange used 1582.48 687.77III. Foreign exchange earned 108.03 55.34

For and on behalf of the Board of DirectorsC.K. Vaidya A.B. GodrejManaging Director Director


1. We have audited the attached Balance Sheet of Godrej Agrovet Limited, as at 31st March 2006 and alsothe Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that dateannexed thereto. These financial statements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based on our audit.

2. We 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 free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that our audit provides a reasonablebasis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Government interms of Section 227 (4A) of the Companies Act, 1956, we annex hereto a statement on the mattersspecified 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) We are unable to comment on the recoverability of a loan amounting to Rs. 4,205 thousand given

to a Company.c) As referred to in note 16 of notes to accounts, the managerial remuneration paid to the managing

director is in excess of the limits laid down under Section 198 read with Schedule XIII of theCompanies Act, 1956, by Rs.3,056 thousand. The Company is in the process of making an applicationto the Central Government for approval of the limits in excess of the prescribed limits.

d) In our opinion, proper books of account as required by law have been kept by the Company sofar as appears from our examination of these books.

REPORT OF THE AUDITORS' TO THE MEMBERS OF GODREJ AGROVET LIMITEDe) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this

report are in agreement with the books of account.f) In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt

with by this report comply with the Accounting Standards referred to in sub-section (3C) ofSection 211 of the Companies Act, 1956.

g) In our opinion and to the best of our information and according to the explanations given to us,the said financial statements read with the notes thereon, subject to (b) and (c) above, give theinformation required by the Companies Act, 1956, in the manner so required and give a true andfair 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 31st March,

2006; andii) in the case of the Profit and Loss Account, of the profit for the year ended on that date.iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year

ended on that date.5. On the basis of the written representations received from the Directors as on 31st March, 2006, and

taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on 31stMarch, 2006 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274of the Companies Act, 1956.


Chartered AccountantsK. M. Elavia

Place : Mumbai PartnerDated : May 25, 2006 Membership No. 12737

ANNEXURE TO THE AUDITORS’ REPORTReferred to in paragraph (3) of our report of even date.1) (a) The Company has maintained proper records showing full particulars, including quantitative

details and situation of fixed assets.(b) As explained to us, the Company has a program for physical verification of fixed assets at

periodic intervals. In our opinion, the period of verification is reasonable having regard to the sizeof the Company and the nature of its assets. No material discrepancies have been reported onsuch verification.

(c) In our opinion, the disposal of fixed assets during the year does not affect the going concernassumption.

2) (a) The Management has conducted physical verification of inventory at reasonable intervals.(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 the nature of its business.(c) The Company is maintaining proper records of inventory and no material discrepancies were

noticed on physical verification.3) (a) The Company has granted three unsecured loans amounting to Rs. 78,198 thousand, to three

parties covered in the register maintained under section 301 of the Companies Act, 1956.(b) The Company has not charged interest on the loan of Rs. 33,600 thousand given to one party

which is prima facie prejudicial to the interests of the Company. The rate of interest and the otherterms and conditions of the other loans is not prejudicial to the interests of the Company.

(c) The Company has not taken any loans, secured or unsecured from companies, firms or otherparties covered in the register maintained under section 301 of the Act.

(d) Consequently, the question of commenting on the rates of interest and the other terms andconditions of the loans taken being prejudicial to the interests of the Company and payment ofregular principal and interest does not arise.

4) In our opinion and according to the information and explanations given to us, there are adequate internalcontrol procedures commensurate with the size of the Company and the nature of its business, for thepurchases of inventory, fixed assets and for the sale of goods and services. During the course of our audit,we have not observed a continuing failure to correct major weaknesses in internal controls.

5) (a) Based on the audit procedures applied by us and according to the information and explanationsprovided by the management, we are of the opinion that the particulars of contracts andarrangements referred to in section 301 of the Companies Act, 1956 have been entered into theregister required to be maintained under that section.

(b) The transactions made in pursuance of such contracts or arrangements, were made at priceswhich are reasonable having regard to prevailing market prices at the relevant time, except forcertain transactions for which, there are no similar services rendered to other parties or havebeen entered into on an reciprocal basis and hence the prices are not comparable.

6) In our opinion and according to the information and explanations given to us, the Company has notaccepted any deposits from the public and hence the provisions of section 58A, 58AA or any otherprovision of the Companies Act, 1956, read with the rules framed thereunder are not applicable.

7) In our opinion and according to the information and explanations given to us, the internal audit systemis commensurate with the size of the Company and nature of its business.

8) We have broadly reviewed the books of account maintained by the Company in respect of the Oil PalmPlantation Division pursuant to the order made by the Central Government for maintenance of costrecords prescribed under section 209 (1)(d) of the Companies Act, 1956, and are of the opinion that primafacie, the prescribed accounts and records have been made and maintained. We, have not, however,made a detailed examination of the records with a view to determining whether they are accurate orcomplete. To the best of our knowledge and according to the information given to us, the Central

Government has not prescribed maintenance of cost records under section 209(1)(d) of the CompaniesAct, 1956, for any other products of the Company.

9) (a) According to the information and explanations given to us and on the basis of our examinationof the books of account, during the year, the Company has been generally regular in depositingundisputed statutory dues including Provident Fund, Investor Education and Protection Fund,Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty,Excise Duty, cess and other statutory dues applicable to it with the appropriate authorities.According to the information and explanations given to us, there are no undisputed dues payablein respect of above as at 31st March 2006 for a period of more than six months from the date theybecame payable.

(b) According to the information and explanations given to us, there are no dues outstanding of SalesTax, Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty or cess on account of anydispute, other than the following:Name of Statute Amount (Rs.) Forum where dispute is pendingSales Tax Act 29,517,000 Commissioner, Appellate Tribunal and High CourtIncome Tax Act 6,119,000 Commissioner of Income Tax (Appeals)

10) The Company does not have accumulated losses at the end of the financial year and it has not incurredany cash losses in the current and immediately preceding financial year.

11) According to the information and explanations given to us and based on the documents and recordsproduced to us, the Company has not defaulted in repayment of dues to banks. There are no dues tofinancial institutions or debenture holders.

12) According to the information and explanations given to us and based on the documents and recordsproduced to us, the Company has not granted loans and advances on the basis of security by way ofpledge of shares, debentures and other securities.

13) In our opinion and according to the information and explanations given to us, the nature of activities ofthe Company does not attract any special statute applicable to chit fund and nidhi/ mutual benefit fund/societies.

14) The Company does not deal in shares, securities, debentures and other investments.15) According to the information and explanations given to us, the Company has given corporate guarantees

for loans taken by its subsidiary/joint venture companies from banks. The terms and conditions are notprima facie prejudicial to the interest of the Company.

16) According to the information and explanations given to us, term loans were applied for the purpose forwhich the loans were obtained.

17) According to the information and explanations given to us and on an overall examination of the BalanceSheet and Cash Flows of the Company, we report that the Company has not utilized funds raised on short-term basis for long term investment.

18) The Company has not made any preferential allotment of shares to parties or companies covered in theregister maintained under section 301 of the Companies Act, 1956.

19) The Company did not issue any debentures during the year.20) The Company has not raised any money through a public issue during the year.21) Based on the audit procedures performed and information and explanations given by the management,

we report that no fraud on or by the Company has been noticed or reported during the year.For and on behalf of

KALYANIWALLA & MISTRYChartered Accountants

K. M. ElaviaPlace : Mumbai PartnerDated : May 25, 2006 Membership No. 12737


71


This Year This Year Previous YearSchedule Rs. ’000 Rs. ’000 Rs. ’000

SOURCES OF FUNDS

Shareholders’ FundsShare Capital 1 71,188 71,188Reserves & Surplus 2 554,821 519,036

626,008 590,224

Loan FundsSecured Loans 3 1,259 139,598Unsecured Loans 4 1,333,526 180,243

1,334,785 319,841Deferred Tax Liability 50,556 51,785

TOTAL 2,011,350 961,850


Fixed Assets 5Gross Block 1,194,189 1,031,495Less : Depreciation 418,931 360,255Less : Provision for Impairment 19,890 19,890

Net Block 755,369 651,349Capital Work-in-Progress/advances 146,415 7,959

901,784 659,308

Investments 6 515,868 334,963

Current Assets, Loansand Advances 7

Inventories 698,849 549,737Sundry Debtors 639,825 504,782Cash and Bank Balances 267,412 82,864Other Current Assets 59 71Loans and Advances 338,914 88,462

1,945,059 1,225,916

Less : Current Liabilitiesand ProvisionsLiabilities 8 1,303,021 1,219,020Provisions 9 48,339 39,541

1,351,360 1,258,561

Net Current Assets 593,699 (32,645)

Miscellaneous Expenditure 10 – 224(to the extent not written offor adjusted)

TOTAL 2,011,350 961,850

NOTES TO ACCOUNTS 16


As per our Report attached Signatures to Balance Sheet andSchedules 1 to 10 and 16

For and on behalf ofKALYANIWALLA & MISTRY A.B. GODREJ DirectorChartered Accountants

V.V. CHAUBAL C.K. VAIDYA Managing DirectorK.M. ELAVIA Company SecretaryPartnerMembership No. 12737Mumbai, May 25, 2006.

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006

This Year This Year Previous YearRs. ’000 Rs. ’000 Rs. ’000

SCHEDULE 2 : RESERVES & SURPLUS

SECURITIES PREMIUM ACCOUNTAs per last Balance Sheet 189,290 189,290

CAPITAL INVESTMENT SUBSIDYAs per last Balance Sheet 9,602 7,102Add : Amount received during the year – 2,500

9,602 9,602GENERAL RESERVEAs per last Balance Sheet 50,470 48,850Less : Provision for impairment – 12,580

50,470 36,270Add : Transferred from Profit & Loss Account 7,000 14,200

57,470 50,470PROFIT AND LOSS ACCOUNT 298,458 269,674

TOTAL 554,821 519,036

This Year Previous YearRs. ’000 Rs. ’000

SCHEDULE 1 : SHARE CAPITAL

AUTHORISED1,00,00,000 Equity Shares of Rs. 10 each 100,000 100,000

ISSUED, SUBSCRIBED AND PAID UP71,18,752 Equity Shares of Rs. 10 each fully paid 71,188 71,188

Of the above Shares

(a) 41,06,956 Equity Shares of Rs. 10/- eachare held by Godrej Industries Limited,the Holding Company.

(b) 52,47,600 Equity Shares of Rs. 10/- eachhave been issued as fully paid Bonus Sharesby capitalising Securities Premium Account.

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ONMARCH 31, 2006

This Year This Year Previous YearSchedule Rs. ’000 Rs. ’000 Rs. ’000

INCOME

From Operations 11 6,027,586 5,671,833Other Income 12 28,004 13,348

6,055,590 5,685,181

EXPENDITURE

Materials 13 4,358,477 4,163,547Expenses 14 1,495,255 1,228,645Interest and Financial Charges 15 51,885 32,364Depreciation 73,626 65,575Miscellaneous Expenditure written off 224 87

5,979,467 5,490,218

PROFIT BEFORE TAXATION 76,123 194,963Provision for Taxation

Current ( including Fringe Benefit Tax) 12,509 48,000MAT Credit entitlement (3,410) –Deferred (1,229) 5,245

7,870 53,245

PROFIT AFTER TAXATION 68,253 141,718Surplus brought forward 269,674 213,213

AMOUNT AVAILABLE FOR APPROPRIATION 337,927 354,931

APPROPRIATION :

DividendInterim – 39,153Final (Proposed) 28,475 23,492

28,475 62,645Tax on Dividend 3,994 8,412Transfer to General Reserve 7,000 14,200Surplus carried forward 298,458 269,674

TOTAL 337,927 354,931

Earnings per share (Basic/Diluted) in Rs. (Refer note 25) 9.59 19.91



As per our Report attached Signatures to Profit and Loss Accountand Schedules 11 to 16




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This Year Previous YearRs.’000 Rs.’000

SCHEDULE 3 : SECURED LOANS

FROM BANKS

Term Loans – 115,598(amount due within a year Rs. Nil,Previous year Rs. 23,922 thousand)Cash Credit/Working Capital Demand Loans 1,259 24,000TOTAL 1,259 139,598Note : Refer Note (4)



SCHEDULE 4 : UNSECURED LOANS

FROM BANKSTerm Loans 1,299,809 148,600(amount due within a year Rs. 1,216,476 thousand,Previous year Rs. 148,600 thousand)

SALES TAX DEFERMENT FACILITY 33,717 31,643

TOTAL 1,333,526 180,243

SCHEDULE 5 : FIXED ASSETS (Rs. ’000)

GROSS BLOCK DEPRECIATION IMPAIRMENT NET BLOCK

ASSETS As at Additions Deductions As at Upto For the On Upto Upto As at As at1.4.2005 31.3.2006 1.4.2005 Year Deductions 31.3.2006 31.3.2006 31.3.2006 31.3.2005

Goodwill – – – – – – – – – – –Freehold Land 86,493 6,777 – 93,270 – – – – – 93,270 86,493Leasehold Land 9,841 – – 9,841 845 112 – 956 – 8,885 8,996Buildings 220,824 12,913 – 233,737 59,302 7,745 – 67,047 – 166,691 161,522Staff Quarters 1,003 – 485 518 491 19 244 267 – 251 512Plant & Machinery 546,059 115,724 6,802 654,982 202,914 46,829 5,246 244,496 19,890 390,595 323,255Furniture & Fixtures 19,476 9,985 120 29,341 12,225 2,487 106 14,607 – 14,734 7,251Leasehold Improvements – 9,409 – 9,409 – 859 – 859 – 8,550 –Office & Other Equipments 25,512 7,461 326 32,647 13,335 2,888 224 16,000 – 16,647 12,177Vehicles 53,130 22,465 14,308 61,287 29,069 9,049 9,132 28,986 – 32,300 24,061Research Centre 3,688 – – 3,688 1,584 175 – 1,759 – 1,929 2,104Trees, Development Costs 45,469 – – 45,469 20,922 3,033 – 23,955 – 21,514 24,547Technical Know-How Fees 20,000 – – 20,000 19,569 429 – 19,999 – 1 431

TOTAL 1,031,495 184,734 22,041 1,194,189 360,256 73,626 14,951 418,931 19,890 755,368 –

Previous Year 919,249 136,645 24,399 1,031,495 307,941 65,575 13,260 360,255 – – 651,349

Capital Work-in-Progress / Advances 146,415 7,959

901,783 659,308


SCHEDULE 6 : INVESTMENTSLONG TERMUNQUOTED (AT COST)IN GOVERNMENT SECURITIES(All the Securities have been deposited withvarious Government Authorities)(a ) National Savings Certificates (Face value

Rs. 112 thousand; Previous year Rs. 92 thousand) 112 92(Rs. 20 thousand purchased during the year)

(b) Indira Vikas Patra (Face valueRs. 2 thousand; Previous year Rs. 3 thousand) 1 2(Rs. 1 thousand matured during the year)

113 94IN SUBSIDIARY COMPANY

In Goldmohur Foods and Feeds Limited18,38,170 (Previous year 21,58,170) equity shares 183,398 183,398of Rs. 10/- eachIn Golden Feeds Products Limited50,000 equity shares of Rs. 10/- each 500 500

IN JOINT STOCK COMPANIES(a) 4,000 Fully-paid Equity Shares of Rs.10/-

each in Ensemble Holdings & Finance Limited 80 80(a company under the same management)

(b) 4,00,000 Fully-paid Equity Share of Tk. 100/- each inACI Godrej Agrovet Private Limited 30,814 30,814

(c) 675 Fully-paid Equity Share of AED. 100/- each inAl Rahba International Trading Limited Liability Company 810 –(acquired during the year)

(d) 23,90,911 fully paid Equity Shares of Rs.10/- eachin Creamline Dairy Products Limited 95,016 95,016

(e) 3,51,352 fully paid Equity Shares of Rs.10/- eachin Creamline Nutrients Limited 8,784 8,784

(f) 4,55,000 fully paid Equity Shares of Rs.10/- eachin Polchem Hygiene Laboratories Private Limited 16,275 16,275

151,779 150,969IN CO-OPERATIVE SOCIETY

3 Shares of Rs.500/- each in SachinIndustrial Co-operative Society Limited 2 2Aggregate Cost of Unquoted Investments 335,792 334,962

CURRENTNON-TRADE UNQUOTED

1,78,74343.368 units of Grindlays Floating Rate Fund -Short term (Plan B) - Daily Dividend. 180,000 –TRADE UNQUOTED

IN SUBSIDIARY COMPANYIn Krithika Agro Farm Chemicals and EngineeringIndustries Private Limited7,600 Fully-paid Equity Share of Rs. 10/- each 76 –(acquired during the year)

TRADE UNQUOTEDIn subsidiary company TOTAL 515,868 334,963


SCHEDULE 7 : CURRENT ASSETS, LOANS AND ADVANCES(A) INVENTORIES :

Raw Materials 351,305 316,869Finished Products 201,993 108,490Poultry Stock 106,282 93,941Stores and Spares 14,816 12,067Stock under Cultivation 24,454 18,370

698,849 549,737(B) SUNDRY DEBTORS

Debts outstanding for a period exceeding six monthsConsidered Good 130,489 95,172Considered Doubtful 21,500 23,682

151,989 118,854Other Debts 509,336 409,610TOTAL 661,325 528,464Less: Provision for doubtful debts 21,500 23,682

639,825 504,782[Debts amounting to Rs. 12,263 thousand (Previous yearRs. 12,263 thousand) are secured by equitable mortgage/hypothecation of assets/deposit of title deeds, Rs. 17,366thousand (Previous year Rs.118 thousand against SecurityDeposits and Rs. 25,392 thousand (Previous year Rs. 12,494thousand) against Bank Guarantees](C) CASH AND BANK BALANCES

Cash and Cheques on hand 12,713 7,375Balances with Scheduled Banksi) In Current Accounts 98,827 64,530ii) In Fixed Deposit Accounts 155,872 10,959

(Rs. 75 thousand pledged withgovernment authorities) 267,412 82,864

(D) OTHER CURRENT ASSETS 59 71(E) LOANS AND ADVANCES

(Unsecured and considered good unless otherwise stated)Loans and Advances recoverable in cash or inkind or for value to be receivedConsidered Good 292,449 76,273Considered Doubtful 3,361 3,674

295,810 79,947Less: Provision for doubtful advances 3,361 3,674

292,449 76,273Other Depositsi) Government Authorities 131 5ii) Others 35,050 25,289

Advance payment of Taxes including MAT CreditEntitlement Rs. 3,410 thousand (Net ofprovision for taxation Rs. 73,294 thousand;Previous year Rs. 73,294 thousand) 11,284 (13,105)

338,914 88,462

TOTAL 1,945,058 1,225,916


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SCHEDULE 8 : LIABILITIESAcceptances 273,048 424,140Sundry Creditors

Dues to Small Scale Undertakings (refer Note 10) 724 5,051Others 854,398 597,996

855,122 603,047Advances from Customers 69,212 96,522Sundry Deposits 105,638 95,311

TOTAL 1,303,021 1,219,020

SCHEDULE 9 : PROVISIONSDividend 28,475 23,492Tax on Dividend 3,994 3,295Gratuity 1,439 416Leave Encashment 14,431 12,338

TOTAL 48,339 39,541

SCHEDULE 10 : MISCELLANEOUS EXPENDITURE(To the extent not written off)Front end Fee on Term Loans – 224

TOTAL – 224

SCHEDULE 11 : INCOME FROM OPERATIONSNet Sales 5,955,461 5,627,822Other Business OperationsClaims & Compensations 32,167 851Rent and Storage Charges – 390

32,167 1,241Financial OperationsDividend on Investments (Gross) 35,609 30,000Interest (Gross) (Tax at Source Rs.114 thousand;Previous year Rs.144 thousand) 4,349 4,696Profit on sale of Investments – 8,074

39,958 42,770

TOTAL 6,027,586 5,671,833

SCHEDULE 12 : OTHER INCOMEProfit/(Loss) on sale of Fixed Assets (Net) 1,273 (431)Provision for Doubtful Debts and Advances no longer required 2,175 1,420Miscellaneous Income 24,556 12,359

TOTAL 28,004 13,348

SCHEDULE 13 : MATERIALSa) RAW MATERIALS CONSUMED

Opening stock 316,869 256,523Add : Purchases during the year 3,910,803 3,852,505

4,227,671 4,109,028Less : Sales during the year 54,881 35,322

4,172,789 4,073,706Less : Closing Stocks 351,305 316,869

3,821,484 3,756,837b) PURCHASE FOR RESALE 648,921 429,398

c) INVENTORY CHANGEOpening Stock

Finished Goods 108,490 105,297Work-in-progress – 124Stock under cultivation 18,370 5,714Poultry Stock 93,941 86,978

220,801 198,113Less : Closing Stock

Finished Goods 201,993 108,490Work-in-progress – –Stock under cultivation 24,454 18,370Poultry Stock 106,282 93,941

332,729 220,801

(111,928) (22,688)

TOTAL 4,358,477 4,163,547

SCHEDULE 14 : EXPENSES1 Salaries, Wages, Bonus, Gratuity and Allowances 274,449 243,1182 Contribution to Provident Fund and

Other Funds and Administration Charges 15,852 11,4583 Employee Welfare Expenses 28,220 22,5324 Processing charges 266,225 228,8045 Consumable Stores 55,783 49,4536 Power and Fuel 141,032 118,9997 Rent 25,870 11,8038 Rates and Taxes 9,596 7,1939 Repairs & Maintenance

Building 2,815 1,189Plant & Machinery 10,014 9,683Other Assets 5,086 1,635

17,914 12,507


10 Insurance 8,330 6,19311 Postage, telephone and stationery 27,314 21,81912 Auditor's Remuneration 1,929 1,67513 Legal & Professional Fees 59,136 17,77014 Freight, Coolie and Cartage 83,620 64,50415 Discount, Commission and Selling expenses 301,345 254,63616 Advertisement and publicity 42,940 37,48917 Travelling expenses 80,390 58,35518 Bad Debts/Advances written off 16,594 33,90619 General Expenses 65,114 52,832

1,521,655 1,255,04520 Less: Shared Expenses recovered (26,400) (26,400)

TOTAL 1,495,255 1,228,645

SCHEDULE 15 : INTEREST AND FINANCIAL CHARGES

(a) Interest paid on fixed loans - Banks 36,505 18,885(b) Interest paid on other loans

i) Banks 3,012 1,394ii) Others 2,157 4,796

5,169 6,190(c) Other Financial Charges 10,212 7,289

TOTAL 51,885 32,364


SCHEDULE 14 : EXPENSES (Contd.)


1. SIGNIFICANT ACCOUNTING POLICIES

a) The accounts have been prepared on historical cost convention. The Company follows mercantilesystem of accounting and recognises income and expenditure on accrual basis.

b) Fixed assets have been stated at cost and include incidental and/or installation/developmentexpenses incurred in putting the asset to use and interest on borrowing incurred during constructionperiod. Pre-operative expenses for major projects are also capitalised, where appropriate.

c) Carrying amount of cash generating units/assets are reviewed at balance sheet date to determinewhether there is any indication of impairment. If such indication exists, the recoverable amount isestimated as the net selling price or value in use, whichever is higher. Impairment loss, if any, isrecognized whenever carrying amount exceeds the recoverable amount.

d) Depreciation /Amortisation has been provided for as under :

(a) The Company has grouped additions and disposals in appropriate time periods of amonth/quarter for the purpose of charging pro rata depreciation in respect of additionsand disposals of its assets keeping in view the materiality of the items involved.

(b) 1) Building, Plant & Machinery, Computers and Research Centre: On Straight LineMethod basis at the rates prescribed by Schedule XIV to the Companies Act, 1956.

2) Other assets: On Written Down Value basis at the rates prescribed by ScheduleXIV to the Companies Act, 1956.

3) Amortizations

Asset type Period

(i) Leasehold Land, improvements and equipments Primary lease period(ii) Tress Development cost 15 years(iii) Nursery/Greenhouse building 10 years(iv) Technical Kno-whow of a capital nature 6 years(v) Poultry Equipments 3 years

e) Grants/Subsidies :

(i) Investment Subsidy under the Central/State investment incentive scheme is credited toCapital Investment Subsidy Reserve and treated as a part of the shareholders’ funds.

(ii) Grants/Subsidies related to specific fixed assets are shown as a deduction from the grossvalue of the asset concerned in arriving at its book value.

(iii) Grants/Subsidies related to revenue are presented as a credit to the profit and lossstatement or are deducted in reporting the related expense.

f) Long Term investments are carried at cost. Provision for diminution, if any, in the value of eachlong term investment is made to recognise a decline, other than of a temporary nature.Current investments are stated at lower of cost and net realizable value.

g) Raw materials and Poultry Stock are valued at weighted average cost.Finished goods and work-in-progress are valued at lower of cost and net realisable value.These costs include cost of conversion and other costs incurred in bringing the inventories totheir present location and condition. Stores and spares are valued at cost using the First-In-First-Out method

h) Retirement benefits to employees comprise payments under defined contribution plans likeprovident fund and family pension. Payments under defined contribution plans are charged to theprofit and loss account. The liability in respect of defined benefit schemes like gratuity and leaveencashment benefit on retirement is provided on the basis of acturial valuation at the end of eachyear. The liability for retirement gratuity is funded through a trust created for the purpose.

i) Miscellaneous expenditure :

i) Non-Compete fee is amortised over a period of five years or the period of the agreement(wherever applicable).

ii) Front-end fee paid on loans raised from financial institutions is amortised over the periodof the loan.

iii) Expenditure incurred on study of business is amortised over the period for which thebusiness plan is evolved.

iv) Expenditure incurred on glow-sign board is amortised over a period of two accounting years.



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j) Revenue is recognised when goods are despatched to external customers. Sales are inclusive ofrealised exchange fluctuations on export receivables but net of returns, sales tax, rebates,etc.

k) Revenue expenditure on Research and Development is charged to Profit and Loss Account of theyear in which it is incurred. Capital Expenditure incurred during the year on Research andDevelopment is shown as an addition to Fixed Assets under the head “Research Centre”.

l) Interest and commitment charges incurred in connection with borrowing of funds, which are directlyattributable to the acquisition, construction or production of an asset that necessarily takes substantialperiod of time to get ready for its intended use, upto the time the said asset is put to use arecapitalised, as a part of the cost of that asset. Other borrowing costs are recognised as an expense inthe period in which they are incurred.

m) Transactions in foreign currency are recorded at the exchange rates prevailing on the date of thetransaction. Assets and liabilities related to foreign currency transactions, remaining unsettled at theyear end, are translated at the year end exchange rates. Forward exchange contracts, remainingunsetteled at the year end, backed by underlying assets or liabilities are also translated at year endexchange rates.The premium payable on foreign exchange contracts is amortised over the period ofthe contract. Exchange gains / losses are recognised in the Profit and Loss Account except in respectof liabilities incurred to acquire fixed assets in which case, they are adjusted to the carrying amountof such fixed assets.

n) Deferred tax is recognised on timing differences, being the differences between the taxable incomeand the accounting income that originate in one period and are capable of reversal in one or moresubsequent periods. Deferred tax assets, subject to consideration of prudence, are recognised andcarried forward only to the extent that there is a reasonable certainty that sufficient future taxableincome will be available against which such deferred tax assets can be realised. The tax effect iscalculated on the accumulated timing difference at the year-end, based on the tax rates and lawsenacted or substantially enacted on the balance sheet date.

o) The basic earnings per share is computed using the weighted average number of common sharesoutstanding during the period. Diluted earnings per share is computed using the weighted averagenumber of common and dilutive common equivalent shares outstanding during the period, exceptwhere the results would be anti-dilutive.

p) Provisions are recognized in the accounts in respect of present probable obligations, the amount ofwhich can be reliably estimated.

Contingent liabilities are disclosed in respect of possible obligations that arise from past events buttheir existence is confirmed by the occurrence or non-occurrence of one or more uncertain futureevents not wholly within the control of the Company.


2. CONTINGENT LIABILITY

In respect of :

(a) Income Tax Matters 6,119 14,010

The Income Tax Department has filed an appeal against theorder of CIT (A), for A.Y. 1998-99, 1999-2000, 2000-2001and has raised a demand for A.Y.2003-04

(b) Sales Tax Matters 30,317 40,085

The Company has filed Appeal with the Sales Tax tribunal inTamilnadu for F.Y. 1993-94 to 1995-96, for classifying branchtransfer as sales. (Against the above the Company has paidadvance of Rs. 800 thousand) The Company has filed an appealin Mumbai High Court in connection with Agricultural ProduceMarket Committee(APMC) in respect of poultry business. TheCompany has preffered an appeal with the Commissioner ofCommercial Taxes, Karnataka against the order of the JointCommissioner of Commercial Taxes, Karnataka, for classifyingchicken sold in crimp pack as chicken sold in sealed container.(Against the above the Company has paid advance of Rs. 14,300thousand) The Company has filed writ petition in Andhra PradeshHigh Court, seeking direction to the CTO, to accept the “C”forms and waive the differential liability

(c) Guarantee issued to a Bank on behalf of the subsidiary company 858,459 590,000

(d) Guarantees issued by the Banks and counter guaranteed by 47,815 41,387the company (other than those mentioned in (c) above)Rs.3,182 thousand (Previous year Rs. 672 thousand) have beensecured by deposit with bank

(e) Case / Claim filed by Processors for claiming various expenses 24,764 –

3. CAPITAL COMMITMENTS

The estimated value of contracts remaining to be executed on 55,462 4,601Capital Account to the extent not provided for

4. SECURED LOANS / UNSECURED LOANS

a) Term Loans from Banks are secured by an equitable mortgage of specified immovable propertiesand hypothecation of specified movable assets of the Company.

b) Cash Credit and other facilities from banks are secured by hypothecation of stocks and bookdebts of the Company (both present and future).

c) Sales Tax Deferment includes Rs. 2,780/- thousand which has been disputed by Sales Taxauthorities. The Company has filed an appeal with the Andhra Pradesh High Court on this count.

5. FIXED ASSETS

Legal formalities relating to the transfer of title of immovable assets situated at Chennai (acquired asa part of the take over of Agrovet business from Godrej Industries Limited), Hyderabad (as part of themerger of Godrej Plant Biotech Limited) and at Coimbatore are being complied with. Stamp dutypayable thereon is not presently determinable.

6. INFORMATION IN RESPECT OF JOINT VENTURE (JOINTLY CONTROLLED ENTITY)

Name Country of Incorporation Percentage HoldingThis Year Previous Year

ACI Godrej Agrovet Private Limited Bangladesh 50% 50%

ACI Godrej Agrovet Private Limited has started its operations in the fields of Animal Feed,

Poultry businesses etc.

Interest in Assets, Liablities, Income and Expense with respect of jointly controlled entity

Assets 78,899 43,827

Liablities 78,899 16,151

Income 15,612 –

Expense 19,758 –

Al Rahaba Trading International LLC Abu Dhabi 70% –

The company has a 45% share in the Equity capital of Al Rahaba International LLC but a 70% sharein the profits and in future investments.

Al Rahaba Trading International LLC is in the Poultry business

Assets 40,227

Liablities 40,227

Income 24,114

Expense 39,883


7. CURRENT ASSETS, LOANS AND ADVANCES

(a) Loans and Advances include due from Companiesunder the same management

Golden Feed Products Limited 40,393 5

Maximum balance during the year 45,000 5

Krithika Agro Farm Chemicals and EngineeringIndustries Private Limited 4,205 –

Maximum balance during the year 4,205

Al Rahba International Trading Limited Liablity Company 33,075 –

Maximum balance during the year 33,075

(b) Sundry Debtors include due from Companiesunder the same management

Goldmohur Foods and Feeds Limited 18,219 7,841

Godrej Consumer Products Limited – 15

Godrej Industries Limited – 55

ACI Godrej Agrovet Private Limited 13 –

8. It is the opinion of the management that the following are parties which can be classified as SmallScale Industrial Undertakings to whom the Company owes sums which is outstanding for more than30 days. The Auditors have accepted the representations of the management in this matter.

Name of the party Rs.’000 Name of the party Rs.’000

Wardhaman Trading Company 28 Pharmline Industries 5

Shivshant Industries 56 Laxmi Solvent (P) Ltd. 422

Yashoraj Industries 171

9. Deferred Tax :

The tax effects of significant temporary differences that resulted in deferred tax assets and liabilities are :


Depreciation on Fixed Assets (82,407) (74,200)

Provision for Impairment of Fixed Assets 7,310 7,310

Provision for Doubtful Debts 8,368 8,983

Carry Forward unabsorbed depreciation 17,576 –

Others (1,403) 6,122

Deferred Tax Liability (50,556) (51,785)


Unit Quantity Value Quantity ValueRs. ‘000 Rs. ‘000

10. SALES TURNOVER

Animal Feeds MT 467,343 3,689,176 470,227 3,790,036

Agro Inputs – 924,208 – 659,175

Integrated Poultry Business – 884,002 – 778,887

Oil Palm Plantation – 323,862 – 298,361

Others – 134,213 – 101,363

TOTAL 5,955,461 5,627,822

Note: Sales Turnover includes sale of items processed by third parties, and items purchased by theCompany for resale.



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11. FINISHED GOODS INVENTORIES

Animal Feeds MT 7,258 62,699 4,978 44,451(4,978) (44,451) (4,851) (34,411)

Agro InputsSynthetic pesticides KL 168 35,848 151 19,153

(151) (19,153) (79) (13,880)Natural pesticides MT 4 480 22 3,477

(22) (3,477) (5) (753))Processed Chicken 40,360 8,612

(8,612) (32,522)Others 62,606 32,797

(32,797) (23,731)

TOTAL 201,993 108,490

(108,490) (105,297)

Note : Figures in bracket pertain to the Previous Year(34,332)

12. PURCHASES FOR RESALE

Animal Feeds MT 5,220 69,987 2,379 25,848Agro InputsPlant Growth PromoterSpray KL 285 21,407 293 22,395Granules MT 5,713 65,185 5,749 65,647Urea coating agent MT 13 2,621 45 3,149Synthetic pesticides KL 1,298 143,591 1,100 128,486Others 346,130 183,873

TOTAL 648,921 429,398

13. RAW MATERIALS CONSUMEDCakes & Brans MT 122,403 697,964 112,066 582,799Extractions MT 262,515 1,276,327 265,412 1,378,058Others 1,847,193 1,795,980

TOTAL 3,821,484 3,756,837

14. DISCLOSURE IN RESPECT OF LEASES:

The Company’s leasing arrangements are in respect of operating leases for premises occupied bythe Company. These leasing arrangements are cancellable, and are renewable on a periodic basisby mutual consent on mutually acceptable terms.

a. The total of future minimum lease payments under non - cancelable operating leases for eachof the following periods :


i. Not later than one year 1,115 1,373ii. Later than one year and not later than five years 2,230 2,746iii. Later than five years – –

b. Lease payments recognised in the statement of Profit & Loss for the period :

Minimum lease payments 1,115 1,373

15. LICENSED & INSTALLED CAPACITY AND ACTUAL PRODUCTION

Capacity Per Annum Actual Third PartyItem For the year Registered Installed Production Production

Ended MT MT MT MT

a) Animal Feeds 31.3.2006 Not Applicable 306,645 185,938 338,577(Non-Scheduled) 31.3.2005 Not Applicable 306,645 188,156 279,819

b) Processed Chicken 31.3.2006 Not Applicable 15,566 12,298 –(Non-Scheduled) 31.3.2005 Not Applicable 13,336 9,422 –

c ) Palm Oil 31.3.2006 Not Applicable 11,490 7,112 –(Non-Scheduled) 31.3.2005 Not Applicable 11,490 7,638 –

Million Million MillionPlants Plants Plants

d) Tissue Culture Plants 31.3.2006 4.25 5.00 4.21 –(Non-Scheduled) 31.3.2005 4.25 5.00 4.21 –

16. (a) Computation of Profit for the purpose of mangerial remuneration


Profit after tax as per Profit and Loss account 68,253 141,718

Add : Depreciation as per accounts 73,626 65,575

Managerial Remuneration 6,708 5,086

Provision for Doubtful Debts / Advances (2,175) (1,420)

Profit / (Loss) on sale of fixed assets referred to in Provisoto Sec. 349 (3)(d) of the Companies Act, 1956 1,273 (431)

Provision for Tax (including Deffered tax) 7,870 53,245

87,302 122,054

Less : Depreciation as per Section 350 of theCompanies Act, 1956 73,626 65,575

Provision for Dimunition in value of investmentswritten back – –

Profit / (Loss) on sale of Fixed assets (net) 1,273 (431)

74,899 65,144

Profit for the purpose of Directors remuneration 80,656 198,629

5% thereof 4,033 9,931


(b) MANAGERIAL REMUNERATION

a) Salaries 6,339 4,751

b) Contribution to Provident fund 341 235

c) Estimated monetary value of perquisites 28 101

6,708 5,086

d) Directors’ Sitting Fees 72 72

6,780 5,158

Note: (a) All the above items have been included under respective heads under “Expenses” in Schedule 14

(b) Salaries include performance linked variable remuneration on provisional basis

(c) The remuneration paid to the Managing Director is in excess of the remuneration prescribedunder Section 198 read with Schedule XIII to the Companies Act, 1956 by Rs.3056 thousands.The company is in the process of making necessary application to the Central Government forapproval of the remuneration in excess of the prescribed limits.

17. COMMON EXPENSES SHARED BY THE COMPANIES :

a) Expenses (Schedule 14) include Rs 16,602 thousand (Previous Year Rs 10,846 thousand) chargedby Godrej Industries Limited, the Holding Company

b) During the year, the Company shared the services of some of it’s employees and facilities withits subsidairy Company. Consequently the value of share of costs attributable to that Companycalculated in accordance with the service agreement has been recovered, amounting toRs. 26,400 thousands (Previous year Rs. 26,400 thousands)

18. AUDITORS’ REMUNERATION

Audit fees 1,122 880

Audit under Other Statutes 337 220

Tax representation before Authorities 196 217

Management Consultancy 73 44

Certification 172 187

Reimbursement of Expenses 29 127

TOTAL 1,929 1,675


19. VALUE OF IMPORTS ON CIF BASIS(INCLUDES DIRECT IMPORTS ONLY )

Raw Materials 103,040 60,234

Spares 1,129 762

Capital Goods 29,990 –

134,159 60,996

20. EXPENDITURE IN FOREIGN CURRENCY

Travelling Expenses 2,523 1,852

Others 21,567 5,929

24,089 7,780

21. EARNINGS IN FOREIGN EXCHANGE

F.O.B value of goods exported 10,803 5,534

Others 1,837 334

12,641 5,868

22. VALUE OF CONSUMPTION OF RAW MATERIALS, SPARES & TOOLS(INCLUDING CANALIZED ITEMS )

This Year Previous YearRs. ’000 % Rs. ’000 %

RAW MATERIALS :

Imported items (including duty content) 43,946 1 47,085 1

Indigenous 3,777,538 99 3,709,752 99

TOTAL 3,821,484 100 3,756,837 100

SPARES & TOOLS :

Imported items 750 1 599 1

Indigenous 55,033 99 48,854 99

TOTAL 55,783 100 49,453 100

23. Research & Development Expenditure of revenue nature charged to the Profit and Loss Accountamounts to Rs.9,031 thousand (previous year Rs.10,620 thousand).

24. The amount of exchange difference included in the Profit and Loss Account, under the related headsof expenses / income, is Rs. 1,742 thousand (Previous year expense Rs.1,598 thousand). The amountof exchange difference in respect of forward exchange contracts to be recognised in the profit andloss account of subsequent accounting periods Rs. Nil (previous year Rs. 940 thousand)

25. EARNINGS PER SHARE

This Year Previous YearProfit after tax and prior period expenses (Rs.’000) 68,253 141,718Weighted average number of equity shares outstanding 7,118,752 7,118,752Basic earnings per share 9.59 19.91Diluted earnings per share 9.59 19.91Nominal value of shares 10.00 10.00


76

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 200526. RELATED PARTY DISCLOSURES

Related party disclosures as required by AS - 18, “Related Party Disclosures”, are given below “

1. Relationships :

(i) Holding Companies :

Godrej Industries Limited (GIL) holds 57.69% in the Company. GIL is the subsidiary ofGodrej & Boyce Mfg. Co. Limited, the ultimate Holding Company.

(ii) Subsidiary companies

Goldmohur Foods and Feeds LimitedGolden Feed Products LimitedKrithika Agro Farm Chemicals and Engineering Industries

(iii) Fellow Subsidaries :

Godrej Consumer Products LimitedGodrej Infotech LimitedGodrej Tea LimitedGodrej Properties & Investments LimitedGodrej Hicare Limited

(iv) Joint Ventures

ACI Godrej Agrovet Private LimitedAl Rahaba Trading International LLC

(v) Associates

Creamline Dairy Products LimitedCreamline Nutrients LimitedPolchem Hygiene Laboratories Private Limited

(v) Other related parties where persons mentioned in (vii) below exercise significant influenceBahar Agrochem & Feeds Private Limited

(vi) Key management personnelMr. C.K.Vaidya

(vii) Individuals exercising control or significant influence (and their relatives)Mr. A.B. GodrejMr. N.B. Godrej

2. The following transactions were carried out with the related parties in the ordinary course of business :(i) Details relating to parties referred to in items 1(i), (ii), (iii), (iv) and (v) above

Rs.’000Nature of Tansactions Holding Subsi- Fellow Joint Assoc- Other

Comp- diaries Subsi- Ventures iates relatedanies diaries Parties

(i) (ii) (iii) (iv) (v) (vi)

1 Purchase/Transfer of fixed assets 3,594 – 797 – – –4,483 – 30 – – –

2 Sales/Transfer of fixed Assets – 47 – 5,667 – –3 Sale of Investments – – – – –

– 4,000 – – – –4 Investment in share capital – 886 – – – –

– – – – – –4 Advances given during the year – 79,230 – 34,511 – –5 Intercorporate deposits

placed during the year – – – – – –1,166 – – – – –

6 Intercorporate depositstaken during the year – – – – – –

– – – – – –7 Sale of materials/finished goods – 216,412 – 5,667 – –

181,579 – – –8 Purchase of materials/finished goods 82 122,745 1,107 – 10,553 122,374

59 137,378 1,865 – – 152,8989 Expenses charged to other

companies – 26,592 – 1,287 – –12 27,210 – 847 – 50

10 Expenses charged by othercompanies 16,470 1,307 3,403 – – –

11,166 2,102 587 – – 16811 Interest income on loan given – 1,787 – – – –

– – – – – –12 Interest expense on intercorporate

deposits taken – – – – – –– – – – – –

13 Dividend Income – 31,000 33 – 4,576 –– 30,000 – – – –

14 Dividend paid 13,573 – – – – –22,621 – – – – –

15 Outstanding receivables,net of (payables) 8 35,552 – (13) (1,173) (1,373)

4,754 5,966 77 847 (11,019)16 Guarantees issued in favour of – 145,000 – 123,459 – –

– 590,000 – – –(ii) Details relating to persons referred to in items 1 (vi) & (vii) above

Current PreviousYear Year

1 Remuneration 5,724 5,4192 Interest income on loans given – –3 Dividend paid 1,935 3,226

3. Significant Related Party Transactions : (Rs.'000)

Nature of Transactions Holding Company Amount Subsidiaries Amount Fellow subsidiaries Amount(i) (ii) (iii)

1 Purchase/Transfer of fixed assets Godrej Industries Ltd 3,594 – – Godrej Tea Ltd.3,558 – 30

Godrej & Boyce Mfg. Co. Ltd. 654 – – – –925

2 Sale of Investments – – Goldmohur Foods & Feeds Ltd. – –– – 40,000

3 Investment in share capital – – Kritika Agro Farm Chemical &– – Engineering Industries Pvt. Ltd. 76 – –– – –

4 Advances given during the year Godrej Industries Ltd. Kritika Agro Farm Chemical & 4,205 Godrej Properties & Investments Ltd. –Engineering Industries Pvt. Ltd.

1,166 –Golden Feeds Products Ltd. 40,393

5 Intercorporate deposits taken during the year Godrej Industries Ltd. – – – – –– – –

6 Sale of materials/finished goods Godrej Industries Ltd. – Goldmohur Foods & Feeds Ltd. 215,661 – –– 181,579 –Kritika Agro Farm Chemical & 458Engineering Industries Pvt. Ltd.

7 Purchase of materials / finished goods Godrej Industries Ltd. – Goldmohur Foods & Feeds Ltd. 111,120 Godrej Consumer Products Ltd. –59 137,378 1,865

8 Expenses charged to other companies Godrej & Boyce Mfg. Co. Ltd. – Goldmohur Foods & Feeds Ltd. 26,592 – –12 27,210 –

9 Expenses charged by other companies Godrej Industries Ltd. 16,470 Goldmohur Foods & Feeds Ltd. 1,307 Godrej Consumer Products Ltd. 49510,846 2,102 563

– – Godrej Tea Ltd. –– 708

10 Interest income on loan given – – Kritika Agro Farm Chemical &Engineering Industries Pvt. Ltd. 230 – –Golden Feeds Products Ltd. 1,557 – –

11 Interest expense on intercorporate deposits taken Godrej Industries Ltd. – – – – ––

12 Dividend Income – – Goldmohur Foods & Feeds Ltd. 31,000 – –30,000 –

13 Dividend paid Godrej Industries Ltd. 13,573 – –22,621 –

14 Outstanding receivables, net of (payables) Godrej Industries Ltd. – Goldmohur Foods & Feeds Ltd. 18,219 Godrej Consumer Products Ltd.4,754 5,917 (10)

Golden Feeds Products Ltd. 16,468Kritika Agro Farm Chemical &Engineering Industries Pvt. Ltd. 865

15 Guarantees issued in favour of – – Goldmohur Foods & Feeds Ltd 70,000590,000

Golden Feed Products Ltd. 75,000


77

3. Significant Related Party Transactions : (Contd.) (Rs.'000)

Joint Amount Associates AmountNature of Transactions Ventures

(iv) (v)

1. Investment in share capital Al Rahaba Trading International LLC 8102. Sales /Transfer of fixed Assets ACI Godrej Agrovet Private Ltd. 5,6673. Advances given during the year Al Rahaba Trading International LLC 33,075 –4. Intercorporate deposits taken during the year – – –5. Sale of materials/finished goods ACI Godrej Agrovet Private Ltd. – –6. Dividend Income – – Creamline dairy Products Ltd. 3,776

– Creamline Nutrients Ltd. 5277. Guarantees issued in favour of Al Rahaba Trading International LLC 60,683

ACI Godrej Agrovet Private Ltd. 62,776

For the year ended 31st March, 2006 Rs. ’000 For the year ended 31st March, 2005 Rs. ’000

Animal Agri Integrated Oil Other Unallocated Total Animal Agri Integrated Oil Other Unallocated TotalRevenue Feeds Inputs Poultry Palm Business Feeds Inputs Poultry Palm Business

Business Plantations Business Plantations

Total Sales 3,991,907 936,825 887,978 328,882 33,759 – 6,179,352 3,945,941 659,175 783,111 299,160 101,363 5,788,750

Less : Inter-segment (209,921) (16,335) (12,003) 14,369 – – (223,890) (155,905) – (4,224) (798) – (160,927)

External Sales 3,781,986 920,490 875,975 343,251 33,759 – 5,955,461 3,790,036 659,175 778,887 298,362 101,363 – 5,627,822

Result

Segment Result 105,267 65,551 (46,806) 87,613 (1,539) – 210,086 173,630 43,982 (63,532) 75,916 25 230,021

Unallocated expenditure net of unallocated income (122,034) (122,034) (37,390) (37,390)

Interest expenses (51,887) (51,887) (32,364) (32,364)

Interest Income 4,349 4,349 4,696 4,696

Dividend Income and Profit on sale of Investments 35,609 35,609 30,000 30,000

Profit before taxation and exceptional items 105,267 65,551 (46,806) 87,613 (1,539) (133,963) 76,123 173,630 43,982 (63,532) 75,916 25 (35,058) 194,963

Provision for taxation 7,870 7,870 53,245 53,245

Profit after taxation and before exceptional items 105,267 65,551 (46,806) 87,613 (1,539) (141,833) 68,253 173,630 43,982 (63,532) 75,916 25 (88,303) 141,718

Exceptional Items

Prior years adjustments – – – –

Net profit 105,267 65,551 (46,806) 87,613 (1,539) (141,833) 68,253 173,630 43,982 (63,532) 75,916 25 (88,303) 141,718Other InformationSegment assets 956,282 389,216 628,642 194,537 29,646 1,164,386 3,362,709 910,212 257,831 459,865 187,679 27,486 377,338 2,220,412Segment liabilities 847,930 66,230 171,650 27,983 602 1,580,794 2,695,188 869,451 82,517 178,566 27,383 5,357 466,915 1,630,188Capital expenditure 32,056 24,102 138,396 3,429 415 124,793 323,191 26,386 2,228 36,976 5,299 1,230 70,872 142,990Depreciation 27,030 2,202 20,121 10,731 1,413 12,128 73,626 25,457 1,188 20,009 10,748 1,214 6,960 65,575Impairment loss 19,890 19,890 – – 19,890Non-cash expenses other than depreciation 87 87

(ii) Information about Secondary business Segments

Rs. ’000 Rs. ’000

Revenue by Geographical segments India Outside Total India Outside Total India India

Total Sales 6,166,711 12,641 6,179,352 5,782,882 5,868 5,788,750

Less : Inter-segment (223,890) – (223,890) (160,928) – (160,928)

External Sales 5,942,821 12,641 5,955,461 5,621,954 5,868 5,627,822

Carrying amount of segment assets 3,362,709 – 3,362,709 2,220,412 – 2,220,412

Additions to fixed assets 323,191 – 323,191 142,991 – 142,991

Notes :(i) The Company is organized into four main business segments, namely

(a) Animal Feeds - comprising of compound feed for cattle, poultry, aqua etc.(b) Agri business - comprising of plant growth promoters, pesticides vegetables etc.(c) Integrated Poultry business(d) Oil Palm Plantation businessSegments have been identified and reported taking into account, the nature of products and services, the differing risks and returns, the organisation structure, and the internal financing reporting systems.

(ii) The Segment revenue in each of the above business segments consists of sales (net of returns, sales tax, rebates etc.)(iii) The Segment revenue in the geographical segments considered for disclosure are as follows :

(a) Revenue within India includes sales to customers located within India(b) Revenue outside India includes sales to customers located outside India

(iv) Segment Revenue,Results,Assets and liabilities include the respective amounts identifiable to each of the segments and amounts allocated on a reasonable basis.

27. SEGMENT INFORMATION FOR THE YEAR ENDED MARCH 31, 2006

(i) Information about Primary Business Segments



78

28. INFORMATION REQUIRED TO BE FURNISHED UNDER PART IV OF SCHEDULE VI OF THECOMPANIES ACT, 1956

i) Registration Details Application of Funds

Registration No. 16655 Net Fixed Assets 901,784

State Code 04 Investments 515,868

Balance Sheet Date 31/3/2006 Net Current Assets 593,699

ii) Capital raised during the year Misc. Expenditure Nil

(Rupees ‘000) Accumulated Losses Nil

Public Issue Nil iv) Performance of Company

Rights Issue Nil (Rupees ‘000)

Bonus Issue Nil Turnover 6,055,590

Private Placement Nil Total Expenditure 5,979,467

iii) Position of mobilisation and deployment of funds Profit before tax 76,123

(Rupees ‘000) Profit after tax 68,253

Total Liabilities 3,362,710 Earning Per Share in Rs. 9.59

Total Assets 3,362,710 Dividend rate 79%

Sources of Funds

Paid-up Capital 71,188 v) Generic Names of three principal

Reserves & Surplus 554,821 products services of Company

Secured Loans 1,259 Item Code No. 23099010

Unsecured Loans 1,333,526 Product Description Animal Feeds

STATEMENT REGARDING SUBSIDIARY COMPANIES PURSUANT TO SECTION 212OF THE COMPANIES ACT, 1956.

1. Name of the Subsidiary Goldmohur Foods Golden Feed Kritika Agro Farmand Feeds Ltd. Products Ltd. Chemicals &

EngineeringIndustriesPvt. Ltd.

2. Date on which it became a Subsidiary January 1, 2001 July 14, 2003 April 27, 2006

3. Financial Year ending March 31, 2004 March 31, 2004

4. The Company’s interest in the Subsidiaryas on 31.3.2005a) Number of fully paid Equity Shares held 2,158,170 50,000 7,600b) Face Value Rs. 10 Rs. 10 Rs. 10c) Extent of holding 100% 100% 76%

5. Net aggregate Profit/(Loss)of the subsidiary (Rs.’000) (Rs.’000) (Rs.’000)Company so far as it concerns the membersof the Company :A) For the Financial Year ended on

March 31, 2005 :i) Not dealt with in the Books of

Account of the Company 18,519 – –ii) Dealt with in the Books of

Account of the Company 47,500 – –B) For the subsidiary company’s

previous Financial Years since itbecame a subsidiaryi) Not dealt with in the Books of 40,590 N.A. N.A.

Account of the Companyii) Dealt with in the Books of Account of the 81,801 N.A. N.A.

Company

V.V. CHAUBAL A.B. GODREJ C.K. VAIDYACompany Secretary Director Managing Director


CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006Current Year Previous Year

Rs. ’000 Rs. ’000 Rs. ’000

A. Cash Flow from Operating Activities :Net Profit Before Taxes 76,123 194,963Adjustment for:Depreciation 73,626 65,575Loss/(Profit) on sale of fixed assets (1,273) 431Profit on sale of Investments – (8,074)Dividend income (35,609) (30,000)Interest income (4,349) (4,696)Interest expenses 51,885 32,364Miscellaneous expenditure written off 224 87Expenditure in respect of prior years – –Investments Written off – –Promotion expenses

84,504 55,687Operating Profit Before Working Capital Changes 160,627 250,649

Adjustments for:Inventories (149,113) (84,781)Debtors and Other Receivables (361,105) (48,400)Creditors and Other Payables 87,117 247,209

(423,101) 114,028

Cash Generated from Operations (262,474) 364,678Direct Taxes paid (net of refund received) (33,489) (19,731)

Net Cash Flow from Operating Activities (295,963) 344,947

B. Cash Flow from Investing Activities :Capital subsidy received – 2,500Acquisition of fixed assets (323,191) (142,991)Proceeds from sale of fixed assets 8,363 10,708Purchase of Investments (180,904) (150,894)Proceeds from sale/maturity of investments 40,001Interest Received 4,361 4,691Dividend Received 35,609 30,000

(455,762)

Net Cash used in Investing Activities (455,762) (205,985)C. Cash Flow from Financing Activites :

Proceeds from Borrowings 1,153,283 4,997Repayment of Borrowings (115,598) (80,932)Increase/(Decrease) in Cash Credit/WCDL (22,741) 24,000Interest Paid (51,885) (32,364)Dividend Paid (23,492) (39,153)Dividend Tax Paid (3,295) (5,117)

Net Cash used in Financing Activities 936,273 (128,570)

Net increase in Cash and Cash equivalents 184,548 10,392

Cash and Cash equivalents (Opening balance) 82,864 72,471

Cash and Cash equivalents (Closing balance) 267,412 82,864

Notes:1. The Cash Flow Statement has been prepared under the “Indirect Method” as set out in the Accounting

Standard (AS) 3 on “CashFlow Statements”, and presents cash flows by operating, investing andfinancing activities.

2. Figures in brackets are outflows/deductions.3. Figures for the previous year have been regrouped/restated wherever necessary to conform to this

year’s classification.




79

DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED ON MARCH 31, 2006To The Shareholders

Your Directors have pleasure in submitting their Report along with the audited Accounts for the financial yearended on 31st March, 2006.

FINANCIAL RESULTS

Your Company’s performance during the year as compared with that during the previous year is summarisedbelow:

Rs. LacFor the For the

year ended year ended31.3.2006 31.3.2005

Total Income 29587.69 30860.71Profit before Taxation (PBT) 618.00 515.37Less: Provision for Taxation 80.00 170.00Profit after Taxation 538.00 345.37Balance Brought Forward from previous year 96.10 124.48

TOTAL 634.10 469.85

Appropriations :Interim Dividend 310.00 300.00Final Dividend – –Tax on Dividend 43.48 39.21General Reserve 53.80 34.54Balance Carried Forward to Balance Sheet 226.82 96.10

TOTAL 634.10 469.85

REVIEW OF OPERATIONS

The year 2005-06 was a challenging year for your Company. The prolonged monsoon had its impact on keyraw materials like de-oiled rice bran, maize, etc. resulting in cost pressure for your Company. However, theCompany got some respite in view of favourable prices for certain raw materials like soya etc. The detectionof Avian influenza in certain pockets of the country impacted the Poultry feed sales of your Company. TheCompany’s Aqua Feed Business suffered a setback due to postponement of the shrimp farming season.

DIVIDEND

Your Directors have paid an interim dividend of Rs. 16.86 per (on 18,38,170 shares) share for the year 2005-06 (previous year Rs. 13.89 per share on 21,58,170 shares). Your directors do not recommend any finaldividend.

DIRECTORS

Mr. A.R. Subbarao and Mr. V. Srinivasan, Directors, retire by rotation at the ensuing Annual General Meetingin accordance with the provisions of the Companies Act, 1956 and being eligible, offer themselves for re-appointment.

AUDITORS

You are requested to appoint Auditors for the current year and fix their remuneration. The retiring AuditorsM/s. Kalyaniwalla & Mistry, Chartered Accountants, Mumbai are eligible for re-appointment and a certificateas required u/s 224 (1-B) of the Companies Act, 1956 has been received from them.


