GIL_annualreport_2006_07

Fast Forward into the Future

annual report 2006-2007

Godrej Industries Limited

Fast Forward into the Future

The future, we believe, belongs to the brave.

Godrej Industries has grown rapidly over the years,

in all its different sectors.

The growth is propelled by the Company’s endeavour to excel

in each of its businesses, and to deliver value to its consumers

and business partners.

Our customers appreciate the consistent quality, excellence

in service and cost effective products.

It is this vision, empowered by an enthusiastic team and a constant

aim to innovate that will ensure that we, along with our customers and

shareholders move into a future of enduring success and growth.

Annual Report 2006–2007

1

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


2

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

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.& TRANSFER AGENT 147, Mahatma Gandhi Road,

Opp. Jehangir Art Gallery, Fort,Mumbai 400 023.Phone : 022 - 2263 5000 - 01- 02Fax : 022 - 2263 5003E-Mail : [email protected]

CONTENTS Page Nos.

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

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

Directors’ Report along with ManagementDiscussion and Analysis Report ............................ 08

Report on Corporate Governance ........................ 18

Shareholders' Information ...................................... 23

Auditors’ Report ...................................................... 25

Accounts ................................................................. 28

Consolidated Accounts ........................................... 52

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

SUBSIDIARIES

Godrej Agrovet Limited ......................................... 70

Aadhaar Retailing Limited ..................................... 82

Godrej Aquafeed Limited ...................................... 85

Golden Feed Products Limited ............................. 89

Goldmohur Foods & Feeds Limited ...................... 94

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

Girikandra Holiday Homes & Resorts Limited .... 108

Godrej Developers Private Limited ...................... 111

Godrej Real Estate Private Limited ...................... 114

Godrej Realty Private Limited .............................. 117

Godrej Seaview Properties Private Limited ......... 121

Godrej Waterside Properties Private Limited ...... 124

Godrej Hicare Limited. ......................................... 128

Ensemble Holdings & Finance Limited ................ 134

Godrej International Limited ................................. 139

Godrej Global Mid East FZE ................................ 141

Godrej Global Solutions Limited .......................... 145

Godrej Global Solutions (Cyprus) Limited ............ 150

Godrej Global Solutions, Inc ................................ 153

Annual Report 2006–2007

3

Break-up of Total IncomeRs. Lac

Break-up of Total ExpenditureRs. Lac

Total Expenditure 2006-2007Total Income 2006-2007

GODREJ INDUSTRIES LIMITED – FINANCIAL HIGHLIGHTS

(Rs. Lac)

2006-07 2005-06 2004-05 2003-04 2002-03

BALANCE SHEET

SOURCES OF FUNDS :

Shareholders’ FundsShare Capital 2919 2919 2919 2919 2919Reserves & Surplus 38143 34216 30618 26197 21511

Loan FundsSecured Loans 33093 24911 22075 16814 14815Unsecured Loans 13677 7803 3557 4235 7432Deferred Tax Liability 3980 3818 2502 2972 3466

91811 73667 61671 53137 50143

APPLICATION OF FUNDS :

Fixed Assets 28704 28594 25100 25656 28130Investments 48567 37135 33577 26533 18646Net Working Capital 12937 5719 2868 739 2944Miscellaneous Expenditure 1602 2219 126 209 423

91811 73667 61671 53137 50143

INCOME AND PROFIT

Total Income 78291 80270 82353 73355 67780Expenditure other than Interest and Depreciation 64078 69661 70117 64243 57737Profit before Interest, Depreciation and Tax 14213 10609 12236 9112 10043Interest (net) 3831 2837 2582 580 2024

Profit before Depreciation and Tax 10382 7772 9654 8532 8019Depreciation 2426 2259 2148 2150 2211

Profit before Tax and exceptional items 7956 5513 7506 6382 5808Exceptional items - expense/(income) (95) (3106) — — —Provision for Current Tax 61 82 401 365 421

Net Profit after Tax 7990 8537 7105 6017 5387Provision for Deferred Tax 162 1417 (470) (494) 2119

Adjustment in respect of prior years - expense/(income) 22 8 (2) (57) (153)

Net Profit after taxes and adjustments 7806 7113 7577 6568 3421

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.

Chemicals 57187

Estate 2562

Finance & Investment 12145Medical Diagnostics 837

78291

Vegoils 4991

Materials 43394

Staff Costs 6266

Depreciation 2426

Interest 3831

Other Operating 14418Expenses

70335

Others 569


4

NOTICE TO SHAREHOLDERS

NOTICE is hereby given that the NINETEENTH ANNUAL GENERAL MEETING of the members of GODREJ INDUSTRIESLIMITED will be held on Friday, July 27, 2007 at 4.30 P.M. at Y. B. Chavan Centre, Nariman Point, Mumbai - 400 021, totransact 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, 2007 theBalance Sheet as at that date, the Auditors' Report thereon and the Directors' Report along with Management Discussionand Analysis Report and Statement of Corporate Governance.

2. To declare dividend for the financial year ended March 31, 2007.3. To appoint a Director in place of Mr. A.B. Godrej, who retires by rotation and being eligible offers himself for re-

appointment.4. To appoint a Director in place of Mr. S.A. Ahmadullah, who retires by rotation and being eligible offers himself for re-

appointment.5. To appoint a Director in place of Mr. V.N. Gogate, who retires by rotation and being eligible offers himself for re-

appointment.6. To appoint a Director in place of Mr. Fali P. Sarkari, 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, Chartered Accountants, 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 SPECIALRESOLUTION :

RESOLVED THAT subject to the provision of Section 269, 309, Schedule XIII and other applicable provisions, if any, of theCompanies Act, 1956, approval of the Company be and is hereby accorded for the re-appointment of and remunerationpayable to Mr. N.B. Godrej as Managing Director of the Company for a period of three years from April 1, 2008 to March31, 2011 on the terms and conditions as contained in the agreement to be entered into between the Company andMr. N.B. Godrej, a draft of which is placed before the meeting and for the purpose of identification, initialled by theChairman.

By Order of the Board of DirectorsS.K. BHATT

Executive Vice-President(Corporate Services)

& Company SecretaryMumbai, May 25, 2007Registered Office :Pirojshanagar, Eastern Express Highway,Vikhroli (East), Mumbai 400 079.

NOTES :

1. The relative Explanatory Statement in respect of business under Item No. 8 as 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 INSTEAD OF HIMSELF. SUCH A PROXY NEED NOT BE A MEMBER OF THE COMPANY. PROXIES IN ORDER TOBE EFFECTIVE MUST BE RECEIVED BY THE COMPANY NOT LESS THAN 48 HOURS BEFORE THE MEETING. A PROXYSO APPOINTED SHALL NOT HAVE ANY RIGHT TO SPEAK AT THE MEETING.

3. The Register of Members and Share Transfer Books of the Company will be closed from July 20, 2007 to July 27, 2007 (bothdays inclusive) for ascertaining the names of the shareholders to whom the dividend which if declared at the AnnualGeneral Meeting is payable. In respect of shares held in electronic form, the dividend will be payable on the basis ofbeneficial ownership as per details furnished by National Securities Depository Ltd. and Central Depository Services(India) Ltd., for this purpose.

Annual Report 2006-2007

5

4. Those Members who have so far not encashed their dividend warrants for the below mentioned financial years, mayclaim or approach the Company for the payment thereof as the same will be transferred to the 'Investor Education andProtection Fund' of the Central Government, pursuant to Section 205C of the Companies Act, 1956 on the respectivedates mentioned thereagainst. Please note that as per Section 205C of the Companies Act, 1956, no claim shall lieagainst the Company or the aforesaid Fund in respect of individual amounts which remain unclaimed or unpaid for aperiod of seven years from the date the dividend became due for payment and no payment shall be made in respect ofsuch claims.

Dividend for theFinancial Year ended Due date for transfer

31.03.2000 01.07.200731.03.2001 28.07.200831.03.2002 14.08.200931.03.2003 25.08.201031.03.2004 26.07.201131.03.2005 26.07.201231.03.2006 24.07.2013

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 RegisteredOffice of the Company to facilitate clarifications during the meeting.

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

Item nos.8

The tenure of Mr. N.B. Godrej as Managing Director of the Company will expire on March 31, 2008.

It is proposed to re-appoint Mr. N.B. Godrej for a further period of three years from April 1, 2008 to March 31, 2011.

The proposed remuneration and terms and conditions of appointment of Mr. N.B. Godrej as Managing Director are givenbelow :

1. Mr. N.B. Godrej, shall perform his duties subject to the superintendence, control and direction of the Board of Directorsof the Company.

2. Period of appointment : From 1/4/2008 to 31/3/2011.

3. In consideration of the performance of his duties, Mr. N.B. Godrej shall be entitled to receive remuneration as statedhereinbelow :-

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. 5,00,000 to Rs. 9,00,000 per month, payable monthly. The Annual BasicSalary and increments will be decided by the Compensation Committee/Board of Directors depending on the performanceof the Managing Director, the profitability of the Company and other relevant factors. The Basic Salary approved by theCompensation Committee for the year 2007-08 is Rs. 4,50,000.

2. Performance Linked Variable Remuneration (PLVR) :

Performance Linked Variable Remuneration according to the Scheme of the Company for each of the financial years asmay be decided by the Compensation Committee/Board of Directors of the Company based on Economic Value Added inthe business and other relevant factors and having regard to the performance of the Managing Director for each year.

3. Flexible Compensation:

In addition to the Fixed Compensation and PLVR, Mr. N.B. 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 CompaniesAct, 1956 (collectively called "perquisites and allowances").

These perquisites and allowances may be granted to Mr. N.B. Godrej in the manner as the Board may decide as per theRules of the Company.


6

● Housing (i.e. unfurnished residential accommodation OR House Rent Allowance at 80% of Basic Salary);● Furnishing at residence;● Supplementary Allowance;● Leave Travel Assistance;● Payment/reimbursement of medical expenses for self and family;● 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, Contingency Loan as per rules of the Company. These loans shall be subject to Central Government

approval, if any;● Earned/privilege leave, on full pay and allowance, not exceeding 30 days in a financial year. Encashment/accumulation

of leave will be permissible in accordance with the Rules specified by the Company. Casual/Sick leave as per therules of the Company;

● Such other perquisites and allowances as per the policy/rules of the Company in force and/or as may be approved bythe Board from time to time.

The maximum cost to the Company per annum for the aggregate of the allowances listed above for the ManagingDirector shall be Rs. 21,00,000. In addition to the above, the Managing Diretor shall be eligible to encashment of leave,club facilities, group insurance cover, group hospitalisation cover, and/or any other allowances, perquisites and facilitiesas per the Rules of the Company.Explanation

i) For the Leave Travel Assistance and reimbursement of medical and hospitalisation expenses, 'family' means thespouse, dependent children 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 IncomeTax Rules.

4. Overall Remuneration :

The aggregate of salary and perquisites as specified above or paid additionally in accordance with the rules of theCompany in any financial year, which the Board in its absolute discretion pay to the Whole-time Director from time totime, shall not exceed the limits prescribed from time to time under Sections 198, 309 and other applicable provisions ofthe Companies Act, 1956 read with Schedule XIII 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, if already availed.

Notes :

I. Unless otherwise stipulated, for the purpose of the above, the perquisites shall be evaluated as per Income Tax Ruleswherever actual cost cannot be determined.

II. Notwithstanding the foregoing, where in any Financial Year during the currency of the tenure of the Managing Director,the Company has no profits or its profits are inadequate, the remuneration by way of salary, commission and perquisitesshall not exceed, the maximum limits prescribed in Schedule XIII to the Companies Act, 1956, except with the approvalof the Central Government.

III. The limits specified above are the maximum limits and the Compensation Committee / Board may in its absolute discretionpay to the Managing Director lower remuneration and revise the same from time to time within the maximum limitsstipulated above.

IV. In the event of any re-enactment or re-codification of the Companies Act, 1956 or the Income Tax Act, 1961 or amendmentsthereto, the foregoing 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 theamendments thereto or the Rules and notifications issued thereunder.

V. If at any time the Managing Director ceases to be in the employment of the Company for any cause whatsoever, he shallcease to be the Managing Director of the Company.

VI. The Managing Director is appointed by virtue of his employment in the Company and his appointment is subject to theprovisions of Section 283(1) of the Companies Act, 1956. The appointment is terminable by giving three months' noticein writing on either side.

Draft of the agreement to be entered into with Mr. N.B. Godrej is available for inspection at the Registered Office of the Companyfrom 10.00 A.M. to 12.00 Noon, Monday to Friday (except public holidays) upto the date of the Annual General Meeting.


7

The particulars given above constitute the abstract of the terms of the agreement which is required to be given to everymember under the provisions of Section 302 of the Companies Act, 1956.The Board of Directors of the Company recommend passing of the resolution as set out at Item no.8 of the Notice.Mr. N.B. Godrej, may be deemed to be interested in the resolution at Item no.8, Mr. A.B. Godrej, being relative of Mr. N.B.Godrej, may be deemed to be interested in the resolution at item no.8. None of the other Directors of the Company areconcerned or interested in the resolution.

By Order of the Board of DirectorsS.K. BHATT

Executive Vice-PresidentMumbai, May 25, 2007 (Corporate Services)Registered Office : & Company SecretaryPirojshanagar, Eastern Express Highway,Vikhroli (East), Mumbai 400 079.

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

Mr. A.B. Godrej (65): Mr. A.B. Godrej is B.S., M.S. from Massachusetts Institute of Technology, U.S.A. and is a Director since 1988.Directorship in other Companies:Chairman & Managing Director, Godrej Consumer Products Ltd.,Chairman: Godrej Commodities Ltd., Godrej Beverages & Foods Ltd., Godrej Hicare Ltd., Godrej Sara Lee Ltd., Swadeshi Detergents Ltd.,Vora Soaps Ltd., Godrej Properties Ltd., Godrej Upstream Ltd., Godrej SCA Hygiene Ltd., Godrej Investments Pvt. Ltd., Godrej ConsumerProducts (UK) Ltd., Keyline Brands Ltd., Rapidol (Pty) Ltd.Director: Godrej & Boyce Mfg. Co. Ltd., Godrej Agrovet Ltd., Nutrine Confectionery Company Ltd., Godrej International Ltd., Godrej GlobalMid East FZE,Member of the Executive Board: Indian School of Business.Committee position held in companies:Chairman : Audit Committee - Godrej Properties Ltd.Chairman : Audit Committee - Godrej Sara Lee Ltd.Chairman : Shareholders' Committee - Godrej Industries Ltd.Member : Shareholders' Committee- Godrej Consumer Products Ltd.Mr. S.A. Ahmadullah (67) : Mr. S.A. Ahmadullah is B. A. (Cantab.). He is a Director of the Company since 1995.Directorship in other Companies : Godrej Industries Ltd. Godrej Global Solutions Ltd., Lawkim Ltd., Globe Theatres Private Ltd., NadirCompany Private Ltd., Motorsports Association of India, Western India Automobile Association.Committee position held in companies:Chairman : Compensation Committee, Godrej Industries Ltd.Member : Audit Committee, Godrej Industries Ltd.Mr. V.N. Gogate (74): Mr. V.N. Gogate is a Chartered Accountant and a qualified Company Secretary by profession. Mr. Gogate washeading the finance function of the former Godrej Soaps Ltd. before retiring in 1994. He is a director of the Company since 1995.Directorship in other Companies :Committee position held in companies :Member : Compensation Committee - Godrej Industries Ltd.Member : Audit Committee - Godrej Industries Ltd.Mr. F.P. Sarkari (75): Mr. F.P. Sarkari is a Practising Chartered Accountant. He was appointed as a Director of the Company from Jan. 30, 2002.Directorship in other Companies :Director : Godrej & Boyce Mfg. Co. Ltd., Tropicana Enterprise Pvt. Ltd., Godrej Global Solutions Ltd.,Committee position held in companies :Chairman : Audit Committee - Godrej Industries Ltd., Godrej & Boyce Mfg. Co. Ltd;Chairman : Remuneration Committee - Godrej & Boyce Mfg. Co. Ltd.,Member : Remuneration Committee: Godrej Global Solutions Ltd.,Member : Audit Committee, Godrej Global Solutions Ltd.Mr. N.B. Godrej (55): Mr. N.B. Godrej has a B.S. degree in Chemical Engineering from the Massachusetts Institute of Technology and aM.S. in Chemical Engineering from Stanford University. He did his M.B.A. at Harvard Business School in 1976. He has a career spanning29 years in Godrej group as a Board Member/Managing Director of Godrej Soaps Ltd., Gujarat-Godrej Innovative Chemicals Ltd. andGodrej Industries Ltd. He has been very active in developing the chemicals business of the Company. He has demonstrated outstandingleadership skills in diverse business areas.Directorship in other companies:Chairman : Godrej Agrovet Ltd., Goldmohur Foods & Feeds Ltd., Godrej Global Solutions Ltd.Director : Godrej & Boyce Mfg Co. Ltd., Godrej Properties Ltd., Godrej Consumer Products Ltd., Mahindra & Mahindra Ltd., GodrejBeverages & Foods Ltd., Godrej Sara Lee Ltd., KarRox Technologies Ltd., Godrej Upstream Ltd., Godrej Gold Coin Aquafeed Ltd., NutrineConfectionery Co. Ltd., Avestha Gengraine Technologies Pvt. Ltd., CBay Systems (India) Pvt. Ltd., Godrej International Ltd., Godrej GlobalMid East FZE, Compass Connections Ltd., UK, CBay Systems Ltd., USA, ACI Godrej Agrovet Pvt. Ltd., Bangladesh, Keyline Brands Ltd.Committee position held in companies:Chairman : Audit Committee - Godrej Global Solutions Ltd. and Godrej Beverages & Foods Ltd.Chairman : Shareholders' Committee - Godrej Consumer Products Ltd.Member : Audit Committee - Godrej Sara Lee Ltd., Godrej Properties Ltd. and Mahindra & Mahindra Ltd.


8

To the Shareholders,

Your Directors have pleasure in submitting the Annual Report alongwith the Audited Accounts for the year ended March 31, 2007.

REVIEW OF OPERATIONS

Your Company's performance during the year as compared with thatduring the previous year is summarised below.

(Rs. lac)

Year ended March 31,

2007 2006

Sales of products and services 65477 74548Other Income 12814 5733

Total Income 78291 80281

Total Expenditure other than Interest andDepreciation 64078 69660

Profit before Interest, Depreciation and Tax 14213 10621

Depreciation 2426 2260

Profit before Interest and Tax 11787 8361

Interest and Financial Charges (net) 3831 2848

Profit before Tax 7956 5513

Provision for Current Tax 61 82

Profit after Current Tax 7895 5431

Provision for Deferred Tax 162 1417

Profit after Current and Deferred Taxation 7733 4014

Profit on sale of undertaking, extraordinary

item (Net of tax) 73 3098

Net Profit 7806 7112

Adjustments in respect of prior years – –

Surplus brought forward 23710 20082

Profit after Tax available for appropriation 31516 27194

Appropriation

Your Directors recommend appropriation as under:

Dividend on Equity Shares 2919 2432

Tax on Distributed Profits 496 341

Transfer to General Reserve 781 711

Surplus Carried Forward 27320 23710

Total Appropriation 31516 27194

The total income reduced by 2% from Rs. 80281 lac to Rs. 78291 lac,mainly on account of sale of Foods division. The Net Profit for the yearwas Rs. 7806 lac as compared to Rs. 7112 lac in the previous year, anincrease of 10%.

DIVIDEND

The Board of Directors of your Company recommends a final dividendof Re. 1/- per equity share of Re. 1/- each, aggregating to Rs. 2919 lac,as against final dividend of Rs. 5/- per equity share of Rs. 6/- eachaggregating to Rs. 2432 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

DIRECTORS’ REPORT

● Discussion on financial performance with respect to operationalperformance

● Segment - wise performance

● Human Resources and Industrial Relations

● Opportunities and Threats

● Internal Control Systems and their adequacy

● Risks and Concerns

● Outlook

The same is appended as Annexure A to the Directors' Report.

SUBSIDIARY AND ASSOCIATE COMPANIES

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

Godrej Agrovet Limited (GAVL) : The Company is in the business ofanimal feeds, agri inputs, poultry, oil palm and rural retailing. TheCompany recorded a revenue growth of 18% in FY 2006-07, the totalincome rising from Rs. 60556 lac to Rs. 71285 lac. The Profit after taxhowever declined from Rs. 683 lac to Rs. 275 lac.

The Company launched 8 new rural retail stores under the Aadhaarinitiative in the last quarter of the year taking the total store count to 39outlets and launched 3 new Nature's Basket stores in Mumbai (total 8such stores), which retail a large range of domestic as well as exoticfruits, vegetables and herbs. The Company also launched the Yummiezrange of ready to eat veg and non-veg snacks and extended this rangeto Delhi, Baroda, Nagpur and Chandigarh in the last quarter.

Avian Influenza and high prices of certain key raw materials impactedthe performance of the Animal Feed and Poultry businesses.

The Company entered into a MoU with IJM Plantations, Berhad a listedMalaysian Company to promote oil palm plantation in India and alsoentered into a JV (49:51) named Godrej Gold Coin Aqua Feed Limitedwith Gold Coin Group, Singapore for developing and marketing specialfeed for shrimp.

Goldmohur Foods and Feeds Limited (GFFL) : Operations of thiswholly owned subsidiary of GAVL were also impacted during the initialmonths of the Financial Year under review by the outbreak of AvianInfluenza. High prices of certain key raw materials like maize alsoimpacted the performance. The Profit after Tax came down from Rs.538 lac in the previous year to Rs. 320 lac in the year under review, inspite of the total income rising from Rs. 29588 lac to Rs. 32635 lac.

Golden Feed Products Limited (GFPL) : This wholly owned subsidiaryof GAVL transferred its Higashimaru brand shrimp feed marketing businessto Godrej Gold Coin Aquafeed Limited during the year. The Companyreported a loss of Rs. 15.57 lac against a loss of Rs.140 lac for 2005-06.

Godrej Properties Limited (GPL) : Recorded an increase in Total Incomeof 95% from Rs. 7046 lac in the previous year to Rs.13726 lac in thecurrent year. The Profit after Tax increased by 210% from Rs. 1339 lacin the previous year to Rs. 4145 lac. GPL has declared an interimdividend of 419% as compared to 96% in the previous year.

"Planet Godrej", the five 50-storeyed towers project located in closeproximity to Mahalaxmi race course and Willingdon Club in Mumbaihas won the prestigious Pinnacle Award 2006 awarded by Zee Businessin the category of 'Best Upcoming Real Estate Project' in India.

In addition to the two IT parks over 35 lac sq. ft. in Salt Lake area,Kolkata, the Company has started developing an IT park at Hyderabad


9

covering an area of approximately 60 lac sq. ft. It has also signed anagreement to develop a residential project on approx. 13 acres of landat Bangalore and 12 acres of land at Pune. The total area underdevelopment is over 2 crore sq. ft. at present.

The Company has formed three new Private Limited Companies viz.,Godrej Real Estate Private Limited, Godrej Developers Private Limitedand Godrej Sea View Properties Private Limited to develop the projectsat Hyderabad, Kolkata and Goa respectively.

Godrej International Limited (GINL) : A worldwide trader of vegetableoils has posted turnover of US$ 61573658 as compared to US$ 50724030in the previous year a rise of 21%. The net profit increased by 78% fromUS$ 382566 in the previous year to US$ 658135 in the current year.

Godrej Global MidEast FZE (GGME) : A 100% subsidiary of GINLearned Net Profit of AED 356453 as compared to AED 191167 in theprevious year registered a rise of 86%.

Godrej Hicare Limited (GHL) : The Pest Management Services Companyhas recorded an excellent growth of 42% in its revenue. Total Incomegrew from Rs. 2112 lac in the previous year to Rs 2996 lac in thecurrent year. The Company's Profit after Tax of Rs. 182 lac for the yearas compared to Rs.104 lac in the previous year shows an impressivegrowth of 75%.

The Company identified training as critical to its success and henceinvested substantial resources behind this activity. In its never endingeffort to achieve excellence in service delivery it invited eminent foreignconsultants to train employees at all levels.

The Company launched one of world's leading brands of Flying InsectKilling machines. This was in the last quarter of the current year and theCompany expects good revenue in coming years from new customeracquisitions and deepening relationship with current ones.

Godrej Global Solutions Ltd. (GGSL) : A back-office transactionProcessing Services Company earned a total income of Rs.1405.26 lacas against Rs. 966.30 lac in the previous year, an increase of 45%.GGSL grew its operations at both Chennai and Navi Mumbai facility.During the year under review, GGSL added a number of new clients,ramped up operations for existing clients, achieved higher operationalefficiencies there by achieving the revenue growth. During the year,GGSL facilities were awarded the most coveted Information SecurityCertification ISO 27001 and ISO 9001 certification. GGSL continued tofocus on business segments like Healthcare claims processing, medicaltranscription, medical billing and document management services.

Godrej Beverages & Foods Ltd. (GBFL) : GBFL markets juices and fruitdrinks under brands Xs and Jumpin; soyamilk based drink under the Sofitbrand; edible oil brands like Cooklite, packaged tea under the brandname Godrej Tea and confectionery under the Nutrine portfolio. TheNutrine's portfolio includes strong sub-brands like MahaLacto, MahaMahaLacto, Koko Naka, Milk Eclairs, Honey Fab, Aam Ras, Aasay,SuperStar and Gulkand.

W.e.f. May 08, 2006, GBFL ceased to be the subsidiary of the Company.GBFL acquired 100% stake in Nutrine Confectionery Company Ltd.(NCCL) on 01/07/06, a major player in the confectionery business inIndia. During the year, GBFL earned a Total Income of Rs. 17795 lac ascompared to Rs. 779 lac in the previous year recording a loss ofRs. 1879 lac compared to loss of Rs. 1717 lac in the previous yearwhereas NCCL earned a total income of Rs.10681 lac and profit ofRs. 321 lac for the period July 1, 2006 to March 31, 2007. Further,towards the end of the financial year, Hershey's, the largest NorthAmerican chocolate manufacturing company signed an agreement toacquire 51% stake in GBFL. The agreement was signed on April 2,2007, giving GBFL a strategic long term partner with global brands andinternational technology.

Godrej Sara Lee Limited (GSLL) : The company recorded a toplinegrowth of 17% with strong profit growth of 23% during the year 06-07.The Company paid a total interim dividend of 313%. This year, GoodKnight, the lead brand of the company underwent a major transformationin line with changing Indian consumers. Good Knight presented a newvibrant identity to consumers showcased in the form of packaging andadvertising. Further, in an endeavour to provide superior solutions forconsumers to protect their cherished happy moments everyday frommosquitoes, Good Knight launched a breakthrough innovation: GoodKnight Advanced Active + System. Good Knight continued to be votedthe most trusted Household care brand by Brand Equity - ET.

HIT brand continues to be the fast growing Household Insecticide brand.This was enabled by the launch of a new innovation: HIT Seek n Kill forcockroaches backed by outstanding brand communication.

The Company's foray into air care, Ambipur also fortified its pioneeringstatus by expanding franchise into the Home Perfume arena through thelaunch of Ambipur Aerosols.

Godrej Consumer Products Limited (GCPL) : GCPL continued to be afocused FMCG company. On a standalone basis, GCPL earned a TotalIncome of Rs. 76382 lac as compared to Rs. 66425 lac in the previousyear. GCPL's Net Profit increased to Rs.13216 lac as compared toRs.12120 lac in the previous year. GCPL declared dividends aggregatingto 375% in the current year as compared to 350% in the previous year.During this year, the Company commenced commercial production atits new facilities at Katha (HP) and Sikkim.

GCPL's 100% subsidiary Keyline Brands Limited (KBL) reported totalearnings of Rs.16748 lac and a PBT of Rs.1987 lac for 2006-07.

On September 01, 2006, GCPL completed the acquisition of the SouthAfrican business of Rapidol, U.K. as well as its subsidiary RapidolInternational. The Rapidol acquisition gives GCPL ownership of strongethnic hair colour brands like 'INECTO' and 'SOFLENE' in ten countries.It also gives GCPL an opportunity to enhance its global presence throughthe Modern Trade Network and the ownership of customer listings of theINECTO and SOFLENE brands.

During March 2007, GCPL entered into an agreement with SCA HygieneProducts AB, Sweden to form a 50:50 joint venture company known asGodrej SCA Hygiene Limited. Godrej SCA Hygiene Limited willmanufacture and market paper based absorbent hygiene products,especially sanitary napkins and baby diapers in India, Nepal and Bhutan.

On a consolidated basis, GCPL earned a total income of Rs. 95588 lacand Net Profit of Rs.14403 lac for the year ended March 31, 2007.

GCPL has been ranked 6th in the Best Employers Study conducted byHewitt Associates along with Economic Times. GCPL is the highest rankedFMCG Company in the survey.

GCPL's Malanpur factory was presented by JIPM solutions, Japan withthe Award for TPM Excellence, 1st Category for improvement inoperational efficiencies with TPM initiatives. The factory also won thePlatinum Award in India Manufacturing Excellence Awards (IMEA) byFrost & Sullivan in the Chemicals Category.

FINANCIAL POSITION

The financial position of your Company continues to be sound. The loanfunds as at the end of the year is at Rs. 46770 lac as compared to Rs.32714 lac as at the end of the previous year. Your Company continues tohold 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

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


10

Valia :

Existing Alpha Olefin Synthesis plant has been revamped to produceAlpha Olefin of higher chain lengths.

Additional fractionation column has been installed in existing Fatty AcidFractionation plant for the production of Lauric Acid as a feed stock forthe Fatty Alcohol Synthesis plant making production of Lauryl Alcoholmore commercial and economical.

Balancing equipment has been installed to help in the manufacture ofFatty Alcohol derivatives.

The EOU unit commissioned in March, 2006 has achieved its fulloperating capacity and contributed to the revenue growth from thisdivision this year.

The factory was awarded the "Energy Efficient Unit" award from CII.

Vikhroli :

Fatty Acid fractionation plant capacity was enhanced by establishing anew fractional distillation plant at Vikhroli factory and the plant wascommissioned. Successful trials were conducted for the manufacture of90% pure Erucic Acid . This plant has been built with heat recoverysystem to reduce the cost of conversion.

The Vikhroli factory has successfully implemented the SAP ERP systemfor all manufacturing operations.

The Vikhroli factory also embarked on Integration of ISO 9001-2000,ISO 14001 and OHSAS 18001 and was audited and certified by"BUREAU VERITAS" for Integrated Management System.

Vegoils Division :

Post sale of Foods Division to Godrej Beverages & Foods Ltd. under theSlump Sale Agreement w.e.f. close of working hours on March 31,2006, the Vegoils Division continued as contract processor of edible oilsand vanspati.

RESEARCH AND DEVELOPMENT

During the year under review, amongst the achievements of R&D ofyour Company, the notable ones include the development of premiumquality fatty acids from economy grade raw materials, a cost and energysaving process for high pressure hydrolysis of specific oils, manufactureof high value fractionated fatty acids for the polymer, oilfield and lubricantindustries, manufacture of specialty surfactants for oral care and personalcare products and value added derivatives of glycerine so as to entercertain niche markets. R&D efforts of your Company also focused onincreasing our intellectual property by filing new patent applications.

INFORMATION SYSTEMS

GIL continues to leverage IT and implemented SAP across the Chemicalbusiness in the year 2006-07. The implementation was done in anaggressive time frame of 5 months across all functions and locations. TheSAP implementation is expected to provide the much needed robustarchitecture required to sustain our e-CRM initiative and ensure fasterand accurate information is made available to key decision makers.

EMPLOYEE STOCK OPTION PLAN (ESOP)

The shareholders at their Extraordinary General Meeting held onDecember 1, 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. Consequent to the subdivision of each equity share ofRs. 6/- into 6 equity shares of Re.1/- each, the number of options thatcan be granted stands increased from 15,00,000 to 90,00,000 convertibleinto 90,00,000 equity shares of Re.1/- each. During the financial year2006-07 no employee was granted ESOP. However, on April 5, 2007

and April 11, 2007, 26,25,000 ESOPs have been granted to 46 employeesof the Company and/or its subsidiaries based on their leadershipresponsibility and potentials. Disclosure in compliance with clause 12of the Securities and Exchange Board of India (Employee Stock OptionScheme and Employee Stock Purchase Schee) Guidelines, 1999 aresetout in 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.

HUMAN RESOURCE DEVELOPMENT AND INDUSTRTIALRELATIONS

Your Company continues to take various initiatives for the developmentof its human resources. The Company maintained healthy and harmoniousindustrial relations at all levels.

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 factory at Vikhroli and in the staff quartersat Vikhroli. "Rain water harvesting" is a process by which rain water iscollected and channelised into tanks for domestic consumption. Duringthe year 845 Sq. Metre of roof area has been covered and total roofarea covered so far is 8500 Sq. Metre under the rain water harvestinginitiative and 22000 M3 of water has been collected at Vikhroli factoryand staff quarters. This process has resulted in saving water andconsequently, the costs, thereof.

To prevent pollution to environment, efforts are made to convert wastefrom the factories into an environment-friendly product and then disposeof 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 factory at Vikhroli. More areasof wasteland have been converted into garden using water from ETP.The process of bio composting has been enhanced to reduce frequencyof decomposition with use of enzyme.

The Vikhroli factory focused on waste elimination and also continuedenergy conservation measures.

Your Company has put up 5 windmills of 1.25 MW each at Dhule inMaharashtra. Windmills generate electricity from wind energy and areencouraged for augmenting the power generation in the country onaccount of their non-polluting nature. Wind power producing cleanenergy is a potential candidate for Clean Development Mechanism(CDM) benefits under the Kyoto Protocol of United Nations FrameworkConvention on Climate Change (UNFCCC).

Your Company's windmill project has been successfully registered forClean Development Mechanism (CDM) benefits under the Kyoto Protocolof United Nations Framework on Climate Change Convention (UNFCCC).Your Company is thereby entitled to Certified Emission Reductions (CERs),popularly known as carbon credits, on the basis of units of powergenerated through windmills. CERs are tradable with countries andcompanies that have not met their Greenhouse gases reduction targetsand thus have a ready market. CERs will continue to accrue on thepower generated from the windmill project for a period of 10 years fromthe date of registration.


11

FIXED DEPOSITS

Your Company has stopped accepting Fixed Deposits from the public.Public Deposits of an aggregate amount of Rs. 17.31 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 March 31, 2007, 99.50 % of the equity shares ofyour Company were held in demat form.

SUB-DIVISION OF EQUITY SHARES

In terms of the shareholders' approval in the previous Annual GeneralMeeting the equity share of the Company each equity share of Rs. 6/-has been subdivided into 6 Equity Shares of Re.1/- each w.e.f. September1, 2006.

DIRECTORS

In accordance with Article 127 of the Articles of Association of theCompany, Mr. A. B. Godrej, Mr. S. A. Ahmadullah, Mr. V. N. Gogate andMr. F. P. Sarkari 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 2006-07. 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 March 31, 2007. The membersof the Audit Committee are Mr. F.P. Sarkari (Chairman), Mr.V. N. Gogateand 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 applied

consistently, and such judgments 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.

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 theCompanies 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 organisations,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 25, 2007


12

ANNEXURE "A" FORMING PART OF THE DIRECTORS’ REPORT

MANAGEMENT DISCUSSION AND ANALYSIS

INDUSTRY STRUCTURE AND DEVELOPMENTS

The Indian economy maintained its growth momentum in F.Y. 2006-07thanks to industrial resurgence, growth in international trade, and theimproving physical infrastructure. However, rising inflation rate is anarea of concern. The advance estimate of growth in GDP of 9.2%released by CSO for FY 06-07 has surpassed expectations. There hasbeen a noticeable rise in the rate of investment in the economy. Theindex of industrial production (11.40%) and the steady and sustainedgrowth trend indicates an upswing in the economy in the manufacturingsector. Positive investor sentiment, evidenced by rise in stock marketindices will also induce investment inflow into the country and augerswell for the economy.

The overall performance of your Company has been satisfactory: Exceptthe Chemicals division, most of the businesses improved their performancecompared to the previous year. The division-wise performance and outlookhave been covered separately in this report.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONALPERFORMANCE

The highlights of overall performance are as follows:Rs. Lac

Particulars 2006-07 2005-06Sales 65477 74548Total Income 78291 80281Profit Before Taxation 7956 5513Profit After Current Taxation 7895 5431Profit After Current & Deferred Taxation 7733 4014Earnings per Equity Share (Rupees)* 2.64 1.37Profitability ratios are as follows:PBDIT/Total Income 18.15% 13.22%PBT/Total Income 10.16% 6.87%PAT/Total Income 9.97% 8.87%Return on Capital Employed 14.58% 11.76%Return on Net Worth 18.82% 12.31%Basic EPS (Rs.)* 2.64 1.37The Financial risk ratios are as follows:Debt/Equity 1.08 0.94Interest coverage 3.08 2.94Segment Performance (Rs. Lac)

2006-07 2005-061. Segment Revenue

Chemicals 57187 51777Vegoils 4991 21117Estate 2562 2283Finance & Investments 12146 3986Others 1405 1118Total 78291 80281

2. Segment Results (PBIT)Chemicals 643 4760Vegoils (417) (341)Estate 1757 1472Finance & Investments 12146 4587Others 478 (112)Total 14606 10366Less: Interest (Net) (3831) (2849)Less: Unallocated expenses (Net) (2819) (2004)Profit Before Tax 7956 5513

3. Segment Capital EmployedChemicals 35335 24448Vegoils 391 3277Estate 226 2331Finance & Investments 56258 40239Others 3015 3413Unallocated – (41)Total 95225 73667

*EPS of previous year has been restated considering the sub-division ofshares from Rs. 6 to Re. 1 per share for comparison.

CHEMICALS DIVISION

The Chemicals division operates in the oleo-chemical and surfactantindustries. The division has a blend of domestic and internationaloperations and continued its leadership position in the Indian market.The Export Oriented Unit (EOU) commissioned in March 2006 hasachieved its full operating capacity and contributed to the revenue fromthis division. The Chemicals business was recognized as "Exporter ofthe Year" in the chemicals category of Internationals Trade Awards 2006-07 awarded by CNBC - TV18 and DHL.

The products category-wise review follows:

Fatty Alcohol

Fatty alcohols accounted for 43% of sales revenue of the Chemicalsdivision. Revenue grew by 11% and volume by 27% over previousyear. Industry cyclicality, announcement of fresh capacities andtemporary supply-demand mismatch have affected the product pricingand margins adversely. In spite of the aggressive competition there hasbeen an increase in sales volume over previous year.

Through effective customer relationship management and supply chaininitiatives, the division could maintain its major share with some of theglobal companies in the international market. With the expansion ofcustomer base, your Company has reached around 60 countries in theworld through its exports.

With the focused manufacturing and marketing strategies it is expectedthat revenues from this segment will improve further in the coming year.

Fatty Acids

The fatty acids portfolio comprising stearic acid, oleic acid, as well as,specialty fatty acids accounted for about 37% of the turnover of thedivision. Continuous cost reduction and market development initiativeshave helped grow this category by about 5% in volume and 16% invalue terms. The division is taking necessary steps to strengthen its positionin this category and counter competition from imports, as well as, smallplayers. New fractionation column which is capable of producing premiumand specialty fatty acids was commissioned during the year and isexpected to achieve full capacity utilisation by the end of 2007-08.

Surfactants

Surfactants contributed 10 % to the turnover of Chemicals division. Salesdeclined by 28% in value but increased by 2% in volume. The declinein value was due to higher proportion of processing vis-a-vis outrightsales.

Your Company is the pioneer, as well as market leader in the productionand sales of Alpha Olefin Sulphonate (AOS) in India, a surfactant used inseveral well known shampoos and detergent brands in the country.Costs have increased due to a steep rise in Alpha Olefin prices, which isthe raw material for AOS, affecting margins and off-take.

To improve capacity utilisation, the division has started the production ofvalue added sulphonated products.

Glycerin

Glycerin accounted for 7.5% of the turnover of this division. Revenuesincreased by 16% over last year, volumes by over 30%. Its competitiveprice allowed the division to take advantage of the opportunity ofsubstituting other polyols with Glycerin.

Other initiatives

Your Company got Kosher Ceritification for oleo chemicals, which wouldallow catering to new market segments, thereby increasing the reachand revenue of the product category and also help in fetching premiumpricing.

Outlook

The outlook for the coming year 2007-08 is mixed at this point in time.


13

There are announcements of new production capacities of fatty alcohols,which might result in an oversupply situation in the market if all of thatcame through. The vegetable oil prices have also moved up in view ofincreasing demand and alternate uses.

Most of the new plants are set up to produce mid chain alcohols. GILhas a competitive advantage due to its unique strategy of offering higherchain alcohols in the market. Producers of petroleum based alcoholscontinue to face relatively high crude oil prices. It is expected thatvegetable oil based alcohols will therefore, substitute petro-alcohols insome applications.

Strong growth in demand for fast moving consumer goods (FMCG) andthe other industry segments that the division caters to, augers well forthe products of the division.

Initiatives to strengthen international distribution, improve logistics andsupply chain capabilities and customer relationship management, coupledwith tight cost control are expected to help grow revenue, as well as,profits of the business.

VEGOILS DIVISION

Post the sale of Foods Division to Godrej Beverages & Foods Ltd. underthe Slump Sale Agreement w.e.f. close of working hours on March 31,2006 the Foods Division was renamed as Vegoils Division. This Divisioncontinues as a contract processor of edible oils. The division recorded aTurnover of Rs. 4991 Lac as against previous year Rs.14228 Lac. Thefocus of the division is to increase third party processing and sales ofbulk oil to improve its profitability.

Estate Management

Mumbai continues to be perceived as a suitable location with good infrastructure and availability of skilled manpower by the BPO sector. Theincrease in real estate prices and the rentals has continued during thecurrent year resulting in increased demand for space in the suburbs.Your Company continues to effectively utilise the available space bygiving the unutilised space on leave & license basis to reputed corporatesfor their back office operations. The green environment and good infrastructure with close proximity to the CBD, airport and suburbs are majoradvantages, making Vikhroli a preferred location. The total income fromthis business for the year was about Rs. 2575 lac as compared to Rs.2280lac previous year an increase of about 13%.

Medical Diagnostics

The Medical Diagnostics Division is in the business of distribution ofDiagnostic equipment and Consumables to the Medical Community.

This division achieved a turnover of Rs. 840 Lac for the year, recording ade-growth of 12% in value terms over the previous year, mainly on accountof lower sales to government institutes compared to the previous year.

The focus of the division was on reduction in Net Working Capital andsale of the Hematology Cell Counter.

The Division extended its sales activities to SAARC countries particularlyNepal and Sri Lanka.

FINANCE AND INVESTMENTS

Dividend income for the year was significantly higher at Rs. 5781 lac(previous year Rs. 2275 lac) and profit on sale of investment was Rs.4383 lac (previous year Rs. 2120 lac).

During the year, your Company invested Rs. 6240 lac in GodrejBeverages & Foods Limited in its Compulsorily Convertible PreferenceShares issue and was also allotted equity shares towards settlement ofpart consideration of Rs. 3000 lac for sale of Foods business in the lastfinancial year.

Your Company invested Rs. 3000 lac in the rights issue of Godrej Agrovet

Limited to support its growth plans, taking its stake to 70.3% from 57.8%.Your Company also acquired a stake of 40.4% in Godrej UpstreamLimited for Rs. 900 lac and a stake of 8.7% in a drug discovery researchcompany Verseon LLC for Rs. 1142 lac.

HUMAN RESOURCES, INDUSTRIAL RELATIONS

Industrial Relations at all locations were cordial. The total number ofpersons employed in your Company as on March 31, 2007 was 1528.

INTERNAL CONTROL SYSTEMS & THEIR ADEQUAECY

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 transaction are authorised,recorded and reported correctly.

Your Company's Corporate Audit & Assurance Dept which is ISO 9001:2000 certified, issues well documented operating procedures andauthorities with adequate built-in controls at the beginning of any activityand any time there is any major change.

The internal control is supplemented by an extensive programme ofinternal, external audits and periodic review by the management.

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.

During the year the Corporate Audit & Assurance Dept was involved infacilitating the SAP implementation so as to ensure that the existingprocesses are adequately captured with in-built control mechanisms.

INFORMATION SECURITY

Your Company recognised that Information being an important assetrequires adequate protection.

Therefore "Information Security" has been established as a separate focusedCorporate function and attached to Corporate Audit & Assurance Dept.

As a part of this initiative, your Company has, with the help of a reputedconsultant, formally documented Infosec Policies & Procedures.

Chief Information Security Manager has been appointed and entrustedwith the implementation of the above policies with a view to safeguardinformation assets by all concerned.

COMPANY WIDE INITIATIVES

Your Company has migrated from Mfg/Pro to SAP, a fully integrated andcentralised ERP system which will help the Company in achieving betterplanning and control in terms of purchase, production, product mix, etc.It has robust a management information system, which will helpmanagement in taking faster and informed decisions.

ICRA Limited (ICRA), one of the leading and reputed credit ratingcompany, has during the year assigned your Company an A1+ rating forits commercial paper programme. This rating is the highest-credit-qualityrating assigned by ICRA to short term debt instruments. This ratingrepresents the lowest credit risk in the short term and reflects yourCompany's relatively stronger credit quality.

OPPORTUNITIES AND THREATS

Increased global demand fuelled by growth in end-user industries coupledwith your Company's standing for consistent quality and product deliverycustomised 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 / products


14

which are more than 10 years old.

The Vegoils division will continue to act as a third party processor inview of good facilities and proximity to the large Mumbai market. Threatcould be increased cost of processing in view of rising fuel oil costs andlarge unutilized refining capacities in the country resulting inuncompetitive pricing.

Estate Management business has a potential to increase revenue bygiving space on leave and license by optimum re-sizing of the existingoperational areas. The factors that can aid further revenue growth includeassured power supply, upcoming infrastructural facilities like metro railand better connectivity that reduces travelling time.

RISKS AND CONCERNS

Your Company had undertaken a comprehensive review of its riskmanagement process last year and has put a risk management frameworkin place. The review involved understanding the existing riskmanagement initiatives, zero-based identification and assessment of risksin the various businesses as also the relative control measures and arrivingat the desired counter measures keeping in mind the risk appetite of theorganization. The Risk Committee has periodically reviewed the risks inthe various businesses and recommended appropriate risk mitigatingactions.

The commodity based businesses are likely to be affected by vagaries ofthe weather, demand for edible oil, oilseed production, etc. The increasein bio-diesel manufacturing capacity is expected to impact vegetable

oil prices. The business is exposed to commodity price risks relating toraw materials which account for the largest portion of the costs of boththe Chemicals and Vegoils businesses. The Chemicals business growthwill also depend on the growth of end user industries like polymer,detergent, cosmetics and personal care.

As a significant employer and chemicals 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 would alsoaffect the businesses of your Company. Legislative changes resulting in achange in the taxes, duties and levies, whether local or central, also impactbusiness performance and relative competitiveness of the businesses.

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.


15

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 Nil

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 Nil

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 2100000 Equity Shares of nominal value of Re. 1/- each

j. Employee wise details of options granted to:

i) senior managerial personnel

ii) any other employee who receives a grant in any one year of option Nil

amounting to 5% or more of option granted during that year.

iii) identified employees who were granted option, during any one year,

equal to or exceeding 1% of the issued capital (excluding outstanding

warrants 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 compensation

intrinsic value of the stock options, the difference between the employee cost using the intrinsic value of stock options. Had the fair

compensation cost so computed and the employee compensation cost that shall value method been used, in respect of stock options granted

have been recognized if it had used the fair value of the options, shall be disclosed. the employee compensation cost would have been higher

The impact of this difference on profits and on EPS of the company shall by Rs. 2.04 crore, Profit after tax lower by Rs. 2.04 crore

also be disclosed. and basic EPS would have been lower by Rs. 0.07

m. Weighted-average exercise prices and weighted-average fair values of Exercise price Rs. 65.39 plus interest as mentioned in

options shall be disclosed separately for options whose exercise price either pricing formula

equals or exceeds or is less than the market price of the stock. Fair Value Rs. 29.33

n. A description of the method and significant assumptions used during the year The fair value of the options granted on 14th Feb 2006 has

to estimate the fair values of options, including the following weighted-average been calculated using Black–Scholes Options pricing

information: formula and the significant assumptions made in this regardare as follows:

i) risk-free interest rate 7.11%

ii) expected life 4 years

iii) expected volatility 65%

iv) expected dividends 1.53%

Re. 1 per share

v) the price of the underlying share in market at the time of option grant Rs. 65.39 (Rs. 392.35 for Rs. 6/- face value)

ANNEXURE "B" FORMING PART OF THE DIRECTORS’ REPORT


16

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

ANNEXURE "C" FORMING PART OF THE DIRECTORS’ REPORT

31 Godrej Upstream Ltd.32 Godrej Waterside Properties Pvt. Ltd.33 Golden Feed Products Ltd.34 Goldmohur Foods & Feeds Ltd.35 J T Dragon Pte Ltd.36 Krithika Agro Farm Chemicals & Engineering Industries Pvt. Ltd.37 Lawkim Ltd.38 Mercury Mfg. Co. Ltd.39 Prashant Metal Forming Industries Pvt. Ltd.40 Swadeshi Detergents Ltd.41 Vora Soaps Ltd.42 Mr. A B Godrej43 Mrs. Parmeshwar A Godrej44 Ms. Nisa A Godrej45 Mr. Pirojsha A Godrej46 Mrs. Tanya A Dubash47 Mr. J N Godrej48 Mrs. Pheroza J Godrej49 Ms. Raika J Godrej50 Mr. Navroze J Godrej51 Mr. Nadir B Godrej52 Mrs. Rati N Godrej53 Mst. Burjis N Godrej54 Mst. Sohrab N Godrej55 Mst. Hormuzd N Godrej56 Mr. Vijay M Crishna57 Mrs. Smita V Crishna58 Ms. Freyan V Crishna59 Ms. Nyrika V Crishna60 Mr. Rishad K Naoroji

1 Aadhaar Retailing Ltd.2 Bahar Agrochem and Feeds Pvt. Ltd.3 Cartini India Ltd.4 Ensemble Holdings and Finance Ltd.5 Girikandra Holiday Homes and Resorts Ltd.6 Godrej (Malaysia) Sdn Bhd7 Godrej (Singapore) Pte Ltd.8 Godrej (Vietnam) Co. Ltd.9 Godrej Agrovet Ltd.10 Godrej & Boyce Mfg. Company Ltd.11 Godrej Aquafeed Ltd.12 Godrej Beverages & Foods Ltd.13 Godrej Commodities Ltd.14 Godrej Consumer Products Ltd.15 Godrej Developers Pvt. Ltd.16 Godrej Efacec Automation & Robotics Ltd.17 Godrej Global Mid East FZE18 Godrej Global Solutions (Cyprus) Ltd.19 Godrej Global Solutions Ltd.20 Godrej Global Solutions, Inc.21 Godrej Hicare Ltd.22 Godrej Holdings Pvt. Ltd.23 Godrej Infotech Ltd.24 Godrej International Ltd.25 Godrej Investments Pvt. Ltd.26 Godrej Oil Palm Ltd.27 Godrej Properties Ltd.28 Godrej Real Estate Pvt. Ltd.29 Godrej Realty Private Ltd.30 Godrej Sea View Properties Pvt. Ltd.

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

OF DIRECTORS) RULES, 1988 IN RESPECT OF CONSERVATION OF

ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE

EARNINGS & OUTGO

A. Conservation of Energy

I. (A) Energy Conservation measures undertaken:

� Installation of Variable frequency drives for process pumps inplants.

� Sizing of pumps and motors in utilities to conserve energy andimprove efficiency of system.

� Installation of CFL/PL lamps.

� Installation of chilled water system to increase through put of AOS.

� Upgradation of instrumentation in FSP and FADP to improve throughput and quality of product.

ANNEXURE "D" FORMING PART OF THE DIRECTORS’ REPORT� Conversion of Medium Pressure Boilers to run on Natural Gas as

feed instead of Liquid fuel.

� Installation of Steam Generators to utilize heat of evaporation intwo alcohol fractionation columns in Export Oriented Unit at Valia.

� Implementation of Condensate recovery system in tank farm

� Installation of two energy efficient motors in high speed machinesrun on variable frequency drives.

� Installation of 6 variable frequency drives in AOS/SLS dryer plantand its tanks.

� Installations of suitably designed fatty acid pump to save on powerconsumed by two smaller pumps.

(B) Proposed energy conservation measures

� Regular monitoring of stacks to improve boiler efficiency.

� Installation of energy efficient metal halide fittings in street lighting.

� Installation of energy efficient motors in plants.


17

� Installation of power factor controller to improve power factor.

� Installation of 1 MW - two gas based generating sets with Co-Genmode to enhance overall thermal efficiency.

� Installation of more efficient alcohol fractionation column in EOUto save on energy consumption on production.

II. Impact of measures on reduction of energy consumption and

consequent 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

i) Purchased

Units (kWh in lac) 350.92 198.78

Total Amount (Rs. in lac) 1928.02 1037.53

Rate per Unit (Rs.) 5.49 5.22

ii) Own generated through D.G. Sets

Units (kWh in lac) 1.73 19.83

Cost (Rs. in lac) 32.71 131.65

Rate per unit (Rs.) 18.91 6.64

iii) Own generated through Steam

Turbine Generator

Co-generation

Units (KWh in lac) 314.06 277.91

Cost (Rs. in lac) 1241.21 988.29

Rate per unit (Rs.) 3.95 3.56

Fuel Oil (LSHS, FO and LDO)

Total Quantity (KL) 3191.44 4510.42


Rate per unit (Rs. per litre) 15.71 17.80

Natural Gas

Total Quantity (SM3 lac) 175.30 144.30


Rate per unit (Rs. per SM3) 9.23 8.28

Pitches

Total Quantity (MT) 677.00 650.09

Total Cost (Rs. in lac) 85.35 44.67

Rate per unit (Rs. per MT) 12607.41 6870.67

b) Consumption per unit of production

Natural Gas Electricity Furnace Oil Pitches

(NM3/MT) (kWh/MT) (Litre/MT)

2006-07 2005-06 2006-07 2005-06 2006-07 2005-06 2006-07 2005-06

Fatty Acid 58.73 77.78 105.58 93.41 13.18 10.04 9.34 8.79

Fatty Alcohol 79.21 94.77 530.34 408.29 2.78 6.86 – –

Alpha Olefin

Sulphonate 24.96 49.33 116.40 104.61 3.05 8.99 1.03 1.14

Fruit Juice/ Pulp – – – 149.92 – 36.20 – –

Oils/Vanaspati – – 182.74 182.49 56.08 77.52 – 6.64

Glycerin 257.57 458.40 714.33 588.72 58.14 53.01 24.46 25.85

B. Technology Absorption, Adaptation and Innovation

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

During the year under review, Research and Development effortsin the following areas strengthened the Company's operationsthrough technology absorption, adaptation and innovation:

a. Oils and Fatty Acidsb. Fatty Alcoholsc. Surfactantsd. Glycerine. Product Applicationsf. Fruit Juices and Soy Milk

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

a. Premium quality fatty acids from economy grade rawmaterials.

b. A cost and energy saving process for high pressure hydrolysisof specific oils.

c. Manufacture of high value pure cut fatty acids, specificallyfor the polymer, oilfield and lubricant industries.

d. Manufacture of specialty surfactants for oral care andpersonal care products.

e. Value added derivatives of glycerin so as to enter certain nichemarkets.

f. New mixed active surfactant blends for the detergentindustry.

g. Four new process patent applications filed.3. Future Plan of Action -

a. Expand Odour Profiling capabilities by installing our ownin-house analytical facilities for the same.

b. Working on manufacture of premium quality fatty acids andtheir derivatives from Jatropha Oil.

c. Developing processes to utilize glycerin derived from JatrophaOil.

d. Specialty chemicals used in the personal care formulations- foam boosters, conditioning agents and co-surfactants.

No technology has been imported during the year.4. Expenditure on R&D This Year Previous Year

Rs. lac Rs. lac(a) Capital Nil Nil(b) Recurring 139.38 139.39(c) Total 139.38 139.39(d) Total R & D expenditure as a

percentage of total sales turnover 0.21% 0.19%C. Foreign Exchange earnings and outgo:

The Chemicals Division's exports were Rs. 22043 lac in the currentyear (including deemed exports of Rs. 3012 lac) as compared toRs. 17561 lac in the previous year (including deemed exports Rs.2889 lac). The Company continues to export refined glycerin, fattyalcohol and 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 Sri Lanka.

This Year Previous YearRs. lac Rs. lac

Foreign exchange used 28239 25714

Foreign exchange earned 22297 15150


18

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.

1. THE COMPANY'S PHILOSOPHY

The Company is a part of the Godrej Group which has establisheda reputation for honesty and integrity. The Company's philosophy ofcorporate governance is to achieve business excellence byenhancing the long term welfare of all its stakeholders. The Companybelieve that corporate governance is much more than Rules, Boards,Committees. It is about creating outperforming organisations, i.e.organizations that consistently succeed in the marketplace againstcompetition and thereby enhance the value of all its stakeholders.

THE GOVERNANCE STRUCTURE

2. BOARD OF DIRECTORS

a) Board Structure

The Board of Directors of the Company comprises thirteenDirectors, which include one Managing Director and fourWhole-time Executive Directors. The remaining eight are Non-Executive Directors, with five of them being IndependentDirectors. The details are given in Table 1.

b) Board meetings held & Directors' attendance record

The Board meets at least once in a quarter to consider amongstother businesses, quarterly performance of the Company andfinancial results. To enable the Board to discharge itsresponsibilities effectively and take informed decisions,necessary information is made available to the Board. Duringthe year four Board meetings were held on May 26, 2006, July24, 2006, October 30, 2006, and January 30, 2007. The detailsare given in Table 1.

Table 1: Details about GIL’s Board of Directors & meetingsattended by the Directors during the yearName of Category Board Board Whether Director- NumberDirector Whether meet- meetings attended ships of Chair-

Promoter ings attended last AGM held in manship/or not 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

PromoterA.B. Godrej Chairman – Non-Executive 4 4 Yes 14(3) 3 1J.N. Godrej Promoter 4 3 Yes 15 (5) 2 4

Non-ExecutiveN.B. Godrej Promoter 4 3 Yes 14(3) 4 3

Managing DirectorS.A. Ahmadullah Non-Executive -

Independent 4 4 Yes 3(1) 1 1V.M. Crishna Promoter

Non-Executive 4 1 Yes 8(2) – 1K.K. Dastur Non-Executive -

Independent 4 4 Yes 5 3 –V.N. Gogate Non-Executive -

Independent 4 4 Yes 1(1) – 1K.N. Petigara Non-Executive -

Independent 4 4 Yes 6(1) – 2F.P. Sarkari Non-Executive -

Independent 4 4 Yes 3(1) 3 2V.F. Banaji Whole-time 4 4 Yes 1(1) 1 1T.A. Dubash Promoter

Whole-time 4 3 Yes 5(1) – 1M. Eipe Whole-time 4 4 Yes 3(1) – 1M.P. Pusalkar Whole-time 4 4 Yes 2(2) 1 3

Notes :

1. Figures in ( ) denote listed companies.None of the Directors is a member of more than 10 Board-levelcommittees or a Chairman of more than five such committees asstipulated under Clause 49 of the listing agreement.

REPORT ON CORPORATE GOVERNANCE c) Information supplied to the Board

Among others, this includes:� Annual operating plans and budgets, capital budgets, and any

updates thereon,� 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, if material,

� Non-compliance of any regulatory, statutory nature or listingrequirements as well as shareholder services such as non-payment of dividend and delays in share transfer.

The Board of GIL is presented with all information under the aboveheads, whenever applicable. These are submitted either as part of theagenda papers well in advance of the Board meetings or are tabled inthe course of the Board meetings.

d) Directors with materially significant related party transactions,pecuniary or business relationship with the CompanyExcept 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-ExecutiveDirectorsThe 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 Directorsfor the year ended March 31, 2007Name of Relationship Sitting Commission Salary Perquisites Provident TotalDirector with Directors fees on profits Fund

A. B. Godrej Brother of 170000 Nil Nil Nil Nil 170000N.B.GodrejFather of T.A.Dubash

J. N. Godrej None Nil Nil Nil Nil Nil NilN. B. Godrej Brother of A.B.Godrej Nil Nil 7350000 640000 576000 8566000S. A. Ahmadullah None 105000 Nil Nil Nil Nil 105000V. M. Crishna None 20000 Nil Nil Nil Nil 20000K. K. Dastur None 80000 Nil Nil Nil Nil 80000V . N. Gogate None 105000 Nil Nil Nil Nil 105000K. N. Petigara None 85000 Nil Nil Nil Nil 85000F. P. Sarkari None 100000 Nil Nil Nil Nil 100000V. F. Banaji None Nil Nil 6096270 448752 410400 6955422T. A. Dubash Daughter of A.B.Godrej Nil Nil 4893000 159657 367200 5419857M. Eipe None Nil Nil 5582585 399620 417600 6399805M. P. Pusalkar None Nil Nil 4223232 252592 247680 4723504


19

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 performance linked variableremuneration of Rs.150000/-, Rs. 700000/-, Rs.150000/-, Rs.110000and Rs.360000/- respectively for the year ended March 31, 2007payable in 2007-08.

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 Directorsand dividend paid

Name of Shares held as on Dividend paid duringNon-Executive Director March 31, 2007 the year (Rupees)

A.B. Godrej* 936226 NilJ.N. Godrej* 3221472 NilF.P. Sarkari 19590 16325S.A. Ahmadullah 6000 5000V.N. Gogate 1878 1565K.K. Dastur 2106 1755

* Shares held as second holder.

Committees of the Board

3. 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 i.e. onMay 26, 2006, July 24, 2006, October 30, 2006 and January 30, 2007.Table 4 gives 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/removal of external auditor, fixationof audit fee and approval for payment for any other services.

� Reviewing with the management the annual financial statements beforesubmission to the board for approval, with particular reference to

� Matters required to be included in the Director's ResponsibilityStatement to be included in the Board's report in terms of clause(2AA) of Section 217 of the Companies Act, 1956.

� Changes, if any, in accounting policies and practices and reasonsfor the same.

� Major accounting entries involving estimates based on the exerciseof judgment by management.

� Significant adjustments made in the financial statements arisingout of audit findings.

� Compliance with listing and other legal requirements relating tofinancial statements.

� Disclosure of any related party transactions.� Any Qualifications in the draft audit report.

� Reviewing with the management, the quarterly financial statementsbefore submission to the board for approval.

� Reviewing, with the management, performance of statutory andinternal auditors, and adequacy of the internal control systems.

� Reviewing the adequacy of internal audit function, if any, includingthe structure of the internal audit department, staffing and seniority ofthe official heading the department, reporting structure coverage andfrequency of internal audit.

� Discussion with internal auditors any significant findings and followup thereon.

� 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.

� 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.

4. COMPENSATION COMMITTEE

Setting up of a Compensation Committee for determining a company'spolicy on remuneration packages for Executive Directors constitutesa non-mandatory provision of Clause 49. GIL set up its RemunerationCommittee on February 22, 2002 to review the human resourcespolicies and practices of the Company and in particular, policiesregarding remuneration of Whole-time Directors. The committeediscusses human resources policies such as compensation andperformance of management. The Remuneration Committee wasrenamed as Compensation Committee by the Board of Directors at itsmeeting 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 endedMarch 31, 2007, the committee met on May 26, 2006. The attendancedetails 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 1 1

Mr. V.N. Gogate 1 1

Mr. K.N. Petigara 1 1

Mr. N.B. Godrej 1 –

Mr. S.K. Mr. S.K. Bhatt, Executive Vice-President (Corporate Services)& Company Secretary 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 andofficers of the Company.

5. SHAREHOLDERS COMMITTEEAmong other functions, this committee looks into redressal ofshareholder complaints regarding transfer of shares, non-receipt ofbalance sheet and non-receipt of declared dividends, as required inclause 49 of the Listing Agreement. The committee consists of thefollowing members: Mr. A.B. Godrej (Chairman), Mr. V.F. Banaji, Ms.T.A. Dubash, Mr. M. Eipe and Mr. M.P. Pusalkar. During the year,11meetings of the Committee were held.Mr. S.K. Bhatt, Executive Vice-President (Corporate Services) &Company Secretary acts as secretary to the Committee.


20

Name and designation of Compliance Officer

Mr. S. K. Bhatt, Executive Vice-President (Corporate Services) & CompanySecretary.

Number of complaints for the year endedMarch 31, 2007

Complaints outstanding as on April 1, 2006 Nil

Complaints received during the year ended March 31, 2007 56

Complaints resolved during the year ended March 31, 2007 56

Complaints outstanding as on March 31, 2007 Nil

There are no pending share transfers as on March 31, 2007.

6. MANAGEMENT

a) Management discussion and analysis

This annual report has a detailed chapter on managementdiscussion and 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,nor do they vote on such matters.

7. DISCLOSURE

i) Materially significant related party transactions that may havepotential conflict of interests of Company at large

During the year 2006-07, there were no materially significantrelated party transactions, i.e. transactions of the Company ofmaterial nature, with its promoters, the Directors or themanagement, their subsidiaries or relatives, etc. that may havepotential conflict with the interests of the Company at large.

ii) Whistle Blower Policy

With a view to establish a mechanism for protecting the employeesreporting unethical behaviour, frauds, violation of Company'sCode of Conduct, the Board of Directors has adopted a WhistleBlower Policy. During the year 2006-07, no personnel has beendenied access to the Audit Committee.

iii) Policy to Prevent Sexual Harassment at the Workplace

The Company is committed to creating and maintaining anatmosphere in which employees can work together, without fearof sexual harassment, exploitation or intimidation. Every employeeis made aware that the Company is strongly opposed to sexualharassment and that such behaviour is prohibited both by lawand by the Godrej group. To redress complaints of sexualharassment, a Complaints Committee has been formed which isheaded by Ms. T.A. Dubash, Executive Director & President(Marketing). Members of the Committee include, among others,a representative from an NGO familiar with the issue of sexualharassment.

iv) Details of compliance with mandatory requirement

Particulars Clause of ComplianceListing Status

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) Yes

II. 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) Yes

Particulars Clause of ComplianceListing Status

Agreement Yes / No

III. 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) Yes

V. CEO/CFO Certification 49 (V) YesVI. Report on Corporate Governance 49 (VI) YesVII. Compliance 49 (VII) Yes

v) Details of Non-compliance

There has not been any non-compliance by the Company and nopenalties or strictures were imposed on the Company by the StockExchanges or SEBI or any statutory authority, on any matter related tocapital markets.

vi) Declaration by the 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 ended March31, 2007, is annexed to the Corporate Governance Report.

8. GENERAL BODY MEETINGS

i) Details of last three AGMs

Year Venue Date Time

2003-04 Y.B. Chavan Centre, July 26, 2004 4.00 P.M.Nariman Point,Mumbai 400 021.

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

2005-06 -do- July 24, 2006 4.30 P.M.

ii) Details of Special Resolutions Passed in previous three AnnualGeneral Meetings.

Date of Number of Details of Special Resolution PassedAGM Special

ResolutionPassed

July 26,2004 7 1. Approval for the reappointment and remuneration of

Mr. N.B. Godrej as a Managing Director of theCompany.

2. Approval for the appointment of Mr. Pirojsha A. Godrejas a employee of the Company.

3. Authorised to further invest upto Rs. Fifty Crore onlyin addition to amount already invested, in securitiesof Godrej Consumer Products Ltd.

4. Authorised to further invest upto Rs. Two Crore only inaddition to amount already invested, in securities ofGodrej Agrovet Ltd.

5. Authorised to further invest upto Rs. Two Crore only inaddition to amount already invested, in securities ofGodrej Properties & Investments Ltd.

6. Authorised to invest upto Rs. Four Core and Fifty Laconly in securities of Avestha Gengraine TechnologiesPvt. Ltd.

7. Authorised to invest upto US$ 300,000 only in securitiesof Ingenero (Mauritius) Ltd.

July 26,2005 3. 1. Authorised to further invest upto Rs. Twenty crore only

in addition to amount already invested, in securitiesof Godrej Consumer Products Ltd.

2. Authorised to further invest upto Rs. Five Crore only inaddition to amount already invested, in securities ofAvestha Gengraine Technologies Pvt. Ltd.

3. Authorised to further invest upto Rs. Twenty Crore onlyin addition to amount already invested, in securitiesof CBay Systems Limited.


21

July 24,2006 6 1. Approval for the reappointment and remuneration

payable to Ms. T.A. Dubash as Whole-time Director ofthe Company.

2. Approval for the reappointment and remunerationpayable to Mr. V. F. Banaji as Whole-time Director ofthe Company.

3. Approval for the reappointment and remunerationpayable to Mr. M. Eipe as Whole-time Director of theCompany.

4. Approval for the remuneration payable to Mr. M.P.Pusalkar as Whole-time Director of the Company.

5. Approval for revision in remuneration payable to Mr.Pirojsha A. Godrej.

6. Amendment to the Articles Association of the Companypursuant to increase in Authorised Share Capital.

7. Approval of sub-division of equity shares of theCompany.

iii) Details of Special Resolutions Passed in the Extraordinary General Meetingsheld in the last three years

Date of Number of Details of Special Resolution PassedEGM Special

ResolutionPassed

December 1,2005 5 1. Approval given for extending Employees Stock Option

to Eligible Employees of the Company2. Approval given for extending Employees Stock Option

to Eligible Employees of the Subsidiary Companies3. Approval given for investment in Godrej Consumer

Products Ltd. u/s 372A of the Companies Act, 1956.4. Approval given for investment in Boston Analytics

LLC u/s 372A of the Companies Act, 1956.5. Approval given for investment in Verseon LLC, USA

u/s 372A of the Companies Act, 1956.

iv) Postal Ballot

During the year, pursuant to the provisions of Section 192A of the Companies Act, 1956 read with the Companies (Passing of the Resolution by PostalBallot) Rules 2001, certain resolutions were passed by shareholders by postal ballot. The Notices of postal ballot were mailed to all shareholdersalongwith postage prepaid envelopes. Mr. Bharat Shemlani, Chartered Accountant, had been appointed as scrutinizer for the postal ballots, whosubmitted his report to the Chairman, Mr. A.B. Godrej. The details of the postal ballots are given below :-

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

results polled favour against votes

% % %

1. March 29, 2007 Special To invest in securities of and/or place inter - 1473 99.97 0.01 0.01corporate deposits with and/or invest indebentures of and/or give guarantee(s) to and/or make loans or any other form of debt toand/or investment in Hyca Technologies Pvt.Ltd. under Section 372A of the Companies Act,1956, upto a sum of Rs. 2 crore.

2. March 29,2007 Special To invest in securities of and / or place 1473 99.97 0.01 0.02intercorporate deposits with and/or invest indebentures of and/or give guarantee(s) to and/or make loans or any other form of debt toand/or investment in CBay Infotech VenturesPvt. Ltd. under Section 372A of the CompaniesAct, 1956, upto a sum of Rs. 2 crore.

3. October 5, 2006 Special To invest in securities of and/or place inter 1439 99.96 0.01 0.03corporate deposits with and/or invest indebentures of and/or give guarantee(s) to and/or make loans or any other form of debt toand/or investment in Godrej Agrovet Ltd., aSubsidiary of the Company, under Section 372Aof the Companies Act, 1956, in addition to theexisting sanctioned limits, a sum of Rs. 30crore.

4 October 5, 2006 Special To revise the terms of appointment and 1439 99.94 0.02 0.04 remuneration of Ms. Nisa A. Godrej

v) Procedure adopted for Postal Ballot

(a) The Board at its meeting approves the items to be passed throughpostal ballot and authorizes one of the functional Directors andthe Company Secretary to be responsible for the entire processof postal ballot.

(b) A professional such as a Chartered Accountant/CompanySecretary, who is not in employment of the Company, is appointedas the scrutinizer for the poll process.

(c) Notice of postal ballot alongwith the ballot papers are sent to theshareholders along with a self-addressed envelope addressed tothe Scrutinizer.

(d) An advertisement is given in a National news paper about thedispatch of ballot papers and notice of postal ballot.

(e) The duly completed postal ballot papers are received by thescrutinizer.

(f) Scrutinizer gives his report to the Chairman.

(g) The Chairman announces the results of the postal ballot in ameeting convened for the same.

(h) Results are intimated to the Stock Exchanges and are put up onthe Notice Board of the Company as well as on the Company'sWebsite.


22

Auditors’ Certificate on Corporate GovernanceTo 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, 2007, 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. Mehta

PartnerMumbai, May 25, 2007 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, 2007.

N.B. Godrej

Mumbai, May 25, 2007 Managing Director

9. SHAREHOLDERS AND MEANS OF COMMUNICATION

a) Disclosures regarding appointment or re-appointment ofDirectors

According to the Articles of Association of GIL, at every annualgeneral meeting of the Company one-third of the Directors areliable to retire by rotation. Thus, Mr. A.B. Godrej, Mr. S.A.Ahmadullah, Mr. V.N. Gogate and Mr. F.P. Sarkari shall retire atthis Annual General Meeting of the Company and being eligible,offer themselves for re-election.

Information about the Directors who are being appointed/ re-appointed is 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 onthe web-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

like Economic Times, Business Standard, Business Line, etc. TheCompany has also posted information relating to its financialresults and shareholding pattern on electronic data informationfiling and retrieval system (EDIFAR) at www.sebiedifar.nic.in.

