Sustainable - Hindware AR 12 08 09(Merged)_final.pdf · Glass products are supplied to...

www.hindwarehomes.com(formerly Hindustan Sanitaryware and Industries Limited)

| 2008-09 Annual Report

Sustainable!

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Across the pages Business profile 02 Awards and certificates 06 Number sustainability 08 Chairman and Managing Director’s

perspective 10 Ability in managing sustainability 12 Business review with the Joint Managing Director 20Business segments at a glance 28 Business segment review 30 Our specialty retail business 40 People

management 42 Managing risks at HSIL 43 Finance review 47 Board of Directors 50 Five-year financial

summary 52 Directors’ Report 56 Corporate Governance Report 66 Auditor’s Report 85 Balance Sheet 88Profit and Loss Account 89 Cash Flow Statement 90 Schedules 92 Balance Sheet Abstract 110Consolidated Accounts 111 Subsidiary accounts 133

Corporate Information

Board of DirectorsMr. R.K. Somany Chairman and Managing Director

Mr. Sandip Somany Joint Managing Director

Mr. Ashok JaipuriaMr. Binay KumarMr. G.L. SultaniaMr. N.G. KhaitanMr. S.B. BudhirajaMr. Vishal K.K. MarwahaMr. V.K. Bhandari

Company secretaryMs. Ruchika Gupta

Statutory auditorsWalker, Chandiok & Co.Chartered Accountants

Internal auditorsHaribhakti & Co.Chartered Accountants

Registered office2, Red Cross Place, Kolkata - 700001Tel: 033 22487406/07Fax: 033 22487045Email: [email protected]

Corporate office301-302, Park CentraSector 30, National Highway 8Gurgaon - 122 001Tel: 0124 4779200-201Fax: 0124 4292899

Regional officesBengaluruUnit No. 9/2, DhondusaComplex, 3rd Flr, Residency RoadRichmond Circle

Bengaluru - 560 025Tel: 080 41136377

ChennaiMKM Chambers (Annexe)1st Flr, 154 & 155,Kodambakkam High RoadNungambakkam, ChennaiTel: 044 28220912

ErnakulamPalaparambil Bldg, Kaloor-Kadavandra RoadNear Katrikadavu BridgeErnakulam-682020, KeralaTel: 0481 2207016

Mumbai14, Vaswani Mansions2nd Floor, Dinshaw Wachha RoadBackbay ReclamationMumbai - 400 020Tel: 022-22044766

PuneFlat No 18, Bldg No. 2Kalpataru Society, Above KeringHospital New Timer Mkt Road, Opp Shanti Nagar SocietyPune - 411042

Secunderabad304, Ashoka BhoopalChambers, Sardar Patel RoadSecunderabadTel: 040 6628800

Plant LocationsBuilding Products Division1. Bahadurgarh-124507,District Jhajjar, HaryanaTel: 1276 230485/87

1276 232226-8Fax: 1276 230138

2. Somanypuram, BrahmanapallyBibinagar, Dist. NalgondaAndhra Pradesh 508126Tel: 8685 651773/448

Container Glass DivisionAGI Glaspac1. Glass Factory Road, off Motinagar,P.B. No. 1930, Sanathnagar P.O.Hyderabad 500018Tel: 40 23831771Fax: 40 238317872. Glass Factory RoadBhongir - 508 116Nalgonda DistrictAndhra Pradesh

EVOK StoresDelhiWest Gate Mall, Unit no.1-252nd Floor, Plot no. 4, 5, 6Shivaji Place Distt. CentreRajouri GardenNew Delhi - 110015Tel: 011 4351 3751/52

FaridabadCrown Interiorz Mall12/7, NH-2, Delhi Mathura RoadSector 35, Faridabad, HaryanaTel: 0129 4161021/23

BankersAndhra Bank Canara BankCitibank, N.A.HDFC Bank Ltd.IDBI Bank Ltd.Standard Chartered BankThe Hongkong and Shanghai Banking Corporation

Cactus and HSILAt HSIL, we are inspired by the most unlikely of natural creations. The cactus.

Can survive three centuries. Can shrink its surface area to counter transpiration. Can bend to reduce exposure to thesun and minimise moisture loss. Can use its spine to remain inedible. Can suspend root growth until it rains again.

At HSIL, we are inspired by the resilience of the cactus. Enabling us to grow in an environment of adversity.Strengthening our resolve to perform against hardship. Spreading our roots deep and wide. Creating opportunities tosurvive and thrive. Just one word can encapsulate our spirit to endure and flourish.

Sustainable.

Disclaimer In this annual report, we have disclosed forward-looking information to help investors comprehend our prospects and take informed investmentdecisions. This report is based on certain forward-looking statements that we periodically make to anticipate results based on the management’s plansand assumptions. We have tried wherever possible to identify such statements by using words such as ‘anticipates’, ‘estimates’, ‘expects’, ‘projects’,‘intends’, ‘plans’, ‘believes’ and words of similar substance in connection with any discussion of future performance. We cannot guarantee that theseforward-looking statements will be realised, although we believe we have been prudent in assumptions. The achievement of results is subject to risks,uncertainties and even inaccurate assumptions. Should known or unknown risks or uncertainties materialise, or should underlying assumptions proveinaccurate, actual results could vary materially from those anticipated, estimated or projected. We undertake no obligation to publicly update anyforward-looking statements, whether as a result of new information, future events or otherwise.

1HSIL Limited |

HSIL reported strongernumbers in 2008-09when most economicindicators weakened.India’s GDP growth declined from 9.2% in 2007-08 to 6.7% in 2008-09.

HSIL’s net turnover grew 17.24%.

2 | HSIL Limited

Sustainable industryoutlookIncreasing population, expanding

disposable income, enlarging basket of

wants, coupled with wider awareness

and need for individual happiness,

enhances confidence in our growth and

sustainability.

Resilient businesscombinationThe combination of building products

and container glass is relatively derisked

as it rides the basic human need for

hygiene and a higher standard of living.

Safe customer mixOur largest customer segment of

container glass comprises alcohol and

beverages, a growing segment largely

unaffected by challenging economic

conditions. The Building Products

Division addresses the needs of

residential, commercial and institutional

customers.

Leadership position in eachWe are India’s most prominent

sanitaryware Company and the market

leader in India; we are among India’s

top two container glass manufacturers

and are the market leaders in southern

India.

Brand strength

Our enduring Hindware brand (for

Building Products Division) stands for

product excellence and sensitive service;

it has been recognised as a Superbrand

for four consecutive years, testifying its

industry leadership.

Solid plus liquid We possessed a net worth of

Rs. 2,505.31 mn and a book value of

Rs. 45.53 as on March 31, 2009; we

enjoyed a net debt-equity ratio of 1.59.

One-time plus annuityincomesEarnings from the sale of products

were supplemented with an annuity

income from maintenance and service

contracts, generating a continuous

revenue stream and a long-term

relationship with customers.

Retail plus institutionalfocusWe derisked ourselves through an

extensive retail clientele in the Building

Products Division, leading to attractive

margins; we enjoyed a sound

institutional clientele in the Container

Glass Division leading to the absorption

of large production volumes.

Low gearingDespite the largest one-time investment

of Rs. 2,765 mn in a new container

glass plant at Bhongir, our net debt-

equity ratio stood at 1.59, indicating

room to borrow afresh and ability to

comfortably service our existing book.

High replacement costThe Company’s gross block of

Rs. 6,267.74 mn (as on March 31,

2009) compares favourably with an

estimated high replacement cost of

Rs. 12,250 mn, serving as a hedge

against fresh competition.

High cash and carry Our sanitaryware business was marked

by a high 62% cash-and-carry sales,

leading to reduced bad debts.

ClienteleThe Company’s Building Products

Division caters to retail customers even

as institutional sales contributed 28%

to its revenues from reputed brands like

DLF, Unitech, Taj Hotels, ITC Hotels,

Mahindra Gesco, Larsen & Toubro and

Infosys, among others. Our Container

Glass products are supplied to

institutional customers like Coca Cola,

Pepsi, Glaxo SmithKline, Dr Reddy’s

Laboratories, Hindustan Unilever,

Reckitt Benckiser, Pernod Ricard, Pfizer,

SABMiller, Dabur, Nestlé, InBev and

United Breweries, to name a few.

Strategic locationaladvantageThe Company’s manufacturing facilities

HSIL is the most respectedname in two of the most diverseindustries – Building Productsand Container Glass

3HSIL Limited |

are located in Haryana and Andhra

Pradesh, proximate to raw material

availability and consuming centres.

Premium rangeThe Building Products Division’s

revenues from the premium range

surged by 35%.

Product mixThe Company’s Building Product

Division possesses the largest product

basket of bathroom solutions in India:

sanitaryware, faucets, bathtubs,

whirlpools, multi-functions and

massage tubs, bath concepts and

kitchen appliances. The Container Glass

Division addresses a bottle range from

30 ml to 3,000 ml catering to

beverage, beer, food, pharmaceuticals,

liquor and chemical industries.

Distribution networkThe Building Product Division possesses

a pan-India presence leveraging a

network of 1,136 authorised dealers,

12,000 sub-dealers and retail outlets.

RangeThe Company’s Building Products

straddle an extensive price spectrum

(Rs. 200 - Rs. 200,000-plus), reaching

out to a wide customer cross-section.

QualityThe Company’s quality and process

standards conform to BIS norms based

on EN standards. Furthermore, it

achieved ISO 9001, ISO 14001 and

OHSAS 18001 certifications.

RecognitionThe Company received several

accreditations in 2008-09 comprising

Superbrand Consumer Validated,

Business Superbrand Award, Reader’s

Digest Trusted Brands Platinum Award,

4P’s India’s 100 most Valuable Brands,

4P’s Most Admired Companies Award,

Mera Brand Award and Elle Deco

International Design award.

End-to-end solutionThe Company’s subsidiary, Hindware

Home Retail Private Ltd., provides end-

to-end solutions for an extensive range

of home interior products and services

through its home fashion mega stores

under EVOK brand.

4 | HSIL Limited

HSIL stewards some of the mostrespected brands in India,representing a strong advantagein a competitive market.

Our destinationWe aspire to build a global Company that creates

value for every customer we serve

We aim to become the undisputed leader in the

businesses we operate in

We strive to be known widely for our governance

practices and financial success

We endeavour to become a premier place to

work, where our employees can construct distinctive

careers

Our locational spreadThe Company enjoys a nationwide presence. Headquartered in Gurgaon (Haryana) with manufacturing facilities located in

Haryana and Andhra Pradesh and registered office in Kolkata, the Company also possesses six regional offices and 18

depots. It exported products to 51 countries.

Our calling card HSIL Limited (erstwhile Hindustan Sanitaryware and Industries

Limited) was incorporated in 1960 as Hindustan Twyfords Ltd.

by the Somany family (promoter group) in collaboration with

Twyfords Limited of UK. The Company pioneered vitreous china

ceramic sanitaryware in India

The Company is an attractive proxy for the significant growth

emerging from India’s real estate sector, through a broad range

of sanitaryware products, bath fittings, bathtubs and whirlpools,

bath concepts and kitchen appliances

The Company’s Container Glass Division caters to India’s

growing container glass packaging requirements

The Company’s Hindware brand was recognised as a

Superbrand for four consecutive years

Capacity allocation

Plant location Business division Installed capacity

(mn pieces per annum)

Bahadurgarh, Haryana Building Products Division 1.30

Somanypuram, Andhra Pradesh Building Products Division 1.50

Hyderabad, Andhra Pradesh Container Glass Division 953.10

Bhongir, Andhra Pradesh Container Glass Division 690.00

(commissioned in March 2009)

5HSIL Limited |

Our products The Company is the largest Indian sanitaryware

manufacturer; it diversified into container glass

manufacture through the acquisition of Associated

Glass Industries Limited in 1981

The Company widened its product basket across

bathroom and kitchen solutions under the Hindware,

Hindware Art and Hindware Italian Collection brands

In a significant forward integration, the Company’s

wholly-owned subsidiary Hindware Home Retail Private

Limited (HHRPL) retails speciality home interior range

under the EVOK brand

Our financial performance 17.24% increase in turnover from Rs. 5,208.38 mn

in 2007-08 to Rs. 6,106.43 mn in 2008-09

27.11% EBIDTA boost from Rs. 887.33 mn in 2007-

08 to Rs. 1,127.89 mn in 2008-09

40.15% post-tax profit growth from Rs. 286.50 mn

in 2007-08 to Rs. 401.52 mn in 2008-09

40.58% cash profit surge from Rs. 542.09 mn in

2007-08 to Rs. 762.06 mn in 2008-09

40.15% EPS (basic) increase from Rs. 5.21

in 2007-08 to Rs. 7.30 in 2008-09

13.53% book value per share enhancement from

Rs. 40.10 in 2007-08 to Rs. 45.53 in 2008-09

Our listing The Company’s shares are listed on the Bombay Stock

Exchange Limited (BSE) and the National Stock Exchange

Limited (NSE)

The promoter’s shareholding comprised 60.20% of

the equity share capital totalling 33.12 mn equity shares

Our customers The Company’s Building Products Division addresses

urban and suburban customers in the residential,

commercial, retail and hospitality sectors

The dealers are the primary customers with

institutional customers as a growing contributor to the

Building Products Division

The Company’s container glass products are procured

by institutional buyers in the processed food (FMCG),

liquor, beverage and pharmaceutical industries including

large international brands

6 | HSIL Limited

Awards and certificates

7HSIL Limited |

8 | HSIL Limited

Ability + Stability = Sustainability

Net turnover and profit before tax (Rs. mn)

Strong business focus – growing customer orders – stronger profitability

EBIDTA and cash profit (Rs. mn)

Growing sales – increasing realisation – stronger cash accruals

2,971.14

289.74

3,965.22404.00

4,777.64

456.15

Profit before taxNet turnover

5,208.38

6,106.43

606.84482.62

784.69

504.94

846.92

570.84

887.33542.09

1,127.89

762.06

449.30

567.77

Cash profitEBIDTA

9HSIL Limited |

EBIDTA margin and net profit margin (in %)

Stronger margins – robust business operations – higher profitability

Shareholder value creation (in Rs.)

Stronger shareholder earnings – progressively higher shareholder value creation – improving shareholder confidence

Net profit marginEBIDTA margin

Dividend per share (face value of Rs. 2)Earnings per share

10 | HSIL Limited

Chairman and Managing Director’s perspective

Challenging year. Improved performance. The reasons are embeddedin our sustainable business model.

I am often asked: ‘How did HSIL counterthe global slowdown?’

My consistent response is precisely what Iwould like to communicate to you aswell.

It is difficult to say how long this financial upheaval will

prevail; there is, however, a reasonable predictability about

how well we will perform in it. There are two reasons for

this.

One, we are confronting the challenges through speed

and strategy derived from decades-long clarity in similar

circumstances.

Two, the performance and prospect of our consumer

sectors continue to be encouraging.

A business built for sustainability HSIL created a business model that rides a basic human

characteristic – the need for a better standard of living

and an overriding concern for hygiene. The combination

of both its businesses maximises returns during an

economic upturn and minimises risks during a slowdown.

This was visibly demonstrated during 2008-09. In a period

that was unmistakably cash-starved for the broad

economy, HSIL generated Rs. 762.06 mn in cash profit,

possessed Rs. 792.72 mn in cash and bank balances and

enjoyed an enviable Rs. 1,500 mn in available credit lines.

This indicates that we are in an attractive position to

combine the power of an enduring brand with deep

financial resources to make our growth scalable and

sustainable. It also reflects that at a time when most

companies within our spaces are delaying their investment

projects, we possess the financial muscle to strengthen

our relative sectoral prominence through capacity

11HSIL Limited |

expansion, strengthening efficiency, widening range,

broadening dealer network, deepening quality and achieving

meaningful customer engagements.

So the reason why we grew our turnover and profit margins

in 2008-09 was not due to some extraordinary effort, rather

it was the result of our consistent endeavour to outperform

industry growth.

Strengthening our leadership There is another reason why we performed better in a

difficult year.

The consumer of today is impatient, demanding and

merciless with a declining loyalty tenure. She expects a wider

product choice and deeper transaction value compatible with

a lifestyle that is progressively mobile, urban and global.

At HSIL, we proactively provided for this over the years. We

embarked on the initiative to engage closely with our

customers (primary) and consumers (secondary). If a product

was moving, it was not an end to be celebrated; it was the

beginning of a deeper enquiry into just how it could be

improved. If a particular region was outperforming the

others, it was not a statistic to be commemorated; it was the

beginning of a deeper understanding on how the elements of

that growth could be replicated in the other regions.

Safeguarding resources and communitiesFor a number of years, we respected the finiteness of

resources from a holistic perspective. The result is that while

we strengthened our productivity leading to wider production

with fewer resources on the one hand, we protected the

environment and its bounty on the other.

How did this manifest in our performance, you ask? Well,

here is how: among various initiatives, we invested Rs. 2,765

mn in a state-of-the-art container glass plant in 2008-09,

which will translate into a lower energy consumption of fossil

fuels.

Furthermore, the concept of sustainability was integrated into

our business model, from productivity and efficiency

enhancements to improvements in water and energy use,

climate protection initiatives, sustainable packaging, healthy

living, workplace rights and community development

programmes. We possess the prestigious ISO 9001, 14001

and OHSAS 18001 certifications.

Clearly, our strategic model demonstrated that what is good

for the earth is also good for our business.

Looking ahead We intend to extend our success by launching the following

strategic activities across the business divisions.

Innovative consumer marketing – emphasising the right

message to the right consumer at the right place at the right

time

Investing in a superior consumer proposition

Stronger alignment with our partners and associates

Developing consumer relationships through our EVOK

brand of ‘home fashion’ stores and superior point-of-sale

execution

Improving in-plant and in-system productivity

Identifying and capitalising on high-value opportunities

AcknowledgementThis growth in a challenging year could not have transpired

had it not been for our various stakeholders. We

wholeheartedly express our gratitude to:

- Our associates for their leadership through particularly

challenging times

- Our Directors, for their conviction in our philosophy and

commitment to enhance organisational value

- Our family of shareowners, bankers and financial

institutions, for their patience and trust in our organisational

vision

To all of you, I have a simple acknowledgement to make: we

are deeply mindful of our value-enhancement responsibility

and will do everything possible to enhance the trust reposed

in us at all times.

My best regards,

Rajendra K Somany

Chairman and Managing Director

HSIL Limited

12 | HSIL Limited

13HSIL Limited |

At HSIL, marketing sustainabilityfocuses on encouraging theconsumer to buy a range ofproducts and engaging her acrossvarious dimensions.

The purchase of bathroom products and

solutions is fraught with various challenges for

end-consumers. Consumers dislike going to

stores because they are inevitably in the most

congested locations. Further, they need to

engage with different product vendors in

different city points. The combination of sizes,

colours and shapes is nothing short of a gamble.

Finally, they must plead with a plumber to

attend to bathroom leaks five days after the SOS.

At HSIL, we changed the nature of the business,

from being product orientated to providing an

enjoyable shopping experience. We designed and

developed dealer retail stores that extended our

range from sanitaryware to wellness to

bathroom solutions (including faucets) and

kitchen solutions. We helped consumers select

the right set of products through design

simulations. We arranged for finance. We

delivered the product. We installed it. We

operated it. We maintained it. We made

ourselves available 24x7.

This is the result: until 2002, we merely

marketed a product. Today, we engage with the

consumer in different ways. Until 2003-04, non-

manufacturing income of our Building Products

division accounted for 21%; today, the

contribution is up to 47% and is expected to

increase further.

14 | HSIL Limited

15HSIL Limited |

At HSIL, operationalsustainability is derived out ofdriving topline growth even whenthere is a deep crisis of consumerconfidence across the world. One of our most effective counter-slowdown

strategies was to invest in a new container glass

plant. We invested Rs. 2,765 mn in this state-of-

the-art greenfield project, the single biggest

investment and the second greenfield project in

the history of our existence.

This investment could not have come at a more

appropriate time, given the prevailing

environment, for a number of reasons:

The new capital-intensive plant will not need

to prospect for customers from scratch; a

number of our long-standing customers are also

enhancing their downstream capacities, coupled

with catering to larger parts of their existing

demands

The customers addressed by the new plant are

from the beverage and pharmaceutical

segments; these sectors address a large product

spectrum with deep penetration in India leading

to the prospect of growing sales with rising

disposable incomes

As a result, our new investment will translate

into a projected capacity utilisation of 80% in

2009-10. In turn, this will help the Company

grow its overall revenue and bottomline

contribution.

16 | HSIL Limited

17HSIL Limited |

At HSIL, corporate sustainability is linked to shareholder wealthenhancement even when mostcompanies are cutting back oninvestments and shrinking to zero growth. Contrary to conventional opinion that a large

capital investment in a fluid business

environment can weaken the Company’s

prospects, the reality is that our new Bhongir

showpiece facility will strengthen our competitive

advantage for the following reasons:

Compressed tenure in asset commissioning

from the usual 24 months to a mere 13 months

has resulted in incremental sales earlier than

expected

It possesses Asia’s largest container glass

furnace in a single location, leading to superior

economies of scale

It will reduce absolute energy consumption

by a precious 3% over competing assets and

generate an additional 200-basis point

production efficiency over standard assets

It retains the potential to reduce annual

energy costs by Rs. 180-200 mn through

proximity to a natural gas pipeline

Better still; the plant was designed to enable a

capacity expansion within a short duration by

making a modest additional investment

Largest investment, commensurate return. That

is how we expect to enhance shareholder value.

18 | HSIL Limited

19HSIL Limited |

At HSIL, leadership sustainabilityis the catchword to distinguish usin a price-sensitive marketplaceinfluenced by declining productdifferentiation. Home designing is a gamble. First, you hunt for

the right interiors expert. Then you visit the right

stores (for paints, furniture, furnishings,

upholstery, carpets, tiles, marble, flooring,

bathroom products, kitchen and electricals) in all

the wrong locations. Then you pray for the

divine spark to put it together.

HHRPL’s EVOK stores extract the sting from the

gamble. We provide all comprehensive Home

Interior category products under one roof. We

empower you through multiple simulated home

interior spaces and combinations. We provide

the services of dedicated home interior

professionals to guide customer choice. We

provide an exhaustive range of 12,500 SKUs

across categories like home furniture, soft

furnishing, home décor, accessories, lighting,

flooring, home organisation modular kitchens

and bathroom products, among others. We

offer Home Viz, a turnkey interior design service

that comprises 3D models, walk-throughs and

convenient customised product selections. And

we provide a world of value-packed services

comprising turnkey installations, warranty

services, post-care services, visual merchandising

exchange offers and spot consumer finance.

Finally, transforming the neighbour’s envy into

enduring pride.

EVOK is going places. Literally. The business is

growing its presence from two stores

(cumulative 45,000 sq. ft) to five (cumulative

0.12 mn sq. ft) in 2009-10 and intends to

significantly increase its average sq. ft revenue

in 2009-10.

The speciality EVOK Kitchen format is taking

shape; business focus on securing prestigious

interior projects in the institutional segments will

further create niche opportunities.

HSIL maintained its leadership through

transitioning from marketing products towards

marketing experiences.

Bigger space. Better value.

20 | HSIL Limited

Business review with the Joint Managing Director

“This is how weexpect to drivesustainable growth:enhancing salesthrough branding;increasing productivitythrough structuredinnovations;augmenting salesefficiencies through asuperior supply chain;enriching our culturethrough collaborativealliances.”Sandip Somany, Joint Managing Director, HSIL Limited, reviews a

challenging year and explains the reasons for his optimism

21HSIL Limited |

Q. How would you rate the 2008-09performance of the Company in adepressed economic environment?

A. HSIL can look back on 2008-09 with a sense of pride as

we delivered across multiple parameters: a growth in topline,

EBIDTA margin, EBIDTA, bottomline and earnings per share.

We grew because we invested in business stability and

sustainability through investments diversified by geography

and product mix, investments that can be expanded swiftly

and economically. Moving forward, this very strategy will

continue to deliver sustainable growth.

Q. One of the terms frequently used atthe Company is the creation of a‘consumer-driven branding enterprise’. Canyou elaborate?

A. In a challenging 2008-09, it was important to create a

consumer branding capability that didn’t just cater to various

consumer needs but proactively anticipated and provided for

them. We undertook the following initiatives in this direction:

Changed our Company’s name from ‘Hindustan

Sanitaryware and Industries Limited’ to ‘HSIL Limited’ to

streamline our identity across our vast dealership network and

consumers (who know us better as HSIL)

Introduced a dedicated customer services team; an

enhanced customer access through a toll-free number, more

branch-level offices and additional touch points; we extended

from product manufacturing to timely product delivery,

installation, demonstration and maintenance, leading to an

end-to-end solution

Established direct customer connect through EVOK, our

specialty home retail stores, which stock multi-brands for an

enriched customer experience. Our two EVOK stores —

Faridabad (25,000 sq. ft) and New Delhi (20,000 sq. ft) —

performed reasonably well in the pilot year of experimenting

and defining the market niche

We strengthened our investment in strategic brand

building through increased investments

So what will all these initiatives do for us? One, they will help

us create a customer pull rather than a product push; they

will enable our brand to stay vibrant in a cluttered

marketplace, leading to higher brand awareness and quicker

offtake.

Q. A number of companies have madecost management their mantra in a worldwhere sales cannot be forecasted.

A. We did so as well. We reinforced our existing low-cost

asset base with process efficiencies that enhanced our

competitiveness. This is what we did:

Optimised the raw material mix in container glass

manufacture following a 54% rise in soda ash prices in 2008-

09. We enhanced production that helped us spread our fixed

22 | HSIL Limited

costs over a larger manufactured volume. The result was that

we grew our EBIDTA margin from 17.04% to 18.47%, one of

the highest ever reported by our division despite a

challenging environment

Strengthened inventory management in our sanitaryware

business by liquidating finished goods inventory, unlocking

cash and holding costs

Rationalised wastages by 1.3% in sanitaryware

manufacturing

Worked with raw material vendors, dealers, depots and

warehouses for a proactive sales and operations planning

(S&OP) initiative that forecasted quarter-wise product

demand, reduced transportation costs through better load

management and route planning and shifted towards

containers for dispatches.

Q. What is the industry outlook?

A. To appreciate the role of HSIL within the industry, it is

essential to look at what is happening fundamentally in each

of our sectors.

Building Products: Asia now accounts for nearly 30% of

global gross domestic product (GDP) even as there is a

relative shrinkage of the US, UK and European economies. In

India, infrastructure growth will sustain and a correction of

25-30% in housing costs and interest rates will catalyse real

estate growth.

Container Glass: Asia’s growth is marked by growing

disposable incomes leading to catalysed demand for the

food, beverage and pharmaceutical sectors. India’s low per

capita consumption will continue to sustain the double-digit

growth of the Indian glass industry well into the long term.

Besides, glass continues to score over packaging alternatives

because of its recyclable, biodegradable and inert nature,

while hygiene norms demand the labelling of plastic products

between 1 and 5 under the bottle, warranting immediate

crushing and disposal after use.

Q. What is the blueprint for the future?

A. We expect to achieve the following:

We expect our newly commissioned Bhongir facility to

generate handsome revenues at full capacity, coupled with

lower operational costs, leading to a cash profit from this

unit within the first year of full operations

Drive revenue and profitability growth across our Building

Products and Container Glass Divisions

Introduce products in our Building Products and Container

Glass Divisions through close customer interaction

Explore acquisition opportunities, especially in the Building

Products Division

Embark on the process to unlock value of 82 acres that we

own near Hyderabad

As a result of most of the above mentioned activities, we are

confident of achieving a respectable growth in 2009-10.

23HSIL Limited |

Ourbusiness model

Productdifferentiation

Best-in-class coststructures

Superiorbranding

Premiummargins

Incremental demand creation

PlusEncourages

PlusDrives

YieldsFunds

Incremental sales and profits

24 | HSIL Limited

25HSIL Limited |

26 | HSIL Limited

27HSIL Limited |

Our business segments

Business segment review and strategy

28 | HSIL Limited

Business segment Industry position Location ofmanufacturing facilities

Building Product Division Largest Indian

sanitaryware product

manufacturer

Industry market

share 40%

Bahadurgarh, Haryana

Somanypuram,

Andhra Pradesh

50.37%

Contribution to grossrevenue, 2008-09

Container Glass Division Second largest Indian

container glass

manufacturer

Industry market share

reinforced in 2008-09

49.41% Hyderabad,

Andhra Pradesh

Bhongir, Andhra Pradesh

Business segment

Building Product Division 6.30% average realisation increase

14.60% EBIT growth from Rs. 477.80 mn to

Rs. 547.57 mn

150 dealers added

Two new depots operational

150 new products launched

Container Glass Division 20.38% revenue increase from Rs. 2,752.39 mn to

Rs. 3,313.35 mn

1.64% production enhancement from 854.50 mn pieces

to 868.50 mn pieces

33 new bottles introduced, including 10 light-weight

bottle varieties

46 new brand-enhancing clients added

Highlights, 2008-09

29HSIL Limited |

Net Sales growth Product category Major brands

2006-07 Rs. 328.11 mn

2007-08 Rs. 324.78 mn

2008-09 Rs. 340.68 mn

Sanitaryware

Bath fittings

Wellness

Kitchen appliances

Hindware Italian

Collection

Hindware Art

Hindware

2006-07 Rs. 482.60 mn

2007-08 Rs. 97.67 mn

2008-09 Rs. 554.84 mn

Container glass AGI

Maintain market leadership; increase market share

Offer the widest product basket through the development

of new products, designs and varieties

Evolve product mix towards value-added premium

products

Widen presence across all segments of the Building

Products value chain

Enhance customer service

Increase production through proactive technology

investments

Maintain optimal inventory leading to superior working

capital management

Widen the global footprint

Undertake a value-accretive acquisition

Stabilise operations at the new plant in Bhongir

Increase customer-centricity

Develop new bottle varieties

Develop value-added products for enhanced realisations

Widen global presence

Strategy

30 | HSIL Limited

Business segment review – 1

Building Products Division

Strengthened volume growth across all product segments | Responded to the robust demand for

building products | Improved average realisations, enhanced profitability | Widened the range across

all product segments | Sustained focus on production and efficiency

(Rs. mn)

2007-08 2008-09 Percentage change

Revenue (gross) 3,044.33 3,378.15 10.97

Operating profit 587.49 677.50 15.32

Capital employed 1,983.06 1,980.55 (0.13)

Return on capital employed 25.33% 27.63% 9.09

Production (MT tonnes) 31,064 24,169 (22.20)

Sales (MT tonnes) 27,041 27,172 0.48

Building Products range

Sanitaryware

Water closets

Wash basins

Pedestals

Squatting pans

Urinals

Bidets

Accessories

PVC cisterns

Fittings / seat covers

Faucets Shower

Kitchen faucets

Bathroom faucets

Wellness Bath tubs

Shower panels

Shower enclosure

Whirlpools

MFMT

Concealed cisterns

Kitchen appliances Hobs

Chimneys

Cooktops

Sinks

BuildingProducts

31HSIL Limited |

From the President’s desk

Q. How would you reviewthe performance of yourdivision in 2008-09?

A. A challenging year demanded the

best out of us. When the Indian real

estate sector reported a sharp decline in

the second half of fiscal 2008-09, we

reduced our production, liquidated

inventory by 4.4%, optimised our

working capital cycle from 129 days of

turnover to 111 days and reported a

lower interest outflow to strengthen cash

profit and net profitability.

What gives us fair satisfaction is that we

enhanced the sale of premium products

by 30% and strengthened product

realisations by an average 6.3% during

the period. Consequently, our EBIDTA

and EBIDTA margin increased 15.32%

and 2.80% in 2008-09, a commendable

achievement in a challenging year.

Q. What were theachievements of 2008-09?

A. We focused on ‘getting more from

less’ through ongoing technological

upgradation and process innovation. The

result: 1.3% reduction in wastages /

losses in 2008-09. We introduced 150

products and enhanced our product

basket through our Hindware Italian

Collection, Hindware Art and Hindware

brands. We introduced a number of

‘green’ products like state-of-the-art

water closets, aqua-free urinals and

sensor urinals, among others, that

rationalised water and energy

consumption. So even as the year was

challenging, we strengthened our overall

business across various dimensions.

Q. What do you expect toachieve in the near future?

A. The downturn arrested property

prices, reduced interest rates, attracted

genuine buyers and prepared the ground

for stable double-digit sectoral growth. It

is our conviction that there is a growing

demand for premium residences and

large unsatisfied demand for value

housing, which will also drive mass

product offtake. We intend to grow our

sales and profitability around 20% by

undertaking the following activities:

Create demand through enhanced

penetration derived from the

appointment of over 150 pan-India

dealers

Open Hindware Boutiques across

metro cities

Launch new products (high-value

and mass)

Introduce multiple green products with

maintenance contracts, especially in the

high-end products segment

Enhance overall plant capacity

utilisation to leverage economies-of-scale

and spread fixed costs over a larger

production volume

Strengthen efficiencies and lower

wastages across our Bahadurgarh and

Somanypuram plants

Reinforce our supply chain

management

Extend and deepen customer services

to create brand loyalty

“We focused on ‘getting more from less’ through ongoingtechnological upgradation and process innovation.”R. B. Kabra, President, Building Products Division, reviews the 2008-09 performance and looks ahead

32 | HSIL Limited

Drivers of excellence 1

Operations

The Company’s Building Products Division leverages a

competitive advantage due to the widest range of domestic

products. The Company’s two plants are located in

Bahadurgarh (Haryana) and Somanypuram (Andhra Pradesh);

the former plant’s 14,000-TPA annual capacity (catering to

India’s northern and eastern markets) and the Somanypuram

plant’s 18,000-TPA annual capacity (catering to India’s

southern and western markets) are cumulatively equivalent to

about 2.80 mn pieces annually.

Highlights, 2008-09Derived 52.86% of the division’s revenue through

manufactured products

Introduced several new models with a lower turnaround

time owing to better team work, coordination and process

re-engineering

Launched 150 new products across business segments,

60% of which were in the premium category

Increased plant efficiency with customer rejection rate of

less than 0.1 through a quality-checking discipline of 18 tests

before final delivery

Operated at 75.53% average capacity utilisation to balance

external demand and internal throughput leading to

inventory liquidation; reduced downtime by shifting from

breakdown maintenance to regular preventive maintenance

Operated within budget despite rising material and fuel

costs

Mechanised a part of the casting process to increase space

and manual productivity

Reduced repair and maintenance costs by 1.97% through

timely preventive maintenance

Achieved a 4% increase in manpower productivity despite

lower production

Lowered raw material and finished goods inventory by

4.4%, optimising the working capital cycle

Developed three models of urinals with concealed built-in

sensors to reduce water usage; developed new closets under

‘EWC green’ with 2/4-litre flush to save water; developed

aqua free urinals using patented technology; developed

products with ‘Germi Clean Glaze’ to eliminate

bacterial/fungal growth in our sanitaryware products for the

first time in India (to be launched in 2009-10) and developed

wash basins with metallic glaze, giving the products

enhanced glossy look

Shifted a majority of the packaging of high-end products

from straw to box packing to reduce transit damages,

enhancing packing effectiveness

Installed energy efficient compact fluorescent lamps and

mercury lamps in plant, saving 8% power; installed energy-

saving devices in the compressor to save 6% power; installed

variable frequency drives to reduce power consumption

Road aheadEnhance the range of premium products

Develop hydrophobic and oleophobic products to

eliminate surface water retention

Implement the Japanese ‘5S’ concept leading to further

improvements

Increase mechanised casting proportion in both plants

33HSIL Limited |

Supply chain management


The Company established an independent supply chain

management (SCM) department through an organisational

re-structuring that integrated raw material purchases,

warehousing, logistics, order processing and depot

management. The supply chain department has the prime

objective of ensuring availability through improving internal

and external lead times. Furthermore, it is equally essential

that the products reach our dealers safely and at an optimum

cost. The demand planning cell, which is also a part of the

SCM department, analyses historical sales and trends to

better plan supply chain operations. The Company distributes

goods to the northeast and central regions through mother

warehouses at Bahadurgarh and Tikri. The distribution for

southern and western regions is through two mother

warehouses at Bibinagar (near Hyderabad).

Highlights, 2008-09Improved packing and reduced transit damages

Created an independent team of professionals to check

stock quality and inventory levels

Entered into a long-term contact with a national level

transport company to transport products under rigorous

service level agreements

Provided supply chain training to enhance customer

orientation

Initiated a sales and operation planning (S&OP) process to

generate quarterly demand forecast using state-of-the-art

forecasting system, ensuring better product availability at

optimal inventory cost

Improved straw quality for packaging to reduce transit

damages

Reduced transportation cost per tonne km

Road aheadOpen depots in new geographies

Optimise cost per tonne km consistently

Improve packing to further minimise transport damages

Engage with a reputed agency to manage our import

logistics through multi modal transport to minimise damages,

transit time and costs

Synchronised supplychain strategy

OutsourcingManufacturing

capacity

Capacity executedbased on demandtriggers

Supplier delivers materialson pull signals

Demand forecasts andresponsive fulfillment

Customer dataused acrosssupply chain

Full visibility to decisionsupport data and

performance measures

Products andmaterials

Forecasting andfulfillment

Demandgeneration

SpeedAgility

HSIL’s supply chain management model

34 | HSIL Limited


Marketing

The Company enjoys an established nation-wide brand recall

in the building products industry. It marketed products

through the retail and institutional channels, contributing

72% and 28% to total sales respectively. The retail realisations

were relatively higher and spread the risk from a dependence

on a few customers to a wider cross-section; institutional

sales helped generate a large volume, leading to economies

of scale.

Highlights, 2008-09Jackpot offer: In 2008, Hindware unveiled a unique

consumer offer aimed to recognise and appreciate our value-

conscious customers. This offer invited customers to

experience Hindware products and enjoy an assured gift. The

Jackpot scheme offered amazing sweepstakes ranging from

LCD TVs, laptops, handycams, vacation trips and air travel

vouchers, to name a few. The bumper prize of a brand new

Honda City car was announced in April 2009

‘Get Charged’ Brand Communication: Hindware evolved

its campaign communication with the tagline ‘Get Charged’.