The additional information required to be given under the Companies Act, 1956, has been laid out in theSchedules attached to and forming part of the Accounts. The Notes to the Accounts referred to in the Auditors’Report are self-explanatory and therefore do not call for any further explanation.

STATUTORY INFORMATION

A) Conservation of Energy, Technology absorption and Foreign Exchange earnings and outgo

The information in respect of these matters, required under Section 217 (1)(e) of the Companies Act,1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules,1988 and forming part of the Directors’ Report is given in the Annexure ‘A’ to this report.

B) Particulars of Employees

None of the employees is covered under the provisions of Section 217(2A) of the Companies Act, 1956,read with the Companies (Particulars of Employees) (Amendment) Rules, 2002.

C) Directors’ Responsibility Statement

Pursuant to the provisions contained in Section 217(2AA) of the Companies Act, 1956, the Directors ofyour Company confirm :-

a) that in the preparation of the annual accounts, the applicable Accounting Standards have been followedand no material departures have been made from the same;

b) that they have selected such Accounting Policies and applied them consistently and made judgementsand estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs ofthe Company at the end of the financial year and of the profit or loss of the Company for that period;

c) that they have taken proper and sufficient care for the maintenance of adequate accounting records inaccordance with the provisions of this Act for safeguarding the assets of the Company for preventing anddetecting fraud and other irregularities;


HUMAN RESOURCES

During the year, the Human Resource Organisation was considerably strengthened by induction of Managerswith varied experience. The Industrial Relations at all units continued to be cordial.


C. K. Vaidya V. SrinivasanDirector Director


ANNEXURE ‘A’

ANNEXURE FORMING PART OF THE DIRECTORS’ REPORT

INFORMATION PURSUANT TO SECTION 217(1)(e) OF THE COMPANIES ACT, 1956, READ WITH THECOMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES,1988 IN RESPECT OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGNEXCHANGE EARNINGS AND OUTGO :


Your Company is constantly endeavouring to conserve and optimize the use of energy through new andimproved methods.

B. Technology absorption, adaptation and innovation

I. Your Company has also been making constant efforts for upgradation of technology and alsocarries out in-house Research & Development activities in relation to maintenance of efficacy andquality of products manufacture.

II. The benefits derived as a result of the above efforts are:

a) Reduction in per ton cost of manufacture.

b) Improved quality of products through new formulation.

c) Savings in raw material and process costs.

C. Foreign Exchange earnings and outgo

Your Company did not have any foreign exchange earnings. Foreign Exchange expenditure during theyear under consideration was Rs.2267.26 lac (Previous year Rs. 3709.71 lac).


C. K. Vaidya V. SrinivasanDirector Director


Goldmohur Foods & Feeds Limited


80

ANNEXURE TO THE AUDITORS’ REPORTReferred to in paragraph (3) of our report of even date.

REPORT OF THE AUDITORS TO THE MEMBERS OFGOLDMOHUR FOODS & FEEDS LIMITED

1. a) The Company is maintaining proper records showing full particulars, including quantitative detailsand situation of fixed assets.

b) As explained to us, the Company has a program for physical verification of fixed assets at periodicintervals. In our opinion, the period of verification is reasonable having regard to the size of theCompany and the nature of its assets. No material discrepancies have been reported on suchverification.

c) In our opinion, the disposal of fixed assets during the year does not affect the going concernassumption.

2. a) The Management has conducted physical verification of inventory at reasonable intervals.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 the nature of its business.c) The Company is maintaining proper records of inventory and no material discrepancies were

noticed on physical verification.3. 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 Companies Act, 1956.b) Consequently, the question of commenting on the rates of interest and the other terms and conditions

of the loans granted being prejudicial to the interests of the Company, receipt of regular principaland interest and reasonable steps taken for recovery of principal and interest does not arise.

c) The Company has not taken any loans, secured or unsecured from companies, firms or otherparties covered in the register maintained under Section 301 of the Act.

d) Consequently, the question of commenting on the rates of interest and the other terms and conditionsof the loans taken being prejudicial to the interests of the Company and payment of regularprincipal and interest does not arise.

4. In our opinion and according to the information and explanations given to us, there are adequate internalcontrol procedures commensurate with the size of the Company and the nature of its business, for thepurchases of inventory, fixed assets and for the sale of goods and services. During the course of our audit,no major weakness has been noticed in the internal controls.

5. a) Based on the audit procedures applied by us and according to the information and explanationsprovided by the management, we are of the opinion that the particulars of contracts andarrangements referred to in Section 301 of the Companies Act, 1956 have been entered into theregister required to be maintained under that section.

b) The transactions made in pursuance of such contracts or arrangements, were made at priceswhich are reasonable having regard to prevailing market prices at the relevant time, except forservice transactions for which, there are no similar services received from other parties andhence the prices are not comparable.

6. In our opinion and according to the information and explanations given to us, the Company has notaccepted any deposits from the public and hence the provisions of Section 58A, 58AA or any otherprovision of the Companies Act, 1956, read with the rules framed thereunder are not applicable.

7. In our opinion and according to the information and explanations given to us, the internal audit systemis commensurate with the size of the Company and nature of its business.

8. According to the information and explanation given to us, the maintenance of cost records has not beenprescribed by the Central Government, under Section 209(1)(d) of the Companies Act, 1956 for any ofthe Company’s products.

9. a) According to the information and explanations given to us and on the basis of our examination of thebooks of account, during the year, the Company has been generally regular in depositing undisputedstatutory dues including Provident Fund, Investor Education and Protection Fund, Employees’ StateInsurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, cess and otherstatutory dues applicable to it with the appropriate authorities. According to the information andexplanations given to us, there are no undisputed dues payable in respect of above as at 31st March2006 for a period of more than six months from the date they became payable.

b) According to the information and explanations given to us, there are no dues outstanding of Sales Tax,Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty or cess on account of any dispute.

10. The Company does not have accumulated losses at the end of the financial year and it has not incurredany cash losses in the current and immediately preceding financial year.

11. According to the information and explanations given to us and based on the documents and recordsproduced to us, the Company has not defaulted in repayment of dues to banks. There are no dues tofinancial institutions or debenture holders.

12. According to the information and explanations given to us and based on the documents and recordsproduced to us, the Company has not granted loans and advances on the basis of security by way ofpledge of shares, debentures and other securities.

13. In our opinion and according to the information and explanations given to us, the nature of activities ofthe Company does not attract any special statute applicable to chit fund and nidhi/mutual benefit fund/societies.

14. The Company does not deal in shares, securities, debentures and other investments.15. According to the information and explanations given to us, the Company has not given any guarantee

for loans taken by others from banks and financial institutions.16. The Company has not taken any term loan during the year.17. According to the information and explanations given to us and on an overall examination of the Balance

Sheet and Cash Flows of the Company, we report that the Company has utilized funds raised on short-term basis for long term investment.

18. The Company has not made any preferential allotment of shares to parties or companies covered in theregister maintained under Section 301 of the Companies Act, 1956.

19. The Company did not issue any debentures during the year.20. The Company has not raised any money through a public issue during the year.21. Based on the audit procedures performed and information and explanations given by the management,

we report that no fraud on or by the Company has been noticed or reported during the year.



K. M. ELAVIAPartner

Membership No. 12737Place : MumbaiDated : May 22, 2006

1. We have audited the attached Balance Sheet of Goldmohur Foods & Feeds Limited, as at 31st March,2006 and also the Profit and Loss Account and the Cash Flow Statement of the Company for the yearended on that date annexed thereto. These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financial statements based on ouraudit.




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 these books.c) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this

report are in agreement with the books of account.d) In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt

with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section211 of the Companies Act, 1956.

e) Without qualifying our opinion, we draw attention to Note 4 of Schedule 12 – Notes to Accounts,in respect of amortization of Trademarks. The same are amortized over a period of 15 years ascompared to the recommended period of 10 years mentioned in Accounting Standard 26 –Intangible Assets since, in the opinion of the management, the Trademarks will have a useful lifematching the amortization period. Being a technical matter, we have relied upon the management’sestimates stated in Note 4, which forms the basis of this assumption.

f) In our opinion and to the best of our information and according to the explanations given to us, thesaid financial statements read with the notes thereon, give the information required by the CompaniesAct, 1956, in the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India:i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2006;

andii) in the case of the Profit and Loss Account, of the profit for the year ended on that date.iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended

on that date.5. On the basis of the written representations received from the Directors as on 31st March, 2006, and

taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on31st March, 2006 from being appointed as a Director in terms of clause (g) of sub-section (1) of Section274 of the Companies Act, 1956.



K. M. ELAVIAPartner



81


Schedule As at As at As atMarch 31, March 31, March 31,

2006 2006 2005Rs. '000 Rs. '000 Rs. '000

SOURCES OF FUNDS

Shareholders' FundsShare Capital 1 18,382 18,382Reserves and Surplus 2 189,181 170,729

207,563 189,111Loan FundsSecured Loans 3 8,440 –Unsecured Loans 4 100,000 –

108,440 –Deferred Tax Liability 54,900 49,000

TOTAL 370,903 238,111


Fixed Assets 5Gross block 460,282 391,938Less : Depreciation 123,968 95,864

Net Block 336,314 296,074Fixed Assets Held for Disposalat Net Realisable Value 7 7

336,321 296,081Current Assets, Loansand Advances 6Inventories 323,619 251,202Sundry Debtors 191,830 252,257Cash and Bank Balances 8,410 11,611Loans and Advances 46,910 28,955

570,769 544,025LESS : Current Liabilities

and Provisions 7Liabilities 529,525 592,530Provisions 6,662 9,465

536,187 601,995

Net Current Assets 34,582 (57,970)

TOTAL 370,903 238,1110Notes to Accounts 12

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDEDMARCH 31, 2006

Schedule For the year For the year For the year31/03/2006 31/03/2006 31/03/2005

Rs. '000 Rs. '000 Rs. '000

INCOME

Sales 2,944,439 3,068,916

Other Income 8 14,330 17,155

2,958,769 3,086,071

EXPENDITURE

Materials 9 2,484,063 2,635,134Expenses 10 377,453 367,235Interest and Financial Charges 11 7,155 7,629Depreciation/Amortisation 28,298 24,536Miscellaneous Expenditure – –Written Off

2,896,969 3,034,534

PROFIT BEFORE TAXATION 61,800 51,537

Provision for Taxation

Current 5,300 10,000Minimum Alternate (5,300) –

– 10,000Fringe Benefit 2,100 –Deferred 5,900 7,000

8,000 17,000

PROFIT AFTER TAXATION 53,800 34,537

Profit Brought Forward 9,610 12,448

AMOUNT AVAILABLE FOR APPROPRIATION 63,410 46,985

APPROPRIATION

Interim Dividend 31,000 30,000Tax on Dividend 4,348 3,921Transfer to General Reserve 5,380 3,454Surplus Carried Forward 22,682 9,610

TOTAL 63,410 46,985

Earnings per share (Basic/Diluted) in Rs. (Refer Note 21) 29.27 16.02


As per our Report attachedFor and on behalf ofKALYANIWALLA & MISTRYChartered Accountants C. K. Vaidya Director

K.M. Elavia S.P. KarmarkarPartner Company Secretary V. Srinivasan DirectorMembership No. 12737Mumbai, May 22, 2006.

SCHEDULES TO THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006As at As at

March 31, March 31,2006 2005

Rs. '000 Rs. '000SCHEDULE 3 : SECURED LOANS

FROM BANKSCash Credit 8,440 –

TOTAL 8,440 –

Security : Refer Note (3)

SCHEDULE 4 : UNSECURED LOANSShort Term Loans from Banks 100,000 –

TOTAL 100,000 –


Signatures to Balance Sheet and Schedules 1 to 7 and 12


Signatures to Profit and Loss Account and Schedules 8 to 12As per our Report attachedFor and on behalf ofKALYANIWALLA & MISTRYChartered Accountants C. K. Vaidya Director

K.M. Elavia S.P. KarmarkarPartner Company Secretary V. Srinivasan DirectorMembership No. 12737Mumbai, May 22, 2006.

As at As at As atMarch 31, March 31, March 31,

2006 2006 2005Rs. '000 Rs. '000 Rs. '000

SCHEDULE 1 : SHARE CAPITALAuthorised5,000,000 Equity Shares of Rs .10 each 50,000 50,000Issued, Subscribed and Paid-up1,838,170 (Previous Year) 2,158,170 Equity Shares of 18,382 21,582Rs.10 each fully paid Less : 320,000 Equity Shares bought back and extinguished as at the year end in accordance withSection 77A of the Companies Act, 1956 – 3,200

18,382 18,382All the above shares are held by Godrej Agrovet Ltd.(Holding Company) & its nominees 558,170 shareshave been issued pursuant to a contract withoutpayment being received in cashSCHEDULE 2 : RESERVES AND SURPLUSSECURITY PREMIUM ACCOUNTAs per last Balance Sheet 136,233 173,033Less : Utilised in accordance with Section 77A of theCompanies Act, 1956 (Refer note 2) – 36,800

136,233 136,233GENERAL RESERVE ACCOUNTAs per last Balance Sheet 24,886 21,432Add : Transfer from Profit & Loss Account 5,380 3,454

30,266 24,886PROFIT AND LOSS ACCOUNT 22,682 9,610

TOTAL 189,181 170,729


82

SCHEDULE 5 : FIXED ASSETS (Rs. '000)

ASSETS GROSS BLOCK DEPRECIATION NET BLOCK

As at Additions Deductions As at As at For the On As at As at As atApril 1, March 31, April 1, period Deductions March 31, March 31, March 31,

2005 2006 2005 2006 2006 2005

Trade Marks 236,789 – 236,789 67,090 15,786 – 82,876 153,913 169,699Land-Freehold 4,191 1,000 – 5,191 – – – – 5,191 4,191Leasehold improvements 2,563 – – 2,563 1,651 70 – 1,721 842 912Buildings 6,105 – – 6,105 1,261 162 – 1,423 4,682 4,844Plant & Machinery 62,316 1,832 – 64,148 16,675 4,338 – 21,013 43,135 45,641Power Generating Wind Mill 60,525 62,643 – 123,168 122 5,328 – 5,450 117,718 60,403Furniture, Fittings & Fixtures 4,599 244 133 4,710 1,757 420 89 2,088 2,622 2,842Computers 9,798 1,218 – 11,016 5,932 1,613 – 7,545 3,471 3,866Motor Vehicles 5,052 1,766 226 6,592 1,376 581 105 1,852 4,740 3,676

TOTAL 391,938 68,703 359 460,282 95,864 28,298 194 123,968 336,314 296,074

Previous Year 340,908 68,590 17,560 391,938 82,550 24,536 11,222 95,864 296,074 –Assets Held for Disposal at NetRealisable Value 7 – – 7 – – – – 7 7

336,321 296,081

As at March 31, As at March 31, As at March 31,2006 2006 2005

Rs. '000 Rs. '000 Rs. '000SCHEDULE 6 : CURRENT ASSETS , LOANSAND ADVANCES

A) INVENTORIES :Raw Materials and Packing Material 247,215 166,336Stores & Spares 527 281Finished Goods 65,076 68,564Raw Material in Transit 10,801 16,021

323,619 251,202B) SUNDRY DEBTORS :

(Unsecured and considered goodunless otherwise stated)Debts outstanding for a periodexceeding six months 15,982 22,717Other Debts 175,848 229,540

191,830 252,257[Debts amounting to Rs.135,409 thousands(Previous Year Rs.125,498 thousands) are securedagainst Bank Guarantees/Security Deposit]

C) CASH AND BANK BALANCES :Cash and cheque on hand 5,606 3,223

Balances with Scheduled BanksIn Current Accounts 2,804 8,388

8,410 11,611D) LOANS AND ADVANCES :

(Unsecured and considered good unlessotherwise stated)Loans and Advances recoverable in cash or inkind or for value to be received :

Considered Good 38,706 21,234Considered Doubtful 715 715

39,421 21,949Less : Provision for Doubtful Advances 715 715

38,706 21,234Deposits 8,204 7,721

46,910 28,955

TOTAL 570,769 544,025

SCHEDULE 7 : CURRENT LIABILITIES AND PROVISIONSA) CURRENT LIABILITIES

Acceptances 111,272 187,817Sundry Creditors (Note 5) 416,080 402,051Deposits 2,091 2,662Interest accrued but not due on loans 82 –

529,525 592,530B) PROVISIONS

Provision for Taxation(Net of Advance Tax Rs. 50,708 thousand;Previous Year (2,291) 1,540Rs. 44,778 thousand)For Gratuity 7,192 6,810For Leave Encashment 1,761 1,115

6,662 9,465

TOTAL 536,187 601,995

For the year ended For the year ended For the year endedMarch 31, 2006 March 31, 2006 March 31, 2005

Rs. '000 Rs. '000 Rs. '000SCHEDULE 8 : OTHER INCOMEInterest Income 52 51Income from wind mill 8,222 16Insurance Claim Received 2 12,871Miscellaneous Income (Tax Deducted at sourceRs .30 thousand; 6,054 4,217Previous year Rs. 38 thousand)

14,330 17,155

SCHEDULE 9 : MATERIALSRAW MATERIALS CONSUMED

Opening Stock 166,336 181,499Add : Purchases during the year 2,440,295 2,483,407

2,606,631 2,664,906Less : Sales during the year 27,946 26,422

2,578,685 2,638,484Less : Closing stocks 247,215 166,336

2,331,470 2,472,148PURCHASE FOR RESALE 149,105 157,446STOCK DESTROYED WRITTEN OFF – 12,697INVENTORY CHANGE

Opening Stock of Finished Goods 68,564 61,407Less : Closing Stock of Finished Goods 65,076 68,564

3,488 (7,157)

TOTAL 2,484,063 2,635,134

SCHEDULE 10 : EXPENSES1. Salaries, Wages, Bonus 78,124 64,9772. Provident and other funds 2,962 5,7033. Workmen and staff welfare expenses 6,927 6,1944. Processing charges 88,889 88,3655. Power, light, fuel and water 35,283 27,4726. Rent 12,994 14,6217. Rates and taxes 3,799 14,1418. Repairs and maintenance – Buildings 279 247

– Plant 5,627 6,389– Other Assets 1,771 1,973

7,677 8,6099. Insurance 1,417 1,06010. Postage, telephone and stationery 8,488 8,68211. Auditors’ Remuneration 1,447 1,13412. Legal and Professional charges 1,478 1,73213. Carriage and freight 58,074 41,63114. Advertisement and Sales Promotion 3,422 4,92815. Travelling and motor car expenses 25,494 21,37316. Provision for Advances – 41517. Bad Debts Written Off 22,500 29,00518. Loss on Sale of Fixed Assets (Net) 41 54419. Fixed Assets Destroyed Written Off – 68220. Provision for Assets Held for Disposal 3,80421. Miscellaneous Expenses 18,437 22,163

TOTAL 377,453 367,235

SCHEDULE 11 : INTEREST AND FINANCIAL CHARGES(a) Interest paid on fixed loans

i) Banks 5,149 –(b) Interest paid on other loans – Banks – 3,642(c) Other Financial Charges 2,006 3,987

TOTAL 7,155 7,629

SCHEDULES TO THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006


83

SCHEDULE 12 : NOTES TO ACCOUNTS1. SIGNIFICANT ACCOUNTING POLICIES


b) Fixed assets have been stated at cost and include incidental and/or installation/development expensesincurred in putting the asset to use and interest on borrowing incurred during construction period.Pre-operative expenses for major projects are also capitalised, where appropriate.

c) Carrying amount of cash generating units/assets are reviewed at balance sheet date to determinewhether there is any indication of impairment. If such indication exists, the recoverable amountis estimated as the net selling price or value in use, whichever is higher. Impairment loss, if any,is recognized whenever carrying amount exceeds the recoverable amount.

d) Depreciation/Amortisation has been provided for as under :(a) Depreciation has been provided on Straight Line Method at rates specified in Schedule XIV

of the Companies Act ,1956. The Company has grouped additions and disposals in appropriatetime periods of a month/quarter for the purpose of charging prorata depreciation in respectof additions and disposals of its assets keeping in view the materiality of the items involved.

(b) 1) Leasehold Improvements: At a rate which will reduce the principal value of each assetto “Nil” over the primary lease period.

2) Trademarks are amortised over the period of 15 years.e) Long Term investments are carried at cost. Provision for diminution, if any, in the value of each long

term investment is made to recognise a decline, other than of a temporary nature. Currentinvestments are stated at lower of cost and net realizable value.

f) Raw materials are valued at moving weighted average cost.Finished goods are valued at lower of cost and net realisable value after providing for cost ofobsolescence and other anticipated losses, wherever considered necessary. Cost is computed onweighted average basis. Finished goods include cost of conversion and other costs incurred inbringing the inventories to their present location and condition.Stores and spares are valued at cost using the First-In-First-Out method.

g) The liability in respect of future payments of gratuity and leave encashment payable to employeeson retirement is provided based on actuarial valuation.

h) Revenue is recognised on despatch of goods to external customers. Sales are net of returns, tradediscounts, rebates and sales tax.

i) Revenue expenditure on Research and Development is charged to Profit and Loss Account of theyear in which it is incurred. Capital Expenditure incurred during the year on Research andDevelopment is shown as an addition to Fixed Assets.

j) Interest & Commitment Charges incurred in connection with borrowings of funds which aredirectly attributable to the acquisition, construction or production of an asset that necessarily takessubstantial period of time to get ready for its intended use, upto the time the said asset is put to useare capitalised, as a part of the cost of that asset. Other borrowing cost are recognised as anexpense in the period in which they are incurred.

k) Transactions in foreign currency are recorded at the exchange rates prevailing on the date of thetransaction. Assets and liabilities related to foreign currency transactions, remaining unsettled atthe year-end, are stated at the contracted rates, when covered under forward foreign exchangecontracts and at year-end rates in other cases.The premium payable on forward foreign exchangecontracts is amortized over the period of the contract. Exchange gains/losses are recognised in theProfit and Loss Account except in respect of liabilities incurred to acquire fixed assets in whichcase, they are adjusted to the carrying amount of such fixed assets.

l) Deferred tax is recognised on timing differences, being the differences between the taxableincome and the accounting income that originate in one period and are capable of reversal in oneor more subsequent periods. Deferred Tax assets, subject to consideration of prudence, arerecognised and carried forward only to the extent that there is a reasonable certainty that sufficentfuture taxable income will be available against which such deferred tax assets can be realised. Thetax effect is calculated on the accumulated timing difference at the year-end, based on the tax ratesand laws enacted or substantially enacted on the balance sheet date.

m) The basic earnings per share is computed using the weighted average number of common shareoutstanding during the period. Diluted earning per share is computed using the weighted averagenumber of common and dilutive common equivalent shares outstanding during the period, expectwhere the results would be anti-dilutive.

n) Miscellaneous Expenditure:Front-end fee paid on loans raised is amortised over the period of loan.

o) Provisions and Contingent Liabilities.Provisions are recognized in the accounts in respect of present probable obligations, the amountof which can be reliably estimated.Contingent liabilities are disclosed in respect of possible obligations that arise from past events buttheir existence is confirmed by the occurrence or non-occurrence of one or more uncertain futureevents not wholly within the control of the Company.

2. BUY BACK OF SHARESThe Company has utilised securities premium account Nil (Previous Year Rs. 36,800/- thousand) foradjusting the difference between the buy-back price and face value of equity shares bought back.

3. SECURED LOANSWorking Capital Demand Loans and Cash Credit from Banks are secured by way of hypothecation ofthe entire Inventory, Book Debts Receivables (Present & Future) ranking on a pari passu basis and alsoby Corporate Guarantee from the Holding Company, Godrej Agrovet Limited.

4. TRADEMARKSThe Trademarks of the Company have a huge market potential, strong market position and Research &Development set-up, which constantly refurbishes the products to avoid technoloical obsolecence. Themanagement is of the opinion that the useful life of the brands is much beyond 15 years. On a conservativebasis the management has decided to amortise the brand acquisition cost over a 15 years period.

5. SSI CREDITORSIn spite of the absence of a data-base identifying creditors as Small Scale Industrial Undertakings, it isthe opinion of the management that there are no parties which can be classified as Small Scale IndustrialUndertakings to whom the Company owes any sum. The Auditors have accepted the representations ofthe management in this matter.

SCHEDULES TO THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006For the Year For the Year

31/03/06 31/03/05

Unit Quantity Value Quantity ValueRs. ‘000 Rs. ‘000

6 SALES TURNOVER MTAqua Feed 11,217 320,624 11,206 372,700Cattle Feed 35,579 216,282 44,068 305,877Poultry Feed 228,196 2,396,162 222,855 2,388,017Lab Feeds 474 3,815 218 2,322Others – 7,556 – –TOTAL 275,466 2,944,439 278,347 3,068,916

7 FINISHED GOODS INVENTORIESMTAqua Feed 1,007 32,236 1,280 41,419Cattle Feed 1,024 5,785 896 5,066Poultry Feed 3,088 25,834 2,700 21,722Lab Feeds 46 377 30 357Others – 844 –

TOTAL 5,165 65,076 4,906 68,563

8 PURCHASE FOR RESALE MTAqua Feed 86 1,314 904 9,937Cattle Feed 19,874 113,731 21,581 125,437Poultry Feed 3,054 28,958 2,307 22,071Lab Feeds – – – –Others 5,101

TOTAL 23,014 149,104 24,792 157,446

9 RAW MATERIALS CONSUMED MTDLM 421 64,937 701 109,150Maize 92,126 605,050 75,792 463,255Rice Bran Extraction 22,189 71,032 23,325 58,026Rice Bran 10,361 61,019 13,117 72,362Soya 64,700 619,358 55,093 685,329Others – 910,074 – 1,084,025

TOTAL 189,797 2,331,470 168,028 2,472,148

10. LICENSED AND INSTALLED CAPACITY AND ACTUAL PRODUCTION

Item For the Capacity Per Annum Actual Capacity Per Annum

Year Registered Installed Production* RegisteredMT MT MT MT

Aqua, Cattle 31.03.06 Not 232,000 252,710 Notand Poultry Feed Applicable Applicable

Aqua, Cattle and 31.03.05 Not 232,000 253,620 NotPoultry Feed Applicable Applicable

* Actual production includes production at third party processing locations.

11. COMMON EXPENSES ALLOCATED BY THE HOLDING COMPANY :For the Year For the Year

31/03/06 31/03/05Rs. ‘000s Rs. ‘000s

Expenses (Schedule 12) include amounts charged byGodrej Agrovet Limited, the Holding Company 26,400 26,400

12. AUDITORS’ REMUNERATIONFor the Year For the Year

31/03/06 31/03/05Rs. ‘000s Rs. ‘000s

Statutory Audit 898 702Audit under other statutes 393 270Certification 44 38Taxation Representation Before Authorities 112 124

TOTAL 1,447 1,134

13. Revenue expenditure on scientific research debited to respective expense heads Rs. 2,594 thousands(Previous Year Rs.2,902 thousands).

14. VALUES OF IMPORTS ON CIF BASISRaw Materials 246,138 258,833

TOTAL 246,138 258,833

15. EXPENDITURE IN FOREIGN CURRENCYTravelling Expenses 618 124Bank Charges 1,017 1,143Interest – –

TOTAL 1,635 1,267

16. VALUE OF CONSUMPTION OF RAW MATERIALSFor the Year For the Year

31/03/06 31/03/05% Value % Value

Rs. ‘000 Rs. ‘000Raw Materials :Imported Items (Including Duty Content) 10 225,141 15 369,704Indigenous 90 2,106,329 85 2,104,748

TOTAL 100 2,331,470 100 2,474,452


84

SCHEDULES TO THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 200617. The amount of exchange difference included in the Profit and Loss Account under the related heads of

income/expense is Rs. 740 thousands (net expense) (Previous Year Rs. 264 thousands, net income). Theamount of exchange difference in respect of forward exchange contracts to be recognised in the Profitor Loss of subsequent accounting periods is Rs. 12 thousands (Previous Year - Rs. 10 thousands ).

18. SEGMENT REPORTINGThe Company is primarily engaged in the business of manufacturing and distribution of Animal Feeds,like Aqua Feed, Poultry Feed, Cattle Feed, Lab Feed, etc. Accordingly, in the opinion of the management,it has only one primary segment and no further disclosure is deemed necessary pursuant to AccountingStandard 17 on Segment Reporting, issued by the Institute of Chartered Accountants of India.

19. DEFERRED TAXIn accordance with the Accounting Standard 22 on Accounting for Taxes on Income, the Company hasmade adjustments in its accounts for deferred tax liabilities/assets.The tax effects of significant temporary differences that resulted in deferred tax assets and liabilities are :

For the Year For the Year31/03/06 31/03/05Rs. ‘ 000 Rs. ‘ 000

Depreciation on Fixed Assets (61,732) (51,809)Carried forward loss 3619 241Provision for Doubtful Debts 241 –Others 2972 2,568

54900 (49,000)

20. RELATED PARTY DISCLOSURERelated party disclousere as required by AS-18 “Related Party Disclosure” are given below :1. Relationships :

Holding CompanyGodrej Agrovet Limited (GAVL) holds 100% in the Company. GAVL is the subsidiary of GodrejIndustries Limited (GIL). GIL is the subsidiary of Godrej & Boyce Mfg. Co. Limited, the ultimateHolding Company.

2. The following transactions were carried out with the related parties in the ordinary course ofbusiness :(i) Details relating to parties referred to in 1 above

Rs. ‘000sHolding

Company1 Sale of Materials/Finished Goods 111,120

137,3782 Purchase of Materials/Finished Goods 215,661

181,5793 Expenses charged to other companies 1,307

(Inclusive of sale of services) 2,102

4 Expenses charged by other companies 26,59227,210

5 Dividend paid 31,00030,000

6 Outstanding payables, net of receivables 18,2195,922

7 Guarantees taken 70,000590,000

8 Amount paid for Buy Back of Equity Share Capital –40,000

Note : Figures in italics pertains to the previous year.

3. Significant Related Party Transactions

All the transactions mentioned above are with Godrej Agrovet Limited.

21. EARNINGS PER SHAREFor the Year For the Year

31/03/06 31/03/05

Profit after tax as per Profit & Loss Account (Rs. ‘000) 53,800 34,537

Weighted average number of equity shares outstanding 1,838,200 2,155,540

Basic earnings per share 29.27 16.02

Diluted earnings per share 29.27 16.02

Nominal value of shares 10.00 10.00

22. DISCLOSURES IN RESPECT OF LEASESThe Company’s leasing arrangements are in respect of operating leases for premises occupied by theCompany. These leasing arrangements are cancellable, and are renewable on a perodic basis by mutualconsent on mutually acceptable terms.The aggregate lease rental payable by the Company and charged to Profit and Loss Account(Schedule 10) is as follows :

For the YearParticulars 31/03/06

Rs. ‘ 000

Lease rental paid during the year 13,262Future Lease Obligations

Due within one year of balance sheet date 4,387Due after one year and with in five years of balance sheet date –Due after five years of balance sheet date –

23. Information required under Schedule VI to the Companies Act, 1956 has been given to the extentapplicable.

24. Figures for the previous financial year have been regrouped wherever necessary.

25. INFORMATION REQUIRED TO BE FURNISHED UNDER THE PART IV OF SCHEDULE VI OF THECOMPANIES ACT, 1956Balance Sheet Abstract and Company’s General Business Profile.i) Registration Details

Registration No. 17887State Code 11Balance Sheet 31st March, 2006

ii) Capital raised during the period (Rupees ‘000)Public Issue NilRights Issue NilBonus Issue NilPrivate Placement Nil

iii) Position of mobilisation and deployment of funds (Rupees ‘000)Total Liabilities 370,903Total Assets 370,903Source of FundsPaid up Capital 18,382Reserve & Surplus 189,181Secured Loans 8,440Unsecured Loans 1000,000Deferred Tax Liability 54,900Application of FundsNet Fixed Assets 336,321Investments –Net Current Assets 34,582Misc. Expenditure –

iv) Performance of the Company (Rupees ‘000)Turnover 2,958,769Total Expenditure 2,896,969Profit Before Tax 61,800Profit After Tax 53,800Earnings Per Share in Rs. 29.27Dividend Rate 169%

v) Generic Names of three Principal Products/Services of the CompanyItem Code No. 23099001Product Description Animal Feeds

S.P. Karmarkar C.K. Vaidya V. SrinivasanCompany Secretary Director Director

Place : MumbaiDate : May 22, 2006

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006For the For the

Year Ended Year Ended31-03-2006 31-03-2005

Rs. '000 Rs. '000 Rs. '000A. Cash Flow from Operating Activities:

Profit before Tax and Operational Items 61,800 51,537Adjustment for:Depreciation 28,298 24,536Loss/(Profit) on sale of Fixed Assets 41 544Exchange Difference (8,876) (5,816)Interest Income (52) (51)Interest Expense 7,155 7,629Provision for Fixed Assets Held for Disposal – 3,804Fixed Assets written off – 682

26,566 31,328Operating Profit before Working Capital Changes 88,366 82,865Adjustments for :Inventories (72,417) 8,776Debtors and Other receivables 42,472 18,936Creditors and Other payables (53,183) 68,572

(83,128) 96,284Cash Generated from Operations 5,237 179,149Direct taxes Paid (5,930) (16,897)Net Cash Generated from Operating Activities (693) 162,252

B. Cash from Investing Activities:Acquisition of Fixed Assets (68,703) (68,534)Proceeds from sales of Fixed Assets 124 1,308Interest Income 52 50Net Cash used in Investing Activities (68,527) (67,176)

C. Cash from Financing Activities:Proceeds from Borrowings 100,000 –(Decrease)/Increase in Cash Credit/WCDL from Banks (net) 8,440 (41,144)Short Term Loans Paid – (17,000)Interest Paid (5,067) (3,814)Amount Paid for Buy-Back of Equity Share Capital – (40,000)Dividend Paid (31,000) (30,000)Tax on distributed profits (4,348) (3,921)Other Financial Charges (2,006) (3,987)Net Cash used in Financing Activities 66,019 (139,866)

Net Increase/(Decrease) in Cash and Cash Equivalents (3,201) (44,790)Cash and Cash equivalents (Opening Balance) 11,611 56,401Cash and Cash equivalents (Closing Balance) 8,410 11,611

As per our Report attachedFor and on behalf ofKALYANIWALLA & MISTRYChartered Accountants C. K. Vaidya DirectorK.M. Elavia S.P. KarmarkarPartner Company Secretary V. Srinivasan DirectorMembership No. 12737Mumbai, May 22, 2006.


85

DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED ON MARCH 31, 2006


C.K. Vaidya Dr. P.N. NarkhedeDirector Director


INFORMATION PURSUANT TO SECTION 217(1)(e) OF THE COMPANIES ACT, 1956,READ WITH THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OFTHE BOARD OF DIRECTORS) RULES, 1988 IN RESPECT OF CONSERVATION OF ENERGY,TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO :


The Company has not established any manufacturing facility this year.


Not Applicable since the Company does not have any manufacturing facility atpresent.

C. Foreign Exchange earnings and outgoYour Company had no foreign exchange earning as well as outgo.

ANNEXURE ‘A’ ANNEXURE FORMING PART OF THE DIRECTORS’ REPORT

1. We have audited the attached Balance Sheet of Golden Feed Products Limited, as at 31st March 2006 andalso the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on thatdate annexed thereto. These financial statements are the responsibility of the Company’s management.Our responsibility is to express an opinion on these financial statements based on our audit.



4. Further to our comments in the Annexure referred to in paragraph (3) above, we report that:a) The accumulated losses of the Company as at March 31, 2006 exceeds its paid up capital resulting

in the erosion of its net worth. The accounts for the year have been prepared on the ‘Going Concern’basis on the understanding that finance will continue to be available to the Company for workingcapital requirements.

b) We have obtained all the information and explanations, which to the best of our knowledge andbelief were necessary for the purposes of our audit.

c) In our opinion, proper books of account as required by law have been kept by the Company so faras appears from our examination of these books.

d) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by thisreport are in agreement with the books of account.

REPORT OF THE AUDITORS TO THE MEMBERS OF GOLDEN FEED PRODUCTS LIMITED

e) In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealtwith by this report comply with the Accounting Standards referred to in sub-section (3C) of section211 of the Companies Act, 1956.

f) In our opinion and to the best of our information and according to the explanations given to us, thesaid financial statements read with the notes thereon, subject to para (a) above, give the informationrequired by the Companies Act, 1956, in the manner so required and give a true and fair view inconformity 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 31st March, 2006; andii) in the case of the Profit and Loss Account, of the loss for the year ended on that date.iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended

on that date.

5. On the basis of the written representations received from the Directors as on 31st March, 2006, and takenon record by the Board of Directors, we report that, none of the Directors is disqualified as on 31st March,2006 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of theCompanies Act, 1956.



K. M. ELAVIAPartner


To The ShareholdersYour Directors have pleasure in submitting their Report along with the audited Accounts for the financial yearended on 31st March, 2006.FINANCIAL RESULTSAs the company has commenced operations in the current year, no previous year figures have been given:

Rs. LacFor the year ended

31/3/2006Total Income 345.00Loss before Taxation 140.06Add: Provision for Taxation NILLoss after Taxation 140.06Balance Brought Forward from previous year NilBalance Carried Forward to Balance Sheet 140.06REVIEW OF OPERATIONSIn the current year, your company has acquired Shrimp Feed Marketing Business of Higashimaru Feeds IndiaLimited (HFIL) effective 31st October, 2005. HFIL were the pioneer in the aqua feed sector. HFIL commencedcommercial production from 1992, in technical and financial collabration with Higashimaru Foods Inc. ofJapan. This acquisition is expected to consolidate the presence in the shrimp feed segment of your companyalongwith other Godrej group companies engaged in the shrimp feed business. Your company alongwith otherGodrej group companies engaged in similar businesses are also expected to benefit through better marketpenetration available through the distribution network of HFIL and joint sourcing of critical raw materials.The Company’s business suffered a setback due to delay in the shrimp farming season.DIRECTORSDr. S.S. Sindhu, Director, retires by rotation at the ensuing Annual General Meeting in accordance with theprovisions of the Companies Act, 1956 and being eligible, offers himself for re-appointment.AUDITORSYou are requested to appoint Auditors for the current year and fix their remuneration. The retiring Auditors M/s. Kalyaniwalla & Mistry, Chartered Accountants, Mumbai are eligible for re-appointment and a certificate asrequired u/s 224 (1-B) of the Companies Act, 1956 has been received from them.QUALIFICATIONS BY AUDITORSThe auditors have qualified in the Auditors report that the accumulated losses as atMarch 31, 2006 exceeds its paid up capital, resulting in the erosion of its net worth. Your company still remains

a “Going Concern” as the finance will continue to be available to the company for its working capital requirementsfrom its holding company Godrej Agrovet Limited.ADDITIONAL INFORMATIONThe additional information required to be given under the Companies Act, 1956, has been laid out in theSchedules attached to and forming part of the Accounts. The Notes to the Accounts referred to in the Auditors’Report are self-explanatory and therefore do not call for any further explanation.STATUTORY INFORMATIONA) Conservation of Energy, Technology absorption and Foreign Exchange earnings and outgo

The information in respect of these matters, required under Section 217 (1)(e) of the Companies Act, 1956,read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988and forming part of the Directors’ Report is given in the Annexure “A” to this report.

B) Particulars of EmployeesNone of the employees is covered under the provisions of Section 217 (2A) of the Companies Act, 1956,read with the Companies (Particulars of Employees) (Amendment) Rules, 2002.

C) Directors’ Responsibility StatementPursuant to the provisions contained in Section 217(2AA) of the Companies Act, 1956, the Directors ofyour Company confirm :-a) that in the preparation of the annual accounts, the applicable Accounting Standards have been

followed and no material departures have been made from the same ;b) that they have selected such Accounting Policies and applied them consistently and made judgements

and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs ofthe Company at the end of the financial year and of the profit or loss of the Company for that period ;

c) that they have taken proper and sufficient care for the maintenance of adequate accountingrecords in accordance with the provisions of this Act for safeguarding the assets of the Companyfor preventing and detecting fraud and other irregularities ;

d) that they have prepared the annual accounts on a going concern basis.HUMAN RESOURCESThe Board would like to place on record its sincere appreciation of the dedicated performance turned in bythe employees of your Company.

For and on behalf of the Board of DirectorsC.K. Vaidya Dr. P.N. Narkhede

Director DirectorMumbai, May 22, 2006.

Golden Feed Products Limited


86


1) (a) The Company has maintained proper records showing full particulars, including quantitativedetails and situation of fixed assets.

(b) As explained to us, the Company has a program for physical verification of fixed assets at periodicintervals. In our opinion, the period of verification is reasonable having regard to the size of theCompany and the nature of its assets. No material discrepancies have been reported on suchverification.


2) (a) The Management has conducted physical verification of inventory at reasonable intervals.

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

(c) The Company is maintaining proper records of inventory and no material discrepancies werenoticed on physical verification.

3) (a) The Company has not granted any loans, secured or unsecured to companies, firms or partiescovered in the register maintained under section 301 of the Companies Act, 1956.

(b) Consequently, the question of commenting whether the rates of interest and other terms andconditions are not prejudicial to the interests of the Company does not arise.

(c) The Company has taken an unsecured loan, from a company covered in the register maintainedunder Section 301 of the Act.

(d) The rate of interest and the other terms and conditions of the loan taken is not prejudicial to theinterests of the Company.

4) In our opinion and according to the information and explanations given to us, there are adequate internalcontrol procedures commensurate with the size of the Company and the nature of its business, for thepurchases of inventory, fixed assets and for the sale of goods and services. During the course of our audit,we have not observed a continuing failure to correct major weaknesses in internal controls.

5) (a) Based on the audit procedures applied by us and according to the information and explanationsprovided by the management, we are of the opinion that the particulars of contracts and arrangementsreferred to in section 301 of the Companies Act, 1956 have been entered into the register requiredto be maintained under that section.

(b) The transactions made in pursuance of such contracts or arrangements, were made at priceswhich are reasonable having regard to prevailing market prices at the relevant time, except forcertain transactions for which, there are no similar services rendered to other parties or have beenentered into on a reciprocal basis and hence the prices are not comparable.

6) In our opinion and according to the information and explanations given to us, the Company has notaccepted any deposits from the public and hence the provisions of section 58A, 58AA or any otherprovision of the Companies Act, 1956, read with the rules framed thereunder are not applicable.

7) In our opinion and according to the information and explanations given to us, the Company is in theprocess of setting up an internal audit system.

8) The Central Government has not prescribed maintenance of cost records under section 209(1)(d) of theCompanies Act, 1956, for any of the products of the Company.

9) (a) According to the information and explanations given to us and on the basis of our examination ofthe books of account, during the year, the Company has been generally regular in depositing

undisputed statutory dues including Provident Fund, Investor Education and Protection Fund,Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, ExciseDuty, cess and other statutory dues applicable to it with the appropriate authorities. According tothe information and explanations given to us, there are no undisputed dues payable in respect ofabove as at 31st March 2006 for a period of more than six months from the date they becamepayable.

(b) According to the information and explanations given to us, there are no dues outstanding of SalesTax, Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty or cess on account of anydispute.

10) The Company has accumulated losses at the end of the financial year and it has incurred cash losses inthe current financial year. There were no operations in the immediately preceding year.


12) According to the information and explanations given to us and based on the documents and recordsproduced to us, the Company has not granted loans and advances on the basis of security by way of pledgeof shares, debentures and other securities.

13) In our opinion and according to the information and explanations given to us, the nature of activities ofthe Company does not attract any special statute applicable to chit fund and nidhi/ mutual benefit fund/societies.

14) The Company does not deal in shares, securities, debentures and other investments.

15) According to the information and explanations given to us, the Company has not given any guarantee.

16) According to the information and explanations given to us, term loans were applied for the purpose forwhich the loans were obtained.

17) According to the information and explanations given to us and on an overall examination of the BalanceSheet and Cash Flows of the Company, we report that the Company has utilized funds raised on short-term basis for long term investment.

18) The Company has not made any preferential allotment of shares to parties or companies covered in theregister maintained under section 301 of the Companies Act, 1956.

19) The Company did not issue any debentures during the year.

20) The Company has not raised any money through a public issue during the year.

21) Based on the audit procedures performed and information and explanations given by the management,we report that no fraud on or by the Company has been noticed or reported during the year.



K. M. ELAVIAPartner



87

BALANCE SHEET AS AT MARCH 31, 2006This Year This Year Previous Year

Schedule Rs. Rs. Rs.SOURCES OF FUNDS

SHAREHOLDERS’ FUNDSShare Capital 1 500,000 500,000

500,000 500,000LOAN FUNDS

Unsecured Loans 2 70,393,120 –70,393,120 –

TOTAL 70,893,120 500,000APPLICATION OF FUNDS

FIXED ASSETS 3Gross Block 45,046,967 –Less: Depreciation 1,875,000 –Net Block 43,171,967 –Capital work-in-progress/advances – –

43,171,967 –INVESTMENTS 4 25,000 –CURRENT ASSETS,LOANSAND ADVANCES 5

Inventories 27,832,117 –Sundry debtors 30,671,000 –Cash and Bank Balances 2,604,347 487,187Other current assets 166,999 –

61,274,462 487,187LESS : CURRENT LIABILITIES

AND PROVISIONSLiabilities 6 47,335,216 51,695Provisions 7 250,000 –

47,585,216 51,695NET CURRENT ASSETS 13,689,246 435,492MISCELLANEOUS EXPENDITURE 8 – 64,508(to the extent not written off or adjusted)PROFIT & LOSS ACOUNT 14,006,907 –

TOTAL 70,893,120 500,000NOTES TO ACCOUNTS 12

The Schedules referred to above form an integral part of the Balance SheetAs per our Report attached Signatures to Balance Sheet and

Schedules 1 to 8 and 12For and on behalf ofKALYANIWALLA & MISTRYChartered Accountants C.K. VAIDYA Director

DR. P.N. NARKHEDE DirectorK. M. ELAVIAPartnerMembership No. 12737Place : MumbaiDate : May 22, 2006.


This Year This Year Previous YearSchedule Rs. Rs. Rs.

INCOME

From Operations 34,550,891 –

Other income 48,940 –

34,599,831 –

EXPENDITURE

Materials 9 22,980,279 –

Expenses 10 21,606,761 –

Interest and financial charges 11 2,080,190 –

Depreciation 1,875,000 –

Miscellaneous Expenditure written off 64,508

48,606,738 –

LOSS BEFORE TAXATION (14,006,907) –

Provision for Taxation – –

LOSS AFTER TAXATION (14,006,907) –

Surplus/Deficit Brought Forward –

Deficit carried forward (14,006,907)

TOTAL (14,006,907) –

Earnings per share (Basic/Diluted) in Rs.

(Refer Note 12) (280) –


The Schedules referred to above form an integral part of the Profit and Loss AccountAs per our Report attached Signatures to Profit and Loss Account

Schedules 9 to 12For and on behalf ofKALYANIWALLA & MISTRYChartered Accountants C.K. VAIDYA Director


This Year Previous YearRs. Rs.

SCHEDULE 1 : SHARE CAPITALAuthorised1,00,000 Equity Shares of Rs.10 each 1,000,000 1,000,000*(Previous year 1,00,000)Issued, Subscribed and Paid up50000 Equity Shares of Rs.10 each fully paid 500,000 500,000*(Previous year 50,000)The entire share capital is held by Godrej AgrovetLimited, the Holding Company (and its nominees)

SCHEDULE 2 : UNSECURED LOANSFrom BanksTerm Loans 30,000,000 –(amount due within a year Rs. 3,00,00,000, Previous year NIL)From Godrej Agrovet Ltd.(including interest accured 40,393,120 –Rs. 15,57,118, Previous year Rs. Nil.)

TOTAL 70,393,120 –

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006This Year This Year Previous Year

Rs. Rs. Rs.SCHEDULE 4 : INVESTMENTSLONG TERMUNQUOTED (AT COST)IN GOVERNMENT SECURITIES(All the Securities have been deposited withvarious Government Authorities)(a ) National Savings Certificates (Face value

Rs. 25,000 ; Previous year NIL) 25,000 –TOTAL 25,000 –

SCHEDULE 5 : CURRENT ASSETS,LOANS & ADVANCES(A) INVENTORIES :

Raw Materials 25,444,477 –Finished Products 2,387,638 –

27,832,115 –(B) SUNDRY DEBTORS

*(Refer note 2)Debts outstanding for a period exceeding six monthsConsidered Good 9,825,161Considered Doubtful –

9,825,161 –Other Debts 20,845,839 –Total 30,671,000 –Less: Provision for doubtful debts – –

30,671,000 –SCHEDULE 3 : FIXED ASSETS (Rs.)

GROSS BLOCK DEPRECIATION NET BLOCK

ASSETS As at Additions Deductions As at Upto For the On Prior Period Upto As at As at1.4.2005 31.3.2006 1.4.2005 Year Deductions Adjustments 31.3.2006 31.3.2006 31.3.2005

Intellectual property,Technical Know-how etc. – 45,000,000 – 45,000,000 – 1,875,000 – – 1,875,000 43,125,000 –*(Refer note 2)Plant & Machinery – 46,967 – 46,967 – – – – – 46,967 –

TOTAL – 45,046,967 – 45,046,967 – 1,875,000 – – 1,875,000 43,171,967 –

Previous Year – – – – – – – – - –


88

This Year This Year Previous YearRs. Rs. Rs.

SCHEDULE 5 : INVESTMENTS (Contd.)(C) CASH AND BANK BALANCES :

Cash and Cheques on hand 53,072 –Balances with ScheduledBanks in current account 2,551,275 487,187

2,604,347 487,187(D) OTHER CURRENT ASSETS : 166,999 –

TOTAL 61,274,462 487,187

SCHEDULE 6 : LIABILITIESSundry Creditors 37,637,147 51,695Advances from Customers 9,698,069 -

TOTAL 47,335,216 51,695

SCHEDULE 7 : PROVISIONSGratuity 200,000 –Leave Encashment 50,000 –

TOTAL 250,000 –

SCHEDULE 8 : MISCELLANEOUS EXPENDITURE(To the extent not written off)Preliminary expenses – 64,508

TOTAL – 64,508

SCHEDULE 9 : MATERIALSa) RAW MATERIALS CONSUMED

Opening stock – –Add : Purchases during the year 41,177,837 –

41,177,837 –Less : Sales during the year 89,554 –

41,088,281 –Less : Closing Stocks 25,444,477 –

15,643,804b) PURCHASE FOR RESALE 8,049,679 –c) INVENTORY CHANGE

Opening Stock –Finished Goods taken over 1,674,434 –*(Note 2)Less : Closing StockFinished Goods 2,387,638 –

(713,204) –

TOTAL 22,980,279 –

SCHEDULE 10: EXPENSES1 Salaries, Wages, Bonus, Gratuity and Allowances 2,365,840 –2 Contribution to Provident Fund and

Other Funds and Administration Charges 191,663 –3 Employee Welfare Expenses 61,477 –4 Processing charges 12,058,653 –5 Consumable Stores – –6 Power and Fuel 252 –7 Rent 40,700 –8 Rates and Taxes 19,142 –9 Repairs & Maintenance

Building 1,933 –Plant & Machinery – –Other assets 2,327 –

4,260 –10 Insurance 22,575 –11 Postage, telephony and stationery 116,827 –12 Auditor’s Remuneration 112,240 –13 Legal & Professional fees 2,765,733 –11 Freight, Coolie and Cartage 1,153,010 –12 Discount, Commission and Selling expenses 1,556,745 –13 Advertisement and publicity 64,979 –14 Travelling expenses 1,062,483 –15 Bad Debts/Advances written off – –16 General Expenses 10,182 –

21,606,761 –SCHEDULE 11 : INTEREST AND FINANCIAL CHARGES(a) Interest paid on fixed loans -

From:-i ) Banks 4,808 –ii ) Others 1,954,936 –

1,959,744 –(b) Other Financial Charges 120,446 –

TOTAL 2,080,190 –




b) Fixed assets have been stated at cost and include incidental and/or installation/development expensesincurred in putting the asset to use and interest on borrowing incurred during construction period.Pre-operative expenses for major projects are also capitalised, where appropriate.

c) Carrying amount of cash generating units /assets are reviewed at balance sheet date to determinewhether there is any indication of impairment. If such indication exists, the recoverable amountis estimated as the net selling price or value in use, whichever is higher. Impairment loss, if any,is recognized whenever carrying amount exceeds the recoverable amount.

d) Intellectual property, Technical Know-how etc. are amortised over a period of 10 years.

e) Raw materials are valued at weighted average cost.

Finished goods and work-in-progress are valued at lower of cost and net realisable value.

These costs include cost of conversion and other costs incurred in bringing the inventories to theirpresent location and condition.

f) Retirement benefits to employees comprise payments under defined contribution plans likeprovident fund and family pension. Payments under defined contribution plans are charged to theprofit and loss account. The liability in respect of defined benefit schemes like gratuity and leaveencashment benefit on retirement is provided on the actual basis.

g) Revenue is recognised when goods are despatched to external customers.

h) Deferred tax is recognised on timing differences, being the differences between the taxable incomeand the accounting income that originate in one period and are capable of reversal in one or moresubsequent periods. Deferred tax assets, subject to consideration of prudence, are recognised andcarried forward only to the extent that there is a reasonable certainty that sufficient future taxableincome will be available against which such Deferred tax liability is recognised, if material. Deferredtax assets can be realised. The tax effect is calculated on the accumulated timing difference at theyear- end, based on the tax rates and laws enacted or substantially enacted on the balance sheet date.

i) The basic earnings per share is computed using the weighted average number of common sharesoutstanding during the period. Diluted earnings per share is computed using the weighted averagenumber of common and dilutive common equivalent shares outstanding during the period, exceptwhere the results would be anti-dilutive.

j) Provisions are recognized in the accounts in respect of present probable obligations, the amountof which can be reliably estimated.

2. ACQUISITION OF SHRIMP FEED BUSINESSDuring the year, the Company has acquired the shrimp feed Marketing Business of Higashimaru Feedson a slump sale basis,effective from 31st October, 2005.The break-up of consideration is:

Rs.Intellectual property, Technical Know-how etc. 45,000,000Debtors taken over 37,900,000Inventory taken over 1,600,000Less: Deposits taken over (9,500,000)Total consideration 75,000,000


Unit Quantity Value Quantity ValueRs. Rs.

3. SALES TURNOVERAqua Feed MT 1,228 34,550,891

Note: Sales Turnover includes sale of items processed by third parties, and items purchased by the Company for resale.4. FINISHED GOODS INVENTORIES

Aqua Feeds MT 92 2,387,638 – –5. PURCHASES FOR RESALE

Aqua Feed MT 365 8,049,679 – –6. RAW MATERIALS CONSUMED

Animal Proteins MT 445 10,217,648Others 5,426,156

TOTAL 15,643,804 – –

7. LICENSED & INSTALLED CAPACITY AND ACTUAL PRODUCTION

Registered Installed Actual Third PartyItem For the year Production Production Production Production

Ended MT MT MT MT

Aqua Feeds 31.03.2006 – – – 1,189.531.03.2005 – – – –


8. AUDITORS’ REMUNERATIONAudit fees 84,180 6,612Audit under Other Statutes 28,060 –

TOTAL 112,240 6,612

9. VALUE OF CONSUMPTION OF RAW MATERIALS, SPARES & TOOLSThis Year Previous Year

Rs. % Rs. %RAW MATERIALS :Indigenous 15,643,804 100 0

TOTAL 15,643,804 100 0 0

10. SEGMENT INFORMATIONThe Company is in the business of manufacturing and distribution of Aqua Feed, which is its singleprimary business segment. All its operations are located in India & so no secondary segment disclosuresare required under AS - 17 segment Reporting

11. RELATED PARTY DISCLOSURESRelated party disclosures as required by AS - 18, “Related Party Disclosures”, are given below “1. Relationships :

(i) Holding Companies :Godrej Agrovet Limited (GAVL) holds 100% in the Company. GAVL is the subsidiary ofGodrej Industries Limited(GIL). GIL is the subsidiary of Godrej & Boyce Mfg. Co. Limited, theultimate holding company.



89

INFORMATION REQUIRED TO BE FURNISHED UNDER THE PART IVOF SCHEDULE VI OF THE COMPANIES ACT, 1956

Balance Sheet Abstract and Company’s General Business Profile

i) Registration DetailsRegistration No 140599State Code 11Balance Sheet 31/3/2006

ii) Capital raised during the period (Rupees)Public Issue NilRights Issue NilBonus Issue NilPrivate Placement Nil

iii) Position of mobilisation and deployment of funds (Rupees)Total Liabilities 118,478,336Total Assets 118,478,336Source of FundsPaid up Capital 500,000Reserve & Surplus –Secured Loans –Unsecured Loans 70,393,120Application of fundsNet Fixed Assets 43,171,967Investments 25,000Net Current Assets 13,689,246Misc Expenditure Nil

iv) Performance of the Company (Rupees)Turnover 34,599,831Total Expenditure 48,606,738Profit Before Tax -14,006,907Profit After Tax -14,006,907Earnings Per Share in Rs. -280.14Dividend Rate

v) Generic Names of three Principalproducts services of the companyItem Code No 23099010Product Description Animal Feeds

Place : Mumbai C.K.Vaidya DR. P.N. NARKHEDEDate : May 22, 2006 Director Director

2. The following transactions were carried out with the related parties in the ordinary course ofbusiness :

Rs.Holding

Nature of Transactions Company *(i)

1 Sale of materials / finished goods 1,072,0002 Purchase of Fixed Assets 46,9873 Purchase of materials / finished goods 293,0004 Loan taken 40,393,1205 Interest expense on loan taken 1,557,1186 Outstanding payables, net of (receivables) 16,467,5627 Guarantees issued by 75,000,000* All transaction are with Godrej Agrovet Limited.

