Annual Report 2005 -2006
GODREJ INDUSTRIES LIMITED
DIRECTORS
A.B. Godrej Chairman
J.N. Godrej
N.B. Godrej Managing Director
S.A. Ahmadullah
V.M. Crishna
K.K. Dastur
V.N. Gogate
K.N. Petigara
F.P. Sarkari
V.F. Banaji Executive Director & President (Group Corporate Affairs)
T.A. Dubash Executive Director & President (Marketing)
M. Eipe Executive Director & President (Chemicals)
M.P. Pusalkar Executive Director & President (Corporate Projects)
COMPANY SECRETARY
S.K. Bhatt
AUDITORS
Kalyaniwalla & Mistry, Chartered Accountants
1 Godrej Industries Limited
REGISTERED OFFICE : Pirojshanagar, Eastern Express Highway, Vikhroli (East), Mumbai 400 079. Phone : 022-2518 8010, 2518 8020, 2518 8030 Fax : 022-2518 8074, 2518 8066 website : http:www.godrejinds.com FACTORIES : Vikhroli Pirojshanagar, Eastern Express Highway, Vikhroli, Mumbai 400 079. Phone : 022 - 2518 8010, 2518 8020, 2518 8030 Fax : 022 - 2518 8068/2518 8074 Valia Burjorjinagar, Plot No. 3, Village Kanerao, Taluka - Valia, District Bharuch, Gujarat 393 135. Phone : 02643 - 270756 to 270760 Fax : 02643 - 270018 Wadala L.M. Nadkarni Marg Near M.P. T. Hospital Wadala (East), Mumbai 400 037. Phone : 022 - 2412 6320/23, 2414 6296 Fax : 022 - 2412 6204/2416 4599 Mandideep Plot No. 5, New Industrial Area No. 1 CONTENTS Page Nos. Mandideep, District Raisen, Financial Highlights ...... 03 Bhopal - 462 046, MP Notice ...... 04 Phone : 07480 - 233405-6 Fax : 07480 - 233409 Directors’ Report along with Management Discussion and Analysis Report ...... 11 BRANCHES : Delhi 4th Floor, Delite Theatre Building, Report on Corporate Governance ...... 21 4/1, Asaf Ali Road, New Delhi 110 002 Shareholders' Information...... 25 Phone : 011 - 2326 1069/76 Fax : 011 - 2326 1088 Auditors’ Report ...... 27 Kolkata Block GN, Sector-V, Accounts ...... 30 Salt Lake City, Kolkata 700 091. Consolidated Accounts ...... 53 Phone : 033 - 2357 3556, 2357 3555 Fax : 033 - 2357 3945 Statement Pursuant to Section 212 ...... 68 Chennai New No. 102, (Old No. 81), SUBSIDIARIES Chamiers Road, Godrej Agrovet Limited ...... 69 Chennai 600 028. Phone : 044 - 2431 5721/2431 5722 Goldmohur Foods & Feeds Limited ...... 79 Fax : 044 - 2431 5723 Golden Feed Products Limited ...... 85 London 284A, Chase Road, Southgate, Krithika Agro Farm Chemicals and Engineering London N14 - 6HF., UK Industries Private Limited ...... 90 Phone : (004420) - 88860145 Godrej Beverages & Foods Limited ...... 93 Fax : (004420) - 88869424 Godrej Properties Limited ...... 100 BANKERS : Central Bank of India Girikandra Holiday Homes & Resorts Limited .... 107 State Bank of India Bank of India Godrej Realty Private Limited ...... 110 HDFC Bank Ltd. Godrej Waterside Properties Private Limited ...... 113 Citibank N.A. Godrej Hicare Limited...... 115 REGISTRARS : Computech Sharecap Ltd. Ensemble Holdings & Finance Limited ...... 121 147, Mahatma Gandhi Road, Godrej International Limited ...... 126 Opp. Jehangir Art Gallery, Fort, Mumbai 400 023. Godrej Global Mid East FZE ...... 128 Phone : 022 - 2267 1824-26 Godrej Global Solutions Limited ...... 132 Fax : 022 - 2267 0380 Godrej Global Solutions (Cyprus) Limited ...... 137 E-Mail : [email protected] Godrej Global Solutions, Inc ...... 141
2 Annual Report 2005 -2006
GODREJ INDUSTRIES LIMITED – FINANCIAL HIGHLIGHTS (Rs. Lac) 2005-06 2004-05 2003-04 2002-03 2001-02 BALANCE SHEET SOURCES OF FUNDS : Shareholders’ Funds Share Capital 2919 2919 2919 2919 3699 Reserves & Surplus 34216 30618 26197 21511 21030 Loan Funds Secured Loans 24911 22075 16814 14815 15051 Unsecured Loans 7803 3557 4235 7432 13456 Deferred Tax Liability 3818 2502 2972 3466 1347 73667 61671 53137 50143 54583 APPLICATION OF FUNDS : Fixed Assets 28594 25100 25656 28130 29099 Investments 37135 33577 26533 18646 14619 Net Working Capital 5719 2868 739 2944 9987 Miscellaneous Expenditure 2219 126 209 423 878 73667 61671 53137 50143 54583 INCOME AND PROFIT Total Income 80270 82353 73355 67780 53465 Expenditure other than Interest and Depreciation 69660 70117 64243 57737 43408 Profit before Interest, Depreciation and Tax 10610 12236 9112 10043 10057 Interest (net) 2837 2582 580 2024 3218 Profit before Depreciation and Tax 7773 9654 8532 8019 6839 Depreciation 2260 2148 2150 2211 2154 Profit before Tax and exceptional items 5513 7506 6382 5808 4685 Exceptional items - expense/(income) (3106) ———624 Provision for Current Tax 82 401 365 421 150 Net Profit after Tax 8537 7105 6017 5387 3911 Provision for Deferred Tax 1417 (470) (494) 2119 923 Adjustment in respect of prior years - (income) 8 (2) (57) (153) (121) Net Profit after taxes and adjustments 7112 7577 6568 3421 3109
Note : The figures for FY 2002-03 are not comparable with the previous year in view of the Schemes of Arrangement with Godrej Consumer Products Limited and Godrej Foods Limited, in FY 2001-02. Total Income 2005-2006 Total Expenditure 2005-2006 Break-up of Total Income Break-up of Total Expenditure Rs. Lac Rs. Lac
3 Godrej Industries Limited
NOTICE TO SHAREHOLDERS NOTICE is hereby given that the EIGHTEENTH ANNUAL GENERAL MEETING of the members of GODREJ INDUSTRIES LIMITED will be held on Monday, July 24, 2006 at 4.30 P.M. at Y B Chavan Centre, Nariman Point, Mumbai – 400 021, to transact the following business:- ORDINARY BUSINESS : 1. To consider and adopt the Audited Profit & Loss Account and Cash Flow Statement for the year ended March 31, 2006, the Balance Sheet as at that date, the Auditors’ Report thereon and the Directors’ Report along with Management Discussion and Analysis Report and Statement of Corporate Governance. 2. To declare dividend for the financial year ended March 31, 2006. 3. To appoint a Director in place of Mr. J.N. Godrej, who retires by rotation and being eligible offers himself for re-appointment. 4. To appoint a Director in place of Ms. T.A. Dubash, who retires by rotation and being eligible, offers herself for re-appointment. 5. To appoint a Director in place of Mr. V.F. Banaji, who retires by rotation and being eligible offers himself for re-appointment. 6. To appoint a Director in place of Mr. M. Eipe, who retires by rotation and being eligible offers himself for re-appointment. 7. To appoint Auditors to hold office from the conclusion of this Annual General Meeting till the conclusion of the next Annual General Meeting, and to authorize the Board of Directors of the Company to fix their remuneration. M/s. Kalyaniwalla & Mistry, Chartered Accountants, the retiring Auditors are eligible for re-appointment. SPECIAL BUSINESS : 8. To consider and, if thought fit, to pass with or without modification(s), the following resolution as a SPECIAL RESOLUTION :- RESOLVED THAT subject to the provisions of Sections 269, 309, Schedule XIII and other applicable provisions, if any, of the Companies Act, 1956, approval of the Company be and is hereby accorded for the re-appointment and remuneration payable to Ms. T.A. Dubash as a Whole-Time Director of the Company designated as Executive Director & President (Marketing), for a period of three years from April 1, 2007 to March 31, 2010 on the terms and conditions as contained in the Agreement to be entered into between the Company and Ms. T.A. Dubash, a draft of which is placed before the meeting and for the purpose of identification, initialed by the Chairman. 9. To consider and, if thought fit, to pass with or without modification(s), the following resolution as a SPECIAL RESOLUTION :- RESOLVED THAT subject to the provisions of Sections 269, 309, Schedule XIII and other applicable provisions, if any, of the Companies Act, 1956, approval of the Company be and is hereby accorded for the re-appointment and remuneration payable to Mr. V. F. Banaji as a Whole-Time Director of the Company designated as Executive Director & President (Group Corporate Affairs) for a period of three years from April 1, 2007 to March 31, 2010, on the terms and conditions as contained in the Agreement to be entered into between the Company and Mr. V. F. Banaji, a draft of which is placed before the meeting and for the purpose of identification, initialed by the Chairman. 10. To consider and, if thought fit, to pass with or without modification(s), the following resolution as a SPECIAL RESOLUTION :- RESOLVED THAT subject to the provisions of Sections 269, 309, Schedule XIII and other applicable provisions, if any, of the Companies Act, 1956, approval of the Company be and is hereby accorded for the re-appointment and remuneration payable to Mr. M. Eipe as a Whole-Time Director of the Company designated as Executive Director & President (Chemicals), for a period of three years from April 1, 2007 to March 31, 2010 on the terms and conditions as contained in the Agreement to be entered into between the Company and Mr. M. Eipe, a draft of which is placed before the meeting and for the purpose of identification, initialed by the Chairman. 11. To consider and, if thought fit, to pass with or without modification(s), the following resolution as a SPECIAL RESOLUTION :- RESOLVED THAT subject to the provisions of Sections 269, 309, Schedule XIII and other applicable provisions, if any, of the Companies Act, 1956, approval of the Company be and is hereby accorded for the remuneration payable to Mr. M. P. Pusalkar as a Whole-Time Director of the Company designated as Executive Director & President (Corporate Projects), for a period of three years from April 1, 2007 to March 31, 2010 on the terms and conditions as contained in the Agreement to be entered into between the Company and Mr. M. P. Pusalkar, a draft of which is placed before the meeting and for the purpose of identification, initialed by the Chairman. 12. To consider and, if thought fit, to pass with or without modification(s), the following resolution as a SPECIAL RESOLUTION :- RESOLVED THAT subject to the provisions of Section 314 and other applicable provisions, if any of the Companies Act, 1956, approval of the Company be and is hereby accorded to the revision in remuneration payable to Mr. Pirojsha A. Godrej, son of Mr. A.B. Godrej, Chairman of the Company, with effect from April 1, 2006 on the terms and conditions as detailed in the Explanatory Statement hereto. 13. To consider and if deemed fit, to pass, with or without modification(s), the following resolution as an ORDINARY RESOLUTION: RESOLVED THAT pursuant to Section 13, 16 and 94 and any other applicable provisions of the Companies Act, 1956, the provisions contained in Articles of Association of the Company and any other applicable law for the time being in force and as may be amended from time to time and subject to such conditions and modifications, if any, as may be prescribed or imposed while granting such approvals, permissions and sanctions, if any, which may be agreed to, by the Board of Directors of the Company (which term shall be deemed to include any Committee which the Board may constitute, to exercise its powers including the powers conferred by this resolution), the existing Equity Shares of the face value of Rs.6/- (Rupees Six) each in the Share Capital of the Company be sub-divided into 6 (Six) Equity Shares of the face value Re.1 (Rupee one) each and consequently, the Equity Share Capital of the Company of Rs. 80,00,00,000/- (Rupees Eighty Crore only) comprising of 13,33,33,333 (Thirteen Crore Thirty Three Lac Thirty Three Thousand Three Hundred Thirty Three) equity shares of Rs.6/- (Rupees Six) each be divided into 80,00,00,000 (Eighty crore) equity shares of the face value of Re.1 (Rupee one) each, with effect from the ‘Record Date’ to be determined by the Board of Directors of the Company for the purpose. 4 Annual Report 2005-2006
RESOLVED FURTHER THAT the issued, subscribed and fully paid–up Equity Share Capital of the Company, as on the Record Date that may be fixed by the Board of Directors of the Company (hereinafter referred to as “the Board” which expression shall be deemed to include any duly authorized committee thereof), be sub-divided from 4,86,41,942 equity shares of the face value of Rs. 6/- each into 29,18,51,652 (Twenty nine crore eighteen lac fifty one thousand six hundred fifty two) equity shares of the face value of Re.1/- (Rupee one) each. RESOLVED FURTHER THAT the Board be and is hereby authorised to inform the Registrar and Transfer Agents of the Company and the depositories to take necessary action to give effect to the above and also to issue new share certificates representing the sub-divided shares with new distinctive numbers (except in case of shares held in the demat form), in the aforesaid proportion subject to the rules as laid down in the Companies (Issue of Share Certificates) Rules 1960 with an option to either exchange the new share certificates in lieu of cancellation of the old share certificates or without physically exchanging the share certificates, by treating the old share certificates, as deemed to be cancelled or by credit of sub-divided equity shares in shareholders’ demat accounts in exchange of old share certificate/s. RESOLVED FURTHER THAT the Board be and is hereby severally authorised to do all such acts, deeds, matters and things and execute all such documents, instruments and writings as may be required in the said connection and to delegate all or any of the powers herein vested in them to give effect to the above. 14. To consider and if deemed fit, to pass, with or without modification(s), the following resolution as an ORDINARY RESOLUTION: RESOLVED THAT pursuant to the provisions of Section 16 of the Companies Act, 1956 and any other provisions as may be applicable the existing Memorandum of Association of the Company be altered by deleting the existing Clause V and substituting in place thereof the following Clause as Clause V: The Authorised Capital of the Company is Rs.180,00,00,000/- (Rupees One Hundred Eighty Crore) divided into 80,00,00,000 (Eighty crore) Equity Shares of Re.1/- (Rupee one) each, and 10,00,00,000 (Ten Crore) Unclassified Shares of Rs.10/-each. 15. To consider and if deemed fit, to pass, with or without modification(s), the following as SPECIAL RESOLUTION: RESOLVED THAT pursuant to the provisions of Section 31 and other applicable provisions, if any, of the Companies Act, 1956 and the provisions of any other law as may be applicable for the time being in force, the Articles of Association of the Company be altered by deleting the existing Article 3 and substituting in place thereof the following as Article 3: 3. The Authorised share capital of the company is Rs.180,00,00,000/- (Rupees One Hundred Eighty Crore) divided into 80,00,00,000 (Eighty crore) Equity Shares of Re.1/- (Rupee one) each, and 10,00,00,000 (Ten Crore) Unclassified Shares of Rs.10/- each with power to the Board of Directors of the Company to divide the shares in the capital of the Company for the time being into several classes therein and to make such modifications therein as the Board may deem fit, and with power to increase or reduce the capital of the Company and to divide the shares in the capital for the time being into several classes and to attach thereto respectively such preferential, deferred qualified or special rights, privileges or conditions as may be determined by or in accordance with the Articles of Association of the Company and to vary modify, amalgamate or abrogate any such rights, privileges or conditions in such manner as may for the time being be provided by the Articles of Association of the Company and as may be thought expedient. Notwithstanding anything contained herein, the Company shall be entitled to dematerialise its shares, debentures and other securities pursuant to the Depositories Act, 1996 and to offer its shares, debentures and other securities for subscription in a dematerialised form. By Order of the Board of Directors S. K. BHATT Executive Vice-President (Corporate Services) & Company Secretary Mumbai, May 26, 2006 Registered Office : Pirojshanagar, Eastern Express Highway, Vikhroli (East), Mumbai 400 079. NOTES : 1. The relative Explanatory Statement in respect of business under Item Nos. 8 to 15 set out in the Notice is annexed hereto. 2. A MEMBER ENTITLED TO ATTEND AND VOTE IS ENTITLED TO APPOINT A PROXY TO ATTEND AND ON POLL, TO VOTE INSTEAD OF HIMSELF. SUCH A PROXY NEED NOT BE A MEMBER OF THE COMPANY. PROXIES IN ORDER TO BE EFFECTIVE MUST BE RECEIVED BY THE COMPANY NOT LESS THAN 48 HOURS BEFORE THE MEETING. A PROXY SO APPOINTED SHALL NOT HAVE ANY RIGHT TO SPEAK AT THE MEETING. 3. The Register of Members and Share Transfer Books of the Company will be closed from July 17, 2006 to July 24, 2006 (both days inclusive) for ascertaining the names of the shareholders to whom the dividend which if declared at the Annual General Meeting is payable. In respect of shares held in electronic form, the dividend will be payable on the basis of beneficial ownership as per details furnished by National Securities Depository Ltd. and Central Depository Services (India) Ltd., for this purpose. 4. Those Members who have so far not encashed their dividend warrants for the below mentioned financial years, may claim or approach the Company for the payment thereof as the same will be transferred to the ‘Investor Education and Protection Fund’ of the Central Government, pursuant to Section 205C of the Companies Act, 1956 on the respective dates mentioned thereagainst. Please note that as per Section 205C of the Companies Act, 1956, no claim shall lie against the Company or the aforesaid Fund in respect of individual 5 Godrej Industries Limited
amounts which remain unclaimed or unpaid for a period of seven years from the date the dividend became due for payment and no payment shall be made in respect of such claims. Dividend for the Financial Year ended Due date for transfer 31.03.2000 01.07.2007 31.03.2001 28.07.2008 31.03.2002 14.08.2009 31.03.2003 25.08.2010 31.03.2004 26.07.2011 31.03.2005 26.07.2012 5. Members are requested to bring their copy of the Annual Report to the Annual General Meeting. 6. Members are requested to send in their queries at least a week in advance to the Company Secretary at the Registered Office of the Company to facilitate clarifications during the meeting. EXPLANATORY STATEMENT PURSUANT TO SECTION 173(2) OF THE COMPANIES ACT, 1956 Item nos.8 to 11 The tenure of the following Whole-time Directors with the Company will expire on March 31, 2007. Ms. T.A. Dubash – Executive Director & President (Marketing) Mr. V.F.Banaji – Executive Director & President (Group Corporate Affairs) Mr. M. Eipe – Executive Director & President (Chemicals) It is proposed to re-appoint Ms. T.A. Dubash, Mr. V.F. Banaji, and Mr. M. Eipe for a further period of three years from April 1, 2007 to March 31, 2010. Mr. M.P. Pusalkar was reappointed by the Shareholders at their Meeting held on July 26, 2005, as a director liable to retire by rotation pursuant to Section 255 of the Companies Act, 1956. However, the approval of shareholders to the remuneration payable to him as a Whole-time Director will expire on March 31, 2007. Hence, it is proposed to approve his remuneration as a Whole-time Director for a period of three years from April 1, 2007 to March 31, 2010 along with the other Whole-time Directors. The proposed remuneration and terms and conditions of appointment of each of the aforementioned Whole-time Directors are given below :- 1. Ms. T.A. Dubash, Mr. V.F.Banaji, Mr. M. Eipe and Mr. M.P. Pusalkar (hereinafter individually referred to as the Whole-time Director) shall perform their duties subject to the superintendence, control and direction of the Board of Directors of the Company. 2. Period of appointment of Ms. T.A. Dubash – from 1/4/2007 to 31/3/2010 Mr. V.F. Banaji - from 1/4/2007 to 31/3/2010 Mr. M. Eipe – from 1/4/2007 to 31/3/2010 Mr. M.P. Pusalkar – from 1/4/2007 to 31/03/2010 3. In consideration of the performance of their duties, the Whole-time Directors, viz. Ms. T.A. Dubash, Mr. V.F. Banaji, Mr. M. Eipe and Mr. M.P. Pusalkar shall be entitled to receive remuneration as stated hereinbelow:- 1. Fixed Compensation: Fixed Compensation shall include Basic Salary and the Company’s Contribution to Provident Fund and Gratuity Fund. The Basic Salary shall be in the range of Rs.1,70,000/- to Rs. 5,00,000/- per month, payable monthly. The Annual increments will be decided by the Compensation Committee/Board of Directors depending on the performance of the Whole-time Director, the profitability of the Company and other relevant factors. The Basic Salary approved for the year 2006-07 for each of the above Whole- time Director is within the range of Rs.1,70,000 – Rs.3,00,000 per month. 2. Performance Linked Variable Remuneration Performance Linked Variable Remuneration according to the Scheme of the Company for each of the financial years as may be decided by the Compensation Committee/Board of Directors of the Company based on Economic Value Added in the business and other relevant factors and having regard to the performance of each of the Whole-time Director for each year. 3. Flexible Compensation: In addition to the Fixed Compensation and PLVR, each Whole-time Director will be entitled to the following allowances, perquisites, benefits, facilities and amenities as per rules of the Company and subject to the relevant provisions of the Companies Act, 1956 (collectively called “perquisites and allowances”). These perquisites and allowances may be granted to each Whole-time Director in the manner as the Board may decide.
6 Annual Report 2005-2006
Housing as per rules of the Company (i.e. unfurnished residential accomodation and House Rent Allowance at applicable rate as per Company’s rules OR House Rent Allowance as per Company’s rules); Furnishing at residence as per rules of the Company; Supplementary Allowance; Leave Travel Assistance in accordance with the rules of the Company; Payment/reimbursement of medical expenses for self and family in accordance with the rules of the Company. Payment/reimbursement of Food Vouchers, petrol reimbursement; Company cars with driver for official use, provision of telephone(s) at residence; Payment/reimbursement of telephone expenses; Housing Loan as per rules of the company, Contingency Loan as per rules of the company. These loans shall be subject to Central Government approval, if any; Earned/privilege leave, on full pay and allowance, not exceeding 30 days in a financial year. Encashment/accumulation of leave will be permissible in accordance with the Rules specified by the Company. Casual/Sick leave as per the rules of the Company; Such other perquisites and allowances as per the policy/rules of the Company in force and/or as may be approved by the Board from time to time. The maximum cost to the Company per annum for the aggregate of the allowances listed above for each of the Whole-time Director shall be Rs.25,00,000/- plus 63.33% of the annual basic salary. For the year 2006-07 the cost to the Company for all the heads of flexible compensation payable to each of the Whole-time Director is Rs.13,20,000/- plus 63.33% of annual basic salary. In addition to the above, the Whole-time Director will be eligible to encashment of leave, club facilities, group insurance cover, group hospitalisation cover, and/ or any other allowances, perquisites and facilities as per the Rules of the Company. Explanation i) For the Leave Travel Assistance and reimbursement of medical and hospitalisation expenses, ‘family’ means the spouse and dependent children and dependent parents. ii) Perquisites shall be evaluated at actual cost or if the cost is not ascertainable the same shall be valued as per Income Tax Rules. 4. Overall Remuneration The aggregate of salary and perquisites as specified above or paid additionally in accordance with the rules of the Company in any financial year, which the Board in its absolute discretion pay to the Whole-time Director from time to time, shall not exceed the limits prescribed from time to time under Sections 198, 309 and other applicable provisions of the Companies Act, 1956 read with Schedule XIII to the said Act as may for the time being, be in force. 5. Loans (a) Granting of loans according to Company’s Scheme subject to Central Government’s approval, if applicable. (b) Continuation of Loans already availed: Contingency Loan to Mr. M.P. Pusalkar as on March 31, 2006 – Rs.24,999/-. Notes : I. Unless otherwise stipulated, for the purpose of the above, the perquisites shall be evaluated as per Income Tax Rules wherever actual cost cannot be determined. II. Notwithstanding the foregoing, where in any Financial Year during the currency of the tenure of the Whole-time Director, the Company has no profits or its profits are inadequate, the remuneration by way of salary, commission and perquisites shall not exceed, the maximum limits prescribed in Schedule XIII to the Companies Act, 1956 except with the approval of the Central Government. III. The limits specified above are the maximum limits and the Compensation Committee / Board may in its absolute discretion pay to Whole- time Directors lower remuneration and revise the same from time to time within the maximum limits stipulated above. IV. In the event of any re-enactment or re-codification of the Companies Act, 1956 or the Income Tax Act, 1961 or amendments thereto, the foregoing shall continue to remain in force and the reference to various provisions of the Companies Act, 1956 or the Income Tax Act, 1961 shall be deemed to be substituted by the corresponding provisions of the new Act or the amendments thereto or the Rules and notifications issued thereunder. V. If at any time the Whole-time Director ceases to be in the employment of the Company for any cause whatsoever, she/he shall cease to be Whole-time Director of the Company. VI. Whole-time Directors are appointed by virtue of their employment in the Company and their appointment is subject to the provisions of Section 283(1) of the Companies Act, 1956 while at the same time the Whole-time Directors are liable to retire by rotation. The appointment is terminable by giving three months’ notice in writing on either side. Draft of the agreements to be entered into with each of the above referred Whole-time Directors is available for inspection at the Registered Office of the Company from 10.00 A.M. to 12.00 Noon, Monday to Friday (except public holidays) upto the date of the Annual General Meeting.
7 Godrej Industries Limited
The particulars given above constitute the abstract of the terms of the agreement which is required to be given to every member under the provisions of Section 302 of the Companies Act, 1956. The Board of Directors of the Company recommends passing of the resolution as set out at Item no.8 to 11 of the Notice. Ms. T.A. Dubash, Mr. V.F. Banaji, Mr. M. Eipe and Mr. M.P. Pusalkar may be deemed to be interested in the resolutions at Item no.8 to 11 respectively. Mr. A.B. Godrej, being relative of Ms. T.A. Dubash, may be deemed to be interested in the resolution at item no.8. None of the other Directors of the Company are concerned or interested in the resolutions. Item no.12 Mr. Pirojsha A. Godrej was appointed as an employee of the Company with effect from June 1, 2004. It is proposed to revise the remuneration payable to Mr. Pirojsha A. Godrej with effect from April 1, 2006 on the following terms and conditions :- 1. Fixed Compensation: Fixed Compensation shall include Basic Salary and the Company’s Contribution to Provident Fund and Gratuity Fund. The Basic Salary shall be in the range of Rs. 20,000 to 75,000 per month, payable monthly. The Basic Salary as on April 1, 2006 is Rs.25,000/- p.m. 2. Performance Linked Variable Remuneration Performance Linked Variable Remuneration according to the Scheme of the Company. 3. Flexible Compensation: In addition to the Fixed Compensation and PLVR, Mr. Pirojsha A. Godrej will be entitled to the following allowances, perquisites, benefits, facilities and amenities as per rules of the Company and subject to the relevant provisions of the Companies Act, 1956 (collectively called “perquisites and allowances”). These perquisites and allowances may be granted to Mr. Pirojsha A. Godrej in the manner as the Board may decide. Housing as per rules of the Company (i.e. unfurnished residential accomodation and House Rent Allowance at applicable rate as per Company’s rules OR House Rent Allowance as per Company’s rules); Furnishing at residence as per rules of the Company; Supplementary Allowance; Leave Travel Assistance in accordance with the rules of the Company; Payment/reimbursement of medical expenses for self and family in accordance with the rules of the Company. Payment/reimbursement of Food Vouchers, petrol reimbursement; Company car with driver for official use, provision of telephone(s) at residence; Payment/reimbursement of telephone expenses; Earned/privilege leave, on full pay and allowance, not exceeding 30 days in a financial year. Encashment/accumulation of leave will be permissible in accordance with the Rules specified by the Company. Casual/Sick leave as per the rules of the Company; Such other perquisites and allowances as per the policy/rules of the Company in force and/or as may be approved by the Board from time to time. The maximum limit of cost to the Company per annum for all the heads of flexible compensation payable to Mr. Pirojsha A. Godrej shall be Rs.50,000/- plus 55% of the annual basic salary. For the year 2006-07 the cost to the Company under all the heads of flexible compensation payable to Mr. Pirojsha A. Godrej shall be Rs.3,06,000/- plus 55% of annual basic salary. In addition to the above, Mr. Pirojsha A. Godrej will be eligible to encashment of leave, group insurance cover, group mediclaim cover, and/or any other allowances, perquisites and facilities as per the Rules of the Company. Notes: 1. Unless otherwise stipulated, for the purpose of the above, the perquisites shall be evaluated as per Income Tax Rules wherever actual cost cannot be determined. 2. The following shall not be included in the computation of perquisites : (a) Provision for use of Company’s car with driver for official use. (b) Provision of free telephone facilities or reimbursement of telephone expenses at residence including payment of local calls and long distance official calls. 3. The Board in its absolute discretion can decide the designation/cadre of Mr. Pirojsha A. Godrej within the above salary range. 4. The limits specified above are the maximum limits and the Board may in its absolute discretion pay to Mr. Pirojsha A. Godrej, lower remuneration and revise the same from time to time within the maximum limits stipulated above. Mr. A.B. Godrej and Ms. T.A. Dubash being relatives may be deemed to be interested in the resolution. None of the other Directors of the Company are concerned or interested in the resolution.
8 Annual Report 2005-2006
Item nos.13 to 15 At present the Company’s paid up and listed equity Share Capital is Rs. 29,18,51,652/- which is divided into 4,86,41,942 equity shares of Rs.6/- each. The Board is of the view that the liquidity of the equity shares of the Company in the stock markets should be increased. Towards this end, it is proposed to reduce the nominal value of equity shares of the Company by sub-dividing the equity shares to make it more affordable to the retail investors. Therefore, it is proposed that the nominal value of equity shares of the Company be reduced from Rs. 6/- each to Rs. 1/- each. Consequent to the sub-division of shares, it is necessary to alter the Capital Clause of the Memorandum and Articles of Association of the Company. The Ordinary Resolution in Item No. 14 and Special Resolution in Item No. 15 seek to make corresponding amendments in Clause V of the Memorandum of Association and Article 3 of the Articles of Association of the Company to give effect to the above. The Board of Directors believes that such issue is in the interest of the Company and therefore recommends the resolutions for your approval. The Directors of the Company may be deemed to be interested in this Resolution to the extent of their respective shareholdings in the Company. The Board of Directors of the Company recommends the passing of the resolutions as set out at Items no. 13 to 15 of the Notice. By Order of the Board of Directors S. K. BHATT Executive Vice-President (Corporate Services) & Company Secretary Mumbai, May 26, 2006 Registered Office : Pirojshanagar, Eastern Express Highway, Vikhroli (East), Mumbai 400 079. Details of the Directors seeking appointment/reappointment at the forthcoming Annual General Meeting (in pursuance of Clause 49 of the Listing Agreement) Mr. J.N. Godrej (57) : Mr. J.N. Godrej holds a bachelor’s degree in Mechanical Engineering and a masters’ degree in Business Administration from the Illinois Institute of Technology, USA. He is a Director on the Board of the Company from 7-3-1988. He joined the Board of Directors of Godrej & Boyce Mfg Co Ltd. (G&B) in 1974. He was appointed Managing Director of G&B in 1990 and became Chairman of the Board of G&B in 2000. Mr. Godrej is President of World Wide Fund for Nature, India, Vice President of World Wide Fund for Nature-International, past President of Confederation of Indian Industry and past President of the Indian Machine Tool Manufacturer’s Association. Directorship in other Companies : Chairman & Managing Director: Godrej & Boyce Mfg Co Ltd. Chairman: Geometric Software Solutions Co. Ltd., 3D PLM Software Solutions Ltd., Lawkim Ltd. Director: Bajaj Auto Ltd., Godrej Agrovet Ltd., Godrej Foods Ltd., Godrej Sara Lee Ltd., Godrej Properties Ltd., Godrej Consumer Products Ltd., Godrej Beverages & Foods Ltd., Godrej Upstream Ltd., Haldia Petrochemicals Ltd., Breach Candy Hospital Trust, Antrix Corporation Ltd., Godrej Investments Pvt. Ltd., Tata Trustee Company Pvt. Ltd., Illinois Institute of Technology (India) Pvt. Ltd., Godrej (Malayasia) Sdn. Bhd., Godrej (Singapore) Pte. Ltd., Godrej (Vietnam) Company Ltd., Godrej & Khimji (Middle East) LLC. Committee position held: Chairman – Investor Grievances & Redressal Committee, Compensation Committee-Geometric Software Solutions Ltd. Member – Audit Committee, Shareholders/Investors Grievances Committee-Bajaj Auto Ltd. Member – Compensation Committee-Haldia Petrochemicals ltd. Trustee – General Committee-Breach Candy Hospital Trust. Ms. T.A. Dubash (37): Ms. T.A. Dubash, Executive Director & President (Marketing), is a graduate in Economics & Political Science from Brown University, USA and has completed an Advanced Management Program from the Harvard Business School. She looks after the Group wide marketing function which involves: A supervisory role in all marketing initiatives, including being in charge of marketing of new initiatives of the Group. Heading a Marketing Council comprising of heads of marketing of all Group companies to capitalize on synergies such as sharing of best practices and development of standardized processes through training and knowledge management. Directorship in other Companies : Chairperson: Ensemble Holdings & Finance Ltd., Director: Tahir Properties Ltd., Girikandra Holiday Homes & Resorts Ltd. Godrej Global Mideast FZE, Godrej Agrovet Ltd., Keyline Brands Ltd., Godrej Holdings Pvt. Ltd. Committee position held: Member: Shareholders Committee-Godrej Industries Ltd.
9 Godrej Industries Limited
V. F. Banaji (52): Mr. V.F. Banaji is B.A. from Nagpur University. His responsibilities as ED & President (Group Corporate Affairs) include leadership of the Group HR function for Godrej Industries and Associate Companies as well as Corporate Strategy and Corporate Communications. Before joining the Company he was based in Paris as leader of ALSTOM’s global project for re-engineering key HR processes and supporting them through the deployment of a state-of-the-art HR Management System. Prior to his international assignment, he worked as Executive Director (HR) for ALSTOM in India. His earlier career was with the Tatas, where his last assignment was as Head of the Corporate HR function for Telco (now Tata Motors). Directorship in other Companies : Nil Committee position held: Member – Shareholders Committee-Godrej Industries Ltd. Mr. Mathew Eipe (53) : Mr. Mathew Eipe graduated in Chemical Engineering from the Indian Institute of Technology, Mumbai, in 1975. He is a Management graduate from the Indian Institute of Management, Kolkata. He joined the erstwhile Godrej Soaps Limited, as a Management Trainee in 1977. Currently, he heads the Chemicals, Medical Diagnostics and Estate businesses of the Company and is designated as Executive Director & President (Chemicals). Mr. Eipe has been a member of the Committee of Administration of Basic Chemicals, Pharmaceuticals & Cosmetics Export Promotion Council (CHEMEXCIL) for the last two years. Directorship in other Companies : Director: Godrej Hicare Ltd., Ensemble Holdings & Finance Ltd. Committee position held: Member – Shareholders Committee-Godrej Industries Ltd.