This theme focuses on the need for personal space in today’s

busy world with hectic schedules. The communication

elevates the bathroom from a sidelined ‘box of space’ to a

place where one can relax and unwind. The concept builds

upon the earlier communications of ‘Simply Obsessive’,

encouraging the premium bathroom experience. This new

campaign promotes the experiential perspective, contrary to

product-centricity of the earlier campaigns

Increased signages at strategic locations

Remodelled 65 exclusive Hindware Dealer showrooms to

enhance market penetration and showcase wide product

spectrum

Increased brand awareness in central and southern India

and Nepal through branding, networking and promotional

activities

Road aheadEnhance focus on ‘Green Building’ products to drive

margins

Improve display of premium products across retail units

Increase brand awareness across product segments and

customer profile

Employ digital technology for customer outreach and

stronger brand awareness

Business mix – major segments and brands

Segment Price range Brands

Super premium Rs. 10,000-75,000 Keramag

Premium Rs. 5,000-200,000 Hindware Italian Collection and Hindware Art

Standard Rs. 1,000-10,000 Hindware

Basic Rs. 500-5,000 Hindware

Raasi Rs. 200-2,000 Raasi

35HSIL Limited |

Customer service


The Company’s organised customer service commenced in

2007 through the creation of an exclusive team, extending

business focus from delivering quality products to effective

customer service. The objective was to ensure superior after-

sales support, including end-to-end solutions starting from

pre-sales guidance to service beyond the warranty period. The

Company established 14 service centres across different

Indian states, covering 85% of the total sales base. We have a

dedicated service team of 221 service professionals,

addressing service calls within 24 hours.

Highlights, 2008-09Introduced the Hindware Protection Plan (HPP) which is an

extended warranty programme covering breakdown repairs,

parts replacements and pre-determined preventive

maintenance schedules

Established annuity HPP relationships with brand-

enhancing clients like Infosys, Satyam, Gurgaon Toll Bridge

and Ranbaxy, among others

Introduced Hindware Home Solutions (HHS) in January

2009 to provide repair solutions for own and other branded

products

Introduced end-to-end solutions for bathroom renovation

(design, refurbishment); one-stop shop for customers, saving

costs and time

Expansion of service network with a national telephone for

call registration

Road aheadAchieve pan-India presence by 2009-10

Cater to over 10% of existing customers under the

Hindware Protection Plan, covering all products under this

plan by 2009-10

Establish two spare-part warehouses (Delhi and

Hyderabad) to reinforce the service infrastructure and

establish a spare parts network across all service centres

Commence a service guarantee programme, which is a

service assurance programme offering the ‘Hindware Care’

service at your doorstep within 24 hours of call registration

Start the Hindware Home Plumber (HHP) programme to

assign a plumber to all high net worth customers, ensuring

differentiated service

Emphasise re-orders from existing customers

Our end-to-end service module

Pre-sales consultancy

to guide customers

for selecting the

right product

Provide installation

facility immediately

after sales

Provide after sales

service to any product

problem within a 24-

hour response time

Guide customers with

best alternatives

upon completion of

product life

How customer-centricity will benefit HSIL Enhance brand image

Create customer loyalty

Create an income mix from products and services

Drive repurchase and renovation decisions

Lead to developing customer-specific insights for focused direct marketing opportunities

36 | HSIL Limited

Business segment review – 2

Container Glass Division

Robust profitability / Improved efficiency | Enhanced investments in capacity expansion and process

optimisation | Commissioning of greenfield Bhongir manufacturing facility

(Rs. mn)

2007-08 2008-09 Percentage change

Revenue (gross) 2,752.39 3,315.35 20.38

Operating profit 356.13 571.47 60.47

Capital employed 2,174.93 5,127.04 135.73

Return on capital employed (%) 9.75 9.00 (7.69)

Production (in mn pieces) 854.50 868.50 1.64

Sales (in mn pcs) 866.40 878.50 1.40

37HSIL Limited |

From the President’s desk

Q. How would you reviewthe performance of yourdivision?

A. The performance of our division

was encouraging as we witnessed a

60.47% growth in EBIDTA on account of

growing turnover and control on

production costs. Our realisations

increased during the year on account of

better customisation and differentiated

service at a time when an established

player ceased production.

Q. What was the rationalebehind establishing a newcontainer glassmanufacturing unit?

A. The rationale behind establishing

this plant was to cater to a rising demand

in southern India. Today, all soft drink

and beer manufacturers are meeting 85%

of their bottle requirements through

recycled bottles. Gradually, the availability

of recycled bottles will become difficult

owing to a rising labour and bottle

collection-cum-recycling cost. We intend

to dedicate a significant part of our

additional capacity to beer bottles as it is

strategically located near the beer hubs of

Aurangabad (Maharashtra), Bangalore

(Karnataka), Hyderabad and Sangareddy

(Andhra Pradesh).

Q. How is the industryscenario expected to evolve?

A. The overall market for container

glass is growing at an average 8-10%

with southern India reporting 20%

growth. The soft drink market, which

grew 28% in 2008-09, is expected to

remain buoyant. The soft drink

companies prefer glass bottles over

packaging alternatives on account of cost

effectiveness and re-use. Soft drink giants

(Coca Cola and Pepsi) are expected to

grow their capacities by 30% in 2009-10,

while the beer market and food market

are also growing rapidly at around 20%.

Besides, three breweries InBev, United

Breweries and Asia Pacific are expected to

establish presence in Andhra Pradesh in

the near future.

Q. What will be yourstrategy going forward?

A. We intend to optimise operations at

the new plant with an average capacity

utilisation of over 80% in the next fiscal

year, complemented by innovation, wider

export presence and broader product

portfolio.

“The performance of our division wasencouraging as we witnessed a 60.47%growth in EBIDTA on account of growingturnover and control on productioncosts.”Mr. Arun Kumar D, President, Container Glass Division, discusses the impact of the Rs. 2,765

mn greenfield container glass capacity expansion, successes, trends and the road ahead

38 | HSIL Limited


Operations

The Company intends to consolidate its position as the second largest container glass manufacturer in India.

Installed capacities (mn pieces per annum)

Location 2007-08 2008-09

Hyderabad 953.10 953.10

Bhongir – 690.00

Highlights, 2008-09Commissioned a Rs. 2,765 mn state-of-the-art greenfield

container glass manufacturing plant in March 2009 in just 13

months (industry benchmark 24 months), funded through

external borrowings and accruals. The plant USPs comprise:

Technology partnership with a leading European

container glass manufacturer

The largest container glass furnace in Asia

Modern batch-house technology from Zippe (Germany)

Furnace from Sorg (Germany), the best in the industry

Annealing lehrs from Pennekamp (Germany) for

enhanced bottle conditioning

IS bottle-making machines and automatic bottle

inspection machines from Emhart (Sweden)

Higher efficiency over the Hyderabad plant

Maximum throughput of up to 720 bottles per minute

per machine

Most modern and state-of-the-art container glass plant

in India

Operational management from a centralised,

computerised control room

Improved process efficiency through process

modernisation; reduced product changeover time by 20%

through computer controls

Maintained a finished goods inventory of 24 days

Developed 33 bottles, including 10 in the light-weight

segment addressing the food and liquor industries

Provided a value-added soft drink bottle labelling service,

enhancing realisations

Implemented the SAP platform for organisational

integration and process coordination

Entered into long-term contracts with raw material

suppliers, meeting over 50% of the requirement; optimised

sand cost through vendor deployment

Improved operational efficiency through better

maintenance and planning

Road aheadIntegrate the new Bhongir plant with existing operations in

2009-10 through SAP intervention

Shift the new plant from furnace oil to gas following gas

availability from the proximate natural gas pipeline, saving up

to 40% fuel costs

Implement the narrow neck press and blow (NNPB)

technology in the new plant to produce light-weight bottles,

20-40% lower in weight

Establish backward integration with raw material vendors

for uninterrupted supply

39HSIL Limited |

Marketing


The Company’s proactive marketing team tapped new

markets and customers. The division serviced 11% of

India’s container glass demand and 50% of southern

India’s container glass demand. The plant is strategically

located in Andhra Pradesh, the largest beverages, liquor

and beer consuming Indian state.

Highlights, 2008-09Added 46 brand-enhancing customers through

proactive marketing

Enjoyed a 15-nation footprint; exports accounted

for 15.96% of the division’s sales

Road aheadEnhance the footprint in Southeast Asia and Europe

Commence market mapping to identify geographies

with potential

Revenue mix (%)

Others 0.84

Alcoholic

beverages

34.50

Food products

25.48

Pharmaceuticals

24.45

Beverages 14.73

40 | HSIL Limited

Our speciality retail business – under the EVOK brand

41HSIL Limited |

The Company launched the EVOK brand of speciality Home

Fashion mega stores to provide a range of more than 12,500

home interior products – proprietary and outsourced – under

one roof in May 2008. This was done through HSIL’s wholly-

owned subsidiary Hindware Home Retail Private Limited. The

store formats comprise EVOK Living, EVOK Bath and EVOK

Kitchen and offer customised end-to-end home interior

solutions.

EVOK mega stores

Location Area Commenced

operations in

Crown Interiorz Mall, 25,000 sq. ft May 2008

Faridabad

West Gate Mall, New Delhi 20,000 sq. ft October 2008

Highlights, 2008-09Launched pilot operations with two EVOK Home Fashion

Mega stores

Started operations of dedicated projects division catering

to institutional segments – architects, builders, interior

designers and corporates – with end-to-end interior solutions

Executed a unique project for a nationally reputed

developer (developing a prestigious project of 500 residential

apartments in Delhi NCR), which involved interior design and

turnkey execution of their sample apartment in 25 days

StrengthsUSP: Positioned as the only comprehensive end-to-end

home interiors solution provider (interior design,

conceptualisation, product offering, installation, after-sale

services) in India

Product offering: Customers can mix-and-match from

over 12,500 products in our retail portfolio, spread across

diverse categories (home furniture, soft furnishings, home

décor and accessories, wall fashion, lighting, flooring,

modular kitchen and bath concepts) to evolve a personalised

mix

Product mix: Provides one of the widest product varieties

and world-class range under each category segment with

best-in-class value proposition, styles, warranty back-ups and

quality

Superior service: Provides affordable and convenient

interior design services with 3D walkthroughs, turnkey

installation services, post-care services, warranty services,

visual merchandising, consumer finance and various other

value-added service offerings

Compelling aesthetics: Positions stores to simulate real-

life conditions and inspirations (living rooms, bedrooms,

bathrooms, children’s rooms, home offices, kitchens, lounge

spaces)

Advanced software and equipment: Equips stores with

sophisticated Home-Viz interior design software comprising

3D simulation for virtual ‘design walk-through’, supported by

state-of-the-art infrastructure like LCD monitors, 3D products

library and professional interior designers

Road aheadLaunch four-five EVOK showrooms in 2009-10,

establishing a strong presence in the NCR and preparing for a

pan-India presence in the next few years

Achieve an aggregate 0.12 mn sq. ft of retail footprint by

2009-10

“We aim to escalate our revenues through acontinuous increment in our interior solutions mixand business segments across retail and institutionalmarkets. Our proactive initiatives will comprise:rightsizing of stores in terms of space allocation andcategory-wise performance; entering into long-termrevenue generation-linked lease models for storeexpansion; increased portfolio of value-addedproducts and services and high focus on widervalue generating product categories.”

D. K. Jairath, Chief Operating Officer, Hindware HomeRetail Private Limited

42 | HSIL Limited

People management

HSIL’s intellectual capital represents its most valuable

resource. The Company’s HR vision is to create a progressive

work culture, inculcate credible practices and foster the right

work ethics, leading to rising productivity and retention. The

Company added around 220 members in 2008-09; its 35-

year average employee age reflects an optimum mix of vigour

and experienced talent.

RecruitmentRecruited through consultants, head hunting, campuses

and web portals

Recruited MBA graduates from reputed B-schools in India,

graduate engineering trainees (GETs) and diploma holders

through campus placements from reputed institutes

TrainingStrengthened specialised training (team building, supply

chain management, sales conversion) and customer centricity

to retail executives

Enlisted trainers at the Bhongir plant for housekeeping,

material-handling and storage

InitiativesEnhanced manpower productivity through selective

rationalisation

Realigned business processes to enhance efficiencies

Restructured the sales force to increase customer focus

Developed key account managers for architects and

builders

Started the High Performance High Potential (HPHP)

programme to identify and develop employees into leaders

Commenced a retention bonus scheme – bonus amount

increases with loyalty quotient and tenure – for high

performers

Initiated open-house, in-plant discussions to encourage

transparency

Introduced suggestion boxes at plants, offices and EVOK

stores; selected suggestions were remunerated

Implemented key result areas, aligning corporate targets

with individual goals

Road ahead, 2009-10Emphasise sales training, commence behavioural and soft

skill training at the new Bhongir plant and reinforce SAP

training

Strengthen the focus on manpower rationalisation to

optimise manpower costs

Commence training for dealer executives on customer

service

43HSIL Limited |

Managing risks at HSIL Risk may be defined as the possibility that an event

(anticipated or unanticipated) can adversely affect business

objectives and goals. At HSIL, risk governance reconciles

estimation, control and quantification through an

institutionalised approach, which includes consistent

implementation and monitoring, supplemented by audits; the

management conducts regular reviews to arrest

abnormalities.

Institutionalised approach to risk management

Riskidentification

Riskmeasurement

Risk reporting Risk mitigation

Risk mitigation

This requires the Company

to assess the quality of risk

controls and identify issues

besides drawing up pre-

emptive action plans.

Risk measurement

This process involves measuring risk

using a combination of

Qualitative/quantitative models

Simulating operational value-at-risk

using modern techniques

Performing qualitative assessments

using the RCSA (risk controls and self

assessments) framework

Combining the quantitative and

qualitative approaches to report an

aggregated risk measure.

Risk reporting

Record risks and their

underlying causes and

controls; and associate

risks, causes and controls

to business lines/

operations/products

Risk identification

The Company first

identifies the key risks,

which can affect

business growth

44 | HSIL Limited

Risk explanation

Economic slowdown may

impact business growth

Risk mitigation

The Company’s two business segments – building

products and container glass – represent a diverse

income portfolio

India’s population is growing at 1.58%, strengthening

products demand

Growing awareness of hygiene and safety needs is

expected to drive demand

Risk identification

Economy risk

The Company may find it

difficult to mobilise

adequate working capital

Reduced debtors’ cycle from 58 days to 57 days Strengthened creditors’ cycle from 44 days to 49 days(excluding creditors for capital goods) Maintained a quick ratio of 1.24, despite a challengingyearReduced average inventory days from 91 days to 81 days Around 25.68% of the Company’s total debt comprisedworking capital loans and adequate working capitallimits were tied up

Liquidity risk

An inability to mobilise

low-cost funds may

jeopardise growth

The Company sustained a 1.59 net debt-equity ratio

The Company maintained a higher proportion of freereserves owing to an increase in profitability year on year

The Company raised funds through external commercialborrowings for the new container glass unit as bulk ofequipment were imported

The Company’s average debt cost declined from 8.26%to 6.00% in 2008-09 (including an amount of interestcapitalised)

Funding risk

The Company may not

possess adequate industry

experience

The Company enjoys a decades-rich industry experience

The Company’s average employee age was 35 years in

2008-09, an optimum mix of vigour and experienced

talent

The Company imparted specialised training, enhancing

skilled manpower

Experience risk

Derisking the corporate

45HSIL Limited |

Risk explanation

A de-growth in the

downstream industries

could hamper demand

Risk mitigation

The real estate and housing demand is expected to

remain buoyant, driving building products demand

Growing urbanisation and upward mobility will increase

demand

Increasing demand for affordable urban and rural

housing is expected to create downstream demand for

our mid-segment products

Replacement demand is expected to surge

Risk identification

Industry risk

Inconsistent product

quality might drive client

attrition.

The Division is certified by ISO:9001, ISO:14001 and

OHSAS: 18001 accreditations

Conforms to superior product quality – conformance to

Bureau of Indian Standards – aligned to European

standards

Approved by QAS (Australia), only one in India

Follows a series of 18 quality tests before the final

delivery to ensure minimum customer rejection rate

below 0.1%

Quality risk

Growing domestic and

international competition

can affect margins

Operates through established brands

Products enjoy extensive price points, catering to a wide

range of customers

Launched various brand promotion schemes to counter

competitors

Introduced customer service programmes to retain

enduring relationships with the customer

Competition risk

An inadequate distribution

network may handicap

growth

Possesses a distribution network of 1,136 authorised

dealers; nearly 70% exclusively sell Hindware products

besides 12,000 sub-dealers and retail outlets

Developed a separate Supply Chain Management

Division to overcome distribution challenges

Distribution risk

A limited product range

might affect customer

retention

Possesses the largest portfolio of sanitaryware products

in India, the annual increment outnumbering competing

brands

Diversified bathroom and kitchen products portfolio

Launched over 150 products in 2008-09, 60% in the

premium segment

Product portfolio risk

De-risking the Building Products Division

46 | HSIL Limited

Risk explanation

Demand slowdown in the

downstream industries

could impact divisional

profitability

Risk mitigation

The Division’s diversified products portfolio caters to the

soft drink, alcoholic beverage, food processing, chemical

and pharmaceutical sectors

The Division’s plant is strategically located in Andhra

Pradesh, largest consumer of beverages, liquor and beer

in India

Rising consumption in India is likely to significantly drive

bottles demand

Risk identification

Industry risk

Inadequate operations can

affect production

Commissioned a fully integrated state-of-the-art

manufacturing facilities with an installed capacity of

690 mn pieces

Process modernisation initiative helped improved

input/output ratio

Formulated strategy to maintain uninterrupted raw

material supply at reasonable prices

Controlled cost of production despite fuel price increase

by manufacturing light-weight bottles

Operations risk

Inconsistent product

quality may erode clients

The Division is ISO 9001 and ISO 14001 certified

Possesses sophisticated annealing and inspection lines,

ensuring optimum quality outputs

Reduced wastage and rejects to less than 2% through

stringent process control and quality checks

Quality risk

An over-dependence on a

few clients can hamper

growth.

Possesses a wide and distinguished portfolio of brand-

enhancing customers

No single client accounted for more than 10% of the

division’s total sales

Added more than 46 clients in 2008-09

Developed 33 new bottles including 10 in the light-

weight category

Client concentration risk

Glass containers can be

replaced by alternative

packaging solutions

Glass is preferred over PET and other packaging

alternatives for a number of reasons: can be recycled;

provides better barrier against oxygen; prevents food

contamination; can carry printed advertisements and

have been proved to be hygienic and non-carcinogenic

with corresponding approvals by the US FDA

Product substitution risk

De-risking the Container Glass Division

47HSIL Limited |

Finance review

Key financial highlightsHSIL achieved a significant annual gross revenue growth of

14.82% from Rs. 5,840.38 mn to Rs. 6,706.02 mn

With strong revenue growth and cost containment, HSIL

realised a 27.11% increase in EBITDA from Rs. 887.33 mn to

Rs. 1,127.89 mn

A notable increase of 8.42% in EBIDTA margin to 18.47%

was observed

A 40.58% increase in cash profit from Rs. 542.09 mn to

Rs. 762.06 mn was booked

The Container Glass Division demonstrated a 20.38%

revenue surge from Rs. 2,752.39 mn to Rs. 3,313.35 mn

Building Products Division contributed Rs. 3,378.15 mn

revenue in 2008-09, a 10.97% growth compared to

Rs. 3,044.33 mn in 2007-08

RevenuesThe Company registered a 14.82% growth in total revenues

owing to effective market positioning, successful and timely

conclusion of sales and enhanced business focus on the

value-added premium products. The Building Products

Division and the Container Glass Division contributed 50.37%

and 49.41% to the total revenues, resulting in revenue

increase by 10.97% and 20.38% over the previous year. As

indicated in the corresponding graph, both business divisions

nearly doubled their revenues over a period of four years.

Business segments gross revenue 20

04-0

51,

709.

271,

636.

12

2,35

9.23

2,07

5.35

2,69

1.78

2,61

7.93 3,

044.

332,

752.

39

3,37

8.15

3,31

3.35

2005

-06

2006

-07

2007

-08

2008

-09

(Rs. mn)

Building Products Container Glass

48 | HSIL Limited

Building Products Division: The 10.97% increase in revenue

from this division was attributed to the following reasons:

Revenues from premium products increased, enhancing

average realisations by 6.3%.

Container Glass Division: Revenues for this division grew

20.38% from Rs. 2,752.39 mn to a record of Rs. 3,313.35

mn in 2008-09, owing to an increase in product prices and

diversification towards premium products catering to the

carbonated drinks and pharmaceutical segments. Besides, a

1.64% increase in production was fuelled by de-

bottlenecking, leading to higher sales.

CostsTotal costs (excluding interest, depreciation and tax) increased

17.57% over the previous year. However, as a percentage of

total income, costs increased by a marginal 0.27%. Enhanced

in-process innovation, improved capacity utilisation, increased

realisation and cost rationalisation nominally increased

EBIDTA.

Raw materials: Raw material cost increased marginally by

0.63% to 16.16% of total income.

Power and fuel: Energy costs increased 10.77% in quantum

terms. However, as a proportion of total income, it declined

by 5.52% owing to a few power-saving measures:

- Better production planning

- Reduction in batch changes

- Manufacture of lighter container varieties

- Use of waste heat from kilns

- Optimisation of the firing cycle

Employee costs: There was a 13.43% increase in employee

cost during 2008-09 owing to enhanced recruitment and a

restructured compensation package. Employee cost, as a

proportion of total income decreased by 3.26%.

MarginsThe Company increased its EBIDTA margin by 8.42% through

higher asset utilisation, improved product mix, enhanced

production, better productivity and higher efficiency.

Additionally, the Company responded through proactive

management of personnel cost, power and fuel cost, as well

as rationalising other manufacturing and selling expenses.

The Company also undertook an aggressive Rs. 91.94 mn

advertisement campaign to promote its Hindware brand,

which significantly contributed to improved awareness. The

Building Products Division enforced the cash-and-carry policy,

significantly reducing credit-based sales, reducing credit

exposure and improving sales quality. Despite a growth in

sales, a reduction in outstanding debtors was observed.

FundsEquity capital: The Company’s equity capital remained at

Rs. 110.05 mn, with no equity dilution during 2008-09.

The equity capital comprised 55,025,508 equity shares of

Rs. 2 each.

Reserves: The Company’s reserves increased from

Rs. 2,096.74 mn to Rs. 2,395.26 mn owing to profits earned

Individual cost heads as a proportion of total income

Cost heads Percentage of total income

2007-08 2008-09

Goods purchased for resale 15.26 14.95

Raw material 16.06 16.16

Stores and spares 3.28 3.35

Power and fuel 21.07 19.90

Employee costs 10.59 10.24

Other manufacturing expenses 5.78 5.52

Administrative and selling expenses 14.60 14.08

Interest 3.08 2.68

Depreciation 4.98 4.49

Tax 3.08 2.68

49HSIL Limited |

during the year in addition to transfers from the previous year

(net of dividend paid and tax thereupon). The Company did

not have any revaluation reserve. Almost 99.33% of its total

reserves comprised free reserves. The Company’s book value

of shares strengthened from Rs. 40.10 to Rs. 45.53.

Loan funds: The Company’s total debt increased 132.36%

to Rs. 4,690.54 mn, primarily owing to loans taken for the

new glass project and meeting the increased working capital

requirements to match business growth. Despite an increase

in loan funds, the Company remained attractively geared

with the ratio of long-term debt to equity at 1.24:1.

Besides, an interest cover of 6.78 ensured adequate credit

worthiness.

Interest cover

Fixed assetsDuring 2008-09, the Company added Rs. 1,980.54 mn to its

fixed assets. Addition to plant and machinery accounted for

Rs. 1,136.23 mn (57.37% of the total addition), establishing

the new glass plant and balancing equipment to enhance

production through de-bottlenecking.

Gross turnover to net block ratio

InvestmentsThe Company’s investments increased 22.12% as on March

31, 2009 (Rs. 427.53 mn) compared with that on March 31,

2008 (Rs. 350.10 mn), mainly owing to investment in its

100% subsidiary (Hindware Home Retail Private Ltd).

Working capitalWorking capital, at the end of the financial year, increased

from Rs. 1,596 mn to Rs. 1,907.54 mn owing to the

following factors:

Increase in debtors for the Container Glass Division was

observed, following a record high sales. The Company’s

debtors comprised reputed institutional buyers from the

pharmaceutical, FMCG and liquor sectors with a negligible

record of payment default

Working capital outlay, as a proportion of total capital

employed, declined from 34.95% to 25.04% in 2008-09. The

current and quick ratios were maintained at the levels of the

previous year, indicating stable short-term liquidity

Liquidity ratio

InventoryThe Company’s inventory constituted around 39.71% of thecurrent assets in 2008-09 end. Total inventory increased 2.25% at year end to Rs. 1,469.96 mn. However, the Building ProductsDivision observed an inventory-turnover tenure decline from 125days to 108 days during the year, attributable to:

Changing sales policy in the Building Products Division

Reducing production in the Building Products Division

Reducing inventory of finished goods

Maintaining an optimum stock of raw materials andlimited volumes of packaging material

Servicing an increased demand for outsourced products

ReceivablesReceivables constituted 27.76% of the current assets at the end of the year. Receivables increased 12.99% to Rs. 1,027.73 mn in 2008-09. The debtors’ cycle marginallyimproved from 58 to 57 days, despite a liquidity crunch.

CreditorsCredit increased from Rs. 976.57 mn to Rs. 1,640.95 mn in 2008-09, owing to increased business activity. Creditors’cycle increased from 44 days of turnover to 49 days(excluding creditors for capital goods).

TaxTax liability (current, deferred and fringe benefit) increasedfrom Rs. 162.80 mn to Rs. 166.25 mn.

2.06

2.43

1.24

1.14

50 | HSIL Limited

1. R.K. SomanyChairman and Managing Director Chairman and Managing Director ofthe Company having 54 years ofworking experience, has prestigiousfellowship of the Institute of Ceramics,U.K., fellow member of CharterManagement Institute, Emiratesmember of American Ceramic Societyand member of Institute of Materials,Minerals and Mining, U.K. and LifeFellow of the All India ManagementAssociation (AIMA). He has helpedBureau of Indian Standards to developquality standards for SanitarywareIndustry. He is presently member ofEmployees State Insurance Corporation(ESIC) and convener of DomesticSanitary Appliances & Accessories SubCommittee. He is a past President ofthe ASSOCHAM, PHD Chambers ofCommerce and Industry (PHDCCI) andEmployers’ Federation of India, pastChairman of Council of IndianEmployers and founder President ofBahadurgarh Chamber of Commerceand Industry (BCCI).

Promoter of Company and Directorsince 09.01.1988

2. Sandip SomanyJoint Managing DirectorCommerce graduate and a diplomaholder in ceramic manufacturingtechnology from the US, he isassociated with the ceramics and glassindustry for 24 years. He is a ManagingCommittee member of PHD Chamberof Commerce and Industry, Federationof Indian Chambers of Commerce andIndustry (FICCI) and ASSOCHAM andmember of the All India GlassManufacturers Association. He is alsothe Chairman of INCOSAMA andmember of the Delhi Chapter of theYoung Presidents’ Organisation andDelhi Achievers Round Table.

Associated with the Company since01.10.1985 and Director since11.11.1994

3. Ashok JaipuriaIndependent DirectorQualified in business administrationand marketing sciences, he is Chairmanand Managing Director of Cosmo FilmsLtd since 1981 and also the Chairmanof Cosmo Ferrites Ltd. He startedCosmo Films to manufacture biaxiallyoriented polypropylene (BOPP) film witha mere 800 TPA initial capacity andtransformed it into the largest domesticBOPP film manufacturer and exporter.He is also a member of the ExecutiveCommittee of the FICCI and Presidentof the Golf Foundation – a charitablesociety which helps under-privilegedpotential golfers in India.

Director since 15.05.2004

4. Binay KumarIndependent DirectorWith a degree in business science, he isthe Chairman of Banaras House Ltd.and UP Hotel Clarks Ltd. He is also thePresident of Indo-Polish Chamber ofCommerce & Industry, member of

Board of Directors

51HSIL Limited |

Indo-German Chamber of Commerceand Executive Committee of FICCI, lifemember of the Indian National Trustfor Art and Cultural Heritage andConfederation of Asian Chamber ofCommerce & Industry, Taiwan. He isformer President of Federation ofIndian Export Organisations, RotaryClub of Delhi Midtown, Indo-AmericanChamber of Commerce & Industry,Indo-French Chamber of Commerceand Industry, PHD Chamber ofCommerce and Industry.


5. G.L. SultaniaIndependent DirectorAn FCA, FCS and consultant byprofession, he is a member of CapitalMarket Committee of the Merchants’Chamber of Commerce and a FICCInominated member of the CostAccounting Standard Board of ICWAI.He is a member of the Company’sShareholders/ Investors GrievanceCommittee.

Associated with the Company since15.11.1971 and Director since9.01.1988

6. N.G. KhaitanIndependent DirectorAn attorney-at-Law, advocate andnotary public, appointed by theGovernment of India, he is practicing inthe Calcutta High Court and in theSupreme Court of India. He is also asenior partner at Khaitan & Co., one ofIndia’s oldest law firms. He holds thereputation of being a committeemember of the Federation of IndianChambers of Commerce and Industry(FICCI), Vice-President of Indian Councilof Arbitration, New Delhi andcommittee member of Bharat Chamberof Commerce, Calcutta. He is also a

Director in various other companiesand is a member of the Company’sAudit Committee and Shareholder/Investor Grievance and RemunerationCommittee.


7. S.B. BudhirajaIndependent DirectorA management consultant andmechanical engineer by profession, hewas the youngest ever ManagingDirector of Indian Oil Corporation Ltd.He has also been a former ManagingDirector of IBP, Balmer Lawrie & Co.Ltd, Indian Oxygen Ltd and Director ofthe Al-Futtaim Group, UAE. He alsoholds the distinction of being a formerPresident of the Institute ofManagement Consultants of India andthe Indian Chamber of Commerce andex-Executive Director of ManagementDevelopment Institute (MDI), Gurgaon.He was a fellow of the All IndiaManagement Association and Instituteof Management Consultants of Indiaand an ex-member of a World Bankteam that studied the restructuring ofthe Haryana power sector. He is theChairman of the Company’sRemuneration Committee andShareholders’/Investors’ GrievanceCommittee and member of the AuditCommittee.


8. Vishal K.K. MarwahaInvestor DirectorA chartered accountant associated with renowned international banks andleading private equity investors, he wasa Director of HSBC Private EquityManagement (Mauritius) Ltd andBusiness Head for management of the private equity operation for theUS$60-mn Indian dedicated fund. He is a representative of the Company’sinvestor HPC (Mauritius) Ltd, Mauritius(Henderson) and associated with theHenderson Equity Partners Ltd (India),as Director for sourcing investments inSouth Asia. He is a member of theCompany’s Audit Committee.


9. V.K. BhandariIndependent Director FCA, ex-banker and former GeneralManager of the Central Bank of India,he has over 30 years’ worth ofexperience in the banking industry andwas the former head of credit, creditmonitoring, treasury, investment, fundsmanagement, merchant banking andinternational banking divisions. He isthe Chairman of the Company’s AuditCommittee and member ofRemuneration and Shareholders’/Investors’ Grievance Committee.


1 6

5984

723

52 | HSIL Limited

Five-year financial summary

(Rs. mn)

2004-05 2005-06 2006-07 2007-08 2008-09

Equity Share Capital 93.56 93.56 110.05 110.05 110.05

Reserve and Surplus 840.08 1,028.89 1,222.75 1,412.68 1,711.20

Share Premium 182.73 171.74 684.06 684.06 684.06

Secured Loans 946.34 812.97 1,649.86 1,122.24 4,315.06

Unsecured Loans 760.98 1,580.80 279.45 896.38 375.48

Deferred Tax Liability 325.67 317.06 348.53 340.98 423.09

Total 3,149.36 4,005.02 4,294.70 4,566.39 7,618.94

Gross Block 3,363.86 3,655.28 4,059.54 4,430.53 6,267.74

Less: Depreciation 1,374.60 1,606.55 1,837.43 2,091.54 2,235.38

Net Block 1,989.26 2,048.73 2,222.11 2,338.99 4,032.36

Capital Work-in-Progress 13.44 38.03 220.29 281.30 1,251.51

Investments 235.58 577.96 484.15 350.10 427.53

Current Assets

Inventories 752.65 1,082.73 1,218.18 1,437.63 1,469.96

Sundry Debtors 706.81 916.55 770.39 909.58 1,027.73

Cash & Bank 107.60 123.95 86.06 121.25 792.72

Loans & Advances 94.64 141.27 272.75 241.43 403.08

Other Current Assets 9.80 11.89 0.91 1.00 8.32

Current Liabilities

Sundry Creditors 549.01 612.77 667.39 630.56 1,251.15

Provisions 65.91 98.32 89.08 138.32 153.32

Other Liabilities 145.50 225.00 223.67 346.01 389.80

Net Current Assets (Working Capital) 911.08 1,340.30 1,368.15 1,596.00 1,907.54

Total 3,149.36 4,005.02 4,294.70 4,566.39 7,618.94

53HSIL Limited |

(Rs. mn)

2004-05 2005-06 2006-07 2007-08 2008-09

Gross Turnover 3,315.57 4,383.18 5,267.50 5,762.74 6,614.57

Less: Excise Duty 344.43 417.96 489.86 554.36 508.14

Net Turnover 2,971.14 3,965.22 4,777.64 5,208.38 6,106.43

Other Income 35.44 74.17 62.24 77.64 91.45

Stock Variation 138.02 296.87 95.37 197.59 -22.65

Total 3,144.60 4,336.26 4,935.25 5483.61 6,175.23

Goods Purchased for Resale 398.47 557.56 742.64 806.48 926.62

Power and Fuel 584.67 849.47 934.56 1,113.69 1,233.68

Manufacturing, Administrative & Other Expenses 1,202.06 1,720.89 1,921.98 2,116.44 2,252.19

Employee Cost 352.56 423.65 489.15 559.67 634.85

Total Expenses 2,537.76 3,551.57 4,088.33 4,596.28 5,047.34

EBIDTA 606.84 784.69 846.92 887.33 1,127.89

Interest 108.92 129.34 142.52 163.03 166.36

Gross Profit 497.92 655.35 704.40 724.30 961.53

Depreciation and Amortisation 208.18 251.35 248.25 263.15 278.43

PBT before Exceptional Items 289.74 404.00 456.15 461.15 683.10

Exceptional Items 0.00 0.00 0.00 -11.85 -115.33

Profit after Exceptional Items 289.74 404.00 456.15 449.30 567.77

Income Tax 15.30 150.41 133.56 170.36 84.14

Deferred Tax 83.19 -4.56 31.47 -7.56 82.11

Profit after Tax 191.25 258.15 291.12 286.50 401.52

Cash Profit 482.62 504.94 570.84 542.09 762.06

54 | HSIL Limited

Ratios analysis

(Rs. mn)

2004-05 2005-06 2006-07 2007-08 2008-09

Networth (Equity capital+Reserves & Surplus) 1,116.37 1,294.19 2,016.86 2,206.79 2,505.31

Capital Employed (Net Worth+Loans+Def.Liab.) 3,149.36 4,005.02 4,294.70 4,566.39 7,618.94

Average Capital Employed 2,843.55 3,577.20 4,149.86 4,430.55 6,092.67

Average Loan Funds 1,434.73 2,050.55 2,161.54 1,973.97 3,354.58

Cash Profit 482.62 504.94 570.84 542.09 762.06

Net Domestic Turnover 2,547.22 3,409.68 4,124.06 4,680.76 5,499.79

Export Turnover 423.92 555.54 653.58 527.62 606.64

Dividend (%) 55.00 65.00 75.00 75.00 80.00

Market Price - (Rs.) (End of year at NSE) 118.25 148.35 89.45 43.05 28.50

Total Dividend Payout (including Dividend Tax) 58.18 69.34 91.04 96.57 103.00

Retained Earnings 133.07 188.81 200.08 189.93 298.52

Balance Sheet Ratios2004-05 2005-06 2006-07 2007-08 2008-09

Return on Networth (%) 17.13 19.95 14.43 12.98 16.03

Return on Average Capital Employed (%) 10.56 10.83 10.45 10.15 9.32

Debt Equity Ratio 1.53 1.85 0.96 0.91 1.87

Debtors Cycle (Days) 78 76 53 58 57

Creditors Cycle (Days) 67 56 51 44 75

Inventory Cycle (Gross Sales) 83 90 84 91 81

Net Current Assets Turnover (Days) 112 123 105 112 114

Turnover/Net Current Assets 3.26 2.96 3.49 3.26 3.20

Turnover/Inventory 4.41 4.05 4.32 4.01 4.50

Turnover/Capital Employed 1.05 1.09 1.23 1.26 0.87

Turnover/Net Block 1.67 2.14 2.37 2.46 1.64

Net Block/Capital Employed 0.63 0.51 0.52 0.51 0.53

Working Capital/Capital Employed 0.29 0.33 0.32 0.35 0.25

55HSIL Limited |

Profit & Loss Account Ratios (in %)

2004-05 2005-06 2006-07 2007-08 2008-09

Domestic Sales/Turnover 85.73 85.99 86.32 89.87 90.07

Export Sales/Turnover 14.27 14.01 13.68 10.13 9.93

Excise/Turnover 11.59 10.54 10.25 10.64 8.32

Margins

EBDITA Margin 20.42 19.79 17.73 17.04 18.47

Gross Profit Margin 16.76 16.53 14.74 13.91 15.75

Pre-Tax Profit Margin 9.75 10.19 9.55 8.63 9.30

PAT Margin 6.44 6.51 6.09 5.50 6.58

Expenses

Goods Purchased for Resale/Total Expenses 15.70 15.70 18.16 17.55 18.36

Power/Total Expenses 23.04 23.92 22.86 24.23 24.44

Manufacturing, Adm. Expenses/Total Expenses 47.37 48.45 47.01 46.05 44.62

Employee Cost/Total Expenses 13.89 11.93 11.96 12.18 12.58

Interest cover (times) 5.57 6.07 5.94 5.44 6.78

Cost of Debt 7.59 6.31 6.59 8.26 4.96

Per Share Data (Rs.)

EPS (Face value Rs. 2) 4.09 5.52 5.55 5.21 7.30

CEPS (Face value Rs. 2) 10.32 10.79 10.88 9.85 13.85

Book value 23.87 27.67 36.65 40.10 45.53

56 | HSIL Limited

Directors’ Report

Your Directors are pleased to present the 49th Annual Report and Audited Financial Statements of your Company for the

year ended March 31, 2009.

Financial results (Rs. mn)

Parameters 2008-09 2007-08

Gross revenue 6,706.02 5,840.38

Less excise duty 508.14 554.36

Net revenue 6,197.88 5,286.02

EBITDA 1,127.89 887.33

Profit before taxation and extraordinary items 683.10 461.15

Less extraordinary item 115.33 11.85

Profit before taxation 567.77 449.30

Less provision for taxation 166.25 162.80

Profit after taxation 401.52 286.50

Add balance brought forward 916.24 756.31

Amount available for appropriation 1,317.76 1,042.81

Appropriations

Transferred to General Reserve 50.00 30.00

Proposed dividend on equity shares 88.04 82.54

Corporate dividend tax 14.96 14.03

Balance carried forward 1,164.76 916.24

57HSIL Limited |

Analysis of performanceBuilding products industry which is closely connected with

construction industry, observed strong growth in the first

half of the fiscal year and suddenly dropped in September.