12. EARNINGS PER SHAREThis Year Previous Year

Rs. Rs.

Profit after tax and prior period expenses (14,006,907) –Weighted average number of equity shares outstanding 50,000 50,000Basic earnings per share (280) –Diluted earnings per share (280) –Nominal value of shares 10.00 10.00

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006Current Previous

Year YearRs. Rs. Rs.

A. Cash Flow from Operating Activities :Net Profit Before Taxes (14,006,907) (14,968)Adjustment for:Depreciation 1,875,000Loss / (Profit) on sale of fixed assets –Profit on sale of Investments –Dividend income –Interest income –Interest expenses 2,080,190Miscellaneous expenditure written off 64,508Expenditure in respect of prior years –Investments Written off –

4,019,698 –

Operating Profit Before Working Capital Changes (9,987,209) (14,968)Adjustments for:Inventories (27,832,115)Debtors and Other Receivables (30,837,998)Creditors and Other Payables 47,533,521 2,755

(11,136,592) 2,755Cash Generated from Operations (21,123,801) (12,213)Direct Taxes paid (net of refund received)Net Cash Flow from Operating Activities (21,123,801) (12,213)

B. Cash Flow from Investing Activities :Capital subsidy received –Acquisition of fixed assets (45,046,967)Proceeds from sale of fixed assets –Purchase of Investments (25,000)Proceeds from sale/maturity of investmentsInterest Received –Dividend Received –

(45,071,967)Net Cash used in Investing Activities (45,071,967) –

C. Cash Flow from Financing Activites :Proceeds from Borrowings 70,393,120Repayment of Borrowings –Increase/(Decrease) in Cash Credit/WCDL –Interest Paid (2,080,190)Dividend Paid –Dividend Tax Paid –Net Cash used in Financing Activities 68,312,930 –

Net increase in Cash and Cash equivalents 2,117,160 (12,213)

Cash and Cash equivalents (Opening balance) 487,187 499,400

Cash and Cash equivalents (Closing balance) 2,604,347 487,187

Notes: 0 -

1. The Cash Flow Statement has been prepared under the “Indirect Method” as set out in the AccountingStandard (AS) 3 on “Cash Flow Statements”, and presents cash flows by operating, investing and financ-ing activities.

2. Figures in brackets are outflows/deductions.

3. Figures for the previous year have been regrouped/restated wherever necessary to conform to this year’sclassification.

For and on behalf ofKALYANIWALLA & MISTRYChartered Accountants C.K. VAIDYA Director


Krithika Agro Farm Chemicals and Engineering Industries Private Limited

90


INFORMATION PURSUANT TO SECTION 217(1)(e) OF THE COMPANIES ACT, 1956, READWITH THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THEBOARD OF DIRECTORS) RULES, 1988 IN RESPECT OF CONSERVATION OF ENERGY,TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO :


The Company has not established any manufacturing facility this year.


Not Applicable since the Company does not have any manufacturing facility at present.

C. Foreign Exchange earnings and outgo

Your Company had no foreign exchange earning as well as outgo.


R.S. Vijan S. VaradarajDirector Director


ANNEXURE ‘A’ ANNEXURE FORMING PART OF THE DIRECTORS’ REPORT

1. We have audited the attached Balance Sheet of Krithika Agro Farm Chemicals and Engineering IndustriesPrivate Limited, as at 31st March 2006 and also the Profit and Loss Account and the Cash Flow Statementof the Company for the year ended on that date annexed thereto. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on thesefinancial statements based on our audit.


3. This report does not include a statement on the matters specified in paragraph 4 of the Companies(Auditor’s Report) Order, 2003, issued by the Department of Company Affairs, in terms of section 227(4A)of the Companies Act, 1956, since in our opinion and according to the information and explanations givento us, the said Order is not applicable to the Company.

4. Further we report that:a) The accumulated losses of the Company as at March 31, 2006 exceed its paid up capital resulting

in the erosion of its net worth. The accounts have been prepared on ‘Going Concern’ basis on theunderstanding that finance will continue to be available to the Company for Working Capitalrequirements from the promoters.

b) We have obtained all the information and explanations, which to the best of our knowledge andbelief were necessary for the purposes of our audit.

c) In our opinion, proper books of account as required by law have been kept by the Company so faras appears from our examination of these books.

d) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by thisreport are in agreement with the books of account.

e) The Company’s Capital Work in Progress of Rs. 1,99,99,000/- comprise of revenue expenses andinterest allocated on the same. These revenue expenses are neither fixed assets as defined under

REPORT OF THE AUDITORS

TO THE MEMBERS OF KRITHIKA AGRO FARM CHEMICALS ANDENGINEERING INDUSTRIES PRIVATE LIMITED

Accounting Standard 10 – Fixed Assets nor comply with the definition of a qualifying asset underAccounting Standard 16 – Borrowing Costs on which interest can be allocated. Consequently, in ouropinion, the Capital Work in Progress is overstated and the accumulated deficit of the Profit and LossAccount is understated by Rs. 1,99,99,000/-.

f) In our opinion, subject to para (e) above, the Balance Sheet, the Profit and Loss Account and the CashFlow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956.

g) In our opinion and to the best of our information and according to the explanations given to us, thesaid financial statements read with the notes thereon, subject to (a) and (e) above, give the informationrequired by the Companies Act, 1956, in the manner so required and give a true and fair view inconformity 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 31st March, 2006; andii) in the case of the Profit and Loss Account, of the loss for the year ended on that date.iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended

on that date.5. On the basis of the written representations received from the Directors as on 31st March, 2006, and taken

on record by the Board of Directors, we report that, none of the Directors is disqualified as on 31st March,2006 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of theCompanies Act, 1956.

For and on behalf ofKALYANIWALLA MISTRY & ASSOCIATES


B.S. DASTOOR

PartnerMembership No. 48936

Mumbai; Dated : May 22, 2006

To The ShareholdersYour Directors have pleasure in submitting their Report along with the audited Accountsfor the financial year ended on 31st March, 2006.FINANCIAL RESULTSAs the company’s activities are in the developmental stage, hence no income has beenearned in the current year. The revenue expenditure (loss) incurred in the current yearis Rs. 7,63,956 (including Fringe Benefit Tax of Rs. 13,555).AUDITORSYou are requested to appoint Auditors for the current year and fix their remuneration.The retiring Auditors M/s. Kalyaniwalla Mistry & Associates, Chartered Accountants,Mumbai are eligible for re-appointment and a certificate as required u/s 224 (1-B) ofthe Companies Act, 1956 has been received from them.QUALIFICATIONS BY AUDITORSThe auditors have qualified in the Auditors' Report that the accumulated losses as atMarch 31, 2006 exceeds its paid up capital, resulting in the erosion of its net worth. Your Companystill remains a “Going Concern” as the finance will continue to be available to the company forits working capital requirements from its holding company Godrej Agrovet Limited.Also, the auditors have qualified that the Company’s Capital Work in Progress of Rs. 1.99 Croresis overstated and the accumulated deficit of the Profit and Loss Account is understated byRs. 1.99 Crores. Your Directors are of the opinion that as this is the expenditure incurred on theOil mill project and the interest thereon, it has been correctly capitalized.ADDITIONAL INFORMATIONThe additional information required to be given under the Companies Act, 1956, has been laidout in the Schedules attached to and forming part of the Accounts. The Notes to the Accountsreferred to in the Auditors’ Report are self-explanatory and therefore do not call for any furtherexplanation.STATUTORY INFORMATIONA) Conservation of Energy, Technology absorption and Foreign Exchange earnings

and outgo

The information in respect of these matters, required under Section 217 (1)(e) of the

Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Reportof the Board of Directors) Rules, 1988 and forming part of the Directors’ Report is givenin the Annexure “A” to this report.

B) Particulars of Employees

None of the employees is covered under the provisions of Section 217 (2A) of theCompanies Act, 1956, read with the Companies (Particulars of Employees) (Amendment)Rules, 2002.

C) Directors’ Responsibility Statement

Pursuant to the provisions contained in Section 217(2AA) of the Companies Act, 1956,the Directors of your Company confirm :-

a) that in the preparation of the annual accounts, the applicable Accounting Standardshave been followed and no material departures have been made from the same;

b) that they have selected such Accounting Policies and applied them consistentlyand made judgements and estimates that are reasonable and prudent so as to givea true and fair view of the state of affairs of the Company at the end of the financialyear and of the profit or loss of the Company for that period;

c) that they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company for preventing and detecting fraud and otherirregularities;


HUMAN RESOURCESThe Board would like to place on record its sincere appreciation of the dedicated performanceturned in by the employees of your Company.





91

BALANCE SHEET AS AT MARCH 31, 2006This Year This Year Previous Year

Schedule Rs. Rs. Rs.

SOURCES OF FUNDS

Shareholders FundsShare Capital 1 100,000 25,000

Loan FundsUnsecured Loans 2 20,205,849 19,975,000

TOTAL 20,305,849 20,000,000

APPLICATION OF FUNDSFIXED ASSETS 3Gross Block 29,789 –Less: Depreciation 14,422 –

Net Block 15,367 –Capital Work-in-progress/advances 19,999,000 19,999,000

20,014,367 19,999,000

Current Assets, Loans and Advances 4Inventories 457,687 –Cash and Bank Balances 1,105 1,000Other current assets 10,000 –

468,792 1,000Advance payment of taxes (net ofprovison of taxation 13555;Previous year NIL) – –Less : Current Liabilities and Provisions 5Liabilities 941,266Net Current Assets (472,474) –Profit and loss account 763,956 –

20,305,849 20,000,000Notes to Accounts 6

The Schedules referred to above form an integral part of the Balance SheetAs per our Report attached Signatures to Balance Sheet and

Schedules 1 to 6For and on behalf ofKALYANIWALLA MISTRY & ASSOCIATESChartered Accountants R. S. VIJAN Director

S. VARADARAJ DirectorB. S. DASTOORPartnerMembership No. 48936Place : MumbaiDate : May 22, 2006.



INCOMEEXPENDITURESalaries, Wages, Bonus, Gratuity and Allowances 75,423 –Travelling expenses 237,852 –Seminar / Training expenses 61,174 –Interest and financial charges 229,849 –Auditor’s Remuneration 22,848 –Advertisement & Publicity 18,702 –Rent 28,750 –Communication expenses 26,787 –General Charges 34,594 –Depreciation 14,422 –

750,401 –

PROFIT/(LOSS) BEFORE TAXATION (750,401) –PROVISION FOR TAXATIONFRINGE BENEFIT TAX 13,555DEFFERRED – 13,555 –

PROFIT AFTER TAXATION (763,956)Balance Brought Forward – –

BALANCE CARRIED FORWARD (763,956) –

Earning per share (Basic/Diluted) in Rs. (Refer Note 4) (81) –

The Schedules referred to above form an integral part of the Profit and Loss AccountAs per our Report attached

For and on behalf ofKALYANIWALLA MISTRY & ASSOCIATESChartered Accountants R. S. VIJAN Director



SCHEDULE 1 : SHARE CAPITALAuthorised10,000 Equity Shares of Rs.10 each 100,000 25,000

Issued, Subscribed and Paid up10,000 Equity Shares of Rs.10 each 100,000 25,0007,600 Shares are held by Godrej Agrovet Ltd.(Previous year NIL)

SCHEDULE 2 : UNSECURED LOANSFrom holding company 4,204,849 500,000From others 16,001,000 19,475,000

TOTAL 20,205,849 19,975,000


SCHEDULE 3 : FIXED ASSETS (Rs.)


ASSETS As at Additions Deductions As at Upto For the On Prior Period Upto As at As at1.4.2005 31.3.2006 1.4.2005 Year Deductions Adjustments 31.3.2006 31.3.2006 31.3.2005

Furniture & Fixtures – 28,589 – 28589 – 13,222 – – 13,222 15,367 –Office & Other Equipments – 1,200 – 1200 – 1,200 – – 1,200 – –

TOTAL – 29,789 – 29789 – 14,422 – – 14,422 15,367 –

Previous Year – – – – – – – – – – –

Capital Work-In-Progress /Advances 19,999,000 19,999,000TOTAL 20,014,368 19,999,000


SCHEDULE 4 : CURRENT ASSETS,LOANS & ADVANCES

(A) INVENTORIESStock under cultivation 457,687 –

(B) CASH AND BANK BALANCESCASH IN HAND 105Balances with scheduled banks in current account 1,000 1,105 1,000

(C) ADVANCE RECEIVED IN CASH/KIND - DEPOSITS 10,000 –

468,792 1,000

SCHEDULE 5 : LIABILITIESSundry creditors 864,449 –Other liabilities 76,817

TOTAL 941,266 –

Krithika Agro Farm Chemicals and Engineering Industries Private Limited

92




b) Fixed assets have been stated at cost and include incidental and / or installation/developmentexpenses incurred in putting the asset to use and interest on borrowing incurred during constructionperiod. Pre-operative expenses for major projects are also capitalised, where appropriate.

c) The basic earnings per share is computed using the weighted average number of common sharesoutstanding during the period. Diluted earnings per share is computed using the weighted averagenumber of common and dilutive common equivalent shares outstanding during the period, exceptwhere the results would be anti-dilutive.

d) Provisions are recognized in the accounts in respect of present probable obligations, the amountof which can be reliably estimated.

e) Interest and commitment charges incurred in connection with borrowing of funds, which aredirectly attributable to the acquisition, construction or production of an asset that necessarily takessubstantial period of time to get ready for its intended use, upto the time the said asset is put to useare capitalised, as a part of the cost of that asset. Other borrowing costs are recognised as anexpense in the period in which they are incurred.

2. The Company has not commenced operations.

3. AUDITORS’ REMUNERATIONAudit fees 22,848 6,612

4. EARNINGS PER SHAREThis year Previous year

Profit after tax and prior period expenses (Rs.) (763,956) –Weighted average number of equity shares outstanding 9,375 2,500Basic earnings per share (81) –Diluted earnings per share (81) –Nominal value of shares 10.00 10.00

5. RELATED PARTY DISCLOSURESRelated party disclosures as required by AS - 18, “Related Party Disclosures”, are given below :

1. Relationships :(i) Holding Companies :

Godrej Agrovet Limited (GAVL) holds 76% in the Company. GAVL is the subsidiary of GodrejIndustries Limited (GIL). GIL is the subsidiary of Godrej & Boyce Mfg. Co. Limited, theultimated holding company.

2. The following transactions were carried out with the related parties in the ordinary courseof business :

Rs.Holding

Nature of Transactions Companies(i)

1 Purchase of materials / finished goods 457,687–

2 Loan taken 4,204,849 –

3 Interest expense on loan taken 229,849–

4 Outstanding payables, net of (receivables) 864,449–

5 Share Capital invested by 76,000

6. Prior period financial statements have been audited by a firm of Chartered Accountants other thanKalayaniwala Mistry & Associates.

The opening balances are being taken as per the last year accounts, which have been regrouped and re-classified wherever necessary to conform to current year’s classification.

7. Balance Sheet Abstract and Company's General Business Profile

i) Registration DetailsRegistration No. 016679State Code 18Balance Sheet Date 31/3/2006

ii) Capital raised during the year(Rupees )

Public Issue NilRights Issue NilBonus Issue NilPrivate Placement 75,000

iii) Position of mobilisation and deployment of funds(Rupees )

Total Liabilities 20,305,849Total Assets 20,305,849

Sources of FundsPaid-up Capital 100,000Reserves & Surplus –Secured Loans –Unsecured Loans 20,205,849Application of FundsNet Fixed Assets 20,014,367Investments –Net Current Assets (472,474)Misc. ExpenditureAccumulated Losses 763,956

iv) Performance of CompanyTurnover –Total Expenditure 750,401Profit before tax -750,401Profit after tax -763,956Earning Per Share in Rs. -81.49Dividend rate –

v) Generic Names of three principal products services of CompanyItem Code No. 23099010Product Description Oil palm plantation



CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006Current year Previous year

Rs. Rs. Rs.A. Cash Flow from Operating Activities :

Net Profit Before Taxes (750,401) –Adjustment for:Depreciation 14,422 –Interest expenses 229,849 244,271 –

Operating Profit Before Working Capital Changes (506,130) –Adjustments for:Inventories (457,687)Debtors and Other Receivables (10,000)Creditors and Other Payables 941,266

473,579 –

Cash Generated from Operations (32,551) –Direct Taxes paid (net of refund received) (13,555) –

Net Cash Flow from Operating Activities (46,106) –B. Cash Flow from Investing Activities :

Acquisition of fixed assets (29,789) (7,147,035)

(29,789)

Net Cash used in Investing Activities (29,789) (7,147,035)C. Cash Flow from Financing Activities :

Proceeds from issuance of share capital 75,000 –Proceeds from Borrowings 3,630,849 7,148,035Repayment of Borrowings (3,400,000) –Interest Paid (229,849)

Net Cash used in Financing Activities 76,000 7,148,035

Net increase in Cash and Cash equivalents 105 1,000

Cash and Cash equivalents (Opening balance) 1,000 –

Cash and Cash equivalents (Closing balance) 1,105 1,000Notes : - -1 The Cash Flow Statement has been prepared under the “Indirect Method” as set out in the Accounting

Standard (AS) 3 on “Cash Flow Statements”, and presents cash flows by operating, investing and financingactivities.

2 Figures in brackets are outflows/deductions.3 Figures for the previous year have been regrouped/restated wherever necessary to conform to this


For and on behalf ofKALYANIWALLA MISTRY & ASSOCIATESChartered Accountants R. S. VIJAN Director



93

REPORT OF THE AUDITORS TO THE MEMBERS OF GODREJ BEVERAGES & FOODS LIMITED (Formerly Godrej Tea Limited)

DIRECTORS’ REPORT FOR THE YEAR ENDED ON MARCH 31, 2006

To The Shareholder,

Your Directors have pleasure in submitting their Report along with the Audited Accounts for the year endedMarch 31, 2006.

FINANCIAL RESULTS

Your Company’s performance during the year 2005-06 as compared with that during the previous year issummarized below.

This Year Last YearRs. ‘000 Rs. ‘000

Sale of Tea 77,729 156,563Other Income 621 1,350

Total Income 78,350 157,913Total expenditure other than Interest and Depreciation 210,144 342,525Profit / (Loss) before Interest, Depreciation and Taxation (131,794) (184,612)Depreciation 3,004 3,254

Profit / (Loss) before Interest and Taxation (134,798) (187,866)Interest and financial charges 47,985 39,292

Profit / (Loss) before Taxation (182,783) (227,158)Provision for Current Tax (481) –Provision for Deferred Tax 11,572 12,900

Profit / (Loss) for the year after Taxation (171,692) (214,258)Surplus brought forward (348,858) (134,600)

Profit / (Loss) After Tax carried forward (520,549) (348,858)

REVIEW OF OPERATIONSThe Total Income for the year under review was Rs. 7.83 Crore compared to Rs.15.79 Crore in the previousyear. The total expenses reduced was Rs. 21 Crore as compared to Rs. 34.25 Crore in the previous year mainlydue to the active steps taken towards control of the fixed expenses. As a restructuring strategy, the Companyhas taken a one time additional write off amount to Rs.1.28 Crore of its deferred expenses and hence to thatextent loss is higher.The year under review was quite eventful for your Company in many respects. The Company has entered intoa distribution agreement with Jyothy Laboratories Ltd. for distribution of tea products and the performance issatisfactory. Towards the end of the year, your Company has restructured its business and is also leveragingits products under the ‘Godrej’ brand.RESTRUCTURINGYour Company’s long-term plan is to be a significant player in the FMCG sector through organic as well asinorganic growth. Business strategies have been developed in consonance with the growth objective, focusingon the three key elements – partnership, acquisition & innovation. In this effort IL&FS Investment ManagersLimited has decided to be a Strategic Investor by participating in equity capital of the Company.With a view to achieve the above goal, the Board of Directors of your Company had on 14th March, 2006,signed a slump sale agreement for the acquisition of Foods Division (except the Wadala factory) of GodrejIndustries Ltd. w.e.f. the close of working hours on 31st March, 2006 for a total consideration of Rs.70 Croreof which Rs. 40 Crore was paid in cash and Rs.30 Crore in the form of equity shares. To facilitate the abovedeal, IL&FS Investment Managers Ltd. invested Rs.60 Crore in the equity capital of the company. This will helpin improving both the top and bottom line of your Company.The major brands acquired by the Company under the terms of the above referred slump sale agreementinclude brands like Jumpin, Xs, Sofit, Cooklite, Sunshakti and Sunrice. Xs & Jumpin operate in Rs. 440 CroreTetrapack fruit drinks and nectar category. The brand Xs operates in high growth nectar segment with an exoticrange of flavours like Berry Blast, Triple Tickle, Litchi Leap, Santra Swing, Kiwi Kraze and 100% natural juicesof Orange and Apple. Jumpin caters to popular and economy segment of the market with Mango, Apple andPineapple drinks in tetrapak and PET bottle. With health consciousness among consumers gaining importance,Soymilk brand Sofit is positioned as “the New Taste of Health” and promises “Wellness for Now and HealthForever”. Godrej Tomato Puree is another major player that operates in the nascent category of tomato puree.The edible oils are marketed under the brands Godrej Sunflower Oil, Godrej Groundnut Oil, and Vanaspati(Hydrogenated Vegetable Oil) under “Godrej Vanaspati”.Mandideep factory, acquired as part of the deal, is one of the major aseptic packaging facilities in India. Thefactory is ISO 9000: 2001 and HACCP certified and has been the winner of “National Productivity Awardcertificate 2003-04”.DIVIDENDSince the profits of the Company are insufficient, your Directors do not recommend payment of equity dividend.

DIRECTORSMr. A.B. Godrej retires by rotation at the ensuing Annual General Meeting in accordance with the provisionsof the Companies Act, 1956 and being eligible, offers himself for re-appointment.During the year under review, Mr. Pranab Barua resigned from the Board of the Company w.e.f. 14th March,2006. The Board wishes to record its appreciation of his efforts during his tenure with the Company.In the Board Meeting held on March 27, 2006, Mr. Rahul Shah was appointed as an Additional Director whois the nominee director of IL&FS Investment Managers Limited and he holds office as such upto the forthcomingAnnual General Meeting.HUMAN RESOURCES AND INDUSTRIAL RELATIONSThe relations with the employees were cordial. As mentioned above, as per the acquisition of the foodsbusiness, 232 experienced employees were added by smooth transition taking the total employees strengthof your Company at 246 as on 31st March, 2006.AUDITORSThe Auditors, M/s. Kalyaniwalla & Mistry, Chartered Accountants, retire at the ensuing Annual GeneralMeeting and are eligible for re-appointment for which they have given their consent.AUDIT COMMITTEEThe Audit Committee, which was appointed pursuant to the provisions of Section 292A of the Companies Act,1956 has reviewed the Accounts for the year ended 31st March, 2006.DIRECTORS’ RESPONSIBILITY STATEMENTPursuant to the provisions contained in Section 217(2AA) of the Companies Act, 1956, the Directors of yourCompany confirm:a) that in the preparation of the annual accounts, the applicable accounting standards have been followed

and no material departures have been made from the same;b) that they have selected such accounting policies and applied them consistently and made judgements

and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs ofthe Company at the end of the financial year and of the profit or loss of the Company for that period;

c) that they have taken proper and sufficient care for the maintenance of adequate accounting records inaccordance with the provisions of this Act for safeguarding the assets of the Company for preventing anddetecting fraud and other irregularities;


ADDITIONAL INFORMATION1. INFORMATION PURSUANT TO SECTION 217(1)(E) OF THE COMPANIES ACT, 1956, READ WITH

THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OFDIRECTORS) RULES, 1988 IN RESPECT OF CONSERVATION OF ENERGY, TECHNOLOGYABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO(A) The additional information required to be given under the Companies Act, 1956 in respect of

Conservation of Energy, Technology Absorption as per Section 217(1)(e), read with the Companies(Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 has not been given,since such requirement is not applicable to the Company.

(B)Rs.’000 Rs.’000

Foreign exchange used Nil NilForeign exchange earned Nil Nil

2. STATEMENT UNDER SECTION 217(2A) READ WITH THE COMPANIES (PARTICULARS OFEMPLOYEES) RULES, 1975

(A) Persons employed for a part of the financial year under review and each of whom was in receiptof remuneration for that part which, in the aggregate, was not less than Rs. 2,00,000 per month.

Sr. Name Designation Gross Qualification Age Particulars ofNo . Remuneration (years) Previous

(Rs.’000) Employment

1 Mr. Zozden Chief 4,331 B.Tech, MMS 54 Godrej Sara Lee,Lobo Operating 4 years

Officer


A.B. GodrejChairman


1. We have audited the attached Balance Sheet of Godrej Beverages & Foods Limited (formerly knownas Godrej Tea Limited), as at 31st March, 2006 and the Profit and Loss Account of the Company for theyear ended on that date annexed thereto. These financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these financial statementsbased on our audit.

2. We 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 whetherthe financial statements are free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that our audit provides a reasonablebasis for our opinion.


4. Further to our comments in the Annexure referred to in para (3) above, we report that:a) The accumulated losses of the Company along with miscellaneous expenditure (to the extent not

written off or adjusted) as at March 31, 2006 exceed its paid up capital resulting in the erosion of its networth. The accounts for the year have been prepared on the ‘Going Concern’ basis on the understandingthat finance will continue to be available to the Company for working capital requirements.

b) We have obtained all the information and explanations, which to the best of our knowledge and beliefwere necessary for the purposes of our audit.

c) In our opinion, proper books of account as required by law have been kept by the Company so far asappears from our examination of these books.

d) The Balance Sheet and the Profit and Loss Account dealt with by this report are in agreement with thebooks of account.

e) During the current year, the Company changed its accounting policy with respect to amortization onpromotion of products, publicity and brand building from 36 months to 30 months. Had there been nochange in the period of amortization, the charge for the year would have been lower by Rs. 12,848thousands. Consequently the losses for the year and accumulated losses are higher by Rs. 12,848 thousands.

f) In our opinion, the Balance Sheet and the Profit and Loss Account dealt with by this report comply withthe Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956.

g) In our opinion and to the best of our information and according to the explanations given to us, subjectto para (a) above, the said financial statements read with the notes thereon, give the informationrequired by the Companies Act, 1956, in the manner so required and give a true and fair view inconformity 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 31st March, 2006; andii) in the case of the Profit and Loss Account, of the loss for the year ended on that date.iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on

that date.5. On the basis of the written representations received from the Directors as on 31st March, 2006, and

taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on31st March, 2006 from being appointed as a Director in terms of clause (g) of sub-section (1) of section274 of the Companies Act, 1956.



K. M. ELAVIAPartner

Membership No. 12737


Godrej Beverages & Foods Limited (Formerly Godrej Tea Limited)


94

ANNEXURE TO THE AUDITORS’ REPORT

This Year Previous YearSchedule Rs. ’000 Rs. ’000

INCOMESale of Tea 77,729 156,563Other Income 9 621 1,350

78,350 157,913

EXPENDITUREMaterials 10 46,052 85,050Processing and Handling Charges 2,589 23,075Expenses 11 163,159 206,536Interest and Financial Charges 12 47,986 39,292Inventory Change 13 (1,657) 27,864Depreciation 3,005 3,254

261,134 385,071

LOSS BEFORE TAX (182,783) (227,158)Provision for taxation

Current Tax (481) –Deferred Tax 11,572 12,900

LOSS AFTER TAXATION (171,692) (214,258)Deficit brought forward (348,858) (134,600)

Deficit carried forward (520,549) (348,858)

Basic/Diluted Earnings per share Rs. (12.49) (15.58)



BALANCE SHEET AS AT MARCH 31, 2006This Year Previous Year

Schedule Rs. ’000 Rs. ’000 Rs. ’000SOURCES OF FUNDS

Shareholders’ FundsShare Capital 1 137,500 137,500Reserves & Surplus – –

137,500 137,500Share Application Money 600,000 –Loan Funds

Secured Loans 2 340,090 193,833Unsecured Loans 3 150,000 300,000

490,090 493,833TOTAL 1,227,590 631,333

APPLICATION OF FUNDSFixed Assets 4

Gross Block 596,749 25,957Less : Depreciation 10,585 7,609Net Block 586,164 18,348Capital Work in Progress 1,500 41

587,664 18,389Deferred Tax Asset 99,272 87,700Investments – –Current Assets, Loans and Advances 5

Inventories 246,053 73,147Sundry Debtors 128,690 27,758Cash & Bank Balances 130,406 30,510Loans & Advances 31,922 5,572

537,071 136,987Less : Current Liabilities and Provisions

Liabilities 6 210,187 26,181Purchase consideration payable(Refer Note No. 2) 300,000 –Provisions 7 13,117 919

523,305 27,100Net Current Assets 13,767 109,887Miscellaneous Expenditure 8 6,338 66,498(To the extent not written off or adjusted)Profit and Loss Account 520,549 348,858

TOTAL 1,227,590 631,333NOTES TO ACCOUNTS 14

The Schedules referred to above form an integral part of the Profit & Loss Account

As per our Report Attached Signatures to Profit & Loss Account and Schedules 9 to 14

For and on behalf ofKALYANIWALLA & MISTRYChartered Accountants

K.M. ELAVIA A.B. GODREJ A. MAHENDRANPartner Chairman Director


Referred to in paragraph (3) of our report of even date.1) (a) The Company has maintained proper records showing full particulars, including quantitative

details and situation of fixed assets.(b) As explained to us, the Company has a program for physical verification of fixed assets at periodic

intervals. In our opinion, the period of verification is reasonable having regard to the size of theCompany and the nature of its assets. No material discrepancies have been reported on suchverification.

(c) In our opinion, the disposal of fixed assets during the year does not affect the going concern assumption.2) (a) The Management has conducted physical verification of inventory at reasonable intervals.



3) (a) The Company has not granted any loans, secured or unsecured to companies, firms or other partiescovered in the register maintained under Section 301 of the Companies Act, 1956.

(b) Consequently, the question of commenting on the rates of interest and the other terms and conditionsof the loans granted being prejudicial to the interests of the Company, receipt of regular principaland interest and reasonable steps taken for recovery of principal and interest does not arise.

(c) The Company has not taken any loans, secured or unsecured from companies, firms or otherparties covered in the register maintained under Section 301 of the Act.

(d) Consequently, the question of commenting on the rates of interest and the other terms and conditionsof the loans taken being prejudicial to the interests of the Company and payment of regularprincipal and interest does not arise.

4) In our opinion and according to the information and explanations given to us, there are adequate internalcontrol procedures commensurate with the size of the Company and the nature of its business, for thepurchases of inventory, fixed assets and for the sale of goods. There are no sales of services. During the courseof our audit, we have not observed a continuing failure to correct major weaknesses in internal controls.

5) (a) Based on the audit procedures applied by us and according to the information and explanationsprovided by the management, we are of the opinion that the particulars of contracts andarrangements referred to in Section 301 of the Companies Act, 1956 have been entered into theregister required to be maintained under that section.

(b) The transactions made in pursuance of such contracts or arrangements, were made at priceswhich are reasonable having regard to prevailing market prices at the relevant time.

6) In our opinion and according to the information and explanations given to us, the Company has notaccepted any deposits from the public and hence the provisions of Section 58A, 58AA or any otherprovision of the Companies Act, 1956, read with the rules framed there under are not applicable.


8) We have broadly reviewed the cost records maintained by the Company pursuant to the order madeby the Central Government for maintenance of cost records prescribed under Section 209(1)(d) of theCompanies Act, 1956, and are of the opinion that prima facie, the prescribed accounts and records havebeen made and maintained. We have not however, made a detailed examination of the records witha view to determining whether they are accurate or complete.

9) (a) According to the information and explanations given to us and on the basis of our examination of thebooks of account, during the year, the Company has been generally regular in depositing undisputed

statutory dues including Provident Fund, Investor Education and Protection Fund, Employees’ StateInsurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, cess and otherstatutory dues applicable to it with the appropriate authorities. According to the information andexplanations given to us, there are no undisputed dues payable in respect of above as at 31st March2006 for a period of more than six months from the date they became payable

(b) According to the information and explanations given to us, there are no dues outstanding of SalesTax, Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty or cess on account of anydispute, other than the following:Name of the Statute Amount (Rs.’000) Forum where dispute is pendingSales Tax Act 121 West Bengal Sales Tax AuthoritySales Tax Act 16 Appellate TribunalSales Tax Act 70 Assistant Commissioner

10) The Company’s accumulated losses at the end of the financial year are in excess of fifty percent of its networth and it has incurred cash losses in the current as well as the immediately preceding financial year.


12) According to the information and explanations given to us and based on the documents and recordsproduced to us, the Company has not granted loans and advances on the basis of security by way ofpledge of shares, debentures and other securities.

13) In our opinion and according to the information and explanations given to us, the nature of activities of theCompany does not attract any special statute applicable to chit fund and nidhi/mutual benefit fund/societies.

14) The Company does not deal in shares, securities, debentures and other investments.15) According to the information and explanations given to us, the Company has not given any guarantee

for loans taken by others from banks and financial institutions.16) According to the information and explanations given to us, the term loans were applied for the purpose

for which the loans were obtained.17) According to the information and explanations given to us and on an overall examination of the Balance

Sheet and Cash Flows of the Company, we report that the Company has not utilized funds raised on short-term basis for long-term investment.

18) The Company has not made any preferential allotment of shares to parties or companies covered in theregister maintained under Section 301 of the Companies Act, 1956.

19) The Company did not issue any debentures during the year.20) The Company has not raised any money through a public issue during the year.21) Based on the audit procedures performed and information and explanations given by the management,




K.M. ELAVIAPartner



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

As per our Report Attached Signatures to Balance Sheet and Schedules 1 to 8 & 14





95

Sr. Particulars GROSS BLOCK DEPRECIATION NET BLOCKNo. Balance Additions On Deductions Balance Balance For the On Balance Balance Balance

as on acquisition of as on as on year deductions as on as on as on1/4/2005 Foods division 31/3/2006 1/4/2005 31/3/2006 31/3/2006 1/4/2005

1 Land – – 18,500 – 18,500 – – – – 18,500 –2 Building – – 103,400 – 103,400 – – – – 103,400 –3 Trade marks 10 – 158,470 – 158,480 5 2 – 7 158,474 54 Plant & Machinery 5,622 – 286,850 – 292,472 1,064 630 – 1,695 290,777 4,5585 Office Equipment 3,500 30 – – 3,530 914 131 – 1,045 2,485 2,5866 Furniture 4,031 58 1,146 – 5,235 659 249 – 908 4,327 3,3727 Computer 12,079 16 2,150 84 14,161 4,818 1,982 29 6,771 7,390 7,2618 Lab Equpiment 190 – – – 190 106 4 – 110 80 849 Electrical Installation 525 – – – 525 42 8 – 50 475 48310 Leased Assets Vehicle – – 256 – 256 – – – – 256 –

TOTAL This Year 25,957 104 570,772 84 596,749 7,608 3,006 29 10,585 586,164 18,349Previous Year 22,789 3,498 – 329 25,957 4,436 3,254 81 7,609 18,390 18,353Capital Work-in-progress – 1,500 – – 1500 – – – – 1,500 41

TOTAL 598,249 587,664 18,389

1. Assets purchased vide slump agreement dated 14th March, 2006 has been taken in books on the basis of a Valuation Report submitted by a professional valuer.2. Land includes leasehold land of Rs.4,250 thousands which is being amortised over the period of lease.

SCHEDULE 4 : FIXED ASSETS

SCHEDULES FORMING PART OF THE ACCOUNTS FOR THEYEAR ENDED MARCH 31, 2006



AUTHORISED :5,00,00,000 Equity Shares of Rs. 10 each(Previous year, 1,50,00,000 Equity Shares of Rs. 10 Each) 500,000 150,000

ISSUED, SUBSCRIBED AND PAID-UP :1,37,50,000 Equity Shares of Rs. 10 each fully paid 137,500 137,500

137,500 137,500

Of the above :

97,49,996 shares (Previous year 68,86,496) are held byGodrej Industries Ltd. (GIL) the Holding Company


SCHEDULE 2 : SECURED LOANSFrom a Finance CompanyFrom BanksForeign Currency Term Loan – 145,616Foreign Currency Working Capital Demand Loan – 48,217Medium Term Loans 330,000 –Cash Credit 10,090 –

340,090 193,833Amounts due within a year (other than cash credit) 43,750 193,833Refer Note 3

SCHEDULE 3 : UNSECURED LOANSFrom BanksShort Term Loans 100,000 60,000Intercoporate deposits 50,000 240,000

150,000 300,000

Amounts due within a year 150,000 300,000

This Year Previous YearRs. ’000 Rs. ’000 Rs. ’000

SCHEDULE 5 : CURRENT ASSETS,LOANS AND ADVANCES

(A) INVENTORIES :Raw materials 103,069 12,997Work-in-progress 29,572 19,972Finished goods 95,775 24,417Packing Material 12,722 10,599Stores and Spares 2,218 –Promotional Items 2,696 5,163

246,053 73,147

(B) SUNDRY DEBTORS (Refer Note No. 2)Debts outstanding over six monthsConsidered good 20,313 14,854Considered doubtful 7,011 –

27,324 14,854Other DebtsConsidered good 108,377 12,904

135,701 27,758Less: Provision for doubtful debts 7,011 –

128,690 27,758(Debts amounting to Rs. 296 thousand(Previous Year Rs. 7,091 thousand)are secured againstBank Guarantees / Security Deposits)

(C ) CASH AND BANK BALANCESCash and cheques on hand 774 1,226Balances with scheduled banks :– on current accounts 15,840 6,119– remittance in transit 10,326 –on deposit accounts 103,466 23,165(Of this, Rs.1,265 thousand(Previous Year Rs.1,165 thousand) is 130,406 30,510Pledged with sales tax authorities

(D) LOANS AND ADVANCES(Unsecured and considered good)Loans and Advances recoverable in cashor in kind or for value to be receivedConsidered good 15,227 4,403Considered doubtful 13,910 –

29,137 4,403Less: Provision for doubtful advances 13,910 –

15,227 4,403Deposits with Others 16,588 1,104Advance payment of taxes 107 65

31,922 5,572

537,071 136,988


SCHEDULE 6 : CURRENT LIABILITIES

Sundry creditors (Refer Note No. 7) 95,180 9,111Other liabilities 94,829 10,549Advances from customers 18,720 2,167Sundry deposits 699 1,620Sales Tax & Other Taxes 759 1,285Interest accrued but not due – 1,449

210,187 26,181

SCHEDULE 7 : PROVISIONS

Leave Encashment 6,177 637Gratuity 6,940 282

13,117 919SCHEDULE 8 : MISCELLANEOUS EXPENDITURE(To the extent not written off or adjusted)

Deferred revenue expenditureBrand Promotion Expenses – 57,184Pre operative Expenses – 806ERP Implementation 6,338 8,508

6,338 66,498SCHEDULE 9 : OTHER INCOME

Interest on Bank Deposits (Gross) 435 451(Tax at source Rs.42 thousand, Previous year Rs.72 thousand)Miscellaneous income 186 899

621 1,350SCHEDULE 10 : MATERIALS CONSUMED

Raw Materials consumedStocks at the commencement of the year 12,997 105,048Add : Purchases 56,131 10,664

On Acquisition 73,801 –

142,929 115,712Less : Sale of Raw Material – 29,201Less : Stocks as at the close of the year 103,069 12,997

39,860 73,515Packing Material Consumed 6,192 11,535

Stores consumedOn Acquisition 2218 –Less : Stocks as at the close of the year 2,218 –

46,052 85,050


96


SCHEDULE 11 : EXPENSES

Salaries wages and allowances 19,882 37,557Contribution to provident fund and other funds 684 1,249Employee welfare expenses 70 295Rent 5,805 8,991Rates and Taxes 1,138 3,099Repairs and maintenance 299 259Insurance 876 793Electricity Charges 566 786Professional Fees 9,269 2,230Audit Fees 362 430Conveyance & Travelling 3,609 8,491Freight 6,693 4,402Discount and Commission 4,393 17,748Advertisement and publicity 11,261 39,006Sales promotion 25,591 17,927Bad Debts written off 679 –Provision for doubtful debts 2,691 –Provision for doubtful advances 300 –Clearing and Forwarding Agent Expenses 3,145 4,685Consumables 228 565Telephone & Telex Charges 654 1,123Recruitment Cost 55 120Royalty 605 634Other Expenses 4,086 3,055Loss on disposal of Asset 58 82Deferred Revenue Expenses written off

Media Amortisation 57,184 48,318Launch Conference – 587Pre-operative Expenses 806 1,934ERP Implementation 2,170 2,170

60,159 53,009

163,159 206,536

SCHEDULE 12 : INTEREST AND FINANCIAL CHARGES(a) Interest Paid on fixed loans

(i) Banks 26,036 18,592(ii) Inter Corporate Deposits 14,663 10,677

40,699 29,269(b) Interest paid on other loans

Banks 167 1,784(c) Other financial charges 7,120 8,239

47,986 39,292

SCHEDULE 13 : INVENTORY CHANGEStocks at the beginning of the yearFinished goods 24,417 47,681Work-in-progress 19,972 24,572

44,389 72,253Add : Taken over on acquisition 79,301 –Stocks at the close of the year :Finished goods 95,775 24,417Work-in-progress 29,572 19,972

125,347 44,389(1,657) 27,864

(1,657) 27,864

SCHEDULES FORMING PART OF THE ACCOUNTS FOR THEYEAR ENDED MARCH 31, 2006

d. Provisions & Contingencies:

Provisions are recognized in the accounts in respect of present probable obligations, the amountof which can be reliably estimated.

Contingent liabilities are disclosed in respect of possible obligations that arise from past events buttheir existence is confirmed by the occurrence or non-occurrence of one or more uncertain futureevents not wholly within the control of the Company.

e. Foreign Exchange Transactions:

Transactions in foreign currency are recorded at the exchange rates prevailing on the date of thetransaction. Assets and liabilities related to foreign currency transactions, remaining unsettled atthe year-end, are translated at the year end exchange rates. Forward exchange contracts, remain-ing unsettled at the year end, backed by underlying assets or liabilities are also translated at yearend exchange rates. The premium payable on foreign exchange contracts is amortised over theperiod of the contract. Exchange gains / losses are recognised in the Profit and Loss Account exceptin respect of liabilities incurred to acquire fixed assets in which case, they are adjusted to thecarrying amount of such fixed assets.

f. Revenue Recognition:

Revenue is recognized when goods are dispatched to external customers. Sales are recorded netof returns, trade discounts, rebates, sales taxes.

g. Depreciation:

Depreciation is provided on the straight line method at the rates specified in Schedule XIV to theCompanies Act, 1956 except for Trademarks which are amortized over a period of five years.

The Company has grouped additions and disposals in the appropriate time period of a month forthe purpose of charging pro rata depreciation in respect of additions and disposals of its assetskeeping in view the materiality of the items involved.

h. Retirement Benefits:

Retirement benefits in the form of gratuity and leave encashment are provided for on actuarialvaluation basis.

i. Miscellaneous expenditure:

i) Expenditure incurred on implementation of software package is deferred over a period of sixyears.

ii) Expenditure incurred prior to commencement of commercial operations is deferred overa period of three years.

j. Leases of assets under which all the risks and rewards of ownership are effectively retained by thelessor are classified as operating leases. Lease payments under operating leases are recognizedas an expense on a straight-line basis over the lease term.

k. Deferred tax assets and liabilities are based on temporary differences between the values of assetsand liabilities recorded in the financial statements and those used for the tax purpose. Tax ratesapplicable to future periods are used to calculate year-end deferred income tax amounts.

A valuation allowance is recorded against deferred tax assets resulting from net operating lossesand deductible temporary differences when their future realization is not likely.

l. The basic earning per share is computed using the weighted average number of common sharesoutstanding during the period. Diluted earnings per share is computed using the weighted averagenumber of common and dilutive common equivalent shares outstanding during the period, exceptwhere the results would be anti-dilutive.

m. The Company is engaged in the business of manufactures of tea, which is its only primary businesssegment. The Company operates in economic environments which are subject to same risks andreturns and hence no disclosure is required under AS 17- Accounting Standard on Segment Report-ing.

2. The Company has acquired the Foods division of Godrej Industries Limited (excluding the WadalaFactory) as a going concern on a slump sale basis for net consideration of Rs.700,000 thousands by takingover the following assets and liabilities

Particulars Rs.’000Assets:Fixed Assets 570,772Stocks 155,320Debtors (Net) 81,415Cash & Bank 13,592Remittance-in-transit 10,326Loans & Advances (Net) 27,520Total 858,945Less: LiabilitiesCreditors 79,968Other Liabilities 66,732Provision for Gratuity 6,683Provision for Leave Encashment 5,562Net Consideration 700,000Less: Amount paid 400,000Consideration to be paid in kind 300,000

3. CONTINGENT LIABILITIES NOT PROVIDED FOR

a) Guarantees given by the Company’s Bankers against counter guarantees given by the CompanyRs.1,325 thousands (as on 31-3-2005 Rs.205 thousands).

b) Sales Tax demand pending with Commissionerate / Tribunal and disputed by the Company Rs.207thousands (as on 31-3-2005 Rs.Nil).

4. During the current year, the company changed its accounting policy with respect to amortization onpromotion of products, publicity & brand from 3 years to 2 years. Had there been no change in the periodof amortization, the charge for the year would have been lower by Rs.12,848 thousands. Consequentlythe losses for the year and accumulated losses are higher by Rs.12,848 thousand.

5. SECURED LOANS

Foreign currency term loan, foreign currency working capital demand loan and cash credit from a bankis secured by hypothecation by way of a first charge on all tangible and moveable fixed assets, stock andbook debts, both present and future.

SCHEDULE 14 : NOTES FORMING PART OF THE ACCOUNTS


a. Accounting Convention:

The financial statements are prepared under the historical cost convention, on accrual basis, inaccordance with the generally accepted accounting principles in India, the Accounting Standardsissued by the Institute of Chartered Accountants of India and the provisions of the Companies Act,1956.

b. Fixed Assets:

Fixed Assets are stated at cost, less accumulated depreciation. Cost includes all expenses relatedto acquisition and installation of the concerned assets.

Carrying amount of cash generating units/assets are reviewed at balance sheet date to determinewhether there is any indication of impairment. If such indication exists, the recoverable amountis estimated as the net selling price or value in use, whichever is higher. Impairment loss, if anyis recognized whenever carrying amount exceeds the recoverable amount.

c. Inventories:

Raw materials and Packing materials are valued at weighted average cost.

Promotional items are valued at cost. Finished goods and work-in-progress are valued at lowerof cost and net realizable value. These costs include cost of conversion and other costs incurredin bringing the inventories to their present location and condition.


97

SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006

6. SUNDRY DEBTORS

This Year Previous YearRs.’000 Rs. ‘000

Sundry Debtors include amount due fromCompanies under the same management:Godrej Consumer Products Ltd. 108 76

Maximum balance during the year 679 964Godrej & Boyce Mfg Co. Ltd. 280 228

Maximum balance during the year 307 228Godrej Industries Ltd. 2,437 10,657

Maximum balance during the year 11,788 10,657Godrej Sara Lee Ltd. 1,280 1,633

Maximum balance during the year 1,842 1,633

7. It is the opinion of the management that there are no parties, which can be classified as Small Scaleindustrial Undertakings to whom the Company owes any sum. The Auditors have accepted therepresentation of the management in this matter.

8. DEFERRED TAX

The tax effect of significant temporary differences that resulted in deferred tax assets and liabilities are:


AssetsLosses carried forward 1,12,350 1,12,350Others 12,445 300

1,24,795 1,12,650

LiabilitiesDepreciation on Fixed Assets (23,390) (2,600)Deferred Revenue Expenditure (2,134) (22,350)

99,272 87,700

Deferred tax assets on carried forward tax losses have been recognized and carried forward on theground that there is virtual certainty that sufficient taxable income will arise in future. The Company hasconsidered certain expenditure which is not expected to arise in the future, increase in business incomedue to formalization of distribution arrangements and the acquisition and amalgamation of highly prof-itable company as factor on the basis of which it has concluded that it is virtually certain that sufficienttaxable income will arise in future against which the deferred tax assets will be realized.

9. The amount of exchange difference included in the Profit and Loss Account, under the related heads ofexpenses, is Rs. 1,018 thousand (Previous year Rs. 3,107 thousand). The amount of exchange differencein respect of forward exchange contracts to be recognized in the profit and loss account of subsequentaccounting periods is Rs. Nil (Previous year Rs. 1,018 thousand).

10. LEASE

Disclosure relating to Operating Lease as required by AS – 19 “Leases”, is given below :

a. The total of future minimum lease payments under non - cancelable operating leases for each ofthe following periods:


i. Not later than one year 2,938 4,241ii. Later than one year and not later than five years 2,546 5,648iii. Later than five years Nil Nil

b. Lease payments recognized in the statement ofProfit & Loss for the period :Minimum Lease payments 5,013 7,944

11. EARNINGS PER SHARE


Number of shares (nominal value Rs.10/- each) 13,750,000 13,750,000(Loss) after tax (171,692) (214,258)

Basic/Diluted EPS:Weighted Average number of shares 13,750,000 13,750,000Earnings per share in Rs. (12.49) (15.58)

Note:

No effect has been given for Share Application Money pending allotment in the diluted EPS as the resultswould be anti-dilutive.

12. RELATED PARTY DISCLOSURES

Related Party disclosure as required by AS - 18 “Related Party Disclosures” are given below:

1. Relationships

(i) Shareholders ( the Godrej Group shareholding) in the company:Godrej Industries Limited hold 70.91%Godrej Industries Limited is a subsidary of Godrej & Boyce (Mfg) Co.Limited, the ultimateholding company.

(ii) Other related parties in the Godrej Group where common control exist.1. Godrej Consumer Products Limited2. Godrej Agrovet Limited3. Godrej Properties Limited4. Godrej Industries Limited5. Geometric Software Solutions Company Limited

(iii) Key Management Personnel:1. Mr. A.Mahendran

(iv) Enterprises over which key management personnel exercise significant influence

1. Godrej Sara Lee Limited2. Godrej Hi Care Limited

(v) Individuals excercing significant influence1. Mr. A.B.Godrej2. Mr. N.B.Godrej3. Mr. J.N. Godrej4. Mr. A.Mahendran

2. The following transactions were carried out with the related parties in the ordinary course ofbusiness:

(i) The details relating to parties referred to in item 1(i) and (ii) above. (Rs.’000)

Sr Particulars Godrej Group Other Related partiesNo. Shareholders in the Godrej Group1 Issue of Share Capital Nil Nil

(Nil) (Nil)2 Inter corporate deposit taken during the year Nil 20,000

(Nil) (20,000)3 Sale of Fixed Assets Nil 58

(Nil) (Nil)4 Sale of goods & Other Income 726 26

(18,382) (Nil)5 Credit note issued for Sales Returns 7,097 Nil

(Nil) (Nil)6 Purchase of goods 2,073 Nil

(1,862) (Nil)7 Expenses charged by other Companies 5,713 653

(9,330) (24)8 Expenses charged to other Companies 284 167

(348) (79)9 Interest on Inter Corporate Deposit Nil 418

(Nil) (Nil)10 Sundry Deposit with Other Companies Nil Nil

(398) (Nil)11 Consideration payable on acquisition 300,000 Nil

(Nil) (Nil)12 Outstanding (Payables) net of Receivables 2,717 452

(8,672) (375)Figures in italics are for the previous year.

(ii) Details relating to persons referred to in items 1(iii),(iv) and (v) above.


1. Expenses charged by other companies andReimbursement made to other companies 1,413 414

2. Expenses charged to other companies 2,532 2,8263. Sales & Other Income 6 Nil4. Advances 15 Nil5. Outstanding (Payables) net of Receivables 1,410 1,895


98

13. MANAGERIAL REMUNERATIONThis Year Previous Year

Rs.’000 Rs. ‘000Salaries & Allowances Nil 2,61Contribution to Provident Fund Nil NilEstimated monetary value of perquisites Nil 14

Total Nil 2,75

14. AUDITOR’S REMUNERATION


Audit Fees 224 110Audit under other statutes 84 33Out of pocket expenses 20 8

Total 328 151

15. VALUE OF CONSUMPTION OF RAW MATERIALThis Year Previous Year

Rs. ‘000 % Rs. ‘000 %

Imported Items Nil – Nil –Indigenous Item 39,860 100 73,515 100

Total 39,860 100 73,515 100

16. SALESUnit This Year Previous Year

Quantity Value Quantity ValueRs. ‘000 Rs. ‘000

Packet Tea MT 701 77,729 1,126 147,488Blended Tea MT Nil Nil 175 9,075

701 77,729 1,256 156,563

17. INVENTORIES – FINISHED GOODS

Unit This Year Previous YearQuantity Value Quantity Value

Rs. ‘000 Rs. ‘000ManufacturedPacket Tea MT 263 16,421 262 23,752TradedFruit Drinks/ FB 161 53 3700 665Trays/JuicesFruits Beverages KL 804 30,728 Nil NilPuree/Pulp/Juices KL 676 17,678 Nil NilRefind Oil/Vanaspati MT 512 24,201 Nil NilSoya & Cereals MT 70 2,048 Nil NilTrading MT 65 3,084 Nil Nil Oils Soya & Cereals 1,562 Nil Nil

95,775 24,417

18. RAW MATERIAL CONSUMED

Unit This Year Previous YearQuantity Value Quantity Value

Rs. ‘000 Rs. ‘000Tea MT 855 39,860 905 73,515

19. ACTUAL PRODUCTION

Unit This Year Previous YearQuantity Quantity

Packet Tea MT 702 830

Note: Actual Production represents production at third party processing locations.

20. Information required under Schedule VI to the Companies Act, 1956 have been given to the extentapplicable.

21. The previous year’s figures have been regrouped and reclassified wherever necessary to conform to thecurrent year’s presentation.

3. Significant Related Party Transaction:Rs. ’ 000

Nature of Transaction Godrej Group Shareholders Amount Other Related parties in the Godrej Group Amount

1 Issue of Share Capital – – – –2 Inter Corporate Deposits taken during the year – – Geometric Software Solutions Company Limited 20,000

20,0003 Sale of Fixed Assets – – Godrej Agrovet Limited 584 Sales of Goods & Other Income Godrej & Boyce Limited 309 Godrej Agrovet Limited 26

Godrej Industries Ltd. 41518,382

5 Credit note Issued for Sales Returns Godrej Industries Ltd. 7,097 – –6 Purchase of goods Godrej Industries Ltd. 2,073 – –

1,8627 Expenses charged by other Godrej Industries Ltd. 5,532 Godrej Agrovet Limited 653

Companies 9,113Godrej & Boyce Limited 181 Godrej Consumers Products Ltd. 24

2178 Expenses charged to other Godrej Industries Ltd. 284 Godrej Consumers Products Ltd. 39

Companies 343 49Godrej & Boyce Limited 5 Godrej Agrovet Limited 128

309 Sundry Deposit with Other Godrej Industries Ltd. 356 – –

Companies Godrej & Boyce Limited 4210 Interest expense on other – – Geometric Software Solutions Company Limited 418

inter coporate deposit taken11 Consideration Payable on acquisition Godrej Industries Ltd. 300,00012 Outstanding (Payable), net of receivables Godrej Industries Ltd. 2,437 Godrej Consumers Products Ltd. 108

8,693 76Godrej Agrovet Limited 45

Godrej & Boyce Limited 280 Godrej Properties Limited 299299

(ii) Details relating to person referred to in item 1(iii) , (iv) and (v) above:1 Issue of Share Capital – – – –2 Remuneration – – – –3 Expenses charged by other – – Godrej Sara Lee Limited 1413

Companies & reimbursement made 355to other Companies Godrej Hi Care Limited 59

4 Expenses charged to other – – Godrej Sara Lee Limited 1075Companies 2564

Godrej Hi Care Limited 1457262

5 Sales & Other Income – – Godrej Hi Care Limited 66 Advances – – Godrej Sara Lee Limited 157 Outstanding (Payable), net of receivables – Godrej Sara Lee Limited 1280

1633Godrej Hi Care Limited 130

262


99

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006Current Year Previous Year

Rs. ‘000 Rs. ‘000A. Cash Flow from Operating Activities :

Loss before tax (182,783) (227,158)Adjustments for :Depreciation 3,005 3,254Loss on Disposal of Asset 58 82Expenses incurred during the year deferred – –Deferred Revenue expenditure written off 60,159 53,009Interest income (435) (451)Interest expense 47,986 39,292

Operating Loss before working capital changes (72,010) (131,973)Adjustments for :Inventories (172,905) 126,842Trade & Other receivables (127,239) 5,932Trade & Other payables 497,173 (29,138)

197,028 103,636Direct Taxes paid (42) 126

Net Cash used in operating activities 124,976 (28,212)B. Cash Flow from Investing Activities :

Purchase of fixed Assets (572,376) (3,538)Sale of fixed assets 38 166Interest received 435 451

Net Cash used in investing activities (571,903) (2,922)C. Cash Flow from Financing Activities :

Share Application Money 600,000 –Changes in Cash Credit/Working Capital Demand Loans (38,127) (92,009)Term Loans/Inter Corporate Deposits taken (150,000) 177,000Term Loans repaid 184,385 –Interest paid (49,435) (38,687)

Net Cash from financing activities 546,823 46,304

Net Increase in Cash and Cash Equivalents 99,895 15,171Add : Cash & Cash equivalents (Opening Balance) 30,510 15,339

Cash & Cash equivalents (Closing Balance) 130,406 30,510




ADDITIONAL INFORMATION AS REQUIRED UNDER PART IV OF SCHEDULE VI OFTHE COMPANIES ACT, 1956

i) Registration DetailsRegistration No. 105714State Code 11Balance Sheet 31-Mar-06

ii) Capital raised during the year (Amount in Rs. '000)Public Issue NilRights Issue NilBonus Issue NilPrivate Placement Nil

iii) Position of mobilisation and deployment of funds (Amount in Rs. '000)Total Liabilities 1,227,590Total Assets 1,227,590

Source of FundsPaid up Capital 137,500Reserve & Surplus / (Accumulated Losses) (520,549)Secured Loans 340,090Unsecured Loans 150,000

Application of FundsNet Fixed Assets 587,664Net Current Assets 13,767Deferred Tax Asset 99,272Misc. Expenditure 6,338

iv) Performance of Company (Amount in Rs. '000)Turnover 78,350Total Expenditure 261,134Loss before Tax (182,783)Loss after Tax (171,692)Earning per Share in Rs. (12.49)Dividend Rate % –

v) Generic Names of the three principal products/services of CompanyItem Code No. 9023000Product Description Packet Tea

Godrej Properties Limited

100

BOARD OF DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST MARCH, 2006

To The Shareholders

Your Directors have pleasure in submitting their Report alongwith the audited Accounts for the year ended31st March, 2006.