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.


23

i) Annual General Meeting

Date : July 27, 2007Time : 4.30 P.M.Venue : Y.B. Chavan Centre, Gen. Jagannathrao Bhonsle Marg,

Nariman Point, Mumbai- 400 021.

ii) Financial CalendarFinancial year: April 1 to March 31For the year ended March 31, 2007, results were announced on:● July 24, 2006 : First quarter

● October 30, 2006 : Half year

● January 30, 2007 : Third quarter

● May 25, 2007 : Fourth quarter and annual

iii) Record Date/Book ClosureA dividend of Re. 1/- per share of Re. 1/- each has beenrecommended by the Board of Directors of the Company. For paymentof dividend, the book closure is from July 20, 2007 to July 27, 2007(both days inclusive).

iv) Listing informationThe Company's equity shares are listed on The Bombay StockExchange Ltd., The National Stock Exchange of India Ltd.

Name of the Stock Exchange Stock code

The Bombay Stock Exchange Ltd. (BSE) 500164

National Stock Exchange of India Ltd. (NSE) GODREJIND

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

The Company had applied to the Calcutta Stock ExchangeAssociation Ltd. for voluntary delisting of equity shares under theSecurities and Exchange Board of India (Delisting of Securities)Guidelines, 2003. The permission for delisting is awaited.

v) Stock Data

Tables 1 and 2 respectively give the monthly high and low pricesand volumes of equity shares of GIL at BSE and the NSE for theyear ended March 31, 2007. Chart A compares GIL's share price atthe BSE versus the sensex.

Table 1 : Monthly high and low prices and trading volumes ofequity shares of GIL at BSE for the year ended March 31, 2007

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

April 06 757.20 476.60 324773

May 06 908.90 619.80 414127

June 06 642.90 356.10 294811

July 06 520.00 381.70 156807

August 06 591.40 579.60 201884

September 06 103.00 87.50 708287

October 06 158.85 90.90 3911833

November 06 200.00 145.15 10091299

December 06 193.40 156.00 4898771

January 07 185.45 156.00 1604580

February 07 189.00 150.50 7552537

March 07 171.70 138.00 1203887

Note :

High and low are in rupees per traded share. Volume is the totalmonthly volume of trade (in numbers) in equity shares of GIL on theBSE.

SHAREHOLDERS’ INFORMATION

Table 2: Monthly high and low prices and trading volumes of equityshares of GIL at NSE for the year ended March 31, 2007

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

April-06 760.95 481.05 544858May -06 905.00 621.55 618117June -06 643.90 352.45 392437July -06 520.95 380.00 199003August-06 661.50 431.00 445348September - 06 103.50 87.60 1469532October-06 159.00 91.00 6392159November-06 201.00 145.10 9814240December - 06 193.75 155.95 5880801January - 07 185.55 159.50 2026687February -07 189.50 155.00 3035304March-07 171.00 140.00 1394667

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 2006-2007

vi) Distribution of shareholding

Tables 3 and 4 give the distribution pattern of shareholding of GIL bysize class and ownership respectively as on March 31, 2007.

Table 3 : Distribution of shareholding by size calss as on March 31,2007

Number of Number of Shareholders Number of Shareholdingshares shareholders % shares held %

1 - 500 15985 75.49 2248753 0.77

501 - 1000 2615 12.35 1974120 0.68

1001 - 2000 1100 5.20 1605171 0.55

2001 - 3000 446 2.11 1172922 0.40

3001 - 4000 245 1.16 830897 0.28

4001 - 5000 102 0.48 470454 0.16

5001 - 10000 357 1.69 2428490 0.83

10001 & above 324 1.53 281120845 96.32

Total 21174 100.00 291851652 100.00


24

Table 4 : Distribution of shareholding by ownership as onMarch 31, 2007

Category (as being reported Shares held % of holdingto stock exchanges) (Nos.)

Promoter’s holding

Promoters 250826144 85.94

Persons deemed to act in concert – –with promoters

Institutional investors

Mutual funds & UTI 1427610 0.49

Banks, financial institutions &insurance companies 435574 0.15

Foreign institutional investors 8794884 3.01

Others

Private corporate bodies 6566226 2.25

Indian public 23151751 7.94

NRI/OCBs 649463 0.22

Total 291851652 100.00

vii) Shares held in physical and dematerialised form

As on March 31, 2007, 99.50 per cent of GIL's shares were held indematerialised form and the remaining 0.50 per cent in physicalform. The break up is listed below:

No. of Folios No. of Folios No. of Shares No. of Total Total

in Physical in Demat in Physical Shares Folios Shares

Mode Mode Mode in Demat

Mode

3708 17466 1451045 290400607 21174 291851652

viii)Outstanding GDRs/ADRs/Warrants/Convertible instruments andtheir impact on equity

GIL does not have any outstanding GDRs/ADRs/Warrants/ConvertibleInstruments.

ix) Share Transfer

Share transfers and related operations for GIL are conducted byComputech Sharecap Limited, which is registered with the SEBI asa Category 1 Registrar. Share transfer is normally effected withinthe maximum period of 30 days from the date of receipt of all therequired documents.

x) Investor correspondence should be addressed to:Computech Sharecap Limited147, M. G. Road, Opp. Jehangir Art Gallery,Mumbai 400001.Tel: 022-22635000-01-02Email: [email protected]: 022-22635003

A C C O U N T S

2006-2007



25

REPORT OF THE AUDITORS TO THE MEMBERS OF GODREJ INDUSTRIES LIMITED

1. We have audited the attached Balance Sheet of GodrejIndustries Limited as at March 31, 2007 and also theProfit and Loss Account and Cash Flow Statement of theCompany for the year ended on that date, both annexedthereto. These financial statements are the responsibilityof the Company's management. Our responsibility is toexpress an opinion on these financial statements basedon our audit.

2. We conducted our audit in accordance with the AuditingStandards generally accepted in India. Those Standardsrequire that we plan and perform the audit to obtainreasonable assurance about whether the financialstatements are free of material misstatement. An auditincludes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements.An audit also includes assessing the accounting principlesused and significant estimates made by management, aswell as evaluating the overall financial statementpresentation. We believe that our audit provides areasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order,2003, issued by the Central Government in terms ofSection 227(4A) of the Companies Act, 1956, we give inthe Annexure a statement on the matters specified inparagraphs 4 and 5 of the said Order.

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

a) We have obtained all the information andexplanations which to the best of our knowledgeand belief were necessary for the purpose of ouraudit.

b) In our opinion, proper books of account as requiredby law have been kept by the Company so far asappears from our examination of such books andproper returns adequate for the purposes of our audithave been received from the branches not visited byus. The Branch Auditor's Report has been forwardedto us and has been appropriately dealt with.

c) The Balance Sheet, Profit and Loss Account and CashFlow Statement dealt with by this report are inagreement with the books of account and with theaudited returns from the branches.

d) In our opinion, the Balance Sheet, Profit and LossAccount and Cash Flow Statement dealt with by thisreport comply with the Accounting Standards referred

to in sub-section (3C) of section 211 of theCompanies Act, 1956.

e) Reference is invited to Note 8 (b) of Schedule 22-Notes to Accounts, regarding the recoverability ofadvances given to certain individuals amounting toRs. 1033 lac being contingent upon the transfer and/or disposal of the shares pledged against the loan.The said shares were lodged for transfer whichapplication was rejected and the Company haspreferred an appeal to the Company Law Board. Theinvestee Company has in the mean while movedthe Bombay High Court and the matter is awaitinghearing. The impact thereof on the profit for the yearcould not be ascertained.

f) In our opinion and to the best of our information andaccording to the explanations given to us, the saidaccounts subject to paragraph (e) above, and readwith the notes thereon, give the information requiredby the Companies Act, 1956, in the manner sorequired and give a true and fair view in conformitywith the accounting principles generally acceptedin India:

i) in the case of the Balance Sheet, of the state ofaffairs of the Company as at March 31, 2007;

ii) in the case of the Profit and Loss Account, of theprofit of the Company for the year ended on thatdate; and

iii) in the case of the Cash Flow Statement, of thecash flows of the Company for the year endedon that date.

5. On the basis of the written representations received fromthe directors of the Company as on March 31, 2007 andtaken on record by the Board of Directors, we report thatnone of the directors of the Company is disqualified ason March 31, 2007 from being appointed as a director interms of clause (g) of sub-section (1) of Section 274 ofthe Companies Act, 1956.

For and on behalf ofKalyaniwalla & MistryChartered Accountants

V.R. MehtaPartner

M. No.: 32083Mumbai, May 25, 2007


26

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 and according to the information and explanationsgiven to us, a substantial part of the fixed assets has not beendisposed of by the Company during the year.

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

(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. 35 lakhs wasoutstanding at the year end. The maximum amount of loansgranted to the said companies during the year was Rs. 4003lakhs.

(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 loan outstanding at the year end is at call and has notbeen recalled during the year. The companies are generallyregular in payment of interest.

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

(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, there is an adequate internal control systemcommensurate with the size of the Company and the nature of its

business, for the purchase of inventory and fixed assets and for thesale of goods and services. During the course of our audit no majorweakness has been noticed in the internal controls.

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 many of theitems are of a special nature and their prices cannot becompared with alternative quotations, the transactions made inpursuance of contracts or arrangements entered in the registermaintained under Section 301 of the Companies Act, 1956have been made at prices which are reasonable having regardto the prevailing market prices at the relevant time.

6) In our opinion and according to the information and explanationsgiven to us, the Company has not accepted any deposits from thepublic during the year and has complied with the directives issuedby the Reserve Bank of India and the provisions of Section 58A and58AA or any other relevant provisions of the Act and the rulesframed there under in respect of the unclaimed deposits.

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

8) We have broadly reviewed the books of account maintained by theCompany in respect of manufacture of vanaspati and edible oilspursuant to the order passed by the Central Government formaintenance of cost records under section 209(1) (d) of theCompanies Act, 1956, and are of the opinion that prima facie theprescribed accounts and records have been maintained. We havenot, however, made a detailed examination of the records with aview to determine whether they are accurate or complete. To thebest of our knowledge and according to the information given to us,the Central Government has not prescribed maintenance of costrecords under Section 209 (1) (d) of the Companies Act, 1956 forany other products of the Company.

9) (a) According to the records examined by us, the Company isgenerally regular in depositing undisputed statutory duesincluding Provident Fund, Investor Education and ProtectionFund, Employees' State Insurance, Income Tax, Sales Tax,Wealth Tax, Service Tax, Customs Duty, Excise Duty, cess andother statutory dues applicable to it with the appropriateauthorities.

(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 31st March, 2007.


27

Name of statute Rs. in lac. Period to which amount relates Forum where dispute is pending

Central Excise 2.90 2002-03, 2004-05, 2006-07 Assistant Commissioner16.14 1996-97, 2003-04, 2004-05 Commissioner of Excise45.21 1982-83 and 1999-00 CESTAT

695.04 1978-79, 1976-85, 1995-96 High Court724.53 1982-95, 1993-97, 2002-03 The Supreme Court

Customs Duty 30.05 1978-83, 2003-04 Assistant Commissioner112.08 1987-93 Commissioner25.44 1978-79, 1978-84, 2003-04 CESTAT

679.98 1978-93, 1991-92 High Court

Sales Tax 148.41 1997-98, 2002-06, 2004-05 Sales Tax Officer78.77 1996-00, 2003-05, 2006-07 Assistant Commissioner

320.39 2000-02, 2002-03 Commissioner127.10 1990-92, 1994-96, 2003-04 Tribunal

1063.29 2003-04 High Court

Others

Stamp Duty 182.23 2000 Controlling Revenue AuthorityMunicipal Taxes 909.20 1984-2002 High CourtEntry Tax 4.26 1997-99 Dy. Commissioner

23.56 1997-2003 Tribunal1.03 2000-01 Supreme Court

Total 5189.62

10) The Company has no accumulated losses as at the end of thefinancial year and it has not incurred any cash losses in thecurrent and immediately preceding financial years.

11) According to the information and explanations given to us andbased on the documents and records produced to us, theCompany has not defaulted in repayment of dues to a financialinstitution, bank or debenture holders as at the Balance Sheetdate.

12) The Company has maintained adequate documents and recordsin respect of loans and advances granted on the basis of securityby way of pledge of shares and other securities, except for theshares referred to in note 8(b) which have not been transferredin the name of the Company.

13) In our opinion and according to the information and explanationsgiven to us, the nature of activities of the Company does notattract any special statute applicable to chit fund and nidhi/mutual benefit fund/ societies.

14) In our opinion, the Company has maintained proper records ofthe transactions and contracts in respect of investmentspurchased and sold during the year and timely entries havebeen made therein. The investments made by the Companyare held in its own name except for the shares referred to innote (a) of Schedule 6.

15) According to the information and explanations given to us andthe records examined by us, it is our opinion that the terms andconditions of the guarantees given by the Company for loanstaken by others from banks or financial institutions are notprejudicial to the interest of the Company.

16) According to the information and explanations given to us andthe records examined by us, on an overall basis, the term loans

have been applied for the purpose for which the loans wereobtained.

17) On the basis on an overall examination of the Balance Sheetand cash flows of the Company and the information andexplanations given to us, we report that the Company has notutilized the funds raised on short-term basis for long terminvestment.

18) The Company has not made any preferential allotment of sharesto parties or companies covered in the register maintainedunder 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 issueduring the year.

21) Based on the audit procedures performed and information andexplanations given by the management, we report that no fraudon or any fraud by the Company has been noticed or reportedduring the year.

For and on behalf ofKalyaniwalla & MistryChartered Accountants

V.R. MehtaPartner

M. No.: 32083Mumbai, May 25, 2007


28

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

BALANCE SHEET AS AT MARCH 31, 2007

SOURCES OF FUNDS

1. Shareholders’ Funds(a) Share capital 1 2918.52 2918.52(b) Reserves & surplus 2 38142.56 34216.68

41061.08 37135.202. Loan Funds

(a) Secured loans 3 33092.48 24910.89(b) Unsecured loans 4 13677.13 7803.24

46769.61 32714.133. Deferred Tax Liability 3980.00 3818.00

TOTAL 91810.69 73667.33

APPLICATION OF FUNDS

4. Fixed Assets 5(a) Gross block 54257.93 53640.20(b) Less : Depreciation/Impairment 27302.62 25568.23

(c) Net block 26955.31 28071.97(d) Capital work-in-progress 1749.02 522.38

28704.33 28594.35

5. Investments 6 48566.78 37134.676. Current Assets, Loans and Advances

(a) Inventories 7 15515.17 11892.38(b) Sundry debtors 8 9253.24 5806.56(c) Cash and bank balances 9 2536.34 1259.63(d) Loans and advances 10 9389.99 7688.73

36694.74 26647.30Less : Current Liabilities and Provisions(a) Liabilities 11 18053.18 15726.32(b) Provisions 12 5704.12 5202.03

23757.27 20928.35

Net Current Assets 12937.47 5718.95

7. Miscellaneous Expenditure 13 1602.11 2219.36(To the extent not written off or adjusted)

TOTAL 91810.69 73667.33

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 25, 2007 Services) & Company Secretary (Finance & Estate)


29

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007

INCOMETurnover (gross) (refer note 15) 71426.21 80054.20Less: Excise duty 5948.61 5505.94

Turnover (net) 65477.60 74548.26Other Income 14 12813.62 5733.04

78291.22 80281.30

EXPENDITUREMaterials consumed and purchase of goods 15 46272.06 50228.83Expenses 16 20683.52 20627.41Inventory change 17 (2877.60) (1196.08)Interest and financial charges (net) 18 3830.78 2848.85Depreciation 2426.36 2259.43(Net of transfer from Revaluation ReserveRs. 160.45 lac, Previous year Rs. 168.43 lac) 70335.12 74768.44

Profit before Taxation and Extraordinary Items 7956.10 5512.86

Profit from continuing operations before tax 7956.10 5813.39Provision for Income tax

– current tax (219.00) —– MAT credit entitlement 219.00 —– fringe benefit tax (60.70) (67.44)– deferred tax (162.00) (1479.00)

Profit from continuing operations after tax 7733.40 4266.95Loss from discontinuing operations before tax — (300.53)Provision for Income tax

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

Loss from discontinuing operations after tax — (252.77)

Profit after Taxation and before Extraordinary Items 7733.40 4014.18Extraordinary Items (Net of Tax) 19 94.75 3105.80Prior Period adjustments (net) 20 (22.07) (7.56)Net Profit 7806.08 7112.42Surplus brought forward 23709.59 20081.61

Amount Available For Appropriation 31515.67 27194.03APPROPRIATIONSProposed Dividend - Final 2918.52 2432.10Tax on distributed profits 496.00 341.10Transfer to General Reserve 780.61 711.24Surplus carried forward 27320.54 23709.59

TOTAL 31515.67 27194.03

Basic & Diluted Earnings per share before Extraordinary Items 2.64 1.37Basic & Diluted Earnings per share after Extraordinary Items 2.67 2.44(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


V.R. Mehta S.K. Bhatt V. SrinivasanPartner Executive Vice President (Corporate Executive Vice PresidentMumbai, May 25, 2007 Services) & Company Secretary (Finance & Estate)


30

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007

A. Cash Flow from operating Activities :Profit before tax 7956.10 5512.86Adjustments for :Depreciation 2426.36 2259.43Foreign exchange (26.57) 294.21Profit on sale of investments (4491.86) (2155.37)(Profit) / Loss on sale of fixed assets (595.31) (309.13)Dividend income (5781.12) (2212.91)Interest income (429.79) (508.39)Interest expense 3901.55 2430.95Voluntary retirement compensation paid (38.65) (2685.07)Deferred expenditure written off 655.90 592.01Provision for diminution in value of investments written back (300.00) -Provision for doubtful debts and sundry balanceswritten back (net) (410.64) (2.87)Others 1.71 (0.42)Operating profit before working capital changes 2867.68 3215.30Adjustments for :Inventories (3622.79) (2693.82)Trade and other receivables (1796.22) 1463.87Trade payables 2346.98 23.70Cash generated from operations (204.35) 2009.05Direct taxes paid (1145.93) (604.30)Direct taxes refund / received 451.03 124.08Net Cash (used in) / from operating activities (899.25) 1528.83

B. Cash Flow from investing activities :Purchase of fixed assets (4516.06) (9503.94)Proceeds from sale of fixed assets 2271.03 1339.31Purchase of investments (66287.82) (51582.27)Proceeds from sale of investments 59645.59 50167.75Intercorporate deposits / Loans (net) (2264.70) (500.02)Interest received 218.70 497.56Dividend received 5781.12 2275.33Net Cash used in investing activities beforeextraordinary item (5152.14) (7306.28)Proceeds from sale of Undertaking (Refer Note 3) – 4000.00Net Cash used in investing activities afterextraordinary item (5152.14) (3306.28)

C. Cash Flow from financing activities :Proceeds from borrowings 45416.61 39331.95Repayments of borrowings (35435.94) (32515.29)Bank overdrafts (net) 4091.27 (62.36)Interest paid (3972.09) (2631.58)Dividend paid (2430.65) (1951.09)Tax on distributed profits (341.10) (272.88)Net Cash from financing activities 7328.10 1898.75

Net increase in cash and cash equivalents 1276.71 121.30Cash and cash equivalents (Opening Balance) 1259.63 1377.88Less : Cash and cash equivalents transferred to Godrej Beverages and Foods Limited – 239.55Cash and cash equivalents (Closing Balance) 2536.34 1259.63

Notes :1. Cash and Cash equivalents.

Cash on hand and balances with banks 2536.45 1266.79Effect of exchange rate changes (0.11) (7.16)Cash and cash equivalents 2536.34 1259.63

2. To finance working capital requirements the Company’s Bankers have sanctioned a total fund-based limit of Rs. 5800 lac. Of this limits utilised as onMarch 31 2007 is Rs. 5609.71 lac.

3. Last year the Foods Division (except Wadala Factory) was sold for a consideration of Rs. 7000 Lac. Out of the total consideration Rs. 4000 Lac has beenreceived in cash and the balance by way of allotment of equity shares in Godrej Beverages and Foods Ltd.

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


As per our Report attached Signatures to Cash Flow Statement


V. R. Mehta S.K. Bhatt V. SrinivasanPartner Executive Vice President (Corporate Executive Vice PresidentMumbai, May 25, 2007 Services) & Company Secretary (Finance & Estate)


31

SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2007This Year Previous Year

Rs. lac Rs. lac

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

SCHEDULE 1 : SHARE CAPITALAUTHORISED:80,00,00,000 Equity shares of Re.1 each 8000.00 8000.00

(previous year 13,33,33,333 Equity Shares of Rs.6 each)10,00,00,000 Unclassified shares of Rs.10 each 10000.00 10000.00

18000.00 18000.00

ISSUED, SUBSCRIBED AND PAID UP:29,18,51,652 Equity shares of Re.1 each fully paid 2918.52 2918.52

(previous year 4,86,41,942) Equity shares of Rs. 6 each fully paid) 2918.52 2918.52Of the above,

(i) 18,72,02,388 (previous year 3,12,00,398) shares are held by Godrej & Boyce Mfg. Co. Limited, the holding company.(ii) 15,55,47,816 (previous year 2,59,24,636) shares are allotted for consideration other than cash pursuant to schemes of

amalgamation/arrangement.(iii) 9,57,05,718 (previous year 1,59,50,953) shares are allotted 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 2291.39 3031.76Less : Depreciation on revalued component and

deduction due to sale/discard of fixed assets (465.68) (740.37)

1825.71 2291.39Capital Redemption ReserveAs per last balance sheet 3125.00 3125.00General ReserveAs per last balance sheet 5057.19 4345.95Add : Transferred from profit & loss account 780.61 711.24

5837.80 5057.19

Profit & Loss Account 27320.54 23709.59

38142.56 34216.68

SCHEDULE 3 : SECURED LOANSTerm loans from banks 27482.77 23392.45Bank overdrafts, packing credit, etc. 5609.71 1518.44

33092.48 24910.89

Particulars of securities (refer note 4)

SCHEDULE 4 : UNSECURED LOANSShort term loans from banks 11677.13 5803.24

Other loans from banks/commercial paper 1000.00 2000.00

Inter corporate borrowing 1000.00 —

13677.13 7803.24

Amount repayable within one year 13677.13 7803.24


32

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 on01.04.2006 Additions Adjustments 31.03.2007 31.03.2006 Adjustments Year 31.03.2007 31.03.2007 31.03.2006

Tangible AssetsLand - Freehold 121.58 – – 121.58 – – – – 121.58 121.58

- Leasehold 147.97 – – 147.97 21.24 – 1.54 22.78 125.19 126.73Buildings 8231.46 344.84 1803.75 6772.55 2285.78 161.12 175.85 2300.51 4472.04 5945.68Plant & Machinery 40841.44 2671.88 912.00 42601.32 20720.43 479.31 2032.21 22273.33 20327.99 20121.01Research Centre 113.51 – – 113.51 46.71 – 3.30 50.01 63.50 66.80Furniture & Fixtures 1112.83 163.81 123.99 1152.65 675.64 52.02 60.64 684.26 468.39 437.19Office & Other Equipments 997.51 144.27 27.56 1114.22 468.67 13.33 54.14 509.48 604.74 528.84Vehicles 609.05 55.92 58.89 606.08 310.18 36.70 49.59 323.07 283.01 298.87Intangible Assets Trademarks 463.00 – – 463.00 239.22 – 46.30 285.52 177.48 223.78Software 700.75 215.27 – 916.02 623.80 – 68.02 691.82 224.20 76.95Assets acquired underfinance lease Vehicles 301.10 106.57 158.64 249.03 176.56 109.94 95.22 161.84 87.19 124.54 TOTAL - This Year 53640.20 3702.56 3084.83 54257.93 25568.23 852.42 2586.81 27302.62 26955.31 28071.97

- Previous Year 49728.83 10738.69 6827.32 53640.20 26192.14 3051.77 2427.86 25568.23Capital Work-in-Progress 1749.02 522.38

TOTAL 28704.33 28594.35

1. Buildings, Plant & Machinery and Research Centre at Vikhroli Factory were revalued on 30th June, 1992 on the basis of a Valuation Report submitted by professionalvaluers.

2. Depreciation for the year includes Rs. 160.45 lac (Previous Year Rs. 168.43 Lac) being depreciation on revalued component of the fixed assets.

3. Gross block deductions includes Rs. 305.23 lac (Previous Year Rs. 571.94 lac) being the revalued component of assets sold/discarded during the year.

4. Accumulated depreciation includes impairment loss of Rs. 510.36 lac (Previous Year Rs. 509 lac) on certain plant & machinery.

5. Capital work-in-progress is net of impairment loss of Rs. 204.10 lac (Previous Year Rs. 204.10 lac) provided on an infructuous asset under construction.

SCHEDULE 6 : INVESTMENTS

LONG TERM INVESTMENTS : At CostA. TRADE INVESTMENTS

Equity Shares : Fully PaidBharuch Eco-Aqua Infrastructure Ltd. 10 440000 – – 440000 44.00 44.00Preference Shares : Partly PaidGodrej Commodities Ltd.(Formerly Godrej Foods Limited) 10 5000000 – – 5000000 (b) 450.00 450.00(8% Redeemable Cumulative PreferenceShares, 2012)

B. OTHER INVESTMENTS :Fully Paid unless stated otherwise Equity SharesQuoted :Godrej Consumer Products Ltd. 1 26936108 – 3800000 23136108 (d) 9216.28 10730.01Unquoted :Avestha Gengraine Technologies Pvt. Ltd. 10 120244 34500 – 154744 743.45 516.76Compass Connections Ltd. £0.25 13692 – – 13692 124.55 124.55Gharda Chemicals Ltd. 100 114 – – 114 (a) 11.57 11.57Godrej Sara Lee Ltd. 4 5107125 – – 5107125 4729.79 4729.79Godrej Beverages & Foods Ltd. 10 9624996 6875000 – 16499996 3963.22 963.22Godrej Upstream Ltd. 10 – 9000000 – 9000000 902.25 –Swadeshi Detergents Ltd. 10 209370 – – 209370 191.33 191.33Tahir Properties Ltd. (Partly Paid) 100 25 – – 25 (b) 0.01 0.01

Common Stock/Membership Units :Unquoted :CBay Systems Ltd. (refer note 6) $0.01 4091073 – – 4091073 4062.82 4062.82Boston Analytics LLC $1.00 781250 286504 – 1067754 650.48 258.76Verseon LLC - Class A Units $1.90 – 1315789 – 1315789 1142.34 –Preference Shares :

Unquoted :Tahir Properties Ltd. (Class - A) (Partly Paid) 100 25 – – 25 (b) 0.02 0.02Godrej Beverages & Foods Ltd. 10 – 7150223 – 7150223 (e) 6240.00 –(Zero Coupon Compulsory Convertible Preference Shares)

Convertible Debentures : Unquoted :Avestha Gengraine Technologies Pvt. Ltd.(redeemed during the year) 10,000,000 3 – 3 – – – 300.00

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

as on during the during the as on Notes 31.03.07 31.03.06(Rs.) 01.04.06 Year Year 31.03.07 Rs. lac Rs. lac


33

Optionally Convertible Loan Notes :Unquoted :Compass Connections Ltd. $1,000 – 97 – 97 83.19 –

Shares in Co-operative Society : Fully PaidUnquoted :The Saraswat Co-op. Bank Ltd. 10 1,000 – – 1,000 0.10 0.10

Investment in the capital of Partnership Firm :View Group LP – – – – 0.01 –

C. INVESTMENT IN SUBSIDIARY COMPANIESEquity Shares : Fully Paidunless stated otherwiseUnquoted :Ensemble Holdings & Finance Ltd. 10 3,770,160 – – 3,770,160 1318.14 1318.14Godrej Agrovet Ltd. 10 4,112,956 3,000,000 – 7,112,956 6377.34 3377.34Godrej Global Solutions Ltd. 10 47,672,739 – 34,070,479 13,602,260 (b), (c) 3549.29 5589.65Godrej International Ltd. £1 2,605,000 – – 2,605,000 1826.94 1826.94Godrej Hicare Ltd. 10 6,647,100 – – 6,647,100 (b) 364.83 364.83Godrej Properties Ltd. 10 5,264,645 – – 5,264,645 4027.61 4027.61

50019.56 38887.45Less : Provision for diminution in value of Investments (1452.78) (1752.78)

48566.78 37134.67Aggregate Book Value of InvestmentsQuoted 9216.28 10730.01Unquoted 39350.50 26404.66

48566.78 37134.67

Market Value of Quoted Investments 34021.65 48875.57

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. - Godrej Commodities Limited - Preference - Re. 1 per share. - Tahir Properties Ltd. - Preference - Rs. 30 per share. - Godrej Global Solutions Ltd - Equity - Rs. 3 per share on 49,71,429 shares. - Godrej Hicare Ltd. - Equity - Rs. 6 per share on 30,40,000 shares.

(c) Reduction in number of shares of GGSL represents reduction in equity capital of the company under Sections 101 to 105 of the Companies Act, 1956as per the order of the High Court of Bombay.

(d) Face value of Rs. 4 per share divided into 4 shares of Re. 1 per share each.(e) The compulsory convertible preference shares are convertible into equity shares on 28th June, 2007.

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

as on during during the as on Notes 31.03.07 31.03.06(Rs.) 01.04.05 Year Year 31.03.07 Rs. lac Rs. lac


SCHEDULE 7 : INVENTORIES(at lower of cost and net realisable value)Stores and spares 1381.64 1156.47Raw materials 5820.54 5300.52Work-in-progress 4919.84 1961.02Finished goods 3393.15 3474.37

15515.17 11892.38

SCHEDULE 8 : SUNDRY DEBTORS(Unsecured)Debts outstanding over six monthsConsidered doubtful 201.20 233.99

Other debtsConsidered good 9253.24 5806.56

9454.44 6040.55

Less : Provision for doubtful debts 201.20 233.99

9253.24 5806.56


34


SCHEDULE 9 : CASH AND BANK BALANCESCash and cheques on hand 64.29 19.37Balance with Scheduled banks– on current accounts 464.39 386.71– on deposit accounts (refer note 7) 2007.66 853.55

2536.34 1259.63

SCHEDULE 10 : LOANS AND ADVANCES(Unsecured and considered good unlessotherwise stated)Loans and Advances (refer note 8) 2772.28 1091.34Loans to GIL ESOP Trust 2784.00 556.50Advances recoverable in cash or in kind or for valueto be received (net of provision for doubtful advancesRs. 377.07 lac, previous year Rs. 377.07 lac) 1265.01 1663.15Consideration Receivable from Godrej Beverages & Foods Ltd. for sale of Foods Division – 3000.00

Intercorporate deposits 35.00 41.80Deposits and balances with– Customs & excise authorities 1319.90 849.59– Others 642.42 486.35Advance payment of taxes 571.38 –(Net of Provision for tax, Rs. 940 lac)

9389.99 7688.73SCHEDULE 11 : CURRENT LIABILITIES(refer note 9)Sundry creditors– due to small scale industrial undertakings 75.79 56.82– others 15724.93 13750.58

15800.72 13807.40Advances from customers 689.40 305.13Sundry deposits 877.93 555.64Investor Education & Protection Fund *– Unclaimed dividend 47.74 46.29– Unpaid Matured Deposits 15.69 24.80– Interest accrued on above – 0.20Other liabilities 534.38 829.03Interest accrued but not due on loans 87.29 157.83

18053.15 15726.32* There is no amount due and outstanding to be credited to the InvestorEducation Protection Fund.

SCHEDULE 12 : PROVISIONSProposed dividend 2918.52 2432.10Provision for tax on distributed profits 496.00 341.10Provision for retirement benefits 2289.60 2388.08Provision for taxation – 40.75(Net of Advance Tax, Previous year Rs. 1270.25 lac)

5704.12 5202.03SCHEDULE 13 : MISCELLANEOUS EXPENDITURE(To the extent not written off or adjusted)Deferred revenue expenditureVoluntary retirement compensationBalance at the beginning of the year 2219.36 126.30Add : Expenditure Incurred during the year 38.65 2685.07

Less : Amortised during the year (655.90) (592.01)

1602.11 2219.36


35


SCHEDULE 14 : OTHER INCOMEInterest :– Debentures 32.98 9.62– Income tax refund 114.78 140.56– Deposits 232.14 318.42Dividend– from subsidiary companies 3592.11 508.20– from long term investments 2189.01 1704.71Profit on sale of fixed assets (Net) 595.31 309.13Profit on sale of long term investments 4382.56 2120.35(refer note 16)Profit on sale of current investments 109.30 35.02Provision for diminution investment written back (refer note 16) 300.00 –Bad debt recovered (refer note 16) 650.00 –Miscellaneous income 615.43 587.03

12813.62 5733.04

SCHEDULE 15 : MATERIALS CONSUMED AND PURCHASE OF GOODSRaw materials consumed :Stocks at the commencement of the year 5300.52 5192.87Add : Purchases (net) 40987.86 40385.71

46288.38 45578.58

Less : Stocks as at the close of the year 5820.54 5300.52

Raw materials consumed during the year 40467.84 40278.06Purchase of goods for resale 5804.22 9950.77

46272.06 50228.83SCHEDULE 16 : EXPENSESSalaries, wages and allowances 5421.36 5772.39Contribution to provident fund and other funds 324.20 326.13Employee welfare expenses 520.11 636.19Stores and spares consumed 930.87 631.87Power and fuel 4963.01 4164.79Processing charges 98.50 80.85Rent 247.18 295.90(refer note 16)Rates and taxes 496.78 389.57Repairs and maintenance– Machinery 644.50 882.25– Buildings 614.23 263.65– Other assets 334.47 402.36Insurance 156.18 133.90Freight 2371.50 2012.54Commission 250.70 282.86Discount 453.22 456.93Advertisement and publicity 86.91 250.96Sales promotion 3.96 47.93Selling and distribution expenses 822.40 1108.67Bad debts written off 32.38 170.79Provision for doubtful debts and advances 5.78 10.87Excise duty on inventory change (61.38) 284.99Foreign exchange loss 243.58 182.62Miscellaneous expenses 2395.62 2376.48Less : Expenses recovered under cost sharing agreement for use of common facilities (672.54) (538.08)

20683.52 20627.41


36

SCHEDULE 17 : INVENTORY CHANGEStocks at the commencement of the year– Finished goods 3474.37 3906.05– Work-in-progress 1961.02 1126.27

5435.39 5032.32Stock adjustment on sale of Foods division – (793.01)Less : Stocks at the close of the year :

– Finished goods (3393.15) (3474.37)– Work-in-progress (4919.84) (1961.02)

(8312.99) (5435.39)

(Increase)/Decrease in Inventory (2877.60) (1196.08)

SCHEDULE 18 : INTEREST AND FINANCIAL CHARGES (Net)Interest paid– on fixed loans 2807.07 1702.34– on bank overdrafts 11.30 114.71– other interest 610.94 485.72

3429.31 2302.77Less : Interest during construction period capitalised – 265.47Less : Interest received

– on loans & deposits 40.59 21.71– on customer balances, etc. 9.30 18.08

49.89 39.79

Net Interest 3379.42 1997.51Other financial charges 472.24 393.65Foreign exchange (gain)/loss (20.88) 457.69

3830.78 2848.85

SCHEDULE 19 : EXTRAORDINARY ITEMSProfit on sale of Foods division 94.75 3510.80Less : Taxation on above

– current tax – (506.00)– deferred tax – 101.00

94.75 3105.80

SCHEDULE 20 : PRIOR PERIOD ADJUSTMENTS(Short)/Excess provision for Income tax (22.07) 42.52Dividend for previous year – 62.42Provision for pension payments – (112.50)

(22.07) (7.56)

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


37

SCHEDULE 21 : SIGNIFICANT ACCOUNTING POLICIES

1. Accounting Convention

The financial statements are prepared under the historicalcost convention, on the accrual basis of accounting, inaccordance with the generally accepted accountingprinciples in India, and the Accounting Standards issuedby the Institute of Chartered Accountants of India.

2. Fixed Assets

Fixed Assets are stated at cost or as revalued as thecase may be, less accumulated depreciation. Costincludes expenses related to acquisition and installationof the concerned assets. Exchange differences arisingon account of repayment and year end translation offoreign currency liabilities relating to acquisition of fixedassets from a country outside India is adjusted to thecarrying cost of the respective assets.

Fixed Assets acquired under finance lease are capitalisedat the lower of their face value and present value of theminimum lease payments.

3. Intangible Assets

The cost of acquisition of trade marks is amortised equallyover a period of ten years. Computer software isamortised over a period of six years on the straight linemethod.

4. Asset Impairment

The Company reviews the carrying values of tangibleand intangible assets for any possible impairment ateach Balance Sheet date. An impairment loss isrecognised when the carrying amount of an asset exceedsits recoverable amount. In assessing the recoverableamount, the estimated future cash flows are discountedto their present value at appropriate discount rate.

5. Borrowing Costs

Borrowing costs that are directly attributable to theacquisition / construction of the underlying fixed assetsare capitalised as a part of the respective asset, uptothe date of acquisition / completion of construction.

6. Investments

Long term investments are carried at cost. Provision fordiminution, if any, in the value of each long terminvestment is made to recognise a decline, other thanof a temporary nature. The fair value of a long terminvestment is ascertained with reference to its marketvalue, the investee's assets and results and the expectedcash flows from the investment.

Current investments are carried at lower of cost and fairvalue.

7. Inventories

Inventories are valued at lower of cost and net realisablevalue. Cost is computed on weighted average basis andis net of modvat. Finished goods and work in progressinclude cost of conversion and other costs incurred inbringing the inventories to their present location andcondition. Provision is made for the cost of obsolescenceand other anticipated losses, wherever considerednecessary.

8. Provisions and Contingent Liabilities

Provisions are recognised in the accounts in respect ofpresent probable obligations, the amount of which canbe reliably estimated.

Contingent Liabilities are disclosed in respect of possibleobligations that arise from past events but their existenceis confirmed by the occurrence or non occurrence ofone or more uncertain future events not wholly withinthe control of the Company.

9. Foreign Exchange Transactions

Transactions in foreign currency are recorded at theexchange rates prevailing on the date of the transaction.Monetary assets and liabilities denominated in foreigncurrency are translated at the period end exchange rates.Forward exchange contracts, remaining unsettled at theperiod end, backed by underlying assets or liabilitiesare also translated at period end exchange rates.Premium or discount on forward exchange contracts isamortised over the period of the contract and recognisedas income or expense for the period. Exchange gains /losses are recognised in the Profit and Loss Accountexcept for exchange differences relating to fixed assetsacquired from a country outside India, which are adjustedin the cost of the asset. Non Monetary foreign currencyitems like investments in foreign subsidiaries are carriedat cost and expressed in Indian currency at the rate ofexchange prevailing at the time of making the originalinvestment.

10. Revenue Recognition

Sales are recognised when goods are supplied and arerecorded net of returns, trade discounts, rebates, salestaxes and excise duties.

Income from processing operations is recognised oncompletion of production / dispatch of the goods, as perthe terms of contract.

Export incentives receivable under the Duty EntitlementPass Book Scheme and Duty Drawback Scheme areaccounted on accrual basis.

Dividend income is recognised when the right to receivethe same is established.


38

Interest income is recognised on a time proportion basis.

Income on assets given on operating lease is recognisedon a straight line basis over the lease term.

11. Research and Development Expenditure

Revenue expenditure on Research and Development ischarged to the Profit and Loss Account of the year inwhich it is incurred. Capital expenditure incurred duringthe year on Research and Development is includedunder as additions to fixed assets.

12. Depreciation

Leasehold land is amortised equally over the leaseperiod. Leasehold improvements are amortised over fiveyears.

Depreciation is provided on the straight line method atthe rates specified in Schedule XIV to the CompaniesAct, 1956, except for computer hardware which isdepreciated over its estimated useful life of 4 years.

Depreciation on assets acquired during the year isprovided for the full accounting year and no depreciationis charged on the assets sold / discarded during theyear, except in case of major additions and deductionsexceeding rupees one crore in which case, proportionatedepreciation is provided.

Depreciation on the revalued component is provided onthe straight line method based on the balance usefullife of the assets as certified by the valuers. Suchdepreciation is withdrawn from Revaluation Reserve andcredited to Profit and Loss Account.

13. Retirement Benefits

Retirement benefits to employees comprise paymentsunder defined contribution plans like provident fundand family pension as well as payments under definedbenefit schemes like leave encashment benefit onretirement and gratuity to eligible employees. Paymentsunder defined contribution plans are charged to revenue.The liability in respect of defined benefit schemes isprovided on the basis of an actuarial valuation at theend of each financial year.

14. Incentive Plans

The Company has a scheme of Performance LinkedVariable Remuneration (PLVR) which rewards itsemployees based on Economic Value Addition (EVA).The PLVR amount is related to actual improvement madein EVA over the previous year when compared withexpected improvements. The EVA awards flow througha notional bank whereby only the prescribed portion ofthe bank is distributed each year and the balance iscarried forward. The amount distributed out of thenotional bank is charged to Profit and Loss Account.

The notional bank is held at risk and charged to EVA offuture years and is payable at that time, if futureperformance so warrants.

15. Hedging

Import of crude palm oil by the Company is beinghedged by futures contract on offshore CommoditiesExchange. Gains or losses on settled contracts isrecognised in the Profit and Loss Account and is includedin the cost of materials consumed. Futures contracts notsettled as on the Balance Sheet date are marked tomarket and losses, if any, are recognized in the Profitand Loss Account, whereas, the unrealised profit isignored.

16. Deferred Revenue Expenditure

The compensation payable under the VoluntaryRetirement Schemes, the benefit of which is expectedto accrue in future is deferred over its payback period.The compensation is generally amortised over three tofive years depending on the payback period.

17. Taxes on Income

Current tax is the amount of tax payable on theassessable income for the year determined in accordancewith the provisions of the Income Tax Act, 1961.

Deferred tax is recognised on timing differences, beingthe differences between the taxable income andaccounting income that originate in one period and arecapable of reversal in one or more subsequent periods.Deferred tax assets on unabsorbed tax losses and taxdepreciation are recognised only when there is virtualcertainty of their realisation and on other items whenthere is reasonable certainty that sufficient future taxableincome will be available against which such deferredtax assets can be realised. The tax effect is calculatedon the accumulated timing differences at the year endbased on the tax rate and laws enacted or substantiallyenacted on the Balance Sheet date.

18. Segment Reporting

The Accounting Policies adopted for segment reportingare in line with the Accounting Policies of the Company.Segment assets include all operating assets used by thebusiness segments and consist principally of fixed assets,debtors and inventories. Segment liabilities include theoperating liabilities that result from the operatingactivities of the business. Segment assets and liabilitiesthat cannot be allocated between the segments areshown as part of unallocated corporate assets andliabilities respectively. Income / expenses relating tothe enterprise as a whole and not allocable on areasonable basis to business segments are reflected asunallocated corporate income / expenses.


39

SCHEDULE 22 : NOTES TO ACCOUNTS

1. Background

The Company was incorporated under the CompaniesAct, 1956 on March 7, 1988 under the name of Gujarat-Godrej Innovative Chemicals Limited. The business andundertaking of the erstwhile Godrej Soaps Limited wastransferred to the Company under a scheme ofamalgamation with effect from April 1, 1994 and theCompany’s name was changed to Godrej Soaps Ltd.Subsequently, under a scheme of arrangement theConsumer Products division of the Company wasdemerged with effect from April 1, 2001 into a separatecompany, Godrej Consumer Products Limited (GCPL) andthe vegetable oils and processed foods manufacturingbusiness of Godrej Foods Ltd. was transferred to theCompany with effect from June 30, 2001. The Foodsdivision (except Wadala factory) was then sold to GBFLon March 31, 2006, The Company’s name was changedto Godrej Industries Limited on April 2, 2001.

The Company is engaged in the businesses of manufactureand marketing of oleo-chemicals, their precursors andderivatives, bulk edible oils, trading in medicaldiagnostic products, estate management and investmentactivities.

2. Contingent Liabilities


a) Claims against the Companynot acknowledged as debts:

i) Excise duty demandsrelating to disputedclassification, postmanufacturing expenses,assessable values, etc.which the Company hascontested and is in appealat various levels. 1544.09 1537.41

ii) Customs Duty demandsrelating to less charge,differential duty,classification, etc. 856.94 844.53

iii) Sales Tax demand relatingto purchase tax on BranchTransfer / Non availabilityof C Forms, etc. at variouslevels. 1716.58 207.13

iv) Octroi demand relatingto classification issue onimport of Palm Stearineand interest thereon. 938.05 844.46

v) Stamp duties claimed oncertain properties whichare under appeal by theCompany 182.23 182.23

vi) Income Tax demands againstwhich the Company haspreferred appeals. 1707.97 1724.64

vii) Industrial relations mattersunder appeal 595.11 518.06

viii) Others 118.76 217.26

b) Guarantees issued by banks,excluding guarantees issuedin respect of matters reportedin (a) above. 647.62 1558.31

c) Guarantees given by theCompany in respect ofcredit / guarantee limitssanctioned by banks tosubsidiary and othercompanies. 3086.00 3085.00

d) Uncalled liability onpartly paid shares / debentures 381.57 579.15

3. Capital Commitments


Estimated value of contractsremaining to be executed oncapital account, to the extentnot provided. 356.81 133.99

4. Secured Loans

a) Term loans from banks are secured by first chargeby way of equitable mortgage of the immovableproperties including land, building and plant &machinery at Vikhroli and Valia factories.

b) Working capital facilities sanctioned by banks aresecured by hypothecation of stocks and book debts.

c) The Company had during the year raised Rs. 9000lac (Previous year Rs. 3000 lac) against the issue ofcommercial paper. The amount outstanding thereagainst as on March 31, 2007 is Rs. 1000 lac.

5. Investments

a) CBay Systems Limited, USA (CBay USA) carried outan organizational restructuring in October 2005,consequent to which, all businesses of CBay grouphave been consolidated under CBay SystemsLimited, India (CBay India), a wholly ownedsubsidiary. Under the scheme, the stockholders ofCBay USA are entitled to receive one additionalshare of CBay India for every two stocks in CBayUSA. The shares in CBay India were distributed toall stockholders except Indian Shareholders of CBayUSA, pending Indian regulatory approvals. Theshares of CBay India, pending distribution to Indianshareholders, are held in trust by CBay USA. In themeanwhile, CBay group decided on a furtherorganizational restructuring, wherein CBay SystemsHoldings Limited (“CBay BVI”), a companyincorporated in the British Virgin Islands, would bethe holding company of the CBay group. As per thescheme the Company is now entitled to four sharesin CBay BVI for every share it was entitled to in


40

CBay India. The company has been allotted theshares in CBay BVI on May 15, 2007.

b) The Company has acquired and sold the followinginvestments during the year:

Mutual Funds - Liquid Funds - Growth PlanThis Year Previous Year

No. of Amount No. of AmountUnits Rs. lac Units Rs. lac

Birla Cash Plus Liquid 83875918 9572.00 39385339 4365.00

Prudential ICICI Liquid 66688100 7117.00 31868947 4912.00

KMMF Liquid 43290891 6200.00 91966703 12598.00

Standard Chartered LiquidityManager Fund 200052 2100.00 – –

LIC MF Liquid Fund 77393645 10355.00 – –

UTI Liquid fund 524962 6272.00 – –

ING Vysya Liquid 27167811 3005.00 52934599 5608.00

SBI Magnum Liquid 49201576 5705.00 130793874 14271.00

Deutsche Insta Cash PlusFund 15539028 1724.00 4566794 500.00

JMMF Liquid 14278700 1590.00 37497975 4047.00


6. Sundry Debtors

Sundry Debtors include thefollowing amounts due fromcompanies under the samemanagement:

Godrej Consumer Products Ltd. 226.49 175.45Godrej Agrovet Ltd. 21.63 —Godrej Beverages and Foods Ltd. 29.01 __Godrej Global Solutions Ltd. 0.61 __Godrej Properties Ltd. 1.76 __Godrej Saralee Ltd. 19.88 __

7. Cash and Bank Balances

Balances with ScheduledBanks in Deposit Accountsinclude deposits held bybank as security againstguarantees issued. 19.34 18.50

8. Loans and Advances

a) Loans and Advances include Rs. 1.76 lac (Previousyear Rs. 2.37 lac) due from a director. Maximumbalance during the year Rs. 2.37 lac (Previous yearRs. 3.00 lac).

b) Loans and Advances include Rs. 1033 lac (Previousyear Rs. 1033 lac) advanced by the Company to certainindividuals against pledge by way of deposit of equityshares of Gharda Chemicals Ltd. The Company hasenforced its security and lodged the shares for transferin its name, however, the transfer application has beenrejected by Gharda Chemicals Ltd. and the Companyhas filed an appeal before the Company Law Board

SCHEDULE 22 : NOTES TO ACCOUNTS (contd.)against the rejection. Interest on the aforesaid loanamounting to Rs. 315 lac was accrued upto March 31,2000 and has been fully provided for, no interest isbeing accrued thereafter. The recoverability of theadvance is contingent upon the transfer and / ordisposal of the said shares. In the opinion of themanagement, the value of the said shares is greaterthan the amount of loan.

c) Loans and Advances include a loan of Rs. 1700 lac toan individual secured by pledge of 59,12,556 sharesof Godrej Beverages & Foods Ltd.

Maximumbalance

during theyear This Year Previous Year

Rs. lac Rs. lac Rs. lac

d) Loans and Advances tosubsidiary companies

i) Ensemble Holdings& Finance Ltd. 5.00 – –

ii) Godrej Agrovet Ltd. 1200.00 – –

e) Loans and Advances toassociate companies

Swadeshi Detergents Ltd. 47.80 35.00 47.80

f) Loans and Advanceswhere there is norepayment schedule orrepayment is beyondseven years :D. Kavasmanekand Others 1033.00 1033.00 1033.00(refer (b) above)

g) Considerationreceivable for saleof Foods division:

Godrej Beverages &Foods Ltd. a subsidiarycompany. 3000.00 - 3000.00

9. Liabilities

a) No amount has been claimed from the Companyunder the Interest on Delayed Payments to SmallScale and Ancillary Industrial Undertakings Act, 1993.

b) The names of small scale industrial undertakings towhom an amount is outstanding for more than 30days are as under:N.R. Packaging Industries Vraj Packaging Pvt. Ltd.Shree Satyanarayan Plastics Neo FabShree Diamond Silicate Akshay InorganicsS. P. Fabricators Monarch CorporationA.R. Engineering Machhar Polymers Pvt. Ltd.

c) The above information regarding small scaleindustrial undertakings has been determined to theextent such parties have been identified on the basisof information available with the Company, and hasbeen relied upon by the Auditors.


41

SCHEDULE 22 : NOTES TO ACCOUNTS (contd.)

10. Employee Stock Option Plans

In December 2005, the Company had instituted anEmployee Stock Option Plan (GIL ESOP) approved by theBoard of Directors and the shareholders, which providesfor the allotment of 15,00,000 options convertible into15,00,000 equity shares of Rs. 6 each to eligible employeesof participating companies. In view of the sub-division ofequity shares into face value of Re. 1 each, the total numberof options stands automatically increased to 90,00,000options convertible into 90,00,000 equity shares of Re. 1each.

The scheme is administered by an independent ESOP Trustwhich purchases from the market shares equivalent to thenumber of options granted by the participating companies.

The Company decided to extend the benefits of the ESOPscheme to other levels of management as approved bythe Compensation Committee. During the year, inpreparation to extend the scheme to other levels ofmanagement, the participating companies providedfinance to the ESOP Trust and the ESOP Trust purchased26,25,000 additional shares during the year.

No. of Wt. averageOptions exercise price

Options outstanding atthe beginning of the year 21,00,000 65.39

(plus interest)Options granted — —Less : Exercised — —Less: Forfeited / expired — —Options outstanding at the year end 21,00,000 65.39

(plus interest)

The options granted shall vest after three years from thedate of grant of option, provided the employee continuesto be in employment and the option is exercisable withintwo years after vesting.

The employee share based payment plans have beenaccounted based on the intrinsic value method and nocompensation expense has been recognised since themarket price of the underlying share at the grant date isthe same / less than the exercise price of the option, theintrinsic value therefore being Nil.

Had the fair value method of accounting been used, theemployee compensation cost would have been Rs. 204lac. (Previous year Rs. 204 lac).

11. Incentive Plans

There is no positive amount carried forward in notionalbank as on March 31, 2007, after distribution of PLVR forthe FY 2006-07 (Previous year Rs. Nil lac).

12. Leases:

a) The Company has entered into leave and licenceagreements in respect of its commercial and residentialpremises. These are not non-cancellable and rangebetween 12 months to 36 months and are renewable

by mutual consent on mutually acceptable terms.Leave and licence arrangements being similar insubstance to operating leases, the particulars of thepremises under leave and licence arrangement areas under:


Gross carrying amount of premises 1784.70 2857.79

Accumulated depreciation 892.97 995.81

Depreciation for the period 58.30 115.71

b) Finance Leases:

The Company has acquired vehicles under Finance Lease.Liability for minimum lease payment is secured byhypothecation of the vehicles acquired under the lease.The minimum lease payments outstanding as on March31, 2007, in respect of vehicles acquired under lease areas under:Period Total Un-matured Present value

minimum Interest of minimumlease payments lease payments

outstanding as onMarch 31, 2007

Rs. lac Rs. lac Rs. lacWithin one year 63.51 17.82 58.48Later than one yearand not later thanfive years 119.36 24.79 92.72

182.87 42.61 151.20

13. Deferred Tax

Major components of deferred tax arising on account oftiming differences as at the year end are:

Assets This Year Previous YearRs. lac Rs. lac

Provision for retirement benefits 351 294Provision for doubtfuldebts / advances 204 209VRS Expenses 156 77Others 82 210

793 790

LiabilitiesDepreciation 4773 4608

Net Deferred Tax Liability 3980 3818

14. Hedging Contracts

a. Reserve Bank of India has permitted the Company tohedge its exposure on Crude Palm Oil on offshoreexchanges to the extent of its imports. Accordingly,the Company is hedging import of crude palm oil onthe Malaysian Commodities Exchange by way offutures contracts. The particulars of the futures contractsfor the year are as under:


42

This Year Previous Year

Details Purchase Sale Purchase Sale

Total number of contracts enteredduring the year – – 2 2

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

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

Number of units under above contracts – – – –

b. The Company uses forward exchange contracts to hedgeits foreign exchange exposure in accordance with its forexpolicy as determined by a Forex Committee. The particularsof the forward exchange contracts for the year are as under:

This Year Previous YearDetails Purchase Sale Purchase Sale

Total number of contractsentered during the year 150 110 171 77

Foreign currency value coveredUS Dollar (million) 66.59 7.00 101.25 33.68Euros (million) – 9.18 – 3.36

Total number of contractsoutstanding as at the year end 34 16 54 20

Foreign currency valueUS Dollar (million) 19.33 2.00 37.30 13.00Euros (million) – 4.12 – 0.94

Uncovered Foreign exchangeexposure as at the year endUS Dollar (million) 15.09 5.54 12.41 –

15. Turnover

Turnover includes This Year Previous YearRs. lac Rs. lac

i) Processing charges 1124.99 2003.93

ii) Export Incentives 345.20 554.42

iii) Licence fees and servicecharges 2308.97 2194.51

3779.16 4752.86

16. Exceptional Items


i) Included under Other Income- Profit on sale of long terminvestments 4382.56 2119.81

- Reversal of provisionfor claims payable onculmination of disputes _ 175.00

- Interest received on depositplaced against above claimon execution of decree _ 307.00

ii) Provision for diminution ininvestment written back 300.00 _

iii) Bad debt recovered 650.00 _

iv) Payment to Mumbai PortTrust for regularisation oflease included in Rent paid. _ 89.00

17. Profit & Loss Account

a) The amount of exchange loss on account of fluctuationof the rupee against foreign currencies and the netcharges for forward foreign exchange contracts addedto the carrying amount of fixed assets during the yearis Rs. 19.57 lac (Previous year Rs. 0.42 lac). Theexchange difference included in the Profit and LossAccount is a loss of Rs. 114.50 lac (Previous year profitof Rs. 640.31 lac). The exchange difference in respectof forward exchange contracts to be recognised insubsequent accounting periods is Rs. 27.02 lac(Previous year Rs. 24.68 lac).

b) Research and Development Expenditure of revenuenature charged to the Profit and Loss Account amountsto Rs. 139.38 lac (Previous year Rs. 139.39 lac).


This Year Previous Year18. Earnings per share:

a. Calculation of weighted average number of equity sharesNumber of shares at the beginning of the year Nos. 291851652 48641942Number of equity shares outstanding at the end of the year Nos. 291851652 48641942Weighted average number of equity shares outstanding during the year Nos. 291851652 48641942Weighted average number of equity shares for the previous yearadjusted for the share split into 6 shares of Re. 1 each Nos. 291851652 291851652

b. Net profit after tax excluding extraordinary items Rs. lac 7711.34 4006.62c. Net profit after tax available for equity shareholders

(including extraordinary items) Rs. lac 7806.09 7112.42d. Basic and diluted earnings per share of Re.1 each excluding

extraordinary items Rupees 2.64 1.37e. Basic and diluted earnings per share of Re.1 each including

extraordinary items Rupees 2.67 2.44

Note: There is no impact on basic and diluted earnings per share on account of the ESOPas the scheme does not envisage any fresh issue of share capital.


43


19. Segment InformationInformation about primary business segments Rs. lac

Chemicals Veg oils 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 57187.42 51777.71 4990.94 21116.55 2561.87 2282.52 12145.53 3986.32 1405.46 1118.20 78291.22 80281.30

Add : Unallocated Income – – – – – – – – – – – –

Total Income 57187.42 51777.71 4990.94 21116.55 2561.87 2282.52 12145.53 3986.32 1405.46 1118.20 78291.22 80281.30

Results

Segment result

before interest and tax 642.81 4760.35 (417.08) (341.38) 1756.72 1471.62 12145.53 4586.33 477.76 (111.58) 14605.74 10365.34

Unallocated expenses (2818.85) (2003.63)

Interest Expense (net) (3830.78) (2848.85)

Profit before tax 7956.11 5512.86

Taxes (222.70) (1498.68)

Profit after taxes and

before Extraordinary Items 7733.41 4014.18

Add: Extraordinary Items

(Net of taxes) 94.75 3105.80

Add/(Less) : Prior Period Items (22.07) (7.56)

Net Profit 7806.09 7112.42

Segment Assets 54217.96 44348.01 730.00 3701.03 1173.00 2768.09 56258.00 40283.49 3189.00 3495.06 115567.96 94595.68

Unallocated Assets - -

Total Assets 115567.96 94595.68

Segment Liabilities 18882.75 19899.83 339.00 423.86 947.00 437.17 0.00 44.86 174.00 81.88 20342.75 20887.60

Unallocated Liabilities 54164.13 36572.88

Total Liabilities 74506.88 57460.48

Total Cost incurred

during the year to

acquire segment assets 3681.76 7276.38 8.07 297.77 12.72 12.72 – 3557.39 – 3151.82 3702.55 14296.08

Segment depreciation 2123.73 1784.09 53.68 239.82 84.02 128.06 – – 164.93 107.46 2426.36 2259.43

Information about Secondary Business Segments

Revenue by Geographical markets

India 55994.08 65131.76

Outside India 22297.14 15149.54

Total 78291.22 80281.30

Carrying Amount of Segment Assets

India 115567.96 94595.68

Outside India – –

Total 115567.96 94595.68

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.


44

20. Related Party Disclosures

a) Names of related parties and description of

relationship:

Parties where control exists

Godrej & Boyce Mfg. Co. Ltd., the holding companySubsidiary companies / Subsidiary of subsidiary

company

Godrej Agrovet Ltd.Goldmohur Foods & Feeds Ltd.Aadhaar Retailing Ltd.Godrej Aquafeed Ltd.Godrej Oil Palm Ltd.Golden Feed Products Ltd.Krithika Agro Farm Chemicals & EngineeringInd. P. Ltd.Godrej Properties Ltd.Girikandra Holiday Homes & Resorts Ltd.Godrej Developers P. Ltd.Godrej Real Estate P. Ltd.Godrej Realty P. Ltd.Godrej Sea View Properties P. Ltd.Godrej Waterside Properties P. Ltd.Godrej Hicare Ltd.Godrej International Ltd.Godrej Global Solutions Ltd.Godrej Global Mid-East FZEGodrej Global Solutions Inc.Godrej Global Solutions (Cyprus) LtdEnsemble Holdings & Finance Ltd.

Fellow Subsidiaries:

Godrej Commodities Ltd.Godrej Infotech Ltd.Godrej Appliances Ltd.Godrej Malaysia Sdn BhdGodrej Singapore Pvt Ltd.Mercury Mfg. Co. Ltd.

J.T. Dragon Pte Ltd.Godrej (Vietnam) Co. Ltd.

Other related parties with whom the Company had

transactions during the year.

Associate/Joint Venture Companies

Godrej SaraLee Ltd.Godrej Beverages & Foods Ltd.Godrej Gold Coin Aquafeed Ltd.Godrej Upstream Ltd.Nutrine Confectionery Company Ltd.

Key Management Personnel

Mr. A.B. Godrej ChairmanMr. 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)

Relatives Key Management Personnel

Ms. N.A. Godrej Daugther of Mr. A.B. GodrejMr. P.A. Godrej Son of Mr. A.B. Godrej

Enterprises over which key management

personnel exercise significant influence

Godrej Consumer Products Ltd.Godrej Investments Pvt. Ltd.Bahar Agrochem & Feeds Pvt. Ltd.Godrej Holdings P. Ltd.Lawkim Ltd.Cartini India Ltd.


45


b) 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 – 3.16 – 19.07 – – 982.10 1004.33Previous Year 17.08 1.53 – 12.50 – – 890.83 921.94Sale of Fixed Assets – – – - – – 21.64 21.64Previous Year 0.05 1.40 – - – – 264.19 265.64Sale of undertaking (Foods Division) – – – - – – – –Previous Year – 7000.00 – – – – – 7000.00Purchase of goods & equipment 112.76 – 914.14 198.46 – – 719.88 1945.24Previous Year 30.77 0.14 695.87 6.69 – – 1033.81 1767.28Processing charges received – – – 193.68 – – – 193.68Previous Year – – – – – – – –Commission received – 7.90 2.50 73.22 – – 15.98 99.60Previous Year – 30.01 2.50 19.78 – – 23.15 75.44Recovery of establishment &Other Expenses 5.88 274.50 0.47 354.24 – – 936.66 1571.75Previous Year 1.43 271.58 12.52 229.64 – – 815.74 1330.91Establishment & other expenses paid 197.04 12.32 16.39 1.88 – – 87.26 314.89Previous Year 228.68 19.60 10.50 14.03 – – 89.66 362.47Interest received – 20.45 – – _ – 3.91 24.36Previous Year – 1.18 – – – – 4.99 6.17Dividend income – 3592.11 33.74 1174.64 – – 980.60 5781.09Previous Year – 508.20 25.28 536.25 – – 1007.66 2077.39Dividend paid 1560.02 – – – 135.61 869.84 – 2565.47Previous Year 1248.02 – – – 47.61 424.41 – 1720.04Remuneration – – – – 320.65 25.64 – 346.29Previous Year – – – – 330.85 4.77 – 335.62Purchase of investments – 3128.63 – 10142.25 – – – 13270.88Previous Year – 190.68 – – – – – 190.68Inter corporate deposits -Advanced / (Accepted) – 3955.00 – – – – (1000.00) 2955.00Previous Year – 1294.46 – (3.30) – – (10.00) 1281.16Inter corporate deposits repaymentreceived during the year – 3955.60 – 3.55 – – 12.80 3971.95Previous Year – 103.48 – – – – – 103.48Capital reduction underSection 101 to 105 – 2042.34 – – – – – 2042.34Guarantees & Collaterals given – – – – – – – –Previous Year – (2300.00) – – – – – (2300.00)Balance Outstanding as onMarch 31, 2007Receivables 75.73 24.49 617.89 48.89 – – 226.58 993.58Previous Year 1.42 3016.15 – 18.54 – – 222.25 3258.36Payables 38.80 2.48 – 3.04 – – 70.97 115.29Previous Year 0.01 113.57 – 42.60 – – 102.85 259.03Guarantees Outstanding – 668.00 1000.00 1350.00 – – – 3018.00Previous Year – 667.00 1000.00 1350.00 – – – 3017.00


46

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

Nature of Transaction This Year Previous Year Nature of Transaction This Year Previous Year

Sale of goods Inter corporate deposits repaid during the year - Godrej Consumer Products Ltd. 981.49 890.83 - Godrej Agrovet Limited 3950.00 –

Sale of fixed assets Dividend income - Godrej Consumer Products Ltd. 21.64 264.19 - Godrej Consumer products Ltd. 980.60 1007.66

- Godrej Properties Limited 2712.16 –Sale of undertaking (Foods Division) - Godrej Agrovet Limited 727.99 – - Godrej Beverages & Foods Ltd. – 7000.00 - Godrej SaraLee Limited 1174.64 –

Purchase of goods & equipment Dividend paid - Godrej Beverages & Foods Ltd. 217.04 – - Godrej & Boyce Mfg. Co. Ltd. 1560.02 1248.02 - Godrej Consumer Products Ltd. 719.88 1033.81 - Godrej Commodities Ltd. 909.67 692.34 Remuneration

- Mr. N.B. Godrej 85.66 82.11Processing charges received - Ms. T.A. Dubash 54.20 50.57 - Godrej Beverages & Foods Ltd. 193.68 – - Mr. Mathew Eipe 64.00 62.56

- Mr. V.F. Banaji 69.55 77.07Commission received - Mr. M.P. Pusalkar 47.24 48.93 - Godrej Consumer Products Ltd. 15.98 23.15 - Godrej Beverages & Foods Ltd. 47.26 24.85 Remuneration to Relatives of Key Management Personnel - Godrej Upstream Ltd. 25.96 19.78 - Ms. Nisaba A. Godrej 19.92 –

- Mr. Pirojsha Godrej 5.73 4.77Recovery of establishment & other expenses - Godrej Consumer Products Ltd. 936.66 815.74 Purchase of Investments - Godrej SaraLee Ltd. 211.65 229.64 - Godrej Agrovet Limited 3000.00 – - Godrej Agrovet Ltd. 191.08 175.10 - Godrej Upstream Ltd. 902.25 – - Godrej Beverages & Foods Ltd. 142.59 – - Godrej Beverages & Foods Ltd. 9240.08 –

Establishment & other exps paid Inter corporate deposits Advanced /(Accepted) - Godrej & Boyce Mfg. Co. Ltd. 197.04 228.68 - Godrej Agrovet Limited 3950.00 – - Godrej Consumer Products Ltd. 87.14 89.66 - Godrej Investments Limited (1000.00) –

Interest received Inter corporate deposits - repayment received - Swadeshi Detergents Ltd. 3.91 4.99 - Godrej Agrovet Limited 3950.00 – - Godrej Agrovet Limited 20.29 –

Capital reduction under Section 101 to 105- Godrej Global Solutions Ltd. 2042.34 –

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

21. Computation of Profits under Section 349of the Companies Act, 1956Profit for the year after tax as per Profit & Loss Account 7806.09 7112.42Add : Depreciation as per accounts 2426.36 2259.43Managerial Remuneration 320.64 330.85Profit / (loss) on sale of assets under Section 349 222.09 294.00

Provision for doubtful debts / advances anddepletion in value of investments 5.78 10.87Provision for Tax (including tax on extraordinary items) 222.70 1903.68

3197.57 4798.83 11003.66 11911.25

Less : Depreciation under Section 350of the Companies Act, 1956 2401.80 2240.45Profit / (loss) on sale of assets as per books 595.31 309.13Profit on sale of investments 4382.56 2155.37Profit on sale of Foods division – 3510.80Provision for diminution in investment written back 300.00 –

7679.67 8215.75Net Profit for the purpose of Directors' Remuneration 3323.99 3695.50

Managerial remuneration to Managing and Executive Directors@ 10% of the net profits 332.40 369.55

Managerial remuneration paid / payable 320.64 321.25


47


24. Turnover (Net)

This Year Previous YearItem Unit Quantity Value Quantity Value

Rs. lac Rs. lac

Fatty Acids MT 58448 20428.32 56110 17447.97Glycerin MT 11965 4066.74 8997 3491.25Alpha Olefin and its precursorsand derivatives MT 88771 30931.08 62657 28311.15Oils & Vanaspati MT 17835 4607.60 38048 14461.23Fruit & Vegetable Puree, Pulp & Juices MT – – 4285 1724.44Fruit beverages and fruit based products KL – – 8586 2289.06Soya Milk MT – – 631 249.29Medical Diagnostic Products 833.23 958.02Others 4410.63 5615.85

TOTAL 65477.60 74548.26

25. Inventories - Finished Goods

March 31, 2007 March 31, 2006 March 31, 2005Item Unit Quantity Value Quantity Value Quantity Value

Rs. lac Rs. lac Rs. lacFatty Acids MT 1564 676.07 2278 817.98 1665 629.54Glycerin MT 399 128.59 638 236.59 202 90.16Alpha Olefin and its precursorsand derivatives MT 5124 2434.86 5710 2300.62 1649 499.65Oils & Vanaspati MT 3 2.04 – – 1075 509.64Fruit & Vegetable Puree, Pulp& Juices MT – – – – 5338 1714.67Fruit beverages and fruit basedproducts KL – – – – 748 165.04Soya Milk MT – – – – 68 15.45Medical Diagnostic Products 150.55 119.18 180.20Others 1.05 0.00 101.70

TOTAL 3393.16 3474.37 3906.05


22. Managerial RemunerationSalaries and allowances 281.44 289.12Contribution to Provident Fund 20.19 16.66Estimated Monetary value of perquisites 19.01 15.47

TOTAL 320.64 321.25

23. Auditors’ RemunerationAudit fees (including Rs. 1.04 lac tobranch auditors, previous year Rs. 0.92 lac) 26.30 30.92Tax audit fees 4.00 5.50Certification and other services 7.02 7.65Tax Consultation and representation 11.93 9.20Consultation and management services 4.40 4.30Out of pocket expenses 1.15 0.71

TOTAL 54.80 58.28


48

28. Licensed, Installed and Utilised Capacity

Item Unit Licensed Installed Capacity ActualCapacity Production

This Previous This PreviousYear Year Year Year

SCHEDULEDFatty Acids MT } 55800 32000 59700 46307Glycerin MT } 8280 8280 11041 9434Alpha Olefin and its precursors }and derivatives MT } 65000 35000 82779 66933Soaps MT } 26381 26381 7645 10338Cosmetics MT } 1200 1200 – –Fruit Beverages & Fruit }based products KL } – 30000 – 18467Fruit & Vegetable Puree, } N.APulp & Juices MT } – 5000 – 3222Refined Oils & Vanaspati MT } 38700 38700 10110 10099Dietetic & Geriatic foods MT } – 250 – 4155U.H.T. / Sweetend Flavoured }Milk KL } – 1800 – 1182Instant Tea / Coffee Plant MT } – 3000 – 879Synthetic Detergents MT } 11250 11250 13953 14699Hydrogen (Captive }consumption) NM3 } 1224000 1224000 687033 518091

}Oxygen (By-Product) NM3 } 612000 612000 343517 259046

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 consumption

to manufacture A.O and its precursors and derivatives.d. Production of A.O and its precursors and derivatives include 18,324 MT produced under process contracts for third parties.

SCHEDULE 22 : NOTES TO ACCOUNTS (contd.)26. Raw Materials Consumed

This Year Previous YearUnit Quantity Value Quantity Value

Rs. lac Rs. lacOils & Fats MT 161362 32253.73 126174 31036.70Chemicals and Catalysts MT 19289 4910.44 19942 4550.73Fruit Pulp & Concentrates KL – – 1070 1073.90Packing and other Materials 3303.66 3616.73

TOTAL 40467.83 40278.06

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

27. Purchase of Goods

This Year Previous YearUnit Quantity Value Quantity Value

Rs. lac Rs. lac

Fatty Acids MT 1435 612.00 134 42.63Oils & Vanaspati MT 17825 4584.32 29063 8910.68Pulp MT – – 1011 473.88Medical Diagnostic Products 512.12 461.33Others 95.78 62.25

TOTAL 5804.22 9950.77


49



29. Value of Imports on CIF Basis (includesonly Imports directly made)Raw materials 25313.10 23326.81Goods for resale 390.48 382.06Stores & spares 509.60 290.72Capital goods 432.86 731.15

TOTAL 26646.04 24730.74

30. Expenditure in Foreign CurrencyInterest 587.04 352.82Travelling expenditure 104.07 83.98Other expenditure 740.73 399.93Expenses for Foreign Branch:- Salaries and allowance 126.98 87.17- Rent 15.98 20.80- Others 18.42 38.07

TOTAL 1593.22 982.77


31. Value of Consumption of % %Raw Materials & SparesRaw MaterialsImported (including dutycontent) 19366.53 48 26138.87 65Indigenous 21101.30 52 14139.19 35

40467.83 100 40278.06 100SparesImported (includingduty content) 620.27 68 240.15 38Indigenous 310.60 32 391.72 62

930.87 100 631.87 100


32. Dividends Remitted inForeign Currency(subject to deduction of tax,as applicable)Final Dividend forFinancial Year 2005-06 to6 shareholders on 1110 shares 0.05 0.04

TOTAL 0.05 0.04


33. Earnings in Foreign ExchangeExport of goods (F.O.B. :this year Rs.17881.90 lac 22223.63 15082.08previous year Rs. 14150.42 lac)Dividend 71.82 65.80Others 1.69 1.66

TOTAL 22297.14 15149.54

34. Interest in Joint Ventures:The Company’s interests, as a venturer, in jointlycontrolled entities are:

Name Countries of Principal Percentage of Percentage

Incorporation activities Ownership Ownership

interest as at interest as at

31st March, 31st March,

2007 2006

Godrej India Household 20% 20%SaraLee Ltd. Insectisides

Godrej Beverages& Foods Ltd. India Beverages 48% *

& Foods

* Godrej Beverages & Foods Ltd. was a subsidiary of the Company during the previous year.