The financial crisis, as signaled by the Lehmans collapse,

coupled with Satyam ordeal had a deep and widespread

impact on the Indian economy and our business segments.

Despite these depressing scenarios your Company reported

a 14.82% increase in gross revenue to Rs. 6,706.02 mn

and a significant increase of 27.11% in EBITDA to

Rs. 1,127.89 mn during 2008-09, on account of the

following:

10.97% growth in revenue from the Building Products

Division was achieved despite economic slowdown and

recession in real estate industry. Your Company was able to

sustain growth through operational efficiencies and

strengthening our product portfolio with the launch of new

products in the premium sanitaryware range, faucets and

wellness product segments

20.38% growth in revenue from the Container Glass

Division was achieved through improved process efficiency,

increase in contribution of value-added products catering

to the soft drinks, liquor and pharmaceutical customers

Your Company achieved EBIDTA margin of 18.47% and

increase in cash profit by Rs. 219.97 mn during the year.

This was made possible due to the following initiatives:

Improved sales realization through premium pricing as a

response to market and economic activities

Reduction in operational costs as a percentage of sales

Improved cash flow through enforced policy on

receivables outstanding

Cost reduction through productivity enhancements &

across the board cost rationalisation

Process innovation and technology upgradation

indirectly supported cash improvements

The inflationary trend in input costs (power, fuel and raw

materials) was offset by better production planning,

reduced number of batch changes and production of

lighter container glass products.

During 2008-09, there was no fresh issue of equity shares.

However, the total debt increased by 132.36% to

Rs. 4,690.54 mn, to fund the setting up of new glass

unit at Bhongir. Despite this, the Company was able to

maintain the long term debt to total equity ratio at 1.24:1

and an interest cover of 6.78 ensuring adequate credit

worthiness.

Division-wise review Building Product Division: The sustainable growth of

10.97% in revenue to Rs. 3,378.15 mn, even though in

later part of the year our industry was affected by

economic slowdown erupted by the global financial crisis.

Container Glass Division: The division attained a

remarkable growth of 20.38% in total revenue to

Rs. 3,313.35 mn during the year, driven by better

production efficiencies, reduction in bottle-weights and

cost management.

Major Initiatives during the year Building Product Division:

Increased plant efficiency with customer rejection rate of

less than 0.1% through a quality-checking discipline of 18

tests before final delivery

58 | HSIL Limited

Increased automation of the casting process to improve

material and manual productivity

Reduced raw material and finished goods inventory,

optimising the working capital cycle

Established a supply chain management department to

integrate raw material procurement, warehousing, logistics,

demand planning, order processing and depot

management

Developed value-added products with reduced water

usage and strengthened product design, aesthetics and

surface finish

Introduced various customer service schemes to

strengthen our brand image

Container Glass Division:

Commercial operations of a greenfield plant in Bhongir,

Andhra Pradesh, commenced on March 30, 2009. We

commenced a Rs. 2,765 mn state-of-the-art new plant in a

short period of 13 months against industry benchmark of

24 months

Increased soft drink bottle production

Improved inventory management by maintaining it for

24 days

Entering into long-term contracts with raw material

suppliers to reduce the production cost

Improved process efficiency through modernisation and

reduction of wastages through process control

Enlarging product basket by developing 33 varieties of

bottles including 10 light weight bottles

Management focusHSIL is a leading player in both Building Products and

Container Glass industry catering to the customers growing

demand. It endeavors to maintain a long-term association

with the customers by satisfying their evolving needs.

The management’s focus is on enhancing the business

model to serve customers 24x7, to grow and sustain in the

expanding domestic / international market. The aim is not

only to serve the customers but to maintain a life-time

contact.

Its focal point is to increase production efficiencies, people

productivity, process controls and innovative practices, in

order to achieve highest standards of good governance

prevalent in the industry.

Your Company is achieving sustainable growth by providing

value-added services to its customers, dealer network,

employees and the environment at large.

DividendYour Directors recommend for the consideration of the

members, at the Annual General Meeting, payment of

dividend of Rs. 1.60 per share on equity shares of face

value of Rs. 2 each for the year ended March 31, 2009,

the total outgo including tax thereon will be Rs.103 mn.

AppropriationsIt is proposed to transfer Rs. 50 mn to the General Reserve

while Rs. 1,164.76 mn is proposed to be retained in the

profit and loss account.

DirectorsMr. Ashok Jaipuria, Mr. G. L. Sultania and Mr. V. K.

Bhandari are liable to retire by rotation and being eligible,

have offered themselves for re-appointment.

Share capitalDuring 2008-09, there was no change in the Company’s

share capital.

ERP programThe Company implemented SAP on the ERP platform in

59HSIL Limited |

Container Glass Division also, which benefited the Company

in managing inventory and debtors with the overall effect

of enhancing cost efficiencies.

Corporate GovernanceYour Company complies with all mandatory requirements

as stipulated under Clause 49 of the Listing Agreement

with the Stock Exchanges. The Corporate Governance

Report and a certificate from the Company’s statutory

auditors, regarding compliance of the conditions of

Corporate Governance, are attached with the report and

form an integral part thereof.

Further, the Management Discussion and Analysis report is

appended to and forms a part of the Annual Report.

Wholly owned subsidiariesThe Company formed one wholly-owned subsidiary, HSIL

Associates Ltd., on September 4, 2008, in India and

another wholly-owned subsidiary, Halis International Ltd.,

On January 14, 2009 in Mauritius. As per the requirement

under Section 212 of the Companies Act, 1956, the Annual

Report of the Company’s subsidiaries, AGI Glasspack Ltd.,

Hindware Home Retail Private Ltd. and HSIL Associates Ltd.

for the year ended March 31, 2009, is attached to the

Company’s balance sheet. Also, the statement as required

under Section 212 (3) is annexed to this Report.

Fixed deposit Your Company did not invite or accept any fixed deposit

pursuant to provisions of Section 58A of the Companies

Act, 1956, during the year.

Statutory disclosuresParticulars of employees as required under Section 217(2A)

of the Companies Act, 1956, read with Companies

(Particulars of Employees) Rules, 1975, are annexed to this

Report.

Awards and recognitionThe Company was recognised through following awards

Selected as ‘Business Superbrand India 2008’

Reader Digest ‘Trusted Brands Platinum Award’

4Ps India's ‘100 most Valuable Brands’

IIPM ‘Most Admired 100 companies’

Mera Brand India’s ‘Most Preferred Brand’

Elle Deco ‘International Design Award 2008’

Name changeYour Company is known and recognised by its abbreviated

name ‘HSIL’ among the Company’s numerous dealers, sub-

dealers, distributors, bankers, financial institutions and the

ultimate users/consumers. Therefore, we thought it was

advisable to change the name of the Company to ‘HSIL

Limited’. After obtaining your consent and compliance of

all statutory formalities, the name change became effective

from March 24, 2009. This intimation was sent to all

concerned.

Directors’ responsibility statementpursuant to Section 217 (2AA) of theCompanies Act, 1956Your Directors hereby confirm that in the preparation of

annual accounts, the applicable accounting standards were

followed along with proper explanation relating to material

departures.

Your Directors selected such accounting policies and

applied them consistently and made judgments and

estimates that were reasonable and prudent so as to give a

true and fair view of the state of affairs of your Company

at the end of the financial year and of the profit of your

Company for that period.

Your Directors took proper and sufficient care for

maintaining adequate accounting records in accordance

with the provisions of this Act for safeguarding the assets

of your Company and for preventing and detecting fraud

and other irregularities.

Your Directors prepared the annual accounts on a going

concern basis.

Conservation of energy, technologyabsorption and foreign exchange earnings/ outgoInformation required under Section 217(1) (e) of the

Companies Act, 1956, read with the Companies (Disclosure

of Particulars in Report of the Board of Directors) Rules,

1988, is annexed to this Report.

AuditorsThe auditors M/s Walker, Chandiok & Company, Chartered

Accountants, will hold office until conclusion of the

ensuing Annual General Meeting, and are recommended

for reappointment. Auditors have confirmed that their re-

appointment, if made, shall be within the limits laid down

under Section 224 (1B) of the Companies Act, 1956.

The notes to the accounts referred to in the Auditors'

Report, are self-explanatory and therefore, do not require

any further comments under Section 217 (3) of the

Companies Act, 1956.

Internal audit The Company has an adequate system of internal control to

ensure compliance with policies and procedures. Internal

audit of all the units/divisions of the Company is regularly

carried out to review the internal control systems. The

internal auditors evaluate the adequacy of internal controls

and independence of the audit is ensured by their direct

reporting to the Audit Committee of the Board.

Appreciation Your Directors wish to place on record their sincere

appreciation for the support and cooperation extended

by all dealers, financial institutions, banks, customers,

employees and all the stakeholders of your Company

and look forward to their continued support

in the years ahead.

For and on behalf of the Board of Directors

Place: Gurgaon Rajendra K Somany

Date: May 23, 2009 Chairman and

Managing Director

60 | HSIL Limited

61HSIL Limited |

Annexure to Director’s Report

A. Conservation of energy 1. Energy conservation measures taken

Rationalising use of LPG vaporiser

Modification to Lehrs to optimally suit bottle-production

requirements from I. S. machines

Rationalisation of compressed air pressure requirements

for various equipment

Predictive maintenance of compressed air coolers, dryers

and air lines

Rationalisation of pumping in the water pumping

systems

Modification of the heat tracing practice for large oil

storage tanks

Installation of additional capacitor banks resulting in

improved power factor

Increased kiln utilisation for firing pieces by stopping one

kiln and dense loading in other kilns

Increased dryer loading by effective utilisation of trolleys

inside the dryer

Waste heat utilisation for ware dryers

Reduced the material losses by corrective and preventive

methods in various stages of the process and implementing

SOPs

Installation of energy efficient compact fluorescent

lamps and mercury lamps, saving 8% power; installed

energy saving devices in the compressors to save 6%

power; installed variable frequency drives to reduce power

consumption

2. Additional investments and proposalsReplacement of old motors with energy saving motors

resulted in energy saving

3. Impact of the above measures on energyconservation and cost of production

Reduction in electrical energy consumption

Reduction in fuel consumption per unit

Action taken on the cast floors and shop floor helped

conserve power consumption per MT

4. Total energy consumption and energyconsumption per unitTotal consumption and energy consumption per unit of

production, in respect of Container Glass Division, as per

Form 'A' was as under:

62 | HSIL Limited

Form ‘A’Particulars 2008-09 2007-08

A) POWER AND FUEL CONSUMPTION

1. a) Electricity (purchased)

units (KWH) 73,228,223 74,013,294

Total amount (Rs.) 196,571,944 227,795,519

Rate / unit 2.68 3.08

b) Own generation

Units (KWH) 1,728,289 255,826

Unit per LT of fuel oils 4.08 3.03

Rate / unit 6.44 9.37

c) Total (A + B)

Units (KWH) 74,956,512 74,269,120

Total amount (Rs.) 207,702,125 230,193,595

Rate / unit 2.77 3.10

2. Fuels (coal, HSD, LDO, LPG and LSHS)

Quantity in MT 25,185 24,056

Value (Rs.) 731,190,522 557,143,691

Rate / MT 29,033 23,160

B) CONSUMPTION PER MN PIECES OF PRODUCTION

Glass bottles (production in mn pieces) 868.53 854.50

Electricity (KWH) 86,303 86,915

Fuels (coal, HSD, LDO, LPG and LSHS) 29.00 28.15

B. Technology absorption1. Research and Development

a) Specific areas in which R&D was carried out by the

Company and benefits derived from it are

Building Products Division :

Development work on enhancing cosmetic gloss and

luster of the glaze and finish

Development of world class enhanced star white colour

glaze benchmarking the best worldwide products

Development of metallic glaze (copper texture)

Development of special anti-bacterial glazes

incorporating Nano technology to produce ‘Germi Clean’

range of products

Development of EWC Green with special water

conservation features of 2/4 litre flush

Development of new urinals:

i) Enigma μ sense and Alexa-e-sense – Both have water

conservation feature through remote sensing and auto

flushing

ii) New aqua free-water less urinal was re-manufactured

63HSIL Limited |

incorporating a different and better waste treatment

cartridge

Successful volume production of Crystal extended WM

closet

Design and development of new one piece closets like

Cedar & Fusion for the high-end market

New carousal spraying system: An additional carousel

was introduced for spraying

Container Glass Division:

Search for cheaper alternate raw materials and sourcing

of the same in the face of depletion of raw materials is in

progress

b) Future plan of action

Development of low-cost and user-friendly concealed

water closets

Continuous process innovation for cost reduction and

cosmetic finish enhancement

Development of innovative high-end products, keeping

water conservation in focus

Introducing “Germi Clean” feature in all high-end

products

2. Technology absorption, adaptation andinnovationa) Efforts made towards technology absorption, adaptation

and innovation

Process innovations with the objective of reducing raw

material and fuel costs

New products were introduced with better aesthetics

and utility

Innovative designs competing with international

standards

b) Benefits derived as a result of the efforts above

Cost reduction and new product development to satisfy

consumer needs

Product improvements through convenient and

environment-friendly production

c) Technology import

No technology was imported during last five years

Expenditure on R&D (Rs. mn)

2008-09 2007-08

Capital expenditure 0 0

Recurring expenditure 1.41 1.04

Total 1.41 1.04

Total R&D expenditure as a % of 0.04% 0.03%

total building products revenue

3. Foreign exchange earnings and outgo

Activities and initiatives

A number of new products were developed and exported.

The export team was strengthened for better direct market

penetration overseas, especially for Southeast Asia and

developed countries. Better strategies were lined up for

more aggressive development of overseas opportunities.

(Rs. mn)

2008-09 2007-08

Earnings in foreign exchange 268.66 203.19

Expenditure on foreign exchange:

Raw material, spare parts

and others 768.87 488.36

Capital equipments 8.44 141.69



Date: May 23, 2009 Chairman and Managing Director

64 | HSIL Limited

Statement regarding subsidiary companies pursuant to

Section 212 (3) of the Companies Act, 1956

(Rs. mn)

1. Name of Subsidiary AGI Glasspack Ltd. HSIL Associates Ltd. Hindware Home Retail Halis InternationalPvt. Ltd. Ltd.*

2. Financial year March 31, 2009 March 31, 2009 March 31, 2009 March 31, 2009

3. Holding company's interest 100% 100% 100% 100%

4. Shares held by holding 4,301,200 50,000 6,225,000 50,000

company in subsidiary

(number)

5. The net aggregate of

profits / (losses) for the

current financial year of

the subsidiary so far as

it concerns the members

of the holding company

(a) Dealt with or provided (0.02) (0.02) (74.71) (0.12)

for in the accounts of the

holding company

(b) Not dealt with or – – – –

provided for in the

accounts of the holding

company

6. The net aggregate of

profits / (losses) for the

previous financial year of

the subsidiary so far as it

concerns the members of

the holding company

(a) Dealt with or provided 0.02 – (18.49) –

for in the accounts of the

holding company

(b) Not dealt with or – – – –

provided for in the

accounts of the

holding company

* The subsidiary was incorporated on January 14, 2009 in Mauritius. The first financial year of this subsidiary will end on March 31, 2010, so its financial

statements could not be attached with the Balance sheet of HSIL Ltd. The figures shown are management certified but unaudited.

65HSIL Limited |

Information as per Section 217(2A) of the Companies Act, 1956read with Companies (Particulars of Employees) Rules, 1975and forming part of the Directors’ Report for the financial yearended March 31, 2009

Name Designation Qualification Experience Date of Age Remuneration Last Employment heldof the & Nature of (years) Employment (years) Received and designationEmployee Employment (Rs.)

A. Employed throughout the period and in receipt of remuneration not less than Rs. 2,400,000 for the periodMr. R.K. Chairman and B.Com., 54 October 1, 72 23,872,340 – –Somany Managing FI (Cem.), 1965

Director FBIM (U.K.), Contractual LFIMA

Mr. Sandip Joint Managing B.Com., 24 October 1, 46 22,634,215 – –Somany Director Diploma in 1985

Contractual Ceramics (USA)Mr. R.B. President, B.Com., 28 September 7, 51 8,417,552 Hyderabad Chief Kabra Building FCA, ACS 1981 Asbestoes Accountant

Products Division Ltd.Mr. Arun President, B.E. (Mechanics) 37 December 2, 62 5,113,950 Nagarjuna PresidentKumar D. Container 1996 Acqua Ltd.

Glass DivisionMr. Sanjay V.P., Sales, BPD B.Sc., MBA 25 April 29, 47 3,912,935 Pidilite D.G.M.Kalra 2002 IndustriesMr. Sanjay V.P., H.R., BPD B.Com., MBA 19 December 04, 42 3,851,876 Bharti G.M., HRGaur 2006 Airtel Ltd. Mr. J.K. Sr. V.P. B.Com., ACS 31 June 16, 52 3,843,531 – –Somani Accounts, BPD 1977Mr. S.S. V.P., Works, B.Tech. 26 December 20, 48 3,432,593 ACC Ltd., V.P., WorksKamath BPD 2005 Refactory

DivisionMr. Direndra Head, Faucets MBA 17 June 10, 41 3,208,007 Ess Ess Ltd. Country Kumar Suri Division 2003 ManagerMr. Ajay V.P., Services, B.E. (Elect), MBA 19 September 10, 41 3,161,040 Reliance G.M.,Seth BPD 2007 Industries Ltd. ServiceB. Employed for part of the period and in receipt of remuneration not less than Rs. 200,000 per monthMr. Vijay V.P., Supply B.E. (Civil), MBA 20 July 14, 44 2,645,842 HCL HeadSati Chain, BPD 2008 Technologies CommercialMr. Anil Sr. G.M., B.Com. (H), FCA, 18 April 21, 41 2,455,559 GHCL Ltd. G.M., Chandani Corporate Finance FCS, AICWA, DBF 2008 Corporate

Finance

Notes:1. Employees named above are/were wholetime employees of the Company as per the Company’s terms and conditions.2. Mr. R.K. Somany, Chairman and Managing Director and Mr. Sandip Somany, Joint Managing Director are related to each other. None of the other employees

are related to any of the Directors of the Company.3. Mr. R.K. Somany, Chairman and Managing Director and Mr. Sandip Somany, Joint Managing Director are promoters of the Company and except them no

other employee holds 2% or more of the equity share capital of the Company. 4. Remuneration Received includes Gross Salary, Bonus, Commission, performance incentive, ex-gratia, actual expenditure for provision of rent free

accommodation or benefits or amenities, house rent allowance, medical expenses, leave travel assistance, other allowances, reimbursement of gas, water andelectricity expenses. Company’s contribution to provident fund, employee pension scheme, gratuity fund and provision of car valued as perquisites inaccordance with rules under the Income Tax Act, 1961.


Place: Gurgaon Rajendra K SomanyDate: May 23, 2009 Chairman and Managing Director

I. Company’s philosophy on CorporateGovernance Your Company continues to project good governance and

responsible management practices benchmarking itself with

some of the best managed companies. The Company

believes that it is rewarding to be better managed and

governed and also to identify and align its activities with

the national interest. The Board of Director’s view is to

ensure that the highest standards are set with an

endeavour, to have governance in line with global best

practices. The Company believes good governance goes

beyond good working results and financial propriety and is

a pre-requisite to attainment of excellent performance in

the terms of stakeholder value creation.

Corporate Governance is not merely compliance and not

simply a matter of instituting checks and balances; it is an

on going measure of superior delivery of the Company’s

objectives with a view, to translate opportunities into

reality.

HSIL continuously reviews its policies and practices of

Corporate Governance with a clear goal not merely to

comply with statutory requirements, but also to constantly

endeavor and implement the best practices in the interest

of all stakeholders.

Some of the major initiatives taken by the Company

towards strengthening its Corporate Governance systems

and practices include the following:

II. Board of DirectorsComposition All of our Directors are experienced professionals with

earned proficiencies in their corresponding fields. The Board

provides expert reviews, approves strategies and oversees

results of management to ensure that the long term

objectives of stakeholders’ value are met. The Board of the

Company has optimum combination of Executive and Non-

Executive Directors. Presently, the Company’s Board

comprises nine Directors, two are Executive Directors i.e.

Chairman and Managing Director and Joint Managing

Director and other seven are Non-Executive Independent

Directors in conformity with the requirement of Clause 49

of the Listing Agreement.

66 | HSIL Limited

Corporate Governance Report

Name of Director Executive /Non- Executive / Independent

Mr. R.K. Somany Executive - Chairman and Managing Director

Mr. Sandip Somany Executive - Joint Managing Director

Mr. V.K. Bhandari Non-Executive and Independent

Mr. S.B. Budhiraja Non-Executive and Independent

Mr. Ashok Jaipuria Non-Executive and Independent

Mr. N.G. Khaitan Non-Executive and Independent

Mr. Binay Kumar Non-Executive and Independent

Mr. Vishal K.K. Marwaha Non-Executive and Independent

Mr. G.L. Sultania Non-Executive and Independent

No Director is related to any other Director on the Board except for Mr. R. K. Somany and Mr. Sandip Somany who are

father and son.

67HSIL Limited |

Board ProcedureA detailed agenda of the Board meeting is circulated to the

Directors ahead of the meeting, supported with relevant

information to enable the Board in taking strategic

decisions. The Board members, in consultation with the

Chairman may bring up any matter for consideration at the

meeting.

In addition to overseeing business the following are also

periodically reviewed by the Board:

Annual operating plans and capital budgets

Quarterly financial statements of the Company and its

business divisions

Minutes of the Board and Committee meetings and

Board meeting of subsidiary companies

Disclosures received from Directors

Internal audit findings and external audit management

reports (through the Audit Committee)

Compliances of statutory, financial and safety regulations

Forex Exposure of the Company and changes in Forex

Policy

Monitor and approve major financial and business

strategies and acquisition and collaboration agreements

Assessment of Risks integrated with reviewing options

for risk mitigation

Materially significant show cause, demand, prosecution

and adjudication notices, if any

Fatal/serious accidents, dangerous occurrences, any

material effluent or pollution problem

Significant Labour problems and their proposed

solutions, any significant development in Human Resources/

Industrial Relations

Long term borrowings and investments made

Sale of material nature, investment, subsidiaries and

assets which is not in normal course of business

Number of Board meetings, Attendance of Directors at

meetings of the Board and at the Annual General Meeting

(AGM)

The Board generally conducts four to five meetings every

year to review and discuss the Company’s performance, its

future plans, strategies and other pertinent issues.

During the year, six Board meetings were held on May 17,

2008, July 30, 2008, September 4, 2008, October 20,

2008, January 28, 2009 and February 16, 2009. The gap

between two meetings did not exceed four months.

The composition of the Board, attendance at Board meetings and at the last Annual General Meeting (AGM), number of

Directorships, Memberships/Chairmanships in public companies (excluding the Company) and their shareholding in the

Company, is as follows:

68 | HSIL Limited

Name Designation Category No. of Whether No. of No. of No. of Board attended other memberships equity

meetings the last Directorships* (Chairmanships) shares held attended AGM of Board ***during Committees

2008-09 of othercompanies**

1. Mr. R.K. Chairman and Executive 6 Yes 4 Nil 2,492,614Somany Managing (Promoter)

Director

2. Mr. Sandip Joint Managing Executive 4 No 6 Nil 2,736,528Somany Director (Promoter)

3. Mr. V.K. Director Non-Executive 5 Yes 7 5(3) NilBhandari and Independent

4. Mr. S.B. Director Non-Executive 5 No 3 2(1) 1,300Budhiraja and Independent

5. Mr. Ashok Director Non-Executive 1 No 2 Nil 18,000Jaipuria and Independent

6. Mr. N.G. Director Non-Executive 5 Yes 8 6(1) 832Khaitan and Independent

7. Mr. Binay Director Non-Executive 5 No 6 Nil 26,473Kumar and Independent

8. Mr. Vishal Director Non-Executive 4 No 1 1 25,000Marwaha and Independent

9. Mr. G.L. Director Non-Executive 5 Yes 13 8(4) 6,705Sultania and Independent

* Excludes Directorship in Indian private companies, foreign companies, membership of managing committees of chambers of commerce/professional bodies and

alternate directorship

** For this purpose only Audit Committees and Investors’/Shareholders’ Grievance Committees of public companies, whether listed or not, are considered

*** Equity shares of Rs. 2 each, as per last declaration made to the Company

69HSIL Limited |

Directors seeking appointment/re-appointmentMr. V.K. Bhandari, Mr. G.L. Sultania and Mr. Ashok Jaipuria are liable to retire by rotation and being eligible, have offered

themselves for reappointment.

Name of Director Mr. V.K. Bhandari Mr. G.L. Sultania Mr. Ashok Jaipuria

Date of Birth October 14, 1943 October 16,1945 September 11,1953

Date of Appointment January 17, 2004 January 9, 2006 May 15, 2004

Expertise in specific An Ex-Banker, experience in He has vast knowledge and Businessman with strong

functional areas banking Industry, credit experience of financial vision who made Cosmo

monitoring, treasury, investment, restructuring, Corporate Laws Films Ltd., the largest BOPP

funds management, merchant and Legal Compliances. film manufacturer and

banking and International banking. exporter

Qualification B.COM. (HONS), F.C.A. B.COM, F.C.A, F.C.S. Degree in Associate of Arts

in Business, Administration

and diploma in Marketing

Science

List of Public Company 1. GNA Enterprises Ltd. 1. Somany Ceramics Ltd. 1. Cosmo Films Ltd.

Directorships held 2. Khanna Paper Mills Ltd. 2. S R Continental Ltd. 2. Cosmo Ferrites Ltd.

3. Jayant Agro- organics Ltd. 3. Schablona India Ltd.

4. Capital Local Area Bank Ltd. 4. The United Provinces

5. Shore to Shore logistics Ltd. Sugar Co. Ltd.

6. Prime Textiles Ltd. 5. SKP Securities Ltd.

7. Super Smelters Ltd. 6. Paco Exports Ltd.

7. Bhilwara Holdings Ltd.

8. Sarvottam Vanijya Ltd.

9. Somany Retail Ltd.

10. SPA Capital Services Ltd.

11. HSIL Associates Ltd.

12. Kirtivardhan Finvest Services Ltd.

13. Hindware Home Retail Pvt. Ltd.

Member(Chairman) of 1. Audit Committee (Chairman) Shareholders/Investors Nil

the Committees of 2. Shareholders/Investors Grievance Committee

the Board of Directors Grievance Committee

of the Company

70 | HSIL Limited

Name of Director Mr. V.K. Bhandari Mr. G.L. Sultania Mr. Ashok Jaipuria

Member (Chairman)

of the Committees of

Directors of other

Companies in which

he is a Director

1. Audit Committee 1. Jayant Agro-Organics Ltd. 1. Somany Ceramics Ltd. Nil

2. Khanna Paper Mills Ltd. 2. Schablona India Ltd.

(Chairman) (Chairman)

3. Capital Local Area Bank Ltd. 3. SKP Securities Ltd.

(Chairman) 4. SPA Capital Services Ltd.

4. Prime Textiles Ltd. (Chairman)

5. Super Smelters Ltd.

(Chairman)

2. Shareholders’/ Nil 1. Somany Ceramics Ltd. Nil

Investors’ Grievance 2. SKP Securities Ltd. (Chairman)

Committee 3. Schablona India Ltd. (Chairman)

Note: Pursuant to Clause 49 of the Listing Agreement, only two committees viz. Audit Committee and Shareholders’/Investors’

Grievance Committee were considered.

HSIL Code of ConductThe Company has Code of Conduct for the Board of

Directors and senior management and employees of the

Company. The Code is posted on the Company’s website.

All Board members and Senior Management Personnel

affirmed compliance with this Code. A Declaration signed

by the Chairman and Managing Director was placed before

the Board and annexed with this report.

Board CommitteesHSIL has five Board appointed committees – Audit

Committee, Remuneration Committee,

Shareholders/Investors Grievance Committee, Share Transfer

Committee, Corporate Affairs Committee.

All decisions pertaining to the constitution of committees,

appointment of members and fixing of terms of service for

committee members, are taken by the Board of Directors.

Details on the role and composition of these committees,

number of Meetings held during the financial year and

related attendance, are provided below:

1. Audit CommitteeComposition

The Board constituted the Audit Committee with five Non-

Executive Independent Directors namely Mr. V.K. Bhandari,

Mr. Binay Kumar, Mr. N.G. Khaitan, Mr. S.B. Budhiraja and

Mr. Vishal Marwaha.

The Chairman of the Committee Mr. V.K. Bhandari is a

Chartered Accountant by qualification and ex-banker by

profession. Our Chairman, Presidents of Divisions, Finance

Head, Statutory Auditors and the Internal Auditors are

71HSIL Limited |

permanent invitees. In addition, other senior management

members are also invited to the committee meetings to

present reports on the respective items being discussed at

the meetings from time to time.

Minutes of the Audit Committee meetings are noted at the

next Board meeting. The Company Secretary acts as the

Secretary to the Committee.

Meetings and attendanceDuring the year, four meetings of the Audit Committee

were held on May 17, 2008, July 30, 2008, October 20,

2008 and January 28, 2009. The time gap between two

meetings was less than four months.

Powers and Scope of the AuditCommitteePowers of this Committee are very wide. Besides having

access to all the required information from within the

Company, the Committee can obtain external professional

advice whenever required. The Committee acts as a link

between the Statutory and the Internal Auditors and the

Board of Directors of the Company. It is authorised to

select and establish accounting policies, review reports of

the statutory and the Internal Auditors and meet them to

discuss their findings, suggestions and other related

matters. The Committee is empowered to review the

quarterly and annual financial statements, remuneration

payable to the Auditors and to recommend a change in

Auditors, if required, Management Discussion and Analysis,

material individual transactions with related parties not in

the normal course of business or which are not on arm’s

length basis are also subjects of discussion for the

committee. It is also empowered to review financial

statements and investments of unlisted subsidiary

companies. Generally all items listed in Clause 49II (D) of

the Listing Agreement are covered in the terms of

reference.

Remuneration CommitteeComposition

The Board constituted this Committee with three Non-

Executive Independent Directors namely Mr. S. B. Budhiraja,

Mr. N. G. Khaitan and Mr. V. K. Bhandari.

The Committee is chaired by Mr. S. B. Budhiraja, who was

the youngest ever Managing Director of Indian Oil

Corporation of India from 1974-78.The Company Secretary

acts as the Secretary to the Committee.

Terms of Reference1. Determine the Company’s policy on the specific

remuneration packages for Whole-time Directors/ Executive

Directors.

The following table summarises the meetings attended by the members:

Name of Members Status No. of meetings

Held Attended

Mr. V.K. Bhandari Chairman 4 4

Mr. Binay Kumar Member 4 4

Mr. N.G. Khaitan Member 4 4

Mr. S.B. Budhiraja Member 4 4

Mr. Vishal Marwaha Member 4 2

2. Recommends the Basic Salary, Salary Grades,

Allowances, Perquisites, retrials and Increment of Whole

time directors.

3. Recommends the amount of Commission payable to the

Directors.

Minutes of the Remuneration Committeemeetings are noted at the next Boardmeeting.

Remuneration policy1. For Executive Directors

The Board of Directors on recommendations of the

Remuneration Committee decides the remuneration of

Executive Directors, subject to the approval of the Members

and Central Government, if required. The Remuneration

Structure comprises of Salary, Perquisites, Retirement

benefits and Commission among others. Annual Increments

are recommended by the Remuneration Committee within

the Salary grade approved by the Members.

Commission is determined on the basis of the Net Profit of

the Company in a particular financial year, subject to the

overall ceiling as stipulated under sections 198 and 309 of

the Companies Act, 1956.

2. For Non Executive Directors

Non-Executive Directors are remunerated by way of

commission within the limits specified under the Act for

each financial year as approved by the shareholders. Non-

Executive Directors’ commission is determined by the Board

based, inter-alia, on the Company’s performance and

regulatory provisions. Non-Executive Directors are also

entitled to sitting fees for attending the meetings of the

Board and committees thereof, within the guidelines

notified by the Central Government.

In accordance with Shareholders approval given at the 48th

Annual General Meeting held on September 4, 2008,

commission is payable to the Directors at a rate of 1% per

annum of the Net Profits of the Company computed in the

manner referred to in Section 309 of the Companies Act,

1956.

Meetings and attendanceThe Remuneration Committee held two Meetings during

the year 2008-09 on May 17, 2008 and January 28, 2009.

72 | HSIL Limited

The following table summarises the attendance details of HSIL’s Remuneration Committee members:


Held Attended

Mr. S.B. Budhiraja Chairman 2 2

Mr. V.K Bhandari Member 2 2


73HSIL Limited |

Details of Remuneration of Directors:The details of the remuneration paid to the directors, during the financial year 2008-09 are as follows:-

(Amount in Rs.)

Name Basic Perquisites Commission Contribution Sitting Stock Total

(for the to fee option

year 2007-08) PF

Mr. R. K. 7,474,194 1,141,815* 14,359,428 896,903 Nil - 23,872,340

Somany

Mr. Sandip 5,700,000 846,787 14,359,428 684,000 Nil - 21,590,215

Somany

Mr. V. K. - - 683,782 - 22,500 - 706,282

Bhandari

Mr. S. B. - - 683,783 - 22,500 - 706,283

Budhiraja

Mr. Ashok - - 683,782 - ** - 683,782

Jaipuria

Mr. N. G. - - 683,782 - 22,500 - 706,282

Khaitan

Mr. Binay - - 683,783 - 16,500 - 700,283

Kumar

Mr. Vishal - - 683,782 - 12,000 - 695,782

Marwaha

Mr. G. L. - - 683,782 - 15,500 - 699,282

Sultania

TOTAL 13,174,194 1,988,602 33,505,332 1,580,903 111,500 50,360,531

* This includes leave encashment amounting to Rs.940,000 to Mr. R.K. Somany.

** Mr. Ashok Jaipuria relinquished his entitlement of sitting fee.

The services of Chairman and Managing Director and Joint Managing Director may be terminated by giving six months’ notice or alternatively six months’ salary

in lieu of six months’ notice.

III. Shareholders’/Investors’ GrievanceCommittee

CompositionThe Board constituted this committee with four Non-

Executive Independent Directors namely Mr. S.B. Budhiraja,

Mr. N.G. Khaitan, Mr. G.L. Sultania and Mr. V.K. Bhandari.

The Committee is chaired by Mr. S.B. Budhiraja.

The Company Secretary acts as the Secretary to the

Committee.

Minutes of the Shareholders’/Investors’ Grievance

Committee meetings are noted at the next Board meeting.

Terms of referenceThe Committee performs the following functions:

1. Transfer/ Transmission of shares, Split, Sub-division and

Consolidation of shares.

2. Look into the redressing of shareholder and Investors

complaints like transfer of shares, non- receipt of declared

dividends and Non-receipt of Annual reports among others.

Meetings and attendanceThe Shareholders’/Investors’ Grievance Committee held four

meetings during the year on May 17, 2008, July 30, 2008,

October 30, 2008, and January 28, 2009.

IV. Share Transfer Committee Composition

The Committee at present comprises one Non-Executive

Director and two Executives of the Company i.e.

1. Mr. G.L. Sultania -Chairman

2. Mr. N. Goenka - Dy. G .M. (Finance)

3. Mr. S. Banerjee- Investor Relations Manager

Terms of referenceThe Company constituted the Share Transfer Committee to

consider and process various requests for transfer of shares,

issue of duplicate shares, split/consolidation of shares and

thereupon issue of fresh share certificates and

transmissions or transposition of shares.

MeetingsDuring the year 2008-09, the committee met on 12

occasions for the approval of transfer of shares lodged with

the Company and all the members attended all the

meetings. As on the date of this report, no requests for

transfer of shares were pending.

V. Corporate Affairs CommitteeThe Corporate Affairs Committee was constituted to cater

to the various operational requirements arising between

two board meetings and to facilitate seamless operations

of the Company.

74 | HSIL Limited

The following table summarises the attendance details of Shareholders/Investors Grievance Committee members:


Held Attended

Mr. S.B. Budhiraja Chairman 4 4


Mr. V.K. Bhandari Member 4 4

Mr. G.L. Sultania Member 4 3

75HSIL Limited |

CompositionCorporate Affairs Committee comprised two Executive and

one Non-Executive Directors:

1. Mr. R.K. Somany Chairman

2. Mr. Sandip Somany

3. Mr. G.L. Sultania

Meetings and attendanceThe Corporate Affairs Committee held ten meetings during

the year 2008-2009 on April 2, 2008, May 24, 2008, July

14, 2008, August 14, 2008, September 5,2008, September

24, 2008, October 21,2008, December 30, 2008, January

30, 2009 and February 28, 2009.

D. Subsidiary CompaniesHSIL does not have any material non-listed Indian

subsidiary whose turnover or Networth (i.e. Paid-up Capital

and free reserves) exceeds 20% of the consolidated

turnover or networth respectively, of the Company and its

subsidiaries in the immediately preceding accounting year.

The Audit Committee reviews the financial statements and

in particular, the investments made by the unlisted

subsidiary companies. The minutes of the Board meetings

as well as statements of all significant transactions of the

unlisted subsidiary companies are placed before the Board

of Directors of the Company for their review.

E. Change of Name The name of the Company has been changed from

“Hindustan Sanitaryware and Industries Ltd.” to “HSIL

Limited” w.e.f. March 24, 2009. The Company passed the

necessary resolution and took approval of the Central

Government in terms of Section 21 of the Companies Act,

1956 for the same.

F. DisclosuresBasis of related party transactions:

The material, financial and commercial transactions, where

Key management personnel have personal interest forms a

part of the disclosure on related parties referred to in

Schedule 20, note no.10 to Annual Accounts which was

reported to Board of Directors.

Disclosure of Accounting TreatmentThe Company followed the guidelines of Accounting

Standards laid down by the Institute of chartered

Accountants of India (ICAI) in preparation of its financial

statements.

Risk managementThe Company’s risk management strategies are

continuously being refined and redefined. Despite the

substantial increase in volume of business risks, they were


Held Attended

Mr. R.K. Somany Chairman 10 10

Mr. Sandip Somany Member 10 9

Mr. G.L. Sultania Member 10 1

The minutes of meetings of the Committee are noted at the next Board meeting. The Company Secretary acts as the

Secretary to the Committee.

effectively managed through risk assessment framework

and policies. The internal control system provides a robust

support for risk management for the Company in operating

its business. The Company laid down a procedure to inform

Board of Directors about risk assessment and minimisation

procedures. The Company formulated a Foreign Exchange

Risk Assessment Policy to effectively monitor and mitigate

Foreign Exchange Risk.