1. OPERATING RESULTS :

Your Company’s performance during the year as compared to the previous period is summarisedbelow:

2005-2006 2004-2005(Rs. in lacs) (Rs. in lacs)

Profit before Taxation 1785.84 879.67Provision for Taxation (445.32) (300.35)Provision for Fringe Benefit Tax (4.88) —Provision for Deferred Tax 3.29 4.00

Profit after Taxation 1338.93 583.32Add: Surplus brought forward 772.20 559.20Prior year tax adjustments (6.87) 1.97

AMOUNT AVAILABLE FOR APPROPRIATION 2104.26 1144.49

Appropriations:Your Directors recommend appropriations as under:Interim Dividend _ 255.00Proposed Dividend 620.00 _Dividend Distribution Tax 86.96 58.95Transfer to General Reserve 133.90 58.34Surplus carried forward 1263.40 772.20

TOTAL APPROPRIATIONS 2104.26 1144.49

2. DIVIDEND :Your Directors had announced during the year an Interim Dividend of 96.20 54% for the year ended31st March, 2006. The same is recommended as the Final Dividend for the year.

3. REVIEW OF OPERATIONS :Your Company has had a good financial year, posting total income of Rs. 7045.78 lacs during the yearended 31st March 2006. Both commercial projects Godrej Eternia C and Godrej Castlemaine at Punewere completely sold out. The office spaces in first phase of the commercial project in Godrej Coliseum,Mumbai have also been sold out and the construction of Phase 2 is in full swing and it should be completedby end of 2006. In the residential segment, our project Godrej Woodsman Estate Bangalore, has beenwell received by the market. The construction work of Godrej Regency Park Tower B, Thane and GodrejHill , Kalyan is going on as per schedule.

4. FUTURE PROSPECTS AND OUTLOOK OF THE COMPANY :The Real Estate Industry continues to flourish and your Company is on the threshold of major developments.Your Company has scaled up operations and increased its geographical footprints. The plan is to achievegood geographical and product balance. The company is doing bigger projects like the IT Parks inKolkata, mixed development at Bavdhan, near Pune and residential development at Bangalore. TheCompany is also diversifying the portfolio and doing projects like the Retail Mall in Kolkata and exploringnew locations like Cochin, Chennai and Hyderabad.

5. SUBSIDIARY COMPANIES :During the year your Company acquired two Private Limited Companies viz., Godrej Waterside PropertiesPrivate Limited and Godrej Realty Private Limited. These two companies will be subsidiaries of yourCompany. The project Godrej Waterside – Kolkata will be developed exclusively by the Godrej WatersideProperties Private Limited and the project at Bavdhan, Pune will be developed exclusively by GodrejRealty Private Limited.Godrej Realty Private Limited allotted 4,90,000 equity shares of Rs.10/- each fully paid-up to HDFCVenture Trustee Company Limited a trustee of HDFC Property Fund, and 5,00,000 equity shares ofRs.10/- each fully paid-up to your Company during the year. As such your Company holds in aggregate5,10,000 Equity Shares and holds 51% of the paid up share capital of Godrej Realty Private Limited.Further, Godrej Realty Private Limited issued 56,35,000 , 10% Secured Redeemable Optionally ConvertibleDebentures of Rs.10/- each to HDFC Venture Trustee Company Limited and 58,65,000, 10% Secured

Redeemable Optionally Convertible Debentures of Rs.10/- each to your Company during the year.During the year your Company was allotted 40,000 equity shares of Rs.10/- each fully paid-up in GodrejWaterside Properties Private Limited and holds the entire paid up share capital of that company.The audited Balance Sheet as at 31st March, 2006 and Profit & Loss Account ended on that date togetherwith the Reports of Directors and Auditors thereon of our Subsidiary Companies namely GirikandraHoliday Homes & Resorts Limited, Godrej Realty Pvt. Ltd. and Godrej Waterside Properties Pvt. Ltd.alongwith Statement as required under Section 212 of the Companies Act, 1956, is annexed herewith.

6. LOAN TO SUBSIDIARY :The Company has granted an interest free loan of Rs. 28,267,717/- to Girikandra Holiday Homes &Resorts Limited (GHHRL) the wholly owned subsidiary company. The auditors have mentioned this intheir Auditors Report. The said loan was given to GHHRL for promoting the company to carry on theproject at Moho near Panvel.

7. FIXED DEPOSITS :The Company has accepted Fixed Deposits to the extent of Rs. 1,740,000/- during the year.

8. ADDITIONAL INFORMATION :(a) The information required to be furnished under the provision of Section 217 (2A) of the Companies

Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 and forming part of Director’sReport is annexed hereto.

(b) Information in respect of Conservation of Energy, Technology Absorption and Foreign ExchangeEarnings and Outgo, required under Section 217(1)(e) of the Companies Act, 1956 read with theCompanies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is providedhereunder:

(i) Conservation of Energy :Expenses on account of Energy are negligible.

(ii) Technology Absorption:It is an on going process.

(iii) Foreign Exchange Earnings & Outgo :During 2005-06, expenditure in foreign currencies amounted to Rs. 755,506/- on account oftraveling and expenses incurred for business promotion.The company has not earned any Foreign Exchange during the year.

9. DIRECTORS :In accordance with the provision of the Articles of Association of the Company, Mr. J. N. Godrej, Mr. R.K.Naoroji and Ms. P. A. Godrej retire by rotation and being eligible, offer themselves for re-appointment.Mr. Milind Korde, Managing Director of the Company was appointed as the Managing Director of theCompany on 1st April, 2005. His tenure as Managing Director expires on 31st March, 2006, the Companyhas proposed to re-appoint him w.e.f. 1st April, 2006 for a period of 3 years.

10. DIRECTORS’ RESPONSIBILITY STATEMENT:Your Directors confirm:(i) that in the preparation of the annual accounts, the applicable accounting standards have been

followed;(ii) that the Directors have selected such accounting policies and applied them consistently and made

judgments and estimates that are reasonable and prudent so as to give a true and fair view of thestate of affairs of the Company at the end of the financial year ended 31st March, 2006 and of theprofit of the Company for that year;

(iii) that the Directors had taken proper and sufficient care for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act, 1956, for safeguarding the assetsof the Company and for preventing and detecting fraud and other irregularities;

(iv) that the Directors have prepared the annual accounts on a going concern basis.11. APPOINTMENT OF AUDITORS:

M/s. Kalyaniwalla Mistry and Associates, Chartered Accountants retire at the ensuing Annual GeneralMeeting and are eligible for re-appointment for which they have given their consent.

12. ACKNOWLEDGEMENT:Your Directors take this opportunity to thank all the employees and associates for their co-operation.


A. B. GODREJMumbai, May 10, 2006 Chairman

ANNEXURE TO DIRECTORS’ REPORTInformation as per Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 and forming part of the Directors’ Report for the year ended March 31, 2006.

SR. NAME AGE QUALIFICATION DATE OF DESIGNATION REMUNERATION EXPERIENCE LAST EMPLOYMENTNO. EMPLOYMENT (RS.) (YEARS) DESIGNATION COMPANY

1. Mr. Milind S. Korde 42 B.Sc., L.L.B., A.C.S. 03.12.1990 Managing Director 62,10,465 19 Commercial Officer Tata HousingDevelopment Co. Ltd.

NOTES :

1. NATURE OF EMPLOYMENT WHETHER CONTRACTUAL OR OTHERWISE:a) The appointment of the Managing Director from 1st April, 2006 is contractual and terminable by three months notice on either side.b) The appointments of the other employees are non-contractual and are terminable by three months notice on either side.

2. OTHER TERMS AND CONDITIONS:a) In case of the Managing Director, gross remuneration as shown above includes salary, House Rent Allowance (wherever applicable), Commission (wherever applicable), Company’s contribution to Provident Fund

and monetary value of perquisites as per Income Tax Rules which are given in terms of the Agreement entered into with him.b) The Designation represent the nature of duties performed by the Employee.d) The age shown is as of last Birthday and the particulars of previous employment pertain to the immediate past employment.

3. RELATIVES OF DIRECTORS:The Managing Director is not related to any of the other Directors of the Company.


101

1. We have audited the attached Balance Sheet of GODREJ PROPERTIES LIMITED, as at 31st March2006 and also the Profit and Loss Account and the Cash Flow Statement of the Company for the yearended on that date annexed thereto. These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financial statements based on ouraudit.

2. We 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 free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. An audit also includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.An audit also includes assessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation. We believe that ouraudit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Government interms of sub-section (4A) of Section 227 of the Companies Act, 1956, we annex hereto a statement onthe 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 andbelief 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 faras appears from our examination of such books.

c) The Balance Sheet, Profit and Loss Account and the Cash Flow Statement dealt with by this reportare in agreement with the books of account.

d) In our opinion, the Balance Sheet, Profit and Loss Account and the Cash Flow Statement dealt withby this report comply with the accounting standards referred to in sub-section (3C) of Section 211of the Companies Act, 1956.

REPORT OF THE AUDITORSTO THE MEMBERS OF GODREJ PROPERTIES LIMITED

e) Without qualifying our opinion, we draw attention to the fact that as referred to in Note 1(f) ofSchedule 19-Notes to Accounts, in respect of projects under long term contracts undertaken and/or financed by the Company, we have relied upon the management’s estimates of the percentageof completion, costs to completion and on the projections of revenues expected from projectsowing to the technical nature of such estimates, on the basis of which profits/losses have beenaccounted, interest income accrued and realizability of the construction work in progress andproject advances determined.

f) In our opinion and to the best of our information and according to the explanations given to us, thesaid accounts read with the notes thereon, give the information required by the Companies Act,1956, in the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India:

i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2006;

ii) in the case of the Profit and Loss Account, of the profit of the Company for the year ended onthat date and

iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year endedon that date.

5. On the basis of the written representations received from the directors as on 31st March, 2006, and takenon record by the Board of Directors, we report that, none of the directors is disqualified as on 31st March,2006 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of theCompanies Act, 1956.

For and on behalf ofKALYANIWALLA MISTRY & ASSOCIATESChartered AccountantsBahadur S. DastoorPartnerMembership No. 48936Place : MumbaiDate : May 10, 2006

Referred to in paragraph (3) of our report of even date.

1. (a) The Company is maintaining proper records showing full particulars, including quantitative detailsand situation of fixed assets.

(b) As explained to us, the Company has a program for physical verification of fixed assets at periodicalsintervals. In our opinion, the period of verification is reasonable having regard to the size of theCompany and the nature of its assets.


2. (a) The Management has conducted physical verification of inventory at reasonable intervals.



3. (a) The Company has not granted any loans, secured or unsecured to companies, firms or other partiescovered in the register maintained under Section 301 of the Companies Act, 1956.

(b) Consequently, the question of commenting on the rates of interest and others terms and conditionsof the loans granted being prejudicial to the interests of the Company, receipt of regular principaland the interest and reasonable steps taken for recovery of principal and interest does not arise.

(c) The Company has not taken any loan, secured or unsecured from companies, firms or other partiescovered in the Register maintained under Section 301 of the Companies Act, 1956.

(d) Consequently, the question of commenting on the rates of interest and others terms and conditionsof the loans taken being prejudicial to the interests of the Company, payment of regular principaland the interest does not arise.

4. In our opinion and according to the information and explanations given to us, there are adequate internalcontrol procedures commensurate with the size of the Company and the nature of its business, for thepurchases of inventory, fixed assets and for the sale of goods. There are no sales of service. During thecourse of our audit, we have not observed a continuing failure to correct major weaknesses in internalcontrols.

5. (a) Based on the audit procedures applied by us and according to the information and explanationsprovided by the management, we are of the opinion that the particular of contracts and arrangementreferred to in Section 301 of the Companies Act, 1956 have been entered into the register requiredto be maintained under that section.

(b) The transactions made in pursuance of such contracts or arrangements, were made at priceswhich are reasonable having regard to prevailing marketing prices at the relevant time, wherecomparable market price exist.

6. In our opinion and according to the information and explanations given to us, the Company has compliedwith directives issued by the Reserve Bank of India and the provisions of Section 58A and 58AA of theCompanies Act, 1956, and the rules framed there under.

7. In our opinion and according to the information and explanations given to us, the internal audit systemis commensurate with the size of the Company and nature of its business.

8. The maintenance of cost records has not been prescribed by the Central Government under Section209(1)(d) of the Companies Act, 1956, in respect of the activities carried on by the Company.

ANNEXURE TO THE AUDITORS' REPORT9. (a) According to the information and explanations given to us and on the basis of our examination of

books of accounts, during the year, the Company has been generally regular in depositing undisputedstatutory dues including Provident Fund, Investor Education and Protection Fund, Employees’ StateInsurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess andother statutory dues applicable to it with the appropriate authorities. According to the informationand explanations given to us, there are no undisputed dues, payable in respect of above as at31st March, 2006 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, there are no dues outstanding of SalesTax, Income Tax, Customs duty, Wealth Tax, Service tax, Excise Duty or Cess on account of anydispute.

10. The Company does not have accumulated losses at the end of the financial year and it has not incurredany cash losses in the current and immediately preceding financial year.

11. According to the information and explanations given to us and based on the documents and recordsproduced to us, the Company has not defaulted in repayment of dues to banks. There are no dues tofinancial institutions or debenture holders.

12. According to the information and explanations given to us and based on the documents and recordsproduced to us, the Company has not granted loans and advances on the basis of security by way of pledgeof shares, debentures and other securities.

13. In our opinion and according to the information and explanations given to us, the nature of activities ofthe Company does not attract any special statute applicable to chit fund and nidhi/ mutual benefit fund/societies.

14. The Company does not deal in shares, securities, debentures and other investments.

15. According to the information and explanations given to us, the Company has given guarantee for loanstaken by others from banks. The terms and conditions are not prima-facie prejudicial to the interest ofthe Company.

16. According to the information and explanations given to us the Company has utilized the term loan forthe purpose it was taken.

17. According to the information and explanations given to us and on an overall examination of the BalanceSheet and cash flows of the Company, we report that the Company has not utilized funds raised on short-term basis for long-term investment.

18. The Company has not made any preferential allotment of shares to parties or companies covered in theregister maintained under Section 301 of the Companies Act, 1956.

19. The Company did not issue any debentures during the year.

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

21. Based on the audit procedures performed and information and explanations given by the management,we report that no fraud on or by the Company has been noticed or reported during the year.

For and on behalf ofKALYANIWALLA MISTRY & ASSOCIATESChartered Accountants

Bahadur S. DastoorPartnerMembership No. 48936Place : MumbaiDate : May 10, 2006


102


This Year Previous YearSchedule Rupees Rupees

INCOMESales - Own Projects 441,634,459 185,429,148

- Development Projects 126,076,106 152,398,186Income from Development Projects 76,737,391 51,495,835Operating Income 13 53,142,859 26,998,677Other Income 14 6,987,239 2,157,094

TOTAL INCOME 704,578,054 418,478,940

EXPENDITURECost of sales - Own Projects 15 363,211,528 175,997,648

- Development Projects 62,040,000 85,358,564Employee Remuneration & Benefits 16 22,925,238 18,534,877Administration Expenses 17 19,766,499 11,699,691Interest & Finance Charges (Net) 18 52,976,531 35,601,852Depreciation 5,074,007 3,319,210

525,993,804 330,511,841

Profit for the year 178,584,250 87,967,099Provision for Current Taxes - (44,532,000) (30,034,500)

for fringe benefit tax (487,699) –for deferred tax 329,000 400,000

Profit After Tax 133,893,551 58,332,599Prior years tax adjustments (687,642) 196,641Surplus brought forward 77,220,108 55,919,900

Amount Available for Appropriation 210,426,018 114,449,140Less :

Interim Dividend – 25,500,000Proposed Dividend 62,000,000 –Dividend Distribution Tax 8,695,500 5,895,032Transfer to General Reserve 13,390,000 5,834,000

Surplus carried forward to Balance Sheet 126,340,518 77,220,108

Earnings per share (basic/diluted) in Rs. (Refer Note 9) 20.67 9.08

NOTES TO ACCOUNTS &ACCOUNTING POLICIES 19

BALANCE SHEET AS AT 31ST MARCH, 2006

Schedule This Year Previous YearRupees Rupees

SOURCES OF FUNDS

Shareholders’ FundsShare Capital 1 64,445,450 64,445,450Reserves & Surplus 2 413,988,398 351,477,988

Loan FundsSecured Loans 3 15,553,290 187,255,573Unsecured Loans 4 60,859,000 254,473,000

554,846,138 857,652,011

APPLICATION OF FUNDS 55.48 85.77

Fixed Assets 5

Gross Block 36,381,750 27,746,336Less: Depreciation 14,673,620 14,299,093

21,708,130 13,447,243

Investments 6 64,264,447 24,036

Current Assets, Loans & AdvancesInventories 7 204,751,391 182,130,830Sundry Debtors 8 543,247,709 277,163,500Cash & Bank Balances 9 149,863,239 41,776,280Loans & Advances 10 809,055,939 948,351,137

1,706,918,278 1,449,421,746

Less: Current Liabilities & ProvisionsCurrent Liabilities 11 1,045,877,540 521,522,751Provisions 12 194,753,178 85,975,263

1,240,630,718 607,498,014

Net Current Assets 466,287,561 841,923,732

Deferred Tax Asset 2,586,000 2,257,000

Miscellaneous Expenditure(to the extent not written off or adjusted)Deferred Revenue Expenditure – –

554,846,138 857,652,011(0) 1

NOTES TO ACCOUNTS &ACCOUNTING POLICIES 19


As per our Report of even date. Signatures to Profit and Loss Account andSchedules 10, 13 to 19

For and on behalf ofKALYANIWALLA MISTRY & ASSOCIATESChartered Accountants A. B. GODREJ Chairman

M. KORDE Managing DirectorB. S. DASTOOR S. KEMBHAVIPartner Company SecretaryMumbai, May 10, 2006


As per our Report of even date. Signatures to Balance Sheet andSchedules 1 to 12 and 19



SCHEDULES FORMING PART OF THE ACCOUNTS

This Year Previous YearRupees Rupees


AUTHORISED10,000,000 Equity Shares of Rs. 10/- each 100,000,000 100,000,000

100,000,000 100,000,000ISSUED, SUBSCRIBED & PAID UP6,444,545 Equity Shares of Rs. 10/- each fully paid up. 64,445,450 64,445,450(Out of above 5,264,645 (Previous year 5,073,965) shares are held byGodrej Industries Ltd., the Holding Company)

64,445,450 64,445,450


Share Premium As per last Balance Sheet 245,172,265 245,172,265

245,172,265 245,172,265

General Reserve - as per last Balance Sheet 29,085,615 23,251,615Add : Transfer from Profit & Loss Account 13,390,000 5,834,000

42,475,615 29,085,615

Profit and Loss Account 126,340,518 77,220,108

413,988,398 351,477,988


SCHEDULE 3 : SECURED LOANS

1) Cash Credit / Working Capital Demand Loan 15,303,290 165,170,657(Secured by equitable mortgage of immovable propertyof the Company’s Project at Juhu- Mumbai &Godrej Hill - Kalyan)

2) Term Loan from Banks 250,000 22,084,916(Secured by way of equitable mortgage of immovableproperty of the projects undertaken by the Company asProject Manager at Godrej Castlemaine - Pune)

15,553,290 187,255,573Of the above,Repayable within a year 15,553,290 178,751,582

SCHEDULE 4 : UNSECURED LOANS

Banks 45,000,000 215,000,000

Companies – 2,500,000

Fixed Deposits 15,859,000 36,973,000

60,859,000 254,473,000

Of the above,Repayable within a year 60,859,000 250,074,000


103



As at Additions Deductions As at As at Additions Deductions As at As at As at1st April, for the year for the year 31st March, 1st April, for the year for the year 31st March, 31st March, 31st March,

2005 2005-2006 2005-2006 2006 2005 2005-2006 2005-2006 2006 2006 2005Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Land - Leasehold 2,007,976 222,740 2,230,716 – 1,405,578 36,669 1,442,247 – – 602,398Building 1,477,796 11,500 1,489,296 – 757,802 6,012 763,814 – – 719,994Leasehold Improvement 4,731,182 4,027,759 604,551 8,154,390 951,344 1,424,403 235,103 2,140,644 6,013,746 3,779,838Motor Vehicle 4,736,275 1,210,309 382,501 5,564,083 3,153,568 661,195 282,417 3,532,346 2,031,737 1,582,707Furniture & Fixtures 3,615,082 3,773,763 45,300 7,343,545 1,256,091 959,985 28,569 2,187,507 5,156,038 2,358,991Office Equipment 2,907,329 2,331,315 202,240 5,036,404 820,468 546,284 143,129 1,223,623 3,812,781 2,086,861Computer 4,902,371 4,127,342 818,505 8,211,208 3,687,980 1,288,005 708,040 4,267,945 3,943,263 1,214,391Site Equipments 3,368,325 – 1,296,205 2,072,120 2,266,262 151,454 1,096,161 1,321,555 750,565 1,102,063

Total 27,746,336 15,704,728 7,069,314 36,381,750 14,299,093 5,074,007 4,699,480 14,673,620 21,708,130 13,447,243

Previous Year 27,964,734 3,359,562 3,577,959 27,746,336 13,967,328 3,319,210 2,987,444 14,299,093 13,447,243

This Year Previous YearSCHEDULE 6 : INVESTMENTS Rupees RupeesLong Term (At Cost)Quoted Investments (Note 3)100 Equity Shares of Rs.10/- each of 742 742Alacrity Housing Limited100 Equity Shares of Rs.10/- each of 616 616Alsa Construction & Housing Limited100 Equity Shares of Rs.10/- each of 1,066 1,066Ansal Buildwell Limited100 Equity Shares of Rs.10/- each of 1,366 1,366Ansal Properties & Construction Limited100 Equity Shares of Rs.10/- each of 3,081 3,081Ansal Properties & Industries Limited100 Equity Shares of Rs.10/- each of 1,241 1,241Lok Housing & Construction Limited100 Equity Shares of Rs.10/- each of 1,641 1,641Mantri Housing & Construction Limited100 Equity Shares of Rs.10/- each of 1,516 1,516Premier Hsg. & Industrial Ent. Limited100 Equity Shares of Rs.10/- each of 891 891D.S. Kulkarni Developers100 Equity Shares of Rs.10/- each of 6,366 6,366Unitech Limited100 Equity Shares of Rs.10/- each of 3,106 3,106The Great Eastern Shipping Company Limited100 Equity Shares of Rs.10/- each of 266 266Radhe Developers Limited23700 Equity Shares of Rs.10/- each of 2,370 2,370United Textiles Limited25000 Equity Shares of Rs.10/- each of 2,500 2,500Amitabh Bachchan Corporation Limited

26,768 26,768

Less : Provision for Diminution in Value 22,321 12,732

4,447 14,036Unquoted Investments1000 Equity Shares of Rs.10/- each of 10,000 10,000Saraswat Co-operative Bank LimitedInvestments In Subsidiary CompaniesGodrej Realty Pvt. Ltd.510,000 Equity Shares of Rs.10/- each of 5,100,000 –10% Secured redeemable optionally convertible debentures 58,650,000 –

Godrej Waterside Properties Pvt. Ltd.50000 Equity Shares of Rs.10/- each of 500,000 –

64,264,447 24,036

1. Cost of Quoted Investments 26,768 26,7682. Market Value of Quoted Investments 148,408 61,874

SCHEDULE 7 : INVENTORIES

Stock in trade (Note 4) 69,281,566 61,584,415Construction Work in progress 135,469,825 120,546,415

204,751,391 182,130,830SCHEDULE 8 : SUNDRY DEBTORS(UNSECURED, CONSIDERED GOOD)

Exceeding 6 months – –Others 543,247,709 277,163,500

543,247,709 277,163,500SCHEDULE 9 : CASH & BANK BALANCES

Cash & Cheques on Hand 87,142 6,275Balance with Scheduled Banks - on Current Accounts 10,453,555 3,640,625

- on Fixed Deposit Accounts 139,322,542 38,129,380(Refer Note 5) 149,863,239 41,776,280

SCHEDULE 10 : LOANS & ADVANCES(UNSECURED, CONSIDERED GOOD)

Loans & Advances recoverable in cash or in kindor for value to be received (Note 3) 62,307,989 32,758,140Development Manager Fees Accrued but not due 232,218,224 249,630,941Due on Management Projects (Including Work-in-progress) 386,020,789 553,161,532Less: Transfer to Cost of Sales - Development Projects (62,040,000) (85,358,565)

323,980,789 467,802,967Deposits 75,744,559 112,438,437Advance Tax & Tax deducted at source 114,804,377 85,720,650

809,055,939 948,351,136


SCHEDULE 11 : CURRENT LIABILITIESAcceptances – 5,679,738Sundry Creditors (Note 7) 28,029,216 37,298,013Investor Education and Protection Fund – –Advances received against sale of flats / TDRs 764,446,554 295,568,286Deposits 24,652,770 23,940,797Unclaimed Fixed Deposits 4,035,000 3,607,000Other liabilities 224,713,999 155,411,161Interest accrued but not due on Loans – 17,755

1,045,877,540 521,522,751SCHEDULE 12 : PROVISIONSGratuity 2,755,825 2,223,511Leave Encashment 2,634,878 2,435,438Proposed Dividend 62,000,000 –Tax on Dividend 8,695,500 –For Taxation 118,666,975 81,316,314

194,753,178 85,975,263SCHEDULE 13 : OPERATING INCOME (GROSS)Project Management fees 2,564 6,216Other Income from Customers – 1,405,630Lease Rent 53,128,295 25,574,830Licence Fees 12,000 12,000

53,142,859 26,998,677Tax Deducted at source 11,877,497 5,488,087SCHEDULE 14 : OTHER INCOMEDividends 3,330 660Provision for diminution in value of investments written back – 4,049Profit on sale of Fixed Assets (net) 5,376,611 –Miscellaneous Income 1,607,298 2,152,385

6,987,239 2,157,094SCHEDULE 15 : COST OF SALESOpening Stock: 182,130,830 230,138,294Add : Expenditure/Transfers from Advances during the yearStock-In-Trade Acquired on Area Sharing – 34,402,940Development Rights 190,000,000 –Construction 99,960,010 4,083,214Infrastructure 27,543 25,036,931Architect Fees 9,116,217 5,670,259Advertisement Expenses 11,069,565 10,909,564Overheads / Interest 75,658,756 47,887,275

385,832,091 127,990,183Less : Closing Stock (204,751,392) (182,130,830)

363,211,528 175,997,648SCHEDULE 16 : EMPLOYEE REMUNERATION & BENEFITSSalaries, Bonus, Gratuity & Allowances 19,862,794 15,957,776Contribution to Provident & other funds 2,023,505 1,425,718Other Employee Benefits 1,038,939 1,151,383

22,925,238 18,534,877SCHEDULE 17 : ADMINISTRATION EXPENSESCost of Project Management 168,360 260,345Consultancy Charges 4,372,846 1,307,704Service Charges / Licence Fees 2,328,656 2,616,469Marketing Expenses – 370,441Compensation Claims – 791,765Loss on sale of Fixed Assets (Net) – 175,569Other Operating Expenses 12,819,182 6,109,533Deferred Revenue Expenditure written off 67,866 67,866Provision for diminution in value of investments 9,589 –

19,766,499 11,699,691SCHEDULE 18 : INTEREST AND FINANCE CHARGES (NET)Interest Paid

- Banks 14,630,446 38,895,784- Inter Corporate Deposits 3,525,045 8,249,217- Projects and landlords 42,082,239 –- Others 15,550,516 20,373,981

Total Interest Paid 75,788,246 67,518,982Add : Brokerage & other Financial charges 1,941,802 1,978,807Total Interest/Finance Charges Paid 77,730,048 69,497,789Less: Interest Received (Gross)

- Customers – 3,450- Projects and landlords 22,523,303 33,576,966- Others 2,230,214 315,522

Less: Interest Received (Gross) 24,753,517 33,895,938NET INTEREST 52,976,531 35,601,852Tax Deducted at source 5,980,919 3,034,602


104

SCHEDULE 19 : NOTES TO ACCOUNTS & ACCOUNTING POLICIES

1) ACCOUNTING POLICIES

a) GENERALThe financial statements are prepared under the historical cost convention in accordance with GenerallyAccepted Accounting Principles in India, the Accounting Standards issued by The Institute of CharteredAccountants of India and the provisions of the Companies Act, 1956.

b) FIXED ASSETSFixed assets are stated at cost of acquisition or construction less accumulated depreciation. Cost includesall incidental expenses related to acquisition and installation, other pre-operation expenses and interestin case of construction.Carrying amount of cash generating units /assets are reviewed at balance sheet date to determinewhether there is any indication of impairment. If such indication exists, the recoverable amount isestimated as the net selling price or value in use, whichever is higher. Impairment loss, if any, is recognizedwhenever carrying amount exceeds the recoverable amount.

c) DEPRECIATION / AMORTIZATIONDepreciation has been provided on Written Down Value basis, at the rates specified in Schedule XIV ofthe Companies Act, 1956.Assets acquired on lease are depreciated over the period of the lease.Leasehold improvements are amortized over a period of five years.

d) INVESTMENTSInvestments are classified into long term and current investments.Long-term investments are carried at cost. Provision for diminution, if any, in the value of each long-terminvestment is made to recognize a decline, other than of a temporary nature.Current investments are carried individually at lower of cost and fair value and the resultant decline, ifany, is charged to revenue.

e) INVENTORIESInventories are valued as under :a) Completed Flats – At lower of Cost or Market valueb) Construction Work-in-Progress – At costConstruction Work-in-Progress includes cost of land, premium for development rights, constructioncosts, allocated interest and expenses incidental to the projects undertaken by the Company.

f ) REVENUE RECOGNITIONThe Company is following the “Percentage of Completion Method” of accounting. As per this method,revenue in Profit & Loss Account at the end of the accounting year is recognized in proportion to the actualcost incurred as against the total estimated cost of projects under execution with the Company.Determination of revenues under the percentage of completion method necessarily involves makingestimates by the Company, some of which are of a technical nature, concerning, where relevant, thepercentages of completion, costs to completion, the expected revenues from the project /activity and theforeseeable losses to completion. Such estimates have been relied upon by the auditors.Income from operation of commercial complexes is recognized over the tenure of the lease/serviceagreement.Interest income is accounted on an accrual basis at contracted rates.Dividend income is recognized when the right to receive the same is established.

g) DEVELOPMENT MANAGER FEESThe Company has been entering into Development & Project Management agreements with landlords.Accounting for income from such projects is done on accrual basis on percentage of completion or asper the terms of the agreement.

h) RETIREMENT BENEFITSRetirement benefits to employees comprise payments under defined contribution plans like providentfund and family pension. Payments under defined contribution plans are charged to the profit and lossaccount. The liability in respect of defined benefit schemes like gratuity and leave encashment benefiton retirement is provided on the basis of actuarial valuation at the end of each year.

i) BORROWING COSTInterest and commitment charges incurred in connection with borrowing of funds, which are incurredfor the development of long term projects are transferred to Construction Work in Progress / Due onManagement Project, as a part of the cost of the projects at weighted average of the borrowing cost / ratesas per Agreements respectively.Other borrowing costs are recognized as an expense in the period in which they are incurred.

j) EARNINGS PER SHAREThe basic earnings per share is computed using the weighted average number of common sharesoutstanding during the period. Diluted earnings per share is computed using the weighted averagenumber of common and dilutive common equivalent shares outstanding during the period, exceptwhere the results would be anti-dilutive.

k) PROVISION FOR TAXATIONTax expense comprises both current and deferred tax.Current tax is measured at the amount expected to be paid to the tax authorities, using the applicable taxrates and tax laws.Deferred tax is recognized on timing differences, being the differences between the taxable income andthe accounting income that originate in one period and are capable of reversal in one or more subsequentperiods. Deferred tax assets, subject to consideration of prudence, are recognized and carried forwardonly to the extent that there is a reasonable certainty that sufficient future taxable income will be availableagainst which such deferred tax assets can be realized. The tax effect is calculated on the accumulatedtiming difference at the year-end based on the tax rates and laws enacted or substantially enacted on thebalance sheet date.

l) FOREIGN CURRENCY TRANSACTIONSTransactions in foreign currency are recorded at the exchange rates prevailing on the date of thetransaction. Assets and liabilities related to foreign currency transactions, remaining unsettled at the yearend, are transalated at the year end exchange rates. Forward exchange contracts, remaining unsetteledat the year end, backed by underlying assets or liabilities are also translated at year end exchangerates.The premium payable on foreign exchange contracts is amortised over the period of the contract.Exchange gains / losses are recognised in the Profit and Loss Account except in respect of liabilitiesincurred to acquire fixed assets in which case, they are adjusted to the carrying amount of such fixedassets.

m) ALLOCATION OF EXPENSESCorporate Employee Remuneration and Administration expenses are allocated to various projects ona reasonable basis as estimated by the management.

n) PROVISIONS AND CONTINGENT LIABILITIESProvisions are recognized in the accounts in respect of present probable obligations, the amount of whichcan be reliably estimated.Contingent liabilities are disclosed in respect of possible obligations that arise from past events but theirexistence is confirmed by the occurrence or non-occurrence of one or more uncertain future events notwholly within the control of the Company.

2) CONTINGENT LIABILITIES:As at As at

Matters 31st March 2006 31st March 2005 Rupees Rupees

a) Uncalled amount of Rs. 80/- & Rs. 30/-on 70 & 75 partly paid shares respectively ofTahir Properties Limited 7,850/- 7,850/-

b) Consideration payable for acquisition of shares inGirikandra Holiday Homes & Resorts Limited(a subsidiary company) for purchase of land. 9,473,750/- 9,473,750/-

c) Claims against the company not acknowledgedas debts represents cases filed by parties in theConsumer forum and High Court and disputedby the Company as advised by our advocates.In the opinion of the management the claim isnot sustainable. 9,427,512/- 5,621,273/-

d) Guarantee given on behalf of project owner(Simplex Mills Company Limited). The Company isentitled to create a corresponding mortgage againstproject assets as considered necessary. 360,000,000/- 360,000,000/-

3) INVENTORIES, CURRENT ASSETS, LOANS AND ADVANCES:a) Construction Work in Progress and Due on Management projects represents materials at site and

unbilled cost on the projects. Based on projections and estimates by the Company of the expectedrevenues and costs to completion. In the opinion of the management, the net realisable value of theconstruction work in progress will not be lower than the costs so included.

b) The company has been entering into Development Agreements with landlords. DevelopmentManager Fees amounting to Rs.232,218,224/- (Previous Year Rs. 249,630,941/-) accrued as perterms of the Agreement are receivable by the Company based upon progress milestones specifiedin the respective Agreements and have been disclosed as Development Manager Fees accruedbut not due in Schedule 10.

4) INVENTORIESStock-in-Trade includes shares in the following Companies - at cost or market value (whichever islower):

Current Year Previous YearRupees Rupees

Tahir Properties Limiteda) 32,597 Equity shares of Rs. 100/- each,

fully paid up 49,993,350 42,296,198b) 70 Equity shares of Rs. 100/- each,

Rs. 20/- paid up 1,400 1,400c) 75 Redeemable Preference Class A shares of

Rs.100/- each, Rs.70/- paid 5,250 5,250Girikandra Holiday Homes & Resorts Limited(a subsidiary company)498 Equity shares of Rs.1,000/- each, fully paid up 17,880,000 17,880,000

5) CASH & BANK BALANCESBalances with scheduled banks on deposit accounts include Rs. 33,829,379/- (Previous yearRs. 33,829,379/-) received from flat buyers and held in trust on their behalf in a corpus fund.

6) LOANS AND ADVANCESa) Amounts due from companies under the same management. (Amount in Rupees)

Particulars Balance as Maximum Balance as Maximumon March Debit on March Debit31, 2006 Balance 31, 2005 Balance

during the duringyear previous

yearGodrej Industries Ltd.

- Advances 19,736 28,089 64,920 4,027,560- Deposits 410,000 410,000 385,000 385,000

Girikandra Holiday Homes & Resorts Ltd.- Advances 28,267,717 28,267,717 28,048,667 28,048,667

b) Amount due from Directors of the Company towards Housing Loan / Consumer Durable Loan /Contingency loan under the Company’s Scheme Rs. NIL (Maximum debit balance during the yearRs.21,189/-) (Previous year Rs. 21,189/- Maximum debit balance Rs. 42,403/-)

c) Due on Management Projects include a sum of Rs.20,056,962/- (Previous Year Rs.19,986,141/-) onaccount of a project, where the matter is sub-judice with arbitrators.

7) SUNDRY CREDITORS AND PROVISIONSThere are no parties within the definition of Small Scale Industrial Undertakings to whom the Companyowes any dues. The auditors have accepted the representation of the management in this matter in theabsence of a database identifying the creditors, which are small scale industrial undertakings.

8) LEASESa) The Company’s significant leasing arrangements are in respect of operating leases for Residential

premises. Lease income from operating leases is recognized on a straight-line basis over theperiod of lease. The particulars of the premises given under operating leases are as under:


Gross Carrying Amount of Assets NIL 1,477,796Accumulated Depreciation NIL 757,803Depreciation for the period NIL 37,894Stock–in–trade (Refer note below) 50,000,000 42,302,848Future minimum lease receipts undernon-cancelable operating leases� Not later than 1 year 2,976,120 2,006,676� Later than 1 year and not later than 5 years 132,000 132,000

Note : The available-for-sale asset, given on lease, has been classified by the Company underStock-in-trade.


105

b) The Company’s significant leasing arrangements are in respect of operating leases for Commercialpremises. Lease expenditure for operating leases is recognized on a straight-line basis over the periodof lease. The particulars of the premises taken on operating leases are as under:


Future minimum lease payments undernon-cancelable operating leasesØ Not later than 1 year 6,400,000 4,800,000Ø Later than 1 year and not later than 5 years 5,775,000 2,200,000

9) Earnings per shareProfit after tax and prior years tax adjustments as perProfit & Loss Account 133,205,909 58,529,240Weighted average no. of equity shares outstanding 6,444,545 6,444,545Basic/Diluted earnings per share 20.67 9.08Nominal value of shares 10 10

10) The amount of exchange difference included in the Profit and Loss Account, under the related heads ofexpenses is Rs.1,93,933/- (Previous Year Rs.2,052,134/-). The amount of exchange difference in respectof forward exchange contracts to be recognized in the profit and loss account of subsequent periods Rs.NIL (Previous year Rs. 391,673/-).

11) Expenditure in Foreign Currency :-Travelling Expenses 286,952 141,244Other Expenditure 468,554 3,126,049TOTAL 755,506 3,267,293

12) Computation of Net Profit under Section 349 of the Companies Act, 1956.Profit before Tax as per Profit and Loss Account 178,597,185 87,967,099Add :-Managerial Remuneration 6,210,495 4,265,465Depreciation 5,074,007 3,319,210Less :-Profit on sale of asset as per accounts 5,376,611 12,397Depreciation 5,074,007 3,319,210Net Profit for the purpose of Directors Remuneration 179,431,069 92,220,167(a) 5% of Net Profits as computed above 8,971,554 4,611,008(b) Maximum remuneration permissible under the Act

(computed on the basis of inadequacy of profits) 3,600,000 3,600,000(a) or (b) whichever is greater 8,971,554 4,611,008Managerial Remuneration:A Salaries 3,648,408 2,171,400B Contribution to Provident Fund 240,000 165,000C Estimated Monetary Value of Perquisites 265,633 417,004D Performance Linked Variable

Remuneration 2,056,454 1,512,061

6,210,495 4,265,465

Notes :In case of the Managing Director - Performance Linked Variable Remuneration of Rs.2,056,454/- (PreviousYear Rs.1,512,061/-) is on the basis of provision made in the accounts.

13) Deferred TaxThe tax effect of significant temporary differences that resulted in deferred tax assets are: -Depreciation on Fixed Asset 771,000 552,000Others 1,815,000 1,705,000

Deferred Tax Asset 2,586,000 2,257,000

14) Segment Information : As the company has only one business segment, disclosure under AccountingStandard 17 on “Segment Reporting” issued by the Institute of Chartered Accountants of India is notapplicable.

15) Amounts paid to Auditors :a. Audit Fees 1,369,328 1,190,160b. Audit under Other Statutes 404,064 352,640c. Certification 35,815 182,990d. Reimbursement of Expenses 7,368 4,373

16) Revised Accounting Standard 7 – Construction Contracts.The revised Accounting Standard 7 on Construction Contracts is now applicable only to contractors andnot to developers. Accordingly the income from projects entered into after 1st April 2003, where thecompany is a developer will be recognized in consonance with the principles laid down by AccountingStandard 9 for Revenue Recognition.

17) Related Party DisclosuresRelated party disclosures as required by AS - 18, “ Related Party Disclosures”, are given below:1. Relationships:

(i) Shareholders (the Godrej Group Shareholding ) in the CompanyGodrej Industries Limited (GIL) holds 81.69% in the Company. GIL is the subsidiary of Godrej& Boyce Mfg. Co. Limited, the Ultimate Holding Company.

(ii) Subsidiaries :Girikandra Holiday Homes & Resorts Limited (99%) (GHHRL)Godrej Realty Private Limited (51%) (GRL)Godrej Waterside Properties Private Limited (100%) (GWPL)

(iii) Other Related Parties in Godrej Group, where common control exists :Vora Soaps Limited (VSL)Bahar Agrochem & Feeds P. Limited (BAFPL)Ensemble Holdings & Finance Limited (EHFL)Godrej Appliances Limited (GAL)Godrej Agrovet Limited (GAVL)Godrej Consumer Products Limited (GCPL)Godrej Saralee Limited (GSLL)Godrej Hicare Limited (GHCL)

(iv) Key Management Personnel :Mr. Milind Surendra Korde

(v) Individuals excercising Significant Influence (and their relatives) :Mr. A. B. GodrejMr. N. B. Godrej

2. The following transactions were carried out with the related parties in the ordinary course of business.(i) Details relating to parties referred to in items 1 (i), (ii) and (iii) above

Sr. Godrej & Godrej Other Related PartiesNo. Description Boyce Industries in Godrej Group

Mfg. Co. Ltd. Ltd. GAL+VSL+GHCL+GSLL+GRL+GWPL+GHHRL+BAFPL+EHFL

+GCPL+GAVL

1. Investment in equity share capital – – 5,600,0002. Investment in debentures – – 58,650,0003. Purchase of fixed assets 3,424,267 – 635,461

837,177 – 87,1804. Sale of fixed assets – – 100,0835. Loans & Advances given – – 219,0506. Deposits – 350,000 –7. Expenses charged to 7,709 1,711,896 15,600,959

other companies – 65,4138. Expenses charged by other 26,475,136 2,628,243 117,401

companies (net) 32,227,595 1,218,973 148,1119. Interest expense on ICD’s taken – –

2,304,79310. ICD’s taken during the year – –

130,000,00011. Outstanding receivables, 830,409 309,739 29,439,825

net of (payables) – (3,170,080) 28,048,66712. Dividend Paid / Payable 50,648,726 2,103,531

20,076,841 1,619,651(ii) Details relating to persons referred

to in items 1 (iv) & (v) aboveCurrent Previous

Year YearKey Management Personnel :

1. Remuneration 6,210,495 4,2654652. Interest income on loans given 516 1,6103. Reimbursement of travel expenses

Individuals exercising significantInfluence (and their relatives) 317,489 21,189

4. Dividend paid – Mr. N.B.Godrej 1,849,549 760,701

Figures in italics are for previous year

3. Significant Related Party Transactions.

Nature of Transactions Other Related Parties Amountin the Godrej Group Rupees

Investment in equity share capital Godrej Realty Limited 5,100,000Investment in debentures Godrej Realty Limited 58,650,000Purchase in fixed assets Godrej Agrovet Limited 635,461

Godrej Agrovet Limited 87,180Sale of fixed assets Godrej Realty Limited 100,083Loans & Advances given Girikandra Holiday Homes

& Resorts Ltd 219,050Expenses charged to other cos. Godrej Realty Limited 15,600,959Expenses charged by other cos. (net) Godrej Agovet Limited 22,811

Godrej Sara Lee Limited 13,400Godrej Hicare India Limited 70,300Godrej Infotech Limited 30,000Godrej Hicare India Limited 96,000

Outstanding receivables, Girikandra Holiday Homesnet of (payables) & Resorts Limited 28,267,717

Girikandra Holiday Homes& Resorts Limited 28,048,667

Dividend Paid / Payable Bahar Agrochem & FeedsPrivate Limited 1,331,675Ensemble Holdings & Finance Limited 738,184Bahar Agrochem & FeedsPrivate Limited 547,705Ensemble Holdings & Finance Limited 1,056,198

Figures in italics are for previous year

18) Information in respect of Joint Ventures.Jointly Controlled Operations - Development of the following Residential / Commercial Projects:

Coliseum, MumbaiWoodsman Estate, BangaloreWaterside I T Park, KolkataPlanet Godrej, MumbaiLa Vista, MumbaiWaldorf, MumbaiGlenelg, MumbaiEdenwoods, MumbaiShivajinagar, PuneNLM, KalyanGVD, KalyanRSM/HKB, KalyanGrenville Park, MumbaiWalkeshwar, Mumbai

19) Additional information as required under Part IV of Schedule VI of the Companies Act, 1956 to the extentnot applicable has not been given.


106

20) STATEMENT PURSUANT TO PART IV OF SCHEDULE VI OF THE COMPANIES ACT, 1956

Balance Sheet Abstract for the Year Ended 31st March 2006 And Company’s GeneralBusiness Profile

a) Registration DetailsRegistration No. : 35308State Code : 11Balance Sheet Date : 31st March, 2006

b) Capital raised during the year (Amount in Rs. thousands)Public Issue : NilRights Issue : NilBonus Issue : NilPrivate Placement : Nil

c) Position of mobilisation and deployment of funds (Amount in Rs. thousands)Total Liabilities : 1,795,477Total Assets : 1,795,477

Sources of FundsPaid-up Capital : 64,446Reserves and Surplus : 413,988Secured Loans : 155,532Unsecured Loans : 608,590

Application of FundsNet Fixed Assets : 21,708Investments : 64,264Net Current Assets : 466,288Misc. Expenditure : NilDeferred Tax Asset : 2,586Accumulated Losses : Nil

d) Performance of Company (Amount in Rs. thousands)Turnover : 704,578Total Expenditure (Net of other income) : 525,994Profit/(loss) before tax : 178,584Profit/(loss) after tax : 133,894Earning per Share in Rs.(on an annualized basis) : 20.67Dividend rate % : 96.2054%

e) Generic Name of three principalproducts/services of Company : N.A.

Cash Flow Statement for the year ended March 31, 2006

Particulars Current Year Previous YearRupees Rupees Rupees

Cash from Operating ActivitiesNet Profit before tax & extraordinary items 178,584,250 87,967,099Add : Non-cash / non-operating ExpensesDepreciation 5,074,007 3,319,210Interest Paid 77,730,048 69,392,361Loss on sale of Fixed Asset – 175,569Provision for Diminution in value of Investment 9,589Deferred Revenue Expenditure 67,866 82,881,510 67,866

261,465,760 160,922,105Less :Non-cash / non-operating IncomeProvision for Diminution in value ofInvestment w/back – 4,049Profit on Sale of Fixed Assets 5,376,611 –Interest Income 24,753,517 33,895,938Dividend Received 3,330 30,133,458 660

231,332,302 127,021,458Add :Change in Inventory (22,620,561) 48,007,465Change in Sundry Debtors (266,084,209) 128,408,437Change in Loans & Advances 168,311,061 41,954,202Change in Current Liabilities / Provisions 525,086,544 7,489,049

636,025,137 352,880,611Less :Taxes Paid (Net) 37,440,410 40,308,297

598,584,727 312,572,314Cash from Investing ActivitiesPurchase of Fixed Assets (15,704,728) (3,359,562)Sale of Fixed Assets 7,746,445 414,947Purchase of Investments (64,250,000) –Interest Received 24,753,517 33,895,938Dividend Received 3,330 660

(47,451,436) 30,951,983Cash from Financing ActivitiesChange in Cash Credit (149,867,367) (32,023,717)Change in Term Loan (21,834,916) (157,790,886)Change in Unsecured Loan from Bank (170,000,000) (25,000,000)Change in Inter Compnay Deposit (2,500,000) (102,500,000)Change in Fixed Deposits (21,114,000) (6,635,000)Interest Paid (77,730,048) (69,392,361)Payment of Dividend – (45,500,000)Tax on Distrubuted Profits – (5,895,032)

(443,046,331) (444,736,996)

Cash & Cash Equivalent 108,086,959 (101,212,699)

Add : Cash & Bank Balance as on 31.3.2005 41,776,280 142,988,979

Cash & Bank Balance as on 31.3.2006 149,863,239 41,776,280

Notes :1. The cash flow statement has been prepared under the ‘Indirect Method’ as set out in the Accounting

Standard (AS) 3 on ‘Cash Flow Statement’, and presents cash flows by operating, investing andfinancing activities.

2. Figures in brackets are outflows / deductions.3. Figures for the previous year have been regrouped / restated wherever necessary to conform to this




STATEMENT REGARDING SUBSIDIARY COMPANY PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956.

1. Name of the Company : Girikandra Holiday Homes & Resorts Ltd.

2. Financial Year ending : 31st March, 2006

3. The Company’s interest in the : 500 Equity Shares of Rs. 1,000/- each, fully paid-subsidiary as on above date. up (representing 100% of the Share Capital)

4. Net Profit / (Loss) of the subsidiary : (Rs. 2,500/-)company (Not dealt with in the accountsof the Company)

S. KEMBHAVI A. B. GODREJ MILIND KORDECompany Secretary Chairman Managing Director



1. Name of the Company : Godrej Realty Private Limited


3. The Company’s interest in the : 510,000 Equity Shares of Rs. 10/- each, fully paid-subsidiary as on above date. up (representing 51% of the Share Capital)

4. Net Profit / (Loss) of the subsidiary : Nilcompany (Not dealt with in the accountsof the Company)




1. Name of the Company : Godrej Waterside Properties Private Limited


3. The Company’s interest in the : 50,000 Equity Shares of Rs. 10/- each, fully paid-subsidiary as on above date. up (representing 100% of the Share Capital)

4. Net Profit / (Loss) of the subsidiary : Nilcompany (Not dealt with in the accountsof the Company)




107

BOARD OF DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST MARCH, 2006

To The Shareholders,

Your Directors have pleasure in submitting their Report alongwith the audited Accounts for the year ended31st March, 2006.1. FINANCIAL HIGHLIGHTS :

The accounting results for the year ended 31st March, 2006 reveal that there is a deficit at the end ofthe year.

2. REVIEW OF OPERATIONS :The Company has not commenced any activities during the year.

3. DIVIDEND :The Directors regret that no dividend can be recommended.

4. DIRECTORS :In accordance with the provision of the Articles of Association of the Company, Mr. V. Srinivasanretires by rotation and being eligible offers himself for reappointment.

5. DIRECTORS’ RESPONSIBILITY STATEMENT :Your Directors confirm :(i) that in the preparation of the annual accounts, the applicable accounting standards have been

followed;(ii) that the Directors have selected such accounting policies and applied them consistently and

made judgments and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company at the end of the financial year ended 31st March,2006 and of the profit of the Company for that year;

(iii) that the Directors had taken proper and sufficient care 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 and otherirregularities;

(iv) that the Directors have prepared the annual accounts on a going concern basis.

6. APPOINTMENT OF AUDITORS :

M/s. Kalyaniwalla Mistry and Associates retire at the ensuing Annual General Meeting and areeligible for re-appointment for which they have given their consent.

7. ADDITIONAL INFORMATION :(a) Since the Company has no employees, the particulars of the employees to be disclosed u/s 217

(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975,are not given.

(b) Information in respect of Conservation of Energy, Technology Absorption and Foreign ExchangeEarnings and Outgo, required under Section 217(1)(e) of the Companies Act, 1956 read withthe Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 isprovided hereunder:

(i) Conservation of Energy :Expenses on account of Energy are negligible.

(ii) Technology Absorption :It is an on going process.

(iii) Foreign Exchange Earning & Outgo :The Company has not earned any Foreign Exchange nor incurred any Foreign ExchangeExpenditure during the year.


TANYA A. DUBASH MILIND S. KORDE

Directors


AUDITORS’ REPORT

Referred to in paragraph (3) of our report of even date.1. The Company does not have any fixed assets.2. The Company does not have any inventories.3. (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 Companies Act, 1956.(b) Consequently, the question of commenting on the rates of interest and conditions of the loans

granted being prejudicial to the interests of the Company, receipt of regular principal andinterest and reasonable steps taken for recovery of principal and interest does not arise.

(c) The Company has not taken any loans, secured or unsecured from companies, firms or otherparties covered in the register maintained under Section 301 of the Companies Act, 1956.

(d) Consequently, the question of commenting on the rates of interest and conditions of the loanstaken being prejudicial to the interests of the Company and payment of regular principal andinterest does not arise.

4. As there are no inventories and assets, nor are there any sales during the year, the question ofadequate internal control procedures commensurate with the size of the Company and the nature ofits business, for the purchases of inventory, fixed assets and for the sale of goods and services doesnot arise. During the course of our audit, we have not observed a continuing failure to correct majorweaknesses in internal controls.

5. Based on the audit procedures applied by us and according to the information and explanationsprovided by the management, we are of the opinion that there are no transactions that need to beentered into the register maintained under Section 301 of the Companies Act, 1956.

6. In our opinion and according to the information and explanations given to us, the Company has notaccepted any deposits from the public and hence the provisions of Sections 58A, 58AA or any otherprovisions of the Companies Act, 1956 are not applicable.

7. In our opinion and according to the information and explanations given to us, the internal auditsystem is commensurate with the size of the Company and nature of its business.

8. The maintenance of cost records has not been prescribed by the Central Government under Section209(1)(d) of the Companies Act, 1956, for any of the Company's products.

9. (a) According to the information and explanations given to us and on the basis of our examinationof the books of accounts, during the year, the Company has no statutory dues including ProvidentFund, Investor Education and Protection Fund, Employees’ State Insurance, Income Tax, SalesTax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, cess and other statutory dues incurredduring the year. According to the information and explanations given to us, there are no

To the Members of Girikandra Holiday Homes and Resorts Limited

1. We have audited the attached Balance Sheet of GIRIKANDRA HOLIDAY HOMES AND RESORTSLIMITED, as at 31st March, 2006 and also the Profit and Loss Account and Cash Flow Statement ofthe Company for the year ended on that date anexed thereto. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on thesefinancial statements based on our audit.

2. We 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 whetherthe financial statements are free of material misstatement. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financial statements. An audit alsoincludes assessing the accounting principles used and significant estimates made by management,as well as evaluating the overall financial statement presentation. We believe that our audit providesa reasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Government interms of sub-section (4A) of Section 227 of the Companies Act, 1956, we annex hereto a statementon 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 such books.c) The Balance Sheet and Profit and Loss Account & Cash flow Statement dealt with by this report

are in agreement with the books of account.

d) In our opinion, the Balance Sheet and Profit and Loss Account and the Cash flow statementdealt with by this report comply with the accounting standards referred to in sub-section (3C) ofSection 211 of the Companies Act, 1956.

e) In our opinion and to the best of our information and according to the explanations given to us,the said accounts read with the notes thereon, give the information required by the CompaniesAct, 1956, in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India:i) in the case of the Balance Sheet, the state of affairs of the Company as at 31st March,

2006; andii) in the case of the Profit and Loss Account, of the loss of the Company for the year ended

on that date.5. On the basis of the written representations received from the Directors as on 31st March, 2006, and

taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on31st March, 2005 from being appointed as a Director in terms of clause (g) of sub-section (1) ofsection 274 of the Companies Act, 1956.

For and on behalf of

KALYANIWALLA MISTRY AND ASSOCIATESChartered Accountants

BAHADUR S. DASTOORPartner

Mumbai, May 10, 2006 Membership No. 48936

ANNEXURE TO THE AUDITORS’ REPORTundisputed dues payable in respect of above as at 31st March, 2005 for a period of more thansix months from the date they became payable.

(b) According to the information and explanations given to us, there are no dues outstanding of Sales Tax,Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty or cess on account of any dispute.

10. The Company’s accumulated losses at the end of the financial year are more than fifty percent of its networth. However, it has incurred cash losses in the current and immediately preceding financial year.