10 Annual Report 2005-2006
DIRECTORS’ REPORT
To the Shareholders, SUBSIDIARY AND ASSOCIATE COMPANIES Your Directors have pleasure in submitting the Annual Report along Your Company has interests in several industries including animal feeds, with the Audited Accounts for the year ended March 31, 2006. poultry and agro-products, property development, household insecticides, pesticides, tea, infotech, etc. through its subsidiary/associate companies. REVIEW OF OPERATIONS Godrej Agrovet Limited (GAVL) : The Operations of the Company was Your Company’s performance during the year as compared with that impacted due to the detection of Avian influenza in some parts of the during the previous year is summarized below. country and unfavourable raw material prices due to delayed monsoon. (Rs. lac) The cumulative effect was a marginal increase of 7% in total income from Rs.56852 lac in the previous year to Rs.60556 for the year ended Year ended March 31, 31.03.06. The Profit after Tax however declined sharply from Rs.1417 2006 2005 lac to Rs.683 lac, a fall of 52%. As against a total dividend payment of Sales of products and services 74542 76335 88% last year GAVL declared a dividend of 40%. Other Income 5728 6018 GAVL has the following businesses viz. Animal feeds, Integrated poultry Total Income 80270 82353 business, Agri inputs, Oil palm plantations and Plant biotech. The Total Expenditure other than Interest and prolonged monsoon and detection of Avian influenza had its effect on Depreciation 69660 70117 the operations of the Animal Feeds and Integrated poultry business of the Profit before Interest, Depreciation and Tax 10610 12236 Company. As against this, the Agri Input business recorded a 40% growth in top line and a 49% growth in the bottom line. The ‘Aadhaar’ initiative Depreciation 2260 2148 to provide a complete solution to Agri Sector opened 7 new centres Profit before Interest and Tax 8350 10088 taking the total number of Aadhaars to 23. The Division also undertook Interest and Financial Charges (net) 2837 2582 a new initiative ‘Nature’s Basket’ in providing gourmet fresh fruits and Profit before Tax 5513 7506 vegetables through this retail chain. This initiative has also received a Provision for Current Tax 82 401 good response. Profit after Current Tax 5431 7105 GAVL acquired a majority stake in Krithika Agro Farm Chemicals & Provision for Deferred Tax 1417 (470) Engineering Industries Pvt. Ltd., Orissa during the year. GAVL has also formed a Joint Venture in UAE in the poultry business with a 70% stake Profit after Current and Deferred Taxation 4014 7575 in the company which operates under the name of Al-Rahba International Profit on sale of undertaking, extraordinary Trading LLC which has commenced production in the second half of item (Net of tax) 3106 – 2005-06. Net Profit 7120 7575 Adjustments in respect of prior years (8) 2 Goldmohur Foods and Feeds Limited (GFFL), a wholly owned subsidiary Surplus brought forward 20082 15481 of GAVL was also impacted by the prolonged monsoon and Avian influenza detected in some parts of the country. The Total Income was Profit after Tax available for appropriation 27194 23058 marginally lower at Rs.29,588 lac as against Rs.30,860 lac in the previous Appropriation year. The Profit after Tax however was Rs.538 lac as against Rs. 345 lac Your Directors recommend appropriation as under: in the previous year. GFFL declared an interim dividend of 168% in the Dividend on Equity Shares 2432 1946 current year as compared to interim dividend of 163% in the previous Tax on distributed profits 341 273 year. Transfer to General Reserve 711 758 Golden Feed Products Limited (GFPL) commenced operations during Surplus Carried Forward 23710 20082 the year. It acquired the shrimp feed marketing business of Higashimaru Total Appropriation 27194 23058 Feeds India Ltd. effective 31st October, 2005. The postponement of the shrimp farming season affected the business and GFPL reported a revenue The total income reduced by 1.8% from Rs. 82353 lac to Rs. 80270 lac. of Rs. 346 lac and a loss of Rs. 140 lac for 2005-06. The Net Profit for the year was Rs.7120 lac as compared to Rs. 7575 lac, in the previous year, a decrease of 5.95%. Godrej Properties Limited (GPL) recorded an increase in Total Income of Rs. 2,862 lac from Rs. 4,185 lac in the previous year to Rs.7,046 lac DIVIDEND in the current year. The Profit after Tax increased from Rs. 583 lac in the The Board of Directors of your Company recommends a final dividend previous year to Rs.1,339 lac, an increase of 130%. GPL has declared of Rs. 5/- per equity share of Rs. 6/- each, aggregating to Rs.2432 lac, as an interim dividend of 96% as compared to 39.56% in the previous against final dividend of Rs. 4/- per equity share of Rs. 6/- each aggregating year. to Rs. 1,945 lac in the previous year. During the year, two commercial projects undertaken in Pune-Godrej MANAGEMENT DISCUSSION & ANALYSIS Eternia C & Godrej Castlemaine were completely sold out. Phase-I of There is a separate section on Management Discussion and Analysis in Godrej Collesium in Mumbai was also sold out. Commencement of Phase this Annual Report, which, inter alia, covers the following: II is in full swing and is expected to be completed by December, 2006. The Company also commenced a residential complex in Bangalore Industry Structure and Developments which was well received. The projects in Thane and Kalyan are Discussion on financial performance with respect to operational progressing as per schedule. The Company also acquired two private performance companies viz., Casablanca Properties Pvt. Ltd. and Bridgestone Segment-wise performance Properties Pvt. Ltd. during the year and has changed their names to Human Resources and Industrial Relations Godrej Realty Pvt. Ltd. and Godrej Waterside Properties Pvt. Ltd. Opportunities and Threats respectively. Internal Control Systems and their adequacy Godrej International Limited (GINL) has posted a net profit of Risks and Concerns US$ 382,566 in the current year as compared to US$ 399,262 in the Outlook previous year. GINL has proposed a final ordinary dividend of 6 US The same is appended as Annexure A to the Directors’ Report. cents per ordinary share of £1 aggregating to US$ 156,300 on the entire 11 Godrej Industries Limited share capital including the increased share capital of about US$ 1.9 On a consolidated basis GCPL earned a Total Income of Rs.70849 lac million raised during the year, as against a final dividend aggregating and PAT of Rs.12080 lac for the year ended March 31, 2006 US$ 150,500 in the previous year. GCPL is aggressively pursuing organic and inorganic growth opportunities Godrej Global MidEast FZE (GGME), a 100% subsidiary of GINL consistent with EVA focus. The macro environment too is encouraging registered a Net Profit of AED 191167 as compared to AED 190379 in with increasing spend being witnessed by both urban and rural consumers. the previous year. GGME has started exporting to Sudan and hopes to GCPL is expected to continue delivering strong growth and stakeholder enter Pakistan soon. value. Godrej Hicare Limited (GHL), a service company in the Pest FINANCIAL POSITION Management business earned Total Income of Rs. 2112 lac as compared to Rs. 1206 lac in the previous year recording growth of 75%. GHL The financial position of your Company continues to be sound. The loan recorded a Profit after Tax of Rs. 104 lac as compared to loss of Rs.113 funds as at the end of the year is at Rs.32638 lac as compared to lac in the previous year. During the year GHL acquired reticulation Rs. 25575 lac as at the end of the previous year. Your Company continues technology (for pre-construction anti-termite treatment) from Termguard, to hold the topmost rating of A1+ from ICRA for its commercial paper Australia and Thermal imaging camera for termite detection from FLIR, programme. The rating indicates that the prospect of timely repayment Sweden. The Company undertook a major quality initiative to enhance of debt/obligation is the best. service delivery to customers. The Company has aggressive plans for MANUFACTURING FACILITIES geographical expansion in the forthcoming year while continuing to grow in current markets by increasing service centers. Chemicals Division : Godrej Global Solutions Ltd. (GGSL), a back-office transaction The Chemicals Division of your Company has manufacturing facilities at processing service company earned Total Income of Rs. 966.30 lac as Vikhroli and Valia. against Rs. 290.57 lac in the previous year. During the year under Valia : review, GGSL acquired through its US subsidiary Godrej Global During the year under review, Export Oriented Unit (EOU) at Valia Solutions, Inc, the business of Outsource Offshore Inc. a US based started commercial production. The factory has commissioned a healthcare forms processing service provider. GGSL also acquired the “Pastillation plant” to cater to the domestic and international demand for data conversion business of Softpage Data Conversion Private Ltd. During long chain fatty alcohol in pastille form. The Pastillation plant is a fully the year GGSL has set up a state of the art service delivery capability at automated plant. Chennai and Navi Mumbai which can support customers in areas of Healthcare such as Medical transcription, medical billing, claims The factory won the National Award for Excellence in Water processing and document management services. Management in Excellent Category in a competition organised by CII at Godrej Beverages & Foods Ltd. (Formerly Godrej Tea Limited) (GBFL) Hyderabad for effecting water recycling mechanism and conservation earned a Total Income of Rs. 783 lac as compared to Rs. 1579 lac in the of natural resources. previous year. GTL recorded loss of Rs. 1717 lac as compared to loss of Vikhroli : Rs. 2142 lac in the previous year. W.e.f. the close of business hours on Various initiatives for de-bottlenecking, reducing costs and quality March 31, 2006 GBFL acquired Foods Division (excluding Wadala improvement has improved the throughput in the various plants. factory) from Godrej Industries Ltd. under a slump sale agreement for a Considering the increasing demand for fractionated fatty acids, your total consideration of Rs.70 crore. Further, IL&FS Investment Managers Company has decided to increase the fractionation capacity at Vikhroli. Ltd. invested Rs.60 crore in the equity share capital of GBFL for a 40% During the year, the Vikhroli factory offered Voluntary Retirement Scheme stake in the Company. Post this acquisition, GTL changed its name to (VRS) to the workers. 322 workers opted for VRS and as a result the GBFL. Post the acquisition, GBFL is expected to perform better in the workers strength has reduced to 678. coming years as its activities will broaden through both organic and inorganic growth and synergy. The factories of the Chemicals Division at Vikhroli and Valia are already ISO 9001 certified for their quality management systems. Both factories Godrej Sara Lee Limited (GSLL) experienced a good year both in terms have also been certified to be ISO 14001 compliant by BVQI for their of sales & profits. The Total Income increased by 12% and Profit after Tax environment management system. Vikhroli factory has also been certified registered an increase of 41% as compared to the previous year. The for OHSAS 18001 standards by BVQI. Company’s continuous focus on value engineering and cost reduction has shown good results. The exports business of the company has more Foods Division : than doubled during the year. The Company has launched Mini Jumbo Foods Division had two manufacturing facilities; viz Wadala (Mumbai), coils under the brand “Good Knight” and Home fresheners under the and Mandideep near Bhopal. brand “Ambipur” during the year. The Company has remained a dominant player in household insecticide market with mat market share of 35%. On 14th March, 2006, your Company signed a slump sale agreement for the Foods division with Godrej Tea Ltd. (Now known as Godrej Beverages Godrej Consumer Products Limited (GCPL), a Company in which your & Foods Ltd.). As per the agreement, the foods division (except the Edible company holds 11.93% has declared dividends aggregating to 350% in fats Wadala factory) has been sold to Godrej Tea Ltd. with effect from the the current year as compared to 300% in the previous year. GCPL is a close of working hours on 31st March, 2006. Post the restructuring Wadala focused FMCG company. On a standalone basis GCPL earned a Total factory is renamed as the Veg Oils Division of Godrej Industries Ltd. Income of Rs.66598 lac in the current year as compared to Rs. 56908 lac in the previous year. GCPL’s PAT in the current year increased to The factory at Mandideep is certified under ISO-14001 standards. Rs.12070 lac as compared to Rs. 8606 lac in the previous year. The Mandideep Factory was awarded the ‘Best Outsourced Manufacturer Award’ in culinary category for the year 2005 by Hindustan Lever Ltd. In October 2005, GCPL acquired 100% ownership interest in Keyline Brands Ltd. (UK) through a 100% subsidiary SPV structure. Keyline is RESEARCH AND DEVELOPMENT one of U.K.’s admired FMCG companies engaged in the manufacture, During the year under review, amongst the achievements of R & D of marketing, sales and distribution of cosmetics and toiletries with a strong your Company the notable ones include collaborative research approach portfolio of brands and a well developed customer base in numerous with detergent manufacturers to develop new generation detergent supermarket chains and discount stores. This transaction gives GCPL blends, developing the technology for the manufacture, transportation ownership of several international brands and trademarks including and storage of high active surfactant products and value addition to ‘CUTICURA’, ‘ERASMIC’ and ‘AAPRI’ in many countries. The Acquisition enables GCPL to widen geographical presence and access trade channels some by-products manufactured by your Company so as to enter certain in key developed markets including Europe, Australia and Canada. niche markets. R & D efforts of your Company also focused on increasing intellectual property by filing four new patent applications. 12 Annual Report 2005-2006
INFORMATION SYSTEMS Company will be entitled to the benefits of CDM in the form of Certified Emission Reduction units (CERs) on the basis of power units generated The e-CRM (electronic customer relationship management) module is through windmills. being extended to cover International Customers which reinforces the organization’s commitment to provide top quality service to all its FIXED DEPOSITS stakeholders. The Chemicals Division has also put in place a knowledge Your Company has stopped accepting Fixed Deposits from the public. portal ensuring that important tacit knowledge amongst key employees Public Deposits of an aggregate amount of Rs. 180.09 lac which matured, is retained and reused by the organization. have been repaid during the year. A number of new initiatives/modules have been added to the employee DEPOSITORY SYSTEM portal ‘Godrejite’ for the benefit of employees. These include the online access for GOLD (Godrej Organisation for Learning & Development) Your Company’s equity shares are available for dematerialisation through and Legal Online, etc. National Securities Depository Limited & Central Depository Services (India) Limited. As of 31st March, 2006, 99.39% of the equity shares of EMPLOYEE STOCK OPTION PLAN your Company were held in demat form. The shareholders at their Extraordinary General Meeting held on SUB-DIVISION OF EQUITY SHARES 1st December, 2005 had approved Godrej Industries Limited Employee Stock Option Plan (GIL ESOP) for grant of 15,00,000 (Fifteen Lac) Options With a view to improve liquidity of Equity Shares of the Company on convertible into 15,00,000 (Fifteen Lac) equity shares of the nominal Stock Markets, the Board of Directors of your Company has, subject to value of Rs.6/- each to the employees/directors of the Company and/or approval of the Members in the forthcoming Annual General Meeting, its subsidiaries. To start with the Compensation Committee of the Company recommended Sub-Division of Equity Shares of Rs.6/- each into Equity in its meeting held on 14th February, 2006 approved the grant of Options Shares of Rs.1/- each. The Company will separately announce the record to the members of the Group Management Committee (GMC) which date for sub-division in due course. currently consists of Managing, Executive and Whole-Time Directors of DIRECTORS the Company and/or its subsidiary companies. Details of the Options allotted under GIL ESOP, as also the disclosures in compliance with In accordance with Article 127 of the Articles of Association of the clause 12 of the Securities and Exchange Board of India (Employee Company, Mr. J.N. Godrej, Ms. T.A. Dubash, Mr. M. Eipe and Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, Mr. V.F. Banaji retire by rotation at the ensuing Annual General Meeting. 1999 are set out in the Annexure B to this Report. They are eligible and offer themselves for re-appointment. GROUP FOR INTERSE TRANSFER OF SHARES AUDITORS As required under Clause 3(1)(e) of the Securities and Exchange Board You are requested to appoint Auditors for the current year and fix their of India (Substantial Acquisition of Shares and Takeovers) Regulations, remuneration. The retiring auditors, Kalyaniwalla & Mistry, Chartered 1997, persons constituting Group (within the meaning as defined in the Accountants, are eligible for re-appointment. A certificate from the Monopolies and Restrictive Trade Practices Act, 1969) for the purpose of Auditors has been received to the effect that their re-appointment, if availing exemption from applicability of the provisions of Regulation 10 made, would be within the limits prescribed under Section 224(1B) of to 12 of the aforesaid SEBI Regulations are given in Annexure C attached the Companies Act, 1956. herewith and the said Annexure C forms part of this Annual Report. Pursuant to directions from the Department of Company Affairs, P. M. ENVIRONMENT AND SOCIAL CONCERN Nanabhoy & Co., Cost Accountants, have been appointed as Cost Auditors for the year 2005-06. They are required to submit their report to the Your Company continues its efforts for the betterment of the environment Central Government within 180 days from the end of the accounting and conservation of scarce natural resources. year. Your Company continued “Rain water harvesting” initiatives undertaken AUDIT COMMITTEE during the previous year at its factories at Vikhroli and Valia and in the staff quarters at Vikhroli. “Rain water harvesting” is a process by which The Audit Committee which was constituted pursuant to the provisions of rain water is collected and channelised into tanks for domestic Section 292A of the Companies Act, 1956 and the listing agreement, has consumption. So far 7655 Sq.Meter of roof area has been covered under reviewed the Accounts for the year ended 31st March, 2006. The the rain water harvesting initiative and 13,300 M3 of water has been members of the Audit Committee are Mr. F.P. Sarkari (Chairman), collected at Vikhroli factory and staff quarters. This process has resulted Mr. V. N.Gogate and Mr. S.A. Ahmadullah. in saving water and consequently, the costs, thereof. DIRECTORS’ RESPONSIBILITY STATEMENT To prevent pollution to environment, efforts are made to convert waste Pursuant to the provisions contained in Section 217(2AA) of the from the factories into an environment-friendly product and then dispose Companies Act, 1956, the Directors of your Company confirm: off the same safely. Your Company continued its arrangement with Trans Thane Creek Waste Management Association for the treatment of solid a. that in the preparation of the annual accounts, the applicable waste being generated at the Company’s factories at Vikhroli and Wadala. accounting standards have been followed and no material departures The Vikhroli factory has undertaken a project to convert the bio have been made from the same; degradable waste into bio compost with the help of an NGO. b. that such accounting policies have been selected and applied The factories focused on waste elimination and also continued their consistently, and such judgements and estimates have been made energy conservation measures. that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year Your Company also commissioned 5 windmills of 1.25 MW each in July- and of the profit or loss of the Company for that period. August, 2005 at Dhule in Maharashtra. Windmills generate electricity from wind energy and are encouraged for augmenting the power c. that proper and sufficient care has been taken for the maintenance generation in the country on account of their non-polluting nature. Wind of adequate accounting records in accordance with the provisions power producing clean energy is a potential candidate for Clean of this Act for safeguarding the assets of the Company, for preventing Development Mechanism (CDM) benefits under the Kyoto Protocol of and detecting fraud and other irregularities; United Nations Framework Convention on Climate Change (UNFCCC). d. that the annual accounts have been prepared on a going concern Your Company has already got approval from the Ministry of Environment basis. and Forest for the project. Once approved by the UNFCCC, your
13 Godrej Industries Limited
CORPORATE GOVERNANCE Companies Act, 1956. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary at the Registered office As required by the existing Clause 49 of the Listing Agreements with the of the Company. Stock Exchanges, a detailed report on Corporate Governance is included in the Annual Report. The Auditors have certified the Company’s The Notes to the Accounts referred to in the Auditors’ Report is self- compliance of the requirements of Corporate Governance in terms of explanatory and therefore does not call for any further explanation. Clause 49 of the Listing Agreement and the same is annexed to the ACKNOWLEDGEMENT Report on Corporate Governance. Your Directors thank the Union Government, the Governments of ADDITIONAL INFORMATION Maharashtra, Madhya Pradesh, Gujarat as also all the Government Annexure D to this Report gives information in respect of Conservation agencies, banks, financial institutions, shareholders, customers, of Energy, Technology absorption and Foreign Exchange earnings and employees, fixed deposit holders, vendors and other related organizations, outgo, required under Section 217(1)(e) of the Companies Act, 1956, who, through their continued support and co-operation, have helped as read with the Companies (Disclosure of Particulars in the Report of the partners in your Company’s progress. Board of Directors) Rules, 1988 and forms a part of the Directors’ Report. Information as per Section 217(2A) of the Companies Act, 1956, read For and on behalf of the Board of Directors with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 forms a part of the Directors’ Report. As per A.B. Godrej the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Chairman Report and Accounts are being sent to the Shareholders of the Company, Mumbai, May 26, 2006 excluding the statement of particulars of employees u/s 217(2A) of the
14 Annual Report 2005-2006
ANNEXURE "A" FORMING PART OF THE DIRECTORS’ REPORT MANAGEMENT DISCUSSION AND ANALYSIS INDUSTRY STRUCTURE AND DEVELOPMENTS CHEMICALS DIVISION The Indian economy maintained its growth momentum in F.Y 2005-06 The Chemicals division operates in the oleo-chemicals and surfactants thanks to industrial resurgence, moderate inflation, growth in international industries. The division has a blend of domestic and international trade, as well as, improving physical infrastructure. The index of industrial operations and continued its leadership position in the Indian market. production and the growth trend for the last 2-3 years indicates an With its strong manufacturing base and integrated systems, the division upswing in the economy and a steady growth of industry and services has been able to manufacture quality products and offer them at sector. The positive investor sentiment, evidenced by rise in stock market competitive prices. The sales of the division dropped about 6% in value indices will also induce investment inflow into the country and augurs terms during the year largely on account of a significant drop in the well for the economy. selling prices internationally, coupled with reduction in customs duty, The overall performance of your Company has been satisfactory. Except which affected the domestic prices. the Chemicals division, most of the businesses performed better than the The products category-wise review follows: previous year. The division-wise performance and outlook have been covered separately in this report. Fatty Alcohol FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL Fatty Alcohol accounted for 47% of the turnover of the division. The PERFORMANCE category declined 8% in value, both on account of lower selling prices and lower volumes. Effective pricing strategies, customer relationships The highlights of overall performance excluding extraordinary items are and initiatives in the areas of product development, packaging and as follows: logistics, helped maintain good share in the domestic and international Rs. Lac market, despite increased competition. Particulars 2005-06 2004-05 Sales 74548 76335 The division is now working with major multi nationals to become their Total Income 80270 82353 preferred global supplier. The capacity expansion through an Export Profit Before Taxation 5513 7506 Oriented Unit (EOU) was achieved in late March 2006, which will Profit After Current Taxation 5431 7105 increase the capacity in this product category by about 60% and is Profit After Current & Deferred Taxation 4014 7575 expected to increase the revenue in the coming year. Earnings per Equity Share (Rupees) 8.24 15.58 Profitability ratios are as follows: Glycerin PBDIT/Total Income 13.22% 14.86% Glycerin accounted for 7% of the turnover of this division. Revenue PBT/ Total Income 6.87% 9.11% declined 8% over last year, owing to the sharp decline in the international PAT/ Total Income 8.87% 9.20% price of refined glycerin, though there was a volume growth of over Return on Capital Employed 11.76% 17.58% 7%. Prices having bottomed out, the opportunity now lies in market Return on Net Worth 12.31% 24.31% Basic EPS (Rs.) 8.24 15.58 expansion as glycerin could possibly substitute other polyols on account The Financial risk ratios are as follows: of its competitive price. Debt/Equity 0.94 0.77 Surfactants Interest coverage 2.94 3.91 Your Company is the pioneer, as well as, market leader in the production SEGMENT PERFORMANCE (Rs. Lac) of Alpha Olefin Sulphonate (AOS) in India, a surfactant used in several 2005-06 2004-05 1. Segment Revenue well-known shampoos and detergent brands in the country. Surfactants Chemicals 51178 54307 contributed 10% to the turnover of Chemicals division. Sales of surfactant Foods 21117 19197 category declined 23% in volume and 20% in value terms on account Estate 2282 2158 of the steep increase in the price and paucity of Alpha Olefin (AO) Finance & Investments 4575 5823 which is petroleum based raw material. The increased cost of AOS has Others 1118 868 affected the margin, as also the off-take. Total 80,270 82,353 The division is looking at alternative uses of the sulphonation capacity 2. Segment Results (PBIT) available and is exploring other value added products in this segment. Chemicals 4,760 6,230 Foods (341) (857) High AO prices have now made manufacture of oleo chemical AO Estate 1472 1361 viable and the division is planning to produce AO - C16 from vegetable Finance & Investments 4575 5373 oils in the coming year. Others (112) 115 Fatty Acids Total 10354 12222 Less: Interest (Net) (2837) (2582) The fatty acids portfolio comprising stearic acid, oleic acid, as well as, Less: Unallocated expenses (Net) (2004) (2134) specialty fatty acids accounted for about 35% of the turnover of the division. Profit Before Tax 5513 7506 Continuous cost reduction and market development initiatives have helped grow this category by about 9% in volume and 3% in value terms. The 3. Segment Capital Employed division is taking necessary steps to strengthen its position in this category Chemicals 24448 17732 Foods 3277 4733 and counter competition from imports, as well as, small players. Estate 2331 2750 Other initiatives Finance & Investments 40239 36123 Others 3413 304 The division has engaged Goldratt Consulting, well-known for their ‘Theory of Constraints’, to apply these principles for business improvement. Unallocated (41) 30 This is expected to benefit the division in terms of improved plant Total 73667 61672 throughput, better supply chain and project management. 15 Godrej Industries Limited
Outlook tight control on working capital usage and engaging the National Productivity Council for productivity improvements at the Mandideep The outlook for the coming year 2006-07 is mixed at this point in time. factory. This division too is applying the relevant principles of Theory of Internationally, new capacities have been announced for oleo chemical Constraints to improve its business. fatty alcohols, which is likely to increase the availability. At the same time, steep increase in the price of mineral oil is impacting petrochemical Restructuring fatty alcohol plants which are expected to be under cost and margin On 14th March, 2006, your company signed an agreement with Godrej pressure, which may curtail output. The increase in bio-diesel Tea Ltd. (now known as Godrej Beverages & Foods Ltd.) for the sale of manufacturing capacity is expected to impact vegetable oil prices. The the Foods division. As per the agreement, the foods division (except the strong growth in demand for fast moving consumer goods (FMCG) and Edible fats Wadala factory) has been sold to Godrej Tea Ltd. for a the other industry segments that the division caters to, augurs well for consideration of Rs 70 crore with effect from close of working hours of the products of the Chemicals division. 31st March, 2006. Post the restructuring, Wadala factory is renamed as The business initiatives to strengthen distribution, improve supply chain the Veg Oils Division of Godrej Industries Ltd. and customer relationship management, backed by expansion in capacity are expected to help grow revenue, as well as, profits of the business. Future Outlook FOODS DIVISION As per the above restructuring, the Vegoils division of Godrej Industries Ltd is expected to sell oil in bulk and also carry out processing for third The Foods Division recorded sales of Rs. 21,117 lac during the year parties. under review as compared to Rs.19197 lac in the previous year clocking a growth of about 10%. Estate Management Industry Outlook Mumbai continues to be perceived as a suitable location with good infra structure and availability of skilled manpower by the BPO sector. Increase The Prices of Edible oils continued to show a bearish trend in view of in real estate prices and the rentals has made the CBD area less affordable higher domestic production and in spite of a growing demand for bio and the suburbs are now more in demand. Your Company continues to diesel in the international markets. Intense competition in the category effectively utilize the available space by giving the unutilized space on and underutilization of plant capacities prevented a rise in selling prices. leave and licence basis to reputed corporates for their back office Heavy imports of cheap Sri Lankan Vanaspati impacted the domestic operations. The green environment and good infrastructure with close industry adversely. proximity to the CBD, airport and surburbs are major advantages making The Processed Foods Division saw the Fruit Juice category register good Vikhroli a preferred location. The total income from this business for the growth rates in light of increasing consumer preference over carbonated year was about Rs. 2,280 lac as compared to Rs.2,166 lac previous year soft drinks. In spite of a good mango crop, higher prices of pulp led to an increase of 5%. lower off takes and a pressure on margins. Medical Diagnostics There are two categories in this Division, viz., Edible Fats and Processed The Medical Diagnostics Division is in the business of distribution of Foods. diagnostic equipment and consumables to the medical community. This Edible Fats Division division achieved a turnover of Rs.958 lac for the year, recording a The turnover during the year under review was Rs. 14,228 lac. Intense growth of 19% in value terms over the previous year. The focus of the competition by large players impacted this business. The division Division was on implementation of rigorous sales and operation planning continued to focus on increasing margins and selling only in profitable (S&OP) process and reduction in Net Working Capital. areas. As a result, the growth in sales of edible oils and Vanaspati during The division plans to increase its product portfolio by introduction of a the year was marginal. new range of Biochemistry Analysers. The Division also plans to extend Processed Foods Division its sales activities to SAARC countries, particularly Sri Lanka and Bangladesh. The turnover of products in this category was Rs. 5,985 lac as compared to Rs. 4,223 lac during the previous year, recording a growth of 41%. FINANCE AND INVESTMENTS The Division produces and markets fruit drinks, fruit nectars and juices Dividend income for the year was Rs. 2,275 lac (previous year Rs.2,236 in Tetrapak, undertakes processing for third parties and also sells fruit lac) and profit on sale of investment Rs. 2120 lac (mainly arising out of pulp. The fruit drinks category in Tetrapak saw intense competitive 1% stake sold in Godrej Consumer Products Limited). pressures with a number of new players launching their brands this Your Company invested Rs.866 lac in its 100% subsidiary Godrej year. In this scenario, the division focused on the trade sales segment to International Limited which is into international trading to strengthen its improve the sale of “Jumpin” fruit drink. base. Your Company also invested in Boston Analytics LLC (a KPO in This year the division invested in brand building activities (e.g. media research and analysis) for a stake of 18.5%. advertising) on Xs and Sofit which was essential to improve sales in the Your Company sold its stake in Godrej Remote Services Ltd. which was highly competitive segment of the beverages market. This helped in into medical transcription business to CBay Systems Ltd. and also growing the sales value of Xs by 39% and of “Sofit” by 18%. The consolidated its stake in CBay systems Ltd. Your Company now holds division launched two new flavours under its ‘SOFIT’ brand viz., Kesar 16.63% stake in CBay Systems Ltd. Pista and Malt Chocolate, for which the response has been good. HUMAN RESOURCES, INDUSTRIAL RELATIONS The division saw a good growth over last year in third party processing of pulp/squash/jam at the Mandideep Factory. The factory was also Industrial Relations at all locations were cordial. At the Chemicals’ plant adjudged ‘Best Outsourced Manufacturer- Culinary category’ by in Vikhroli a restructuring exercise was initiated and as a result workers Hindustan Lever Limited. strength has reduced by 32%. Following restructuring exercise, long Over all, the focus of the Division continued to be predominantly on term settlement was signed with the workers amicably settling all the improving profitability in both the above categories during the year by pending industrial disputes. Similar long term settlement was also signed focusing on high margin products, restricting sale to profitable areas, with the Valia unit. 16 Annual Report 2005-2006
Your Company formed the Godrej Industries Limited Employees’ Group RISKS AND CONCERNS Gratuity Trust to manage the gratuity funds. Rs. 12 crore of the gratuity Your Company had undertaken a comprehensive review of its risk liability of the company has been funded and has been invested in the management process and has put a risk management framework in group gratuity schemes of reputed insurance companies. The investments place. The review involved understanding the existing risk management have yielded an average return of 11.8% p.a. for the period ended initiatives, zero-based identification and assessment of risks in the various March 31, 2006. businesses as also the relative control measures and developing The total number of persons employed in your Company as on appropriate risk response strategy for various risks identified while March 31, 2006 was 1711. keeping in mind the risk appetite of the organization. A risk committee INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY has been constituted to periodically review the risks and develop appropriate response strategies to ensure achievement of company’s Your Company has a proper and adequate system of Internal Controls, to objectives. ensure that all assets are safeguarded and protected against loss from unauthorised use or disposition and that transactions are authorised, The commodity based businesses are likely to be affected by vagaries of recorded and reported correctly. the weather, demand for edible oil, oilseed production, etc. The business is exposed to commodity price risks relating to raw materials which Recently, the Corporate Audit and Assurance Department of your account for the largest portion of the costs of both these businesses. The Company got certified under ISO 9001: 2000. It issues well documented operating procedures and authorities with adequate built-in controls at Chemicals business growth will also depend on the growth of end user the beginning of any activity and any time there is a major change. industries like polymer, detergent, cosmetics and personal care. The internal control is supplemented by an extensive programme of As a significant employer and chemical producer, to ensure occupational internal, external audits and periodic review by the management. safety, employment standards, production safety, and environmental Consequent to the amendment in Clause 49 of the Listing Agreement by protection, your Company maintains strict safety, health, environmental SEBI, the Corp Audit and Assurance Dept. facilitated formal protection and quality control programs to monitor and control these documentation, implementation and review of Internal Controls at all operational risks. locations. Macro economic factors including economic and political developments, The system is designed to adequately ensure that financial and other natural calamities which affect the industrial sector generally would records are reliable for preparing financial information and other data also affect the businesses of your Company. Legislative changes resulting and for maintaining accountability of assets. in a change in the taxes, duties and levies, whether local or central, also impact business performance and relative competitiveness of the OPPORTUNITIES AND THREATS businesses. Increased global demand fuelled by growth in end-user industries coupled CAUTIONARY STATEMENT with your Company’s standing for consistent quality and product delivery customized to the needs of the clients, provides good opportunity for Some of the statements in this management discussion and analysis growth for the Chemicals division. At the same time, new capacity describing the Company’s objectives, projections, estimates and addition in the industry is likely to increase competition from the supply expectations may be ‘forward looking statements’ within the meaning of side. applicable laws and regulations. Actual results might differ substantially In the Medical Diagnostics Division, the opportunity is the large growing or materially from those expressed or implied. Important developments middle class medically aware consumer and the increasing focus on that could affect the Company’s operations include a downtrend in industry, medical insurance. Threat could be obsolescence of technology / products significant changes in political and economic environment in India, tax which are more than 10 years old. laws, import duties, litigation and labour relations.