The Company’s interests in Joint Venture are reported asLong Term Investments (Schedule “6”) and stated atcost less provision, if any, for permanent diminution invalue of such investments. The Company’s share of eachof the assets, liabilities, income and expenses, etc.(without elimination of the effect of transaction betweenthe company and Joint Venture) related to its interestsin these joint ventures are:


I. ASSETS1. Fixed Assets 4233.86 967.172. Investments/Goodwill 10444.32 –3. Current Assets,

Loans and Advancesa) Inventories 2644.75 898.23b) Sundry Debtors 1516.68 375.64c) Cash and Bank Balances 2260.41 577.36d) Other Current Assets 5.16 0.22e) Loans and Advances 1280.09 463.50

4. Misc. Expenditure 59.52 –

II. LIABILITIES1. Loan Funds

a) Secured Loans 8274.24 70.98b) Unsecured Loans 410.41 -

2. Current Liabilitiesand Provisionsa) Liabilities 4730.65 1251.71b) Provisions 327.67 127.05

3. Deferred Tax - Net 85.86 21.02

III. INCOME1. Turnover

(net of excise) 23924.55 8911.432. Other Income 314.69 152.84

IV. EXPENSES1. Material consumed

and purchase of goods 14736.03 4970.022. Expenses 7425.11 2724.803. Inventory change 52.81 119.204. Depreciation 401.00 91.385. Interest 776.17 12.126. Provision for Taxation 200.39 117.79

V. OTHER MATTERS1. Contingent Liabilities 328.13 207.022. Capital Commitments 132.46 2.48

35. Figures for the previous year have been regroupedwherever necessary.


50


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

1. Registration DetailsRegistration No : 97781State Code : 11Balance Sheet Date : 31/3/2007

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 : 115567.96Total Assets : 115567.96

Sources of FundsPaid-up Capital : 2918.52Reserves & Surplus : 41557.09Secured Loans : 33092.48Unsecured Loans : 13677.13Deferred Tax Liability : 3980.00

Application of Funds

Net Fixed Assets : 28704.33Investments : 48566.78Net Current Assets : 16351.99Misc. Expenditure : 1602.11Accumulated Losses : –

4. Performance of Company(Amount in Rs. lac)

Turnover(Income from Operations) : 65477.60Total Expenditure :(Net of Other Income) : 57521.49Profit/(Loss) before tax : 7956.11Profit/(Loss) after tax : 7733.41Earning per Share inRs. (on an annualised basis) : 2.64Dividend rate % : 100%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 Oils

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

C O N S O L I D A T E D

A C C O U N T S

2006-2007


REPORT OF THE AUDITORS TO THE BOARD OF DIRECTORS OF THE GODREJ INDUSTRIES LIMITED

ON CONSOLIDATED FINANCIAL STATEMENTS

1. We have audited the attached Consolidated Balance Sheet ofGodrej Industries Limited and its subsidiaries as at March 31, 2007,and also the Consolidated Profit and Loss Account and ConsolidatedCash Flow Statement for the year then ended, both annexed thereto.These consolidated financial statements are the responsibility ofGodrej Industries Limited's management. Our responsibility is toexpress 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 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. (a) We did not audit the financial statements of certain subsidiariesand joint ventures, whose financial statements reflect thegroup's share of total assets of Rs. 11,682 lakhs as at March31, 2007, and the group's share of total revenues of Rs.172,965 lakhs and net cash outflows amounting to Rs. 1,440lakhs for the year ended on that date as considered in theconsolidated financial statements. These financial statementshave been audited by other auditors whose reports havebeen furnished to us and our opinion, insofar as it relates tothe amounts included in respect of the subsidiaries and jointventures is based solely on the report of the other auditors.

(b) As stated in Note 2 of Schedule 21, the financial statementsof a Jointly controlled entity, whose financial statements reflectthe Group's share of total assets of Rs. (276) lakhs as at March31, 2007 and the Group's share of total revenue of Rs. 851lakhs and net cash outflow amounting to Rs.262 lakhs for theyear ended on that date are not audited as of the date of thisreport and have been included in the consolidated financialstatements on the basis of unaudited management accounts.

(c) As stated in Note 2 of Schedule 21, the financial statementsof certain associates whose financial statements reflect theGroup's share of associates' loss upto March 31, 2007 of Rs.582 lakhs and the share of profit for the year of Rs. 239 lakhshas been included in the consolidated financial statements

on the basis of unaudited management accounts.

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

5. Reference is invited to note 10 of Schedule 21- Notes to Accounts,regarding the recoverability of advances given to certain individualsamounting to Rs. 1033 lac being contingent upon the transfer and/or disposal of the shares pledged against the loan. The said shareswere lodged for transfer which application was rejected and theCompany has preferred an appeal to the Company Law Board. Theinvestee company has in the meanwhile moved the Bombay HighCourt and the matter is awaiting hearing. The impact thereof onthe profit for the year could not be ascertained.

6. 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 inparagraphs 3 and 5 above, give a true and fair view in conformitywith the accounting 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 March31, 2007;

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.

For and on behalf of

KALYANIWALLA & MISTRYChartered Accountants

V. R. MehtaPartner

Mumbai, May 25, 2007 Membership No.: 32083

Godrej Industries Limited – Consolidated Accounts

51


52


CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2007

SOURCES OF FUNDS

1. Shareholders’ Funds(a) Share capital 1 2918.52 2918.52(b) Share Application Money – 6000.00(c) Reserves & surplus 2 44353.00 33481.40

47271.52 42399.922. Minority Interest 3139.53 3625.673. Loan Funds

(a) Secured loans 3 50710.32 29982.41(b) Unsecured loans 4 40652.56 27140.40

91362.88 57122.814. Deferred Tax Liability 5117.64 3876.13

TOTAL 146891.57 107024.53APPLICATION OF FUNDS5. Fixed Assets 5

(a) Gross block 87729.86 77659.88(b) Less : Depreciation/Impairment 39023.35 32997.46(c) Net block 48706.51 44662.42(d) Capital work-in-progress 2604.42 2274.89

51310.93 46937.316. Goodwill (on consolidation) 27631.09 11275.937. Investments 6 19372.51 24100.968. Current Assets, Loans and Advances

(a) Inventories 7 46362.41 28500.97(b) Sundry debtors 8 45640.04 23052.69(c) Cash and bank balances 9 8881.57 9106.59(d) Other Current Assets 9.56 24.96(e) Loans and advances 10 27307.58 17212.33

128201.16 77897.54Less : Current Liabilities and Provisions(a) Liabilities 11 74849.87 49278.68(b) Provisions 12 6436.45 6127.98

81286.32 55406.67Net Current Assets 46914.83 22490.86

9. Miscellaneous Expenditure 13 1662.20 2219.46(To the extent not written off or adjusted)TOTAL 146891.57 107024.53

Significant Accounting Policies 20Notes to Accounts 21


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




53

CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007

INCOMETurnover (gross) 243864.79 209816.33Less : Excise duty 5967.69 5519.15Turnover (net) 237897.10 204297.18Other Income 14 8672.62 6319.73

246569.71 210616.91EXPENDITUREMaterials consumed and cost of sales 15 177787.43 150164.44Expenses 16 54980.24 46763.12Inventory change 17 (4581.11) (2220.73)Interest and financial charges (net) 18 6500.66 4528.44Depreciation 4280.34 3766.77(Net of transfer from Revaluation ReserveRs. 160.45 lac, Previous year Rs. 168.43 lac)

238967.56 203002.04Profit Before Tax 7602.15 7614.87Provision for taxation- Current Tax 867.16 1197.49- Deferred Tax 204.64 1242.82- Fringe Benefit Tax 197.38 114.85Profit for the year after taxation 6332.96 5059.71Prior Period adjustments (net) 19 (65.09) (14.38)

6267.87 5045.33Share of Profit/(Loss) in Associates 24.56 (78.09)Profit before Minority Interest 6292.43 4967.24Share of Minority Interest (404.37) (67.47)Profit after Minority Interest 5888.06 4899.77Surplus brought forward 18220.27 17913.78Adjustment for opening profit of Subsidiaries (Net) 8737.81 –Profit Available For Appropriation 32846.14 22813.55

APPROPRIATIONS :Dividend on Equity Shares- Interim 873.69 106.15- Final 2918.52 2552.25Tax on distributed profits 1154.78 683.27Transfer to General Reserve 1507.89 1251.61Surplus carried forward 26391.27 18220.27

TOTAL 32846.14 22813.55Basic & Diluted Earnings per share (Face Value Re. 1 per share) 2.02 1.68(refer note 17)Significant Accounting Policies 20Notes to Accounts 21

This Year Previous YearSchedule Rs. lac Rs. lac


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




54

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007

A. Cash Flow from operating activities :Profit before tax 7602.15 7614.87Adjustments for :Depreciation 4190.59 3766.77Foreign exchange 10.16 119.45Profit on sale of investments (4509.98) (2299.64)Profit on sale of fixed assets (570.15) (373.81)Dividend income (1018.61) (1299.75)Interest income (1415.34) (945.81)Interest expense 6668.46 4352.16Voluntary retirement compensation paid (38.65) (2685.07)Deferred expenditure written off 596.46 704.02Provision for diminution in value of investments written back (300.00) (364.79)Provision for doubtful debts and sundry balances written off (net) (418.93) (6.04)Others 42.72 264.97Operating profit before working capital changes 10838.87 8847.33Adjustments for :Inventories (18987.18) (5828.97)Trade and other receivables (26674.99) (7115.65)Trade payables 24663.54 8257.31Cash generated from operations (10159.76) 4160.02Direct taxes paid (2579.66) (1554.31)Direct taxes refund received 451.03 125.75Net Cash (used in) / from operating activities (12288.39) 2731.46

B. Cash Flow from investing activities :Purchase of fixed assets (9640.47) (16143.97)Proceeds from sale of fixed assets 2916.07 1523.12Acquistion of new businesses - (1246.10)Purchase of investments (71094.70) (57587.86)Proceeds from sale of investments 61956.37 54265.71Intercorporate deposits / Loans (net) (2366.49) 1289.31Interest received 1109.78 953.84Dividend received 1018.61 1284.18Net Cash used in investing activities (16100.83) (15661.77)

C. Cash Flow from financing activities :Proceeds from share capital 1322.99 6579.40Proceeds from issue of debentures 171.50 1154.46Proceeds from borrowings 55163.74 55685.42Repayments of borrowings (37965.15) (37498.41)Bank overdrafts (net) 20606.42 (2135.52)Interest paid (6736.77) (4587.88)Dividend paid (3390.20) (2036.10)Tax on distributed profits (1201.99) (467.58)Net Cash from financing activities 27970.54 16693.79Net increase in cash and cash equivalents (418.68) 3763.48Cash and cash equivalents (Opening Balance) 9,106.59 5343.11Add : Cash and cash equivalents - GBFL (opening balance) 159.46 -Add : Cash and cash equivalents - GUL (opening balance) 34.20 -Adjusted Cash and cash equivalents (opening balance) 9,300.25 5343.11Cash and cash equivalents (Closing Balance) 8881.57 9106.59(including share in jointly controlled entities - Rs. 2176.97 lac)

Notes :This Year Previous Year

Rs. lac Rs. lac

1. Cash and Cash equivalents.Cash on hand and balances with banks 8881.68 9113.75Effect of exchange rate changes (0.11) (7.16)Cash and cash equivalents 8881.57 9106.59

2. The above cash flow statement includes share of cash flows from jointly controlled entities as under:a. Net cash from operating activities 1772.01b. Net cash used in investing activities (14111.51)c. Net cash used in financing activities (12361.45)


As per our Report attached Signatures to Cash Flow Statement




55

SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT AND LOSS

ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007 This Year Previous YearRs. lac Rs. lacSCHEDULE 1 : SHARE CAPITAL

Authorised80,00,00,000 Equity shares of Re.1 each

(Previous year 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:29,18,51,652 Equity shares of Re. 1 each fully paid 2918.52 2918.52

(Previous year 14,86,41,942 Equity shares of Rs. 6 each)2918.52 2918.52

Of the above, 18,72,02,388 (previous year 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

1.4.2006 31.03.2007

Securities Premium Account 1099.18 1557.84 – 2657.02

1099.27 – 0.10 1099.17Capital Investment Subsidy Reserve 80.39 – – 80.39

80.42 – 0.03 80.39Revaluation Reserve 2291.39 – 465.68 1825.71

3031.76 – 740.37 2291.39Special Reserve u/s. 451C of RBI Act, 1934 117.39 14.92 – 132.31

– 117.39 – 117.39Capital Redemption Reserve 3125.00 – – 3125.00

3125.00 – – 3125.00General Reserve 7561.51 861.13 22.00 8400.64

6309.90 1251.61 – 7561.51Foreign Exchange Fluctuation Reserve 35.58 – 6.79 28.79

12.29 23.29 – 35.58Total - This Year 14193.05 2418.97 494.47 16117.55

Total - Previous Year 13658.64 1274.90 740.50 14193.04Profit & Loss Account 26391.27

18220.27Share in Jointly Controlled Entities 1711.87

950.71Total Reserves - This Year 44353.00

Total Reserves - Previous Year 33481.41

SCHEDULE 3 : SECURED LOANSTerm loans from financial institutions 735.00 565.68Term loans from banks 30662.20 27577.29Bank overdrafts 11038.88 1768.46Share in Jointly Controlled Entities 8274.24 70.98

50710.32 29982.41SCHEDULE 4 : UNSECURED LOANSFixed deposits 168.98 158.59Intercorporate deposits 2443.07 1828.10Short term loans from banks 35532.13 21777.87Other loans from banks 1470.04 2337.17Sales tax deferment facility 627.93 -Share in jointly controlled entities 410.41 1038.67

40652.56 27140.40


56

SCHEDULE 5 : FIXED ASSETS Rs. lacASSETS GROSS BLOCK DEPRECIATION/IMPAIRMENT NET BLOCK

As on Deductions/ As on Upto Deductions/ For the Upto As on As on1.04.2006 Additions Adjustments 31.03.2007 31.03.2006 Adjustments Year 31.03.2007 31.03.2007 31.03.2006

Tangible Assets Land - Freehold 1137.67 463.49 – 1601.16 – – – – 1601.16 1137.67

- Leasehold 246.38 8.00 13.12 241.26 30.81 – 2.92 33.73 207.53 215.57 Buildings 11436.97 1793.70 1935.64 11295.03 3051.14 200.30 353.17 3204.01 8091.02 8385.83 Plant & Machinery 51698.40 3281.58 1760.44 53219.54 24087.93 888.25 2664.53 25864.21 27355.33 27610.50 Research Centre 150.39 – – 150.39 64.30 – 5.05 69.35 81.04 86.09 Furniture & Fixtures 1608.44 442.57 184.39 1866.62 896.45 67.83 68.24 896.86 969.76 712.01 Office & Other Equipments 1187.65 768.08 82.65 1873.08 531.05 33.41 219.77 717.41 1155.67 656.60 Vehicles 1348.23 168.31 152.87 1363.67 655.41 92.12 1.97 565.26 798.41 692.82 Trees Development Cost 454.69 – – 454.69 239.55 – 30.33 269.88 184.81 215.14 Intangible Assets Goodwill 1116.02 487.53 – 1603.55 182.73 – 172.86 355.59 1247.96 933.29 Trademarks 3509.72 (138.73) 450.10 2920.89 1106.50 41.32 235.66 1300.84 1620.05 2403.22 Technical Knowhow Fees 200.00 – – 200.00 199.98 – – 199.98 0.02 0.02 Software 718.89 252.96 – 971.85 625.63 – 74.97 700.60 271.25 93.26 Assets Acquired Under Finance Lease Plant & Machinery 494.42 588.68 0.41 1082.69 22.63 0.24 115.48 137.87 944.82 473.43 Vehicles 312.04 106.57 169.58 249.03 176.56 109.94 95.22 161.84 87.19 135.48 Share in jointly controlled entities 2039.98 6641.42 44.99 8636.41 1126.79 (3018.50) 400.62 4545.92 4090.49 912.10 TOTAL - This Year 77659.89 14864.16 4794.19 87729.86 32997.46 (1585.09) 4440.79 39023.35 48706.51 44663.03

- Previous Year 67005.19 15946.86 5292.16 77659.88 32523.15 3465.45 3939.76 32997.46 – – Capital Work in-Progress – – – – – – – – 2604.42 2274.89

TOTAL 51310.92 46937.92

1. 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. 2. Depreciation for the year includes Rs.160.45 Lac (Previous Year Rs.168.43 Lac) being depreciation on revalued component of the fixed assets. 3. Accumulated depreciation includes impairment loss of Rs. 707.90 lac on plant & machinery in an earlier year. 4. Capital work-in-progress is net of impairment loss of Rs. 204.10 lac provided on an infructuous asset under construction.

SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS (contd.)


57

SCHEDULE 6 : INVESTMENTSFACE NUMBER AMOUNT

Investee Company/Institutions VALUE Qty Acquired Sold/Adj. Qty As on As onAs on During During As on Notes 31.03.07 31.03.06

(Rs.) 01.04.06 Year Year 31.03.07 Rs. lac Rs. lac

LONG TERM INVESTMENTS - At costA. TRADE INVESTMENTS

Equity Shares : Fully PaidBharuch Eco-Aqua Infrastructure Ltd. 10 440000 – – 440000 44.00 44.00Preference Shares : Partly paidGodrej Commodities Ltd. (Formerly GodrejFoods Limited) 10 5000000 – – 5000000 (b) 450.00 450.00(8% Redeemable CumulativePreference Shares, 2012)

B. OTHER INVESTMENTS : Fully paid unless stated otherwiseEquity SharesQuoted :Godrej Consumer Products Ltd. 1 26936108 – 3800000 23136108 (d) 9216.28 10730.01Others – – – – 0.92 1.19Unquoted :Associate CompaniesGodrej Upstream Ltd. 10 9000000 – – 9000000 241.06 457.06Swadeshi Detergents Ltd. 10 209370 – – 209370 55.29 50.28Creamline Diary Products Ltd 10 2390911 – – 2390911 1162.26 1014.23Creamline Nutrients Ltd. 10 351352 – _ 351352 120.95 95.96Polychem Hygine Laboratories Private Limited 10 455000 – - 455000 174.91 170.98Personalitree Academy Ltd. 10 389269 – – 389269 68.24 68.24Other CompaniesAvestha Gengraine Technologies Pvt Ltd. 10 175744 34500 – 210,244 883.30 767.13Compass Connections Ltd. £0.25 13692 – – 13692 159.17 159.18Gharda Chemicals Ltd. 100 114 – – 114 (a) 11.57 11.57Tahir Properties Ltd. (Partly paid) 100 25 – – 25 (b) 0.01 0.01KaROX Technologies Ltd. 10 250000 – – 250000 100.50 100.50Krithika Agro Farm Chemicals & Engg.Inds.Ltd. 10 7600 – 7,600 – – 0.76Common Stock/Membership Units :Unquoted :CBay Systems Ltd. ( refer note 6) $0.01 4586073 – – 4586073 4497.62 5430.14Boston Analytics LLC $1.00 781250 286504 – 1067754 650.48 258.76Verseon LLC - Class A Units $1.90 – 1315789 1315789 1142.34 1142.34Newmarket Limited 883.36 –Preference Shares :Unquoted :Tahir Properties Ltd. (Class - A) (partly paid) 100 25 – – 25 (b) 0.02 0.02Unquoted :Avestha Gengraine Technologies Pvt. Ltd.(redemed during the year) 10000000 3 – 3 – – 300.00Government SecuritiesUnquoted :National Saving Certificate 92000 – – – – – 1.37Indira Vikas Patra 2000 – – – – – 0.01Optionally convertible Loan notes :Unquoted :Compass Connections Ltd. $1000 – 97 – 97 83.19 –Shares in Co-operative Society : Fully PaidUnquoted :The Saraswat Co-op Bank Ltd. 10 1000 – – 1000 0.10 0.20Sachin Industrial Co-op.Society 500 3 – 3 – – 0.02Investment in the capital of Partnership Firm :View Group LP – – – – – 0.01 1368.01

CURRENT INVESTMENTSUnits of Mutual Fund :UnquotedTempleton India Treasury Fund – – – – – – 160.29Kotak Liquid Scheme – – – – – – 63.53Prudential ICICI Liquid Plan – – – – – – 2.06Grindlays Floating Rate Fund – – – – – – 1800.00Magnum Institutional Income Fund - Savings Growth – – – – – – 23.00LIC Mutual Fund - Growth plan 2.73 -

19948.32 25554.21Less : Provision for diminution in value of Investments (575.81) (569.89)

19372.51 24100.96Aggregate book value of InvestmentsQuoted 9216.28 10730.01Unquoted 10156.22 14254.31

19372.51 24984.32Market Value of Quoted Investments 34021.65 48875.57

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. - Godrej Commodities Limited - Preference - Rs. 1 per share. - Tahir Properties Ltd. - Prefernce - Rs. 30 per share. - Godrej Global Solutions Ltd - Equity - Rs. 3 per share on 49,71,429 shares. - Godrej Hicare Ltd - Equity - Rs. 6 per share on 30,40,000 shares.

(c) Reduction in number of shares of GGSL represents reduction in equity capital of the company under sections 101to 105 of the Companies Act, 1956 as per the order of the High Court of Bombay.(d) Face value of Rs. 4/- per share divided into 4 shares of Rs. 1/- per share each.(e) The compulsory convertible preference shares are convertible into equity shares on 28th Jun 2007.


58

SCHEDULE 11 : CURRENT LIABILITIES

Acceptances 4755.26 3843.20Sundry creditors 32875.55 27983.12Advances from customers 22997.39 9174.61Sundry deposits 2256.61 1865.90Investor Education & Protection Fund- Unclaimed Dividend 47.74 46.29- Unpaid Matured Deposits 15.69 65.15- Interest accrued on above – 0.20Other liabilities 6985.54 4504.59Interest accrued but not due on loans 185.45 168.21Share in jointly controlled entities 4730.65 1627.41

74849.87 49278.68

SCHEDULE 12 : PROVISIONS

Proposed dividend 2918.52 2658.37Provision for tax on distributed profits 496.00 473.16Provision for retirement benefits 2694.26 2869.40Share in jointly controlled entities 327.67 127.05

6436.45 6127.98

SCHEDULE 13 : MISCELLANEOUS

EXPENDITURE

(To the extent not written off or adjusted)

Deferred revenue expenditure

- Voluntary retirement compensation 1602.68 2219.46

Share in jointly controlled entities 59.52 –

1662.20 2219.46

SCHEDULE 14 : OTHER INCOME

Interest :

- Debentures 32.98 9.62

- Income tax refund 114.78 140.83

- Deposits (refer note 15) 367.17 486.54

Dividend 1018.62 1237.33

Profit on sale of fixed assets (net) 570.15 373.81

Profit on sale of long-term investments

(refer note 15) 4509.98 2299.64

Provision for depletion in value of long

term investments written back – 364.89

Bad debts recovered 650.00 –

Miscellaneous income (refer note 15) 1094.24 1253.00

Share in jointly controlled entities 314.69 154.07

8672.62 6319.73

SCHEDULE 7 : INVENTORIES(at lower of cost and net realisable value)Stores and spares 1533.89 1594.27Raw materials 15567.90 12829.31Construction work-in-progress 11705.95 2316.09Work-in-progress 6893.70 3607.67Finished Goods 7444.42 7134.83Share in jointly controlled entities 3216.55 1018.80

46362.41 28500.97

SCHEDULE 8 : SUNDRY DEBTORS

(Unsecured)Debts outstanding over six monthsConsidered good 3809.74 2115.24Considered doubtful 559.73 522.90

4369.47 2638.14Other debtsConsidered good 40313.62 20450.21

44683.09 23088.35Less: Provision for doubtful debts (559.73) (522.90)

44123.36 22565.45Share in jointly controlled entities 1516.68 487.24

45640.04 23052.69

SCHEDULE 9 : CASH AND

BANK BALANCES

Cash and cheques on hand 525.58 218.84Balances with scheduled banks- on current accounts 3391.39 2917.49- on deposit accounts 2704.19 5295.11Share in jointly controlled entities 2260.41 675.15

8881.57 9106.59

SCHEDULE 10: LOANS AND ADVANCES(Unsecured and considered goodunless otherwise stated)Loans and Advances (refer note 10) 8572.37 4152.72Loan to GIL ESOP Trust 2972.00 742.00Advances recoverable in cash or inkind or for value to be received (net ofprovision for doubtful advances) 10075.63 8642.30

Intercorporate deposits- Associate companies 35.00 41.80- Others 100.00 –Deposits and balances with- Customs & excise authorities 1637.30 850.90- Others 1736.23 1834.65Advance payment of taxes(Net of provision for tax) 893.79 153.75Share in jointly controlled entities 1285.25 794.21

27307.58 17212.33





59

SCHEDULE 15 : MATERIALSCONSUMED AND COST OF SALES

Raw materials consumed :Stocks at the commencement of the year 12829.30 10306.42Less: Stock adjustment for subsidiaries deleted (1085.55) –Add : Purchases (net) 139556.76 125106.17

151300.51 135412.59Less : Stocks as at the close of the year 15601.13 12829.30Raw Materials consumed during the year 135699.38 122583.29Cost of Sales - Property DevelopmentStocks at the commencement of the year 2316.09 1928.28Add : Construction Expenditure during the year 16988.31 4640.33

19304.40 6568.61Less : Stocks as at the close of the year 11720.44 2316.09

7583.96 4252.52Purchase of goods for resale 19775.61 18085.57Share in jointly controlled entities 14728.49 5243.06

177787.44 150164.44SCHEDULE 16 : EXPENSESSalaries, wages and allowances 11586.17 10318.84Contribution to provident fund and otherfunds 704.40 601.90Employee welfare expenses 912.27 981.81Stores and spares consumed 1596.79 1242.06Power and fuel 7050.16 5988.09Processing charges 4196.49 3795.24Rent (refer note 15) 782.75 728.76Rates and taxes 639.38 560.80Repairs and maintenance- Machinery 850.61 1046.90- Buildings 654.99 294.61- Other assets 440.79 519.84Insurance 265.29 243.23Freight 4298.57 3535.04Commission 2993.68 3355.81Discount 497.50 467.55Advertisement and publicity 766.83 1465.11Sales promotion 586.61 303.84Selling and distribution expenses 1471.37 1465.84Bad debts written off 358.65 620.33Provision for doubtful debts and advances 186.12 40.78Provision for depletion in the value of long-term investments – 0.10Excise duty on inventory change (61.38) 284.99Foerign Exchange loss 274.60 182.62Miscellaneous expenses 6706.90 5654.87Share in jointly controlled entities 7220.70 3064.16

54980.24 46763.12

SCHEDULE 17 : INVENTORY CHANGEStocks at the commencement 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 9160.12Less: Stock adjustment for subsidiaries deleted 340.90 -Less: Stocks at the close of the year :

Finished goods 7229.25 7134.83Work-in-progress 6893.70 3607.67



Share in jointly controlled entities 1498.11 638.3515621.06 11380.85

(Increase) / Decrease in Inventory (4581.11) (2220.73)

SCHEDULE 18 : INTEREST ANDFINANCIAL CHARGES (Net)Interest paid- on debentures and fixed loans 2841.09 2289.97- on bank overdrafts 1643.42 441.92- on Inter corporate deposits 210.24 190.10- other interest 1323.44 1093.59

6018.19 4015.58Less: Interest during construction period

capitalised – 265.47Less: Interest received- on loans & deposits 25.17 39.19- on Customer balances, etc. 0.01 18.08- projects and landlords 736.43 225.23- others 138.80 26.32

900.41 308.82Net Interest 5117.78 3441.29Other financial charges 650.27 602.05Foreign exchange (gain) / loss (20.89) 457.69Share in jointly controlled entities 753.49 27.41

6500.66 4528.44

SCHEDULE 19 : PRIOR PERIODADJUSTMENTSExcess provision for Income tax (65.09) 35.70Provision for pension payments – (112.50)Dividend for previous year – 62.42

(65.09) (14.38)


z

SCHEDULE 20 : SIGNIFICANT ACCOUNTING POLICIESa) Accounting Convention

The financial statements are prepared under the historical costconvention, on the accrual basis of accounting, in accordancewith the generally accepted accounting principles in India andthe Accounting Standards issued by the Institute of CharteredAccountants of India.

b) Fixed AssetsFixed Assets are stated at cost or as revalued as the case maybe, less accumulated depreciation. Cost includes all expensesrelated to acquisition and installation of the concerned assets.Exchange differences arising on account of repayment andyear end translation of foreign currency liabilities relating toacquisition of fixed assets from a country outside India areadjusted to the carrying cost of the respective assets.Fixed Assets acquired under finance lease are capitalised atthe lower of their face value and present value of the minimumlease payments.

c) Intangible AssetsThe group has evaluated the useful lives of the IntangibleAssets – Goodwill, Trade marks, Non compete fees, Acquisitionvalue of contracts, etc. based on the nature of business, growthrates and estimated discounted cash flows. The intangible assetsare amortised over the estimated useful lives as follows.

Particulars Estimated useful livesGoodwill 8 – 10 years


60


Particulars Estimated useful livesTrade marks 8 – 15 yearsNon compete fees 7 – 8 yearsAcquisition costs of contracts 3 yearsTrees Development cost 15 yearsComputer Software 6 years

d) Asset ImpairmentThe group reviews the carrying values of tangible and intangibleassets for any possible impairment at each Balance Sheet date.An impairment loss is recognised when the carrying amountof an asset exceed its recoverable amount. In assessing therecoverable amount, the estimated future cash flows arediscounted to their present value based on appropriatediscount rates.

e) Borrowing CostsBorrowing costs that are directly attributable to the acquisition/construction of the underlying fixed assets are capitalised as apart of the respective asset, upto the date of acquisition/completion of construction.

f) InvestmentsLong-term investments are carried at cost. Provision fordiminution, if any, in the value of each long term investment ismade to recognise a decline, other than of a temporary nature.The fair value of a long-term investment is ascertained withreference to its market value, the investee’s assets and resultsand the expected cash flows from the investment.Current investments are carried at lower of cost and fair value.

g) InventoriesInventories are valued at lower of cost and net realisable value.Cost is computed on weighted average basis and is net ofmodvat. Finished goods and work-in-progress include cost ofconversion and other costs incurred in bringing the inventoriesto their present location and condition. Provision is made forthe cost of obsolescence and other anticipated losses, whereverconsidered necessary.Construction work-in-progress is valued at cost. Constructionwork-in-progress includes cost of land, premium fordevelopment rights, construction costs, allocated interest andexpenses incidental to the projects undertaken by theCompany.

h) Provisions and Contingent LiabilitiesProvisions are recognised in the accounts in respect of presentprobable obligations, the amount of which can be reliablyestimated.Contingent Liabilities are disclosed in respect of possibleobligations that arise from past events but their existence isconfirmed by the occurrence or non occurrence of one ormore uncertain future events not wholly within the control ofthe Company.

i) Foreign Exchange TransactionsTransactions in foreign currency are recorded at the exchangerates prevailing on the date of the transaction. Monetary assetsand liabilities denominated in foreign currency are translatedat the period end exchange rates. Forward exchange contracts,remaining unsettled at the period end, backed by underlyingassets or liabilities are also translated at period end exchangerates. Premium or discount on forward exchange contracts isamortised over the period of the contract and recognised asincome or expense for the period. Exchange gains/losses arerecognised in the Profit and Loss Account except for exchangedifferences relating to fixed assets acquired from a countryoutside India, which are adjusted in the cost of the asset. NonMonetary foreign currency items like investments in foreignsubsidiaries are carried at cost and expressed in Indian

currency at the rate of exchange prevailing at the time of makingthe original investment.

j) Revenue RecognitionSales are recognised where goods are supplied and arerecorded net of returns, trade discounts, rebates, sales taxesand excise duty.Income from processing operations is recognised oncompletion of production/dispatch of the goods, as per theterms of contract.Export incentives receivable under the Duty Entitlement PassBook Scheme and the Duty Drawback Scheme are accountedon accrual basis.Revenue from construction activity is recognized on“Percentage of Completion Method” of accounting. As per thismethod, revenue in Profit and Loss Account at the end of theaccounting year is recognised in proportion to the actual costincurred as against the total estimated cost of projects underexecution 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, whererelevant, the percentages of completion, costs to completion,the expected revenues from the project/activity and theforeseeable losses to completion. Such estimates have beenrelied upon by the auditors.Dividend income is recognised when the right to receive thesame is established.Interest income is recognised on a time proportion basis.Income on assets given on operating lease is recognised on astraight line basis over the lease term.

k) DepreciationLeasehold land is amortised equally over the lease period.Leasehold improvements are amortised over five years.Depreciation is provided on the straight line method at therates specified in Schedule XIV to the Companies Act, 1956,except in some subsidiary companies, where depreciation hasbeen provided on the written down value method. The impactof the differing method of depreciation has not beenascertained but is not likely to be material. Computer hardwareis depreciated over its estimated useful life of 4 years.Depreciation on assets acquired during the year is providedfor the full accounting year and no depreciation is charged onthe assets sold/discarded during the year, except in case ofmajor additions and deductions exceeding rupees one crorein which case, proportionate depreciation is provided.Depreciation on the revalued component is provided on thestraight line method based on the balance useful life of theassets as certified by the valuers. Such depreciation iswithdrawn from Revaluation Reserve and credited to Profit andLoss Account.

l) Retirement BenefitsRetirement benefits to employees comprise payments underdefined contribution plans like provident fund and familypension as well as payments under defined benefit schemeslike leave encashment benefit on retirement and gratuity toeligible employees. Payments under defined contribution plansare charged to revenue. The liability in respect of defined benefitschemes is provided on the basis of an actuarial valuation atthe end of each financial year.

m) Deferred Revenue ExpenditureThe compensation payable under the Voluntary RetirementSchemes, the benefit of which is expected to accrue in futureis deferred over its payback period. The compensation isgenerally amortised over three to five years depending on thepayback period.


61


n) Hedging

Import of crude palm oil by the Group are being hedged byfutures contract on offshore Commodities Exchange. Gains orlosses on settled contracts is recognised in the Profit and LossAccount and is included in the cost of materials consumed.Futures contracts not settled as on the Balance Sheet date aremarked to market and losses, if any, are recognised in theprofit and Loss Account, whereas, the unrealised Profit isignored.

o) Taxes on Income

Current tax is the amount of tax payable on the assessableincome for the year determined in accordance with theprovisions of the Income Tax Act, 1961.Deferred tax is recognised on timing differences, being thedifferences between the taxable income and accountingincome that originate in one period and are capable of reversalin one or more subsequent periods. Deferred tax assets onunabsorbed tax losses and tax depreciation are recognizedonly when there is virtual certainty of their realisation and onother items when there is reasonable certainty that sufficientfuture taxable income will be available against which suchdeferred tax assets can be realised. The tax effect is calculatedon the accumulated timing differences at the year end andbased on the tax rate and laws enacted or substantially enactedon the Balance Sheet date.

p) Segment Reporting

The Accounting Policies adopted for segment reporting are inline with the Accounting Policies of the Company. Segmentassets include all operating assets used by the businesssegments and consist principally of fixed assets, debtors andinventories. Segment liabilities include the operating liabilitiesthat result from the operating activities of the business. Segmentassets and liabilities that cannot be allocated between thesegments are shown as part of unallocated corporate assetsand liabilities respectively. Income / Expenses relating to theenterprise as a whole and not allocable on a reasonable basisto business segments are reflected as unallocated corporateincome/expenses.


1. Principles of Consolidation:The consolidated financial statements relate to Godrej IndustriesLimited, the holding company, its majority owned subsidiaries,Joint Ventures and Associates (collectively referred to as Group).The consolidation of accounts of the Company with itssubsidiaries has been prepared in accordance with AccountingStandard (AS) 21 ‘Consolidated Financial Statements’. Thefinancial statements of the parent and its subsidiaries arecombined on a line by line basis and intra group balances,intra group transactions and unrealised profits or losses arefully eliminated.

In the consolidated financial statements, ‘Goodwill’ representsthe excess of the cost to the Company of its investment in thesubsidiaries and/or joint ventures over its share of equity, atthe respective dates on which the investments are made.Alternatively, where the share of equity as on the date ofinvestment is in excess of cost of investment, it is recognisedas ‘Capital Reserve’ in the consolidated financial statements.

Minority interest in the net assets of consolidated subsidiariesconsists of the amount of equity attributable to the minorityshareholders at the respective dates on which investments aremade by the Company in the subsidiary companies and furthermovements in their share in the equity, subsequent to the datesof investment as stated above.

Investments in Joint Ventures are dealt with in accordance withAccounting Standard (AS) 27 ‘Financial Reporting of Interestsin Joint Ventures’. The Company’s interest in jointly controlledentities are reported using proportionate consolidation,whereby the Company’s share of jointly controlled assets andliabilities and the share of income and expenses of the jointlycontrolled entities are reported 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 theInstitute of Chartered Accountants of India. Effect has beengiven to the carrying amount of investments in associates usingthe ‘Equity method’. The Company’s share of the postacquisition profits or losses is included in the carrying cost ofinvestments.

2. The financial statements of the subsidiaries, joint ventures andassociates used in the consolidation are drawn upto the samereporting date as of the Company i.e. year ended March 31,2007, except in respect of Personalitree Academy Ltd. anassociate company whose accounts for the year ended March31, 2007 have not been received till date. The investment notbeing significant and fully provided for in the previous year,there is no impact on the Profit & Loss Account.

The accounts of Al Rahba International Trading Ltd. a jointventure company with Godrej Agrovet Ltd., Creamline DairyProducts Ltd, Creamline Nutrients Ltd. & Polychem HygieneLaboratories Pvt. Ltd, associate companies have not beenaudited for the year ended March 31, 2007 as of date andhave been consolidated on the basis of the accounts as certifiedby their respective management.

3. Information on subsidiaries, joint ventures andassociates:

(a) The subsidiary companies considered in theconsolidated financial statements are:

Sr. Name of the Company Country of Percentage of HoldingNo. Incorporation This Previous

Year Year

1 Godrej Agrovet Ltd. India 70.30 % 57.80%2 Goldmohur Foods & Feeds Ltd. India 70.30 % 57.80%

(100% subsidiary of GodrejAgrovet Ltd.)

3 Golden Feed Products Ltd. India 70.30 % 57.80%(100% subsidiary of GodrejAgrovet Ltd.)

4 Godrej Acquafeed Ltd. India 70.30 % –(100% subsidiary of GodrejAgrovet Ltd.)

5 Adhar Retailing limited India 70.30 % –(100% subsidiary of GodrejAgrovet Ltd.)


62


Sr. Name of the Company Country of Percentage of HoldingNo. Incorporation This Previous

Year Year

6 Godrej Properties Ltd. India 82.88% 82.88%7 Girikandra Holiday Homes

& Resorts Ltd. India 82.88% 82.88%(100% subsidiary of GodrejProperties Ltd.)

8 Godrej Realty Pvt. Ltd. India 42.27% 42.27%(51% subsidiary of GodrejProperties Ltd.)

9 Godrej Waterside PropertiesPvt. Ltd. India 82.88% 82.88%(100% subsidiary of GodrejProperties Ltd.)

10 Godrej Developers Pvt. Ltd. India 82.88% –(100% subsidiary of GodrejProperties Ltd.)

11 Godrej Real Estate PrivateLimited India 82.88% –(100% subsidiary of GodrejProperties Ltd.)

12 Godrej Seaview Private Limited India 82.88% –(100% subsidiary of GodrejProperties Ltd.)

13 Godrej Hicare Ltd. India 85.91% 85.91%14 Ensemble Holdings & Finance

Limited India 99.95% 99.95%15 Godrej International Ltd., UK U.K. 100.00% 100.00%16 Godrej Global Mid-East FZE,

UAE U.A.E. 100.00% 100.00%(100% subsidiary of GodrejInternational Ltd.)

17 Godrej Beverages and FoodsLimited India – 70.00%

18 Godrej Global Solutions Ltd. India 100.00% 100.00%19 Godrej Global Solutions (Cyprus)

Limited Greece 100.00% 100.00%(100% subsidiary of GodrejGlobal Solutions Ltd.)

20 Godrej Global Solutions Inc. U.S.A. 100.00% 100.00%(100% subsidiary of GodrejGlobal Solutions Ltd.)

(b) Interests in Joint Ventures:

Sr. Name of the Company Country of Percentage ofNo. Incorporation Ownership interest

This 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 U.A.E. 45.00% 45%(held by Godrej Agrovet Ltd.)

v) ACI Godrej Agrovet Pvt. Ltd. Bangladesh 50.00% 50.00%(held by Godrej Agrovet Ltd.)

vi) Godrej Acquafeed Ltd. India 49.00% -(held by Godrej Agrovet Ltd.)

vii) Godrej Beverages & Foods Ltd. India 48.00% -viii) Nutrine Confectionery Ltd India 48.00% -

(100% subsidiary of GodrejBeverages and Foods Limited)

(c) Investments in Associates:Sr. Name of the Company Country of Percentage of HoldingNo. Incorporation This Previous

Year 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) Personalitree Academy Ltd. India 26.00% 26.00%(held by Ensemble Holdings& Finance Ltd.)

iv) Creamline Dairy Products Ltd. India 26.00% 26.00%(held by Godrej Agrovet Ltd.)

v) Creamline Nutrients Ltd. India 26.00% 26.00%(held by Godrej Agrovet Ltd.)

vi) Polychem Hygiene LaboratoriesPvt. Ltd. India 26.00% 26.00%(held by Godrej Agrovet Ltd.)

vii) Compass Connections Limited U.K. – 20.74 %

4. The accounting policies of certain subsidiaries, joint venturesand associates especially regarding the method of depreciation,amortization of technical know-how and accounting forretirement benefits are not in consonance with the groupaccounting policies. No effect has been given in theconsolidated financial statements on account of such differingaccounting policies, where the impact is not expected to bematerial.

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 associates in the ments

post value ofacquisition investments

( i ) SwadeshiDetergents Ltd. 191.34 91.48 (136.04) 55.30 –

(ii ) Godrej UpstreamLtd. 902.25 95.27 (661.19) – 241.06

( i i i ) PersonalitreeAcademy Ltd. 110.28 42.84 (42.04) 68.24 Nil

( iv) Creamline DairyProducts Ltd. 950.16 364.53 212.44 – 1162.60

(v) Creamline NutrientsLtd. 87.84 33.89 33.11 – 120.95

(vi) Polychem HygieneLab. Pvt. Ltd. 162.75 88.99 12.16 – 174.91

Total 2404.62 717.00 (581.56) 123.54 1699.52

6. Contingent LiabilitiesThis Year Previous Year

Rs. lac Rs. lac

a) Claims against the Company notacknowledged as debts:i) Excise duty demands relating to

disputed classification, postmanufacturing expenses, assessablevalues, etc. which the Companyhas contested and is in appeal atvarious levels 1544.09 1537.41

ii) Customs Duty demands relating toless charge, differential duty,classification, etc. 856.94 844.53


63



Rs. lac Rs. lac

iii) Sales Tax demand relating topurchase tax on Branch Transfer/Non availability of C Forms, etc.at various levels 2154.74 512.37

iv) Octroi demand relating toclassification issue on import ofPalm Stearine and interestthereon 938.05 844.46

v) Stamp duties claimed oncertain properties which areunder appeal by the Company 182.23 182.23

vi) Income Tax demands againstwhich the Company haspreferred appeals 1777.17 1785.83

vii) Industrial relations mattersunder appeal 595.11 518.06

viii) Others 886.11 704.18b) Guarantees issued by banks, excluding

guarantees issued in respect of mattersreported in (a) above 660.03 2062.14

c) Guarantees given by the Companyin respect of credit/guarantee limitssanctioned by banks to subsidiaryand other companies 14121.10 15,269.59

d) Uncalled liability on partly paidshares/debentures 381.64 673.97

e) Share in Jointly Controlled Entities 329.11 207.02This Year Previous Year

Rs. lac Rs. lac

7. Capital Commitments :

Estimated value of contracts remainingto be executed on capital account, tothe extent not provided 435.92 688.61Share in Jointly Controlled Entities 53.09 2.48

8. Investments :

CBay Systems Limited, USA (CBay USA) carried out anorganizational restructuring in October 2005, consequent towhich, all businesses of CBay group have been consolidatedunder CBay Systems Limited, India (CBay India), a whollyowned subsidiary. Under the scheme, the stockholders of CBayUSA are entitled to receive one additional share of CBay Indiafor every two stocks in CBay USA. The shares in CBay Indiawere distributed to all stockholders except Indian Shareholdersof CBay USA, pending Indian regulatory approvals. The sharesof CBay India, pending distribution to Indian shareholders,are held in trust by CBay USA. In the meanwhile, CBay groupdecided on a further organizational restructuring, wherein CBaySystems Holdings Limited (“CBay BVI”), a companyincorporated in the British Virgin Islands, would be the holdingcompany of the CBay Group. As per the scheme the companyis now entitled to four shares in CBay BVI for every share itwas entitled to in CBay India. The company has been allottedthe shares in CBay BVI on May 15, 2007.

9. Deferred Tax:Major components of Deferred Tax arising on account oftiming differences as at March 31, 2007 are:


Rs. lac Rs. lac

AssetsProvision for retirement benefits 351.00 324.14Provision for doubtful debts/advances 327.44 295.09Business Losses 306.91 1338.33VRS Expenses 156.00 77.00Others 242.35 346.20

1383.70 2380.76LiabilitiesDepreciation 6312.18 6214.53Deferred Revenue Expenditure – 21.34Share in Jointly Controlled Entities 189.16 21.02

6501.34 6256.89Net Deferred Tax Liability 5117.64 3876.13

10. Loans & Advances :Loans and Advances include Rs. 1,033 lac (Previous yearRs. 1033 lac) advanced by the Company to certain individualsagainst pledge, by way of deposit, of equity share 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. Gharda Cheicals Ltd. has in the meanwhile moved theBombay High Court and the matter is awaiting hearing. Intereston the aforesaid loans and advances amounting to Rs. 315 lacwas accrued upto March 31, 2000 and has been fully providedfor, no interest is being accrued thereafter. The recoverability ofthe advance is contingent upon the transfer and/ or disposal ofsaid shares. In the opinion of the management, the value of thesaid shares is greater than the amount of the loans and advances.

11. Employee Stock Option Plans :

In December 2005, the Group had instituted an EmployeeStock Option Plan (GIL ESOP) approved by the Board ofDirectors and the Shareholders, which provides for theallotment of 15,00,000 options convertible into 15,00,000equity shares of Rs. 6 each to eligible employees of participatingcompanies. In view of the sub-division of equity shares intoface value of Re. 1 each, the total number of options standsautomatically increased to 90,00,000 options convertible into90,00,000 equity shares of Re 1 each.The scheme is administered by an independent ESOP Trustwhich purchases from the market shares equivalent to thenumber of options granted by the participating companies.The Group decided to extend the benefits of the ESOP schemeto other levels of management as approved by theCompensation Committee. During the year, in preparation toextend the scheme to other levels of management, theparticipating companies provided finance to the ESOP Trustand the ESOP Trust purchased 26,25,000 additional sharesduring the year.

No. of Wt. averageOptions exercise price

Options outstanding at thebeginning of the year 21,00,000 65.39

(plus interest)Options granted – –Less : Exercised – –Less : Forfeited/expired – –Options outstanding at theyear end 21,00,000 65.39

(plus interest)


64


The options granted shall vest after three years from the dateof grant of option, provided the employee continues to be inemployment and the option is exercisable within two yearsafter vesting.The employee share based payment plans have beenaccounted based on the intrinsic value method and nocompensation expense has been recognised since the marketprice of the underlying share at the grant date is the same/lessthan the exercise price of the option, the intrinsic value thereforebeing Nil.Had the fair value method of accounting been used, theemployee compensation cost would have been Rs. 204 lac.(Previous year Rs. 204 lac).

12. Leases:

a) The Group has entered into leave and licence agreementsin respect of its commercial and residential premises. Theseare not non-cancellable and range between 12 months to36 months and are renewable by mutual consent onmutually acceptable terms. Leave and licencearrangements being similar in substance to operatingleases, the particulars of the premises under leave andlicence arrangement are as under:


Gross carrying amount ofpremises 1784.70 2857.79Accumulated depreciation 892.97 995.81Depreciation for the period 58.30 115.71

b) The total of future minimum lease payments under non-cancellable operating leases for each of the followingperiods:

Period Minimum future Jointlylease rentals controlled

entitiesRs. Lac Rs. Lac

Within one year 553.8 43.97Later than one year and not laterthan five years 1998.70 34.41Later than five years 2806.32 1.55Total 5358.82 79.93Amount recognised during the year 435.06 106.64c) Finance Leases:

The Group has acquired vehicles under Finance Lease.Liability for minimum lease payment is secured byhypothecation of the vehicles acquired under the lease.The minimum lease payments outstanding as on March31, 2007, in respect of vehicles acquired under lease areas under:Period Total Unmatured Present value

minimum Interest of minimumlease payments lease

outstanding as on paymentsMarch 31, 2007

Rs. lac Rs. lac Rs. lac

Within one year 63.51 17.82 58.48Later than one year andnot later than five years 119.36 24.79 92.72

182.87 42.61 151.20

13. Hedging :

a. Reserve Bank of India has permitted the Group to hedgeits exposure on Crude Palm Oil on offshore exchanges tothe extent of its imports. Accordingly, the Group is hedgingimport of crude palm oil on the Malaysian CommoditiesExchange by way of futures contracts. The particulars ofthe futures contracts for the year are as under:

This Year Previous YearDetails Purchase Sale Purchase SaleTotal number of contracts enteredduring the year – – 2 2Number of units (25 MT per unit)under above contracts – – 60 60Future contracts not settled as onMarch 31, 2007 – – – –Number of units under abovecontracts – – – –

b. The Group uses forward exchange contracts to hedge itsforeign exchange exposure in accordance with its forexpolicy as determined by a Forex Committee. The particularsof the forward exchange contracts for the year are as under:

This Year Previous YearDetails Purchase Sale Purchase Sale

Total number of contractsentered during the year 163 113 179 77Foreign currency value coveredUS Dollar (million) 66.90 7.29 103.30 33.68Euros (million) 0.30 9.18 – 3.36Total number of contractsoutstanding as at the year end 34 16 54 20Foreign currency valueUS Dollar (million) 19.33 2.00 37.30 13.00Euros (million) – 4.12 – 0.94Uncovered Foreign exchangeexposure as at the year endUS Dollar (million) 15.14 5.54 15.10 –Euros (million) 0.35 1.90 – –

14. TurnoverThis Year Previous Year

Turnover includes: Rs. lac Rs. laci) Processing charges 1124.99 2003.93ii) Export Incentives 345.20 554.42iii) Licence fees and service charges 3910.14 2561.11iv) Project/Development

Management Fees 3121.31 767.40v) Share in Jointly Controlled Entities 23818.59 9308.70

32320.23 15195.55

15. Exceptional ItemsThis Year Previous Year

Rs. lac Rs. laci) Included under Other Income

- Profit on sale of long-terminvestments 4382.56 2,119.81

- Reversal of provision for claimspayable on culmination of disputes – 175.00

- Interest received on deposit placedagainst above claim on executionof decree – 307.00

- Bad debt recovered 650.00 –ii) Payment to Mumbai Port Trust for

regularization of lease (included inRent paid). – 89.00

iii) Share in Jointly Controlled Entities (86.40) –

16. Profit and Loss Account

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. 75.98 lac (Previous yearRs. 0.42 lac). The exchange difference included in the Profitand Loss Account is a loss of Rs. 253.71 lac (Previous yearLoss of Rs. 669.94 lac). The exchange difference in respect offorward exchange contracts to be recognised in subsequentaccounting periods is Rs. 27.02 lac (Previous yearRs. 24.88 lac).


65


17. Earnings Per ShareThis PreviousYear Year

a. Calculation of weightedaverage number of equitysharesNumber of shares atthe beginning of the year Nos. 291851652 48542952Number of equity sharesoutstanding at the end ofthe year Nos. 291851652 48542952Weighted average numberof equity shares outstandingduring the year Nos. 291851652 48542952Weighted average number ofequity shares for the previousyear adjusted for the share splitinto 6 shares of Re. 1 each Nos.291851652 291257712

b. Net profit after tax availablefor equity shareholders Rs. lac 5888.06 4899.77

c. Basic and diluted earningsper share of Rs. 6 each Rupees 2.02 1.68

18. Related Party Disclosuresa) Names of related parties and description of

relationship:

(i) Parties where control existsGodrej & Boyce Mfg Co. Ltd, the holdingcompany.

Fellow Subsidiaries:Godrej Commodities Ltd.Godrej Infotech Ltd.Godrej Appliances Ltd.Godrej (Malaysia) Sdn BhdGodrej (Singapore) Pvt. LtdMercury Mfg. Co. Ltd.J.T. Dragon Pte Ltd.Godrej (Vietnam) Co. Ltd.

(ii) Other related parties with whom Company hadtransactions during the year

Associate/Joint Venture CompaniesGodrej SaraLee Ltd.Godrej Beverages & Foods Ltd.Godrej Upstream LtdGodrej Aquafeed Ltd.Nutrine Confectionery Comopany Limited

Key Management PersonnelMr. A. B. Godrej ChairmanMr. 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 CorporateAffairs)

Mr. M. P. Pusalkar Executive Director &President (CorporateProjects)

Mr. A. Mahendran Managing Director(Godrej Saralee Ltd.)

Mr. C. K. Vaidya Managing DirectorGodrej Agrovet Ltd.

Relatives Key Management PersonnelMs. N. A. Godrej Daughter of Mr. A.B.

GodrejMr. P. A. Godrej Son of Mr. A.B. Godrej

Enterprises over which key managementpersonnel excerise significant influenceGodrej Consumer Products Ltd.Godrej Investments Pvt. Ltd.Bahar Agrochem & Feeds Pvt. Ltd.Godrej Holdings P. LtdLawkim Ltd.Cartini India Ltd.


66

b) 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 110.67 – 22.97 – – 982.10 1115.74Previous Year 20.17 – 12.50 – – 976.74 1009.41Sale of Fixed Assets – – – – – 21.64 21.64Previous Year 0.05 – – – – 264.19 264.24Purchase of goods & equipment 153.27 914.14 198.46 – – 719.98 1985.85Previous Year 30.77 695.87 6.69 – – 1262.28 1995.61Processing charges received – – 193.68 – – – 193.68Previous Year – – – – – – –Commission received – 2.50 73.22 – – 15.98 91.70Previous Year – 2.50 19.78 – – 23.15 45.43Recovery of establishment& Other Expenses 20.60 0.47 360.22 – – 937.72 1319.00Previous Year 1.48 12.52 229.64 – – 816.13 1059.77Establishment & other exps. paid 1030.67 16.39 8.72 – – 139.87 1195.64Previous Year 230.49 10.50 14.03 – – 89.91 344.93Interest received – – – – – 3.91 3.91Previous Year – – – – – 4.99 4.99Dividend income – 33.74 1174.64 – – 980.60 2188.98Previous Year – 25.28 536.25 – – 1007.66 1569.19Dividend paid 2485.80 – – 135.61 869.84 – 3491.25Previous Year 1248.02 – – 47.61 424.41 – 1720.04Remuneration – – – 427.14 25.64 – 452.79Previous Year – – – 428.16 – – 428.16Purchase of Investments – – 10142.25 – – – 10142.25Previous Year – – – – – –Intercorporate Deposits -Advanced / (Accepted) 0.01 – – – – (1000.00) (999.99)Previous Year 0.42 – (3.30) – – (10.00) (12.88)Intercorporate Deposits Repaymentreceived during the year – – 3.55 – – 12.80 16.35Previous Year – – – – – – –Balance Outstanding as on March 31, 2007Receivables 78.71 617.89 54.68 – – 226.67 977.95Previous Year 1.42 – 18.54 – – 222.25 242.21Payables 94.85 – 3.04 – – 70.97 168.86Previous Year 2.81 – 42.60 – – 103.93 149.34Guarantees Outstanding – 1000.00 1350.00 – – – 2350.00Previous Year – 1000.00 1350.00 – – – 2350.00

c) The significant Related Party transactions are as under:Nature of Transaction


Rs. Lac Rs. LacSale of goods- Godrej Consumer Products Ltd. 982.10 890.83Sale of fixed assets- Godrej Consumer Products Ltd. 21.64 264.19Purchase of goods & equipment- Godrej & Boyce Mfg. Co. Ltd. 40.51 –- Godrej Beverages & Foods Ltd. 112.76 –- Godrej Consumer Products Ltd. 720.96 1262.28- Godrej Commodities Ltd. 909.67 692.34Processing Charges received- Godrej Beverages & Foods Ltd. 193.68 –Commission received- Godrej Consumer Products Ltd. 15.98 23.15- Godrej Beverages & Foods Ltd. 47.26 –- Godrej Upstream Ltd. 25.96 19.78Recovery of establishment & other expenses- Godrej Consumer Products Ltd. 936.66 815.74- Godrej Saralee Ltd. 211.65 229.64- Godrej Beverages & Foods Ltd. 142.59 –


Rs. Lac Rs. LacEstablishment & other exps paid- Godrej & Boyce Mfg. Co. Ltd. 1017.21 228.68- Godrej Consumer Products Ltd. 87.14 89.66Interest received- Swadeshi Detergents Ltd. 3.91 4.99Dividend income- Godrej Consumer Products Ltd. 980.60 1007.66- Godrej Commodities Ltd. 33.74 –- Godrej SaraLee Ltd. 1174.64 –Dividend paid- Godrej & Boyce Mfg. Co. Ltd. 2485.80 1248.02Remuneration to Key Management Personnel- Mr. N.B. Godrej 85.66 82.11- Ms. T. A. Dubash 54.20 50.57- Mr. Mathew Eipe 64.00 62.56- Mr. V.F. Banaji 69.55 77.07- Mr. M.P. Pusalkar 47.24 48.93- Mr. A. Mahendran 39.36 30.23- Mr. C.K. Vaidya 67.14 67.08Remuneration to Relatives of Key Management Personnel- Mr. Pirojsha Godrej 5.73 4.77- Ms. Nisaba A. Godrej 19.92 –Purchase of Investments- Godrej Upstream Ltd. 902.25 –- Godrej Beverages & Foods Ltd. 9240.00 –Intercorporate Deposits Advanced/(Accepted)- Goderj Investments Ltd. (1000.00) –


67

19. Segm

ent In

form

ation

(Rs.

la

c)

Info

rmat

ion a

bout

Chem

ical

sA

nim

al F

eed

Veg

oils

Est

ate

& P

ropert

yH

ouse

hold

Bevera

ges

& F

oods

Finan

ce &

Oth

ers

Tota

lpri

mary

busi

ness

Dev

elopm

ent

Inse

ctic

ides

Inve

stm

ents

segm

ents

This

Prev

ious

This

Prev

ious

This

Prev

ious

This

Prev

ious

This

Prev

ious

This

Prev

ious

This

Prev

ious

This

Prev

ious

This

Prev

ious

Year

Year

Year

Year

Year

Year

Year

Year

Year

Year

Year

Year

Year

Year

Year

Year

Year

Year

(A) R

evenue

Exte

rnal

Sal

es57085.2

751

177.

7138975.8

567

609.

765085.6

921

115.

0215819.4

791

51.1

513564.5

111

176.

4613564.3

078

2.92

7078.7

834

96.2

995395.8

446

107.

60246569.7

121

0616

.91

Inte

rseg

men

t Sa

les

102.1

50.

001479.6

820

99.2

1–

1.53

468.5

417

7.15

1.7

8–

104.1

8–

5066.7

510

78.6

1280.2

443

94.1

97503.3

277

50.6

9To

tal

Sale

s57187.4

251

177.

7140

455.

5369

708.

975085.6

921

116.

5516288.0

193

28.3

013566.2

911

176.

4613668.4

878

2.92

12145.5

345

74.9

095676.0

850

501.

79254073.0

321

8367

.60

Less

: In

ters

egm

ent

Sale

s(1

02.1

5)

–(1

479.6

8)

(209

9.21

)–

(1.5

3)(4

68.5

4)

(177

.15)

(1.7

8)

–(1

04.1

8)

–(5

066.7

5)

(107

8.61

)(2

80.2

4)

(439

4.19

)(7

503.3

2)

(775

0.69

)To

tal

Rev

enue

57085.2

751

177.

7138975.8

567

609.

765085.6

921

115.

0215819.4

791

51.1

513564.5

111

176.

4613564.3

078

2.92

7078.7

834

96.2

995395.8

446

107.

60246569.7

121

0616

.91

(B) R

esu

lts

Segm

ent

resu

lt be

fore

inte

rest

, ex

cept

iona

lite

ms

and

tax

540.6

647

60.3

51261.7

215

86.2

2(3

22.3

3)

(342

.91)

6392.0

436

13.4

31751.7

213

12.3

4215.4

9(7

40.2

4)7078.7

834

96.4

42014.2

713

85.9

718932.3

515

071.

60Ex

cept

iona

l ite

ms

–U

nallo

cate

d ex

pens

es(4

829.5

3)

(292

8.29

)In

tere

st E

xpen

se (

net)

(6500.6

6)

(452

8.44

)Pro

fit befo

re tax

7602.1

676

14.8

7Ta

xes

(1269.1

9)

(255

5.16

)A

dd/(L

ess)

pri

or p

erio

d a

djus

tmen

ts(6

5.0

9)

(14.

38)

Pro

fit after

taxes

6267.8

850

45.3

3Sh

are

of p

rofit

inas

soci

ates

24.5

6(7

8.09

)Pr

ofit

befo

re M

inor

ityIn

tere

st6292.4

449

67.2

4Sh

are

of M

inor

ityIn

tere

st(4

04.3

7)

(67.

47)

Net Pro

fit after

Min

ori

ty Inte

rest

5888.0

748

99.7

7

Segm

ent

Ass

ets

54217.9

644

336.

1310413.5

818

497.

48730.0

070

1.03

46498.3

020

137.

206619.8

045

53.7

617874.1

377

25.4

439984.5

829

363.

3047616.9

728

095.

60223955.3

215

3409

.94

Una

lloca

ted

Ass

ets

4222.5

590

21.2

6

Tota

l A

sset

s228177.8

716

2431

.20

Segm

ent

Liab

ilitie

s18882.7

519

897.

288936.6

116

100.

77339.0

042

3.86

41500.4

413

355.

605330.2

834

36.9

711118.7

271

32.8

6–

44.8

634

820.

4257

56.0

6120928.2

266

148.

26U

nallo

cate

d Li

abili

ties

59978.1

553

883.

02To

tal

Liab

ilitie

s180906.3

712

0031

.28

Tota

l Cos

t inc

urre

ddu

ring

the

yea

r to

acqu

ire

segm

ent

asse

ts3681.7

672

76.3

8206.8

383

1.63

8.0

729

7.77

116.0

217

0.77

659.1

319

4.53

950.2

511

.98

–35

57.3

963

45.5

710

229.

3211967.6

322

569.

77Se

gmen

t de

prec

iatio

n2123.7

317

84.0

9138.7

151

8.75

53.6

823

9.82

154.0

617

8.82

401.4

810

0.05

502.

0030

.06

–0.

0038

1.87

915.

183755.5

337

66.7

7

Info

rmation a

bout

Secondary

Busi

ness

Segm

ents

Tota

lR

evenue b

yG

eogra

phic

al m

ark

ets

This

Year

Prev

ious

Yea

rIn

dia

194896.0

918

6840

.48

Out

side

Ind

ia51673.6

223

776.

43

Tota

l246569.7

121

0616

.91

Carr

yin

g A

mount of

Segm

ent ass

ets

This

Year

Prev

ious

Yea

rIn

dia

222530.9

115

8380

.95

Out

side

Ind

ia5646.9

640

50.2

5

Tota

l228177.8

716

2431

.20

Note

s:

1.Th

e C

ompa

ny h

as d

iscl

osed

Bus

ines

s Se

gmen

t as

the

pri

mar

y se

gmen

t. Se

gmen

ts h

ave

been

ide

ntifi

ed t

akin

g in

to a

ccou

nt t

he n

atur

e of

the

pro

duct

s, t

he d

iffer

ent

risk

s an

d re

turn

s, t

he o

rgan

isat

iona

l st

ruct

ure

and

the

inte

rnal

rep

ortin

g sy

stem

.

2.C

hem

ical

s se

gmen

t in

clud

es t

he b

usin

ess

of O

leoc

hem

ical

s su

ch a

s Fa

tty A

cids

, Fa

tty A

lcoh

ols

and

Alfa

Ole

fin S

ulph

onat

es a

nd R

efin

ed G

lyce

rin.

Ani

mal

Fee

d se

gmen

t in

clud

es t

he b

usin

ess

of c

ompo

und

feed

for

cat

tle,

poul

try,

acq

uatic

ani

mal

s. V

eg o

ilsse

gmen

t in

clud

es t

he b

usin

ess

of r

efin

ed v

eget

able

oils

and

van

aspa

ti. B

ever

ages

and

Foo

ds s

egm

ent

incl

udes

fru

it an

d ve

geta

ble

pure

e, p

ulp,

jui

ces

and

frui

t be

vera

ges.

Est

ate

segm

ent

com

pris

es t

he b

usin

ess

of d

evel

opin

g co

mm

erci

al &

res

iden

tial

prop

erty

and

giv

ing

prem

ises

on

leav

e an

d lic

ence

bas

is.

Hou

seho

ld I

nsec

ticid

es s

egm

ent

incl

udes

the

bus

ines

s of

hou

seho

ld &

env

iron

men

tal

pest

con

trol

sol

utio

ns.

Fina

nce

& I

nves

tmen

ts i

nclu

des

inve

stm

ents

in

subs

idia

ries

, as

soci

ates

com

pani

es a

ndth

er i

nves

tmen

ts.

Oth

ers

incl

udes

Med

ical

Dia

gnos

tics,

Agr

i In

puts

, In

tegr

ated

Pou

ltry,

Oil

Palm

Pla

ntat

ions

and

ene

rgy

gene

ratio

n th

roug

h w

indm

ills.

3.Th

e ge

ogra

phic

al s

egm

ents

are

as

follo

ws

- Sa

les

in I

ndia

rep

rese

nt s

ales

to

cust

omer

s lo

cate

d in

Ind

ia.

- Sa

les

outs

ide

Indi

a re

pres

ent

sale

s to

cus

tom

ers

loca

ted

outs

ide

Indi

a.

SC

HED

ULES F

OR

MIN

G P

AR

T O

F T

HE C

ON

SO

LID

ATED

AC

CO

UN

TS (

cont

d.)


68

Statement regarding Subsidiary Companies pursuant to Section 212 of the Companies Act, 1956

1. Name of the Company Godrej Godrej Ensemble Godrej Godrej Godrej Golden GodrejAgrovet Properties Holdings International Global Hicare Feed GlobalLimited Limited & Finance Limited Solutions Solutions Products MidEast

Limited FZE

2. The Company's interest inthe subsidiaries as onMarch 31, 2005a. Number of Equity Shares 7112956 5264645 3770160 2605000 13602260 6647100 (See note (See note

Total Number of Shares 10118752 6444545 3774160 2605000 13610606 7900000b. Face Value 10 10 10 £1(US$1.52) 10 10 6 below) 7 below)c. Extent of Holding 70.29% 81.69% 99.89% 100% 99.94% 84.14%

3. Net aggregate profit/(Loss) ofthe subsidiary company sofar it concerns the members Rs. lac Rs. lac Rs. lac US$ Rs. lac Rs. lac _ _of the CompanyA. For the financial year

ended on March 31, 2005 i. Not dealt with in the books

of Account of the Company (1,627.45) 648.71 31.09 27,800 (182.42) 153.44 _ _ ii. Dealt with in the books of

Account of the Company 72,799.00 2,712.48 4,340.00 Nil Nil Nil _ _

B. For the subsidiary company's previous financial years since it became a subsidiary i. Not dealt with in the books of

Account of the Company 2,436.74 1,446.48 (519.34) 2,458,697 (169.25) N.A _ _ ii. Dealt with in the books of

Account of the Company 2,384.08 1,719.63 Nil 1,134,828 Nil N.A _ _

Notes:1 The Financial Year of all subsidiary companies have ended on March 31, 2007.2 76,795 Equity Shares of Rs.10 each fully paid up in Godrej Properties Ltd. are held by Ensemble Holdings & Finance Ltd., a subsidiary

of the Company.3 4,000 Equity Shares of Rs.10 each in Ensemble Holdings & Finance Ltd., are held by Godrej Agrovet Ltd., a subsidiary of the Company.4 8,340 equity shares of Rs.10 each in Godrej Global Solutions Ltd. are held by Ensemble Holdings & Finance Ltd., a subsidiary of the

Company.5 4,800 Equity Shares of Rs.10 each in Godrej Hicare Ltd. are held by Ensemble Holdings and Finance Ltd., a subsidiary of the Company.6 50,000 Equity Shares of Rs. 10 each fully paid up in Golden Feed Products Ltd. (representing 100% of the Share Capital) are held by

Godrej Agrovet Ltd., a subsidiary of the Company.7 5 Ordinary Shares of US$ 2,50,000 each fully paid up in Godrej Global MidEast FZE. (representing 100% of the Share Capital) are held

by Godrej International Ltd., a subsidiary of the Company.8 18,38,170 equity shares of Rs.10 each fully paid up in Goldmohur Foods & Feeds Ltd. (representing 100% of the share capital) are held

by Godrej Agrovet Ltd, a subsidiary of the Company.9 500 equity shares of the face value of Rs.1000 each fully paid up in Girikandra Holiday Homes and Resorts Ltd. ( representing 100%

of the share capital)are held by Godrej Properties Ltd., a subsidiary of the Company.10 510000 equity shares of the face value of Rs.10 each fully paid up in Godrej Realty Pvt. Ltd. are held by Godrej Properties Ltd., a

subsidiary of the Company.11 50000equity shares of the face value of Rs.10 each fully paid up in Godrej Waterside Properties Pvt. Ltd. ( representing 100% of the

share capital)are held by Godrej Properties Ltd., a subsidiary of the Company.12 1000 equity shares of the face value of US 1 cent each fully paid up in Godrej Global Solutions Inc. ( representing 100% of the share

capital)are held by Godrej Global Solutions (Cypurs) Ltd., a sub-subsidiary of the Company.13 26240229 equity shares of the face value of USD 1 each fully paid up in Godrej Global Solutions (Cyprus) Ltd. ( representing 100%

of the share capital)are held by Godrej Global Solutions Ltd., a subsidiary of the Company.


69

Goldmohur Girikandra Godrej Godrej Godrej Godrej Aadhaar Godrej Godrej Godrej GodrejFoods & Holiday Realty Waterside Global Global Retailing Aquafeed Developers Real Sea

Feeds Homes & Pvt. Properties Solutions Solutions Ltd. Ltd. Pvt. Ltd Estate ViewLimited Resorts Ltd. Pvt. Ltd Inc. (Cyprus) Pvt. Ltd. Properties

Limited Ltd. Pvt. Ltd.

(see note (see note (see note (see note (see note (see note (see note (see note (see note (see note (see note

8 below) 9 below) 10 below) 11 below) 12 below) 13 below) 14 below) 15 below) 16 below) 17 below) 18 below)

_ _ _ _ _ _ _ _ _ _ _

_ _ _ _ _ _ _ _ _ _ _

_ _ _ _ _ _ _ _ _ _ _

_ _ _ _ _ _ _ _ _ _ _

_ _ _ _ _ _ _ _ _ _ _

14 50,000 Equity Shares of Rs. 10 each fully paid up in Aadhaar Retailing Ltd. (representing 100% of the Share Capital) are held by GodrejAgrovet Ltd., a subsidiary of the Company.

15 50,000 Equity Shares of Rs. 10 each fully paid up in Godrej Aquafeed Ltd. (representing 100% of the Share Capital) are held by GodrejAgrovet Ltd., a subsidiary of the Company.

16 500 Equity Shares of Rs. 10 each fully paid up in Godrej Developers Pvt Ltd. (representing 100% of the Share Capital) are held byGodrej Properties Ltd., a subsidiary of the Company.

17 500 Equity Shares of Rs. 10 each fully paid up in Godrej Real Estate Pvt Ltd. (representing 100% of the Share Capital) are held byGodrej Properties Ltd., a subsidiary of the Company.

18 500 Equity Shares of Rs. 10 each fully paid up in Godrej Sea View Properties Pvt Ltd. (representing 100% of the Share Capital) are heldby Godrej Properties Ltd., a subsidiary of the Company.