11. According to the information and explanations given to us and based on the documents and recordsproduced to us, the Company does not have dues to banks, financial institutions or debenture holders.


13. In our opinion and according to the information and explanations given to us, the nature of activities of theCompany does not attract any special statute applicable to chit fund and nidhi/mutual benefit fund/societies.


for loans taken by others from banks or financial Institutions.16. The Company did not have any term loans during the year.17. According to the information and explanations given to us and on an overall examination of the

Balance Sheet and Cash Flows of the Company, we report that the Company has not utilized fundsraised on short-term basis for long-term investments.

18. The Company has not made any preferential allotment of shares to parties or companies covered inthe register maintained under Section 301 of the Companies Act, 1956.

19. The Company did not issue any debentures outstanding during the year.20. The Company has not raised any money through a public issue during the year.21. Based on the audit procedures performed and information and explanations given by the management,

we report that no fraud on or by the Company has been noticed or reported during the year.For and on behalf of


BAHADUR S. DASTOORPartner

Mumbai, May 10, 2006 Membership No. 48936

Girikandra Holiday Homes & Resorts Limited

Girikandra Holiday Homes & Resorts Limited

108

BALANCE SHEET AS AT MARCH 31, 2006This Year Previous Year

Schedule Rupees RupeesSOURCES OF FUNDS

Shareholders’ FundsShare Capital 1 500,000 500,000Reserves & Surplus – –Loan FundsUnsecured Loans 28,267,717 28,048,667TOTAL 28,767,717 28,548,667

APPLICATION OF FUNDSFixed Assets – –Investments – –Current Assets, Loans and AdvancesProjects in Progress 2 28,796,852 28,577,310Cash Balance – –Advance Income tax A Y 2004-2005 4,239 4,239

28,801,091 28,581,549Less : Current Liabilities and Provisions

Current Liabilities 3 53,448 52,95653,448 52,956

Net Current Assets 28,747,643 28,528,593Miscellaneous Expenditure(to the extent not written off or adjusted)

Preliminary Expenditure 10,000 12,500Profit and Loss Account 10,074 7,574

TOTAL 28,767,717 28,548,667

NOTES TO ACCOUNTS & ACCOUNTING POLICIES 5



INCOME

Sundry Balances written back (Net) – –

– –

EXPENDITURE

Administration Expenses 4 219,542 182,071

Preliminary Expenses written off 2,500 2,500

222,042 184,571

Less : Amount Transferred to Projectin Progress (219,542) (182,071)

(Deficit)/Surplus for the year (2,500) (2,500)

Deficit brought forward 7,574 5,074

Deficit carried forward to Balance Sheet 10,074 7,574

Earning per share (basic/diluted ) in Rs. (5.00) (5.00)

NOTES TO ACCOUNTS & ACCOUNTING POLICIES 5


As per our Report of even date. Signatures to the Profit and Loss Accountand Schedules 4 and 5


B. S. DASTOOR T. A. DUBASH M. S. KORDEPartner Directors Directors

Mumbai, Dated : May 10, 2006

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006

This Year Previous YearSCHEDULE 1 : SHARE CAPITAL Rupees Rupees

AUTHORISED1000 Equity Shares of Rs.1000/- each 1,000,000 1,000,000

1,000,000 1,000,000ISSUED & SUBSCRIBED500 Equity Shares of Rs.1000/- each 500,000 500,000

500,000 500,000PAID UP500 Equity Shares of Rs.1000/- each fully paid-up 500,000 500,000

[The entire share capital is held by Godrej Properties Limitedthe Holding Company & its nominees]

500,000 500,000SCHEDULE 2 : PROJECT IN PROGRESSProject Payments 28,577,310 28,395,239Add : Expenses transferred from Profit & Loss Account 219,542 182,071

28,796,852 28,577,310

SCHEDULE 3 : CURRENT LIABILITIESSundry Creditors (Note 1)For Expenses 53,448 52,956Investors Education & Protection Fund – –

53,448 52,956SCHEDULE 4 : ADMINISTRATION EXPENSESRent, Rates & Taxes 36,002 –Payment to Auditors - Audit Fees 28,060 27,550Other Operating Expenses 155,480 154,521

219,542 182,071

SCHEDULE 5 : NOTES TO ACCOUNTS AND ACCOUNTING POLICIES

ACCOUNTING POLICIES

1) GENERALThe accounts are prepared under the Historical Cost Convention, using the accrual method ofaccounting.

2) MISCELLANEOUS EXPENDITUREMiscellaneous expenditure is amortised over a period of 10 years.

3) The basic earnings per share is computed using the weighted average number of common sharesoutstanding during the period. Diluted earnings per share is computed using the weighted averagenumber of common and dilutive common equivalent shares outstanding during the period, exceptwhere the results would be anti-dilutive.

NOTES TO ACCOUNTS :1. There are no parties within the definition of Small Scale Industrial Undertakings to whom the

Company owes any sum.2. Additional information required to be given under Schedule VI, Part II of the Companies Act, 1956 to

the extent not applicable is not given.3. Earnings per share This Year Previous Year

Profit after transfer to project in Progress as perProfit & Loss Account Rs. (2500) Rs. (2,500)Weighted average no. of equity shares outstanding 500 500Basic/Diluted earnings per share Rs. (5) Rs. (5)Nominal value of shares Rs. 1,000 Rs. 1,000

4. AS 18 – RELATED PARTY DISCLOSURERelated party disclosures as required by AS-18, “Related Party Disclosures”, are given below:1. Relationships:

(i) Shareholders (the Godrej Group Shareholding) in the Company Godrej Properties Limited(GPL) holds 100% in the Company. GPL is the Subsidiary of Godrej Industries Limited(GIL). GIL is subsidiary of Godrej & Boyce Manufacturing Company Limited (G&B), theultimate holding company.

(ii) Key Management Personnel :Mr. Milind Surendra Korde

2. The following transactions were carried out with the related parties in the ordinary course ofthe business:

Sr. No. G&B GIL GPL1 Expenses charged by other Companies – – 219,0502 Outstanding net of (payables) – – 28,267,717

28,048,667Figures in italics are for previous year


As per our Report of even date. Signatures to the Balance Sheet andSchedules 1 to 3 and 5





109

5. STATEMENT PURSUANT TO PART IV OF SCHEDULE VI TO THE COMPANIES ACT, 1956.BALANCE SHEET ABSTRACT FOR THE YEAR ENDED 31ST MARCH, 2006 AND COMPANY’SGENERAL BUSINESS PROFILE

1. Registration DetailsRegistration No. : 11-91582State Code : 11Balance Sheet Date : March 31, 2006

2. Capital raised during the year (Amount in Rs. Thousands)Public Issue : NilRights Issue : NilBonus Issue : NilPrivate Placement- Capital : Nil

- Premium : Nil

3. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands)Total Liabilities : 28,821Total Assets : 28,821Sources of Funds :

Paid-up Capital : 500Reserves & Surplus : –Secured Loans : –Unsecured Loans : 28,268

Application of Funds : –Net Fixed Assets : –Investments : –Net Current Assets : 28,748Misc. Expenditure : 10Accumulated Losses : 10

4. Performance of the Company (Amount in Rs. Thousands)Turnover : –Total Expenditure : 222Profit/(Loss) before tax : (3)Profit/(Loss) after tax : (3)Earning per Share in Rs. : (5)Dividend Rate % : –

5. Generic Names of Three PrincipalProducts/Services of Company : N.A.

Cash Flow Statement for the year ended March 31, 2006

Particulars Current Year Previous YearRs. Rs. Rs.

Cash from Operating ActivitiesNet Profit Before Tax (2,500) (2,500)Add : Non-cash / Non-operating ExpensesDeferred Revenue Expenditure 2,500 2,500

Less :Non-cash / Non-operating Income – –Add :Change in Inventory (219,542) (182,071)Change in Loans and Advances – (4,239)Change in Current Liabilities 492 1,059

(219,050) (185,251)Less :Taxes Paid – (219,050) –

(185,251)Cash from Investing Activities –Cash from Financing ActivitiesIncrease in Unsecured Loan 219,050 219,050 185,251

Cash & Cash Equivalent – –

Add : Cash & Bank Balance as on 31.3.2005 – –

Cash & Bank Balance as on 31.3.2006 – –

Notes:

1) The Cash Flow Statement has been prepared under the “Indirect Method” as set out in the AccountingStandard (AS) 3 on “Cash Flow Statements”, and presents cash flows by operating, investing andfinancing activities.

2) Figures in brackets are outflows/deductions.3) Figures for the previous year have been regrouped/restated wherever necessary to conform to this





Godrej Realty Private Limited (Formerly Casablanca Properties Private Limited)

110


1. We have audited the attached Balance Sheet of GODREJ REALTY PRIVATE LIMITED, as at31st March, 2006 and also the Profit and Loss Account of the Company for the period ended 27th June2005 to 31st March, 2006. These financial statements are the responsibility of the Company’s management.Our responsibility is to express an opinion on these financial statements based on our audit.


3. As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Government interms of sub-section (4A) of Section 227 of the Companies Act, 1956, we annex hereto a statement onthe matters specified in paragraphs 4 and 5 of the said Order.


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 such books.c) The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the

books of account.

REPORT OF THE AUDITORSTO THE MEMBERS OF GODREJ REALTY PRIVATE LIMITED (Formerly Casablanca Properties Private Limited)

d) In our opinion, the Balance Sheet and Profit and Loss Account dealt with by this report comply withthe accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956.

e) In our opinion and to the best of our information and according to the explanations given to us, thesaid accounts read with the notes thereon, give the information required by the Companies Act,1956, in the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India:i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2006; andii) in the case of the Profit and Loss Account, of the performance Company for the period ended

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

on that date.5. On the basis of the written representations received from the directors as on 31st March, 2006, and taken

on record by the Board of Directors, we report that, none of the directors is disqualified as on 31st March,2006 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of theCompanies Act, 1956.

For and on behalf ofKALYANIWALLA MISTRY & ASSOCIATES

Chartered AccountantsB. S. Dastoor

Place : Mumbai PartnerDate : May 10, 2006 Membership No. 48936

To The ShareholdersYour Directors have pleasure in submitting their Report alongwith the audited Accounts for the year ended31st March, 2006.1. FINANCIAL HIGHLIGHTS :

The accounting results for the year ended 31st March, 2006 reveal that there is no surplus/deficit at theend of the year.

2. REVIEW OF OPERATIONS :During the year the Company was taken over by Godrej Properties Limited.Further during the year the Company allotted 4,90,000 Nos. of equity shares of Rs.10/- each fully paid-up to HDFC Venture Trustee Company Limited a trustee of HDFC Property Fund, and 5,00,000 Nos. ofequity shares of Rs.10/- each fully paid-up to Godrej Properties Limited. As such Godrej Properties Ltd.holds in aggregate 5,10,000 Nos. of equity shares of the Company and holds 51% of the paid up sharecapital of the Company. Further, the Company issued 56,35,000 Nos. of 10% Secured RedeemableOptionally Convertible Debentures of Rs.10/- each fully paid-up to HDFC Venture Trustee CompanyLimited and 58,65,000 Nos. of 10% Secured Redeemable Optionally Convertible Debentures ofRs.10/- each to Godrej Properties Ltd.

3. DIVIDEND :As there are no profits, the Directors regret that no dividend can be recommended.

4. DIRECTORS :Mr. Pirojsha A. Godrej was appointed as Additional Director of the Company with effect from30th January, 2006. He holds office till the ensuing Annual General Meeting.Mr. Milind Korde was appointed as Additional Director of the Company with effect from 30th January,2006. He holds office till the ensuing Annual General Meeting.Mr. Naresh Nadkarni was appointed as Additional Director of the Company with effect from 16th March,2006. He holds office till the ensuing Annual General Meeting.Mr. Rakesh Desai, Director of the Company resigned on 31st January, 2006. The Board desires to place onrecord the valuable services rendered by Mr. Rakesh Desai during his tenure as a Director of the Company.Mr. Sanjay Desai, Director of the Company resigned on 31st January, 2006. The Board desires to placeon record the valuable services rendered by Mr. Sanjay Desai during his tenure as a Director of theCompany

5. CHANGE OF AUTHORISED CAPITAL :The Company has increased its Authorised Capital from Rs.1 Lac to Rs. 1 Crore during the year.

6. CHANGE OF NAME OF THE COMPANY :The name of the Company was changed from Casablanca Properties Private Limited to Godrej RealtyPrivate Limited with effect from 25th January, 2006. The Registrar of Companies has accordingly issuedthe new Incorporation Certificate.

7. CHANGE OF REGISTERED OFFICE OF THE COMPANY :The Company changed the address of its Registered Office from 5/40, C.C.I. Colony, Unnat Nagar – 4,M.G. Road, Goregaon (West), Mumbai – 400 062 to Godrej Bhavan, 4th Floor, 4A, Home Street, Fort,Mumbai – 400 001 with effect from 30th January, 2006.

8. APPOINTMENT OF AUDITORS :M/s. Kalyaniwalla Mistry and Associates, Chartered Accountants retire at the ensuing Annual GeneralMeeting and are eligible for re-appointment for which they have given their consent.

9. DIRECTORS’ RESPONSIBILITY STATEMENT:Your Directors confirm:(i) that in the preparation of the annual accounts, the applicable accounting standards have been followed;(ii) that the Directors have selected such accounting policies and applied them consistently and made

judgments and estimates that are reasonable and prudent so as to give a true and fair view of thestate of affairs of the Company at the end of the financial year ended 31st March, 2006 and of theprofit of the Company for that year;


(iv) that the Directors have prepared the annual accounts on a going concern basis.10. ADDITIONAL INFORMATION :

(a) Since the company has no employees, the particulars of the employees to be disclosed u/s 217 (2A) ofthe Companies Act, 1956 read with Companies (particulars of employees) Rules, 1975, are not given.

(b) Information in respect of Conservation of Energy, Technology Absorption and Foreign Exchange Earningsand Outgo, required under Section 217(1)(e) of the Companies Act, 1956 read with the Companies(Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is provided hereunder:(i) Conservation of Energy :

Expenses on account of Energy are negligible.(ii) Technology Absorption :

It is an on going process.(iii) Foreign Exchange Earning & Outgo :

The Company has not earned any Foreign Exchange nor incurred any Foreign ExchangeExpenditure during the year.

For and on behalf of the Board of DirectorsPirojsha A. Godrej Milind KordeDirector Director


Referred to in paragraph (3) of our report of even date.1) (a) The Company is maintaining proper records showing full particulars, including quantitative details

and situation of fixed assets.(b) As explained to us, the Company has a program for physical verification of fixed assets at periodical

intervals. In our opinion, the period of verification is reasonable having regard to the size of the Company(c) In our opinion, the disposal of fixed assets during the year does not affect the going concern

assumption.2) (a) The management has conducted physical verification of inventory at reasonable intervals.

(b) In our opinion, the procedures of physical verification of inventory followed by the managementare reasonable and adequate in relation to the size of the company and the nature of its business.

(c) The company is maintaining proper records of inventory and no material discrepancies werenoticed on physical verification.

3) (a) The Company has not granted any loans, secured or unsecured to companies, firms or other partiescovered in the register maintained under Section 301 of the Companies Act, 1956.

(b) Consequently, the question of commenting on the rates of interest and conditions of the loansgranted being prejudicial to the interests of the Company, receipt of regular principal and theinterest and reasonable steps for recovery of principal and interest does not arise.

(c) The Company has not taken any loan, secured or unsecured from companies, firms or other partiescovered in the register maintained under Section 301 of the Companies Act, 1956.

(d) Consequently, the question of commenting on the rates of interest and others terms and conditionsof the loans taken being prejudicial to the interests of the Company, payment of regular principaland the interest does not arise.

4) In our opinion and according to the information and explanations given to us, there are adequate internalcontrol procedures commensurate with the size of the Company and the nature of its business, for thepurchases of inventory, fixed assets and for the sale of goods. There are no sales of service. During the courseof our audit, we have not observed a continuing failure to correct major weaknesses in internal controls.

5) (a) Based on the audit procedures applied by us and according to the information and explanationsprovided by the management, we are of the opinion that the particulars of contracts and arrangementreferred to in Section 301 of the Companies Act, 1956 have been entered into the register requiredto be maintained under that section.

(b) The transactions made in pursuance of such contracts or arrangements, were made at priceswhich are reasonable having regard to prevailing marketing prices at the relevant time.

6) In our opinion and according to the information and explanations given to us, the Company has notaccepted any deposits from the public hence the provisions of Section 58A and 58AA or any otherprovisions of the Companies Act, 1956, are not applicable.


8) The maintenance of cost records has not been prescribed by the Central Government under Section209(1)(d) of the Companies Act, 1956, for any of the Company’s products.

ANNEXURE TO THE AUDITORS' REPORT9) (a) According to the information and explanations given to us and on the basis of our examination of books

of accounts, during the year, the Company has no statutory dues including Provident Fund, InvestorEducation and Protection Fund, Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, ServiceTax, Customs Duty, Excise Duty, Cess and other statutory dues incurred during the year. According tothe information and explanations given to us, there are no undisputed dues, payable in respect of aboveas at 31st March 2006 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, there are no dues outstanding of SalesTax, Income Tax, Wealth Tax, Excise Duty, cess on account of any dispute.

10) The Company does not have accumulated losses at the end of the financial year and it has not incurredany cash losses in the current and immediately preceding financial year.

11) According to the information and explanations given to us and on the based on documents and recordsproduced to us, the Company has not defaulted in dues to debenture holders. There are no dues to banksand financial institutions.

12) According to the information and explanations given to us and based on the documents and recordsproduced to us, the Company has not granted loans and advances on the basis of security by way of pledgeof shares, debentures and other securities.

13) In our opinion and according to the information and explanations given to us, the nature of activities of theCompany does not attract any special statute applicable to chit fund and nidhi/mutual benefit fund/societies.

14) The Company does not deal in shares, securities, debentures and other investments.15) 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 institutions.16) The Company did not have any term loans during the year.17) According to the information and explanations given to us and an overall examination of the Balance

Sheet and Cash Flow of the Company, we report that the Company has not utilized funds raised on shortterm basis for long term investments.

18) The Company has not made any preferential allotment of shares to parties or companies covered in theregister maintained under Section 301 of the Companies Act, 1956.

19) According to the information and explanations given to us, during the current perod, the Company hadissued 1,15,00,000 debentures of Rs. 10 each. The Company is in process of creating securities for the same.

20) The Company has not raised any money through a public issue during the year.21) Based on the audit procedures performed and information and explanations given by the management,

we report that no fraud on or by the Company has been noticed or reported during the year.For and on behalf ofKALYANIWALLA MISTRY & ASSOCIATESChartered AccountantsB. S. DastoorPartnerMembership No. 48936Place : MumbaiDate : May 10, 2006.


111

BALANCE SHEET AS AT MARCH 31, 2006Schedule As at

31.03.06Rupees

SOURCES OF FUNDSShareholders’ FundsShare Capital 1 10,000,000

Loan FundsSecured Loans 2 115,446,417

125,446,417APPLICATION OF FUNDSFixed AssetsGross Block 3 100,083Less : Depreciation 2,769

Net Block 97,314Investments –Current Assets, Loans & AdvancesProjects in Progress 4 15,941,552Cash Balance 5 34,689,427Loans & Advances 6 76,248,733

126,879,712Less : Current Liabilities & ProvisionsCurrent Liabilities 7 1,530,610Provisions –

1,530,610

Net Current Assets 125,349,102

125,446,4170.0Notes to Accounts & Accounting Policies 10

PROFIT AND LOSS ACCOUNT FOR THE PERIOD JUNE 27TH, 2005TO MARCH 31, 2006

Schedule For theperiod ended

31.03.06INCOME –

EXPENDITURE

Administration Expenses 8 13,271,680

Interest & Finance Charges 9 2,667,104

Depreciation 2,769

15,941,552

Less : Amount Transferred to Project in Progress 15,941,552

Earning per share (basic/diluted ) in Rs. (refer note no. 3) 0.00

Notes to Accounts & Accounting Policies 10

The Schedules referred to above form an integral part of the Profit and Loss AccountAs per our Report of even date. Signatures to Profit and Loss Account

and Schedules 8 to 10For and on behalf ofKALYANIWALLA MISTRY & ASSOCIATESChartered Accountants PIROJSHA GODREJ Director

MILIND KORDE DirectorBAHADUR S. DASTOORPartner


As at31-03-2006

RupeesSCHEDULE 1 : SHARE CAPITALAuthorised1000000 Equity Shares of Rs.10 each 10,000,000

10,000,000Issued, Subscribed and Paid up1,000,000 Equity Shares of Rs.10 each 10,000,000(out of which 510,000 equity shares are held bythe holding company, Godrej Properties Ltd.)

10,000,000


SCHEDULE 3 : FIXED ASSETS (Rs. ’000)


ASSETS As at Additions Deductions As at As at For the As at As at1.4.2005 31.3.2006 1.4.2005 Year 31.3.2006 31.3.2006

Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Motor Vehicle – 100,083 – 100,083 – 2,769 2,769 97,314

TOTAL – 100,083 – 100,083 – 2,769 2,769 97,314

Previous Year – – – – – – –

As at31-03-2006

RupeesSCHEDULE 2 : SECURED LOANS10% Secured redeemable optionally convertible debentures @Rs. 10/- each 115,000,000Interest Accrued & Due 446,417(The Company is in process of creating securities for the same)

115,446,417

The Schedules referred to above form an integral part of the Balance SheetAs per our Report of even date. Signatures to Balance Sheet and

Schedules 1 to 7 and 10For and on behalf ofKALYANIWALLA MISTRY & ASSOCIATESChartered Accountants PIROJSHA GODREJ Director



As at31-03-2006

RupeesSCHEDULE 4 : PROJECT IN PROGRESSOpening Balance –Add : Expenses transferred from Profit & Loss Account 15,941,552

15,941,552SCHEDULE 5 : CASH & BANK BALANCECurrent account with Scheduled Bank 4,624,681Fixed Deposits 30,064,746

34,689,427SCHEDULE 6 : LOANS & ADVANCESAdvances recoverable in cash or kind or for value to be received 76,248,733

76,248,733SCHEDULE 7 : CURRENT LIABILITIESSundry Creditors (Note 2)

For Expenses 925,485Others 605,125

1,530,610

As at31-03-2006

RupeesSCHEDULE 8 : ADMINISTRATION EXPENSESPayment to Auditors - Audit Fees 101,016Consultancy Charges 7,380,371Other Operating Expenses 5,790,293

13,271,680SCHEDULE 9 : INTEREST AND FINANCE CHARGES (NET)Interest Paid

Companies 2,246,473Others 504,110

Total Interest paid 2,750,583Less : Interest received (Gross)

Others 83,479

Total Interest received 83,479

NET INTEREST 2,667,104

Godrej Realty Private Limited (Formerly Casablanca Properties Private Limited)

112

SCHEDULE 10 : NOTES TO ACCOUNTS AND ACCOUNTING POLICIES

1) ACCOUNTING POLICIESa) GENERAL

The financial statements are prepared under the historical cost convention in accordance withGenerally Accepted Accounting Principles in India, the Accounting Standards issued by The Instituteof Chartered Accountants of India and the provisions of the Companies Act, 1956.

b) FIXED ASSETSFixed assets are stated at cost of acquisition or construction less accumulated depreciation. Costincludes all incidental expenses related to acquisition and installation, other pre-operation expensesand interest in case of construction.

Carrying amount of cash generating units / assets are reviewed at balance sheet date to determinewhether there is any indication of impairment. If such indication exists, the recoverable amountis estimated as the net selling price or value in use, whichever is higher. Impairment loss, if any,is recognized whenever carrying amount exceeds the recoverable amount.

c) DEPRECIATION/AMORTIZATIONDepreciation has been provided on Written Down Value basis, at the rates specified in ScheduleXIV of the Companies Act, 1956.

d) INVENTORIES

Inventories are valued as under :a) Completed Flats – At lower of Cost or Market valueb) Construction Work-in-Progress – At costConstruction Work-in-Progress includes cost of land, premium for development rights, constructioncosts, allocated interest and expenses incidental to the projects undertaken by the Company.

e) REVENUE RECOGNITIONThe Company is following the “Percentage of Completion Method” of accounting. As per thismethod, revenue in Profit & Loss Account at the end of the accounting year is recognized inproportion to the actual cost incurred as against the total estimated cost of projects under executionwith the Company.

Determination of revenues under the percentage of completion method necessarily involvesmaking estimates by the Company, some of which are of a technical nature, concerning, whererelevant, the percentages of completion, costs to completion, the expected revenues from theproject/activity and the foreseeable losses to completion. Such estimates have been relied uponby the auditors.

Income from operation of commercial complexes is recognized over the tenure of the lease/service agreement.

Interest income is accounted on an accrual basis at contracted rates.

Dividend income is recognized when the right to receive the same is established.

f ) BORROWING COSTInterest and commitment charges incurred in connection with borrowing of funds, which areincurred for the development of long term projects are transferred to Construction Work-in-Progress/Due on Management Project, as a part of the cost of the projects at weighted average ofthe borrowing cost/rates as per Agreements respectively.

Other borrowing costs are recognized as an expense in the period in which they are incurred.

g) EARNINGS PER SHAREThe basic earnings per share is computed using the weighted average number of common sharesoutstanding during the period. Diluted earnings per share is computed using the weighted averagenumber of common and dilutive common equivalent shares outstanding during the period, exceptwhere the results would be anti-dilutive.

h) PROVISION FOR TAXATIONTax expense comprises both current and deferred tax.

Current tax is measured at the amount expected to be paid to the tax authorities, using the applicabletax rates and tax laws.

Deferred tax is recognized on timing differences, being the differences between the taxableincome and the accounting income that originate in one period and are capable of reversal in oneor more subsequent periods. Deferred tax assets, subject to consideration of prudence, arerecognized and carried forward only to the extent that there is a reasonable certainty that sufficientfuture taxable income will be available against which such deferred tax assets can be realized. Thetax effect is calculated on the accumulated timing difference at the year-end based on the tax ratesand laws enacted or substantially enacted on the balance sheet date.

i) PROVISIONS AND CONTIGENT LIABILITIESProvisions are recognized in the accounts in respect of present probable obligations, the amountof which can be reliably estimated.Contingent liabilities are disclosed in respect of possible obligations that arise from the past eventsbut their existence is confirmed by the occurrence or non-occurrence of one or more uncertainfuture events not wholly within the control of the Company.

2) There are no parties within the definition of Small Scale Industrial Undertakings to whom the Companyowes any sum.

3) Earnings per shareThis Year (Rs.)

Profit after transfer to Project in Progress as per Profit & Loss Account NILWeighted average no. of equity shares outstanding 1000000Basic/Diluted earnings per share NILNominal value of shares 10000000

4) Amounts paid to Auditors: Current Year (Rs.)Audit Fees 78,568 Audit under other Statutes 22,448

Total 101016

5) SEGMENT INFORMATIONAs the Company has only one business segment, disclosure under Accounting Standard 17 on “ SegmentReporting” issued by the Institute of Chartered Accountants of India is not applicable.

6) AS 18 – RELATED PARTY DISCLOSURE1. Relationships:

(i) Shareholders (the Godrej Group Shareholding) in the Company Godrej Properties Limited(GPL) holds 51% in the Company. GPL is the Subsidiary of Godrej Industries Limited (GIL).GIL is subsidiary of Godrej & Boyce Manufacturing Company Limited (G&B), the ultimateholding company.


2. The following transactions were carried out with the related parties in the ordinary course of the business:

Sr. No. G&B GIL GPL1 Issue of equity share capital – – 5,100,0002 Issue of debentures – – 58,650,0003 Purchase of Fixed Assets – – 100,0834 Expenses Charged by other Companies (net) – – 15,600,9595 Outstanding net of (payables) – – 911,655

7) This being the first year of operations of the Company, the question of previous years figures does not arise.

ADDITIONAL INFORMATION AS REQUIRED PART IVOF THE SCHEDULE VI OF THE COMPANIES ACT, 1956


i) Registration DetailsRegistration No 11-154268State Code 11Balance Sheet 31/3/2006

ii) Capital raised during the year (Rupees ‘000)Public Issue NilRights Issue NilBonus Issue NilPrivate Placement - Capital Nil

- Premium Nil

iii) Position of mobilisation and deployment of funds (Rupees ‘000)Total Liabilities 126,977Total Assets 126,977Sources of FundsPaid up Capital 1,000Reserve & Surplus NilSecured Loans 115,446Unsecured Loans NilApplication of FundsNet Fixed Assets 97Investments NilNet Current Assets 125,349Misc Expenditure Accumulated Losses Nil

iv) Performance of the Company (Rupees ‘000)Turnover NilTotal Expenditure 15,942Profit/ (Loss) Before Tax NilProfit/(Loss) After Tax NilEarnings Per Share in Rs. NilDividend Rate Nil

v) Generic Names of three Principal N.A.products/services of the company

Cash Flow Statement for the period June 27, 2005 to March 31st, 2006.

Particulars Rupees RupeesCash from Operating ActivitiesNet Profit before Tax –Add : Non-cash / non-operating ExpensesDepreciation 2,769Interest Income (83,479)Interest Paid 2,750,583Loss on sale of Fixed assets –Tax Provision –Deferred Revenue Expenditure –

2,669,873Less :Non-cash / non-operating Income –

2,669,873Add :Change in Inventory (15,941,552)Change in Loans & Advances (76,248,733)Change in Current Liabilities / Provisions 1,530,610

(87,989,803)

Less : Taxes Paid (Net) – (87,989,803)Cash from Investing ActivitiesPurchase of Fixed Assets (100,083)Interest Received 83,479 (16,604)Cash from Financing ActivitiesIssue of Share Capital 10,000,000Issue of Debentures 115,446,417Interest Paid (2,750,583) 122,695,835Cash and Cash Equivalent 34,689,427Cash and Bank Balance as on 31.3.2006 34,689,427

Notes :1. The cash flow statement has been prepared under the ‘Indirect Method’ as set out in the Accounting

Standard (AS) 3 on ‘Cash Flow Statement’, and presents cash flows by operating, investing andfinancing activities.

2. Figures in brackets are outflows / deductions.

For and on behalf ofKALYANIWALLA MISTRY & ASSOCIATESChartered Accountants PIROJSHA GODREJ Director




113


TO THE SHAREHOLDERSYour Directors have pleasure in submitting their Report alongwith the audited Accounts for the year ended 31stMarch, 2006.1. FINANCIAL HIGHLIGHTS :

The accounting results for the year ended 31st March, 2006 reveal that there is no surplus/deficit at theend of the year.

2. REVIEW OF OPERATIONS :The Company was taken over by Godrej Properties Limited during the financial year.During the year Godrej Properties Limited was allotted 40,000 nos of equity shares of Rs.10/- each fullypaid-up of the Company and they hold the entire paid up share capital of the Company.

3. DIVIDEND :As there are no profits, the Directors regret that no dividend can be recommended.

4. DIRECTORS :Mr. Pirojsha A. Godrej was appointed as Additional Director of the Company with effect from 30thJanuary, 2006. He holds office till the ensuing Annual General Meeting. A notice has been received froma shareholder proposing the candidature of Mr. Pirojsha A. Godrej for the office of Director.Mr. Milind Korde was appointed as Additional Director of the Company with effect from 30th January,2006. He holds office till the ensuing Annual General Meeting. A notice has been received from ashareholder proposing the candidature of Mr. Milind Korde for the office of Director.Mr. Rakesh Desai, Director of the Company has resigned on 31st January, 2006. The Board desires toplace on record the valuable services rendered by Mr. Rakesh Desai during his tenure as a Director ofthe Company.Mr. Sanjay Desai, Director of the Company has resigned on 31st January, 2006. The Board desires to placeon record the valuable services rendered by Mr. Sanjay Desai during his tenure as a Director of theCompany.

5. CHANGE OF AUTHORISED CAPITAL :During the year the Company has increased its Authorised Capital from Rs.1 Lac to Rs. 5 Lacs.

6. CHANGE OF NAME OF THE COMPANY :The name of the Company was changed from Bridgestone Properties Private Limited to Godrej WatersideProperties Private Limited with effect from 25th January, 2006. The Registrar of Companies has accordinglyissued the new Incorporation Certificate.

7. CHANGE OF REGISTERED OFFICE OF THE COMPANY :The Company changed the address of its Registered Office from 5/40, C.C.I. Colony, Unnat Nagar – 4,M.G. Road, Goregaon (West), Mumbai – 400 062 to Godrej Bhavan, 4th Floor, 4A, Home Street, Fort,Mumbai – 400 001 with effect from 30th January, 2006.

8. APPOINTMENT OF AUDITORS :M/s. Kalyaniwalla Mistry and Associates, Chartered Accountants retire at the ensuing Annual GeneralMeeting and are eligible for re-appointment for which they have given their consent.

9. DIRECTORS’ RESPONSIBILITY STATEMENT:Your Directors confirm:(i) that in the preparation of the annual accounts, the applicable accounting standards have been

followed;(ii) that the Directors have selected such accounting policies and applied them consistently and made

judgements and estimates that are reasonable and prudent so as to give a true and fair view of thestate of affairs of the Company at the end of the financial year ended 31st March, 2006 and of theprofit of the Company for that year;


(iv) that the Directors have prepared the annual accounts on a going concern basis.10. ADDITIONAL INFORMATION :

(a) Since the company has no employees, the particulars of the employees to be disclosed u/s 217 (2A)of the Companies Act, 1956 read with Companies (particulars of employees) Rules, 1975, are notgiven.

(b) Information in respect of Conservation of Energy, Technology Absorption and Foreign ExchangeEarnings and Outgo, required under section 217(1)(e) of the Companies Act, 1956 read with theCompanies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 isprovided hereunder:(i) Conservation of Energy :

Expenses on account of Energy are negligible.(ii) Technology Absorption :

It is an on going process.(iii) Foreign Exchange Earning & Outgo :

The Company has not earned any Foreign Exchange nor incurred any Foreign ExchangeExpenditure during the year.


Pirojsha Godrej Milind KordeDirector Director


1. We have audited the attached Balance Sheet of GODREJ WATERSIDE PROPERTIES PRIVATE LIMITED,as at 31st March 2006 and also the Cash Flow statement of the Company for the period 27th June, 2005to 31st March, 2006. These financial Statements are the responsibility of the Company’s management.Our responsibility is to express an opinion on these financial statements based on our audit.


3. This report does not include a statement on the matters specified in paragraph 4 of the Companies(Auditor’s Report) Order, 2003, issued by the Department of Company Affairs, in terms of Section227(4A) of the Companies Act, 1956, since in our opinion and according to the information and explanationsgiven to us, the said Order is not applicable to the Company.

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 andbelief 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 faras appears from our examination of such books.

c) No Profit and Loss Account has been prepared as the Company is yet to commence operations.

d) The Balance Sheet and the Cash Flow Statement dealt with by this report are in agreement withthe books of account.

REPORT OF THE AUDITORSTO THE MEMBERS OF GODREJ WATERSIDE PROPERTIES PRIVATE LIMITED (Formerly Bridgestone Properties Private Limited)

e) In our opinion, the Balance Sheet and the Cash Flow Statement dealt with by this report comply withthe accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956.

f) In our opinion and to the best of our information and according to the explanations given to us, thesaid accounts read with the notes thereon, give the information required by the Companies Act,1956, in the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India:

i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2006;and

ii) in the case of Cash Flow Statement, of the cash flows of the Company for the year ended onthat date.

5. On the basis of the written representations received from the directors as on 31st March, 2006, and takenon record by the Board of Directors, we report that, none of the directors is disqualified as on 31st March,2006 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of theCompanies Act, 1956.

For and on behalf ofKALYANIWALLA MISTRY & ASSOCIATESChartered AccountantsB.S. DastoorPartnerMembership No. 48936Place : MumbaiDate : May 10, 2006

Godrej Waterside Properties Private Limited (Formerly Bridgestone Properties Private Limited)

Godrej Waterside Properties Private Limited (Formerly Bridgestone Properties Private Limited)

114

BALANCE SHEET AS AT MARCH 31, 2006Schedule As at

31.03.06Rupees

SOURCES OF FUNDSShareholders’ FundsShare Capital 1 500,000Loan Funds –

500,000Application Of FundsFixed Assets –

–Investments –Current Assets, Loans and AdvancesCash Balance 2 500,000

500,000Less : Current Liabilities and Provisions –

Net Current Assets 500,000

500,000Notes To Accounts and Accounting Policies 3

The Schedules referred to above form an integral part of the Balance SheetAs per our Report of even date. Signatures to Balance Sheet and

Schedules 1, 2, and 3For and on behalf ofKALYANIWALLA MISTRY & ASSOCIATESChartered Accountants PIROJSHA GODREJ Director



SCHEDULES ATTACHED TO AND FORMING PART OF THEACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006

As at 31.03.06Rupees

SCHEDULE 1 : SHARE CAPITALAuthorised50000 Equity shares of Rs.10/- each 500,000

500,000Issued and Subscribed and Paid Up50000 Equity Shares of Rs.10/- each 500,000(50000 equity shares are held by the holding company,Godrej Properties Ltd)

500,000SCHEDULE 2 : CASH & BANK BALANCECurrent account with Scheduled Bank 500,000

500,000

SCHEDULE 3 - NOTES TO ACCOUNTS AND ACCOUNTING POLICIES

ACCOUNTING POLICIES

1) GENERALThe accounts are prepared under the Historical Cost Convention, using the accrual method of accounting.

NOTES TO ACCOUNTSa) As there are no operations, no Profit & Loss Account has been prepared.b) Additional information required to be given under Schedule VI, Part II of the Companies Act, 1956 to the

extent not applicable is not given.

2) AS 18 – RELATED PARTY DISCLOSURERelated party disclosures as required by AS-18, “Related Party Disclosures’, are given below:1. Relationships:

(i) Shareholders (the Godrej Group Shareholding) in the Company Godrej Properties Limited (GPL)holds 100% in the Company. GPL is the Subsidiary of Godrej Industries Limited (GIL). GIL is subsidiaryof Godrej & Boyce Manufacturing Company Limited (G&B), the ultimate holding company.


2. The following transactions were carried out with the related parties in the ordinary course of the business:

Sr. No G&B GIL GPL1 Issue of equity share capital – – 500,000

3) This being the first year of operations of the Company, the question of previous years figures does not arise.

INFORMATION REQUIRED TO BE FURNISHED UNDER THE PART IVOF SCHEDULE VI OF THE COMPANIES ACT, 1956


i) Registration DetailsRegistration No 11-154255State Code 11Balance Sheet 31/3/2006

ii) Capital raised during the year (Rupees ‘000)Public Issue NilRights Issue NilBonus Issue NilPrivate Placement - Capital Nil

- Premium Nil

iii) Position of mobilisation and deployment of funds (Rupees ‘000)Total Liabilities 500Total Assets 500Source of FundsPaid up Capital 500Reserve & Surplus NilSecured Loans NilUnsecured Loans NilApplication of fundsNet Fixed Assets NilInvestments NilNet Current Assets 500Misc Expenditure NilAccumulated Losses Nil

iv) Performance of the Company (Rupees ‘000)Turnover NilTotal Expenditure NilProfit/ (Loss) Before Tax NilProfit/(Loss) After Tax NilEarnings Per Share in Rs. NilDividend Rate

v) Generic Names of three Principal N.A.products/services of the company

Cash Flow Statement for the period June 27, 2005 to March 31, 2006

Particulars Rs. Rs.

Cash from Operating Activities

Net Profit Before Tax –

Cash from Investing Activities –

Cash from Financing Activities

Increase in Share Capital 500,000 500,000

Cash and Cash Equivalent 500,000

Cash and Bank Balance as on 31.3.2006 500,000

Notes:

1) The Cash Flow Statement has been prepared under the “Indirect Method” as set out in the AccountingStandard (AS) 3 on “Cash Flow Statements”, and presents cash flows by operating, investing and financingactivities.

2) Figures in brackets are outflows/deductions.

For and on behalf ofKALYANIWALLA MISTRY & ASSOCIATESChartered Accountants PIROJSHA GODREJ Director




115


To The Members of GODREJ HICARE LIMITEDYour Directors submit their Report along with the Audited Accounts of your Company for the year endedMarch 31, 2006.Operating ResultsYour Company’s performance during the year as compared with the previous year is summarized below:

March 31, 2006 March 31, 2005(Rs. Lac) (Rs.Lac)

Total Income 2112.19 1205.84Profit/(Loss) for the year 104.34 (113.04)Before Extraordinary Items (After tax)Profit/(Loss) After Extraordinary Items 104.34 (113.04)Add: Balance brought Forward (1444.94) (1331.90)Deficit Carried Forward (1340.60) (1444.94)Operations ReviewYour Company has recorded impressive growth of 75%. Total Income grew from Rs. 1206 lac in theprevious year to Rs. 2112 lac in the current year. The Company has been delivering profits for last 14months in a row and recorded a Profit after Tax of Rs. 103 lac as compared to loss of Rs.113 lac in theprevious year.During the year the Company acquired reticulation technology (for pre-construction anti-termite treatment)from Termguard, Australia and Thermal imaging camera for termite detection from FLIR, Sweden.Your Company also undertook a major quality initiative called “SMILE” to improve internal processes andto enhance service delivery to customers.Your Company has planned aggressive geographical expansion in next year while continuing to grow incurrent markets by increasing service centers.Dividend:In view of the accumulated losses, your Directors do not recommend any dividend for the year.Directors:There are no changes in the Directorship in the Company.In accordance with Article 150 of the Articles of Association of your Company, one of the Directors of theCompany, Mr. A.B.Godrej by rotation in the ensuing Annual General Meeting and being eligible, offershimself for reappointment.Auditors:You are requested to appoint Auditors for the current year and fix their remuneration. The retiring Auditors,M/s. Kalyaniwalla Mistry & Associates (KMA), Chartered Accountants, are eligible for re-appointment.Audit Committee:The Audit Committee which was appointed pursuant to the provision of Sec 292A of the Companies Act,1956 has reviewed the accounts for the year ended March 31st 2006.Note on Auditors Report:Erosion of Networth (Note 4(i) of Auditors report and note 10 of Annexure to Auditors report)Though the accumulated losses of the Company exceeds its paid up capital, the shareholders are verysupportive of the Pest management business and are committed to infuse funds as and when required tofor working capital and other requirements.Change in Amortisation policy for Software (Note 4(iii) of Auditors report)The change in the amortization policy for computer software from 3 years to 6 years has been done toreflect more appropriate value of the asset in the Balance Sheet of the Company considering the useful lifeof the computer softwares.Fixed Assets Register (Note 1 (a) and (b) of Annexure to Auditors report)Your Company is in process of updating the same. Physical verifications will be carried out after therecords and updated.

Repayment of Loans from Group Companies (Note 3(e) of Annexure to Auditors report)Due to the accumulated losses, the repayment of the loans of the group companies are not being made.Your Company is regular in repayment of loans taken from other corporates in form of Inter CorporateDeposits.Directors Responsibility Statement:Pursuant to the provisions contained in Section 217(2AA) of the Companies Act, 1956, the Directors of yourCompany confirm:a) that in the preparation of the annual accounts, the applicable accounting standards have been

followed and no material departures have been made from the same;b) that they have selected such accounting policies and applied them consistently and made judgements

and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs ofthe Company at the end of the financial year and of the profit or loss of the Company for that period.

c) that they have taken proper and sufficient care for the maintenance of adequate accounting recordsin accordance with the provisions of this Act for safeguarding the assets of the Company for preventingand detecting fraud and other irregularities;

d) that they have prepared the annual accounts on a going concern basis.Conservation of Energy, Technology Absorption:The information in respect of Conservation of Energy, Technology Absorption and Foreign Exchange earningsand outgo, required under Section 217(1)(e) of the Companies Act,1956, read with the Company’s ( Disclosureof Particulars in the Report of the Board of Directors) Rules, 1988 has not been given, since such requirementis not applicable to the Company.Particulars of Employees:None of the employees fall under the provisions of Sec 217(2A) of the Companies Act, 1956. Hence, theparticulars required under Section 217(2A) of the Companies Act, 1956 read with the Company’s (Particularsof Employees) Rules, 1975 are not given.Foreign Exchange earnings and Outgo:Expenditure in Foreign Currency

Current Year Previous YearMarch 31, 2006 March 31, 2005

(Rs. Lacs) (Rs. Lacs)License Fees 8.75 NilTraining Expenses 2.28 NilTravelling Expenses 0.53 0.26Additional InformationThe additional information as required to be given under the Companies Act, 1956 has been laid out in theschedules attached to and forming part of the Balance Sheet and Profit and Loss Account , including theNotes to Accounts which are self explanatoryAcknowledgementYour Board wishes to thank all its Members, Bankers, Franchisees, Employees, Suppliers and Customersfor their continued support and help for the growth of the Company.


A. B. GodrejMumbai , May 8, 2006 Chairman

REPORT OF THE AUDITORS TO THE MEMBERS OF GODREJ HICARE LIMITED1. We have audited the attached Balance Sheet of GODREJ HICARE LIMITED as at 31 March, 2006

and also the Profit and Loss Account of the Company for the year ended on that date annexedthereto. These financial statements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based on our audit.

2. We 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 whetherthe financial statements are free of material misstatement. An audit includes examining, on testbasis, evidence supporting the amounts and disclosures in the financial statements. An audit alsoincludes assessing the accounting principles used and significant estimates made by the management,as well as evaluating the overall financial statement presentation. We believe that our audit providesa reasonable basis for our opinion.


4. Further to our comments in the Annexure referred to in para (3) above, we report that:i) The accumulated losses of the Company as at March 31, 2006 exceed its paid up capital

resulting in the erosion of its net worth. The accounts for the year have been prepared on the‘Going Concern’ basis on the understanding that finance will continue to be available to theCompany for working capital requirements from the promoters.

ii) We have obtained all the information and explanations, which to the best of our knowledgeand belief were necessary for the purposes of our audit.

iii) In current year the Company has changed the amortization policy of software developmentfrom 3 years to 6 years. Had there been no change in the rate of depreciation, the charge forcurrent year would have been higher by Rs. 115,786. Consequently accumulated losses andwritten down value of asset as at year end are lower by Rs. 183,415.

iv) In our opinion, proper books of account, as required by law, have been kept by the Companyso far as appears from our examination of such books.

v) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by thisreport are in agreement with the books of account.

vi) In our opinion, the Balance Sheet and the Profit and Loss Account dealt with by this reportcomply with the Accounting Standards referred to in sub-section (3C) of Section 211 of theCompanies Act, 1956.

vii) In our opinion and to the best of our information and according to the explanations given to us,subject to paragraph (i) above, give the information required by the Companies Act, 1956, inthe manner so required and give a true and fair view:i) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31 , 2006;ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; andiii) in the case of the Cash Flow Statement, of the cash flows of the company for the year

ended on that date.5. On the basis of the written representations received from the Directors as on March 31, 2006, and

taken on record by the Board of Directors, we report that, none of the Directors is disqualified as onMarch 31, 2006 from being appointed as a Director in terms of clause (g) of sub-section (1) ofsection 274 of the Companies Act, 1956.

For and on behalf ofKALYANIWALLA MISTRY AND ASSOCIATES

Chartered AccountantsB. S. Dastoor

PartnerMembership No. 48936

Mumbai, May 8, 2006


1. (a) As per the information and explanations given to us, the Company is in the process of updatingits records showing full particulars, including quantitative details and situation of fixed assets.

(b) The Company has not conducted a physical verification of fixed assets during the year, in viewof which we are unable to comment on discrepancies, if any.

(c) The disposal of fixed assets during the year does not affect the going concern assumption.2. (a) The Management has conducted physical verification of inventory at reasonable intervals.

(b) In our opinion, the procedures of physical verification of inventory followed by the managementare reasonable and adequate in relation to the size of the Company and the nature of itsbusiness.


3. (a) The Company has not granted any loans, secured or unsecured to Companies, firms or otherparties listed in the register maintained under Section 301 of the Companies Act, 1956.

(b) Consequently, the question of commenting on the rates of interest and the other terms andconditions of the loans granted being prejudicial to the interests of the Company, receipt ofregular principal and interest and reasonable steps taken for recovery of principal and interestdue does not arise

(c) The Company has taken unsecured loans of Rs. 104,310,000/- from six Companies listed in theRegister maintained under Section 301 of the Companies Act, 1956.

(d) In case of these loans, Interest has been waived by the respective companies. In our opinion,the rate of interest and other terms and conditions of these loans are not prima facie prejudicialto the interests of the Company.

(e) The payment of principal for above amounts has not been regular. The payment of interest hasbeen regular wherever the same has not been waived.

Godrej Hicare Limited


116

4. In our opinion and according to the information and explanations given to us, there are adequateinternal control procedures commensurate with the size of the Company and the nature of itsbusiness, for the purchases of inventory, fixed assets and for the sale of goods. During the course ofour audit, no major weakness has been noticed in the internal controls.

5. (a) Based on the audit procedures applied by us and according to the information and explanationsprovided by the management, we are of the opinion that the particulars of contracts andarrangements referred to in Section 301 of the Companies Act, 1956 have been entered intothe register required to be maintained under that section.

(b) These transactions made in pursuance of such contracts or arrangements, were made at priceswhich are reasonable having regard to the prevailing market prices at the relevant time.

6. In our opinion and according to the information and explanations given to us, the Company has notaccepted any deposits from public and the provisions of Section 58A, 58AA or any other provision ofthe Companies Act, 1956, read with the rules framed there under are not applicable.

7. In our opinion and according to the information and explanations given to us, the internal auditsystem is commensurate with the size of the Company and nature of its business.

8. The maintenance of cost records has not been prescribed by the Central Government under Section209(1)(d) of the Companies Act, 1956, in respect of the Company’s products.

9. (a) According to the information and explanations given to us and on the basis of our examinationof the books of account, during the year, the Company has been generally regular in depositingundisputed statutory dues including Provident Fund, Investor Education and Protection Fund,Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, Customs Duty, Excise Duty,Service Tax, Cess and other statutory dues applicable to it with the appropriate authorities.According to the information and explanations given to us, there are no undisputed duespayable in respect of above as at March 31, 2006 for a period of more than six months fromthe date they became payable

(b) According to the information and explanations given to us, there are no dues outstanding ofSales Tax, Income Tax, Customs Duty, Service tax, Wealth Tax, Excise Duty or Cess on accountof any dispute.

10. The Company’s accumulated losses at the end of the financial year are in excess of fifty percent of itsnet worth. Though it has incurred cash losses in the immediately preceding financial year, there areno cash losses in the current financial year.

11. According to the information and explanations given to us and based on the documents and recordsproduced to us, there are no dues to banks, financial institutions or debenture holders.


13. In our opinion and according to the information and explanations given to us, the nature of activities of theCompany does not attract any special statute applicable to chit fund and nidhi/ mutual benefit fund/ societies.


for loans taken by others from banks and financial institutions.16. The Company did not have any term loans during the year.17. According to the information and explanations given to us and on an overall examination of the

Balance Sheet and Cash Flows of the Company, we report that the Company has not utilized fundsraised on short-term basis for long-term investment.

18. The Company has made preferential allotment of shares during the year to parties covered in theregister maintained under Section 301 of the Companies Act, 1956. In our opinion and based on theinformation and explanations given to us, the price at which the shares are issued is not prima-facieprejudicial to the interest of the Company.

19. The Company did not issue any debentures during the year.20. The Company has not raised any money through a public issue during the year.21. Based on the audit procedures performed and information and explanations given by the management,




B. S. DastoorPartner


Mumbai, May 8, 2006

ANNEXURE TO THE AUDITORS’ REPORT (Contd.)



SOURCES OF FUNDS :SHAREHOLDERS’ FUNDS

Share Capital 1 56,200,000 36,000,000LOAN FUNDS

Secured Loans – –Unsecured Loans 2 139,310,000 127,358,000

DEFERRED TAX LIABILITY 401,000 –

195,911,000 163,358,000

APPLICATION OF FUNDS :FIXED ASSETS 3

Gross Block 17,353,167 14,223,379Less : Depreciation 6,011,084 4,694,077

Net Block 11,342,083 9,529,302INVESTMENTS 4 68,905 68,905CURRENT ASSETS, LOANSAND ADVANCES

Inventory 5 22,276,952 20,111,010Sundry Debtors 6 45,098,800 44,523,041Cash and Bank Balances 7 17,917,076 2,253,597Loans and Advances 8 31,802,401 4,236,709

117,095,229 67,124,357LESS : CURRENT LIABILITIESAND PROVISIONSCurrent liabilities 9 64,451,387 57,040,119Provisions 10 2,204,243 818,404

66,655,630 57,858,523

NET CURRENT ASSETS 50,439,599 9,265,834PROFIT & LOSS ACCOUNT 134,060,413 144,493,959

195,911,000 163,358,000



As per our Report of even date Signatures to Balance Sheet andSchedules 1 to 10 and 16

For and on behalf ofKALYANIWALLA MISTRY AND ASSOCIATES A.B. GODREJ ChairmanChartered Accountants

D.U. MENON A. MAHENDRAN Managing DirectorBAHADUR S. DASTOOR Company SecretaryPartner

Mumbai, May 8, 2006



INCOME :

Gross Sales 44,484,712 32,467,955Less : Excise Duty 1,321,380 –

Net Sales 43,163,332 32,467,955Service Income 163,155,659 86,735,748Other Income 11 4,899,732 1,380,239

211,218,723 120,583,942

EXPENDITURE:Raw Materials Consumed 12 53,190,753 17,451,768Purchase of Traded Goods 7,404,457 22,990,205Inventory Change 13 (1,900,192) (2,198,413)Expenses 14 136,573,253 90,656,366Interest and Finance Expense 15 2,317,918 1,784,373Depreciation 3 1,324,008 1,203,817

198,910,197 131,888,116

Profit/(Loss) for the Year 12,308,526 (11,304,174)Less : Fringe Benefit Tax 668,980 –

Current Tax 805,000 –Deferred Tax 401,000 –

Profit/(Loss) for the Year after Tax 10,433,546 (11,304,174)Add : Balance Brought Forward (144,493,959) (133,189,785)

Deficit Carried Forward (134,060,413) (144,493,959)

Basic/Diluted Earnings per Share 2.29 (3.29)(Refer Note 9)


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

As per our Report attached Signatures to Profit and Loss Account andSchedules 11 to 16



Mumbai, May 8, 2006


117

SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2006This Year Previous Year

Rupees RupeesSCHEDULE 1 : SHARE CAPITALAuthorised:8,000,000 Equity Shares of Rs.10/- each (Previous year 7,500,000 Equity Shares of Rs.10 each) 80,000,000 75,000,000Issued & Subscribed7,900,000 (Previous year 3,600,000) Equity Shares of Rs 10/- each 79,000,000 36,000,000Paid-up4,100,000 (Previous year 3,600,000) Equity Shares of Rs 10/- each fully paid 41,000,000 36,000,0003,800,000 (Previous year Nil) Equity Shares of Rs 10/- each, Rs 4/- paid. 15,200,000 –

56,200,000 36,000,000Of the above:6,647,100 (Previous year 3,107,100) shares are held by Godrej Industries Ltd. (GIL), the Holding CompanySCHEDULE 2UNSECURED LOANSIntercorporate deposits (due within a year, or at call) 139,310,000 127,358,000

139,310,000 127,358,000


ASSETS As at Additions Deductions As at Up to For the year Deductions Up to As at As at01/04/2005 31/03/2006 01/04/2005 31/03/2006 31/03/2006 31/03/2005

IntangiblesTrademarks 9,000,000 – – 9,000,000 1,070,137 900,000 – 1,970,137 7,029,863 7,929,863Computer Software 540,000 1,274,392 – 1,814,392 135,110 48,306 – 183,416 1,630,976 404,890Total (A) 9,540,000 1,274,392 – 10,814,392 1,205,247 948,306 – 2,153,553 8,660,839 8,334,753TangiblesFactory Building 82,400 – – 82,400 8,281 7,412 – 15,693 66,707 74,119Plant & Machinery 4,407,529 1,211,234 74,675 5,544,088 3,381,774 200,196 7,001 3,574,969 1,969,119 1,025,755Office Equipment 46,863 26,052 – 72,915 13,182 11,485 – 24,667 48,248 33,681Furniture & Fixture 48,638 – 48,638 11,567 6,710 – 18,277 30,361 37,071Spray and Service Kit 59,000 – – 59,000 35,077 23,923 – 59,000 – 23,923Vehicles 38,949 – – 38,949 38,949 – – 38,949 – –Computer Hardware – 692,785 692,785 – 125,976 – 125,976 566,809 –

Total (B) 4,683,379 1,930,071 74,675 6,538,775 3,488,830 375,702 7,001 3,857,531 2,681,244 1,194,549

TOTAL(A+B) 14,223,379 3,204,463 74,675 17,353,167 4,694,077 1,324,008 7,001 6,011,084 11,342,083 9,529,302

Previous Year Total 12,979,858 1,243,521 – 14,223,379 3,490,260 1,203,817 – 4,694,077 9,529,302

SCHEDULE 3 : FIXED ASSETS (Amount in Rs.)