17 Godrej Industries Limited
ANNEXURE B FORMING PART OF THE DIRECTORS’ REPORT As per the Securities & Exchange Board of India (Employee Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines, 1999 following information is disclosed in respect of Godrej Industries Limited Employee Stock Option Plan : Sr. No. Heading Particulars a. Options granted 3,50,000 b. The pricing formula Market Price plus Interest at such rate not being less than the Bank Rate then prevailing, compoundable on an annual basis for the period commencing from the date of Grant of the Option and ending on the date of intimating Exercise of the Option to the Company c. Options vested NIL d. Options exercised NIL e. The total number of shares arising as a result of exercise of option 3,50,000 equity shares of nominal value of Rs.6/- each f. Options lapsed NIL g. Variation of terms of options NIL h. Money realized by exercise of options NIL i. Total number of options in force 3,50,000 j. Employee wise details of options granted to: i) senior managerial personnel ii) any other employee who receives a grant in any one year of option As per attached statement amounting to 5% or more of option granted during that year. } iii) identified employees who were granted option, during any one year, NIL equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant k. Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of There is no fresh issue of shares hence, not applicable. option calculated in accordance with Accounting Standard (AS) 20 ‘Earnings Per Share’. l. Where the company has calculated the employee compensation cost using the The company has calculated the employee compensation intrinsic value of the stock options, the difference between the employee cost using the intrinsic value of stock options. Had the fair compensation cost so computed and the employee compensation cost that shall value method been used, in respect of stock options granted have been recognized if it had used the fair value of the options, shall be disclosed. the employee compensation cost would have been higher The impact of this difference on profits and on EPS of the company shall by Rs. 2.06 crore, Profit after tax lower by Rs. 2.06 crore also be disclosed. and basic EPS would have been lower by Rs. 0.42 m. Weighted-average exercise prices and weighted-average fair values of Exercise price Rs. 392.35 plus interest as mentioned in options shall be disclosed separately for options whose exercise price either pricing formula equals or exceeds or is less than the market price of the stock. Fair Value Rs. 175.99 n. A description of the method and significant assumptions used during the year The fair value of the options granted on 14th Feb 2006 has to estimate the fair values of options, including the following weighted-average been calculated using Black–Scholes Options pricing information: formula and the significant assumptions made in this regard are as follows: i) risk-free interest rate 7.11% ii) expected life 4 years iii) expected volatility 65% iv) expected dividends 1.27% Rs. 5 per share v) the price of the underlying share in market at the time of option grant Rs. 392.35
Statement attached to Annexure B to the Directors’ Report for the year ended 31st March, 2006. Name of senior managerial persons to whom stock options have been granted Number of options granted Mr. Mathew Eipe 50,000 Mr. Visty Banaji 50,000 Mr. Mohan Pusalkar 50,000 Mr. C. K. Vaidya 50,000 Mr. Hoshedar Press 50,000 Mr. Milind Korde 50,000 Mr. A. Mahendran 50,000 18 Annual Report 2005-2006
ANNEXURE "C" FORMING PART OF THE DIRECTORS’ REPORT The following is the list of persons constituting Group (within the meaning as defined in the Monopolies and Restrictive Trade Practices Act, 1969) for the purpose of availing exemption from applicability of the provisions of Regulation 10 to 12 of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (“the said Regulations”), as provided in Clause 3(1)(e) of the said Regulations: 1 Godrej & Boyce Mfg. Co. Ltd. 30 Krithika Agro Farm Chemicals & Engineering Industries Pvt. Ltd. 2 Godrej Consumer Products Ltd. 31 Aadhaar Retailing Ltd. 3 Ensemble Holdings & Finance Ltd. 32 Mercury Mfg. Co. Ltd. 4 Godrej Hicare Ltd. 33 Godrej Efacec Automation & Robotics Ltd. 5 Godrej Agrovet Ltd. 34 Godrej Upstream Ltd. 6 Goldmohur Foods & Feeds Ltd. 35 Godrej Holdings Pvt. Ltd. 7 Golden Feed Products Ltd. 36 Cartini India Ltd. 8 Godrej Properties Ltd. 37 Godrej (Vietnam) Co. Ltd. 9 Girikandra Holiday Homes & Resorts Ltd. 38 J T Dragon Pte Ltd. 10 Godrej Beverages & Foods Ltd. 39 Mr Adi B Godrej 11 Godrej Global Solutions Ltd. 40 Mrs Parmeshwar A Godrej 12 Godrej Global Solutions (Cyprus) Limited 41 Ms Nisa A Godrej 13 Godrej Global Solutions, Inc. 42 Mr Pirojsha A Godrej 14 Godrej International Ltd. 43 Mrs Tanya A Dubash 15 Godrej Global Mid East FZE 44 Mr Jamshyd N Godrej 16 Swadeshi Detergents Ltd. 45 Mrs Pheroza J Godrej 17 Vora Soaps Ltd. 46 Ms Raika J Godrej 18 Godrej Foods Ltd. 47 Mr Navroze J Godrej 19 Tahir Properties Ltd. 48 Mr Nadir B Godrej 20 Bahar Agrochem & Feeds Pvt. Ltd. 49 Mrs Rati N Godrej 21 Prashant Metal Forming Industries Pvt. Ltd. 50 Mst. Burjis N Godrej 22 Godrej Investments Pvt. Ltd. 23 Godrej Infotech Ltd. 51 Mst. Sohrab N Godrej 24 Godrej (Malaysia) Sdn Bhd 52 Mst. Hormuzd N Godrej 25 Godrej (Singapore) Pte Ltd. 53 Mr Vijay M Crishna 26 Godrej Appliances Ltd. 54 Mrs Smita V Crishna 27 Lawkim Ltd. 55 Ms Freyan V Crishna 28 Godrej Realty Pvt. Ltd. 56 Ms Nyrika V Crishna 29 Godrej Waterside Properties Pvt. Ltd. 57 Mr Rishad K Naoroji
ANNEXURE 'D' FORMING PART OF THE DIRECTORS’ REPORT INFORMATION PURSUANT TO SECTION 217(1)(e) OF THE COMPANIES Installation of UP FLOW Anaerobic Sludge Blanket reactor to ACT, 1956, READ WITH THE COMPANIES (DISCLOSURE OF reduce COD load on affluent water without surface aerators. PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES, Energy Audit by CII and implementation of 32 projects suggested 1988 IN RESPECT OF CONSERVATION OF ENERGY, TECHNOLOGY thereat ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO Installation of Suzlon make 5 wind mills of 1.25 MW capacity & A. Conservation of Energy commissioning of power generation at Dhulia. I. (A) Energy Conservation measures undertaken: Installation of 15 variable frequency drives (VFD) on Cooling Tower Fans. Installation of Vapor Absorption Chilling System at Flakers Installation of power factor correction Panel to improve power replacing mechanical chillers to get power saving. factor (PF) to 0.99 Installation of Vapor Absorption Chilling System in AOS plant in Installation of energy-efficient motors in Plants. place of conventional mechanical chilling system to get power Installation of 400 KVA UPS to maximize use of MPSEB power to saving. reduce run of DG Set. Automation of High Pressure Boiler by installing PLC based controls Installation of power factor correct (PF) panel to improve power along with Variable Frequency drive in pump and blowers to factor. increase efficiency as well as power saving. Energy audit by National Productivity Council
19 Godrej Industries Limited
(B) Proposed energy conservation measures B. Technology Absorption, Adaptation and Innovation Recovery of flash steam from Co-generation Plant Blow down. I. Specific areas in which R&D carried out by the Company - This steam will be used to heat Boiler feed water in deaerator. Scheduled monitoring of stacks of all furnaces to further improve During the year under review, Research & Development efforts in efficiency. the following areas strengthened the Company’s operations through Improvement in heat recovery of steam condensate collection technology absorption, adaptation and innovation : from tank farms. a. Oils & Fatty Acids Energy saving light fixtures b. Fatty Alcohols Energy efficient motors VFD for process Pumps in Plants c. Surfactants II. Impact of measures on reduction of energy consumption and d. Glycerin consequent impact on the cost of production of goods:- e. Product Application Group Saving in energy costs during the period under consideration. f. Fruit Juices/ Soymilk III. Details of energy consumption 2. Benefits derived as a result of the above R&D - The details of energy consumption are given below. These details a. Collaborative research with detergent manufacturers to cover the operations of your Company’s factories at Vikhroli, Valia, develop new generation detergent blends. Wadala and Mandideep. b. Developing the technology for the manufacture, transportation a) Power and Fuel consumption & storage of high active surfactant products. This Year Previous Year Electricity c. Expansion of Odour Profiling capabilities by incorporating/ i) Purchased outsourcing the use of instrumental analytical tools. Units (kWh in lac) 198.78 166.45 d. Focus on adding value to some of the by-products, in order to Total Amount (Rs. in lac) 1037.53 849.27 enter niche markets – Fatty Acid Esters. Rate per Unit (Rs.) 5.22 5.10 e. Patent applications for four processes ii) Own generated through D.G. Sets Units (kWh in lac) 19.83 47.10 3. Future Plan of Action - Cost (Rs. in lac) 131.65 239.83 a. Developing different variants of surfactant products. Rate per unit (Rs.) 6.64 5.09 b. Developing speciality surfactants for niche markets. iii) Own generated through Steam Turbine Generator - c. Developing cost effective, mixed active detergent Co-generation formulations. Units (KWh in lac) 277.91 269.91 d. Focus on adding value to some of our existing products – Cost (Rs. in lac) 988.29 900.87 Glycerol Derivatives. Rate per Unit (Rs.) 3.56 3.34 No technology has been imported during the year. Fuel Oil (LSHS, FO and LDO) Total Quantity (KL) 4510.42 3994.67 4. Expenditure on R&D ThisYear Previous Year Total Amount (Rs. in lac) 802.68 565.67 Rs. lac Rs. lac Rate per unit (Rs. per litre) 17.80 14.16 (a) Capital Nil Nil Natural Gas (b) Recurring 139.39 108.38 Total Quantity (SM3 lac) 401.30 341.50 (c) Total 139.39 108.38 Total Amount (Rs. in lac) 3460.90 2738.6 Rate per unit (Rs. per SM3) 8.62 8.02 (d) Total R & D expenditure as a Pitches percentage of total sales turnover 0.19% 0.14% Total Quantity (MT) 650.09 294.00 C. Foreign Exchange earnings and outgo: Total Cost (Rs. in lac) 44.67 21.40 Rate per unit (Rs. per MT) 6870.67 7278.91 The Chemicals Division’s exports were Rs. 17561 lac in the current year (including deemed exports of Rs. 2889 lac) as compared to Rs. b) Consumption per unit of production 17570 lac in the previous year (including deemed exports Rs. 2716 Natural Gas Electricity Furnace Oil Pitches 3 lac) to. The Company continues to export refined glycerin, fatty alcohol (SM /MT) (kWh/MT) (Litre/MT) and other chemicals to over 50 countries including U.S.A., U.A.E., 2005-06 2004-05 2005-06 2004-05 2005-06 2004-05 2005-06 2004-05 Japan, South Africa, Germany, U.K., France, Malaysia, China, Fatty Acid 77.78 78.12 93.41 86.88 10.04 5.34 8.79 4.931 Australia, Mexico, Singapore and Srilanka. Fatty Alcohol 94.77 79.88 408.29 369.11 6.86 3.93 – – Alpha Olefin ThisYear Previous Year Sulphonate 49.33 47.92 104.61 90.82 8.99 5.86 1.14 0.45 Rs. lac Rs. lac Fruit Juice/ Pulp – – 149.42 70.49 36.20 15.27 – – Foreign exchange used 26049 18091 Oils/Vanaspati – – 182.49 160.36 77.52 74.00 6.64 – Glycerin 458.40 524.18 588.72 610.02 53.01 32.37 25.85 13.56 Foreign exchange earned 15150 15373
20 Annual Report 2005-2006
REPORT ON CORPORATE GOVERNANCE Clause 49 of the listing agreement with the Indian Stock Exchanges Quarterly results of the Company, stipulates the norms and disclosure standards that have to be followed Minutes of meetings of audit committee and other committees, on the corporate governance front by listed Indian companies. Information on recruitment and remuneration of senior officers The Company is a part of the Godrej Group which has established a just below the Board level, reputation for honesty and integrity. The Company’s philosophy of Materially important show cause, demand, prosecution and corporate governance is to achieve business excellence by enhancing penalty notices, the long term welfare of all its stakeholders. We believe that corporate governance is much more than Rules, Boards, Committees. It is about Fatal or serious accidents or dangerous occurrences, creating outperforming organisations, i.e. organizations that consistently Any materially significant effluent or pollution problems, succeed in the marketplace against competition and thereby enhance Any materially relevant default in financial obligations to and the value of all its stakeholders. by the Company or substantial non-payment for goods sold by BOARD OF DIRECTORS the Company, a) Board Structure Any issue which involves possible public or product liability The Board of Directors of Godrej Industries Limited (GIL) comprises claims of a substantial nature, thirteen Directors, which include one Managing Director and four Details of any joint venture or collaboration agreement, Whole-Time Executive Directors. The remaining eight are Non- Transactions that involve substantial payment towards goodwill, Executive Directors, with five of them being Independent Directors. brand equity or intellectual property, The details are given in Table 1. Significant labour problems and their proposed solutions, b) Board meetings held & Directors’ attendance record Significant development in the human resources and industrial The Board meets atleast once in a quarter to consider among other relations front, business, quarterly performance of the company and financial results. To enable the Board to discharge its responsibilities effectively and Sale of material nature of investments, subsidiaries, assets, which take informed decisions, the necessary information is made available is not in the normal course of business, to the Board. During the year six Board meetings were held on Quarterly details of foreign exchange exposure and the steps May 30, 2005, July 26, 2005 October 24, 2005, December 13, taken by management to limit the risks of adverse exchange 2005, January 31, 2006 and March 7, 2006. The details are given rate movement, below. Risk assessment and minimization procedures, and Table 1: Details about GIL’s Board of Directors & meetings attended Non-compliance of any regulatory, statutory nature or listing by the Directors during the year requirements as well as shareholder services such as non- Name of Category Board Board Whether Director- Number payment of dividend and delays in share transfer. Director meet- meetings attended ships of Chair- ings attended last AGM held in manship/ held during public member- The Board of GIL is regularly presented with all information under during the comp- ship in the above heads, whenever applicable. These are submitted either the year anies other year incorpo- Board as part of the agenda papers well in advance of the Board meetings rated Commit- in India tees as at or are tabled in the course of the Board meetings. as at the year year end end d) Directors with materially significant related party transactions, Chairm- Mem- anship bership pecuniary or business relationship with the Company A.B. Godrej Chairman – Non-Executive 6 6 Yes 12(3) 3 1 Except for drawing remuneration, none of the Directors have any J.N. Godrej Non-Executive 6 4 Yes 14 (5) 1 3 N.B. Godrej Managing Director 6 6 Yes 13(4) 4 3 other materially significant related party transactions, pecuniary or S.A. Ahmadullah Non-Executive - business relationship with the Company. Independent 6 6 Yes 3(1) Nil 1 V.M. Crishna Non-Executive 6 2 No 7(2) Nil Nil K.K. Dastur Non-Executive - e) Remuneration of Directors: sitting fees, salary, perquisites and Independent 6 5 Yes 6(2) 2 Nil commissions and Number of Shares held by Non-Executive Directors V.N. Gogate Non-Executive - Independent 6 6 Yes 1(1) Nil 1 The details of remuneration package of Directors and their K.N. Petigara Non-Executive - Independent 6 6 Yes 6(1) Nil 2 relationships with each other are given in Table 2. The number of F.P. Sarkari Non-Executive - shares held and dividend paid are given in Table 3. Independent 6 5 Yes 3(1) 2 1 V.F. Banaji Whole-time 6 5 No 1(1) 1 1 T.A. Dubash Whole-time 6 5 Yes 5(1) Nil 1 Table 2 : Remuneration in Rupees paid or payable to Directors for M. Eipe Whole-time 6 4 Yes 3(1) Nil 1 the year ended March 31, 2006 M.P. Pusalkar Whole-time 6 6 Yes 2(2) 1 2 Name of Director Relationship with Sitting Commission Salary Perquisites Provident Total Notes : Directors fees on profits Fund A. B. Godrej Brother of N.B.Godrej 1. Figures in ( ) denote listed companies. Father of T.A. Dubash 240000 Nil Nil Nil Nil 240000 2. Board Meetings held during the year represent the no. of J. N. Godrej None Nil Nil Nil Nil Nil Nil N. B. Godrej Brother of A.B.Godrej Nil Nil 7381877 340000 489600 8211477 meetings held during the tenure of that Director. S. A. Ahmadullah None 160000 Nil Nil Nil Nil 160000 None of the Directors is a member of more than 10 Board-level V. M. Crishna None 40000 Nil Nil Nil Nil 40000 committees, or a Chairman of more than five such committees, as K. K. Dastur None 100000 Nil Nil Nil Nil 100000 V . N. Gogate None 160000 Nil Nil Nil Nil 160000 required under Clause 49 of the listing agreement. K. N. Petigara None 140000 Nil Nil Nil Nil 140000 c) Information supplied to the Board F. P. Sarkari None 120000 Nil Nil Nil Nil 120000 V. F. Banaji None Nil Nil 6990186 414432 302400 7707018 Among others, this includes: T. A. Dubash Daughter of A.B.Godrej Nil Nil 4666877 94467 295200 5056544 Annual operating plans and budgets, capital budgets, and any M. Eipe None Nil Nil 5498193 383957 374400 6256550 M. P. Pusalkar None Nil Nil 4374888 313727 204480 4893095 updates thereon, 21 Godrej Industries Limited
Notes : Reviewing with the management, external and internal auditors, the Salary to Mr. N.B. Godrej, Mr. V.F. Banaji, Ms. T. A. Dubash, adequacy of internal control systems. Mr. M. Eipe and Mr. M.P. Pusalkar includes a performance Reviewing the adequacy of internal audit function including the linked variable remuneration of Rs. 853877, Rs. 3390210, structure of internal audit department, staffing and seniority of the Rs. 853877 and Rs. 846693 and Rs. 1475000 respectively for the official heading the department, reporting structure coverage and year ended March 31, 2006 payable in 2006-07. frequency of internal audit. The service contracts of the Whole-Time Directors are for a period Discussing with internal auditors any significant findings and following of three years with a notice period of three months. it up. Table 3: Number of shares held by Non-Executive Directors and Reviewing the findings of any internal investigations by the internal dividend paid auditors into matters where there is suspected fraud or irregularity or Name of Shares held as on Dividend paid during failure of internal control systems of a material nature and reporting Non-Executive Director March 31, 2006 the year (Rupees) the matter to the Board. F.P. Sarkari 3265 13060 Discussing with external auditors before the audit commences, nature S.A. Ahmadullah 1000 4000 and scope of audit as well as conducting post-audit discussion to V.M. Crishna 75013 300052 ascertain any area of concern. V.N. Gogate 313 1252 Reviewing the Company’s financial and risk management policies. K.K. Dastur 351 1404 Looking into the reasons for substantial defaults in payment to depositors, debenture holders, shareholders (in case of non-payment f) Committees of the Board of declared dividend) and creditors. Audit Committee Reviewing the functioning of Whistle Blower mechanism. GIL’s audit committee comprises of three Independent & Non-Executive Compensation Committee Directors. They are Mr. F.P. Sarkari (Chairman), Mr. S.A. Ahmadullah and Mr. V.N. Gogate. Mr. F.P. Sarkari is the Chairman of the Committee. Mr. Setting up of a Compensation Committee for determining a company’s Sarkari is a qualified Chartered Accountant and is knowledgeable in policy on remuneration packages for Executive Directors constitutes a finance, accounts and Company Law. All the members of the committee non-mandatory provision of Clause 49. GIL set up its Remuneration are eminent professionals and draw upon their experience and expertise Committee on February 22, 2002 to review the human resources policies across a wide spectrum of functional areas such as finance and corporate and practices of the Company and, in particular, policies regarding strategy. Minutes of each of the audit committee meetings are placed remuneration of Whole-Time Directors. The committee discusses human before the Board meetings. Mr. S.K. Bhatt, Executive Vice-President resources policies such as compensation and performance of management. (Corporate Services) & Company Secretary acts as secretary to the audit The Remuneration Committee was renamed as Compensation Committee committee. The audit committee met four times during the year. Table 4 by the Board of Directors at its meeting held on October 24, 2005. gives the attendance record. GIL’s Compensation Committee consists of the following directors: Mr. S.A. Table 4: Attendance record of audit committee members Ahmadullah (Chairman and Independent Director); Mr. N.B. Godrej (Managing Director); Mr. V.N. Gogate (Independent Director) and Mr. K.N. Name of Director No. of meetings held Meetings attended Petigara (Independent Director). During the year ended March 31, 2006, Mr. F.P. Sarkari 4 4 the committee met four times. The attendance details are given in Table 5. Mr. S.A. Ahmadullah 4 4 Table 5: Attendance record of Compensation Committee members Mr. V.N. Gogate 4 4 Name of Director No. of meetings held Meetings attended The Audit Committee of GIL performs the following functions : Mr. S.A. Ahmadullah 4 4 Overview of the Company’s financial reporting process and the Mr. V.N. Gogate 4 4 disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible. Mr. K.N. Petigara 4 4 Mr. N.B. Godrej 4 2 Recommending the appointment and removal of external auditor, fixation of audit fee and approval for payment for any other services. Mr. S.K. Bhatt, Executive Vice-President (Corporate Services) & Company Secretary acts as the secretary to the Committee. Reviewing with management the annual financial statements before submission to the board, focusing primarily on GIL has adopted EVA as a tool for driving performance, and has linked Matters required to be included in the Directors Responsibility improvements in EVA to performance linked variable remuneration (PLVR) Statement to be included in the Boards Report in terms of Clause of Managing Director, Whole-Time Directors, managers and officers of (2AA) of Section 217 of the Companies Act, 1956. the company. Any changes in accounting policies and practices. Shareholders Committee Major accounting entries based on exercise of judgement by the Among other functions, this committee looks into redressal of shareholder management. complaints regarding transfer of shares, non-receipt of balance sheet and Qualifications in draft audit report. non-receipt of declared dividends, as required in clause 49 of the Listing Significant adjustments arising out of audit. Agreement. The committee consists of the following members: The going concern assumption. Mr. A.B. Godrej (Chairman), Mr. V.F. Banaji, Ms. T.A. Dubash, Mr. M. Eipe and Compliance with accounting standards. Mr. M.P. Pusalkar. During the year, 18 meetings of the Committee were held. Compliance with stock exchanges and legal requirements Mr. S.K. Bhatt, Executive Vice-President (Corporate Services) & Company concerning financial statements. Secretary acts as secretary to the Committee. Any related party transactions, i.e. transactions of the Company of material nature, with promoters or the management, their Name and designation of Compliance Officer subsidiaries or relatives, etc. that may have potential conflict Mr. S. K. Bhatt, Executive Vice-President (Corporate Services) & Company with the interests of Company at large. Secretary. 22 Annual Report 2005-2006
Number of complaints regarding shares for the year ended and Mr. M. Eipe shall retire at this Annual General Meeting of the March 31, 2006 Company and being eligible, offer themselves for re-election. Complaints outstanding as on April 1, 2005 Nil Information about the Directors who are being appointed/ re-appointed Complaints received during the year ended March 31, 2006 94 is given as an annexure to the Notice of the AGM. Complaints resolved during the year ended March 31, 2006 94 b) Communication to shareholders Complaints outstanding as on March 31, 2006 Nil All vital information relating to the Company and its performance, including quarterly results, official press releases are posted on the There are no pending share transfers as on March 31, 2006. web-site of the Company. The Company’s web-site address is MANAGEMENT www.godrejinds.com. The quarterly and annual results of the Company’s performance are published in leading English dailies like a) Management discussion and analysis Economic Times, Business Standard, Business Line, etc. This annual report has a detailed chapter on management discussion c) Investor grievances and analysis. As mentioned before, the Company has constituted a Shareholders b) Disclosures by management to the Board Committee to look into and redress Shareholders and investor All details relating to financial and commercial transactions where complaints. Mr. S.K. Bhatt, Executive Vice-President (Corporate Directors may have a potential interest are provided to the Board, Services) & Company Secretary is the compliance officer. and the interested Directors neither participate in the discussion, nor d) Share transfer do they vote on such matters. GIL has outsourced its share transfer function to M/s. Computech DISCLOSURES Sharecap Ltd., which is registered with the SEBI as a Category 1 Whistle Blower Policy Registrar and Transfer Agent. With a view to establish a mechanism for protecting the employees reporting e) Details of non-compliance unethical behaviors, frauds, violation of Company’s Code of Conduct, the There has been no instance of GIL not complying with any matter Board of Directors has adopted a Whistle Blower Policy. During the year related to capital markets. 2005-06, no personnel has been denied access to the Audit Committee. f) General body meetings Details of compliance with mandatory requirement Year Venue Date Time Particulars Clause of Compliance Status Listing Agreement Yes / No 2002-03 Y.B. Chavan Centre, August 25, 2003 3.00 P.M. I. Board of Directors 49 I Nariman Point, (A) Composition of Board 49 (IA) Yes Mumbai 400 021. (B) Non-executive Directors’ compensation & disclosures 49 (IB) Yes 2003-04 - do - July 26, 2004 4.00 P.M. (C) Other provisions as to Board and Committees 49 (IC) Yes 2004-05 - do - July 26, 2005 4.00 P.M. (D) Code of Conduct 49 (ID) Yes II. Audit Committee 49 (II) g) Postal Ballot (A) Qualified & Independent Audit Committee 49 (IIA) Yes (B) Meeting of Audit Committee 49 (IIB) Yes During the year, pursuant to the provisions of Section 192A of the (C) Powers of Audit Committee 49 (IIC) Yes Companies Act, 1956 read with the Companies (Passing of the (D) Role of Audit Committee 49 II(D) Yes Resolution by Postal Ballot) Rules 2001, certain resolutions were passed (E) Review of Information by Audit Committee 49 (IIE) Yes by shareholders by postal ballot results of which were announced on III. Subsidiary Companies 49 (III) Yes February 2, 2006. The Notice of postal ballot was mailed to all IV. Disclosures 49 (IV) shareholders along with postage prepaid envelopes. Mr. Bharat (A) Basis of related party transactions 49 (IV A) Yes Shemlani, Chartered Accountant, had been appointed as scrutinizer (B) Board disclosures 49 (IV C) Yes (C) Proceeds from public issues, rights issues, 49 (IV D) Not Applicable for the postal ballots, who submitted his report to the Chairman, preferential issues etc. at present Mr. A.B. Godrej. The details of the postal ballots are given below :- (D) Remuneration of Directors 49 (IV E) Yes Sr. Date of Nature Item Total no. No. of No. of No. of (E) Management 49 (IV F) Yes No. announcement of of votes votes in votes invalid (F) Shareholders 49 (IV G) Yes of results resolution polled favour against votes V. CEO/CFO Certification 49 (V) Yes %% VI. Report on Corporate Governance 49 (VI) Yes 1. February 2, 2006 Ordinary To sell, lease or otherwise 1080 99.96 0.02 0.02 VII. Compliance 49 (VII) Yes dispose of the whole, or substantially the whole Details of Non-compliance of the Foods Division of the Company; There has not been any non-compliance by the Company and no penalties 2. February 2, 2006 Special To invest in securities of 1107 99.98 0.01 0.01 or strictures were imposed on the Company by the Stock Exchanges or and/or place intercorporate SEBI or any statutory authority, on any matter related to capital markets. deposits with and/or invest in debentures of and/or give Declaration by Managing Director guarantee(s) to and/or make loans or any other form of debt The declaration by the Managing Director stating that all the Board to Godrej Upstream Limited under Section 372A of the Members and senior management personnel have affirmed their Companies Act, 1956, in compliance with the said code of conduct for the year ended addition to the current limits, March 31, 2006, is annexed to the Corporate Governance Report. a further sum of Rs.10 crore; 3 February 2, 2006 Special To invest in securities of and/or 1074 99.96 0.02 0.02 SHAREHOLDERS place intercorporate deposits with and/or invest in debentures a) Disclosures regarding appointment or re-appointment of Directors of and/or give guarantee(s) to and/or make loans or any other According to the Articles of Association of GIL, at every annual general form of debt to View Group LP meeting of the Company one-third of the Directors are liable to retire under Section 372A of the Companies Act, 1956, a sum by rotation. Thus, Mr. J.N. Godrej, Mr. V.F. Banaji, Ms. T.A. Dubash of Rs.14 crore. 23 Godrej Industries Limited
Declaration by Managing Director
I, N.B. Godrej, Managing Director of Godrej Industries Limited (GIL), hereby confirm pursuant to clause 49(1)(D) of the listing agreement that :
The Board of Directors of GIL has laid down a code of conduct for all Board members and senior management of the Company. The said code of conduct has also been posted on the Company’s website viz. www.godrejinds.com.
All the Board members and senior management personnel have affirmed their compliance with the said code of conduct for the year ended March 31, 2006.
N.B. Godrej
Managing Director
Mumbai, May 26, 2006
Auditors’ Certificate on Corporate Governance
To the Members of, Godrej Industries Limited
We have examined the compliance of conditions of Corporate Governance by Godrej Industries Limited for the year ended on March 31, 2006, as stipulated in Clause 49 of the Listing Agreement of the said Company with the stock exchanges.
The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to a review of procedures and implementation thereof, adopted by the Company for ensuring the compliance of the 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 stipulated in Clause 49 of the above mentioned Listing Agreement.
We state that such compliance is neither an assurance as to the future viability of the Company nor of the efficiency or effectiveness with which the management has conducted the affairs of the Company.
For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants
V. R. Mehta Partner Mumbai, May 26, 2006. Membership No. 32083
24 Annual Report 2005-2006
SHAREHOLDERS’ INFORMATION
Annual General Meeting Note : Date : July 24, 2006 High and low are in rupees per traded share. Volume is the total monthly Time : 4.30 P.M. volume of trade (in numbers) in equity shares of GIL on the BSE. Venue : Y.B. Chavan Centre, General Jagannath Bhosale Marg, Table 2 : Monthly high and low prices and trading volumes of equity Nariman Point, Mumbai 400 021. shares of GIL at NSE for the year ended March 31, 2006 Financial Calendar Month High Low Volume traded Financial year: April 1 to March 31 (Rs.) (Rs.) (No. of Shares) For the year ended March 31, 2006, results were announced on: April-05 123.30 106.60 984844 July 26, 2005 : First quarter May-05 267.95 123.60 26359665 October 24, 2005 : Half year June-05 238.80 205.45 7658630 January 31, 2006 : Third quarter July-05 249.40 225.40 1981097 May 26, 2006 : Fourth quarter and annual August-05 247.45 229.50 713266 September-05 272.75 232.35 1120630 Record Date/Book Closure October-05 273.85 219.45 376538 A dividend of Rs. 5/- per share of Rs. 6/- each has been recommended November-05 260.35 225.10 243094 by the Board of Directors of the Company. For payment of dividend, the book closure is from July 17, 2006 to July 24, 2006 (both days inclusive). December–05 399.05 258.95 11921783 January–06 384.85 365.75 751313 Listing information February-06 415.30 365.95 853984 The Company’s equity shares are listed on The Bombay Stock Exchange March-06 643.05 442.45 1713153 Ltd., The National Stock Exchange of India Ltd. and the Calcutta Stock Exchange Association Ltd. High and low are in rupees per traded share. Volume is the total monthly Name of the Stock Exchange Stock code volume of trade (in numbers) in equity shares of GIL on the NSE. The Bombay Stock Exchange Ltd. (BSE) 500164 Chart A - GIL share performance compared to the BSE Sensex for FY 2005-2006 The National Stock Exchange of India Ltd. (NSE) GODREJIND The Calcutta Stock Exchange Association Ltd. 17038 (for physical) 10017038 (for demat) The ISIN Number of GIL on both NSDL and CDSL is INE233A01027. The Company had applied to the Calcutta Stock Exchange Association Ltd. for voluntary delisting of equity shares under the Securities and Exchange Board of India (Delisting of Securities) Guidelines, 2003. The permission for delisting is awaited. Stock Data Tables 1 and 2 respectively give the monthly high and low prices and volumes of equity shares of GIL at BSE and the NSE for the year ended March 31, 2006. Chart A compares GIL’s share price at the BSE versus the sensex. Table 1 : Monthly high and low prices and trading volumes of equity shares of GIL at BSE for the year ended March 31, 2006 Distribution of shareholding Month High Low Volume traded (Rs.) (Rs.) (No. of Shares) Tables 3 and 4 give the distribution pattern of shareholding of GIL by size class and ownership respectively as on March 31, 2006. April-05 126.00 104.00 606612 Table 3 : Distribution of shareholding by size class as on March 31, 2006 May-05 278.80 116.10 9150145 Number of Number of Shareholders Number of Shareholding June-05 248.90 201.50 2567483 shares shareholders % shares held % July-05 262.00 225.00 893303 1 - 500 12754 91.87% 1065043 2.19% August-05 253.00 215.15 292735 501 - 1000 523 3.77% 385558 0.79% September-05 284.00 225.00 594544 1001 - 2000 290 2.09% 390640 0.80% 2001 - 3000 113 0.81% 278064 0.57% October-05 279.90 214.15 241317 3001 - 4000 33 0.24% 116544 0.24% November-05 271.00 220.00 128074 4001 - 5000 24 0.17% 109414 0.22% December-05 417.00 250.50 5336337 5001 - 10000 56 0.40% 393088 0.81% January-06 397.00 344.65 346736 10001 & above 89 0.64% 45903591 94.37% February-06 434.00 360.05 497743 Total 13882 100.00% 48641942 100.00% March-06 674.00 396.65 979933
25 Godrej Industries Limited
Table 4 : Distribution of shareholding by ownership as on Shares held in physical and dematerialised form March 31, 2006 As on March 31, 2006, 99.39 per cent of GIL’s shares were held in Category (as being reported to stock Shares held % of holding dematerialised form and the remaining 0.61 per cent in physical form. exchanges) (Nos.) The break up is listed below: Promoter’s holding No. of Folios No. of Folios No. of Shares No. of Total Total Promoters 4300780 88.40% in Physical in Demat in Physical shares Folios Shares Mode Mode Mode in Demat Persons deemed to act in concert Mode with promoters – –% 4605 9277 297791 48344151 13882 48641942 Institutional investors Share Transfer Mutual funds & UTI 148505 0.31% Share transfers and related operations for GIL are conducted by Banks, financial institutions & Computech Sharecap Ltd., which is registered with the SEBI as a Category insurance companies 77929 0.16% 1 Registrar. Foreign institutional investors 590024 1.21% Investor correspondence should be addressed to: Others Computech Sharecap Ltd. Private corporate bodies 1182751 2.43% 147, M.G. Road, Opp. Jehangir Art Gallery, Indian public 3501471 7.20% Mumbai 400 023. Tel : 022-22671824/22671825 NRI/OCBs 140482 0.29% E-mail : [email protected] Total 48641942 100.00% Fax : 022-22670380
26 Annual Report 2005-2006
REPORT OF THE AUDITORS TO THE MEMBERS OF GODREJ INDUSTRIES LIMITED
1. We have audited the attached Balance Sheet of Godrej Industries e) Reference is invited to Note 8 (b) of Schedule 22- Notes to Limited as at March 31, 2006 and also the Profit and Loss Account Accounts, regarding the recoverability of advances given to and Cash Flow Statement of the Company for the year ended on certain individuals amounting to Rs. 1,033 lac being contingent that date, both annexed thereto. These financial statements are the upon the transfer and/or disposal of the shares pledged against responsibility of the Company’s management. Our responsibility is the loan. The said shares were lodged for transfer which to express an opinion on these financial statements based on our application was rejected and the Company has preferred an audit. appeal to the Company Law Board. The impact thereof on the profit for the year could not be ascertained. 2. We conducted our audit in accordance with the Auditing Standards generally accepted in India. Those Standards require that we plan f) In our opinion and to the best of our information and according and perform the audit to obtain reasonable assurance about whether to the explanations given to us, the said accounts subject to the financial statements are free of material misstatement. An audit paragraph (e) above, and read with the notes thereon, give the includes examining, on a test basis, evidence supporting the amounts information required by the Companies Act, 1956, in the manner and disclosures in the financial statements. An audit also includes so required and give a true and fair view in conformity with assessing the accounting principles used and significant estimates the accounting principles generally accepted in India: made by management, as well as evaluating the overall financial i) in the case of the Balance Sheet, of the state of affairs of statement presentation. We believe that our audit provides a the Company as at March 31, 2006; reasonable basis for our opinion. ii) in the case of the Profit and Loss Account, of the profit of 3. As required by the Companies (Auditor’s Report) Order, 2003, issued the Company for the year ended on that date; and by the Central Government in terms of Section 227(4A) of the Companies Act, 1956, we give in the Annexure a statement on the iii) in the case of the Cash Flow Statement, of the cash flows matters specified in paragraphs 4 and 5 of the said Order. for the year ended on that date. 4. Further to our comments in the Annexure referred to in paragraph 5. On the basis of the written representations received from the directors 3 above, we report that: of the Company as on March 31, 2006 and taken on record by the Board of Directors, we report that none of the directors of the a) We have obtained all the information and explanations, which Company is disqualified as on March 31, 2006 from being appointed to the best of our knowledge and belief were necessary for the as a director in terms of clause (g) of sub-section (1) of Section 274 purpose of our audit. of the Companies Act, 1956. b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of these books and proper returns adequate for the purposes of our audit have been received from the branches not visited by us. The Branch Auditor’s Report has been For and on behalf of forwarded to us and has been appropriately dealt with. Kalyaniwalla & Mistry Chartered Accountants c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account and with the audited returns from the branches. d) In our opinion, the Balance Sheet, Profit and Loss Account and V.R. Mehta Cash Flow Statement dealt with by this report comply with the Partner Accounting Standards referred to in sub-section (3C) of Section M. No.: 32083 211 of the Companies Act, 1956. Mumbai, May 26, 2006
27 Godrej Industries Limited
ANNEXURE TO THE AUDITOR’S REPORT Referred to in Paragraph (3) of our report of even date on the accounts of Godrej Industries Limited for the year ended March 31, 2006.