No strictures/ penalties were imposed on the Company

by the Stock Exchanges or SEBI or any statutory authority

on any matter related to capital markets during the last

three years

Proceeds from public issue, right issues, preferential

issues

During the year 2008-09, the Company did not raise

money from public issue, right issues and preferential

issues.

Managementi) The Management Discussion and Analysis Report forms a

part of the Annual Report and is in accordance with the

requirements laid out in Clause 49 of the Listing

Agreement.

ii) No material transaction was entered into by the

Company with the Promoters, Directors or the senior

management that may have a potential conflict with

interests of the Company.

G. CEO and CFO Certification The certificate required under Clause 49(V) of the Listing

Agreement duly signed by the Chairman and Managing

Director and Sr. G.M. (Corporate Finance), was placed

before the Board and the same is annexed to this report.

H. Report on Corporate GovernanceThis Corporate Governance Report forms a part of the

Annual Report. The Company is fully compliant with all the

provisions of Clause 49 of the Listing Agreement of the

stock exchanges in India where the company’s shares are

listed.

I. ComplianceWe have complied with all the mandatory requirements of

corporate governance as stipulated under the Listing

Agreement. We obtained a Certificate affirming the

compliance from Walker Chandiok and Co., Statutory

Auditors of the Company and the same is annexed to this

Report and forms a part of the Annual Report.

Adoption of Non-Mandatory Items1. Remuneration Committee :We have remuneration Committee of Board of Directors. A

detailed note on the same has been provided in the ‘Board

Committees’ section of this report.

2. Shareholders Rights and Auditors Qualifications:The Company has a policy of announcement of the

reviewed Quarterly results. The results approved by the

Board of directors are submitted to the stock exchanges

within 15 minutes of the approval and results are

disseminated to the media by way of press release.

3. During the previous financial year there was no

qualification in the Auditors Report.

J. HSI Code of Conduct for prevention ofinsider trading HSIL has a HSI Share Transaction Code for prevention of

insider trading in the shares and securities of the Company

in accordance with model code of conduct prescribed

under insider trading regulation. The code is amended

during the year by the Board of Directors in compliance

with amendments made by SEBI in Insider Trading

Regulation.

76 | HSIL Limited

77HSIL Limited |

K. General Body Meetings The last three Annual General Meetings were held as under :

Financial year Date Time Venue

2007-08 September 4, 2008 11:00 a.m. Somany Conference Hall, Merchant’s

Chamber of Commerce, 15B, Hemanta

Basu Sarani, Kolkata – 700 001

2006-07 September 15, 2007 11:00 a.m. Same as above

2005-06 September 9, 2006 11.30 a.m. Same as above

Four Special resolutions were passed in the

Annual General Meetings held during last three

financial years.

During the financial year 2008-09, no special resolution

was passed through Postal Ballot.

An Extra Ordinary General Meeting was held at Somany

Conference Hall of Merchants’ Chamber of Commerce, 15-

B Hemanta Basu Sarani, Kolkata-700 001 on Wednesday,

March 18, 2009 at 11:30 a.m. during the financial year for

seeking approval of shareholders to change the Company’s

Name from ‘Hindustan Sanitaryware and Industries Limited’

to ‘HSIL Limited’.

L. Means of Communication The quarterly and annual financial results are

published in any prominent daily newspaper viz. The

Economic Times/Business Standard/Financial Express and

Kalantar (vernacular newspaper). Up to date financial

results, Annual Reports, Shareholding Pattern and other

general information about the Company is available on the

Company’s website www.hindwarehomes.com

The Quarterly and Annual financial statements,

Shareholding Pattern and Corporate Governance Report are

posted on the official website of SEBI-

www.sebiedifar.nic.in.

M. Shareholders’ Information (i) The 49th Annual General Meeting is proposed to be

held on September 19, 2009 at 11.30 a.m. at Somany

Conference Hall of Merchant's Chamber of Commerce, 15B,

Hemant Basu Sarani, Kolkata - 700 001.

(ii) Tentative financial calendar for 2009-2010

First quarter results Last week of July, 2009

Second quarter results Last week of October, 2009

Third quarter results Last week of January, 2010

Audited annual results Last week of May, 2010.

for the year

(iii) Date of Book Closure

September 10, 2009 to September 19, 2009 (both days

inclusive).

(iv) Dividend payment date

Latest by October 19, 2009

(v) Listing on Stock Exchanges

The Stock Exchanges at which the equity shares of the

Company are listed and the respective stock codes are:

Name of the Stock Exchange Stock Code

1. National Stock Exchange

of India Ltd. (NSE) HSIL

2. Bombay Stock Exchange Ltd. (BSE) 500187

78 | HSIL Limited

Monthly stock market data:

Month NSE BSE

High Low High Low

(Rs.) (Rs.) (Rs.) (Rs.)

April 08 66.95 41.10 66.60 39.00

May 08 63.40 45.00 63.10 48.55

June 08 50.80 38.30 50.20 38.00

July 08 40.25 35.00 40.40 35.35

August 08 45.00 35.00 44.40 35.00

September 08 42.95 28.15 41.00 28.20

October 08 30.90 20.00 30.90 20.00

November 08 29.50 24.60 29.40 25.00

December 08 30.00 25.00 30.00 24.70

January 09 30.75 27.00 30.95 27.25

February 09 30.00 24.00 31.00 27.55

March 09 31.00 23.00 32.00 24.75

ISIN allotted for Company’s equity shares of Rs. 2 each: INE

415A 01038.

Listing fees for the financial year 2009-10 has been paid to

the stock exchanges.

(vi) Market price data

Monthly stock market data of high-and-low prices of

equity shares of the Company during 2008–09 and their

performance in comparison with the broad-based index

comprise:

(Rs.

)

79HSIL Limited |

(viii) Registrar and Transfer Agents

The Company appointed M/s Maheshwari Datamatics

Private Limited as Registrar and Share Transfer Agent (RTA)

for physical as well as electronic connectivity with the

depositories for dematerialised shares. The contact details

of RTA are:

Maheshwari Datamatics Private Limited

6, Mangoe Lane, Kolkata – 700 001.

Phone no. (033) 2243 5809/5029,

Fax No. (033) 2248 4787

Email : [email protected]

(ix) Share Transfer System

The Company's shares are traded on stock exchanges in

compulsory demat mode. The Company’s Share Transfer

Committee is authorised to approve transfers of securities.

Share transfers which are received in physical form are

processed and the share certificates returned within a

period of 14 days from the date of receipt, subject to the

documents being valid and complete in all respects. The

dematerialised shares are transferred directly to the

beneficiaries by the depositories.

(vii) Performance comparison with broad-based index

Month HSIL* NSE Nifty

April 08 62.75 5165.90

May 08 59.00 4870.10

June 08 46.75 4040.55

July 08 38.65 4332.95

August 08 41.40 4360.00

September 08 39.15 3921.20

October 08 30.00 2885.60

November 08 28.30 2755.10

December 08 29.40 2959.15

January 09 30.65 2874.80

February 09 30.00 2763.65

March 09 29.75 3020.95

*HSIL’s monthly closing prices on NSE

80 | HSIL Limited

(x) Distribution of Shareholding as on March 31, 2009

Number of Shares held Shareholders Shares

Number % of total Number % of total

Upto 500 7731 70.03 1,301,617 2.36

501-1000 1940 17.58 1,526,348 2.77

1001-2000 745 6.75 1,098,213 2.00

2001-3000 194 1.76 483,557 0.88

3001-4000 93 0.84 318,576 0.58

4001-5000 71 0.64 326,142 0.59

5001-10000 137 1.24 983,929 1.79

10000 and above 128 1.16 48,987,126 89.03

Total 11039 100.00 55,025,508 100.00

(xi) Category of Shareholders as on March 31, 2009

Category No. of Shares of Rs. 2 each % of Total

Promoter, Directors and Relatives 33,123,178 60.20

Mutual Funds/UTI 3,561,888 6.47

Financial Institutions/Banks 17,531 0.03

Insurance Companies 122,815 0.22

Foreign Institutional Investors 626,683 1.14

Foreign Companies 8,250,000 14.99

Domestic Companies/ Bodies Corporate 1,785,756 3.25

Non-Resident Individual 123,069 0.22

Others 7,414,588 13.48

Total 55,025,508 100.00

81HSIL Limited |

(xii) Dematerialisation of shares: The Details of Shares dematerialised and

those held in physical as on March 31, 2009.

Particulars of Shares Shares of Rs. 2 each Shareholders

Number % of total Number % of total

Dematerialised form

National Securities 27,070,054 49.19 6,338 57.42

Depository Ltd. (NSDL)

Central Depository 1,594,260 2.90 1,783 16.15

Services(India) Ltd.

(CDSL)

Physical Form 26,361,194 47.91 2,918 26.43

Total 55,025,508 100.00 11,039 100.00

(xiii) Liquidity

The Company’s Shares are actively traded on the

National Stock Exchange of India Ltd. (NSE) and the

Bombay Stock Exchange (BSE). The average daily number of

Shares traded and the average daily value of shares

traded in BSE and NSE during the Financial Year 2008-09

is given below.

Particulars (Face value of Rs. 2)

BSE NSE

Average daily number of 14,502 23,291

Shares traded

Average daily value of Shares 5.54 9.05

traded (Rs. in lacs)

(xiv) Outstanding GDRs/ADRs/warrant or any convertible

instruments

As on March 31, 2009, the Company had no outstanding

GDRs/ADRs/warrant or any convertible instruments.

(xv) Plant locationsLocation Address

Haryana

Building Product District Jhajjar,

Division Haryana-124507

Andhra Pradesh

Building Somanypuram, Brahmanapally,

Product Division Bibinagar- 508 126

Glass Division Glass Factory Road, Off Motinagar,

P.B No. 1930, Sanathnagar P.O.,

Hyderabad – 500 018

Glass Division Glass Factory Road Thukkapur Road,

Bhongir – 508116, Nalgonda District

(xvi) Address for correspondence 2, Red Cross Place, Kolkata - 700 001

Phone: 91 - 33 -2248 7406/07, Fax: 91 - 33 - 2248 7045

email: [email protected]

82 | HSIL Limited

CEO/ CFO Certification

To Board of Directors We hereby certify that:

a. We have reviewed financial statements of HSIL Limited (‘the Company’) for the period upto March 31, 2009 and that to

the best of our knowledge and belief :

i these statements do not contain any materially untrue statement or omit any material fact or contain statements that

might be misleading;

ii these statements together present a true and fair view of the Company’s affairs and are in compliance with existing

accounting standards, applicable laws and regulations.

b. There were, to the best of our knowledge and belief, no transactions entered into by the Company during the above said

period which were fraudulent, illegal or violate the Company’s code of conduct.

c. We accept the responsibility of establishing and maintaining internal controls for financial reporting and that we have

evaluated the effectiveness of the internal control systems of the Company and we have disclosed to the Auditors and the

Audit Committee deficiencies in the design or operation of internal controls, if any, and the steps we have taken or propose

to take to rectify these deficiencies.

d. We have indicated to the Auditors and the Audit Committee:

i) significant changes in internal control over financial reporting during the abovesaid period;

ii) significant changes in accounting policies, if any, during the abovesaid period and that the same have been disclosed in

the notes to the financial statements; and

iii) instances of significant fraud of which we have become aware and the involvement therein, if any, of the management

or an employee having a significant role in the internal control system over financial reporting.

Mr. Rajendra K Somany Mr. V.K. Ajmera

Chairman and Managing Director Sr. G.M. (Corporate Finance)

Place: Gurgaon

Date: May 23, 2009

83HSIL Limited |

Auditors Certificate on Corporate Governance

To the members of

HSIL Ltd.

We have examined the compliance of conditions of corporate governance by HSIL Ltd. (“the Company) for the year ended

on March 31, 2009, as stipulated in clause 49 of the Listing Agreement of the Company with the stock exchanges.

The compliance of conditions of corporate governance is the responsibility of the management. Our examination was

limited to procedures and implementation thereof, adopted by the Company, for ensuring the compliance of conditions of

corporate governance. It is neither 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 conditions of corporate governance as stipulated in the above mentioned listing

agreement.

We state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or

effectiveness with which the management has conducted the affairs of the Company.

For Walker, Chandiok and Co.

Chartered Accountants

Place : Gurgaon B.P. Singh

Date : May 23, 2009 Partner

Membership No. 70116

Declaration by Chairman and Managing Director under Clause 49 of theListing Agreement regarding adherence to Code of Conduct

In accordance with sub clause 1(D) of Clause 49 of the Listing Agreement with the Stock Exchanges, I hereby confirm that,

all the Directors and the Senior Management have affirmed compliance with their respective codes of conduct as applicable

to them, for the year ended on March 31, 2009.


Date: May 23, 2009 Chairman and Managing Director

84 | HSIL Limited

Financial section

1. We have audited the attached Balance Sheet of HSIL

Limited, (the ‘Company’) as at 31 March 2009, the Profit

and Loss Account and also the Cash Flow Statement for the

year ended on that date annexed thereto (collectively

referred to as the ‘financial statements’). 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.

2. We conducted our audit in accordance with the auditing

standards generally accepted in India. Those Standards

require that we plan and perform the audit to obtain

reasonable assurance about whether 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. An

audit also includes 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 provides a reasonable basis for our

opinion.

3. As required by the Companies (Auditor’s Report) Order,

2003 (the ‘Order’) (as amended), issued by the Central

Government of India in terms of sub-section (4A) of Section

227 of the Companies Act, 1956 (the ‘Act’), we enclose in

the Annexure a statement on the matters specified in

paragraphs 4 and 5 of the 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 purposes of our audit;

b. In our opinion, proper books of account as required by

law have been kept by the Company so far as appears

from our examination of those books;

c. The financial statements dealt with by this report are in

agreement with the books of account;

d. On the basis of written representations received from

the directors, as on 31 March 2009 and taken on

record by the Board of Directors, we report that none

of the directors is disqualified as on 31 March 2009

from being appointed as a director in terms of clause

(g) of sub-section (1) of Section 274 of the Act;

e. In our opinion and to the best of our information and

according to the explanations given to us, the financial

statements dealt with by this report comply with the

accounting standards referred to in sub-section (3C) of

Section 211 of the Act and the Rules framed there

under and give the information required by the Act, in

the manner so required and give a true and fair view in

conformity with the accounting principles generally

accepted in India, in the case of:

i) the Balance Sheet, of the state of affairs of the

Company as at 31 March 2009;

ii) the Profit and Loss Account, of the profit for the

year ended on that date; and

iii) the Cash Flow Statement, of the cash flows for the

year ended on that date.

For Walker, Chandiok & Co.


Per B. P. Singh

Place : Gurgaon Partner

Date : 23 May 2009 Membership No. 70116

To

The Members of

HSIL Limited (formerly known as Hindustan Sanitaryware & Industries Limited)

AUDITORS’ REPORT

85HSIL Limited |

HSIL LIMITED

ANNEXURE TO THE AUDITORS' REPORT

Annexure to the Auditors’ Report of even date to the members of HSIL Limited (formerly known as Hindustan Sanitaryware &Industries Limited), on the financial statements for the year ended 31 March 2009

Based on the audit procedures performed for the purpose of

reporting a true and fair view on the financial statements of the

Company and taking into consideration the information and

explanations given to us and the books of account and other

records examined by us in the normal course of audit, we report

that:

i) a) The Company has maintained proper records showing

full particulars, including quantitative details and

situation of fixed assets.

b) The Company has a regular programme of physical

verification of its fixed assets by which fixed assets are

verified in a phased manner over a period of three years.

In our opinion, this periodicity of physical verification is

reasonable having regard to the size of the Company

and the nature of its assets. No material discrepancies

were noticed on such verification.

c) In our opinion, a substantial part of fixed assets has not

been disposed off during the year.

ii) a) Physical verification of inventory (except stock in transit)

have been verified at reasonable intervals. Finished

goods inventories are being verified by the management

in a phased manner over the period of two years.

b) 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 but its coverage needs to be

increased.

c) The Company is maintaining proper records of inventory

and no material discrepancies were noticed on physical

verification carried out.

iii) a) The Company has not granted any loan, secured or

unsecured to companies, firms or other parties covered

in the register maintained under Section 301 of the Act.

Accordingly, the provisions of clauses 4(iii)(b) to (d) of

the Order are not applicable.

b) The Company has not taken any loans, secured or

unsecured from companies, firms or other parties

covered in the register maintained under Section 301 of

the Act. Accordingly, the provisions of clauses 4(iii)(f)

and 4(iii)(g) of the Order are not applicable.

iv) In our opinion, there is an adequate internal control system

commensurate with the size of the Company and the nature

of its business for the purchase of inventory and fixed assets

and for the sale of goods and services.

(v) a) In our opinion, the particulars of all contracts or

arrangements that need to be entered into the register

maintained under Section 301 of the Act have been so

entered.

b) In our opinion, the transactions made in pursuance of

such contracts or arrangements and exceeding the value

of rupees five lakhs in respect of any party during the

year have been made at prices which are reasonable

having regard to prevailing market prices at the relevant

time.

vi) The Company has not accepted any deposits from the public

within the meaning of Sections 58A and 58AA of the Act

and the Companies (Acceptance of Deposits) Rules, 1975.

Accordingly, the provisions of clause 4(vi) of the Order are

not applicable.

vii) In our opinion, the Company has an internal audit system

commensurate with its size and the nature of its business.

viii) To the best of our knowledge and belief, the Central

Government has not prescribed maintenance of cost records

under clause (d) of sub-section (1) of Section 209 of the Act,

in respect of Company’s products. Accordingly, the

provisions of clause 4(viii) of the Order are not applicable.

ix) a) The Company is generally regular in depositing the

undisputed statutory dues including provident fund,

investor education and protection fund, employees’

state insurance, income tax, sales tax, wealth tax, service

tax, custom duty, excise duty, cess and other material

statutory dues, as applicable, with the appropriate

authorities. Further, no undisputed amounts payable in

respect thereof were outstanding at the year end for a

period of more than six months from the date they

become payable.

86 | HSIL Limited

Name of Nature of dues Rs. Period to which Forum where dispute is pending

the Statute in Million the amount relates

The Central Excise Duty on captive consumption 0.50 June 1990 to Customs, Excise and Service tax Appellate

Act, 1944 of plaster of paris. April 1991 Tribunal. Out of this, Rs. 0.25 million has

been paid under protest.

The Central Excise Duty on cisterns cleared 2.78 February 1988 to Commissioner of Central Excise, Rohtak

Act, 1944 with fittings July 1988

Delhi Sales Tax Sales tax demand due to 11.44 1998-99 to Commissioner (Appeals), sales tax. Out of

Act, 1975 non submission of statutory 2004-05 this demand Rs. 2.98 million has been

forms deposited by the Company and

assessment for the year 2003-04 and

2004-05 involving disputed tax of Rs. 6.36

million has been remanded back to the

Assessing officer.

b) The dues outstanding in respect of sales tax, income tax, custom duty, wealth tax, excise duty, cess on account of any dispute,

are as follows:

x) In our opinion, the Company has no accumulated losses atthe end of the financial year and it has not incurred cashlosses in the current and the immediately preceding financialyear.

xi) In our opinion, the Company has not defaulted inrepayment of dues to a financial institution or a bank. Therewere no outstanding debentures during the year.

xii) The Company has not granted any loans and advances onthe basis of security by way of pledge of shares, debenturesand other securities. Accordingly, the provisions of clause4(xii) of the Order are not applicable.

xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/society. Accordingly, the provisions ofclause 4(xiii) of the Order are not applicable.

xiv) In our opinion, the Company is not dealing in or trading inshares, securities, debentures and other investments.Accordingly, the provisions of clause 4(xiv) of the Order arenot applicable.

xv) In our opinion, the terms and conditions on which theCompany has given guarantee for loans taken by othersfrom banks or financial institutions are not, prima facie,prejudicial to the interest of the Company.

xvi) In our opinion, the Company has applied the term loans forthe purpose for which the loans were obtained.

xvii) In our opinion, no funds raised on short-term basis havebeen used for long-term investment.

xviii) The Company has not made any preferential allotment ofshares to parties or companies covered in the registermaintained under Section 301 of the Act. Accordingly, theprovisions of clause 4(xviii) of the Order are not applicable.

xix) The Company has neither issued nor had any outstandingdebentures during the year. Accordingly, the provisions ofclause 4(xix) of the Order are not applicable.

xx) The Company has not raised any money by public issueduring the year. Accordingly, the provisions of clause 4(xx)of the Order are not applicable.

xxi) No fraud on or by the Company has been noticed orreported during the period covered by our audit.

For Walker, Chandiok & Co.Chartered Accountants

Per B. P. SinghPlace : Gurgaon PartnerDate : 23 May 2009 Membership No. 70116

87HSIL Limited |

HSIL LIMITED

BALANCE SHEET(Rs. in Million)

Schedule As at As at31 March 2009 31 March 2008

SOURCES OF FUNDSShareholders' fundShare capital 1 110.05 110.05Reserves and surplus 2 2,395.26 2,096.74

2,505.31 2,206.79Loan fundsSecured 3 4,315.06 1,122.24Unsecured 4 375.48 896.38

4,690.54 2,018.62Deferred tax liability (net) 423.09 340.98(Refer note 8 on Schedule 20)

7,618.94 4,566.39APPLICATION OF FUNDSFixed assets 5Gross block 6,267.74 4,430.53Less: Accumulated depreciation and amortisation 2,235.38 2,091.54Net block 4,032.36 2,338.99Capital work-in-progress (including spares and capital advances) 1,251.51 281.30

5,283.87 2,620.29Investments 6 427.53 350.10Current assets, loans and advancesInventories 7 1,469.96 1,437.63Sundry debtors 8 1,027.73 909.58Cash and bank balances 9 792.72 121.25Other current assets 10 8.32 1.00Loans and advances 11 403.08 241.43

3,701.81 2,710.89Less:Current liabilities and provisions 12a) Current liabilities 1,640.95 976.57b) Provisions 153.32 138.32

1,794.27 1,114.89Net current assets 1,907.54 1,596.00

7,618.94 4,566.39Significant accounting policies 19Notes to the financial statements 20

The schedules referred to above form an integral part of the financial statementsOn behalf of the Board of Directors

Ruchika Gupta V. K. Ajmera Sandip Somany Rajendra K SomanyCompany Secretary Sr. General Manager (Corporate Finance) Joint Managing Director Chairman & Managing Director

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


Place : Gurgaon Per B. P. SinghDate : 23 May 2009 Partner


88 | HSIL Limited

The schedules referred to above form an integral part of the financial statementsOn behalf of the Board of Directors


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




PROFIT AND LOSS ACCOUNT(Rs. in Million)

Schedule Year ended Year ended31 March 2009 31 March 2008

INCOMEIncome from operations 13 6,614.57 5,762.74Less: Excise duty on sale of goods 508.14 554.36

6,106.43 5,208.38Other income 14 91.45 77.64Increase/(decrease) in stocks 15 (22.65) 197.59

6,175.23 5,483.61EXPENDITUREGoods purchased for resale 926.62 806.48Personnel cost 16 634.85 559.67Manufacturing, selling and general expenses 17 3,485.87 3,230.13

5,047.34 4,596.28Profit before interest, depreciation, amortisation and tax 1,127.89 887.33Interest 18 166.36 163.03Depreciation and amortisation 5 278.43 263.15Profit before tax and exceptional items 683.10 461.15Loss on foreign exchange fluctuations 115.33 –Loss in respect of exceptional transaction – 11.85Profit before tax 567.77 449.30Tax expense:

Current tax 82.85 161.50Income Tax for earlier years (8.57) (1.17)Deferred tax 82.11 (7.56)Fringe benefit tax 9.86 10.03

Profit after tax 401.52 286.50Balance transferred from previous year 916.24 756.31Balance available for appropriation 1,317.76 1,042.81APPROPRIATIONSTransferred to general reserve 50.00 30.00Proposed dividend on equity shares 88.04 82.54Tax on proposed dividend 14.96 14.03Balance carried to balance sheet 1,164.76 916.24

1,317.76 1,042.81Earnings per share - Basic and Diluted (Rs.) 7.30 5.21(Refer note 9 on Schedule 20)Significant accounting policies 19Notes to the financial statements 20

89HSIL Limited |

90 | HSIL Limited

HSIL LIMITED

CASH FLOW STATEMENT(Rs. in Million)

Year ended Year ended

31 March 2009 31 March 2008

A. CASH FLOW FROM OPERATING ACTIVITIES

Net Profit before tax 567.77 449.30

Adjustments for:

Depreciation and Amortisation 278.43 263.15

(Profit)/loss on disposal of fixed assets (net) (2.27) (0.21)

Interest expense 166.36 163.03

Dividend – (1.30)

Interest income (6.25) (7.62)

(Profit)/loss on sale of investments (net) (1.32) (21.18)

Dimunition in the value of current investments – 0.36

Bad Debts and provision for doubtful debts and advances 5.17 3.89

Sundry balances and liabilities no longer required written back (11.30) (8.16)

Operating Profit before working capital changes 996.59 841.26

Adjustments for :

Inventories (32.33) (219.45)

Trade/other receivables (284.98) (114.61)

Trade/other payables 642.08 95.06

Cash generated from operations 1,321.36 602.26

Direct taxes paid (78.43) (153.38)

Net cash from operating activities 1,242.93 448.88

B. CASH FLOW FROM INVESTING ACTIVITIES

Purchase of fixed assets including capital work in progress (2,785.94) (449.67)

Proceeds from sale of fixed assets 11.02 8.83

Purchase of investments (107.07) (95.00)

(including investment in subsidiaries Rs. 107.04 million, previous year Rs. 65.00 million)

Sale proceeds of investments 30.96 249.87

Movement in restricted cash 3.08 (14.36)

Interest received (1.07) 8.38

Dividend received – 1.30

Loans and advances recovered – 2.00

Net cash used in investing activities (2,849.02) (288.65)

91HSIL Limited |

CASH FLOW STATEMENT (Contd.)

(Rs. in Million)


31 March 2009 31 March 2008

C. CASH FLOW FROM FINANCING ACTIVITIES

Proceeds/(Repayment) of long term borrowings (net) 2,318.12 (76.23)

Proceeds from short term borrowings (net) 189.17 165.54

Interest paid (130.73) (164.47)

Dividend paid (81.89) (54.91)

Taxes on dividend (14.03) (9.35)

Net cash used/(from) in financing activities 2,280.64 (139.42)

Net increase in cash and cash equivalents 674.55 20.81

Cash and cash equivalents in the beginning 84.45 63.64

Cash and cash equivalents at the close 759.00 84.45

Note:

Cash and cash equivalents include:

Cash and cheques in hand and remittances in transit 57.32 67.33

Balances with bank 701.68 17.12

Cash and cash equivalents 759.00 84.45

Balances in fixed deposit accounts - pledged 30.04 33.76

Balances in unpaid dividend accounts 3.62 2.98

Bonus fraction 2005 account 0.03 0.03

Share split fraction 2006 account 0.03 0.03

Balance in post office savings account (pledged)* – –

Balance with bank not considered as cash equivalents 33.72 36.80

Cash and bank balances as per Balance Sheet 792.72 121.25

* Rounded off to Nil

On behalf of the Board of Directors


This is the Cash Flow Statement referred to in our report of even date.




92 | HSIL Limited

HSIL LIMITED

SCHEDULES FORMING PART OF THE FINANCIAL STATEMENTS(Rs. in Million)

As at As at31 March 2009 31 March 2008

Authorised75,000,000 (previous year 75,000,000) equity shares of Rs. 2 each 150.00 150.00

150.00 150.00Issued55,029,333 (previous year 55,029,333) equity shares of Rs. 2 each 110.06 110.06

110.06 110.06Subscribed and paid-up*55,025,508 (previous year 55,025,508) equity shares of Rs. 2 each fully paid-up 110.05 110.05Add: Forfeited shares ** – –

110.05 110.05

*Of the above shares, 24,268,638 equity shares of Rs. 2 each (previous year 24,268,638 equity shares of Rs. 2 each) were allotted as fullypaid-up by way of bonus shares by capitalisation of revenue reserves, 67,500 equity shares of Rs. 10 each fully paid-up (now stands splitinto 337,500 equity shares of Rs. 2 each, previous year 337,500 equity shares of Rs. 2 each) were issued to the equity shareholders ofthe erstwhile The Associated Glass Industries Limited pursuant to the scheme of amalgamation and 365,645 equity shares of Rs. 10 eachfully paid up (now stands split into 1,828,225 equity shares of Rs. 2 each, previous year 1,828,225 shares of Rs. 2 each fully paid up)were issued to the equity shareholders of the erstwhile Krishna Ceramics Limited pursuant to the scheme of amalgamation.

** Rounded off to Nil

1 SHARE CAPITAL

(Rs. in Million)As at As at

31 March 2009 31 March 2008

i) Capital reservea) On account of amalgamation with erstwhile Krishna Ceramics Limited 0.33 0.33b) Forfeited amount of debentures 2.00 2.00c) Forfeited amount of upfront payment for naked warrants 9.75 9.75

12.08 12.08

ii) Central subsidy reserve 2.50 2.50

iii) Securities premium account 684.06 684.06

iv) General reserveAs per last year 480.36 450.36Add: Transferred from profit and loss account 50.00 30.00

530.36 480.36

v) Capital redemption reserve 1.50 1.50

vi) Profit and loss accountSurplus in profit and loss account 1,164.76 916.24

2,395.26 2,096.74

2 RESERVES AND SURPLUS

93HSIL Limited |



From banks:Cash credit accounts 1,204.35 253.95Buyers credit – 217.83

(Secured by hypothecation of stocks and book debts and further secured by secondcharge on all the fixed assets located at Bahadurgarh, Bibinagar and Sanathnagar)

Term loans from banks* 3,108.68 645.91(Term loans of Rs. 465.37 million, previous year Rs. 162.50 million are payablewithin one year)

Car finance loans from banks and bodies corporate 2.03 4.55(Secured by hypothecation of vehicles financed out of proceeds of loans)(Amount payable within one year Rs. 1.42 million, previous year Rs. 3.16 million)

4,315.06 1,122.24

*Notes:- 1) Term loans from HSBC, CITI, Standard Chartered, HDFC and IDBI banks are secured by way of hypothecation of the whole of fixed

assets including moveable plant & machinery, machine spares, tools and accessories (both present and future) pertaining to the GlassDivisions of Company located at Sanathnagar and Bhongir and further secured by first pari-passu charge by way of mortgage ofdeposit of title deeds of immovable properties of Glass Divisions of the Company located at Sanathnagar and Bhongir.

2) Term loan from Andhra bank is secured by way of hypothecation of the whole of fixed assets including moveable plant & machinery,machine spares, tools and accessories (both present and future) pertaining to the Ceramic Division of the Company located atBibinagar, District Nalgonda, Andhra Pradesh and further to be secured by first pari-passu charge by way of mortgage of deposit oftitle deeds of immoveable properties of Ceramic Division located at Bibinagar, District Nalgonda, Andhra Pradesh and of CorporateOffice of the Company at Gurgaon.

Notes:- * Maximum amount outstanding on commercial paper during the year Rs. 600 million (previous year Rs. 500 million).

** The amount of deferred sales tax credit is subject to assessment by sales tax authorities. As per agreement with Commercial TaxDepartment, Hyderabad, deferred sales tax credit relating to the Glass Division located at Sanathnagar amounting to Rs. 113.82 million(previous year Rs. 108.26 million) and Ceramic Division located at Bibinagar amounting to Rs. 136.22 million (previous year Rs. 119.11million) is secured against the moveable and immoveable properties of the Company. However, the charge is pending registration withthe Registrar of Companies, West Bengal.

3 SECURED LOANS


31 March 2009 31 March 2008

Short termTrade deposits from dealers 69.29 65.96Interest accrued and due on above – 0.18From banksCommercial paper* – 500.00Supplier bills discounted 5.14 9.86Export Packing Credit 51.01 93.01OtherDeferred sales tax credit** 250.04 227.37

375.48 896.38

4 UNSECURED LOANS

94 | HSIL Limited

HSIL LIMITED

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95HSIL Limited |



LONG TERMNon Tradei) Government securities* - Unquoted:

National Savings Certificates 0.11 0.08ii) Fully paid-up equity shares of Rs. 10 each - Quoted:

125 (previous year 125) Neycer India Limited** – –50 (previous year 50) Swastik Sanitarywares Limited** – –Trade - Unquoted(equity shares of Rs. 10 each)Subsidiary companies4,301,200 (previous year 4,301,200) AGI Glasspack Limited 128.02 128.026,225,000 (previous year 3,625,000) Hindware Home Retail Private Limited 189.00 85.0050,000 (previous year Nil) HSIL Associates Limited 0.50 –5,000 (previous year Nil) Halis International Limited, Mauritius (Fully paid upequity shares USD 1 each) 0.25 –Others804,000 (previous year 804,000) Andhra Pradesh Gas Power Corporation Limited 107.36 107.36

iii) Fully paid-up Preference shares of USD 1 eachSubsidiary companies45,000 (previous year Nil) Halis International Limited, Mauritius 2.29 –

427.53 320.46CURRENTi) Mutual Fund - non trade (unquoted)

(units of Rs. 10 each fully paid)Nil (previous year 232,016.767) HDFC Prudence Fund - Growth – 29.64

– 29.64427.53 350.10

Aggregate cost of quoted investments** – –Aggregate cost of unquoted investments 427.53 350.10Aggregate net asset value of mutual fund investments – 29.64* Deposited with government departments 0.05 0.04** Rounded off to Nil

During the year, the following current investments were purchased and sold:1) 2,244,706.7010 units of HDFC Cash Management Fund-Savings Plus Plan-Wholesale-Growth purchased at cost of Rs. 40.00 million

and sold at Rs. 40.32 million

2) 678,358.2300 units of HDFC Cash Management Fund-Savings Plus Plan-Wholesale-Growth purchased at cost of Rs. 12.10 million andsold at Rs. 12.18 million


4) 1,119,545.0170 units of HDFC Cash Management Fund-Savings Plus Plan-Wholesale-Growth purchased at cost of Rs. 20.00 millionand sold at Rs. 20.14 million



6 INVESTMENTS

96 | HSIL Limited

HSIL LIMITED



(As taken, valued and certified by the management)Stores, spares and packing materials 197.75 166.87Raw materials and components 126.89 88.74Stock-in-process 33.34 56.76Goods in transit* 12.07 24.60Finished goods including goods purchased for sale 1,099.91 1,100.66

1,469.96 1,437.63

* Includes raw materials and components Rs. 10.55 million (previous year Rs. 24.60 million) and finished goods Rs. 1.52 million (previousyear Rs. Nil).

* Rs. 30.04 million (previous year Rs. 33.76 million) are pledged with banks as margin money.

** Rounded off to Nil.

7 INVENTORIES


31 March 2009 31 March 2008

(Unsecured unless otherwise stated)Debts Outstanding for a period exceeding six months:Considered good

Secured 2.94 5.27Others 70.36 68.28

Considered doubtful 66.70 62.11Other debts:Considered good

Secured 27.17 22.51Others 927.26 813.52

Considered doubtful – 0.411,094.43 972.10

Less: Provision for doubtful debts 66.70 62.521,027.73 909.58

8 SUNDRY DEBTORS


31 March 2009 31 March 2008

Cash in hand 2.81 2.23Remittance-in-transit 54.51 65.10Balances with scheduled banks in:

Current accounts 27.45 16.54Deposit accounts * 704.27 34.34Unpaid dividend accounts 3.62 2.98Bonus fraction 2005 account 0.03 0.03Share split fraction 2006 account 0.03 0.03

With post office in savings account (pledged)** – –792.72 121.25

9 CASH AND BANK BALANCES

97HSIL Limited |


* Including excise duty payable Rs. 78.03 million (previous year Rs. 143.01 million) on finished goods lying at company's bondedwarehouses.

** Not due for deposit

(Rs. in Million)


Interest accrued but not due on loans and deposits 8.32 1.008.32 1.00

10 OTHER CURRENT ASSETS


31 March 2009 31 March 2008

(Unsecured, considered good except where otherwise stated)Advance recoverable in cash or in kind or for value to be received 152.07 171.11(including Rs. 2.69 million, previous year Rs. 4.04 million considered doubtful of recovery)Balance with excise/sales tax authorities 212.88 40.64Deposits 40.82 33.72

405.77 245.47Less: Provision for doubtful advances 2.69 4.04

403.08 241.43

11 LOANS AND ADVANCES


31 March 2009 31 March 2008

a) Current liabilitiesAcceptances 288.52 18.73Sundry creditors for goods, services and expenses

Due to Micro, Small and Medium enterprises 1.05 7.15Others 961.58 604.68

Interest accrued but not due on loans 37.62 1.80Advance against sales/orders 56.29 39.65Investor education & protection fund**

Unclaimed Dividend 3.62 2.98Unclaimed Share Split Fraction 2006 0.03 0.03Unclaimed Bonus Fraction 2005 0.03 0.03

Other liabilities* 292.21 301.521,640.95 976.57

b) ProvisionsEmployee benefits 26.14 23.27Income tax (including fringe benefit tax) 24.18 18.48(net of advance payment of Rs. 387.06 million, previous year Rs. 438.49 million)Proposed dividend 88.04 82.54Tax on proposed dividend 14.96 14.03

153.32 138.321,794.27 1,114.89

12 CURRENT LIABILITIES AND PROVISIONS

98 | HSIL Limited

HSIL LIMITED


Year ended Year ended31 March 2009 31 March 2008

Sale of goods (net of returns)DomesticSanitaryware, fittings and glassware 5,978.13 5,211.06ExportSanitaryware, fittings and glassware 606.64 527.62(including deemed export Rs. 280.24 million (previous year Rs. 294.52 million))

6,584.77 5,738.68OthersScrap and other sales 29.80 24.06

29.80 24.066,614.57 5,762.74

13 INCOME FROM OPERATIONS

(Rs. in Million)Year ended Year ended

31 March 2009 31 March 2008

Rent received * 6.45 2.84Dividend received on investment in liquid mutual funds (non-trade - unquoted) – 1.30Interest income (gross) on: *

Loans to body corporate 0.10 1.35Deposits 1.84 0.84Margin money 1.97 1.87Dealers 2.34 2.73Other accounts – 0.84

Profit on sale of investments in liquid mutual funds (non trade - unquoted) 1.32 21.18Profit on disposal of fixed assets 3.48 0.96Export incentives 7.96 12.75Insurance claims received 14.19 2.39Provision for doubtful debts and advances written back – 2.85Sundry balances and liabilities no longer required written back 11.30 8.16Foreign exchange gain 30.44 –Miscellaneous receipts 10.06 17.58

91.45 77.64* Income tax deducted at source 2.43 1.13

14 OTHER INCOME


31 March 2009 31 March 2008

Opening stocksFinished goods including goods purchased for resale 1,100.66 927.25Stock-in-process 56.76 44.43

1,157.42 971.68Less: loss in respect of exceptional transaction – 11.85

1,157.42 959.83Less: Closing stocksFinished goods including goods purchased for resale 1,101.43 1,100.66Stock-in-process 33.34 56.76

1,134.77 1,157.42(22.65) 197.59

15 INCREASE/(DECREASE) IN STOCKS

99HSIL Limited |



Salaries, wages and bonus 566.84 497.52Contribution to provident and other funds 37.49 34.85Staff and labour welfare expenses 30.52 27.30

634.85 559.67

16 PERSONNEL COST


31 March 2009 31 March 2008

Raw materials consumed * 1,001.61 848.89Stores and spares consumed 207.68 173.53Excise duty on increase/(decrease) of stocks (56.65) 28.60Packing materials consumed 223.64 213.24Power and fuel 1,233.68 1,113.69Repairs to:

Buildings 12.03 9.47Plant and machinery (excluding stores consumption) 35.76 39.59Other assets 18.46 10.50

Rent (including hire charges) 21.86 16.65Rates and taxes 3.09 3.07Directors fees 0.11 0.11Expenditure on ceramic and applied research centre 1.41 1.04Insurance 11.30 15.99Travelling and conveyance 70.35 69.77Discount 203.45 185.10Commission on sales 16.37 14.55Expenses on exports 70.73 62.02Advertisement and publicity 91.94 104.56Other selling and distribution expenses 175.50 159.86Bad Debts and provision for doubtful debts and advances 17.28 6.74Charity and donations 1.05 1.14Foreign exchange fluctuation – 30.62Loss on disposal of fixed assets 1.21 0.75Diminution in the value of current investments – 0.36Miscellaneous expenses 124.01 120.29

3,485.87 3,230.13

17 MANUFACTURING, SELLING AND GENERAL EXPENSES

(Rs. in Million)


On term loans 89.74 72.56Others* 76.62 90.47

166.36 163.03

18 INTEREST

* Includes accessories and fittings aggregating to Rs. 36.93 million (previous year Rs. 35.07 million).