SCHEDULE 4 : INVESTMENTS : LONG TERMIn Mutual Funds, QuotedTempleton India Treasury Management AccountRegular Plan - Growth 68,905 68,905No. of units 43.19 (Previous year 43.19)

68,905 68,905

Market Value 75,728 68,905

SCHEDULE 5 : INVENTORYRaw material 3,922,887 3,635,957Packing Material 930,122 785,956Finished Goods 4,356,905 2,429,913Service Stock 12,252,981 12,418,328Photographic equipment 814,057 840,856

22,276,952 20,111,010

SCHEDULE 6 : SUNDRY DEBTORS(Unsecured and considered good unless otherwise stated)Due for more than six months

Considered good 8,409,492 12,247,885Considered doubtful 379,601 379,601

8,789,093 12,627,486Other debts

Considered good 36,689,308 28,275,156Considered doubtful – –

45,478,401 40,902,642Less : Provision for doubtful debts 379,601 379,601

45,098,800 40,523,041

SCHEDULE 7 : CASH AND BANK BALANCESCash on hand 47,281 1,034Balances with scheduled banks

in current accounts 9,303,535 1,622,216in fixed deposit account 7,323,200 –in margin deposit account 1,243,060 630,347

17,917,076 2,253,597

SCHEDULE 8 : LOANS AND ADVANCES(Unsecured and considered good unless otherwise stated)Loans and advances recoverable in cash or inkind or for value to be received : 22,453,920 941,023Advance to Suppliers 4,938,556 728,090Deposits 2,715,931 2,564,536Advance Tax and Tax Deducted at Source 1,693,994 3,060

31,802,401 4,236,709


SCHEDULE 9 : CURRENT LIABILITIESCurrent Liabilities:Sundry Creditors (Refer Note 4) 12,057,968 15,631,800Security Deposits 8,620,334 7,899,449Advance from Customers 24,870,848 14,083,253Other Liabilities 17,945,805 19,416,028Interest accrued but not due 956,432 9,589

64,451,387 57,040,119

SCHEDULE 10 : PROVISIONSLeave Encashment 1,399,243 818,404Taxation 805,000 –

2,204,243 818,404

SCHEDULES FORMING PART OF THE PROFIT & LOSS ACCOUNTFOR THE YEAR ENDED MARCH 31, 2006

SCHEDULE 11 : OTHER INCOMEMiscellaneous income 4,123,113 1,232,534Sundry Credit balances written back 776,619 147,705

4,899,732 1,380,239

SCHEDULE 12 : MATERIALSa) Raw Material and Packing Material Consumed

Opening stock 4,421,913 69,856Add : Purchases during the year 24,028,993 4,975,000

28,450,906 5,044,856Less : Closing stocks 4,853,009 4,421,913

23,597,897 622,943b) Service Stock Consumed 29,592,856 16,828,825

53,190,753 17,451,768

SCHEDULE 13 : INVENTORY CHANGEOpening stock

Photographic equipments 840,857 840,857Finished goods 2,429,913 231,500

3,270,770 1,072,357Less: Closing Stock

Photographic equipments 814,057 840,857Finished goods 4,356,905 2,429,913

5,170,962 3,270,770

(1,900,192) (2,198,413)


118

SCHEDULES FORMING PART OF THE PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006


SCHEDULE 14 : EXPENSESSalaries, Bonus & Allowances 16,448,123 12,936,622Contribution to Provident Fund and Other Funds 770,279 1,338,763Staff Welfare Expenses 759,757 237,237Processing Charges 1,677,141 1,090,572Electricity Expenses 359,073 287,683Rent 2,261,717 1,512,787Rates & Taxes 2,586,662 43,073Repairs & Maintenance :

Machinery & Equipment 7,802 8,494Others 274,713 46,778

282,515 55,272Insurance 104,398 171,020Freight & Transportation Expenses 2,709,778 648,439Service Center Expenses 35,717,165 19,657,815Advertising, Publicity & Sales Promotion Expenses 52,907,561 40,361,448Discount 1,062,414 –Travelling & Conveyance 4,333,627 3,351,709Legal & Professional Charges 3,836,943 4,213,557Bad debts and advances written off 5,111,522 120,175IT Expenses 587,943 1,223,142General Expenses 5,056,635 3,407,052

136,573,253 90,656,366

SCHEDULE 15 : INTEREST AND FINANCE EXPENSESInterest on intercorporate deposits 919,610 658,203Other Interest & financial charges 1,799,886 1,126,170

2,719,496 1,784,373Less : Interest Income 401,578 –

2,317,918 1,784,373SCHEDULE 16 : NOTES TO ACCOUNTS


a) Accounting Conventions :

The accounts have been prepared on historical cost convention. The Company follows mercantilesystem of accounting and recognizes income and expenditure on accrual basis

b) Fixed Assets :

Fixed assets have been stated at cost and include incidental and / or installation/developmentexpenses incurred in putting the asset to use and interest on borrowing incurred duringconstruction period. Pre-operative expenses for major projects are also capitalized, whereappropriate.

c) Depreciation/Amortization :

1) Spray and service kits and Vehicles: On Straight Line Method basis at the rates prescribedby Schedule XIV to the Companies Act, 1956.

2) Computer Hardware and Other Assets: On Written Down Value basis at the ratesprescribed by Schedule XIV to the Companies Act, 1956.

3) Following assets are Amortized as follow:

Asset Type Period

(a) Trademarks 10 years

(b) Computer Software 6 years

d) Impairment :

Carrying amount of cash generating units / assets are reviewed at balance sheet date todetermine whether there is any indication of impairment. If such indication exists, therecoverable amount is estimated as the net selling price or value in use, whichever is higher.Impairment loss, if any, is recognized whenever carrying amount exceeds the recoverableamount.

e) Inventories :

Raw materials and Service Stock are valued at weighted average cost.

Finished goods are valued at lower of cost and net realisable value.These costs include cost ofconversion and other costs incurred in bringing the inventories to their present location andcondition.

Stores and spares are valued at weighted average cost.

f ) Retirement Benefits :

Retirement benefits to employees comprise payments under defined contribution plans likeprovident fund and family pension. Payments under defined contribution plans are charged tothe profit and loss account. The liability in respect of defined benefit schemes like gratuity andleave encashment benefit on retirement is provided on the basis of actuarial valuation at theend of each year. The liability for retirement gratuity is funded through a trust created for thepurpose.

g) Research & Development :

Revenue expenditure on Research and Development is charged to Profit and Loss Account ofthe year in which it is incurred. Capital expenditure incurred during the year on Research andDevelopment is shown as addition to Fixed Assets.

h) Revenue Recognition :

Revenue from Pest Management services is recognized as and when the services are rendered.Sales are net of returns, rebates, sales tax, etc.

i) Foreign Exchange Transactions :

Transactions in foreign currency are recorded at the exchange rates prevailing on the date ofthe transaction. Assets and liabilities related to foreign currency transactions, remaining unsettledat the year end, are translated at the year end exchange rates. Forward exchange contracts,remaining unsettled at the year end, backed by underlying assets or liabilities are also translatedat year end exchange rates.The premium payable on foreign exchange contracts is amortisedover the period of the contract. Exchange gains / losses are recognised in the Profit and LossAccount except in respect of liabilities incurred to acquire fixed assets in which case, they areadjusted to the carrying amount of such fixed assets.

j) Earnings per Share :

The basic earning per share is computed using the weighted average number of commonshares outstanding during the period. Diluted earning per share is computed using the weightedaverage number of the common and dilutive common equivalent shares outstanding duringthe period except where the results would be anti dilutive.

2. CONTINGENT LIABILITIES :

1) Claims against company not acknowledged as debts amounts to Rs. 14,500,000 (Previous yearRs. 13,718,000)

2) Bank Guarantee given by the company amounting to Rs.1,243,060 (Previous year Rs. 630,347)

3. Capital Commitments

The estimated value of contracts remaining to be executed on capital account to the extent notprovided for is Rs. Nil (Previous Year Rs. Nil.)

4. SSI CREDITORS

In the absence of a database identifying creditors as Small Scale Industrial Undertakings, it is theopinion of the management that there are no parties, which can be classified as Small ScaleIndustrial Undertakings to whom the company owes any sum. The auditors have accepted therepresentations of the management in this matter.

5. The Company has not provided for interest for the year on certain Inter Corporate Deposits received,as the same has been waived by the concerned companies in view of the financial position of theCompany.

6. During the current year, the Company changed its accounting policy with respect to amortization ofComputer Software from 3 years to 6 years. Had there been no change in the rate of depreciation,the charge for current year would have been higher by Rs. 115,786. Consequently accumulatedlosses and written down value of asset as at year end are lower by Rs.183,415.

7. Expenditure in Foreign Currency

This Year This Year

License Fees 875,400 NilTraining Expenses 227,978 NilTravelling Expenses 53,389 26,720

8. ACCOUNTING FOR LEASES

The lease rentals in respect of office and factory space charged during the period and maximumobligations on non-cancellable operating leases payable as per the rentals stated in the leaseagreement are given in accordance with the Accounting Standard (AS-19) on “Leases” issued by theInstitute of Chartered Accountants of India.

(Amounts in Rupees)

This Year This Year

1. Lease Rentals paid during the year 1,136,209 318,000

2. Future Lease Obligations

– Due within one year of the Balance Sheet date 1,204,132 318,000

– Due between one year and five years 2,255,473 631,000

– Due after five years – –

Current Year Previous Year

Item Units Quantity Value Quantity Value(Rs.) (Rs.)

9. INVENTORIES OF FINISHED GOODSTraded goodsPrint Leader Nos 3 352,286 3 352,286Imager Nos 5 461,771 6 488,571

814,057 840,857Insecticides Ltrs 1,767 306,864 2215 515,041

1,120,921 1,355,898

Manufactured goodsInsecticides Ltrs 9,352 4,050,041 7101 1,914,872

4,050,041 1,914,872

Total 5,170,962 3,270,770

10. SALES (NET OF EXCISE DUTY)Item Units Quantity Value Quantity Value

(Rs.) (Rs.)Traded goodsSpares & Consumables – – 92,596Insecticides Ltrs. 29,920 11,672,717 32,825 21,513,196Manufactured goodsInsecticides Ltrs. 82,932 31,490,615 28,846 11,877,036

Total 43,163,332 33,482,828


119

SCHEDULE 16 : NOTES TO ACCOUNTS (Contd..)Current Year Previous Year

Item Units Quantity Value Quantity Value(Rs.) (Rs.)

11. PURCHASES FOR RESALEInsecticides 29,472 7,404,457 35,240 22,983,950Spares & Consumables – – – 6,255

Total 7,404,457 22,990,205

12. RAW MATERIAL CONSUMEDBasic Chemicals Kgs 127,522 22,862,147 5,523 622,943Service Stock – 29,592,856 – 16,828,825Others 735,750 –

Total 53,190,753 17,451,768

13. VALUE OF CONSUMPTION OF RAW MATERIALS,SPARES AND CONSUMABLESItem Value Value

% (Rs.) % (Rs.)Raw MaterialsIndigenous 80 42,305,906 100 17,451,768Imported (including custom duty) 20 10,884,847 – –

Total 53,190,753 17,451,768

14. INSTALLED CAPACITY AND ACTUAL PRODUCTIONUnits Installed Capacity Production

Current Year Previous Year Current Year Previous Year

Insecticides Ltrs. 240,000 240,000 51,215 35,484Processed Outside – – 33,968 –

240,000 240,000 51,215 35,484

15. CIF VALUE OF IMPORTSItem Units Quantity Value Quantity Value

(Rs.) (Rs.)

Insecticide Kgs. 58,660 12,016,607 2,500 2,540,309

Total 12,016,607 2,540,309

16. EARNING PER SHARECurrent Year Previous Year

Profit/ (Loss) after Tax as per profit & loss account Rs. 10,433,546 (11,304,174)Weighted average number of equity shares of Rs. 10 each 4,557,425 3,435,616Basic/Diluted Earnings Per Share Rs. 2.29 (3.29)

17. RELATED PARTY DISCLOSURE AS REQUIRED BY AS - 18 “RELATED PARTY DISCLOSURES”ARE GIVEN BELOW:

1. Relationships

(i) Shareholders (the Godrej Group shareholding) in the company:Godrej Industries Limited hold 84.1%GIL is a subsidiary of Godrej & Boyce (Mfg.) Co. Limited, the ultimate holding co.

(ii) Other related parties in the Godrej Group where common control exists.

1. Godrej Tea Limited2. Godrej Agrovet Limited3. Godrej Properties Limited4. Godrej Sara Lee Limited

(iii) Key Management Personnel

Mr. A. Mahendran (Managing Director)

2. The following transactions were carried out with the related parties in the ordinary courseof business:

Details relating to parties referred to in item 1(i) and (ii) above:

Sr. Particulars Godrej Group Other RelatedNo. Shareholders parties in the Godrej

Ultimate Holding Co. GroupHolding Co.

(i) (i) (ii)

1. Issue of Share Capital Nil 17,160,000 Nil(Nil) (2,400,000) (Nil)

2. Sale of Fixed Assets Nil Nil 74,675(Nil) (Nil) (Nil)

3. Purchase of Fixed Asset Nil Nil Nil(Nil) (Nil) (74,675)

4. Sales & Other Income Nil Nil 4,066,038(Nil) (Nil) (1,014,862)

5. Purchases (net of returns) Nil Nil (454,918)(Nil) (17,000) (14,312,784)

6. Expenses charged by other Companies Nil 1,475,254 2,065,638(2,975) (1,301,911) (3,203,865)

7. Expenses charged to other Companies Nil 5,650 1,733,582(Nil) (Nil) (Nil)

8. Interest on Inter Corporate Deposit Nil 88,457 Nil(Nil) (111,000) (Nil)

9. Sundry Deposit with Other Companies 351,450 Nil Nil(Nil) (350,000) (Nil)

10. Sundry Deposits refunded 350,000 Nil Nil(Nil) (Nil) (Nil)

11. Outstanding Receivables (net) of Payables Nil (357,800) 3,004,913(Nil) (-21,286) (49,008)

(ii) Details relating to person referred to in item1(iii) above

Current year Previous year1 Issue of share capital 3,040,000 2,400,000

3. Significant Related Party Transactions

1. Sale of Fixed Assets Godrej Sara Lee Limited 74,675– (Nil)

2. Purchase of Fixed Assets – NilGodrej Sara Lee Limited (74,675)

3. Sales & Other Income Godrej Sara Lee Limited 3,044,295Godrej Properties Limited 991,250Godrej Sara Lee Limited (1,014,862)

4. Purchases(net of returns) Godrej Sara Lee Limited (454,918)Godrej Sara Lee Limited (14,312,784)

5. Expenses charged by other Godrej Tea Limited 1,337,917Companies Godrej Sara Lee Limited 727,720

Godrej Tea Limited (1,016,303)Godrej Sara Lee Limited (2,187,562)

6. Expenses charged to other Godrej Sara Lee Limited 1,724,082Companies – (Nil)

7. Outstanding Receivables, netof Payables Godrej Tea Limited 2,018,551

Godrej Sara Lee Limited 991,250Godrej Tea Limited (-262,147)Godrej Sara Lee Limited (311,155)

18. Deferred Tax

The Tax effects of significant temporary differences that resulted in deferred tax assets and liabilities are :Current Year Previous Year

Rs. Rs.

Depreciation on Fixed Assets (1,163,000) –Others 762,000 –

Deferred Tax Liability (401,000) –

19. Auditors RemunerationStatutory Audit 134,688 82,650Audit under other Statutes 33,672 27,550

Total 168,360 110,200

20. The amount of exchange difference included in the Profit and Loss Account, under the related headsof expenses / income, is Rs.9,856 (Previous year expense Rs.).

21. The Company is engaged in the business of rendering pest management services, which is its onlyprimary business segment. The Company operates in economic environments which are subject tosame risks and returns and hence no disclosure is required under AS 17- Accounting Standard onSegment Reporting.

22. Information required under Schedule VI to the Companies Act ,1956, have been given to the extentapplicable.


120


Current Year Previous YearRs. ‘000 Rs. ‘000

A. Cash Flow from Operating Activities :Profit/(Loss) before tax 12,308,526 (11,304,174)Adjustments for :Depreciation 1,324,008 1,203,817Interest expense 2,317,918 1,784,373

Operating Loss before working capital changes 15,950,452 (8,315,984)Adjustments for :Inventories (2,165,942) (17,862,984)Trade & Other receivables (30,447,457) (45,733,188)Trade & Other payables 7,035,675 49,045,856

(9,627,272) (22,866,300)Direct taxes paid (1,693,994) (3,060)Fringe Benefit tax Paid (668,980) –

B. Cash Flow from Investing Activities :Purchase of Assets (3,136,789) (1,083,521)Investments – (68,905)

Net Cash used in investing activities (3,136,789) (1,152,426)C. Cash Flow from Financing Activities :

Term Loans/Inter Corporate Deposits taken 11,952,000 19,500,000Issue of Share Capital 20,200,000 4,800,000Interest paid (1,361,486) (1,774,786)

Net Cash from financing activities 30,790,514 22,525,214

Net Increase in Cash and Cash Equivalents 15,663,479 (1,496,572)

Add : Cash & Cash equivalents (Opening Balance) 2,253,597 3,750,169

Cash & Cash equivalents (Closing Balance) 17,917,076 2,253,597

Notes1. Cash flow statement has been prepared under the Indirect method as set out in the accounting

standards AS-3 on Cash Flow Statement as present cash flows by operating, investing and financingactivities

2. Figures in brackets are outflows/deductions.3. Previous year figures are regrouped/restated whereever necessary to confirm to this year’s

classification.



Mumbai, May 8, 2006

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE1. Registration details

Registration No. : 72222State Code : 11Balance Sheet Date : March 31, 2006

2. Capital raised during the yearPublic Issue : –Rights Issue : 20,200,000Bonus Issue : –Private Placement : –

3. Position of mobilisation and deployment of fundsTotal Liabilities : 262,566,630Total Assets : 262,566,630Sources of fundsPaid up Capital : 56,200,000Reserves & Surplus : –Secured Loans : –Unsecured Loans : –Deferred Tax Liability : 401,000Application of fundsNet Fixed Assets : 11,342,083Investments : 68,905Net Current Assets : 50,439,599Miscellaneous Expenditure : –Accumulated Losses : 134,060,413

4. Performance of CompanyTurnover (Total Income) : 211,218,723Total Expenditure : 198,910,197Profit / (Loss) before tax : 12,308,526Profit / (Loss) after tax : 10,433,546Earnings per share in Rs. : 2.29Dividend rate (%) : –

5 Generic names of three principal products / services of the CompanyItem Code No. NilProduct Description Pest Control ServicesItem Code No. 3808.1*Product Description InsecticidesItem Code No. 90.10 *Product Description Photographic Equipment & Spares


121

DIRECTORS’ REPORT FOR THE YEAR ENDED ON MARCH 31, 2006

REPORT OF THE AUDITORSTo The Members of ENSEMBLE HOLDINGS & FINANCE LIMITED

To The Shareholders,Your Directors submit their Report along with the audited Accounts for the year ended on March 31, 2006.Review of operationsYour Company’s performance during the year as compared with that during the previous year is summarisedbelow :-

This Year Previous Year(Rs.’000) (Rs.’000)

Gross Revenue earned 57,332 3,039

Profit/(Loss) for the year 57,185 2,053Provision for Taxation 520 –Adjustment in respect of prior years 5 –Loss brought forward (80,575) (82,628)

Loss carried forward (80,521) (80,575)

DividendThe Board of Directors have declared and paid two interim dividends for year 2005-06 aggregating to Rs.8.13per share. The Directors recommend a final dividend of Rs.0.97 per share. Taken together these work out toRs.9.11 per share (previous year Rs. Nil).Compliance with guidelines issued by the Reserve Bank of IndiaYour Company has been granted a Certificate of Registration by Reserve Bank of India to carry on the businessas Non-Banking Financial Institution.Your Company has not accepted any public deposits during the year under review, nor does it propose to acceptthe same. As such, pursuant to Non-Banking Financial Companies (Reserve Bank) Directions, 1998, issued byReserve Bank of India vide notification No.DFC.114/DG (SPT) dated January 2, 1998, your Company is notrequired to obtain rating from a rating agency in this regard. Hence, rating for Fixed Deposit obtained fromCRISIL in 1996-97 has not been renewed.In view of the above, there are no overdue or unclaimed deposits.DirectorsIn accordance with Article 124 of the Articles of Association of your Company, Ms. T. A. Dubash retires by rotationand being eligible offers herself for re-appointment. Mr. Hoshedar K. Press was appointed as Executive Director witheffect from November 16, 2005. Notice under Section 257 of the Companies Act, 1956 has been received from amember signifying intention to propose his appointment as Director in the forthcoming Annual General Meeting.

AuditorsYou are requested to appoint Auditors for the current year and fix their remuneration. The retiring auditors, M/s Kalyaniwalla Mistry & Associates, Chartered Accountants are eligible for reappointmentDirectors’ Responsibility StatementPursuant to the provisions contained in Section 217 (2AA) of the Companies Act, 1956, the Directors of yourCompany confirm :a) that in the preparation of the annual accounts, the applicable accounting standards have been followed

and no material departures have been made from the same;b) that they have selected such accounting policies and applied them consistently and made judgements

and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs ofthe Company at the end of the financial year and of the loss of the Company for that period;

c) that they have taken proper and sufficient care for the maintenance of adequate accounting records inaccordance with the provisions of this Act for safeguard of the assets of the Company and for preventingand detecting fraud and other irregularities;

d) that they have prepared the annual accounts on a going concern basis.Additional InformationThe additional information required to be given under the Companies Act, 1956, has been laid out in theAccounts to the extent applicable. The notes to the Accounts referred to in the Auditors’ Report are self-explanatory and therefore do not call for any further explanation.The information in respect of Conservation of energy, Technology Absorption and Foreign Exchange earningsand outgo, required under Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosureof Particulars in the Report of the Board of Directors) Rules, 1988 has not been given, since such requirementis not applicable to the Company.The particulars, required under Section 217(2A) of the Companies Act, 1956, read with the Companies (Particularsof Employees) Rules, 1975, have not been given, since the Company did not employ any person during the yearunder review.


M. EIPE C.K. VAIDYADirector Director


1. We have audited the attached Balance Sheet of Ensemble Holdings and Finance Limited as atMarch 31, 2006 and also the Profit and Loss Account and Cash Flow Statement for the year ended on thatdate annexed thereto. These financial statements are the responsibility of the Company’s management.Our responsibility is to express an opinion on these financial statements based on our audit.


3. As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Government in termsof Section 227 (4A) of the Companies Act, 1956, we annex hereto a statement on the matters specifiedin paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to 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 purpose 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 such books;c) The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the

books of account;d) In our opinion, the Profit and Loss Account and Balance Sheet dealt with by this report comply with

the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;e) In our opinion and to the best of our information and according to the explanations given to us, the

said accounts, read with the notes thereon, give the information required by the Companies Act,1956, in the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India:(i) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2006,(ii) in the case of the Profit and Loss Account, of the Profit of the Company for the year ended on

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

5. On the basis of the written representations received from the Directors as on March 31, 2006, and takenon record by the Board of Directors, we report that none of the Directors is disqualified as on March 31,2006, from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of theCompanies Act, 1956.


Chartered AccountantsV. M. PADWAL

PartnerMumbai, May 26, 2006 Membership No.: 49639

ANNEXURE TO THE AUDITORS’ REPORTReferred to in Paragraph 3 of our report of even date on the accounts of Ensemble Holdings & Finance Limitedfor the year ended March 31, 2006:1. a) The Company has granted unsecured loans to two companies covered in the register maintained

under Section 301 of the Companies Act, 1956 and the amount involved in the said transactions wasRs. Nil. The outstanding amount receivable towards loans from such companies amount to Rs.2,31,81,117/-.

b) In our opinion and according to information and explanations given to us, the rate of interest andother terms and conditions of unsecured loans given by the Company, are prima facie not prejudicialto the interest of the Company except for unsecured loan given to Godrej Hicare Limited whichhas been adequately provided for.

c) All parties except for Godrej Hicare Limited have repaid the principal amounts as stipulated andhave been regular in the payment of interest.

d) In our opinion, the Company has taken reasonable steps for the recovery of principal and interestin respect of overdue balance of Rs. 23,110,000/- due from Godrej Hicare Limited.

e) The Company had taken unsecured loans from a company covered in the register maintainedunder Section 301 of the Companies Act, 1956. The amount involved during the year wasRs. 58,00,000/-.

f) According to information and explanations given to us, we are of the opinion that the rate of interestand other terms and conditions on which loans have been taken from the company covered in theregister maintained under Section 301 of the Companies Act, 1956 are not, prima facie, prejudicialto the interest of the Company.

g) The Company is regular in repaying the principal amounts as stipulated and has been regular inthe payment of interest.

2. a) Based on the audit procedures applied by us and according to the information and explanationsprovided by the management, we are of the opinion that all transactions that need to be enteredinto the register in pursuance of Section 301 of the Companies Act, 1956, have been so entered.

b) These transactions have been made at reasonable prices having regard to the prevailing marketprices at the relevant time.

3. In our opinion and according to the information and explanations given to us, the Company has notaccepted any deposits from the public within the meaning of Sections 58A and 58AA or any other relevantprovisions of the Companies Act, 1956, and the rules framed thereunder.

4. The Company has an internal audit system, which in our opinion, is commensurate with the size andnature of its business.

5. a) According to the records examined by us, the Company is generally regular in depositing undis-puted statutory dues including income tax with appropriate authorities.

b) According to the information and explanation given to us there are no dues of sales tax, incometax, wealth tax, service tax, excise duty or cess, which have not been deposited on account of anydispute.

6. The accumulated losses of the Company as at end of the financial year are more than fifty percent of itsnet worth. The company has not incurred cash losses during the current financial year and in theimmediately preceding financial year.

7. According to the information and explanations given to us and the records examined by us, we observedthat the Company has not borrowed any money from financial institutions or banks or debenture holders.

8. According to the information and explanations given to us the Company has not granted loans andadvances on the basis of security by way of pledge of shares and other securities.

9. In our opinion and according to the information and explanation given to us, the nature of the activities of theCompany does not attract any special statute applicable to chit fund and nidhi/mutual benefit fund/ societies.

10. In our opinion, the Company has maintained proper records of the transactions and contracts of theinvestments dealt in by the Company and timely entries have been made therein. The investments madeby the Company are held in its own name.

11. According to the information and explanations given to us and the records examined by us, the Companyhas not given any guarantees for loans taken by others from banks or financial institutions.

12. According to the information and explanations given to us and the records examined by us we observedthat the Company has not taken any term loan.

13. On the basis of an overall examination of the balance sheet and cash flows of the Company and theinformation and explanation given to us, we report that the Company has not utilised any funds raisedon short-term basis for long-term investments.

14. The Company has not made any preferential allotment of shares to parties or companies covered underSection 301 of the Companies Act, 1956.

15. The Company did not issue any debentures during the financial year.16. The Company has not raised any money through a public issue during the year.17. Based upon the audit procedures performed and the information and explanation given by the management,

we report that no fraud on or by the Company has been noticed or reported during the year.18. In our opinion, clauses (i), (ii), (iv) and (viii) of paragraph 4 of the Companies (Auditor’s Report) Order, 2003

are not applicable.For and on behalf of


V. M. PADWALPartner

Mumbai, May 26,2006 Membership No.: 49639

Ensemble Holdings & Finance Limited


122



SOURCE OF FUNDS

1 Shareholders’ Funds

(a) Share Capital 1 37,741,600 37,741,600

(b) Reserves & Surplus 2 102,357,370 84,945,040

140,098,970 122,686,6402 Loan Funds

Unsecured Loans 3 – 1,100,000

Total 140,098,970 123,786,640


1 Investments 4 44,027,576 35,578,755

2 Current Assets, Loansand Advances

(a) Sundry Debtors 453,350 –

(b) Cash & Bank Balances 5 504,958 7,207,669

(c) Other Current Assets 6 804 8,600

(d) Loans and Advances 7 18,893,472 502,273

19,852,584 7,718,542

Less : Current Liabilities andProvisions 8Current Liabilities 103,199 85,762Provisions 4,199,084 –

4,302,283 85,762

Net Current Assets 15,550,301 7,632,780

3 Profit and Loss Account 80,521,093 80,575,105

Total 140,098,970 123,786,640



As per our Report of even date attached. Signatures to Balance Sheet andSchedules 1 to 8 and 12

For and on behalf ofKALYANIWALLA MISTRY AND ASSOCIATESChartered Accountants M. EIPE Director

C.K. VAIDYA DirectorV.M. PADWAL S. SRINIVASANPartner Company Secretary


SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006



SHARE PREMIUM

As per last Balance Sheet 84,945,040 84,945,040

Special Reserves u/s 45IC of RBI Act, 1934Opening Balance – –Add : Transfer during the year for FY 2004-05 411,000 –Add : Transfer during the year for FY 2005-06 11,334,220 –

11,745,220General ReserveOpening Balance –Transfer during the year for FY 2005-06 5,667,110

5,667,110 –

102,357,370 84,945,040SCHEDULE 3 : UNSECURED LOANS

Inter Corporate Borrowings – 1,100,000

– 1,100,000

(Inter Corporate Borrowings are from the Holding Company; and are due for repayment within on call.)



AUTHORISED

5,000,000 Equity Shares of Rs. 10/- each 50,000,000 50,000,000

ISSUED, SUBSCRIBED AND PAID UP

3,774,160 Equity Shares of Rs. 10/- each fully paid up. 37,741,600 37,741,600

37,741,600 37,741,600

(Out of the above, 3,770,160 shares are held byGodrej Industries Ltd., the Holding Company)



INCOMEInterest Income 9 457,070 842,572Dividend 397,935 2,181,632Profit on sale of investments (Net) 19,750,323 34Provision for diminution in value ofLong term investments written back 36,488,750 –Profit on sale of Mutual Funds 237,935 14,595

57,332,013 3,038,833

EXPENDITUREExpenses 10 127,137 54,329Interest 11 19,554 931,130

146,691 985,459

PROFIT / (LOSS) BEFORE TAX 57,185,322 2,053,374Provision for Taxation 520,000 –

PROFIT / (LOSS) AFTER TAX 56,665,322 2,053,374Adjustments for Income tax of prior years 5,779 –

PROFIT AVAILABLE FOR APPROPRIATION 56,671,101 2,053,374

APPROPRIATIONDividend

Interim 30,700,000Final (Proposed) 3,682,599 34,382,599 –

Dividend Distribution Tax 4,822,160 –Transfer to Special Reserve Fund u/s 45IC of RBI Act, 1934 11,745,220 –Transfer to General Reserves 5,667,110 –

56,617,089 –Balance available for set off against b/f deficit in P&L A/c 54,012 –Loss brought forward (80,575,105) (82,628,479)

Loss Carried Forward (80,521,093) (80,575,105)

Earnings Per Share 12 (6) 15.02 0.54


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

As per our Report of even date attached. Signatures to Profit & Loss Accountand Schedules 9 to 12





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SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006


SCHEDULE 5 : CASH AND BANK BALANCESCash on hand 1,736 1,792Balances with Scheduled Banksin Current Accounts 503,222 1,205,877in Fixed Deposits with Bank – 6,000,000

504,958 7,207,669SCHEDULE 6 : OTHER CURRENT ASSETS

Accrued Interest 804 8,600804 8,600

SCHEDULE 7 : LOANS AND ADVANCES(Unsecured, considered good, unless stated otherwise)Loans 71,117 139,440ESOP Loans 18,550,000 –Share Application Money (considered doubful) 300,000 300,000Intercorporate Deposits (considered doubtful) 23,110,000 23,110,000

23,410,000 23,410,000Less : Provision for Doubtful Loans and Advances (23,410,000) (23,410,000)

– –Advance Payment of Taxes 272,355 362,833(Net of provision for tax Rs.5,20,000, previous year Nil)

18,893,472 502,273SCHEDULE 8 : CURRENT LIABILITIES & PROVISIONSCurrent LiabilitiesSundry Creditors 103,199 85,762Provisions :Proposed Dividend 3,682,599 –Tax on Distributed Profits 516,485 –

4,199,084 85,762SCHEDULE 9 : INTEREST INCOME (Gross)On Loans (TDS Rs. 85,400/-, previous year Rs. Nil) 405,846 35,848On Intercorporate Deposits – 805,562(TDS Rs. Nil, previous year Rs. 1,68,443/-)On Income tax Refund 26,690 52On Fixed Deposits with Bank (TDS Rs. 5,505, previous year Rs. Nil) 24,534 1,110

457,070 842,572SCHEDULE 10 : EXPENSESSalary 22,500 –Profession Tax 2,500 2,500Directors’ sitting fees 4,000 2,000Auditors’ Remuneration 44,896 27,550Professional Charges 25,510 20,000Miscellaneous Expenses 27,731 2,279

Total 127,137 54,329SCHEDULE 11 : INTERESTOn Inter Corporate Borrowings 19,554 931,130

Total 19,554 931,130

SCHEDULE 4 : INVESTMENTSQuantity Amount

Investee Company / Institution Face Quantity as Acquired Sold Quantity as As on As onValue on 01.04.05 during during on 31.03.06 31.03.06 31.03.05

the year the year Rupees RupeesLong Term Investments (At Cost)Equity shares - QuotedCompanies under same managementGodrej Industries Ltd. 6 98,990 – 98,990 – – 40,992,795Godrej Foods Ltd. 1 1,484,864 – 1,484,864 – – 1,363,885Other CompaniesAgro Tech Foods Ltd. 10 1 – – 1 53 53Colgate Palmolive India Ltd. 10 1 – – 1 151 151Dabur India Ltd. 1 1 1 – 2 59 59(Bonus received during the year)Henkel Spic India Ltd. 10 1 – – 1 31 31Hindustan Lever Ltd. 1 751 – – 751 90,589 90,589Gillette India Ltd. 10 1 – – 1 400 400Marico Industries Ltd. 10 4 – – 4 271 271Nirma Ltd. 10 1 – – 1 255 255Procter & Gamble Hygiene & Health Care Ltd. 10 1 – – 1 490 490Venkys India Ltd. 10 1 – – 1 37 37UnquotedCompanies under the Same Management :Godrej Properties Ltd. 10 267,410 65 190,680 76,795 5,488,590 18,957,460Godrej Agrovet Ltd. 10 – 2,000 – 2,000 560,000 –Godrej Remote Services Ltd. 10 10,883 – 10,883 – – 109,384Godrej Hicare Ltd. 10 4,800 – – 4,800 48,000 48,000Godrej Global Solutions Ltd. (Reduction of 10 49,940 – 8,689 41,251 499,400 499,400Share Capital during the year under ascheme of arrangement)Other Companies :karROX Technologies Ltd. 10 250,000 – – 250,000 10,050,000 10,050,000Personalitree Academy Ltd. 10 389,269 – – 389,269 11,027,991 11,027,991Reckitt Benckiser (India) Ltd. 10 10 – 10 – – 2,433Avestha Gengraine Technologies Pvt. Ltd. 10 – 55,500 – 55,500 25,037,438 –Current InvestmentsMutual Funds - UnquotedMagnum Institutional Income fund– Savings Growth 2,300,000 –

55,103,755 83,143,684Less : Provision for diminution in value of Investments 11,076,179 47,564,929

44,027,576 35,578,755Aggregate Book Value of Investments :Quoted Investments 92,336 5,960,076Unquoted Investments 43,935,240 29,618,677

44,027,576 35,578,753Market Value of quoted investments 210,151 24,993,109

SCHEDULE 12 : NOTES TO ACCOUNTS1. Significant Accounting Policies

a. Accounting ConventionThe financial statements are prepared under the historical cost convention, on accrual basis inaccordance with the generally accepted accounting principles in India, the Accounting Standardsissued by the Institute of Chartered Accountants of India and the provisions of the Companies Act,1956.

b. Income recognition(i) Dividend income is recognised when the right to receive the same is established.(ii) Interest income is recognised on time proportion basis.(iii) Profit/loss on sale of investments is accounted on the trade dates.

c. InvestmentsLong term investments are carried at cost. Provision for diminution, if any, in the value of each longterm investment is made to recognise decline, other than that of a temporary nature. The fair valueof a long term investment is ascertained with reference to its market value, the investee’s assetsand results and the expected cash flows from the investments.

d. Taxes on IncomeCurrent Tax is the amount of tax payable on the taxable income for the year determined in accordancewith the provisions of the Income Tax Act, 1961.Deferred tax is recognised on timing differences, being the differences between the taxable incomeand accounting income that originate in one period and are capable of reversal in one or moresubsequent periods. Deferred tax assets subject to the consideration of prudence are recognisedand carried forward only to the extent that there is a reasonable certainty that sufficient futuretaxable income will be available against which such deferred tax assets can be realised. The taxeffect is calculated on the accumulated timing differences at the year end based on the tax rate andlaws enacted or substantially enacted on the Balance Sheet date.

2. InvestmentsThe Company has acquired and sold the following investments during the year :

This year Previous yearNo. of units/ Purchase No. of units/ PurchaseShare (Rs.) Cost (Rs.) Share (Rs.) Cost (Rs.)

JM Mutual Fund – – 1,895,393 20,000,000Avestha Gengraine Technology Pvt. Ltd. – – 50,000 20,000,000SBI-Magnum Inst. Income Fund 4,967,729 54,503,966 Nil NilSBI- Insta Cash Fund 120,882 1,850,000 Nil NilKotak -Liquid Inst Premium Fund 1,379,441 18,700,000 Nil Nil

3. Loans given by the Company to the ex-employees of Godrej Industries Limited and Lawkim Limitedare covered by an undertaking from the respective companies to repay the instalments on due datesfrom the voluntary retirement compensation falling due to the said ex-employees.

4. Amount due from a Company under the same managementThis year Previous Year

Rupees RupeesGodrej Industries Ltd. 71,921 140,971Godrej Hicare Ltd. 23,110,000 23,110,000Godrej Remote Services Ltd. – 7,534

23,181,921 23,258,5055. Auditors’ Remuneration :

(includes service tax wherever applicable)Audit Fees 28,060 27,550Tax Audit Fees 16,836 –

44,896 27,5506. Earnings per share

a. Net Profit/(Loss) after Tax available for shareholders 56,671,101 2,053,373b. Weighted Average Number of Equity Shares 3,774,160 3,774,160c. Basic and Diluted Earnings per Share of Rs.10 each 15.02 0.54


124

SCHEDULES ANNEXED TO AND FORMING PART OF ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 20067. Related Party Disclosures

a) Related Parties with whom transactions have taken place during the year, with the name and descriptionof relationship.Parties where control exists.Godrej Industries Limited, the Holding CompanyGodrej & Boyce Mfg. Co. Ltd., the ultimate Holding CompanyRelated Parties with whom transactions have taken place during the yearHolding CompanyGodrej Industries LimitedFellow SubsidiariesGodrej Properties LimitedGodrej Remote Services LimitedIndividual exercising significant influence over the enterpriseMs. T. A. Dubash Mr. M. EipeMr. C. K. Vaidya Mr. H. K. Press

b) Transactions with Related Parties(Rs. in lac)

Sr. Nature of Transaction Holding Subsidiary Fellow Associate/ Key Mang. Relatives of TotalNo. Company Company Subsidiary Joint Personnel Key Mang.

Venture Personnel

i) Acceptance of ICB 57.00 – – – – – 57.00Previous Year 25.00 – – – – – 25.00

ii) Refund of ICB 68.00 – – – – – 68.00Previous Year 258.50 – – – – – 258.50

iii) Interest paid on ICB 0.19 – – – – – 0.19Previous Year 9.31 – – – – – 9.31

iv) IntercorporateDeposits placed – – – – – – –Previous Year – – 105.00 – – – 105.00

v ) ICD Refund received – – – – – – –Previous Year – – 105.00 – – – 105.00

vi) Interest Receivedon ICD – – – – – – –Previous Year – – 8.06 – – – 8.06

vii) Dividend Received 3.96 – – – – – 3.96Previous Year 2.97 – 18.84 – – – 21.81

viii) Refund of VRS Loan 0.68 – – – – – 0.68Previous Year 0.58 – – – – – 0.58

ix) Interest Receivedon VRS Loan 0.26 – – – – – 0.26Previous Year 0.36 – – – – – 0.36

x ) Sale of Investments 190.68 – – – – – 190.68Previous Year 200.00 – – – – – 200.00

xi) Dividend Paid 306.67 – 0.32 – – – 307.00Previous Year – – – – – – –

xii) Remuneration – – – – 0.23 – 0.23Previous Year – – – – – – –

xiii) Balance Outstandingas on 31.3.06 – – – – – – –PayablePrevious Year 11.00 – – – – – 11.00Receivable 0.72 – – – – – 0.72Previous Year 1.41 – 0.08 – – – 1.49

10. ADDITIONAL INFORMATION AS REQUIRED UNDER PART IV OF SCHEDULE VI TO THECOMPANIES ACT, 1956BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

1. Registration detailsRegistration No. : 11-65457State Code : 11Balance Sheet Date : 31.03.2006

2. Capital raised during the year (Amount in Rs. Thousands)Public Issue : –Rights Issue : –Bonus Issue : –Private Placement : –

3. Position of mobilisation and deployment of funds (Amount in Rs .Thousands)Total Liabilities : 140,099Total Assets : 140,099Sources of funds :

Paid up Capital : 37,742Reserves & Surplus : 102,357Secured Loans : –Unsecured Loans : –

Application of funds :Net Fixed Assets : –Investments : 44,028Net Current Assets : 15,550Miscellaneous Expenditure : –Accumulated Losses : 80,521

4. Performance of Company (Amount in Rs. Thousands)Turnover (Total Income) : 57,332Total Expenditure : 147Profit before tax : 57,185Profit after tax : 56,665Earnings per share in Rs. : Rs. 15.02Dividend rate (%) : 91.10%

5. Generic names of three principal The Company is a Loanproducts/services of the Company : and Investment Company

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006This Year Previous Year

Rupees Rupees

Cash flow from Operating ActivitiesProfit before tax 57,185,322 2,053,374Adjustments for :Profit on sale of long term investments (19,750,323) (34)Profit on sale of Mutual Fund (237,936) (14,595)Provision for Dimunition in value of long term Investments (36,488,750) –Interest Expense - GIL 19,554 931,130

Operating Profit before working capital changes 727,867 2,969,875

Adjustments for :Accrued Interest 7,796 (6,453)Sundry Debtors (453,350) 28,635,000Trade Payables 17,437 641

Cash generated from operations 299,750 31,599,063Direct Taxes paid (590,905) (168,443)Direct Taxes refund received 167,161 1,274Net Cash from operating activities (123,994) 31,431,894

Cash flow from Investing ActivitiesProceeds from sale of investments 151,018,592 14,629New investments made (102,990,404) (138,364)Loans (18,481,677) 57,862

Net cash generated/(used) from investing activities 29,546,511 (65,873)

Cash flow from Financing ActivitiesIntercorporate Borrowings (Net) (1,100,000) (23,350,000)Interest Paid on Borrowings (19,554) (931,130)Dividend Paid (30,700,000) –Tax on Distributed Profits (4,305,675) –

Net cash generated/(used) from financing activities (36,125,229) (24,281,130)

Net increase/(decrease) in cash and cash equivalents (6,702,712) 7,084,891

Cash in and cash equivalents (opening balance) 7,207,669 122,778

Cash in and cash equivalents (closing balance) 504,957 7,207,669

As per our Report attached. Signatures to Cash Flow Statement




c) The significant Related Party Transactions are as under(Rs. in lac)

Nature of Transaction Amount

Acceptance of ICBGodrej Industries Limited 57.00

Refund of ICBGodrej Industries Limited 68.00

Interest paid on ICBGodrej Industries Limited 0.19

Dividend ReceivedGodrej Industries Limited 3.96

Refund of VRS LoanGodrej Industries Limited 0.68

Interest Received on VRS LoanGodrej Industries Limited 0.26

Sale of InvestmentsGodrej Industries Limited 190.68

Dividend PaidGodrej Industries Limited 306.67Godrej Agrovet Limited 0.32

RemunerationMr. H. K. Press 0.23

Balance Receivable OutstandingGodrej Industries Limited 0.72

8. Additional information required under Schedule VI, Part II of the Companies Act, 1956 to the extent notapplicable has not been given.

9. Previous year’s figures have been regrouped/reclassified wherever necessary.


125

SCHEDULE TO BALANCE SHEET OF A NON-BANKING FINANCIAL COMPANY(as required in terms of Paragraph 9BB of

Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998

(Rs. in lakhs)Particulars

LIABILITIES SIDE :

1. Loans and advances availed by the NBFCs inclusive Amount Amountof interest accrued thereon but not paid: outstanding overdue(a) Debentures : Secured Nil Nil

: Unsecured Nil Nil(other than falling within themeaning of public deposits*)

(b) Deferred Credits Nil Nil(c) Term Loans Nil Nil(d) Inter-corporate loans and borrowing Nil Nil(e) Commercial Paper Nil Nil(f) Public Deposits* Nil Nil(g) Other Loans (specify nature) Nil Nil

* Please see Note 1 below

2. Break-up of (1)(f) above (Outstanding public depositsinclusive of interest accrued thereon but not paid) :(a) In the form of Unsecured debentures Nil Nil(b) In the form of partly secured debentures i.e. debentures Nil Nil

where there is a shortfall in the value of security (c) Other public deposits Nil Nil

* Please see Note 1 below

ASSETS SIDE :

3. Break-up of Loans and Advances including bills Amount outstandingreceivables [other than those included in (4) below] :(a) Secured Nil(b) Unsecured

i) Loans/Advances 189.21ii) Intercorporate Deposit 231.10iii) Advance Payment of Taxes 2.72

4. Break up of Leased Assets and stock on hire andhypothecation loans counting towards EL/HP activities(i) Lease assets including lease rentals under sundry debtors :

(a) Financial lease Nil(b) Operating lease Nil

(ii) Stock on hire including hire charges under sundry debtors :(a) Assets on hire Nil(b) Repossessed Assets Nil

(iii) Hypothecation loans counting towards EL/HP activities(a) Loans where assets have been repossessed Nil(b) Loans other than (a) above Nil

5. Break-up of Investments :Current Investments :1. Quoted :

(i) Shares : (a) Equity Nil(b) Preference Nil

(ii) Debentures and Bonds Nil(iii) Units of mutual funds Nil(iv) Government Securities Nil(v) Others (please specify) Nil

2. Unquoted :(i) Shares : (a) Equity Nil

(b) Preference Nil(ii) Debentures and Bonds Nil(iii) Units of mutual funds 23(iv) Government Securities Nil(v) Others (Please specify) Nil

Long Term investments :1. Quoted :

(i) Share : (a) Equity 0.92(b) Preference —

(ii) Debentures and Bonds Nil(iii) Units of mutual funds Nil(iv) Government Securities Nil(v) Others (Please specify) Nil

2. Unquoted :(i) Shares : (a) Equity 527.11

(b) Preference —(ii) Debentures and Bonds Nil(iii) Units of mutual funds Nil(iv) Government Securities Nil(v) Others (Please specify) Nil

6. Borrower group-wise classification of all leased assets, stock-on-hire and loans and advances :Please see Note 2 belowCategory Amount net of provisions

Secured Unsecured Total1. Related Parties **

(a) Subsidiaries Nil Nil Nil(b) Companies in the same group :

LoansGodrej Industries Ltd. Nil 0.71 0.71

(c) Other related partiesInter Corporate Deposits -Godrej Photo-Me Ltd. Nil — —

2. Other than related partiesa) Advance Tax Payment Nil 2.72 2.72

Total 3.43 3.437. Investor group-wise classification of all investments

(current and long term) in shares and securities (both quoted and unquoted):Please see note 3 belowCategory Market Value / Break up Book Value (Net

or fair value or NAV of Provisions)1. Related Parties **

(a) Subsidiaries Nil Nil(b) Companies in the same group :

Quoted Nil NilUnquoted 329.26 65.48

(c) Other related parties NIL NIL

2. Other than related partiesQuoted : 2.10 0.92Unquoted : 519.03 373.88

Total 850.39 440.28** As per Accounting Standard of ICAI (Please see Note 3)# Start up Company hence fair value considered at face value.

8. Other informationParticulars Amount(i) Gross Non-Performing Assets

(a) Related parties Nil(b) Other than related parties Nil

(ii) Net Non-Performing Assets(a) Related parties Nil(b) Other than related parties Nil

(iii) Assets acquired in satisfaction of debt NilNotes :1. As defined in Paragraph 2(1)(xii) of the Non-Banking Financial Companies Acceptance of Public Deposits

(Reserve Bank) Directions, 1998.2. Provisioning norms shall be applicable as prescribed in the Non-Banking Financial Companies Prudential

Norms (Reserve Bank) Directions, 1998.3. All Accounting Standards and Guidance Notes issued by ICAI are applicable including for valuation of

investments and other assets as also assets acquired in satisfaction of debt. However, market value inrespect of quoted investments and break up/fair value/NAV in respect of unquoted investments should bedisclosed irrespective of whether they are classified as long term or current in column (5) above.

Godrej International Limited

126

DIRECTORS’ REPORT

The Directors present their report and accounts for the year ended 31st March, 2006

Principal activities and review of the business

The company's principal activity during the year continued to be trading in vegetable oils. The company'sworking capital was augmented during the year by means of a Rights Issue of 1,100,000 shares of £1 each,taken up entirely by the parent company. Prices of vegetable oil remained flat for most of the year andmade trading conditions difficult. The Company managed to increase it's turnover by 30 percent as aresult of better availability of workinag capital. However, margins were under severe pressure due tothose flat market conditions for most of the year. The strength in energy prices and the prospect of usage ofvegetable oils in bio-diesel are expected to lead to greater market volatility and more trading opportunityin the coming year.

Results and dividends

Profit for the year declined slightly to USD382,566. The directors recommend a dividend for the year at 6cents for each £ 1 share on the entire increased share capital, amounting to USD156,300 in total.

Directors

The directors who served during the year and their interests in the share capital of the Company were as follows:

£1 Ordinary shares

2006 2005

Adi B Godrej (Indian) 1 1Nadir B Godrej (Indian) – –Aspi K Bardy (Indian) – –Dorab E Mistry (British) – –Sharon Lancaster (British) (resigned 13 October 2005) – –Philip Collins (British) (Appointed 13 October 2005, Resigned 11 May 2006) – –Marion Hodgson (British) (Appointed 11 May 2006) – –

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF GODREJ INTERNATIONAL LIMITEDWe have audited the accounts of Godrej International Limited for the year ended 31 March 2006. Theseaccounts have been prepared under the historical cost convention and the accounting policies set outtherein.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS

As described in the Statement of Directors’ Responsibilities the company’s directors are responsible for thepreparation of the accounts in accordance with applicable law. In the absence of comparable accountingstandards in the Isle of Man, the Directors have chosen to apply United Kingdom Accounting Standardswhere they do not conflict with Isle of Man Statute.

Our responsibility is to audit the accounts in accordance with relevant legal and regulatory requirementstogether with our own professional ethical guidance.

We report to you our opinion as to whether the accounts give a true and fair view and are properlyprepared in accordance with the Companies Acts 1931 to 2004. We also report to you if, in our opinion,the Directors’ Report is not consistent with the accounts, if the company has not kept proper accountingrecords, if we have not received all the information and explanations we require for our audit, or ifinformation specified by law regarding directors’ remuneration and transactions with the company is notdisclosed.

We read the Directors’ Report and consider the implications for our report if we become aware of anyapparent misstatements within it.

Political and charitable donations

The company made no political or charitable contributions during the year.

Directors’ responsibilities

Company law requires the directors to prepare accounts for each financial year which give a true and fairview of the state of affairs of the company and of the profit or loss for that period. In preparing thoseaccounts, the directors are required to:

- select suitable accounting policies and then apply them consistently;

- make judgements and estimates that are reasonable and prudent; and

- prepare the accounts on the going concern basis unless it is inappropriate to presume that thecompany will continue in business.

The directors are responsible for maintaining proper accounting records which disclose with reasonableaccuracy at any time the financial position of the company and to enable them to ensure that the accountscomply with the Companies Acts 1931 to 2004. They are also responsible for safeguarding the assets ofthe company and hence for taking reasonable steps for the prevention and detection of fraud and otherirregularities.

Auditors

A resolution to reappoint Graham Moore as auditors will be put the members at the Annual GeneralMeeting.

This report was approved by the board on 12 May 2006.

Homeric LimitedSecretary

BASIS OF AUDIT OPINION

We conducted our audit in accordance with United Kingdom Auditing Standards issued by the AuditingPractices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts anddisclosures in the accounts. It also includes an assessment of the significant estimates and judgementsmade by the directors in the preparation of the accounts, and of whether the accounting policies areappropriate to the company’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considerednecessary in order to provide us with sufficient evidence to give reasonable assurance that the accounts arefree from material misstatement, whether caused by fraud or other irregularity or error. In forming ouropinion we also evaluated the overall adequacy of the presentation of information in the accounts.

OPINION

In our opinion the accounts give a true and fair view of the state of the company’s affairs as at 31 March2006 and of its profit for the year then ended and have been properly prepared in accordance with theCompanies Acts 1931 to 2004.

Graham MooreChartered Accountants

14 Douglas StreetPeel Isle of ManMay 12, 2006

BALANCE SHEET AS AT MARCH 31, 2006Notes 2006 2005

$ Rs. Lac $ Rs. LacFixed assetsInvestments 5 4,312,060 1,924 4,312,060 1,888Current assetsDebtors 6 2,389,343 1,066 1,718,086 752Cash at bank and in hand 1,193,349 532 386,598 169

3,582,692 1,598 2,104,684 922Creditors: amounts fallingdue within one year 7 (177,876) (79) (844,314) (370)

Net current assets 3,404,816 1,519 1,260,370 552

Total assets lesscurrent liabilities 7,716,876 3,443 5,572,430 2,440Creditors: amountsfalling due after morethan one year 8 (1,169,000) (521) (1,169,000) (512)

6,547,876 2,922 4,403,430 1,928

Capital and reservesCalled up share capital 9 4,209,327 1,878 2,291,147 1,003Profit and loss account 10 2,338,549 1,044 2,112,283 925Shareholders’ funds:

Equity 6,547,876 2,922 4,403,430 1,928

11 6,547,876 2,922 4,403,430 1,928

Note: The Rupee equivalents of US $ have been given at the closing exchange rates has on March 31,2006 (US $1.00 = Rs. 44.62) and March 31, 2005 (US $ 1.00 = Rs. 43.79)

M Hodgson D E MistryDirector DirectorApproved by the board on 12 May 2006

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED31 MARCH 2006

Notes 2006 2005$ Rs. Lac $ Rs. Lac

Turnover 2 50,724,030 22,633 39,031,709 17,092Cost of sales (50,239,122) (22,417) (38,491,244) (16,855)

Gross profit 484,908 216 540,465 237Administrative expenses (72,417) (32) (131,660) (58)Other operating income – – 12,000 5

Operating profit 412,491 184 420,805 184Interest receivable 22,158 10 7,206 3Interest payable 3 (52,083) (23) (28,749) (13)

Profit on ordinary activities before taxation 382,566 171 399,262 175Tax on profit on ordinary activities – – – –Profit for the financial year 382,566 171 399,262 175

Dividends:ordinary dividend on equity shares 4 (156,300) (70) (150,500) (66)

Retained profit for the financial year 10 226,266 101 248,762 109

Continuing operationsNone of the Company's activities were acquired or discontinued during the above two financial years.



127

NOTES TO THE ACCOUNTS FOR THE YEAR ENDEDMARCH 31, 2006

8. Creditors: amounts falling due after one year 2006 2005$ Rs. Lac $ Rs. Lac

Bank loans 1,169,000 521 1,169,000 512

9. Share capitalAuthorised:Ordinary shares of £1 each 4,000,000 1,785 2,000,000 876

2006 2005 2005 2006 2005 2005No. No. $ Rs. Lac $ Rs. Lac

Allotted, called upand fully paid:Ordinary sharesof £1 each 2,605,000 1,505,000 4,209,327 1,878 2,291,147 1,003

10. Profit and loss accountAt 1 April 2,112,283 943 1,863,521 816Retained profit 226,266 101 2,112,283 109

At 31 March 2,338,549 1,044 2,112,281 925

11. Reconciliation of movement in shareholders’ fundsAt 1 April 4,403,430 1,965 4,154,668 1819Retained Profit 382,566 171 399,262 175Dividends (156,300) (70) (150,500) (66)Shares issued 1,918,180 856 – –

At 31 March 6,547,876 2,922 4,403,430 1,928

12. Gross cash flowsReturns on investments and servicing of financeInterest received 22,158 10 7,206 3Interest paid (52,083) (23) (28,749) (13)

(29,925) (13) (21,543) (9)

Capital expenditureReceipts from sales of tangible fixed assets – – 767,014 336

FinancingIssue of share capital 1,918,180 856 – –

13. Analysis of changes in net debtAt 1 Apr 2005 Cash flows Non-cash changes At 31 Mar 2006

$ Rs. Lac $ Rs. Lac $ Rs. Lac $ Rs. LacCash at bank andin hand 386,598 169 806,751 360 – – 1,193,349 532Debt due after1 year (1,169,000) (512) – – – – (1,169,000) (521)

Total (782,402) (343) 806,751 360 – – 24,349 11

14. Ultimate Parent CompanyIn April 2001 Godrej Soaps Limited, the owner of all the company's share capital, was demergedinto two separate entities: Godrej Consumer Products Limited and Godrej Industries Limited. Theassets and liabilities of Godrej Soaps Limited were divided between the two new companies. Theentire share capital of Godrej International Limited is now held by Godfej Industries Limited.Godrej Industries Limited is currently listed on the Mumbai Stock Exchange.The financial statements of Godrej Industries Limited are available from : The Secretary, GodrejIndustries Limited, Eastern Express Highway, Vikroli, Mumbai 400 079, India.