1. (a) The Company is generally maintaining proper records showing an adequate internal control system commensurate with the size of full particulars, including quantitative details and situation of the Company and the nature of its business, for the purchase of fixed assets, except in case of certain continuous process plants inventory and fixed assets and for the sale of goods and services. In where item-wise values are not available and in case of our opinion and according to the information & explanation given furniture, fittings and equipment at Vikhroli where the records to us, there is no continuing failure to correct major weaknesses in maintained show quantitative details with their situation and the internal control system. values based on valuation by an approved valuer. 5. (a) Based on the audit procedures applied by us and according to (b) The Company has a program for physical verification of fixed the information and explanations provided by the management, assets at periodic intervals. In our opinion, the period of we are of the opinion that the particulars of contracts or verification is reasonable having regard to the size of the arrangements referred to in Section 301 of the Act have been Company and the nature of its assets. No material discrepancies entered in the register required to be maintained under that between the book records and physical inventory were reported section. for the assets verified during the year. (b) In our opinion and according to the information and explanations (c) In our opinion, the fixed assets disposed off during the year given to us, having regard to the explanation that some of the were not substantial and do not effect the going concern items are of a special nature and their prices cannot be compared assumption. with alternative quotations, the transactions made in pursuance of contracts or arrangements entered in the register maintained 2. (a) The management has conducted physical verification of under Section 301 of the Companies Act, 1956 and exceeding inventory at reasonable intervals during the year. the value of Rs. 5 Lac in respect any party during the year, have (b) In our opinion, the procedures of physical verification of been made at prices which are reasonable having regard to the inventory followed by the management are reasonable and prevailing market prices at the relevant time. adequate in relation to the size of the Company and the nature 6. In our opinion and according to the information and explanations of its business. given to us, the Company has complied with the directives issued by (c) The Company is maintaining proper records of inventory. The the Reserve Bank of India and the provisions of Section 58A and discrepancies noticed on verification between physical 58AA or any other relevant provisions of the Act and the rules framed inventories and book records were not material in relation to there under in respect of the deposits accepted from the public. the operations of the Company and the same have been properly 7. The Company has an internal audit system, which in our opinion, is dealt with in the books of account. commensurate with the size of the Company and the nature of its business. 3. (a) The Company had granted unsecured loans to three companies 8. We have broadly reviewed the books of account maintained by the listed in the register maintained under Section 301 of the Company in respect of manufacture of vanaspati pursuant to the Companies Act, 1956, of which one loan of Rs. 47.80 lac were order passed by the Central Government for maintenance of cost outstanding at the year end. The maximum amount of loans records under Section 209(1) (d) of the Companies Act, 1956, and are granted to the said companies during the year was Rs. 128.28 of the opinion that prima facie the prescribed accounts and records lac. have been maintained. We have not, however, made a detailed (b) In our opinion and according to the information and explanations examination of the records with a view to determine whether they given to us, the rate of interest and other terms and conditions are accurate or complete. To the best of our knowledge and according of loans given are, prima facie, not prejudicial to the interest of to the information given to us, the Central Government has not the Company. prescribed maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956 for any other products of the Company. (c) The loans outstanding at the year end are at call and have not been recalled during the year. The companies are generally 9. (a) According to the records examined by us, the Company is regular in payment of interest. generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, (d) There are no overdue amounts exceeding Rs. one lac. Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, (e) The Company has not taken any loans, secured or unsecured, Service Tax, Customs Duty, Excise Duty, cess and other statutory from companies, firms or other parties listed in the register dues applicable to it with the appropriate authorities. maintained under Section 301 of the Companies Act, 1956. (b) According to the information and explanations given to us and 4. In our opinion and according to the information and explanations the records examined by us, there are no dues of Income Tax, given to us, having rearded to the explanation that some of the Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty items purchased are of a special nature and suitable alternative or cess which have not been deposited on account of any sources do not exist for obtaining comparable quotations, there is dispute, other than those stated hereunder:
28 Annual Report 2005-2006
Name of statute Amount Rs. in lac Period to which the Forum where dispute amount relates is pending Central Excise Act, 1944 43.32 1999 – 2000 Assistant Commissioner 0.87 2003 – 2005 Assistant Commissioner 393.40 1992 – 1997 Commissioner (Appeals) 0.09 1994 – 1999 CEGAT 241.20 1978 – 1983 High Courts 87.39 1997 – 1999 High Courts 683.33 1986 – 1998 The Supreme Court of India Customs Act, 1962 8.77 1978 – 1983 Assistant Commissioner 111.88 1987 – 1993 Commissioner of Customs 26.28 2003 – 2004 Dy. Commissioner 109.12 1978 – 1993 High Court 570.86 1991 – 1992 High Court 8.23 1978 – 1979 CESTAT Income Tax Act, 1961 50.53 1992 – 1995 ITAT 518.53 1996 – 2001 ITAT 70.62 1985 – 1991 High Court 1084.95 1995 – 1996 High Court Central Sales Tax Act, 1956 0.16 1997 – 1998 Appellate Tribunal Sales Tax 19.60 1998 – 2005 Sales Tax Officer 68.19 2003 – 2004 Commissioner (Appeals) 14.15 1996 – 2002 Dy. Commissioner 1.83 1998 – 1989 Sales Tax Tribunal 30.55 1990 – 1992 Sales Tax Tribunal 62.39 1994 – 1996 Sales Tax Tribunal Others Stamp Duty 182.23 2000 Controlling Revenue Authority Municipal Taxes 815.61 1984 – 2005 The Bombay High Court Entry Tax 28.85 1997 – 2003 Tribunal 5,232.96
10. The Company has no accumulated losses as at the end of the financial 16. According to the information and explanations given to us and the year and it has not incurred any cash losses in the current and records examined by us, on an overall basis, the term loans have immediately preceding financial years. been applied for the purpose for which the loans were obtained. 11. According to the information and explanations given to us and based 17. On the basis on an overall examination of the balance sheet and on the documents and records produced to us, the Company has not cash flows of the Company and the information and explanations defaulted in repayment of dues to a financial institution, bank or given to us, we report that the Company has not utilized the funds debenture holders as at the balance sheet date. raised on short-term basis for long-term investment. 12. The Company has maintained adequate documents and records in 18. The Company has not made any preferential allotment of shares to respect of loans and advances granted on the basis of security by parties or companies covered in the register maintained under section way of pledge of shares and other securities, except that the shares 301 of the Companies Act, 1956. in question have not been transferred in the name of the Company as stated in note 8(b) of Schedule 22- Notes to Accounts. 19. The Company did not issue any debentures during the year. 13. In our opinion and according to the information and explanations 20. The Company has not raised any money through a public issue given to us, the nature of activities of the Company does not attract during the year. any special statute applicable to chit fund and nidhi/ mutual benefit 21. Based on the audit procedures performed and information and fund/ societies. explanations given by the management, we report that no fraud on 14. In our opinion, the Company has maintained proper records of the or by the Company has been noticed or reported during the year. transactions and contracts in respect of investments purchased and sold during the year and timely entries have been made therein. For and on behalf of The investments made by the Company are held in its own name Kalyaniwalla & Mistry except for the shares referred to in note (a) of Schedule 6. Chartered Accountants 15. According to the information and explanations given to us and the records examined by us, it is our opinion that the terms and V.R. Mehta conditions of the guarantees given by the Company for loans taken Partner by others from banks or financial institutions are not prejudicial to M. No.: 32083 the interest of the Company. Mumbai, May 26, 2006
29 Godrej Industries Limited
BALANCE SHEET AS AT MARCH 31, 2006 This Year Previous Year Schedule Rs. lac Rs. lac Rs. lac SOURCES OF FUNDS 1. Shareholders’ Funds (a) Share capital 1 2918.52 2918.52 (b) Reserves & surplus 2 34216.68 30617.83 37135.20 33536.35 2. Loan Funds (a) Secured loans 3 24910.89 22075.67 (b) Unsecured loans 4 7803.24 3557.13 32714.13 25632.80 3. Deferred Tax Liability 3818.00 2502.00 TOTAL 73667.33 61671.15
APPLICATION OF FUNDS 4. Fixed Assets 5 (a) Gross block 53640.20 49728.83 (b) Less : Depreciation/Impairment 25568.23 26192.14 (c) Net block 28071.97 23536.69 (d) Capital work-in-progress 522.38 1563.09 28594.35 25099.78 5. Investments 6 37134.67 33577.28 6. Current Assets, Loans and Advances (a) Inventories 7 11892.38 10751.76 (b) Sundry debtors 8 5806.56 8604.44 (c) Cash and bank balances 9 1259.63 1377.88 (d) Loans and advances 10 7688.73 4132.23 26647.30 24866.31 Less : Current Liabilities and Provisions (a) Liabilities 11 15726.32 17050.24 (b) Provisions 12 5202.03 4948.28 20928.35 21998.52 Net Current Assets 5718.95 2867.79 7. Miscellaneous Expenditure 13 2219.36 126.30 (To the extent not written off or adjusted) TOTAL 73667.33 61671.15 Significant Accounting Policies 21 Notes to Accounts 22
The Schedules referred to above form an integral part of the Balance Sheet.
As per our Report attached Signatures to Balance Sheet and Schedules 1 to 13, 21 and 22
For and on behalf of A.B. Godrej N.B. Godrej M. Eipe M.P. Pusalkar Kalyaniwalla & Mistry Chairman Managing Director Executive Director Executive Director Chartered Accountants & President (Chemicals) & President (Corporate Projects)
V. R. Mehta S.K. Bhatt V. Srinivasan Partner Executive Vice President (Corporate Executive Vice President Mumbai, May 26, 2006 Services) & Company Secretary (Finance & Estate) 30 Annual Report 2005-2006
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006 This Year Previous Year Schedule Rs. lac Rs. lac Rs. lac INCOME Turnover (gross) 80054.20 82198.93 Less: Excise duty 5505.94 5863.69 Turnover (net) 74548.26 76335.24 Other Income 14 5721.62 6017.78 80269.88 82353.02 EXPENDITURE Materials consumed and purchase of goods 15 50228.83 50794.93 Expenses 16 20627.41 20204.43 Inventory change 17 (1196.08) (882.46) Interest and financial charges (net) 18 2837.43 2581.67 Depreciation 2259.43 2148.43 (Net of transfer from Revaluation Reserve Rs. 168.43 lac, Previous year Rs. 223.80 lac) 74757.02 74847.00 Profit before Taxation and Extraordinary Items 5512.86 7506.02 Profit from continuing operations before tax 5813.39 8022.03 Income tax – current tax — (401.00) – fringe benefit tax (67.44) — – deferred tax (1479.00) 444.00 Profit from continuing operations after tax 4266.95 8065.03 Loss from discontinuing operations before tax (300.53) (516.01) Income tax – current tax — — – fringe benefit tax (14.24) — – deferred tax 62.00 26.00 Loss from discontinuing operations after tax (252.77) (490.01) Profit after Taxation and before Extraordinary Items 4014.18 7575.02 Extraordinary Items (Net of Tax) 19 3105.80 — Prior Period adjustments (net) 20 (7.56) 2.20 Net Profit 7112.42 7577.22 Surplus brought forward 20081.61 15480.67 Amount Available For Appropriation 27194.03 23057.89 APPROPRIATIONS Proposed Dividend - Final 2432.10 1945.68 Tax on distributed profits 341.10 272.88 Transfer to General Reserve 711.24 757.72 Surplus carried forward 23709.59 20081.61 TOTAL 27194.03 23057.89 Basic & Diluted Earnings per share before Extraordinary Items 8.24 15.58 Basic & Diluted Earnings per share after Extraordinary Items 14.62 15.58 (refer note 19) Significant Accounting Policies 21 Notes to Accounts 22
The Schedules referred to above form an integral part of the Profit and Loss Account.
As per our Report attached Signatures to Profit and Loss Account and Schedules 14 to 22
For and on behalf of A.B. Godrej N.B. Godrej M. Eipe M.P. Pusalkar Kalyaniwalla & Mistry Chairman Managing Director Executive Director Executive Director Chartered Accountants & President (Chemicals) & President (Corporate Projects)
V. R. Mehta S.K. Bhatt V. Srinivasan Partner Executive Vice President (Corporate Executive Vice President Mumbai, May 26, 2006 Services) & Company Secretary (Finance & Estate) 31 Godrej Industries Limited
CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006
This Year Previous Year Rs. lac Rs. lac A. Cash Flow from operating Activities : Profit before tax 5512.86 7506.02 Adjustments for : Depreciation 2259.43 2148.43 Foreign exchange 294.21 939.30 Profit on sale of investments (2155.37) (3491.26) (Profit) / Loss on sale of fixed assets (309.13) 123.78 Dividend income (2212.91) (2236.06) Interest income (508.39) (115.87) Interest expense 2430.95 1745.16 Voluntary retirement compensation paid (2685.07) (100.42) Deferred expenditure written off 592.01 182.75 Provision for diminution in value of investments — 450.02 Provision for doubtful debts and sundry balances written back (net) (2.87) (87.96) Others (0.42) 2.99 Operating profit before working capital changes 3215.30 7066.88 Adjustments for : Inventories (2693.82) 192.59 Trade and other receivables 1463.87 (1443.92) Trade payables 23.70 (807.91) Cash generated from operations 2009.05 5007.64 Direct taxes paid (604.30) (547.32) Direct taxes refund received 124.08 139.70 Net Cash from operating activities 1528.83 4600.02 B. Cash Flow from investing activities : Purchase of fixed assets (9503.94) (2799.64) Proceeds from sale of fixed assets 1339.31 197.25 Purchase of investments (51582.27) (57714.35) Proceeds from sale of investments 50167.75 53425.24 Intercorporate deposits / Loans (net) (500.02) 456.50 Interest received 497.56 138.25 Dividend received 2275.33 2236.06 Net Cash used in investing activities before extraordinary item (7306.28) (4060.69) Proceeds from sale of Undertaking (Refer Note 3) 4000.00 — Net Cash used in investing activities after extraordinary item (3306.28) (4060.69)
32 Annual Report 2005-2006
This Year Previous Year Rs. lac Rs. lac C. Cash Flow from financing activities : Proceeds from borrowings 39331.95 23560.07 Repayments of borrowings (32515.29) (17995.22) Bank overdrafts (net) (62.36) (1920.40) Interest paid (2631.58) (1703.81) Dividend paid (1951.09) (1473.49) Tax on distributed profits (272.88) (186.97) Net Cash from financing activities 1898.75 280.18 Net increase in cash and cash equivalents 121.30 819.51 Cash and cash equivalents (Opening Balance) 1377.88 558.37 Less : Cash and cash equivalents transferred to Godrej Beverages & Foods Limited 239.55 — Cash and cash equivalents (Closing Balance) 1259.63 1377.88 Notes: 1. Cash and Cash equivalents Cash on hand and balances with banks 1266.79 1384.97 Effect of exchange rate changes (7.16) (7.09) Cash and cash equivalents 1259.63 1377.88 2. To finance working capital requirements, the Company’s Bankers have sanctioned a total fund-based limit of Rs. 5,800 lac. Of this, limits utilised as on March 31, 2006 is Rs. 1,518.44 lac. 3. The Foods Division (except Wadala Factory) was sold for a consideration of Rs. 7,000 lac. Out of the total consideration, Rs. 4,000 lac has been received in cash and the balance receivable by way of allotment of equity shares in Godrej Beverages & Foods Ltd. 4. The figures of previous year have been regrouped wherever necessary.
As per our Report attached Signatures to Cash Flow Statement
For and on behalf of A.B. Godrej N.B. Godrej M. Eipe M.P. Pusalkar Kalyaniwalla & Mistry Chairman Managing Director Executive Director Executive Director Chartered Accountants & President (Chemicals) & President (Corporate Projects)
V. R. Mehta S.K. Bhatt V. Srinivasan Partner Executive Vice President (Corporate Executive Vice President Mumbai, May 26, 2006 Services) & Company Secretary (Finance & Estate)
33 Godrej Industries Limited
SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006 This Year Previous Year Rs. lac Rs. lac SCHEDULE 1 : SHARE CAPITAL AUTHORISED: 13,33,33,333 Equity shares of Rs.6 each 8000.00 8000.00 10,00,00,000 Unclassified Shares of Rs.10 each 10000.00 10000.00 18000.00 18000.00 ISSUED, SUBSCRIBED AND PAID UP: 4,86,41,942 Equity shares of Rs.6 each fully paid 2918.52 2918.52 2918.52 2918.52 Of the above, (i) 3,12,00,398 shares are held by Godrej & Boyce Mfg. Co. Limited, the holding Company (ii) 2,59,24,636 shares are alloted for consideration other than cash pursuant to schemes of amalgamation/arrangement (iii) 1,59,50,953 shares are alloted as fully paid bonus shares by way of capitalisation of Securities premium account.
This Year Previous Year Rs. lac Rs. lac Rs. lac SCHEDULE 2 : RESERVES AND SURPLUS Securities Premium Account As per last balance sheet 8.51 8.51 Capital Investment Subsidy Reserve As per last balance sheet 25.00 25.00 Revaluation Reserve As per last balance sheet 3031.76 3256.59 Less : Depreciation on revalued component and deduction due to sale/discard of fixed assets (740.37) (224.83) 2291.39 3031.76 Capital Redemption Reserve As per last balance sheet 3125.00 3125.00 General Reserve As per last balance sheet 4345.95 4301.33 Add : Transferred from profit & loss account 711.24 757.72 Less : Accumulated impairment loss as on April 1, 2004 — (713.10) 5057.19 4345.95 Profit & Loss Account 23709.59 20081.61 34216.68 30617.83
SCHEDULE 3 : SECURED LOANS Term loans from banks 23392.45 20494.87 Bank overdrafts, packing credit, etc. 1518.44 1580.80 24910.89 22075.67 Particulars of securities (refer note 4)
SCHEDULE 4 : UNSECURED LOANS Fixed deposits — 101.72 Short term loans from banks 5803.24 3455.41 Other loans from banks 2000.00 — 7803.24 3557.13
Amount repayable within one year 7803.24 3557.13
34 Annual Report 2005-2006
SCHEDULE 5 : FIXED ASSETS Rs. lac
ASSETS GROSS BLOCK DEPRECIATION/IMPAIRMENT NET BLOCK As on Deductions/ As on Upto Deductions/ For the Upto As on As on 01.04.2005 Additions Adjustments 31.03.2006 31.03.2005 Adjustments Year 31.03.2006 31.03.2006 31.03.2005 Tangible Assets Land 252.90 50.00 33.35 269.55 21.48 1.88 1.64 21.24 248.31 231.42 Buildings 8961.76 952.82 1683.12 8231.46 2307.80 263.28 241.26 2285.78 5945.68 6653.96 Plant & Machinery 36588.54 9516.74 4563.09 41542.19 21985.58 2511.33 1869.98 21344.23 20197.96 14602.96 Research Centre 113.51 — — 113.51 43.41 — 3.30 46.71 66.80 70.10 Furniture & Fixtures 1117.84 52.62 57.63 1112.83 635.49 21.71 61.86 675.64 437.19 482.35 Office & Other Equipments 1034.34 46.58 83.41 997.51 472.24 55.53 51.96 468.67 528.84 562.10 Vehicles 631.69 61.13 83.77 609.05 294.88 35.03 50.33 310.18 298.87 336.81 Intangible Assets Trademarks 754.00 — 291.00 463.00 314.17 150.35 75.40 239.22 223.78 439.83 Assets acquired under Finance Lease Vehicles 274.25 58.80 31.95 301.10 117.09 12.66 72.13 176.56 124.54 157.16 TOTAL - This Year 49728.83 10738.69 6827.32 53640.20 26192.14 3051.77 2427.86 25568.23 28071.97 23536.69 - Previous Year 48949.68 1402.49 623.34 49728.83 24117.03 297.12 2372.23 26192.14 Capital Work-in-Progress 522.38 1563.09 TOTAL 28594.35 25099.78 1. Land includes leasehold land of Rs.126.72 lac (Previous Year Rs.136.18 Lac) which is being amortised over the period of lease. 2. Buildings, Plant & Machinery and Research Centre at Vikhroli Factory were revalued on 30th June, 1992 on the basis of a Valuation Report submitted by professional valuers. 3. Depreciation for the year includes Rs.168.43 Lac (Previous Year Rs.223.80 Lac) being depreciation on revalued component of the fixed assets. 4. Gross block deductions includes Rs. 571.94 lac (Previous Year Rs.1.03 lac) being the revalued component of assets sold/discarded during the year. 5. Buildings include Rs.0.01 lac (previous year Rs.0.01 lac) being the value of investment in shares of Co-operative Housing Society. 6. Buildings include Rs. 1701.74 lac (previous year Rs. 2651.08 lac) being the cost of equity shares in Tahir Properties Ltd., representing the right of the Company to three (previous year five) flats in the property. 7. Accumulated depreciation includes impairment loss of Rs. 509 lac on plant & machinery in an earlier year. 8. Capital work-in-progress is net of impairment loss of Rs. 204.10 lac provided on an infructuous asset under construction. SCHEDULE 6 : INVESTMENTS Investee Company/Institutions Face Number Amount Value Qty. Acquired Sold Qty. As on As on as on during during as on Notes 31.03.06 31.03.05 (Rs.) 01.04.05 Year Year 31.03.06 Rs. lac Rs. lac LONG TERM INVESTMENTS - At Cost A. TRADE INVESTMENTS Equity Shares : Fully Paid Bharuch Eco-Aqua Infrastructure Ltd. 10 4,40,000 — — 4,40,000 44.00 44.00 Preference Shares : Partly Paid Godrej Foods Ltd. 10 50,00,000 — — 50,00,000 (b) 450.00 450.00 (8% Redeemable Cumulative, 2012) Tahir Properties Ltd. (Class-A) 100 25 — — 25 (b) 0.02 0.02 B. OTHER INVESTMENTS : Equity Shares : Fully Paid Quoted : Godrej Consumer Products Ltd. 4 73,24,027 — 5,90,000 67,34,027 10,730.01 11670.12 Unquoted : Compass Connections Ltd. £0.25 13,692 — — 13,692 124.55 124.55 Gharda Chemicals Ltd. 100 114 — — 114 (a) 11.57 11.57 Godrej Sara Lee Ltd. 4 51,07,125 — — 51,07,125 4,729.79 4729.79 Swadeshi Detergents Ltd 10 2,09,370 — — 2,09,370 191.33 191.33 Avestha Gengraine Technologies Pvt. Ltd. 10 1,05,500 14,744 — 1,20,244 516.76 450.25 Tahir Properties Ltd. (Partly Paid) 100 25 — — 25 (b) 0.01 0.01 Boston Analytics LLC (Partly Paid) $1 — 78,250 — 7,81,250 (b) 258.76 — Common Stock : Unquoted : C Bay Systems Ltd. $0.01 9,03,798 31,87,275 — 40,91,073 (c) 4,062.82 845.70 Convertible Debentures : Unquoted : Avestha Gengraine Technologies Pvt. Ltd. 10000000 — 3 — 3 300.00 — Government Securities Unquoted : Kisan Vikas Patra — — — — ——0.32 Shares in Co-operative Societies - Fully Paid Unquoted : The Saraswat Co-op Bank Ltd 10 1,000 — — 1,000 0.10 0.10 Balance carried forward 21419.72 18517.76 35 Godrej Industries Limited
Investee Company/Institutions Face Number Amount Value Qty. Acquired Sold Qty. As on As on as on during during as on Notes 31.03.06 31.03.05 (Rs.) 01.04.05 Year Year 31.03.06 Rs. lac Rs. lac Balance brought forward 21419.72 18517.76 C. INVESTMENTS IN SUBSIDIARY COMPANIES : Equity Shares: Fully Paid Unquoted: Ensemble Holdings & Finance Ltd. 10 37,70,160 — — 37,70,160 1318.14 1318.14 Godrej Agrovet Ltd. 10 41,12,956 — — 41,12,956 3377.34 3377.34 Godrej Global Solutions Ltd. 10 5,76,96,500 — 1,00,23,761 4,76,72,739 (b),(d) 5589.65 5379.65 Godrej International Ltd. £1 15,05,000 11,00,000 — 26,05,000 1826.94 960.83 Godrej Beverages & Foods Ltd. 10 97,49,996 — 1,25,000 96,24,996 963.22 975.72 (formerly Godrej Tea Ltd.) Godrej Hicare Ltd. 10 31,07,100 35,40,000 — 66,47,100 (b) 364.83 193.23 Godrej Properties Ltd. 10 50,73,965 1,90,680 — 52,64,645 4027.61 3836.46 Godrej Remote Services Ltd. 10 77,12,642 — 77,12,642 ——771.25 38887.45 35330.38 Less : Provision for diminution in value of Investments (1752.78) (1753.10) 37134.67 33577.28 Aggregate Book Value of Investments Quoted 10730.01 11670.12 Unquoted 26404.66 21907.16 37134.67 33577.28 Market Value of Quoted Investments 48875.57 22708.15 NOTES : (a) The said shares have been refused for registration by the investee company. (b) Uncalled liability on partly paid shares - Tahir Properties Ltd. - Equity - Rs. 80 per share - Boston Analytics LLC - Equity - USD 440,000 - Godrej Foods Ltd. - Preference - Re. 1 per share - Tahir Properties Ltd. - Preference - Rs. 30 per share - Godrej Global Solutions - Equity - Rs. 3 per share on 60 lac shares - Godrej Hicare Ltd. - Equity - Rs. 6 per share on 30.4 lac shares. (c) Preferred Stock - series E & F has been converted into Common Stock during the year. (d) Reduction of shares held pursuant to Capital Reduction under a Scheme of Arrangement. This Year Previous Year Rs. lac Rs. lac SCHEDULE 7 : INVENTORIES (at lower of cost and net realisable value) Stores and spares 1156.47 526.57 Raw materials 5300.52 5192.87 Work-in-progress 1961.02 1126.27 Finished goods 3474.37 3906.05 11892.38 10751.76
SCHEDULE 8 : SUNDRY DEBTORS (Unsecured) Debts outstanding over six months Considered good — 1.67 Considered doubtful 233.99 262.05 233.99 263.72 Other debts Considered good 5806.56 8602.77 Considered doubtful — 33.53 5806.56 8636.30 Less : Provision for doubtful debts 233.99 295.58 5806.56 8604.44
36 Annual Report 2005-2006
This Year Previous Year Rs. lac Rs. lac SCHEDULE 9 : CASH AND BANK BALANCES Cash and cheques on hand 19.37 19.62 Balance with Scheduled banks – on current accounts 386.71 621.10 – on deposit accounts (refer note 7) 853.55 737.16 1259.63 1377.88
SCHEDULE 10 : LOANS AND ADVANCES (Unsecured and considered good unless otherwise stated) Loans and Advances (refer note 8) 1091.34 1127.86 Loans to GIL ESOP Trust 556.50 — Advances recoverable in cash or in kind or for value to be received (net of provision for doubtful advances Rs. 382.41 lac, previous year Rs.656.49 lac) 1663.15 1302.54 Consideration Receivable from Godrej Beverage & Foods Ltd. for sale of Foods Division 3000.00 — Intercorporate deposits – Subsidiary companies — 46.48 – Others 41.80 51.80 Deposits and balances with – Customs & excise authorities 849.59 1008.60 – Others 486.35 564.76 Advance payment of taxes — 30.19 (Net of Provision for tax, Previous year Rs. 1220 lac) 7688.73 4132.23 SCHEDULE 11 : CURRENT LIABILITIES (refer note 9) Acceptances — 1429.49 Sundry creditors – due to small scale industrial undertakings 56.82 72.05 – others 13750.58 12101.83 13807.40 12173.88 Advances from customers 305.13 964.05 Sundry deposits 555.64 951.76 Investor Education & Protection Fund * – Unclaimed dividend 46.29 51.70 – Unpaid Matured Deposits 24.80 103.17 – Interest accrued on above 0.20 58.70 Other liabilities 829.03 1224.50 Interest accrued but not due on loans 157.83 92.99 15726.32 17050.24 * There is no amount due and outstanding to be credited to the Investor Education and Protection Fund.
SCHEDULE 12 : PROVISIONS Proposed dividend 2432.10 1945.68 Provision for tax on distributed profits 341.10 272.88 Provision for retirement benefits 2388.08 2729.72 Provision for taxation 40.75 — (Net of Advance Tax Rs. 1270.25 lac) 5202.03 4948.28 SCHEDULE 13 : MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted) Deferred revenue expenditure Voluntary retirement compensation Balance at the beginning of the year 126.30 208.63 Add : Expenditure Incurred during the year 2685.07 100.42 Less : Amortised during the year (592.01) (182.75) 2219.36 126.30
37 Godrej Industries Limited
This Year Previous Year Rs. lac Rs. lac
SCHEDULE 14 : OTHER INCOME Interest : – Government Securities — 16.90 – Debentures 9.62 — – Income tax refund 140.56 8.10 – Deposits (refer Note 17) 307.00 — Dividend – from subsidiary companies 508.20 646.66 – from long term investments 1704.71 1589.40 Profit on sale of fixed assets (Net) 309.13 — Profit on sale of long term investments 2120.35 3422.22 (refer Note 17) Profit on sale of current investments 35.02 69.04 Miscellaneous income (refer Note 17) 587.03 265.46 5721.62 6017.78 SCHEDULE 15 : MATERIALS CONSUMED AND PURCHASE OF GOODS Raw materials consumed : Stocks at the commencement of the year 5192.87 6096.76 Add : Purchases (net) 40385.71 44007.83 45578.58 50104.59 Less : Stocks as at the close of the year 5300.52 5192.87 Raw Materials consumed during the year 40278.06 44911.72 Purchase of goods for resale 9950.77 5883.21 50228.83 50794.93
SCHEDULE 16 : EXPENSES Salaries, wages and allowances 5772.39 6004.11 Contribution to provident fund and other funds 326.13 354.20 Employee welfare expenses 636.19 513.37 Stores and spares consumed 631.87 814.31 Power and fuel 4164.79 3569.68 Processing charges 80.85 456.75 Rent 295.90 236.69 (refer Note 16) Rates and taxes 389.57 447.83 Repairs and maintenence – Machinery 882.25 1200.36 – Buildings 263.65 247.19 – Other assets 402.36 431.63 Insurance 133.90 135.89 Freight 2012.54 1606.78 Commission 282.86 383.90 Discount 456.93 203.06 Advertisement and publicity 250. 96 154.04 Sales promotion 47.93 97.55 Selling and distribution expenses 1108.67 772.78 Bad debts written off 170.79 0.57 Provision for doubtful debts and advances 10.87 7.00 Provision for depletion in value of investments — 450.02 Loss on sale of fixed assets — 123.78 Excise duty on inventory change 284.99 (50.70) Foreign exchange loss 182.62 809.09 Miscellaneous expenses 2376.48 1812.28 Less : Expenses recovered under cost sharing agreement for use of common facilities (538.08) (577.73) 20627.41 20204.43
38 Annual Report 2005-2006
This Year Previous Year Rs. lac Rs. lac Rs. lac
SCHEDULE 17 : INVENTORY CHANGE Stocks at the commencement of the year – Finished goods 3906.05 3113.51 – Work-in-progress 1126.27 1036.35 5032.32 4149.86 Stock adjustment on sale of Foods Division (793.01) — Less : Stocks at the close of the year : – Finished goods (3474.37) (3906.05) – Work-in-progress (1961.02) (1126.27) (5435.39) (5032.32) (Increase)/Decrease in Inventory (1196.08) (882.46)
SCHEDULE 18 : INTEREST AND FINANCIAL CHARGES (Net) Interest paid – on fixed loans 1702.34 817.65 – on bank overdrafts 114.71 121.46 – other interest 485.72 497.72 2302.77 1436.83 Less : Interest during construction period capitalised 265.47 14.25 Less : Interest received – on loans & deposits 33.13 56.41 – on Customer balances, etc. 18.08 34.46 51.21 90.87 Net Interest 1986.09 1331.71 Brokerage and other financial charges 393.65 322.58 Foreign exchange loss 457.69 927.38 2837.43 2581.67
SCHEDULE 19 : EXTRAORDINARY ITEMS Profit on sale of Foods division 3510.80 — Less : Taxation on above – current tax (506.00) — – deferred tax 101.00 — 3105.80 —
SCHEDULE 20 : PRIOR PERIOD ADJUSTMENTS Excess provision for Income-tax 42.52 2.20 Dividend for previous year 62.42 — Provision for pension payments (112.50) — (7.56) 2.20
39 Godrej Industries Limited
SCHEDULE 21 : SIGNIFICANT ACCOUNTING POLICIES are also translated at period end exchange rates. Premium or 1. Accounting Convention discount on forward exchange contracts is amortised over the period of the contract and recognized as income or expense for the period. The financial statements are prepared under the historical cost Exchange gains / losses are recognised in the Profit and Loss Account convention, on the accrual basis of accounting, in accordance with except for exchange differences relating to fixed assets acquired the generally accepted accounting principles in India, and the from a country outside India, which are adjusted in the cost of the Accounting Standards issued by the Institute of Chartered Accountants asset. Non Monetary foreign currency items like investments in of India. foreign subsidiaries are carried at cost and expressed in Indian 2. Fixed Assets currency at the rate of exchange prevailing at the time of making Fixed Assets are stated at cost or as revalued as the case may be, the original investment. less accumulated depreciation. Cost includes expenses related to 10. Revenue Recognition acquisition and installation of the concerned assets. Exchange Sales are recognised when goods are supplied and are recorded differences arising on account of repayment and year end translation net of returns, trade discounts, rebates, sales taxes and excise duties. of foreign currency liabilities relating to acquisition of fixed assets Income from processing operations is recognised on completion of from a country outside India is adjusted to the carrying cost of the production / dispatch of the goods, as per the terms of contract. respective assets. Export incentives receivable under the Duty Entitlement Pass Book Fixed Assets acquired under finance lease are capitalised at the Scheme and Duty Drawback Scheme are accounted on accrual lower of their face value and present value of the minimum lease basis. payments. Dividend income is recognised when the right to receive the same 3. Intangible Assets is established. The cost of acquisition of trade marks is amortised equally over a Interest income is recognised on a time proportion basis. period of ten years. Income on assets given on operating lease is recognised on a straight 4. Asset Impairment line basis over the lease term. The Company reviews the carrying values of tangible and intangible 11. Research and Development Expenditure assets for any possible impairment at each balance sheet date. An Revenue expenditure on Research and Development is charged to impairment loss is recognized when the carrying amount of an the Profit and Loss Account of the year in which it is incurred. asset exceeds its recoverable amount. In assessing the recoverable Capital expenditure incurred during the year on Research and amount, the estimated future cash flows are discounted to their Development is included under as additions to fixed assets. present value at appropriate discount rate. 12. Depreciation 5. Borrowing Costs Leasehold land is amortised equally over the lease period. Leasehold Borrowing costs that are directly attributable to the acquisition / improvements are amortised over five years. construction of the underlying fixed assets are capitalised as a part of the respective asset, upto the date of acquisition / completion of Depreciation is provided on the straight line method at the rates construction. specified in Schedule XIV to the Companies Act, 1956, except for computer hardware which is depreciated over its estimated useful 6. Investments life of 4 years. Long term investments are carried at cost. Provision for diminution, Depreciation on assets acquired during the year is provided for the if any, in the value of each long term investment is made to recognise full accounting year and no depreciation is charged on the assets a decline, other than of a temporary nature. The fair value of a long sold/discarded during the year, except in case of major additions term investment is ascertained with reference to its market value, and deductions exceeding rupees one crore in which case, the investee’s assets and results and the expected cash flows from proportionate depreciation is provided. the investment. Depreciation on the revalued component is provided on the straight Current investments are carried at lower of cost and fair value. line method based on the balance useful life of the assets as certified 7. Inventories by the valuers. Such depreciation is withdrawn from Revaluation Reserve and credited to Profit and Loss Account. Inventories are valued at lower of cost and net realisable value. Cost is computed on weighted average basis and is net of modvat. 13. Retirement Benefits Finished goods and work in progress include cost of conversion and Retirement benefits to employees comprise payments under defined other costs incurred in bringing the inventories to their present contribution plans like provident fund and family pension as well as location and condition. Provision is made for the cost of obsolescence payments under defined benefit schemes like leave encashment and other anticipated losses, wherever considered necessary. benefit on retirement and gratuity to eligible employees. Payments 8. Provisions and Contingent Liabilities under defined contribution plans are charged to revenue. The liability in respect of defined benefit schemes is provided on the basis of an Provisions are recognised in the accounts in respect of present actuarial valuation at the end of each financial year. probable obligations, the amount of which can be reliably estimated. 14. Incentive Plans Contingent Liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the The Company has a scheme of Performance Linked Variable occurrence or non occurrence of one or more uncertain future Remuneration (PLVR) which rewards its employees based on events not wholly within the control of the Company. Economic Value Addition (EVA). The PLVR amount is related to actual improvement made in EVA over the previous year when compared 9. Foreign Exchange Transactions with expected improvements. The EVA awards flow through a notional Transactions in foreign currency are recorded at the exchange rates bank whereby only the prescribed portion of the bank is distributed prevailing on the date of the transaction. Monetary assets and each year and the balance is carried forward. The amount distributed liabilities denominated in foreign currency are translated at the out of the notional bank is charged to profit and loss account. The period end exchange rates. Forward exchange contracts, remaining notional bank is held at risk and charged to EVA of future years and unsettled at the period end, backed by underlying assets or liabilities is payable at that time, if future performance so warrants. 40 Annual Report 2005-2006
15. Hedging that originate in one period and are capable of reversal in one or Import of crude palm oil by the Company is being hedged by futures more subsequent periods. Deferred tax assets on unabsorbed tax contract on offshore Commodities Exchange. Gains or losses on losses and tax depreciation are recognized only when there is virtual settled contracts is recognized in the profit and loss account and is certainty of their realisation and on other items when there is included in the cost of materials consumed. Futures contracts not reasonable certainty that sufficient future taxable income will be settled as on the Balance Sheet date are marked to market and available against which such deferred tax assets can be realised. losses, if any, are recognized in the profit and loss account, whereas, The tax effect is calculated on the accumulated timing differences the unrealized profit is ignored. at the year end based on the tax rate and laws enacted or substantially enacted on the balance sheet date. 16. Deferred Revenue Expenditure 18. Segment Reporting The compensation payable under the Voluntary Retirement Schemes, the benefit of which is expected to accrue in future is deferred over The Accounting Policies adopted for segment reporting are in line with its payback period. The compensation is generally amortised over the Accounting Policies of the Company. Segment assets include all three to five years depending on the pay back period. operating assets used by the business segments and consist principally of fixed assets, debtors and inventories. Segment liabilities include the 17. Taxes on Income operating liabilities that result from the operating activities of the Current tax is the amount of tax payable on the assessable income business. Segment assets and liabilities that cannot be allocated between for the year determined in accordance with the provisions of the the segments are shown as part of unallocated corporate assets and Income Tax Act, 1961. liabilities respectively. Income / Expenses relating to the enterprise as a Deferred tax is recognized on timing differences, being the whole and not allocable on a reasonable basis to business segments differences between the taxable income and accounting income are reflected as unallocated corporate income / expenses.