A.B. Godrej N.B. Godrej M. Eipe M.P. Pusalkar

Chairman Managing Director Executive Director Executive Director& President (Chemicals) & President (Corporate Projects)

S.K. Bhatt V. Srinivasan

Executive Vice President Executive Vice President(Corporate Company Secretary (Finance & Estate)


S U B S I D I A R I E S '

A C C O U N T S

2006-2007


Godrej Agrovet Limited

70

DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED ON MARCH 31, 2007

To The Shareholders

Your Directors have pleasure in submitting their Report along with the audited Accounts for the financialyear ended on March 31, 2007.

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 year

ended ended

31/3/2007 31/3/2006

Rs. lac Rs. lac

Total Income 71285.18 60555.90

Profit Before Taxation (PBT) 372.66 761.23Less : Provision for Taxation 97.64 78.70Profit After Taxation (PAT) 275.02 682.53Balance brought forward from previous year 2984.58 2696.74

Total 3259.60 3379.27

Appropriations:

Interim Dividend 975.27 –Final Dividend – 284.75Tax on Dividend 136.78 39.94General Reserve 28.5 70.00

Balance Carried Forward to Balance Sheet 2119.05 2984.58

Total 3259.60 3379.27

Review of Operations

During the year under review, a Joint Venture was formed with Gold Coin Group of Singapore. YourCompany's shrimp feed business has been transferred to this Joint Venture operating in the name and styleof Godrej Gold Coin Aquafeed Limited. The JV company has also taken over the shrimp feed business ofGolden Feed Products Limited as well as Gold Coin Group in India.

The year under review presented many challenges for your Company. Avian Influenza continuing in theinitial months of the Financial Year adversely impacted the performance of your Company. Additionallythe high raw material prices put severe pressure on the profitability. The foray into retailing, started by yourCompany witnessed good expansion during the year under review. However, this initiative being in growthmode has impacted the profitability for the year under review.

The impact of the above mentioned factors resulted in profitability declining from Rs. 683 lac to Rs. 275lac. The total income smartly grew from Rs. 60,556 lac to Rs. 71,285 lac. The business-wise performanceis reviewed hereunder:

ANIMAL FEEDS:

Avian Influenza which was detected in some parts of India in February '06 adversely impacted the AnimalFeeds Business. The industry witnessed a degrowth during the year under review. While your Company'sperformance was impacted during the first half of the year under review, your Company did well to regainits volume and market share in the second half of the year under review.

Unprecedented price increases in some of the key raw materials such as maize, impacted the marginsadversely. Your Company tried to mitigate this pressure on the bottom line by stepping up its R & D effortsand focusing on various cost saving opportunities. Use of various enzymes and additives which helped insaving substantial cost are a result of these efforts.

INTEGRATED POULTRY BUSINESS:

The Poultry Business too was adversely impacted by the Avian Influenza. However, with no furtheroutbreak reported during the year, consumer confidence has now been restored. The Poultry ProcessingPlant at Bangalore has been replaced by a modern, higher capacity plant designed to cater to the requirementsof the most demanding customers. A range of frozen Ready to Eat and Ready to Cook vegetarian as wellas chicken based products has been launched under the brand name "Yummiez". The "Yummiez" rangeof products has been received well by the consumers.

AGRICULTURAL INPUTS:

The Agri Inputs Division has reported an excellent performance with 20% growth in profit. Some of ourhigh contribution products have witnessed good volume growth during the year under review despite theAgri Inputs Industry witnessing a degrowth.

Your Company's Agri Exports Division too witnessed a good growth with sales growing by 121% over theprevious year. The agricultural exports have expanded both in width and depth with newer territories andproduct categories being added during the year under review.

AADHAAR:

In the Financial Year 2006-07 Godrej Aadhaar - the agri services cum retail initiative of your Companyopened 20 new outlets taking the total count to 39 outlets covering retail area of over 10,000 sq. met.

The Aadhaar outlets have been modified to give a refreshing look and an attractive ambience - factorsconsidered very important for retail. For their Visual Merchandise & Retail Design (VM & RD) work forGodrej Aadhaar, the design agencies have won national level awards from independent trade organizations.

Your Company also expanded its Strategic Alliances. Some of the alliance partners who have joined handswith Godrej Aadhaar are Apollo Hospitals, ICICI Prudential Life Insurance, Bajaj Allianz Life Insurance,Agri Insurance Company, HDFC Bank, John Deere Tractors, Eicher Motors and Western Union MoneyTransfer Service. All the partners have already started offering their own products and services to customersof Godrej Aadhaar.

Your Company has also tied up with petroleum companies like HPCL and BPCL for petro-format Aadhaaroutlets - branded as "Aadhaar Suvidha".

Keeping in mind the core objective of serving the farmer community of the country Godrej Aadhaar haslaunched Crop Improvement Programmes (CIPs). These are aimed at ensuring a much higher crop yieldand farm productivity to the members of the CIPs.

NATURE'S BASKET:

Your Company's initiative in retailing of gourmet foods also witnessed good growth with 5 more Nature'sBasket stores being opened during the year under review taking the total number to 8. The sales from thesestores has doubled from Rs. 6.4 crores to Rs. 12.9 crores. Your Company is repositioning Nature's Basketwith new categories like wines, boulangerie, cheese and meat delis, etc. being added.

PLANTATIONS:

Oil PalmThe Oil Palm Division grew revenue by 35% and profit by 45%. The capacity of your Company's Palm OilMill at Eluru, Andhra Pradesh has been expanded to 20 MT/hr of FFB, expandable to 30 MT/hr of FFB withmarginal additional equipment. An MOU has been signed with Government of Orissa for Oil PalmDevelopment in that State. Additional area of over 3800 HA has been brought under Oil Palm Cultivation.The total area under Oil Palm Cultivation is 12,300 HA.

JatrophaWith encouragement and vigorous support from the Government of Mizoram, Jatropha Cultivation hasbeen started in the state of Mizoram. In the very first year, about 5000 HA has been brought under Jatrophacultivation in that state.

Your Company has ambitious plans for covering larger areas under Oil Palm as well as Jatropha.

PLANT BIOTECH BUSINESS:

The Plant Biotech Division has been expanding its operations of Banana plants in the states of UP and Bihar.Yield improvement program of sugarcane is going on well and is expected to be replicated innewer territories.

FINANCE AND INFORMATION SYSTEMS:

Your Company was able to procure funds at very competitive pricing in spite of rising interest rate scenariodue to efficient treasury operations. Your Company continues to enjoy the apex rating of A1+ from ICRAfor it's Commercial Paper Programme of Rs. 15 crore. ICRA had in the previous year put your Company'rating under "rating watch with developing implication". During the year, ICRA removed the rating from"rating watch with developing implication" and confirmed the A1+ rating. During the year, your Companyhas embarked on implementation of an ERP solution (SAP - IS Retail) for it's retail businesses. IT continuesto play a crucial role in the operations of your Company.

OTHER INITIATIVES:

Your Company's Windmill Power Generation Project at Dhule, Maharashtra has been approved by UnitedNations Framework Convention on Climate Changes (UNFCCC) under the Clean Development Mechanism(CDM) program, enabling your Company to obtain carbon credits for the units generated by the windmills.

DIVIDEND

Your Directors have declared an interim dividend for 2006-07 amounting to Rs.13.70 per share of facevalue of Rs. 10/- each, i.e. 137%. No final dividend is recommended.

FIXED DEPOSITS

Your Company has not accepted any public deposits during the financial year under review.

ADDITIONAL CAPITAL AND HOLDING COMPANY

Your Company issued 30,00,000 additional shares to Godrej Industries Limited (GIL) raising GIL's holdingto 70.29%. Your Company continues to be a subsidiary of Godrej Industries Limited as defined underSection 4(1)(b) of the Companies Act, 1956.

SUBSIDIARY COMPANIES

Your Company continues to be the holding Company of Goldmohur Foods and Feeds Ltd. (GFFL), GoldenFeed Products Ltd., (GFPL). Your Company has sold its shareholding in Krithika Agro Farm Chemicals andEngineering Industries Private Limited (Krithika) during the year under review. Consequently, Krithikaceases to be a subsidiary of your Company.

During the year, your Company has promoted following new wholly owned subsidiary Companies -

a) Aadhaar Retailing Limited (ARL)b) Godrej Aquafeed Limited (GAL)

The audited Balance Sheets of GFFL, GFPL, ARL and GAL as at March 31, 2007 together with their auditedProfit & Loss Accounts, Directors' Reports and Audtors' Reports are attached to the Balance Sheet andProfit & Loss Account of your Company.

JOINT VENTURES

Your Company's Joint Ventures in Bangladesh and United Arab Emirates, namely, ACI Godrej Agrovet Pvt.Ltd. and Al Rahba International Trading LLC, have also been impacted by the Avian Influenza. However,the performance of both theses joint ventures has improved considerably in recent months

As mentioned elsewhere in this report, your company has formed a joint venture with the Gold Coin group,Singapore to operate in the aqua feed business in India. The aqua feed business of your company alongwiththe aqua feed business of Golden Feed Products Limited and Gold Coin group in India has been transferredto the joint venture company, Godrej Gold Coin Aquafeed Limited. The joint venture, Godrej Gold CoinAquafeed Limited (GGCAL), operated only for a few months in the year under review.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGEEARNINGS 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 andforming part of this Report, is annexed hereto (Annexure - A).

DIRECTORS

Mr. A. B. Godrej, Mr. C. K. Vaidya and Mr. Amit Choudhury, the Directors retire by rotation at the ensuingAnnual General Meeting in accordance with Article 124 of the Articles of Association of the Company andthe provisions of the Companies Act, 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 reappointment.


71

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 Energy

The 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) ENERGY CONSERVATION AND TECHNOLOGY INNOVATION MEASURES UNDERTAKENDURING 2006-07 AT PALM OIL MILL, CH.POTHEPALLI:

Sl. Area Equipment Conservation SavingsNo. measures per annum

1. CPO Mill Decanter water pump Replaced 5 HP motor with 3 HP Rs. 6200/-2. CPO Mill Sludge day tank pump Replaced 5 HP motor with 2 HP Rs. 9400/-3. CPO Mill Sludge pit pump Replaced 3 HP motor with 2 HP Rs. 3100/-4. Lighting Tube lights Replaced 40 W tube light with 36 W Rs. 7000/-

Total saving Rs.25700/-

2) Replacement of 40 W tube light with 36 W fluorescent candle lamps has resulted in powersaving.

3) During the year, most of the boilers which were using LDO as fuel were replaced by moreefficient Furnace oil based/solid fuel based boilers to help in saving energy and costs.

B) Technology Absorption, Adaptation and Innovation

I. 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) Use of various enzymes and additives helped in saving substantial costs in particularlybroiler feeds.

II. The Company's expenditure on R&D is given below:Expenditure on R & D

2006-2007 2005-2006Rs. lac Rs. lac.

(a) Capital – –(b) Recurring 100.78 90.31(c) Total 100.78 90.31(d) Total R & D expenditure as 0.15% 0.15 %

a percentage of total turnover

C. 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.

2006-2007 2005-2006Rs. lac Rs. lac

II. Foreign exchange used 1460.28 1582.48

III. Foreign exchange earned 114.93 108.03


N. B. GodrejChairman

Mumbai, May 24, 2007.

1. We have audited the attached Balance Sheet of Godrej Agrovet Limited, as at March 31, 2007 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 andbelief were necessary for the purposes of our audit.

b) As stated in Note 6 of Schedule 15, during the current year, the Company has changed its accountingpolicy with respect to depreciation on Staff quarters, Furniture & Fixtures, Office & Other equipmentsand Vehicles to Straight line method at the rates prescribed in Schedule XIV to the Companies Act,1956, from Written down method followed earlier. Computer hardware is being depreciated overa period of four years against 16.31% as per Straight line method earlier. Consequently excessdepreciation for the earlier years amounting to Rs. 23,287 thousand has been netted off againstdepreciation for the year. Had there been no change in the method / rate of depreciation, the chargefor the year would have been higher by Rs. 3,993 thousand. Consequently the Net Block of FixedAssets and Reserves and Surplus are higher by Rs. 27,280 thousands

c) As referred to in Note 7 of Schedule 15, investments in joint ventures aggregating to Rs. 38,368thousands, exceeds the book value of the shares of those companies. The Company has alsoadvanced Rs. 40,805 thousands to those companies. However, in view of the benefits of future

REPORT OF THE AUDITORS' TO THE MEMBERS OF GODREJ AGROVET LIMITEDprofitability of the joint ventures being non-quantifiable at this stage, we are unable to determinethe quantum of the possible diminution in the value of these investments /advances.

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.

e) 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.

f) 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) 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 (c) above, give the informationrequired by the Companies Act, 1956, in the manner so required and give a true and fair viewin 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,2007; and

ii) 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, 2007, andtaken on record by the Board of Directors, we report that, none of the Directors is disqualified as on31st March, 2007 from being appointed as a Director in terms of clause (g) of sub-section (1) of Section274 of the Companies Act, 1956.


Chartered AccountantsE.K. Irani

Place : Mumbai PartnerDated : May 24, 2007 Membership No. 35646


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 theAudit Committee of the Board of Directors.

The following Directors are the Members of the Audit Committee: -

(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 and annual financialstatements, standard accounting principles, Risk Management policies, etc. The Board of Directors hassince accepted the recommendations of the Audit Committee.

REMUNERATION COMMITTEE

Pursuant to the provisions of Schedule XIII to the Companies Act, 1956, your Company has constitutedRemuneration Committee of the Board of Directors to approve the payment of remuneration to theManagerial Personnel.

The following Directors are the Members of the Audit Committee: -

(1) Mr. K. N. Petigara - Chairman(2) Dr. S. L. Anaokar - Member(3) Mr. Amit Choudhury - Member

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 beenfollowed and 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 affairsof the 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.

HUMAN RESOURCES

In spite of high churn experienced by most corporates in India, your Company has been able to retain keyHuman Resources. The industrial relations at all units continued to be cordial. The Board would like to placeon record its sincere appreciation for the unstinted support 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 readwith the Companies (Particulars of Employees) (Amendment) Rules, 2002, are attached (ANNEXURE B).


N. B. GodrejChairman



72

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 quantitativedetails and situation of fixed assets.

(b) As explained to us, the Company has a program for physical verification of fixed assets atperiodic intervals. In our opinion, the period of verification is reasonable having regard to thesize of the Company and the nature of its assets. No material discrepancies have been reportedon such 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 itsbusiness.

(c) The Company is maintaining proper records of inventory and no material discrepancies werenoticed on physical verification.

3) (a) The Company has granted unsecured loans amounting to Rs. 128,436 thousand to threecompanies covered in the register maintained under Section 301 of the Companies Act, 1956.The maximum amount involved during the year was Rs. 128,436 thousand and the year endbalance of loan granted to such parties was Rs. 111,982 thousands

(b) The Company has not charged interest on unsecured loans amounting to Rs. 88,043 thousandsgiven to two companies which is prima facie prejudicial to the interest of the Company. Therate of interest of other unsecured loans and the other terms and conditions of all the loans isnot prima facie prejudicial to the interests of the Company.

(c) As informed to us the receipt of principal and interest, to the extent due, has been regular.(d) As informed to us, there are no overdue amounts exceeding rupees one lakh and hence the

question of commenting on reasonable steps taken for recovery of principal and interest doesnot arise.

(e) The Company has taken unsecured loans of Rs. 345,000 thousand from a company covered inthe register maintained under Section 301 of the Act. The maximum amount involved duringthe year was Rs. 80,000 thousand and year-end balance of loan taken from such party wasRs. Nil.

(f) The rate of interest and the other terms and conditions of the unsecured loan taken is not primafacie prejudicial to the interest of the Company.

(g) The payment of principal amounts and interest was also regular.

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 and services. Duringthe course of our audit, we have not observed a continuing failure to correct major weakness ininternal 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) 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, exceptfor certain transactions for which, there are no similar services rendered to other parties orreciprocal 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 auditsystem is 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 OilPalm Plantation Division pursuant to the order made by the Central Government for maintenance of

cost records prescribed under Section 209 (1)(d) of the Companies Act, 1956, and are of the opinionthat prima facie, the prescribed accounts and records have been made and maintained. We havenot, however, made a detailed examination of the records with a view to determining whether theyare accurate or complete. 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) ofthe Companies Act, 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 duespayable in respect of above as at 31st March, 2007 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 ofIncome Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty or cess on accountof any dispute, other than the following:

Name of Statute Amount (Rs.'000) Forum where dispute is pending

Sales Tax Act 28,716 Commissioner, Appellate Tribunal and High CourtIncome Tax Act 6,920 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 a corporate guaranteefor loans taken by its subsidiary/joint venture from banks. The terms and conditions are not prima facieprejudicial 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.


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.


Chartered AccountantsE.K. Irani

Place : Mumbai PartnerDated : May 24, 2007 Membership No. 35646


73


This Year This Year Previous YearSchedule Rs. ’000 Rs. ’000 Rs. ’000

SOURCES OF FUNDS

Shareholders’ FundsShare Capital 1 101188 71188Reserves & Surplus 2 741117 554821

842305 626008

Loan FundsSecured Loans 3 494469 1259Unsecured Loans 4 1216637 1333526

1711107 1334785Deferred Tax Liability 49139 50556

TOTAL 2602551 2011350


Fixed Assets 5Gross Block 1530802 1194189Less : Depreciation 433802 418931Less : Provision for Impairment 19890 19890

Net Block 1077109 755367Capital Work-in-Progress/advances 50176 146415

1127285 901782

Investments 6 524060 515868

Current Assets, Loansand Advances 7

Inventories 1179630 698849Sundry Debtors 587791 639825Cash and Bank Balances 92271 267412Other Current Assets 92 59Loans and Advances 605799 338914

2465584 1945059

Less : Current Liabilitiesand ProvisionsLiabilities 8 1497124 1303021Provisions 9 17254 48339

1514377 1351360

Net Current Assets 951207 593699

TOTAL 2602551 2011350

NOTES TO ACCOUNTS 15


As per our Report attached Signatures to Balance Sheet andSchedules 1 to 10 and 15

For and on behalf ofKALYANIWALLA & MISTRY N.B. GODREJ ChairmanChartered Accountants

V.V. CHAUBAL C.K. VAIDYA Managing DirectorE.K. IRANI Company SecretaryPartnerMembership No. 35646Mumbai, May 24, 2007.

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2007

This Year This Year Previous YearRs. ’000 Rs. ’000 Rs. ’000

SCHEDULE 2 : RESERVES & SURPLUS

SECURITIES PREMIUM ACCOUNTAs per last Balance Sheet 189290 189290Add : Received during the year 270000 –

459290 189290

CAPITAL INVESTMENT SUBSIDYAs per last Balance Sheet 9602 9602

GENERAL RESERVEAs per last Balance Sheet 57470 50470Add : Transferred from Profit and Loss Account 2850 7000

60320 57470PROFIT AND LOSS ACCOUNT 211905 298458

TOTAL 741117 554821

This Year Previous YearRs. ’000 Rs. ’000

SCHEDULE 1 : SHARE CAPITAL

AUTHORISED1,50,00,000 (Previus year 100,00,000) Equity Shares of Rs. 10 each 150000 100000

ISSUED, SUBSCRIBED AND PAID UP1,01,18,752 (Previous year 71,18,752)Equity Shares of Rs. 10 each fully paid 101188 71188

Of the above Shares

(a) 71,12,956 (Previous year 41,12,956) 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 ON

MARCH 31, 2007

This Year This Year Previous YearSchedule Rs. ’000 Rs. ’000 Rs. ’000

INCOME

From Operations 10 6895038 6027586Other Income 11 233479 28004

7128517 6055590

EXPENDITURE

Materials 12 5173711 4358477Expenses 13 1735090 1495255Interest and Financial Charges 14 124227 51885Depreciation (Refer Note 6) 58223 73626Miscellaneous Expenditure written off – 224

7091251 5979467

PROFIT BEFORE TAXATION 37266 76123Provision for Taxation

Current Tax – 3409Fringe Benefit Tax 9000 9100MAT Credit entitlement – (3410)Deferred (1417) (1229)Prior year Tax adjustment 2181 –

9764 7870

PROFIT AFTER TAXATION 27502 68253Surplus brought forward 298458 269674

AMOUNT AVAILABLE FOR APPROPRIATION 325960 337927

APPROPRIATION :

DividendInterim 97527 –Final (Proposed) – 28475

97527 28475Tax on Dividend 13678 3994Transfer to General Reserve 2850 7000Surplus carried forward 211905 298458

TOTAL 325960 337927

Earnings per share (Basic/Diluted) in Rs. (Refer Note 29) 3.61 9.59



As per our Report attached Signatures to Profit and Loss Accountand Schedules 11 to 15


V.V. CHAUBAL C.K. VAIDYA Managing DirectorE.K. IRANI Company SecretaryPartnerMembership No. 35646Mumbai, May 24, 2007.


74

This Year Previous YearRs.’000 Rs.’000

SCHEDULE 3 : SECURED LOANS

FROM BANKS

Term Loans 150000 –(amount due within a year Rs. 25,000 thousand,Previous year Nil thousand)Cash Credit/Working Capital Demand Loans 344469 1259

TOTAL 494469 1259Note : Refer Note (4)



SCHEDULE 4 : UNSECURED LOANS

FROM BANKSTerm Loans 1169633 1299809(amount due within a year Rs. 1,029,634 thousand,Previous year Rs. 1,216,476 thousand)

SALES TAX DEFERMENT FACILITY 47004 33717

TOTAL 1216637 1333526

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 at1.4.2006 31.3.2007 1.4.2006 Year Deductions 31.3.2007 31.3.2007 31.3.2007 31.3.2006

Tangible AssetsFreehold Land 93270 – – 93270 – – – – – 93270 93270Leasehold Land 9841 800 1312 9329 957 138 1095 – 8234 8885Buildings 233738 119982 12842 340878 67047 9770 4580 72237 – 268641 166691Staff Quarters 518 – 347 171 268 (144) 82 42 – 129 251Plant & Machinery 651806 221786 66581 807011 241900 51648 33758 259790 19890 527330 390595Furniture & Fixtures 29382 23047 381 52047 14674 (1627) 221 12826 – 39221 14734Leasehold Improvements 9409 31046 - 40455 859 4371 – 5231 – 35224 8550Office & Other Equipments 35783 20648 1181 55250 18529 (3010) 774 14745 – 40505 16647Vehicles 61285 8189 6636 62839 28985 (6145) 3937 18902 – 43936 3300Research Centre 3688 – – 3688 1759 175 – 1935 – 1754 1929Trees, Development Costs 45469 – – 45469 23954 3033 – 26987 – 18482 21514Intangible AssetsComputer Software – 394 – 394 – 14 – 14 – 380 –Technical Know-How Fees 20000 – – 20000 19999 – – 19999 – 1 1

TOTAL 1194189 425892 89279 1530802 418931 58223 43352 433802 19,890 1077109 –

Previous Year 1031495 184734 22041 1194189 360256 73626 14951 418931 19,890 – 755367

Capital Work-In-Progress/Advances 50176 146415

1127285 901782


SCHEDULE 6 : INVESTMENTSLONG TERMNON TRADE UNQUOTEDIN GOVERNMENT SECURITIES(All the Securities have been deposited withvarious Government Authorities)(a ) National Savings Certificates (Face value

Rs. 110 thousand; Previous year Rs. 112 thousand) 110 112(Rs. 2.5 thousand matured during the year)

(b) Indira Vikas Patra (Face valueRs. 1 thousand) 1 1

111 113TRADE UNQUOTEDIN SUBSIDIARY COMPANIES

(a) Goldmohur Foods and Feeds Limited18,38,170 equity shares of Rs. 10 each 183398 183398

(b) In Golden Feed Products Limited50,000 Equity Shares of Rs.10/- each 500 500

(c) In Godrej Acqua Feed Limited50,000 Equity Shares of Rs.10/ each 500 –(Aquired during the year)

(d) In Aadhaar Retailing Limited 500 –50,000 Equity Shares of Rs.10/ each(Aquired during the year)

IN 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) 5,00,000 (previous year 4,00,000) Fully-paidEquity Shares of Tk.100/- each inACI Godrej Agrovet Private Limited 37558 30814(Aquired 1,00,000 shares during the year)

(c) 675 Fully-Paid Equity share of AED 100/- each inAl Rahba International Trading Limited Liability Co. 810 810

(d) 23,90,911 Fully-Paid Equity Shares of Rs.10/- eachin Creamline Dairy Products Limited 95016 95016

(e) 3,51,352 Fully-Paid Equity Shares of Rs.10/- eachin Creamline Nutrients Limited 8784 8784

(f) 4,55,000 Fully-Paid Equity shares of Rs.10/- eachin Polchem Hygiene Laboratories Private Limited 16275 16275

(g) 49,00,000 Fully-paid Equity shares of Rs. 10/- eachin Godrej Goldcoin Aquafeed Limited 180528 –(Acquired during the year)

339050 151779 IN CO-OPERATIVE SOCIETY

3 Shares of Rs.500/- each in SachinIndustrial Co-operative Society Limited 2 2

524060 335792CURRENTNON-TRADE UNQUOTED

Current year Nil, Previous year 1,78,74,343.368 unitsof Grindlays Floating Rate Fund–Short–term (Plan B) - Daily Dividend – 180000

(17874343.368 units sold during the year)TRADE UNQUOTEDIN SUBSIDIARY COMPANY

In Krithika Agro Farm Chemicals and Engineering IndustriesPrivate LimitedCurrent year Nil, (Previous year 7,600 Fully-paid Equity share of Rs. 10/- each – 76(7600 shares sold during the year) – 180076

AGGREGATE COST OF UNQUOTED INVESTMENTSTOTAL 524060 515868


SCHEDULE 7 : CURRENT ASSETS,

LOANS & ADVANCES

(A) INVENTORIES :Raw Materials 648684 351305Finished Products 318852 201993Poultry Stock 156262 106282Stores and Spares 14708 14816Stock under Cultivation 41124 24454

1,179,630 698849(B) SUNDRY DEBTORS

Debts outstanding for a period exceeding six monthsConsidered Good 188007 130489Considered Doubtful 28490 21500

216498 151989Other Debts 399784 509336Total 616281 661325Less: Provision for doubtful debts 28490 21500

587791 639825[Debts amounting to Rs. 12,263 thousand (previous yearRs12,263 thousand )are secured by equitable mortgage/ hypothecation of assets / deposit of title deeds,Rs.10,891 thousand (previous year Rs. 17,366 thousand)against Security Deposits and Rs. 39,100 thousand(Previous year Rs. 25,392 thousands) against BankGuarantees]

(C) CASH AND BANK BALANCES :Cash and Cheques on hand 23535 12713Balances with Scheduled Banksi) In Current Accounts 62316 98827ii) In Fixed Deposit Accounts 6420 155872

[Rs.75 thousand (Previous year Rs. 75 thousand)pledged with Government Authorities)]

92271 267412(D) OTHER CURRENT ASSETS : 92 59(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 508583 292449Considered Doubtful 7561 3361

516144 295810Less: Provision for doubtful advances 7561 3361

508583 292449Share application money pending allotment 4425 –Other Depositsi) Government Authorities 4877 131ii) Others 52615 35050

Advance payment of Taxes [including MAT CreditEntitlement Rs. 3410 thousand, Previous year Rs. 3410 thousand(Net of provision for taxation Rs. 93575 thousand; Previousyear Rs. 73294 thousand)] 35299 11284

605799 338914TOTAL 2465582 1945058


75

SCHEDULE 8 : LIABILITIESAcceptances 315875 273048Sundry Creditors

Dues to Small Scale Undertakings (Refer Note 11) 3591 724Others 982539 854398

986130 855122Advances from Customers 78441 69212Sundry Deposits 116677 105638

TOTAL 1497124 1303021

SCHEDULE 9 : PROVISIONSDividend – 28475Tax on Dividend – 3994Gratuity – 1439Leave Encashment 17254 14431

TOTAL 17254 48339

SCHEDULE 10 : INCOME FROM OPERATIONSNet Sales 6823658 5955461Other Business OperationsClaims and Compensation 19012 32167

19012 32167Financial OperationsDividend on Investments (Gross) 40041 35609Interest (Gross) (Tax at Source Rs.414 thousand;Previous year Rs. 114 thousand) 12327 4349

52368 39958TOTAL 6895038 6027586

SCHEDULE 11 : OTHER INCOMEProfit on transfer of aqua feed business (Refer Note 10) 230475 –Profit on sale of Fixed Assets (Net) – 1273Provision for Doubtful Debts and Advances no longer required – 2175Miscellaneous Income 3004 24556

TOTAL 233479 28004

SCHEDULE 12 : MATERIALSa) RAW MATERIALS CONSUMED

Opening Stock 351305 316868Add : Purchases during the year 4648244 3910803

4999549 4227671Less: Transferred to Godrej Aquafeed Limited 27177 –Less : Sales during the year 52774 54881

4919598 4172789Less : Closing Stocks 648684 351305

4270914 3821484b) PURCHASE FOR RESALE 1086306 648921c) INVENTORY CHANGE

Opening StockFinished Goods 201993 108490Stock under cultivation 24454 18370Poultry Stock 106282 93941

332729 220801Less : Closing Stock

Finished Goods 318852 201993Stock under cultivation 41124 24454Poultry Stock 156262 106282

516238 332729(183509) (111928)

TOTAL 5173711 4358477

SCHEDULE 13 : EXPENSES1 Salaries, Wages, Bonus, Gratuity and Allowances 341576 2744492 Contribution to Provident Fund and

Other Funds and Administration Charges 18909 158523 Employee Welfare Expenses 34813 282204 Processing Charges 313159 2662255 Consumable Stores 66439 557836 Power and Fuel 165740 1410327 Rent 49809 258708 Rates and Taxes 8405 95969 Repairs & Maintenance

Building 3873 2815Plant & Machinery 11495 10014Other Assets 3688 5086

19056 1791410 Insurance 8016 833011 Postage, telephone and stationery 35153 2731412 Auditor's Remuneration 2130 192913 Legal & Professional Fees 50111 5913614 Freight, Coolie and Cartage 120892 8362015 Discount, Commission and Selling expenses 268925 30134516 Advertisement and publicity 52016 4294017 Travelling expenses 99653 8039018 Bad Debts/Advances written off 18731 1659419 Provision for Doubtful Debts and Advances 11190 –20 Loss on sale of Fixed Assets (Net) 2336 –


21 General Expenses 74431 651141761490 1521655

22 Less: Shared Expenses recovered (26400) (26400)

TOTAL 1735090 1495255

SCHEDULE 14 : INTEREST AND FINANCIAL CHARGES

(a) Interest paid on fixed loansi ) Banks 113119 38005ii ) Inter corporate Deposits 5361 –

118480 38005Less: Interest capitalised 6373 1500

112107 36505(b) Interest paid on other loans

i ) Banks 2096 3012ii ) Others 1605 2157

3701 5169(c) Other Financial Charges 8419 10212

TOTAL 124227 51885


SCHEDULE 13 : EXPENSES (contd.)


1. SIGNIFICANT ACCOUNTING POLICIES

a) The accounts have been prepared on historical cost convention. The Company followsmercantile system 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 duringconstruction period. Pre-operative expenses for major projects are also capitalised, whereappropriate.

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, ifany, is recognized 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) Depreciation is provided on the straight line method at the rates specified in ScheduleIV to the Companies Act, 1956, except for computer hardware which is depreciatedover its estimated useful life of four years.

2 ) Amortizations

Asset type Period

(i) Leasehold Land Primary lease period

(ii) Leasehold improvements and equipments Primary lease period or 16 yearswhichever is less

(iii) Trees Development cost 15 years

(iv) Nursery/Greenhouse building 10 years

(v) Poultry Equipments/Signages 3 years

(vi) Technical Know-how of a capital nature 6 years

(vii) Computer software 6.17 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 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.



76

i) Miscellaneous expenditure :

i) Non-Compete fee is amortized 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 amortized overthe period of the loan.

j) Revenue is recognized when goods are despatched to external customers. Sales are inclusiveof realised 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 ofthe year in which it is incurred. Capital Expenditure incurred during the year on Researchand Development 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 aredirectly attributable to the acquisition, construction or production of an asset that necessarilytakes substantial period of time to get ready for its intended use, upto the time the said asset isput to use are capitalised, as a part of the cost of that asset. Other borrowing costs arerecognized as an expense in the period in which they are incurred.

m) 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.

n) 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 inone or 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 thatsufficient future taxable income will be available against which such deferred tax assets can berealised. The tax effect is calculated on the accumulated timing difference at the year end,based on the tax rates and laws enacted or substantially enacted on the Balance Sheet date.

o) The basic earnings per share is computed using the weighted average number of commonshares outstanding during the period. Diluted earnings per share is computed using the weightedaverage number of common and dilutive common equivalent shares outstanding during theperiod, except where the results would be anti-dilutive.

p) 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 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. CONTINGENT LIABILITY

In respect of :

(a) Income Tax Matters 6920 7228

The Income Tax Department has filed an appeal against theorder of CIT (A), for A.Y. 2000-2001 and has also raised ademand for A.Y.2002-03 & 2004-05

(b) Sales Tax Matters 43816 45066The 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 (Previous year Rs. 800 thousand).The Company has filed an appeal in Mumbai High Court inconnection with Agricultural Produce Market Committee (APMC)in respect of poultry business. The Company has preffered anappeal with the Commissioner of Commercial Taxes, Karnatakaagainst the order of the Joint Commissioner of CommercialTaxes, Karnataka, for classifying chicken sold in crimp pack aschicken sold in sealed container. (Against the above the Companyhas paid advance of Rs. 14,300 thousand (Previous year Rs.14,300 thousand).

(c) Guarantee issued to Banks on behalf of the subsidiary companies 600000 735000

(d) Guarantee issued to Banks on behalf of the Joint venture companies 88875 123459

(e) Guarantees issued by the Banks and counter guaranteed by theCompany (other than those mentioned in (c) & (d) above) 54635 47815Rs.3,182 thousand (Previous year Rs.3,182 thousand) have beensecured by deposit with bank

(f) Case/Claim filed by Processors for claiming various expenses 39468 37328

3. CAPITAL COMMITMENTS

The estimated value of contracts remaining to be executed on CapitalAccount to the extent not provided for 4702 55462

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. 1,328 thousand (Previous year Rs. 2,780 thousand) which hasbeen disputed by Sales Tax authorities. The Company has filed an appeal with the AndhraPradesh 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 takeover 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. DEPRECIATION ON ASSETS

During the current year, the Company has changed its accounting policy with repect to depreciationon Staff Quarters, Furniture & Fixtures, Office & Other equipments and Vehicles to straight linemethod at the rates prescribed in Schedule XIV to the Companies Act, 1956 from Written downmethod followed earlier. Computer hardware is being depreciated over a period of four yearsagainst 16.31% as per Straight line method earlier. Consequently excess depreciation for the earlieryears amounting to Rs. 23,287 thousand has been netted off against depreciation for the year. Hadthere been no change in the rate of depreciation, the charge for the year would have been higher byRs. 3,993 thousand Consequently the Net Block of Fixed Assets and Reserves and Surpluses arehigher by Rs. 27,280 thousand.

7 INVESTMENTS IN JOINT VENTURES

The Company has equity investment of Rs. 37,558 thousand (Previous year Rs. 30,814 thousands) inACI Godrej Agrovet Private Limited and Rs. 810 thousand (Previous year Rs. 810 thousand) in AlRahba International Trading LLC. The Company’s investments in Joint ventures are carried at costs,which are higher than their respective book values. The diminution in the value of these investmentsis considered to be of a temporary nature, in view of the Company’s long–term financial involvementin, and the future profitability projected by the two companies. No provision for diminution in thevalue of investments is therefore considered necessary in the accounts. Accordingly no provision forDebtors/Loans and advance of Rs. 3,381 thousand (Previous year Rs. 13 thousands) in ACI GodrejAgrovet Private Limited and Rs. 37,424 thousand (previous year Rs. 33,075 thousand) in Al RahbaInternational Trading LLC is also considered necessary in the accounts.

8. INFORMATION IN RESPECT OF JOINT VENTURE (JOINTLY CONTROLLED ENTITY)

Name Country of Incorporation Percentage HoldingThis Year Previous Year

(a) ACI Godrej Agrovet Private Limited Bangladesh 50% 50%ACI Godrej Agrovet Private Limited has its operations in the fields of Animal Feed,Poultry businesses etc.Interest in Assets, Liabilities, Income and Expense with respect of jointly controlled entityAssets 2135 78899Liabilities 2135 78899Income 81500 15612Expense 107830 19758

(b) Al Rahaba Trading International LLC Abu Dhabi 70% 70%The company has a 45% share in the Equity capital of Al Rahaba International LLC but a 70%share in the profits and in future investments.Al Rahaba Trading International LLC is in the Poultry businessInterest in Assets, Liablities, Income and Expense with respect of jointly controlled entityAssets 33134 40227Liablities 33134 40227Income 121585 24114Expense 139187 39883

(c) Godrej Gold Coin Aquafeed Limited India 49% –The Company is in the the aqua feed business.Interest in Assets, Liablities, Income and Expense with respect of jointly controlled entityAssets 210712 –Liablities 210712 –Income 40958 –Expense 54894 –


9. CURRENT ASSETS, LOANS AND ADVANCES

(a) Sundry Debtors include due from Companies under the same management(i) Godrej & Boyce Mfg Co. Ltd. 96 -(ii) Godrej Industries Limited 659 -(iii) Goldmohur Foods and Feeds Limited 9100 18219(iv) ACI Godrej Agrovet Private Limited 3381 13(v) Al Rahba International Trading LLC 947 –(vi) Godrej Gold Coin Aqua feed Limited 40332 –

(b) Loans and Advances include due from Companies under the same management(i) Golden Feed Products Limited 23939 40393

Maximum balance during the year 40393 45000(ii) Krithika Agro Farm Chemicals and Engineering

Industries Private Limited 4909 4205Maximum balance during the year 4909 4205

(iii) Al Rahba International Trading Limited Liability Company 36477 33075Maximum balance during the year 36477 33075

(iv) Aadhaar Retailing Limited 83134 –Maximum balance during the year 83134 –

10. Transfer of Aqua BusinessEffective 30th September, 2006, the Company has transferred its aqua feed business to GodrejAquafeed Limited for a total consideration of Rs. 342,223 thousand. Pursuant to the same the followingassets were transferred to Godrej Aquafeed Limited.

Rs. '000Fixed Assets 39576Inventories :(a) Raw material 27177(b) Finished goods 5854

33031Sundry Debtors 39141Total 111748



77

11. Current Liabilities:

(a) It is the opinion of the management that the following are parties which can be classified asSmall Scale Industrial Undertakings to whom the Company owes sums which is outstanding formore than 30 days. The Auditors have accepted the representations of the management in thismatter.

Name of the party Rs.’000 Name of the party Rs.’000

Sai Annapurna Pkg. 2274 Sainath Fisheries 98

Sriram Chemicals 843 Nandi Enterprises 3

M/s. Healthcare Pvt. Ltd. 1 Malchand Dinadayal & Co. 30

S R Enterprises 2 Sesha Sai Mining 334

Finplast (Surat) Pvt. Ltd. 5

(b) Dues to subsidiary company - Godrej Aquafeed Limited Rs. 16,891 thousand ( previous yearNIL thousand).

12. Deferred Tax :

The tax effects of significant temporary differences that resulted in deferred tax assets and liabilities are :


Depreciation on Fixed Assets (104837) (82407)

Provision for Impairment of Fixed Assets 7310 7310

Provision for Doubtful Debts 10585 8368

Carry Forward unabsorbed depreciation 29130 8946

Others 8674 7227

Deferred Tax Liability (49139) (50556)

13. Grants/subsidies from GovernmentGrants/Subsidies amounting to Rs. 50,297 thousand (Previous year Rs. Nil thousand) related to revenueare credited to the profit and loss statement or are deducted in reporting the related expense.


Unit Quantity Value Quantity ValueRs.‘000 Rs.‘000

14. SALES TURNOVER

Animal Feeds MT 452873 3897585 467343 3689176Agro Inputs – 630282 – 641747Integrated Poultry Business – 1169952 – 884002Oil Palm Plantation – 462256 – 323862Retail Segment – 485306 – 282461Others – 178277 – 134213

TOTAL 6823658 5955461

Note: Sales Turnover includes sale of items processed by third parties, and items purchased by theCompany for resale.

15. FINISHED GOODS INVENTORIES

Animal Feeds MT 8291 68170 7,258 62699(7258) (62699) (4,978) (44451)

Agro InputsSynthetic pesticides KL 184 24178 168 35848

(168) (35848) (151) (19153)Natural pesticides MT 3 458 4 480

(4) (480) (22) (3477)Processed Chicken 18707 40360

(40360) (8612)Retail Segment 158998 NA

NA NAOthers 48341 62606

(62606) (32797)TOTAL 318852 201993

(201993) (108490)

Note : Figures in bracket pertain to the Previous Year.

16. PURCHASES FOR RESALE

Animal Feeds MT 3256 70290 5,220 69987Agro Inputs

Plant Growth Promoter Spray KL 467 37183 285 21407 Granules MT 5376 80994 5,713 65185 Synthetic pesticides KL 1114 129848 1,298 143591Retail Segment 614753 240092Others 153238 108659TOTAL 1086306 648921

17. RAW MATERIALS CONSUMED

Cakes & Brans MT 135,397 842107 122403 697964Extractions MT 243,991 1469241 262515 1276327Others 1959566 1847193TOTAL 4270914 3821484


18. 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-cancellable operating leases for eachof the following periods :


Rs.'000 Rs.'000

i. Not later than one year 53328 1115

ii. Later than one year and not later than five years 196165 2230

iii. Later than five years 280632 –

b. Lease payments recognized in the statement ofProfit & Loss for the period :

Minimum lease payments 41728 1115

19. 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 31.3.2007 Not Applicable 294600 154777 362157(Non-Scheduled) 31.3.2006 Not Applicable 306645 185938 338577

b) Processed Chicken 31.3.2007 Not Applicable 17536 12694 –(Non-Scheduled) 31.3.2006 Not Applicable 15566 12298 –

c ) Palm Oil 31.3.2007 Not Applicable 14850 8806 –(Non-Scheduled) 31.3.2006 Not Applicable 11490 7112 –

Million Million MillionPlants Plants Plants

d) Tissue Culture Plants 31.3.2007 4.25 5.00 4.63 –(Non-Scheduled) 31.3.2006 4.25 5.00 4.21 –

e ) Agri Inputs(Non-Scheduled)(i) Plant Growth Promoter Liquids 31.3.2007 500 KL 500 KL 465KL –

31.3.2006 – – – –(ii) Plant Growh Regulator Granules 31.3.2007 5000 MT 5000 MT 2729MT –

31.3.2006 – – – –

20. (a) Computation of Profit for the purpose of manegerial remuneration


Profit after tax as per Profit and Loss Account 27502 68253

Add : Depreciation as per accounts 58223 73626

Managerial Remuneration 6714 6708

Provision for Doubtful Debts/Advances 18751 (2175)

Profit on transfer of aqua feed unit (230475) 1273

Provision for Tax (including Deffered tax) 9764 7870

(137024) 87302

Less : Depreciation as per Section 350 of theCompanies Act, 1956 79582 73626

(Loss)/Profit on sale of Fixed Assets (net) (2336) 1273

77246 74899

Net (Loss)/Profit for the purpose of Directors remuneration (186768) 80656

5% thereof – 4,033Amount approved by Central Government 7244 6708

(b) MANAGERIAL REMUNERATION

a) Salaries 6144 4941

b) Contribution to Provident Fund 356 341

c) Estimated monetary value of perquisites 214 28

d) Performance Linked Variable Remuneration – 1398

6714 6708

e) Directors' Sitting Fees 144 72

6858 6780

Note: (a) All the above items have been included under respective heads under "Expenses" in Schedule 14.(b) Performance linked variable remuneration is on the basis of provision made in the books of accounts.(c) The remuneration paid to the Managing Director is in excess of the remuneration prescribed

under Section 198 read with Schedule XIII to the Companies Act, 1956 by Rs. 6714 thousand(Previous year Rs. 2,675 thousand). The Company has got the necessary approval from theCentral Government for the remuneration in excess of the prescribed limits.

21. COMMON EXPENSES SHARED BY THE COMPANIES :

a) Expenses (Schedule 14) include Rs. 21006 thousand (Previous year Rs. 16470 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 subsidiary 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 thousand (Previous year Rs. 26,400 thousand).


78



Rs.'000 Rs.'000

22. AUDITORS’ REMUNERATION

Audit fees 1122 1122

Audit under Other Statutes 337 337

Tax representation before Authorities 411 196

Management Consultancy 73 73

Certification 93 172

Reimbursement of Expenses 93 29

TOTAL 2130 1929


Rs.'000 Rs.'000

23. VALUE OF IMPORTS ON CIF BASIS(INCLUDES DIRECT IMPORTS ONLY)

Raw Materials 86002 103040

Spares 2802 1129

Capital Goods 33759 29990

122563 134159

24. EXPENDITURE IN FOREIGN CURRENCY

Travelling Expenses 5887 2523

Others 17578 21567

23465 24089

25. EARNINGS IN FOREIGN EXCHANGE

F.O.B value of goods exported 11493 10803

Others 2374 1837

13867 12641

26. 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) 75080 2 43946 1

Indigenous 4195834 98 3777538 99

TOTAL 4270914 100 3821484 100

SPARES & TOOLS :

Imported items 741 1 750 1

Indigenous 65698 99 55033 99

TOTAL 66439 100 55783 100

27. Research & Development Expenditure of revenue nature charged to the Profit and Loss Accountamounts to Rs. 10,078 thousand (Previous year Rs. 9031 thousand).

28. The amount of exchange difference included in the Profit and Loss Account, under the related headsof expenses/income, is Rs. 1,735 thousand (Previous year expense Rs. 1,742 thousand). The amountof exchange difference in respect of forward exchange contracts to be recognized in the Profit andLoss Account of subsequent accounting periods Rs. Nil (previous year Rs. Nil thousand)

29. EARNINGS PER SHARE


Profit after tax and prior period expenses (Rs.'000) 27502 68253

Weighted average number of equity shares outstanding 7618752 7118752

Basic earnings per share (Rs.) 3.61 9.59

Diluted earnings per share (Rs.) 3.61 9.59

Nominal value of shares (Rs.) 10.00 10.00

30. 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 70.29% (Previous year 57.69%)in the Company.GIL is the subsidiary of Godrej & 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 Private Limited (upto 30.03.2007)Godrej Aquafeed LimitedAadhaar Retailing Limited

(iii) Fellow Subsidiaries :

Godrej Consumer Products LimitedGodrej Infotech LimitedGodrej Beverages & Foods Limited (upto 08.05.2006)Godrej Properties LimitedGodrej Hicare LimitedEnsemble Holdings & Finance Limited

(iv) Joint Ventures.

ACI Godrej Agrovet Private LimitedAl Rahba Trading International LLCGodrej Gold Coin Aquafeed Limited

(v) Associates

Creamline Dairy Products LimitedCreamline Nutrients LimitedPolchem Hygiene Laboratories Private Limited

(vi) Other related parties where persons mentioned in (vii) below exercise significant influence

Bahar Agrochem & Feeds Private LimitedAvestha Gengraine Technologies Pvt. Ltd.Krithika Agro Farm Chemicals and Engineering Industries Private Limited (from 31.03.2007)

(vii) Key management personnel :

Mr. C. K. Vaidya

(viii) 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) (v) and (vi) above

Rs.’000Nature of Transactions Holding Subsi- Fellow Joint Assoc- Other

Comp- diaries Subsi- Ventures iates Relatedanies diaries Parties

(i) (ii) (iii) (iv) (v) (vi)

1 Issue of share capital(incl. Premium) 300000 – – – – –

– –

2 Share application money 3925 – – – –– –

3 Purchase/Transfer of fixed assets 1582 5696 – – – –

3594 – 797 – – –

4 Sales/Transfer of fixed assets 39576 – – – –47 5667 – –

5 Investment in share capital – – – 6743 – –– 886 – – – –

6 Advances given during the year 83134 – 4240 705– 79230 – 34511 – –

7 Intercorporate deposits takenduring the year 345000 – – – – –

– – – – –

8 Sale of materials / finished goods 238144 – 19697 – –- 216412 – 5667 – –

9 Sundry deposits placed 1778 – – – – –– – – – – –

10 Purchase of materials / finished goods – 213889 – – 12843 13443282 122745 1107 – 10553 122374

11 Expenses charged to other companies – 26412 – 701 – –– 26592 – 1287 – –

12 Expenses charged by othercompanies 21159 2224 2366 7798 – –

16470 1307 3403 – – –

13 Interest income on loan given 1846 – –– 1787 – – – –

14 Interest expense on intercorporatedeposits taken 2029 – – – – –

– –

15 Dividend Income – 34006 3 – 6031 –– 31000 33 – 4576 –

16 Dividend paid 72799 – – – – –13573 – – – – –

17 Sundry Income – 230475 – – – –– – – – – –

18 Outstanding receivables,net of (payables) 755 (7790) – 43714 527 4909

8 35552 – (13) (1173) (1373)

19 Guarantees issued in favour of – – – – – –– 145000 – 123459 – –

20 Gurantees Outstanding – 600000 – 88875 – –– 735000 – 123459 – –

(ii) Details relating to persons referred to in items 1 (vii) & (viii) above

Current PreviousYear Year

1 Remuneration 6714 67082 Dividend paid 10381 19353 Sale of investments 76 –


79

3. Significant Related Party Transactions : (Rs.'000)

Nature of Transactions Holding Companies Amount Subsidiaries Amount Fellow subsidiaries Amount(i) (ii) (iii)

1 Issue of share capital (incl. Premium) Godrej Industries Ltd. 300000–

2 Share application money Aadhaar Retailing Limited 3925–

3 Purchase/Transfer of fixed assets Godrej Industries Ltd. – Goldmohur Foods & Feeds Ltd. 56963594 –

Godrej & Boyce Mfg. Co. Ltd. – Godrej Aquafeed Limited 39576654 –

4 Investment in share capital – – Krithika Agro Farm Chemical &Engineering Industries Pvt. Limited –

– 765 Advances given during the year Godrej Industries Ltd. – Krithika Agro Farm Chemical &

Engineering Industries Pvt. Limited 7051166 4205

Golden Feeds Products Limited –40393

Aadhaar Retailing Ltd. 83134–

6 Intercorporate deposits taken during the year Godrej Industries Ltd. 345000 – –– –

7 Sale of materials/finished goods / debtors Godrej Industries Ltd. – Goldmohur Foods & Feeds Ltd. 162653– 215661

Godrej Aquafeed Limited 72934–

Krithika Agro Farm Chemical &Engineering Industries Pvt. Limited –

4588 Purchase of materials/finished goods Godrej & Boyce Mfg. Co. Ltd. – Goldmohur Foods & Feeds Ltd. 202245

– 111120Godrej Industries Ltd. –

599 Expenses charged to other companies Godrej & Boyce Mfg. Co. Ltd. – Goldmohur Foods & Feeds Ltd. 26400

12 2640010 Expenses charged by other companies Godrej Industries Ltd. 21006 Goldmohur Foods & Feeds Ltd. – Godrej Consumer Products Ltd. 1225

16470 1307 495– –

Aadhaar Retailing Ltd. 1800–

11 Interest income on loan given – – Kritika Agro Farm Chemical &Engineering Industries Pvt. Limited –

230– Golden Feeds Products Limited 1846

1557 155712 Interest expense on intercorporate deposits taken Godrej Industries Ltd. – – –

– –13 Dividend Income – – Goldmohur Foods & Feeds Ltd. 34006

3100014 Dividend paid Godrej Industries Ltd. 72799 –

13573 –15 Outstanding receivables, net of (payables) Godrej Industries Ltd. 659 Goldmohur Foods & Feeds Ltd. 9100

– 18219Godrej & Boyce Mfg. Co. Ltd. 96 –

– Golden Feeds Products Limited 2393940393

Godrej Aquafeed Limited (16891)–

Krithika Agro Farm Chemical &Engineering Industries Pvt. Limited –

4205Aadhaar Retailing Limited 83134

–16 Sundry Income Godrej Aquafeed Limited 230475

– –17 Guarantees issued in favour of – – Goldmohur Foods & Feeds Ltd. –

70000Golden Feed Products Limited –

7500018 Guarantees Outstanding Goldmohur Foods & Feeds Ltd. 600000

6600001 Investment in share capital Al Rahba Trading International LLC –

810ACI Godrej Agrovet Pvt. Ltd. 6743

– -2 Sales/Transfer of fixed assets ACI Godrej Agrovet Pvt. Ltd. –

5667– –

3 Advances given during the year Al Rahba TradingInternational LLC 4240 –

33075 –4 Sale of materials/finished goods Godrej Gold Coin Aquafeed Ltd. 19697 –5 Purchase of materials / finished goods – Polchem Hygiene Laboratories Pvt. Ltd. 12843 Bahar Agrochem & Feeds Private Ltd. 134432

- 122374-

6 Expenses charged to other companies Al Rahaba Trading International LLC 701 ––

7 Expenses charged by other companies Godrej Gold Coin Aquafeed Ltd. 6725–

ACI Godrej Agrovet Pvt. Ltd. 1,073–


80

3. Significant Related Party Transactions (contd.) :Joint Amount Associates Amount Other Related Amount

Nature of Transactions Ventures Parties(iv) (v) (vi)

8 Dividend Income – – Creamline Dairy Products Limited 47823776

Creamline Nutrients Limited 703527

Polchem Hygiene Laboratories Pvt. Ltd. 546– –

9 Outstanding receivables, net of payables ACI Godrej Agrovet Private Ltd. 3381 Polchem Hygiene Laboratories Pvt. Ltd. 527 Kritika Agro Farm Chemical &Engineering Industries Pvt. Limited 4909

13 – –Al Rahaba Trading International LLC 37424

33075Godrej Goldcoin Aqufeed Ltd. 40332

–10 Guarantees issued in favour of Al Rahaba Trading International LLC –

60683ACI Godrej Agrovet Private Limited –

6277611 Guarantees Outstanding Al Rahaba Trading International LLC 59582

60683ACI Godrej Agrovet Private Limited 29294

62776

For the year ended 31st March, 2007 Rs. ’000 For the year ended 31st March, 2006 Rs. ’000

Animal Agri Retail Integrated Oil Other Unallocated Total Animal Agri Retail Integrated Oil Other Unallocated TotalRevenue Feeds Poultry Palm Business Feeds Poultry Palm Business

Business Plantations Business Plantations

Total Sales 4045553 637267 485306 1184197 463996 179341 – 6995660 3991907 654364 282461 887978 357620 33759 – 6208090

Less : Inter-segment (147968) (6985) – (14246) (1740) (1063) – (172002) (209921) (16335) (12003) (14369) – – (252628)

External Sales 3897585 630282 485306 1169952 462256 178278 – 6823658 3781986 638029 282461 875975 343251 33759 – 5955462

Result

Segment Result 126172 111698 (207198) (88837) 126717 11216 79768 105267 93121 (27570) (46806) 87613 (1539) 210086

Unallocated expenditure net of unallocated

income (201118) (201118) (122034) (122034)

Profit on transfer of Aqua feed business 230475 230475

Interest expenses (124227) (124227) (51887) (51887)

Interest Income 12327 12327 4349 4349

Dividend Income and Profit on sale of

Investments 40041 40041 35609 35609

Profit before taxation and exceptional items 356647 111698 (207198) (88837) 126717 11216 (272977) 37266 105267 93121 (27570) (46806) 87613 (1539) (133963) 76123

Provision for taxation 9764 9764 7870 7870

Profit after taxation and before exceptional

items 356647 111698 (207198) (88837) 126717 11216 (282741) 27502 105267 93121 (27570) (46806) 87613 (1539) (141833) 68253

Exceptional Items –

Prior years adjustments – – – –

Net profit 356647 111698 (207198) (88837) 126717 11216 (282741) 27502 105267 93121 (27570) (46806) 87613 (1539) (141833) 68253

Other Information

Segment assets 1041358 374885 321226 924150 256265 27086 1305430 4250400 956282 310358 78857 628642 194537 29646 1164386 3362709

Segment liabilities 893661 56049 14480 254561 43955 5258 2140131 3408095 847930 50921 15309 171650 27983 602 1580794 2695188

Capital expenditure 20683 29330 101622 96442 49616 859 31101 329654 32056 1359 22743 138396 3429 415 124793 323191

Depreciation 13871 (10) 9356 21256 9986 1531 2233 58223 27030 861 1341 20121 10731 1413 12128 73626

Non-cash expenses other than depreciation

(ii) Information about Secondary Business Segments

Rs. ’000 Rs. ’000

Revenue by Geographical segments India Outside Total India Outside Total India India

Total Sales 6981794 13866 6995660 6195449 12641 6208090

Less : Inter-segment (172002) – (172002) (252628) – (252628)

External Sales 6809792 13866 6823658 5942821 12641 5955462

Carrying amount of segment assets 4250400 – 4250400 3362709 – 3362709

Additions to fixed assets 329654 – 329654 323191 – 323191

Information required under Schedule VI to the Companies Act, 1956 have been given to the extent applicable.

Notes :(iii) (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) Retail - comprises of Aadhaar and Nature's Basket.(d) Integrated Poultry business.(e) Oil Palm Plantation business.

Segments 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.

31. SEGMENT INFORMATION FOR THE YEAR ENDED MARCH 31, 2007

(i) Information about Primary Business Segments

32. Figures of the previous year have been regrouped and re-classified wherever necessary to conform to the current year's classification.


81

33. INFORMATION REQUIRED TO BE FURNISHED UNDER PART IV OF SCHEDULE VIOF THE COMPANIES ACT, 1956

BALANCE SHEET ABSTRACT & COMPANY'S GENERAL BUSINESS PROFILE

i ) Registration DetailsRegistration No. 16655State Code 11Balance Sheet Date 31/3/2007

ii) Capital raised during the year (Rupees '000)Public Issue NilRights Issue NilBonus Issue NilPrivate Placement 300000

iii) Position of mobilisation and deployment of funds (Rupees '000)Total Liabilities 4116928Total Assets 4116928

Sources of FundsPaid-up Capital 101188Reserves & Surplus 741117Secured Loans 494469Unsecured Loans 1216637

Application of FundsNet Fixed Assets 1127285Investments 524060Net Current Assets 951207Misc. Expenditure 0Accumulated Losses Nil

iv) Performance of Company (Rupees '000)Turnover 6,823658Total Expenditure 7091251Profit before tax 37266Profit after tax 27502Earning Per Share in Rs. 3.61Dividend rate 137%

v) Generic Names of three principalproducts services of CompanyItem Code No. 23099010Product Description Animal Feeds

STATEMENT REGARDING SUBSIDIARY COMPANIES PURSUANT TO SECTION 212OF THE COMPANIES ACT, 1956

1. Name of the Subsidiary Goldmohur Golden Aadhaar GodrejFoods Feed Retailing Aquafeed

and Products Ltd. LimitedFeeds Ltd. Ltd.

2. Date on which it became a Subsidiary Jan. 1, 2001 July 14, 2003 Aug. 16, 2006Oct. 23, 20063. Financial Year ending Mar. 31, 2004 Mar. 31, 2004 Mar. 31, 2007Mar. 31, 20074. The Company's interest in the Subsidiary

as on 31.3.2007a ) Number of fully paid Equity Shares held 2158170 50000 50000 50000b) Face Value Rs. 10 Rs. 10 Rs. 10 Rs. 10c ) Extent of holding 100% 100%

5. Net aggregate Profit/(Loss) of the subsidiary Company (Rs.'000) (Rs.'000)so far as it concerns the members of the Company :-A) For the Financial Year ended on March 31, 2004 :

i) Not dealt with in the Books of Account of theCompany 18519 – – –

ii) Dealt with in the Books of Account of theCompany 47500 – – –

B) For the subsidiary company's previous FinancialYears since it became a subsidiaryi) Not dealt with in the Books of Account of the 40590 N.A. – –

Companyii) Dealt with in the Books of Account of the 81801 N.A. – –

Company

V.V. CHAUBAL N.B. GODREJ C.K. VAIDYA

Company Secretary Chairman Managing Director


CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007Current Year Previous Year

Rs. ’000 Rs. ’000 Rs. ’000

A. Cash Flow from Operating Activities :Net Profit Before Taxes 37266 76123Adjustments for:Depreciation 58223 73626Loss/(Profit) on sale of Fixed Assets 2336 (1273)Profit on transfer of aqua feed business (230475) –Dividend Income (40041) (35609)Interest Income (12327) (4349)Interest Expenses 124227 51885Miscellaneous expenditure written off – 224

(98058) 84504

Operating Profit Before Working Capital Changes (60792) 160627

Adjustments for:Inventories (513811) (149113)Debtors and Other Receivables (229977) (361105)Creditors and Other Payables 195486 87117

(548303) (423101)Cash Generated from Operations (609095) (262472)Direct Taxes paid (net of refund received) (35196) (33489)Net Cash Flow from Operating Activities (644291) (295963)

B. Cash Flow from Investing Activities :

Acquisition of Fixed Assets (329653) (323191)Proceeds from sale of Fixed Assets 4015 8363Proceeds from transfer of aqua feed business 342223 –Purchase of Investments (188269) (180904)Proceeds from sale/maturity of Investments 180076 –Interest Received 12294 4361Dividend Received 40041 35609

60728Net Cash used in Investing Activities 60728 (455762)

C. Cash Flow from Financing Activities :

Proceeds from Issue of Capital 300000 –Repayment of Borrowings (116889) (115598)Proceeds from Borrowings 150000 1153283Increase/(Decrease) in Cash Credit/WCDL 343210 (22741)Interest Paid (124227) (51885)Dividend Paid (126002) (23492)Dividend Tax Paid (17672) (3295)Net Cash used in Financing Activities 408422 936273

Net increase in Cash and Cash equivalents (175142) 184548

Cash and Cash equivalents (Opening balance) 267412 82864

Cash and Cash equivalents (Closing balance) 92271 267412

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 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.


V.V. CHAUBAL C.K. VAIDYA Managing DirectorE.K. IRANI Company SecretaryPartnerMembership No. 35646Mumbai, May 24, 2007

Aadhaar Retailing Limited

82

BOARD OF DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST MARCH, 2007To The Shareholders,Your Directors have pleasure in submitting their Report along with the audited Accounts for the financialyear ended on 31st March, 2007.PRINCIPAL ACTIVITYThe principal activity of the Company is to carry on the business of retailing, selling, buying and providingservices in all types of goods and equipments, including consumer, household lifestyle and fast movingconsumer durable and non-durable goods.FINANCIAL RESULTSAs the company's activities are in the nascent stage, no income was earned in the year under review. Therevenue expenditure (loss) incurred in the year was Rs.1,29,335/-.INCORPORATION AND SHARE CAPITAL DETAILSYour Company was incorporated on March 10, 2006 with an Authorised Capital of Rs. 5,00,000. TheCompany obtained the Certificate of Commencement of Business from the Registrar of Companies onApril 10, 2006. The Authorised Capital was then increased to Rs. 10,00,00,000 by an Ordinary Resolutionpassed at the Extraordinary General Meeting of the Company held on November 21, 2006. Presently, theentire paid-up share capital of Rs. 5,00,000 is held by Godrej Agrovet Limited (GAVL) and its nominees.DIVIDENDThe Directors do not recommend any dividend for the year 2006-07.FIXED DEPOSITSThe Company has not accepted any public deposits during the financial year under review.HOLDING COMPANYThe Company is a subsidiary of Godrej Agrovet Limited as defined under Section 4(1)(b) of the CompaniesAct, 1956.SUBSIDIARY COMPANIESThe Company has no subsidiary companies during the year under review.DIRECTORSMr. C. K. Vaidya, Mr. R. S. Vijan and Mr. Subbarao A. R. are the First Directors of the Company who werenamed under Article 21 of the Articles of Association of the Company and hence are not liable to retire byrotation at the First Annual General Meeting of the Company.AUDITORSYou are requested to appoint Auditors for the current year and fix their remuneration. The retiring AuditorsM/s. Kalyaniwalla Mistry & Associates, Chartered Accountants, Mumbai are eligible for re-appointmentand a certificate as required u/s 224 (1-B) of the Companies Act, 1956 has been received from them.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 theAuditors' 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 CompaniesAct, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board ofDirectors) Rules, 1988 and forming part of the Directors' Report is given in the Annexure "A" tothis report.

B) Particulars of EmployeesThe Company doesnot have any any employee, hence none of the employees is covered underthe provisions of Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particularsof Employees) (Amendment) Rules, 2002.

C) Directors' Responsibility StatementPursuant to the provisions contained in section 217(2AA) of the Companies Act, 1956, the Directorsof your 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 fairview of the state of affairs of the Company at the end of the financial year and of the profitor 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 theCompany for preventing and detecting fraud and other irregularities ;

d) that they have prepared the annual accounts on a going concern basis.ANNEXURE `A'

ANNEXURE FORMING PART OF THE DIRECTORS' REPORTINFORMATION 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, 1988IN RESPECT OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGEEARNINGS & OUTGO :

A. Conservation of EnergyNot Applicable since the Company does not have any manufacturing facility.

B. Technology absorption, adaptation and innovationNot Applicable since the Company does not have any manufacturing..

C. Foreign Exchange earnings and outgoYour Company had no foreign exchange earning as well as outgo.

For and on behalf of the Board of DirectorsR.S. VIJAN C.K. Vaidya

Mumbai, May 23, 2007 Director Director

AUDITORS’ REPORT

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 tothe size of the Company and the nature of its assets.

(c) There are no disposal of fixed assets during the year.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 principaland the interest and reasonable steps for recovery of principal and interest does not arise.

(c) The Company has taken unsecured loan amounting to Rs. 83134043 from companies, firmsor other parties covered in the register maintained under Section 301 of the Companies Act,1956.

(d) The rates of interest and conditions of the loans taken are not prejudicial to the interests ofthe Company and payment of principal and the interest is regular.

(e) The payment of the principal amount and interest are regular.4) As there are no inventories and sales during the year, the question of adequate internal control

procedures commensurate with the size of the Company and the nature of its business, for thepurchases of inventory and for the sale of goods and services does not arise. As regards fixed assetsthe internal control procedures are commensurate with the size of the Company and the nature of itsbusiness. During the course of our audit, we have not observed a continuing failure to correct majorweaknesses 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 intothe register 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, exceptfor certain transactions for which, there are no similar services rendered to other parties orhave been entered 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 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.

9) (a) According to the information and explanations given to us and on the basis of our examination

1. We have audited the attached Balance Sheet of Aadhaar Retailing Limited, as at 31st March,2007 and also the Profit and Loss Account and the Cash Flow Statement of the Company for theperiod 10th March, 2006 to 31st March, 2007 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.

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 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 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 financial statements read with the notes thereon, give the information required by theCompanies Act, 1956, in the manner so required and give a true and fair view in conformitywith 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,

2007; andii) in the case of the Profit and Loss Account, of the loss 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, 2007, and

taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on31st March, 2007, from being appointed as a director in terms of clause (g) of sub-section (1) ofSection 274 of the Companies Act, 1956.


KALYANIWALLA MISTRY AND ASSOCIATESChartered Accountants

BAHADUR S. DASTOORPartner

Mumbai, May 23, 2007 Membership No. 48936

ANNEXURE TO THE AUDITORS’ REPORT of books of accounts, during the period, the Company has no statutory dues including ProvidentFund, Investor Education and Protection Fund, Employees' State Insurance, Income Tax, SalesTax, Value Added Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, cess and otherstatutory dues incurred during the period covered. According to the information and explanationsgiven to us, there are no undisputed dues, payable in respect of above as at 31st March, 2007for 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 ofSales Tax, Income Tax, Wealth Tax, Excise Duty, cess on account of any dispute.

10) As the Company has been registered for a period less than five years the question of commenting onits accumulated losses being less than fifty percent of its net worth does not arise. The Company hasnot incurred cash loss during the financial year.

11) According to the information and explanations given to us and based on documents and recordsproduced to us, the Company has not defaulted in payment of dues to banks, financial institutions ordebenture holders.


13) In our opinion and according to the information and explanations given to us, the nature of activitiesof the Company does not attract any special statute applicable to chit fund and nidhi/ mutual benefitfund/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) According to the information and explanations provided to us, the term loans have been applied for

the purposes which they were obtained.17) According to the information and explanations given to us and 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 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





83


This PeriodSchedule Rupees

SOURCES OF FUNDSShareholders’ FundsShare Capital 1 500000Share application money pending 3925000allotment of Shares

Loan FundsUnsecured Loans 2 83134043Secured loans 3 15700000Total 103259043

APPLICATION OF FUNDSFixed Assets 4 –Gross Blocks 98403080Less Depreciation 777593Net Block 97625487Capital Work-in-progress/advances 4598143

102223630Current Assets, Loans and Advances 5Cash and Bank Balances 533703Loans and Advances 542986

1076689Less : Current Liabilities and Provision 6

Liabilities 170611170611

Net Current Assets 906078Profit and Loss Account 129335

103259043NOTES TO ACCOUNTS 7

PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED

MARCH 31, 2007

This Period

Schedule Rupees RupeesINCOMERental Income 1800000

` – –

EXPENDITURE

Interest and Financial Charges 489087Auditor's Remuneration 23072Depreciation 777593Preliminary Expenses written off 639583

1929335

(Loss) Before Taxation (129335)

Provision for Taxation

Current Tax –Fringe Benefit Tax –Deffered Tax –

Profit after Taxation (129335)

Balance Brought Forward –Balance Carried Forward (129335)Earning per share (Basic/Diluted) in Rs. (Refer Note 3) (2.59)

NOTES TO ACCOUNTS 7

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE PERIOD ENDED MARCH 31, 2007

This PeriodSCHEDULE 1 : SHARE CAPITAL Rupees Rupees

AUTHORISED10000000 Equity Shares of Rs.10/- each 100000000

Issued, Ssubscribed And Paid–up50,000 Equity Shares of Rs.10/- each 500000

The entire share capital is held by Godrej Agrovet Limitedthe holding Company (and its nominees)

TOTAL 500000

SCHEDULE 2 : SECURED LOANSFrom Banks 15700000

TOTAL 15700000

SCHEDULE 3 : UNSECURED LOANSFrom holding Company 83134043

TOTAL 83134043


As per our Report attached. Signatures to the Balance Sheet andSchedules 1 to 7

For and on behalf ofKALYANIWALLA MISTRY AND ASSOCIATESChartered Accountants

B.S. DASTOOR C.K. VAIDYA R.S. VIJANPartner Director DirectorMembership No. 48936


Signature to Profit & Loss AccountAs per our Report attached and Schedule 7


B. S. DASTOOR C.K. VAIDYA R.S. VIJANPartner Director DirectorMembership No. 48936


SCHEDULE 5 : CURRENT ASSETS, LOANS & ADVANCES

A) CASH AND BANK BALANCESCash in HandBalance with scheduled banks in current account 533703 533703

B) LOANS AND ADVANCESAdvance payment of taxes 407880Deposits with Government authorities 135106

5429861076689

SCHEDULE 6 : LIABILITIES

Other Liabilties 170611

Total 170611

SCHEDULE 4 : FIXED ASSETS (Rs. ’000)

GROSS BLOCK DEPRECIATION NET BLOCK

ASSETS As at Additions Deductions As at Upto For the On Upto As at10.03.2006 31.3.2007 10.03.2006 Period Deductions 31.3.2007 31.3.2007

Building – 46469547 – 46469547 – 673929 – 673929 45795618Land – 49274510 – 49274510 – – – – 49274510Furniture & Fixtures – 2144338 – 2144338 – 67868 – 67868 2076470Office Equipment – 514685 – 514685 – 35796 – 35796 478889

TOTAL – 98403080 – 98403080 – 777593 – 777593 97625487

Previous Year – – – – – – – – –

Capital-Work-in-Progress/Advances 4598143102223630

Aadhaar Retailing Limited

84



a) 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 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 capitalised, whereappropriate.

c) 1) Depreciation is provided on the straight line method at the rates specified in Schedule IVto the Companies Act, 1956, except for computer hardware which is depreciated over itsestimated useful life of four years.

2 ) Amortizations(ii) Leasehold improvements and equipments Primary lease period or 16 years

whichever is less

d) The basic earnings per share is computed using the weighted average number of commonshares outstanding during the period. Diluted earnings per share is computed using the weightedaverage number of common and dilutive common equivalent shares outstanding during theperiod, except where the results would be anti-dilutive.

e) Provisions are recognized in the accounts in respect of present probable obligations, the amountof which can be reliably estimated.

f) Interest and commitment charges incurred in connection with borrowing of funds, which aredirectly attributable to the acquisition, construction or production of an asset that necessarilytakes substantial period of time to get ready for its intended use, upto the time the said asset isput to use are capitalised, as a part of the cost of that asset. Other borrowing costs arerecognized as an expense in the period in which they are incurred.

g) 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 reversalin one or more subsequent periods. Deferred tax assets, subject to consideration of prudence,are recognized and carried forward only to the extent that there is a reasonable certaintythat sufficient future taxable income will be available against which such deferred tax assetscan 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 BalanceSheet date.