Notes 2006 2006 2005 2005$ Rs. Lac $ Rs. Lac

Reconciliation of operating profit to netcash inflow from operating activitiesOperating profit 412,491 184 420,805 184Increase in debtors (671,257) (299) (1,050,190) (460)Decrease in creditors (672,238) (300) (186,772) (82)

Net cash outflow from operating activities (931,004) (415) (816,157) (357)

Net cash outflow from operating activities (931,004) (415) (816,157) (357)Returns on investments andservicing of finance 12 (29,925) (13) (21,543) (9)Capital expenditure 12 – – 767,014 336

(960,929) (429) (70,686) (31)

Equity dividends paid (150,500) (67) (135,450) (59)

(1,111,429) (496) (206,136) (90)

Financing 12 1,918,180 856 – –

Increase/(decrease) in cash 806,751 360 (206,136) (90)

Reconciliation of net cash flow tomovement in net debtIncrease/(decrease) in cash in the period 806,751 360 (206,136) (90)

Change in net debt 13 806,751 360 (206,136) (90)Net debt at 1 April (782,402) (349) (576,266) (252)

Net funds/(net debt) at 31 March 24,349 11 (782,402) (343)


1. Accounting policiesAccounting conventionThe accounts have been prepared under the historical cost convention and in accordance withapplicable accounting standards.

Foreign currenciesTransactions in foreign currencies are recorded at the rate ruling at the date of the transaction.Monetary assets and liabilities denominated in foreign currencies are translated at the rate ofexchange ruling at the balance sheet date. All differences are taken to the profit and loss account.

2. TurnoverTurnover represents the invoiced value of goods supplied by the Company, net of value added taxand trade discounts.

Turnover is attributable to one continuing activity, the trading of vegetable oils.

3. Interest payable 2006 2006 2005 2005$ Rs. Lac $ Rs. Lac

Bank loans and overdrafts 37,633 17 – –Other loans 14,450 6 28,749 13

52,083 23 28,749 13

4. Equity dividendsEquity dividends on ordinary shares - final proposed 156,300 70 150,500 66

5. InvestmentsInvestments in Other investments Total

subsidiary undertakings$ Rs. Lac $ Rs. Lac $ Rs. Lac

CostAt 1 April 2005 1,257,060 550 3,055,000 1,338 4,312,060 1,888At 31 March 2006 1,257,060 561 3,055,000 1,363 4,312,060 1,924

On 11 December 1997 the Company acquired the entire issued share capital (US$507060) ofGodrej Global ME, a Company incorporated in the United Arab Emirates on 1 November 1997. On10 March 2003 the Company invested a further sum of US$750,000 in the equity share capital ofGGME.Other investments 2006 2006 2005 2005

$ Rs. Lac $ Rs. Lac

Unlisted investments 3,055,000 1,363 3,055,000 1,338

On 4 April 2001, the Company invested US$1million in 495,000 C Bay Systems Ltd. (C Bay) 8%Series E Cumulative Convertible Redeemable Preferred Stock of US$ 0.1 per share at a price of US$0.2 per share. This represents approximately 6% of the issued share capital of C Bay.CB ay is incorporated in Delaware, USA.On 8 March 2004, the Company invested US$2,055,000 in equity shares of Newmarket Limited, aCompany incorporated in the lisle of Man. This represents approximately 18% of the issued sharecapital of Newmarket Limited.

6. Debtors 2006 2006 2005 2005$ Rs. Lac $ Rs. Lac

Trade debtors 577,578 258 315,072 138Amounts owned by group undertakingsand undertakings in which the company 113,764 51 113,764 50has a participating interestOther debtors 1,689,614 754 1,283,837 562Prepayments and accrued income 8,387 3 5,412 2

2,389,343 1,066 1,718,086 752

7. Creditors: amounts falling due within one yearAmounts owed to group undertakings andundertakings in which the Company has aparticipating interest – – 650,000 285Other creditors 235 – 235 –Accruals and deferred income 21,341 9 43,579 19Proposed dividend 156,300 70 150,500 66

177,876 79 844,314 370

Notes 2006 2005$ Rs. Lac $ Rs. Lac

Profit for the financial year 382,566 171 399,262 175

Total recognised gains and losses related to the year 382,566 171 399,262 175

STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESFOR THE YEAR ENDED 31 MARCH 2006

Godrej Global Mid East FZE

128

DIRECTORS’ REPORT

AUDITORS’ REPORT TO THE SHAREHOLDERS OF GODREJ GLOBAL MIDEAST FZE

INCOME STATEMENT FOR THE YEAR ENDEDMARCH 31, 2006

Your Company’s performance for the year under review is summarized below:

2005-06 2004-05AED Mio. AED Mio.

Sales 7.56 6.21Cost of Sales 5.23 4.25

Gross Profit 2.33 1.96Expenses 2.14 1.83Other Income – 0.06

Profit Before Tax 0.19 0.19Tax – –

Profit after Tax 0.19 0.19

REVIEW OF OPERATIONSYour Company has achieved breakthrough in exports to Sudan, Yemen.Your Company hopes to open up the Pakistan market through initial launch of Powder Haircolour sachets andlater consolidate their position through launch of other range.Since the net assets of your Company are below 75 percent of the share capital, the Auditors have qualifiedin their report. Remedial measure of providing sufficient funds will have to be taken by the parent companyin due course in accordance with the implementation procedures of Sharjah Airport Free Zone.

FUTURE OUTLOOKYour Company is planning to launch Cinthol soaps in Syria. Cinthol soaps manufactured in the UAE has dutyrebates in the Arab league countries.Your Company is working towards launch of newly acquired Cuticura and Erasmic brands in the GCC.Bottom line improvement is envisaged through lower cost raw material suppliers which includes GIL forsupply of soap noodles.AUDITORSYou are required to appoint Auditors for the current year. The Auditors, M/s. Pannell Kerr Forster, CharteredAccountants Co. being eligible, offer themselves for reappointment.PARTNERS IN PROGRESSYour company wishes to thank the Sharjah Airport International Free Zone, HSBC Bank Middle East, AlseerTrading Agencies , Khimji Ramdas, A. Latiff Al Aujan Food International, Gulf Trading Corporation, Zahem &Malhotra, Nasser Bin Khalid Trading Company, Godrej Consumer Products Ltd. and Godrej Industries Limited,who through their continued support and co-operation, have been partners in your Company’s progress.

On behalf of the Board of directors

A.B.GODREJDirector

Date : May 15, 2006

We have audited the accompanying financial statements of GODREJ GLOBAL MIDEAST FZE for the yearended 31 March 2006 set out on pages 2 to 15.

Respective responsibilities of the management and the auditors

These financial statements are the responsibility of the establishment’s management. Our responsibility is toexpress an opinion on these financial statements based on our audit.

Basis of opinion

We conducted our audit in accordance with International Standards on Auditing. Those Standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are freeof material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis for our opinion.

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of GODREJ GLOBALMIDEAST FZE as of 31 March 2006 and of the results of its operations and its cash flows for the year then endedin accordance with International Financial Reporting Standards and comply with Implementation Proceduresissued by the Sharjah Airport Free Zone Authority pursuant to Law No. 2 of 1995.

As required by the Sharjah Airport Free Zone Authority pursuant to Law No. 2 of 1995, we further confirm thatwe have obtained all the information and explanations necessary for our audit, proper books of account andother records have been maintained in accordance with the said regulation.

Sharjah Pannell Kerr ForsterUnited Arab Emirates15 May 2006


Notes 2006 2005AED Rs. AED Rs.

NON-CURRENT ASSETSProperty, plant and equipment 3 21,863 265,636 35,861 427,463Intangible assets 4 — — 10,344 123,300

21,863 2,65,636 46,205 550,764CURRENT ASSETSInventories 5 719,232 8,738,669 845,697 10,080,708Trade and other receivables 6 2,220,868 26,983,546 1,691,775 20,165,958Amounts due from related parties 7 2,755 33,473 1,755 20,920Cash and cash equivalents 8 191,120 2,322,108 286,881 3,419,621

3,133,975 38,077,796 2,826,108 33,687,207TOTAL ASSETS 3,155,838 38,343,432 2,872,313 34,237,971CURRENT LIABILITIESBank borrowings 9 714,674 8,683,289 1,151,394 13,724,616Trade and other payables 10 1,840,403 22,360,896 1,332,953 15,888,800Loan from the parent company 11 418,030 5,079,065 418,030 4,982,918

2,973,107 36,123,250 2,902,377 34,596,334NON-CURRENT LIABILITYStaff end-of-service gratuity 12 92,300 1,121,445 70,672 842,410

SHAREHOLDER’S FUNDSShare capital 13 4,586,250 55,722,938 4,586,250 54,668,100Accumulated losses (4,495,819) (54,624,201) (4,686,986) (55,868,873)

90,431 10,98,737 (100,736) (1,200,773)TOTAL EQUITY AND LIABILITIES 3,155,838 38,343,432 2,872,313 34,237,971

The accompanying notes form an integral part of these financial statements.

The report of the auditor is set forth as given above

We confirm that we are responsible for these financial statements, including selecting the accounting policiesand making the judgements underlying them. We confirm that we have made available all relevant accountingrecords and information for their compilation.

Approved by the directors on 15 May 2006.

For GODREJ GLOBAL MIDEAST FZEA.B.GODREJ

Director


REVENUE 7,562,467 9,1883,974 6,213,663 74,066,863

Cost of sales 14 (5,233,800) (63,590,670) (4,253,630) (50,703,270)

GROSS PROFIT 2,328,667 28,293,304 1,960,033 23,363,593

Other operating income 2,074 25,199 60,783 724,533

Staff costs 15 (479,832) (5,829,959) (429,688) (5,121,881)

Depreciation 3 (18,196) (221,081) (18,402) (219,352)

Amortisation 4 (10,344) (125,680) (10,344) (123,300)

Other operating expenses 16 (1,438,059) (17,472,417) (1,235,313) (14,724,931)

PROFIT FROM OPERATING ACTIVITIES 384,310 4,669,366 327,069 3,898,662

Interest income on bank call deposits 2,310 28,067 762 9,083

Finance costs 17 (195,453) 2,374,754 (137,452) (1,638,428)

PROFIT FOR THE YEAR 191,167 2,322,679 190,379 2,269,318

The accompanying notes form an integral part of these financial statements.The report of the auditor is set forth as given above

We confirm that we are responsible for these financial statements, including selecting the accounting policiesand making the judgements underlying them. We confirm that we have made available all relevant accountingrecords and information for their compilation.

Approved by the directors on 15 May 2006.For GODREJ GLOBAL MIDEAST FZE

A.B.GODREJDirector

The Rupee equivalents of AED have been given at the closing exchange rates as on March 31, 2006.(1 AED = Rs. 12.15) and as on March 31, 2005 (1 AED = Rs.11.92)

The Rupee equivalents of AED have been given at the closing exchange rates as on March 31, 2006. (1 AED= Rs. 12.15) and as on March 31, 2005 (1 AED = Rs.11.92)


129

CASH FLOW STATEMENT YEAR ENDED MARCH 31, 2006STATEMENT OF CHANGES IN EQUITYYEAR ENDED MARCH 31, 2006

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDEDMARCH 31, 2006

Share capital Accumulated losses TotalAED Rs. AED Rs. AED Rs.

As at 31.03.2004 4,586,250 54,438,788 (4,877,365) (57,894,323) (291,115) (3,455,535)

Profit for the year — — 190,379 2,269,318 190,379 2,269,318

As at 31.03.2005 4,586,250 54,668,100 (4,686,986) (55,868,873) (100,736) (1,200,773)

Profit for the year — — 191,167 2,322,679 191,167 2,322,679

As at 31.03.2006 4,586,250 55,722,938 (4,495,819) (54,624,201) 90,431 1,098,737


REVENUE

Cash flows from operating activities

Cash generated from/(used in) operations 18 512,572 6,227,750 (144,279) (1,719,806)

Interest paid (169,725) (2,062,159) (137,452) (1,638,428)

Net cash from/(used in) operating activities (A) 342,847 4,165,591 (281,731) (3,358,234)

Cash flows from investing activities

Purchase of property, plant and equipment (4,198) (51,006) (1,600) (19,072)

Interest received 2,310 28,067 762 9,083

Net cash used in investing activities (B) (1,888) (22,939) (838) (9,989)

Cash flows from financing activities

Receipt of loan from the parent company — — 25,725 306,642

(Payment of)/proceeds from clean

import loans (401,267) (4,875,394) 365,052 4,351,420

Payment of bank overdraft (net) (35,453) (430,754) (206,135) (2,457,129)

Net cash (used in)/from financing activities (C) (436,720) (5,306,148) 184,642 2,200,933

Net decrease in cash and cash equivalents (A+B+C) (95,761) (1,163,496) (97,927) (1,167,290)

Cash and cash equivalents at beginning

of year 286,881 3,485,604 384,808 4,586,911

Cash and cash equivalents at end of year 8 191,120 2,322,108 286,881 3,419,622

1. LEGAL STATUS AND BUSINESS ACTIVITY

a) GODREJ GLOBAL MIDEAST FZE was incorporated on 1 November 1997 in the Sharjah AirportFree Zone, Sharjah, UAE as a Free Zone Establishment pursuant to Law No. 2 of 1995 of H.H.Sheikh Sultan Bin Mohammed Al Qassimi, The Ruler of Sharjah. The registered office is P. O. Box7966, Sharjah, United Arab Emirates.

b) The establishment’s principal activity consists of trading in soaps and toiletries in the United ArabEmirates and other AGCC countries.

c) The establishment is a wholly owned subsidiary of Godrej International Limited, a companyincorporated in the Isle of Man. Godrej International Limited is a wholly owned subsidiary of GodrejIndustries Limited, a company incorporated in India and which is a subsidiary of the ultimate parentcompany Godrej & Boyce Mfg. Co. Ltd., India.

2. SIGNIFICANT ACCOUNTING POLICIES, JUDGEMENTS AND KEY ASSUMPTIONS

The financial statements are prepared under the historical cost convention and in accordance withInternational Financial Reporting Standards issued or adopted by the International Accounting StandardsBoard (IASB) and which are effective for accounting periods beginning on or after 1 January 2005, andthe laws of Sharjah Airport Free Zone Authority. The significant accounting policies adopted, and thathave been consistently applied, are as follows:

a) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairmentlosses. The cost less estimated residual value, where material, is depreciated using the straight-linemethod over the estimated useful lives of five years.

An assessment of residual values is undertaken at each balance sheet date and, where material,if there is a change in estimate, an appropriate adjustment is made to the depreciation charge.

b) Intangible assets

Intangible assets are stated at cost less accumulated amortisation and impairment losses. Productdevelopment expenses are amortised over their estimated useful life of five years.

c) Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is arrived at using the First-In First-Out (FIFO) method and comprises invoice value plus applicable landing charges. Netrealizable value is based on estimated selling price less any estimated cost of disposal.

d) Staff end-of-service gratuity

Provision is made for end-of-service gratuity payable to the staff at the balance sheet date inaccordance with the local labour laws.

e) Revenue

Revenue represents the net amount invoiced for goods delivered during the year.

f) Foreign currency transactions

Transactions in foreign currencies are translated into UAE Dirhams at the rate of exchange rulingon the date of the transactions.

Monetary assets and liabilities expressed in foreign currencies are translated into UAE Dirhamsat the rate of exchange ruling at the balance sheet date.

Gains or losses resulting from foreign currency transactions are taken to the income statement.

g) Cash and cash equivalents

Cash and cash equivalents comprise cash, bank current accounts, bank deposits free of encumbrancewith a maturity date of three months or less from the date of deposit and highly liquid investmentswith a maturity date of three months or less from the date of investment.

h) Financial instruments

Financial assets and financial liabilities are recognised when, and only when, the establishmentbecomes a party to the contractual provisions of the instrument.

Financial assets are de-recognised when, and only when, the contractual rights to receive cashflows expire or when substantially all the risks and rewards of ownership have been transferred.

Financial liabilities are de-recognised when, and only when, they are extinguished, cancelled orexpired.

Current financial assets that have fixed or determinable payments and for which there is no activemarket, which comprise trade and other receivables and related party receivables, are classifiedas receivables and stated at cost or, if the impact is material, at amortised cost using the effectiveinterest method, less any write down for impairment losses plus reversals of impairment losses.Impairment losses and reversals thereof are recognised in the income statement.

Current financial liabilities, which comprise current bank borrowings, trade and other payables,related party payables are measured at cost or, if the impact is material, at amortised cost usingthe effective interest method.

i) Significant judgments and key assumptions

� The significant judgments made in applying accounting policies that have the most significanteffect on the amounts recognised in the financial statements are as follows:

Impairment

At each balance sheet date, management conducts an assessment of property, plant, equipmentand all financial assets to determine whether there are any indications that they may beimpaired. In the absence of such indications, no further action is taken. If such indications doexist, an analysis of each asset is undertaken to determine its net recoverable amount and,if this is below its carrying amount, a provision is made.

� Key assumptions made concerning the future and other key sources of estimation uncertaintyat the balance sheet date, that have a significant risk of causing a material adjustment to thecarrying amounts of assets and liabilities within the next financial year, are as follows:

Carrying values of property, plant and equipment

Residual values are assumed to be zero unless a reliable estimate of the current value canbe obtained for similar assets of ages and conditions that are reasonably expected to exist atthe end of the assets’ estimated useful lives.

Inventory provisions

Management regularly undertakes a review of the establishment’s inventory, stated at AED590,000 (previous year AED 876,690) in order to assess the likely realisation proceeds, takinginto account purchase and replacement prices, technological changes, age, likelyobsolescence, the rate at which goods are being sold and the physical damage. Based on theassessment assumptions are made as to the level of provisioning required.

Doubtful debt provisions

Management regularly undertakes a review of the amounts of loans and receivables owedto the establishment either from third parties, (see note 6) or from related parties (see note




A.B.GODREJDirector




A.B.GODREJDirector

Godrej Global Mid East FZE

130

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 20067) and assesses the likelihood of non-recovery. Such assessment is based upon the age of thedebts, historic recovery rates and assessed creditworthiness of the debtor. Based on theassessment assumptions are made as to the level of provisioning required.

Impairment

Assessments of net recoverable amounts of property, plant, equipment and all financial assetsother than loans and receivables (see above) are based on assumptions regarding future cashflows expected to be received from the related assets.

Staff end-of-service gratuity

The establishment computes the provision for the liability to staff end-of-service gratuitystated at AED 92,300 (previous year AED 70,672), assuming that all employees were to leaveas of the balance sheet date. The management is of the opinion that no significant differencewould have arisen had the liability been calculated on an actuarial basis as salary inflationand discount rates are likely to have approximately equal and opposite affects.

j) Adoption of revised and new International Financial Reporting Standards

The adoption of revised International Financial Reporting Standards effective for accounting periodsbeginning on or after 1 January 2005 has impacted only on presentation and disclosures.

The following International Financial Reporting Standards, amendments thereto and Interpretationsthat are assessed by management as likely to have an impact on the financial statements, havebeen issued by the IASB prior to 31 March 2006 but have not been applied in these financialstatements as their effective dates of adoption are for future accounting periods, as referred tobelow. It is anticipated that their adoption in the relevant accounting periods will have an impactonly on disclosures within the financial statements:

� Amendment to IAS39: Cash Flow Accounting of Forecast Intragroup Transactions (1 January2006)

� Amendment to IAS1: Capital Disclosures (1 January, 2007)

3. PROPERTY, PLANT AND EQUIPMENT

Furniture, fixtures, computers and equipment

AED Rs.

Net book valuesAs at 31.03.2005

Cost 178,121 2,123,202Accumulated depreciation (142,260) (1,695,739)Net book value 35,861 427,463

As at 31.03.2006

Cost 182,319 2,215,176Accumulated depreciation (160,456) (1,949,540)Net book value 21,863 265,636

Reconciliation of net book values

As at 1.4.2004 52,663 625,110Additions 1,600 19,072Depreciation for the year (18,402) (219,352)

As at 31.03.2005 35,861 427,463Additions 4,198 51,006Depreciation for the year (18,196) (221,081)

As at 31.03.2006 21,863 265,636

4. INTANGIBLE ASSETS

Product development expenses

Net book values

As at 31.03.2005

Cost 51,720 616,502Accumulated amortisation (41,376) (493,202)Net book value 10,344 123,300

As at 31.03.2006

Cost 51,720 628,398Accumulated amortisation (51,720) (628,398)Net book value — —

Reconciliation of net book values

As at 1.4.2004 20,688 251,360Amortisation for the year (10,344) (125,680)As at 31.03.2005 10,344 125,680

Amortisation for the year (10,344) (125,680)

As at 31.03.2006 — —

2006 2005AED Rs. AED Rs.

5. INVENTORIES

Goods held for sale 590,000 7,168,500 876,690 10,450,145

Less: Provision for slow moving inventories — — (66,690) (794,945)

590,000 7,168,500 810,000 9,655,200

Goods in transit 129,232 1,570,169 35,697 425,508

719,232 8,738,669 845,697 10,080,708

6. TRADE AND OTHER RECEIVABLES

Trade receivables 2,182,058 26,512,005 1,650,234 19,670,789

Prepayments 10,510 127,697 9,741 116,113

Deposits 28,300 343,845 31,800 379,056

2,220,868 26,983,547 1,691,775 20,165,958

7. RELATED PARTIES

The establishment enters into transactions with entities that fall within the definition of a related partyas contained in International Accounting Standard 24. The directors consider such transactions to bein the normal course of business.

Related parties comprise the parent companies, companies under common ownership and/orcommon management control.

At the balance sheet date significant balances with related parties were as follows:


Trade and other payablesto other related parties 589,632 7,164,029 190,333 2275921

Due from other related parties 2,755 33,473 1,755 20920

Loan from the parent company 418,030 5,079,065 418,030 4982918

Guarantee received 1,400,000 17,010,000 1,400,000 16,688,000

All balances other than loan from a parent company are unsecured and are expected to be settled incash. Other terms are set out in note 11 and 19.Significant transactions with related parties during the year were as follows:

Sales 712,358 8,655,150 684,980 8,164,962

Purchases 1,894,517 23,018,382 2,284,240 27,228,141

Interest expenses 39,724 482,647 39,730 473,582

8. CASH AND CASH EQUIVALENTS

Cash on hand 5,625 68,344 1,459 17,391

Bank call deposits accounts 185,495 2,253,764 285,422 3,402,231

191,120 2,322,108 286,881 3,419,622

9. BANK BORROWINGS

Overdraft 124,914 1,517,705 160,367 1,911,574

Clean import loans 589,760 7,165,584 991,027 11,813,042

714,674 8,683,289 1,151,394 13,724,616

An analysis by bank of amountsoutstanding is as follows:

HSBC Bank Middle East Limited 714,674 8,683,289 1,151,394 13,724,616

Bank borrowings are secured by assignment of insurance policies covering inventories and assets,corporate guarantee from a parent company, letter of awareness and comfort from the parent companiesand assignment of dues from one of the customers.

The bank borrowings are subject to certain financial covenants including non withdrawal of profits.

10. TRADE AND OTHER PAYABLES

Trade payables 1,385,735 16,836,680 961,013 11,455,275

Accruals 454,668 5,524,216 371,940 4,433,525

1,840,403 22,360,896 1,332,953 15,888,800

11. LOAN FROM THE PARENT COMPANY

This represents a short term loan, secured by a first floating charge on property, plant and equipment,inventories and book debts. Interest is paid @ 7% (previous year 7% per annum).


12 PROVISION FOR STAFF END-OF-SERVICE GRATUITY

Opening balance 70,672 858,665 61,628 734,605

Provision for the year 21,628 262,780 20,802 247,960

Paid during the year – – (11,758) (140,155)

Closing balance 92,300 1,121,445 70,672 842,410

13. SHARE CAPITAL

Authorised, issued and paid-up:

5 ordinary shares of US$ 250,000 each 4,586,250 55,722,938 4,586,250 54,668,100

[2 shares converted @ 1 US$ = AED 3.66]

[3 shares converted @ 1 US$ = AED 3.675]

14. COST OF SALES

Inventory, beginning of the year 876,690 10,651,784 673,846 8,032,244

Add: Purchases (including direct expenses) 4,947,110 60,107,386 4,456,474 53,121,170

Less: Inventory, end of the year (590,000) (7,168,500) (876,690) (10,450,145)

5,233,800 63,590,670 4,253,630 50,703,270

15. STAFF COSTS

Staff salaries and benefits 458,204 5,567,179 408,886 4,873,921

Staff end-of-service gratuity 21,628 262,780 20,802 247,960

479,832 5,829,959 429,688 5,121,881


131


16. OTHER OPERATING EXPENSES

Rent 80,000 972,000 80,002 953,624

Advertisement and promotion expenses 991,625 12,048,244 901,321 10,743,746

Bad debts written off 5,839 70,944 — —

Other expenses 360,595 4,381,229 253,990 3,027,561

1,438,059 17,472,417 1,235,313 14,724,931

17. FINANCE COSTS

On other bank short term loans and overdraft 106,106 1,289,188 72,947 869,528

On loan from the parent company 25,728 312,595 25,725 306,642

On related party guarantees 13,996 170,051 14,005 166,940

On supplier’s delayed payments 49,623 602,920 24,775 295,318

195,453 2,374,754 137,452 1,638,428

18. CASH GENERATED FROM/(USED IN) OPERATIONS

Profit for the year 191,167 2,322,679 190,379 2,269,318

Adjustments for:

Depreciation of property, plant and equipment 18,196 221,081 18,402 219,352

Amortisation 10,344 125,680 10,344 123,300

Finance costs 195,453 2,374,754 137,452 1,638,428

Interest income (2,310) (28,067) (762) (9,083)

Operating profit before changes in

operating assets and liabilities 412,850 5,016,128 355,815 4,241,315

Decrease/(increase) in inventories 126,465 1,536,550 (164,217) (1,957,467)

Increase in trade and other receivables (529,093) (6,428,480) (521,739) (6,219,129)

Increase in trade and other payables 481,722 5,852,922 176,534 2,104,285

Increase in staff gratuity provision 21,628 262,780 9,044 107,804

(Increase)/decrease in amounts duefrom related parties (1,000) (12,150) 284 3,385

512,572 6,227,750 (144,279) (1,719,806)

19. FINANCIAL INSTRUMENTS

The management conducts and operates the business in a prudent manner, taking into account thesignificant risks to which the business is or could be exposed.

The primary risks to which the business is exposed comprise credit, currency, liquidity and cash flowinterest rate risks.

Credit risk is managed by assessing the creditworthiness of potential distributors/customers and thepotential for exposure to the market in which they operate, combined with regular monitoring andfollow-up.

The establishment buys and sells goods and services in foreign currencies. Exposure is minimised wherepossible by denominating such transactions in US dollars to which the UAE Dirham is pegged.

Management continuously monitors its cash flows to determine its cash requirements and makescomparison with its funded and un-funded facilities with banks in order to manage exposure to liquidityrisk.

Borrowing facilities are regularly reviewed to ensure that the establishment obtains the best availablepricing, terms and conditions on it borrowings.

Exposures to the aforementioned risks are detailed below:

Credit risk

Financial assets that potentially expose the establishment to concentrations of credit risk compriseprincipally bank accounts, trade and other receivables and amounts due from related parties.

The establishment’s bank accounts are placed with high credit quality financial institutions.

Amounts due from related parties, trade and other receivables are stated net of the allowance for doubtfulrecoveries. The establishment’s trade receivables mainly comprise of duly appointed distributors in theUAE and other Middle East countries.

At the balance sheet date, the establishment’s maximum exposure to credit risk from trade receivablessituated outside the UAE amounts to AED 1,484,223 due from distributors/customers in other Middle Eastcountries (Previous year AED 933,586).

At the balance sheet date 61% of trade receivables was due from two distributors (Previous year 69 %due from three distributors).

There are no significant concentrations of credit risk outside the industry in which the establishmentoperates.

Interest rate risk

Call and fixed deposit accounts, amounts due to related parties and suppliers are subject to fixed interestrates at levels generally obtained in the UAE and are therefore exposed to fair value interest rate risk.All other bank borrowings are subject to floating interest rates at levels generally obtained in the UAEand are therefore exposed to cash flow interest rate risk.

Exchange rate risk

There are no significant exchange rate risks as substantially all financial assets and financial liabilitiesare denominated in UAE Dirhams or US Dollars to which the Dirham is fixed.

Fair values

The fair value of a financial instrument is the amount for which an asset could be exchanged, or a liabilitysettled, between knowledgeable, willing parties in an arm’s length transaction. The fair values of theestablishment’s financial assets and financial liabilities which are required to be stated at cost or atamortised cost, approximate to their carrying values.

For GODREJ GLOBAL MIDEAST FZEA.B.GODREJ

Director

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2006

Godrej Global Solutions Limited

132

DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST MARCH, 2006.

To,The Members ofGODREJ GLOBAL SOLUTIONS LIMITEDYour Directors present their Forth Annual Report together with the Audited Accounts of the Company forthe year ended 31st March, 2006.FINANCIAL RESULTS

Particulars Year ended Period ended31.3.06 31.3.05

(Rupees) (Rupees)

Income from Services 82,265,686 1,667,018Other Income 14,364,895 27,390,126Total Income 96,630,581 29,057,144Less: Total Expenditure 97,286,753 28,023,912Profit / [Loss] Before Tax (656,172) 1,033,233Less: Fringe Benefit Tax (250,381) —Income Tax - Deferred 288,313 —Profit [Loss] After Tax (618,240) 1,033,233Profit /(Loss) brought forward (14,244,299) (15,277,532)Loss written off in Capital Reorganisation 14,244,299 —Profit/(Loss) carried forward (618,240) (14,244,299)

DIVIDENDIn view of the loss sustained by the Company, your Directors do not recommend any dividend for the yearunder review.OPERATIONS & FUTURE OUTLOOKYour Company is focused on providing transaction processing services. During the year under reviewyour Company acquired, through its US subsidiary, Godrej Global Solutions Inc., the business of OutsourceOffshore Inc., a US based healthcare forms processing service provider. Your Company successfullycompleted the acquisition of the Data Conversion Business of Softpage Data Conversion Services PrivateLtd., Navi Mumbai during the year. Your Company also successfully set up state-of-art service deliverycapabilities at Chennai and Navi Mumbai which can support customers in areas of healthcare such asmedical transcription, medical billing, claims processing and document management services.INVESTMENTS IN SUBSIDIARIES AND ASSOCIATE COMPANIESTo enable your Company to facilitate business development and manage the customer relationships, yourcompany set-up an US subsidiary, Godrej Global Solutions, Inc. The US entity is held through a holdingcompany in Cyprus, viz. Godrej Global Solutions (Cyprus) Limited.Your Company has investments in The View Group LP, an US based private equity group and GodrejUpstream Limited, a travel focused customer care and service company. During the year your companyalso made investments in Verseon LLC, a Delaware based Limited Liability company engaged in the businessof development and exploitation of technology relating to pharmaceutical research and development. Toenable your company to focus on its core BPO business, your Company proposes to divest these investmentsin the coming year. Your company has already initiated necessary action in this regard.CAPITAL RESTRUCTURINGPursuant to demerger of Data Conversion business of Softpage Data Conversion Services Private Limited(Softpage) into the Company during the year, the Equity Share Capital of the Company was restructuredwhich presently stands at Rs.46,22,26,090 divided into 4,27,42,609 Equity Shares of Rs.10/-each fully paid-upand 49,71,429 Equity Shares of Rs.10/- each, Rs.7/- each paid-up respectively. During the year the Companyissued and allotted 18,000 Redeemable Preference Shares of Rs.10/- each at par to shareholders of Softpage.DIRECTORSIn accordance with the provisions of the Companies Act, 1956, read with the Articles of Association of theCompany, Mr. Sanjay S. Tipnis and Mr. K. N. Petigara will retire by rotation at the ensuing Annual GeneralMeeting. However, being eligible, they have offered themselves for re-appointment. Your Directorsrecommend their re-appointment for your approval.STATUTORY INFORMATIONa. Conservation of Energy, Foreign Exchange Earnings & Outgo and Technology Absorption:

As required under Section 217[1][e] of the Companies Act, 1956, the necessary details are givenhereunder:The activities of the Company being service oriented, the particulars required to be furnished inrespect of conservation of energy are not applicable. However, all efforts are being made by theCompany to conserve energy at all the stages of its activities.

REPORT OF THE AUDITORS

During the year under review, the Company has earned Rs. 8,22,65,686/- in foreign currency.However, it has spent Rs. 13,75,844/- in foreign currency, the details of which are available in points3 and 4 of the Notes to the Accounts (Schedule 18) for the year. Further, the Company has notimported any foreign technology and hence the requisite particulars in this regard are not applicable.

b. Particulars of Employees:The particulars required under Section 217(2A) of the Companies Act, 1956 read with the Companies

(Particulars of Employees) Rules 1975 :

Name Designation Gross Qualification Experie- Date of Age Particularsremu- nce (yrs.) commen- of previousneration cement employment(Rs.) of employ-

ment* Sanjay Wholetime 43,44,492 B.Com., ACA 22 1-09-2004 41 GodrejTipnis Director Remote

Services Ltd.

c. Audit Committee :As required under Section 292A of the Companies Act, 1956, the Audit Committee of Directors of theCompany consisted of Mr. N.B. Godrej, Mr. F.P. Sarkari and Mr. K.N. Petigara. The said Committeemet Four times during the year and has performed the functions as prescribed under the said Sectionand its terms of reference.

d. Fixed Deposits :The Company has not accepted any deposits from the public during the year under review.

e. Directors’ Responsibility Statement :In accordance with the requirement under Section 217(2AA) of the Companies Act, 1956, the Directorshereby confirm :

1. that in the preparation of the accounts for the financial year ended 31st March, 2006, theapplicable accounting standards have been followed along with proper explanation relating tomaterial departures;

2. that the Directors have selected such accounting policies and applied them consistently andmade judgements and estimates that were reasonable and prudent, so as to give a true and fairview of the state of affairs of the Company at the end of the financial year under review andalso of the loss of the Company for that period;

3. that the Directors have taken proper and sufficient care 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 and otherirregularities;

4. that the Directors have prepared the accounts for the financial year ended 31st March, 2006 ona going concern basis.

INSURANCEAll the assets of the Company are adequately insured.

AUDITORSThe present Auditors of the Company, M/s. Kalyaniwalla Mistry and Associates, Chartered Accountants,Mumbai, holds their office until the conclusion of the ensuing Annual General Meeting. The Company hasreceived an eligibility Certificate from them pursuant to Section 224(IB) of the Companies Act, 1956.Your Directors recommend their re-appointment at the ensuing Annual General Meeting for your approval.

ACKNOWLEDGEMENTSYour Directors place on record their sincere thanks to all the Government Departments concerned withthe operations of the Company, the Bankers and employees of the Company, and to Godrej IndustriesLimited, for their continued support and co-operation.

For and on behalf of the Board

S.S. Tipnis C.K. VaidyaDirector Director

Mumbai, May 5, 2006

TO THE MEMBERS OF GODREJ GLOBAL SOLUTIONS LIMITED

1. We have audited the attached Balance Sheet of Godrej Global Solutions Limited as at March 31,2006 and the Profit and Loss Account for the year ended on that date annexed thereto. These financialstatements are the responsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audit.

2. We 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 whetherthe financial statements are free of material misstatement. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financial statements. An audit alsoincludes assessing the accounting principles used and significant estimates made by management,as well as evaluating the overall financial statement presentation. We believe that our audit providesa reasonable basis for our opinion.


4. Further to our comments in the Annexure referred to 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 purpose 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 such books;c. The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with

the books of account;

d. In our opinion, the Profit and Loss Account and Balance Sheet dealt with by this report complywith the Accounting Standards referred to in sub-section (3C) of Section 211 of the CompaniesAct, 1956;

e. In our opinion and to the best of our information and according to the explanations given to us,the said accounts, read with the notes thereon, give the information required by the CompaniesAct, 1956, in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India:(i) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31,

2006; and(ii) in the case of the Profit and Loss Account, of the profit of the Company for the year ended

on that date.(iii) in the case of cash flow statement, of the cash flow for the year ended on that date.

5. On the basis of the written representations received from the Directors as on March 31, 2006, andtaken on record by the Board of Directors, we report that none of the Directors is disqualified as onMarch 31, 2006, from being appointed as a Director in terms of clause (g) of sub-section (1) ofSection 274 of the Companies Act, 1956.


Chartered AccountantsV. M. PADWAL

PartnerMembership No.: 49639



133

Referred to in Paragraph 3 of our report of even date on the accounts of Godrej Global Solutions Limited forthe period ended March 31, 2006:1. a) The Company is maintaining proper records showing full particulars, including quantitative details

and situation of fixed assets.b) The Company has a program for physical verification of fixed assets at periodic intervals. In our

opinion, the frequency of verification is reasonable having regard to the size of the Company andthe nature of its assets. The discrepancies reported on such verification were not material and havebeen properly dealt with in the books of account.

2. a) The Company has granted unsecured loans to a company listed in the register maintained underSection 301 of the Companies Act, 1956 and the said loan has been repaid during the year. The totalamount of loan granted during the year was Rs. 100 lac and the total amount of loan repaid duringthe year was Rs. 2192 lac.

b) In our opinion and according to the information and explanations given to us, the rate of interest andother terms and conditions of loan given are prima facie not prejudicial to the interest of the company.

c) In our opinion and according to the information and explanation given to us the company isgenerally regular in repayment of principal amount and interest.

d) There are no overdue amount of principal and interest.e) The Company has not taken any loans, secured or unsecured, from companies, firms or other

parties listed in the register maintained under section 301 of the Companies Act, 1956.3. In our opinion and according to the information and explanations given to us, there is an adequate internal

control system commensurate with the size of the Company and the nature of its business, for thepurchase of fixed assets and sale of services. During the course of our audit no major weakness have beenobserved in the internal controls.

4. a) Based on the audit procedures applied by us and according to the information and explanationprovided by the management, the particulars of contracts or arrangements referred to in Section301 of the Act have been entered in the register required to be maintained under that section.

b) In our opinion and according to the information and explanations given to us, having regard to theexplanation that many of the items are of a special nature and their prices cannot be compared withalternative quotations, the transactions made in pursuance of contracts or arrangements enteredin the register maintained under Section 301 of the Companies Act, 1956 in respect of any partyduring the period have been made at prices which are reasonable having regard to the prevailingmarket prices at the relevant time.

5. In our opinion and according to the information and explanations given to us, the Company has notaccepted any deposits from the public within the meaning of Section 58A, 58AA or any other relevantprovisions of the Companies Act, 1956 and the rules framed there under.

6. The Company has an internal audit system, which in our opinion, is commensurate with the size andnature of its business.

7. a) According to the records examined by us the Company is generally regular in depositing theundisputed statutory dues including Provident Fund, Employees State Insurance, Income tax, Cessand other statutory dues with the appropriate authorities and there is no arrears of outstanding dues

ANNEXURE TO THE AUDITORS’ REPORT


Year Ended Year EndedMarch 31, 2006 March 31, 2005

Schedule (Amount Rs.) (Amount Rs.)INCOMEIncome from Services 82,265,686 1,667,018Other Income 13 14,364,895 27,390,126

96,630,581 29,057,144

EXPENDITUREStaff Expenses 14 38,846,547 4,655,619Establishment Expenses 15 27,369,723 6,510,716Other Operating Expenses 16 19,945,861 13,692,634Interest & Finance Charges 17 2,864,457 –Amortizations – 556,671Depreciation 8,260,166 2,608,271

97,286,753 28,023,911

PROFIT / (LOSS) FOR THE YEAR -Before Tax (656,172) 1,033,233Fringe Benefit Tax (250,381) –Income Tax - Current – –Income Tax - Deferred 288,313 –

PROFIT / (LOSS) FOR THE YEAR -After Tax (618,240) 1,033,233

Profit / (Loss) brought forward (14,244,299) (15,277,532)Loss written off in Capital Regorganisation 14,244,299 –(Refer Note number 3 in Schedule 18)

Profit / (Loss) carried forward (618,240) (14,244,299)Basic Earning Per Share (Face value of Rs 10 per share) (0.01) 0.02


March 31, 2006 March 31, 2005Schedule (Amount Rs.) (Amount Rs.)

SOURCE OF FUNDS1 SHAREHOLDERS’ FUNDS

(a) Share Capital 1 462,406,093 538,465,000(b) Reserves & Surplus 2 51,374,134 –

513,780,227 538,465,000

2 BORROWED FUNDS(a) Secured Loans 3 17,300,244 –(b) Unsecured Loan 4 22,654,141 –

39,954,385 –

553,734,612 538,465,000

APPLICATION OF FUNDS1 FIXED ASSETS 5

(a) Gross Block 37,589,595 7,813,568(b) Less : Accumulated Depreciation 11,900,449 3,691,261

(c) Net Block 25,689,146 4,122,307

2 INVESTMENTS 6 455,394,643 193,332,1143 DEFERRED TAX ASSET 288,313 –4 CURRENT ASSETS, LOANS

AND ADVANCES(a) Cash & Bank Balances 7 32,800,201 105,830,447(b) Debtors 8 26,950,942 150,132(c) Loans and Advances 9 22,626,693 221,759,874

82,377,836 327,740,453LESS : CURRENT LIABILITIES ANDPROVISIONSCurrent Liabilities 10 9,818,433 2,756,895Provisions 11 815,132 468,066

10,633,565 3,224,961NET CURRENT ASSETS 71,744,271 324,515,492

5 MISCELLANEOUS EXPENDITURE 12 – 2,250,789(To the extent not written off or adjusted)

6 PROFIT AND LOSS ACCOUNT 618,240 14,244,299

553,734,612 538,465,000



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

As per our Report attached. For and on behaof of the

For and on behalf ofKALYANIWALLA MISTRY AND ASSOCIATESChartered Accountants

S. S. Tipnis Whole time DirectorV. M. Padwal C. K. Vaidya DirectorPartner A.K. Singla Company Secretary

Mumbai, May 5, 2005


As per our Report attached. For and on behalf of the Board

For and on behalf ofKALYANIWALLA MISTRY AND ASSOCIATESChartered Accountants

S. S. Tipnis Whole time DirectorV. M. Padwal C. K. Vaidya DirectorPartner A.K. Singla Company Secretary

Mumbai, May 5, 2006

as at the last date of the financial year concerned for a period of more than six months from the datethey became payable.

b) According to the information and explanations given to us and the records examined by us, thereare no dues of Income tax or Cess outstanding on account of any dispute.

8. The Company’s accumulated losses at the end of the financial year do not exceed fifty percent of its networth and it has not incurred any cash losses in the immediately preceding financial year.

9. According to the information and explanations given to us and records examined by us, we observed that theCompany has not has not defaulted in repayment of dues to a financial institution or bank or debenture holders.

10. According to the information and explanations given to us the Company has not granted loans andadvances on the basis of security by way of pledge of shares and other securities.

11. In our opinion and according to the information and explanations given to us, the nature of the activities of theCompany does not attract any special statute applicable to chit fund and nidhi/mutual benefit fund /societies.

12. In our opinion, the Company has maintained proper records of the transactions and contracts in respectof the investments purchased and sold during the year and timely entries have been made therein. Theinvestments made by the Company have been held in its own name.

13. According to information and explanations given to us and records examined by us, on overall basis, theterm loans were applied for the purpose for which they were obtained.

14. According to the information and explanations given to us and the records examined by us, the Companyhas not given any guarantees for loans taken by others from banks or financial institutions, the terms andconditions whereof are prima facie prejudicial to the interest of the Company.

15. On the basis of an overall examination of the balance sheet of the Company and the information andexplanations given to us, we report that the Company has not utilised any funds raised on short-term basisfor long-term investments.

16. The Company has not made any preferential allotment of shares to parties or companies covered underSection 301 of the Act.

17. According to the information and explanations given to us and the records examined by us, no debentureshave been issued by the Company.

18. The Company has not raised any money through a public issue during the period.19. Based upon the audit procedures performed and the information and explanation given by the management,

we report that no fraud on or by the Company has been noticed or reported during the year.20. In our opinion, clauses (ii) and (viii) of paragraph 4 of the companies (Auditors Report) Order, 2003 are

not applicable.For and on behalf of


V. M. PADWALPartner

Membership No.: 49639Mumbai, May 5, 2006.


134

SCHEDULES ANNEXED TO AND FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2006

March 31, 2006 March 31, 2005(Amount Rs.) (Amount Rs.)

SCHEDULE 1 : SHARE CAPITALAUTHORISED59,900,000 (Previous Year 60,000,000) Equity Shares 599,000,000 600,000,000of Rs.10/- each100,000 (Previous Year Nil) Preference Shares 1,000,000 –of Rs.10/- each

600,000,000 600,000,000

ISSUED AND SUBSCRIBED47,714,038 (Previous Year 57,746,500) Equity Sharesof Rs.10/- each. 477,140,380 577,465,00018,000 (Previous Year NIL) Preference Sharesof Rs.10/- each. 180,000 –

477,320,380 577,465,000

PAID UP42,742,609 (Previous Year 51,746,500) Equity Shares ofRs.10/- each fully paid up 427,426,090 517,465,0004,971,429 (Previous Year 6,000,000) Equity Shares of of Rs.10/-each Rs. 7.00 each paid up (P.Y. Rs 3.50) 34,800,003 21,000,00018,000 (Previous Year NIL ) Preference Shares of Rs.10/- each. 180,000 –

462,406,093 538,465,000

Of the above 4,76,72,739 (Previous Year 5,22,96,500) equity sharesare held by Godrej Industries Limited, the Holding Company.18,000 Preference shares of Rs. 10/- each were issued forconsideration other than cash. Refer Note Number 3 in Schedule 18.



As on Additions Deletions As on As on For the Reductions As on As on As on01.04.2005 31.03.2006 01.04.2005 Year 31.03.2006 31.03.2006 31.03.2005

Leasehold Improvements 3,457,993 2,957,260 – 6,415,253 1,440,299 1,625,317 – 3,065,616 3,349,637 2,017,694Computers 3,176,990 21,494,567 – 24,671,557 1,878,452 5,889,972 – 7,768,424 16,903,133 1,298,538Office Equipments 169,825 5,006,757 190,065 4,986,517 73,638 535,254 50,978 557,914 4,428,603 96,187Furniture & Fixtures 633,400 507,508 – 1,140,908 223,800 134,551 – 358,351 782,557 409,600Vehicle 375,360 – – 375,360 75,072 75,072 – 150,144 225,216 300,288Total 7,813,568 29,966,092 190,065 37,589,595 3,691,261 8,260,166 50,978 11,900,449 25,689,146 4,122,307

Previous Year 6,142,511 1,671,057 – 7,813,568 1,082,990 2,608,271 – 3,691,261 4,122,307 5,059,521

Investee Face Value Quantity Acquired Sold Quantity Amount (Rs.) Amount (Rs.)Company/Institutions As on during during As on As on As on

(Rs.) 1/04/05 Year Year 31/3/2006 31/3/2006 31/3/2005

LONG TERM INVESTMENTSUnquotedEquity Shares-Fully PaidGodrej Upstream Limited 10 9,000,000 – – 9,000,000 90,000,000 90,000,000Verseon LLC - Class A preferred units (US$)** 1.90** – 1,315,789 1,315,789 114,233,750 –Investment in Subsidiary CompanyEquity Shares in Godrej Global Solutions (Cyprus) Ltdface value of US$ 1.00 each 26,240,229 – 26,240,229 26,240,229 –Preference Shares in Godrej Global Solutions (Cyprus) Ltdface value of US$ 1.00 each – 65,600,571 – 65,600,571 65,600,571 –Investment in the capital of Partnership firmView Group LP – – – – – 136,801,078 80,243,788CURRENT INVESTMENTSUnquotedUnits of Mutual FundTempleton India Treasury Management 1,000 13,264 50,195 52,904 10,555 15,959,680 20,055,234Prudential ICICI Liquid Plan Institutional Plus 10 – 4,236,307 4,218,875 17,432 206,590 –Kotak Liquid Scheme 10 303,094 10,109,650 9,787,072 625,672 6,352,745 3,033,092TOTAL 455,394,643 193,332,114

SCHEDULE 6 : INVESTMENTS



SCHEDULE 2 : RESERVES & SURPLUSCapital ReserveOpening Balance –Add : Additions during the year 1,554,134 1,554,134 –(Refer note 3, Schedule 18)

Securities Premium AccountOpening Balance –Add : Additions during the year 49,820,000 49,820,000 –

51,374,134 –

SCHEDULE 3 : SECURED LOANSTerm Loan from bank 17,300,244 –

17,300,244 –

SCHEDULE 4 : UNSECURED LOANSDemand Loan from bank 22,654,141 –(Repayable within one year)

22,654,141 –


SCHEDULE 7 : CASH AND BANK BALANCESCash on hand 97,371 34,804Balances with Scheduled BankIn Current Account 32,536,330 5,726,644In Fixed Deposit 166,500 100,069,000

32,800,201 105,830,447SCHEDULE 8 : DEBTORSUnsecured and Considered GoodOutstanding for more than six months 1,293,710 –Outstanding for less than six months 25,657,232 150,132

26,950,942 150,132SCHEDULE 9 : LOANS AND ADVANCESAdvances recoverable in cash or in kindor for value to be received 723,721 398,820Intercorporate deposits – 214,868,647Security Deposits 13,357,804 1,720,272Accrued Interest – 331,644Staff Loan 78,500 21,000Advance Payment of Taxes 8,466,668 4,419,491

22,626,693 221,759,874


SCHEDULE 10 : CURRENT LIABILITIESSundry creditors 3,076,823 1,451,295(Due to SSI Undertakings Rs: Nil / Prev. Year Rs : Nil )Other Liabilities 6,741,610 –Advance from Customers – 1,305,600

9,818,433 2,756,895SCHEDULE 11 : PROVISIONSProvision for employee retirement benefit 815,132 468,067

815,132 468,067SCHEDULE 12 : MISCELLANEOUS EXPENDITURE[To the extent not written off or adjusted]Preliminary Expenses 929,240 1,045,395Less : Adjusted during the year (929,240) –Less : written off during the year – (116,155)

– 929,240Pre-operative Expenses 1,321,549 1,762,065Less : Adjusted during the year (1,321,549) –Less : written off during the year – (440,516)

– 1,321,549

– 2,250,789


135


SCHEDULE 13 : OTHER INCOMEInterest (Gross)– Bank - (TDS : C.Y : Rs. 7,687/-, P.Y: Rs. 354,340/-) 52,363 2,042,707– Companies - (TDS : C.Y : Rs. 2,781,773/- P.Y. : Rs. 4,054,506/-) 12,396,488 25,132,315Dividend 1,910,349 116,391Miscellaneous Income 5,696 98,713

14,364,895 27,390,126

SCHEDULE 14 : STAFF EXPENSESSalary, bonus, exgratia 34,990,456 4,097,232Contribution to Providend Fund and other funds 2,617,899 61,820Staff Welfare 1,238,192 496,567

38,846,547 4,655,619

SCHEDULE 15 : ESTABLISHMENT EXPENSESRent 11,251,006 1,170,071Office Maintenance 5,785,814 3,510,296Electricity 5,409,147 993,315Communication expenses 4,406,888 837,034Repairs and Maintenance - Plant and Machinery 516,868 –

27,369,723 6,510,716

SCHEDULE 16 : OTHER OPERATING EXPENSESLegal & Professional Expenses 9,532,816 7,611,612Insurance 183,094 71,970Conveyance and Travelling 2,916,553 2,774,267Recruitment & Training 1,415,302 1,508,896Outsourcing expenses 2,690,130 –Loss on Sale of Assets 82,837 –Exchange Difference – Loss 287,282 –General Expenses 2,837,848 1,725,889

19,945,861 13,692,634

SCHEDULE 17 : INTEREST & FINANCE CHARGESInterest on Bank Loan 2,392,882 –Finance Commission 471,575 –

2,864,457 –

SCHEDULES ANNEXED TO AND FORMING PART OF THEACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006SCHEDULE 18 : NOTES TO ACCOUNTS1. Background

Godrej Global Solutions Limited (“the Company”) was incorporated on February 28, 2003 as alimited liability company. The main business of the company is to carry out IT enabled services andback office support functions.

2. Significant Accounting Policiesa) Accounting Convention

The financial statements are prepared under the historical cost convention, on accrual basis in accordancewith the generally accepted accounting principles in India, the Accounting Standards issued by theInstitute of Chartered Accountants of India and the provisions of the Companies Act, 1956.

b) Fixed AssetFixed Assets are stated at cost less accumulated depreciation. Cost includes all expensesrelated to acquisition and installation of the concerned asset.

c) Asset ImpairmentThe Company reviews the carrying values of tangible and intangible assets for any possibleimpairment at each balance sheet date. An Impairment loss is recognised when the carryingamount of an asset exceeds its recoverable amount. In assessing the recoverable amount, theestimated future cash flows are discounted to their present value at appropriate discount rate.

d) InvestmentsLong-term investments are carried at cost. Provision for diminution, if any, in the value of eachlong-term investment is made to recognize a decline, other than that of a temporary nature.The fair value of a long-term investment is ascertained with reference to its market value, theinvestee’s assets and results and the expected cash flows from the investments.Current investments are carried at lower of cost and fair value.

e) Provisions and Contingent LiabilitiesProvisions are recognized in the accounts in respect of present probable obligations, the amountof which can be reliably estimated.Contingent Liabilities are disclosed in respect of possible obligations that arise from past eventsbut their existence is confirmed by the occurrence or non-occurrence of one or more uncertainfuture events not wholly within the control of the company.

f ) Revenue RecognitionIncome from services is recognized on completion of service as per terms of the contract.Interest income is recognized on a time proportion basis. Dividend income is recognised whenthe right to receive the same is established.

g) DepreciationLeasehold Improvements are amortized equally over the lease period.Depreciation is provided pro-rata to the period of use on the Straight Line Method over theestimated useful life of assets which is as under:Computers 3 YearsOffice Equipment 5 YearsFurniture & Fixture 5 YearsMotor Vehicle 5 Years

h) Retirement BenefitsRetirement Benefits to employees comprises payment under approved provident fund plans,leave encashment and gratuity to eligible employees. Payments under approved providentfund plans are charged to revenue. The liability in respect of future payment of gratuity toretiring employees and leave encashment benefit on retirement is provided on the basis of anactuarial valuation at the end of each financial year.

i) Taxes on IncomeProvision for current tax is ascertained on the basis of the taxable income for the year determinedin accordance with the provision of Income Tax Act, 1961.Deferred tax is recognised on timing differences; being the difference between the taxableincomes and accounting income that originate in one period and are capable of reversal inone or more accounting periods. Deferred tax assets subject to the consideration of prudenceare recognised and carried forward only to the extent that there is reasonable certainly thatsufficient future taxable income will be realised. The tax effect is calculated on the accumulatedtiming difference at the year-end and based on the tax rate and laws enacted on substantiallyenacted on the balance sheet date.

j) Foreign Currency TransactionsTransactions in foreign currency are recorded at the exchange rates prevailing on the date ofthe transaction. Monetary assets and Liabilities denominated in foreign currency are translatedat the period end exchange rates. Exchange gain/losses are recognised in the profit and lossaccount except for exchange differences related to fixed assets, which are adjusted in the cost ofthe assets. Non Monetary foreign currency items like investments in foreign subsidiaries arecarried at cost and expressed in Indian currency at the rate of exchange prevailing at the timeof making the original investment.

3. Scheme of ArrangementThe scheme of arrangement under Sections 391 and 394 of the Companies Act, 1956 between theCompany, Softpage Data Conversion Services Private Limited and their respective Shareholders forvesting the Data Conversion business of the Company was approved by the Honorable High Court ofMumbai on November 9, 2005. Accordingly all the Assets and Liabilities pertaining to the DataConversion Business of Softpage Data Conversion Services Private Limited were transferred to andvested in the company with retrospective effect from April 1, 2005, the appointed date. The schemehas accordingly been given effect to in these accounts.Pursuant to the scheme, all the assets and liabilities of data Conversion Business of Softpage DataConversion Services Private Limited as at April 1, 2005 have been taken over at their book valueand accounted for under the “Pooling of Interest Method”. The assets and liabilities taken over consistof fixed assets Rs. 5.98 lac, current assets Rs. 3.87 lac, bank loan Rs. 1.69 lac.Pursuant to the scheme, consideration for vesting of the Data Conversion Business of Softpage DataConversion Services Private limited was discharged by payment of Rs. 300 lac in cash and issue of18,000 redeemable preference shares of the face value of Rs. 10/- each issued at a premium ofRs. 498.20 lac to be redeemed as under:a. 4,000 preference shares of Rs. 10/- each on January 31, 2006b. 10,000 preference shares of Rs .10 each on May 31, 2006c. 4,000 preference shares of Rs. 10 each on May 31, 2007The maximum premium payable on redemption of these shares is Rs. 498.20 lac subject toachievement of predetermined performance on the date of redemption.Pursuant to the scheme, equity share capital of the company is reduced by Rs. 972.39 lac and thesaid amount is credited to capital reorganization account. The difference of aggregate of value ofRedeemable Preference Shares (i.e. face value and the maximum premium payable) allotted andcash over the value of net assets of Data cConversion Business of Softpage Data Conversion ServicesPrivate Limited amounting to Rs. 791.83 lac is debited to capital reorganization account. The debitbalance in profit and loss account of Rs. 142 lac and the balance in miscellaneous expenditureaccount of Rs. 23 lac as on April 1, 2005 is also debited to capital reorganization account. Thebalance lying in capital reorganization account after the above adjustment is transferred to capitalreserve account.As per the scheme of arrangement, the company has taken over all the employees of the DataConversion Business of Softpage Data Conversion Services Private Limited.

4. Redemption of Preference SharesThe Company has not redeemed 4,000 preference shares of Rs 10/- each at par on January 31, 2006due to inadequacy of divisible profits.

5. Secured LoanTerm loan from bank are secured by- Charge by way of hypothecation of assets on movable fixed assets of the Company- Hypothecation of the entire current assets of the Company.- Irrevocable and unconditional Corporate Guarantee from Godrej Industries Limited.