* Includes Rs. 25.43 million (previous year Rs. 40.44 million) incurred on account of discounting charges of commercial paper.

HSIL LIMITED


1. Basis of preparationThe financial statements are prepared on accrual basis under the historical cost convention, in accordance with the generally acceptedaccounting principles in India and to comply with the Accounting Standards referred to in sub section (3C) of Section 211 of theCompanies Act, 1956 and the Rules framed thereunder except as specifically stated in note 20 in schedule 20. The accounting policieshave been consistently applied by the Company and are consistent with those used in the previous year.

2. Use of estimatesThe preparation of financial statements in conformity with generally accepted accounting principles requires management to makeestimates and assumptions that affect the reported balances of assets and liabilities and the disclosure relating to contingent liabilitiesas at the date of financial statements and reported amount of income and expenses during the period. Although these estimates arebased upon management’s best knowledge of current events and actions, actual results could differ from those estimates. Any revisionto accounting estimates is recognised in the current and future periods.

3. Revenue recognitionSale of goodsRevenue from sale of goods is recognised when significant risks and rewards in respect of ownership of the goods are transferred tothe customer and is stated inclusive of excise duty and net of trade discounts, sales return and sales tax wherever applicable.

InterestInterest income is recognised on time proportion basis at the applicable rates.

4. Export benefit/incentiveBenefit under the advance license scheme and duty free replenishment certificate are accounted for at the time of purchase ofimported raw materials or sale of the license.

5. Fixed assetsTangibleTangible assets are stated at cost of acquisition less accumulated depreciation. Cost comprises the purchase price (net of cenvat creditavailed) and any attributable cost of bringing the asset to its working condition for its intended use. Expenditure on account ofrestoration/ modification/ alteration in plant and machinery/ building, which increases the future benefit from the existing assetbeyond its previously assessed standard of performance/ estimated useful life, is capitalised.

IntangibleIntangible assets are recognised if and only if it is probable that the future economic benefits that are attributable to the assets willflow to the Company.

6. Depreciation and amortisationA. Tangible

Depreciation on fixed assets has been provided on straight line method at the rates and in the manner prescribed under scheduleXIV (“schedule”) to the Companies Act, 1956 except the following:

i. on assets acquired and put to use on or before 1 July 1987 in the glass division of the Company and on vehicles acquired tilldate in all the divisions of the Company, depreciation is provided on written down value method at the rates and in themanner prescribed in the schedule;

ii. on furnaces (included in plant and machinery) having a cost of Rs. 1,166.89 million used in the glass division, depreciation isprovided on straight line method, as technically assessed from time to time, based on expected useful lives of the furnaces.The rate presently being 16.21% per annum which is the rate as prescribed in the schedule;

iii. cost of leasehold improvements is depreciated over the period of the lease or estimated useful life of the leaseholdimprovements, whichever is lower.

B. Intangiblei. Pre-operative expenditure including borrowing cost (net of revenue, where applicable) and foreign exchange transactions

difference on specific project loans incurred during the construction/trial run of the project is allocated on an appropriate basisto fixed assets on commissioning;

ii. Trademarks are being amortised over a period of ten years;

iii. Computer software (included in Computers in Schedule 5) are amortised over a period of six years;

The depreciation rates are indicative of the expected useful lives of the assets.

19 SIGNIFICANT ACCOUNTING POLICIES

100 | HSIL Limited

7. InvestmentsInvestments that are readily realisable and intended to be held for not more than a year are classified as current investments. All otherinvestments are classified as long-term investments.

Current investments are valued at the lower of cost and fair value. Long-term investments are stated at cost. Provision is made fordiminution in the value of long-term investments to recognise a decline, if any, other than temporary in nature.

Profit/Loss on sale of investments are computed with reference to their cost determined on first in first out basis.

8. Inventoriesa) Inventories are valued as follows:

Stores and spares, packing materials, raw materials including components and goods in transit - At lower of cost and net realisablevalue. However, materials and other items held for use in the production of inventories are not written down below cost if thefinished products in which they will be incorporated are expected to be sold at or above cost.

Work-in-process - At cost upto estimated stage of completion.

Finished goods and goods purchased for resale - At lower of cost and net realisable value.

b) Cost of inventories is ascertained on the following basis:Raw materials, stores and spare parts and packing materials - On weighted average basis.

Finished goods purchased for resale - On weighted average basis.

Cost of manufactured finished goods and stock in process comprises of material, labour and other related production overheadsincluding depreciation.

9. Foreign currency transactionsForeign currency transactions are recorded at the exchange rates prevailing on the date of transaction. Differences arising out offoreign currency transactions settled during the year are recognised in the profit and loss account.

Monetary items outstanding at the balance sheet date and denominated in foreign currencies are restated at the exchange ratesprevailing at the end of the year. Differences arising on such restatement are recognised in the profit and loss account except to theextent permitted by the transitional provision contained in the Companies (Accounting Standards) Amendment Rules, 2009 in respectof long term foreign currency monetary items, in which case the cost of fixed assets are adjusted by the translation differences andamortised over the remaining useful life of the asset.

The premium or discount arising at the inception of forward exchange contracts is amortised as expense or income over the life of thecontract. Exchange differences on such contracts are recognised in the statement of profit and loss in the year in which the exchangerates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or as expensefor the year.

10. Taxes on incomeTax expense comprises current income tax, deferred income tax and fringe benefit tax.

Current tax is determined as the amount of tax payable in respect of taxable income for the year.

Deferred income tax reflects the impact of current year timing differences between taxable income and accounting income for theyear and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted orsubstantively enacted at the balance sheet date. Deferred tax assets are recognised only to the extent that there is reasonable/virtualcertainty, depending on the nature of the timing differences, that sufficient future taxable income will be available against which suchdeferred tax assets can be realised.

Fringe benefit tax is determined in accordance with applicable Income-tax laws.

11. Research and developmentResearch and development expenditure is charged to profit and loss account except capital expenditure, which is added to the costof respective fixed assets in the year in which it is incurred.

12. Leasesa) Operating Lease

Lease rentals in respect of assets taken on operating lease are charged to the profit and loss account on a straight-line basis overthe lease term.

b) Finance LeaseAssets acquired on finance lease which transfer risk and rewards of ownership to the Company are capitalised as assets by the

SCHEDULES FORMING PART OF THE FINANCIAL STATEMENTS19 SIGNIFICANT ACCOUNTING POLICIES

101HSIL Limited |

102 | HSIL Limited

HSIL LIMITED

Company at the lower of fair value of the leased property or the present value of the related lease payments or where applicable,estimated fair value of such assets. Amortisation of capitalised leased assets is computed on the Straight Line method over theuseful life of the assets. Lease rental payable is apportioned between principal and finance charge using the internal rate of returnmethod. The finance charge is allocated over the lease term so as to produce a constant periodic rate of interest on the remainingbalance of liability.

13. Employee benefitsExpenses and liabilities in respect of employee benefits are recorded in accordance with Accounting Standard 15 Employee Benefits(Revised 2005) “Revised AS 15”.

a) Provident fundThe Company makes contributions to two independently constituted trusts and regional provident fund recognised by income taxauthorities. In terms of the Guidance on implementing the revised AS 15, issued by the Accounting Standard Board of the Instituteof Chartered Accountants of India (the ‘ICAI’), the provident fund set up by the Company is treated as a defined benefit plan sincethe Company has to meet the interest shortfall, if any. Accordingly, the contribution paid or payable and the interest shortfall, ifany is recognised as an expense in the period in which services are rendered by the employee.

b) GratuityGratuity is a post employment defined benefit plan. The liability recognised in respect of gratuity is the present value of the definedbenefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognised actuarialgains or losses and past service costs. The defined benefit obligation is calculated annually by actuaries using the projected unitcredit method.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited tothe profit and loss account in the year in which such gains or losses arise.

c) Compensated absenceThe Company measures and recognises the liability in respect of the expected cost of accumulating compensated absences as theadditional amount that it expects to pay as a result of the unused entitlement that has accumulated at the balance sheet date.

d) Other short term benefitsExpenses relating to other short term benefit including performance bonus is recognised on the basis of amount paid or payablefor the period during which services are rendered by the employee.

14. Earnings per shareBasic earnings per share are calculated by dividing net profit or loss for the period attributable to equity shareholders by weightedaverage number of equity shares outstanding during the period. The weighted average number of equity shares outstanding duringthe period is adjusted for events of bonus issue, share split and any new equity issue.

For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders andthe weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equityshares.

15. Impairment of assetsThe Company on an annual basis makes an assessment of any indicator that may lead to impairment of assets. If any such indicationexists, the Company estimates the recoverable amount of the assets. If such recoverable amount is less than the carrying amount, thenthe carrying amount is reduced to its recoverable amount by treating the difference between them as impairment loss and is chargedto the profit and loss account.

16. Contingent liabilities and provisionsDepending on facts of each case and after due evaluation of relevant legal aspects, the Company makes a provision when there is apresent obligation as a result of a past event where the outflow of economic resources is probable and a reliable estimate of theamount of obligation can be made. The disclosure is made for all possible or present obligations that may but probably will not requireoutflow of resources as contingent liability in the financial statements.

SCHEDULES FORMING PART OF THE FINANCIAL STATEMENTS19 SIGNIFICANT ACCOUNTING POLICIES

103HSIL Limited |


(Rs. in Million)

2009 2008

1. Estimated amount of contracts remaining to be executed on capital account and not providedfor (net of advances Rs. 256.53 million; Previous year Rs. 63.10 million) 73.14 363.59

2. Contingent liabilities not provided for in respect of:a) Demands raised by the excise authorities against which appeals have been filed 3.28 3.28b) Demands made by the sales tax authorities against which appeals have been filed 11.44 11.44c) Bank guarantees outstanding 31.26 89.79d) Claims against the Company not acknowledged as debts 176.19 148.22

3. Unfulfilled export obligation under EPCG license of EXIM Policy 362.74 91.71

5. Amount due to entities covered under Micro, Small and Medium Enterprises have been identified on the basis of confirmationsreceived from these entities and information available with the Company. There was no amount due for more than forty five dayspayable to these identified entities at any time during the year.

6. Miscellaneous expenses include payments to auditors for:

4. Other liabilities include:

7. Employee benefitsDuring the year the Company has recognised the following amounts in the profit and loss account.

a) Provident fund and other funds*:

* included in contribution to provident and other funds (refer schedule 16)

** The Fund does not have any existing deficit or interest shortfall. In regard to any future obligation arising due to interest shortfall,pending the issuance of the Guidance Note from the Actuarial Society of India, the measurement of actuarial valuation liabilitytowards Provident Fund is not feasible. Accordingly, other related disclosures in respect of provident fund have not been furnished.

(Rs. in Million)

2009 2008

a) Audit fee 1.10 0.70b) Tax audit fee 0.17 0.11c) Certification and other services 0.28 0.11d) Reimbursement of expenses 0.19 0.21

(including service tax wherever applicable)1.74 1.13

20 NOTES TO THE FINANCIAL STATEMENTS

(Rs. in Million)

2009 2008

Employer’s contribution to provident fund ** 22.08 20.81Employer’s contribution to ESI 5.09 5.58

(Rs. in Million)

2009 2008

Directors’ commission payable 43.95 33.51

HSIL LIMITED



Leave LeaveGratuity encashment Gratuity encashmentFunded Unfunded Funded Unfunded

Amount recognised in the balance sheet :Present value of obligations 92.03 20.61 99.81 16.21Fair value of plan assets 86.50 – 92.75 –

5.53 20.61 7.06 16.21Unrecognized past service cost – – – –Net liability recognised in the balance sheet 5.53 20.61 7.06 16.21Amount recognized in profit and loss account:Current service cost 7.54 2.47 5.77 1.75Interest cost 6.46 1.30 6.10 1.04Expected return on plan assets (7.42) – (6.02) –Net Actuarial (gain)/loss (1.77) 0.63 9.37 0.42Past service cost – – – –Curtailment and settlement cost/(gain) – – – –Total included in 'Personnel Cost' (Refer schedule 16) 4.81 4.40 15.22 3.21Actual return on plan assets 2.47 – 17.37 –Reconciliation of opening and closing balancesof benefit obligations and plan assetsChange in defined benefit obligationOpening defined benefit obligation 99.81 16.21 76.26 13.00Current service cost 7.54 2.47 5.77 1.75Interest cost 6.46 1.30 6.10 1.04Benefits paid (15.06) – (9.04) –Curtailment and settlement cost/(credit) – – – –Contribution by plan participants – – – –Past service cost – – – –Actuarial (gain)/loss (6.72) 0.63 20.72 0.42Closing defined benefit obligation 92.03 20.61 99.81 16.21Change in fair value of plan assetsFair value of plan assets at the beginning of the year 92.75 – 75.27 –Expected return on plan assets 7.41 – 6.02 –Actuarial gain/(loss) (4.95) – 11.35 –Employer's contribution 6.35 – 9.15 –Contribution by plan participants – – – –Settlement cost – – – –Benefits paid (15.06) – (9.04) –Fair value of plan assets at the end of the year 86.50 – 92.75 –Assumptions used to determine the benefit obligations:Discount rate 7.00% 8.00% 8.50% 8.00%Expected rate of increase in compensation levels 6.00% 5.50% 6.00% 5.50%Expected rate of return on plan assets 8.00% NA 8.00% NAExpected average remaining working lives of employees 17 Years 18.11 Years 16 Years 17.19 Years

b) Defined benefit plans (Rs. in Million)


104 | HSIL Limited


Amounts for the current and previous periods are as follows: 2008-09 2007-08 2006-07

Defined benefit plan - GratuityDefined benefit obligation (92.03) (99.81) (76.26)Plan Assets 86.50 92.75 75.27Surplus/(deficit) (5.53) (7.06) (0.99)Defined benefit plan - Leave encashmentDefined benefit obligation (20.61) (16.21) (13.00)Plan Assets – – –Surplus/(deficit) (20.61) (16.21) (13.00)

Employee benefits (Contd.) (Rs. in Million)

2009 2008

Deferred tax liabilityOn fiscal allowances on fixed assets 458.43 374.28Deferred tax assetsOn provision for doubtful debts, loans and advances 23.59 22.62Other timing differences 11.75 10.68

35.34 33.30Deferred tax liability (net) 423.09 340.98

8. Deferred taxMajor components of deferred tax assets and liabilities are as given below: (Rs. in Million)

2009 2008

Basic earnings per shareProfit after tax 392.95 285.33Tax for earlier years 8.57 1.17Profit attributable to equity shareholders 401.52 286.50Number of Shares 55,025,508 55,025,508Weighted average number of shares outstanding during the year 55,025,508 55,025,508Nominal value per share (Rs.) 2 2Earnings per share – Basic and Diluted 7.30 5.21

The Company made annual contribution to the Birla Sun Life Insurance Company Limited (‘BSL’) of an amount advised by the BSL. TheCompany was not informed by BSL of the investment made or the break down of plan assets by investment type.

Estimated amount of benefits payable within next year are Rs. 5.53 million (previous year Rs. 6.22 million).

10. Related party transactionsa) Name of related parties and description of relationship:

i) Subsidiaries – AGI Glasspack LimitedHindware Home Retail Private Limited

HSIL Associates Limited

Halis International Limited, Mauritius

ii) Key management personnel (Name of the relatives of key management personnel with whom the Company had transactions during the year are listed below).Mr. Rajendra K Somany (Father)Mr. Sandip Somany (Son)

9. Earnings per share


(Rs. in Million)

105HSIL Limited |

HSIL LIMITED


Other parties whichKey Management significantly influence /

Particulars Subsidiaries Personnel and are influenced by thetheir Relatives Company (either

individually or otherwise)

2009 2008 2009 2008 2009 2008

A. a) Sale of Goods 3.36 – – 0.03 – –b) Purchase of Trading Goods 0.51 – – – – –c) Purchase of Capital Goods 0.20 – – – – –d) Expenses paid on behalf of Subsidiary 0.84 7.76 – – – –e) Rent Paid – – 0.40 – 0.03 0.03f) Investment made 107.04 65.00 – – – –g) Balance outstanding at the year end:

- Receivable – 7.76 – – – –B. Directors’ remuneration – – 54.41 42.93 – –

Balance outstanding at the year end-payable – – 37.67 28.72 – –

11. Related party disclosures

12. In the opinion of the board of directors, current assets, loans and advances have a value on realisation in the ordinary course of thebusiness at least equal to the amounts at which they are stated and provision for all known liabilities have been made.

13. The year end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below:


(Rs. in Million)

(Rs. in Million)

2009 2008Receivables and advances:Exports outstanding 95.26 65.39Payables:Payable on imports 211.20 41.63Loans:Buyers credit – 217.83Export packing credit 18.65 93.01Term loan – 264.66

18.65 575.50325.11 682.52

2009 2008

a) Salary 13.17 10.95b) Contribution to provident fund 1.58 1.31c) Leave encashment paid 0.94 1.04d) Commission 43.95 33.51e) Monetary value of perquisites 1.05 0.90f) Directors’ sitting fee 0.11 0.11Total 60.80 47.82

* exclusive of provision for future liability in respect of gratuity and leave encashment which is based on actuarial valuation done onoverall Company basis.

14. Payments to directors *

b) Entities where significant influence is exercised by key management personnel and/or their relatives having transactions with the Company:i) Textool Mercantile Private Limitedii) Paco Exports Limitediii) New Delhi Industrial Promoters and Investors Limitediv) Soma Investments Limitedv) Hindusthan National Glass & Industries Limited

(Rs. in Million)

106 | HSIL Limited


2009 2008

Raw materials and components 307.88 205.03Spares 27.90 33.37Capital goods 8.44 141.69Goods purchased for resale 306.15 226.22Total 650.37 606.31

15. Particulars relating to foreign exchangea) Value of imports calculated on C.I.F. basis

2009 2008

Net profit before tax from ordinary activities 567.77 449.30Add: Directors’ remuneration including directors’ fee 60.80 47.82Add: Provision for doubtful debts and advances (net) 2.83 2.91

631.40 500.03Less: Profit on sale of fixed assets (net) 2.27 0.21Less: Profit on sale of investments (net) 1.32 21.18Net profit for the year in accordance with Section 198 of the Companies Act, 1956 627.81 478.64i) Commission payable to whole-time directors

a) Chairman & Managing Director 18.83 14.36(Restricted to 3% of net profit as calculated above)

b) Joint Managing Director 18.83 14.36(Restricted to 3% of net profit as calculated above)

ii) Commission payable to non-whole-time directors(Restricted to 1% of net profit as calculated above) 6.29 4.79

Computation of net profit in accordance with Section 198 of the Companies Act, 1956 and the commission payable todirectors

2009 2008

Commission on exports 2.56 3.83Travelling 13.23 8.77Consultancy fee (net of tax) 52.89 10.96Designs and drawings 16.78 –Interest to bank (net of tax) 40.53 –Rent 0.13 0.18Others 0.82 –Total 126.94 23.74

b) Expenditure in foreign currency


(Rs. in Million)

(Rs. in Million)

(Rs. in Million)

2009 2008

FOB value of export of goods 268.66 203.19Total 268.66 203.19

c) Earnings in foreign exchange (Rs. in Million)

2009 2008

Value % Value %

Imported 310.24 31 233.65 28Indigenous 691.37 69 615.24 72Total 1,001.61 100 848.89 100

d) Value of imported and indigenous raw materials, stores and spares consumed

Raw material and components: (Rs. in Million)

107HSIL Limited |

HSIL LIMITED

SCHEDULES FORMING PART OF THE FINANCIAL STATEMENTS20 NOTES TO THE FINANCIAL STATEMENTS

2009 2008

Description Qty. (M.T.) Value Qty. (M.T.) Value

Clays 17,367 48.55 22,449 58.03Soda Ash 40,946 347.88 20,987 223.20Cullets 123,421 304.83 90,218 263.76Quartz/Feldspar 10,831 18.68 15,333 23.28Others – 281.67 – 280.62Total 1,001.61 848.89

17. Raw material and components consumed

2009 2008

Value % Value %

Imported 28.91 14 17.67 10Indigenous 178.77 86 155.86 90Total 207.68 100 173.53 100

Stores and spare parts consumed:

(Rs. in Million)

Unit of Licensed/ Installed Production Purchase Opening Stock Closing Stock SalesClass of Goods Measure- Registered Capacity Quantity Value

ment Capacity Qty. Value Qty. Value Qty. Value

Sanitaryware, fittings and other allied M.T NA 32,000 24,169 926.62 17,208 901.93 14,205 884.76 27,172 3,322.35products (32,000) (31,064) (806.48) (13,185) (712.82) (17,208) (901.93) (27,041) (3,019.73)Plaster of Paris M.T NA 3,000 127 – 95 0.10 56 0.32 166 –

(3,000) (317) – (100) (0.36) (95) (0.10) (322) –Refractories M.T NA 1,200 – – – – – – – –

(1,200) – – – – – – – –Zirconium opacified M.T NA 600 – – – – – – –

(600) – – (7) (0.25) – – – –Heat Rings Nos. NA 500,000 81,000 – 18,970 – 40,600 – 59,370 0.20

(500,000) (78,520) – (18,200) – (18,970) – (77,750) (0.17)Acide Resistant Tiles Nos. NA 650,000 – – 160 – 160 – – –

(650,000) (7,530) – (9,470) – (160) – (16,840) (0.06)Glass Bottles / Lac Pcs. NA 16,431 8,685 – 1,042 198.63 942 216.35 8,785 3,262.22Containers (9,531) (8,545) – (1,162) (213.83) (1,042) (198.63) (8,664) (2,718.72)Scrap & Other Sales – – – – – – – – 29.80

– – – – – – – – (24.06)

16. Particulars in respect of goods manufactured/traded

1 Installed capacity has been certified by the management, which the auditors have relied on without verification as this is a technicalmatter.

2 Production includes captive consumption.

3 Sales quantities include free replacement, breakage, samples, etc. the quantity whereof has not been separately determined.

4 Value of purchases, sales & stocks of sanitaryware & fittings include the value of fitting items. In view of practical difficulties, thequantitative details of fitting items have not been included above.

5 Previous year's figures are given in brackets.

(Rs. in Million)

(Rs. in Million)

108 | HSIL Limited







2009 2008Balance brought forward from previous year 9.29 –Add:- Stores & spares consumed 1.79 –- Power & fuel 4.17 –- Insurance 1.04 –- Rates & taxes 0.76 0.64- Travelling & conveyance 8.20 1.46- Rent & hiring charges 3.82 0.16- Salary, wages & bonus 30.53 2.54- Contribution to provident and other funds 2.08 0.18- Staff & labour welfare expenses 1.31 0.30- Interest paid 239.43 0.17- Foreign exchange fluctuation loss 164.82 –- Miscellaneous expenses 14.04 3.88Total (A) 481.28 9.33Less :- Miscellaneous receipts 1.47 0.03- Miscellaneous sales 0.13 –- Interest received 19.05 0.01- Provision for taxation (6.44) –- Insurance claim received 0.22 –Total (B) 14.43 0.04Total (A-B) 466.85 9.29Allocated to fixed assets 258.00 –Balance allocated to capital work-in-progress 208.85 –Balance carried forward – 9.29

18. Expenditure during construction period (Rs. in Million)

2009 2008

Salaries, wages and bonus 0.88 0.83Contribution to provident and other funds 0.06 0.04Stores and spares consumed 0.47 0.17Total 1.41 1.04

19. Expenditure on ceramic and applied research centre

20. Upto 31 March 2008 the Company was recognizing to translation differences arising on long term foreign currency monetary items(i.e. monetary assets or liabilities expressed in foreign currency and having a term of 12 months or more at the date of origination) inprofit and loss account. Pursuant to Companies (Accounting Standards) Amendment Rules, 2009, the Company has exercised theoption of deferring the recognition of Profit and Loss account in respect of accounting periods commencing on or after 7 December2006. As a result, foreign exchange transaction difference amounting to Rs. 164.82 million relating to the acquisition of depreciablecapital assets have been adjusted with cost of such assets and would be depreciated over the balance life of the assets. The amountremaining to be amortised as at 31 March 2009 is Rs. 164.76 million.

21. Name of the Company has been changed from ‘Hindustan Sanitaryware & Industries Limited’ to ‘HSIL Limited’. The Registrar ofCompanies, West Bengal has issued fresh certificate on 24 March 2009.

22. Previous year figures have been regrouped/recast wherever considered necessary to make them comparable with those of the current year.

(Rs. in Million)

109

HSIL LIMITED

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

Public Issue

L 5 1 4 3 3 W B 1 9 6 0 P L C 0 2 4 5 3 9

N I L

N I L

Bonus Issue

N I L

Private Placement

Right Issue

N I L

3 1 0 3

Registration No./CIN State Code

Balance Sheet Date

I. Registration Details

II. Capital Raised during the year (Rs. in Million)

Total Liabilities

7 6 1 9

III. Position of mobilisation and deployment of funds (Rs. in Million)

2 0 0 9

2 1

Total Assets

7 6 1 9

Paid-up CapitalSources of Funds

1 1 0

Reserves and Surplus

2 3 9 5

Secured Loans

4 3 1 5

Unsecured Loans

3 7 6

Deferred Tax Liabilities

4 2 3

Net Fixed AssetsApplication of Funds

5 2 8 4

Investment

4 2 7

Net Current Assets

1 9 0 8

Miscellaneous Expenditure

N I L

Accumulated Losses

N I L

IV. Performance of the Company (Rs. in Million)

Item Code No. (ITC Code)

Product/Service Description

V. Generic Names of Two Principal Products of the Company

Net Turnover (including other income)

6 1 9 8

Total Expenditure

5 6 3 0

Profit before Tax

5 6 8

Profit after Tax

4 0 2

Basic Earning Per Share (Rs.)

7 . 3 0

Dividend Rate (%)

8 0

6 9 1 0 1 0 0 0

S A N I T A R Y W A R E S



7 0 1 0 9 0 0 0

G L A S S B O T T L E S



Place : GurgaonDate : 23 May 2009

110 | HSIL Limited

CONSOLIDATED AUDITORS’ REPORT

1. We have audited the attached consolidated balance sheet

of HSIL Limited (formerly known as Hindustan Sanitaryware

& Industries Limited) (“the Company”) and its subsidiaries

collectively referred to as the “HSIL Group” as at 31 March

2009, the consolidated profit and loss account and also the

consolidated cash flow statement for the year ended on

that date annexed thereto. These financial statements are

the responsibility of the management of the HSIL Group

and have been prepared by the management on the basis

of separate financial statements and other financial

information regarding components. Our responsibility 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. Those standards

require that we plan and perform the audit to obtain

reasonable assurance about whether 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. An

audit also includes 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 provides a reasonable basis for our

opinion.

3. We did not audit the financial statements of the

subsidiaries, whose financial statements reflect total assets

of Rs. 128.30 million as at 31 March 2009, the total

revenue of Rs. 0.01 million and cash out flows amounting

to Rs. Nil for the year then ended. These financial

statements and other financial information have been

audited by other auditors whose reports have been

furnished to us, and our opinion is based solely on the

reports of other auditors.

4. We did not audit the financial statements of a subsidiary,

whose financial statements reflect total assets of Rs. 2.42

million as at 31 March 2009, total revenue of Rs. NIL and

cash flows amounting to Rs. 1.93 million for the year then

ended. These financial statements included in the

consolidated financial statements of the Group are not

audited.

5. We report that the consolidated financial statements have

been prepared by HSIL Group’s management in accordance

with the requirements of Accounting Standard 21,

Consolidated Financial Statements, issued by the Institute

of Chartered Accountants of India.

6. Based on our audit and on consideration of reports of

other auditors on separate financial statements and on the

other financial information of the subsidiaries, and to the

best of our information and according to the explanations

given to us, subject to financial statements of a subsidiary

not audited as per Para 4 above, we are of the opinion that

the attached consolidated financial statements give a true

and fair view in conformity with the accounting principles

generally accepted in India; in case of:

a) the consolidated balance sheet, of the state of affairs of

the HSIL Group as at 31 March 2009;

b) the consolidated profit and loss account, of the profit

for the year ended on that date; and

c) the consolidated cash flow statement, of the cash flows

for the year ended on that date.

For Walker, Chandiok & Co.


Per B. P. Singh

Place : Gurgaon Partner

Date : 23 May 2009 Membership No. 70116

To

The Board of Directors of

HSIL Limited (formerly known as Hindustan Sanitaryware & Industries Limited)

111HSIL Limited |

HSIL LIMITED

CONSOLIDATED BALANCE SHEET(Rs. in Million)

Schedule As at As at31 March 2009 31 March 2008

SOURCES OF FUNDSShareholders' fundShare capital 1 110.05 110.05Reserves and surplus 2 2,279.88 2,065.62

2,389.93 2,175.67Loan fundsSecured 3 4,331.93 1,136.95Unsecured 4 375.48 896.38

4,707.41 2,033.33Deferred tax liability (net) (Refer note 8 on Schedule 21) 423.09 331.58

7,520.43 4,540.58APPLICATION OF FUNDSFixed assets 5Gross block 6,466.70 4,571.99Less: Accumulated depreciation and amortisation 2,241.95 2,092.58Net block 4,224.75 2,479.41Capital work-in-progress (including spares and capital advances) 1,251.51 294.77

5,476.26 2,774.18 Investments 6 107.95 137.24Current assets, loans and advancesInventories 7 1,509.39 1,470.44Sundry debtors 8 1,027.73 909.58Cash and bank balances 9 797.12 122.05Other current assets 10 8.32 1.00Loans and advances 11 421.23 249.68

3,763.79 2,752.75Less: Current liabilities and provisions 12a) Current liabilities 1,673.27 984.68b) Provisions 154.32 138.91

1,827.59 1,123.59Net current assets 1,936.20 1,629.16Miscellaneous expenditure (To the extent not written off or adjusted) 13 0.02 –

7,520.43 4,540.58 Significant accounting policies 20Notes to the financial statements 21

The schedules referred to above form an integral part of the consolidated financial statementsOn behalf of the Board of Directors


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




112 | HSIL Limited

The schedules referred to above form an integral part of the consolidated financial statementsOn behalf of the Board of Directors


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




CONSOLIDATED PROFIT AND LOSS ACCOUNT(Rs. in Million)

Schedule Year ended Year ended31 March 2009 31 March 2008

INCOMEIncome from operations 14 6,665.88 5,762.77Less: Excise duty on sale of goods 508.14 554.36

6,157.74 5,208.41Other income 15 94.03 77.88Increase/(decrease) in stocks 16 (16.03) 230.40

6,235.74 5,516.69EXPENDITUREGoods purchased for resale 959.92 839.31Personnel cost 17 671.21 574.30Manufacturing, selling and general expenses 18 3,543.81 3,242.02

5,174.94 4,655.63Profit before interest, depreciation, amortisation and tax 1,060.80 861.06Interest 19 168.10 163.37Depreciation and amortisation 5 283.96 264.18Profit before tax and exceptional items 608.74 433.51Loss on foreign exchange fluctuations 115.33 –Loss in respect of exceptional transaction – 11.85Profit before tax 493.41 421.66Tax expense

Current tax 82.85 161.50Income tax for earlier years (8.57) (1.17)Deferred tax 82.11 (16.96)Fringe benefit tax 10.36 10.26

Profit after tax before prior period item 326.66 268.03Prior period item

Deferred tax for earlier years (9.40) –Profit after tax and prior period item 317.26 268.03Balance transferred from previous year 885.09 743.63Balance available for appropriation 1,202.35 1,011.66APPROPRIATIONSTransferred to general reserve 50.00 30.00Proposed dividend on equity shares 88.04 82.54Tax on proposed dividend 14.96 14.03Balance carried to balance sheet 1,049.35 885.09

1,202.35 1,011.66Basic and diluted earning per share (Rs.)Before prior period item 5.94 4.87After prior period item 5.77 4.87(Refer note 11 on Schedule 21)Significant accounting policies 20Notes to the financial statements 21

113HSIL Limited |

114 | HSIL Limited

HSIL LIMITED

CONSOLIDATED CASH FLOW STATEMENT(Rs. in Million)


31 March 2009 31 March 2008


Net Profit before tax 493.41 421.66

Adjustments for:

Depreciation and amortisation 283.96 264.18

Miscellaneous expenditure 0.01 0.05

(Profit)/loss on fixed assets discarded/sold (net) (2.34) (0.21)

Interest expense 168.10 163.37

Dividend – (1.30)

Interest income (6.25) (7.65)

(Profit)/loss on sale of investments (net) (1.33) (21.39)

Sundry balances and liabilities no longer required written back (11.30) (8.16)

Dimunition in the value of current investments – 0.36

Bad Debts and provision for doubtful debts and advances 5.17 3.89

Operating Profit before working capital changes 929.43 814.81

Adjustments for :

Inventories (38.95) (252.26)

Trade/other receivables (294.28) (122.77)

Trade/other payables 666.71 103.59

Cash generated from operations 1,262.91 543.37

Direct taxes paid (78.93) (153.53)

Net cash from operating activities 1,183.98 389.84


Purchase of fixed assets including capital work in progress (2,830.10) (477.03)

Proceeds from sale of fixed assets 11.19 8.83

Purchase of investments (0.48) (37.55)

Sale proceeds of investments 31.10 257.61

Movement in restricted cash equivalent 2.98 (14.36)

Interest received (1.07) 8.41

Dividend received – 1.30

Loans and advances recovered (0.60) 1.94

Net cash used in investing activities (2,786.98) (250.85)

115HSIL Limited |

CONSOLIDATED CASH FLOW STATEMENT (Contd.)

(Rs. in Million)


31 March 2009 31 March 2008

C. CASH FLOW FROM FINANCING ACTIVITIES

Proceeds/(repayment) of long term borrowings (net) 2,318.12 (76.23)

Proceeds from short term borrowings (net) 191.34 180.25

Expenditure incurred on Preliminary Expenses (0.03) –

Interest paid (132.46) (164.75)

Dividend paid (81.89) (54.90)

Taxes on dividend (14.03) (9.35)

Net cash (used)/from in financing activities 2,281.05 (124.98)

Net increase in cash and cash equivalents 678.05 14.01

Cash and cash equivalents in the beginning 85.25 71.24

Cash and cash equivalents at the close 763.30 85.25

Note:

Cash and cash equivalents include:

Cash and cheques in hand and remittances in transit 57.73 67.35

Balances with bank 705.57 17.90

Cash and cash equivalents 763.30 85.25

Balances in fixed deposit accounts - pledged 30.14 33.76

Balances in unpaid dividend accounts 3.62 2.98

Bonus fraction 2005 account 0.03 0.03

Share split fraction 2006 account 0.03 0.03

Balance in post office savings account (pledged)* – –

Balance with bank not considered as cash equivalents 33.82 36.80

Cash and bank balances as per Balance Sheet 797.12 122.05

* Rounded off to Nil



This is the Consolidated Cash Flow Statement referred to in our report of even date.




116 | HSIL Limited

HSIL LIMITED

SCHEDULES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS(Rs. in Million)


Authorised75,000,000 (previous year 75,000,000) equity shares of Rs. 2 each 150.00 150.00

150.00 150.00Issued55,029,333 (previous year 55,029,333) equity shares of Rs. 2 each 110.06 110.06

110.06 110.06Subscribed and paid-up*55,025,508 (previous year 55,025,508) equity shares of Rs. 2 each fully paid-up 110.05 110.05Add: Forfeited shares** – –** Rounded off to Nil

110.05 110.05

*Of the above shares, 24,268,638 equity shares of Rs. 2 each (previous year 24,268,638 equity shares of Rs. 2 each) were allotted as fullypaid-up by way of bonus shares by capitalisation of revenue reserves, 67,500 equity shares of Rs. 10 each fully paid-up (now stands splitinto 337,500 equity shares of Rs. 2 each, previous year 337,500 equity shares of Rs. 2 each) were issued to the equity shareholders of theerstwhile The Associated Glass Industries Limited pursuant to the scheme of amalgamation and 365,645 equity shares of Rs. 10 each fullypaid up (now stands split into 1,828,225 equity shares of Rs. 2 each, previous year 1,828,225 shares of Rs. 2 each fully paid up) wereissued to the equity shareholders of the erstwhile Krishna Ceramics Limited pursuant to the scheme of amalgamation.