2 AUDITORS' REMUNERATION

Audit fees 22472

3. EARNINGS PER SHARE

This Year

Profit after tax and prior period expenses (Rs.) (129335)

Weighted average number of equity shares outstanding 50000

Basic earnings per share (2.59)

Diluted earnings per share (2.59)

Nominal value of shares 10.00

4. RELATED PARTY DISCLOSURES

Related 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,the ultimated holding company.

2. The following transactions were carried out with the related parties in the ordinary course ofbusiness :

Rs.

HoldingNature of Transactions Company

(i)

1 Loan taken 83134043

2 Outstanding payables, net of (receivables) 83134043

3 Share Application Money 3925000

4 Rent received 1800000

5. The Current year figures for a period of 12 months and 21 days. Previous year figures have not beendisclosed has the Company was incorportated on March 10, 2006.

STATEMENT PURSUANT TO PART IV OF SCHEDULE VI TO THE COMPANIES ACT, 1956.

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE1 Registration Details

Registration No. 160440State Code 11Balance Sheet Date 31.03.2007

ii) Capital raised during the year (Rupees)Public Issue NilRights Issue NilBonus Issue NilPrivate Placement500000

iii) Position of mobilisation and deployment of funds (Rupees)Total Liabilities 103259043Total Assets 103259043Source of Funds

Paid up Capital 500000Reserve & Surplus –Secured Loans 15700000Unsecured Loans 83134043

Application of fundsNet Fixed Assets 102223630Investments –Net Current Assets 906078Misc. Expenses –Accumulated Losses 129335

(iv) Performance of the Company (Rupees)Turnover –Total Expenditure 1929335Profit Before Tax -129335Profit After Tax -129335Earnings Per Share in Rs. -2.59Dividend Rate –

(v) Generic Names of three Principal products services of the CompanyItem Code No. –Product Description –

C.K. VAIDYA R.S. VIJANMumbai, May 23, 2007 Director Director


Particulars Current YearRs. Rs.

A. Cash Flow from Operating ActivitiesNet Profit Before Taxes (129335)Adjustment for:Depreciation 777593Interest expenses 489087

1266680

Operating Profit Before Working Capital Changes 1137345Adjustments for:Debtors and Other Receivables (542986)Creditors and Other Payables 170611

(372375)

Cash Generated from Operations 764970Direct Taxes paid (net of refund received) –Net Cash Flow from Operating Activities 764970

B. Cash Flow from Investing ActivitiesAcquisition of Fixed Assets (103001223)

(103001223)Net Cash used in Investing Activities (103001223)

C. Cash Flow from Financing ActivitiesProceeds from issuance of share capital 500000Share Application money received 3925000Proceeds from Borrowings 98834043Interest Paid (489087)Net Cash used in Financing Activities 102769956

Net increase in Cash and Cash equivalents 533703Cash and Cash equivalents (Opening balance) –Cash and Cash equivalents (Closing balance) 533703

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 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


For and on behalf ofKALYANIWALLA MISTRY AND ASSOCIATES For and on behalf of the BoardChartered Accountants

B.S. DASTOOR C.K. VAIDYA R.S. VIJANPartner Directors Directors



85


To The Shareholders,Your Directors have pleasure in submitting their Report along with the audited Accounts for the financial yearended on 31st March, 2007.PRINCIPAL ACTIVITYThe principal activity of the Company is to carry on the business of manufacturing, producing, processing,formulating, buying, selling and distributing of all types of feeds and foods including Aquaculture feeds, butexcluding hatchery feed and sinking fish feed, for consumption of animals, birds, insects, fish, plants andother living organisms.FINANCIAL RESULTSAs your Company's business of shrimp feed marketing business was transferred to a Joint Venture formedbetween Godrej Agrovet Limited and Gold Coin Group, Singapore no previous year figures have been given:

(Rupees)For the period ended

31/3/2007Total Income 27750365Loss before Taxation 1522914Add: Provision for Taxation 34226Loss after Taxation 1557140Balance Brought Forward from previous year –Balance Carried Forward to Balance Sheet 1557140INCORPORATION AND SHARE CAPITALYour Company was incorporated on August 18, 2006 with an Authorised Capital of Rs. 500000. The Companyobtained the Certificate of Commencement of Business on September 13, 2006. Presently, the entire paid-upshare capital of Rs. 500000 is held by Godrej Agrovet Limited (GAVL) and its nominees.DIVIDENDThe Directors do not recommend any dividend for the year 2006-07.FIXED DEPOSITSThe Company has not accepted any public deposits during the financial year under review.HOLDING COMPANYThe Company is a subsidiary of Godrej Agrovet Limited as defined under Section 4(1)(b) of the CompaniesAct, 1956.SUBSIDIARY COMPANIESThe Company has no subsidiary companies during the year under review.DIRECTORSMr. C. K. Vaidya, Mr. Subbarao A. R. and Mr. N. B. Godrej were the First Directors of the Company named underArticle 111 of the Articles of Association of the Company.During the year Mr. R. S. Vijan was appointed as an 'Additional Director' of the Company pursuant toprovisions of Section 260 of the Companies Act, 1956 on February 8, 2007. Mr. N. B. Godrej has resigned asthe Director w.e.f. February 8, 2007.Since this is the first year of operation of the Company, Mr. C. K. Vaidya and Mr. Subbarao A. R. are not liableto retire by rotation.Mr. R. S. Vijan being an Additional Director holds office up to the date of the ensuing Annual GeneralMeeting. He is eligible for appointment as a 'Director' of the Company. The notice in this respect underSection 257 of the Companies Act, 1956 has been received from one of the Members along with a deposit ofRs.500/- (Rupees Five hundred only) signifying the intention to propose his candidature for the office ofDirector of the Company.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.

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,1988 and 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 Directorsof your 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 viewof the state of affairs of the Company at the end of the financial year and of the profit or lossof 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 theCompany for preventing and detecting fraud and other irregularities ;

d) that they have prepared the annual accounts on a going concern basis.HUMAN RESOURCESYour Company aims to focus on development of Human Resources. The industrial relations are cordial and theBoard would like to place on record its sincere appreciation for the unstinted support from all the employees.

ANNEXURE `A'

ANNEXURE FORMING PART OF THE DIRECTORS' REPORTINFORMATION 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, 1988IN RESPECT OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGEEARNINGS & OUTGO :A. Conservation of Energy

The Company has not established any manufacturing facility this year.B. Technology absorption, adaptation and innovation

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.


C.K. Vaidya A.R. SubbaraoDirector Director


REPORT OF THE AUDITORS’ REPORT

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 atperiodic 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.



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 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 interest of the Company, receipt of regularprincipal and interest and reasonable steps taken for recovery of principal and interest does notarise.

(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 adequateinternal control procedures commensurate with the size of the Company and the nature of its business,for the purchases of inventory, fixed assets and for the sale of goods and services. 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 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 and hencethe prices are not comparable.


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 notbeen prescribed by the Central Government, under Section 209(1)(d) of the Companies Act, 1956, forany of the Company's products.

1. We have audited the attached Balance Sheet of Godrej Aquafeed Limited, as at 31st March, 2007and also the Profit and Loss Account for the period ended on that date annexed thereto. Thesefinancial statements are the responsibility of the Company's management. Our responsibility is toexpress 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 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) 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 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 dealt with by this report

comply with the Accounting Standards referred to in sub-section (3C) of section 211 of theCompanies Act, 1956.

e ) In our opinion and to the best of our information and according to the explanations given tous, the said financial statements read with the notes thereon, give the information requiredby 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, 2007; andii) in the case of the Profit and Loss Account, of the loss for the period ended on that date.

5. On the basis of the written representations received from the Directors as on 31st March, 2007, andtaken on record by the Board of Directors, we report that, none of the Directors is disqualified as on31st March, 2007 from being appointed as a Director in terms of clause (g) of sub-section (1) ofSection 274 of the Companies Act, 1956.



ERMIN K. IRANIPartner


ANNEXURE TO THE AUDITORS’ REPORT 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 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. Accordingto the information and explanations given to us, there are no undisputed dues payable in respectof above as at 31st March, 2007 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 has incurred cash losses inthe period under review. This being the first year of operations there were no operations in the immediatelypreceding year.



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 benefitfund/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 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 not utilized fundsraised on short-term basis for long–term investment.



we report that no fraud on or by the Company has been noticed or reported during the year.





Godrej Aquafeed Limited


86


This YearSchedule Rupees

SOURCES OF FUNDSShareholders' FundsShare Capital 1 500000Reserves & Surplus –

Loan FundsSecured Loans –

500000


Current Assets, Loans & AdvancesInventories -Sundry Debtors 2 28590993Cash & Bank Balances 3 3115369Loans and Advances 4 2500

31708862LESS: Current Liabilities & Provisions

Current Liabilities 5 32647506Provisions 6 118496

32766002

Net Current Assets (1057140)

Balance In (Profit) & LOSS 1557140

500000NOTES TO ACCOUNTS 8

PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED

MARCH 31, 2007

This Year

Schedule RupeesINCOME

Sales 27750365

TOTAL INCOME 27750365

EXPENDITUREMaterials 23626853Expenses 7 5203771Depreciation 442655

29273279

Profit/(Loss) for the year (1522914)

ProvisionCurrent Tax –Deferred Tax –Fringe benefit tax 34226

Profit/(Loss) After Tax (1557140)

Balance Brought Forward –

Balance Carried Forward to Balance Sheet (1557140)

Earnings Per Share (Basic / Diluted) in Rs. (31.14)NOTES TO ACCOUNTS 8

SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2007

This YearSCHEDULE 1 : SHARE CAPITAL Rupees

Authorised10000000 Equity Shares of Rs. 10/- each 100000000

100000000

Issued & Subscribed And Paid–Up50000 Equity Shares of Rs. 10/- each 500000

(All the above shares are held by Godrej Agrovet Ltd.,Holding Company

Total 500000

SCHEDULE 2 : SUNDRY DEBTORS

Unsecured And Considered Good)

Over six months –Others 28590993

TOTAL 28590993

Less : –Provision For Doubtful Debts 28590993

SCHEDULE 3 : CASH & BANK BALANCES

Cash and Cheques on Hand –Balance with Scheduled Banks - on Current Accounts 3115369

3115,369

SCHEDULE 4 : LOANS AND ADVANCES

(Unsecured and considered good unlessotherwise stated)i) Government Authorities 2500ii) Others –

2500


Sundry Creditors (32425890)Security Deposits (221616)Other Liabilities –

(32647506)


As per our Report attached. Signatures to the Balance Sheet andSchedules 1 to 6 & 8

For and on behalf ofKALYANIWALLA & MISTRYChartered Accountants

E.K. IRANI C.K. VAIDYA A.R. SUBBARAOPartner Director DirectorMembership No. 35646


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

As per our Report of even date. Signatures to the Profit and Loss AccountSchedules 1 to 8

For and on behalf ofKALYANIWALLA & MISTRYChartered AccountantsE.K. IRANI C.K. VAIDYA A.R. SUBBARAOPartner Director DirectorMembership No. 35646


SCHEDULE 6 : PROVISIONS

Fringe Benefit Tax (34226)Auditors' Remuneration (84270

(118496)

SCHEDULE 7 : EXPENSES

Salaries & Wages 1515420

Provident and other Funds 49714

Workmen and Staff Welfare expenses 57239

Processing Charges 606868

Consumption of Stores and Spare Parts 153231

Power, light, fuel and water 703081

Rent 30400

Rates and Taxes 7500

Repairs and maintenance

i) Buildings 750

ii) Plant 6800

Insurance 120374

Postage, telephone and stationery 75882

Legal and Professional charges 609241

Carriage and freight 171115

Travelling and motor car expenses 810107

Miscellaneous Expenses 201779

Auditors' Remuneration 84270

5203771


87



a) 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 have been stated at cost and include incidental and/or installation/developmentexpenses incurred in put to use and interest on borrowing incurred during the constructionperiod. Pre-operative expenses for major Projects are also capitalised, where appropriate.

c) Depreciation/Amortisation has been provided for as under:

(i) 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.

(ii) 1) Building, plant & Machinery: On Straight Line Method basis at the rates prescribed bySchedule XIV of the Companies Act, 1956. 2) Computers are amortized over the period of 4years. 3) Other assets: On Written down Value basis at the rate prescribed by Schedule XIVto the Companies Act, 1956. 4] Purchased Goodwill is amortised over a period of ten years.

d) Raw materials are valued at weighted average cost. Finished goods are valued at lower of costand net realizable value. These Costs include cost of conversion and other costs incurred to inbringing the inventories to their present location and condition. Stores and Spares are valued atcost using the First-in-First-Out Method.

e) Retirement benefits to employees comprise of Payments made under defined contributionplans like provident fund and family pension. Payments under defined contribution plans arecharged to profit and loss account. The Liability for in respect of defined benefit schemes likegratuity and leave encashment benefit on retirement is provided on the basis of actuarialvaluation at the end of each year.

f) Revenue is recognised when goods are dispatched to external customers. Sales are inclusive ofrealized exchange fluctuations on export receivables but net of returns, sales tax, rebates etc.

g) 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 & 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.

h) 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 inone or more subsequent periods. Deferred tax assets, subject to consideration on prudence, arerecognised and carried forward 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.The tax effect is calculated on the accumulated timing difference at the year end, based on thetax rates and laws enacted or substantially enacted in the balance sheet date.

i) The basic earnings per share are computed using the weighted average number of commonshares outstanding during the period. Diluted earning per share is computed using the weightedaverage number of common and dilutive common equivalent shares outstanding during theperiod, excepts where the results would be anti-dilutive.

j) Provisions are recognized in the accounts in respect of possible obligations that arise from pastevents but their existence is confirmed by the occurrence or non-occurrence of one or moreuncertain future events not wholly within the control of the Company.

ITEM UNIT For the Year 31.3.07

Qty. ValueRs 000

2. Sales Turnover

Aqua Feed MT 1071 26470

Others – 1280

TOTAL 1071 27750

3. Raw Materials consumed

Animal Proteins MT 272 7512

Others 123 16114

TOTAL 395 23626


ITEM For the Year Capacity Per Annum Act. CapacityProduction P.A.MT Regd., MT

Registered InstalledMT MT

Aqua 31.3.07 Not 800 778 NotFeed Applicable Applicable

5. AUDITORS REMUNERATION

For the year 31.3.07

Rs. '000

Statutory Audit 56

Audit under other statutes 28

Certification

Taxation Representation Before Authorities

Total 84

6. VALUE OF CONSUMPTION OF RAW MATERIALS:

For the year 31.3.07% Value Rs.000

Raw Materials

Imported Items (Incl. Duty Content) – –

Indigenous 100 23626

Total 100 23626

7. RELATED PARTY DISCLOUSERE

Related party disclosure as required by AS-18 "Related Party Disclosure" are given below

1. Relationships:

(A) Holding Company:

Godrej Agrovet Limited (GAVL) holds 100% in the Company. GAVL is the subsidiaryof Godrej Industries Limited (GIL). GIL is the subsidiary of Godrej & Boyce Mfg. Co.Limited, the ultimate Holding Company.

(B) Fellow Subsidiary:

Godrej Agrovet Limited (GAVL) holds 100% stake in GoldMohur Foods &Feeds Limited (GFFL), Aadhaar Retailing Limited (ARL) and Golden Feed ProductsLimited (GFPL), which are100% subsidiary companies.

2. The following transactions were carried out with the related parties in the ordinarycourse of business:(i) Details relating to parties referred to in 1 above Rs.'000's

Sr. Nature of Holding Co. Fellow Fellow TotalNo. transactions Subsidiary Subsidiary

(GAVL) (GFFL) (GFPL)1 Sales of Raw Material

& Finished Goods – 28.67 – 28.672 Purchases of Raw

Material & Finishedgoods – – 2.45 2.45

3 Expenses charged byother companies 37.70 – – 37.70

– – – –

3. Significant Related Party TransactionsAll the transactions with holding company mentioned above are with Godrej AgrovetLimited and transactions with Fellow subsidiaries are with GoldMohur Foods & FeedsLimited and Golden Feed Products Limited.

8. EARNINGS PER SHARE:

For the Year 31.3.07

Profit after tax and prior period items (Rs.'000) (1557)Weighted average number of equity shares outstanding 50000Basic & Diluted earnings per share (31.14)Nominal value of shares 10.00

9. Information required under Schedule VI to the Companies Act, 1956 has been given to theextent applicable.

10. This is the first year of operation for the Company, hence no previous financial year dataavailable.

11. Transfer of Aqua BusinessEffective 16th November, 2006, the company has transferred its aqua feed business to GodrejGoldcoin Aquafeed Limited for a total consideration of Rs. 403853 thousand. Pursuant to thesame the following assets were transferred to Godrej Goldcoin Aquafeed Limited.

Rs. '000Fixed Assets 39173Inventories : (a) Raw material 35622 (b) Finished goods 6641 (c) Spares 3719

45982Sundry Debtors 56701Sundry Creditors (Security deposit) (9353)Total 132503


88

Cash Flow Statement for the year ended March 31, 2007

Particulars Current Year Previous YearRs. Rs.

A. Cash Flow from Operating Activities:Loss before Tax and Operational Items (1472870)Adjustment for:Depreciation 442655

442655Operating Profit before Working Capital Changes (1030215)Adjustments for :Debtors and Other Receivables (28593493)Creditors and Other Payables 32681732

4088239Cash Generated from Operations 3058024Direct taxes Paid –Net Cash Generated from Operating Activities 3058024

B. Cash from Investing Activities:Acquisition of Fixed Assets (39576482)Proceeds from sales of Fixed Assets 39133827Net Cash used in Investing Activities (442655)

C. Cash from Financing Activities:Increase in Share Capital/Share Premium 500000Net Cash used in Financing Activities 500000

Net Increase/(Decrease) in Cash and Cash Equivalents 3115369Cash and Cash equivalents (Opening Balance) –Cash and Cash equivalents (Closing Balance) 3115369

As per our Report attached For and on behalf of Board

For and on behalf ofKALYANIWALLA & MISTRYChartered Accountants

E.K. IRANI C.K. VAIDYA A.R. SUBBARAOPartner Director Director

Membership No. 35646


12. Information required to be furnished under the Part IV of the Companies Act 1956Balance Sheet Abstract and Company's General Business Profile:

i ) Registration DetailsRegistration No 163857State Code 11Balance Sheet 31 Mar. 07

ii) Capital raised during the period (Rs. 000)Public Issue 500Rights Issue NilBonus Issue NilPrivate Placement Nil

iii) Position of mobilization and deployment of funds (Rs. 000)Total Liabilities 33181Total Assets 33181Source of Funds

Paid up Capital 500Reserve & Surplus –Secured Loans –Unsecured Loans –Deferred Tax Liability –

Application of fundsNet Fixed Assets –Investments –Net Current Assets 973Misc. Expenses –

iv) Performance of the Company (Rs. 000)Turnover 27750Total Expenditure 29273Profit / (Loss) Before Tax (1523)Profit / (Loss) After Tax (1557)Earnings Per Share in Rs. (31.14)Dividend Rate Nil

v) Generic Names of three Principal productsservices of the companyItem Code No. 23099010Product Description Aqua Feeds


89



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 :A. Conservation of Energy

The Company has not established any manufacturing facility this year.B. Technology absorption, adaptation and innovation

Not Applicable since the Company does not have any manufacturing facility atpresent.


Your Company had no foreign exchange earning as well as outgo.

ANNEXURE ‘A’


1. We have audited the attached Balance Sheet of Golden Feed Products Limited, as at 31st March2007 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.


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) The accumulated losses of the Company as at March 31, 2007 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 theCompany for working capital 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 sofar as 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) ofSection 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,the said financial statements read with the notes thereon, subject to para (a) above, give theinformation required by the Companies Act, 1956, in the manner so required and give a trueand fair view in conformity with the accounting principles generally accepted in India:i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March,

2007; 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, 2007, and

taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on31st March, 2007 from being appointed as a Director in terms of clause (g) of sub-section (1) of Section274 of the Companies Act, 1956.



ERMIN K. IRANI


To The ShareholdersYour Directors have pleasure in submitting their Report along with the audited Accounts for the financial yearended on 31st March, 2007.FINANCIAL RESULTS

Your Company's performance during the year as compared with that during the previous year is summarised below:Rs. Lac

For the year ended For the year ended31/3/2007 31/3/2006

Total Income 940.83 345.00Loss before Taxation 14.12 140.07Add: Provision for Taxation 01.45 NilLoss after Taxation 15.57 140.07Balance Brought Forward from previous year 140.07 NilBalance Carried Forward to Balance Sheet 155.64 140.07REVIEW OF OPERATIONS

During the year under review, your Company transferred the shrimp feed marketing business to Godrej AquafeedLimited effective 30th September, 2006. Consequently, the results reflected the operations for the six monthsperiod from April '06 to September '06.DIVIDEND

Your Directors do not recommend any dividend for the year 2006-07.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 Agrovet Limited as defined under Section 4(1)(b) of theCompanies Act, 1956.SUBSIDIARY COMPANIES

The Company has no subsidiary companies during the year under review.DIRECTORS

Mr. C. K. Vaidya and Dr. S. L. Anaokar, Directors, retire by rotation at the ensuing Annual General Meeting inaccordance 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.

QUALIFICATIONS BY AUDITORS

The auditors have qualified in the Auditors report that the accumulated losses as at March 31,2007 exceedsits paid up capital, resulting in the erosion of its net worth. Your Company still remains a "Going Concern" asthe finance will continue to be available to the Company for its working capital requirements from its holdingcompany Godrej Agrovet Limited.ADDITIONAL INFORMATION

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 andoutgo The information in respect of these matters, required under Section 217 (1)(e) of the CompaniesAct, 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

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 affairsof the 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 RESOURCES

The Board would like to place on record its sincere appreciation of the dedicated performance turned in bythe employees of your Company.

Golden Feed Products Limited


C.K. Vaidya Dr. P.N. NarkhedeDirector Director



90

ANNEXURE TO THE AUDITORS’ REPORT


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 atperiodic intervals. In our opinion, the period of verification is reasonable having regard to thesize of the Company and the nature of its assets. No material discrepancies have been reportedon such verification.


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 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 of Rs.40,393,120, from a company covered in theregister maintained under Section 301 of the Act. The maximum amount involved during theyear was Rs.40,393,120 and the year end balance & loan taken from such party wasRs.23,938,744.

(d) The rate of interest and the other terms and conditions of the loan taken is not prejudicial to theinterests of the Company.

(e) The payment of principal and interest was also regular.

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 its business,for the purchases of inventory, fixed assets and for the sale of goods and services. During the courseof 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 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) 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, exceptfor certain transactions for which, there are no similar services rendered to other parties orhave been entered into on a reciprocal basis and hence the prices are not comparable.


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) ofthe Companies 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 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 2007, for a period of more than six months from the datethey became payable.

(b) According to the information and explanations given to us, there are no dues outstanding ofSales Tax, Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty or cess on accountof any dispute.

10) As the Company has been registered for a period less than five years the question of commenting onits accumulated losses being less than fifty percent of its net worth does not arise. The Company hasnot incurred cash loss during the financial year.



13) In our opinion and according to the information and explanations given to us, the nature of activitiesof the Company does not attract any special statute applicable to chit fund and nidhi/mutual benefitfund/societies.


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, the Company has not applied for any termloans.

17) According to the information and explanations given to us and on an overall examination of theBalance Sheet and Cash Flows of the Company, we report that the Company has not utilized fundsraised on short-term basis for long term investment.







ERMIN K. IRANI



91


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

SOURCES OF FUNDSSHAREHOLDERS’ FUNDS

Share Capital 1 500000500000 500000

LOAN FUNDSUnsecured Loans 2 23938744 70393120

23938744 70393120TOTAL 24438744 70893120

APPLICATION OF FUNDSFIXED ASSETS 3

Gross Block 46967 45046967Less: Depreciation 11742 1875000Net Block 35225 43171967Capital work-in-progress/advances – –

35225 43171967INVESTMENTS 4 25000 25000CURRENT ASSETS,LOANSAND ADVANCES 5

Inventories – 27832117Sundry debtors 19658516 30671000Cash and Bank Balances 248099 2604347Other current assets 42996 166999Loans and Advances 18200 _

19967812 61274462LESS : CURRENT LIABILITIES

AND PROVISIONSLiabilities 6 11153355 47335216Provisions 7 – 250000

11153355 47585216NET CURRENT ASSETS 8814456 13689246PROFIT & LOSS ACCOUNT 15564062 14006907

TOTAL 24438744 70893120NOTES TO ACCOUNTS 11

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 7 and 11For and on behalf ofKALYANIWALLA & MISTRYChartered Accountants C.K. VAIDYA Director

DR. P.N. NARKHEDE DirectorE. K. IRANIPartnerMembership No. 35646

Mumbai, May, 23, 2007


MARCH 31, 2007

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

INCOME

From Operations 92301242 34550891

Other income 1782044 48940

94083287 34599831

EXPENDITURE

Materials 8 64580667 22980279

Expenses 9 26363023 21606761

Interest and financial charges 10 2290274 2080190


Miscellaneous Expenditure written off _ 64508

95495706 48606738

LOSS BEFORE TAXATION (1412419) (14006907)

Provision for Taxation – –

Fringe Benefit Tax 144736144736 –

LOSS AFTER TAXATION (1557155) (14006907)

Surplus/Deficit Brought Forward (14006907)

Deficit carried forward

TOTAL (15564062) (14006907)

Earnings per share (Basic/Diluted) in Rs.

(Refer Note 12) (31) (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 8 to 11For and on behalf ofKALYANIWALLA & MISTRYChartered Accountants C.K. VAIDYA Director

DR. P.N. NARKHEDE DirectorE.K. IRANIPartnerMembership No. 35646


This Year Previous YearRs. Rs.

SCHEDULE 1 : SHARE CAPITALAuthorised1,00,000 Equity Shares of Rs.10 each 1000000 1000000*(Previous year 1,00,000)Issued, Subscribed and Paid up50,000 Equity Shares of Rs.10 each fully paid 500000 500000*(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 – 30000000(amount due within a year Rs. Nil, Previous year 30,000,000)From Godrej Agrovet Ltd.(including interest accured 23938744 40393120Rs. 18,458,77, Previous year Rs. 15,57,118)

TOTAL 23938744 70393120

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2007This 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) 25000 25000TOTAL 25000 25000

SCHEDULE 5 : CURRENT ASSETS,LOANS & ADVANCES(A) INVENTORIES :

Raw Materials – 25444477Finished Products – 2387638

– 27832115(B) SUNDRY DEBTORS

Debts outstanding for a period exceedingsix monthsConsidered Good 4526306 9825161Considered Doubtful 538508 _

5064814 9825161Other Debts 15132212 20845839

TOTAL 20197026 30671000Less: Provision for doubtful debts 538508 –

19658518 30671000SCHEDULE 3 : FIXED ASSETS (Rs.)


ASSETS As at Additions Deductions As at Upto For the On Prior Period Upto As at As at1.4.2006 31.3.2007 1.4.2006 Year Deductions Adjustments 31.3.2006 31.3.2007 31.3.2006

Intellectual property,

Technical Know-how etc. 45000000 – 45000000 – 1875000 2250000 4125000 – – – 43125000

*(Refer note 2)

Plant & Machinery 46967 – – 46967 – 11742 – – 11742 35225 46967

TOTAL 45046967 – 45000000 46967 1875000 2261742 4125000 – 11745 35225 43171967Previous Year – 45046967 – 45046967 – 1875000 – – 1875000 43171962 –


92

This Year This Year Previous YearRs. Rs. Rs.

SCHEDULE 5 : CURRENT ASSET LOANS & ADVANCES(C) CASH AND BANK BALANCES :

Cash and Cheques on hand – 53072Balances with ScheduledBanks in current account 248099 2551275

248099 2604347(D) OTHER CURRENT ASSETS : 42996 166999

(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 18200Considered Doubtful

18200 –Less: Provision for doubtful advances – –

18200 –Advance payment of Taxes(Net of provision for taxation Rs.81,925 thousand;Previous Year Rs. 81,925 thousand)

18200 –TOTAL 19967814 61274460

SCHEDULE 6 : LIABILITIESSundry Creditors 5462400 37637147

Other Liabilities 2868190 –8330590

Advances from Customers 2822766 9698069

TOTAL 11153355 47335216

SCHEDULE 7 : PROVISIONSGratuity – 200000Leave Encashment – 50000

TOTAL – 250000

SCHEDULE 8 : MATERIALSa) RAW MATERIALS CONSUMED

Opening stock 25444477 –Add : Purchases during the year 44256407 41177837

69700884 41177837Less : Transferred to Godrej Aquafeed Limited 7972627 –Less : Sales during the year 856069 89.554

60872187 41088283Less : Closing Stocks – 25444477

60872187 15643805b) PURCHASE FOR RESALE 1320842 8049679c) INVENTORY CHANGE

Opening StockFinished Goods 2387638 – Finished Goods taken over – 1674434

2387638 1674434Less : Closing StockFinished Goods – 2387638

– – 23876382387638 (713204)

TOTAL 64580667 22980280

SCHEDULE 9 : EXPENSES

1 Salaries, Wages, Bonus, Gratuity and Allowances 3153401 23658402 Contribution to Provident Fund and

Other Funds and Administration Charges 343159 1916633 Employee Welfare Expenses 468973 614774 Processing charges 10572608 120586535 Consumable Stores – –6 Power and Fuel 11107 2527 Rent 56000 40,7008 Rates and Taxes 9143 191429 Repairs & Maintenance

Building 6223 1933Plant & Machinery – –Other assets 14700 2329

20922 426010 Insurance 117631 2257511 Postage, telephony and stationery 153252 11682712 Auditor’s Remuneration 115360 11224013 Legal & Professional fees 356893 276573311 Freight, Coolie and Cartage 3353218 115301012 Discount, Commission and Selling expenses 5372542 155674513 Advertisement and publicity _ 6497914 Travelling expenses 1632774 106248315 Provision for Dobtful Debts and Advances 538508 –16 General Expenses 87532 10182

26363023 21606762

SCHEDULE 10 : INTEREST AND FINANCIAL CHARGES(a) Interest paid on fixed loans -

From:-i ) Banks 203959 4,808ii ) Others 1869931 1954936

2073,890 1959744(b) Other Financial Charges 216384 120446

TOTAL 2290274 2080190



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 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) The Company has grouped additions and disposals in appropriate time periods of a

month/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) Depreciation is provided on the straight line method at the rates specified in ScheduleIV to the Companies Act, 1956, except for computer hardware which is depreciatedover its estimated useful life of four years.

2 ) AmortizationsAsset type Period(i) Leasehold Land Primary lease period(ii) Leasehold improvements and equipments Primary lease period or

16 years whichever is less(ii) Signages 3 years(iv) Technical knowhow, technical knowhow

fees of a capital nature 10 years(v) Computer software 6.17 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 totheir present 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 tothe Profit and Loss Account.The liability in respect of defined benefit schemes like gratuity and leave encashment benefiton 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

income and the accounting income that originate in one period and are capable of reversal inone or 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 thatsufficient future taxable income will be available against which such Deferred tax liability isrecognised, if material. Deferred tax assets can be realised. The tax effect is calculated on theaccumulated timing difference at the year-end, based on the tax rates and laws enacted orsubstantially enacted on the balance sheet date.

i) The basic earnings per share is computed using the weighted average number of commonshares outstanding during the period. Diluted earnings per share is computed using the weightedaverage number of common and dilutive common equivalent shares outstanding during theperiod, except where 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. TRANSFER OF SHRIMP FEED BUSINESS

Effective 30th September, 2006, the Company has transferred its aqua feed business to Godrej AquafeedLimited for a total consideration of Rs. 6,46,68,396. Pursuant to the same the following assets weretransferred to Godrej Aquafeed Limited.

Rs. ‘000

Fixed Assets 40875000Inventories :(a) Raw material 7971627(b) Finished goods 1207980

9179607Sundry Debtors 24407181

74461788Less: Current liabilities 9793392Total 64668,396


Unit Quantity Value Quantity ValueRs. Rs.

3. SALES TURNOVERAqua Feed MT 2903 92301242 1228 34550,891

Note: Sales Turnover includes sale of items processed by third parties, and items purchased by the Company for resale.



93

4. FINISHED GOODS INVENTORIESAqua Feeds MT – – 92 2387638

5. PURCHASES FOR RESALEAqua Feed MT 40 1320842 365 8049679

6. RAW MATERIALS CONSUMEDAnimal Proteins MT 601 15759,194 445 10217648Others 45112993 5426156

TOTAL 60872187 15643804


Registered Installed Actual Third PartyItem For the year Production Production Production Production

Ended MT MT MT MT

Aqua Feeds 31.03.2007 – – – 2918.431.03.2006 – – – 1189.5

This Year This Year Previous YearRs. Rs. Rs.

8. AUDITORS’ REMUNERATIONAudit fees 86520 84180Audit under Other Statutes 28840 28060TOTAL 115360 112240

9. VALUE OF CONSUMPTION OF RAW MATERIALS, SPARES & TOOLSThis Year Previous Year

Rs. % Rs. %RAW MATERIALS :Indigenous 60872187 100 15643804 100

TOTAL 60872187 100 15643804 100

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.

(ii) Fellow subsidiaries:GAVL also holds 100% stake in GoldMohur Foods & Feeds Limited (GFFL), Godrej AquafeedLimited (GAL) and Aadhaar Retailing Limted (ARL).

2. The following transactions were carried out with the related parties in the ordinary course ofbusiness :

Rs. Rs.Holding Fellow

Nature of Transactions Company * Subsidiary**(i) (ii)

1 Sale of materials/finished goods/ Debtors 4524000 335867881072000 –

2 Purchase of Fixed Assets – –46987 –

3 Sale of Fixed Assets – 40875000 – –

4 Purchase of materials/finished goods 2558000 –293000 –

5 Loan taken – 40393120 –

5 Loan repaid 16454376 –– –

6 Interest expense on loan taken 1846000 –1557118 –

7 Expenses charged to other companies 257816 –– –

8 Transfer of current liabilities – 9793392 – –

9 Outstanding payables, net of (receivables) 23938744 – 40393120 –

10 Guarantees issued by – –75000000 –

11 Gurantees outstanding – – 75000000 –

* All transaction are with Godrej Agrovet Limited** All transactions are with Godrej Aquafeed Limited

12. EARNINGS PER SHAREThis Year Previous Year

Rs. Rs.

Profit after tax and prior period expenses (1557155) (14006907)Weighted average number of equity shares outstanding 50000 50000Basic earnings per share (31) (280)Diluted earnings per share (31) (280)Nominal value of shares 10.00 10.00

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007Current Previous

Year YearRs. Rs. Rs.

A. Cash Flow from Operating Activities :Net Profit Before Taxes (1412419) (14006907)Adjustment for:Depreciation 2261742 1875000Interest expenses 2290274 2080190Miscellaneous expenditure written off – 64508

4552016 4019698Operating Profit Before Working Capital Changes 3139597 (9987209)Adjustments for:Inventories 27832117 (27832115)Debtors and Other Receivables 11118288 (30837998)Creditors and Other Payables (36431861) 47533521

2518544 (11136592)Cash Generated from Operations 5658141 (21123801)Direct Taxes paid (net of refund received) (144736)Net Cash Flow from Operating Activities 5513405 (21123801)

B. Cash Flow from Investing Activities :Acquisition of fixed assets – (45046967)Proceeds from sale of fixed assets 40875000Purchase of Investments – (25000)

40875000 (45071967)Net Cash used in Investing Activities 40875000 (45071967)

C. Cash Flow from Financing Activites :Proceeds from Borrowings – 70393120Repayment of Borrowings (46454376) –Interest Paid (2290274) (2080,190)

Net Cash used in Financing Activities (48744650) 68312930

Net increase in Cash and Cash equivalents (2356247) 2117160

Cash and Cash equivalents (Opening balance) 2604,347 487187

Cash and Cash equivalents (Closing balance) 248099 2,604347

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 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.


INFORMATION REQUIRED TO BE FURNISHED UNDER THE PART IVOF SCHEDULE VI OF THE COMPANIES ACT, 1956Balance Sheet Abstract and Company’s General Business Profilei ) Registration Details

Registration No. 140599State Code 11Balance Sheet 31/3/2007

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 35592099Total Assets 35592099Source of Funds

Paid up Capital 500000Reserve & Surplus –Secured Loans –Unsecured Loans 23938744

Application of fundsNet Fixed Assets 35225Investments 25000Net Current Assets 8814456Misc Expenditure –Accumulated Loses Nil

iv) Performance of the Company (Rupees)Turnover 94083287Total Expenditure 95495706Profit Before Tax -1412419Profit After Tax -1557155Earnings Per Share in Rs. -31.14Dividend Rate

v) Generic Names of three Principalproducts services of the CompanyItem Code No. 23099010Product Description Animal Feeds

C.K.Vaidya DR. P.N. NARKHEDE

Mumbai, May 23, 2007 Director Director

For and on behalf ofKALYANIWALLA & MISTRYChartered Accountants C.K. VAIDYA Director

DR. P.N. NARKHEDE DirectorE.K. IRANIPartnerMembership No. 35646


Goldmohur Foods & Feeds Limited

94


To The Shareholders

Your Directors have pleasure in submitting their Report along with the audited Accounts for the financial yearended on 31st March, 2007.

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 ended31.3.2007 31.3.2006

Total Income 32635.13 29587.69Profit before Taxation (PBT) 443.40 618.00Less: Provision for Taxation 123.00 80.00Profit after Taxation 320.40 538.00Balance Brought Forward from previous year 226.82 96.10

TOTAL 547.22 634.10Appropriations:Interim Dividend 340.06 310.00Final Dividend – -Tax on Dividend 47.69 43.48General Reserve 32.04 53.80Balance Carried Forward to Balance Sheet 127.44 226.82

TOTAL 547.22 634.10


The year under review presented many challenges for your Company. Avian influenza which was detectedin certain pockets of the country last year continued to adversely impact the performance of your Company.Additionally unprecedented increase in certain key raw materials like maize put severe pressure on themargins. Though the industry witnessed a degrowth during the year under review, your Company did well togrow by 10 %.

DIVIDEND

Your Directors have paid an interim dividend of Rs.18.50 per (on 18,38,170 shares) share for the year 2006-07 (previous year Rs.16.86 per share on 18,38,170 shares). Your directors do not recommend any finaldividend.

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 Agrovet Limited as defined under Section 4(1)(b) of theCompanies Act, 1956.

SUBSIDIARY COMPANIES

The Company has no subsidiary companies during the year under review.

DIRECTORS

Mr. N. B. Godrej and Dr. S. L. Anaokar, 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 Auditors M/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 Directorsof your Company confirm :-

a) that in the preparation of the annual accounts, the applicable Accounting Standards havebeen followed and no material departures have been made from the same ;

b) that they have selected such Accounting Policies and applied them consistently and madejudgements and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company at the end of the financial year and of the profit or lossof 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 theCompany for preventing and detecting fraud and other irregularities ;

d) that they have prepared the annual accounts on a going concern basis.

HUMAN RESOURCES

In a competitive business environment, a competent and motivated team of employees is a key ingredientfor the success of an organization. We are pleased to report that during the year under review industrialrelations at all units continued to be cordial. The Management thanks all the employees and workers for theircontinued contribution and efforts towards the Company's progress.


N.B. GodrejMumbai, May 23, 2007 Chairman

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 Energy

Your Company is constantly endeavoring 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 up-gradation 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.


Your Company did not have any foreign exchange earnings. Foreign Exchange expenditure during theyear under consideration was Rs.1615.91 lac (Previous year Rs. 2267.76 lac).


N.B. GodrejMumbai, May 23, 2007 Chairman


95


Referred to in paragraph (3) of our report of even date

REPORT OF THE AUDITORS TO THE MEMBERS OF

GOLDMOHUR FOODS & FEEDS LIMITED

of the loans granted being prejudicial to the interest 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.



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 March,2007 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.



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.


15) According to the information and explanations given to us, the Company has not given guarantee forloans 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 BalanceSheet and Cash Flows of the Company, we report that no funds raised on short-term basis have been usedfor long-term investment.








Membership No. 35646Mumbai, May 23, 2007

1. We have audited the attached Balance Sheet of Goldmohur Foods and Feeds Limited, as at31st March, 2007 and also the Profit and Loss Account and the Cash Flow Statement of the Company forthe year 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 statements basedon our audit.


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) 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, inrespect 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 Standards 26 IntangibleAssets since, in the opinion of the management the Trademarks will have a useful life matching theamortization period. Being a technical matter, we have relied upon the management’s estimatesstated 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, 2007;

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, 2007, and

taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on 31stMarch, 2007 from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274of the Companies Act, 1956.




Membership No. 35646Mumbai, May 23, 2007

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.



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


3) (a) The Company has not granted 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 conditions


96


Schedule As at As at As atMarch 31, March 31, March 31,

2007 2007 2006Rs. '000 Rs. '000 Rs. '000

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED

MARCH 31, 2007Schedule For the year For the year For the year

ended ended ended31/03/2007 31/03/2007 31/03/2006

Rs. '000 Rs. '000 Rs. '000

As per our Report attachedFor and on behalf ofKALYANIWALLA & MISTRYChartered Accountants N.B. Godrej Chairman

E.K. IRANIPartner C.K. Vaidya DirectorMembership No. 35646Mumbai, May 23, 2007.

SCHEDULES TO THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2007


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 N.B. Godrej Chairman

E.K. IRANIPartner C.K. Vaidya DirectorMembership No. 35646Mumbai, May 23, 2007.

As at As at As atMarch 31, March 31, March 31,

2007 2007 2006Rs. '000 Rs. '000 Rs. '000

SCHEDULE 1 : SHARE CAPITALAuthorised5,000,000 Equity Shares of Rs 10 each 50000 50000Issued, Subscribed and Paid up1,838,170 Equity Shares of Rs.10 each fully paid 18382 18382All 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 cash

SCHEDULE 2 : RESERVES AND SURPLUSSECURITY PREMIUM ACCOUNTAs per last Balance Sheet 136233 136233GENERAL RESERVE ACCOUNTAs per last Balance Sheet 30266 24886Add: Transfer from Profit & Loss Account 3204 5380

33470 30266PROFIT AND LOSS ACCOUNT 12744 22682

TOTAL 182447 189180

SOURCES OF FUNDS

Shareholders’ FundsShare Capital 1 18382 18382Reserves and Surplus 2 182447 189180

200829 207563Loan FundsSecured Loans 3 - 8440Unsecured Loans 4 90000 100000

90000 108440Deferred Tax Liability 52400 54900

TOTAL 343229 370903


Fixed Assets 5Gross Block 459402 460282Less : Depreciation 153062 123968

Net Block 306340 336314Capital work-in-progress 10108 -Fixed Assets Held for Disposalat Net Realisable Value 7 7

316455 336321Current Assets, Loansand Advances 6Inventories 378835 323619Sundry Debtors 238502 191830Cash and Bank Balances 42862 8410Loans and Advances 88839 46910

749038 570769LESS :Current Liabilities

and Provisions 7Liabilities 705130 529525Provisions 17134 6662

722264 536187

Net Current Assets 26774 34582

TOTAL 343229 370903


INCOME

Sales 3233489 2944439

Other Income 8 30025 14330

3263514 2958769

EXPENDITURE

Materials 9 2791578 2484063

Expenses 10 391066 377453

Interest and Financial Charges 11 5728 7155

Depreciation/Amortisation 30802 28298

3219173 2896969

PROFIT BEFORE TAXATION 44340 61800

Provision for Taxation

Current 13500 5300

Minimum Alternate Tax - (5300)

Fringe Benefit 1300 2100

Deferred (2500) 5900

12300 8000

PROFIT AFTER TAXATION 32040 53800

Profit Brought Forward 22682 9610

AMOUNT AVAILABLE FOR APPROPRIATION 54722 63410

APPROPRIATION

Interim Dividend 34006 31000

Tax on Dividend 4769 4348


Surplus Carried Forward 12743 22682

TOTAL 54722 63410

Earnings per share (Basic/Diluted ) in Rs. ( Refer Note 21 ) 17.43 29.27


As at As at As atMarch 31, March 31, March 31,

2007 2007 2006Rs. '000 Rs. '000 Rs. '000


FROM BANKSCash Credit – 8440TOTAL – 8440

Security : Refer Note (3)

SCHEDULE 4 : UNSECURED LOANSShort Term Loans from Banks 90000 100000

TOTAL 90000 100000

Repayable at call or within a year Rs. 90,000 thosusands(Previous Year 1,00,000)


97

SCHEDULE 5 : FIXED ASSETS (Rs. '000)

ASSETS GROSS BLOCK DEPRECIATION NET BLOCK

As at Additions Deductions As at Up to For the On Up to As at As atApril 1, March 31, April 1, year Deductions March 31, March 31, March 31,

2006 2007 2006 2007 2007 2006

Land-Freehold 5191 – – 5191 – – – – 5191 5191Leasehold improvements 2563 – – 2563 1721 70 – 1791 772 842Buildings 6105 – – 6105 1423 162 – 1585 4520 4682Plant & Machinery 64148 865 106 64907 21013 5638 26 26625 38283 43136Power Generating Wind Mill 123168 323 – 123491 5450 6537 – 11987 111504 117718Furniture, Fittings & Fixtures 4710 32 1570 3172 2088 219 998 1309 1863 2622Computers 11016 542 308 11249 7545 1798 278 9065 2185 3471Motor Vehicles 6592 507 1164 5935 1852 592 406 2038 3897 4740Trade Marks 236789 – – 236789 82876 15786 – 98662 138127 153913

TOTAL 460281 2269 3148 459402 123968 30802 1708 153062 306340 336314

Previous Year 391938 68703 359 460282 95864 28298 194 123968 336314 –Capital Work-in-Progress/Advances – – – – – – – – 10108 –Assets Held for Disposal at NetRealisable Value 7 7 77

316455 336321

As at March 31, As at March 31, As at March 31,2007 2007 2006

Rs. '000 Rs. '000 Rs. '000SCHEDULE 6 : CURRENT ASSETS , LOANSAND ADVANCES(A) INVENTORIES :

Raw Materials and Packing Material 281859 247215Stores & Spares 517 527Finished Goods 58632 65076Raw Material in Transit 37827 10801

378835 323619(B) SUNDRY DEBTORS :

Debts outstanding for a periodexceeding six monthsConsidered Good 30362 15982Considered Doubtful 4105 –

34467 15982Other Debts 208140 175848

TOTAL 242607 191830

Less: Provisions for doubtful debts 4105 –

238500 191830[Debts amounting to Rs.1,37,851 thousands(Previous Year Rs.1,19,752 thousands) aresecured against Bank Guarantees.Debtors Rs.15,012 thousands (Previous YearRs.15,657 thousands) are secured againstCollateral Land and shares

(C) CASH AND BANK BALANCES :Cash and cheques on hand 7512 5606

Balances with Scheduled BanksIn Current Accounts 35350 2804

42862 8410

(D) LOANS & ADVANCES :(Unsecured and considered good unlessotherwise stated)Loans and Advances recoverable incash or in kind or for value to be received :Considered Good 56435 38706Considered Doubtful 1070 715

57504 39421Less: Provision for Doubtful Advances 1070 715

56435 38706Deposits 32404 8204

88839 46910

TOTAL 749038 570769

SCHEDULE 7 : CURRENT LIABILITIES AND PROVISIONSA) CURRENT LIABILITIES

Acceptances 159651 111272Sundry Creditors (Note 5) 539862 416080Deposits 5617 2091Interest accrued but not due on loans – 82

705130 529525B) PROVISIONS

For Taxation(Net of Advance Tax Rs.55,285 thousand;Previous Year 5828 (2291)Rs. 50,708 thousand)For Gratuity 8884 7192For Leave Encashment 2422 1761

11306 6662

17134 6662

TOTAL 722264 536187

For the year ended For the year ended For the year endedMarch 31, 2007 March 31, 2007 March 31, 2006

Rs. '000 Rs. '000 Rs. '000SCHEDULE 8 : OTHER INCOMEInterest Income 97 52Income from wind mill 18545 8222Insurance Claim Received 87 2Miscellaneous Income(Tax Deducted at source Rs. 4 thousand; 11295 6054Previous Year Rs. 30 thousand)

30024 14330

SCHEDULE 9 : MATERIALSRaw Materials Consumed

Opening Stock 247215 166336Add: Purchases during the year 2840213 2440295

3087428 2606631

Less: Sales during the year 257081 27946

2830347 2578685

Less: Closing stocks 281859 247215

2548488 2331470Purchase For Resale 236646 149105Inventory Change

Opening Stock of Finished Goods 65076 68564Less: Closing Stock of Finished Goods 58632 65076

6444 3488

2791578 2484063

SCHEDULE 10 : EXPENSES1. Salaries, Wages, Bonus 95662 781242. Provident and other funds 3369 29623. Workmen and staff welfare expenses 2751 69274. Processing charges 79117 888895. Power, light, fuel and water 34717 352836. Rent 11447 129947. Rates and taxes 1790 3,7998. Repairs and maintenance - Buildings 196 279

Plant 8863 5627Other Assets 191 1771

925010. Insurance 1442 141711. Postage, telephone and stationery 7169 848812. Auditors’ Remuneration 1447 144713. Legal and Professional charges 8070 147814. Carriage and freight 64064 5807415. Advertisement and Sales Promotion 1460 342216. Travelling and motor car expenses 23223 2549417. Provision for Doubtful Debts &

Advances/(Written back) 4505 –18. Bad Debts Written Off 10422 2250019. Loss on Sale of Fixed Assets (Net) 254 4120. Miscellaneous Expenses 30907 18437

391066 377453

SCHEDULE 11 : INTEREST AND FINANCIAL CHARGES(a) Interest paid on fixed loans

i) Banks 3549 5149( b) Other Financial Charges 2179 2006

5728 7155



98

SCHEDULE 12 : NOTES TO ACCOUNTS1. 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/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 pro-rata 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 lowerof cost and net realisable value after providing for cost of obsolescence and other anticipatedlosses, wherever considered necessary. Cost is computed on weighted average basis. Finishedgoods include cost of conversion and other costs incurred in bringing the inventories to theirpresent location and condition. Stores and spares are valued at cost using the First-In-First-Outmethod

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 certainity 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 ofloan.

o) Provisions and Contingent Liablities Provisions are recognized in the accounts in respect of presentprobable obligations, the amount of 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 Rs.nil (Previous Year Rs. 36,800/- thousands) 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 technological obsolecence. Themanagement is of the opinion that th 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, 2007For the Year For the Year31/03/07 31/03/06

Unit Quantity Value Quantity ValueRs. ‘000 Rs. ‘000

6. SALES TURNOVER MTAqua Feed 8948 244317 11217 320624Cattle Feed 37006 232624 35579 216282Poultry Feed 229209 2457835 228196 2396162Lab Feeds 222 2617 474 3815Contract Broiler Farming – – – –Others 1596 296097 – 7556

TOTAL 276981 3233490 275466 2944439

7. FINISHED GOODS INVENTORIESMTAqua Feed 759 22794 1007 32236Cattle Feed 567 3686 1024 5785Poultry Feed 2954 30991 3088 25834Lab Feeds 4 30 46 377Others 29 1131 – 844

TOTAL 4313 58632 5165 65076

8. PURCHASE FOR RESALE MTAqua Feed 188 1074 86 1314Cattle Feed 14315 90999 19874 113731Poultry Feed 14664 143183 3054 28958Lab Feeds – – – –Others 168 1389 – 5101

TOTAL 29335 236646 23014 149104

9. RAW MATERIALS CONSUMED MTDLM 333 58,896 421 64937Maize 84945 714376 92126 605050Rice Bran Extraction 25311 105089 22189 71032Rice Bran 7377 55009 10361 61019Soya 64022 666352 64700 619358Others – 948766 – 910074

TOTAL 181988 2548488 189797 2331470

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 31.03.07 Not 232000 246794 Notand Poultry Feed Applicable Applicable

Aqua, Cattle and 31.03.06 Not 232000 252710 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

31/03/07 31/03/06Rs. ‘000s Rs. ‘000s

Expenses (Schedule 12) include amounts charged byGodrej Agrovet Limited, the Holding Company 26400 26400

12. AUDITORS’ REMUNERATIONStatutory Audit 898 898Audit under other statutes 393 393Certification 44 44Taxation Representation Before Authorities 112 112

TOTAL 1447 1447

13. Revenue expenditure on scientific research debited to respective expense heads Rs. 2,657 thousands(Previous Year Rs.2,594 thousands )

14. VALUES OF IMPORTS ON CIF BASISRaw Materials 152837 246138

TOTAL 152837 246138

15. EXPENDITURE IN FOREIGN CURRENCYTravelling Expenses 312 618Bank Charges 2367 1017

TOTAL 2679 1635

16. VALUE OF CONSUMPTION OF RAW MATERIALSFor the Year For the Year31/03/07 31/03/06

% Value % ValueRs. ‘000 Rs. ‘000

Raw Materials :Imported Items (Including Duty Content) 6 158912 10 225141Indigeneous 94 2389576 90 2106329

TOTAL 100 2548488 100 2331470

17. The profit/loss on forward foreign exchange contracts cancelled during the year included in the Profitand Loss Account amounts to Rs. 482 thousands (net expense) (Previous Year Rs. 740 thousands, netincome). The amount of exchange difference in respect of forward exchange contracts to be recognisedin the Profit or Loss of subsequent accounting periods is Rs.140 thousands (Previous Year - Rs. 12thousands ).


99


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 deffered tax liabilities/assets.The tax effects of significant temporary differences that resulted in deferred tax assets and liabilities are :

For the Year For the Year31/03/07 31/03/06Rs. ‘ 000 Rs. ‘ 000

Depreciation on Fixed Assets (57986) (61732)Carried forward loss – 3619Provision for Doubtful Debts 1395Provision for Doubtful Advances 364 241Others 3843 2972

(52384) (54900)

20. RELATED PARTY DISCLOUSERERelated 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 subsidairy of Godrej & Boyce Mfg. Co. Limited, the ultimateHolding Company.Associate CompanyGodrej Gold Coin Aqua Feed Private Limited.GAVL holds 49% in the Company.GVAL has aquired 49% stake in GGCAFPL during the year.

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. ‘000s Rs. ‘000sHolding Associate

Company Company1 Sale of Materials/Finished Goods 132548 595

11120 –2 Sale of Services 180 –

- –3 Purchase of Materials/Finished Goods 198469 2820

215661 –4 Expenses charged to other companies 8400 –

1307 –5 Expenses charged by other companies 39152 –

26592 –6 Dividend paid 34006 –

31000 –7 Outstanding receivables, net of payables 5497 (2225)

18219 –8 Guarantees taken 5900 –

70000 –Note : Figures in italics pertains to the previous year

3. Significant Related Party TransactionsAll the transactions with holding company mentioned above are with Godrej Agrovet Limited.All the transactions with associate company mentioned above are with Godrej Gold Coin FeedPrivate Limited.

21. EARNINGS PER SHAREFor the Year For the Year

31/03/07 31/03/06Profit after tax as per Profit & Loss Account ( Rs. ‘000) 32040 53800Weighted average number of equity shares outstanding 1838200 1838200Basic earnings per share 17.43 29.27Diluted earnings per share 17.43 29.27Nominal 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 mutual consenton mutually acceptable terms.The aggregate lease rental payable by the Company and charged to Profit and Loss Account (Schedule10) is as follows :

For the Year For the YearParticulars 31/03/07 31/03/06

Rs. ‘ 000 Rs. ‘ 000Lease rental paid during the year 10640 11012Future Lease Obligations

Due within one year of balance sheet date 6061 6077Due after one year and with in five years of balance sheet date 8832 9301Due 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 31-Mar-2007

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 343229Total Assets 343229Source of FundsPaid up Capital 18382Reserve & Surplus 182447Secured Loans –Unsecured Loans 90000Deferred Tax Liability 52400Application of fundsNet Fixed Assets 316455Investments –Net Current Assets 26774Misc. Expenditure –

iv) Performance of the Company (Rupees ‘000)Turnover 3263514Total Expenditure 3219174Profit Before Tax 44340Profit After Tax 32040Earnings Per Share in Rs. 17.43Dividend Rate 185%

v) Generic Names of three Principal Products Services of the CompanyItem Code No 23099001Product Description Animal Feeds

N.B. Godrej C.K. VaidyaChairman Director


CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007For the For the

Year Ended Year Ended31-03-2007 31-03-2006

Rs. '000 Rs. '000 Rs. '000A. Cash Flow from Operating Activities :

Profit before Tax and Operational Items 44340 61800Adjustment for:Depreciation 30802 28298Loss/(Profit) on sale of Fixed Assets 254 41Exchange Difference 3956 (8876)Interest Income (97) (52)Interest Expense 3549 7155

38463 26566

Operating Profit before Working Capital Changes 82803 88366Adjustments For :Inventories (55215) (72417)Debtors and Other receivables (88599) 42472Creditors and Other payables 174084 (53183)

30270 (83128)

Cash Generated from Operations 113073 5237Direct taxes Paid (6681) (5930)

Net Cash Generated from Operating Activities 106392 (693)

B. Cash from Investing Activities:Acquisition of Fixed Assets (12377) (68703)Proceeds from sales of Fixed Assets 1200 124Interest Income 97 52

Net Cash used in Investing Activities (11080) (68527)

C. Cash from Financing Activities:Proceeds from Borrowings – 100000Repayment of Borrowings (10000) –(Decrease)/Increase in Cash Credit/WCDL from Banks (net) (8453) 8440Interest Paid (3631) (5067)Dividend Paid (34006) (31000)Tax on distributed profits (4769) (4348)Other Financial Charges – (2006)

Net Cash used in Financing Activities (60858) 66019

Net Increase/(Decrease) in Cash and Cash Equivalents 34454 (3201)Cash and Cash equivalents (Opening Balance) 8410 11611

Cash and Cash equivalents (Closing Balance) 42864 8410

As per our Report attachedFor and on behalf ofKALYANIWALLA & MISTRYChartered Accountants N.B. Godrej ChairmanE.K. IRANIPartner C.K. Vaidya DirectorMembership No. 35646Mumbai, May 23, 2007

Godrej Properties Limited

100

BOARD OF DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST MARCH, 2007

To The Shareholders

Your Directors have pleasure in submitting their Report alongwith the Audited Accounts for the yearended 31st March, 2007.1. OPERATING RESULTS:

Your Company’s performance during the year as compared to the previous period is summarisedbelow:

2006-2007 2005-2006(Rs. in lacs) (Rs. in lacs)

Profit before Taxation 4609.76 1785.84Provision for Taxation (517.42) (445.32)Provision for Fringe Benefit Tax (7.67) (4.88)Provision for Deferred Tax 14.71 3.29Provision for MAT credit entitlement 45.84 –Profit after Taxation 4145.22 1338.93Add: Surplus brought forward 1263.41 772.20

Prior year tax adjustments (0.52) (6.87)

AMOUNT AVAILABLE FOR APPROPRIATION 5408.11 2104.26Appropriations:

Your Directors recommend appropriations as under:Interim Dividend 2700.00 620.00Dividend Distribution Tax 378.67 86.96Transfer to General Reserve 414.53 133.90Surplus carried forward 1914.91 1263.40TOTAL APPROPRIATIONS 5408.11 2104.26

2. DIVIDEND:

Your Directors during the year had announced two interim dividends @ 186.2039% & @232.7549%. The said two interim dividends are 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. 13726.17 lacs during theyear ended 31st March, 2007.The highlights of the year have been the residential projects Godrej Woodsman Estate in Bangaloreand Planet Godrej at Mahalaxmi. Both these projects recorded excellent sales and the launch ofthe 5th Tower Celesta in Planet Godrej has been very successful.

4. FUTURE PROSPECTS AND OUTLOOK OF THE COMPANY:

The Industry continues to surge ahead as demand outstripped supply in all major markets acrossvarious business verticals. The growth story is expected to continue for the next five years in theback of strong IT/ITES demand, expansion of modern retails and housing demand for the growingyoung urban population in India. To capitalise on this tremendous opportunity your Company hasentered into a large development opportunity in Hyderabad for building an IT Park of six million sq.ft. The Company is also in the process of finalizing several residential and commercial projects inBangalore, Pune, Chennai and Goa. The Company is also exploring the possibility of raising capitalthrough an Initial Public Offer subject to SEBI approval during the current financial year.

5. SUBSIDIARY COMPANIES :

During the year your Company formed three new Private Limited Companies viz., Godrej RealEstate Private Limited, Godrej Developers Private Limited and Godrej Sea View Properties PrivateLimited. These three companies will be subsidiaries of your Company. The project at Hyderabadwill be developed exclusively by the Godrej Real Estate Private Limited, one of the project withSimoco at Kolkata will be developed by Godrej Developers Private Limited and the new projectat Goa will be developed exclusively by Godrej Sea View Properties Private Limited.During the year, Godrej Realty Private Limited issued 1715000 10% Secured RedeemableOptionally Convertible Debentures of Rs.10/- each to HDFC Venture Trustee Company Limitedand 1785000 10% Secured Redeemable Optionally Convertible Debentures of Rs. 10/- each toyour Company.

The audited Balance Sheet as at 31st March, 2007 and Profit & Loss Account ended on that datetogether with the Reports of Directors and Auditors thereon of our Subsidiary Companies namelyGirikandra Holiday Homes & Resorts Limited, Godrej Realty Private Limited, Godrej WatersideProperties Private Limited, Godrej Real Estate Private Limited, Godrej Developers Private Limitedand Godrej Sea View Properties Private Limited alongwith Statement as required under Section212 of the Companies Act, 1956, is annexed herewith.

6. FIXED DEPOSITS:

The Company has accepted Fixed Deposits to the extent of Rs. 4140000/- during the year.

7. ADDITIONAL INFORMATION :

(a) The information required to be furnished under the provision of section 217 (2A) of theCompanies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 andforming part of Directors' Report 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 withthe 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 Earnings & Outgo :

During 2006-07, expenditure in foreign currencies amounted to Rs. 39,497,612 /- onaccount of travelling and expenses incurred for business promotion.

The Company has not earned any Foreign Exchange during the year.

8. DIRECTORS :

In accordance with the provision of the Articles of Association of the Company, Ms. PherozaJamshyd Godrej, Mr. Nadir B. Godrej and Ms. Smita Vijay Crishna retire by rotation and beingeligible, offer themselves for re-appointment.

9. DIRECTORS’ RESPONSIBILITY STATEMENT:

Your Directors confirm:

(i) that in the preparation of the annual accounts, the applicable accounting standards havebeen followed;

(ii) that the Directors have selected such accounting policies and applied them consistently andmade 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 ended31st March, 2007 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.

10. APPOINTMENT OF AUDITORS:

M/s. Kalyaniwalla Mistry and Associates, Chartered Accountants retire at the ensuing AnnualGeneral Meeting and are eligible for re-appointment.

11. ACKNOWLEDGEMENT:

Your Directors take this opportunity to thank all the employees and associates for their co-operation.


A.B. GODREJ

ChairmanMumbai, May 23, 2007

ANNEXURE TO DIRECTORS’ REPORT

Information 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 31st March, 2007.

SR. NAME AGE QUALIFICATION DATE OF DESIGNATION REMUNERATION EXPERIENCE LAST EMPLOYMENTNO. EMPLOYMENT (RS.) (YEARS) DESIGNATION COMPANY

1. Mr. Milind S. Korde 43 B.Sc., L.L.B., A.C.S. 03.12.1990 Managing Director 7916230 20 Commercial Officer Tata HousingDevelopment Co. Ltd.

2. Mr. K. T. Jithendran 40 B.Tech., P.G.D.M. 01.06.1994 Executive Vice President 3479680 19 Design Engineer Metallurgical EngineeringConsultants India 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) Remuneration for the purpose of this statement as shown above includes Salary, House Rent Allowance, Performance Linked Variable Remuneration (PLVR), Company’s contribution to Provident Fundand monetary value of perquisites as per Income Tax Rules.

b) The Designation represents the nature of duties performed by the Employee.c) 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.4. Information about qualification and last employment is based on particulars furnished by the concerned employee.


101

1. We have audited the attached Balance Sheet of GODREJ PROPERTIES LIMITED, as at31st March, 2007 and also the Profit and Loss Account and the Cash Flow Statement of theCompany 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.

2. We conducted our audit in accordance with auditing standards generally accepted in India.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 basis, evidence supporting the amounts and disclosures in the financial statements. Anaudit also includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statementpresentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Governmentin terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we annex hereto astatement on the matters specified in paragraphs 4 and 5 of the said Order.

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

a) We have obtained all the information and explanations, which to the best of our knowledgeand 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 Companyso far as appears from our examination of such books.

c) The Balance Sheet, Profit and Loss Account and the Cash Flow Statement dealt with by thisreport are in agreement with the books of account.

d) In our opinion, the Balance Sheet, Profit and Loss Account and the Cash Flow Statementdealt with by this report comply with the accounting standards referred to in sub-section(3C) of Section 211 of the Companies Act, 1956.

e) Without qualifying our opinion, we draw attention to the fact that as referred to in Note 1(f)of Schedule 19-Notes to Accounts, in respect of projects under long term contracts

REPORT OF THE AUDITORS

TO THE MEMBERS OF GODREJ PROPERTIES LIMITED

undertaken and/or financed by the Company, we have relied upon the management’sestimates of the percentage of completion, costs to completion and on the projections ofrevenues expected from projects owing to the technical nature of such estimates, on thebasis of which profits/losses have been accounted, interest income accrued and realizabilityof the construction work in progress and project advances determined.

f) In our opinion and to the best of our information and according to the explanations given tous, the said accounts read with the notes thereon, give the information required by theCompanies Act, 1956, in the manner so required and give a true and fair view in conformitywith 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,2007;

ii) in the case of the Profit and Loss Account, of the profit of the Company for the yearended on that date, and

iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the yearended on that date.

5. On the basis of the written representations received from the directors as on 31st March, 2007,and taken on record by the Board of Directors, we report that, none of the directors is disqualifiedas on 31st March, 2007 from being appointed as a director in terms of clause (g) of sub-section(1) of Section 274 of the Companies Act, 1956.


Bahadur S. DastoorPartnerMembership No. 48936



1) (a) The Company is maintaining 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 atperiodicals intervals. In our opinion, the period of verification is reasonable having regardto the size of the Company and the nature of its assets.



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

(c) The Company is maintaining proper records of inventory and no material discrepancieswere noticed on physical verification.

3) (a) The Company has not granted any loan, secured or unsecured to companies, firms or otherparties 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 other terms andconditions of the loans granted being prejudicial to the interests of the Company, receipt ofregular principal and interest and overdue amounts exceeding rupees one lakh does notarise.

(c) The Company has not taken any loan, secured or unsecured from companies, firms orother parties covered in the Register maintained under Section 301 of the CompaniesAct, 1956.

(d) Consequently, the question of commenting on the rates of interest and other terms andconditions of the loans taken being prejudicial to the interests of the Company, payment ofregular principal and the interest does not arise.

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. There are no salesof service. During the course of our audit, we have not observed a continuing failure to correctmajor weaknesses in internal controls.

5) (a) Based on the audit procedures applied by us and according to the information andexplanations provided by the management, we are of the opinion that the particular ofcontracts and arrangement referred to in Section 301 of the Companies Act, 1956 havebeen entered into the register required to be maintained under that section.

(b) The transactions made in pursuance of such contracts or arrangements, were made atprices which are reasonable having regard to prevailing marketing prices at the relevanttime, where comparable market price exist.

6) In our opinion and according to the information and explanations given to us, the Company hascomplied with directives issued by the Reserve Bank of India and the provisions of Section 58Aand 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framedthere under, with regard to deposits accepted from the public. There have been no proceedingsbefore the Company Law Board or National Company Law Tribunal or Reserve Bank of India orany court or any other Tribunal in respect of the aforesaid deposits.


8) The maintenance of cost records has not been prescribed by the Central Government underSection 209(1)(d) of the Companies Act, 1956, in respect of the activities carried on by theCompany.

ANNEXURE TO THE AUDITORS' REPORT

9) (a) According to the information and explanations given to us and on the basis of our examinationof books of accounts, 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, Value Added Tax, Sales Tax, Wealth Tax, ServiceTax, Custom Duty, Excise Duty, cess and other statutory dues applicable to it with theappropriate authorities. According to the information and explanations given to us, there areno undisputed dues, payable in respect of above as at 31st March, 2007 for a period of morethan six months from the 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, Wealth Tax, Service Tax, Excise Duty or cess onaccount of any dispute.

10) The Company does not have accumulated losses at the end of the financial year and it has notincurred any 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 andrecords produced to us, the Company has not defaulted in repayment of dues to banks. There areno dues to financial institutions or debenture holders.

12) According to the information and explanations given to us and based on the documents andrecords produced to us, the Company has not granted loans and advances on the basis of securityby way of pledge of shares, debentures and other securities.

13) In our opinion and according to the information and explanations given to us, the nature ofactivities of the Company does not attract any special statute applicable to chit fund and nidhi/mutual benefit fund/societies.


15) According to the information and explanations given to us, the Company has given guarantee forloans taken by others from banks. The terms and conditions are not primafacie prejudicial to theinterest of the Company.

16) According to the information and explanations given to us the Company has utilized the termloan for the purpose it was taken.

17) According to the information and explanations given to us and on an overall examination of theBalance 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 not made any preferential allotment of shares to parties or companies coveredin the Register maintained under Section 301 of the Companies Act, 1956.



21) Based on the audit procedures performed and information and explanations given by themanagement, we report that no fraud on or by the Company has been noticed or reported duringthe year.





102


31ST MARCH, 2007Schedule For the For the

Period ended year ended31.03.2007 31.03.2006

Rupees RupeesINCOME

Sales 1172466094 567710565Operating Income 13 199775722 129880250Other Income 14 375370 6987239

TOTAL INCOME 1372617186 704578054

EXPENDITURE

Cost of sales 15 758398853 425251528Employee Remumeration & Benefits 16 69482325 22925238Administration Expenses 17 35359665 19766499Interest & Finance Charges (Net) 18 41519933 52976531Depreciation 6879606 5074007

911640382 525993804

Profit for the year 460976804 178584250Provision for Current Taxes - (51742000) (44532000)

for fringe benefit tax (767000) (487699)for MAT credit entitlement 4584000 –for deferred tax 1471000 329000

Profit After Tax 414522804 133,893,551Prior years tax adjustments (51572) (687642)Surplus brought forward 126340517 77220108

Amount Available for Appropriation 540811750 210426017

Less :Interim Dividend 270000000 62000000

Dividend Distribution Tax 37867500 8695500


Surplus carried forward to Balance Sheet 191491250 126340517

Earnings per share (basic/diluted) in Rs. (Refer Note 9) 64.31 20.67

NOTES TO ACCOUNTS &

ACCOUNTING POLICIES 19

BALANCE SHEET AS AT 31ST MARCH, 2007

Schedule As at As at31.03.2007 31.03.2006

Rupees RupeesSOURCES OF FUNDSShareholders’ Funds

Share Capital 1 64445450 64445450Reserves & Surplus 2 520592130 413988398

Loan FundsSecured Loans 3 173899130 15553290Unsecured Loans 4 1137065294 60859000

1896002004 554846138APPLICATION OF FUNDSFixed Assets 5

Gross Block 44391084 36381750Less: Depreciation 20339609 14673620Net Block 24,051475 21708130Capital Work-in-progress 2141192 –

26192667 21708130

Investments 6 83614447 64264447

Deferred Tax Asset 4057000 2586000

Current Assets, Loans & AdvancesInventories 7 787897598 204751391Sundry Debtors 8 2197881753 828107552Cash & Bank Balances 9 133678881 149863239Loans & Advances 10 1070145412 704608934

4189603646 1887331115Less: Current Liabilities & Provisions

Current Liabilities 11 2401583011 1341094752Provisions 12 5882745 79948801

2407465756 1421043553Net Current Assets 1782137890 466287563

1896002004 554846138 0 (0)

NOTES TO ACCOUNTS &

ACCOUNTING POLICIES 19

The Schedules referred to above form an Signatures to Profit and Loss Account andintegral part of the Profit and Loss Account. Schedules 13 to 19

As per our Report of even date.