6. InvestmentsThe Company is in the process of disposing off the investment made in the equity shares of GodrejUpstream Limited and in the capital of view Group LP, a partnership firm formed under the laws ofthe state of Delaware, USA and does not expect to incur any loss on such sale.

7. Operating LeaseThe Company’s significant leasing agreements are in respect of operating lease for office premises.These leasing agreements are cancelable and renewable by mutual consent on mutually acceptableterms. The aggregate lease rentals payable by the company are charged to profit and loss account asa rent amounting to Rs. 101.34 Lacs. (Previous year. Rs. 11.70 Lacs). The future minimum leasepayments under non-cancelable operating leases due within a period of one year are estimated atRs. 103.92 Lacs (Previous year. Rs. 11.23 Lacs) and due within a period of one year but less than fiveyears are estimated at Rs. 126.58 Lacs. (Previous year. Rs. 6.55 Lacs)

8. Related Party Disclosuresa) Related Parties with whom transactions have taken place during the year, with the name and

description of relationship.Parties with whom control exists :Godrej Industries Limited (GIL); the Holding company.Godrej & Boyce Manufacturing Co. Ltd (GBMCL); the Ultimate Holding CompanyAssociate Companies :Godrej Upstream Limited (GUL)Fellow Subsidiaries :Godrej Remote Services Limited (GRSL)Wholly Owned Subsidiaries :Godrej Global Solutions Inc. (GGSI)Godrej Global Solutions (Cyprus) Ltd. (GGSCL)Key Management PersonnelMr. N.B. Godrej (NBG)Mr. Sanjay Tipnis (SST)

SCHEDULES ANNEXED TO AND FORMING PART OF THE PROFIT AND LOSS ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006


136

b) Transactions with Related Parties – Parent and Fellow Subsidiaries (Amount Rs.)

Nature of Transaction Ultimate Holding Fellow TotalHolding Co. Company Subsidiaries

(GBMCL) (GIL) (GRSL)

Leave & Licence – 1,123,440 – 1,123,440Previous Year – 1,011,700 – 1,011,700Service Charges – 2,808,000 – 2,808,000Previous Year – 2,529,250 – 2,529,250Other Expenses – 571,604 – 571,604Previous Year – 153,799 – 153,799Issue of Equity Shares – – – –Previous Year – 288,465,000 – 288,465,000Call Money Received – 21,000,000 – 21,000,000Previous Year – – – –Purchase of Fixed Assets 12,240 – – 12,240Previous Year – – 375,360 375,360Balance Outstanding as of 31-3-2005Payables – 17,447 – –

c) Transactions with Related Parties – Subsidiaries and Others(Amount Rs)

Nature of Transaction Wholly Wholly Associate Key TotalOwned Owned Company Management

Subsidiary Subsidiary PersonnelCompany Company

(GGSI) (GGSCL) (GUL) (SST)

Investment in Preference Shares – 65,600,571 – – 65,600,571Previous Year – – – – –Investment in Equity Shares – 26,240,229 – – 26,240,229Previous Year – – – – –Export of Services 54,733,608 – – – 54,733,608Previous Year – – – – –Interest Income – – 12,396,488 – 12,396,488Previous Year – – 25,132,315 – 25,132,315Inter Corporate Deposit -Given– – – 10,000,000 – 10,000,000Previous Year – – 335,000,000 – 335,000,000Inter Corporate DepositRepaid – – 219,200,000 – 219,200,000Previous Year – – 135,000,000 – 135,000,000Managerial Remuneration – – – 4,344,492 4,344,492Previous Year – – – 1,605,206 1,605,206

9. Computation of Profits under Section 349 of Companies Act, 1956

Particulars Current Year Previous Year

Profit for the year as per Profit and Loss Account (618,240) 1,033,233Add :Depreciation as per Accounts 8,260,166 2,608,271Managerial Remuneration 4,344,492 1,645,206

11,986,418 4,253,447Less :Depreciation u/s 350 (4,922,868) (1,733,139)

Net Profit / (Loss) 7,063,550 2,520,338

10. Management RemunerationSalaries and allowances 4,118,460 1,501,720Contribution to Provident Fund and other fund 226,032 103,486Sitting Fees – 40,000

Total 4,344,492 1,645,206

11. Auditors Remuneration included in General Expenses(Excluding service tax)Audit Fees 9,00,000 75,000Tax Audit Fees 1,00,000 25,000

Total 10,00,000 1,00,000

12. Earning in Foreign CurrencyIncome from services 82,265,686 1,667,018

13. Expenditure in Foreign CurrencyMarketing Expenses 3,209 86,250Travelling Expenses 106,389 875,538Books & Periodicals 18,849 NilTechnical Services Nil 36,171Professional Fees Nil 788,357Training 1,176,955 1,093,500Liability Insurance 26,581 Nil

Software Development & Maintenance 43,861 Nil

14. Earning Per ShareNet profit / (loss) after tax available to shareholders (618,240) 1,033,233Number of Equity Shares:As at commencement of the year 57,746,500 25,000,000As at the end of the year 47,714,038 57,746,500Weighted Average Number of Equity Shares 52,952,098 46,038,992

Basic Earning per Share of Rs. 10/- each (0.01) 0.02

15. Additional information required under Schedule VI Part II of the Companies Act, 1956, to the extentnot applicable has not been given.

16. Figures of the previous year have been regrouped wherever necessary.

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006Disclosure as required vide Part IV of Schedule VI of the Companies Act, 1956.


Amount in Rs. ThousandsI. Registration Details

Registration No. 11-139431State Code 11Balance Sheet date March 31, 2006

II. Capital raised during the yearPublic Issue –Rights Issue –Bonus Issue –Private Placement

III. Position of mobilisation and deployment of fundsTotal Liabilities 553,734Total Assets 553,734Sources of FundsPaid-up Capital 462,406Reserves and surplus 51,374Secured Loans 17,300Unsecured Loans 22,654Application of FundsNet Fixed Assets 25,689Investments 455,395Deferred Tax Asset 288Net Current Assets 71,744Miscellaneous Expenditure –Accumulated Losses 618

IV. Performance of the CompanyTotal Income 96,631Total Expenditure 97,287Profit / (loss) before Tax (656)Profit / (loss) after Tax (618)Earning per share (in Rs.) 0.01Dividend Rate % –

V. Generic names of principle products / services of company (as per monetary terms)Item Code N.A.Product Description IT Service

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006Particulars March 31, 2006 March 31, 2005

(Amount Rs) (Amount Rs)Cash Flow from Operating ActivitiesNet Loss Before Tax (656,172) 1,033,233Adjustment for:Depreciation 8,260,166 2,608,271Interest Paid 2,864,457 –Deferred Revenue Expenditure written off – 556,671(Profit)/Loss on Fixed Assets Scrapped / Sold 84,122 –(Profit)/Loss on Investments Sold (5,696) –Dividend Income (1,910,349) (116,391)Interest Income (12,448,851) (27,175,022)Operating Profit before Working Capital Changes (3,812,322) (23,093,238)Adjustment for:Trade and Other Receivables (38,101,714) (155,192,413)Trade Payables 7,408,603 2,656,405Cash Generated from Operations (34,505,433) (175,629,246)Direct Taxes Paid -FBT (250,381) –Direct Taxes Paid (4,047,177) –Total Cash Generated from Operating Activites (38,802,991) (175,629,246)Net Cash from/(used) in Operating Activities (38,802,991) (175,629,246)Cash Flow from Investing ActivitiesPurchase of Fixed Assets (29,375,208) (1,671,057)Sale of Fixed Assets 56,250 –Acquisitions of Data Conversion Business (80,000,000) –Purchase of Long Term Investments (262,631,840) (11,094,000)Purchase of Current Investments (277,318,150) (43,147,045)Sale of Current Investments 277,893,157 20,058,719Recovery of Inter Corporate Deposits 214,868,647 –Interest Income 12,448,851 27,175,022Dividend Income 1,910,349 116,391Net Cash from/(used) in Investing Activities (142,147,944) (8,561,970)Cash Flow from Financing ActivitiesProceeds from Issue of Share Capital 71,000,000 288,465,000Proceeds from Long Term Borrowings 48,190,146 –Repayment of Long Term Borrowing (8,405,000) –Interest Paid (2,864,457) –Net Cash from Financing Activities 107,920,689 288,465,000Net Increase in Cash and Cash Equivalents (73,030,246) 104,273,785Cash and Cash Equivalents as at beginning of the year 105,830,447 1,556,662Cash and Cash Equivalents as at end of the year 32,800,201 105,830,447Note: To finance working capital requirements, the Company’s Bankers have sanctione a total fund based limitof Rs 450 lac. Of this, limits utilized as on March 31, 2006 is Rs Nil.

As per our Report attached. For and on behalf of the boardFor and on behalf ofKALYANIWALLA MISTRY AND ASSOCIATESCHARTERED ACCOUNTANTS

V M Padwal S. S. Tipnis C. K. Vaidya Partner Whole Time Director DirectorMumbai, May 5, 2006 A.K.Singla

Company Secretary


137

DIRECTORS’ REPORT

AUDITORS’ REPORT TO THE MEMBERS OF GODREJ GLOBAL SOLUTIONS (CYPRUS) LIMITED

INCOME STATEMENT For the year endedfrom January 19, 2005 to December 31, 2005

For the period from January 19, 2005 to December 31, 2005The Directors have pleasure in enclosing the Company’s first set of financial statements for the period fromJanuary 19, 2005 to December 31, 2005.

Principal activitiesThe Company’s principal activity during the period under review was that of holding of investments andfinancing.

DirectorsThe Directors of the Company during the period were the following :Stelios SavvidesEva AgathangelouRohinton Homi KhajotiaDorab Erach MistrySanjay Tipnis

Company’s results19.01.2005- 31.12.2005

US$Profit for the period 32.962Balance carried forward 32.962

DividendsThe Directors recommend no dividend to be paid for the period ended December 31, 2005.

AuditorsA resolution will be put forward to the Annual General Meeting to reappoint PKF Savvides & Co Limited asauditors for the next year.

By order of the BoardFor Godrej Global Solution (Cyprus) Limited

Secretary

Limassol : April 13, 2006

1. We have audited the financial statements of Godrej Global Solutions (Cyprus) Limited which comprisethe balance sheet as at December 31, 2005 and the income statement, statement of changes in equityand cash flow statement for the period from January 19, 2005 to December 31, 2005 and the relatednotes. These financial statements are the responsibility of the Company’s Board of Directors. Our respon-sibility is to express an opinion on these financial statements based on our audit. This report is made solelyto the Company’s members, as a body, in accordance with Section 156 of the Companies Law, Cap. 113.Our audit work has been undertaken so that we might state to the Company’s members those matterswe are required to state to them in an auditor’s report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other than the Company and theCompany’s members as a body, for our audit work, for this report, or for the opinions we have formed.

2. We conducted our audit in accordance with International Standards on Auditing. Those Standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financialstatements 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 Board of Directors, as well asevaluating the overall financial statement presentation. We believe that our audit provides a reasonablebasis for our opinion.

3. In our opinion, the financial statements give a true and fair view of the financial position of Godrej Global

Solutions (Cyprus) Limited for the period from January 19, 2005 to December 31, 2005 and of its financialperformance and its cash flows for the period then ended in accordance with International FinancialReporting Standards and the requirements of Cyprus Companies Law, Cap. 113.

Report on other legal requirementsPursuant to the requirements of the Companies Law, Cap. 113, we report the following :� We have obtained all the information and explanations we considered necessary for the purposes of our

audit.� In our opinion, proper books of account have been kept by the Company.� The Company’s financial statements are in agreement with the books of account.� In our opinion and to the best of our information and according to the explanations given to us, the

financial statements give the information required by the Companies Law, Cap. 113, in the manner sorequired.

� In our opinion, the information given in the report of the Board of Directors on page 1 is consistent withthe financial statements.

Certified Public AccountantsLimassol: April 13, 2006

BALANCE SHEET AS AT DECEMBER 31, 2005

Note US$ Rs. LacAssetsNon-current AssetsInvestments 6 1,000,000 450.70

Loan receivable 7 1,055,000 475.49Current AssetsInterest receivabe 49,844 22.46Cash at Bank 35,428 15.97

85,272 38.43

Total Assets 2,140,272 964.62

Equity and LiabilitiesCapital and reservesShare capital 8 2,245 1.01Equity to be issued 2,097,755 945.46Reserves 9 32,962 14.86

2,132,962 961.33Current liabilities –Creditors and accruals 10 7,310 3.29

–Total equity and liabilities 2,140,272 964.62

Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on December 31,2005 (US$ 1.00 = Rs. 45.07).


Limassol: April 13, 2006 Secretary

NoteParticulars US$ Rs. LacInterest receivable 49,844 22.46Administration expenses (9,850) (4.44)(Loss)/profit from operations 3 39,994 18.03Financial (expenses)/income-net 4 (1,449) (0.65)Incorporation expenses writen off (5,583) (2.52)(Loss)/profit for the period before taxation 32,962 14.86Taxation 5 – –(Loss)/profit for the period after taxation 32,962 14.86



Secretary

Limassol: April 13, 2006

STATEMENT OF CHANGES IN EQUITYFor the Period from January 19, 2005 to December 31, 2005

Share Share Equity Equity Profit & Loss Profit & Losscapital capital to be issued to be issued Reserve Reserve Total TotalUS$ Rs. Lac US$ Rs. Lac US$ Rs. Lac US$ Rs. Lac

Issue of share capital 2,245 1.01 – – – – 2,245 1.01

Funds received – – 2,097,755 945.46 – – 2,097,755 945.46

Profit for the period – – – - 32,962 14.86 32,962 14.86

At December 31, 2005 2,245 1.01 2,097,755 945.46 32,962 14.86 2,132,962 961.33

Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on December 31, 2005 (US$ 1.00 = Rs. 45.07).

Godrej Global Solutions (Cyprus) Limited


138

NOTES TO THE FINANCIAL STATEMENTSDECEMBER 31, 20051. Introduction

The Company was incorporated in Cyprus on January 19, 2005 as a private limited liability company inaccordance with the provisions of the Cyprus Companies Law Cap. 113. The Company’s principal activityduring the period was that of holding of in investments and financing.

2. Principal accounting policiesThe following is a summary of the most important accounting policies used by the Company :a) Basis of accounting

The financial statements have been prepared under the historical cost convention and in accordancewith the International Financial Reporting Standards and the Companies Law.

b) Foreign exchangeThe financial statements are expressed in US Dollars.Current assets and liabilities of the Company other than in US Dollars are translated at the rate ofexchange ruling at the balance sheet date.Transactions during the period other than in US Dollars are converted at the rate of exchange rulingon the dates when they occur.Differences on exchange are included in the income statement.

c) TaxationTax is calculated as follows :� The current and deferred taxation are recognised as income or expense for the period.� The provision for income tax and defence contribution for the period is calculated in accordance

with the Income Tax Laws. Deferred taxation is calculated on the basis of the rates ruling atthe balance sheet date.

� The debit balances of the deferred taxation arriving from deductible temporary differencesare recognised to the extent of the anticipated taxable profits.

d) InvestmentsInvestments in subsidiaries are stated at cost unless there is an impairment of value. Any suchimpairment is recognised in the income statement. Investments held for trading are classified ascurrent assets and are stated at fair value, with any resultant gain or loss recognised in the incomestatement. When the Company has the positive intent and ability to hold bonds to maturity, theseare stated at amortised cost less impairment losses. Other investments held by the Company areclassified as being available-for-sale and are stated at fair value, with any resultant gain or lossrecognised directly to equity. When an investment is sold collected or otherwise disposed of orwhen the carrying amount of the investment is impaired, the cumulative gain or loss recognisedin equity is transferred to the income statement.The fair value of investments held for trading and investments available-for-sale is their quotedprice, excluding disposal costs, at the balance sheet date. Where a quoted price is not available andother methods of determining fair value are inappropriate, the investment is stated at cost.Any sale of investment is recognised when the actual transfer of shares from the registrar takesplace.

e) ProvisionsProvisions are recognised when the Company has a present obligation as a result of a past event,which it is probable will result in an outflow of economic benefits that can be reasonably estimated.

f ) Contingent liabilitiesContingent liabilities are disclosed as expenditure and liability if the confirmation of the expenseor loss is considered possible from future events.

g) Post balance sheet eventsCurrent assets and liabilities of the Company are adjusted to reflect any post balance sheet eventsand include additional information for amounts calculated on the basis ruling at the balance sheetdate.

3. Profit from operationsProfit from operations is arrived at after charging the following :

19.1.2005-31.12.2005US$

Auditors’ remuneration 5,0664. Financial expenses

19.01.2005-31.12.2005US$

Bank charges 1,4495. Taxation

The Company is liable to income tax at the rate of 10% on its taxable profits. Defence contribution ischarged on interest receivable at the rate of 10% per annum.

6. InvestmentsCountry of Class of

Incorporation/ shares Holding 2005Registration held % US$

Godrej Global Solutions Inc. USA Ordinary 100 1,000,000

7. Loan receivable2005US$

Godrej Global Solutions Inc.(Subsidiary company registered in USA) 1,055,000

The above loan carries interest at the rate of 7% per annum on the outstanding amount and it is receivableby the end of March 31, 2010. The interest receivable is accounted for on an accruals basis. The interestexpense for the period ended December 31, 2005 was US$ 49.844.

8. Share capital2005

£C US$Authorised, issued and fully paid1.000 ordinary shares of £C1 each 1,000 2,245

9. ReservesAs at 31 December, 2005 the reserves available for distribution amounted to US$32.962.

10. Creditors and accruals2005US$

Accruals 7,310The above amounts are payable within one year.

11. Capital commitmentsAt the balance sheet date there were no capital commitments.

12. Contingent liabilitiesAt the balance sheet date there were no contingent liabilities.

13. Fair value of assets and liabilitiesThe fair value of an asset or liability represents the replacement cost or an obligation to be settled at anarms length transaction. The fair value of all the assets and liabilities of the Company approaches theiraccounting value as stated in the financial statements.

Cash Flow Statement for the Period from January 19, 2005 to December 31, 2005

Particulars US$ Rs. LacCash flows from operating activities(Loss)/profit for the period before taxation 32,962 14.86Operating (loss)/profit before workingcapital changes 32,962 14.86Increase in creditors and accruals 7,310 3.29

Net cash from operating activities 40,272 18.15Cash flows from investing actinitiesPurchase of investments (1,000,000) (450.70)Interest receivable (49,844) (22.46)

Net cash used in investing activities (1,049,844) (473.16)Cash flows from financing activitiesIssuance of share capital 2,245 1.01Equity to be issued 2,097,755 945.46Loan receivable (1,055,000) (475.49)

Net cash generated from financing activities 1,045,000 470.98

(Decrease)/increase in cash and cash equivalents 35,428 15.97Cash and cash equivalents at beginning of period – –Cash and cash equivalents at end of period 35,428 15.97Cash and cash equivalents are as follows :Cash at bank 35,428 15.97



Secretary

Limassol: April 13, 2006


139

DIRECTORS’ REPORTFor the period from January 1, 2006 to March 31, 2006The Directors have pleasure in enclosing the Company’s set of financial statements for the period from1 January, 2006 to March 31, 2006.

Principal activitiesThe Company’s principal activity during the period under review was that of holding of investments andfinancing.

DirectorsThe Directors of the Company during the period were the following :Stelios SavvidesEva AgathangelouRohinton Homi KhajotiaDorab Erach MistrySanjay Tipnis

Company’s results1.1.2006–31.3.2006

US$Balance brought forward 32,962Loss for the period (7,260)Balance carried forward 25,702DividendsThe Directors recommend no dividend to be paid for the period ended March 31, 2006.AuditorsA resolution will be put forward to the Annual General Meeting to reappoint PKF Savvides & Co. Limited asauditors for the next year.


Secretary


AUDITORS’ REPORT TO THE MEMBERS OF GODREJ GLOBAL SOLUTIONS (CYPRUS) LIMITED1. We have audited the financial statements of Godrej Global Solutions (Cyprus) Limited on which comprise

the balance sheet as at March 31, 2006 and the income statement, statement of changes in equity andcash flow statement for the period from January 1, 2006 to March 31, 2006 and the related notes. Thesefinancial statements are the responsibility of the Company’s Board of Directors. Our responsibility is toexpress an opinion on these financial statements based on our audit. This report is made solely to theCompany’s members, as a body, in accordance with Section 156 of the Companies Law, Cap. 113. Ouraudit work has been undertaken so that we might state to the Company’s members those matters we arerequired to state to them in an auditor’s report and for no other purpose. To the fullest extent permittedby law, we do not accept or assume responsibility to anyone other than the Company and the Company’smembers as a body, for our audit work, for this report, or for the opinions we have formed.

2. We conducted our audit in accordance with International Standards on Auditing. Those Standards requirethat 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 theamounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by the Board of Directors, as well as evaluating theoverall financial statement presentation. We believe that our audit provides a reasonable basis for ouropinion.

3. In our opinion, the financial statements give a true and fair view of the financial position of Godrej GlobalSolutions (Cyprus) Limited for the period from January 1, 2006 to March 31, 2006 and of its financialperformance and its cash flows for the period then ended in accordance with International FinancialReporting Standards and the requirements of Cyprus Companies Law, Cap. 113.

Report on other legal requirementsPursuant to the requirements of the Companies Law, Cap. 113, we report the following :� We have obtained all the information and explanations we considered necessary for the purposes of our

audit.� In our opinion, proper books of account have been kept by the Company.� The Company’s financial statements are in agreement with the books of account.� In our opinion and to the best of our information and according to the explanations given to us, the

financial statements give the information required by the Companies Law, Cap. 113, in the manner sorequired.

� In our opinion, the information given in the report of the Board of Directors on page 1 is consistent withthe financial statements.

Certified Public AccountantsLimassol : April 13, 2006

INCOME STATEMENT FOR THE YEAR ENDEDJanuary 1, 2006 to March 31, 2006


Note 31.3.2006 31.12.2005US$ Rs. Lac US$ Rs. Lac

AssetsNon-current AssetsInvestments 6 1,000,000 446.10 1,000,000 450.70

Loan receivable 7 1,055,000 470.64 1,055,000 475.49Current AssetsInterest receivabe 68,054 30.36 49,844 22.46Cash at bank 27,718 12.36 35,428 15.97

95,772 42.72 85,272 38.43

Total Assets 2,150,772 959.46 2,140,272 964.62

Equity and LiabilitiesCapital and reservesShare capital 8 2,100,000 936.81 2,245 1.01Equity to be issued – – 2,097,755 945.46Reserves 9 25,702 11.47 32,962 14.86

2,125,702 948.28 2,132,962 961.33Current LiabilitiesCreditors and accruals 10 25,070 11.18 7,310 3.29

Total equity and liabilities 2,150,772 959.46 2,140,272 964.62

Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on March 31, 2006(US$ 1.00 = Rs. 44.61).


Secretary

Limassol : 13 April, 2006

1.1.2006 to 19.1.2005 toNote 31.3.2006 31.12.2005

Particulars US$ Rs. Lac US$ Rs. Lac

Interest receivable 18,210 8.12 49,844 22.46Administration expenses (25,363) (11.31) (9,850) (4.44)

(Loss)/profit from operations 3 (7,153) (3.19) 39,994 18.03Financial (expenses)/income-net 4 (107) (0.05) (1,449) (0.65)Incorporation expenses writen off – – (5,583) (2.52)

(Loss)/profit for the periodbefore taxation (7,260) (3.24) 32,962 14.86Taxation 5 – – – –

(Loss)/profit for the period after taxation (7,260) (3.24) 32,962 14.86



Secretary


STATEMENT OF CHANGES IN EQUITYFor the Period from January 1, 2006 to March 31, 2006

Share Share Equity Equity Profit & Loss Profit & Losscapital capital tobe issued to be issued Reserve Reserve Total TotalUS$ Rs. Lac US$ Rs. Lac US$ Rs. Lac US$ Rs. Lac

Issue of share capital 2,245 1.01 – – – – 2,245 1.01

Funds received – – 2,097,755 945.46 – – 2,097,755 945.46

Profit for the period – – – – 32,962 14.86 32,962 14.86

At December 31, 2005 2,245 1.01 2,097,755 945.46 32,962 14.86 2,132,962 961.33

Issue of share capital 2,097,755 935.81 (2,097,755) (935.81) – – – –

Loss for the period – – – – (7,260) (3.24) (7,260) (3.24)

At March 31, 2006 2,100,000 936.81 – – 25,702 11.47 2,125,702 948.28

Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on December 31, 2005 (US$ 1.00 = Rs. 45.07).


140

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDEDMARCH 31, 20061. Introduction

The Company was incorporated in Cyprus on January 19, 2005 as a private limited liability company inaccordance with the provisions of the Cyprus Companies Law Cap. 113. The Company’s principal activityduring the period was that of holding of in investments and financing.

2. Principal accounting policiesThe following is a summary of the most important accounting policies used by the Company :a) Basis of accounting

The financial statements have been prepared under the historical cost convention and in accordancewith the International Financial Reporting Standards and the Companies Law.

b) Foreign exchangeThe financial statements are expressed in US Dollars.Current assets and liabilities of the Company other than in US Dollars are translated at the rate ofexchange ruling at the balance sheet date.Transactions during the period other than in US Dollars are converted at the rate of exchange rulingon the dates when they occur.Differences on exchange are included in the income statement.

c) TaxationTax is calculated as follows:� The current and deferred taxation are recognised as income or expense for the period.� The provision for income tax and defence contribution for the period is calculated in accordance

with the Income Tax Laws. Deferred taxation is calculated on the basis of the rates ruling at thebalance sheet date.

� The debit balances of the deferred taxation arriving from deductible temporary differences arerecognised to the extent of the anticipated taxable profits.

d) InvestmentsInvestments in subsidiaries are stated at cost unless there is an impairment of value. Any suchimpairment is recognised in the income statement. Investments held for trading are classified ascurrent assets and are stated at fair value, with any resultant gain or loss recognised in the incomestatement. When the Company has the positive intent and ability to hold bonds to maturity, these arestated at amortised cost less impairment losses. Other investments held by the Company are classifiedas being available-for-sale and are stated at fair value, with any resultant gain or loss recogniseddirectly to equity. When an investment is sold collected or otherwise disposed of or when the carryingamount of the investment is impaired, the cumulative gain or loss recognised in equity is transferredto the income statement.The fair value of investments held for trading and investments available-for-sale is their quoted price,excluding disposal costs, at the balance sheet date. Where a quoted price is not available and othermethods of determining fair value are inappropriate, the investment is stated at cost.Any sale of investment is recognised when the actual transfer of shares from the registrar takes place.

e) ProvisionsProvisions are recognised when the Company has a present obligation as a result of a past event,which it is probable will result in an outflow of economic benefits that can be reasonably estimated.

f) Contingent liabilitiesContingent liabilities are disclosed as expenditure and liability if the confirmation of the expense orloss is considered possible from future events.

g) Post balance sheet eventsCurrent assets and liabilities of the Company are adjusted to reflect any post balance sheet events andinclude additional information for amounts calculated on the basis ruling at the balance sheet date.

3. (Loss)/profit from operations(Loss)/profit from operations is arrived at after charging the following:

1.1.2006- 19.01.2005-31.3.2006 31.12.2005

US$ US$Auditors’ remuneration 1.826 5.066

4. Financial (expenses)/income - net1.1.2006- 19.01.2005-31.3.2006 31.12.2005

US$ US$Bank charges (146) (1.449)Exchange differences – gain 39 –

(107) (1.449)5. Taxation

The Company is liable to income tax at the rate of 10% on its taxable profits. Defence contribution is chargedon interest receivable at the rate of 10% per annum.

6. InvestmentsCountry of Class of

Incorporation/ shares Holding 31.3.2006 31.12.2005

Registration held % US$ US$

Godrej Global Solutions Inc. USA Ordinary 100 1.000.000 1.000.000

7. Loan receivable31.3.2006 31.12.2005

US$ US$Godrej Global Solutions Inc.(Subsidiary company registered in USA) 1,055,000 1,055,000

The above loan carries interest at the rate of 7% per annum on the outstanding amount and it is receivableby the end of March 31, 2010. The interest receivable is accounted for on an accruals basis. The interestexpense for the period ended March 31, 2006 was US$ 18,210

8. Share capital31.3.2006

US$ £C US$

Authorised, issued and fully paid1.000 ordinary shares of £C1 each 1,000 2,245Authorised, issued and fully paid600.000 ordinary shares of US$ 1 each 600,0001.500.100 preference shares of US$ 1 each 1,500,000

2,100,0009. Reserves

As at March 31, 2006 the reserves available for distribution amounted to US$ 25,702.10. Creditors and accruals

31.3.2006 31.12.2005US$ US$

Accruals 25,070 7,310The above amounts are payable within one year.

11. Capital commitmentsAt the balance sheet date there were no capital commitments.

12. Contingent liabilitiesAt the balance sheet date there were no contingent liabilities.

13. Fair value of assets and liabilitiesThe fair value of an asset or liability represents the replacement cost or an obligation to be settled at an armslength transaction. The fair value of all the assets and liabilities of the Company approaches their accountingvalue as stated in the financial statements.

Cash Flow Statement for the period from January 1, 2006 to March 31, 2006

1.1.2006- 1.1.2006- 19.1.2005- 19.1.2005-31.3.2006 31.3.2006 31.12.2005 31.12.2005

Particulars US$ Rs. Lac US$ Rs. LacCash flows from operating activities(Loss)/profit for the period before taxation (7,260) (3.24) 32,962 14.70Operating (loss)/profit before workingcapital changes (7,260) (3.24) 32,962 14.70Increase in creditors and accruals 17,760 7.92 7,310 3.26Net cash from operating activities 10,500 4.68 40,272 17.97Cash flows from investing actinitiesPurchase of investments – – (1,000,000) (446.10)Interest receivable (18,210) (8.12) (49,844) (22.24)Net cash used in investing activities (18,210) (8.12) (1,049,844) (468.34)Cash flows from financing activitiesIssuance of share capital 2,097,755 935.81 2,245 1.00Equity to be issued (2,097,755) (935.81) 2,097,755 935.81Loan receivable – – (1,055,000) (470.64)Net cash generated from financing activities – – 1,045,000 466.17(Decrease)/increase in cash and cash equivalents (7,710) (3.44) 35,428 15.80Cash and cash equivalents at beginning of period 35,428 15.80 – –Cash and cash equivalents at end of period 27,718 12.36 35,428 15.80Cash and cash equivalents are as follows :Cash at bank 27,718 12.36 35,428 15.80



Limassol : April 13, 2006 Secretary


141

DIRECTORS’ REPORT

AUDITORS’ REPORT TO THE MEMBERS OF GODREJ GLOBAL SOLUTIONS, INC.

We are pleased to submit the report for the period from April 8, 2005 to December 31, 2005.

Principal activities

The Company’s principal activity during the period under review was that of providing Healthcare - relatedBusiness Process Outsourcing Services. The company acquired the business of Outsource Offshore Inc, duringthis period.

Company’s results

Net loss for the period : $ 10,970

Retained deficit as of December 31, 2005 : $ 10,970

Dividends

No dividend is recommended to be paid for the period ended December 31, 2005

Events Since Balance Sheet Date

There have been no events since the balance sheet date which affect the company’s results or performance.

Political or Charitable Contributions

The company made no political or charitable contributions during the year.

For Godrej Global Solutions, Inc.

Sanjay TipnisDirector

March 6, 2006

To the Board of Directors' and Stockholder

Godrej Global Solutions, Inc.

Boston, Massachusetts

We have audited the accompanying balance sheet of Godrej Global Solutions, Inc. ( a Delaware corporation)as of December 31, 2005, and the related statements of operations and retained earnings (deficit) and cash flowfor the period of April 8, 2005 (inception of operations) to December 31, 2005. These financial statements arethe responsibility of the Company’s management. Our responsibility is to express an opinion on these financialstatements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica. Those standards require that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement. An audit includes examining, on a test

BALANCE SHEET AS AT DECEMER 31, 2005

US$ Rs. LacAssetsCurrent AssetsCash and cash equivalents 553,414 249.42Accounts receivable - trade, net of allowance fordoubtful accounts of $0 345,253 155.61Deferred tax asset 8,275 3.73

Total current assets 906,942 408.76

Intangible assets, net of accumulated amortization of $168,723 482,112 217.29Goodwill 1,580,093 712.15

Total non-current assets 2,062,205 929.44

Total assets 2,969,147 1,338.19

Liabilities and stockholder’s equityCurrent liabilitiesAccounts payable 741,927 334.39Note payable 112,346 50.63Accrued expenses 70,844 31.93

Total current liabilities 925,117 416.95

Note payable 1,055,000 475.49

Stockholder’s equityCommon stock, .01 par value, 1,000 shares authorized,issued and outstanding 10 0Additional paid in capital 999,990 451Retained earnings (deficit) (10,970) (5)

Total stockholder’s equity 989,030 446

Total liabilities and stockholder’s equity 2,969,147 1,338

The accompanying notes are an integral part of these financial statements




March 6, 2006

Particulars US$ Rs. LacSales 1,534,150 691.44Cost of goods sold 1,077,669 485.71

Gross Profit 456,481 205.71Operating expenses 259,651 117.02

Operating income 196,830 88.71

Other income (expense)Interest income 2,492 1.12Amortization (168,723) (76.04)Interest expense (49,844) (22.46)

(216,075) (97.39)

Net loss before income tax benefit (19,245) (8.67)Income tax benefit 8,275 3.73

Net loss (10,970) (4.94)Retained earnings, (deficit) April 8, 2005 – –Retained earnings, (deficit) December 31, 2005 (10,970) (4.94)





March 6, 2006

STATEMENT OF OPERATIONS AND RETAINED EARNINGS(ACCUMULATED DEFICIT)For the period April 8, 2005 (Inception of Operations) toDecember 31, 2005

basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made by management, as well as evaluatingthe overall financial statement presentation. We believe that our audit provides a reasonable basis for ouropinion.

In our opinion, the financial statement referred to above present fairly, in all material respects, the financialposition of Godrej Global solutions, Inc. as of December 31, 2005, and the results of its operations and its cashflow for the period then ended in conformity with accounting principles generally accepted in the United Statesof America.

Braver PC

Accountants & Advisors

March 6, 2006


Godrej Global Solutions, Inc

142

NOTES TO THE FINANCIAL STATEMENTS

For the Period April 8, 2005 (Inception of Operations) to December 31, 2005

Note 1 – Nature of the BusinessGodrej Global Solutions, Inc. (the “Company” or “GGSI”) was incorporated on January 21, 2005 under thelaws of the state of Delaware; however, the Company did not begin its operations until April 8, 2005 when itacquired the assets of another company (Note 9). The Company’s principal activity is to provide informationtechnology services consisting of business process outsourcing services. Presently, the principal areas ofindustry it services are claims processing for insurance companies and healthcare third party administrators.Note 2 – Summary of Significant Accounting PoliciesFair Value of Financial InstrumentsThe carrying amounts of the Company’s financial instruments, which include accounts receivable, accountspayable and other accrued expenses approximate their fair values due to their short maturities.Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in theUnited States of America requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenue and expenses during the reporting period. Although theseestimates are based upon management’s best knowledge of current events and actions, actual results coulddiffer from those estimates.Cash and Cash EquivalentsThe Company considers all highly liquid investment with maturity of three months or less at the date ofpurchase to be cash equivalents. Cash equivalents are stated at cost plus accrued interest, which approximatesfair value. At December 31, 2005, cash equivalents consist of bank deposits of $553,414.Accounts Receivable Accounts receivable are stated at the amount the Company expects to collect from outstanding balances. Anallowance for doubtful accounts is provided for that potion of accounts receivable considered to be uncollectible,based upon historical experience and management’s evaluation of outstanding accounts receivable at the end of theyear. Bad debts expense was $0 as of December 31, 2005. Bad debts are written off against the allowance whenidentified. Management has determined that any uncollectible amounts at December 31, 2005 are not material.Impairment of Long-Lived AssetsThe Company reviews long-lived assets for impairment whenever an event or change in circumstancesindicate that the carrying amount of such assets may not be recoverable. The carrying values of long-livedassets are assessed for recoverability by reference to the estimated future undiscounted cash flows associatedwith them. Where this assessment indicates a deficit, the assets are written down to market value. For assetswhich do not have a readily determinable market value, the assets are written down to their estimated marketvalue calculated by reference to the estimated future discounted cash flows. Assets to be disposed are reportedat the lower of the written down value or the fair value, less the cost to sell.GoodwillThe Company evaluates the carrying value of goodwill each year. When evaluating whether goodwill isimpaired, the Company compares the fair value of the reporting unit to which the goodwill is assigned toreporting unit’s carrying amount, including goodwill. If the carrying amount exceeds its fair value, then theamount of the impairment loss is measured and recorded. At December 31, 2005, the Company has notidentified any impairment related goodwill.Revenue RecognitionRevenues generated from providing services to customer are recognized at the time the services are beingprovided. Revenue earned from fixed-price engagements is recognized on a monthly basis during the periodwhen services are being provided.Income TaxesDeferred tax assets and liabilities are determined based on the future effect on the temporary differences betweenthe carrying amounts for financial statement purposes and the income tax basis of assets and liabilities and aremeasured using enacted tax rates and laws that will be in effect when the differences are expected to reverse.The future effect on deferred taxes of change in tax rates or laws are adjusted for on the date of the enactment.Deferred tax assets are recognized, net of any valuation allowance, for the estimated future tax effects of thedeductible temporary differences and tax credit carryforwards. A valuation allowance against deferred taxassets is recorded when and if, based upon available evidence, it is more likely than not that some or alldeferred tax assets will not be realized.Concentration of Credit RiskFinancial instruments which potentially expose the Company to concentrations of credit risk consist primarilyof accounts receivable. To minimize customer credit risk, ongoing credit evaluations of customer’ financialcondition are performed, although collateral generally is not required.The Company maintains its cash in bank deposit accounts which, at times, may exceed the federally insuredlimits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $100,000. AtDecember 31, 2005. The Company has approximately $447,939 in excesss of the FDIC insured limites. TheCompany has not experienced any losses in such accounts.During 2005, the Company provided services to three customers that constituted approximately 83% of salesfor the period ending December 31, 2005. The Company anticipates the growth of the business will overcomeany loss of future revenue from these customers.The Company currently uses only one vendor, an affiliate, for the outsourcing of date processing. Managementbelieves the vendor can be replaced with other outsourcing vendors, if necessary.Note 3 – GoodwillThe total amount the Company paid for the acquisition (see Note 9) as of December 31, 2005 is $2,230,928 ofwhich $650,835 has been allocated to intangible assets as the value of the contracts. The remaining amountof $1,580,093 has been identified as goodwill.Goodwill is comprised of the following at December 31, 2005 :Expertise of employees $ 158,009Customer list 474,028Entry into U.S. markets 948,056

Total Goodwill $ 1,580,093Note 4 – Stockholder’s EquityCommon SharesIn April 2005, the Company issued 1,000 Common Shares of $0.01 par for $1,000,000 to Godrej Global Solutions(Cyprus) Limited. Each share of common stock is entitled to one vote. The holders of common stock are entitledto receive dividends whenever funds are legally available and when declared by the Board of Directors.Note 5 – Note Payable (Current)As part of the Company’s acquisition (see Note 9) the Company must pay earn out payments to the stockholdersof the acquired company. These earn-out payments are calculated based on a percentage of revenues and netincome for the previous year April 1st to March 31st. There is one payment due on May 31, 2006 calculatedon the 2005 year’s operations and another payment due May 31, 2007 calculated on the 2006 operations. Theamount of the note payable as an earn out payment as of December 31, 2005 is $112,346.Note 6 – Note Payable (Non-current)In April 2005, the Company issued an unsecured Note, in favor of Godrej Global Solutions (Cyprus) Limited,(GGSC), its stockholder, in exchange for installments totaling $1,055,000. The note bears interest at the rate of7% per annum. The entire amount of principal is payable at maturity on March 31, 2010, while interest ispayable every March 31st. Interest expense was $49,844 for the period ended December 31, 2005.

Note 7 – Income TaxesDeferred tax assets consist of the following at December 31, 2005 :Federal net operating loss $ 6,543State net operating loss 1,732

$ 8,275

Management determined a valuation allowance was not applicable. For the period endedDecember 31, 2005, the income tax benefit consisted of the following :Deferred taxes $ (8,275)

At December 31, 2005, the Company has net tax operating loss carryforwards of approximately $1,000available to reduce future taxable income which begin to expire in December 31, 2006 through 2025.Note 8 – Employee Benefit PlansThe Company sponsors a defined contributions plan (individual retirement account) covering substantially allits employees. Company contributions are at the discretion of the board of directors. Defined contributionpension expenses for the Company was $37,500 for the period ended December 31, 2005.Note 9 – AcquisitionsDuring the current year, the Company acquired the assets, liabilities and the business of Outsource OffshoreInc. (OOI), a Minnesota Corporation, for an initial cash consideration of $1.68 million. The rights and obligationsas agreed between OOI and its customers have been assumed by the Company. The stockholders of OOI arealso to receive two earn-out payments (see Note 5) on May 31, 2006 and 2007. The Company has calculatedthe earn-out payment to be $112,346 as of December 31, 2005. The Company has also paid to a former vendorof date-entry services, consideration of approximately $439,000 as set up and termination fees. Data entry andrelated services were thereafter provided by an affiliate company, Godrej Global Solutions Limited for servicingits US Clients. As of December 31, 2005 the total acquisition cost is approximately, $2,231,000.Note 10 – Related Party TransactionsThe Company’s data entry and related services are provided by Godrej Global Solutions Limited, an affiliate,for servicing the Company’s clients. During the period ended December 31, 2005, the Company's expensesinclude $741,165 to Godrej Global Solution Limited for these services. As of December 31, 2005 the amountin accounts payable due to Godrej Global Solutions Limited is $741,165.Note 11 – Commitment and ContingenciesCertain conditions may exist as of the date of the financial statements are issued, which may result in a lossto the Company but which will only be resolved when one or more future events occur or fail to occur. TheCompany’s management and its legal counsel assess such contingent liabilities, and such assessment inherentlyinvolves an exercise of judgment. In assessing loss contingencies related to legal proceedings or unassertedclaims as well as perceived merits of the amount of relief sought or expected be sought therein.If the assessment of a contingency indicates that it is probable that a material loss has been incurred and theamount of the liability can be estimated, than the estimated liability would be accrued in the Company’sfinancial statements. If assessment indicates that a potentially material loss contingency is not probable, butis reasonably possible, or is probable but can not be estimated, the nature of the contingent liability, togetherwith an estimate of the range of possible loss if determined material, would be disclosed.Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in whichcase the nature of the guarantee would be disclosed.In connection with the Company’s purchase of assets of OOI, the Company must pay earn out payments on May31, 2006 and 2007. These earn out payments are calculated based on a percentage of revenues and net incomefor the previous fiscal year. Amounts paid for earn out payments will increase the Company’s purchase price.Note 12 – Intangible AssetsIn connection with acquisition of Outsource Offshore Inc., (see Note 9) the assets acquired included $650,835of intangible assets other than goodwill. All of the $650,835 of intangible assets is attributable to value of thecontracts purchased from Outsource Offshore Inc. The Company estimates the useful lives of the contractsremaining at December 31, 2005 to extend over a period of up to three years. Amortization in amount of$168,723 was recorded in 2005.Amortization expense for the next three years would be as follows :2006 213,5692007 162,2652008 106,278Note 13 – Subsequent EventsFollowing the period ended December 31, 2005, the Company has changed its fiscal year end to March 31st.

Statement of cash flows For the period april 8, 2005 (inception of operations) to december 31, 2005

Particulars US$ Rs. LacCash flows from operating activitiesNet loss (10,970) (4.94)Adjustments to reconcile net loss to net cashprovided by operating activitiesAmortization 168,723 76.04Changes in operating assets and liabilitiesAccounts receivable (345,253) (155.61)Deferred tax asset (8,275) (3.73)Accounts payable 741,927 334.39Accrued expenses 70,844 31.93Net cash provided by operating activities 616,996 278.08Cash flows from investing activitiesPurchase of intangible asset (650,835) (293.33)Purchase of goodwill (1,467,747) (661.51)Net cash used in investing activities (2,118,582) (954.84)Cash flows from financing activitiesProceeds from note payable 1,055,000 475.49Proceeds from stock issuance 1,000,000 450.70Net cash provided by financing activities 2,055,000 926.19Net increase in cash and cash equivalents 553,414 249.42Cash and cash equivalents April 8, 2005 – –Cash and cash equivalents at December 31, 2005 553,414 249.42Supplemental disclosure of non-cash investing and finansing activities :Investment in Goodwill financed by a note payable 112,346 50.63Supplemental disclosure of cash flow informationCash paid during the period for interest – –The accompanying notes are an integral part of these financial statements




March 6, 2006


143

DIRECTORS’ REPORTWe are pleased to submit the report for the period January 1, 2006 to March 31, 2006

Principal activitiesThe Company’s principal activity during the period under review was that of providing Healthcare relatedBusiness Process Outsourcing Services.

Companys’ ResultsNet income for the period : $ 27,845Retained deficit as of March 31, 2006 : $ 16,875

DividendsNo dividend is recommended to be paid for the period ended March 31, 2006

Events Since Balance Sheet DateThere have been no events since the balance sheet date which affect the company’s results or performance.

Political Or Charitable ContributionsThe Company made no political or charitable contributions during the year.



April 14, 2006

AUDITORS’ REPORT TO THE MEMBERS OF GODREJ GLOBAL SOLUTIONS, INC.To the Board of Directors' and Stockholder


Boston, Massachusetts

We have audited the accompanying balance sheet of Godrej Global Solutions, Inc. ( a Delaware corporation)as of March 31, 2006, and the related statements of operations and retained earnings (accumulated deficit) andcash flow for the three months then ended. 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.

We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica. Those standards require that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes

assessing the accounting principles used and significant estimates made by management, as well as evaluatingthe overall financial statement presentation. We believe that our audit provides a reasonable basis for ouropinion.

In our opinion, the financial statement referred to above present fairly, in all material respects, the financialposition of Godrej Global solutions, Inc. as of March 31, 2006, and the results of its operations and its cash flowfor the three month then ended in conformity with accounting principles generally accepted in the UnitedStates of America.

Braver PC

Accountants & Advisors

April 14, 2006


US$ Rs. LacAssetsCurrent AssetsCash and cash equivalents 342,281 152.69Accounts receivable - trade, net of allowance fordoubtful accounts of $0 378,862 169.01

Total current assets 721,143 321.70

Intangible assets, net of accumulated amortization of $224,964 425,871 189.98Goodwill 1,891,721 843.90

Total non-current assets 2,317,592 1,033.88

Total assets 3,038,735 1,355.58

Liabilities and stockholder’s equityCurrent liabilitiesNote payable 423,974 189.13Accounts payable 488,137 217.76Income taxes payable 27,249 12.16Accrued expenses 27,500 12.27

Total current liabilities 966,860 431.32

Note payable 1,055,000 470.64

Stockholder’s equityCommon stock, .01 par value, 1,000 shares authorized,issued and outstanding 10 –Additional paid in capital 999,990 446.10Retained earnings 16,875 7.53

Total stockholder’s equity 1,016,875 453.63

Total liabilities and stockholder’s equity 3,038,735 1,355.58





April 14, 2006

Particulars US$ Rs. LacSales 706,995 315 .39Cost of goods sold 488,137 217.76

Gross Profit 218,858 218,858.00Operating expenses 84,490 37.69

Operating income 134,368 59.94Other income (expense) Interest income 3,452 1.54 Amortization of intangible assets (56,241) (25.09) Interest expense (18,210) (8.12)

(70,999) (31.67)

Net income before provision for income taxes 63,369 28.27Provision for income taxes 35,524 15.85

Net income 27,845 12.42Accumulated deficit - January 1, 2006 (10,970) (4.89)

Retained earnings - March 31, 2006 16,875 7.53



For Godrej Global Solutions, Inc


April 14, 2006

STATEMENT OF OPERATIONS AND RETAINED EARNINGS(ACCUMULATED DEFICIT)For the period January 1, 2006 to March 31, 2006

Godrej Global Solutions, Inc

144

NOTES TO THE FINANCIAL STATEMENTS

For the Period January 1, 2006 to March 31, 2006

Note 1 – Nature of the BusinessGodrej Global Solutions, Inc. (the “Company” or “GGSI”) was incorporated on January 21, 2005 under thelaws of the state of Delaware; however, the Company did not begin its operations until April 8, 2005 when itacquired the assets of another company (Note 9). The Company’s principal activity is to provide informationtechnology services consisting of business process outsourcing services. Presently, the principal areas ofindustry it services are claims processing for insurance companies and healthcare third party administrators.Note 2 – Summary of Significant Accounting PoliciesFair Value of Financial InstrumentsThe carrying amounts of the Company’s financial instruments, which include accounts receivable, accountspayable and other accrued expenses approximate their fair values due to their short maturities.Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in theUnited States of America requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenue and expenses during the reporting period. Although theseestimates are based upon management’s best knowledge of current events and actions, actual results coulddiffer from those estimates.Cash and Cash EquivalentsThe Company considers all highly liquid investment with maturity of three months or less at the date ofpurchase to be cash equivalents. Cash equivalents are stated at cost plus accrued interest, which approximatesfair value. At March 31, 2006, cash equivalents consist of bank deposits of $342,281.Accounts ReceivableAccounts receivable are stated at the amount the Company expects to collect from outstanding balances. Anallowance for doubtful accounts is provided for that potion of accounts receivable considered to be uncollectible,based upon historical experience and management’s evaluation of outstanding accounts receivable at the endof the year. The allowance is $0 as of March 31, 2006. Bad debts are written off against the allowance whenidentified. Management has determined that any uncollectible amounts at March 31, 2006 are not material.Impairment of Long-Lived AssetsThe Company reviews long-lived assets for impairment whenever an event or change in circumstancesindicate that the carrying amount of such assets may not be recoverable. The carrying values of long-livedassets are assessed for recoverability by reference to the estimated future undiscounted cash flows associatedwith them. Where this assessment indicates a deficit, the assets are written down to market value. For assetswhich do not have a readily determinable market value, the assets are written down to their estimated marketvalue calculated by reference to the estimated future discounted cash flows. Assets to be disposed are reportedat the lower of the written down value or the fair value, less the cost to sell.GoodwillThe Company evaluates the carrying value of goodwill each year. When evaluating whether goodwill isimpaired, the Company compares the fair value of the reporting unit to which the goodwill is assigned toreporting unit’s carrying amount, including goodwill. If the carrying amount exceeds its fair value, then theamount of the impairment loss is measured and recorded. At March 31, 2006, the Company has not identifiedany impairment related goodwill.Revenue RecognitionRevenues generated from providing services to customer are recognized at the time the services are beingprovided. Revenue earned from fixed-price engagements is recognized on a monthly basis during the periodwhen services are being provided.Income TaxesDeferred tax assets and liabilities are determined based on the future effect on the temporary differencesbetween the carrying amounts for financial statement purposes and the income tax basis of assets and liabilitiesand are measured using enacted tax rates and laws that will be in effect when the differences are expectedto reverse. The future effect on deferred taxes of change in tax rates or laws are adjusted for on the date of theenactment.Deferred tax assets are recognized, net of nay valuation allowance, for the estimated future tax effects of thedeductible temporary differences and tax credit carryforwards. A valuation allowance against deferred taxassets is recorded when and if, based upon available evidence, it is more likely than not that some or alldeferred tax assets will not be realized.Concentration of Credit RiskFinancial instruments which potentially expose the Company to concentrations of credit risk consist primarilyof accounts receivable. To minimize customer credit risk, ongoing credit evaluations of customer’ financialcondition are performed, although collateral generally is not required.The Company maintains its cash in bank deposit accounts which, at times, may exceed the federally insuredlimits. The balances are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $100,000. AtMarch 31, 2006, the Company has approximately $131,000 in excess of the FDIC insured limits. The Companyhas not experienced any losses in such accounts.During the period January to March 2006, the Company provided services to three customers that constitutedapproximately 93% of sales for the period ending March 31, 2006. The Company anticipates the growth of thebusiness will overcome any loss of future revenue from these customers.The Company currently uses only one vendor, an affiliate, for the outsourcing of data processing. Managementbelieves the vendor can be replaced with other outsourcing vendors, if necessary.Note 3 – GoodwillThe total amount the Company paid for the acquisition (see Note 9) as of March 31, 2006 is $2,542,556; of which$650,835 has been allocated to intangible assets as the value of the contracts. The remaining amount of$1,891,721 has been identified as goodwill.Goodwill is comprised of the following at March 31, 2006 :Expertise of employees $ 189,172Customer list 567,516Entry into U.S. markets 1,135,033

Total Goodwill $ 1,891,721

Note 4 – Stockholder’s EquityCommon SharesIn April 2005, the Company issued 1,000 Common Shares of $0.01 par for $1,000,000 to Godrej GlobalSolutions (Cyprus) Limited. Each share of common stock is entitled to one vote. The holders of common stockare entitled to receive dividends whenever funds are legally available and when declared by the Board ofDirectors.

Note 5 – Note payable (Current)As part of the Company’s acquisition (see Note 9) the Company must pay earn out payment to thestockholders of the acquired company. These earn-out payments are calculated based on a percentageof revenues and net income for the previous fiscal year ended March 31st. There is one payment due onMay 31, 2006 calculated on the 2005 year’s operations and another payment due May 31, 2007 calculatedon the 2006 operations. The amount of the note payable as an earn-out payment as of March 31, 2006 isapproximately $424,000.Note 6 – Note Payable (Non-current)In April 2005, the Company issued an unsecured Note, in favor of Godrej Global Solutions (Cyprus) Limited,(GGSC), its stockholder, in exchange for installments totaling $1,055,000. The note bears interest at the rate of7% per annum. The entire amount of principal is payable at maturity on March 31, 2010, while interest ispayable every March 31st. Interest expense was $18,210 for the period ended March 31, 2006.Note 7 – Income TaxesProvision for income taxes for the three months ended March 31, 2006, is $35,524. A net operating loss wasavailable in the amount of $8,275. The balance of $27,249 is in income tax payable.Note 8 – Employee Benefit PlansThe Company sponsors a defined contributions plan (individual retirement account) covering substantially allits employees. Company contributions are at the discretion of the board of directors. Defined contributionpension expenses for the Company was $12,500 for the period ended March 31, 2006.Note 9 – AcquisitionsThe Company acquired the assets, liabilities and the business of Outsource Offshore Inc. (OOI), a MinnesotaCorporation, for an initial cash consideration of $1.68 million. The rights and obligations as agreed betweenOOI and its customers have been assumed by the Company. The stockholders of OOI are also to receive twoearn-out payments (see Note 5) on May 31, 2006 and 2007. The Company has calculated the first earn-outpayment to be $423,974 as of March 31, 2006. The Company has also paid to a former vendor of date-entryservices, consideration of approximately $439,000 as set up and termination fees. Data entry and relatedservices were thereafter provided by an affiliate company, Godrej Global Solutions Limited for servicing itsUS Clients. As of March 31, 2006 the total acquisition cost is approximately, $2,542,556.Note 10 – Related Party TransactionsThe Company’s data entry and related services are provided by Godrej Global Solutions Limited, an affiliate,for servicing the Company’s clients. During the period ended March 31, 2006, the Company's expenses include$488,137 to Godrej Global Solution Limited for these services. As of March 31, 2006 the amount in accountspayable due to Godrej Global Solutions Limited is $488,137.Note 11 – Commitment and ContingenciesIn connection with the Company’s purchase of assets of OOI, the Company must pay earn-out payments onMay 31, 2006 and 2007. These earn-out payments are calculated based on a percentage of revenues and netincome for the previous fiscal year. Amounts paid for earn out payments will increase the Company’s purchaseprice.Note 12 – Intangible AssetsIn connection with acquisition of Outsource Offshore Inc., (see Note 9) the assets acquired included $650,835of intangible assets other than goodwill. All of the $650,835 of intangible assets is attributable to value of thecontracts purchased from Outsource Offshore Inc. The Company estimates the useful lives of the contractsremaining at March 31, 2006 to extend over a period of up to three years. Amortization in amount of $56,241was recorded in the period January 1, 2006 to March 31, 2006.Amortization expense for the next three fiscal years ending March 31would be as follows:2007 $ 198,1912008 161,7572009 65,923

Statement of Cash Flows for the period January 1, 2006 To March 31,2006

Particulars US$ Rs. LacCash flows from operating activitiesNet income 27,845 12.42Adjustments to reconcile net income to net cashprovided by operating activitiesAmortization of intangible assets 56,241 25.09Changes in operating assets and liabilitiesAccounts receivable (33,609) (14.99)Deferred tax asset 8,275 3.69Accounts payable (253,790) (113.22)Income taxes payable 27,249 12.16Accrued expenses (43,344) (19.34)Net cash used in operating activities (211,133) (94.19)Cash and cash equivalents - January 1, 2006 553,414 246.88Cash and cash equivalents - March 31, 2006 342,281 152.69Supplemental disclosure of non-cash investing and finansing activitiesIncrese in note payable (current) 311,628 139.02Supplemental disclosure of cash flow informationCash paid during the period for interest 68,054 30.36





April 14, 2006

GODREJ INDUSTRIES LIMITED · Godrej Industries Limited 4 NOTICE TO SHAREHOLDERS NOTICE is hereby...

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Transcript of GODREJ INDUSTRIES LIMITED · Godrej Industries Limited 4 NOTICE TO SHAREHOLDERS NOTICE is hereby...