1 SHARE CAPITAL


31 March 2009 31 March 2008

i) Capital reservea) On account of amalgamation with erstwhile Krishna Ceramics Limited 0.33 0.33b) Forfeited amount of debentures 2.00 2.00c) Forfeited amount of upfront payment for naked warrants 9.75 9.75d) Profit on acquisition of shares 0.03 0.03

12.11 12.11

ii) Central subsidy reserve 2.50 2.50

iii) Securities premium account 684.06 684.06

iv) General reserveAs per last year 480.36 450.36Add: Transferred from profit and loss account 50.00 30.00

530.36 480.36

v) Capital redemption reserve 1.50 1.50

vi) Profit and loss accountSurplus in profit and loss account 1,049.35 885.09

2,279.88 2,065.62

2 RESERVES AND SURPLUS

117HSIL Limited |



From banks:Cash credit accounts 1,221.22 268.66Buyers credit – 217.83

(Secured by hypothecation of stocks and book debts and further secured by second charge on all the fixed assets located at Bahadurgarh, Bibinagar and Sanathnagar)

Term loans from banks* 3,108.68 645.91(Term loans of Rs. 465.37 million, previous year Rs. 162.50 million are payable within one year)

Car finance loans from banks and bodies corporate 2.03 4.55(Secured by hypothecation of vehicles financed out of proceeds of loans)(Amount payable within one year Rs. 1.42 million, previous year Rs. 3.16 million)

4,331.93 1,136.95

*Notes:- 1) Term loans from HSBC, CITI, Standard Chartered, HDFC and IDBI banks are secured by way of hypothecation of the whole of fixed

assets including moveable plant & machinery, machine spares, tools and accessories (both present and future) pertaining to the GlassDivisions of Company located at Sanathnagar and Bhongir and further secured by first pari-passu charge by way of mortgage ofdeposit of title deeds of immoveable properties of Glass Divisions of the Company located at Sanathnagar and Bhongir.

2) Term loan from Andhra bank is secured by way of hypothecation of the whole of fixed assets including moveable plant & machinery,machine spares, tools and accessories (both present and future) pertaining to the Ceramic Division of the Company located atBibinagar, District Nalgonda, Andhra Pradesh and further to be secured by first pari-passu charge by way of mortgage of deposit oftitle deeds of immovable properties of Ceramic Division located at Bibinagar, District Nalgonda, Andhra Pradesh and of CorporateOffice of the Company at Gurgaon.

Notes:- * Maximum amount outstanding on commercial paper during the year Rs. 600 million (previous year Rs. 500 million).

** The amount of deferred sales tax credit is subject to assessment by sales tax authorities. As per agreement with Commercial TaxDepartment, Hyderabad, deferred sales tax credit relating to the Glass Division located at Sanathnagar amounting to Rs. 113.82 million(previous year Rs. 108.26 million) and Ceramic Division located at Bibinagar amounting to Rs. 136.22 million (previous year Rs. 119.11million) is secured against the moveable and immoveable properties of the Company. However, the charge is pending registration withthe Registrar of Companies, West Bengal.

3 SECURED LOANS


31 March 2009 31 March 2008

Short termTrade deposits from dealers 69.29 65.96Interest accrued and due on above – 0.18From banksCommercial paper* – 500.00Supplier bills discounted 5.14 9.86Packing Credit Accounts 51.01 93.01OtherDeferred sales tax credit** 250.04 227.37

375.48 896.38

4 UNSECURED LOANS

118 | HSIL Limited

HSIL LIMITED

SCHEDULES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS

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119HSIL Limited |



LONG TERMNon Tradei) Government securities* - Unquoted:

National Savings Certificates 0.11 0.08ii) Fully paid-up equity shares of Rs. 10 each - Quoted:

125 (previous year 125) Neycer India Limited** – –50 (previous year 50) Swastik Sanitarywares Limited** – –Trade - Unquoted(equity shares of Rs. 10 each)Others804,000 (previous year 804,000) Andhra Pradesh Gas Power Corporation Limited 107.36 107.36

107.47 107.44CURRENTi) Mutual Fund - Non Trade (unquoted)

(Units of Rs. 10 each fully paid up)Nil (previous year 232,016.767) HDFC Prudence Fund - Growth – 29.6426,444.236 (previous year 9,829.647) HDFC Liquid Fund - Growth 0.48 0.16

0.48 29.80107.95 137.24

Aggregate cost of quoted investments** – –Aggregate cost of unquoted investments 107.95 137.24Aggregate net asset value of mutual fund investments 0.48 29.80* Deposited with government departments 0.05 0.04** Rounded off to Nil

During the year, the following current investments were purchased and sold:1) 2,244,706.7010 units of HDFC Cash Management Fund-Savings Plus Plan-Wholesale-Growth purchased at cost of Rs. 40.00 million

and sold at Rs. 40.32 million



4) 1,119,545.0170 units of HDFC Cash Management Fund-Savings Plus Plan-Wholesale-Growth purchased at cost of Rs. 20.00 millionand sold at Rs. 20.14 million



6 INVESTMENTS

120 | HSIL Limited

HSIL LIMITED



(As taken, valued and certified by the management)Stores, spares and packing materials 197.75 166.87Raw materials and components 126.89 88.74Stock-in-process 33.34 56.76Goods in transit* 12.07 24.60Finished goods including goods purchased for sale 1,139.34 1,133.47

1,509.39 1,470.44

* Includes raw materials and components Rs. 10.55 million (previous year Rs. 24.60 million) and finished goods Rs. 1.52 million (previousyear Rs. Nil)

7 INVENTORIES


31 March 2009 31 March 2008

(Unsecured unless otherwise stated)Debts Outstanding for a period exceeding six months:Considered good

Secured 2.94 5.27Others 70.36 68.28

Considered doubtful 66.70 62.11Other debts:Considered good

Secured 27.17 22.51Others 927.26 813.52

Considered doubtful – 0.411,094.43 972.10

Less: Provision for doubtful debts 66.70 62.521,027.73 909.58

8 SUNDRY DEBTORS


31 March 2009 31 March 2008

Cash in hand 3.22 2.25Remittances-in-transit 54.51 65.10Balances with scheduled banks in:

Current accounts 31.34 17.30Fixed deposit accounts * 704.37 34.36Unpaid dividend accounts 3.62 2.98Bonus fraction 2005 0.03 0.03Share split fraction 2006 0.03 0.03

With post office in savings account (pledged)** – –797.12 122.05


* Rs. 30.04 million (previous year Rs. 33.76 million) are pledged with banks as margin money.

** Rounded off to Nil

121HSIL Limited |


* Including excise duty payable Rs. 78.03 million (previous year Rs. 143.01 million) on finished goods lying at company's bondedwarehouses.

** Not due for deposit

(Rs. in Million)


Interest accrued but not due on loans and deposits 8.32 1.008.32 1.00

10 OTHER CURRENT ASSETS


31 March 2009 31 March 2008

(Unsecured, considered good except where otherwise stated)Advance recoverable in cash or in kind or for value to be received 156.20 172.41(including Rs. 2.69 million, previous year Rs. 4.04 million considered doubtful of recovery)Balance with excise/sales tax authorities 216.66 41.65Deposits 51.06 39.66

423.92 253.72Less: Provision for doubtful advances 2.69 4.04

421.23 249.68



31 March 2009 31 March 2008

a) Current liabilitiesAcceptances 288.52 18.73Sundry creditors for goods, services and expenses

Due to Micro, Small and Medium enterprises 1.05 7.15Others 976.97 611.19

Interest accrued but not due on loans 37.62 1.80Advance against sales/orders 56.29 39.65Investor education & protection fund**

Unclaimed dividend 3.62 2.98Unclaimed Share Split Fraction 2006 0.03 0.03Unclaimed Bonus Fraction 2005 0.03 0.03

Other liabilities* 309.14 303.121,673.27 984.68

b) ProvisionsEmployee benefits 27.06 23.77Income tax (including fringe benefit tax) 24.26 18.57(net of advance payment of Rs. 387.70 million, previous year Rs. 438.50 million)Proposed dividend 88.04 82.54Tax on proposed dividend 14.96 14.03

154.32 138.911,827.59 1,123.59

12 CURRENT LIABILITIES AND PROVISIONS

(Rs. in Million)


Preliminary expenses 0.03 0.05Less: Written off during the year 0.01 0.05

0.02 –

13 MISCELLANEOUS EXPENDITURE

122 | HSIL Limited

HSIL LIMITED



Sale of goods (net of returns)DomesticSanitaryware, fittings and glassware 5,974.07 5,211.09ExportSanitaryware, fittings and glassware 606.64 527.62(including deemed export Rs. 280.24 million, previous year Rs. 294.52 million)

6,580.71 5,738.71OthersScrap and other sales 85.17 24.06

85.17 24.066,665.88 5,762.77

14 INCOME FROM OPERATIONS


31 March 2009 31 March 2008

Rent received * 6.45 2.84Dividend received on investment in liquid mutual funds (non-trade unquoted) – 1.30Interest income (gross) on: *

Loans to body corporate 0.10 1.35Deposits 1.84 0.86Margin money 1.97 1.87Dealers 2.34 2.73Other accounts – 0.84

Profit on sale of investments in liquid mutual funds (non trade - unquoted) 1.33 21.39Profit on disposal of fixed assets 3.55 0.96Commission on Sales 0.17 –Service Charges 0.65 –Shop in Shop Income 1.28 –Export incentives 7.96 12.75Insurance claims received 14.43 2.39Provision for doubtful debts and advances written back – 2.85Sundry balances and liabilities no longer required written back 11.30 8.16Foreign exchange gain 30.54 –Miscellaneous receipts 10.12 17.59

94.03 77.88* Income tax deducted at source 2.43 1.14

15 OTHER INCOME


31 March 2009 31 March 2008

Opening stocksFinished goods including goods purchased for resale 1,133.47 927.25Stock-in-process 56.76 44.43

1,190.23 971.68Less: loss in respect of exceptional transaction – 11.85

1,190.23 959.83Less: Closing stocksFinished goods including goods purchased for resale 1,140.86 1,133.47Stock-in-process 33.34 56.76

1,174.20 1,190.23(16.03) 230.40

16 INCREASE/(DECREASE) IN STOCKS

123HSIL Limited |



Salaries, wages and bonus 601.50 511.51Contribution to provident and other funds 38.43 35.04Staff and labour welfare expenses 31.28 27.75

671.21 574.30

17 PERSONNEL COST


31 March 2009 31 March 2008

Raw materials consumed * 1,001.61 848.89Stores and spares consumed 207.68 173.53Excise duty on increase/(decrease) of stocks (56.65) 28.60Packing materials consumed 223.64 213.24Power and fuel (net) 1,233.68 1,113.69Repairs to:

Buildings 12.03 9.47Plant and machinery (excluding stores consumption) 36.44 39.59Other assets 18.86 10.79

Rent (including hire charges) 47.68 17.94Rates and taxes 3.17 3.72Directors fees 0.11 0.11Expenditure on ceramic and applied research centre 1.41 1.04Insurance 11.75 16.07Traveling and conveyance 73.33 70.97Discount 203.45 185.10Commission on sales 16.37 14.55Expenses on exports 70.73 62.02Advertisement and publicity 103.88 105.70Other selling and distribution expenses 178.50 159.88Bad Debts and provision for doubtful debts and advances 17.28 6.74Charity and donations 1.05 1.14Foreign exchange fluctuation – 30.60Loss on disposal of fixed assets 1.21 0.75Diminution in the value of current investments – 0.36Miscellaneous expenses 136.60 127.53

3,543.81 3,242.02

18 MANUFACTURING, SELLING AND GENERAL EXPENSES

(Rs. in Million)


On term loans 89.74 72.56Others* 78.36 90.81

168.10 163.37

19 INTEREST

* Includes accessories and fittings aggregating to Rs. 36.93 million (previous year Rs. 35.07 million).

* Includes Rs. 25.43 million (previous year Rs. 40.44 million) incurred on account of discounting charges of commercial paper.

HSIL LIMITED

1. Principles of consolidationThese consolidated financial statements include the financial statements of HSIL Limited (formerly known as Hindustan Sanitaryware& Industries Limited), the Parent Company and its subsidiaries namely, AGI Glasspack Limited, Hindware Home Retail Private Limited,HSIL Associates Limited and Halis International Limited (collectively referred to as ‘the Group’).

The consolidated financial statements have been combined on a line by line basis by adding the book value of the like items of theassets, liabilities, income and expenses after eliminating intra-group transactions and resulting unrealised profits in full. The amountsshown in respect of reserves comprise the amount of the relevant reserves as per balance sheet of the Parent Company and its sharein the post-acquisition increase in the relevant reserves of the subsidiaries.

The excess/deficit of cost to the Parent Company of its investment over its portion of equity in the subsidiaries at the respective dateon which the investment in such entity was made is recognised in the financial statement as goodwill/capital reserve. The ParentCompany’s portion of equity in such entities is determined on the basis of book value of assets and liabilities as per financial statementsof the entity as on the date of investment.

The consolidated statements are presented, to the extent possible, in the same format as that adopted by the Parent Company for itsseparate financial statements.

2. Basis of preparationThe financial statements are prepared on accrual basis under the historical cost convention, in accordance with the generally acceptedaccounting principles in India and to comply with the Accounting Standards referred to in sub section (3C) of Section 211 of theCompanies Act, 1956 and the Rules framed thereunder except as specifically stated in note 17 in schedule 21. The accounting policieshave been consistently applied by the Company and are consistent with those used in the previous year.

3. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to makeestimates and assumptions that affect the reported balances of assets and liabilities and the disclosure relating to contingent liabilitiesas at the date of financial statements and reported amount of income and expenses during the period. Although these estimates arebased upon management’s best knowledge of current events and actions, actual results could differ from those estimates. Any revisionto accounting estimates is recognised in the current and future periods.

4. Revenue recognitionSale of goodsRevenue from sale of goods is recognised when significant risks and rewards in respect of ownership of the goods are transferred tothe customer and is stated inclusive of excise duty and net of trade discounts, sales return and sales tax wherever applicable.

InterestInterest income is recognised on time proportion basis at the applicable rates.

5. Export benefit/incentiveBenefit under the advance license scheme and duty free replenishment certificate are accounted for at the time of purchase ofimported raw materials or sale of the license.

6. Fixed assetsTangibleTangible assets are stated at cost of acquisition less accumulated depreciation. Cost comprises the purchase price (net of cenvat creditavailed) and any attributable cost of bringing the asset to its working condition for its intended use. Expenditure on account ofrestoration/modification/ alteration in plant and machinery/ building, which increases the future benefit from the existing asset beyondits previously assessed standard of performance/estimated useful life, is capitalised.


7. Depreciation and amortisationA. Tangible

Depreciation on fixed assets has been provided on straight line method at the rates and in the manner prescribed under scheduleXIV (“schedule”) to the Companies Act, 1956 except the following:i. on assets acquired and put to use on or before 1 July 1987 in the glass division of the Parent Company and on vehicles

acquired till date in all the divisions of the Parent Company, depreciation is provided on written down value method at therates and in the manner prescribed in the schedule;

ii. on furnaces (included in plant and machinery) having a cost of Rs. 1,166.89 million used in the glass division, depreciation is



124 | HSIL Limited

provided on straight line method, as technically assessed from time to time, based on expected useful lives of the furnaces.The rate presently being 16.21% per annum which is the rate as prescribed in the schedule;

iii. cost of leasehold improvements is depreciated over the period of the lease or estimated useful life of the leaseholdimprovements, whichever is lower.

B. Intangiblei. Pre-operative expenditure including borrowing cost (net of revenue, where applicable) and foreign exchange transactions

difference on specific project loans incurred during the construction/trial run of the project is allocated on an appropriate basisto fixed assets on Commissioning;

ii. Trademarks are being amortised over a period of ten years;

iii. Computer software (included in Computers in Schedule 5) are amortized over a period of six years;

The depreciation rates are indicative of the expected useful lives of the assets.

8. Investments Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All otherinvestments are classified as long-term investments.

Current investments are valued at the lower of cost and fair value. Long-term investments are stated at cost. Provision is made fordiminution in the value of long-term investments to recognise a decline, if any, other than temporary in nature.

Profit/Loss on sale of investments are computed with reference to their cost determined on first in first out basis.

9. Inventoriesa) Inventories are valued as follows:

Stores and spares, packing materials, raw materials including components and goods in transit - At lower of cost and net realisablevalue. However, materials and other items held for use in the production of inventories are not written down below cost if thefinished products in which they will be incorporated are expected to be sold at or above cost.

Work-in-process - At cost upto estimated stage of completion.

Finished goods and goods purchased for resale - At lower of cost and net realisable value.

b) Cost of inventories is ascertained on the following basis: Raw materials, stores and spare parts and packing materials - On weighted average basis.

Finished goods purchased for resale - On weighted average basis.

Cost of manufactured finished goods and stock in process comprises of material, labour and other related production overheadsincluding depreciation.


Monetary items outstanding at the balance sheet date and denominated in foreign currencies are restated at the exchange ratesprevailing at the end of the year. Differences arising on such restatement are recognised in the profit and loss account except to theextent permitted by the transitional provision contained in the Companies (Accounting Standards) Amendment Rules, 2009 in respectof long term foreign currency monetary items, in which case the cost of fixed assets are adjusted by the translation differences andamortised over the remaining useful life of the asset.

The premium or discount arising at the inception of forward exchange contracts is amortised as expense or income over the life of thecontract. Exchange differences on such contracts are recognised in the statement of profit and loss in the year in which the exchangerates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or as expensefor the year.

11. Taxes on incomeTax expense comprises current income tax, deferred income tax and fringe benefit tax.

Current tax is determined as the amount of tax payable in respect of taxable income for the year.

Deferred income tax reflects the impact of current year timing differences between taxable income and accounting income for theyear and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted orsubstantively enacted at the balance sheet date. Deferred tax assets are recognised only to the extent that there is reasonable/virtualcertainty, depending on the nature of the timing differences, that sufficient future taxable income will be available against which suchdeferred tax assets can be realised.

Fringe benefit tax is determined in accordance with applicable Income-tax laws.

20 SIGNIFICANT ACCOUNTING POLICIES (Contd.)


125HSIL Limited |

HSIL LIMITED

12. Research and developmentResearch and development expenditure is charged to profit and loss account except capital expenditure, which is added to the costof respective fixed assets in the year in which it is incurred.

13. Leasesa) Operating Lease

Lease rentals in respect of assets taken on operating lease are charged to the profit and loss account on a straight-line basis overthe lease term.

b) Finance LeaseAssets acquired on finance lease which transfer risk and rewards of ownership to the Company are capitalised as assets by theCompany at the lower of fair value of the leased property or the present value of the related lease payments or where applicable,estimated fair value of such assets. Amortisation of capitalised leased assets is computed on the Straight Line method over theuseful life of the assets. Lease rental payable is apportioned between principal and finance charge using the internal rate of returnmethod. The finance charge is allocated over the lease term so as to produce a constant periodic rate of interest on the remainingbalance of liability.

14. Employee benefitsExpenses and liabilities in respect of employee benefits are recorded in accordance with Accounting Standard 15 Employee Benefits(Revised 2005) “Revised AS 15”.

a) Provident fundThe Company makes contributions to two independently constituted trusts and regional provident fund recognised by income taxauthorities. In terms of the Guidance on implementing the revised AS 15, issued by the Accounting Standard Board of the Instituteof Chartered Accountants of India (the ‘ICAI’), the provident fund set up by the Company is treated as defined benefit plan sincethe Company has to meet the interest shortfall, if any. Accordingly, the contribution paid or payable and interest shortfall, if anyis recognised as an expense in the period in which services are rendered by the employee.

b) GratuityGratuity is a post employment defined benefit plan. The liability recognised in respect of gratuity is the present value of the definedbenefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognised actuarialgains or losses and past service costs. The defined benefit obligation is calculated annually by actuaries using the projected unitcredit method.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited tothe profit and loss account in the year in which such gains or losses arise.

c) Compensated absenceThe Company measures and recognises the liability in respect of the expected cost of accumulating compensated absences as theadditional amount that it expects to pay as a result of the unused entitlement that has accumulated at the balance sheet date.

d) Other short term benefitsExpenses relating to other short term benefit including performance bonus is recognised on the basis of amount paid or payablefor the period during which services are rendered by the employee.

15. Earnings per shareBasic earnings per share are calculated by dividing net profit or loss for the period attributable to equity shareholders by weightedaverage number of equity shares outstanding during the period. The weighted average number of equity shares outstanding duringthe period is adjusted for events of bonus issue, share split and any new equity issue.

For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and theweighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

16. Impairment of assetsThe Company on an annual basis makes an assessment of any indicator that may lead to impairment of assets. If any such indicationexists, the Company estimates the recoverable amount of the assets. If such recoverable amount is less than the carrying amount, thenthe carrying amount is reduced to its recoverable amount by treating the difference between them as impairment loss and is chargedto the profit and loss account.

17. Contingent liabilities and provisionsDepending on facts of each case and after due evaluation of relevant legal aspects, the Company makes a provision when there is apresent obligation as a result of a past event where the outflow of economic resources is probable and a reliable estimate of theamount of obligation can be made. The disclosure is made for all possible or present obligations that may but probably will not requireoutflow of resources as contingent liability in the financial statements.

20 SIGNIFICANT ACCOUNTING POLICIES (Contd.)


126 | HSIL Limited


(Rs. in Million)

2009 2008

1. Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances Rs. 256.62 million ; Previous year Rs. 63.16 million) 73.32 363.80

2. Contingent liabilities not provided for in respect of:a) Demands raised by the excise authorities against which appeals have been filed 3.28 3.28b) Demands made by the sales tax authorities against which appeals have been filed 11.44 11.44c) Bank guarantees outstanding 31.26 89.79d) Claims against the Company not acknowledged as debts 176.19 148.22

3. Unfulfilled export obligation under EPCG license of EXIM Policy 362.74 91.71

5. Amount due to entities covered under Micro, Small and Medium Enterprises have been identified on the basis of confirmationsreceived from these entities and information available with the Company. There was no amount due for more than forty five dayspayable to these identified entities at any time during the year.

6. Miscellaneous expenses include payments to auditors of the Parent Company for:


a) Provident fund and other funds**




(Rs. in Million)

2009 2008

Employer’s contribution to provident fund ** 22.08 20.81Employer’s contribution to ESI * 5.09 5.58

4. Other liabilities include:

(Rs. in Million)

2009 2008

a) Audit fee 1.10 0.70b) Tax audit fee 0.17 0.11c) Certification and other services 0.28 0.11d) Reimbursement of expenses 0.19 0.21

(including service tax wherever applicable)1.74 1.13

(Rs. in Million)

2009 2008

Directors’ commission payable 43.95 33.51

127HSIL Limited |

HSIL LIMITED



Leave LeaveGratuity encashment Gratuity encashmentFunded Unfunded Funded Unfunded

Amount recognised in the balance sheet:Present value of obligations 92.03 20.61 99.81 16.21Fair value of plan assets 86.50 – 92.75 –

5.53 20.61 7.06 16.21Unrecognised past service cost – – – –Net liability recognised in the balance sheet 5.53 20.61 7.06 16.21Amount recognised in profit and loss account:Current service cost 7.54 2.47 5.77 1.75Interest cost 6.46 1.30 6.10 1.04Expected return on plan assets (7.42) – (6.02) –Net actuarial (gain)/loss (1.77) 0.63 9.37 0.42Past service cost – – – –Curtailment and settlement cost/(gain) – – – –Total included in 'Personnel Cost' (Refer schedule 17) 4.81 4.40 15.22 3.21Actual return on plan assets 2.47 – 17.37 –Reconciliation of opening and closing balances of benefit obligations and plan assetsChange in defined benefit obligationOpening defined benefit obligation 99.81 16.21 76.26 13.00Current service cost 7.54 2.47 5.77 1.75Interest cost 6.46 1.30 6.10 1.04Benefits paid (15.06) – (9.04) –Curtailment and settlement cost/(credit) – – – –Contribution by plan participants – – – –Past service cost – – – –Actuarial (gain)/loss (6.72) 0.63 20.72 0.42Closing defined benefit obligation 92.03 20.61 99.81 16.21Change in fair value of plan assetsFair value of plan assets at the beginning of the year 92.75 – 75.27 –Expected return on plan assets 7.41 – 6.02 –Actuarial gain/(loss) (4.95) – 11.35 –Employer's contribution 6.35 – 9.15 –Contribution by plan participants – – – –Settlement cost – – – –Benefits paid (15.06) – (9.04) –Fair value of plan assets at the end of the year 86.50 – 92.75 –Assumptions used to determine the benefit obligations:Discount rate 7.00% 8.00% 8.50% 8.00%Expected rate of increase in compensation levels 6.00% 5.50% 6.00% 5.50%Expected rate of return on plan assets 8.00% NA 8.00% NAExpected average remaining working lives of employees 17 Years 18.11 Years 16 Years 17.19 Years

b) Defined benefit plans (Rs. in Million)


128 | HSIL Limited

9. Segment ReportingIdentification of segment:The group’s operating business are organized and managed separately according to the nature of the products and services provided,with each segment representing a strategic business unit that offers different products and serves different markets. The group hasaccordingly identified two primary business segments, i.e. sanitaryware and glassware.

The activities of the Company are primarily limited within Indian territories having no variation in risk and returns. Consequently,information in respect of geographical segment is not given.

Unallocated items:The corporate and other segment includes general corporate income and expense items, which are not allocated to any businesssegment.


Amounts for the current and previous periods are as follows: 2008-09 2007-08 2006-07

Defined benefit plan - GratuityDefined benefit obligation (92.03) (99.81) (76.26)Plan Assets 86.50 92.75 75.27Surplus/(deficit) (5.53) (7.06) (0.99)Defined benefit plan - Leave encashmentDefined benefit obligation (20.61) (16.21) (13.00)Plan Assets – – –Surplus/(deficit) (20.61) (16.21) (13.00)

Employee benefits (Contd.) (Rs. in Million)

2009 2008

Deferred tax liabilityOn fiscal allowances on fixed assets 458.43 374.51Deferred tax assetsCarrying Forward of Losses – 9.63On provision for doubtful debts, loans and advances 23.59 22.62Other timing differences 11.75 10.68

35.34 42.93Deferred tax liability (net) 423.09 331.58

8. Deferred taxMajor components of deferred tax assets and liabilities are as given below: (Rs. in Million)

The Company made annual contribution to the Birla Sun Life Insurance Company Limited (‘BSL’) of an amount advised by the BSL. TheCompany was not informed by BSL of the investment made or the break down of plan assets by investment type.

Estimated amount of benefits payable within next year are Rs. 5.53 million (previous year Rs. 6.22 million).


129HSIL Limited |

HSIL LIMITED

SCHEDULES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS21 NOTES TO THE FINANCIAL STATEMENTS

2009 2008

a) Salary 13.17 10.95b) Contribution to provident fund 1.58 1.31c) Leave encashment paid 0.94 1.04d) Commission 43.95 33.51e) Monetary value of perquisites 1.05 0.90f) Directors’ sitting fee 0.11 0.11Total 60.80 47.82

10. Payment to directors of Parent Company* (Rs. in Million)

Particulars Sanitaryware Glassware Others Total year ended31 March 2009

Segment revenueExternal sales (gross) 3,323.52 3,275.19 67.17 6,665.88

(3,023.96) (2,728.81) (10.00) (5,762.77)Other income 51.27 38.16 4.60 94.03

(20.37) (23.58) (33.93) (77.88)Segment results 544.91 328.61 (68.17) 805.35

(477.80) (198.18) (-18.97) (657.01)Unallocated corporate expenses (net) 143.84

(71.98)Interest 168.10

(163.37)Income tax (including deferred & fringe benefit tax) 166.75

(153.63)Profit after tax 326.66

(268.03)Other informationSegment assets 2,570.72 6,147.60 48.61 8,766.93

(2,522.45) (2,585.59) (109.63) (5,217.67)Unallocated corporate assets 581.08

(446.50)Total assets 9,348.01

(5,664.17)Segment liabilities 1,660.23 4,638.15 50.21 6,348.59

(1,242.96) (1,716.77) (14.01) (2,973.74)Unallocated corporate liabilities 609.50

(514.76)Total liabilities (excluding shareholders' fund) 6,958.09

(3,488.50)Capital expenditure 150.83 1,659.84 308.79 2,119.46

(154.27) (234.05) (14.21) (402.53)Depreciation 103.93 167.00 13.03 283.96

(97.84) (157.96) (8.38) (264.18)Other non-cash expensesProvision for doubtful debts and advances 14.94

(5.76)Dimunition in the value of current investments –

(0.36)Preliminary expenditure written off 0.01

(0.05)

Information about primary business segments is given below:(Figures in parenthesis are for the previous year)

Segment Reporting (Contd.)

(Rs. in Million)

* exclusive of provision for future liability in respect of gratuity and leave encashment which is based on actuarial valuation done onoverall Company basis.

130 | HSIL Limited

SCHEDULES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS21 NOTES TO THE FINANCIAL STATEMENTS

2009 2008Basic earnings per shareProfit after tax 318.09 266.86Tax for earlier years 8.57 1.17Profit before prior period item 326.66 268.03Prior period item (deferred tax for earlier years) (9.40) –Profit after prior period item 317.26 268.03Number of Shares 55,025,508 55,025,508Weighted average number of shares outstanding during the year 55,025,508 55,025,508Nominal value per share (Rs.) 2 2Earnings per Share – Basic and dilutedBefore prior period item 5.94 4.87After prior period item 5.77 4.87

11. Earnings per share (Rs. in Million)

12. Related party transactionsa) Name of related parties and description of relationship:

i) Key management personnel (Name of the relatives of key management personnel with whom the Group had transactions during the year are listed below).Mr. Rajendra K Somany (Father)Mr. Sandip Somany (Son)Mrs. Sumita Somany (Wife of Mr. Sandip Somany)

b) Entities where significant influence is exercised by key management personnel and/ or their relatives having transactions with the Group:i) Textool Mercantile Private Limitedii) Paco Exports Limitediii) New Delhi Industrial Promoters and Investors Limitediv) Soma Investments Limitedv) Hindusthan National Glass & Industries Limited

Other parties whichKey Management significantly influence /

Particulars Personnel and are influenced by thetheir Relatives Company (either

individually or otherwise)2009 2008 2009 2008

A. a) Sale of Goods – 0.03 – –b) Rent Paid 0.40 – 0.03 0.03

B. Directors’ remuneration 54.41 42.93 – –Balance outstanding at the year end–payable 37.67 28.72 – –

Related party disclosures (Rs. in Million)

13. In the opinion of the board of directors, current assets, loans and advances have a value on realisation in the ordinary course of thebusiness at least equal to the amounts at which they are stated and provision for all known liabilities have been made.

2009 2008

Receivables and Advances:Exports outstanding 96.01 65.39Payables:Payable on imports 211.27 41.63Loans:Buyers credit – 217.83Export packing credit 18.65 93.01Term loan – 264.66

18.65 575.50325.93 682.52


(Rs. in Million)

131HSIL Limited |


HSIL LIMITED

21 NOTES TO THE FINANCIAL STATEMENTS15. The subsidiary companies namely AGI Glasspack Limited, Hindware Home Retail Private Limited and HSIL Associates Limited are

incorporated in India and 100% of its share capital is held by the Parent Company. The subsidiary Company namely Halis InternationalLimited was incorporated on 14 January 2009 in Mauritius and 100% of its share capital is held by the Parent Company. The firstfinancial year of Halis International Limited will end on 31 March 2010 and hence unaudited financial statements as certified by itsmanagement have been used for the purpose of these consolidated financial statements.

17. Upto 31 March 2008 the Company was recognising translation differences arising on long term foreign currency monetary items (i.e.monetary assets or liabilities expressed in foreign currency and having a term of 12 months or more at the date of origination) in profitand loss account. Pursuant to Companies (Accounting Standards) Amendment Rules 2009, the Company has exercised the option ofdeferring the recognition of Profit and Loss account in respect of accounting periods commencing on or after 7 December 2006. Asa result, foreign exchange transaction difference amounting to Rs. 164.82 million relating to the acquisition of depreciable capitalassets have been adjusted with cost of such assets and would be depreciated over the balance life of the assets. The amount remainingto be amortised as at 31 March 2009 is Rs. 164.76 million.

18. Name of the Parent Company has been changed from ‘Hindustan Sanitaryware & Industries Limited’ to ‘HSIL Limited’. The Registrarof Companies, West Bengal has issued fresh certificate on 24 March 2009.

19. Previous year figures have been regrouped/ recast wherever considered necessary to make them comparable with those of the currentyear.

2009 2008Balance brought forward from previous year 9.29 –Add:- Stores & spares consumed 1.79 –- Power & fuel 4.17 –- Insurance 1.04 –- Rates & taxes 0.76 0.64- Travelling & conveyance 8.20 1.46- Rent & hiring charges 3.82 0.16- Salary, wages & bonus 30.53 2.54- Contribution to provident and other funds 2.08 0.18- Staff & labour welfare expenses 1.31 0.30- Interest paid 239.43 0.17- Foreign exchange fluctuation loss 164.82 –- Miscellaneous expenses 14.04 3.88Total (A) 481.28 9.33Less :- Miscellaneous receipts 1.47 0.03- Miscellaneous sales 0.13 –- Interest received 19.05 0.01- Provision for taxation (6.44) –- Insurance claim received 0.22 –Total (B) 14.43 0.04Total (A-B) 466.85 9.29Allocated to fixed assets 258.00 –Balance allocated to capital work-in-progress 208.85 –Balance carried forward – 9.29

16. Expenditure during construction period (Rs. in Million)






132 | HSIL Limited

Your Directors present the Twelfth Annual Report together withaudited accounts of the Company for the year ended 31 March2009.

Financial ResultsRupees

Profit/(Loss) during the year (17,664.11)Add: Balance brought forward from previous year (186,642.15)Balance carried to Balance Sheet (204,306.26)

DividendIn view of loss, your Directors do not recommend any dividend forthe year under review.

Fixed DepositsThe Company has not accepted any fixed deposit within themeaning of Section 58A of the Companies Act, 1956, during theyear under review.

Auditors’ ReportThe Report of the Auditors read together with the Notes onAccount is self explanatory and, therefore, does not need anycomments under Section 217 of the Companies Act, 1956.

DirectorsMr. A. K. Dokania, Director of the Company, retires by rotation atthe ensuing Annual General Meeting and, being eligible, offershimself for re-appointment.

AuditorsM/s. Choudhari Pramod & Co., Chartered Accountants, Auditors ofthe Company retire at the ensuing Annual General Meeting andbeing eligible, expressed their willingness to continue in office, ifre-appointed.

Particulars of EmployeesThe Company had no employee in the categories specified underSection 217(2A) of the Companies Act, 1956.

Conservation of Energy, Technology Absorption and ForeignExchange Earnings and OutgoThe Company had no operations during the year under review

and, hence, there are no details that may be furnished pursuant tothe provisions of Section 217(1)(e) of the Companies Act, 1956read with Companies (Disclosure of particulars in the Board ofDirectors) Rules, 1988.

Secretarial Compliance CertificatePursuant to the provisions of Section 383A of the Companies Act,1956 the Secretarial Compliance Certificate for the year 2008-09 isenclosed as part of this Directors’ Report.

Directors’ Responsibility StatementThe Directors of your Company confirm that:i) in the preparation of the Annual Accounts, the applicable

accounting standards have been followed along with properexplanation relating to material departures;

ii) the Directors have selected such accounting policies andapplied them consistently and made judgments and estimatesthat are reasonable and prudent so as to give a true and fairview of the state of the affairs of the Company at the end ofthe financial year and of the profit or loss of the Company forthat period;

iii) the Directors have taken proper and sufficient care for themaintenance of adequate accounting records in accordancewith the provisions of the Companies Act,1956, forsafeguarding the assets of the Company and for preventingand detecting fraud and other irregularities; and

iv) the Directors have prepared the annual accounts on a goingconcern basis.

For and on behalf of the Board

Place : Kolkata N. Goenka A. K. DokaniaDate : 5 May 2009 Director Director

DIRECTORS’ REPORT

Dear Members,

AGI GLASSPACK LIMITED

133HSIL Limited |

COMPLIANCE CERTIFICATECIN NO of the Company : U67120WB1997PLC085439

Nominal Capital : Rs. 5,00,00,000/-

Paid Up Capital : Rs. 4,30,12,000/-

The MembersAGI GLASSPACK LIMITED2, Red Cross Place, Kolkata-700 001

We have examined the registers, records, books & papers of M/s.AGI GLASSPACK LIMITED (the Company), as required to bemaintained under the Companies Act, 1956 (The Act) and theRules made thereunder and also the provisions contained in theMemorandum & Articles of Association of the Company for theyear ended on 31 March 2009. In our opinion & to the best of ourinformation & according to the examinations carried out by us &explanations furnished to us by the Company, its officers & agents,we certify that in respect of aforesaid financial year :

1. The Company has kept & maintained all the registers as statedin Annexure ‘A’ to this certificate, as per the provisions of theAct & the Rules made thereunder and all entries therein havebeen duly recorded.

2. The Company has duly filed the forms and returns as stated inAnnexure ‘B’ to this certificate with the Registrar ofCompanies, West Bengal under the Companies Act, 1956 andthe Rules made thereunder. However, no forms or returnswere required to be filed with the Regional Director, CentralGovernment, Company Law Board or other authorities.

3. The Company being a Public Limited Company, provisions ofSection 3(1)(iii) are not applicable, so comments are notrequired.

4. The Board Of Directors duly met four times respectively on 5May 2008, 27 August 2008, 19 December 2008 & 16 February2009 in respect of which meetings proper notices were givenand the proceedings were properly recorded and signed in theMinutes Book maintained for the purpose. The Company hasnot passed any Board Resolution by circulation during the yearunder review.

5. The Company has closed its register of Members from 29August 2008 to 3 September 2008 (both days inclusive) fortransfer or other purposes during the above financial year.

6. The Annual General Meeting of the Company for the financialyear ended on 31 March 2008 was held on 3 September 2008,after giving due notice to the Members of the Company andthe resolutions passed thereat were duly recorded in theMinutes Book maintained for the purpose.

7. No Extra-Ordinary General meeting was held during theaforesaid financial year.

8. The Company has not advanced loan to its Director and/orperson, Firm or Company referred to in Section 295 of the Act.

9. The Company has not entered into any contract falling withinthe purview of Section 297 of the Act.

10. The Company has made necessary entries in the registermaintained under Section 301 of the Act as and wherenecessary.

11. As there are no instances falling within the purview of Section314 of the Act, the Company has not obtained approvals fromthe Board of Directors, Members or Central Government.

12. The Company has not issued any duplicate Share Certificatesduring the financial year under review.

13. The Company has :a) not made allotment of any Equity share during the

financial year under review.

b) delivered all the certificates on lodged thereof fortransfer/transmission or any other purposes during theabove financial year within statutory time limit asprescribed under various provisions of the Companies Actand as per listing agreement.

c) not required to deposit any amount in a separate bankaccount for dividend as no dividend was declared duringthe above financial year.

d) not required to post dividend warrants to any of itsMember as no Dividend was declared during the abovefinancial year.

e) no amount lying outstanding in unpaid Dividend accountor under any other head for more than seven years, whichare required to be transferred to IEPF under Section 205Cof the Act.

f) duly complied with the requirements of Section 217 of theAct.