For and on behalf ofKALYANIWALLA MISTRY AND ASSOCIATESChartered Accountants A.B. GODREJ Chairman

MILIND S. KORDE Managing DirectorBAHADUR S. DASTOOR SHODHAN KEMBHAVI Company SecretaryPartnerMumbai, May 23, 2007

The Schedules referred to above form an Signatures to Balance Sheet andintegral part of the Balance Sheet. Schedules 1 to 12 and 19


For and on behalf ofKALYANIWALLA MISTRY AND ASSOCIATESChartered Accountants A.B. GODREJ Chairman

MILIND S. KORDE Managing DirectorBAHADOOR S. DASTOOR SHODHAN KEMBHAVI Company SecretaryPartnerMumbai, May 23, 2007

SCHEDULES FORMING PART OF THE ACCOUNTS

As at As at31.03.2007 31.03.2007

Rupees Rupees


AUTHORISED10,000,000 Equity Shares of Rs. 10/- each 100000000 100000000

100000000 100000000

ISSUED, SUBSCRIBED & PAID UP6444545 Equity Shares of Rs. 10/- each fully paid- up. 64445450 64445450(Out of above 5264645 shares are held byGodrej Industries Limited, the Holding Company)

64445450 64445450


Share Premium as per last Balance Sheet 245172265 245172265

245172265 245172265

General Reserve - as per last Balance Sheet 42475615 29085615

Add : Transfer from Profit and Loss Account 41453000 13390000

83928615 42475615

Profit and Loss Account 191491250 126340518

520592130 413988398

As at As at31.03.2007 31.03.2006

Rupees RupeesSCHEDULE 3 : SECURED LOANS

1) Cash Credit / Working Capital Demand Loan 173899130 15303290(Secured by equitable mortgage of immovable propertyof the Company’s Project at Juhu - Mumbai &Godrej Hill - Kalyan)

2) Term Loan from Banks – 250000(Secured by way of equitable mortgage of immovableproperty of the projects undertaken by the Company asProject Manager at Godrej Castlemaine - Pune)

173899130 15553290Of the above,Repayable within a year (other than cash credit accounts) – 250000


Banks 1110167294 45000000

Companies 10000000 –

Fixed Deposits 16898000 15859000

1137065294 60859000

Of the above,Repayable within a year 1137065294 60859000


103

SCHEDULE 5 : FIXED ASSETS


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,

2006 2006-2007 2006-2007 2007 2006 2006-2007 2006-2007 2007 2007 2006Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Leasehold Improvement 8154390 935139 – 9089529 2140645 1800,115 – 3940760 5148769 6013746Motor Vehicle 5564083 383231 1222922 4724392 3532346 607252 1,043,966 3095633 1628759 2031737Furniture & Fixtures 7343544 1681741 – 9,025285 187507 1312181 – 3499688 5525597 5156038Office Equipment 5036403 778611 34000 5781014 1223625 583671 5,114 1802182 3978832 3812781Computer 8211208 2554637 195550 10570295 4267947 2123766 164,536 6227176 4343118 3943263Site Equipments 2072120 – – 2072120 1321555 104404 – 1425959 646161 750565Intangible AssetsLicenses & Software – 3128449 – 3128449 – 348217 – 348217 2780232 –Total 36381748 9461808 1452472 44391084 14673626 6879606 1213616 20339615 24051469 21708130Previous Year 27746336 15704728 7069314 36381750 14299093 5074007 4699480 14673620

Capital Work-In-Progress 2141192 –TOTAL 26192661 21708130

As at As atSCHEDULE 6 : INVESTMENTS 31.03.2007 31.03.2006Long Term Rupees RupeesQuoted Investments

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 1066 1066Ansal Buildwell Limited100 Equity Shares of Rs.10/- each of 1366 1366Ansal Properties & Construction Limited300 Equity Shares of Rs. 5/- each of 3081 3081Ansal Properties & Industries Limited(150 shares received on stock split during the year)(Previous Year 150 Equity Shares of Rs. 10/- each)100 Equity Shares of Rs.10/- each of 1241 1241Lok Housing & Construction Limited100 Equity Shares of Rs.10/- each of 1641 1641Mantri Housing & Construction Limited100 Equity Shares of Rs.10/- each of 1516 1516Premier Hsg. & Industrial Ent. Limited100 Equity Shares of Rs.10/- each of 891 891D.S. Kulkarni Developers6500 Equity Shares of Rs. 2/- each of 6366 6366Unitech Limited(400 shares received on stock split & 6000 bonus sharesreceived during the year)(Previous Year 100 Equity Shares of Rs. 10/- each)72 Equity Shares of Rs.10/- each of 2485 3,106The Great Eastern Shipping Company Limited(72 shares of resulting company received in lieu of 90 shares ofdemerged company during the year)(Previous Year 90 Equity Shares of Rs. 10/- each)18 Equity Shares of Rs.10/- each of 621 –The Great Offshore Limited(18 shares received on demerger during the year)(Previous Year NIL)100 Equity Shares of Rs.10/- each of 266 266Radhe Developers Limited23700 Equity Shares of Rs.10/- each of 2370 2370United Textiles Limited25000 Equity Shares of Rs.10/- each of 2500 2500Amitabh Bachchan Corporation Limited

26768 26768

Less : Provision for Diminution in Value 22321 223214447 4447

Unquoted Investments1000 Equity Shares of Rs.10/- each of 10000 10000Saraswat Co-operative Bank LimitedInvestments in Subsidiary CompaniesGodrej Realty Pvt. Ltd.510000 Equity Shares of Rs.10/- each 5100000 510000010% Secured redeemable optionally convertible debentures 76500000 58650000Godrej Waterside Properties Pvt. Ltd.50000 Equity Shares of Rs.10/- each 500000 500000Godrej Sea View Properties Pvt. Ltd.50000 Equity Shares of Rs.10/- each 500000 –(Purchased during the year)Godrej Real Estate Pvt. Ltd.50000 Equity Shares of Rs.10/- each 500000 –(Purchased during the year)Godrej Developers Pvt. Ltd.50000 Equity Shares of Rs.10/- each 500000 –(Purchased during the year)

83614447 64264447

1. Cost of Quoted Investments 26768 267682. Market Value of Quoted Investments 2677624 148408

As at As at31.03.2007 31.03.2006

Rupees Rupees

SCHEDULE 7 : INVENTORIES

Stock in trade (Note 4) 19328216 69281566Construction Work in progress 768569382 135469825

787897598 204751391SCHEDULE 8 : SUNDRY DEBTORS

(UNSECURED, CONSIDERED GOOD)

Exceeding 6 months 14209863 15945862Others 2183671891 812161690

2197881753 828107552SCHEDULE 9 : CASH & BANK BALANCES

Cash & Cheques-in-Hand 10826454 87142Balance with Scheduled Banks - on Current Accounts 82797016 10453555

- on Fixed Deposit Accounts 40055411 139322542

(Refer Note 5) 133678881 149863239SCHEDULE 10 : LOANS & ADVANCES(UNSECURED, CONSIDERED GOOD)Loans & Advances recoverable in cash or in kindor for value to be received 450741887 63017736Development Manager Fees Accrued but not due (Note 3 b) 205299063 232218224Due on Management Projects 448079279 395173841Less: Transfer to Cost of Sales - Development Projects (88368864) (62040000)

359710415 333133841Interest Accrued 9492175 494573Deposits 31740447 75744559Advance Tax & Tax deducted at source(Including MAT credit entitlement 13161426 –of Rs. 45,84,000/- & Net of Provision for Tax of Rs. 153155245/-)

1070145412 704608934

SCHEDULE 11 : CURRENT LIABILITIESSundry Creditors (Note 7) 57487977 28029216Investor Education and Protection Fund – –Advances received against sale of flats 1880540792 764705864Deposits 410590 24652770Unclaimed Fixed Deposits 1689000 4035000Other liabilities 307135995 225918319Due to Management Projects 154318657 293753583

2401583011 1341094752

SCHEDULE 12 : PROVISIONSGratuity 3076578 2755825Leave Encashment 2806167 2634878Interim Dividend – 62000000Tax on Dividend – 8695500For Taxation – 3862598(Net of Advance Tax & Tax deducted at source of Rs. 114804377/-)

5882745 79948801

For the For thePeriod ended year ended

31.03.2007 31.03.2006Rupees Rupees

SCHEDULE 13OPERATING INCOME (GROSS)Income From Development Projects 71065851 76737391Compensation Received 120000000 –Project Management fees 12769 2564Other Income from Customers 3512026 –Lease Rent 5173076 53128295Licence Fees 12000 12000

199775722 129880250

Tax Deducted at source 995854 11877497


104

For the For thePeriod ended year ended

31.03.2007 31.03.2006Rupees Rupees

SCHEDULE 14 : OTHER INCOMEDividends 4529 3330Profit on sale of Fixed Assets 43908 5376611Miscellaneous Income 326933 1607298

375370 6987239SCHEDULE 15 : COST OF SALESOwn ProjectsOpening Stock: 204751392 182130830Add : Expenditure/Transfers from Advances during the yearDevelopment Rights 6612000 190000000Land 570000000 -Construction 532541579 99960010Infrastructure 3501892 27543Architect Fees 12378669 9116217Advertisement Expenses 16461721 11069565Overheads 68852936 63272454Interest 42827398 12386302

1253176195 385832001Less : Closing Stock: (787897597) (204751392)

670029990 363211439Development Projects 88368864 62040000

758398854 425251439SCHEDULE 16 : EMPLOYEE REMUNERATION & BENEFITSSalaries, Bonus, Gratuity & Allowances 65887735 19862794Contribution to Provident & other funds 2951360 2023505Other Employee Benefits 643230 1038939

69482325 22925238SCHEDULE 17 : ADMINISTRATION EXPENSESCost of Project Management 530087 168360Consultancy Charges 11163268 4372846Service Charges 111734 235688Power & Fuel 1052240 151345Rent 9421234 2092969Insurance 841480 272307Rates & Taxes 23100 467763Repairs & Maintenance 474780 479451Deferred Revenue Expenditure written off – 67866Provision for diminution in value of investments – 9589Other Operating Expenses 11741742 11448316

35359665 19766499

SCHEDULE 18 : INTEREST AND FINANCE CHARGES (NET)Interest Paid

- Banks 48569967 14630446- Inter Corporate Deposits 15813507 3525045- Projects and landlords 53165598 48613207- Others 590762 9019548

Total Interest Paid 118139834 75788246Add : Brokerage & other Financial charges 6414436 1941802Total Interest/Finance Charges Paid 124554270 77730048Less: Interest Received (Gross)

- Customers 1480 -- Projects and landlords 73643136 22523303- Others 9389720 2230214

Total Interest Received 83034336 24753517

NET INTEREST 41519933 52,976,531

Tax Deducted at source 6943577 5980919

Long-term investments are carried at cost. Provision for diminution, if any, in the value ofeach long-term investment is made to recognize a decline, other than of a temporarynature.

Current investments are carried individually at lower of cost and fair value and the resultantdecline, if any, is charged to revenue.

e) INVENTORIES

Inventories are valued as under :

a) Completed Flats - At lower of Cost or Market Value

b) Construction Work-in-Progress - At Cost

Construction Work-in-Progress includes cost of land, premium for development rights,construction costs, allocated interest and expenses incidental to the projects undertaken bythe Company.

f ) REVENUE RECOGNITION

The Company is following the “Percentage of Completion Method” of accounting. As perthis method, revenue in Profit and Loss Account at the end of the accounting year isrecognized in proportion to the actual cost incurred as against the total estimated cost ofprojects under execution with 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,where relevant, the percentages of completion, costs to completion, the expected revenuesfrom the project/activity and the foreseeable losses to completion. Such estimates havebeen relied upon by the auditors.

Income from operation of commercial complexes is recognized over the tenure of thelease/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.

g) DEVELOPMENT MANAGER FEES

The Company has been entering into Development & Project Management agreementswith landlords. Accounting for income from such projects is done on accrual basis onpercentage of completion or as per the terms of the agreement.

h) RETIREMENT BENEFITS

Retirement benefits to employees comprise payments under defined contribution plans likeprovident fund and family pension. Payments under defined contribution plans are chargedto the Profit and Loss Account. The liability in respect of defined benefit schemes likegratuity and leave encashment benefit on retirement is provided on the basis of actuarialvaluation at the end of each year.

i ) BORROWING COST

Interest and finance charges incurred in connection with borrowing of funds, which areincurred for the development of long term projects are transferred to Construction Work inProgress / Due on Management Project, as a part of the cost of the projects at weightedaverage of the borrowing cost / rates as per Agreements respectively.

Other borrowing costs are recognized as an expense in the period in which they areincurred.

j) EARNINGS PER SHARE

The basic earnings per share is computed using the weighted average number of commonshares outstanding during the period. Diluted earnings per share is computed using theweighted average number of common and dilutive common equivalent shares outstandingduring the period, except where the results would be anti-dilutive.

k) PROVISION FOR TAXATION

Tax expense comprises both current, deferred and fringe benefit tax.

Current and fringe benefit tax is measured at the amount expected to be paid to the taxauthorities, using the applicable tax 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 reversalin one or more subsequent periods. Deferred tax assets, subject to consideration of prudence,are recognized and carried forward only to the extent that there is a reasonable certaintythat sufficient future taxable income will be available against which such deferred tax assetscan be realized. 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 balancesheet date.

l) FOREIGN CURRENCY TRANSACTIONS

Transactions in foreign currency are recorded at the exchange rates prevailing on the dateof the transaction. Assets and liabilities related to foreign currency transactions, remainingunsettled at the year end, are translated at the year end exchange rates. Forward exchangecontracts, remaining unsetteled at the year end, backed by underlying assets or liabilitiesare also translated at year end exchange rates.The premium payable on foreign exchangecontracts is amortised over the period of the contract. Exchange gains/losses are recognizedin the Profit and Loss Account except in respect of liabilities incurred to acquire fixed assetsin which case, they are adjusted to the carrying amount of such fixed assets.

m) ALLOCATION OF EXPENSES

Corporate Employee Remuneration and Administration expenses are allocated to variousprojects on a reasonable basis as estimated by the management.

n) PROVISIONS AND CONTINGENT LIABILITIES

Provisions are recognized in the accounts in respect of present probable obligations, theamount of which can be reliably estimated.

Contingent liabilities are disclosed in respect of possible obligations that arise from pastevents but their existence is confirmed by the occurrence or non-occurrence of one ormore uncertain future events not wholly within the control of the Company.

SCHEDULE 19 : NOTES TO ACCOUNTS & ACCOUNTING POLICIES

1) ACCOUNTING POLICIES

a) GENERALThe financial statements are prepared under the historical cost convention in accordancewith Generally Accepted Accounting Principles in India, the Accounting Standards issued byThe Institute of 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.Cost includes all incidental expenses related to acquisition and installation, other pre-operation expenses and interest in case of construction.

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 ishigher. Impairment loss, if any, is recognized whenever carrying amount exceeds therecoverable amount.

c) DEPRECIATION/AMORTIZATIONDepreciation has been provided on Written Down Value basis, at the rates specified inSchedule XIV of the 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.

Intangible Assets are amortized over a period of six years.

d) INVESTMENTSInvestments are classified into long-term and current investments.


105

2) CONTINGENT LIABILITIES:

As at As atMatters 31st March, 2007 31st March 2006

Rupees Rupeesa) Uncalled amount of Rs. 80/- & Rs. 30/- on 7850 7850

70 & 75 partly paid shares respectively ofTahir Properties Limited

b) Consideration payable for acquisition of 9473750 9473750shares in Girikandra Holiday Homes &Resorts Limited (a subsidiary company)for purchase of land.

c) Claims against the Company not acknowledged 9476293 9427512as debts represents cases filed by partiesin the Consumer forum and High Courtand disputed by the Company as advisedby our advocates.In the opinion of themanagement the claims are notsustainable.

d) Guarantee given on behalf of project owner 360000000 360000000(The Simplex Mills Company Limited). TheCompany is entitled to create acorresponding mortgage against projectassets as considered necessary.

3) INVENTORIES, CURRENT ASSETS, LOANS AND ADVANCES:

a) Construction Work-in-Progress and Due on Management projects represents materials atsite and unbilled cost on the projects. Based on projections and estimates by the Companyof the expected revenues and costs to completion. In the opinion of the management, thenet realizable value of the construction work-in-progress will not be lower than the costs soincluded.

b) The company has been entering into Development Agreements with landlords. DevelopmentManager Fees amounting to Rs. 205299063/- (Previous Year Rs. 232218224/-) accrued asper terms of the Agreement are receivable by the Company based upon progress milestonesspecified in the respective Agreements and have been disclosed as Development ManagerFees accrued but not due in Schedule 10.

c) Construction Work in Progress includes the land situated at Patancheru, village Sangareddy,Medak District, Andhra Pradesh, for which legal formalities relating to the transfer of thetitle are being complied with. Stamp duty payable thereon is not presently determinable.

4) INVENTORIES

Stock-in-Trade includes shares in the following Companies - at cost or market value (whicheveris lower) :

Current Year Previous YearRupees Rupees

Tahir Properties Limited

a) 400 (Previous year 32,597) Equity shares 40000 49993350of Rs. 100/- each, fully paid-up

b) 70 Equity shares of Rs. 100/- each, 1400 1400Rs. 20/- paid up

c) 75 Redeemable Preference Class A shares of 5250 5250Rs.100/- each, Rs. 70/- paid

Girikandra Holiday Homes & Resorts Limited

(a subsidiary company)500 Equity shares of Rs.1,000/- each, fully paid-up 17880000 17880000

5) CASH & BANK BALANCES

Balances with scheduled banks on deposit accounts include Rs. 36617677/- (Previous yearRs. 33829379/- ) received from flat buyers and held in trust on their behalf in a corpus fund.

6) LOANS AND ADVANCES

a) Amounts due from companies under the same management.(Amount in Rupees)

Particulars Balance as Maximum Balance as Maximumon March Debit on March Debit31, 2007 Balance 31, 2006 Balance

during the duringyear previous

year

Godrej Industries Ltd.- Advances 19736 493706 19736 28089- Deposits 1350000 1350000 410000 410000Girikandra Holiday Homes& Resorts Ltd.- Advances 28511433 28511433 28267717 28267717Godrej Reality Pvt Ltd.

- Advances 4824156 16639964 1111058 1111058Godrej Waterside Properties Pvt Ltd.

- Advances 278077328 342031262 NIL NIL

Godrej Sea View Properties Pvt Ltd

- Advances 18420 18420 NIL NIL

Godrej Real Estate Pvt Ltd.


Godrej Developers Pvt Ltd.


b) Due on Management Projects include a sum of Rs. 20309477/- (Previous yearRs. 20056962/-) on account of a project, where the matter is sub-judice with arbitrators.

7) SUNDRY CREDITORS AND PROVISIONS

There are no parties within the definition of Small Scale Industrial Undertakings to whom theCompany owes any dues. The auditors have accepted the representation of the management inthis matter in the absence of a database identifying the creditors, which are small scale industrialundertakings.

8) LEASES

a) The Company’s significant leasing arrangements are in respect of operating leases forResidential premises. Lease income from operating leases is recognized on a straight-linebasis over the period of lease. The particulars of the premises given under operating leasesare as under:


Gross Carrying Amount of Assets NIL NILAccumulated Depreciation NIL NILDepreciation for the period NIL NILStock – in – trade (Refer note below) NIL 50000000Future minimum lease receipts under non-cancelable operating leases● Not later than 1 year 26400 2976120● Later than 1 year and not later than 5 years 132000 132000Note : The available-for-sale asset, given on lease, has been classified by the Companyunder Stock-in-trade.

b) The Company’s significant leasing arrangements are in respect of operating leases forCommercial premises. Lease expenditure for operating leases is recognized on a straight-line basis over the period of lease. The particulars of the premises taken on operating leasesare as under:


Future minimum lease payments under non-cancelable operating leases● Not later than 1 year 4621234 4200000● Later than 1 year and not later than 5 years 7191878 9975000

9) Earnings per share

Profit after tax and prior years tax adjustments as perProfit and Loss Account 414471232 133205909Weighted average no. of equity shares outstanding 6444545 6444545Basic/Diluted earnings per share Rs. 64.31 Rs. 20.67Nominal value of shares Rs. 10 Rs. 10

10) The amount of exchange difference included in the Profit and Loss Account, under the relatedheads of expenses is Rs. Nil (Previous Year Rs.193,933/-).

11) Expenditure in Foreign Currency :Current Year Previous Year

Rupees RupeesTravelling Expenses 681041 286952Other Expenditure 38816571 8819964TOTAL 39497612 9106916

12) Computation of Net Profit under Section 349 of theCompanies Act, 1956.Profit before Tax as per Profit and Loss Account 460976804 178584250Add :-Managerial Remuneration 13657985 6210495Depreciation 6879606 5074007Less :-Profit on sale of asset as per accounts 43908 5376611Depreciation 6879606 5074007Net Profit for the purpose of Directors Remuneration 474590881 179418134(a) 5% of Net Profit as computed above 23729544 8970907

(b) Maximum remuneration permissible under the Act

(computed on the basis of inadequacy of profits) 3600000 3600000(a) or (b) whichever is greater 23729544 8970907Managerial Remuneration:

A Salaries 4910678 3648408B Contribution to Provident Fund 353280 240000C Estimated Monetary Value of Perquisites 432856 265633D Performance Linked Variable Remuneration 7961171 2056454

13657985 6210495

Notes :

In case of the Managing Director - Performance Linked Variable Remuneration of Rs.7961171/-(Previous year Rs. 2056454/-) is on the basis of provision made in the accounts.

13) Deferred Tax

The tax effect of significant temporary differences that resulted in deferred tax assets are: -Current Year Previous Year

Rupees RupeesDepreciation on Fixed Assets 2058000 771000Others 1999000 1815000

Deferred Tax Asset 4057000 2586000

14) Segment Information : As the Company has only one business segment, disclosure underAccounting Standard 17 on “Segment Reporting” issued by the Institute of Chartered Accountantsof India is not applicable.

15) Amounts paid to Auditors:Current Year Previous Year

Rupees Rupees

Audit Fees 1487180 1369328Audit & Other Statutes 589260 404064Certification 30866 35815Consultancy Charges 516304 –Reimbursement of Expenses 601 7368


106

16) Related Party Disclosures

Related 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 ofGodrej & Boyce Mfg. Co. Limited, the Ultimate Holding Company.

(ii) Subsidiaries :Girikandra Holiday Homes & Resorts Limited (100%)Godrej Realty Private Limited (51%)Godrej Waterside Properties Private Limited (100%)Godrej Real Estate Private Limited (100%)Godrej Developers Private Limited (100%)Godrej Sea View Properties Private Limited (100%)

(iii) Other Related Parties in Godrej Group, where common control exists :Vora Soaps LimitedBahar Agrochem & Feeds Private LimitedEnsemble Holdings & Finance LimitedGodrej Appliances LimitedGodrej Agrovet LimitedGodrej Consumer Products LimitedGodrej Saralee LimitedGodrej Hicare LimitedGodrej Infotech LimitedGodrej Beverages & Foods Limited

(iv) Key Management Personnel :Mr. Milind Surendra Korde

(v) Individuals excercising Significant Influence :Mr. A. B. GodrejMr. N. B. Godrej

2. The following transactions were carried out with the related parties in the ordinary courseof business.(i) Details relating to parties referred to in items 1 (i), (ii) and (iii) above

(Amt in Rupees)

Sr. Description Godrej & Godrej Subsidiaries Other RelatedNo. Boyce Mfg. Industries Parties in

Co. Ltd. Ltd. Godrej Group(i) (i) ( i i ) (iii)

1. Investment in equityshare capital – – 5100000 –

2. Investment in debentures – – 17850000 –58650000

3. Purchase of fixed assets 2892016 – – 84000

3424267 – – 6354614. Sale of fixed assets – – – –

– – 100083 –

5. Loans & Advances given – – 4200000 –

6. Deposits – 1000000 – –– 350000 – –

7. Construction & other 1471819 502278 358970202 –expenses incurred on 7709 1711896 15820009 –behalf of other companies

8. Expenses charged by 82017012 2035464 2656006 759799other companies (net) 26475136 2628243 – 117401

9. Outstanding receivables, (5605348) 1353565 387968178 (48965)net of (payables) 830409 309736 88028775 (31608)

10. Dividend Paid – 220567029 – 9160538– 50648726 – 2103531

Figures in italics are for previous year

(ii) Details relating to persons referred to in items 1 (iv) & (v) aboveAmount (Rs.)

Key Management Personnel: Current Year Previous Year

1. Remuneration 13657985 6210495

2. Interest income on loans given – 516

3. Reimbursement of travel expenses 194400 317489

4. Individuals exercising significant InfluenceDividend paid – Mr. N. B.Godrej 8054487 1849549

3. Significant Related Party Transactions.

Nature of Subsidiaries & Other Related PartiesTransactions in the Godrej Group Amount (Rs.)

Investment in equity Godrej Realty Private Limited –share capital 5100000Investment in debentures Godrej Realty Private Limited 17850000

58650000Purchase of fixed assets Godrej Appliances Limited 84000

635461Sale of fixed assets Godrej Realty Private Limited –

100083Loans & Advances given Girikandra Holiday Homes & Resorts Ltd . 231391

219050Godrej Realty Private Limited 4200000

–

Nature of Transactions Subsidiaries & Other Related Partiesin the Godrej Group Amount (Rs.)

Construction & other expenses Godrej Realty Private Limited 16639964

incurred on behalf of other companies 15820009

Godrej Waterside Properties Private Limited 342031262–

Expenses charged by other cos. (net) Godrej Agrovet Limited 22811

Godrej Sara Lee Limited 13400

Godrej Hicare Limited 70300

Outstanding receivables, net of Girikandra Holiday Homes & Resorts Limited 28511433

(payables) 28267717

Godrej Waterside Properties Private Limited 278077329–

Godrej Realty Private Limited 81324156

59761058Dividend Paid Bahar Agrochem & Feeds Private Limited 5799230

1331675Ensemble Holdings & Finance Limited 3217396

738184


18) Information in respect of Joint Ventures

Jointly Controlled Operations - Development of the following Residential / Commercial Projects:

Coliseum, Mumbai

Woodsman Estate, Bangalore

Simoco, Kolkata

Planet Godrej, Mumbai

La Vista, Mumbai

Waldorf, Mumbai

Glenelg, Mumbai

Edenwoods, Mumbai

Shivajinagar, Pune

NLM, Kalyan

GVD, Kalyan

RSM/HKB, Kalyan

Grenville Park, Mumbai

Walkeshwar, Mumbai

19) Additional information as required under Part IV of Schedule VI of the Companies Act, 1956 to theextent not applicable has not been given.

20) STATEMENT PURSUANT TO PART IV OF SCHEDULE VI OF THE COMPANIESACT, 1956

Balance Sheet Abstract for the Year Ended 31st March, 2007 And Company’s General BusinessProfile

a) Registration Details

Registration No. : U74120MH1985PLC35308State Code : 11Balance Sheet Date : 31st March, 2007

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 : 4303468Total Assets : 4303468Sources of Funds

Paid-up Capital : 64446Reserves & Surplus : 520592Secured Loans : 173899Unsecured Loans : 1137065


Net Fixed Assets : 26193Investments : 83614Net Current Assets : 1782138Misc. Expenditure : NilDeferred Tax Asset : 4057Accumulated Losses : Nil

d) Performance of Company (Amount in Rs. thousands)

Turnover : 1372617Total Expenditure (Net of other income) : 911640Profit/(loss) before tax : 460977Profit/(loss) after tax : 414523Earning per Share in Rs.(on an annualized basis) : 64.31Dividend rate % : 418.9589%

e) Generic Name of three principalproducts/services of Company : N.A


107

STATEMENT REGARDING SUBSIDIARY COMPANY PURSUANT TO SECTION 212 OFTHE COMPANIES ACT, 1956

1. Name of the Company : Girikandra Holiday Homes & Resorts Ltd.

2. Financial Year ending : 31st March, 2007

3. The Company’s interest in the : 500 Equity Shares of Rs. 1000/- each, fully paid-subsidiary as on above date. up (representing 100% of the Share Capital)

4. Net Profit/(Loss) of the subsidiary : (Rs. 2500/-)company (Not dealt with in the accountsof the Company)

A.B. GODREJ MILIND S. KORDE SHODHAN KEMBHAVIChairman Managing Director Company Secretary


STATEMENT REGARDING SUBSIDIARY COMPANY PURSUANT TO SECTION 212 OF THECOMPANIES ACT, 1956

1. Name of the Company : Godrej Realty Private Limited


3. The Company’s interest in the : 510,000 Equity Shares of Rs. 10/- each, fullysubsidiary as on above date. paid-up (representing 51% of the

Share Capital)4. Net Profit/(Loss) of the subsidiary : (Rs.1142533/-)

company (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 : 50000 Equity Shares of Rs. 10/- each, fullysubsidiary as on above date. paid-Up (representing 100% of the Share

Capital)4. Net Profit/(Loss) of the subsidiary : (Rs.1851808/-)



Mumbai,: May 23, 2007


1. Name of the Company : Godrej Real Estate Private Limited


3. The Company’s interest in the : 50000 Equity Shares of Rs. 10/- each, fullysubsidiary as on above date. paid-Up (representing 100% of the share

Capital)4. Net Profit / (Loss) of the subsidiary : (Rs.25931/-)





1. Name of the Company : Godrej Developers Private Limited


3. The Company’s interest in the : 50000 Equity Shares of Rs. 10/- each, fullysubsidiary as on above date. paid-Up (representing 100% of the share






1. Name of the Company : Godrej Sea View Properties Private Limited


3. The Company’s interest in the : 50,000 Equity Shares of Rs. 10/- each, fullysubsidiary as on above date. paid-up (representing 100% of the share





CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2007

Particulars Current Year Previous YearRupees Rupees Rupees

Cash Flow form Operating ActivitiesNet Profit before tax & extraordinary items 460976804 178584250Add : Non-cash / Non-operating Expenses1. Depreciation 6879606 50740072. Interest Paid 124554270 777300483. Provision for Diminution in value of Investment – 95894. Deferred Revenue Expenditure – 131433876 67866

592410679 261465760Less :Non-cash / Non-operating Income1. Profit on Sale of Fixed Assets 43908 53766112. Interest Income 83034336 247535173. Dividend Received 4529 83082773 3330

509327907 231332302Add :1. Change in Inventory (583146207) (22620561)2. Change in Sundry Debtors (1369774201) (266084209)3. Change in Loans & Advances (343377450) 1683110614. Change in Current Liabilities / Provisions 1060980303 525086544

(725989649) 636025137Less :Taxes Paid (Net) 65000599 37440410

(790990248) 598584727Cash Flow from Investing Activities1. Purchase of Fixed Assets (11603000) (15704728)2. Sale of Fixed Assets 282764 77464453. Purchase of Investments (19350000) (64250000)4. Interest Received 74036734 247535175. Dividend Received 4529 3330

43371026 (47451436)Cash Flow from Financing Activities1. Change in Cash Credit 158595840 (149867367)2. Change in Term Loan (250000) (21834916)3. Change in Unsecured Loan from Bank 1065167294 (170000000)4. Change in Inter Company Deposit 10000000 (2500000)5. Change in Fixed Deposits 1039000 (21114000)6. Interest Paid (124554270) 777300487. Payment of Dividend (332000000) –8. Tax on Distributed Profits (46563000) –

731434864 (443046331)

Net (Decrease)/Increase in Cash & Cash Equivalents (16184359) 108086961

Add : Cash & Bank Balance as on 31.3.2006 149863239 41776279

Cash & Bank Balance as on 31.3.2007 133678881 149863239

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


For and on behalf ofKALYANIWALLA MISTRY & ASSOCIATESChartered Accountants A.B. GODREJ Chairman

MILIND S. KORDE Managing DirectorBAHADUR S. DASTOOR SHODHAN KEMBHAVI Company SecretaryPartner



108


To The Shareholders,

Your Directors have pleasure in submitting their Report along with the Audited Accounts for the yearended 31st March, 2007.1. FINANCIAL HIGHLIGHTS :

The accounting results for the year ended 31st March, 2007 reveal that there is deficit at the end ofthe year.

2. REVIEW OF OPERATIONS :

The Company has not commenced any activities during the year.3. DIVIDEND :

As there are no profits, 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. Milind S. Korderetires by rotation and being eligible, offers himself for re-appointment.

5. APPOINTMENT OF AUDITORS :

M/s. Kalyaniwalla Mistry and Associates, Chartered Accountants retire at the ensuing AnnualGeneral Meeting and are eligible for re-appointment.

6. 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 trueand fair view of the state of affairs of the Company at the end of the financial year ended31st March, 2007 and of the loss of the Company for that year;


(iv) that the Directors have prepared the annual accounts on a going concern basis.7. ADDITIONAL INFORMATION :

(a) Since the Company has no employees, the particulars of the employees to be disclosed u/s217 (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 ForeignExchange Earnings and 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 ofDirectors) 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 ForeignExchange Expenditure during the year.


MILIND S. KORDEDirector


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 and theinterest and reasonable steps 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 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) 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.



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 books of account, during the year, the Company has no statutory dues including ProvidentFund, Investor Education and Protection Fund, Employees’ State Insurance, Income Tax, SalesTax, Value Added Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, cess and otherstatutory dues incurred during the year. According to the information and explanations given tous, there are no undisputed dues, payable in respect of above as at 31st March, 2007 for aperiod of more than six months from the date they became payable.

To the Members of Girikandra Holiday Homes and Resorts Limited

1. We have audited the attached Balance Sheet of GIRIKANDRA HOLIDAY HOMES & RESORTSLIMITED, as at 31st March, 2007 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. 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, 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, Profit and Loss Account and the Cash Flow Statement dealtwith 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, 2007;ii) in the case of the Profit and Loss Account, the loss of the Company 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


taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on31st March, 2007 from being appointed as a director in terms of clause (g) of sub-section (1) ofSection 274 of the Companies Act, 1956.




Mumbai, May 23, 2007 May 10, 2006 Membership No. 48936

ANNEXURE TO THE AUDITORS’ REPORT(b) According to the information and explanations given to us, there are no dues outstanding of

Sales Tax, Income Tax, Wealth Tax, Excise Duty, cess on account of any dispute.10) The Company’s accumulated losses at the end of the financial year are less than fifty percent of its

net worth. However, it has incurred cash losses in the current and immediately preceding financialyear.

11) According to the information and explanations given to us and on the based on documents andrecords produced to us, the Company does not have dues to banks, financial institutions or debentureholders.




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 Flows of the Company, we report that the Company has not utilized funds raised onshort term basis for long term investments.


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,







109

BALANCE SHEET AS AT 31ST MARCH, 2007As at As at

31.03.2007 31.03.2006Schedule Rupees Rupees

SOURCES OF FUNDSShareholders’ FundsShare Capital 1 500000 500000Reserves & Surplus – –Loan FundsUnsecured Loans 28511433 28267717

29011433 28767717APPLICATION OF FUNDS

Fixed Assets – –Investments – –Current Assets, Loans and AdvancesProjects in Progress 2 29028243 28796852

Advance Income tax 4239 423929032482 28801091

Less : Current Liabilities and Provisions Current Liabilities 3 41123 53448

41123 53448

Net Current Assets 28991359 28747643Miscellaneous Expenditure(to the extent not written off or adjusted)

Preliminary Expenditure 7500 10000

Profit and Loss Account 12574 10074

29011433 28767717

NOTES TO ACCOUNTS & ACCOUNTING POLICIES 5


31ST MARCH, 2007As on As on

31.03.2007 31.03.2006Schedule Rupees Rupees

INCOME

– –

EXPENDITURE

Administration Expenses 4 231391 219542

Preliminary Expenses written off 2500 2500

233891 222042

Less : Amount Transferred to Projectin Progress (231391) (219542)

Loss for the year 2500 2500

Loss brought forward 10074 7574

Loss carried forward to Balance Sheet 12574 10074

Earning per share (basic/diluted ) in Rs. (5.00) (5.00)

NOTES TO ACCOUNTS & ACCOUNTING POLICIES 5

The Schedules referred to above form an Signatures to the Profit and Loss Account andintegral part of the Profit and Loss Account Schedules 4 and 5


For and on behalf ofKALYANIWALLA MISTRY & ASSOCIATESChartered Accountants

BAHADUR S. DASTOOR TANYA A. DUBASH MILIND S. KORDEPartner Director Director

Mumbai, May 23, 2007 May 10, 2006

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2007

As at As at31.03.2007 31.03.2006

Rupees RupeesSCHEDULE 1 : SHARE CAPITAL

AUTHORISED1000 Equity Shares of Rs.1000/- each 1000000 1000000

1000000 1000000ISSUED & SUBSCRIBED500 Equity Shares of Rs.1000/- each 500000 500000

500000 500000PAID UP500 Equity Shares of Rs.1000/- each fully paid-up 500000 500000

[The entire share capital is held by Godrej Properties Limitedthe Holding Company & its nominees]

500000 500000SCHEDULE 2 : PROJECT IN PROGRESS

Project Payments 28796852 28577310Add : Expenses transferred from Profit & Loss Account 231391 219542

29028243 28796852


Sundry Creditors (Note 1)For Expenses 41123 53448

41123 53448SCHEDULE 4 : ADMINISTRATION EXPENSES

Rent, Rates & Taxes 46000 36002Audit Fees 28060 28060Other Operating Expenses 157331 155480

231391 219542

SCHEDULE 5 : NOTES TO ACCOUNTS AND ACCOUNTING POLICIES

ACCOUNTING POLICIES

1) GENERAL

The accounts are prepared under the Historical Cost Convention, using the accrual method ofaccounting.

2) MISCELLANEOUS EXPENDITURE

Miscellaneous 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 theCompany owes any sum.

2. Additional information required to be given under Schedule VI, Part II of the Companies Act, 1956 tothe extent not applicable is not given.

3. Earnings per share Current Year Previous YearProfit after transfer to project in Progress as perProfit & Loss Account Rs. 2500 Rs. 2500Weighted average no. of equity shares outstanding 500 500Basic/Diluted earnings per share Rs. (5) Rs. (5)Nominal value of shares Rs. 1000 Rs. 1000

4. AS 18 – RELATED PARTY DISCLOSURERelated party disclosures as required by AS-18, “Related Party Disclosures”, are given below:1. Relationships:

Shareholders (the Godrej Group Shareholding) in the Company Godrej Properties Limited(GPL) holds 100% of the Share Capital of the Company.

2. The following transactions were carried out with the related parties in the ordinary course ofthe business:

Sr. No. Rs.1 Expenses charged by other Companies 243716

219050

2 Outstanding net of (payables) 2851143328267717


The Schedules referred to above form an Signatures to the Balance Sheet andintegral part of the Balance Sheet. Schedules 1 to 3 and 5



BAHADUR S. DASTOOR TANYA A. DUBASH MILIND S. KORDEPartner Director Director

Mumbai, May 23, 2007 May 10, 2006


110

5. STATEMENT PURSUANT TO PART IV OF SCHEDULE VI TO THE COMPANIES ACT, 1956.

BALANCE SHEET ABSTRACT FOR THE YEAR ENDED 31ST MARCH, 2007 ANDCOMPANY’S GENERAL BUSINESS PROFILE

1 Registration DetailsRegistration No. : U55101MH1995PLC091582State Code : 11Balance Sheet Date : 31st March, 2007

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

- Premium : Nil3 Position of mobilisation and deployment of funds (Amount in Rs. thousands)


Paid-up capital : 500Reserves & Surplus: -Secured Loans : -Unsecured Loans : 28511

Application of FundsNet Fixed Assets : -Investments : -Net Current Assets : 28991Misc. Expenditure : 7Accumulated Losses : 13

4 Performance of Company (Amount in Rs. thousands)Turnover : -Total Expenditure : 234Profit / (Loss) before tax : 3Profit / (Loss) after tax : 3Earning per Share in Rs. : (5)Dividend Rate % : -

5 Generic Names of Three Principalproducts / services of Company : N.A.


Particulars Current Year Previous YearRs. Rs. Rs.

Cash Flow from Operating ActivitiesNet (Loss) Before Tax (2500) (2500)Add : Non-cash / Non-operating Expenses1 Deferred Revenue Expenditure 2500 2500

– –Working Capital ChangesInventory (231391) (219542)Current Liabilities (12325) 492

(243716) (219050)Less :Taxes Paid (243716) –

Cash Flow from Investing Activities – –

Cash Flow from Financing ActivitiesIncrease in Unsecured Loan 243716 243716 219050

Net (Decrease)/Increase in Cash &Cash Equivalents – –

Add : Cash & Bank Balance as on 31.3.2006 – –

Cash & Bank Balance as on 31.3.2007 – –

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 thisyear's classification.


BAHADUR S. DASTOOR TANYA A. DUBASH MILIND S. KORDEPartner Directors Directors



111

BOARD OF DIRECTORS’ REPORT FOR THE YEAR ENDED

31ST MARCH, 2007To The Shareholders

Your Directors have pleasure in submitting their Report together with the Audited Accounts for theperiod ended 31st March, 2007.

1. FINANCIAL HIGHLIGHTS :

The accounting results for the period ended 31st March, 2007 reveal that there is deficit at theend of the period.


The Company has not commenced any activities during the year.

3. DIVIDEND :

As there are no profits, the Directors regret that no dividend can be recommended.

4. SHARE CAPITAL :

The share capital is held by Godrej Properties Limited.

5. DIRECTORS :

Mr. Milind S. Korde and Mr. K. T. Jithendran who were named as the first Directors of theCompany in the Articles of Association of the Company, constituted the Board of Directors.

Mr. Milind S. Korde and Mr. K. T. Jithendran retire by rotation at the ensuing Annual GeneralMeeting and are eligible for re-appointment.


M/s. Kalyaniwalla Mistry and Associates, Chartered Accountants were appointed as StatutoryAuditors of the Company who will hold office from until the conclusion of first Annual GeneralMeeting of the Company.

7. DIRECTORS’ RESPONSIBILITY STATEMENT :



(ii) that the Directors have selected such accounting policies and applied them consistently andmade 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 31stMarch, 2007 and of the loss of the Company for that year;




(a) Since the Company has no employees, the particulars of the employees to be disclosed u/s217 (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 is provided hereunder:



(ii) Technology Absorption :


(iii) Foreign Exchange Earning & Outgo :

The Company has not earned any Foreign Exchange nor incurred any Foreign ExchangeExpenditure during the year.




1. We have audited the attached Balance Sheet of GODREJ DEVELOPERS PRIVATE LIMITED, asat 31st March 2007 and also the Profit and loss account and the Cash Flow Statement of theCompany for the period 15th March 2007 to 31st March 2007. 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 aboutwhether the 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. Anaudit also includes assessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation. We believe thatour audit provides a reasonable basis for our opinion.

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 andexplanations given to us, the said Order is not applicable to the Company.

4. Further we report that:




d) In our opinion, the Balance Sheet and the Cash Flow Statement dealt with by this reportcomply with the accounting standards referred to in sub-section (3C) of Section 211 of theCompanies Act, 1956.


TO THE MEMBERS OF GODREJ DEVELOPERS PRIVATE LIMITED

e) In our opinion and to the best of our information and according to the explanations given tous, the said accounts read with the notes thereon, give the information required by theCompanies Act, 1956, in the manner so required and give a true and fair view in conformitywith 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, 2007;

ii) in the case of the Profit and Loss Account, of the loss of the Company for the periodended on that date and,

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

5. On the basis of the written representations received from the Directors as on 31st March, 2007,and taken on record by the Board of Directors, we report that, none of the directors is disqualifiedas on 31st March, 2007 from being appointed as a Director in terms of clause (g) of sub-section(1) of section 274 of the Companies Act, 1956.




Godrej Developers Private Limited

Godrej Developers Private Limited

112


Schedule As At31.03.07Rupees

SOURCES OF FUNDSShareholders’ Funds

Share Capital 1 500000Loan Funds –

500000APPLICATION OF FUNDSFixed Assets –

Investments –Current Assets, Loans & Advances

Cheques-in-hand 2 500000500000

Less : Current Liabilities & ProvisionsCurrent Liabilities 3 42509

42509

Net Current Assets 457491

457491Miscellaneous Expenditure(To the Extent Not Written Off or Adjusted)

Preliminary Expenditure 16578Profit & Loss Account 25931

42509

500000

Notes to Accounts & Accounting Policies 5

The Schedules referred to above form an integral Signatures to the Balance Sheetpart of the Balance Sheet. and Schedules 1 to 3 and 5



BAHADUR S. DASTOORPartner MILIND S. KORDE Director

K.T. JITHENDRAN DirectorMumbai, May 23, 2007

PROFIT AND LOSS ACCOUNT FOR THE PERIOD

15TH MARCH, 2007 TO 31ST MARCH, 2007Schedule For the

period ended31.03.07

Rupees

INCOME –

EXPENDITURE

Administration Expenses 4 24089

Preliminary Expenses written off 1842

25931

Loss for the period 25931

Earning per share (basic/diluted) in Rs. (0.52)


The Schedules referred to above form an integral Signatures to Profit & Loss Accountpart of the Profit and Loss Account. and Schedules 4 and 5





As at

31.03.07

Rupees


Authorised

50,000 Equity shares of Rs. 10/- each 500000500000

Issued & Subscribed & Paid Up

50,000 Equity shares of Rs. 10/- each 500000( 50,000 equity shares are held by the Holding Company, Godrej Properties Limited and its nominee)

500000

SCHEDULE 2 : CASH & BANK BALANCE

Cheques-in-hand 500000500000


Sundry Creditors (Refer note 1 ) 17355Other Liabilities 25154

42509

SCHEDULE 4 : ADMINISTRATION EXPENSES

Audit fees 6734Professional Fees 17355

24089


ACCOUNTING POLICIES

1) GENERAL

The accounts are prepared under the Historical Cost Convention, using the accrual method ofaccounting.


Miscellaneous expenditure is amortised over a period of 10 years.

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON 31ST MARCH, 2007

3) The basic earnings per share is computed using the weighted average number of commonshares outstanding during the period. Diluted earnings per share is computed using the weightedaverage number of common and dilutive common equivalent shares outstanding during theperiod, except where the results would be anti-dilutive.

NOTES TO ACCOUNTS

1) There are no parties within the definition of Small Scale Industrial Undertakings to whomthe 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.


Current Year

Loss for the period as per Profit & Loss Account Rs. 25931

Weighted average no. of equity shares outstanding 50000

Basic/Diluted earnings per share Rs. (0.52)

Nominal value of shares Rs. 10

4) AS 18 – RELATED PARTY DISCLOSURE

Related party disclosures as required by AS-18, “Related Party Disclosures”, are given below:

1. Relationships:

Shareholders : Godrej Properties Limited (GPL) holds 100% of the Share Capital of theCompany.

2. The following transactions were carried out with the related party in the ordinary course ofthe business:

Sr. No. Rs.

1 Reimbursement of expenses to holding company 18420

2 Outstanding payables 18420

5) Amounts paid to Auditors: Current Year (Rs.)

Audit Fees 6734

6) This being the first year of operations of the Company, the question of previous years figures doesnot arise.


113

ADDITIONAL INFORMATION AS REQUIRED UNDER PART IV OF THE SCHEDULE VI TO THECOMPANIES ACT, 1956

Balance Sheet Abstract for the period ended 31st March, 2007 and Company’s GeneralBusiness Profile.

1. Registration Details

Registration No. : U45200MH2007PTC168783State Code : 11Balance Sheet Date : 31st March, 2007

2. Capital raised during the year (Amount in Rs. thousands)

Public Issue : NilRights Issue : NilBonus Issue : NilPrivate Placement - Capital : Nil

- Premium : Nil3. Position of mobilisation and deployment of funds (Amount in Rs. thousands)


Paid-up capital : 500Reserves & Surplus : –Secured Loans : –Unsecured Loans : –


Net Fixed Assets : –Investments : –Net Current Assets : 457Misc. Expenditure : 17Accumulated Losses : 26

4. Performance of Company (Amount in Rs. thousands)

Turnover : –Total Expenditure : 26Profit / (Loss) before Tax : (26)Profit / (Loss) after Tax : (26)Earning per Share in Rs. : (0.52)Dividend Rate % : –

5. Generic Names of three principal

products / services of Company : N.A.

CASH FLOW STATEMENT FOR THE PERIOD ENDED 31ST MARCH, 2007

Particulars Current Year

Rs. Rs.

Cash Flow from Operating Activities

Net (Loss) Before Tax (25931)

Add : Non-cash / non-operating Expenses

Preliminary Expenditure 1842

(24089)

Working Capital changes

Current Liabilities 42509

Preliminary Expenditure (18420)

–

Cash Flow from Investing Activities –

Cash Flow from Financing Activities

Issue of Share Capital 500000 500000

Net (Decrease)/Increase in Cash & Cash Equivalents 500000

Add : Cash & Bank Balance as on 15.3.2007 –

Cash & Bank Balance as on 31.3.2007 500000

NOTES:

1) The Cash Flow Statement has been prepared under the “Indirect Method” as set out in theAccounting Standard (AS) 3 on “Cash Flow Statements”, and presents cash flows by operating,investing and financing activities.




K. T. JITHENDRAN DirectorMumbai, May 23, 2007

Godrej Real Estate Private Limited

114

BOARD OF DIRECTORS’ REPORT FOR THE PERIOD ENDED ON 31ST MARCH, 2007

1. We have audited the attached Balance Sheet of GODREJ REAL ESTATE PRIVATE LIMITED, asat 31st March, 2007 and also the Profit and Loss Account and the Cash Flow Statement of the Companyfor the period 15th March, 2007 to 31st March 2007. These financial statements are the responsibilityof the Company's management. Our responsibility is to express an opinion on these financial statementsbased 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.



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.


TO THE MEMBERS OF GODREJ REAL ESTATE PRIVATE LIMITED

d) In our opinion, the Balance Sheet and the Cash Flow Statement dealt with by this report complywith 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, 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, 2007;

ii) in the case of the Profit and Loss Account, of the loss of the Company for the period ended onthat date and

iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the period endedon that date.

5. On the basis of the written representations received from the directors as on 31st March, 2007, and takenon record by the Board of Directors, we report that, none of the directors is disqualified as on 31st March,2007 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 AND ASSOCIATES


BAHADUR S. DASTOOR


To The Shareholders

Your Directors have pleasure in submitting their Report together with the Audited Accounts for the periodended 31st March, 2007.


The accounting results for the period ended 31st March, 2007 reveal that there is deficit at the endof the period.



3. DIVIDEND :


4. SHARE CAPITAL:


5. DIRECTORS :

Mr. Milind S. Korde and Mr. K. T. Jithendran who were named as the first directors of the Companyin the Articles of Association of the Company, constituted the Board of Directors.

Mr. Milind S. Korde and Mr. K. T. Jithendran retire by rotation at the ensuing Annual General Meetingand are eligible for reappointment.


M/s. Kalyaniwalla Mistry and Associates, Chartered Accountants were appointed as Statutory Auditorsof the Company who will hold office from until the conclusion of first Annual General Meeting of theCompany.

7. DIRECTORS' RESPONSIBILITY STATEMENT


(i) that in the preparation of the annual accounts, the applicable accounting standards have beenfollowed;

(ii) that the Directors have selected such accounting policies and applied them consistently andmade judgments and estimates that 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 year ended 31st March, 2007and of the loss 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 theassets of the Company and for preventing and detecting fraud and other irregularities;



(a) Since the Company has no employees, the particulars of the employees to be disclosedu/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 with theCompanies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 isprovided hereunder:








MILIND S. KORDEMumbai, May 23, 2007 Director


115


Schedule As at31.03.07

RupeesSOURCES OF FUNDSShareholders’ Funds

Share Capital 1 500000

Loan Funds –

500000APPLICATION OF FUNDS

Fixed Assets –

Investments –

Current Assets, Loans & AdvancesCheques-in-hand 2 500000

500000Less : Current Liabilities & Provisions

Current Liabilities 3 42509


MISCELLANEOUS EXPENDITURE(to the extent not written off or adjusted)

Preliminary Expenditure 16578PROFIT AND LOSS ACCOUNT 25931

42509

500000Notes to Accounts & Accounting Policies 5

PROFIT AND LOSS ACCOUNT FOR THE PERIODMARCH 15, 2007 TO 31ST MARCH, 2007

Schedule For theperiod ended

31.03.07Rupees

INCOME –

EXPENDITURE



25931


Earning per share (Basic/Diluted) in Rs. (0.52)

NOTES TO ACCOUNTS AND ACCOUNTING POLICIES 5

The Schedules referred to above form an Signatures to Profit and Loss Account andintegral part of the Profit and Loss Account Schedules 4 and 5As per our Report of even date.

For and on behalf ofKALYANIWALLA MISTRY AND ASSOCIATESChartered Accountants MILIND S. KORDE Director

K.T. JITHENDRAN DirectorBAHADUR S. DASTOORPartner


As at31-03-2007

RupeesSCHEDULE 1 : SHARE CAPITALAuthorised50000 Equity shares of Rs.10 each 500000

500000Issued, Subscribed and Paid up50000 Equity shares of Rs.10 each 500000(50000 Equity shares are held bythe holding company, Godrej Properties Limited and its nominee)

500000


As at31-03-2007

RupeesSCHEDULE 2 : CASH AND BANK BALANCECheques-in-hand 500000

500000

SCHEDULE 3 : CURRENT LIABILITIESSundry Creditors (Refer Note 1) 17355Other Liabilities 25154

42509SCHEDULE 4 : ADMINISTRATION EXPENSESAudit Fees 6734Professional Fees 17355

24089

The Schedules referred to above form an Signatures to the Balance Sheet andintegral part of the Balance Sheet Schedules 1 to 3 and 5As per our Report of even date.

For and on behalf ofKALYANIWALLA MISTRY AND ASSOCIATESChartered Accountants MILIND S. KORDE Director

K.T. JITHENDRAN DirectorBAHADUR S. DASTOORPartner


number 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 Companyowes any sum.

2) Additional information required to be given under Schedule VI, Part II of the Companies Act, 1956 to theextent not applicable is not given.


Current Year

Loss for the period as per Profit and Loss Account Rs. 25931




4) AS 18 - RELATED PARTY DISCLOSURE

Related party disclosures as required by AS-18, "Related Party Disclosures", are given below:

1. Relationships:

Shareholders :Godrej Properties Limited (GPL) holds 100% of the share capital of the Company.

2. The following transactions were carried out with the related party in the ordinary course of thebusiness:

Sr. No. Rs.

1 Reimbursement of expenses to Holding Company 18420



Audit Fees 6734

6) This being the first year of operations of the Company, the question of previous years figures does notarise.



GENERAL

The accounts are prepared under the Historical Cost Convention, using the accrual method of accounting.


Miscellaneous expenditure is amortized 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 average

Godrej Real Estate Private Limited

116

ADDITIONAL INFORMATION AS REQUIRED PART IVOF THE SCHEDULE VI OF THE COMPANIES ACT, 1956BALANCE SHEET ABSTRACT FOR THE PERIOD ENDED 31ST MARCH, 2007 ANDCOMPANY’S GENERAL BUSINESS PROFILE

i ) Registration DetailsRegistration No. U45200MH2007PTC168818State Code 11Balance Sheet 31st March, 2007

ii) Capital raised during the year (Amount in Rs. thousands)Public Issue NilRights Issue NilBonus Issue NilPrivate Placement- Capital Nil

- Premium Nil

iii) Position of mobilisation and deployment of funds (Amount in Rs. thousands)Total Liabilities 543Total Assets 543

Sources of FundsPaid– up Capital 500Reserve & Surplus –Secured Loans –Unsecured Loans –

Application of FundsNet Fixed Assets –Investments –Net Current Assets 457Misc Expenditure 17Accumulated Losses 26

iv) Performance of the Company (Amount in Rs. thousands)Turnover –Total Expenditure 26Profit/ (Loss) Before Tax (26)Profit/(Loss) After Tax (26)Earnings Per Share in Rs. (0.52)Dividend Rate% –

v) Generic Names of three Principal N.A.products/services of the Company


Current YearParticulars Rupees Rupees



Add : Non-cash/non-operating Expenses


(24089)

Working Capital Changes



–




Net (decrease)/Increase in Cash & Cash Equivalents 500000

Add: Cash & Bank Balance as on 15.3.2007 –


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.


KALYANIWALLA MISTRY & ASSOCIATESChartered Accountants MILIND S. KORDE Director

K.T. JITHENDRAN Director




117

BOARD OF DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED ON 31ST MARCH, 2007

1. We have audited the attached Balance Sheet of GODREJ REALTY PRIVATE LIMITED, as at 31stMarch, 2007 and also the Profit and Loss Account and the Cash Flow Statement of the Company forthe year 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.


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, 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, Profit and Loss Account and the Cash Flow Statement dealt


TO THE MEMBERS OF GODREJ REALTY PRIVATE LIMITED

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, of the state of affairs of the Company as at 31st March, 2007;ii) in the case of the Profit and Loss Account, of the loss of the Company for the year ended

on that date and,iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year


taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on31st March, 2007 from being appointed as a director in terms of clause (g) of sub-section (1) of Section274 of the Companies Act, 1956.


Chartered AccountantsBAHADUR S. DASTOOR

PartnerMembership No. 48936


To The ShareholdersYour Directors have pleasure in submitting their Report alongwith the Audited Accounts for the year ended31st March, 2007.1. FINANCIAL HIGHLIGHTS :



The Company has conceptualised the project and finalised the design & are awaiting further approvals.3. DIVIDEND :

As there are no profits, the Directors regret that no dividend can be recommended.4. ISSUE OF DEBENTURE :

During the year the Company issued 1715000 10% Secured Redeemable Optionally ConvertibleDebentures of Rs.10/- each to HDFC Venture Trustee Company Limited and 17,85,000 10% SecuredRedeemable Optionally Convertible Debentures of Rs.10/- each to Godrej Properties Limited.

5. DIRECTORS :

In accordance with the provisions of the Article of Associations, Mr. Naresh Nadkarni, retire byrotation and being eligible, offer himself for re-appointment.


M/s. Kalyaniwalla Mistry and Associates, Chartered Accountants retire at the ensuing Annual GeneralMeeting and are eligible for re-appointment.


Your Directors confirm:(i) that in the preparation of the annual accounts, the applicable accounting standards have been

followed;



(iv) that the Directors have prepared the annual accounts on a going concern basis.8. 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 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.

For and on behalf of the board of directors

MILIND S. KORDE

Mumbai, May 23, 2007 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

periodicals intervals. In our opinion, the period of verification is reasonable having regard to thesize of the Company.


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 conditions of the loans

granted 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 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 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 adequateinternal control procedures commensurate with the size of the Company and the nature of its business,for the purchases of inventory, fixed assets and for the sale of goods. There are no sales of service. Duringthe course of our audit, we have not observed a continuing failure to correct major weaknesses ininternal 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 marketing prices at the relevant time, wherecomparable market price exist.



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 ProvidentFund, Investor Education and Protection Fund, Employees’ State Insurance, Income Tax, ValueAdded Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and other statutorydues incurred during the year. According to the information and explanations given to us, thereare no undisputed dues, payable in respect of above as at 31st March 2007 for a period of morethan 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, Value Added Tax, Income Tax, Wealth Tax, Excise Duty, cess on account of any dispute.

10) The Company’s accumulated losses at the end of the financial year are less than fifty percent of its networth. However, it has incurred cash losses in the current financial year.

11) According to the information and explanations given to us and 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.




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 Flows of the Company, we report that the Company has not utilized funds raised on shortterm basis for long term investments.


19) According to the information and explanations given to us, securities have been created in respect ofdebenture issued by the Company as required by the Debenture Trust Deed.

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,



Chartered AccountantsBAHADUR S. DASTOOR



Godrej Realty Private Limited


118


Schedule As at As at31.03.07 31.03.06Rupees Rupees

SOURCES OF FUNDS

Shareholders’ Funds

Share Capital 1 10000000 10000000Loan Funds

Secured Loans 2 150000000 115000000160000000 125000000


Fixed Assets

Gross Block 3 347608 100083Less : Depreciation 39754 2769

Net Block 307854 97314Investments – –

Deferred Tax Assets 589000 –

Current Assets, Loans & Advances

Inventory 4 61819484 15941553Cash & Bank Balances 5 20571060 34689427Loans & Advances 6 88235917 76248733

170626462 126879713Less : Current Liabilities & Provisions

Current Liabilities 7 12665849 197702712665849 1977027

Net Current Assets 157960613 124902686Profit And Loss Account 1142533 –

160000000 125000000Notes To Accounts & Accounting Policies 11



For and on behalf ofKALYANIWALLA MISTRY AND ASSOCIATESChartered AccountantsBAHADUR S. DASTOOR MILIND S. KORDE DirectorPartner NARESH NADKARNI DirectorMumbai, May 23, 2007

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST

MARCH, 2007Schedule For the period For the year

ended 31.03.07 ended 31.03.06Rupees Rupees

INCOME

Interest Income 8 1026852 83479

EXPENDITURE

Administration Expenses 9 9098167 913953

Interest & Finance Charges 10 – –


Less : Amount Transferred to Project

In Progress 6376767 9051243

Loss for the year 1731533 –

Provision for Deferred Tax 589000 –

Net Loss After Tax 1142533 –

(Amount Transferred to Balance Sheet)

Earning Per Share (Basic/ Diluted )In Rs. (Refer Note No 5) (1.14) –


The Schedules referred to above form an Signatures to the Profit and Loss Accountintegral part of the Profit & Loss Account Schedules 8 to 11


For and on behalf ofKALYANIWALLA MISTRY AND ASSOCIATESChartered AccountantsBAHADUR S. DASTOOR MILIND S. KORDE DirectorPartner NARESH NADKARNI Director


As at As at31.03.07 31.03.06Rupees Rupees

SCHEDULE 1 : SHARE CAPITALAuthorised1000000 Equity Shares of Rs.10 each 10000000 10000000

10000000 10000000Issued, Subscribed and Paid up1,000,000 Equity Shares of Rs.10 each 10000000 10000000(out of which 510,000 equity shares are held bythe holding company, Godrej Properties Ltd.)

10000000 10000000

SCHEDULE 2 : SECURED LOANS10% Secured redeemable optionally convertible debentures 150000000 115000000@ Rs. 10/- each (Refer Note -2)

150000000 115000000


Gross Block Depreciation Net Block

As at As at As at As at As at As at1st Addi- Deduc- 31st 1st For the 31st 31st 31st

April tions tions March April year March March March2006 2007 2006 2007 2007 2006

Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Land (Refer Note 1b) – 222175 – 222175 – – – 222175 –

Motor Vehicle 100083 – – 100083 2769 25195 27964 72119 97314

Computers – 25350 – 25350 – 11790 11790 13560 –

Total 100083 247525 – 347608 2769 36985 39754 307854 –

Previous Year – 100083 – 100083 – 2769 2769 97314 –

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS AS AT 31ST MARCH, 2007


SCHEDULE 4 : INVENTORY

Construction work in progressAs per last Balance Sheet 15941553 –Add : Expenditure/Transfers from advances during the year

Construction 17960338 32,825Advertisement Expenses 281427 –Overheads 9220785 4,105,133


SCHEDULE 4 : INVENTORY (contd.)

Interest 12038615 275235255442717 6890310

Add : Transferred from Profit & Loss Account 6376767 905124361819484 15941553


Cash & Cheques in Hand 2657347 –Balance with Scheduled Bank - on Current Account 413713 4624681

- on Fixed Deposit Account 17500000 3006474620571060 34689427

SCHEDULE 6 : LOANS & ADVANCES

(Unsecured & considered good unless otherwise stated)Advances recoverable in cash or kind or for value to be receivedSecured (Secured against Bank Guarantee) 11753493 –Others 76230000 76230000Interest Accrued 13386 –Advance Tax and Tax Deducted at Source 239038 18733

88235917 76248733


Sundry Creditors (Note 3) 392530 925485Interest Accrued but not due 9514561 446417Other Liabilities 2758758 605125

12665849 1977027

SCHEDULE 8 : NCOME

Interest received 1026852 834791026852 83479

Tax deducted at Source 232461 18733


Consultancy Charges 6707047 7380371Other Operating Expenses 2391121 1751582

9098167 9131953


119

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON 31ST MARCH, 2007


SCHEDULE 10 : INTEREST AND FINANCE CHARGES (NET)

Interest Paid

Others 12038466 2750583Total Interest paid 12038466 2750583Add : Brokerage & Other Financial Charges 149 1769Total Interest / Finance Charges Paid 12038615 2752352Less : Transferred to project in Progress 12038615 2752352NET INTEREST – –

SCHEDULE 11

NOTES TO ACCOUNTS & ACCOUNTING POLICIES


a) GENERAL

The financial statements are prepared under the historical cost convention in accordance withGenerally 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 ASSETS

Fixed assets are stated at cost of acquisition or construction less accumulated depreciation.Cost includes all incidental expenses related to acquisition and installation, other pre-operationexpenses and 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 / AMORTIZATION

Depreciation has been provided on Written Down Value basis, at the rates specified inSchedule XIV 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,construction costs, allocated interest and expenses incidental to the projects undertaken by theCompany.

e) REVENUE RECOGNITION

The 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 underexecution with 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 reliedupon by 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 COST

Interest and finance 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 on Management Project, as a part of the cost of the projects at weighted average of theborrowing 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 SHARE

The basic earnings per share is computed using the weighted average number of commonshares outstanding during the period. Diluted earnings per share is computed using the weightedaverage number of common and dilutive common equivalent shares outstanding during theperiod, except where the results would be anti-dilutive.

h) PROVISION FOR TAXATION

Tax expense comprises both current and deferred tax.Current tax is measured at the amount expected to be paid to the tax authorities, using theapplicable tax 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 inone or 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 thatsufficient future taxable income will be available against which such deferred tax assets canbe realized. The tax effect is calculated on the accumulated timing difference at the year-endbased on the tax rates and laws enacted or substantially enacted on the balance sheet date.

i ) 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 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) Secured Loans

The 10% secured optionally convertible debentures are redeemable at the end of the 7 years fromthe deed date of allotment and are secured to the extent of specific immovable assets of the Companydisclosed under the head “Fixed Assets”.The Company shall create a Debenture Redemption Reserve as required under section 117 ( C ) ofthe Companies Act, 1956 from the year in which profits are available for creation.

3) There are no parties within the definition of Small Scale Industrial Undertakings to whom the Companyowes any sum.

4) Deferred Tax

The Tax effect of significant temporary difference that resulted in deferred tax assets and liabilities are :Current Year (Rs.) Previous Year (Rs.)

Loss Carried forward 586319 -Depreciation on Fixed Assets 2681 -Deferred Tax Asset 589000 -

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 Companyhas considered the profitability of the project in progress as the factor on the basis of which it hasconcluded that it is virtually certain that sufficient taxable income will arise in future against whichthe deferred tax assets will be realized.


Current Year Previous YearLoss after transfer to Project in Progress as perProfit & Loss Account Rs. 1142533 –Weighted average no. of equity shares outstanding 1000000 1000000Basic/Diluted earnings per share (Rs. 1.14) –Nominal value of shares Rs. 10 Rs. 10

6) Amounts paid to Auditors:

Current Year (Rs.) Previous Year (Rs.)Audit Fees 89792 101016

7) Segment Information :

As 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.

8) AS-18 Related Party Disclosures.

Related 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 51% in the Company. GPL is the subsidiary of Godrej Industries Limited (GIL).GILis a subsidiary of Godrej & Boyce Manufacturing Company Limited (G&B), the UltimateHolding Company.

(ii) Investing party in respect of which the reporting enterprise is an associate :HDFC India RealEstate Fund.

2. The following transactions were carried out with the related parties in the ordinary courseof business. (Amount in Rupees))

SR.NO. DESCRIPTION G&B GPL HDFC IndiaReal Estate

Fund

1 Issue of equity share capital - 5100000 49000002 Issue of debentures - 17850000 17150000

58650000 563500003 Expenses Charged to other companies - 2656006 -4 Purchase of Fixed Assets - 100083 -5 Expenses charged by other companies 2351113 16639964 -

15820009 -6 Loans/Advances taken - 4200000 -7 Outstanding receivables, Net of (payables) 703 (81324156) (78190405)

(59761058) (56597014)

Figures in italics are for previous year9) Previous year figures have been rearranged/regrouped wherever necessary to confirm to current



120

ADDITIONAL INFORMATION AS REQUIRED UNDER PART IV OF THE SCHEDULE VITO THE COMPANIES ACT, 1956

Balance Sheet Abstract for the year ended 31st March, 2007 and Company’s GeneralBusiness Profile.

1. Registration Details

Registration No. U70100MH2005PTC154268State Code: 11Balance Sheet Date 31st March, 2007

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 172666Total Assets 172666Sources of Funds

Paid-up capital 10000Reserves & Surplus NilSecured Loans 150000Unsecured Loans –


Net Fixed Assets 308Investments –Net Current Assets 157961Deferred Tax Assets 589Misc. Expenditure –Accumulated Losses 1142

4. Performance of Company (Amount in Rs. thousands)

Turnover –Total Expenditure 9135Profit / (Loss) before Tax 1732Profit / (Loss) after Tax 1143Earning per Share in Rs. (1.14)Dividend Rate % –

5. Generic Names of three principal

products / services of Company N.A.

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2007

Particulars Current Year Previous Year

Rs. Rs. Rs.Cash Flow from Operating Activities

Net Loss before Tax (1731533) –Add : Non-cash / Non-operating Expenses

1 Depreciation 36985 27692 Interest Paid 12038615 12075600 2752352

10344066 2755121Less : Non-Cash / Non - operating Income

Interest Income 1026852 1026852 83479

9317214 2,671642Add :

1 Change in Inventory (45877932) (15941553)2 Change in Loans & Advances (11734760) (76230000)3 Change in Current Liabilities / Provisions 1620678 1977027

(55992014)

(46674800) (87522884)Less : Taxes Paid (Net) 239038 239038 18733

(46913838) (87541617)Cash Flow from Investing Activities

1 Purchase of Fixed Assets (247525) (100,083)2 Interest Received 1013466 765941 83479

(16604)Cash Flow from Financing Activities

1 Issue of Share Capital – 100000002 Issue of Debentures 35000000 1150000003 Interest Paid (2970471) 32029529 (2752352)

122247648Net (Decrease)/Increase in Cash & Cash Equivalents (14118367) 34689427Add : Cash & Cash Equivalents as on 01.04.2006 34689427 –

Cash & Bank Balance as on 31.3.2007 20571060 34689427Notes :

1. The cash flow statement has been prepared under the ‘Indirect Method’ as set out in the AccountingStandard (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



BAHADUR S. DASTOOR MILIND S. KORDE DirectorPartner NARESH NADKARNI Director



121

BOARD OF DIRECTORS’ REPORT FOR THE PERIOD ENDED 31ST MARCH, 2007

To The Shareholders

Your Directors have pleasure in submitting their Report together with the Audited Accounts for theperiod ended 31st March, 2007.


The accounting results for the period ended 31st March, 2007 reveal that there is deficit at theend of the period.



3. DIVIDEND :


4. SHARE CAPITAL:


5. DIRECTORS :

Mr. Milind S. Korde and Mr. K. T. Jithendran who were named as the first directors of theCompany in the Articles of Association of the Company, constituted the Board of Directors.

Mr. Milind S. Korde and Mr. K. T. Jithendran retire by rotation at the ensuing Annual GeneralMeeting and are eligible for reappointment.


M/s. Kalyaniwalla Mistry and Associates, Chartered Accountants were appointed as StatutoryAuditors of the Company who will hold office from until the conclusion of first Annual GeneralMeeting of the Company.




(ii) that the Directors have selected such accounting policies and applied them consistently andmade judgments and estimates that are reasonable and prudent so as to give a true and fair

view of the state of affairs of the Company at the end of the financial year ended31st March, 2007 and of the loss of the Company for that year;




(a) Since the Company has no employees, the particulars of the employees to be disclosedu/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 is provided hereunder:







For and on behalf of the Board Of Directors



1. We have audited the attached Balance Sheet of GODREJ SEA VIEW PROPERTIES PRIVATELIMITED, as at 31st March 2007 and also the Profit and Loss Account and the Cash FlowStatement of the Company for the period 14th March, 2007 to 31st March, 2007. These financialstatements are the responsibility of the Company’s management. Our responsibility is to expressan 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 aboutwhether the 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. Anaudit also includes assessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation. We believe thatour audit provides a reasonable basis for our opinion.






d) In our opinion, the Balance Sheet and the Cash Flow Statement dealt with by this report

comply with the accounting standards referred to in sub-section (3C) of Section 211 of theCompanies Act, 1956.

e) In our opinion and to the best of our information and according to the explanations given tous, the said accounts read with the notes thereon, give the information required by theCompanies Act, 1956, in the manner so required and give a true and fair view in conformitywith 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,2007;

ii) in the case of the Profit and Loss Account, of the loss of the Company for the periodended on that date and;

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

5. On the basis of the written representations received from the directors as on 31st March, 2007,and taken on record by the Board of Directors, we report that, none of the directors is disqualifiedas on 31st March, 2007 from being appointed as a director in terms of clause (g) of sub-section(1) of Section 274 of the Companies Act, 1956.


BAHADUR S. DASTOORPartnerMembership No. 48936



TO THE MEMBERS OF GODREJ SEA VIEW PROPERTIES PRIVATE LIMITED

Godrej Sea View Properties Private Limited

Godrej Sea View Properties Private Limited

122


Schedule As At31.03.07Rupees

SOURCES OF FUNDSShareholders’ Funds

Share Capital 1 500000Loan Funds –

500000APPLICATION OF FUNDSFixed Assets –

Investments –Current Assets, Loans & Advances

Cheques-in-hand 2 500000500000

Less : Current Liabilities & ProvisionsCurrent Liabilities 3 42659

42659


457341Miscellaneous Expenditure(to the extent not written off or adjusted)Preliminary Expenditure 16578Profit and Loss Account 26081

42659

500000

Notes to Accounts and Accounting Policies 5

The Schedules referred to above form an integral Signatures to the Balance Sheetpart of the Balance Sheet. and Schedules 1 to 3 and 5





PROFIT AND LOSS ACCOUNT FOR THE PERIOD

14TH MARCH, 2007 TO 31ST MARCH, 2007Schedule For the period

ended 31.03.07Rupees

INCOME –

EXPENDITURE



26081


Earning per share (basic/diluted) in Rs. (0.52)

NOTES TO ACCOUNTS AND ACCOUNTING POLICIES 5

The Schedules referred to above form an integral Signatures to Profit & Loss Accountpart of the Profit and Loss Account and Schedules 4 & 5





As at31.03.07Rupees


AUTHORISED

50000 Equity shares of Rs. 10/- each 50000050000

Issued and Subscribed and Paid up

50000 Equity shares of Rs. 10/- each 500000( 50000 equity shares are held by the Holding Company, Godrej Properties Limited and its nominee)

500000


Cheques-in-hand 500000500000


Sundry Creditors (Refer Note 1 ) 17505Other Liabilities 25154

42659


Audit Fees 6734Professional Fees 17505

24239


ACCOUNTING POLICIES

1) GENERAL

The accounts are prepared under the historical cost convention, using the accrual method ofaccounting.