SCHEDULE 22 : NOTES TO ACCOUNTS
1. Background v) Stamp duties claimed on certain The Company was incorporated under the Companies Act, 1956 on properties which are under March 7, 1988 under the name of Gujarat-Godrej Innovative appeal by the Company 182.23 182.23 Chemicals Limited. The business and undertaking of the erstwhile vi) Income Tax demands against Godrej Soaps Limited was transferred to the Company under a which the Company has scheme of amalgamation with effect from April 1, 1994 and the preferred appeals 1724.64 586.85 Company’s name was changed to Godrej Soaps Ltd. Subsequently, under a scheme of arrangement the Consumer Products division of vii) Industrial relations matters the Company was demerged with effect from April 1, 2001 into a under appeal 518.06 486.08 separate Company, Godrej Consumer Products Limited (GCPL) and viii) Others 217.26 262.58 the vegetable oils and processed foods manufacturing business of b) Guarantees issued by banks, Godrej Foods Ltd. was transferred to the Company with effect from excluding guarantees issued in June 30, 2001. The Company’s name was changed to Godrej Industries respect of matters reported in Limited on April 2, 2001. (a) & (b) above 1558.31 1789.77 The Company is engaged in the businesses of manufacture and c) Guarantees given by the marketing of oleo-chemicals, their precursors and derivatives, bulk edible oils, trading in medical diagnostic products, estate Company in respect of credit/ management and investment activities. guarantee limits sanctioned by banks to subsidiary and other 2. Contingent Liabilities companies 3085.00 5385.00 This year Previous Year d) Uncalled liability on partly paid Rs. lac Rs. lac shares/debentures 579.15 440.03 a) Claims against the Company 3. Capital Commitments not acknowledged as debts : i) Excise duty demands relating This year Previous Year to disputed classification, post Rs. lac Rs. lac manufacturing expenses, Estimated value of contracts remaining assessable values, etc. which to be executed on capital account, the Company has contested and to the extent not provided 133.99 2059.91 is in appeal at various levels 1537.41 3386.52 ii) Customs Duty demands relating 4. Secured Loans to less charge, differential a) Term loans from banks are secured by first charge by way of duty, classification, etc. 844.53 1062.93 equitable mortgage of the immovable properties including land, iii) Sales Tax demand relating to building and plant & machinery at Vikhroli and Valia factory. purchase tax on Branch Transfer/ Non availability of C Forms, etc. b) Working capital facilities sanctioned by banks are secured by at various levels 207.13 200.96 hypothecation of stocks and book debts. iv) Octroi demand relating to c) The Company had during the year raised Rs. 3,000 lac (Previous classification issue on import of year Rs. 1,000 lac) against the issue of commercial paper. The Palm Stearine and interest thereon 844.46 722.01 amount outstanding there against as on March 31, 2006 is Rs. Nil.
41 Godrej Industries Limited
SCHEDULE 22 : NOTES TO ACCOUNTS (contd.) 5. Investments b) Loans and Advances include Rs. 1033 lac (Previous year Rs. 1033 lac) advanced by the Company to certain individuals a) CBay Systems Limited, USA (CBay USA) has carried out an organizational restructuring during the year, consequent to against pledge by way of deposit of equity shares of Gharda which, all the businesses of CBay Group have been consolidated Chemicals Ltd. The Company has enforced its security and under CBay Systems Limited, India (CBay India), a wholly lodged the shares for transfer in its name, however, the transfer owned subsidiary. The Shares of CBay India have been application has been rejected by Gharda Chemicals Ltd. and distributed in specie on a pro-rata basis to all the stockholders the Company has filed an appeal before the Company Law of CBay USA under the above scheme. The Indian Stockholders Board against the rejection. Interest on the aforesaid loan and will be allotted the shares in CBay India on receipt of approval advances amounting to Rs. 315 lac was accrued upto March from the Reserve Bank of India (RBI). No effect has been given 31, 2000 and has been fully provided for, no interest is being to the aforesaid scheme in the accounts, pending approval of accrued thereafter. The recoverability of the advance is RBI and allotment of shares in CBay India. contingent upon the transfer and / or disposal of the said shares. b) As per the share purchase agreement dated October 29, 2004, In the opinion of the management, the value of the said shares the Company had agreed to sell its entire holding (77,12,642 is greater than the amount of the loans. equity shares) in Godrej Remote Services Limited, a subsidiary Maximum company to CBay Systems Limited, USA for a consideration of balance Rs. 842.81 lac, to be satisfied by issue of 7,04,691 common during the stock of CBay Systems Limited, USA (par value USD 0.01 per year This year Previous year common stock) valued at USD 2.6 per common stock. The Rs. lac Rs. lac Rs. lac agreement was conditional upon receipt of approval from c) Loans and Advances to Foreign Investment Promotion Board (FIPB) and the Reserve subsidiary companies Bank of India (RBI). The sale of the subsidiary company was completed during the year on receipt of the necessary i) Ensemble Holdings approvals in July 2005. The profit on sale amounting to Rs. 71 & Finance Ltd. 35.00 — 11.00 lac is included under Profit on sale of long term investments, iii) Godrej Hicare Ltd. 35.48 — 35.48 an exceptional item. d) Loans and Advances to c) The Company has acquired and sold the following investments associate companies during the year: i) Swadeshi Detergents Ltd. 57.80 47.80 57.80 Mutual Funds - Liquid Funds - Growth Plan This Year Previous Year e) Loans and Advances where No. of Purchase No. of Purchase there is no repayment Units Cost Units Cost schedule or repayment is Rs. lac Rs. lac beyond seven years : Birla Cash Plus Liquid 3,93,85,339 4365.00 34,54,371 600.00 i) D. Kavasmanek Prudential ICICI Liquid 3,18,68,947 4912.00 2,76,48,845 4445.00 and Others 1033.00 1033.00 1033.00 KMMF Liquid 9,19,66,703 12598.00 7,57,03,162 9791.00 Templeton India Liquid —— 7,08,398 9994.00 (refer (b) above) ING Vysya Liquid 5,29,34,599 5608.00 5,88,05,678 6364.00 f) Consideration receivable SBI Magnum Liquid 13,07,93,874 14271.00 11,41,25,847 11990.00 for sale of Foods divisions : Deutsche Insta Cash Plus Fund 45,66,794 500.00 —— Godrej Foods & JMMF Liquid 3,74,97,975 4047.00 4,74,84,632 4970.00 Beverages Ltd. a subsidiary Company 7000.00 3000.00 — This year Previous Year Rs. lac Rs. lac 9. Liabilities 6. Sundry Debtors a) No amount has been claimed from the Company under the Sundry Debtors includes amount due Interest on Delayed Payments to Small Scale and Ancillary from a Company under the same Industrial Undertakings Act, 1993. management : b) The names of small scale industrial undertakings to whom an Godrej Consumer Products Ltd. 175.45 19.60 amount is outstanding for more than 30 days are as under: 7. Cash and Bank Balances Akshay Inorganics S. P. Fabricators Amelon Synthetics Corporation Shree Diamond Silicates Co. Balances with Scheduled Banks in Deposit Accounts include deposits held Jayant Packing Industry Viraj Packging Pvt. Ltd. by bank as security against guarantees Neo Fab issued 18.50 36.04 c) The above information regarding small scale industrial undertakings has been determined to the extent such parties 8. Loans and Advances have been identified on the basis of information available with a) Loans and Advances include an amount of Rs. Nil (Previous the Company, and has been relied upon by the Auditors. year Rs. 0.45 lac) due from directors. Maximum balance during the year Rs. 0.45 lac (Previous year Rs. 5.61 lac).
42 Annual Report 2005-2006
10. Employee Stock Option Plans b) Finance Leases: The Company has during the year instituted an Employee Stock The Company has acquired vehicles under Finance Lease. Liability Option Plan (GIL ESOP) approved by the Board of Directors and for minimum lease payment is secured by hypothecation of the the shareholders on October 24, 2005 and December 1, 2005 vehicles acquired under the lease. The minimum lease payments respectively. The Plan provides for the allotment of 15,00,000 options outstanding as on March 31, 2006, in respect of vehicles acquired convertible into 15,00,000 equity shares to eligible employees of under lease are as under: the participating companies. The compensation committee Period Total Un-matured Present value comprising independent members of the Board of Directors minimum Interest of minimum administers the plan. lease payments lease payments outstanding as on The scheme is administered by an independent ESOP Trust which March 31, 2006 Rs. Lac Rs. Lac Rs. Lac has purchased shares equivalent to the number of options granted Within one year 86.87 13.06 81.76 from the market, out of the finance provided by the participating Later than one year companies to the Trust. and not later than five years 65.59 9.74 54.72 The number and weighted average exercise price of options granted, 152.46 22.80 136.48 exercised and forfeited are as under: 13. Deferred Tax Major components of deferred tax arising on account of timing No. of Wt. average differences as at the year end are: Options exercise price Assets This Year Previous Year Options outstanding at Rs. lac Rs. lac the beginning of the year — — Provision for retirement benefits 294 806 Options granted 350,000 392.35 Provision for doubtful debts/advances 209 307 (plus interest) VRS Expenses 77 — Less : Exercised — — Others 210 228 Forfeited / expired — — 790 1,341 Options outstanding at the year end 350,000 392.35 Liabilities (plus interest) Depreciation 4,608 3,798 The options granted shall vest after three years from the date of VRS Expenses — 45 grant of option, provided the employee continues to be in 4,608 3,843 employment and the option is exercisable within two years after Net Deferred Tax Liability 3,818 2,502 vesting. 14. Hedging Contracts The employee share based payment plans have been accounted a. Reserve Bank of India has permitted the Company to hedge its based on the intrinsic value method and no compensation expense exposure on Crude Palm Oil on offshore exchanges to the extent has been recognized since the market price of the underlying share of its imports. Accordingly, the Company is hedging import of at the grant date is the same / less than the exercise price of the crude palm oil on the Malaysian Commodities Exchange by option, the intrinsic value being Nil. way of futures contracts. The particulars of the futures contracts Had the fair value method of accounting been used, the employee for the year are as under: compensation cost would have been Rs. 204 lac. This Year Previous Year 11. Incentive Plans Details Purchase Sale Purchase Sale Total number of contracts entered There is no positive amount carried forward in notional bank as on during the year 22 12 11 March 31, 2006, after distribution of PLVR for the FY 2005-06 Number of units (25 MT per unit) (Previous year Rs. 947.72 lac). under above contracts 60 60 595 595 12. Leases Future contracts not settled as on March 31, 2006 —— —— a) The Company has entered into leave and licence agreements Number of units under above contracts —— —— in respect of its commercial and residential premises. These are not non-cancellable and range between 11 months to 35 b. The Company uses forward exchange contracts to hedge its months and are renewable by mutual consent on mutually foreign exchange exposure in accordance with its forex policy acceptable terms. Leave and licence arrangements being similar as determined by a Forex Committee. The particulars of the in substance to operating leases, the particulars of the premises forward exchange contracts for the year are as under: under leave and licence arrangement are as under: This Year Previous Year
This Year Previous Year Details Purchase Sale Purchase Sale Rs. lac Rs. lac Total number of contracts Gross carrying amount of premises 2857.79 3816.04 entered during the year 171 77 184 36 Accumulated depreciation 995.81 957.72 Foreign currency value covered Depreciation for the period 115.71 120.20 US Dollar (million) 101.25 33.68 105.48 20.59 Euros (million) —3.34 — 0.18 Total number of contracts outstanding as at the year end 54 20 39 12
43 Godrej Industries Limited
SCHEDULE 22 : NOTES TO ACCOUNTS (contd.)
This Year Previous Year 16. Turnover Turnover includes: This Year Previous Year Details Purchase Sale Purchase Sale Rs. lac Rs. lac Foreign currency value US Dollar (million) 37.30 13.00 39.61 5.84 i) Processing charges 2,003.93 2,125.86 Euros (million) —0.94 —— ii) Export Incentives 554.42 573.27 Uncovered Foreign exchange exposure as at the year end iii) Licence fees and service charges 2,194.51 2,148.27 US Dollar (million) 12.41 — 16.92 — 4,752.86 4,847.40 15. Discontinuing Operations: 17. Exceptional Items During the year, in terms of the agreement dated March 14, 2006 with Godrej Tea Limited (now known as Godrej Beverages & Foods This Year Previous Year Limited), the Foods Division (except the Wadala factory) was sold Rs. lac Rs. lac for a consideration of Rs. 7,000 lac with effect from close of working i) Included under Other Income hours on March 31, 2006. Of the total consideration, Rs. 4,000 lac has been received in cash and the balance Rs. 3,000 lac is - Profit on sale of long term receivable by way of allotment of 68,75,000 equity shares of Rs. 10 investments 2,119.81 3,422.22 each at a premium of Rs. 33.64 per share. - Reversal of provision for The Foods Division is a separate segment as per AS 17, Segment claims payable on culmination of Reporting. The carrying amounts of the total assets disposed, the disputes 175.00 — total liabilities settled and the amounts of revenues and expenses in respect of the ordinary activities attributable to the discontinued - Interest received on deposit operations for the current financial year are as under: placed against above Rs. in lac claim on execution of Continuing Discontinuing Total Operation Operation decree 307.00 — (Foods Division) ii) Payment to Mumbai Port Trust for 2005-06 2004-05 2005-06 2004-05 2005-06 2004-05 regularization of lease included in Turnover 54,226 57,174 20,322 19,161 74,548 76,335 Rent paid. 89.00 — Other Income 5,487 5,962 235 56 5,722 6,018 18. Profit and Loss Account Operating Expenses 51,372 52,845 20,548 19,420 71,920 72,265 a) The amount of exchange loss on account of fluctuation of the Operating Profit 8,341 10,291 9 (203) 8,350 10,088 rupee against foreign currencies and the net charges for forward Interest 2,527 2,269 310 313 2,837 2,582 foreign exchange contracts added to the carrying amount of Profit / (loss) fixed assets during the year is Rs. 0.42 lac (Previous year before tax 5,814 8,022 (301) (516) 5,513 7,506 Rs. 0.90 lac). The exchange difference included in the Profit Income Tax (1,547) 43 48 26 (1,499) 69 and Loss Account is a loss of Rs. 640.31 lac (Previous year Profit / (loss) after tax 4,267 8,065 (253) (490) 4,014 7,575 Rs. 1,736.08 lac). The exchange difference in respect of forward exchange contracts to be recognised in subsequent accounting Total Assets 94,596 76,825 5,079 6,845 94,596 83,670 periods is Rs. 24.68 lac (Previous year Rs. 715.88 lac). Total Liabilities 54,687 47,743 1,589 2,390 54,687 50,133 b) Research and Development Expenditure of revenue nature Cash Flow charged to the Profit & Loss Account amounts to Rs. 139.39 lac from operating activity 219 6,559 1,310 (1,959) 1,529 4,600 (Previous year Rs. 108.38 lac). from investing activity (2,843) (3,934) (463) (127) (3,306) (4,061) from financing activity 2,724 (1,602) (825) 1,882 1,899 280
Note :The total assets and liabilities as on March 31, 2006, excludes the assets and libility of the Foods Division which have been sold as at the close of working hours on March 31, 2006 This Year Previous Year 19. Earnings per share: a. Calculation of weighted average number of equity shares Number of shares at the beginning of the year Nos. 4,86,41,942 4,86,41,942 Number of equity shares outstanding at the end of the year Nos. 4,86,41,942 4,86,41,942 Weighted average number of equity shares outstanding during the year Nos. 4,86,41,942 4,86,41,942 b. Net profit after tax excluding extraordinary items Rs. lac 4,006.62 7,577.22 c. Net profit after tax available for equity shareholders (including extraordinary items) Rs. lac 7,112.42 7,577.22 d. Basic and diluted earnings per share of Rs.6 each excluding extraordinary Items Rupees 8.24 15.58 e. Basic and diluted earnings per share of Rs.6 each including extraordinary Items Rupees 14.62 15.58 Note : There is no impact on basic as well as diluted earnings per share on account of the ESOP implemented during the year, as the scheme does not envisage any fresh issue of share capital. 44 Annual Report 2005-2006
SCHEDULE 22 : NOTES TO ACCOUNTS (contd.) 20. Segment Information Information about primary business segments Rs. lac Chemicals Foods Estate Finance & Investments Others Total This Year Previous Year This Year Previous Year This Year Previous Year This Year Previous Year This Year Previous Year This Year Previous Year Revenue External Sales 51177.71 54306.55 21116.55 19197.24 2282.52 2158.44 4574.90 5822.96 1118.20 867.83 80269.88 82353.02 Add : Unallocated Income — — — — — — — — — —— — Total Income 51177.71 54306.55 21116.55 19197.24 2282.52 2158.44 4574.90 5822.96 1118.20 867.83 80269.88 82353.02 Results Segment result before interest and tax 4760.35 6230.43 (341.38) (856.81) 1471.62 1361.05 4574.90 5372.94 (111.58) 114.87 10353.91 12222.48 Unallocated expenses (2003.63) (2134.79) Interest Expense (net) (2837.42) (2581.67) Profit before tax 5512.86 7506.02 Taxes (1498.68) 69.00 Profit after taxes and before extraordinary items 4014.18 7575.02 Add : Extraordinary Items (Net of taxes) 3105.80 — Add/(Less) : Prior period items (7.56) 2.20 Net Profit 7112.42 7577.22 Segment Assets 44348.01 34793.82 3701.03 8628.96 2768.09 3699.98 40283.49 36151.10 3495.06 365.62 94595.68 83,639.48 Unallocated Assets — 30.19 Total Assets 94595.68 83669.67 Segment Liabilities 19899.83 17062.14 423.86 3896.27 437.17 950.20 44.86 27.85 81.88 62.06 20887.60 21998.52 Unallocated Liabilities 36572.88 28134.80 Total Liabilities 57460.48 50133.32 Total Cost incurred during the year to acquire segment assets 7276.38 915.21 297.77 426.08 12.72 61.20 3,557.39 7,494.02 3,151.82 — 14296.08 8,896.51 Segment depreciation 1784.09 1741.79 239.82 240.22 128.06 133.06 — 450.02 107.46 33.36 2259.43 2598.45 Information about Secondary Business Segments Revenue by Geographical markets India 65120.34 66979.67 Outside India 15149.54 15373.35 Total 80269.88 82353.02 Carrying Amount of Segment assets India 94595.68 83669.67 Outside India —— Total 94595.68 83669.67 Notes: 1. The Company has disclosed Business Segment as the primary segment. Segments have been identified taking into account the nature of the products, the different risks and returns, the organisational structure and the internal reporting system. 2. Chemicals segment includes Oleo Chemicals such as Fatty Alcohols, Fatty Acids, Alfa Olefin Sulphonates and Refined Glycerin. Foods segment includes refined vegetable oils and vanaspati, fruit and vegetable puree, pulp juices and fruit beverages. Estate segment comprises the business of giving premises on leave and license basis. Finance and Investments segment comprises of investment in subsidiaries, associate companies and other investments. 3. The geographical segments are as follows : – Sales in India represent sales to customers located in India – Sales outside India represent sales to customers located outside India.
45 Godrej Industries Limited
21. Related Party Disclosures List of Related Parties and Relationships Mercury Mfg. Co. Ltd. a) Parties where control exists Godrej (Malaysia) Sdn. Bhd. Godrej & Boyce Mfg. Co. Ltd., the holding company. Godrej (Singapore) Pte. Ltd. Subsidiary companies: JT Dragon Pte. Ltd. Ensemble Holdings & Finance Ltd. b) Other related parties with whom the Company had Godrej Agrovet Ltd. transactions: Goldmohur Foods & Feeds Ltd. Associate / Joint Venture Companies Golden Feed Products Ltd. Godrej SaraLee Ltd. Godrej Global Solutions Ltd. Godrej Upstream Ltd. Godrej Global Solutions (Cyprus) Limited Godrej Global Solutions, Inc. Key Management Personnel Godrej International Ltd. Mr. A. B. Godrej - Chairman (Non-Executive) Godrej Global Mideast FZE Mr. N. B. Godrej - Managing Director Godrej Properties Ltd. Ms. T. A. Dubash - Executive Director & President Girikandra Holiday Homes & Resorts Ltd. (Marketing) Godrej Hicare Ltd. Mr. Mathew Eipe - Executive Director & President Godrej Beverages & Foods Ltd. (Chemicals) (formerly known as Godrej Tea Ltd.) Mr. V. Banaji - Executive Director & President Godrej Realty Pvt. Ltd. (Group Corporate Affairs) Godrej Waterside Properties Pvt. Ltd. Mr. M. P. Pusalkar - Executive Director & President Krithika Agro Farm Chemicals & Engineering Industries Pvt. Ltd. (Corporate Projects) Fellow Subsidiaries: Enterprises over which key management personnel exercise Godrej Appliances Ltd. significant influence Godrej Foods Ltd. Godrej Consumer Products Ltd. Godrej Infotech Ltd. Swadeshi Detergents Ltd.
46 Annual Report 2005-2006
SCHEDULE 22 : NOTES TO ACCOUNTS (contd.)
c) Transactions with Related Parties Rs. lac Enterprises over which Key Management Relative Personnel Associate/ Key of Key exercise Holding Subsidiary Fellow Joint Venture Management Management significant Nature of Transaction Company Companies Subsidiaries Companies Personnel Personnel influence Total Sale of Goods 17.08 1.53 — 12.50 — — 890.83 921.94 Previous Year 22.14 0.59 904.96 3.18 — — — 930.87 Sale of Fixed Assets 0.05 1.40 — — — — 264.19 265.64 Previous Year — — 1.46 — — — — 1.46 Sale of undertaking (Foods Division) — 7000.00 — — — — — 7000.00 Previous Year — — — — — — — — Purchase of goods & equipment 30.77 0.14 695.87 6.69 — — 1,033.81 1767.28 Previous Year 60.60 263.54 1086.77 11.49 — — — 1422.40 Commission received — 30.01 2.50 19.78 — — 23.15 75.44 Previous Year — — 21.05 4.50 — — — 25.55 Recovery of establishment & Other Expenses 1.43 271.58 12.52 229.64 — — 815.74 1330.91 Previous Year 13.82 362.57 898.07 216.83 ——0.06 1491.35 Establishment & other exps paid 228.68 19.60 10.50 14.03 — — 89.66 362.47 Previous Year 225.68 26.31 112.17 7.35 — — 0.13 371.64 Sale of Investments — — — — — — — — Previous Year 4950.00 — — — — — — 4,950.00 Purchase of Investments — 190.68 — — — — — 190.68 Previous Year — — — — — — 10.20 10.20 Interest received — 1.18 — — — — 4.99 6.17 Previous Year — 33.47 — — — — 5.85 39.32 Interest paid — — — — — — — — Previous Year — — — — 0.27 — — 0.27 Dividend income — 508.20 25.28 536.25 — — 1,007.66 2077.39 Previous Year — 646.66 562.72 1010.33 — — — 2219.71 Dividend paid 1,248.02 — — — 47.61 424.41 — 1720.04 Previous Year 936.01 2.97 — — 75.60 272.64 — 1287.22 Remuneration — — — — 330.85 — — 330.85 Previous Year — — — — 402.01 — — 402.01 Finance provided including loans & equity contributions — 1,294.46 — (3.30) — — (10.00) 1,281.16 Previous Year — 4,292.37 (3.08) (24.10) — — — 4265.19 Finance repaid during the year — 103.48 — — — — — 103.48 Previous Year — 1,558.50 — — — — 8.00 1,566.50 Guarantees & collaterals given — (2,300.00) — — — — — (2,300.00) Previous Year — (700.00) — 1,350.00 — — — 650.00 Balance Outstanding as on March 31, 2006 Receivables 1.42 3016.15 — 18.54 — — 222.25 3258.36 Previous Year 69.12 91.92 19.76 10.67 — — — 191.47 Payables 0.01 113.57 — 42.60 — — 102.85 259.03 Previous Year 4.33 198.98 61.80 35.29 — — 0.11 300.51 Guarantees Outstanding — 667.00 1,000.00 1,350.00 — — — 3017.00 Previous Year — 2,967.00 1,000.00 1,350.00 — — — 5317.00
47 Godrej Industries Limited d) The significant Related Party transactions are as under: Rs. lac Rs. lac Nature of Transaction Amount Nature of Transaction Amount Sale of goods Interest received - Godrej Consumer Products Ltd. 890.83 - Swadeshi Detergents Ltd. 4.99 Sale of fixed assets Finance repaid during the year - Godrej Consumer Products Ltd. 264.19 - Ensemble Holdings & Finance Ltd. 68.00 - Godrej Hicare Ltd. 35.48 Sale of undertaking (Foods Division) - Godrej Beverages & Foods Ltd. 7,000.00 Guarantees & collaterals given - Godrej Beverages & Foods Ltd. (2,800.00) Purchase of goods & equipment - Godrej Global Solutions Ltd. 500.00 - Godrej Consumer Products Ltd. 1,033.81 - Godrej Foods Ltd. 692.34 Dividend income - Godrej Consumer Products Ltd. 1,007.66 Commission received - Ensemble Holdings & Finance Ltd. 306.67 - Godrej Consumer Products Ltd. 23.15 - Godrej Beverages & Foods Ltd. 24.85 Dividend paid - Godrej Upstream Ltd. 19.78 - Godrej & Boyce Mfg. Co. Ltd. 1,248.02 Recovery of establishment & other expenses Remuneration - Godrej Consumer Products Ltd. 815.74 - Mr. N. B. Godrej 82.11 - Godrej Saralee Ltd. 229.64 - Ms. T. A. Dubash 50.57 - Godrej Agrovet Ltd. 175.10 - Mr. Mathew Eipe 62.56 - Mr. V. F. Banaji 77.07 Establishment & other exps paid - Mr. M. P. Pusalkar 48.93 - Godrej & Boyce Mfg. Co. Ltd. 228.68 - Godrej Consumer Products Ltd. 89.66 Finance provided including loans & equity contributions Purchase of Investments - Godrej Global Solutions Ltd. 210.00 - Ensemble Holdings & Finance Ltd. 190.68 - Godrej International Ltd. 866.15 - Godrej Hicare Ltd. 171.60 This Year Previous Year Rs. lac Rs. lac Rs. Lac 22. Computation of Profits under Section 349 of the Companies Act, 1956 Profit for the year after tax as per Profit & Loss Account 7112.42 7575.52 Add : Depreciation as per accounts 2259.43 2148.43 Managerial Remuneration 330.85 402.01 Profit/(loss) on sale of assets under Section 349 294.00 (127.31) Provision for doubtful debts/advances and depletion in value of investments 10.87 457.02 Provision for Tax (including tax on extraordinary items) 1903.68 (69.00) 4798.83 2811.15 11911.25 10386.67 Less : Depreciation under Section 350 of the Companies Act, 1956 2240.45 2093.73 Profit/(loss) on sale of assets as per books 309.13 (123.78) Profit on sale of investments 2155.37 3491.26 Profit on sale of Foods division 3510.80 — 8215.75 5461.21 Net Profit for the purpose of Directors’ Remuneration 3695.50 4925.46 Managerial remuneration to Managing and Executive Directors @ 10% of the net profits 369.55 492.55
Managerial remuneration paid/payable 330.85 402.01
48 Annual Report 2005-2006
SCHEDULE 22 : NOTES TO ACCOUNTS (contd.) This Year Previous Year Rs. lac Rs. lac 23. Managerial Remuneration Salaries and allowances 289.12 342.48 Contribution to Provident Fund 16.66 13.64 Estimated Monetary value of perquisites 15.47 39.44 Directors’ Fees 9.60 6.45 TOTAL 330.85 402.01
24. Auditors’ Remuneration Audit fees (including Rs. 0.92 lac to branch auditors, Previous Year Rs. 0.98 lac) 30.92 25.48 Tax audit fees 5.50 4.50 Certification and other services 7.65 11.47 Tax Consultation and representation 9.20 3.15 Consultation and management services 4.30 2.99 Out of pocket expenses 0.71 0.13 TOTAL 58.28 47.72
25. Turnover (Net) This Year Previous Year Item Unit Quantity Value Quantity Value Rs. lac Rs. lac Fatty Acids MT 56110 17447.97 51369 17014.51 Glycerin MT 8997 3491.25 8390 3796.68 Alpha Olefin and its precursors and derivatives MT 62657 28311.15 71967 31517.63 Oils & Vanaspati MT 38048 14461.23 27597 13652.66 Fruit & Vegetable Puree, Pulp & Juices MT 4285 1724.44 3951 1616.33 Fruit beverages and fruit based products KL 8586 2289.06 8645 2264.50 Soya Milk MT 631 249.29 591 224.64 Medical Diagnostic Products 958.02 803.33 Others 5615.85 5444.96 TOTAL 74548.26 76335.24
26. Inventories - Finished Goods March 31, 2006 March 31, 2005 March 31, 2004 Item Unit Quantity Value Quantity Value Quantity Value Rs. lac Rs. lac Rs. lac Fatty Acids MT 2278 817.98 1665 629.54 2245 878.39 Glycerin MT 638 236.59 202 90.16 121 63.46 Alpha Olefin and its precursors and derivatives MT 5710 2,300.62 1649 499.65 1867 723.39 Oils & Vanaspati MT ——1075 509.64 1098 575.99 Fruit & Vegetable Puree, Pulp & Juices MT ——5338 1714.67 1576 343.99 Fruit beverages and fruit based products KL ——748 165.04 650 153.89 Soya Milk MT ——68 15.45 — — Medical Diagnostic Products 119.18 180.20 307.60 Others — 101.70 66.80 TOTAL 3474.37 3906.05 3113.51
49 Godrej Industries Limited
SCHEDULE 22 : NOTES TO ACCOUNTS (contd.) 27. Raw Materials Consumed This Year Previous Year Unit Quantity Value Quantity Value Rs. lac Rs. lac Oils & Fats MT 126174 31036.70 126151 32793.15 Chemicals and Catalysts MT 19942 4550.73 21314 4546.98 Fruit Pulp & Concentrates KL 1070 1073.90 5170 2639.87 Packing Materials, etc. 3616.73 4931.72 TOTAL 40278.06 44911.72 Raw materials consumption includes consumption for production of captively consumed items.
28. Purchase of Goods This Year Previous Year Unit Quantity Value Quantity Value Rs. lac Rs. lac Fatty Acids MT 134 42.63 1002 380.73 Oils & Vanaspati MT 29063 8910.68 11914 4,292.97 Pulp MT 1011 473.88 254 112.18 Medical Diagnostic Products 461.33 379.51 Others 62.25 717.82 TOTAL 9950.77 5883.21
29. Licensed, Installed and Utilised Capacity Item Unit Licensed Installed Capacity Actual Capacity Production This Previous This Previous Year Year Year Year SCHEDULED Fatty Acids MT } 32000 32000 46307 37014 Glycerin MT } 8280 8280 9434 8448 Alpha Olefin and its precursors } and derivatives MT } 35000 35000 66933 72699 Soaps MT } 26381 26381 10338 10944 Cosmetics MT } 1200 1200 – – Fruit Beverages & Fruit } based products KL } 30000 30000 18467 46509 Fruit & Vegetable Puree, } N.A Pulp & Juices. MT } 5000 5000 3222 8581 Refined Oils & Vanaspati MT } 38700 38700 10099 14390 Dietetic & Geriatic foods MT } 250 250 4155 – U.H.T./Sweetened Flavoured Milk KL } 1800 1800 1182 1,136 Instant Tea/Coffee Plant MT } 3000 3000 879 690 Synthetic Detergents MT } 11250 11250 14699 16888 Hydrogen (Captive consumption) NM3 } 1224000 1224000 518091 411412 Oxygen (By-Product) NM3 } 612000 612000 259046 205706 Notes : a) The Licensed capacities are not applicable in view of the exemption from licensing granted under Notification SO 477(E) dated July 25, 1991, issued under the Industries (Development & Regulation) Act, 1951 b) Alpha Olefin and its precursors and derivatives includes Fatty Alcohols and A.O. Sulphonates. c) Installed capacity excludes the installed capacity for manufacture of intermediates which are intended to be used for internal consumption to manufacture A.O and its precursors and derivatives. d) Production of A.O and its precursors and derivatives include 14,919 MT produced under process contracts for third parties.