14. The Board of Directors of the Company is duly constituted.There was no appointment of additional Director, alternateDirector or Director to fill causal vacancy during the abovefinancial year.

15. The Company has not appointed any ManagingDirector/Whole time Director/Manager during the abovefinancial year.

16. The Company has not appointed any Sole-selling Agent duringthe above year under review.

17. The Company was not required to obtain any approvals of theCentral Government, Company Law Board, Regional Director,Registrar of Companies and/or such other authoritiesprescribed under the various provisions of the Act.

18. The Directors have disclosed their interest in other


134 | HSIL Limited

ANNEXURE : ARegister as maintained by the Company

ANNEXURE : B

Firms/Companies to the Board of Directors pursuant to theprovisions of the Act and the rules made there under.

19. The Company has not issued any Share/Debenture/OtherSecurity during the financial year under review.

20. The Company has not bought back Share during the abovefinancial year.

21. The Company has neither issued nor redeemed anyredeemable preference share/ debentures.

22. There was no transaction necessitating the Company to keepin abeyance the right to dividend, rights Shares and BonusShares pending registration of transfer of Shares.

23. The Company has not invited/accepted any deposits includingany unsecured loans falling within the purview of Section 58Aof the Act during the above financial year under review.

24. The Company has not borrowed any loan during the financialyear from other Bodies Corporate, Financial Institutions, Banks,Public and others under Section 293 (1)(d) of the CompaniesAct, 1956.

25. The Company has not made any loans, advances or givenguarantee or provided securities in relation to loan given toother Bodies Corporate under Section 372A of the Act. Henceno entries have been required to be made in the register keptfor this purpose.

26. The Company has not altered the provisions of theMemorandum with respect to situation of the Company’sregistered office from one state to another during the above

financial year.

27. The Company has not altered the provisions of Memorandumwith respect to the objects of the Company during the abovefinancial year.

28. The Company has not altered the provisions of Memorandumwith respect to name of the Company during the abovefinancial year.

29. The Company has not altered the provisions of Memorandumwith respect to Share Capital of the Company during the abovefinancial year.

30. The Company has not altered its Articles of Association duringthe above financial year.

31. There was no prosecution initiated against or show causenotices received by the Company during the above year foroffence under the various provisions of the Act.

32. The Company has not received any money as security from itsemployees during the above financial year.

33. The Company has not deducted any contribution towardsProvident Fund during the aforesaid financial year as the sameis not applicable to the Company.

For Drolia & Company(Company Secretaries)

Place: 9, Crooked Lane, (P K Drolia)Kolkata - 700 069 ProprietorDate: 5 May 2009 CP: 1362

Sl. No. Particulars Section1. Register of Members 1502. Directors Minutes Book 1933. Shareholders Minutes Book 1934. Register of Directors 3035. Register of transfer –6. Shareholders attendance register –7. Register of Contracts & Agreements 3018. Register of Directors Shareholding 307

Sl. No. Form No./Return Filed under Date of Whether filed withinSection filing Statutory time period

1. Balance Sheet as at 31 March 2008 in Form No. 23AC 220 25.09.2008 Yes2. Annual Return as on 3 September 2008 in Form No. 20B 159 19.10.2008 Yes

135HSIL Limited |


AUDITORS’ REPORT

We have audited the attached Balance Sheet of AGI GLASSPACKLIMITED as at 31 March 2009, the Profit and Loss Account andCash Flow Statement for the year ended on that date annexedthereto. These financial statements are the responsibility of theCompany’s management. Our responsibility is to express anopinion on these financial statements based on our audit.

We conducted our auditing in accordance with auditing standardsgenerally accepted in India. Those standards require that we planand perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financialstatement presentation. We believe that our audit provides areasonable basis for our opinion.

As required by the Companies (Auditors’ Report) Order, 2003 andas amended by Companies (Auditors’ Report) (Amendment Order),2004 issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, enclosein the Annexure a statement on the matters specified in paragraph4 and 5 of the said order.

Further to our comments in the Annexure referred to above, wereport that:

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

2. In our opinion proper books of account as required by lawhave been kept by the Company so far as appears from ourexamination of such books.

3. The Balance Sheet and Profit & Loss Account are in agreementwith the books of account.

4. In our opinion, the Profit and Loss account and the BalanceSheet dealt with by this report comply with the accountingstandards referred to in sub-section (3C) of Section 211 of theCompanies Act, 1956.

5. During the course of our Audit, we have not come across withany such observation which has any adverse effect on thefunctioning of the Company.

6. Pursuant to the provisions of sub-section (1) (g) of Section 274of the Companies Act, 1956, we report as under:

On the basis of written representation received from thedirectors, as on 31 March 2009 and taken on record by theBoard of directors, we report that none of the Director isdisqualified as on 31 March 2009 from being appointed as aDirector in terms of clause (g) of sub-section (1) of Section 274of the Companies Act, 1956.

7. In our opinion and to the best of our information andaccording to the explanation given to us, the said accountsgive the information required by the Companies Act, 1956 inthe manner as required and give a true and fair view inconformity with the accounting principles generally acceptedin India:

a) In the case of Balance Sheet, of the state of affairs of theCompany as at 31 March 2009;

b) In the case of Profit & Loss Account of the Loss for theperiod ended on that date; and

c) In the case of Cash Flow Statement of the Cash Flows forthe year ended on that date.

For Choudhari Pramod & Co.Chartered Accountants

D. PandaPlace : Kolkata PartnerDate : 5 May 2009 Membership No. 66197

To

The Members of

AGI Glasspack Limited

136 | HSIL Limited

ANNEXURE TO THE AUDITORS’ REPORT

Annexure referred to in paragraph 3 of our report of even date to the members of AGI GLASSPACK LIMITED

1. a) The Company is maintaining proper records showing fullparticulars, including quantitative details and situation offixed assets.

b) As explained to us, the management has physically verifiedthe fixed assets during the year and there is a regularprogramme of verification which, in our opinion, isreasonable having regard to the size of the Company andthe nature of the assets. No material discrepancies werenoticed on such verification.

c) The Company has not disposed off any fixed assets duringthe year and hence, it has not affected the going concernstatus of the Company.

2. The Company did not have any inventory during the year.

3. As inform to us, the Company has not granted loans securedor unsecured to companies, firms or other parties covered inthe register maintained under Section 301 of the CompaniesAct, 1956.

4. As inform to us, the Company has not taken loans secured orunsecured from companies, firms or other parties covered inthe register maintained under Section 301 of the CompaniesAct, 1956.

5. The Company has adequate internal control procedurescommensurate with the size of Company and the nature of itsbusiness.

6. Based on the audit procedure applied by us and according tothe information and explanations provided by themanagement, the Company has made necessary entries in theregister maintained under Section 301 of the Companies Act,1956 as and where necessary.

7. The Company has not accepted any deposits from public.

8. In our opinion, the Company has internal audit systemcommensurate with size of the Company and the nature of itsbusiness.

9. According to the records of the Company, the Company isregular in depositing undisputed statutory dues applicable tothe Company among Provident Fund, Investor Education andProtection Fund, Employee’s State Insurance, Income Tax,Sales Tax, Customs duty and excise duty, cess and otherstatutory dues with appropriate authorities. According to theinformation and explanations given to us, there are noundisputed amounts payable in respect of income tax, wealthtax, service tax, sales tax, custom duty and excise duty whichhave remained outstanding as at 31 March 2009 for a periodof more than six months from the date they became payable.

10. The Company has accumulated losses at the end of thefinancial year 31 March 2009. Further the Company hasincurred cash losses of Rs. 17664.11 in the current financialyear 31 March 2009, however, there was no cash losses

incurred by the Company during the immediately precedingfinancial year 31 March 2008.

11. Based on the audit procedure and on the information andexplanations provided by the management, the Company hasnot borrowed any loan from financial institution or bank ordebenture holders.

12. According to the information and explanations given to us andbased on the documents and records produced to us, theCompany has not granted any loans and advances on the basisof security by way of pledge of shares, debentures and othersecurities.

13. In our opinion and according to the information andexplanations given to us, the nature of the activities of theCompany does not attract any special statute applicable to chitfund and nidhi/mutual fund/societies.

14. The Company is dealing and trading in shares, securities,debentures and other Investments and maintaining properrecords of the transactions and contracts with timely entriestherein, also held shares, securities, debentures and othersecurities in its own name.

15. According to the information and explanations given to us, theCompany has not given any guarantee for loans taken byothers from bank or financial institutions.

16. Based on information and explanations given to us by themanagement, no term loan has been taken from any Bank orFinancial Institution.

17. According to the information & explanations given to us andan overall examination of the balance sheet of the Company,we report that short term funds have not been used to financelong term investments and vice versa as the Company has notavailed any financial facilities during the year.

18. The Company has not made any preferential allotment duringthe year.

19. During the year, since the Company has not issued anydebentures, paragraph 4(xix) of the Order is not applicable.

20. During the year, since the Company has not raised any moneyby way of public issue, paragraph 4(xx) of the Order is notapplicable.

21. Based upon the audit procedures performed and informationand explanations given by the management, we report that nofraud on or by the Company has been noticed or reportedduring the course of our audit.



137HSIL Limited |

The schedules referred to above form an integral part of the Balance SheetThis is the Balance Sheet referred to in our report of even date. On behalf of the Board of Directors


D. Panda N. Goenka A. K. DokaniaPartner Director DirectorMembership No. 66197

Place : KolkataDate : 5 May 2009


BALANCE SHEET(Amount in Rs.)

Schedule As at As at

31 March 2009 31 March 2008

SOURCES OF FUNDS

Shareholders' fund

Share Capital 1 43,012,000.00 43,012,000.00

Reserves & Surplus 2 85,000,000.00 85,000,000.00

Total 128,012,000.00 128,012,000.00

APPLICATION OF FUNDS

Fixed Assets

Land 127,569,500.00 127,569,500.00

Investments 3 26,430.21 151,908.35

Current Assets, Loans & Advances

Cash & Bank Balances 4 23,836.53 36,207.50

Loans & Advances 5 193,395.00 72,922.00

217,231.53 109,129.50

Less: Current Liabilities & Provisions

Current Liabilities 6 3,168.00 2,880.00

Provision for Income Tax 7 2,300.00 2,300.00

5,468.00 5,180.00

Net Current Assets 211,763.53 103,949.50

Profit & Loss Account 204,306.26 186,642.15

Total 128,012,000.00 128,012,000.00

Notes on Accounts 8

138 | HSIL Limited

The schedules referred to above form an integral part of the Profit and Loss AccountThis is the Profit and Loss Account referred to in our report of even date. On behalf of the Board of Directors




PROFIT AND LOSS ACCOUNT(Amount in Rs.)

Schedule Year ended Year ended

31 March 2009 31 March 2008

INCOME

Profit on sale of Investments 9,521.86 113,322.23

9,521.86 113,322.23

EXPENSES

Electricity & Water Charges 4,125.00 14,740.00

Charges General 270.00 4,735.00

Bank Charges 1,292.17 1,453.00

Filing Fees 1,000.00 1,000.00

Audit Fees 2,500.00 2,809.00

Printing & Stationary 22.80 131.00

Rates & Taxes 17,570.00 16,190.00

Security Transaction Tax – 683.00

Legal & Professional 406.00 –

Preliminary Expenses written off – 50,000.00

27,185.97 91,741.00

Profit/(Loss) for the year (17,664.11) 21,581.23

Less : Provision for Taxation – 2300.00

Profit/(Loss) after Taxation (17,664.11) 19,281.23

Balance brought forward from previous year (186,642.15) (205,923.38)

Balance carried to Balance Sheet (204,306.26) (186,642.15)

Earnings per share – –

Notes on Accounts 8

139HSIL Limited |

140 | HSIL Limited




We have examined the above cash flow statement of AGI Glasspack Limited for the year ended 31 March 2009. The statement has been

prepared by the Company and is based on and in agreement with the corresponding Profit & Loss Account and the Balance Sheet of the

Company covered by our report of even date to the Members of the Company.

For Choudhari Pramod & Co.


D. Panda

Partner


Place: Kolkata

Date: 5 May 2009

CASH FLOW STATEMENT

AUDITORS REPORT

(Amount in Rs.)


31 March 2009 31 March 2008


Net Profit/(Loss) before tax (17,664.11) 21,581.23

Adjustment for

- Profit on sale of Investments (9,521.86) (113,322.23)

- Preliminary Expenses written off – 50,000.00

Operating profit before Working Capital Changes (27,185.97) (41,741.00)

Adjustments for

- Trade and Other receivables (118,250.00) (62,922.00)

- Trade and Other Payables 288.00 (1,221.00)

Cash Generated from Operations (145,147.97) (105,884.00)

- Direct tax paid (2,223.00) –

Cash Flow Before Extraordinary Items (147,370.97) (105,884.00)

Extraordinary Items : – –

Net Cash from Operating Activities (147,370.97) (105,884.00)


- Purchase/Sale of Investments 135,000.00 105,683.00

Net Cash Used in Investing Activities 135,000.00 105,683.00

C. CASH FLOW FROM FINANCING ACTIVITIES – –

Net Increase in Cash & Cash Equivalents(A+B+C) (12,370.97) (201.00)

Cash and Cash Equivalents as at (Opening) 36,207.50 36,408.50

Cash and Cash Equivalents as at (Closing) 23,836.53 36,207.50

141HSIL Limited |

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS(Amount in Rs.)

As on As on31 March 2009 31 March 2008

Authorised5,000,000 Equity Shares of Rs. 10/- each 50,000,000.00 50,000,000.00Issued, Subscribed & Paid up4,301,200 Equity Shares of Rs. 10/- each fully paid up in cash 43,012,000.00 43,012,000.00

43,012,000.00 43,012,000.00

1 SHARE CAPITAL

(Amount in Rs.)


Share Premium Account 85,000,000.00 85,000,000.0085,000,000.00 85,000,000.00

2 RESERVES & SURPLUS

(Amount in Rs.)


Liabilities for Expenses 3,168.00 2,880.003,168.00 2,880.00

6 CURRENT LIABILITIES

(Amount in Rs.)


Cash in hand (As Certified by the Management) 1,634.00 1,634.00Balance with Scheduled Banks- In Current Accounts 22,202.53 34,573.50

23,836.53 36,207.50

4 CASH & BANK BALANCES

(Amount in Rs.)


Advances (Recoverable in cash or in kind or for value to be received or pending adjustment) 172,996.00 62,922.00Security Deposit 18,176.00 10,000.00Advance Income Tax 2,223.00 –

193,395.00 72,922.00

5 LOANS & ADVANCES

(Amount in Rs.)

As on 31 March 2009 As on 31 March 2008No. of units Amount No. of units Amount

Mutual FundHDFC Liquid Fund - Growth 1,710.239 26,430.21 9,829.647 151,908.35Total : 26,430.21 151,908.35NAV of Mutual Fund 29,866.76 158,127.57

3 INVESTMENTS (AT COST)

142 | HSIL Limited

Signature to Schedules “1” to “8”

In terms of our report of even date On behalf of the Board of Directors






For Income Tax 2,300.00 2,300.002,300.00 2,300.00

A. Significant Accounting policiesBasis of Preparation of financial statementsThe Company adopts accrual basis of Accounting in preparation of accounts. All expenses and income to the extent consideredpayable and receivable respectively, unless stated otherwise, are accounted for on mercantile basis.

Investmentsi) In terms of Accounting Standard-13 issued by the Institute of Chartered Accountants of India, investments in securities are valued

at cost, which includes brokerage, transfer stamp etc.

ii) Provision for diminution in the value of investments are made if such fall is considered permanent in nature.

Fixed AssetsFixed Assets are stated at cost.

DepreciationDepreciation on Fixed Assets is provided at the rates in accordance with Schedule XIV of the Companies Act, 1956 as notified by theDepartment of Company Affairs vide notification no. GSR.756(E) dated 16 December 1993.

TaxationProvision for the Income Tax is made on estimates to arise on the results for the year at current rates of tax in accordance with theIncome Tax Act, 1961.

Foreign Currency TransactionsThe Company has no foreign currency transactions during the year.

Retirement BenefitThe Company has no employee during the year under review, hence provision for liabilities for provident fund, gratuity and accruedleave benefits are not required to be made by the Company on the date of Balance Sheet.

B. Notes on Accountsi) Estimated amount of contracts amounting to Rs. 1,85,617/- (Previous year Rs. 2,17,078/-) net of advances Rs. 94,383/- (Previous

year Rs. 62,922/-) remaining to be executed on capital account and not provided for.

ii) The entire paid-up Equity Share Capital of the Company is held by HSIL Limited (Formerly: Hindustan Sanitaryware & IndustriesLimited), the holding Company and its nominees.

iii) Previous year's figures have been regrouped /rearranged, wherever considered necessary.

7 PROVISION

8 SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS


143HSIL Limited |

N I L

N I L N I L

N I L

1 2 8 0 1 2 1 2 8 0 1 2

4 3 0 1 2 8 5 0 0 0

N I L

2 0 4

N . A .

N . A .




Public Issue

U 6 7 1 2 0 W B 1 9 9 7 P L C 0 8 5 4 3 9

Bonus Issue Private Placement

Right Issue

3 1 0 3


Balance Sheet Date


II. Capital Raised during the year (Amount in Rs. Thousand)

Total LiabilitiesIII. Position of mobilisation and deployment of funds (Amount in Rs. Thousand)

2 0 0 9

2 1

Total Assets

Paid-up CapitalSources of Funds


Secured Loan Unsecured Loan


Investment

Net Current Assets Miscellaneous Expenditure

Accumulated Losses

IV. Performance of the Company (Amount in Rs. Thousand)




Turnover Total Expenses

Profit/(Loss) before Tax Profit/(Loss) after Tax

Basic Earning Per Share (Rs.) Dividend Rate (%)

1 2 7 5 7 0

2 1 2

9

( 1 8 )

N I L

N I L

2 6

N I L

2 7

( 1 8 )

N I L

DIRECTORS’ REPORTDear Members,

Your Directors are pleased to present the Fourth Annual Reporttogether with the audited accounts of the Company for thefinancial year ended 31 March 2009.

Financial ResultsThe Company incurred a loss of Rs. 74,706,621 for the year underreview which has been carried forward to next year.

OperationsThe Company is a wholly owned subsidiary of HSIL Limited,established to diversify the group into the total Home SolutionsEnterprise with its foray into the high potential Home Interiorssector in India under the brand name “EVOK”.

The core vision of the Company is to be the first choice partner ofcustomers aspiring for value for style Home Interior solutions inLiving, Kitchen and Bath domains.

During the financial year 2008-09, the Company established itstwo pilot flagship store in NCR at Crown Interiorz Mall, Faridabadand at West Gate Mall, Rajouri Garden, New Delhi. These largeformat flagship stores of approximately 20,000 to 25,000 sq. ftsize offer end to end single window solutions for Home interiorneeds ranging from interiors design services, concepts, wide rangeproducts, turnkey installation services and post care services. Thecomprehensive product category range includes Home Furniture,Soft Furnishings, Home Décor, Modular Kitchens, Bath, Lighting,Flooring, Home organisation and accessories with a population ofmore than 12,000 world class products sourced and aggregatedglobally. The Company invested its capability in developing bestbreed ERP systems, operating processes and infrastructure,comprising of mother warehouse, retail stores and an extensiveglobal supplier base for its operations. Investments were effectivelyutilised for building and promoting the exciting brand of theCompany “EVOK” and propagating it to be the icon for HomeFashion retail in India. Besides the successful launch of retaildivision operations in the financial year 2008-09, the Companyalso established it Projects and Institutional Division to service thearchitects, builders, corporates and institutional community.

During the year, the revenue operations started very well thoughfluctuated during the later part of the year, primarily influenceddue to market downturn and consumer buying sentiments beingaffected. However, the Company sustained the growth curve andutilized significant learnings during the year to focus on revenueand cost optimisation as well as re-engineer the development ofnew formats with better deployment of category-wiseperformance and value added services delivery. In the nextfinancial year, the Company is confident of its target to achieveoperating break even of both pilot flagship stores and is focusedon expanding the store population with additional 4 to 5 storesbased on revised formats and introducing the specialty kitchenretail formats which is proposed to be launched next year. TheProject & Institutional Sales division secured a very prestigiousproject of Mahindra Chloris at Faridabad, NCR from Mahindra LifeSpaces. The Project scope included interior design, conceptdevelopment, comprehensive interior products supply, turnkeyinstallation services, visual merchandising services and Post-careservices for its sample apartment at the project site. The projectwas executed and delivered successfully and the Company receivedexcellent testimonials from the Customer with recommendationsfor more projects ahead.

The Company is completely focused on significant revenueescalation through its existing and upcoming/proposed retailstores and the projects division next year, as well as controloperating costs with effective budgeting and control systems. TheCompany expects to deliver significant long term value to theGroup operations.

DividendIn view of losses, your Directors do not recommend dividend forthe year.

Share CapitalDuring the year under review, the Company has increased itsauthorised share capital from Rs. 50,000,000 to Rs. 100,000,000 tomeet additional funds requirement of the Company for its proposedbusiness. Your Company has issued and allotted 26,00,000 equityshares of Rs. 10 each at a premium of Rs. 30 each, for cash at parto HSIL Limited (formerly known as Hindustan Sanitaryware &Industries Limited), the parent Company on 31 March 2009.

Fixed DepositsThe Company has not accepted any fixed deposit within themeaning of Section 58A of the Companies Act, 1956, during theyear ended 31 March 2009.

Auditors’ ReportThe Report of the Auditors read together with the Notes onAccount is self explanatory and, therefore, does not need anycomments under Section 217 of the Companies Act, 1956.

DirectorsMr. N. Goenka, Director of the Company, retires by rotation at theensuing Annual General Meeting of the Company and, beingeligible, offers himself for re-appointment.

Mrs. Sumita Somany who was appointed as regular director by theMembers of the Company at its AGM held on 3 September 2008,has been appointed as Whole Time Director designated asExecutive Director of Company for a period of 3 years with effectfrom 1 October 2008.

AuditorsM/s. Walker Chandiok & Co., Chartered Accountants retire at theensuing Annual General Meeting and offer themselves for re-appointment. The Board recommends appointing M/s. WalkerChandiok & Co., Chartered Accountants, as Statutory Auditors ofthe Company to hold office from the conclusion of ensuing AnnualGeneral Meeting for conducting audit of the books of account ofthe Company for the financial year 2009-10, subject to approval ofthe shareholders at the ensuing Annual General Meeting.

Particulars of EmployeesList of employees covered under the provisions of Section 217 (2A)of the Companies Act, 1956 read with the Companies (Particularsof Employees) Rules, 1975, as amended is enclosed.

Conservation of Energy, Technology Absorption and ForeignExchange Earnings and OutgoInformation required under Section 217(1)(e) of the CompaniesAct, 1956, read with the Companies (Disclosure of Particulars inthe Report of Board of Directors) Rules, 1988, is attached asannexure to this report.

HINDWARE HOME RETAIL PRIVATE LIMITED

144 | HSIL Limited

Directors’ Responsibility StatementThe Directors of your Company confirm that:i) in the preparation of the Annual Accounts, the applicable

accounting standards have been followed along with properexplanation relating to material departures;


iii) the Directors have taken proper and sufficient care for themaintenance of adequate accounting records in accordancewith the provisions of the Companies Act, 1956 for

safeguarding the assets of the Company and for preventingand detecting fraud and other irregularities; and


AcknowledgementYour Directors wish to place on record their sincere appreciationfor the support and co-operation extended by all the banks and allthe stakeholders of your Company.


Place: Gurgaon Sandip SomanyDated: 14 May 2009 Chairman

A) Conservation of Energya) Energy Conservation measures taken:

• Synchronised and balanced running of equipments andmachinery.

• Creating awareness in workmen & implementingdiscipline of switching off fans, lights and otherequipments immediately after work to eliminate all kindsof power wastages.

b) Additional investments and proposals, if any, beingimplemented for reduction of consumption of energy: The Company has installed energy efficient equipments tosave consumption of energy.

c) Impact of measures (a) and (b) above for reduction ofenergy consumption and consequent impact on the cost ofproduction of goods:In the first year of operations in the Company, there wassubstantial impact of measures (a) and (b) above on the energyconsumption and reduction in operational cost componentattributable to the overall consumption of the energy.

d) Total energy consumption and energy consumption per

unit of production:Not applicable in case of our Company.

B) Technology AbsorptionResearch and Development (R & D)1) Specific areas in which R & D carried out by the Company:

Not Applicable

2) Benefits derived, as a result of the above R & D: Not Applicable

3) Future plan of action and expenditure on R & D: Not Applicable

Technology absorption, adaptation and innovationEfforts made and benefit arrived: Not Applicable

C) Foreign Exchange Earnings and Outgo: Rs.a. Foreign Exchange Outgo - 5,320,402b. Foreign Currency Earned - Nil


Place: Gurgaon Sandip SomanyDated: 14 May 2009 Chairman

ANNEXURE TO THE DIRECTORS’ REPORTAdditional information given as required under the Companies (Disclosure of the Particulars in the Report of the Board of Directors)Rules, 1988.

Information as per Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 andforming part of the Directors’ Report for the financial year ended 31 March 2009.

Notes:1. Employee named above is the wholetime employee of the Company as per terms and conditions of the Company.

2. Remuneration received gross includes salary, bonus, performance incentive, ex-gratia, actual expenditure for provision of benefits, houserent allowance, medical expenses, leave travel assistance, other allowances, reimbursement of gas, water and electricity expenses.Company’s contribution to provident fund, employee pension scheme, gratuity fund and provision of car valued as perquisites inaccordance with rules under the Income Tax Act, 1961.


Place: Gurgaon Sandip SomanyDated: 14 May 2009 Director

Name of the Designation & Qualification Experience Date of Age Remuneration Last Employment held Employee Nature of Employment (Yrs.) Employment (Yrs.) Received (Rs.) and designation

Mr. D.K. Jairath COO & Business Head B.E (Mechanical) & 20 years 01.11.2005 41 Yrs 3,998,418 General Manager In MBA-Marketing M/s. Godrej &

Boyce Limited

145HSIL Limited |


1. We have audited the attached Balance Sheet of HindwareHome Retail Private Limited (the ‘Company’) as at 31 March2009, the Profit and Loss Account and also the Cash FlowStatement for the year ended on that date annexed thereto(collectively referred as the ‘financial statements’). Thesefinancial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion onthese financial statements based on our audit.

2. We conducted our audit in accordance with the auditingstandards generally accepted in India. Those Standards requirethat we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing theaccounting principles used and significant estimates made bymanagement, as well as evaluating the overall financialstatement presentation. We believe that our audit provides areasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003(the ‘Order’) (as amended), issued by the Central Governmentof India in terms of sub-section (4A) of Section 227 of theCompanies Act, 1956 (the ‘Act’), we enclose in the Annexurea statement on the matters specified in paragraphs 4 and 5 ofthe 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 werenecessary for the purposes of our audit;

b. In our opinion, proper books of account as required by lawhave been kept by the Company so far as appears from ourexamination of those books;

c. The financial statements dealt with by this report are inagreement with the books of account;

d. On the basis of written representations received from thedirectors, as on 31 March 2009 and taken on record by theBoard of Directors, we report that none of the directors isdisqualified as on 31 March 2009 from being appointed asa director in terms of clause (g) of sub-section (1) ofSection 274 of the Act;

e. In our opinion and to the best of our information andaccording to the explanations given to us, the financialstatements, dealt with by this report comply with theaccounting standards referred to in sub-section (3C) ofSection 211 of the Act and the Rules framed there underand give the information required by the Act, in themanner so required and give a true and fair view inconformity with the accounting principles generallyaccepted in India, in the case of:

i) the Balance Sheet, of the state of affairs of theCompany as at 31 March 2009;

ii) the Profit and Loss Account, of the loss for the yearended on that date; and

iii) the Cash Flow Statement, of the cash flows for the yearended on that date.

For Walker, Chandiok & CoChartered Accountants

Per B. P. SinghPlace: Gurgaon PartnerDate: 14 May 2009 Membership No. 70116

ToThe Members ofHindware Home Retail Private Limited

AUDITORS’ REPORT

Based upon the audit procedures performed for the purpose ofreporting the true and fair view of the financial statements and interms of the information and explanations given to us and the booksand records examined by us in the normal course of audit, we reportthat:

i) a) The Company is maintaining proper records showing fullparticulars including quantitative details and situation offixed assets.

b) The fixed assets have been physically verified by themanagement during the year and no material discrepancieswere noticed on such verification. In our opinion, the

frequency of verification of the fixed assets is reasonablehaving regard to the size of the Company and the nature ofits assets.

c) In our opinion, a substantial part of fixed assets has not beendisposed off during the year.

ii) a) Inventory has been physically verified by the managementduring the year. In our opinion, the frequency of verificationis reasonable.

b) The procedures of physical verification of inventory followedby the management are reasonable and adequate in relation

ANNEXURE TO THE AUDITORS’ REPORT Annexure to the Auditors’ report of even date to the members of Hindware Home Retail Private Limited on the financial statementsfor the year ended 31 March 2009

146 | HSIL Limited

to the size of the Company and the nature of its business.

c) The Company is maintaining proper records of inventory andno material discrepancies were noticed on physicalverification.

iii) a) The Company has not granted any loans, secured orunsecured to companies, firms or other parties covered inthe register maintained under Section 301 of the Act.Accordingly, the provisions of clauses 4(iii)(b), 4(iii)(c) and4(iii)(d) of the Order are not applicable to the Company.

b) The Company has not taken any loans, secured or unsecuredfrom companies, firms or other parties covered in the registermaintained under Section 301 of the Act. Accordingly, theprovisions of clauses 4(iii)(f) and 4(iii)(g) of the Order are notapplicable to the Company.

iv) In our opinion, there is an adequate internal control systemcommensurate with the size of the Company and the nature ofits business for the purchase of inventory and fixed assets andfor the sale of goods and services. During the course of ouraudit, no major weakness has been noticed in the internalcontrols in respect of these areas.

v) a) In our opinion, the particulars of all contracts orarrangements that need to be entered into the registermaintained under Section 301 of the Act have been soentered.

b) In our opinion, the transactions made in pursuance of suchcontracts or arrangements and exceeding the value of rupeesfive lakhs in respect of any party during the year have beenmade at prices which are reasonable having regard toprevailing market prices at the relevant time.

vi) The Company has not accepted any deposits from the publicand accordingly, the provisions of clause 4(vi) of the Order arenot applicable to the Company.

vii) In our opinion, the Company has an internal audit systemcommensurate with its size and the nature of its business.

viii) The Central Government has not prescribed maintenance of costrecords under clause (d) of sub-section (1) of Section 209 of theCompanies Act, 1956 for the products of the Company andaccordingly, the provisions of clause 4(viii) of the Order are notapplicable to the Company.

ix) a) The Company is regular in depositing the undisputedstatutory dues including provident fund, investor educationand protection fund, employees’ state insurance, income tax,sales tax, wealth tax, service tax, custom duty, excise duty,cess and other material statutory dues, as applicable, withthe appropriate authorities. Further, no undisputed amountspayable in respect thereof were outstanding at the year endfor a period of more than six months from the date theybecome payable.

b) There are no dues in respect of income tax, sales tax, wealthtax, service tax, customs duty, excise duty and cess that have

not been deposited with the appropriate authorities onaccount of any dispute.

x) The Company has been registered for a period of less than fiveyears. Accordingly, the provisions of clause 4(x) of the Order arenot applicable.

xi) The Company has not defaulted in repayment of dues to a bank.The Company has no dues payable to a financial institution orto debenture holders.

xii) The Company has not granted any loans and advances on thebasis of security by way of pledge of shares and accordingly, theprovisions of clause 4(xii) of the Order are not applicable to theCompany.

xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/ society. Accordingly, the provisions ofclause 4(xiii) of the Order are not applicable to the Company.

xiv) In our opinion, the Company is not dealing in or trading inshares, securities, debentures and other investments.Accordingly, the provisions of clause 4(xiv) of the Order are notapplicable to the Company.

xv) The Company has not given any guarantee for loans taken byothers from bank or financial institutions. Accordingly, theprovisions of clause 4(xv) of the Order are not applicable to theCompany.

xvi) The Company has not taken any term loan during the year.Accordingly, the provisions of clause 4(xvi) of the Order are notapplicable to the Company.

xvii) In our opinion, no funds raised on short-term basis have beenused for long-term investment.

xviii) The Company has made preferential allotment of shares toparties and companies covered in the register maintained underSection 301 of the Act. In our opinion, the price at which shareshave been issued is not prejudicial to the interest of theCompany.

xix) The Company did not have any outstanding debentures duringthe year. Accordingly, the provisions of clause 4(xix) of the Orderare not applicable to the Company.

xx) The Company has not raised any money by public issue duringthe year. Accordingly, the provisions of clause 4(xx) of the Orderare not applicable to the Company.

xxi) No fraud on or by the Company has been noticed or reportedduring the period covered by our audit.

For Walker, Chandiok & CoChartered Accountants

Per B. P. SinghPlace: Gurgaon PartnerDate: 14 May 2009 Membership No. 70116

147HSIL Limited |

148 | HSIL Limited

The schedules referred to above form an integral part of the financial statements

This is the balance sheet referred to in our report of even date. On behalf of the Board of Directors


Per B. P. Singh Meenakshi Nayyar Sumita Somany Sandip SomanyPartner Company Secretary Executive Director DirectorMembership No. 70116



Schedule As at As at

31 March 2009 31 March 2008

SOURCES OF FUNDS

Shareholders' fund

Share capital 1 62,250,000 36,250,000

Reserves & surplus 2 126,750,000 48,750,000

189,000,000 85,000,000

Loan funds

Secured loans 3 16,881,112 14,709,982

205,881,112 99,709,982


Fixed assets 4

Gross block 71,380,380 13,882,805

Less : Depreciation 6,559,579 1,026,673

Net Block 64,820,801 12,856,132

Capital work-in-progress (including capital advances) – 13,460,461

64,820,801 26,316,593

Deferred tax asset (net) – 9,400,144

(refer note 5 of Schedule 16)

Current assets, loans and advances

Inventories 5 39,433,281 32,811,445

Cash & bank balances 6 2,436,714 760,445

Loans & advances 7 17,470,230 8,163,899

59,340,225 41,735,789

Less: Current liabilities and provisions 8

Current liabilities 32,327,768 8,091,534

Provisions 1,004,703 599,922

33,332,471 8,691,456

Net current assets 26,007,754 33,044,333

Miscellaneous expenditure (to the extent not written off or adjusted) – 3,120

Deficit in profit and loss account 115,052,557 30,945,792

205,881,112 99,709,982

Significant accounting policies 15

Notes to the financial statements 16


149HSIL Limited |

The schedules referred to above form an integral part of the financial statements

This is the profit and loss account referred to in our report of even date. On behalf of the Board of Directors





Schedule Year ended Year ended

31 March 2009 31 March 2008

INCOME

Income from operations 55,373,855 31,995

Other income 9 2,567,651 147,993

Increase in stocks 10 6,621,836 32,811,445

64,563,342 32,991,433

EXPENDITURE

Cost of goods purchased for resale 11 37,361,674 32,827,249

Personnel cost 12 36,364,924 14,633,190

Administration, selling & general expenses 13 57,766,548 12,000,858

Interest & finance charges 14 1,739,691 155,958

Depreciation/amortisation 4 5,541,464 1,026,673

138,774,301 60,643,928

Profit/(Loss) before tax and prior period item (74,210,959) (27,652,495)

Provision for tax

Fringe benefit tax 495,662 234,168

Deferred tax – (9,400,144)

Profit/(Loss) after tax before prior period item (74,706,621) (18,486,519)

Prior period item

Deferred tax for earlier years (9,400,144) –

Profit/(Loss) after tax and prior period item (84,106,765) (18,486,519)

Balance brought forward (30,945,792) (12,459,273)

Balance carried to Balance Sheet (115,052,557) (30,945,792)

Basic/diluted Profit/(Loss) per share before prior period item (20.57) (10.31)

Basic/diluted Profit/(Loss) per share after prior period item (23.16) (10.31)

Significant accounting policies 15

Notes to the financial statements 16

150 | HSIL Limited


CASH FLOW STATEMENT(Amount in Rs.)


A. CASH FLOW FROM OPERATING ACTIVITIESNet Profit/(Loss) before tax (74,210,959) (27,652,495)Adjustments for:Depreciation and Amortisation 5,541,464 1,026,673(Profit)/loss on fixed assets discarded/sold (net) (58,665) –Miscellaneous expenditure 3,120 1,560Interest expense 1,739,691 155,958Interest income (7,931) (30,782)(Profit)/Loss on sale of Investment in liquid mutual funds – (95,927)Operating Profit before working capital changes (66,993,280) (26,595,013)Adjustments for :Inventories (6,621,836) (32,811,445)Trade/other receivable (9,306,331) (8,163,898)Trade/other payables 24,647,595 8,541,776Cash generated from operations (58,273,852) (59,028,580)Direct taxes paid (502,242) (143,608)Net cash from operating activities (58,776,094) (59,172,188)

B. CASH FLOW FROM INVESTING ACTIVITIESPurchase of fixed assets including capital work in progress (44,161,719) (27,343,267)Proceeds from sale of fixed assets 174,711 –Purchase of investments – (7,400,000)Sale proceeds of investments – 7,495,927Movement in restricted cash (82,948) (20,000)Interest received 7,931 30,782Net cash used in investing activities (44,062,025) (27,236,558)

C. CASH FLOW FROM FINANCING ACTIVITIESProceeds from issue of share capital 104,000,000 65,000,000Proceeds from short term borrowings (net) 2,171,131 14,709,981Interest paid (1,739,691) (101,837)Net cash from financing activities 104,431,440 79,608,144Net increase in cash and cash equivalents 1,593,321 (6,800,602)Cash and cash equivalents in the beginning 740,445 7,541,047Cash and cash equivalents at the close 2,333,766 740,445Note:Cash and cash equivalents include:Cash and cheques in hand and remittances in transit 412,982 15,498Balances with bank 1,920,784 724,947Cash and cash equivalents 2,333,766 740,445Balance with bank not considered as cash equivalents 102,948 20,000Cash and bank balances as per Balance Sheet 2,436,714 760,445

This is the cash flow statement referred to in our report of even date. On behalf of the Board of Directors




151HSIL Limited |

SCHEDULES FORMING PART OF THE FINANCIAL STATEMENTS(Amount in Rs.)