Miscellaneous expenditure is amortized over a period of 10 years.


3) The basic earnings per share is computed using the weighted average number of commonshares outstanding during the period. Diluted earnings per share is computed using the weightedaverage number of common and dilutive common equivalent shares outstanding during theperiod, except where the results would be anti-dilutive.

NOTES TO ACCOUNTS

1) There are no parties within the definition of Small Scale Industrial Undertakings to whomthe 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.


Current Year

Loss for the period as per Profit and Loss Account Rs. 26081




4) AS 18 – RELATED PARTY DISCLOSURES

Related party disclosures as required by AS-18, “Related Party Disclosures”, are given below:

1. Relationships:

Shareholders : Godrej Properties Limited (GPL) holds 100% of the Share Capital of theCompany.

2. The following transactions were carried out with the related party in the ordinary course ofthe business:

Sr. No. Rs.

1 Reimbursement of expenses to holding company 18420



Audit Fees 6734

6) This being the first year of operations of the Company, the question of previous years figures doesnot arise.


123

ADDITIONAL INFORMATION AS REQUIRED UNDER PART IV OF THE SCHEDULEVI TO THE COMPANIES ACT, 1956

Balance Sheet Abstract for the period ended 31st March, 2007 and Company’s General

Business Profile.

1 Registration Details

Registration No. : U45200MH2007PTC168730State Code : 11Balance Sheet Date : 31st March, 2007

2 Capital raised during the year (Amount in Rs. thousands)

Public Issue : NilRights Issue : NilBonus Issue : NilPrivate Placement - Capital : Nil

- Premium : Nil3 Position of mobilisation and deployment of funds (Amount in Rs. thousands)


Paid-up capital : 500Reserves & Surplus : -Secured Loans : -Unsecured Loans : -


Net Fixed Assets : -Investments : -Net Current Assets : 457Misc. Expenditure : 17Accumulated Losses : 26

4 Performance of Company (Amount in Rs. thousands)

Turnover : -Total Expenditure : 26Profit / (Loss) before Tax : (26)Profit / (Loss) after Tax : (26)Earning per Share in Rs. : (0.52)Dividend Rate % : -

5 Generic Names of three principalproducts / services of Company : N.A.


Particulars Current Year

Rupees Rupees



Add : Non-cash/Non-operating Expenses


(24239)

Working Capital changes



–




Net (Decrease)/Increase in Cash & Cash equivalents 500000

Add : Cash & Bank Balance as on 14.3.2007 –


NOTES:

1) The Cash Flow Statement has been prepared under the “Indirect Method” as set out in theAccounting Standard (AS) 3 on “Cash Flow Statement”, and presents cash flows by operating,investing and financing activities.





Godrej Waterside Properties Private Limited

124


TO THE SHAREHOLDERS

Your Directors have pleasure in submitting their Report alongwith the audited Accounts for the year ended31st March, 2007.1. FINANCIAL HIGHLIGHTS :



During the year the Company has entered into agreement for developing the property at Salt LakeKolkata. The project has been conceived as a landmark IT project in the heart of IT city, Salt LakeKolkata. The needs of ITES space requirement have been specifically considered by providing largefloor plates of approximately 17.87 lacs sq. ft. which will be the largest floor plates available in thecity after its completion. The construction of the project has already commenced.

3. DIVIDEND :

As there are no profits, the Directors regret that no dividend can be recommended.4. FUTURE PROSPECTS AND OUTLOOK OF THE COMPANY :

The project is expected to develop into a major IT destination on its completion. We also expect toenter into agreement for leasing the units/premises in the building with international IT/ ITES companiesof repute in the coming years.

5. DIRECTORS :

In accordance with the provisions of the Article of Associations, Mr. Milind S. Korde, retire by rotationand being eligible, offer himself for reappointment.Mr. K.T. Jithendran was appointed as an Additional Director of the Company with effect from May1, 2007. He holds office till the ensuing Annual General Meeting. A notice has been received froma shareholder proposing the candidature of Mr. K.T. Jithendran.


M/s. Kalyaniwalla Mistry and Associates, Chartered Accountants retire at the ensuing Annual GeneralMeeting and are eligible for reappointment.

7. DIRECTORS’ RESPONSIBILITY STATEMENT:

Your Directors confirm:(i) that in the preparation of the annual accounts, the applicable accounting standards have been

followed;





(a) Since the Company has no employees, the particulars of the employees to be disclosedu/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 with theCompanies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 isprovided hereunder:





(iii) Foreign Exchange Earning and Outgo :



MILIND S. KORDE

DirectorMumbai, May 23, 2007

1. We have audited the attached Balance Sheet of GODREJ WATERSIDE PROPERTIES PRIVATE

LIMITED, as at 31st March, 2007 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.





b) In our opinion, proper books of account as required by law have been kept by the Company sofar as appears from our examination of such books.



TO THE MEMBERS OF GODREJ WATERSIDE PROPERTIES PRIVATE LIMITED

d) In our opinion, the Balance Sheet and the Cash Flow Statement 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 31st March, 2007;

ii) in the case of the Profit and Loss Account, of the loss of the Company for the year endedon that date; and

iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the yearended on that date.

5. On the basis of the written representations received from the directors as on 31st March, 2007 andtaken on record by the Board of Directors, we report that, none of the directors is disqualified as on31st March, 2007 from being appointed as a director in terms of clause (g) of sub-section (1) of Section274 of the Companies Act, 1956.



BAHADUR S. DASTOOR




125


Schedule As at As at31.03.07 31.03.06Rupees Rupees

SOURCES OF FUNDSShareholders’ FundsShare Capital 1 500000 500000Loan Funds – –

500000 500000Application of FundsFixed AssetsGross Block 2 622259 –Less : Depreciation 88408 –Net Block 533851 –Investments – –


Current Assets, Loans and Advances

Inventory 3 311178675 –Cash & Bank Balances 4 5346124 500000Loans & Advances 5 105286436 –

421811235 500000Less : Current Liabilities and Provisions

Current Liabilities 6 424649894 –424649894 –

Net Current Assets/(Liabilities) (2838659) 500000Profit and Loss Account 1851808 –

500000 500000



As per our Report of even date.For and on behalf ofKALYANIWALLA MISTRY & ASSOCIATESChartered AccountantsBAHADUR S. DASTOOR MILIND S. KORDE DirectorPartner K.T. JITHENDRAN Director


SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON 31st MARCH, 2007


SCHEDULE 1 : SHARE CAPITALAuthorised50000 Equity shares of Rs. 10/- each 500000 500000

500000 500000Issued & Subscribed and Paid Up50000 Equity shares of Rs. 10/- each 500000 500000(50000 equity shares are held by the HoldingCompany, Godrej Properties Limited and its nominee)

500000 500000


SCHEDULE 4 : CASH AND BANK BALANCE

Cash and Cheques-in-Hand 16530 –Balances with Scheduled Bank - On current Account 5329594 500000

5346124 500000SCHEDULE 5 : LOANS AND ADVANCES

(Unsecured and considered good unless otherwise stated)Advances recoverable in cash or kind or for value to be received- Secured (Secured against Bank/Corporate Guarantee) 35273927 –- Others 69616764 –- Interest accrued 305789 –Advance Tax and Tax Deducted at Source 89956 –

105286436 –SCHEDULE 6 : CURRENT LIABILITIES

Sundry Creditors (Note 2)Sundry Creditors 1609144 –Advances received against Sale of Commercial premises 94892000 –Other Liabilities 328148750 –

424649894 –SCHEDULE 7 : INCOME

Interest received 394262 –394262 –

Tax deducted at source 88473


Consultancy Charges 14979176 –Other Administrative Expenses 3722937 –

18702113 –SCHEDULE 9 : INTEREST AND FINANCIAL CHARGES

Interest PaidOther Loans 16126997 –Total Interest Paid 16126997 –Add: Brokerage and other Financial Charges 82781 –Total Interest/Finance Charges Paid 16209778 –

Less: Allocated to Construction Work-in-progress 15820516 –

Net Interest 389262 –


Particulars Gross Block Depreciation Net Block

As at As at As at As at As at As at1st Addi- Deduc- 31st 1st For the 31st 31st 31st

April, tions tions March, April, year March, March, March,Particulars 2006 2007 2006 2007 2007 2006

Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Furniture & Fixtures – 80591 – 80591 – 65526 65526 15065 –Office Equipments – 59331 – 59331 – 701 701 58630 –Computers – 482337 – 482337 – 22181 22181 460156 –

Total – 622259 – 622259 – 88408 88408 533851

PreviousYear – – – – – – – – –


SCHEDULE 3 : INVENTORY

Construction Work-in-progress

As per last Balance Sheet – –Add : Expenditure/Transfers from Advances/taken over during the year

Construction 235956947 –Architect Fees 7631073 –Advertisment Expenses 3774807 –Overheads 28587371 –Interest 19247765 –

295197963 –Add: Transferred from Profit and Loss Account 15980713 –

311178675 –

The Schedules referred to above form an Signatures to the Profit & Loss Accountintegral part of the Profit & Loss Account. and Schedules 7 to 10

As per our Report of even date.For and on behalf ofKALYANIWALLA MISTRY & ASSOCIATESChartered AccountantsBAHADUR S. DASTOOR MILIND S. KORDE DirectorPartner K.T. JITHENDRAN Director



ON 31ST MARCH, 2007

Schedule For the For theperiod ended year ended

31.03.07 31.03.06Rupees Rupees

INCOME 7 394262 –

EXPENDITURE

Administration Expenses 8 18702113 –

Interest and Finance Charges 9 389262 –

Depreciation 88,408 –

Less : Amount Transferred to Construction Work in Progess 15980713 –

Loss for the year 2804808 –

Provision for Deferred Tax (953000) –

Net Loss After Tax 1851808 –

(Amount Transferred to Balance Sheet)

Earning per share (basic/diluted) in Rs. (Refer Note No. 4) (37) –


Godrej Waterside Properties Private Limited

126

SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON 31st MARCH, 2007

SCHEDULE 10NOTES TO ACCOUNTS AND ACCOUNTING POLICIES


a) GENERAL

The financial statements are prepared under the historical cost convention in accordance withGenerally 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 ASSETS

Fixed assets are stated at cost of acquisition or construction less accumulated depreciation.Cost includes all incidental expenses related to acquisition and installation, other pre-operationexpenses and 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/AMORTIZATION

Depreciation 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 Value

b) Construction Work-in-Progress - At Cost

Construction Work-in-Progress includes cost of land, premium for development rights,construction costs, allocated interest and expenses incidental to the projects undertaken by theCompany.

e) REVENUE RECOGNITION

The Company is following the “Percentage of Completion Method” of accounting. As per thismethod, revenue in Profit and 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 underexecution with 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 COST

Interest and Finance 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 on Management Project, as a part of the cost of the projects at weighted average of theborrowing 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 SHARE

The basic earnings per share is computed using the weighted average number of commonshares outstanding during the period. Diluted earnings per share is computed using the weightedaverage number of common and dilutive common equivalent shares outstanding during theperiod, except where the results would be anti-dilutive.

h) PROVISION FOR TAXATION

Tax expense comprises both current and deferred tax.

Current tax is measured at the amount expected to be paid to the tax authorities, using theapplicable tax 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 inone or 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 thatsufficient future taxable income will be available against which such deferred tax assets can berealized. The tax effect is calculated on the accumulated timing difference at the year-endbased on the tax rates and laws enacted or substantially enacted on the Balance Sheet date.

i ) PROVISIONS AND CONTINGENT LIABILITIES

Provisions are recognized in the accounts in respect of present probable obligations, theamount of which can be reliably estimated.

Contingent liabilities are disclosed in respect of possible obligations that arise from the pastevents but their existence is confirmed by the occurrence or non-occurrence of one or moreuncertain future events not wholly within the control of the Company.

2) There are no parties within the definition of Small Scale Industrial Undertakings to whom theCompany owes any sum.

3) Deferred Tax

The Tax effect of significant temporary differences that resulted in the deferred tax assets and liabilitiesare :

Current Year Previous Year

(Rs.) (Rs.)

Assets

Losses carried forward 975016 –

Liabilities

Depreciation on Fixed Assets 22016 –


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 Companyhas considered the profitability of the project in progress as the factor on the basis of which it hasconcluded that it is virtually certain that sufficient taxable income will arise in future against whichthe deferred tax assets will be realized.



Loss after transfer to Project in Progress as per

Profit and Loss Account Rs. 1851808 –

Weighted average no. of Equity shares outstanding 50000 50000

Basic/Diluted earnings per share Rs. (37) –

Nominal value of shares Rs. 10 Rs. 10

5) Amounts paid to Auditors : Current Year (Rs.)

Audit Fees 89792

Total 89792

6) SEGMENT INFORMATION

As the Company has only one business segment, disclosure under Accounting Standard 17 on “"Segment Reporting" issued by the Institute of Chartered Accountants of India is not applicable.

7) AS 18 – RELATED PARTY DISCLOSURE

1. Relationships:

Shareholders in the Company : Godrej Properties Limited (GPL) holds 100% of the sharecapital of the Company.

2. The following transactions were carried out with the related party in the ordinary course of the business:

Sr. No Rs.

1. Expenses incurred by holding company towards Constructionwork-in-progress and Revenue expenditure 342031262

2. Outstanding net of (payables) 278077329


8) Previous year figures have been regrouped/rearranged whereever necessary to confirm to currentyear’s classification.


127


Particulars Current Year Previous YearRupees Rupees Rupees

Cash Flow from Operating ActivitiesNet Loss before Tax (2804808) –Add : Non- Cash/Non-operating Expenses1. Depreciation 884082. Interest paid 16209778 16298186 –

13493378 –Less : Non-Cash/Non operating IncomeInterest Income 394262 394262 –

13099116 –

Add:1. Change in Inventory (311178675) –2. Change in Loans and Advances (104890691) –

3. Change in Current Liabilities/Provisions 424649894 8580528 –21679644

less: Taxes paid (Net) 89956 89956 –

21589688Cash Flow from Investing Activities1. Purchase of Fixed Assets (622259)

2. Interest Received 88473 (533786) –21055902 –

Cash Flow from Financing Activities1. Issue of Share Capital – 5000002. Interest paid (16209778) (16209778) –Net (decrease)/Increase inCash & Cash Equivalents 4846124 500000Add: Cash & Cash Equivalents

as on 01.04.2006 500000 –

Cash & bank Balance as on 31.03.2007 5346124 500000

Notes:

1. The cash flow statement has been prepared under the 'Indirect Method' as set out in the AccountingStandard (AS) 3 on 'Cash Flow Statement', 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 confirm to this year'sclassification.

For and on behalf ofKALYANIWALLA MISTRY & ASSOCIATESChartered Accountants MILIND S. KORDE Director

K.T. JITHENDRAN DirectorBAHADUR S. DASTOORPartnerMumbai, May 23, 2007

INFORMATION REQUIRED TO BE FURNISHED UNDER THE PART IV OF SCHEDULE VIOF THE COMPANIES ACT, 1956Balance Sheet Abstract for the year ended 31st March, 2007 and Company’s General BusinessProfile

1 Registration Details

Registration No. U70100MH2005PTC154255

State Code 11

Balance Sheet Date 31st March, 2007

2 Capital raised during the year (Amount in Rs. thousands)

Public Issue Nil

Rights Issue Nil

Bonus Issue Nil

Private Placement - Capital Nil

- Premium Nil

3 Position of mobilisation and deployment of funds (Amount in Rs. thousands)

Total Liabilities 425150

Total Assets 425150

Sources of Funds

Paid-up capital 500

Reserves & Surplus –

Secured Loans –

Unsecured Loans –


Net Fixed Assets 534

Investments –

Net Current Assets (2839)

Deferrred Tax Assets 953

Misc. Expenditure –

Accumulated Losses 1852

4 Performance of the Company (Amount in Rs. thousands)

Turnover –

Total Expenditure 19180

Profit/(Loss) before Tax (2805)

Profit/(Loss) after Tax (1852)

Earning per Share in Rs. (37)

Dividend Rate % –

5 Generic Names of three Principal products /services of

Company N.A.

Godrej Hicare Limited

128

DIRECTORS’ REPORT FOR THE YEAR ENDED ON MARCH 31, 2007

REPORT OF THE AUDITORS TO THE MEMBERS OF GODREJ HICARE LIMITED

1. We have audited the attached Balance Sheet of GODREJ HICARE LIMITED, as at 31st March, 2007and 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.


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 para (3) above, we report that:i) The accumulated losses of the Company as at March 31, 2007 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 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.

To the Members GODREJ HICARE LIMITEDYour Directors submit their Report along with the Audited Accounts of your Company for the yearended March 31, 2007.Operating ResultsYour Company’s performance during the year as compared with the previous year is summarizedbelow:

March 31, 2007 March 31, 2006 (Rs Lacs) (Rs Lacs)

Total Income 2995.53 2112.19Profit/ (Loss) for the year 182.35 104.34before extraordinary items (After tax)Profit / (Loss) After Extraordinary Items 182.35 104.34Add: Balance brought Forward (1340.60) (1444.94)Deficit Carried Forward (1158.26) (1340.60)Operations ReviewYour Company has recorded an excellent growth of 42% in its revenue. Total Income grew fromRs. 2112 lac in the previous year to Rs 2996 lac in the current year. The Company’s Profit after Tax ofRs. 182 lac for the year as compared to Rs.104 lac in the previous year shows an impressive growth of75%.The Company identified training as critical to its success and hence invested substantial resourcesbehind this activity. In its never ending effort to achieve excellence in service delivery it invitedeminent foreign consultants to train employees at all levels.The Company launched one of world’s leading brands of Flying Insect Killing machines. This was in thelast quarter of the current year and the Company expects good revenue in coming years from newcustomer acquisitions and deepening relationship with current ones.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 ofthe Company, Mr. A.B. Godrej by rotation in the ensuing Annual General Meeting and being eligible,offers himself for reappointment.Auditors:The retiring Auditors of the Company, Messrs. Kalyaniwalla Mistry and Associates, CharteredAccountants, have indicated their inability to accept appointment as Auditor of the Company. Asrequired under Section 225(1) of the Companies Act, 1956, a Special Notice in terms of Section 190 ofthe Act has been received from a Member, proposing the appointment of Messrs. Kalyaniwalla &Mistry (K & M ), Chartered Accountants, as the Auditors of the Company, in place of the retiringAuditors.The retiring Auditors have informed the Company that they have no representation to make to theMembers of the Company relating to the Special Notice.Messrs Kalyaniwalla & Mistry ( K & M ) is a reputed firm of Chartered Accountants and the Board,therefore, proposes the appointment of Messrs Kalyaniwalla & Mistry ( K & M ) as the Auditors of theCompany.Audit Committee:The Audit Committee which was appointed pursuant to the provision of Sec 292A of the CompaniesAct, 1956 has reviewed the accounts for the year ended Mar 31st 2007.Note on Auditors Report:Erosion of Net worth (Note 4(i) of Auditors report and note 10 of Annexure to Auditors report)Though the accumulated losses of the Company exceed its paid up capital, the shareholders are verysupportive of the Pest management business and are committed to infuse funds as and when requiredto for working capital and other requirements.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 beingmade. Your Company is regular in repayment of loans taken from other corporates in form of InterCorporate Deposits.

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 beenfollowed and no material departures have been made from the same;

b. that they have selected such accounting policies and applied them consistently and madejudgments 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 and of the profit or loss of theCompany 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

Conservation of Energy, Technology Absorption:The 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 theCompany’s (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 has not beengiven, since such requirement is not applicable to the Company.Particulars of Employees:Statement under Section 217(2A) of the Companies Act, 1956 read with the Company’s (Particulars ofEmployees) Rules, 1975.A) Persons employed for a part of the financial year under review and each of whom was in receipt

of remuneration for that part which, in the aggregate, was not less than Rs. 2,00,000 per month.Sr. Name Designation Gross Qualifi Years Date of A g e Partic- PreviousNo. Remun- -cation of Experi- Commen- (Years) ulars Experience

eration ence cement of previ- (Years)(Rs.‘000) inGHCL of employ- ous

ment Emplo-yment

1 V ikas Chief 4048 PGDMM 2 18.01.05 53 GSLL 31Hajela Operating

Officer2 S . Exe. 3111 CA, 3 21.01.04 41 GSLL 18

Anand Vice ICWAIPresident

Foreign Exchange earnings and Outgo:Expenditure in Foreign Currency

Current Year PreviousYearMar-2007 Mar-2006(Rs Lacs) (Rs Lacs)

License Fees Nil 8.75Training Expenses Nil 2.28Travelling Expenses Nil 0.53Consultancy Charges 16.35 NilAdditional InformationThe additional information as required to be given under the Companies Act, 1956 has been laid out inthe Schedules attached to and forming part of the Balance Sheet and Profit and Loss Account , includingthe Notes 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. Godrej Chairman

Mumbai, May 7, 2007

iv) 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.

v) In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statementdealt with by this report comply with the Accounting Standards referred to in sub-section (3C)of section 211 of the Companies Act, 1956.

vi) 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 31st March 2007;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


taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on31st March, 2007 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 ASSOCIATESCharetered Accountant


Mumbai, May 7, 2007


129

Referred to in paragraph (3) of our report of even date.1) (a) As per the information and explanations given to us, the Company is in the process of updating

its 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 view

of 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.


are 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 waived.

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.


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 examination

of 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 31st March 2007 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 ofits net worth. There are no 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, 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 activitiesof the Company does not attract any special statute applicable to chit fund and nidhi/ mutual benefitfund/ 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 a 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.





Mumbai, May 7, 2007

ANNEXURE TO THE AUDITORS’ REPORT (Contd.)


Current Year Previous YearSchedule Rupees Rupees

SOURCES OF FUNDS :SHAREHOLDERS’ FUNDS

Share Capital 1 56200000 56200000LOAN FUNDS

Secured Loans 2 19114088 –Unsecured Loans 3 134310000 139310000

DEFERRED TAX LIABILITY – 401000

209624088 195,911,000

APPLICATION OF FUNDS :FIXED ASSETS 4

Gross Block 20453140 17353167Less : Depreciation 8230125 6011084

Net Block 12223015 11342083INVESTMENTS 5 68905 68905DEFERRED TAX ASSETCURRENT ASSETS, LOANS 1535000 –AND ADVANCES

Inventory 6 26864719 22276952Sundry Debtors 7 77064818 45098800Cash and Bank Balances 8 11654782 17917076Loans and Advances 9 81565959 31802401

197150278 117095229LESS : CURRENT LIABILITIES

AND PROVISIONSCurrent liabilities 10 115403281 64451387Provisions 11 1775725 2204243

117179006 66655630

NET CURRENT ASSETS 79971272 50439599PROFIT & LOSS ACCOUNT 115825895 134060413

209624088 195911000



As per our Report of even date Signatures to Balance Sheet andSchedules 1 to 11 and 17

For and on behalf ofKALYANIWALLA MISTRY AND ASSOCIATES A.B. GODREJ ChairmanChartered Accountants A. MAHENDRAN Managing Director

RAMESH IYER Company SecretaryBAHADUR S. DASTOORPartner

Mumbai, May 7, 2007


MARCH 31, 2007

Current Year Previous YearSchedule Rupees Rupees

INCOME :

Gross Sales 50485610 44484712Less : Excise Duty 1908583 1321380

Net Sales 48577027 43163332Service Income 237733236 152706621Other Income 12 13242305 15289388

299552568 211218723

EXPENDITURE:Raw Materials Consumed 13 61163839 53190753Purchase of Traded Goods 9862569 7404457Inventory Change 14 (954916) (1900192)Expenses 15 205971039 136573253Interest and Finance Expense 16 2257479 2317918Depreciation 2219041 1324008

280519050 198910197

Profit/(Loss) for the Year 19033518 12308526Less : Fringe Benefit Tax 675000 668980

Current Tax 2060000 805000Deferred Tax (1936000) 401000

Profit/(Loss) for the Year after Tax 18234518 10433546Add : Balance Brought Forward (134060413) (144493959)

Deficit Carried Forward (115825895) (134060413)

Basic/Diluted Earnings per Share 3.24 2.29(Refer Note 15)


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

As per our Report of even date Signatures to Profit and Loss Account andSchedules 12 to 17



Mumbai, May 7, 2007


130

SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2007



Authorised:8000000 Equity Shares of Rs.10/- each 80000000 80000000Issued & Subscribed7900000 Equity Shares of Rs 10/- each 79000000 79000000Paid-up4100000 Equity Shares of Rs 10/- each fully paid 41000000 410000003800,000 Equity Shares of Rs 10/- each, Rs 4/- paid. 15200000 15200000

56200000 56200000Of the above:6647100 shares are held by Godrej Industries Ltd. (GIL), the Holding Company


ASSETS As at Additions Deductions As at Up to For the year Deductions Up to As at As at01/04/2006 31/03/2007 01/04/2006 31/03/2007 31/03/2007 31/03/2006

Intangibles

Trade Marks 9000000 – – 9000000 1970137 900000 – 2870137 6129863 7029863Computer Software 1814392 246668 – 2061060 183416 333122 – 516538 1544522 1630976Total (A) 10814392 246668 – 11061060 2153553 1233122 – 3386675 7674385 8660839TangiblesFactory Building 82400 – – 82400 15693 6671 – 22364 60036 66707Plant & Machinery 5544088 412218 – 5956306 3574970 293809 – 3868779 2087527 1969118Office Equipment 72915 153953 – 226868 24666 26623 – 51289 175579 48249Furniture & Fixture 48638 561615 – 610253 18277 72844 – 91121 519132 30361Spray and Service Kit 59000 – – 59000 59000 – – 59000 – –Vehicles 38949 456745 – 495694 38949 1477 – 40426 455268 –Computers 692785 1268774 – 1961559 125976 584495 – 710471 1251088 566809Total (B) 6538775 2853305 – 9392080 3857531 985919 – 4843450 4548630 2681244TOTAL (A+B) 17353167 3099973 – 20453140 6011084 2219041 – 8230125 12223015 11342083Previous Year Total 14223379 3204463 74675 17353167 4694077 1324008 7001 6011084 11342083

SCHEDULE 4 : FIXED ASSETS (Amount in Rs.)


SCHEDULE 5 : INVESTMENTS : LONG TERMIn Mutual Funds, Unquoted43.19 units of Templeton India TreasuryManagement Account Regular Plan - Growth 68905 68905

68905 68905

Net Asset Value 80438 75728

SCHEDULE 6 : INVENTORYRaw material 385444 3922887Packing Material 284863 930122Finished Goods 5718849 4356905Service Stock 20068533 12252981Photographic equipment 814057Less : Provision for Stock obsolesence (407028) 407029 814057

26864719 22276952

SCHEDULE 7 : SUNDRY DEBTORS(Unsecured and considered good unless otherwise stated)Due for more than six months

Considered good 31400811 8409492Considered doubtful 2718884 379601

34119695 8789093Other debts

Considered good 45664007 36689308Considered doubtful – –

79783702 45478401Less : Provision for doubtful debts 2718884 379601

77064818 45098800

SCHEDULE 8 : CASH AND BANK BALANCESCash on hand 1610 47281Balances with scheduled banks

in current accounts 6148343 9303535in fixed deposit account 4263620 7323200in margin deposit account 1241209 1243060

11654782 17917076

SCHEDULE 9 : LOANS AND ADVANCES(Unsecured and considered good unless otherwise stated)Loans and advances recoverable in cash or inkind or for value to be received : 71711757 22431883Advance to Suppliers 3480385 4938556Deposits 4610669 2737968Advance Tax and Tax Deducted at Source (Net of Provision 1763148 888994for Taxation Rs. 3540000/- Prvious Year Rs. 805000/-)

81565959 30997401


SCHEDULE 10 : CURRENT LIABILITIESCurrent Liabilities:Sundry Creditors (Refer Note 4) 26965355 12057968Security Deposits 13474661 8620334Advance from Customers 40630979 24870848Other Liabilities 34029889 17945805Interest accrued but not due 302397 956432

115403281 64451387

SCHEDULE 11 : PROVISIONSLeave Encashment 1775725 1399243Taxation – –

1775725 1399243

SCHEDULES FORMING PART OF THE PROFIT & LOSS ACCOUNTFOR THE YEAR ENDED MARCH 31, 2007

SCHEDULE 12 : OTHER INCOMEPublicity & Information Support 10988057 10449038Miscellaneous Income 1700185 4063731Sundry Credit balance written back 554063 776619

13242305 15289388

SCHEDULE 13 : MATERIALSa) Raw Material and Packing Material Consumed

Opening stock 4853009 4421913Add : Purchases during the year 17605232 24028993

22458241 28450906Less : Closing stocks 670308 4853009

21787933 23597897b) Service Stock Consumed 39375906 29592856

61163839 53190753

SCHEDULE 14 : INVENTORY CHANGEOpening stock

Photographic equipments 814057 840857Finished goods 4356905 2429913

5170962 3270770Less: Closing Stock

Photographic equipments 407029 814057Finished goods 5718849 4356905

6125878 5170962

(954916) (1900192)



Cash Credit 19114088 –(Secured against hypothecation of stock & book debts)

19114088 –


Intercorporate deposits (due within a year, or at call) 134310000 139310000

134310000 139310000


131

in the Profit and Loss Account except in respect of liabilities incurred to acquire fixed assetsin which case, they are adjusted 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 theweighted average number of the common and dilutive common equivalent shares outstandingduring the period except where the results would be anti dilutive.

2) CONTINGENT LIABILITIES:1) Claims against company not acknowledged as debts amounts to Rs. 18318000/- (Previous

year Rs. 14500000/-)2) Bank Guarantee given by the Company amounting to Rs.1241209/- (Previous year

Rs. 1243060/-)3) CAPITAL COMMITMENTS

The estimated value of contracts remaining to be executed on capital account to the extent notprovided for is Rs. 3208634 (Advance paid Rs. 3208634) (Previous Year Rs. Nil/-)

4) SSI CREDITORSIn 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 Depositsreceived, as the same has been waived by the concerned companies in view of the financialposition of the Company.

6) EXPENDITURE IN FOREIGN CURRENCYCurrent Year PreviousYear

License Fees Nil 875400Training Expenses Nil 227978Travelling Expenses Nil 53389Consultancy Charges 1635556 Nil

7) Accounting for LeasesThe 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 bythe Institute of Chartered Accountants of India.

(Amounts in Rupees)Current Year Previous Year

1. Lease Rentals paid during the year 1777514 11362092. Future Lease Obligations

- Due within one year of the Balance Sheet date 2051984 1204132- Due between one year and five years 3704898 2255473- Due after five years – –

Current year Previous yearItem Units Quantity Value Quantity Value

(Rs.) (Rs.)8) INVENTORIES OF FINISHED GOODS

Traded goods

Print Leader Nos 3 176143 3 352,286Imager Nos 5 230886 5 461771

407029 814057Insecticides Ltrs 367 216038 1367 251369

Nos 100 32011 100 32011Fly Catcher Nos 814 3872400 – –

4527479 1097437Manufactured goods

Insecticides Ltrs 2759 1185064 9352 4050041Kgs 24142 413335 300 23484

1598399 4073525 Total 6125878 5170962

9) SALES (NET OF EXCISE DUTY)

Item Units Quantity Value Quantity Value(Rs.) (Rs.)

Traded goods

Fly Catcher Nos 316 2258240 – –Insecticides Kgs 1774 527028 6074 9792033Insecticides Ltrs. 13058 5852907 23846 1880684Manufactured goods

Insecticides Ltrs. 83078 38581541 82932 31490615Kgs 130408 1357310 – –

Total 48577027 4316333210) PURCHASES FOR RESALE


Insecticides Ltrs. 12058 4366993 29472 7404457Kgs 1524 109696 – –

Fly Catcher Nos 1130 5385880 – –Total 9862569 7404457

11) RAW MATERIAL CONSUMED


Basic Chemicals Kgs 140167 20276018 127522 22862147Service Stock 39375906 29592856Others 1511916 735750Total 61163839 53190753

SCHEDULES FORMING PART OF THE PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007


SCHEDULE 15 : EXPENSESSalaries, Bonus & Allowances 37198224 16448123Contribution to Provident Fund and Other Funds 2178292 770279Staff Welfare Expenses 477423 759757Processing Charges 2318094 1677141Electricity Expenses 481151 359073Rent, Rates & Taxes 4049016 4848379Repairs & Maintenance

Machinery & Equipment 33470 7802Others 170671 274713

204141 282515Insurance 601890 104398Freight & Transportation Expenses 4226884 2709778Service Center Expenses 68244802 35717165Advertising, Publicity & Sales Promotion Expenses 58264824 52907561Discount 4427575 1062414Auditors Remuneration 169360 169360Travelling & Conveyance 6384052 4333627Legal & Professional Charges 6453210 3836943Provision for Doubtful debts 2339283 –Bad debts and advances written off 1210153 5111522IT expenses 1752748 587943General Expenses 4989917 4887275

205971039 136573253

SCHEDULE 16 : INTEREST AND FINANCE EXPENSESInterest on intercorporate deposits 1878888 919610Other Interest & financial charges 2528339 1799886

4407227 2719496Less : Interest Income 2149748 460960(Tax deducted at source Rs. 449,499/-Previous year Rs. 84,908/-) 2257479 2317918


1) Significant Accounting Policies

a) Accounting Conventions:The accounts have been prepared on historical cost convention. The Company followsmercantile system 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

prescribed by Schedule XIV to the Companies Act, 1956.2) Computer Hardware and Other Assets: On Written Down Value basis at the rates

prescribed 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 ishigher. Impairment loss, if any, is recognized whenever carrying amount exceeds therecoverable amount.

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 costof conversion and other costs incurred in bringing the inventories to their present locationand condition.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 chargedto the profit and loss account. The liability in respect of defined benefit schemes like gratuityand leave encashment benefit on retirement is provided on the basis of actuarial valuationat the end of each year. The liability for retirement gratuity is funded through a trust createdfor the purpose.

g) Research & Development:Revenue expenditure on Research and Development is charged to Profit and Loss Accountof the year in which it is incurred. Capital expenditure incurred during the year on Researchand Development is shown as addition to Fixed Assets.

h) Revenue Recognition:Revenue from Pest Management services is recognized as and when the services arerendered. 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 dateof the transaction. Assets and liabilities related to foreign currency transactions, remainingunsettled at the year end, are translated at the year end exchange rates. Forward exchangecontracts, remaining unsettled at the year end, backed by underlying assets or liabilities arealso translated at year end exchange rates.The premium payable on foreign exchangecontracts is amortised over the period of the contract. Exchange gains / losses are recognised


132

Item Value Value% (Rs.) % (Rs.)

12) VALUE OF CONSUMPTION OF RAW MATERIALS,

SPARES AND CONSUMABLES

Raw Materials

Indigenous 73 44682320 80 42305906Imported (including custom duty) 27 16481519 20 10884847Total 61163839 53190753

13) INSTALLED CAPACITY AND ACTUAL PRODUCTION

Units Installed Capacity Production

Current Year Previous Year Current Year Previous Year

Insecticides Ltrs. 240000 240000 43950 51215Processed Outside – – 32535 33968

240000 43950 51215

14) CIF VALUE OF IMPORTS


Insecticide Kgs. 57300 15375964 58660 12016607

Insect-O-Cutor (PMS) Nos 1130 5385880 – –

Total 20761844 12016607

15) EARNING PER SHARE:Current Year Previous Year

Profit/(Loss) after Tax as per Profit & Loss account 18234518 10433546Weighted average number of equity shares of Rs 10 each 5620000 4557425Basic / Diluted Earnings Per Share 3.24 2.29

16) RELATED PARTY DISCLOSURE AS REQUIRED BY AS - 18 “RELATED PARTYDISCLOSURES” 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 Beverage & Foods Limited

2. Godrej Agrovet Limited

3. Godrej Properties Limited

4. Godrej Sara Lee Limited

(iii) Key Management Personnel

1. Mr. A. Mahendran (Managing Director)

2 The following transactions were carried out with the related parties in theordinary course of business:

Details relating to parties referred to in item 1(i) and (ii) above:

Sr. Particulars Godrej Group Other RelatedNo. Shareholders parties in the

Ultimate Holding GodrejHolding Co. Co. Group

(i) (i) (ii)

1. Issue of Share Capital Nil Nil Nil

(Nil) (17160000) (Nil)

2. Sale of Fixed Assets Nil Nil NIL(Nil) (Nil) (74675)

3. Purchase of Fixed Asset 403600 Nil Nil(Nil) (Nil) (Nil)

4. Sales & Other Income 266568 774438 2400342(Nil) (Nil) (4066038)

5. Purchases (net of returns) Nil Nil Nil(Nil) (Nil) (454918)

6. Expenses charged by other Companies 228 1699574 1284333(Nil) (1475254) (2065638)

7. Expenses charged to other Companies Nil Nil 49486(Nil) (5,650) (1733582)

8. Interest on Inter Corporate Deposit Nil Nil Nil(Nil) (88457) (Nil)

9. Sundry Deposit with Other Companies 1450 355500 6000351450 ((Nil) (Nil)

10. Sundry Deposits refunded Nil Nil Nil(350000) (Nil) (Nil)

11. Outstanding Receivables (net) of Payables 183020 423926 2314375(Nil) (357800) (3004913)

(ii) Details relating to person referred to in item1(iii) aboveCurrent year Previous year

Issue of share capital Nil 3040000

3. Significant Related Party Transactions

1 Sale of Fixed Assets – Nil


2 Purchase of Fixed Assets – Nil

– Nil

3 Sales & Other Income Godrej Agrovet Limited 457173

Godrej Agrovet Limited Nil



Godrej Properties Limited 1455822

Godrej Properties Limited 991250

4 Purchases (net of returns) – Nil

Godrej Sara Lee Limited (454918)

5 Expenses charged by other Godrej Beverages & Foods Limited 1227467

Companies Godrej Beverages & Foods Limited (1337917)



6 Expenses charged to other

Companies Godrej Beverages & Foods Limited 8686

Godrej Beverages & Foods Limited Nil



7 Outstanding Receivables, Godrej Properties Limited 1441559

net of Payables Godrej Properties Limited 991250



Note :- Figures in Italics represents previous year figures.

17) Deferred Tax

The Tax effects of significant temporary differences that resulted in deferred tax assets and liabilitiesare :-

Current Year Previous YearDepreciation on Fixed Assets – (1163,000)

Provision for Stock 137000 –

Provision for Doubtful debts 787000 –

Others 611000 762000

Deferred Tax Asset / (Liability) 1535000 (401000)

18) Auditors Remuneration


Statutory Audit 134688 134688

Audit under other Statutes 33672 33672

Total 168360 168360

19) The amount of exchange difference included in the Profit and Loss Account, under the relatedheads of expenses / income, is Rs. 57,419 (Previous year expense Rs.9,856).

20) The Company is engaged in the business of rendering pest management services & sale ofrelated insecticides which is its only primary business segment. The Company operates in economicenvironments which are subject to same risks and returns and hence no disclosure is requiredunder AS 17- Accounting Standard on Segment Reporting.

21) Information required under Schedule VI to the Companies Act 1956, have been given to theextent applicable.


133

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

1. Registration details

Registration No. : U29294MH1993PTCO72222State Code : 11Balance Sheet Date : March 31, 2007

2. Capital raised during the year

Public Issue : –Rights Issue : –Bonus Issue : –Private Placement : –

3. Position of mobilisation and deployment of funds

Total Liabilities : 326803094Total Assets : 325268094Sources of funds

Paid up Capital : 56200000Reserves & Surplus : –Secured Loans : 19114088Unsecured Loans : 134310000Deferred Tax Liability : –

Application of funds

Net Fixed Assets : 12223015Investments : 68905Deferred Tax Assets : 1535000Net Current Assets : 79971272Miscellaneous Expenditure : –Accumulated Losses : 115825895

4. Performance of Company

Turnover (Total Income) : 299552568Total Expenditure : 280519050Profit / (Loss) before tax : 19033518Profit / (Loss) after tax : 18234518Earnings per share in Rs. : 3.24Dividend rate (%) : –

5 Generic names of three principal products / services of the Company

Item Code No. NilProduct Description Pest Control ServicesItem Code No. 3808.1*Product Description InsecticidesItem Code No. 90.10 *Product Description Photographic Equipment & Spares

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


Current Year Previous YearRs. Rs.

A. Cash Flow from Operating Activities :

Profit/(Loss) before tax 19033518 12308526

Adjustments for :


Interest expense 2257479 2317918

Operating Profit/(Loss) before working capital changes 23510037 15950452

Adjustments for :

Inventories (4587767) (2165942)

Trade & Other receivables (78120422) (30447457)

Trade & Other payables 47485979 7035675

(11712173) (9627272)

Direct & Fringe Benefit Taxes paid (2972117) (1693994)

Fringe Benefit tax Paid (637037) (668980)

B. Cash Flow from Investing Activities :

Purchase of Assets (3099973) (3136789)

Investments – –

Net Cash used in investing activities (3099973) (3136789)

C. Cash Flow from Financing Activities :

Term Loans/Inter Corporate Deposits taken 14114088 11952000

Issue of Share Capital – 20200000

Interest paid (1955082) (1361486)

Net Cash from financing activities 12159006 30790514

Net Increase in Cash and Cash Equivalents (6262294) 15663479

Add : Cash & Cash equivalents (Opening Balance) 17917076 2253597

Cash & Cash equivalents (Closing Balance) 11654782 17917076

Notes

1. Cash flow statement has been prepared under the Indirect method as set out in the acountingstandsrds AS-3 on Cash Flow Statement as present cash flows by operating, investing andfinancing activities

2. Figures in brackets are outflows/deductions.

3. Previous year figures are regrouped/restated whereever necessary to confirm to this year’sclassification.



Mumbai, May 7, 2007

Ensemble Holdings & Finance Limited

134

DIRECTORS’ REPORT FOR THE YEAR ENDED ON MARCH 31, 2007


To 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, 2007.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 8062 57332

Profit / (Loss) for the year 7896 57185Provision for Taxation 438 520Adjustment in respect of prior years – 5Loss brought forward (80521) (80575)

Loss carried forward (80250) (80521)

Dividend

The Board of Directors have declared and paid two interim dividends for year 2006-07 aggregating to Rs.1.15per share. The same is recommended as the final dividend for the year.Compliance with guidelines issued by the Reserve Bank of India

Your 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.Directors

In accordance with Article 124 of the Articles of Association of your Company, Mr. C. K. Vaidya retires byrotation and being eligible offers himself for re-appointment.

Auditors

You are requested to appoint Auditors for the current year and fix their remuneration. The retiring auditors,M/s Kalyaniwalla Mistry and Associates, Chartered Accountants are eligible for re-appointment.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 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 Information

The 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 at March31, 2007 and also the Profit and Loss Account and Cash Flow statement 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.


3. As required by the Companies (Auditor's Report) Order, 2003, as amended by the Companies (Auditors'Report) (Amendment) Order 2004, issued by the Central Government in terms of section 227 (4A) of theCompanies Act, 1956, we annex hereto a statement on the matters specified in paragraphs 4 and 5 ofthe 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 thebooks of account;

d. In our opinion, the Profit and Loss Account and Balance Sheet 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 March 31, 2007,(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, 2007, and takenon record by the Board of Directors, we report that none of the Directors is disqualified as on March 31,2007, from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of theCompanies Act, 1956.


V. M. PADWALPartnerMembership No.: 49639


ANNEXURE TO THE AUDITORS’ REPORTReferred to in Paragraph 3 of our report of even date on the accounts of Ensemble Holdings & Finance Limited forthe year ended March 31, 2007:1. a ) The Company, during the current year, has not granted any loans, secured or unsecured, to any

companies, firms or other parties covered in the register maintained under section 301 of the CompaniesAct, 1956 and the outstanding from one company covered in the register maintained under section301 of the Companies Act, 1956 is Rs. 23,110,000/-

b) In our opinion and according to information and explanations given to us, the rate of interest and otherterms and conditions of unsecured loans given by the Company, are prima facie not prejudicial to theinterest of the Company except for unsecured loan given to Godrej Hicare Limited which has beenadequately provided for.

c ) All parties except for Godrej Hicare Limited have repaid the principal amounts as stipulated and havebeen regular in the payment of interest.

d) In our opinion, the Company has taken reasonable steps for the recovery of principal and interest inrespect 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 maintained undersection 301 of the Companies Act, 1956. The amount involved during the year was Rs. 500,000/- andthe same was repaid during the year.

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 in thepayment 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 entered intothe 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 and natureof its business.

5. a ) According to the records examined by us, the Company is generally regular in depositing withappropriate authorities undisputed statutory dues including Income Tax and other statutory dues asapplicable to it. According to the information and explanation given to us, no undisputed amounts

payable in respect of statutory dues were outstanding, at the year end for a period of more than sixmonths from the date they became payable.

b) According to the information and explanation given to us there are no dues of sales tax, income tax,wealth tax, service tax, excise duty or cess, which have not been deposited on account of any dispute.

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 the immediatepreceding 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 and advanceson 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 ofthe Company 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 the investmentsdealt in by the Company and timely entries have been made therein. The investments made by theCompany 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 raised onshort-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.



V.M. PADWALPartnerMembership No.: 49639

Mumbai, May 25,2007


135


This Year Previous YearSchedule Rupees Rupees

SOURCE OF FUNDS

1 SHAREHOLDERS' FUNDS

(a) Share Capital 1 37741600 37741600

(b) Reserves & Surplus 2 104594668 102357370

142336268 140098970


1 Investments 3 31202440 44027576

2 Current Assets, Loans

and Advances

(a) Sundry Debtors – 453350

(b) Cash & Bank Balances 4 1461530 504958

(c) Other Current Assets 5 440110 804

(d) Loans and Advances 6 29114660 18893472

31016300 19852584

LESS: Current Liabilities and

Provisions 7

Current Liabilities 132215 103199

Provisions – 4199084

132215 4302283

NET CURRENT ASSETS 30884085 15550301

3 Profit And Loss Account 80249743 80521093

Total 142336268 140098970



As per our Report of even date attached. Signatures to Balance Sheet andSchedules 1 to 7 and 11

For and on behalf ofKALYANIWALLA MISTRY AND ASSOCIATESChartered Accountants M. EIPE Director

C.K. VAIDYA DirectorV.M. PADWAL S. SRINIVASAN Company SecretaryPartner


SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31,

2007

This Year Previous YearRupees Rupees


SHARE PREMIUM

As per last Balance Sheet 84945040 84945040

Special Reserves u/s 45IC of RBI Act, 1934Opening Balance 117453220 –Add Transferred from Profit and Loss A/c 1491532

13236752 11745220General ReserveOpening Balance 5667110Add: Transferred from Profit and Loss A/c 745766Transfer during the year for FY 2005-06 6412876 5667110

104594668 102357370



AUTHORISED

5000000 Equity Shares of Rs. 10/- each 50000000 50000000

ISSUED, SUBSCRIBED AND PAID UP

3774160 Equity Shares of Rs. 10/- each fully paid up 37741600 37741600

37741600 37741600

(Out of the above, 3770160 shares are held byGodrej Industries Ltd., the Holding Company)


MARCH 31, 2007This Year Previous Year

Schedule Rupees Rupees

INCOMEInterest Income 8 2114248 457070Dividend 3992965 397935Profit on sale of investments (Net) 1809937 19750323Provision for diminution in value oflong–-term investments written back – 36488750Profit on sale of Mutual Funds 135160 237935Misc. Income 9558 –

8061868 57332013EXPENDITUREExpenses 9 150302 127137Interest 10 15904 19554

166206 146691

PROFIT / (LOSS) BEFORE TAX 7895662 57185322Provision for Taxation 438000 520000

PROFIT / (LOSS) AFTER TAX 7457662 56665322Adjustments for Income tax of prior years – 5779

PROFIT AVAILABLE FOR APPROPRIATION 7457662 56671101

Dividend1st Interim 11322482nd Interim 3208036 4340284 34382599

Dividend Distribution Tax 608730 4822160Transfer to Special Reserve Fund u/s 45IC of RBI Act, 1934 1491532 11745220Transfer to General Reserves 745766 5667110

7186312 56617089Balance available for set off against b/f deficit in P&L A/c 271350 54012Loss brought forward (80521093) (80575105)Loss Carried Forward (80249743) (80521093)

Earnings Per Share 11 (6) 1.98 15.02



As per our Report of even date attached. Signatures to Profit and Loss Accountand Schedules 8 to 11





136

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31,

2007


SCHEDULE 4 : CASH AND BANK BALANCESCash on hand 2852 1736Balances with Scheduled Banksin Current Accounts 1458678 503222

1461530 504958SCHEDULE 5 : OTHER CURRENT ASSETS

Accrued Interest 440110 804440110 804

SCHEDULE 6 : LOANS AND ADVANCES(Unsecured, considered good, unless stated otherwise)Loans – 71117ESOP Loans 18800000 18550000Share Application Money (considered doubful) 300000 300000Intercorporate Deposits (considered good) 10000000 –Intercorporate Deposits (considered doubtful) 23110000 23110000

33410000 23410000Less : Provision for Doubtful Loans and Advances (23410000) (23410000)

10000000 –Advance Payment of Taxes 314660 272355(Net of provision for tax Rs. 438000, previous year 520000)

29114660 18893472SCHEDULE 7 : CURRENT LIABILITIES & PROVISIONSCurrent LiabilitiesSundry Creditors 132215 103199Provisions :Proposed Dividend – 3682599Tax on Distributed Profits – 516485

– 4199084SCHEDULE 8 : INTEREST INCOME (Gross)On Loans (TDS Rs. 344292, previous year Rs. 85400) 1547125 405846On Intercorporate Deposits 567123 –(TDS Rs. 127013 previous year Rs. Nil)On Income tax Refund – 26690On Fixed Deposits with Bank (TDS Rs. NIl previous year Rs. 5505) – 24534

Total 2114248 457070SCHEDULE 9 : EXPENSESSalary 60000 22500Profession Tax 2500 2500Directors' sitting fees 1500 4000Auditors' Remuneration 44944 44896Professional Charges 30000 25510Miscellaneous Expenses 11358 27731

Total 150302 127137SCHEDULE 10 : INTERESTOn Inter Corporate Borrowings 15904 19554

Total 15904 19554

SCHEDULE 3 : INVESTMENTSQuantity Amount

Investee Company / Institution Face Quantity as Acquired Sold Quantity as As on As onValue on 01.04.06 during during on 31.03.07 31.03.07 31.03.06

the year the year Rupees Rupees

Long Term Investments (At Cost)Equity shares - QuotedOther CompaniesAgro Tech Foods Ltd. 10 1 – – 1 53 53Colgate Palmolive India Ltd. 10 1 – – 1 151 151Dabur India Ltd. 1 2 1 – 3 59 59(Bonus received during the year)Henkel India Ltd. 10 1 – – 1 31 31Hindustan Lever Ltd. 1 751 – – 751 90589 90589Gillette India Ltd. 10 1 – – 1 400 400Marico Industries Ltd. (Change in FV to Re.1) 1 40 – – 40 271 271Nirma Ltd. (Change in FV to Rs.5) 5 2 – – 2 255 255Procter & Gamble Hygiene & Health Care Ltd. 10 1 – – 1 490 490Venkys India Ltd. 10 1 – – 1 37 37

UnquotedCompanies under the Same Management :Godrej Properties Ltd. 10 76795 – – 76795 5488688 5488590Godrej Agrovet Ltd. 10 2000 4500 – 6500 1011402 560000Godrej Hicare Ltd. 10 4800 – – 4800 48000 48000Godrej Global Solutions Ltd. (Reduction of 10 41251 – 32911 8340 302290 499400Share Capital during the year approvedby Hon HC)

Other Companies :karROX Technologies Ltd. 10 250000 – – 250000 10050000 10,050,000Personalitree Academy Ltd. 10 389269 – – 389269 11027991 11027991Avestha Gengraine Technologies Pvt. Ltd. 10 55500 – 24500 31,000 13984875 25037438

Current InvestmentsMutual Funds - UnquotedLIC Mutual Fund - Growth Plan 273037 2300000

42278619 55,03755Less : Provision for diminution in value of Investments 11076179 11076179

31202440 44027576Aggregate Book Value of Investments :Quoted Investments 92336 92336

Unquoted Investments 31110104 4393524031202440 44,027576

Market Value of quoted investments 159342 210151

SCHEDULE 11 : 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. Investments :Long 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. Investments :The Company has acquired and sold the following investments during the year :

This year Previous yearNo. of units/ Purchase No. of units/ Purchase

Share (Rs.) Cost (Rs.) Share (Rs.) Cost (Rs.)

LIC Mutual Fund 1169380 15426963 – –SBI-Magnum Inst Income Fund – – 4967729 54503966SBI- Insta Cash Fund – – 120882 1850,000Kotak -Liquid Inst Premium Fund – – 1379441 18700000

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 management

This year Previous YearRupees Rupees

Godrej Industries Ltd. – 71921Godrej Hicare Ltd. 23110000 23110000

23,110,000 23,1819215. Auditors' Remuneration:

(includes service tax wherever applicable)This year Previous Year

Rupees RupeesAudit Fees 28090 28060Tax Audit Fees 16854 16836

44944 44896


137

SCHEDULES ANNEXED TO AND FORMING PART OF ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 20076. Earnings per share

This year Previous yeara. Net Profit/(Loss) after Tax available for shareholders 7457662 56671101b. Weighted Average Number of Equity Shares 3774160 3774160c. Basic and Diluted Earnings per Share of Rs.10 each 1.98 15.02


a) Related Parties with whom transactions have taken place during the year, with the nameand description of relationship.

Parties where control existsGodrej Industries Limited, the Holding CompanyGodrej & Boyce Mfg. Co. Ltd., the ultimate holding companyRelated Parties with whom transactions have taken place during the year

Holding CompanyGodrej Industries Limited

Fellow SubsidiariesGodrej Properties LimitedGodrej Agrovet Limited

Individual exercising significant influence over the enterprise

Ms. T. A. Dubash Mr. C. K. VaidyaMr. M. Eipe 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 5.00 – – – – – 5.00Previous Year 57.00 – – – – – 57.00

ii) Refund of ICB 5.00 – – – – – 5.00

Previous Year 68.00 – – – – – 68.00

iii) Interest paid on ICB 0.16 – – – – – 0.16Previous Year 0.19 – – – – – 0.19

iv) Dividend Received – – 39.91 – – – 39.91Previous Year 3.96 – – – – – 3.96

v ) Refund of VRS Loan 0.81 – – – – – 0.81Previous Year 0.68 – – – – – 0.68

vi) Interest Received onVRS Loan 0.14 – – – – – 0.14Previous Year 0.26 – – – – – 0.26

vii) Sale of Investments 128.63 – – – – – 128.63Previous Year 190.68 – – – – – 190.68

viii) Dividend Paid 80.14 – 0.09 – – – 80.23Previous Year 306.67 – 0.32 – – – 307.00

ix) Remuneration – – – – 0.60 – 0.60Previous Year – – – – 0.23 – 0.23

x ) Balance Outstandingas on 31.3.07 – – – – – - -PayablePrevious Year – – – – – – -Receivable – -Previous Year 0.72 – – – – – 0.72

10. ADDITIONAL INFORMATION AS REQUIRED UNDER PART IV OF SCHEDULE VI TOTHE COMPANIES ACT, 1956BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

1. Registration detailsRegistration No : 11-65457State Code : 11Balance Sheet Date : 31.03.2007

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 : 142336Total Assets : 142336Sources of funds

Paid up Capital : 37742Reserves & Surplus : 104595Secured Loans : –Unsecured Loans : –

Application of funds:Net Fixed Assets : –Investments : 31202Net Current Assets : 30884Miscellaneous Expenditure : –Accumulated Losses : 80250

4. Performance of Company (Amount in Rs Thousand)Turnover (Total Income) : 8062Total Expenditure : 166Profit before tax : 7896Profit after tax : 7458Earnings per share in Rs : Rs.1.98Dividend rate (%) : 11.50%

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 YearRupees Rupees

Cash flow from Operating ActivitiesProfit before tax 7894162 57185322Adjustments for :Profit on sale of long term investments (1809937) (19750323)Profit on sale of Mutual Fund (135160) (237936)Provision for Dimunition in value of long term Investments – (36488750)Interest Expense - GIL 15904 19554

Operating Profit before working capital changes 5964969 727867

Adjustments for :Accrued Interest (439306) 7796Sundry Debtors 453350 (453350)Trade Payables (4170068) 17437

Cash generated from operations 1808945 299750Direct Taxes paid (480305) (590905)Direct Taxes refund received - 167161Net Cash from operating activities 1328640 (123994)

Cash flow from Investing ActivitiesProceeds from sale of investments 30921733 151018592New investments made (16150000) (102990404)Loans (10178883) (18481677)

Net cash generated/(used) from investing activities 4592850 29546511

Cash flow from Financing ActivitiesIntercorporate Borrowings (Net) – (1100000)Interest Paid on Borrowings (15904) (19554)Dividend Paid (4340284) (30700000)Tax on Distributed Profits (608730) (4305675)

Net cash generated/(used) from financing activities (4964918) (36125229)

Net increase/(decrease) in cash and cash equivalents (956572) (6702712)

Cash in and cash equivalents (opening balance) 504958 7207669

Cash in and cash equivalents (closing balance) 1461530 504957

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 5.00

Refund of ICBGodrej Industries Limited 5.00

Interest paid on ICBGodrej Industries Limited 0.16

Dividend ReceivedGodrej Properties Limited 39.91

Refund of VRS LoanGodrej Industries Limited 0.81

Interest Received on VRS LoanGodrej Industries Limited 0.14

Sale of InvestmentsGodrej Industries Limited 128.63

Dividend PaidGodrej Industries Limited 80.14Godrej Agrovet Limited 0.09

RemunerationMr. H. K. Press 0.60

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.


138

SCHEDULE TO BALANCE SHEET OF A NON-BANKING FINANCIAL COMPANY

(as required in terms of Paragraph 9BB ofNon-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 deposits

inclusive 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 belowASSETS SIDE :

3. Break-up of Loans and Advances including bills Amount outstandingreceivables [other than those included in (4) below] :

(a) Secured Nil(b) Un-secured

i) Loans/Advances 188.00ii) Intercorporate Deposit 331.10iii) Advance Payment of Taxes 3.15

4. Break up of Leased Assets and stock on hire and

hypothecation 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 2.73(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 419.13

(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 andadvances :

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 :

Loans Nil Nil Nil(c) Other related parties

Inter Corporate Deposits - Nil Nil Nil

2. Other than related partiesa) Advance Tax Payment Nil 3.15 3.15b) Loans Nil 100.00 100.00Total Nil 103.15 103.15

7. 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 2446.85 68.02

(c) Other related parties NIL NIL2. Other than related parties

Quoted : 1.59 0.92Unquoted : 671.00 243.08

Total 3119.44 312.02** As per Accounting Standard of ICAI (Please see Note 3)# Start up Company hence fair value considered at face value.

8. Other information

Particulars 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 Nil

Notes :

1. As defined in Paragraph 2(1)(xii) of the Non-Banking Financial Companies Acceptance of PublicDeposits (Reserve Bank) Directions, 1998.

2. Provisioning norms shall be applicable as prescribed in the Non-Banking Financial CompaniesPrudential Norms (Reserve Bank) Directions, 1998.

3. All Accounting Standards and Guidance Notes issued by ICAI are applicable including for valuationof investments and other assets as also assets acquired in satisfaction of debt. However, marketvalue in respect of quoted investments and break up/fair value/NAV in respect of unquoted invest-ments should be disclosed irrespective of whether they are classified as long term or current incolumn (5) above.


139

DIRECTORS’ REPORT

The Directors present their report and accounts for the year ended 31st March, 2007

Principal activities and review of the business

The company trades worldwide in vegetable oils. The year under review was a record for the company.Vegtable oilmarkets were bouyant throughout the year as the worldwide commodity boom continued .The company's assessment of market behaviour proved to be quite accurate and this resulted in recordturnover and profits. Turnover for the year increased 21% at $61,573,658 while profits increased 72% to$ 658135.

Results and dividends

The Company does not propsoe to distribute a dividend this year. In due course depending on furtherprogress in the business, a buyback of shares from the parent company may be contemplated. The outlookfor the year 2007-08 continues to be encouraging.

Directors

The directors who served during the year and their interests in the share capital of the Company were as follows:

£1 Ordinary shares

2007 2006

Adi B Godrej (Indian) 1 1Nadir B Godrej (Indian) - -Aspi K Bardy (Indian) - -Dorab E Mistry (British) - -Marion Hodgson (British) (Appointed 11 May 2006 retired 28 February 2007) - -Andrew B Byers (British) (Appointed 28 February 2007) - -Lynsey Elliott (British) (Appointed 28 February 2007) - -–

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF GODREJ INTERNATIONAL LIMITED

We have audited the accounts of Godrej International Limited for the year ended 31 March 2007 whichcomprise pages 5 to 18. These accounts have been prepared under the historical cost convention and theaccounting policies set out therein.

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 the company 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 27 April, 2007.

L. ELLIOTT ACCASecretary

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 weconsidered necessary in order to provide us with sufficient evidence to give reasonable assurance that theaccounts are free from material misstatement, whether caused by fraud or other irregularity or error. Informing our opinion we also evaluated the overall adequacy of the presentation of information in theaccounts.

OPINION

In our opinion the accounts give a true and fair view of the state of the company's affairs as at 31 March2007and 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 Man27 April, 2007

BALANCE SHEET AS AT 31 MARCH, 2007

Notes 2007 2006$ Rs. Lac $ Rs. Lac

Fixed assetsInvestments 5 4312060 1875 4312060 1924Current assetsDebtors 6 3269025 1421 2389344 1066Cash at bank and in hand 1179505 513 1193349 532

4448530 1934 3582692 1599Creditors: amounts fallingdue within one year 7 (1554594) (676) (177879) (79)

Net current assets 2893936 1258 3404814 1519

Total assets lesscurrent liabilities 7205996 3133 7716874 3443Creditors: amountsfalling due after morethan one year 8 13 – (1169000) (522)

7206009 3133 6547874 2922

Capital and reservesCalled up share capital 9 4209327 1830 4209327 1878Profit and loss account 10 2996682 1303 2338547 1043Shareholders’ funds:

Equity 7206009 3133 6547876 2922

11 7206009 3133 6547874 2922

Note: The Rupees equivalents of US $ have been given at the closing exchange rates as on March 31,2007 (US $ 1 = Rs. 43.48) and March 31, 2006 (US $ 1 = Rs. 44.62)A.B. Byers ACA D E MistryDirector DirectorApproved by the board on 27 April, 2007


31 MARCH 2007

Notes 2007 2006$ Rs. Lac $ Rs. Lac

Turnover 2 61573658 26772 50724030 22633

Cost of sales (60741539) (26410) (50239122) (22417)

Gross profit 832119 362 484908 216Administrative expenses (114624) (50) (72417) (32)

Operating profit 717495 312 412491 184Interest receivable 15807 7 22158 10Interest payable 3 (75167) (33) (52083) (23)Profit on ordinary

activities before taxation 658135 286 382566 171Tax on profit on ordinary activities – – – –

Profit for the financial year 658135 373 382566 171Dividends:ordinary dividend onequity shares 4 – – (156300) (70)Retained profit for the

financial year 10 658135 286 226266 101Continuing operations

None of the Company's activities were acquired or discontinued during the above two financial years.

Note: The Rupees equivalents of US $ have been given at the closing exchange rates as on March 31,2007 (US $ 1 = Rs. 43.48) and March 31, 2006 (US $ 1 = Rs. 44.62)

Godrej International Limited

Godrej International Limited

140

NOTES TO THE ACCOUNTS FOR THE YEAR ENDED

31 MARCH, 2007

8. Creditors: amounts falling due after one year 2007 2006$ Rs. Lac $ Rs. Lac

Bank loans (13) – 1169000 522

9. Share capitalAuthorised:Ordinary shares of £1 each 4000000 1739 4000000 1785

2007 2006 2007 2007 2006 2006No. No. $ Rs. Lac $ Rs. Lac

Allotted, called upand fully paid:Ordinary sharesof £1 each 2605000 2605000 4209327 1830 4209327 1878

2007 2006$ Rs. Lac $ Rs. Lac

Movement in share capitalAt 1 April 4209327 1830 2291147 1022Share Issued – – 1918180 856At 31 March 4209327 1830 4209327 1878

10. Profit and loss accountAt 1 April 2338547 1017 2112281 942Retained profit 658135 286 226266 101

At 31 March 2996682 1303 2338547 1043

11. Reconciliation of movement in shareholders’ fundsAt 1 April 6547874 2847 4403428 1965Profit for the financial year 658135 286 382566 171Dividends – – (156300) (70)Shares issued – – 1918180 856

At 31 March 7206009 3133 6547874 2922

12. Gross cash flowsReturns on investments and servicing of financeInterest received 15807 7 22158 10Interest paid (75167) (33) (52083) (23)

(59360) (26) (29925) (13)FinancingIssue of share capital – – 1918180 856Loan advance 54744 24 – –

13. Analysis of changes in net debtAt 1 Apr 2006 Cash flows Non-cash changes At 31 Mar 2007

$ Rs. Lac $ Rs. Lac $ Rs. Lac $ Rs. LacCash at bank and 1193349 519 (13844) (6) – – 1179505 513in handDebt due within – – (1223757) (532) – – (1223757) (532)1 year

Debt due after (1169000) (508) 1169013 508 – – 13 –1 year (54744) (24) – – – –

Total 24349 11 (68588) (30) – – (44239) (19)

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, Vikhroli, Mumbai 400 079, India.

CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2007

Notes 2007 2007 2006 2006$ Rs. Lac $ Rs. Lac

Reconciliation of operating profit to netcash inflow from operating activitiesOperating profit 717495 312 412491 184Increase in debtors (879681) (382) (671257) (300)Increase/(decrease) in creditors 309257 134 (672238) (300)

Net cash inflow/(outflow) from operating activities 147071 64 (931004) (415)

CASH FLOW STATEMENTNet cash inflow/(outflow) from operating activities 147071 64 (931004) (415)Returns on investments and servicing of finance 12 (59360) (26) (29925) (13)

87711 38 (960929) (429)Equity dividends paid (156300) (68) (150500) (67)

(68589) (30) (1111429) (496)Financing 12 54744 24 1918180 856(Decrease)/Increase in cash (13845) (6) 806751 360Reconciliation of netcash flow to movement in net debt(decrease)/Increase in cash in the period (13845) (6) 806751 360Increase in debt and lease financing (54743) (24) – –Change in net debt 13 (68588) (30) 806751 360Net fund/(Net debt) at 1 April 24349 11 (782402) (349)(Net debt)/Net funds at 31 March (44239) (19) 24349 11

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 2007 2007 2006 2006$ Rs. Lac $ Rs. Lac

Bank loans and overdrafts 75167 33 37633 17Other loans – – 14450 6

75167 33 52083 23

2007 2007 2006 2006$ Rs. Lac $ Rs. Lac

4. Equity dividendsEquity dividends on ordinary shares - final proposed – – 156300 70

5. InvestmentsInvestments in Other Total

subsidiary undertakings Investment$ Rs. Lac $ Rs. Lac $ Rs. Lac

CostAt 1 April 2006 1257060 547 3055000 1328 4312060 1875At 31 March 2007 1257060 547 3055000 1328 4312060 1875

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 2007 2007 2006 2006

$ Rs. Lac $ Rs. Lac

Unlisted investments 3055000 1328 3055000 1363

On 4 April 2001, the Company invested US$1million in 495,000 CBay Systems Ltd. (CBay) 8%Series E Cumulative Convertible Redeemable Preferred Stock of US$ 0.1 per share at a price of US$0.2 per share. This represents approximately 6% of the issued share capital of CBay.CBay 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 2007 2007 2006 2006$ Rs. Lac $ Rs. Lac

Trade debtors 416927 181 577578 258Amounts owned by group undertakingsand undertakings in which the company 100014 43 113765 51has a participating interestOther debtors 2739672 1191 1689614 754Prepayments and accrued income 12412 5 8387 4

3269025 1421 2389344 1066

7. Creditors: amounts falling due within one yearBank loans & overdraftes 1223757 532 – –Trade Creditors 1825 1 – –Amount owed to group undertaking 300000 130 – –and undertaking in which the companyhas participating interestOther Creditors 235 – 235 –Accruals and deferred income 28777 13 21344 10Proposed dividend – – 156300 70

1554594 676 177879 79

STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

FOR THE YEAR ENDED 31 MARCH 2007

2007 2006$ Rs. Lac $ Rs. Lac

Profit for the financial year 658135 286 382566 171

Total recognised gains and lossess related to the year 658135 286 382566 171

Note: The Rupees equivalents of US $ have been given at the closing exchange rates as on March 31,2007 (US $ 1 = Rs. 43.48) and March 31, 2006 (US $ 1 = Rs. 44.62)


141

DIRECTORS’ REPORT

AUDITORS’ REPORT TO THE SHAREHOLDERS OF GODREJ GLOBAL MIDEAST FZE

INCOME STATEMENT FOR THE YEAR ENDED

31 MARCH, 2007

OPERATING RESULTS

Your Company’s performance for the year under review is summarized below:

2006-07 2005-06AED Mio. AED Mio.

Sales 8.34 7.56Cost of Sales 5.63 5.23

Gross Profit 2.71 2.33Expenses 2.47 2.14Other Income 0.12 0.00

Profit Before Tax 0.36 0.19Tax – –

Profit after Tax 0.36 0.19


Sudan market opened up during the last financial year continuing to grow. However Pakistan market, whichyour company opened up during the same period did not grow beyond the trial orders. New channels arebeing looked into for servicing this market.Since the net assets of your company are below 75 percent of the share capital, the Auditors have qualifiedin their report in accordance with the implementation procedures of Sharjah Airport Free Zone.FUTURE OUTLOOKYour company is planning to launch Cinthol DeoSpray in new designs and fragrances for the GCC markets.

Your company is also in the final stages of developing a new Cinthol Handwash range in contemporary designsand fragrance for the GCC markets.In soaps your company will be launching the newly launched hygiene soap Vigil and Cinthol Deo complexionsoap after adapting the packs to GCC requirements.The Cuticura range would be launched soon after Keyline Brands -U.K, finalise their distribution partner in theUAE.Gross contribution affected due to increased costs of raw material would be addressed partially through priceincrease across GCC in a phased manner and partially through smart Below the Line activities.Your company hopes to double the business in the state of Bahrain having appointed a new distributor M/s AlJazira Cold Stores in last financial year.AUDITORSYou are required to appoint Auditors for the current year. The Auditors, M/s Pannell Kerr Forster, CharteredAccountants Co. being eligible offers self for reappointment.PARTNERS IN PROGRESSYour company wishes to thank the Sharjah Airport International Free Zone, HSBC Bank Middle East, Fine FairTrading (A division of Al Seer group) in the UAE , Khimji Ramdas of Sultanate of Oman, Al Jazira Cold Storesof Bahrain, Gulf Trading Corporation of the Kingdom of Saudi Arabia, Zahem & Malhotra of Kuwait, NasserBin Khalid Trading Company of the state of Qatar, Godrej Consumer Products Ltd , Godrej Industries Limited,Gulf Centre for soaps and chemicals Industries LLC and European Perfume Works LLC who through theircontinued support and co-operation, have been partners in your company's progress.

On behalf of the Board of directors

A.B.GODREJDirector

Date : 1 May,, 2007

Report on the Financial StatementsWe have audited the accompanying financial statements of GODREJ GLOBAL MIDEAST FZE whichcomprise the balance sheet as at 31 March 2007, and the income statement, statement of changes in equity andcash flow statement for the year then ended and a summary of significant accounting policies and other explanatorynotes.Management's Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of these financial statements in accordancewith international Financial Reporting Standards. This responsibility includes designing, implementing andmaintaining internal control relevant to the preparation and fair presentation of financial statements that arefree from material misstatement, whether due to fraud or error; selecting and applying appropriate accountingpolicies, and making accounting estimates that are reasonable in the circumstances.Auditor' ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted ouraudit in accordance with international Standards on Auditing. Those standards require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance whether the financialstatements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditor's judgement including the assessment ofthe risks of material misstatement of the financial statements. Whether due to fraud or error in making thoserisk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation

of the financial statements in order to design audit procedures that are appropriate in the circumstances, butnot for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit alsoincludes evaluating the appropriateness of accounting policies used and the reasonableness of accountingestimates made by management, as well as evaluating the overall presentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ouraudit opinion.OpinionIn our opinion, the financial statements give a true and fair view of the financial position of GODREJ GLOBALMIDEAST (FZE) as of 31 March 2007, and of its financial performance and its cash flows for the year then endedin accordance with international Financial Reporting Standards.Report on Other Legal and Regulatory RequirementsExcept as stated in Note 20, that the net assets of the establishment are below 75% of its share capital, weconfirm that the financial statements comply with implementation Procedures issued by the Sharjah AirportFree Zone Authority pursuant to Law No.2 of 1995, we have obtained all the information and explanationsnecessary for our audit and proper books of account and other records have been maintained in accordancewith the said regulation.