50 Annual Report 2005-2006
SCHEDULE 22 : NOTES TO ACCOUNTS (contd.) This Year Previous Year 35. Interest in Joint Ventures: Rs. lac Rs. lac The Company’s interests, as a venturer, in jointly controlled entities are: 30. Value of Imports on CIF Basis (includes Name Countries Principal Percentage of only Imports directly made) of activities Ownership Raw materials 23326.81 15240.87 Incorporation interest as at Goods for resale 50.13 1136.45 31st March, 2006 Stores & spares 290.72 270.46 Godrej India Household 20.00% Capital goods 731.15 36.89 SaraLee Ltd. Insectisides TOTAL 24398.81 16684.67 The Company’s interests in Joint Venture are reported as Long Term Investments (Schedule “6”) and stated at cost less provision, if any, 31. Expenditure in Foreign Currency for permanent diminution in value of such investments. The Interest 352.82 833.15 Company’s share of each of the assets, liabilities, income and Travelling expenditure 83.98 80.37 expenses, etc. related to its interests in this joint venture are: Other expenditure 399.93 353.17 Expenses for Foreign Branch: This year Previous year - Salaries and allowance 87.17 84.91 Rs. lac Rs. lac - Rent 20.80 21.96 I. ASSETS - Others 38.07 32.64 1. Fixed Assets 967.17 862.07 TOTAL 982.77 1406.20 2. Investments — — 3. Current Assets, This year Previous year Loans and Advances Rs. lac Rs. lac a) Inventories 898.23 894.18 b) Sundry Debtors 375.64 255.10 32. Value of Consumption of % % c) Cash and Bank Balances 577.36 865.31 Raw Materials & Spares d) Other Current Assets 0.22 0.24 Raw Materials e) Loans and Advances 463.50 378.54 Imported (including duty content) 26138.87 65 28354.38 63 II. LIABILITIES Indigenous 14139.19 35 16557.34 37 1. Loan Funds 40278.06 100 44911.72 100 a) Secured Loans 70.98 96.19 b) Unsecured Loans — — Spares 2. Current Liabilities Imported (including and Provisions duty content) 240.15 38 373.04 46 a) Liabilities 1251.71 1640.83 Indigenous 391.72 62 441.27 54 b) Provisions 127.05 52.64 631.87 100 814.31 100 3. Deferred Tax- Net 21.02 23.03
This year Previous year III. INCOME Rs. lac Rs. lac 1. Turnover 33. Dividends Remitted in (Net of excise) 8911.43 9757.50 Foreign Currency 2. Other Income 152.84 124.16 (subject to deduction of tax, IV. EXPENSES as applicable) 1. Material consumed Final Dividend for and purchase of goods 4970.02 4837.66 Financial Year 2004-05 to 2. Expenses 2724.80 4039.40 6 shareholders on 1110 shares 0.04 0.01 3. Inventory change 119.20 (43.57) 4. Depreciation 91.38 137.11 TOTAL 0.04 0.01 5. Interest 12.12 20.55 6. Provision for Taxation 117.79 63.77
This year Previous year V. OTHER MATTERS Rs. lac Rs. lac 1. Contingent Liabilities 207.02 262.35 34. Earnings in Foreign Exchange 2. Capital Commitments 2.48 0.52 Export of goods (F.O.B. : 36. Figures for the previous year have been regrouped wherever this year Rs.14150.42 lac 15082.08 15309.42 necessary. previous year Rs.14793.04 lac) Dividend 65.80 62.21 Others 1.66 1.72 TOTAL 15149.54 15373.35
51 Godrej Industries Limited
SCHEDULE 22 : NOTES TO ACCOUNTS (contd.)
37. Additional information as required under part IV of Schedule VI to the Companies Act, 1956
1. Registration Details Registration No : 97781 State Code : 11 Balance Sheet Date : 31/3/2006 2. Capital raised during the year (Amount in Rs. lac) Public Issue : Nil Rights Issue : Nil Bonus Issue : Nil Private Placement (Preference) : Nil 3. Position of mobilisation and deployment of funds (Amount in Rs. lac) Total Liabilities : 73,667.33 Total Assets : 73,667.33 Sources of Funds Paid-up Capital : 2,918.52 Reserves & Surplus : 34,216.68 Secured Loans : 24,910.89 Unsecured Loans : 7,803.24 Deferred Tax Liability : 3,818.00 Application of Funds Net Fixed assets : 28,594.35 Investments : 37,134.67 Net Current Assets : 5,718.95 Misc. Expenditure : 2,219.36 Accumulated Losses : — 4. Performance of Company (Amount in Rs. lac) Turnover (Income from Operations) : 74,548.26 Total Expenditure (Net of Other Income) : 69,035.40 Profit/(Loss) before tax : 5,512.86 Profit/(Loss) after tax : 4,014.18 Earning per Share in Rs. (on an annualised basis) : 8.24 Dividend rate % : 83.33% Generic Names of three principal products/services of Company Item Code No. : 38.23 * Product description : Fatty Acids/Fatty Alcohols Item Code No. : 15.16 * Product description : Vanaspati/Refined Oils Item Code No. : 22.02 * Product description : Fruit Drinks
(*represents Heading No. of the Harmonized Commodity Description and Coding System)
52 Godrej Industries Limited – Consolidated Accounts
REPORT OF THE AUDITORS TO THE BOARD OF DIRECTORS OF THE GODREJ INDUSTRIES LIMITED ON CONSOLIDATED FINANCIAL STATEMENTS
1. We have audited the attached Consolidated Balance Sheet of accordance with the requirements of Accounting Standard (AS) 21 Godrej Industries Limited and its subsidiaries as at March 31, 2006, – Consolidated Financial Statements, Accounting Standard (AS) 23 and also the Consolidated Profit and Loss Account and the – Accounting for Investments in Associates in Consolidated Financial Consolidated Cash Flow Statement for the year then ended, both Statements and Accounting Standard (AS) 27 – Financial Reporting annexed thereto. These consolidated financial statements are the of Interests in Joint Ventures issued by the Institute of Chartered responsibility of Godrej Industries Limited’s management. Our Accountants of India. responsibility is to express an opinion on these financial statements based on our audit. 6. Reference is invited to note 10 of Schedule 21- Notes to Accounts, regarding the recoverability of advances given to certain individuals 2. We conducted our audit in accordance with the auditing standards amounting to Rs. 1033 lakh being contingent upon the transfer generally accepted in India. Those standards require that we plan and/or disposal of the shares pledged against the loan. The said and perform the audit to obtain reasonable assurance whether the shares were lodged for transfer which application was rejected financial statements are free of material misstatements. An audit and the Company has preferred an appeal to the Company Law includes, examining on a test basis, evidence supporting the Board. The impact thereof on the profit for the year could not be amounts and disclosures in the financial statements. An audit also ascertained. includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall 7. Based on our audit and on consideration of the reports of other financial statement presentation. We believe that our audit provides auditors on separate financial statements, and the management’s a reasonable basis for our opinion. certification of the unaudited financial statements, in our opinion, the consolidated financial statements, subject to the observations in 3. We did not audit the financial statements of some subsidiaries and para (6) above, give a true and fair view in conformity with the joint ventures whose financial statements reflect the Group’s share accounting principles generally accepted in India: of total assets of Rs. 7,326 lakhs as at March 31, 2006 and the Group’s share of total revenues of Rs. 25,348 lakhs and net cash a) in case of the Consolidated Balance Sheet, of the consolidated outflow amounting to Rs. 38 lakhs for the year ended on that date state of affairs of the Godrej Industries Limited Group as at as considered in the consolidated financial statements. These March 31, 2006; financial statements have been audited by other auditors whose reports have been furnished to us and our opinion, insofar as it b) in case of the Consolidated Profit and Loss Account, of the relates to the amounts included in respect of the subsidiaries and consolidated results of operations for the year ended on that joint ventures is based solely on the report of the other auditors. date; and 4. As stated in Note 2 of Schedule 21 to the Consolidated Financial c) in case of the Consolidated Cash Flow Statement, of the Statements, a joint venture whose Financial Statements reflect the consolidated cash flows for the year ended on that date. Group’s share of total assets of Rs. 703 lakhs as at March 31, 2006 and the Group’s share of total revenues of Rs. 242 lakhs and net cash inflow amounting to Rs. 70 lakhs and associates insofar as it For and on behalf of relates to the Group’s share of the associates’ net profit of Rs. 56 KALYANIWALLA & MISTRY lakhs for the year ended on that date have not been audited and Chartered Accountants have been considered in the consolidated financial statements based solely on the un audited seprate financial statements certified by the management. Viraf R. Mehta 5. We report that the consolidated financial statements have been Partner prepared by the management of Godrej Industries Limited in Mumbai, May 26, 2006 Membership No.: 32083
53 Godrej Industries Limited – Consolidated Accounts
CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2006 This Year Previous Year Schedule Rs. lac Rs. lac Rs. lac SOURCES OF FUNDS 1. Shareholders’ Funds (a) Share capital 1 2918.52 2912.58 (b) Share Application Money 6000.00 – (c) Reserves & surplus 2 33481.41 32177.16 42399.93 35089.74 2. Minority Interest 3625.67 3390.95 3. Loan Funds (a) Secured loans 3 29982.41 27970.40 (b) Unsecured loans 4 27140.40 12295.52 57122.81 40265.92 4. Deferred Tax Liability 3876.13 2409.81 TOTAL 107024.54 81156.42
APPLICATION OF FUNDS 5. Fixed Assets 5 (a) Gross block 77659.89 67005.18 (b) Less : Depreciation/Impairment 32997.46 32523.15 (c) Net block 44662.43 34482.03 (d) Capital work-in-progress 2274.89 1819.61 46937.32 36301.64 6. Goodwill (on consolidation) 11275.93 10967.94 7. Investments 6 24100.96 17479.53 8. Current Assets, Loans and Advances (a) Inventories 7 28500.97 22617.01 (b) Sundry debtors 8 23052.69 20744.80 (c) Cash and bank balances 9 9106.59 5343.11 (d) Other Current Assets 24.96 – (e) Loans and advances 10 17212.32 16320.73 77897.54 65025.65 Less : Current Liabilities and Provisions (a) Liabilities 11 49278.68 43302.23 (b) Provisions 12 6127.98 5455.60 55406.67 48757.83 Net Current Assets 22490.87 16267.81 9. Miscellaneous Expenditure 13 2219.46 139.49 (To the extent not written off or adjusted) TOTAL 107024.54 81156.42 Significant Accounting Policies 20 Notes to Accounts 21
The Schedules referred to above form an integral part of the Balance Sheet.
As per our Report attached Signatures to Balance Sheet and Schedules 1 to 13, 20 and 21
For and on behalf of A.B. Godrej N.B. Godrej M. Eipe M.P. Pusalkar Kalyaniwalla & Mistry Chairman Managing Director Executive Director Executive Director Chartered Accountants & President (Chemicals) & President (Corporate Projects)
V. R. Mehta S.K. Bhatt V. Srinivasan Partner Executive Vice President (Corporate Executive Vice President Mumbai, May 26, 2006 Services) & Company Secretary (Finance & Estate) 54 Annual Report 2005-2006
CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006 This Year Previous Year Schedule Rs. lac Rs. lac INCOME Turnover (gross) 209816.33 200999.17 Less : Excise Duty 5519.15 5863.69 Turnover (net) 204297.18 195135.48 Other Income 14 6319.73 4781.82 210616.91 199917.30 EXPENDITURE Materials consumed and cost of sales 15 150164.44 142231.77 Expenses 16 46763.12 43866.10 Inventory change 17 (2220.73) (784.23) Interest and financial charges (net) 18 4528.44 3496.47 Depreciation 3766.77 3360.55 (Net of transfer from Revaluation Reserve Rs. 168.43 lac, Previous year Rs. 223.80 lac) 203002.04 192170.66 Profit Before Tax 7614.87 7746.64 Provision for taxation - Current Tax 1197.49 1359.87 - Fringe benefit Tax 114.85 – - Deferred Tax 1242.82 (718.79) Profit For The Year After Taxation 5059.71 7105.56 Prior Period adjustments (net) 19 (14.38) 4.17 5045.33 7109.73 Share of Loss in Associates (78.09) (137.70) Profit before Minority Interest 4967.24 6972.03 Share of Minority Interest (67.47) (504.91) Profit After Minority Interest 4899.77 6467.12 Surplus brought forward 17913.78 15317.18 Profit Available For Appropriation 22813.55 21784.30 APPROPRIATIONS: Dividend on Equity Shares – Interim 106.15 209.00 – Final 2552.25 2044.86 Tax on distributed profits 683.27 547.10 Transfer to General Reserve 1251.61 1069.56 Surplus carried forward 18220.27 17913.78 TOTAL 22813.55 21784.30
Basic and Diluted Earnings per share (Face Value Rs. 6 per share) 10.09 12.05 (refer note 17) Significant Accounting Policies 20 Notes to Accounts 21
The Schedules referred to above form an integral part of the Profit and Loss Account.
As per our Report attached Signatures to Profit & Loss Account and Schedules 14 to 21
For and on behalf of A.B. Godrej N.B. Godrej M. Eipe M.P. Pusalkar Kalyaniwalla & Mistry Chairman Managing Director Executive Director Executive Director Chartered Accountants & President (Chemicals) & President (Corporate Projects)
V. R. Mehta S.K. Bhatt V. Srinivasan Partner Executive Vice President (Corporate Executive Vice President Mumbai, May 26, 2006 Services) & Company Secretary (Finance & Estate) 55 Godrej Industries Limited – Consolidated Accounts
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006 This Year Previous Year A. Cash Flow from operating activities : Rs. lac Rs. lac Profit before tax 7614.87 7746.65 Adjustments for : Depreciation 3766.77 3360.55 Foreign exchange 119.45 946.54 Profit on sale of investments (2299.64) (3458.14) Loss/(Profit) on sale of fixed assets (373.81) 182.24 Dividend income (1299.75) (580.27) Interest income (945.81) (746.62) Interest expense 4352.16 3214.73 Voluntary retirement compensation paid (2685.07) (100.42) Deferred expenditure written off 704.02 209.22 Provision for diminution in value of investments (364.79) 531.76 Provision for doubtful debts and sundry balances written off (net) (6.04) (99.86) Others 264.97 (273.48) Operating profit before working capital changes 8847.33 10932.90 Adjustments for : Inventories (5828.97) 1043.25 Trade and other receivables (7115.65) (2545.85) Trade payables 8257.31 2590.17 Cash generated from operations 4160.02 12020.47 Direct taxes paid (1554.31) (1392.52) Direct taxes refund received 125.75 140.11 Net Cash from operating activities 2731.46 10768.06 B. Cash Flow from investing activities : Purchase of fixed assets (16143.97) (5270.97) Proceeds from sale of fixed assets 1523.12 687.69 Acquisition of new businesses (1246.10) – Purchase of investments (57587.86) (56076.53) Proceeds from sale of investments 54265.71 53425.25 Intercorporate deposits/Loans (net) 1289.31 457.08 Interest received 953.84 795.29 Dividend received 1284.18 583.21 Net Cash used in investing activities (15661.77) (5398.98) C. Cash Flow from financing activities : Proceeds from share capital 6579.40 – Proceeds from issue of debentures 1154.46 – Proceeds from borrowings 55685.42 25812.12 Repayments of borrowings (37498.41) (21935.24) Bank overdrafts (net) (2135.52) (3379.95) Interest paid (4587.88) (3227.87) Dividend paid (2036.10) (1571.79) Tax on distributed profits (467.58) (448.82) Net Cash from/(used) in financing activities 16693.79 (4751.55) Net increase in cash and cash equivalents 3763.48 617.53 Cash and cash equivalents (Opening Balance) 5343.11 4725.58 Cash and cash equivalents (Closing Balance) 9106.59 5343.11 (including share in jointly controlled entities - Rs. 675.15 lac) Notes : This Year Previous Year Rs. lac Rs. lac 1. Cash and Cash equivalents. Cash on hand and balances with banks 9113.75 5343.23 Effect of exchange rate changes (7.16) (0.12) Cash and cash equivalents 9106.59 5343.11 2. The above cash flow statement includes share of cash flows from jointly controlled entities as under: a. Net cash from operating activities 680.73 b. Net cash used in investing activities (642.92) c. Net cash used in financing activities (353.35)
As per our Report attached Signatures to Cash Flow statement
For and on behalf of A.B. Godrej N.B. Godrej M. Eipe M.P. Pusalkar Kalyaniwalla & Mistry Chairman Managing Director Executive Director Executive Director Chartered Accountants & President (Chemicals) & President (Corporate Projects)
V. R. Mehta S.K. Bhatt V. Srinivasan Partner Executive Vice President (Corporate Executive Vice President Mumbai, May 26, 2006 Services) & Company Secretary (Finance & Estate) 56 Annual Report 2005-2006
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006 This Year Previous Year Rs. lac Rs. lac SCHEDULE 1 : SHARE CAPITAL Authorised: 13,33,33,333 Equity shares of Rs. 6 each 8000.00 8000.00 10,00,00,000 Unclassified Shares of Rs. 10 each 10000.00 10000.00 18000.00 18000.00 Issued, Subscribed and Paid-up: 4,86,41,942 Equity shares of Rs. 6 each fully paid 2918.52 2912.58 2918.52 2912.58 Of the above 3,12,00,398 shares are held by Godrej & Boyce Mfg. Co. Limited, the holding Company SCHEDULE 2 : RESERVES AND SURPLUS As at Additions Deductions As at 1.4.2005 31.03.2006 Securities Premium Account 1099.27 – 0.10 1099.17 1099.16 0.11 – 1099.27 Capital Investment Subsidy Reserve 80.42 – 0.03 80.39 65.97 14.45 – 80.42 Revaluation Reserve 3031.76 – 740.37 2291.39 3256.59 – 224.83 3031.76 Special Reserve u/s. 451C of RBI Act, 1934 – 117.39 – 117.39 Capital Redemption Reserve 3125.00 – – 3125.00 3125.00 ––3125.00 General Reserve 6309.90 1251.61 – 7561.51 6152.34 1069.56 912.00 6309.90 Foreign Exchange Fluctuation Reserve 12.29 23.29 – 35.58 12.29 ––12.29 Profit & Loss Account 17913.79 306.48 – 18220.27 15317.18 2596.61 – 17913.79 Share in Jointly Controlled Entities 604.73 345.98 – 950.71 706.87 – 102.14 604.73 Total Reserves – This Year 32177.16 2044.75 740.50 33481.41 – Previous Year 29723.11 3680.73 1238.97 32164.87
This Year Previous Year SCHEDULE 3 : SECURED LOANS Rs. lac Rs. lac Term loans from financial institutions 565.68 1155.98 Term loans from banks 27577.29 23303.20 Bank overdrafts 1768.46 3415.03 Share in jointly controlled entities 70.98 96.19 29982.41 27970.40 SCHEDULE 4 : UNSECURED LOANS Fixed deposits 158.59 471.45 Intercorporate deposits 1828.10 3663.10 Short term loans from banks 21777.87 7691.41 Other loans from banks 2337.17 – Sales tax deferment facility – 316.43 Share in jointly controlled entities 1038.67 153.13 27140.40 12295.52
SCHEDULE 5 : FIXED ASSETS Rs. lac ASSETS GROSS BLOCK DEPRECIATION/IMPAIRMENT NET BLOCK As on Deductions/ As on Upto Deductions/ For the Upto As on As on 1.4.2005 Additions Adjustments 31.03.2006 31.03.2005 Adjustments Year 31.03.2006 31.03.2006 31.03.2005 Tangible Assets Land 1303.87 130.00 24.18 1409.69 60.50 16.30 3.82 48.02 1361.67 1243.37 Buildings 11430.62 1246.01 1265.25 11411.38 2988.99 314.75 359.73 3033.97 8377.41 8441.63 Plant & Machinery 43849.60 11553.81 3178.38 52225.03 24636.36 2,564.15 2523.21 24595.42 27629.61 19213.24 Research Centre 150.39 – – 150.39 59.25 – 5.05 64.30 86.09 91.14 Furniture & Fixtures 1483.35 198.82 73.69 1608.48 831.93 42.07 106.61 896.47 712.01 651.42 Office & Other Equipments 1403.91 261.32 285.31 1379.92 733.16 208.43 124.44 649.17 730.75 670.75 Vehicles 1264.62 316.54 232.93 1348.23 631.62 130.22 154.02 655.42 692.81 633.00 Trees Development Cost 454.69 – – 454.69 209.22 – 30.33 239.55 215.14 245.47 Intangible Assets Technical Know-how Fees 200.00 – – 200.00 195.69 – 4.29 199.98 0.02 4.31 Goodwill – 1116.02 – 1116.02 – – 182.73 182.73 933.29 – Trademarks 3211.99 450.00 152.27 3509.72 995.82 150.35 261.03 1106.50 2403.22 2216.17 Assets Acquired Under Finance Lease Plant & Machinery 52.31 442.11 – 494.42 – – 20.99 20.99 473.43 52.31 Vehicles 274.25 69.74 31.95 312.04 117.09 12.66 72.13 176.56 135.48 157.16 Share in jointly controlled entities 1925.59 162.49 48.20 2039.88 1063.52 26.52 91.38 1128.38 911.50 862.07 TOTAL - This Year 67005.19 15946.86 5292.16 77659.89 32523.15 3465.45 3939.76 32997.46 44662.43 34482.04 - Previous Year 65238.97 3786.87 2020.65 67005.18 29845.11 906.30 3584.34 32523.15 Capital Work-in-Progress 2274.89 1819.61 TOTAL 46937.32 36301.65 1. Land includes leasehold land of Rs.291.75 lac (Previous Year Rs.232.16 lac) which is being amortised over the period of lease. 2. Buildings, Plant & Machinery and Research Centre at Vikhroli Factory were revalued on 30th June, 1992 on the basis of a Valuation Report submitted by professional valuers. 3. Depreciation for the year includes Rs.168.43 Lac (Previous Year Rs.223.80 Lac) being depreciation on revalued component of the fixed assets. 4. Buildings includes Rs.0.01 lac (Previous Year Rs.0.01 lac) being the value of investment in shares of Co-operative Housing Society. 5. Buildings include Rs. 1701.74 lac (Previous year Rs. 2651.08 lac) being the cost of equity shares in Tahir Properties Ltd., representing the right of the Company to three (previous year five) flats in the property. 6. Accumulated depreciation includes impairment loss of Rs. 707.90 lac on plant & machinery in an earlier year. 7. Capital work-in-progress is net of impairment loss of Rs. 204.10 lac provided on an infructuous asset under construction. 57 Godrej Industries Limited – Consolidated Accounts
SCHEDULE 6 : INVESTMENTS FACE NUMBER AMOUNT Investee Company/Institutions VALUE Qty Acquired Sold Qty As on As on As on During During As on Notes 31.03.06 31.03.05 (Rs.) 01.04.05 Year Year 31.03.06 Rs. lac Rs. lac LONG TERM INVESTMENTS - At cost A. TRADE INVESTMENTS Equity Shares : Fully Paid Bharuch Eco-Aqua Infrastructure Ltd. 10 4,40,000 – – 4,40,000 44.00 44.00 Preference Shares : Partly Paid Godrej Foods Ltd. 10 50,00,000 – – 50,00,000 (b) 450.00 450.00 (8% Redeemable Cumulative Preference Shares, 2012) Tahir Properties Ltd. (Class-A) 100 25 – – 25 (b) 0.02 0.02 B. OTHER INVESTMENTS Equity Shares : Fully Paid Quoted : Godrej Consumer Products Ltd. 4 73,24,027 – 5,90,000 67,34,027 10730.01 11670.12 Godrej Foods Ltd. 1 14,84,864 – 14,84,864 – – 13.64 Others – – – – 1.19 1.08 Equity Shares : Fully Paid Unquoted : Associate Companies Compass Connections Ltd. £0.25 13,692 – – 13,692 159.18 142.99 Godrej Upstream Ltd. 10 9,000,000 – – 9,000,000 457.06 591.86 Swadeshi Detergents Ltd. 10 2,09,370 – – 2,09,370 50.28 49.54 Creamline Dairy Products Ltd. 10 23,90,911 – – 23,90,911 1014.23 971.88 Creamline Nutrients Ltd. 10 3,51,352 – – 3,51,352 95.96 90.79 Polychem Hygiene Laboratories Pvt. Ltd. 10 4,55,000 – – 4,55,000 170.98 178.72 Personalitree Academy Ltd. 10 3,89,269 – – 3,89,269 68.24 68.24 Other Companies Gharda Chemicals Ltd. 100 114 – – 114 (a) 11.57 11.57 Avestha Gengraine Technologies Pvt. Ltd. 10 1,05,500 70,244 – 1,75,744 767.13 450.25 karROX Technologies Ltd. 10 2,50,000 – – 2,50,000 100.50 100.50 Krithika Agro Farm Chemicals & Engg. Inds. Ltd. 10 – 7,600 7,600 0.76 – Tahir Properties Ltd. (Partly Paid) 100 25 – – 25 (b) 0.01 0.01 Boston Analytics LLC (Partly Paid) $1 – 7,81,250 – 7,81,250 (b) 258.76 – Common Stock : Unquoted : C Bay Systems Ltd. $0.01 13,98,798 31,87,275 – 45,86,073 (c) 5430.14 2177.23 Preferred Stock: Fully Paid Unquoted : Verseon LLC - Class A preferred units $1.90 – 13,15,789 – 13,15,789 1142.34 – Convertible Debentures : Unquoted : Avestha Gengraine Technologies Pvt. Ltd. 10000000 – 3 – 3 300.00 – Government Securities Unquoted : Kisan Vikas Patra – – – – ––0.32 National Saving Certificate 92,000 – – – – 1.37 0.92 Indira Vikas Patra 2,000 – – – – 0.01 0.03 Shares in Co-operative Societies - Fully Paid Unquoted : Sachin Industrial Co-op. Society 500 3 – – 3 0.02 0.02 The Saraswat Co-op. Bank Ltd. 10 2,000 – – 2,000 0.20 0.20
Investment in partnership Firm View Group LP 1368.01 802.44 Current Investments Units of Mutual Fund : Unquoted Templeton India Treasury Fund 160.29 200.55 Kotak Liquid Scheme 63.53 30.33 Franklin Templeton Mutual Fund – 0.69 Prudential ICICI Liquid Plan 2.06 – Grindlays Floating Rate Fund 1800.00 – Magnum Institutional Income Fund-Savings Growth 23.00 – 24670.85 18047.94 Less: Provision for diminution in value of Investments (569.89) (568.41) 24100.96 17479.53 Aggregate Book Value of Investments Quoted 10731.20 11684.84 Unquoted 13369.76 5794.69 24100.96 17479.53 Market Value of Quoted Investments 48875.57 22958.08 Notes : a) The said shares have been refused for registration by the investee company b) Uncalled liability on partly paid shares: - Tahir Properties Ltd. - Equity - Rs. 80 per share. - Boston Analytics LLC - Equity - USD 440,000 - Godrej Foods Ltd. - Preference - Re. 1 per share. - Tahir Properties Ltd. - Preference - Rs. 30 per share. c) Preferred Stock - series E & F has been converted into Common Stock during the year. 58 Annual Report 2005-2006
SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS (contd.)
This Year Previous Year This Year Previous Year Rs. lac Rs. lac Rs. lac Rs. lac
SCHEDULE 7 : INVENTORIES SCHEDULE 11 : CURRENT LIABILITIES (at lower of cost and net realisable value) Acceptances 3843.20 6176.37 Stores and spares 1594.27 670.80 Sundry creditors 27983.12 24966.50 Raw materials 12829.31 10306.42 Advances from customers 9174.61 5231.65 Construction work-in-progress 2316.09 1928.28 Sundry deposits 1865.90 2049.12 Work-in-progress 3607.67 1509.69 Investor Education & Protection Fund Finished Goods 7134.83 6892.88 – Unclaimed Dividend 46.29 51.70 Share in jointly controlled entities 1018.80 1308.94 – Unpaid Matured Deposits 65.15 139.24 28500.97 22617.01 – Interest accrued on above 0.20 58.70 Other liabilities 4504.59 2876.41 SCHEDULE 8 : SUNDRY DEBTORS Interest accrued but not due on loans 168.21 107.76 (Unsecured) Share in jointly controlled entities 1627.41 1644.78 Debts outstanding over six months Considered good 2115.24 1492.28 49278.68 43302.23 Considered doubtful 522.90 536.20 SCHEDULE 12 : PROVISIONS 2638.14 2028.48 Proposed dividend 2658.37 2044.86 Other debts Provision for tax on distributed profits 473.16 305.83 Considered good 20450.21 19001.66 Provision for taxation — 23.36 23088.35 21030.14 (Net of advance tax, Less : Provision for doubtful debts (522.90) (536.20) Previous year Rs. 3205.94 lac) 22565.45 20493.94 Provision for retirement benefits 2869.40 3028.91 Share in jointly controlled entities 487.24 250.86 Share in jointly controlled entities 127.05 52.64 23052.69 20744.80 6127.98 5455.60
SCHEDULE 9 : CASH AND BANK BALANCES SCHEDULE 13 : MISCELLANEOUS Cash and cheques on hand 218.84 138.48 EXPENDITURE Balances with scheduled banks (To the extent not written off or adjusted) – on current accounts 2917.49 1685.51 Deferred revenue expenditure – on deposit accounts 5295.11 2528.41 – Voluntary retirement compensation 2219.46 126.30 Share in jointly controlled entities 675.15 990.71 – Preliminary Expenses — 9.59 9106.59 5343.11 – Others — 3.60 SCHEDULE 10 : LOANS AND ADVANCES 2219.46 139.49 (Unsecured and considered good unless SCHEDULE 14 : OTHER INCOME otherwise stated) Interest : Loans and Advances (refer note 9) 4152.72 2166.54 – Government Securities — 16.90 Loans to GIL ESOP Trust 742.00 — – Debentures 9.62 — Advances recoverable in cash or – Income tax refund 140.83 8.10 in kind or for value to be received – Deposits (refer note 15) 486.54 53.05 (net of provision for doubtful advances Rs. 382.41 lac, Dividend 1237.33 580.27 Previous Year Rs. 934.18 lac) 8642.30 8545.54 Profit on sale of fixed assets (Net) 373.81 — Intercorporate deposits Profit on sale of long term investments – Associate companies 41.80 2148.69 (refer note 15) 2299.64 3458.14 – Others — 55.76 Provision for depletion in value of Deposits and balances with long term investments written back 364.89 — – Customs & excise authorities 850.90 1008.65 Provision for doubtful debts and – Others 1834.65 1951.90 advances written back — 3.05 Advance payment of taxes 153.75 — Miscellaneous income (refer note 15) 1253.00 538.15 (Net of provision for tax of Share in jointly controlled entities 154.07 124.16 Rs. 3863.58 lac) Share in jointly controlled entities 794.21 443.65 6319.73 4781.82 17212.32 16320.73
59 Godrej Industries Limited – Consolidated Accounts
SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS (contd.)