Authorised10,000,000 (Previous year 5,000,000) Equity Shares of Rs. 10 each 100,000,000 50,000,000Issued, subscribed and fully paid up*6,225,000 (Previous year 3,625,000) Equity Shares of Rs. 10 each 62,250,000 36,250,000

62,250,000 36,250,000

*Refer note 2 on schedule 16

1 SHARE CAPITAL

(Amount in Rs.)


Securities premium accountAs per last year 48,750,000 –Add: premium on issue of shares 78,000,000 48,750,000

126,750,000 48,750,000

2 RESERVES & SURPLUS

(Amount in Rs.)


From BanksCash credit account 16,881,112 14,709,982(Secured by hypothecation of stocks and books debts and also secured against a corporate guarantee provided by the HSIL Limited, the holding Company)

16,881,112 14,709,982

3 SECURED LOANS

152 | HSIL Limited



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153HSIL Limited |

(Amount in Rs.)


(As taken, valued and certified by the management)Goods purchased for sale 39,433,281 32,811,445

39,433,281 32,811,445

5 INVENTORIES

(Amount in Rs.)


Cash in hand 412,982 15,498Balances with scheduled banks in:

Current accounts 1,920,784 724,947Fixed deposit accounts- Margin money accounts 102,948 20,000

2,436,714 760,445



(Amount in Rs.)


(Unsecured, considered good unless otherwise stated)Advances recoverable in cash or in kind or for value to be received 3,472,699 1,221,191Balances with excise/sales tax authorities 3,781,087 1,014,599Security deposits 10,216,444 5,928,109

17,470,230 8,163,899


(Amount in Rs.)


Current LiabilitiesSundry creditors for goods, services and expenses 15,391,387 6,499,113Other liabilities 16,936,381 1,592,421

32,327,768 8,091,534ProvisionsRetirement benefits 920,723 509,362Tax (including fringe benefit tax) 83,980 90,560(net of advance payment of Rs. 645,850, previous year Rs. 143,608)

1,004,703 599,92233,332,471 8,691,456

8 CURRENT LIABILITIES & PROVISIONS

154 | HSIL Limited



(Amount in Rs.)


Purchase domestic 29,965,909 6,304,185Purchase import 4,669,024 16,137,086Purchase others 130,066 –Direct expenses 2,596,675 10,385,978

37,361,674 32,827,249

11 COST OF GOODS PURCHASED FOR RESALE

(Amount in Rs.)


Salaries, wages and bonus 34,663,697 12,705,232Contribution to provident & other funds 937,594 700,394Staff & labour welfare expenses 763,633 1,227,564

36,364,924 14,633,190

12 PERSONNEL COST

(Amount in Rs.)


Opening stocksGoods purchased for resale 32,811,445 –Less: Closing stocksGoods purchased for resale 39,433,281 32,811,445

6,621,836 32,811,445

10 INCREASE IN STOCKS

(Amount in Rs.)


Profit on sale of investments – 95,927Profit on sale of fixed assets 58,665 –Foreign exchange fluctuation (net) 94,427 21,223Interest on bank fixed deposits* 7,931 30,782Claims received 240,840 –Shop in shop income 1,281,802 –Service Charges 646,131 –Commission on sales 171,755 –Miscellaneous Income 66,100 61

2,567,651 147,993

9 OTHER INCOME

* Tax deducted at source on interest Rs. 1,742 (previous year Rs. 7,004)

155HSIL Limited |

(Amount in Rs.)


Interest & Finance Charges:Interest on car Finance 14,436 31,028Interest to bank 1,725,255 124,930

1,739,691 155,958

14 INTEREST AND FINANCIAL CHARGES

(Amount in Rs.)


Repairs to: Buildings 672,768 –Other assets 406,110 290,110

Rent 25,820,800 2,426,559Rates & taxes 56,195 270,394Insurance 446,357 82,446Travelling & conveyance 2,983,129 1,197,845Advertisement & publicity 11,943,426 1,154,458Other selling & distribution expenses 3,006,715 329,200Recruitment charges 1,489,446 1,162,377Printing & stationery 1,227,166 146,059Legal & professional charges 846,716 2,905,135Communication expenses 1,756,884 437,589Electricity expenses 4,612,837 182,078Miscellaneous expenses 2,497,999 1,416,608

57,766,548 12,000,858

13 ADMINISTRATION, SELLING & GENERAL EXPENSES

1. Basis of preparationThe financial statements are prepared on accrual basis under the historical cost convention, in accordance with the generally acceptedaccounting principles in India and to comply with the Accounting Standards referred to in sub section (3C) of Section 211 of theCompanies Act, 1956 and the Rules framed there under. The accounting policies have been consistently applied by the Company andare consistent with those used in the previous year.

2. Use of estimatesThe preparation of financial statements in conformity with generally accepted accounting principles requires management to makeestimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liability on thedate of the financial statements and the results of operations during the reporting periods. Although these estimates are based uponmanagement’s best knowledge of current events and actions, actual results could differ from those estimates and revisions, if any, arerecognised in the current and future periods.

3. Revenue recognitionSale of goodsRevenue from sale of goods is recognised when significant risks and rewards in respect of ownership of the goods are transferred tothe customer and is stated exclusive of sales tax, trade discounts, and sales return wherever applicable.



4. Fixed assetsTangibleTangible assets are stated at cost of acquisition less accumulated depreciation. Cost comprises the purchase price and any attributablecost of bringing the asset to its working condition for its intended use. Capital expenditure incurred on rented properties is classifiedas leasehold improvements under fixed assets.


5. Depreciation/amortisationDepreciation on fixed assets has been provided on the basis of straight line method at the rates and in the manner prescribed inSchedule XIV of the Companies Act, 1956 except in the case of leasehold improvements which are being depreciated over the leaseperiod or estimated useful life, whichever is lower.


Monetary items outstanding at the balance sheet date and denominated in foreign currencies are restated at the exchange ratesprevailing at the end of the year. Differences arising on such restatement are recognised in the profit and loss account.

7. InventoriesInventories including material in transit are valued at lower of cost and net realisable value. Cost includes freight and other relatedincidental expenses and is arrived at on weighted average basis using specific identification method.

8. Retirement BenefitsExpenses and liabilities in respect of employee benefits are recorded in accordance with Revised Accounting Standard 15 - EmployeeBenefits (Revised 2005) issued by the ICAI.

i) Provident fundThe Company makes contributions regional provident fund recognised by income tax authorities.

ii) GratuityGratuity is a post employment benefit and is in the nature of a defined benefit plan. The liability recognised in the balance sheetin respect of gratuity is the present value of the defined benefit/ obligation at the balance sheet date less the fair value of planassets, if any, together with adjustments for unrecognised actuarial gains or losses and past service costs. The defined benefit/obligation is calculated at or near the balance sheet date by an independent actuary using the projected unit credit method.

Actuarial gains and losses arising from past experience and changes in actuarial assumptions are charged or credited to the Profitand loss account in the year to which such gains or losses relate.

iii) Compensated absencesLiability in respect of compensated absences becoming due or expected to be availed within one year from the balance sheet dateis recognised on the basis of undiscounted value of estimated amount required to be paid or estimated value of benefit expectedto be availed by the employees. Liability in respect of compensated absences becoming due or expected to be availed more thanone year after the balance sheet date is estimated on the basis of an actuarial valuation performed by an independent actuaryusing the projected unit credit method.

iv) Other short term benefitsExpense in respect of other short-term benefits is recognised on the basis of the amount paid or payable for the period duringwhich services are rendered by the employee.

9. TaxationProvision for tax for the year comprises current income tax, deferred tax and fringe benefit tax. Current income tax is determined inrespect of taxable income with deferred tax being determined as the tax effect of timing differences representing the differencebetween taxable income and accounting income that originate in one period, and are capable of reversal in one or more subsequentperiod(s). Such deferred tax is quantified using rates and laws enacted or substantively enacted as at the end of the financial year.Fringe benefit tax is determined in accordance with applicable income tax laws.




156 | HSIL Limited


10. LeasesLeases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, are classified asoperating leases. Lease rentals in respect of assets taken on 'operating lease' are charged to the Profit and Loss account on a straightline basis over the lease term.

11. Earnings per shareBasic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by theweighted average number of equity shares outstanding during the period.

For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders andthe weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equityshares.

12. Contingent liabilities and provisionsThe Company makes a provision when there is a present obligation as a result of a past event where the outflow of economic resourcesis probable and a reliable estimate of the amount of obligation can be made. When it is not probable that a present obligation existsor where a reliable estimate can not be made of the same it is disclosed as a contingent liability in the financial statements.

13. Impairment of assetsThe Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indicationexists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amountof the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to itsrecoverable amount and the reduction is treated as an impairment loss and is recognised in the profit and loss account. If at thebalance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount isreassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost and is accordinglyreversed in the profit and loss account.


1. Hindware Home Retail Private Limited (‘the Company’) was incorporated on 24 November 2005 is a wholly owned subsidiary of HSILLimited (formerly known as Hindustan Sanitaryware & Industries Limited).

2. The entire share capital of the Company amounting to Rs. 62,250,000 (previous year Rs. 36,250,000) comprising of 6,225,000 equityshares of Rs. 10 each (previous year 3,625,000 equity shares of Rs 10 each) is held by HSIL Limited the holding Company and itsnominees.

3. In the opinion of the board of directors current assets, loans and advances have a value on realisation in the ordinary course of businessat least equal to the amounts at which they are stated and provision for all known liabilities have been made in the accounts.

4. The Company is a lessee under various operating leases for premises taken on lease. These leasing arrangements, which are non-cancellable, ranges between 0 months to 36 months and are renewable on mutually agreeable terms. Aggregate rental expensesunder operating leases amounted to Rs. 25,820,800 (previous year Rs. 2,426,559) for the year, has been charged to profit and lossaccount. The future lease payments in respect of these leases as at 31 March 2009 and 2008 are as follows.


Minimum lease payments 2009 2008

Not later than one year 35,114,393 –Later than one year but not later than five years 72,504,370 –Later than five years – –

(Amount in Rs.)

5. Deferred tax asset (net)In accordance with Accounting Standard 22 “Accounting of Taxes on Income”, in view of the significant losses incurred by theCompany during the year, deferred tax assets on carried forward losses, unabsorbed depreciation and other timing differences havenot been accounted in the books, since it is not virtually certain whether the Company will be able to utilise such asset.

157HSIL Limited |




10. Payment to auditors

Particulars 2009 2008

Audit fee 50,000 15,000Service tax and cess 5,150 –

55,150 15,000

(Amount in Rs.)


a) Provident fund and other funds*:

2009 2008

Employer’s contribution to provident fund ** 390,974 161,532Employer’s contribution to ESI 104,872 29,456

(Amount in Rs.)



Major components of deferred tax asset / (liability) are as given below:


a) Unabsorbed depreciation – (225,733)b) Business losses – 9,624,817c) Preliminary expenses – 1,060Total – 9,400,144

(Amount in Rs.)

6. Value of imports calculated on CIF basis


Finished goods for re-sale 4,892,150 26,046,626Capital goods 251,267 –

(Amount in Rs.)

7. Expenditure in foreign currency


Travelling 377,051 259,797Service Charges – 303,744

(Amount in Rs.)

8. Due to directors


Amount due to directors (Salary) – –Maximum balance at any time during the year 155,263 –

(Amount in Rs.)

9. Directors’ remuneration


Salaries 600,000 –Contribution to provident fund 72,000 –Total 672,000 –

(Amount in Rs.)

158 | HSIL Limited


b) Defined benefit plans

As at 31 March 2009

LeaveGratuity encashment

Unfunded Unfunded

Amount recognised in the balance sheet :Present value of obligations 506,249 414,474Fair value of plan assets – –Unrecognised past service cost – –Net liability recognised in the balance sheet 506,249 414,474Amount recognised in profit and loss account:Current service cost 278,223 169,175Interest cost 5,572 14,877Expected return on plan assets – –Net Actuarial (gain)/ loss 150,061 40,367Past service cost – –Curtailment and settlement cost/(gain) – –Total included in 'Personnel Cost' * 433,856 224,419Actual return on plan assets – –* Refer schedule 12Change in defined benefit obligationOpening defined benefit obligation 79,593 212,530Current service cost 278,223 169,175Interest cost 5,572 14,877Benefits paid (7,200) (22,475)Curtailment and settlement cost/(credit) – –Contribution by plan participants – –Past service cost – –Actuarial (gain)/loss 150,061 40,367Closing defined benefit obligation 506,249 414,474Change in fair value of plan assetsFair value of plan assets at the beginning of the year – –Expected return on plan assets – –Actuarial gain/(loss) – –Employer's contribution – –Contribution by plan participants – –Settlement cost – –Benefits paid – –Fair value of plan assets at the end of the year – –Discount rate 7.00 % 7.00 %Expected rate of increase in compensation levels 4.50% 4.50%Expected rate of return on plan assets N.A N.AExpected average remaining working lives of employees 30.10 years 29.72 years

(Amount in Rs.)


159HSIL Limited |




13. Earnings per share

14. There are no micro, small and medium enterprises, as defined in the Micro, Small, Medium Enterprises Development Act, 2006, towhom the Company owes dues on account of principal amount together with interest and accordingly no additional disclosures havebeen made.

The above information regarding MSMED enterprises have been determined to the extent such parties have been identified on thebasis of information available with the Company.

2009 2008

Basic & Diluted loss per shareProfit/(Loss) attributable to equity shareholders before prior period item (74,706,621) (18,486,519)Prior period item (deferred tax for earlier year) (9,400,144) –Profit/(Loss) attributable to equity shareholders after prior period item (84,106,765) (18,486,519)Number of Shares 6,225,000 3,625,000Weighted average number of shares outstanding during the year 3,632,123 1,792,842Nominal value per share (Rs.) 10 10Basic and diluted Profit/(Loss) per Share – before prior period item (20.57) (10.31)Basic and diluted Profit/(Loss) per Share – after prior period item (23.16) (10.31)

(Amount in Rs.)


Qty* (in pcs) Value Qty* (in pcs) Value

Opening StockFurniture & Home Furnishing 25,627 31,506,726 – –Other – 1,304,719 – –

25,627 32,811,445 – –PurchasesFurniture & Home Furnishing 100,347 26,970,889 25,632 31,522,530Other – 10,390,785 – 1,304,719

100,347 37,361,674 25,632 32,827,249SalesFurniture & Home Furnishing 56,961 44,047,680 5 31,995Other – 11,326,175 – –

56,961 55,373,855 5 31,995Closing StockFurniture & Home Furnishing 69,013 33,504,665 25,627 31,506,726Other – 5,928,616 – 1,304,719

69,013 39,433,281 25,627 32,811,445

12. Details in respect of finished Goods dealt with by the Company:

* The Company having dealt in a large number of products, the quantitative information has been furnished only in respect of majoritems namely Furniture & Home Furnishing items. Other items are grouped together, as quantitative information in respect of eachproduct is not practical to ascertain in view of nature of retail operation of the Company.

Amounts for the current period are as follows: 2009

Defined benefit plan – GratuityDefined benefit obligation 506,249Plan Assets –Surplus/(deficit) 506,249Defined benefit plan - Leave encashmentDefined benefit obligation 414,474Plan Assets –Surplus/ (deficit) 414,474

(Amount in Rs.)

Estimated amount of benefits payable within next year are Rs. 664,619 (previous year Rs. 509,362).

Amounts for the current period are as follows: 2009

Defined benefit plan – GratuityDefined benefit obligation 506,249Plan Assets –Surplus/(deficit) 506,249Defined benefit plan - Leave encashmentDefined benefit obligation 414,474Plan Assets –Surplus/ (deficit) 414,474

(Amount in Rs.)

(Amount in Rs.)

Estimated amount of benefits payable within next year are Rs. 664,619 (previous year Rs. 509,362).

160 | HSIL Limited


Particulars Holding Company Key Management Personnel

2009 2008 2009 2008

Transactions during the yearSales of trading goods 508,829 – – –Sales of fixed assets 196,550 – – –Purchase of trading goods 3,358,345 – – –Amount paid by holding Company on account ofexpenses pertaining to the Company 836,459 7,760,474 – –Amount received from the holding Company againstallotment of shares 104,000,000 65,000,000 – –Remuneration paid – – 672,000 –

17. Related party disclosuresInformation to be disclosed in accordance with Accounting Standard 18 “Related Party Disclosures” as issued by ICAI.

Transactions undertaken/ balances outstanding with related parties in the ordinary course of business:

18. Previous year’s figures have been regrouped / reclassified, wherever considered necessary to make them comparable with those of thecurrent year.

Sl. No. Relationship Particulars

1. Holding Company HSIL Limited (formerly known as Hindustan Sanitaryware & Industries Limited)2. Fellow Subsidiary Companies AGI Glasspack Limited

HSIL Associates LimitedHalis International Limited

3. Key Management Personnel Mr. Sandip SomanyMrs. Sumita Somany

(Amount in Rs.)






16. The Company is engaged in the business of “Retail Trade” which is considered to be the only reportable business segment as per theAccounting Standard 17 on ‘Segment Reporting’ issued by the Institute of Chartered Accountants of India.


PayablesPayable on imports 74,158 –ReceivablesAdvances to suppliers 750,361 470,405

(Amount in Rs.)

161HSIL Limited |




Place : Gurgaon Meenakshi Nayyar Sumita Somany Sandip SomanyDate : 14 May 2009 Company Secretary Executive Director Director

U 5 1 1 0 9 W B 2 0 0 5 P T C 1 0 6 3 0 7

3 1 0 3


Balance Sheet Date



Total Liabilities

2 0 5 8 8 1

III. Position of mobilisation and deployment of funds (Amount in Rs. Thousand)

2 0 0 9

2 1

Total Assets

2 0 5 8 8 1

Sources of Funds


6 4 8 2 1

Investment

N I L

Net Current Assets

2 6 0 0 8


N I L

Public Issue

N I L

Right Issue

N I L

Bonus Issue

N I L

Private Placement

(including Share Premium amounting Rs. 78,000 in thousand)

1 0 4 0 0 0

Accumulated Losses

1 1 5 0 5 2

Paid up Capital

6 2 2 5 0


1 2 6 7 5 0

Secured Loans

1 6 8 8 1

Unsecured Loans

N I L





Net Turnover (including other income)

5 7 9 4 1

Total Expenses

1 3 2 1 5 2

Profit/(Loss) before Tax

( 7 4 2 1 1 )

Profit/(Loss) after Tax

( 8 4 1 0 7 )


( 2 3 . 1 6 )

Dividend Rate (%)

N I L

9 4 0 3 6 0 0 0

W O O D E N F U R N I T U R E

162 | HSIL Limited

HSIL ASSOCIATES LIMITED

DIRECTORS’ REPORT

Dear Members,

Your Directors have pleasure in presenting the 1st (First) AnnualReport together with Audited Accounts of the Company for theperiod from 4 September 2008 to 31 March 2009.

Financial ResultsThe working results of the Company for the above period show aloss of Rs. 17882.20 which has been carried forward to next year.

DividendIn view of losses, your Directors do not recommend any dividendfor the year under review.

Share CapitalAuthorised Share Capital of the Company is Rs. 5,00,000/- andIssued, Subscribed and Paid up Share Capital is Rs. 5,00,000/-.

Fixed DepositsThe Company has not accepted Fixed Deposits within the meaningof Section 58A of the Companies Act, 1956 from the date ofIncorporation i.e. 4 September 2008 to 31 March 2009.

Auditors’ ReportThe Report of the Auditors read together with the Notes onAccount is self explanatory and therefore does not call for anyfurther comments under Section 217 of the Companies Act, 1956.

DirectorsMr. R. K. Somany, one of the first Director of the Company, retiresby rotation at the ensuing Annual General Meeting of theCompany and, being eligible, offers himself for re-appointment.

AuditorsM/s. Choudhari Pramod & Co., Chartered Accountants, the firstAuditors of the Company retire at the ensuing Annual GeneralMeeting and being eligible offer themselves for re-appointment.The Directors recommend their appointment as Auditors of theCompany.

Particulars of EmployeesThe Company had no employee in the categories specified underSection 217(2A) of the Companies Act, 1956 hence no statement.

Conservation of Energy, Technology Absorption and ForeignExchange Earnings and OutgoThe provisions of Section 217(1)(e) of the Companies Act, 1956are not applicable to the Company, as the Company does not carryon any manufacturing activity. There was no foreign exchangeearning and outgo during the period.

Directors’ Responsibility StatementPursuant to sub-section (2AA) of Section 217 of the CompaniesAct, 1956, the Board of Directors of the Company hereby state andconfirm that:

i) in the preparation of the Annual Accounts, the applicableaccounting standards have been followed along with properexplanation relating to material departures;


iii) the Directors have taken proper and sufficient care for themaintenance of adequate accounting records in accordancewith the provisions of the Companies Act, 1956 forsafeguarding the assets of the Company and for preventingand detecting fraud and other irregularities;



Place: Kolkata N. Goenka G. L. SultaniaDated: 5 May 2009 Director Director

163HSIL Limited |


AUDITORS’ REPORT

To the Members of


We have audited the attached Balance Sheet of HSIL ASSOCIATESLIMITED as at 31 March 2009, the Profit and Loss Account andalso the Cash Flow Statement for the period ended on that dateannexed thereto. These financial statements are the responsibilityof the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audit.

We conducted our auditing in accordance with auditing standardsgenerally accepted in India. Those standards require that we planand perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financialstatement presentation. We believe that our audit provides areasonable basis for our opinion.

As required by the Companies (Auditors’ Report) Order, 2003 andas amended by Companies (Auditors’ Report) (Amendment Order),2004 issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, enclosein the Annexure a statement on the matters specified in paragraph4 and 5 of the said order.

Further to our comments in the Annexure referred to above, wereport that:

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

2. In our opinion proper books of account as required by lawhave been kept by the Company so far as appears from ourexamination of such books.

3. The Balance Sheet and Profit & Loss Account are in agreementwith the books of account.

4. In our opinion, the Profit and Loss account and the BalanceSheet dealt with by this report comply with the accountingstandards referred to in sub-section (3C) of Section 211 of theCompanies Act, 1956.

5. During the course of our Audit, we have not come across withany such observation which has any adverse effect on thefunctioning of the Company.

6. Pursuant to the provisions of sub-section (1) (g) of Section 274of the Companies Act, 1956, we report as under:

On the basis of written representation received from thedirectors, as on 31 March 2009 and taken on record by theBoard of directors, we report that none of the Director isdisqualified as on 31 March 2009 from being appointed as aDirector in terms of clause (g) of sub-section (1) of Section 274of the Companies Act, 1956.

7. In our opinion and to the best of our information andaccording to the explanations given to us, the said accountsgive the information required by the Companies Act, 1956 inthe manner as required and give a true and fair view inconformity with the accounting principles generally acceptedin India:

a) In the case of Balance Sheet, of the state of affairs of theCompany as at 31 March 2009;

b) In the case of Profit & Loss Account of the Loss for theperiod ended on that date; and

c) In the case of Cash Flow Statement of the Cash Flows forthe period ended on that date.



164 | HSIL Limited

ANNEXURE TO THE AUDITORS’ REPORT Annexure referred to in paragraph 3 of our report of even date to the members of HSIL ASSOCIATES LIMITED

1. The Company does not have any fixed assets, hence the clauseis not applicable to the Company.

2. The Company did not have any inventory, hence the clause isnot applicable to the Company.

3. As inform to us, the Company has not granted loans securedor unsecured to companies, firms or other parties covered inthe register maintained under Section 301 of the CompaniesAct, 1956.

4. As inform to us, the Company has not taken loans secured orunsecured from companies, firms or other parties covered inthe register maintained under Section 301 of the CompaniesAct, 1956.

5. The Company has adequate internal control procedurescommensurate with the size of Company and the nature of itsbusiness.

6. Based on the audit procedure applied by us and according tothe information and explanations provided by themanagement, the Company has entered the transactionswhich are required to be entered into the register maintainedunder Section 301 of the Companies Act, 1956.

7. The Company has not accepted any deposits from public.

8. In our opinion, the Company did not have any internal auditsystem commensurate with size of the Company and thenature of its business.

9. According to the records of the Company, the Company isregular in depositing undisputed statutory dues applicable tothe Company among Provident Fund, Investor Education andProtection Fund, Employee’s State Insurance, Income Tax,Sales Tax, Customs duty and excise duty, cess and otherstatutory dues as applicable with appropriate authorities.According to the information and explanations given to us,there are no undisputed amounts payable in respect of incometax, wealth tax, service tax, sales tax, custom duty and exciseduty which have remained outstanding as at 31 March 2009for a period of more than six months from the date theybecame payable.

10. The Company has incurred cash losses of Rs. 17882.20 in thecurrent financial year 31 March 2009. This being first year ofoperation, no accumulated losses from the previous periodarise.

11. Based on the audit procedure and on the information andexplanations provided by the management, the Company hasnot borrowed any loan from financial institution or bank ordebenture holders.

12. According to the information and explanations given to us andbased on the documents and records produced to us, theCompany has not granted any loans and advances on the basisof security by way of pledge of shares, debentures and othersecurities.

13. In our opinion and according to the information andexplanations given to us, the nature of the activities of theCompany does not attract any special statute applicable to chitfund and nidhi/mutual fund/societies.

14. The Company is dealing and trading in shares, securities,debentures and other Investments and maintaining properrecords of the transactions and contracts with timely entriestherein, also held shares, securities, debentures and othersecurities in its own name.

15. According to the information and explanations given to us, theCompany has not given any guarantee for loans taken byothers from bank or financial institutions.

16. Based on information and explanations given to us by themanagement, no term loans have taken from any Banks orFinancial Institution.

17. According to the information & explanations given to us andan overall examination of the balance sheet of the Company,we report that short term funds have not been used to financelong term investments and vice versa as the Company has notavailed any financial facilities during the year.

18. The Company has not made any preferential allotment duringthe year.

19. During the year, since the Company has not issued anydebentures, paragraph 4(xix) of the Order is not applicable.

20. During the year, since the Company has not raised any moneyby way of public issue, paragraph 4(xx) of the Order is notapplicable.

21. Based upon the audit procedures performed and informationand explanations given by the management, we report that nofraud on or by the Company has been noticed or reportedduring the course of our audit.



165HSIL Limited |


Schedule 1 to 6 form part of the Balance Sheet

In terms of our attached report of even date On behalf of the Board of Directors


D. Panda N. Goenka G. L. SultaniaPartner Director DirectorMembership No. 66197



Schedule As at

31 March 2009

SOURCES OF FUNDS

Shareholders' fund

Share Capital 1 500,000.00

Total 500,000.00


Investments 2 450,000.00

Current Assets, Loans & Advances

Cash & Bank Balances 3 11,441.00

11,441.00

Less : Current Liabilities & Provisions

Current Liabilities 4 3,000.00

3,000.00

Net Current Assets 8,441.00


(To be extent not written off and/or adjusted)

Preliminary Expenses 5 23,676.80

Profit & Loss Account 17,882.20

Total 500,000.00

Notes on Accounts 6

166 | HSIL Limited

Schedule 1 to 6 form part of the Balance Sheet & Profit and Loss Account

In terms of our attached report of even date On behalf of the Board of Directors





Schedule For the period from

4 September 2008

to 31 March 2009

INCOME –

EXPENDITURE

Filing Fee 600.00

Auditor's Remuneration 3,750.00

General Charges 12.00

Legal & Professional Charges 3,056.00

Printing & Stationery 145.00

Rates & Taxes 4,400.00

Preliminary Expenses Written off 5,919.20

17,882.20

Profit/(Loss) before Taxation (17,882.20)

Provision for Taxation –

Profit/(Loss) after Taxation (17,882.20)

Balance carried to Balance Sheet (17,882.20)

Notes on Accounts 6

167HSIL Limited |

168 | HSIL Limited



Place : Kolkata N. Goenka G. L. SultaniaDate : 5 May 2009 Director Director

We have examined the above cash flow statement of HSIL Associates Limited for the period ended 31 March 2009. The statement hasbeen prepared by the Company and is based on and in agreement with the corresponding Profit & Loss Account and the Balance Sheetof the Company covered by our report of even date to the Members of the Company.


(D. Panda)Place: Kolkata PartnerDate : 5 May 2009 Membership No. 66197

CASH FLOW STATEMENT

AUDITORS’ REPORT

(Amount in Rs.)

For the period from4 September 2008to 31 March 2009

A. CASH FLOW FROM OPERATING ACTIVITIESNet Profit/(Loss) before tax (17,882.20)Adjustment for:- Preliminary Expenses written off 5,919.20Operating profit before Working Capital Changes (11,963.00)Adjustments for:- Trade and Other Payables 3,000.00Cash Generated from Operations (8,963.00)- Direct tax paid –Cash Flow Before Extraordinary Items (8,963.00)Extraordinary Items :Net Cash from Operating Activities (8,963.00)

B. CASH FLOW FROM INVESTING ACTIVITIES- Purchase/Sale of Investments (450,000.00)Net Cash Used in Investing Activities (450,000.00)

C CASH FLOW FROM FINANCING ACTIVITIES- Preliminary Expenses (29,596.00)- Proceeds by way of issue of Shares 500,000.00Net Cash Used in Financing Activities 470,404.00Net Increase in Cash & Cash Equivalents(A+B+C) 11,441.00Cash and Cash Equivalents as at (Opening) –Cash and Cash Equivalents as at (Closing) 11,441.00

169HSIL Limited |


As on31 March 2009

Authorised50,000 Equity Shares of Rs. 10/- each 500,000.00Issued, Subscribed and Paid-up50,000 Equity Shares of Rs. 10/- each 500,000.00

500,000.00

1 SHARE CAPITAL

(Amount in Rs.)

As on31 March 2009

Balances with Schedule Banks- in Current Account 11,441.00

11,441.00

3 CASH & BANK BALANCES

(Amount in Rs.)

As on31 March 2009

Sundry Creditors- For Expenses 3,000.00

3,000.00

4 CURRENT LIABILITIES

(Amount in Rs.)

As on31 March 2009

(To the extent not written off and/or adjusted) Preliminary Expenses 29,596.00Less: Written Off 5,919.20

23,676.80

5 MISCELLANEOUS EXPENDITURE

(Amount in Rs.)

No. of As onUnits 31 March 2009

Mutual Fund HDFC Liquid Fund - Growth 26,273.997 450,000.00

450,000.00NAV of Mutual Fund 458,835.95

2 INVESTMENTS (AT COST)

A. ACCOUNTING POLICIES1) Basis of preparation of Financial Statements

The financial statements are prepared under the historical cost conventions in accordance with Generally Accepted AccountingPrinciples (GAAP), and comply with the mandatory accounting standards issued by the Institute of Chartered Accountants of India(ICAI).

2) Accounting ConventionThe financial statement have been prepared in accordance with the historical cost convention.

6 ACCOUNTING POLICIES AND NOTES ON ACCOUNTS

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS


3) Revenue RecognitionThe Company recognises income on accrual basis.

4) Fixed AssetsThe Company does not have any asset during the year.

5) DepreciationThe Company does not have any Assets during the year hence no depreciation has been provided.

6) InvestmentsCurrent investments are valued at the lower of cost and fair value.

Long-term investments are stated at cost. Provision is made for diminution in the value of long-term investments to recognise adecline, if any, other than temporary in nature.

7) InventoriesThe Company has not dealt with any inventory during the year.

8) Foreign Currency TransactionsThe Company has no foreign currency transactions during the year.

9) Retirement BenefitThe Company has no employee during the year under review, hence provision for liabilities for provident fund, gratuity andaccrued leave benefits are not required to be made by the Company on the date of Balance Sheet.

B. NOTES ON ACCOUNTS1) Contingent Liabilities

Their is no contingent liabilities of the Company on the date of Balance Sheet.

2) Sundry Debtors & CreditorsThe Company has not started its business operations during the year.

3) Share CapitalThe entire paid-up Equity Share Capital of the Company is held by HSIL Limited (Formerly: Hindustan Sanitaryware & IndustriesLimited), the holding Company and its nominees.

4) Remuneration to Auditors

Audit Fee 3,000.00Certification fee 750.00

3,750.00

5) Managerial RemunerationThe Company has not paid any managerial remuneration during the year.

6) Provision for Income TaxCompany does not require to make any Provision for taxation due to loss during the year.

7) Fixed AssetsThe Company has not made any additions/disposal of Fixed Assets during the year.

8) The Company was incorporated on 4 September 2008 and these are the first Accounts of the Company, hence, previous yearfigures do not appear in the financial statements.

9) Additional information pursuant to the provisions of paragraph 4C & 4D of part II of Schedule-VI is not applicable to the Company.

6 ACCOUNTING POLICIES AND NOTES ON ACCOUNTS





(Amount in Rs.)

170 | HSIL Limited



Place : Kolkata N. Goenka G. L. SultaniaDate : 5 May 2009 Director Director

U 2 7 1 0 7 W B 2 0 0 8 P L C 1 2 9 0 6 4

3 1 0 3


Balance Sheet Date



Total Liabilities

5 0 0

III. Position of mobilisation and deployment of funds (Amount in Rs. Thousand)

2 0 0 9

2 1

Total Assets

5 0 0

Sources of Funds


N I L

Investment

4 5 0

Net Current Assets

8


2 4

Accumulated Losses

1 8

Public Issue

N I L

Right Issue

N I L

Bonus Issue

N I L

Private Placement

(By way of subscription to the memorandum)

5 0 0

Paid up Capital

5 0 0


N I L

Secured Loans

N I L

Unsecured Loans

N I L





Turnover

N I L

Total Expenses

1 8

Profit/(Loss) before Tax

( 1 8 )

Profit/(Loss) after Tax

( 1 8 )


N I L

Dividend Rate (%)

N I L

N . A .

N . A .

171HSIL Limited |

Across the pages Business profile 02 Awards and certificates 06 Number sustainability 08 Chairman and Managing Director’s

perspective 10 Ability in managing sustainability 12 Business review with the Joint Managing Director 20Business segments at a glance 28 Business segment review 30 Our specialty retail business 40 People

management 42 Managing risks at HSIL 43 Finance review 47 Board of Directors 50 Five-year financial

summary 52 Directors’ Report 56 Corporate Governance Report 66 Auditor’s Report 85 Balance Sheet 88Profit and Loss Account 89 Cash Flow Statement 90 Schedules 92 Balance Sheet Abstract 110Consolidated Accounts 111 Subsidiary accounts 133

Corporate Information

Board of DirectorsMr. R.K. Somany Chairman and Managing Director

Mr. Sandip Somany Joint Managing Director

Mr. Ashok JaipuriaMr. Binay KumarMr. G.L. SultaniaMr. N.G. KhaitanMr. S.B. BudhirajaMr. Vishal K.K. MarwahaMr. V.K. Bhandari

Company secretaryMs. Ruchika Gupta

Statutory auditorsWalker, Chandiok & Co.Chartered Accountants

Internal auditorsHaribhakti & Co.Chartered Accountants

Registered office2, Red Cross Place, Kolkata - 700001Tel: 033 22487406/07Fax: 033 22487045Email: [email protected]

Corporate office301-302, Park CentraSector 30, National Highway 8Gurgaon - 122 001Tel: 0124 4779200-201Fax: 0124 4292899

Regional officesBengaluruUnit No. 9/2, DhondusaComplex, 3rd Flr, Residency RoadRichmond Circle

Bengaluru - 560 025Tel: 080 41136377

ChennaiMKM Chambers (Annexe)1st Flr, 154 & 155,Kodambakkam High RoadNungambakkam, ChennaiTel: 044 28220912

ErnakulamPalaparambil Bldg, Kaloor-Kadavandra RoadNear Katrikadavu BridgeErnakulam-682020, KeralaTel: 0481 2207016

Mumbai14, Vaswani Mansions2nd Floor, Dinshaw Wachha RoadBackbay ReclamationMumbai - 400 020Tel: 022-22044766

PuneFlat No 18, Bldg No. 2Kalpataru Society, Above KeringHospital New Timer Mkt Road, Opp Shanti Nagar SocietyPune - 411042

Secunderabad304, Ashoka BhoopalChambers, Sardar Patel RoadSecunderabadTel: 040 6628800

Plant LocationsBuilding Products Division1. Bahadurgarh-124507,District Jhajjar, HaryanaTel: 1276 230485/87

1276 232226-8Fax: 1276 230138

2. Somanypuram, BrahmanapallyBibinagar, Dist. NalgondaAndhra Pradesh 508126Tel: 8685 651773/448

Container Glass DivisionAGI Glaspac1. Glass Factory Road, off Motinagar,P.B. No. 1930, Sanathnagar P.O.Hyderabad 500018Tel: 40 23831771Fax: 40 238317872. Glass Factory RoadBhongir - 508 116Nalgonda DistrictAndhra Pradesh

EVOK StoresDelhiWest Gate Mall, Unit no.1-252nd Floor, Plot no. 4, 5, 6Shivaji Place Distt. CentreRajouri GardenNew Delhi - 110015Tel: 011 4351 3751/52

FaridabadCrown Interiorz Mall12/7, NH-2, Delhi Mathura RoadSector 35, Faridabad, HaryanaTel: 0129 4161021/23

BankersAndhra Bank Canara BankCitibank, N.A.HDFC Bank Ltd.IDBI Bank Ltd.Standard Chartered BankThe Hongkong and Shanghai Banking Corporation

Cactus and HSILAt HSIL, we are inspired by the most unlikely of natural creations. The cactus.

Can survive three centuries. Can shrink its surface area to counter transpiration. Can bend to reduce exposure to thesun and minimise moisture loss. Can use its spine to remain inedible. Can suspend root growth until it rains again.

At HSIL, we are inspired by the resilience of the cactus. Enabling us to grow in an environment of adversity.Strengthening our resolve to perform against hardship. Spreading our roots deep and wide. Creating opportunities tosurvive and thrive. Just one word can encapsulate our spirit to endure and flourish.

Sustainable.

Disclaimer In this annual report, we have disclosed forward-looking information to help investors comprehend our prospects and take informed investmentdecisions. This report is based on certain forward-looking statements that we periodically make to anticipate results based on the management’s plansand assumptions. We have tried wherever possible to identify such statements by using words such as ‘anticipates’, ‘estimates’, ‘expects’, ‘projects’,‘intends’, ‘plans’, ‘believes’ and words of similar substance in connection with any discussion of future performance. We cannot guarantee that theseforward-looking statements will be realised, although we believe we have been prudent in assumptions. The achievement of results is subject to risks,uncertainties and even inaccurate assumptions. Should known or unknown risks or uncertainties materialise, or should underlying assumptions proveinaccurate, actual results could vary materially from those anticipated, estimated or projected. We undertake no obligation to publicly update anyforward-looking statements, whether as a result of new information, future events or otherwise.

www.hindwarehomes.com(formerly Hindustan Sanitaryware and Industries Limited)

| 2008-09 Annual Report

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