Sharjah Pannell Kerr ForsterUnited Arab Emirates8 May,, 2007

BALANCE SHEET AS AT 31 MARCH, 2007

Notes 2007 2006AED Rs. AED Rs.

NON-CURRENT ASSETSProperty, plant and equipment 3 9892 116132 21863 265635CURRENT ASSETSInventories 5 485311 5697551 719232 8738669Trade and other receivables 6 2154636 25295427 2220868 23983546Amounts due from related parties 7 -- – 2755 33473Cash and cash equivalents 8 246133 2889601 191120 2322108

2886080 33882579 3133975 38077796TOTAL ASSETS 2895972 33998711 3155838 38343431CURRENT LIABILITIESBank borrowings 9 349358 4101463 714674 8683289Trade and other payables 10 1576337 18506196 1840403 22360896Loan from the parent company 11 393228 4616497 418030 5079065Amount due to a related party 7 1000 11740 – –

2319923 27235896 2973107 36123250NON-CURRENT LIABILITYStaff end-of-service gratuity 12 129165 1516397 92300 1121445SHAREHOLDER'S FUNDSShare capital 13 4586250 53842575 4586,250 55722,938Accumulated losses (4139366) (48596157) (4495,819) (54624201)Equity funds 446884 5246418 90,431 1098737

TOTAL EQUITY AND LIABILITIES 2895972 33998711 3155838 38343431


REVENUE 8341626 97930689 7562467 91883974

Cost of sales 14 (5633262) (66134496) (5233800) (63590670)

GROSS PROFIT 2708364 31796193 2328667 28293304

Other operating income 15 120100 1409974 2074 25199

Staff costs 16 (470911) (5528495) (479832) (5829959)

Depreciation 3 (15459) (181489) (18196) (221081)

Amortisation 4 – – (10344) (125680)

Other operating expenses 17 (1834164) (21533085) (1438059) (17472417)

PROFIT FROM OPERATING ACTIVITIES 507930 5963098 384310 4669367

Interest income on bank call deposits 8446 99156 2310 28067

Finance costs 18 (159923) (1877496) (195453) (2374754)

PROFIT FOR THE YEAR 356453 4184758 191167 2322679

The Rupee equivalents of AED have been given at the closing exchange rates as on March 31, 2007.1 AED = Rs.11.74) and as on March 31, 2006 (1 AED = Rs.12.15).

The accompanying notes form an integral part of these financial statements. The report of the independentauditor 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 1 May 2007.

For GODREJ GLOBAL MIDEAST FZEA.B.GODREJ

Director

The Rupee equivalents of AED have been given at the closing exchange rates as on March 31, 2007.(1 AED =Rs.11.74 and as on March 31, 2006 (1 AED = Rs.12.15).The accompanying notes form an integral part of these financial statements. The report of the independentauditor 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 1 May 2007.

For GODREJ GLOBAL MIDEAST FZEA.B. GODREJ

Director

Godrej Global Mid East FZE

Godrej Global MidEast FZE

142

CASH FLOW STATEMENT YEAR ENDED 31 MARCH, 2007STATEMENT OF CHANGES IN EQUITY

YEAR ENDED 31 MARCH, 2007

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED

31 MARCH, 2007

Share capital Accumulated losses TotalAED Rs. AED Rs. AED Rs.

As at 31.03.2005 4586250 54668100 (4686986) (55868873) (100736) (1200773)

Profit for the year – – 191167 2322679 191167 2322679

As at 31.03.2006 4586250 55722938 (4495819) (54624201) 90431 1098737

Profit for the year – – 356453 4184758 356453 4184758

As at 31.03.2007 4586250 53842575 (4139366) (48596157) 446884 5246418

GODREJ GLOBAL MID EAST FZE


REVENUE

Cash flows from operating activities

Cash generated from operations 19 600096 7045127 512572 6227750

Interest paid (159923) (1877496) (169725) (2062159)

Net cash from operating activities (A) 440173 5167631 342847 4165591

Cash flows from investing activities

Purchase of property, plant and equipment (3488) (40949) (4198) (51006)

Interest received 8446 99156 2310 28067

Net cash from/(used in) investing activities (B) 4958 58207 (1888) (22939)

Cash flows from financing activities

Repayment of loan from the parent company (24802) (291175) -- --

Payment of clean import loans (345130) (4051826) (401267) (4875394)

Payment of bank overdraft (net) (20186) (236984) (35453) (430754)

Net cash (used in)/from financing activities (C) (390118) (4579985) (436720) (5306148)

Net Increase/(Decrease) in cash and

cash equivalents (A+B+C) 55013 645853 (95761) (1163496)

Cash and cash equivalents at beginning of year 191120 2243749 286881 3485604

Cash and cash equivalents at end of year 8 246133 2889601 191120 2322108

1. LEGAL STATUS AND BUSINESS ACTIVITY

a) GODREJ GLOBAL MIDEAST FZE was incorporated on 1 November 1997 in the SharjahAirport Free 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 that havebeen 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 ifthere 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 payablesrelated party payables are measured at cost or if the impact is material at amortised cost using theeffective 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 equipment andall financial assets to determine whether there are any indications that they may be impaired. Inthe absence of such indications no further action is taken. If such indications do exist an analysis ofeach asset is undertaken to determine its net recoverable amount and if this is below its carryingamount a provision is made.

● Key assumptions made concerning the future and other key sources of estimation uncertainty atthe balance sheet date that have a significant risk of causing a material adjustment to the carryingamounts 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 can beobtained for similar assets of ages and conditions that are reasonably expected to exist at the endof the assets' estimated useful lives.

Inventory provisions

Management regularly undertakes a review of the establishment's inventory stated at

AED 625311 (previous year AED 590000) in order to assess the likely realisation proceeds takinginto account purchase and replacement prices technological changes age likely obsolescence therate at which goods are being sold and the physical damage. Based on the assessment assumptionsare made as to the level of provisioning required.

Doubtful debt provisions

Management regularly undertakes a review of the amounts of loans and receivables owed to theestablishment either from third parties (see note 6) or from related parties (see note 7) and assessesthe likelihood of non-recovery. Such assessment is based upon the age of the debts historic recovery

The Rupee equivalents of AED have been given at the closing exchange rates as on March 31, 2007.(1 AED = Rs. 11.74) and as on March 31, 2006 (1 AED = Rs.12.15).The accompanying notes form an integral part of these financial statements. The report of the independentauditor 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 1 May 2007.

For GODREJ GLOBAL MIDEAST FZEA.B. GODREJ

Director

The Rupee equivalents of AED have been given at the closing exchange rates as on March 31, 2007. (1 AED = Rs. 11.74) and as on March 31, 2006 (1 AED = Rs.12.15).The accompanying notes form an integral part of these financial statements. The report of theindependentauditor is set forth as given above.

For GODREJ GLOBAL MID EAST FZEA.B. GODREJ

Director


143

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 MARCH, 2007rates and assessed creditworthiness of the debtor. Based on the assessment assumptions are madeas to the level of provisioning required.

Impairment

Assessments of net recoverable amounts of property plant equipment and all financial assets otherthan loans and receivables (see above) are based on assumptions regarding future cash flowsexpected 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 gratuity stated atAED 129165 (previous year AED 92300) assuming that all employees were to leave as of thebalance sheet date. The management is of the opinion that no significant difference would havearisen had the liability been calculated on an actuarial basis as salary inflation and discount ratesare likely to have approximately equal and opposite affects.

j) Adoption of new International Financial Reporting Standards

The following International Financial Reporting Standards amendments thereto and Interpretationsthat are assessed by management as likely to have an impact on the financial statements have beenissued by the IASB prior to 31 March 2007 but have not been applied in these financial statementsas their effective dates of adoption are for future accounting periods as referred to below. It isanticipated that their adoption in the relevant accounting periods will have an impact only ondisclosures within the financial statements:

� Amendment to IAS1: Capital Disclosures (1 January 2007)

� IFRS7: Financial Instruments Disclosures (1 January 2007)

3. PROPERTY PLANT AND EQUIPMENT

Furniture fixtures computers and equipment

AED Rs.

Net book values

As at 31.03.2006

Cost 182319 2215176Accumulated depreciation (160456) (1949540)

Net book value 21863 265635

As at 31.03.2007

Cost 185807 2181374Accumulated depreciation (175915) (2065242)

Net book value 9892 116132

Reconciliation of net book valuesAs at 31.03.2005 35861 421008Additions 4198 49285Depreciation for the year (18196) (213621)

As at 31.03.2006 21863 256672Additions 3488 40949Depreciation for the year (15459) (181489)As at 31.03.2007 9892 116132

4. INTANGIBLE ASSETSProduct development expensesNet book values

As at 31.03.2006Cost 51720 628398Accumulated amortisation (51720) (628398)Net book value – –As at 31.03.2007Cost 51720 607193Accumulated amortisation (51720) (607193)Net book value – –

Reconciliation of net book values

As at 01.04.2005 10344 121439Amortisation for the year (10344) (121439)As at 31.03.2006 – –Amortisation for the year – –As at 31.03.2007 – –

2007 20065. INVENTORIES AED Rs. AED Rs.

Goods held for sale 625311 7341151 590000 7168500Less: Provision for slow moving inventories (140000) (1643600) – –

485311 5697551 590000 7168500Goods in transit – – 129232 1570169

485311 5697551 719232 8738669

6. TRADE AND OTHER RECEIVABLESTrade receivables 1986399 23320324 2182058 26512005Advance to Suppliers 112158 1316735 – –Prepayments 26055 305886 10510 127697Deposits 30024 352482 28300 343845

2154636 25295427 2220868 269835477. 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:

2007 2006Parent Other Total Total

Companies Related

Parties

AED AED AED Rs. AED Rs.

Trade and other payables – 506496 506496 5946263 589632 7164029

Due from other related parties – – – – 2755 33473

Due to a related party – 1000 1000 11740 – –

Loan from the parent company 393228 – 393228 4616497 418030 5079065

Guarantee received 1400000 – 1400000 16436000 1400000 17010000

All balances other than loan from a parent company are unsecured and are expected to be settled in cash.Other terms are set out in note 11 and 21.

Significant transactions with related parties during the year were as follows:

Parent Other 2007 2006Companies Related AED Rs. AED Rs.

PartiesAED AED

Sales – 803079 803079 9428147 712358 8655150

Purchases – 2125620 2125620 24954779 1894517 23018382

Interest expenses 39728 – 39728 466407 39724 482647

2007 2006AED Rs. AED Rs.

8. CASH AND CASH EQUIVALENTS

Cash on hand 1585 18608 5625 68344

Bank call deposits accounts 244548 2870994 185495 2253764

246133 2889602 191120 2322108

9. BANK BORROWINGS

Overdraft 104728 1229507 124914 1517705

Clean import loans 244630 2871956 589760 18440117

349358 4101463 714674 8683289

An analysis by bank of amountsoutstanding is as follows:

HSBC Bank Middle East Limited 349358 4101463 714674 8683289

Bank borrowings are secured by assignment of insurance policies covering inventories and assetscorporate guarantee from a parent company letter of awareness and comfort from the parentcompanies and assignment of dues from one of the customers.

The bank borrowings are subject to certain financial covenants including non withdrawal of profits.

2007 2006AED Rs AED Rs.

10. TRADE AND OTHER PAYABLES

Trade payables 1171901 13758118 1385735 16836680

Accruals 404436 4748079 454668 5524216

1576337 18506196 1840403 22360896

11. LOAN FROM THE PARENT COMPANY

This represents a short term loan secured by a first floating charge on property plant and equipmentinventories and book debts. Interest is paid @ 7% (previous year 7% per annum).

2007 2006

AED Rs. AED Rs.

12 PROVISION FOR STAFF END-OF-SERVICE GRATUITY

Opening balance 92300 1083602 70672 858665

Provision for the year 36865 432795 21628 262780

Closing balance 129165 1516397 92300 1121445

13. SHARE CAPITAL

Authorised issued and paid-up:

5 ordinary shares of US$ 250000 each 4586250 53842575 4586250 55722938

[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 590000 6926600 876690 10651784

Add: Purchases (including direct expenses) 5668573 66549047 4947110 60107387

Less: Inventory end of the year (625311) (7341151) (590000) 7168500

5633262 66134496 5233800 63590670

Godrej Global MidEast FZE

144

2007 2006AED Rs. AED Rs.

15 OTHER OPERATING INCOME

Provisions written back 120000 1408800 – –

Miscellaneous income 100 1174 2074 25199

120100 1409974 2074 25199

16. STAFF COSTS

Staff salaries and benefits 434046 5095700 458204 5567179

Staff end-of-service gratuity 36865 432795 21628 262780

470911 5528495 479832 5829959

17. OTHER OPERATING EXPENSES

Rent 80000 939200 80000 972000

Advertisement and promotion expenses 1270754 14918652 991625 12048244

Bad debts written off – – 5839 70944

Inventory provision 140000 1643600 – –

Other expenses 343410 4031633 360595 4381229

1834164 21533085 1438059 17472417

18. FINANCE COSTS

On other bank short term loans and overdraft 75065 881263 106106 1289187

On loan from the parent company 25728 302047 25728 312595

On related party guarantees 14000 164360 13996 170051

On supplier's delayed payments 45130 529826 49623 602919

159923 1877496 195453 2374754

19 CASH GENERATED FROM OPERATIONS

2007 2006

AED Rs AED Rs

Profit for the year 356453 4184758 191167 2322679

Adjustments for:

Depreciation of property plant and equipment 15459 181489 18196 221081

Amortisation – – 10344 125680

Finance costs 159923 1877496 195453 2374754

Interest income (8446) (99156) (2310) 28067

Operating profit before changes in operating

assets and liabilities 523389 6144587 412850 5016128

Decreasein inventories 233921 2746233 126465 1536550

(Decrease)/ Increase in trade and otherreceivables 66232 777564 (529093) 6428480

(Decrease)/Increase in trade andother payables (264066) (3100135) 481722 5852922

Increase in staff gratuity provision 36865 432795 21628 262780

(Increase in amount due to a related party 1000 11740 – –

Decrease/(increase) in amounts due fromrelated Parties 2755 32344 (1000) 12150

600096 7045127 512572 6227750

20. SHARJAH AIRPORT FREE ZONE AUTHORITY REGULATIONS

As the net assets of the establishment area below 75 percent of its share capital in accordance with theimplementation Procedures issued by the Sharjah Airport Free Zone Authority pursuant to Law No.2 of1995 the Directors have intimated the matter to the Sharjah Airport Free Zone Authority and have takensteps to remedy the situation.

21. 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 and follow-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 1228364 due from distributors/customers in other Middle Eastcountries (previous year AED 1484223).

At the balance sheet date 77% of trade receivables was due from three distributors (previous year 61 %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 31 MARCH, 2007


145

DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST MARCH, 2007.To, The Members ofGODREJ GLOBAL SOLUTIONS LIMITED

Your Directors present their Fifth Annual Report together with the Audited Accounts of the Companyfor the year ended 31st March 2007.FINANCIAL RESULTS

Particulars Year ended Period ended31.3.07 31.3.06

[Rupees] [Rupees]Income from Services 140031074 82265686Other Income 494690 14364895Total Income 140525764 96630581Less: Total Expenditure 160038116 97286753Profit / [Loss] Before Tax (19512352) (656172)Less: Fringe Benefit Tax (851931) (250381)Income Tax - Deferred – 288313Profit [Loss] After Tax (20364283) (618240)Profit /(Loss) brought forward (618240) (14244299)Loss written off in Capital Reorganisation – 14244299Profit/(Loss) carried forward (20982523) (618240)

DIVIDEND

In view of the loss sustained by the Company, your Directors do not recommend any dividend for theyear under review.OPERATIONS & FUTURE OUTLOOK

GGSL has shown growth in its operations at both Chennai and Navi Mumbai facility. During the yearunder review, GGSL added new clients, ramped up operations for existing clients, achieved higheroperational efficiencies thereby achieving the revenue growth. During the year, GGSL facilities wereawarded the Information Security Certification ISO 27001 . GGSL continued to focus on business segmentslike Healthcare claims processing, medical transcription, medical billing and document managementservices. The Company would explore organic and inorganic opportunities for future growth.INVESTMENTS IN SUBSIDIARIES AND ASSOCIATE COMPANIES

To enable your Company to focus on its core BPO business, your Company has sold its investments inThe View Group LP, Godrej Upstream Limited and Verseon LLC to its holding Company Godrej IndustriesLtd. at Book value during the year.CAPITAL RESTRUCTURING

Consequent to the decision of the Board for sale of Investments and reduction of Capital, the Companyhas filed on 19th January, 2007 a Petition under Sections 100 to 105 of the Companies Act, 1956 forreduction of fully paid up Equity Share Capital of the Company from Rs. 427,426,090 representing42,742,609 Equity Shares of Rs.10 each fully paid up to Rs. 86,391,770 representing 8,639,177 EquityShares of Rs. 10 each fully paid up. The petition was admitted by Bombay High Court on 2nd February,2007. Accordingly vide order dated 2nd March, 2007 Hon’ble High Court of Bombay has confirmedthe reduction of Issued/Subscribed and Paid up Capital to Rs. 121,191,773/- divided into 8,639,177Equity Shares of Rs.10 each fully paid up and 49,71,429 Equity Shares of Rs.10/- each , Rs.7/- each paidup respectively. A copy of the said order was filed and registered with Registrar of CompaniesMaharashtra Mumbai on 26th March, 2007.DIRECTORS

In accordance with the provisions of the Companies Act, 1956, read with the Articles of Association ofthe Company, Mr. F.P. Sarkari and Mr. V. Srinivasan Directors of the Company, will retire by rotation atthe ensuing Annual General Meeting. However, being eligible, they have offered themselves for re-appointment. Your Directors recommend their re-appointment for your approval.STATUTORY INFORMATION

a. 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.


During the year under review, the Company has earned Rs. 14,00,31,074/- in foreign currency.However, it has spent Rs. 48,15,864/- in foreign currency, the details of which are available inpoints 11 and 12 of the Notes to the Accounts (Schedule 17) for the year. Further, the Companyhas not imported any foreign technology and hence the requisite particulars in this regard are notapplicable.

b. Particulars of Employees :

The particulars required under Section 217(2A) of the Companies Act, 1956 read with theCompanies (Particulars of Employees) Riles 1975:

Name Designation Gross Qualification Experie- Date of Age Particularsremu- nce (yrs.) commen- of previousneration cement employment(Rs.) of employ-

ment

*Sanjay Wholetime 5538912 B.Com., ACA 23 1-09-2004 42 GodrejTipnis Director Remote

Services Ltd.

c. Audit Committee :

As required under Section 292A of the Companies Act, 1956, the Audit Committee of Directors ofthe Company consisted of Mr. N.B. Godrej, Mr. F.P. Sarkari and Mr. K.N. Petigara. The saidCommittee met four times during the year and has performed the functions as prescribed underthe said Section and 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, theDirectors hereby confirm :1. that in the preparation of the accounts for the financial year ended 31st March, 2007, the

applicable accounting standards have been followed along with proper explanation relatingto material 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 andfair view of the state of affairs of the Company at the end of the financial year under reviewand also 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,2007 on a going concern basis.

INSURANCE

All the assets of the Company are adequately insured.AUDITORS REPORT

The present Auditors of the Company, M/s. Kalyaniwalla Mistry & Associates, Chartered Accountants,Mumbai, has expressed their inability to seek reappointment as Auditors of the Company. You arerequested to appoint Auditors and fix their remuneration.One of the members has recommeneded appoint of M/s Kalyaniwala & Mistry, Chartered Accountants,Mumbai as Auditors of the Company in place of M/s. Kalyaniwalla Mistry & Associates, CharteredAccountants, retiring auditors. The Directors recommend the appointment of M/s Kalyaniwala &Mistry, Chartered Accountants, Mumbai as auditors of the Company in the vacancy caused by M/sKalyaniwala Mistry and Associates, Chartered Accountants, Mumbai.ACKNOWLEDGEMENTS

Your Directors place on record their sincere thanks to all the Government Departments concernedwith the operations of the Company, the Bankers and employees of the Company, and to GodrejIndustries Limited, for their continued support and co-operation.

For and on behalf of the BoardN. B. Godrej

ChairmanMumbai, May 24, 2007

TO THE MEMBERS OF GODREJ GLOBAL SOLUTIONS LIMITED

1. We have audited the attached Balance Sheet of Godrej Global Solutions Limited as at March 31,2007 and also the Profit and Loss Account and Cash Flow statement for the year ended on that dateannexed 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, as amended by the Companies(Auditors' Report) (Amendment) Order 2004, issued by the Central Government in terms of section227 (4A) of the Companies Act, 1956, we annex hereto a statement on the matters specified inparagraphs 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 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,

2007,(ii) in the case of the Profit and Loss Account, of the loss 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, 2007, andtaken on record by the Board of Directors, we report that none of the Directors is disqualified as onMarch 31, 2007, 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 ASSOCIATESChartered AccountantsV. M. PADWALPartnerMembership No.: 49639Mumbai, May 24, 2007

Godrej Global Solutions Limited


146

Referred to in Paragraph 3 of our report of even date on the accounts of Godrej Global Solutions Limited forthe year ended March 31, 2007:1. 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 regards to the size of the Company andnature of its assets. The discrepancies reported on such verification were not material and havebeen properly dealt with in the books of accounts.

c) In our opinion, the disposal of fixed assets during the year does not affect the going concernassumption.

2. 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) 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

3. In our opinion and according to the information and the explanation given to us, there is an adequateinternal control system commensurate with the size of the Company and the nature of its business, forthe purchase of fixed assets and sale of services. During the course of our audit no major weakness hasbeen observed in the internal controls.

4. a) Based on the audit procedures applied by us and according to the information and explanationsprovided by the management, the particulars of contracts or arrangements referred to in section301 of the Companies Act, 1956, have been entered in the register required to be maintained underthat section.

b) In our opinion and according to the information and explanations given to us, having regards to theexplanation that many of the items are of special nature and their prices cannot be compared withalternative quotations, the transactions made in the pursuance of contracts or arrangement enteredin the register maintained under 301 of the Companies Act, 1956 in respect of any party during theperiod have been made at the prices which are reasonable having regards to prevailing marketprices 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 Sections 58A and 58AA or any otherrelevant provisions of the Companies Act, 1956, and the rules framed thereunder.

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 withappropriate authorities undisputed statutory dues including Provident Fund, Employees' StateInsurance, Income Tax, Cess and other statutory dues as applicable to it. According to the informationand explanation given to us, no undisputed amounts payable in respect of statutory dues wereoutstanding, at the year end for a period of more than six months from the date they becamepayable.

b) According to the information and explanation given to us and the records examined by us there



Year Ended Year EndedMarch 31, 2007 March 31, 2006

Schedule (Amount Rs.) (Amount Rs.)INCOME

Income from Services 140031074 82265686

Other Income 12 494690 14364895

140525764 96630581

EXPENDITURE

Staff Expenses 13 71290277 38846547

Establishment Expenses 14 39383921 27369723

Other Operating Expenses 15 28043151 19753641

Interest & Finance Charges 16 3889350 3056677

Depreciation 5 17431417 8260166

160038116 97286753

PROFIT / (LOSS) FOR THE YEAR -Before Tax (19512352) (656172)

Fringe Benefit Tax (851931) (250381)

Income Tax - Current – –

Income Tax - Deferred – 288313

PROFIT / (LOSS) FOR THE YEAR -After Tax (20364283) (618240)

Profit / (Loss) brought forward (618240) (14244299)

Loss written off in Capital Regorganisation – 14244299Profit/Loss carried forward

Profit / (Loss) carried forward (20982523) (618240)

Basic Earning Per Share (Face value of Rs 10 per share) (0.47) (0.01)


Year ended Year endedMarch 31, 2007 March 31, 2006

Schedule (Amount Rs.) (Amount Rs.)SOURCE OF FUNDS1 SHAREHOLDERS’ FUNDS

(a) Share Capital 1 121371773 462406093(b) Reserves & Surplus 2 51374134 51374134

172745907 513780227

2 BORROWED FUNDS(a) Secured Loans 3 42034821 17300244(b) Unsecured Loan 4 – 22654141

42034821 39954385

214780728 553734612

APPLICATION OF FUNDS1 FIXED ASSETS 5

(a) Gross Block 57533801 37589594(b) Less : Accumulated Depreciation 29113787 11900449(c) Net Block 28420014 25689145

2 INVESTMENTS 6 91840800 4553946433 DEFERRED TAX ASSET 288313 2883134 CURRENT ASSETS, LOANS

AND ADVANCES(a) Cash & Bank Balances 7 8747767 32800201(b) Debtors 8 56313073 26950942(c) Loans and Advances 9 24474861 22626693

89535701 82377836LESS : CURRENT LIABILITIES ANDPROVISIONSCurrent Liabilities 10 14429874 9818433Provisions 11 1856749 815132

16286623 10633565NET CURRENT ASSETS 73249078 71744271

5 PROFIT AND LOSS ACCOUNT 20982523 618240214780728 553734612



MARCH 31, 2007

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 Board


N. B. Godrej ChairmanS. S. Tipnis Whole time Director

V. M. Padwal C. K. Vaidya DirectorPartner A. K. Singla Company Secretary



As per our Report attached. For and on behalf of the Board


N. B. Godrej ChairmanS. S. Tipnis Whole time Director

V. M. Padwal C. K. Vaidya DirectorPartner A. K. Singla Company Secretary


are no dues of income tax or cess outstanding on account of any dispute.8. The accumulated losses of the Company as at end of the financial year do not exceed fifty percent of

its net worth. The company has incurred cash losses during the current financial year and has notincurred cash losses in the immediate preceding financial year.

9. According to the information and explanations given to us and the records examined by us, we observedthat the company has not defaulted in repayment of dues to financial institutions or banks or debentureholders.

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 explanation given to us, the nature of the activitiesof the Company 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 of theinvestments dealt in by the Company and timely entries have been made therein. The investmentsmade by the Company are held in its own name.

13. 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.

14. According to the information and explanations given to us and the records examined by us on an overallbasis, the term loans were applied for the purpose for which they were obtained.

15. On the basis of an overall examination of the balance sheet of the Company and the information andexplanation 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 Companies Act, 1956.

17. According to the information and explanation given to us and the records examined by us, the Companydid not issue any debentures during the financial year.

18. The Company has not raised any money through a public issue during the year.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 theyear.

20. In our opinion, clauses (ii) and (viii) of paragraph 4 of the Companies (Auditor's Report) Order, 2003 arenot applicable.

For and on behalf ofKALYANIWALLA MISTRY AND ASSOCIATESChartered AccountantsV. M. PADWALPartnerMembership No.: 49639Mumbai, May 24, 2007


147

SCHEDULES ANNEXED TO AND FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2007

March 31, 2007 March 31, 2006(Amount Rs.) (Amount Rs.)

SCHEDULE 1 : SHARE CAPITALAUTHORISED59,900,000 (Previous Year 59,900,000) Equity Shares 599000000 599000000of Rs.10/- each100,000 (Previous Year 100,000) Preference Shares 1000000 1000000of Rs.10/- each

600000000 600000000ISSUED AND SUBSCRIBED13,610,606 (Previous Year 47,714,038) Equity Shares 477140380 477140380of Rs.10/- each.18,000 (Previous Year 18,000) Preference Sharesof Rs.10/- each. 180000 180000

477320380 477320380PAID UPFully paid up equity sharesOpening balance42,742,609 (Previous Year 51,746,500) Equity Shares ofRs.10/- each fully paid up 427426090 517465000Less : Reduced during the year (Refer note number 3 Schedule 17)34,103,432 (Previous Year 9,003,891) Equity Shares of of Rs.10/-each fully paid upClosing balance 341034320 900389108,639,177 (Previous Year 42,742,609) Equity Shares of of Rs.10/-each fully paid up 86391770 427426090

Partly paid up Equity SharesOpening Balance4,971,429 (Previous Year6,000,000 ) Equity Shares of Rs 10/- eachRs 7.00 paid up (Previous Year Rs. 3.50 Paid Up) 34800003 21000000Add: Call money received during the yearNil (P.Y. 6,000,000 Equity Shares @ Rs. 3.50 per share – 21000000Less: Reduced during the yearNil (Previous Year 1,028,571) Equity Shares of Rs. 10/- each – 7199997Rs. 7.00 paid upClosing balance4,971,429 (Previous year 4,971,429) Equity Shares of of Rs.10/-each Rs. 7.00 each paid up (Previous Year Rs 7.00)

34800003 34800003

Investee Face Value Quantity Acquired Sold Quantity Amount (Rs.) Amount (Rs.)Company/Institutions As on during during As on As on As on

(Rs.) 01/04/06 Year Year 31/03/2007 31/03/2007 31/04/2006

LONG TERM INVESTMENTSUnquotedEquity Shares - Fully PaidGodrej Upstream Limited 10 9000000 – 9000000 – – 90000000Verseon LLC - Class A preferred units (US$ 1.90) 87 1315789 – 1315789 – – 114233750Investment in Subsidiary CompanyEquity Shares in Godrej Global Solutions (Cyprus) Ltdface value of US$ 1.00 each 44 600000 – – 600000 26240229 26240229Preference Shares in Godrej Global Solutions (Cyprus) Ltd.face value of US$ 1.00 each 44 1500000 – – 1500000 65600571 65600571Investment in the capital of Partnership firmView Group LP (Refer Note Number 3 in Schedule 17) NA NA NA NA NA – 136801078CURRENT INVESTMENTSUnquotedUnits of Mutual FundTempleton India Treasury Management 1000 10555 6841 17396 – – 15959680Prudential ICICI Liquid Plan Institutional Plus 10 17432 423 17855 – – 206590Kotak Liquid Scheme 10 634824 5406 640230 – – 6352745TOTAL 91840800 455394643

SCHEDULE 6 : INVESTMENTS

March 31, 2007 March 31, 2006(Amount Rs.) (Amount Rs.)

Fully paid up Preference Shares18,000 (Previous Year 18,000) Preference Sharesof Rs.10/- each. 180,000 180000

121371773 462406093

Of the above 13,602,260 (Previous Year 47,672,739) Equity Shares are held by Godrej IndustriesLimited, the holding company.18,000 Preference Shares of Rs. 10/- each were issued for consideration other than cash.(Refer note number 4 in Schedule 17)

SCHEDULE 2 : RESERVES & SURPLUS Capital Reserve Opening Balance 1554134 – Additions during the year – 1554134

1554134 1554134 Securities Premium Account Opening Balance 49820000 – Add: Additions during the year – 49820000

49820000 49820000 51374134 51374134

SCHEDULE 3 : SECURED LOANSTerm Loan from Bank 42034821 17300244Repayable within one year Rs. 11,112,000(Previous Year Rs. 3,620,000)

42034821 17300244

SCHEDULE 4 : UNSECURED LOANSDemand Loan from Bank – 22654141(Repayable within one year)

– 22654141

March 31 2007 March 31 2006(Amount Rs.) (Amount Rs.)

SCHEDULE 7 : CASH AND BANK BALANCESCash on hand 59257 97371Balances with Scheduled BankIn Current Account 8515760 32536330In Fixed Deposit 172750 166500

8747767 32800201

SCHEDULE 8 : DEBTORSUnsecured and Considered GoodOutstanding for more than six months 1282425 1293710Outstanding for less than six months 55030648 25657232

56313073 26950942

March 31 2007 March 31 2006(Amount Rs.) (Amount Rs.)

SCHEDULE 9 : LOANS AND ADVANCESAdvances recoverable in cash or in kind or for value to be received 1016189 723721Inter corporate Deposits 13608084 13357804Security Deposits 180542 –Accrued Interest 10509 –Staff Loan 1190811 78500Advance Payment of Taxes 8468726 8466668

24474861 22626693SCHEDULE 10 : CURRENT LIABILITIESSundry creditors– Due to SSI Undertakings Rs: Nil/Previous Year Rs : Nil ) – –– Other Liabilities 14429874 9818433

14429874 9818433



As on Additions Deletions As on As on For the Reductions As on As on As on01.04.2006 31.03.2007 01.04.2006 Year 31.03.2007 31.03.2007 31.04.2006

Leasehold Improvements 6415253 21600 – 6436853 3065616 1766364 – 4831978 1604875 3349638 Computers 24671555 16985253 41656808 7768425 13966088 – 21734514 19922295 16903131 Office Equipments 4986517 1401562 47998 6340081 557914 1260378 23917 1794375 4545706 4428603 Furniture & Fixtures 1140908 295003 – 1435911 358351 280834 – 639185 796726 782557 Vehicle 375360 1664148 375360 1664148 150144 157752 194161 113735 1550413 225216 Total 37589594 20367566 423358 57533801 11900449 17431416 218078 29113787 28420015 25689145 Previous Year 7813568 29966092 190065 37589595 3691261 8260166 50978 11900449 25689146 4122307


148

SCHEDULE 11 : PROVISIONSProvision for employee retirement benefit 1856749 815132

1856749 815132

SCHEDULE 12 : OTHER INCOMEInterest (Gross)– Bank - (TDS : C.Y : Rs. 2058/- P.Y: Rs. 7687/-) 11697 52363– Companies - (TDS : C.Y : Rs. Nil P.Y. : Rs. 2781773/-) – 12396488– Staff loan 53159 –Dividend 418483 1910349Profit on sale of investment 2437 5696Profit on sale of fixed assets 6801 –Miscellaneous Income 2113 –

494690 14364895

SCHEDULE 13 : STAFF EXPENSESSalary, bonus, exgratia 60477186 34273675Contribution to Providend Fund and other funds 7502485 3334680Staff Welfare 3310606 1238192

71290277 38846547

SCHEDULE 14 : ESTABLISHMENT EXPENSESRent 17652556 11251006Office Maintenance 7713353 5785814Electricity 7423059 5409147Communication expenses 6381913 4406888Repairs and Maintenance - Plant and Machinery 213039 516868

39383921 27369723

SCHEDULE 15 : OTHER OPERATING EXPENSESLegal & Professional Expenses 10030360 9532816Insurance 212744 209675Conveyance and Travelling 4795494 2916553Recruitment & Training 3997393 1415302Processing Cost 3648042 2690130Loss on Sale of Fixed Assets – 82837Exchange Difference – Loss (Net) 1462636 287282General Expenses 3896483 2619047

28043151 19753641

SCHEDULE 16 : INTEREST & FINANCE CHARGESInterest on Bank Loan 3226056 2392882Other Bank/Finance Commission 663294 663795

3889350 3056677

SCHEDULES ANNEXED TO AND FORMING PART OF THE

ACCOUNTS FOR THE YEAR ENDED MARCH 31 2006


1. 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 Policies

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 AccountingStandards issued by the Institute of Chartered Accountants of India and the provisions of theCompanies Act 1956.

b) Fixed Asset

Fixed Assets are stated at cost less accumulated depreciation. Cost includes all expensesrelated to acquisition and installation of the concerned asset.

c) Asset Impairment

The 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 amountthe estimated future cash flows are discounted to their present value at appropriate discountrate.

d) Investments

Long-term investments are carried at cost. Provision for diminution if any in the value ofeach long-term investment is made to recognize a decline other than that of a temporarynature. The fair value of a long-term investment is ascertained with reference to its marketvalue the investee’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 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 eventsbut their existence is confirmed by the occurrence or non-occurrence of one or moreuncertain future events not wholly within the control of the Company.

f ) Revenue Recognition

Income 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 ) Depreciation

Leasehold 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 Benefits

Retirement Benefits to employees comprises payment under approved provident fund plansleave encashment and gratuity to eligible employees. Payments under approved provident fundplans are charged to revenue. The liability in respect of future payment of gratuity to retiringemployees and leave encashment benefit on retirement is provided on the basis of an actuarialvaluation at the end of each financial year.

i) Taxes on Income

Provision 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 or substantiallyenacted on the balance sheet date.

j) Foreign Currency Transactions

Transactions 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 time ofmaking the original investment.

3. Reduction of Equity Capital

The Company has made an application for reduction of equity share capital under Section 101 to105 of the Companies Act 1956 which was approved by Hon’ble High Court Bombay vide itsorder dated March 2nd 2007 and accordingly:

a. Fully paid up equity share capital of Rs. 427426090 representing 42742609 equity shares ofRs. 10 each fully paid up were reduced to Rs 86391770 representing 8639177 equity sharesof Rs. 10 each fully paid up. By way of repayment of Rs. 10/- per equity share to theshareholders holding 20423375 equity shares of Rs. 10/- each fully paid up aggregating toRs. 204233750 in proportion to there existing shareholdings.

b. To utilize an amount of Rs.136800570 from equity share capital held by the equityshareholders in proportion of their existing shareholding for the downward revision in thecarrying value of investments in the capital of View Group LP as at 1st April 2006.

During the year the Company has sold the investment in the equity shares of GodrejUpstream Limited Verseon LLC and in the capital of View Group LP to Godrej IndustriesLimited at their carrying value as at March 31 2007. The aggregate sale proceed thereofwas Rs. 204234258. The said sales proceeds were adjusted against the dues payable by thecompany to Godrej Industries Limited on account of reduction of equity share capital.

4. Redemption of Preference Shares

Due to inadequacy of divisible profits the Company has not redeemed 18000 preference sharesof Rs 10/- each at par due for redemption on May 31 2006.

5. Secured loan

Term 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. Operating Lease

The 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. 217.66 Lacs. (Previous year. Rs. 101.34 Lacs). The future minimum leasepayments under non-cancelable operating leases due within a period of one year are estimated atRs. 216.16 Lacs (Previous Year. Rs. 103.92 Lacs) and due within a period of one year but less than fiveyears are estimated at Rs. 392.24 Lacs.(Previous Year. Rs. 126.58 Lacs)


a) Related Parties with whom transactions have taken place during the year with the nameand description of relationship.

Parties with whom control exists :Godrej Industries Limited; the Holding company.Godrej & Boyce Manufacturing Co Ltd.; the Ultimate Holding CompanyAssociate Companies :Godrej Upstream Limited upto 23-03-2007Wholly Owned Subsidiaries :Godrej Global Solutions Inc.Godrej Global Solutions (Cyprus) Ltd.Key Management Personnel :Mr. N. B. GodrejMr. Sanjay Tipnis

SCHEDULES ANNEXED TO AND FORMING PART OF THE PROFIT AND LOSS ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2007


149

b) Transactions with Related Parties – Parent and Fellow Subsidiaries (Amount Rs.)

Nature of Transaction Holding Company

Leave & License 1123440Previous Year 1123440Service Charges 3516282Previous Year 2808000Other Expenses 373549Previous Year 571604Call Money Received –Previous Year 21000000Repayment of Equity Shares 204036400Previous Year –Sale of Investments 204234258Previous Year –Balance Outstanding as of 31-3-2006 –Receivable 197858

c) Transactions with Related Parties – Subsidiaries and Others (Amount Rs.)Nature of Transaction Wholly Owned Associate Key Total

Subsidiary Company ManagementCompany Personnel

Investment in Pref Shares –Previous Year 65600571 – – 65600571Investment in Equity Shares – – – –Previous Year 26240229 – – 26240229Export of Services 96196640 – – 96196640Previous Year 54733608 – – 54733608Interest Income – – – –Previous Year – 12396488 – 12396488Inter Corporate Deposit - – – – –Given – – – –Previous Year – 10000000 – 10000000Inter Corporate Deposit – – – –Repaid – – – –Previous Year – 219200000 – 219200000Managerial Remuneration – – 5538912 5538912Previous Year – – 4474492 4474492

8. Managerial Remuneration

Particulars Current YearPrevious Year

Salaries and allowances paid 5268613 4118460

Contribution to Provident Fund 270299 226032

Sitting Fees 115000 130000

Total 5653912 4474492

9. Auditors Remuneration included in General Expenses

(Excluding service tax)

Audit Fees 900000 900000

Tax Audit Fees 100000 100000

Total 1000000 1000000

10. Earning in Foreign Currency

Income from services 140031074 82265686

11. Expenditure in Foreign Currency

Marketing Expenses Nil 3209

Traveling Expenses 855602 106389

Books & Periodicals 19692 18849

Professional Fees 9406 Nil

Training 3860970 1176955

Liability Insurance 25765 26581

Software Development & Maintenance 44429 43861

12. Earning Per Share

Net profit / (loss) after tax available to shareholders (20364283) (618240)

Number of Equity Shares:

As at commencement of the year 47714038 57746500

As at the end of the year 13610606 47714038

Weighted Average Number of Equity Shares 43517624 52952098

Basic Earning per Share of Rs 10/- each (0.47) (0.01)

13. Additional information required under Schedule VI Part II of the Companies Act 1956 to the extentnot applicable has not been given.

14. 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, 2007

Disclosure as required vide Part IV of Schedule VI of the Companies Act 1956.Balance Sheet Abstract and Company’s General Business Profile

Amount in Rs. Thousands

I . Registration DetailsRegistration No. 11-139431State Code 11Balance Sheet date March 31 2007

II. Capital raised during the yearPublic Issue –Rights Issue –Bonus Issue –Private Placement

III. Position of mobilisation and deployment of fundsTotal Liabilities 214780Total Assets 553734Sources of Funds

Paid-up Capital 121780Reserves and surplus 51374Secured Loans 42034Unsecured Loans

Application of FundsNet Fixed Assets 28420Investments 91841Deferred Tax Asset 288Net Current Assets 73249Miscellaneous Expenditure –Accumulated Losses 618

IV. Performance of the CompanyTotal Income 140526Total Expenditure 160038Profit / (loss) before Tax (19512)Profit / (loss) after Tax (20364)Earning per share (in Rs.) (0.47)Dividend 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 2007Particulars March 31 2007 March 31 2006

(Amount Rs.) (Amount Rs.)Cash Flow from Operating ActivitiesNet loss before tax (19512352) (656172)Adjustment for:Depreciation 17431417 8260166Interest Paid 3889350 2864457Deferred revenue expenditure written off - -(Profit)/loss on fixed assets scrapped / sold (6801) 84122(Profit)/loss on investments sold (2437) (5696)Dividend income (418483) (1910349)Interest income (64856) (12448851)Operating Profit before Working Capital Changes 1315838 (3812322)Adjustment for:Trade and Other Receivables (31208241) (38101714)Trade Payables 5653057 7408603Cash Generated from Operations (34505433)Direct Taxes Paid -FBT (851931) (250381)Direct Taxes Paid (2058) (4047177)Total Cash Generated from Operating Activites (25093335) (38802991)Net Cash from/(used) in Operating Activities (25093335) (38802991)Cash Flow from Investing ActivitiesPurchase of Fixed Assets (20367566) (29375208)Sale of Fixed Assets 212081 56250Acquisitions of Data Conversion Business – (80000000)Purchase of Long Term Investments – (262631840)Sale of Long Term Investments 204234258 –Downward Revision of Investments 136800570 –Purchase of Current Investments (10420921) (277318150)Sale of Current Investments 32942373 277893157Recovery of Inter Corporate Deposits – 214868647Interest Income 64856 12448851Dividend Income 418483 1910349Net Cash from/(used) in Investing Activities 343884135 (142147944)Cash Flow from Financing ActivitiesProceeds from Issue of Share Capital – 71000000Repayment of Equity Share Capital (204233750) –Reduction in Equity Share Capital (136800570) –Proceeds from Long Term Borrowings 32072639 48190146Repayment of Long Term Borrowing (29992203) (8405000)Interest Paid (3889350) (2864457)Net Cash from Financing Activities (342843234) 107920689

Net Increase in Cash and Cash Equivalents (24052434) (73030246)Cash and Cash Equivalents as at beginning of the year 32800201 105830447Cash and Cash Equivalents as at end of the year 8747767 32800201

(Note: To finance working capital requirements the Company’s Bankers have sanctioned a totalfund based limit of Rs. 450 lac. Of this limits utilized as on March 31 2007 is Rs. Nil.)

For and on behalf ofKALYANIWALLA MISTRY AND ASSOCIATESChartered Accountants For and on the behalf of the Board

N.B. Godrej ChairmanS.S. Tipnis Whole time Director

V. M. Padwal C.K. Vaidya DirectorPartner A.K. Singla Company SecretaryMumbai May 24 2007

150

Godrej Global Solutions (Cyprus) Limited


3/31/2007 3/31/2007 3/31/2006 3/31/2006Note US $ Rs. in Lacs US $ Rs. in Lacs

ASSETSNon-Current AssetsInvestments 6 1000000 430.50 1000000 446.10

Loan Receivable 7 1055000 454.18 1055000 470.64

Current AssetsInterest Receivable 66465 28.61 68054 30.36Cash at Bank 62960 27.10 27718 12.36

129425 55.72 95772 42.72

Total Assets 2184425 940.39 2150772 959.46

EQUITY AND LIABILITIES

Capital and ReserveShare Capital 8 2100000 904.05 2100000 936.81Reserves 9 74183 31.94 25702 11.47

2174183 935.99 2125702 948.28

Current LiabilitiesCreditors and accruals 10 5567 2.40 25070 11.18Income Tax 11 4675 2.01 – –

10242 4.41 25070 11.18

Total Equity and Liabilities 2184425 940.39 2150772 959.46

Note : The Rupee equivalent of US $ have been given at the closing exchange rates as on March 31,2007. (US $ 1.00 = Rs. 43.05)

DIRECTORS’ REPORT FOR THE YEAR ENDED MARCH 31, 2007

The Directors have pleasure in enclosing the Company’s set of financial statements for the year endedMarch 31, 2007.

Principal activities

The company’s principal activity during the period under review was that of holding of investments andfinancing.

Directors

The Directors of the Company during the period were the following:

Stelios SavvidesEva AgathangelouRohinton Homi KhajotiaDorab Erach MistrySanjay Tipnis

Company’s results

31-03-2007 31-03-2007US $ Rs. in Lac

Balance Brought Forward 25702 11.47Profit / Loss for the period 48481 20.87Balance Carried Forward 74183 31.94

Dividends

The directors recommend no dividend to be paid for the year ended 31 March, 2007.

AuditorsA resolution will be put forward to the Annual General Meeting to reappoint PKF Savvides & CoLimited as auditors for the next year.

By order of the BoardFor Godrej Global Solutions (Cyprus) Limited

HIVE MANAGEMENT SERVICES LTDSecretaryLimassol : May 4, 2007

INDEPENDENT AUDITORS’ REPORT

TO THE MEMBERS OF GODREJ GLOBAL SOLUTIONS

(CYPRUS) LIMITED

We have audited the financial statements of Godrej Global Solutions (Cyprus) Limited on pages 4 to 11,which comprise the Balance Sheet as at March 31, 2007 and the income statement, statement ofchanges in equity and cash flow statement for the year then ended, and a summary of significantaccounting policies and other explanatory notes.

Board of Directors’ Responsibility for the Financial Statements

The Company’s Board of Directors is responsible for the preparation and fair presentation of thesefinancial statements in accordance with International Financial Reporting Standards as adopted by theEuropean Union (EU) and International Financial Reporting Standards as issued by the InternationalAccounting Standards Board (IASB) and the requirements of the Cyprus Companies Law, Cap 113. Thisresponsibility includes: designing, implementing and maintaining internal control relevant to thepreparation and fair presentation of financial statements that are free from material misstatement,whether due to fraud or error, selecting and applying appropriate accounting policies: and makingaccounting estimates that are reasonable in the circumstances.

Auditors' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. Weconducted our audit in accordance with International Standards on Auditing. Those Standards requirethat we comply with ethical requirements and plan and perform the audit to obtain reasonable assurancewhether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe financial statements. The procedure selected depend on the auditor’s judgement, including theassessment of the risks of material misstatement of these financial statements, whether due to fraud orerror. In making those risk assessments, the auditor considers internal control relevant to the entity’spreparation and fair presentation of the financial statements in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectivenessof the entity’s internal control. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of accounting estimates made by the Board of Directors, as wellas evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of GodrejGlobal Solutions (Cyprus) Limited as on March 31, 2007, and of its financial performance and its cashflows for the period then ended in accordance with International Financial Reporting Standards asadopted by the EU and the International Financial Reporting Standards as issued by the IASB and therequirements of Cyprus Companies Law, Cap. 113.

Report on other legal requirements

Pursuant 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 purposesof 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 themanner so required.

� In our opinion, the information given in the report of the Board of Directors on page 1 isconsistent with the financial statements.

Other Matter

This report, including the opinion, has been prepared for and only for the Company’s members as abody in accordance with Section 156 of Companies Law, Cap.113 and for no other purpose. We do not,in giving this opinion, accept or assume responsibility for any other purpose or to any other person towhose knowledge this report may come to.

PKF SAVVIVES & CO. LTD.

Certified Public Accountants

Limassol : May 4, 2007


MARCH 31, 2007

01/04/06 01/04/06 01/01/06 01/01/0631/03/07 31/03/07 31/03/06 31/03/06

Note US $ Rs in Lac US $ Rs in Lac

Interest Receivable 73850 31.79 18210 8.12

Administration Expenses (5971) (2.57) (25363) (11.31)

Profit /(Loss) from Operations 3 67879 29.22 (7153) (3.19)

Financial (Expenses)/Income Net 4 (532) (0.23) (107) (0.05)

(Profit)/Loss for the period before 67347 28.99 (7260) (3.24)

Taxation 5 (18866) (8.12) – –

Profit/(Loss) for the year after taxation 48481 20.87 (7,260) (3.24)



151

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2007

1. Introduction

The company was incorporated in Cyprus on January, 19, 2005 as a private limited liabilitycompany in accordance with the provisions of the Cyprus Companies Law Cap. 113. The Company’sprincipal activity during the period was that of holding of in investments and financing.

2. Principal accounting policies

The 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 inaccordance with the International Financial Reporting Standards and the Companies Law.

b) Foreign exchange

The financial statements are expressed in US Dollars.

Current assets and liabilities of the Company other than in US Dollars are translated at therate of exchange ruling at the balance sheet date.

Transactions during the period other than in US Dollars are converted at the rate of exchangeruling on the dates when they occur.

Differences on exchange are included in the income statement.

c) Taxation

Tax is calculated as follows:

� The current and deferred taxation are recognized as income or expense for the period.

� The provision for income tax and defence contribution for the period is calculated inaccordance with the Income Tax Laws. Deferred taxation is calculated on the basis ofthe rates ruling at the balance sheet date.

� The debit balances of the deferred taxation arriving from deductible temporarydifferences are recognised to the extent of the anticipated taxable profits.

d) Investments

Investments in subsidiaries are stated at cost unless there is an impairment of value. Anysuch impairment is recognised in the income statement. Investments held for trading areclassified as current assets and are stated at fair value, with any resultant gain or lossrecognised in the income statement. When the Company has the positive intent and abilityto hold bonds to maturity, these are stated at amortised cost less impairment losses. Otherinvestments held by the Company are classified as being available-for-sale and are stated atfair value, with any resultant gain or loss recognised directly to equity. When an investmentis sold collected or otherwise disposed of or when the carrying amount of the investment isimpaired, the cumulative gain or loss recognised in equity is transferred to the incomestatement.

The fair value of investments held for trading and investments available-for-sale is theirquoted price, excluding disposal costs, at the balance sheet date. Where a quoted price isnot available and other methods of determining fair value are inappropriate, the investmentis stated at cost.

Any sale of investment is recognised when the actual transfer of shares from the registrartakes place.

e) Provisions

Provisions are recognised when the Company has a present obligation as a result of a pastevent, which it is probable will result in an outflow of economic benefits that can bereasonably estimated.

f ) Contingent liabilities

Contingent liabilities are disclosed as expenditure and liability if the confirmation of theexpense or loss is considered possible from future events.

g) Post balance sheet events

Current assets and liabilities of the Company are adjusted to reflect any post balance sheetevents and include additional information for amounts calculated on the basis ruling at thebalance sheet date.

3. (Loss)/profit from operations

(Loss)/profit from operations is arrived at after charging the following:

4/1/2006 4/1/2006 1/1/2006 1/1/20063/31/2007 3/31/2007 3/31/2006 3/31/2006

US $ Rs in Lac US $ Rs in Lac

Auditor's Remmuneration 5567 2.40 1826 0.81

5567 2.40 1826 0.81

4. Financial (expenses)/income - net

4/1/2006 4/1/2006 1/1/2006 1/1/20063/31/2007 3/31/2007 3/31/2006 3/31/2006

US $ Rs in Lac US $ Rs in Lac

Bank Charge 343 0.15 146 0.07

Exchange Differences - Loss/(gain) 189 0.08 (39) (0.02)

532 0.23 107 0.05

5. Taxation

01/04/06 01/04/06 01/01/06 01/01/0631/03/07 31/03/07 31/03/06 31/03/06

US $ Rs in Lac US $ Rs. in Lac

Income TaxFor the year 3000 1.29 – –Prior year 1675 0.72 _ _

Defence ContributionFor the year 7385 3.18 – –Prior year 6806 2.93 _ _

6. Investments

Country of Class of Holding 31/03/2007 31/03/2006Incorporation Shares held % US $ US $Registration

Godrej Global Solutions, INC USA Ordinary 100 1000000 1000000

7. Loan receivable

31/03/2007 31/03/2007US $ US $

Godrej Global Solutions Inc.

( Subsidiary company registered in USA) 1055000 1055000

The above loan carries interest at the rate of 7% per annum on the outstanding amount and itis receivable by the end of 31 March, 2010. The interest receivable is accounted for on anaccruals basis. The interest expense was US$ 73.850 for the period ended 31 March, 2007.

8. Share capital

31/03/07 31/03/07 31/03/06 31/03/06 US $ Rs. in Lac US $ Rs. in Lac

Authorised, issued and fully paid

600000 ordinary shares of US$1 each 600000 258.30 600000 267.66

1500100 perference shares of US$1 each 1500000 645.75 1500,000 669.15

2100000 904.05 2100000 936.81

9. Reserves

As at March 31, 2007 the reserves available for distribution amounted to US$74.183(31-03-2006 : US$ 25.702)

10. Creditors and accruals

03/03/07 03/31/07 03/31/06 31/03/06 US $ Rs. in Lac US $ Rs. in Lac

Accruals 5567 2.40 32.380 14.44

The above amounts are payable within one year.

11. Taxation

US $ Rs in Lacs

Income tax due 4675 2.013

12. Capital commitments

At the balance sheet date there were no capital commitments.

13. Contingent liabilities

At the balance sheet date there were no contingent liabilities.

14. Fair value of assets and liabilities

The fair value of an asset or liability represents the replacement cost or an obligation to be settledat an arms length transaction. The fair value of all the assets and liabilities of the companyapproaches their accounting value as stated in the financial statements.

15. Related party transactions

The Company, in the normal course of business, trades with other businesses that fall within thedefinition of related party contained in International Accounting Standard 24. The amount receivablefrom related party is shown in note 7.

152

Godrej Global Solutions (Cyprus) Limited

CASH FLOW STATEMENT FOR THE PERIOD ENDED MARCH 31, 2007

1/04/07 01/04/07 01/01/06 01/01/0631/03/07 31/03/07 31/03/06 31/03/06

US $ Rs. in Lacs US $ Rs. in Lacs

Cash Flows from operating activities

profit/ (Loss) for the period before taxation 67347 28.99 (7260) (3.24)

Operating profit/ (loss) before working

capital changes 67347 28.99 (7260) (3.24)

Increase in creditors and accruals (19503) (8.40) 17760 7.92

Cash flows from operations 47844 20.60 10500 4.68

Tax paid on interest received (6806) (2.93) - -

Net Cash from operating activities 41038 17.67 10500 4.68

Cash flows from investing activities

Interest receivable (5796) (2.50) (18210) (8.12)

Net cash used in investing activities (5796) (2.50) (18210) (8.12)

Cash flows from financing activities

Issuance of share capital - - 2097755 935.81

Equity to be issued - - (2097755) (935.81)

Net cash generated from financing activities - - - -

Increase/(Decrease) in cash and cash equivalents 35242 15.17 (7710) (3.44)

Cash and cash equivalents at beginning of year 27718 11.93 35428 15.80

Cash and cash equivalents at end of year 62960 27.10 27718 12.36

Cash and cash equivalents are as follows

Cash at Bank 62960 27.10 27718 12.36


DETAILED PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED MARCH 31, 2007

01/04/06 01/04/06 01/01/06 01/01/0631/03/07 31/03/07 31/03/06 31/03/06

Schedule US $ Rs in Lac US $ Rs in Lac

Interest Receivable 73850 31.79 18210 8.12

Administration Expenses 2 (5971) (2.57) (25363) (11.31)

Profit /(Loss) from Operations 67879 29.22 (7153) (3.19)

Fianancial (expenses)/income-net 2 (532) (0.23) (107) (0.05)

Profit/(Loss) for the period before 67347 28.99 (7260) (3.24)

defence Contribution

Defence Contribution

Current Year 3 (7385) (3.18) – –

Prior Year (6806) (2.93) – –

Profit/(Loss) for the yearbefore taxation 53156 22.88 (7260) (3.24)

Income tax

Current Year (3000) (1.29) – –

Prior Year (1675) (0.72) – –

Profit/(Loss) for the year after taxation 48481 20.87 (7260) (3.24)

Share Share Equity to Equity to P& L P& L 31-03-2007 31-03-2007

Capital Capital be issued be issued reserve reserve Total TotalUS $ Rs in Lac US $ Rs in Lac US $ Rs in Lac US $ Rs in Lac

At December 31, 2005 2245 1.01 2097755 945.46 32962 14.86 2132962 961.33

Issue of Share Capital 2097755 935.81 (2097755) (935.81) - - - -

Loss for the period - - - - (7260) (3.27) (7260) (3.27)

At March 31, 2006 2100000 936.81 - - 25702 11.47 2125702 948.28

Profit for the period - - - - 48481 20.87 48481 20.87

At March 31, 2007 2100000 904.05 - - 74183 31.94 2174183 935.99

From the tax year commencing 1 January, 2003 onwards companies, which do not distribute 70% of their profits after tax, as defined by the Special Contribution for Defence Law 117 (1) 2002, within two yearsafter the end of the relevant tax year, will be deemed to have distributed as dividends 70% of these profits. Special contribution for defence at 15% will be payable on such deemed dividends to the extent that theshareholders are Cyprus tax residents. The amount of deemed distribution is reduced by any actual dividends paid out of the profits of the relevant year during the following two years. This special contribution fordefence is payable for the account of the shareholders.

Financial Statements for the year ended 31st March 2007

01/04/06 01/04/06 01/01/06 01/01/06Schedule 31/03/07 31/03/07 31/03/06 31/03/06

US $ Rs in Lacs US $ Rs in Lacs

Administration Expenses

Issuing costs of additional equityOverprovision made in previous period (3147) (1.35) 18000 8.03Professional fees 2899 1.25 2537 1.13Audit Fees 5567 2.40 1826 0.81Consulancy Fees 652 0.28 3000 1.34

1 5971 2.57 25363 11.31Financial expenses / (income) - net

Bank Charges 343 0.15 146 0.07Exchange Difference - loss / (gain) 189 0.08 (39) (0.02)

1 532 0.23 107 0.05

Computation of Defence Contribution for the year ended 31st March 2007

Schedule US $ Rs in Lacs £C

Interest received 1 73850 31.79 43.05Total Income subject to defencecontribution 73850 31.79Translated into £C1 = US $2.3052 32036

£C cents

Defence contribution at the rate of 10% 3203.60Tax suffered in USA(US$7385 Equivalent to £C3203.60 (3203.60)

Computation of Chargeable Incom e for the year ended 31st March 2007

Schedule US $ Rs in Lacs £C

Profit for the periodas per profit and loss account 1 67347 28.99Interest received exempt at 50% 1 (36925) (15.90)Issuing cost for additional equity 2 (3147) (1.35)Adjusted profit for the year 27275 11.74

Translated into £C at the rate of£C1 : US $ 2.3052 11832Income tax on above amount at 10% 2727.51 1.17 1183.20Additional tax 10% 272.75 0.12 118.32Income tax charge for the year payable 3000.26 1.29 1301.52

STATEMENT OF CHANGES IN EQUITY AS AT MARCH 31, 2007


153

DIRECTORS’ REPORT

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF GODREJ GLOBAL SOLUTIONS, INC.

We are pleased to submit the report for the period from April 1, 2006 to March 31, 2007.

Principal Activities

The Company’s principal activity during the period under review was that of providing Healthcare-relatedBusiness Process Outsourcing Services.

Companys’ Results

Net income for the period : $ 160944

Retained earnings as of March 31, 2006 : $ 16875

Dividends

No dividend is recommended to be paid for the period ended March 31, 2007.

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

April 17, 2007

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 Delawarecorporation) as of March 31, 2007, and the related statements of operations and retained earnings and cashflows for the year then ended. 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.

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 about


Assets US $ Rs. LacCurrent Assets

Cash and cash equivalents 873908 376.22

Accounts receivable - trade, net of allowance for

doubtful accounts of $0 399599 172.03

Prepaid and other assets 10959 4.72

Total Current Assets 1284466 552.96

Intangible assets, net of accumulated amortization of $423,155 227680 98.02

Goodwill, net of accumulated amortization of $13,608 3010596 1296.06

Total Non-Current Assets 3238276 1394.08

Total Assets 4522742 1947.04

Liabilities and stockholder’s equity

Current Liabilities

Note Payable 1132483 487.53

Account Payable 1117198 480.95

Accrued expenses 23242 10.01

Total Current Liabilities 2272923 978.49

Long Term Liabilities

Note Payable 1055000 454.18

Deffered Tax Liability 17000 7.32

Total Long Term Liabilities 1072000 461.50

Stockhoder’s equity

Common Stock, 0.01 par value, 1,000 shares authorized,issued and outstanding 10 –

Additional paid in capital 999990 430.50

Retained earnings 177819 76.55

Total Stockhoder’s equity 1177819 507.05

Total Liabilities and Stockholder’s equity 4522742 1947.04

The accompanying notes are an integral part of these financial statements

Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on March 31,2007 (US$ 1.00 = 43.05)



April 17, 2007

Particulars US $ Rs. Lac

Sales 3078647 1325.36

Cost of goods sold 2139335 920.98

Gross Profit 939312 404.37

Operating expenses 399177 171.85

Operating Income 540135 232.53

Other Income (expenses)

Interest Income 16482 7.10

Impairmnent of Goodwill (13608) (5.86)

Amortization of Intangible Assets (198191) (85.32)

Interest expenses (73850) (31.79)

(269167) (115.88)

Net Income before provision for Income Taxes 270968 116.65

Provision for Income Taxes 110024 47.37

Net Income 160944 69.29

Retained Earnings - April 1, 2006 16875 7.26

Retained Earnings - March 31, 2007 177819 76.55

The accompanying notes are an integral part of these financial statements

Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on March 31, 2007 (US$ 1.00 = 43.05).



April 17, 2007

STATEMENT OF OPERATIONS AND RETAINED

EARNINGS FOR THE YEAR ENDED MARCH 31, 2007

whether the financial statements are free of material misstatement. An audit includes examining on a testbasis, evidence supporting the amounts and disclosures in 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.

In our opinion, the financial statements referred to above present fairly, in all material respects, thefinancial position of Godrej Global Solutions, Inc. as of March 31, 2007, and the result of its operationsand its cash flows for the year ended in conformity with accounting principles generally accepted in theUnited States of America.

BRAVER PCAccountants & AdvisorsApril 17, 2007



154

NOTES TO THE FINANCIAL STATEMENTS

For the Year Ended March 31, 2007

Note 1 – Nature of the Business

Godrej Global Solutions, Inc. (the “Company” or “GGSI”) was incorporated on January 21, 2005, underthe laws of the state of Delaware; however, the Company did not begin its operations until April 8, 2005,when it acquired the assets of another company. 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 Policies

Fair Value of Financial Instruments

The 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 Estimates

The 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 disclosure 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 Equivalents

The Company considers all highly liquid investments with maturity of three months or less at the date ofpurchase to be cash equivalents. Cash equivalents are stated at cost plus accrued interest, whichapproximates fair value. At March 31, 2007, cash equivalents consist of bank deposits and short-terminvestments of $873908.Accounts Receivable

Accounts receivable are stated at the amount the Company expects to collect from outstanding balances.An allowance for doubtful accounts is provided for that portion of accounts receivable considered to beuncollectible, based upon historical experience and management’s evaluation of outstanding accountsreceivable at the end of the year. Bad debts expense was $0 for the year ended March 31, 2007. Bad debtsare written off against the allowance when identified. Management has determined that any uncollectibleamounts at March 31, 2007, are not material.Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever an event or change in circumstancesindicates 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. Forassets which do not have a readily determinable market value, the assets are written down to theirestimated market value calculated by reference to the estimated future discounted cash flows. Assets tobe disposed are reported at the lower of the written down value or the fair value, less the cost to sell.Goodwill

The 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 tothe reporting unit’s carrying amount, including goodwill. If the carrying amount exceeds its fair value, thenthe amount of the impairment loss is measured and recorded.Revenue Recognition

Revenues generated from providing services to customers are recognized at the time the services arebeing provided. Revenue earned from fixed-price engagements is recognized on a monthly basis duringthe period when services are being provided.Income Taxes

Deferred 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 andliabilities and are measured using enacted tax rates and laws that will be in effect when the differences areexpected to reverse. The future effect on deferred taxes of a change in tax rates or laws is adjusted for onthe date of the enactment.Deferred tax assets are recognized, net of any valuation allowance, for the estimated future tax effects ofdeductible temporary differences and tax credit carry forwards. A valuation allowance against deferredtax assets is recorded when and if, based upon available evidence, it is more likely than not that some orall deferred tax assets will not be realized.Concentration of Credit Risk

Financial instruments which potentially expose the Company to concentrations of credit risk consist primarilyof accounts receivable. To minimize customer credit risk, ongoing credit evaluations of customers’ financialcondition are performed, although collateral generally is not required.The Company maintains its cash in bank deposit accounts in several institutions which, at times, mayexceed the federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation(FDIC) up to $100000. At March 31, 2007, the Company has approximately $769000 in excess of the FDICinsured limits. The Company has not experienced any losses in such accounts.During the year ended March 31, 2007 the Company provided services to four customers that constitutedapproximately 92% of sales. The Company anticipates the growth of the business will overcome any lossof 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 – Goodwill

The total amount the Company paid for the acquisition as of March 31, 2007 is $3675039 of which $650835has been allocated to intangible assets as the value of the contracts. The remaining amount of $3024204has been identified as Goodwill. During the year ended March 31, 2007 the Company identified animpairment related to Goodwill as one customer on the customer list did not renew their contract. Theamount of impairment reported at March 31, 2007 in other expenses on the statement of operations is$13608.Goodwill is comprised of the following at March 31, 2007:

Goodwill

Original Goodwill Impairment March 31, 2007

Expertise of employees $ 302420 $ – $ 302420Customer list 907261 (13608) 893653Entry into U.S. markets 1814523 – 1814523Total Goodwill $ 3024204 $ (13608) $ 3010596

Note 4 – Stockholder’s Equity

Common Shares

In April 2005, the Company issued 1000 Common Shares of $0.01 par for $1,000,000 to Godrej GlobalSolutions (Cyprus) Limited (“GGSC”). Each share of common stock is entitled to one vote. The holders ofcommon stock are entitled to receive dividends whenever funds are legally available and when declaredby the Board of Directors.

Note 5 – Note Payable (Current)

As part of the Company’s acquisition of Outsource Offshore Inc. (“OOI”) the Company must pay earn-outpayments to the stockholders of the acquired company. These earn-out payments are calculated based ona percentage of revenues and net income for the two year period ending March 31, 2007. The last paymentis due May 31, 2007. The amount of the note payable as an earn-out payment as of March 31, 2007, isapproximately $1132483.Note 6 – Note Payable (Non-current)

In April 2005, the Company issued an unsecured note in favor of Godrej Global Solutions(Cyprus Ltd.)(GGSC). Its stockholder, in exchange for installments totaling $1055000. The note bears interest at the rateof 7% per annum. The entire amount of principal is payable at maturity on March 31, interest expenseinclusive of withholding taxes paid was $73,850 for the year ended March 31, 2007.Note 7 – Income Taxes

As of March 31, 2007, the Company’s deferred tax liability is as follows.Amortization of goodwill and intangible assets $ 17000The Company’s provision for income taxes for the year ended March 31, 2007 was as follows :Current $ 93024Deffered $ 17000

$ 110024

Note 8 – Employee Benefit Plans

The Company sponsors a defined contribution plan (individual retirement account) covering substantiallyall its employees. Company contributions are at the discretion of the Board of Directors. Defined contributionpension expense for the Company was $50000 for the year ended March 31, 2007.Note 9 – Acquisitions

The 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 receivetwo earn-out payments (See Note 5) on May 31, 2006 and 2007. The Company has calculated the first earn-out payment to be $423974 as of March 31, 2006. The Company has also paid to a former vendor of dataentry services consideration of approximately $439000 as set up and termination fees. Data entry andrelated services were thereafter provided by an affiliate company, Godrej Global Solutions Limited forservicing its U.S. clients. As of March 31, 2007, the total acquisition cost is approximately $3675039.Note 10 – Related Party Transactions

The Company’s data entry and related services are provided by Godrej Global Solutions Limited, anaffiliate, for servicing the Company’s clients. During the period ended March 31, 2007, the Company’sexpenses include $2139335 paid to Godrej Global Solution Limited for these services. As of March 31,2007, the amount in accounts payable due to Godrej Global Solutions Limited is $1117198.Note 11 – Commitment and Contingencies

In connection with the Company’s purchase of assets of OOI, the Company is obligated to pay earn outpayments on May 31, 2006 and 2007 (See Note 5.)The Company has entered into a lease for office space which began on November 1,2006 and expires onApril 30, 2007. The lease requires an initial deposit of $2.200 and base rental payments are $1,100 whichdoes not include taxes. Internet and phone fees. Rent expense for the year ended March 31, 2007 is $7.349.This lease has been renewed for the period from May 1, through October of 2007, with base rentalpayments increasing to $1400 a month, beginning May 1, 2007. Future minimum lease payments for 2007amounts to $9500.Note 12 – Intangible Assets

In connection with acquisition of Outsource Offshore Inc., the assets acquired included $650835 of intangibleassets other than goodwill. All of the $650835 of intangible assets is attributable to value of the contractspurchased from Outsource Offshore Inc. The Company estimates the useful lives of the contracts remainingat March 31, 2007, to extend over a period of up to two years. Amortization in the amount of $198191 wasrecorded in the fiscal year ended March 31, 2007.Amortization expense for the next three fiscal years would be as follows:2008 $ 1617572009 $ 65923

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED MARCH 31, 2007

Particulars US$ Rs. LacCash Flows from operating activitiesNet income 160944 69.29Adjustments to reconcile net income to net cashprovided by operating activitiesAmortization of intangible assets 198191 85.32Impairment of Goodwill 13608 5.86Provision for deferred income tax 17000 7.32Changes in operating assets and liabilitiesIncrease Accounts receivable (20737) (8.93)Increase in prepaid and other assets (10959) (4.72)Increase accounts payable 629061 270.81Increase in Income taxes payable (27249) (11.73)Decrease in accrued expenses (4258) (1.83)Net cash provided by Operating activities 955601 411.39Cash Flows from investing activitiesPurchase of goodwill (423974) (182.52)Net increase in cash and cash equivalents 531627 228.87Cash and Cash equivalents- April 1, 2006 342281 147.35Cash and Cash equivalents- March 31, 2007 873908 376.22Supplemental disclosure of non-cash investing and financing activitiesIncrease in note payable (current) 708509 305.01Supplemental disclosure of cash flow informationCash paid during the year for interest 73850 31.79Cash paid for income taxes during the year 118418 50.98

The accompanying notes are an integral part of these financial statementsBNote: The Rupee equivalents of US$ have been given at the closing exchange rates as on March 31,2007 (US$ 1.00 = 43.05).



April 17, 2007

PropertiesBuilding Solid FoundationOur company’s foundation is based on our philosophy to deliver value to our customers and business partners by building world-class real estate. We endeavour to deliver good value, prime locations and excellent construction, in the development of safe, well-planned residential, commercial and retail spaces. The company has built several landmark projects in Mumbai, Pune, Kolkatta and Bangalore. However, this is just the beginning. India’s booming economy is dramatically increasing the need for quality real estate. Godrej Properties is now ideally situated to build on its successful beginning by leveraging its established brand image to achieve exponential growth.

Agrovet

A Step AheadA company committed to building world-class products and services for farmers. Our businesses include Animal Feeds, Agricultural Inputs and Farm Produce. We are pioneers in the area of retail processed fresh chicken, fresh fruits and vegetables retailing, and rural retail chains. We strive to deliver quality products and services to our customers at competitive prices. Godrej Agrovet feels confi dent to take on global competition and has started to make its presence felt in the international arena too.

Joint VenturesMoving AheadWe believe in moving ahead by building enduring partnerships and synergies in our businesses that include joint ventures such as Godrej Sara Lee and Godrej Hershey's. Constant innovation ensures that Godrej Sara Lee maintains its position as the market leader in the Household Insecticides category. We have entered into an alliance with one of the world's leading chocolate and confectionery manufacturing company, Hershey's, and acquired the prestigious Nutrine Confectionery business. These partnerships add value to our company, and set the foundation for rapid future growth.

GIL_annualreport_2006_07

Documents

Transcript of GIL_annualreport_2006_07