This Year Previous Year This Year Previous Year Rs. lac Rs. lac Rs. lac Rs. lac
SCHEDULE 15 : MATERIALS SCHEDULE 18 : INTEREST AND FINANCIAL CONSUMED AND COST OF SALES CHARGES (Net) Raw materials consumed : Interest paid Stocks at the commencement of the year 10306.42 11610.63 – on debentures and fixed loans 2289.97 1019.42 Add : Purchases (net) 125106.17 121494.78 – on bank overdrafts 441.92 755.63 135412.59 133105.41 – on Inter Corporate Deposits 190.10 176.40 Less : Stocks as at the close of the year 12829.30 10306.42 – other interest 1093.59 770.29 Raw Materials consumed during the year 122583.29 122798.99 4015.58 2721.74 Cost of Sales - Property Development Stocks at the commencement of the year 1928.28 2406.54 Less : Interest during construction period capitalised 265.47 14.25 Add : Construction Expenditure during the year 4640.33 2135.31 Less : Interest received 6568.61 4541.85 – on loans & deposits 39.19 285.90 Less : Stocks as at the close of the year 2316.09 1928.28 – on Customer balances, etc. 18.08 43.74 4252.52 2613.57 – projects and landlords 225.23 335.77 Purchase of goods for resale 18085.57 11981.55 – others 26.32 3.16 Share in jointly controlled entities 5243.06 4837.66 z 308.82 668.57 150164.44 142231.77 Net Interest 3441.29 2038.92 SCHEDULE 16 : EXPENSES Brokerage and other financial charges 602.05 507.24 Salaries, wages and allowances 10318.84 9995.87 Foreign exchange loss 457.69 927.38 Contribution to provident fund Share in jointly controlled entities 27.41 22.93 and other funds 601.90 608.71 Employee welfare expenses 981.81 826.33 4528.44 3496.47 Stores and spares consumed 1242.06 1526.50 SCHEDULE 19 : PRIOR PERIOD Power and fuel 5988.09 5068.20 ADJUSTMENTS Processing charges 3795.24 3838.17 Excess provision for Income-tax 35.70 4.17 Rent (refer note 15) 728.76 527.02 Provision for pension payments (112.50) — Rates and taxes 560.80 692.40 Dividend for previous year 62.42 — Repairs and maintenance – Machinery 1046.90 1363.37 (14.38) 4.17 – Buildings 294.61 261.55 – Other assets 519.84 453.54 Insurance 243.23 222.02 SCHEDULE 20 : SIGNIFICANT ACCOUNTING POLICIES Freight 3535.04 2718.63 a) Accounting Convention Commission 3355.81 3107.74 The financial statements are prepared under the historical cost Discount 467.55 203.06 convention, on the accrual basis of accounting, in accordance with Advertisement and publicity 1465.11 1427.64 Sales promotion 303.84 280.52 the generally accepted accounting principles in India and the Selling and distribution expenses 1465.84 819.63 Accounting Standards issued by the Institute of Chartered Accountants Bad debts written off 620.33 630.88 of India. Provision for doubtful debts and advances 40.78 — b) Fixed Assets Provision for depletion in the value of long term investments 0.10 449.98 Fixed Assets are stated at cost or as revalued as the case may be, less Loss on Sale of Fixed Assets — 182.24 accumulated depreciation. Cost includes all expenses related to Excise duty on inventory change 284.99 (50.70) acquisition and installation, of the concerned asset. Exchange differences Foreign Exchange loss 182.62 809.09 arising on account of repayment and year end translation of foreign Miscellaneous expenses 5654.87 3864.31 currency liabilities relating to acquisition of fixed assets from a country Share in jointly controlled entities 3064.16 4039.40 outside India, are adjusted to the carrying cost of the respective assets. 46763.12 43866.10 Fixed Assets acquired under finance lease are capitalised at the lower SCHEDULE 17 : INVENTORY CHANGE of their face value and present value of the minimum lease payments. Stocks at the commencement of the year c) Intangible Assets Finished goods 6892.88 6137.86 Work-in-progress 1509.69 1340.45 The cost of acquisition of trademarks is amortised equally over a Share in jointly controlled entities 757.55 897.58 period of four to fifteen years depending on the expected utilisation. 9160.12 8375.89 d) Asset Impairment Less : Stocks at the close of the year : The Company reviews the carrying values of tangible and intangible Finished goods 7134.83 6892.88 assets for any possible impairment at each balance sheet date. An Work-in-progress 3607.67 1509.69 Share in jointly controlled entities 638.35 757.55 impairment loss is recognized when the carrying amount of an asset exceed its recoverable amount. In assessing the recoverable 11380.85 9160.12 amount, the estimated future cash flows are discounted to their (Increase)/Decrease in Inventory (2220.73) (784.23) present value based on appropriate discount rates. 60 Annual Report 2005-2006
SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS (contd.) e) Borrowing Costs in proportion to the actual cost incurred as against the total estimated Borrowing costs that are directly attributable to the acquisition / cost of projects under execution with the Company. construction of the underlying fixed assets are capitalised as a part Determination of revenues under the percentage of completion of the respective asset, upto the date of acquisition / completion of method necessarily involves making estimates by the Company, construction. some of which are of a technical nature, concerning, where relevant, f) Investments the percentages of completion, costs to completion, the expected revenues from the project/activity and the foreseeable losses to Long term investments are carried at cost. Provision for diminution, completion. Such estimates have been relied upon by the auditors. if any, in the value of each long term investment is made to recognise Dividend income is recognised when the right to receive the same a decline, other than of a temporary nature. The fair value of a long is established. term investment is ascertained with reference to its market value, the investee’s assets and results and the expected cash flows from Interest income is recognised on a time proportion basis. the investment. Income on assets given on operating lease is recognised on a straight Current investments are carried at lower of cost and fair value. line basis over the lease term. g) Inventories k) Depreciation Inventories are valued at lower of cost and net realisable value. Leasehold land is amortised equally over the lease period. Leasehold Cost is computed on weighted average basis and is net of modvat. improvements are amortised over five years. Finished goods and work-in-progress include cost of conversion Depreciation is provided on the straight line method at the rates z and other costs incurred in bringing the inventories to their present specified in Schedule XIV to the Companies Act, 1956, except in location and condition. Provision is made for the cost of obsolescence some subsidiary companies, where depreciation has been provided and other anticipated losses, wherever considered necessary. on the written down value method. The impact of the differing Construction work-in-progress is valued at cost. Construction work- method of depreciation has not been ascertained but is not likely to be material. Computer hardware is depreciated over its estimated in-progress includes cost of land, premium for development rights, useful life of 4 years. construction costs, allocated interest and expenses incidental to the projects undertaken by the Company. Depreciation on assets acquired during the year is provided for the full accounting year and no depreciation is charged on the assets h) Provisions and Contingent Liabilities sold/discarded during the year, except in case of major additions Provisions are recognised in the accounts in respect of present and deductions exceeding rupees one crore in which case, probable obligations, the amount of which can be reliably estimated. proportionate depreciation is provided. Contingent Liabilities are disclosed in respect of possible obligations Depreciation on the revalued component is provided on the straight that arise from past events but their existence is confirmed by the line method based on the balance useful life of the assets as certified occurrence or non occurrence of one or more uncertain future by the valuers. Such depreciation is withdrawn from Revaluation events not wholly within the control of the Company. Reserve and credited to Profit and Loss Account. i) Foreign Exchange Transactions l) Retirement Benefits Transactions in foreign currency are recorded at the exchange rates Retirement benefits to employees comprise payments under defined prevailing on the date of the transaction. Monetary assets and contribution plans like provident fund and family pension as well as liabilities denominated in foreign currency are translated at the payments under defined benefit schemes like leave encashment period end exchange rates. Forward exchange contracts, remaining benefit on retirement and gratuity to eligible employees. Payments unsettled at the period end, backed by underlying assets or liabilities under defined contribution plans are charged to revenue. The liability are also translated at period end exchange rates. Premium or in respect of defined benefit schemes is provided on the basis of an discount on forward exchange contracts is amortised over the period actuarial valuation at the end of each financial year. of the contract and recognised as income or expense for the period. m) Deferred Revenue Expenditure Exchange gains/losses are recognised in the Profit and Loss Account The compensation payable under the Voluntary Retirement Schemes, except for exchange differences relating to fixed assets acquired the benefit of which is expected to accrue in future is deferred over from a country outside India, which are adjusted in the cost of the its payback period. The compensation is generally amortised over asset. Non Monetary foreign currency items like investments in three to five years depending on the pay back period. foreign subsidiaries are carried at cost and expressed in Indian currency at the rate of exchange prevailing at the time of making Preliminary Expenses and Share issue expenses are amortised in the original investment. ten equal instalments. j) Revenue Recognition n) Hedging Sales are recognised where goods are supplied and are recorded Import of crude palm oil by the Company are being hedged by net of returns, trade discounts, rebates, sales taxes and excise duty. futures contract on offshore Commodities Exchange. Gains or losses on settled contracts is recognised in the profit and loss account and Income from processing operations is recognised on completion of is included in the cost of materials consumed. Futures contracts not production / dispatch of the goods, as per the terms of contract. settled as on the Balance Sheet date are marked to market and Export incentives receivable under the Duty Entitlement Pass Book losses, if any, are recognised in the profit and loss account, whereas, Scheme and the Duty Drawback Scheme are accounted on accrual the unrealised profit is ignored. basis. o) Taxes on Income Revenue from construction activity is recognised on “Percentage of Current tax is the amount of tax payable on the assessable income Completion Method” of accounting. As per this method, revenue in for the year determined in accordance with the provisions of the Profit & Loss Account at the end of the accounting year is recognised Income Tax Act, 1961. 61 Godrej Industries Limited – Consolidated Accounts
SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS (contd.) Deferred tax is recognised on timing differences, being the reporting date as of the Company i.e. year ended March 31, 2006, differences between the taxable income and accounting income except in respect of Personalitree Academy Ltd., an associate that originate in one period and are capable of reversal in one or company whose accounts for the year ended March 31, 2006 have more subsequent periods. Deferred tax assets on unabsorbed tax not been received till date. The investment not being significant losses and tax depreciation are recognized only when there is virtual and fully provided for in the previous year, there is no impact on certainty of their realisation and on other items when there is the profit & loss account. reasonable certainty that sufficient future taxable income will be The accounts of Al Rahba International Trading Ltd., a joint venture available against which such deferred tax assets can be realised. company with Godrej Agrovet Ltd., Compass Connections Ltd., UK, The tax effect is calculated on the accumulated timing differences Creamline Dairy Products Ltd., Creamline Nutrients Ltd. and at the year end and based on the tax rate and laws enacted or Polychem Hygiene Laboratories Pvt. Ltd., associate companies have substantially enacted on the balance sheet date. not been audited for the year ended March 31, 2006 as of date and p) Segment Reporting have been consolidated on the basis of the accounts as certified by The Accounting Policies adopted for segment reporting are in line with their respective management. the Accounting Policies of the Company. Segment assets include all 3. Information on subsidiaries, joint ventures and associates : operating assets used by the business segments and consist principally (a) The subsidiary companies considered in the consolidated of fixed assets, debtors and inventories. Segment liabilities include the financial statements are : operating liabilities that result from the operating activities of the S. No. Name of the Company Country of Percentage of Holding business. Segment assets and liabilities that cannot be allocated between Incorporation This Previous the segments are shown as part of unallocated corporate assets and Year Year liabilities respectively. Income / Expenses relating to the enterprise as a 1. Godrej Agrovet Ltd. India 57.80% 57.78% whole and not allocable on a reasonable basis to business segments 2. Goldmohur Foods & Feeds Ltd. India 57.80% 57.78% are reflected as unallocated corporate income / expenses. (100% subsidiary of SCHEDULE 21 : NOTES TO ACCOUNTS Godrej Agrovet Ltd.) 1. Principles of Consolidation: 3. Golden Feed Products Ltd. India 57.80% 57.78% The consolidated financial statements relate to Godrej Industries (100% subsidiary of Godrej Agrovet Ltd.) Limited, the holding company, its majority owned subsidiaries, Joint Ventures and Associates (collectively referred to as Group). The 4. Godrej Properties Ltd. India 82.88% 82.85% consolidation of accounts of the Company with its subsidiaries has 5. Girikandra Holiday Homes & been prepared in accordance with Accounting Standard (AS) 21 Resorts Ltd. India 82.88% 82.85% ‘Consolidated Financial Statements’. The financial statements of the (100% subsidiary of Godrej parent and its subsidiaries are combined on a line by line basis and Properties Ltd.) intra group balances, intra group transactions and unrealized profits 6. Godrej Realty Pvt. Ltd. India 42.27% — or losses are fully eliminated. (51% subsidiary of Godrej Properties Ltd.) In the consolidated financial statements, ‘Goodwill’ represents the excess of the cost to the Company of its investment in the subsidiaries 7. Godrej Waterside Properties Pvt. Ltd. India 82.88% — and/or joint ventures over its share of equity, at the respective dates (100% subsidiary of Godrej on which the investments are made. Alternatively, where the share Properties Ltd.) of equity as on the date of investment is in excess of cost of investment, it is recognised as ‘Capital Reserve’ in the consolidated 8. Godrej Hicare Ltd. India 85.91% 86.44% financial statements. 9. Godrej Remote Services Ltd. India — 99.99% Minority interest in the net assets of consolidated subsidiaries consists 10. Ensemble Holdings & of the amount of equity attributable to the minority shareholders at Finance Ltd. India 99.95% 99.95% the respective dates on which investments are made by the Company 11. Godrej International Ltd., UK U.K. 100.00% 100.00% in the subsidiary companies and further movements in their share in 12. Godrej Global Mid-East FZE, the equity, subsequent to the dates of investment as stated above. UAE U.A.E. 100.00% 100.00% Investments in Joint Ventures are dealt with in accordance with (100% subsidiary of Accounting Standard (AS) 27 ‘Financial Reporting of Interests in Godrej International Ltd.) Joint Ventures’. The Company’s interest in jointly controlled entities 13. Godrej Beverage & Foods Ltd. India 70.00% 70.91% are reported using proportionate consolidation, whereby the 14. Godrej Global Solutions Ltd. India 100.00% 100.00% Company’s share of jointly controlled assets and liabilities and the 15. Godrej Global Solutions share of income and expenses of the jointly controlled entities are (Cyprus) Ltd. Greece 100.00% — reported as separate line items. (100% subsidiary of Investments in Associates are dealt with in accordance with Godrej Global Solutions Ltd.) Accounting Standard (AS) 23 ‘Accounting for Investments in 16. Godrej Global Solutions Inc U.S.A. 100.00% — Associates in Consolidated Financial Statements’ issued by the Institute (100% subsidiary of of Chartered Accountants of India. Effect has been given to the Godrej Global Solutions Ltd.) carrying amount of investments in associates using the ‘Equity Note: method’. The Company’s share of the post acquisition profits or Krithika Agro Farm Chemicals & Engineering Pvt. Ltd., a company in which losses is included in the carrying cost of investments. Godrej Agrovet Ltd. acquired a 76% interest during the year is excluded 2. The financial statements of the subsidiaries, joint ventures and from consolidation as the control is intended to be temporary since Godrej associates used in the consolidation are drawn upto the same Agrovet Ltd. intends to dispose of its holding in the near future. 62 Annual Report 2005-2006
SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS (contd.) (b) Interests in Joint Ventures: 6. Contingent Liabilities S. No. Name of the company Country of Percentage of This Year Previous Year Incorporation Ownership Interest Rs. lac Rs. lac This Previous Year Year a) Claims against the Company not acknowledged as debts: i) Godrej SaraLee Ltd. India 20.00% 20.00% i) Excise duty demands relating to 1537.41 3386.52 ii) Godrej SaraLee disputed classification, post Bangladesh Pvt. Ltd. Bangladesh 20.00% 20.00% manufacturing expenses, iii) Godrej SaraLee assessable values, etc. which the Sri Lanka Pvt. Ltd. Sri Lanka 20.00% 20.00% Company has contested and is in appeal at various levels. iv) Al Rahba International ii) Customs Duty demands relating to 844.53 1036.65 Trading Limited (held by U.A.E. 70.00% — less charge, differential duty, Godrej Agrovet Ltd.) classification, etc. v) ACI Godrej Agrovet iii) Sales Tax demand relating to 512.37 532.21 Pvt. Ltd. (held by Bangladesh 50.00% 50.00% purchase tax on Branch Transfer/ Godrej Agrovet Ltd.) Non availability of C Forms, etc. (c) Investments in Associates: at various levels. S. No. Name of the company Country of Percentage of holdings iv) Octroi demand relating to 844.46 722.01 Incorporation This year Previous year classification issue on import of Palm Stearine and interest thereon. i) Swadeshi Detergents Ltd. India 41.08% 41.08% v) Stamp duties claimed on certain 182.23 182.23 ii) Godrej Upstream Ltd. India 40.43% 40.43% properties which are under appeal (held by Godrej Global by the Company Solutions Ltd.) vi) Income Tax demands against which 1785.83 726.95 iii) Compass Connections Ltd. U.K. 20.74% 21.16% the company has preferred appeals iv) Personalitree Academy Ltd. India 26.00% 26.00% vii) Industrial relations matters (held by Ensemble Holdings under appeal 518.06 486.08 & Finance Ltd.) viii) Others 704.18 649.69 b) Guarantees issued by banks, excluding 2062.14 2207.42 v) Creamline Dairy Products Ltd. India 26.00% 26.00% guarantees issued in respect of matters (held by Godrej Agrovet Ltd.) reported in (a) above vi) Creamline Nutrients Ltd. India 26.00% 26.00% c) Guarantees given by the Company in 15269.59 14855.00 (held by Godrej Agrovet Ltd.) respect of credit/guarantee limits vii) Polychem Hygiene Laboratories sanctioned by banks to subsidiary Pvt. Ltd. India 26.00% 26.00% and other companies. (held by Godrej Agrovet Ltd.) d) Uncalled liability on partly paid 673.97 534.85 shares/debentures 4. The accounting policies of certain subsidiaries, joint ventures & e) Share in Jointly Controlled Entities 207.02 262.35 associates especially regarding the method of depreciation, amortisation of technical know-how and accounting for retirement 7. Capital Commitments benefits are not in consonance with the group accounting policies. Estimated value of contracts remaining 688.61 3105.92 No effect has been given in the consolidated financial statements to be executed on capital account, on account of such differing accounting policies, where the impact to the extent not provided is not expected to be material. Share in Jointly Controlled Entities 2.48 0.52 5. The break-up of Investment in Associates is as under: 8. Investments Rs. in lac a) CBay Systems Limited, USA (CBay USA) has carried out an Cost of Goodwill Share in Provision Carrying organizational restructuring during the year, consequent to Acquisition included profits/ for cost of which, all the businesses of CBay Group have been consolidated in cost of (loss) of diminution Invest- under CBay Systems Limited, India (CBay India), a wholly acquisition associatesin the value ments owned subsidiary. The Shares of CBay India have been post of distributed in specie on a pro-rata basis to all the stockholders acquisitioninvestments of CBay USA under the above scheme. The Indian Stockholders (i) Swadeshi will be allotted the shares in CBay India on receipt of approval Detergents Ltd. 191.34 91.48 (141.05) 50.28 Nil from the Reserve Bank of India (RBI). No effect has been given (ii) Godrej Upstream Ltd. 900.00 95.27 (442.94) — 457.06 to the aforesaid scheme in the accounts, pending approval of (iii) Compass RBI and allotment of shares in CBay India. Connections Ltd. 124.54 80.56 34.63 — 159.17 b) As per the share purchase agreement dated 29th October, 2004, (iv) Personalitree the Parent Company had agreed to sell its entire holding Academy Ltd. 110.28 42.84 (42.04) 68.24 Nil (7712642 equity shares) in Godrej Remote Services Limited , a (v) Creamline Dairy subsidiary company to CBay Systems Limited, USA for a Products Ltd. 950.16 364.53 64.07 — 1014.23 consideration of Rs. 842.81 lac, to be satisfied by issue of 704691 (vi) Creamline Nutrients Ltd. 87.84 33.89 8.12 — 95.96 common stock of CBay Systems Limited, USA (par value USD (vii) Polychem Hygiene 0.01 per comon stock) valued at USD 2.6 per common stock. The agreement was conditional upon receipt of approval from Lab. Pvt. Ltd. 162.75 88.99 8.23 — 170.98 Foreign Investment Promotion Board (FIPB) and the Reserve Total 2526.91 797.56 (510.98) 118.52 1897.40 Bank of India (RBI). The sale of the subsidiary company was 63 Godrej Industries Limited – Consolidated Accounts
SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS (contd.) completed during the year on receipt of the necessary The options granted shall vest after three years from the date of approvals in July 2005. The profit on sale amounting to Rs. 71 grant of option, provided the employee continues to be in lac is included under Profit on sale of long term investments, employment and the option is exercisable within two years after an exceptional item. vesting. 9. Deferred Tax The employee share based payment plans have been accounted Major components of Deferred Tax arising on account of timing based on the intrinsic value method and no compensation expense differences as at March 31, 2006 are : has been recognized since the market price of the underlying share This Year Previous Year at the grant date is the same / less than the exercise price of the Rs. lac Rs. lac option, the intrinsic value being Nil. Assets Had the fair value method of accounting been used, the employee Provision for retirement benefits 324.14 806.00 compensation cost would have been Rs. 204 lac. Provision for doubtful debts/advances 295.09 399.24 Business Losses 1338.33 1123.50 12. Leases : VRS Expenses 77.00 (45.00) a) The group has entered into leave and licence agreements in Others 346.20 334.95 respect of its commercial and residential premises. These are Share in Jointly Controlled Entities 35.53 60.17 not non-cancelable and range between 11 months to 35 months 2416.29 2723.86 and are renewable by mutual consent on mutually acceptable Liabilities terms. Leave and licence arrangements being similar in Depreciation 6214.53 5005.47 substance to operating leases, the particulars of the premises under leave and licence arrangement are as under: Deferred Revenue Expenditure 21.34 — Share in Jointly Controlled Entities 56.55 83.20 This Year Previous Year Rs. lac Rs. lac 6292.42 5133.67 Gross carrying amount of premises 3357.79 4253.85 Net Deferred Tax Liability 3876.13 2409.81 Accumulated depreciation 995.81 965.30 10. Loans and Advances : Depreciation for the period 115.71 120.58 Loans and Advances include Rs. 1033 lac (Previous Year Rs. 1033 lac) advanced by the Company to certain individuals against pledge, b) The total of future minimum lease payments under non by way of deposit, of equity share of Gharda Chemicals Ltd. The cancelable operating leases for each of the following periods : Company has enforced its security and lodged the shares for transfer in its name, however, the transfer application has been rejected by Period Minimum future Jointly Gharda Chemicals Ltd. and the Company has filed an appeal before lease rentals controlled the Company Law Board. Interest on the aforesaid loans and advances entities amounting to Rs. 315 lac was accrued upto March 31, 2000 and has Rs. lac Rs. lac been fully provided for, no interest is being accrued thereafter. The Within one year 177.34 5.35 recoverability of the advance is contingent upon the transfer and/ or Later than one year and not later disposal of said shares. In the opinion of the management, the value than five years 221.07 57.46 of the said shares is greater than the amount of the loans and advances. Later than five years — 2.40 11. Employee Stock Option Plans : Total 398.41 65.21 The Parent Company has during the year instituted an Employee Stock Option Plan (GIL ESOP) approved by the Board of Directors Amount recognised during the year 182.76 61.09 and the shareholders on 24th October, 2005 and 1st December, c) Finance Leases : 2005 respectively. The Plan provides for the allotment of 15,00,000 The group has acquired assets under Finance Lease. Liability options convertible into 15,00,000 equity shares to eligible employees for minimum lease payment is secured by hypothecation of the of the participating companies. The compensation committee vehicles acquired under the lease. The minimum lease payments comprising of independent members of the Board of Directors outstanding as on March 31, 2006, in respect of vehicles administers the plan. acquired under lease are as under : The scheme is administered by an independent ESOP Trust which has purchased shares equivalent to the number of options granted Period Total Unmatured Present value from the market, out of the finance provided by the participating minimum Interest of minimum companies to the Trust. lease payments lease outstanding as on payments The number and weighted average exercise price of options granted, March 31, 2006 exercised and forfeited are as under: Rs. lac Rs. lac Rs. lac No. of Wt. average Options exercise price Within one year 86.87 13.06 81.76 Options outstanding at the Later than one year beginning of the year — — and not later than five years 65.59 9.74 54.72 Options granted 350000 392.35 152.46 22.80 136.48 (plus interest) 13. Hedging : Less: Exercised — — a) Reserve Bank of India has permitted the Parent Company to Forfeited/expired — — hedge its exposure on Crude Palm Oil on offshore exchanges Options outstanding at the year end 350000 392.35 to the extent of its imports. Accordingly, the Company is hedging (plus interest) import of crude palm oil on the Malaysian Commodities 64 Annual Report 2005-2006
SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS (contd.) Exchange by way of futures contracts. The particulars of the 16. Profit & Loss Account futures contracts for the year are as under: The amount of exchange loss on account of fluctuation of the rupee This Year Previous Year against foreign currencies and the net charges for forward foreign Details Purchase Sale Purchase Sale exchange contracts added to the carrying amount of fixed assets Total number of contracts entered during the year is Rs. 0.42 lac (Previous year Rs. 0.90 lac). The during the year 22 12 11 exchange difference included in the Profit & Loss Account is a loss Number of units (25 MT per unit) of Rs. 669.94 lac (Previous year Rs. 1806.29 lac). The exchange under above contracts 60 60 595 595 difference in respect of forward exchange contracts to be recognised Future contracts not settled in subsequent accounting periods is Rs. 24.68 lac (Previous year Rs. as on March 31, 2006 —— —— 739.48 lac). Number of units under above contracts —— —— 17. Earnings Per Share b. The Group uses forward exchange contracts to hedge its foreign This Year Previous Year exchange exposure in accordance with its forex policy as a. Calculation of weighted average determined by a Forex Committee. The particulars of the number of equity shares forward exchange contracts for the year are as under: Number of shares at the beginning of the year Nos. 48542952 48542952 This Year Previous Year Number of equity shares outstanding Details Purchase Sale Purchase Sale at the end of the year Nos. 48641942 48542952 Total number of contracts entered Weighted average number of equity during the year 179 77 184 36 shares outstanding during the year Nos. 48570344 48542952 Foreign currency value covered b. Net profit after tax available for US Dollar (million) 103.30 33.68 105.48 20.59 equity shareholders Rs. lac 4899.77 6467.14 Euros (million) – 3.36 – 0.18 c. Basic and diluted earnings per share Total number of contracts of Rs.6 each Rupees 10.09 13.32 outstanding as at the year end 54 20 39 12 Foreign currency value 18. Related Party Disclosures US Dollar (million) 37.30 13.00 39.61 5.84 List of Related Parties and Relationships Euros (million) – 0.94 – – a) Parties where control exists Uncovered Foreign exchange exposure as at the year end Godrej & Boyce Mfg. Co. Ltd., the holding company. US Dollar (million) 15.10 – 17.50 0.20 Fellow Subsidiaries: 14. Turnover Godrej Appliances Ltd. This year Previous Year Godrej Foods Ltd. Turnover includes: Rs. lac Rs. lac Godrej Infotech Ltd. i) Processing charges 2003.93 2125.86 Mercury Mfg. Co. Ltd. ii) Export Incentives 554.42 573.27 Godrej (Malaysia) Sdn. Bhd. iii) Licence fees and service charges 2561.11 2191.75 Godrej (Singapore) Pte. Ltd. iv) Project/Development JT Dragon Pte. Ltd. Management Fees 767.40 515.02 b) Other related parties with whom the Company had v) Share in jointly controlled entities 9308.70 9757.50 transactions: 15195.55 15163.40 Associate/Joint Venture Companies 15. Exceptional Items Godrej SaraLee Ltd. This Year Previous Year Godrej Upstream Ltd. Rs. Lac Rs. Lac Key Management Personnel i) Included under Other Income Mr. A. B. Godrej - Chairman (Non-Executive) - Profit on sale of long term Mr. N. B. Godrej - Managing Director investments 2119.81 3422.22 Ms. T. A. Dubash - Executive Director & President - Reversal of provision for claims (Marketing) payable on culmination of disputes 175.00 — Mr. Mathew Eipe - Executive Director & President - Interest received on deposit (Chemicals) placed against above claim on Mr. V. Banaji - Executive Director & President execution of decree 307.00 — (Group Corporate Affairs) ii) Payment to Mumbai Port Trust Mr. M. P. Pusalkar - Executive Director & President for regularization of lease included (Corporate Projects) in Rent paid. 89.00 — Enterprises over which key management personnel exercise significant influence Godrej Consumer Products Ltd. Swadeshi Detergents Ltd.
65 Godrej Industries Limited – Consolidated Accounts
c) Transactions with Related Parties Rs. lac Nature of Transaction Holding Fellow Associate/ Key Relative of Key Enterprises Company Subsidiaries Joint Venture Management Management over which Key Companies Personnel Personnel Management Personnel exercise significant influence Total Sale of Goods 20.17 — 12.50 — — 976.74 1009.41 Previous Year 22.14 904.96 3.18 — — — 930.28 Sale of Fixed Assets 0.05 — — — — 264.19 264.24 Previous Year — 1.46 — — — — 1.46 Purchase of goods and equipment 30.77 695.87 6.69 — — 1262.28 1995.61 Previous Year 60.60 1086.77 11.49 — — — 1158.86 Commission received — 2.50 19.78 — — 23.15 45.43 Previous Year — 21.05 4.50 — — — 25.55 Recovery of establishment and Other Expenses 1.48 12.52 229.64 — — 816.13 1059.77 Previous Year 13.82 898.07 216.83 — — 0.06 1128.78 Establishment & other exps paid 230.49 10.50 14.03 — — 89.91 344.93 Previous Year 225.68 112.17 7.35 — — 0.13 345.33 Sale of Investments — — — — — — — Previous Year 4950.00 — — — — — 4950.00 Purchase of Investments — — — — — — — Previous Year — — — — — 10.20 10.20 Interest received — — — — — 4.99 4.99 Previous Year — — — — — 5.85 5.85 Interest paid — — — — — — — Previous Year — — — 0.27 — — 0.27 Dividend income — 25.28 536.25 — — 1,007.66 1569.19 Previous Year — 562.72 1010.33 — — — 1573.05 Dividend paid 1248.02 — — 47.61 424.41 — 1720.04 Previous Year 936.01 — — 75.60 272.64 — 1284.25 Remuneration — — — 330.85 — 330.85 Previous Year — — — 402.01 — 402.01 Finance provided including loans & equity contributions 0.42 — (3.30) — — (10.00) (12.88) Previous Year — (3.08) (24.10) — — — (27.18) Finance repaid during the year — — — — — — — Previous Year — — — — — 8.00 8.00 Guarantees & collaterals given — — — — — — — Previous Year — — 1350.00 — — — 1350.00 Balance Outstanding as on March 31, 2006 Receivables 1.42 — 18.54 — — 222.25 242.21 Previous Year 69.12 19.76 10.67 — — — 99.55 Payables 2.81 — 42.60 — — 103.93 149.34 Previous Year 4.33 61.80 35.29 — — 0.11 101.53 Guarantees Outstanding — 1000.00 1350.00 — — — 2350.00 Previous Year — 1000.00 1350.00 — — — 2350.00 d ) The significant Related Party transactions are as under: Nature of Transaction Rs. lac Nature of Transaction Rs. lac Sale of goods Establishment & other exps paid - Godrej Consumer Products Ltd. 890.83 - Godrej & Boyce Mfg. Co. Ltd. 228.68 Sale of fixed assets - Godrej Consumer Products Ltd. 89.66 - Godrej Consumer Products Ltd. 264.19 Dividend income Purchase of goods & equipment - Godrej Consumer Products Ltd. 1,007.66 - Godrej Consumer Products Ltd. 1,262.28 Dividend paid - Godrej Foods Ltd. 692.34 - Godrej & Boyce Mfg. Co. Ltd. 1,248.02 Commission received Remuneration - Godrej Consumer Products Ltd. 23.15 - Mr. N. B. Godrej 82.11 - Godrej Upstream Ltd. 19.78 - Ms. T. A. Dubash 50.57 Recovery of establishment & other expenses - Mr. Mathew Eipe 62.56 - Godrej Consumer Products Ltd. 815.74 - Mr. V. F. Banaji 77.07 - Godrej Saralee Ltd. 229.64 - Mr. M. P. Pusalkar 48.93 66 Annual Report 2005-2006 Year 4.17 nt (Rs. lac) 3209.53 3786.87 2695.76 (641.08) 7109.73 (137.70) 6972.03 (504.91) 6467.12 3575.91 7746.64 3360.54 Previous (3575.91) 19486.72 94824.52 60168.21 34656.31 14387.27 (3144.16) (3496.47) Integrated 203493.21 126704.74 180430.58 199917.30 129914.27 199917.30 199917.30 127218.51 129914.27 otal is. Household Previous Year Previous Year This Year (14.38) (78.09) (67.47) 9021.26 4050.25 5045.33 4967.24 4899.77 7750.69 7614.87 3766.77 (7750.69) 23776.43 22569.77 66148.26 53883.02 15071.60 (2928.29) (4528.44) (2555.16) This Year This Year Total 218367.60 153409.94 186840.48 210616.91 162431.20 210616.91 210616.91 158380.95 120031.28 162431.20 Year 72.04 (72.04) 531.89 1797.08 4344.58 1379.65 Previous 17967.95 38684.97 38684.97 38757.01 Others T This Year 915.18 5756.06 1385.97 4394.19 (4394.19) 28095.60 46107.60 46107.60 10229.32 50501.79 – – Year 27.85 3674.60 3674.60 3636.65 1694.44 5369.04 Previous (1694.44) 25455.30 – This Year 44.86 3496.29 3496.29 3496.44 3557.39 4574.90 (1078.61) 29363.30 – Year 34.97 32.53 1554.11 1579.13 1579.13 5208.61 1579.13 Previous (1353.58) – – – 1078.61 This Year 11.98 30.06 782.92 782.92 782.92 7725.44 7132.86 (740.24) – – Year 839.89 184.80 149.15 4056.21 3646.09 Previous 11087.50 11087.50 11087.50 – – Household Tea Finance & This Year 194.53 100.05 4553.76 3436.97 1312.34 re of the products, different risks and returns, organisational structure internal reporting system. 11176.46 11176.46 11176.46 des investments in subsidiaries, associates companies and other investments. Others includes Medical Diagnostics, Agri Inputs, Refined Glycerin. Animal Feed segment includes the business of compound feed for cattle, poultry, acquatic animals. Foods segme ate segment comprises the business of developing commercial & residential property and giving premises on leave licence bas a represent sales to customers located outside India. Year 94.78 166.26 212.39 (212.39) 6138.94 6138.94 2391.61 6351.33 Previous 17422.14 11283.63 Development Insecticides Investments This Year Estate & Property 170.77 178.82 177.15 (177.15) 9151.15 9151.15 3613.43 9328.30 20137.20 13355.60 – – Year 426.08 240.22 3896.27 (856.81) 8628.96 Previous 19191.97 19191.97 19191.97 Foods This 1.53 Year (1.53) 423.86 297.77 239.82 701.03 (342.91) 21115.02 21115.02 21116.55 Year 333.95 498.70 2157.42 1559.05 Previous (1559.05) 65399.74 65399.74 14699.04 16883.73 66958.79 Animal Feed This Year 831.63 518.75 1586.22 2099.21 (2099.21) 67609.76 67609.76 16100.77 18497.48 69708.97 Year 37.99 (37.99) 915.21 6192.44 1741.79 Previous 54160.45 54160.45 17062.14 34736.34 54198.44 Chemicals – – This Year 4760.35 1784.09 7276.38 51177.71 19897.28 44336.13 51177.71 venue 51177.71 Insecticides segment includes the business of household and environmental pest control solutions. Finance Investments inclu Poultry, Oil Palm Plantations and energy generation through windmills. includes the business of refined vegetable oils and vanaspati, fruit puree, pulp, juices beverages. Est Less: Intersegment Sales Total Re Total primary business segments 19. Segment Information Information about Segments Revenue by Geographical markets India (A) Revenue External Sales Unallocated Assets Total Assets Total Outside India Total (B) Results Segment result before interest and tax Segment depreciation Segment Liabilities Carrying Amount of Segment assets India Total Cost incurred Total during the year to acquire segment assets Unallocated Liabilities Liabilities Total Intersegment Sales Outside India 3. The geographical segments are as follows - Sales in India represent sales to customers located India. outside Indi Total Add/(Less) prior period adjustment Profit after taxes Share of loss in associates Profit before Minority Interest Share of Minority Interest Net Profit after Minority Interest Segment Assets Total Sales Total Notes: 1. The Company has disclosed Business Segment as the primary segment. Segments have been identified taking into account natu 2. Chemicals segment includes the business of Oleochemicals such as Fatty Acids, Alcohols and Alfa Olefin Sulphonates Unallocated expenses net of unallocated income Interest Expense (net) Profit before tax Taxes Information about Secondary Business 67 Godrej Industries Limited – Consolidated Accounts Cyprus) Limited ohur Global Global Solutions Solutions Pvt.Ltd. Inc. ( t. Ltd.t. Properties Godrej Godrej Godrej Godrej Pvt. Ltd. Industries Agro Farm Realty Waterside Engineering Resorts Limited Home & Chemicals & Pv Girikandra Krithika ohur Feeds Foods & Holiday Srinivasan FZE Limited (Finance & Estate) Global Godrej Goldm MidEast Feed below) 7 below) 8 below) 9 below) 10 below) 11 below) 12 below) 13 below) 14 below) Golden Products (See note (See note (see note (see note) (see note (see note (see note (see note (see note 87.79 – – – – – – – – – Hicare Limited e held by Godrej International Ltd., a subsidiary of the Company. e held by mpany. mpany. 00% of the share capital)are held by Godrej Properties Ltd., a subsidiary of the Company. 00% of the share capital)are held by of the Company. sidiary of the Company. ld by Godrej Agrovet Ltd., a subsidiary of the Company. Agrovet Godrej ld by re held by Godrej Agrovet Ltd., a subsidiary of the Company. During the year, 3,20,000 equity shares were bought back by Gold M by 3,20,000 equity shares were bought back During the year, Ltd., a subsidiary of the Company. Agrovet Godrej re held by of the share capital)are held by Godrej Properties Ltd., a subsidiary of the Company. of the share capital)are held by Pvt. Ltd. are held by Godrej Agrovet Ltd., a subsidiary of the Company. Agrovet Godrej Pvt. Ltd. are held by Foods g 100% of the share capital) are held by Godrej Global Solutions Ltd., a subsidiary of the Company. g 100% of the share capital) are held by he share capital) are held by Godrej Global Solutions (Cypurs) Ltd., a sub-subsidiary of the Company. he share capital) are held by Ltd., a subsidiary of the Company. 70.00% 84.14%
(598.52) N.A – – – – – – –& President (Chemicals) – & President (Corporate Projects) – Beverages (6.18) (1,201.84) Global Solutions & US$ Rs. lac Rs. lac Rs. lac – – – – – – – – – S.K. Bhatt V. Executive Vice President (CorporateVice Executive Services) & Company Secretary President Vice Executive 100% 99.91% Godrej Godrej Godrej Godrej (US$1.52) 10 10 10 6 2,083,054 (163.07) International Limited Limited Limited Limited Holdings Ensemble 30,700.00 Nil Nil Nil Nil – – – – – – – – – Godrej
A.B. GodrejChairman N.B. Godrej Managing Director Executive Director M. Eipe Executive Director Pusalkar M.P. 394.34 1,088.18 259.11 382,566 57.78% 81.69% 99.89% Limited Limited & Finance Limited Agrovet Properties 41129567118752 5264645 6444545 3770160 3774160 2605000 2605000 47672739 47714038 9624996 13750000 6647100 7900000 2,219.48 1,205.76 Nil 1,127,905 Nil Nil N.A – – – – – – – – – 2,207.00 872.17 (741.66) Account of the Company NilAccount of the Company – Account of the Company of Account the Company ii. Dealt with in the books of ii. Dealt with in the books of previous financial years since it became a subsidiary i. Not dealt with in the books of March 31, 2006 i. Not dealt with in the books Total Number of Shares Total Foods & Feeds Ltd. under a buyback scheme. B. the subsidiary company’s For the members of Company A. For the financial year ended on subsidiary company so far it concerns Rs. lac Rs. lac Rs. lac subsidiaries as on March 31, 2006 a. Number of Equity Shares b. Value Face 10 10 10 £1 c. Extent of Holding 10 Chemicals and Engineering Industries Agro Farm fully paid up in Krithika of Rs.10 each 7,600 equity shares of the face value 11 Godrej Properties fully paid up in Godrej Realty Pvt. Ltd. are held by of Rs.10 each 510,000 equity shares of the face value 12 Properties Pvt. Ltd. (representing 100% Waterside fully paid up in Godrej of Rs.10 each 50,000equity shares of the face value 9 Homes and Resorts Ltd. (representing 1 fully paid up in Girikandra Holiday of Rs.1000 each 500 equity shares of the face value 3 Ltd., a subsidiary of the Co Agrovet Godrej Ltd., are held by in Ensemble Holdings & Finance 4,000 Equity Shares of Rs.10 each 4 Ltd., a subsidiary Ensemble Holdings & Finance in Godrej Global Solutions Ltd. are held by 41,251 equity shares of Rs.10 each 5 Ltd., a subsidiary of the Co Ensemble Holdings and Finance in Godrej Hicare Ltd. are held by 4,800 Equity Shares of Rs.10 each 6 Products Ltd. (representing 100% of the Share Capital) are he fully paid up in Golden Feed 50,000 Equity Shares of Rs. 10 each 7 fully paid up in Godrej Global MidEast FZE. (representing 100% of the Share Capital) ar Ordinary Shares of US$ 2,50,000 each 5 8 Ltd. (representing 100% of the share capital) a & Feeds 18,38,170 equity shares of Rs.10 each fully paid up in Goldmohur Foods Notes: 1 31, 2006. ended on March of all subsidiary companies have Year Financial The 2 Ltd., a sub Ensemble Holdings & Finance fully paid up in Godrej Properties Ltd. are held by 76,795 Equity Shares of Rs.10 each 3. Net aggregate profit/(Loss) of the 2. interest in the company’s The STATEMENT REGARDING SUBSIDIARY COMPANIES PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956 ACT, THE COMPANIES SECTION 212 OF TO PURSUANT COMPANIES REGARDING SUBSIDIARY STATEMENT 1. Name of the Company Godrej 13 fully paid up in Godrej Global Solutions Inc. (representing 100% of t of US 1 cent each 1,000 equity shares of the face value Mumbai, May 26, 2006 14 fully paid up in Godrej Global Solutions (Cyprus) Ltd. ( representin of USD 1 each 26,240,229 equity shares of the face value 68 Annual Report 2005-2006
Godrej Agrovet Limited DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED ON MARCH 31, 2006
To The Shareholders HOLDING COMPANY Your Directors have pleasure in submitting their Report along with the audited Accounts for the financial year Your Company continues to be a subsidiary of Godrej Industries Limited as defined under Section 4(1)(b) of the ended on March 31, 2006. Companies Act, 1956. Financial Results SUBSIDIARY COMPANIES Your Company’s performance during the year as compared with that during the previous year is summarised below: - Your Company continues to be the holding Company of Goldmohur Foods and Feeds Ltd (GFFL), Golden Feed Products Ltd (GFPL). For the year For the year ended ended By virtue of acquisition of 76% stake in the equity share capital of “Krithika Agro Farm Chemicals and 31/3/2006 31/3/2005 Engineering Industries Pvt. Ltd.” (Krithika) as stated elsewhere in this report, Krithika Agro Farm Chemicals Rs. lac Rs. lac and Engineering Industries Pvt. Ltd has become a subsidiary of your Company with effect from April 27, 2005. Total Income 60555.90 56851.81 Your Company has advanced an amount of Rs.42.05 lacs to Krithika during the current year. The Auditors in their Report have stated that they are unable to comment on the recoverability of the said loan. The Board of Profit Before Taxation (PBT) 761.23 1949.63 Directors feel that the said loan is recoverable in view of the proposed oil palm plantation activities to be carried Less : Provision for Taxation 78.70 532.45 out by Krithika in Orrisa. Profit After Taxation (PAT) 682.53 1417.18 st Balance brought forward from previous year 2696.74 2132.13 The audited Balance Sheet of GFFL, GFPL and Krithika as at 31 March, 2006 together with their audited Profit & Loss Account, Directors’ Report and Auditors’ Report is attached to the Balance Sheet and Profit & Loss Total 3379.27 3549.31 Account of your Company. Appropriations: Also annexed hereto is the Statement required under Section 212(1) of the Companies Act, 1956 relating to Interim Dividend – 391.53 GFFL, GFPL and Krithika. Final Dividend 284.75 234.92 JOINT VENTURES Tax on Dividend 39.94 84.12 General Reserve 70.00 142.00 ACI Godrej Agrovet Pvt Ltd, your Company’s Joint Venture with ACI in Bangladesh has commissioned its Feed Balance Carried Forward to Balance Sheet 2984.58 2696.74 Mill in October, 2005. The feeds have been receiving very good response. The hatchery has also been commissioned and is expected to add significant value in the coming years. Your company has acquired Total 3379.27 3549.31 management control in Al Rahba International Trading LLC, United Arab Emirates for carrying on the business of Poultry. This Joint Venture has 70% (stake in profit and 45% stake in equity) participation from your Company. Review of Operations This Joint Venture has already commenced production during the second half of the year 2005-06. The year under review was one of the toughest years your company has experienced. Adverse environmental CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS factors put heavy pressure on costs while announcement of Avian Influenza impacted sales growth. Many new AND OUTGO initiatives and investments made during the year also impacted the bottom line, which declined by 52% compared to previous year. The top line grew by about 7% compared to previous year. The business-wise The information in respect of these matters, required under Section 217(1)(e) of the Companies Act, 1956, read performance is reviewed hereunder: with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 and forming part of this Report, is annexed hereto (Annexure - A). ANIMAL FEEDS DIRECTORS The Animal Feeds Business continued to operate under challenging external environment. The prolonged monsoon had its impact on key raw materials such as de-oiled rice bran, maize resulting in increased cost Dr. S.L. Anaokar and Ms. Tanya Dubash, Directors retire by rotation at the ensuing Annual General Meeting for your Company, which could not be passed on to the customers due to increased competition. Avian in accordance with Article 124 of the Articles of Association of the Company and the provisions of the Companies influenza detected in Western parts of the country impacted the Poultry Feed sales of your Company. Golden Act, 1956 and being eligible offer themselves for reappointment. Feed Products Limited, a subsidiary of your company, acquired the Shrimp Feed Marketing business of AUDITORS Higashimaru Feeds (India) Limited, with effect from October 31, 2005. You are requested to appoint Auditors for the current year and fix their remuneration. The retiring Auditors INTEGRATED POULTRY BUSINESS M/s. Kalyaniwalla & Mistry, Chartered Accountants, Mumbai are eligible for re-appointment. The detection of Avian Influenza had severe impact on off take of the poultry products. However, your Company ADDITIONAL INFORMATION has been able to control the cost by continuing to achieve breakthrough performance in its breeding business. The additional information required to be given under the Companies Act, 1956, has been laid out in the Your Company’s new TV Commercial for Real Good Chicken drew in new customers and helped the business Schedules attached to and forming part of the Accounts. The Notes to the Accounts referred to the Auditors’ report good growth in the face of such adversities. Report are self-explanatory and therefore do not call for any further explanation . AGRICULTURAL INPUTS AUDIT COMMITTEE The Agri Inputs Division has continued to show excellent performance with growth in the top line of 40% and Pursuant to the provisions of Section 292-A of the Companies Act, 1956, your Company has constituted the Audit growth in the bottom line of 49%. Aadhaars have been positioned as centres of “Khushion ka, Khushhali ka”, Committee of the Board of Directors. i.e. centres of Happiness and Prosperity. Your Company plans to have strategic tie-ups with other corporates for bringing this vision to fruition. Recently, an MOU was signed with Apollo Pharmacy, a member of Apollo During the year, the Audit Committee was reconstituted in view of the resignation of Mr. N.B. Godrej, a Hospital group to bring Health solutions to the customers of Aadhaar. Similar efforts are on to find partners for Member and the Chairman of the Committee. The reconstructed Audit Committee comprises of the following Finance/Credit needs, Insurance and a host of other critical requirements. We draw inspiration from the appeal Directors of the Company :- made by our Honorable President to bring Urban Amenities to Rural India. The product offering at Aadhaars (1) Mr. K.N. Petigara – Chairman has also been considerably expanded and includes most items of daily needs. Nine new Aadhaars were opened (2) Dr. S.L. Anaokar – Member during the year taking the total to 23. Your Company’s initiative in retailing of fresh foods, especially fresh fruits (3) Mr. C.K. Vaidya - Member and vegetables through “Nature’s Basket” has been expanding. The Company has opened two more stores during the year in Mumbai. The Audit Committee, pursuant to the terms of reference specified by the Board from time to time has made recommendations to the Board in respect of internal control systems, half-yearly & annual financial statements, OIL PALM PLANTATIONS standard accounting principles, Risk Management polices, etc. The Board of Directors has since accepted the During the year, the Division has brought over 3500 Hectares under Oil Palm. Your Company received recommendations of the Audit Committee. allocation of fresh area in Andhra Pradesh for development of Oil Palm. An MOU has been signed with RESPONSIBILITY STATEMENT Government of Mizoram for development of Oil Palm in that State. The development activities in the state of Pursuant to the provisions contained in section 217(2AA) of the Companies Act, 1956, the Directors of your Gujarat and Mizoram have started. Your Company acquired majority stake in “Krithika Agro Farm Chemicals Company confirm :- and Engineering Industries Pvt. Ltd,”, which has its presence in the Oil Palm cultivation activities in the state of Orissa. a) that in the preparation of the annual accounts, the applicable accounting standards have been followed and no material departures have been made from the same ; PLANT BIOTECH BUSINESS b) that they have selected such accounting policies and applied them consistently and made judgments The Plant Biotech Division has introduced Banana plants in the states of UP and Bihar. It has also undertaken and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of an ambitious plan to help substantially increase the yield of Sugarcane. the Company at the end of the financial year and of the profit or loss of the Company for that period ; FINANCE AND INFORMATION SYSTEMS c) that they have taken proper and sufficient care for the maintenance of adequate accounting records in Despite overall hardening of interest rates in the economy, your Company was able to reduce the cost of funds accordance with the provisions of this Act for safeguarding the assets of the Company for preventing and during the year by efficient treasury operations. The Company’s Commercial Paper programme continues to detecting fraud and other irregularities ; carry the Apex rating of A1 + from ICRA for Rs 15 crore. However, after detection of Avian Influenza, ICRA d) that they have prepared the annual accounts on a going concern basis. has put your Company’s rating under “rating watch with developing implication”. IT continues to play a crucial role in the operations of your Company. During the year, your Company provided IT solutions for the retail HUMAN RESOURCES businesses. Your company continues to focus on development of Human Resources. The industrial relations at all units OTHER INITIATIVES continued to be cordial. The Board would like to place on record its sincere appreciation for the unstinted support it continues to receive from all associates. Your Company has invested in one more 1.25 MW windmill, which was commissioned during the first quarter of the year at Dhule, Maharashtra. The Maharashtra State Electricity Distribution Company Ltd has agreed to PARTICULARS OF EMPLOYEES purchase all the power produced by this Windmill on terms attractive to your Company. Details of the employees covered under the provisions of Section 217(2A) of the Companies Act, 1956 read with DIVIDEND the Companies (Particulars of Employees) (Amendment) Rules, 2002, are attached (ANNEXURE B) Your Directors recommend a Final Dividend for 2005-06 amounting to Rs. 4.00 per share of face value of Rs. For and on behalf of the Board of Directors 10/-each i.e.40% (Previous year – Interim 55%, Final 33%). C.K. Vaidya A.B. Godrej FIXED DEPOSITS Managing Director Director Your Company has not accepted any public deposits during the financial year under review. Mumbai, May 25, 2006. 69 Godrej Agrovet Limited
ANNEXURE ‘A’ (b) Reduction in process loss, improvement in efficiency in respect of post grinding operations (c) Clean fuel, low fuel cost, zero storage, zero volatile losses ANNEXURE FORMING PART OF THE DIRECTORS’ REPORT (d) Improved oil extraction rate at oil palm mill INFORMATION PURSUANT TO SECTION 217(1)(e) OF THE COMPANIES ACT, 1956, READ WITH THE (e) Improvement in energy efficiency and power factory COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES, III. The Company’s expenditure on R&D is given below :- 1988 IN RESPECT OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN Expenditure on R & D EXCHANGE EARNINGS & OUTGO : 2005-2006 2004-2005 Rs. lac Rs. lac. A) Conservation of Energy (a) Capital – 0.31 The Companies continues its policy of encouraging energy conservation measures. The regular review (b) Recurring 90.31 107.30 of energy consumption and the systems installed to control utilization of energy is undertaken. Some (c) Total 90.31 107.61 of the measures adopted by your Company towards conservation of energy were as follows :- (d) Total R & D expenditure as 0.15% 0.19 % 1. Pneumatic system for main plant change to elevator system a percentage of total turnover 2. Pipeline of higher diameter provided for the boiler to the pellet mill C . Foreign Exchange earnings and outgo 3. Adequate steam straps provided I. Your Company’s efforts to export agricultural inputs (Vipul – liquid, Achook, Nimin) to South 4. Provision of automatic control meters and capacitors Asian countries continued during the year. The efforts to export agricultural inputs to other 5. Replacement of 40W tube lights with 36W fluorescent candle lamps. countries are continuing. B) Technology absorption, Adaptation and Innovation 2005-2006 2004-2005 I. During the year under review, in-house research in quality systems and standards was continuously Rs. lac Rs. lac carried out. Some of the key measures undertaken are follows :- II. Foreign exchange used 1582.48 687.77 (a) Hammer Mill design change. III. Foreign exchange earned 108.03 55.34 (b) Post conditioning tank design change . (c) Use of CNG in place of HSD For and on behalf of the Board of Directors (d) Circulation of sludge water through centrifugal separator C.K. Vaidya A.B. Godrej II. The benefits derived as a result of various measures undertaken are as follows :- Managing Director Director (a) Better quality while grinding and saving in time Mumbai, May 25, 2006. REPORT OF THE AUDITORS' TO THE MEMBERS OF GODREJ AGROVET LIMITED 1. We have audited the attached Balance Sheet of Godrej Agrovet Limited, as at 31st March 2006 and also e) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that date report are in agreement with the books of account. annexed thereto. These financial statements are the responsibility of the Company’s management. Our f) In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt responsibility is to express an opinion on these financial statements based on our audit. with by this report comply with the Accounting Standards referred to in sub-section (3C) of 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Section 211 of the Companies Act, 1956. 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, g) In our opinion and to the best of our information and according to the explanations given to us, evidence supporting the amounts and disclosures in the financial statements. An audit also includes the said financial statements read with the notes thereon, subject to (b) and (c) above, give the assessing the accounting principles used and significant estimates made by management, as well as information required by the Companies Act, 1956, in the manner so required and give a true and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable fair view in conformity with the accounting principles generally accepted in India: basis for our opinion. i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 3. As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Government in 2006; and terms of Section 227 (4A) of the Companies Act, 1956, we annex hereto a statement on the matters ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date. specified in paragraphs 4 and 5 of the said Order. iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date. 4. Further to our comments in the Annexure referred to in paragraph (3) above, we report that: a) We have obtained all the information and explanations, which to the best of our knowledge and 5. On the basis of the written representations received from the Directors as on 31st March, 2006, and belief were necessary for the purposes of our audit. taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on 31st March, 2006 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 b) We are unable to comment on the recoverability of a loan amounting to Rs. 4,205 thousand given of the Companies Act, 1956. to a Company. For and on behalf of c) As referred to in note 16 of notes to accounts, the managerial remuneration paid to the managing director is in excess of the limits laid down under Section 198 read with Schedule XIII of the KALYANIWALLA & MISTRY Companies Act, 1956, by Rs.3,056 thousand. The Company is in the process of making an application Chartered Accountants to the Central Government for approval of the limits in excess of the prescribed limits. K. M. Elavia d) In our opinion, proper books of account as required by law have been kept by the Company so Place : Mumbai Partner far as appears from our examination of these books. Dated : May 25, 2006 Membership No. 12737
Government has not prescribed maintenance of cost records under section 209(1)(d) of the Companies ANNEXURE TO THE AUDITORS’ REPORT Act, 1956, for any other products of the Company. Referred to in paragraph (3) of our report of even date. 9) (a) According to the information and explanations given to us and on the basis of our examination 1) (a) The Company has maintained proper records showing full particulars, including quantitative of the books of account, during the year, the Company has been generally regular in depositing details and situation of fixed assets. undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, (b) As explained to us, the Company has a program for physical verification of fixed assets at Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, periodic intervals. In our opinion, the period of verification is reasonable having regard to the size Excise Duty, cess and other statutory dues applicable to it with the appropriate authorities. of the Company and the nature of its assets. No material discrepancies have been reported on According to the information and explanations given to us, there are no undisputed dues payable such verification. in respect of above as at 31st March 2006 for a period of more than six months from the date they (c) In our opinion, the disposal of fixed assets during the year does not affect the going concern became payable. assumption. (b) According to the information and explanations given to us, there are no dues outstanding of Sales 2) (a) The Management has conducted physical verification of inventory at reasonable intervals. Tax, Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty or cess on account of any (b) In our opinion, the procedures of physical verification of inventory followed by the management dispute, other than the following: are reasonable and adequate in relation to the size of the Company and the nature of its business. Name of Statute Amount (Rs.) Forum where dispute is pending (c) The Company is maintaining proper records of inventory and no material discrepancies were Sales Tax Act 29,517,000 Commissioner, Appellate Tribunal and High Court noticed on physical verification. Income Tax Act 6,119,000 Commissioner of Income Tax (Appeals) 3) (a) The Company has granted three unsecured loans amounting to Rs. 78,198 thousand, to three parties covered in the register maintained under section 301 of the Companies Act, 1956. 10) The Company does not have accumulated losses at the end of the financial year and it has not incurred (b) The Company has not charged interest on the loan of Rs. 33,600 thousand given to one party any cash losses in the current and immediately preceding financial year. which is prima facie prejudicial to the interests of the Company. The rate of interest and the other 11) According to the information and explanations given to us and based on the documents and records terms and conditions of the other loans is not prejudicial to the interests of the Company. produced to us, the Company has not defaulted in repayment of dues to banks. There are no dues to (c) The Company has not taken any loans, secured or unsecured from companies, firms or other financial institutions or debenture holders. parties covered in the register maintained under section 301 of the Act. 12) According to the information and explanations given to us and based on the documents and records (d) Consequently, the question of commenting on the rates of interest and the other terms and produced to us, the Company has not granted loans and advances on the basis of security by way of conditions of the loans taken being prejudicial to the interests of the Company and payment of pledge of shares, debentures and other securities. regular principal and interest does not arise. 13) In our opinion and according to the information and explanations given to us, the nature of activities of 4) In our opinion and according to the information and explanations given to us, there are adequate internal the Company does not attract any special statute applicable to chit fund and nidhi/ mutual benefit fund/ control procedures commensurate with the size of the Company and the nature of its business, for the societies. purchases of inventory, fixed assets and for the sale of goods and services. During the course of our audit, 14) The Company does not deal in shares, securities, debentures and other investments. we have not observed a continuing failure to correct major weaknesses in internal controls. 15) According to the information and explanations given to us, the Company has given corporate guarantees 5) (a) Based on the audit procedures applied by us and according to the information and explanations for loans taken by its subsidiary/joint venture companies from banks. The terms and conditions are not provided by the management, we are of the opinion that the particulars of contracts and prima facie prejudicial to the interest of the Company. arrangements referred to in section 301 of the Companies Act, 1956 have been entered into the 16) According to the information and explanations given to us, term loans were applied for the purpose for register required to be maintained under that section. which the loans were obtained. (b) The transactions made in pursuance of such contracts or arrangements, were made at prices 17) According to the information and explanations given to us and on an overall examination of the Balance which are reasonable having regard to prevailing market prices at the relevant time, except for Sheet and Cash Flows of the Company, we report that the Company has not utilized funds raised on short- certain transactions for which, there are no similar services rendered to other parties or have term basis for long term investment. been entered into on an reciprocal basis and hence the prices are not comparable. 18) The Company has not made any preferential allotment of shares to parties or companies covered in the 6) In our opinion and according to the information and explanations given to us, the Company has not register maintained under section 301 of the Companies Act, 1956. accepted any deposits from the public and hence the provisions of section 58A, 58AA or any other 19) The Company did not issue any debentures during the year. provision of the Companies Act, 1956, read with the rules framed thereunder are not applicable. 20) The Company has not raised any money through a public issue during the year. 7) In our opinion and according to the information and explanations given to us, the internal audit system 21) Based on the audit procedures performed and information and explanations given by the management, is commensurate with the size of the Company and nature of its business. we report that no fraud on or by the Company has been noticed or reported during the year. 8) We have broadly reviewed the books of account maintained by the Company in respect of the Oil Palm For and on behalf of Plantation Division pursuant to the order made by the Central Government for maintenance of cost KALYANIWALLA & MISTRY records prescribed under section 209 (1)(d) of the Companies Act, 1956, and are of the opinion that prima Chartered Accountants facie, the prescribed accounts and records have been made and maintained. We, have not, however, K. M. Elavia made a detailed examination of the records with a view to determining whether they are accurate or Place : Mumbai Partner complete. To the best of our knowledge and according to the information given to us, the Central Dated : May 25, 2006 Membership No. 12737 70 Annual Report 2005-2006
BALANCE SHEET AS AT MARCH 31, 2006 PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ON MARCH 31, 2006 This Year This Year Previous Year Schedule Rs. ’000 Rs. ’000 Rs. ’000 This Year This Year Previous Year SOURCES OF FUNDS Schedule Rs. ’000 Rs. ’000 Rs. ’000 INCOME Shareholders’ Funds Share Capital 1 71,188 71,188 From Operations 11 6,027,586 5,671,833 Reserves & Surplus 2 554,821 519,036 Other Income 12 28,004 13,348 626,008 590,224 6,055,590 5,685,181 Loan Funds Secured Loans 3 1,259 139,598 EXPENDITURE Unsecured Loans 4 1,333,526 180,243 Materials 13 4,358,477 4,163,547 1,334,785 319,841 Expenses 14 1,495,255 1,228,645 Deferred Tax Liability 50,556 51,785 Interest and Financial Charges 15 51,885 32,364 TOTAL 2,011,350 961,850 Depreciation 73,626 65,575 Miscellaneous Expenditure written off 224 87 APPLICATION OF FUNDS 5,979,467 5,490,218 Fixed Assets 5 Gross Block 1,194,189 1,031,495 PROFIT BEFORE TAXATION 76,123 194,963 Less : Depreciation 418,931 360,255 Provision for Taxation Less : Provision for Impairment 19,890 19,890 Current ( including Fringe Benefit Tax) 12,509 48,000 MAT Credit entitlement (3,410) – Net Block 755,369 651,349 Deferred (1,229) 5,245 Capital Work-in-Progress/advances 146,415 7,959 7,870 53,245 901,784 659,308 Investments 6 515,868 334,963 PROFIT AFTER TAXATION 68,253 141,718 Surplus brought forward 269,674 213,213 Current Assets, Loans and Advances 7 AMOUNT AVAILABLE FOR APPROPRIATION 337,927 354,931 Inventories 698,849 549,737 Sundry Debtors 639,825 504,782 APPROPRIATION : Cash and Bank Balances 267,412 82,864 Dividend Other Current Assets 59 71 Interim – 39,153 Loans and Advances 338,914 88,462 Final (Proposed) 28,475 23,492 1,945,059 1,225,916 28,475 62,645 Less : Current Liabilities Tax on Dividend 3,994 8,412 and Provisions Transfer to General Reserve 7,000 14,200 Liabilities 8 1,303,021 1,219,020 Surplus carried forward 298,458 269,674 Provisions 9 48,339 39,541 TOTAL 337,927 354,931 1,351,360 1,258,561 Net Current Assets 593,699 (32,645) Earnings per share (Basic/Diluted) in Rs. (Refer note 25) 9.59 19.91 Miscellaneous Expenditure 10 – 224 (to the extent not written off or adjusted)
TOTAL 2,011,350 961,850 NOTES TO ACCOUNTS 16 NOTES TO ACCOUNTS 16 The Schedules referred to above form an integral part of the Balance Sheet. The Schedules referred to above form an integral part of the Profit and Loss Account. As per our Report attached Signatures to Balance Sheet and As per our Report attached Signatures to Profit and Loss Account Schedules 1 to 10 and 16 and Schedules 11 to 16 For and on behalf of For and on behalf of KALYANIWALLA & MISTRY A.B. GODREJ Director KALYANIWALLA & MISTRY A.B. GODREJ Director Chartered Accountants Chartered Accountants V.V. CHAUBAL C.K. VAIDYA Managing Director V.V. CHAUBAL C.K. VAIDYA Managing Director K.M. ELAVIA Company Secretary K.M. ELAVIA Company Secretary Partner Partner Membership No. 12737 Membership No. 12737 Mumbai, May 25, 2006. Mumbai, May 25, 2006.
SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006
This Year Previous Year This Year This Year Previous Year Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 SCHEDULE 1 : SHARE CAPITAL SCHEDULE 2 : RESERVES & SURPLUS AUTHORISED SECURITIES PREMIUM ACCOUNT 1,00,00,000 Equity Shares of Rs. 10 each 100,000 100,000 As per last Balance Sheet 189,290 189,290 ISSUED, SUBSCRIBED AND PAID UP CAPITAL INVESTMENT SUBSIDY 71,18,752 Equity Shares of Rs. 10 each fully paid 71,188 71,188 As per last Balance Sheet 9,602 7,102 Add : Amount received during the year – 2,500 Of the above Shares 9,602 9,602 GENERAL RESERVE (a) 41,06,956 Equity Shares of Rs. 10/- each As per last Balance Sheet 50,470 48,850 are held by Godrej Industries Limited, Less : Provision for impairment – 12,580 the Holding Company. 50,470 36,270 (b) 52,47,600 Equity Shares of Rs. 10/- each Add : Transferred from Profit & Loss Account 7,000 14,200 have been issued as fully paid Bonus Shares 57,470 50,470 by capitalising Securities Premium Account. PROFIT AND LOSS ACCOUNT 298,458 269,674 TOTAL 554,821 519,036
71 Godrej Agrovet Limited
SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006
This Year Previous Year This Year Previous Year Rs.’000 Rs.’000 Rs.’000 Rs.’000 SCHEDULE 3 : SECURED LOANS SCHEDULE 4 : UNSECURED LOANS FROM BANKS FROM BANKS Term Loans – 115,598 Term Loans 1,299,809 148,600 (amount due within a year Rs. Nil, (amount due within a year Rs. 1,216,476 thousand, Previous year Rs. 23,922 thousand) Previous year Rs. 148,600 thousand) Cash Credit/Working Capital Demand Loans 1,259 24,000 SALES TAX DEFERMENT FACILITY 33,717 31,643 TOTAL 1,259 139,598 TOTAL 1,333,526 180,243 Note : Refer Note (4) SCHEDULE 5 : FIXED ASSETS (Rs. ’000) GROSS BLOCK DEPRECIATION IMPAIRMENT NET BLOCK ASSETS As at Additions Deductions As at Upto For the On Upto Upto As at As at 1.4.2005 31.3.2006 1.4.2005 Year Deductions 31.3.2006 31.3.2006 31.3.2006 31.3.2005 Goodwill – – ––––––––– Freehold Land 86,493 6,777 – 93,270 ––– – – 93,270 86,493 Leasehold Land 9,841 – – 9,841 845 112 – 956 – 8,885 8,996 Buildings 220,824 12,913 – 233,737 59,302 7,745 – 67,047 – 166,691 161,522 Staff Quarters 1,003 – 485 518 491 19 244 267 – 251 512 Plant & Machinery 546,059 115,724 6,802 654,982 202,914 46,829 5,246 244,496 19,890 390,595 323,255 Furniture & Fixtures 19,476 9,985 120 29,341 12,225 2,487 106 14,607 – 14,734 7,251 Leasehold Improvements – 9,409 – 9,409 – 859 – 859 – 8,550 – Office & Other Equipments 25,512 7,461 326 32,647 13,335 2,888 224 16,000 – 16,647 12,177 Vehicles 53,130 22,465 14,308 61,287 29,069 9,049 9,132 28,986 – 32,300 24,061 Research Centre 3,688 – – 3,688 1,584 175 – 1,759 – 1,929 2,104 Trees, Development Costs 45,469 – – 45,469 20,922 3,033 – 23,955 – 21,514 24,547 Technical Know-How Fees 20,000 – – 20,000 19,569 429 – 19,999 – 1 431 TOTAL 1,031,495 184,734 22,041 1,194,189 360,256 73,626 14,951 418,931 19,890 755,368 – Previous Year 919,249 136,645 24,399 1,031,495 307,941 65,575 13,260 360,255 – – 651,349 Capital Work-in-Progress / Advances 146,415 7,959 901,783 659,308
This Year This Year Previous Year This Year This Year Previous Year Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 SCHEDULE 6 : INVESTMENTS SCHEDULE 7 : CURRENT ASSETS, LOANS AND ADVANCES LONG TERM (A) INVENTORIES : UNQUOTED (AT COST) Raw Materials 351,305 316,869 Finished Products 201,993 108,490 IN GOVERNMENT SECURITIES Poultry Stock 106,282 93,941 (All the Securities have been deposited with Stores and Spares 14,816 12,067 various Government Authorities) Stock under Cultivation 24,454 18,370 (a ) National Savings Certificates (Face value 698,849 549,737 Rs. 112 thousand; Previous year Rs. 92 thousand) 112 92 (B) SUNDRY DEBTORS (Rs. 20 thousand purchased during the year) Debts outstanding for a period exceeding six months (b) Indira Vikas Patra (Face value Considered Good 130,489 95,172 Rs. 2 thousand; Previous year Rs. 3 thousand) 1 2 Considered Doubtful 21,500 23,682 (Rs. 1 thousand matured during the year) 151,989 118,854 113 94 Other Debts 509,336 409,610 IN SUBSIDIARY COMPANY TOTAL 661,325 528,464 In Goldmohur Foods and Feeds Limited 18,38,170 (Previous year 21,58,170) equity shares 183,398 183,398 Less: Provision for doubtful debts 21,500 23,682 of Rs. 10/- each 639,825 504,782 In Golden Feeds Products Limited [Debts amounting to Rs. 12,263 thousand (Previous year 50,000 equity shares of Rs. 10/- each 500 500 Rs. 12,263 thousand) are secured by equitable mortgage/ IN JOINT STOCK COMPANIES hypothecation of assets/deposit of title deeds, Rs. 17,366 (a) 4,000 Fully-paid Equity Shares of Rs.10/- thousand (Previous year Rs.118 thousand against Security each in Ensemble Holdings & Finance Limited 80 80 Deposits and Rs. 25,392 thousand (Previous year Rs. 12,494 (a company under the same management) thousand) against Bank Guarantees] (b) 4,00,000 Fully-paid Equity Share of Tk. 100/- each in (C) CASH AND BANK BALANCES ACI Godrej Agrovet Private Limited 30,814 30,814 Cash and Cheques on hand 12,713 7,375 (c) 675 Fully-paid Equity Share of AED. 100/- each in Balances with Scheduled Banks Al Rahba International Trading Limited Liability Company 810 – i) In Current Accounts 98,827 64,530 (acquired during the year) ii) In Fixed Deposit Accounts 155,872 10,959 (d) 23,90,911 fully paid Equity Shares of Rs.10/- each (Rs. 75 thousand pledged with in Creamline Dairy Products Limited 95,016 95,016 government authorities) 267,412 82,864 (e) 3,51,352 fully paid Equity Shares of Rs.10/- each (D) OTHER CURRENT ASSETS 59 71 in Creamline Nutrients Limited 8,784 8,784 (f) 4,55,000 fully paid Equity Shares of Rs.10/- each (E) LOANS AND ADVANCES in Polchem Hygiene Laboratories Private Limited 16,275 16,275 (Unsecured and considered good unless otherwise stated) Loans and Advances recoverable in cash or in 151,779 150,969 kind or for value to be received IN CO-OPERATIVE SOCIETY Considered Good 292,449 76,273 3 Shares of Rs.500/- each in Sachin Considered Doubtful 3,361 3,674 Industrial Co-operative Society Limited 2 2 Aggregate Cost of Unquoted Investments 335,792 334,962 295,810 79,947 Less: Provision for doubtful advances 3,361 3,674 CURRENT NON-TRADE UNQUOTED 292,449 76,273 1,78,74343.368 units of Grindlays Floating Rate Fund - Other Deposits Short term (Plan B) - Daily Dividend. 180,000 – i) Government Authorities 131 5 TRADE UNQUOTED ii) Others 35,050 25,289 IN SUBSIDIARY COMPANY Advance payment of Taxes including MAT Credit In Krithika Agro Farm Chemicals and Engineering Entitlement Rs. 3,410 thousand (Net of Industries Private Limited provision for taxation Rs. 73,294 thousand; 7,600 Fully-paid Equity Share of Rs. 10/- each 76 – Previous year Rs. 73,294 thousand) 11,284 (13,105) (acquired during the year) 338,914 88,462 TRADE UNQUOTED TOTAL 1,945,058 1,225,916 In subsidiary company TOTAL 515,868 334,963 72 Annual Report 2005-2006
SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006
This Year This Year Previous Year This Year This Year Previous Year Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 SCHEDULE 14 : EXPENSES (Contd.) SCHEDULE 8 : LIABILITIES 10 Insurance 8,330 6,193 Acceptances 273,048 424,140 11 Postage, telephone and stationery 27,314 21,819 Sundry Creditors 12 Auditor's Remuneration 1,929 1,675 Dues to Small Scale Undertakings (refer Note 10) 724 5,051 13 Legal & Professional Fees 59,136 17,770 Others 854,398 597,996 14 Freight, Coolie and Cartage 83,620 64,504 855,122 603,047 15 Discount, Commission and Selling expenses 301,345 254,636 Advances from Customers 69,212 96,522 16 Advertisement and publicity 42,940 37,489 Sundry Deposits 105,638 95,311 17 Travelling expenses 80,390 58,355 TOTAL 1,303,021 1,219,020 18 Bad Debts/Advances written off 16,594 33,906 19 General Expenses 65,114 52,832 SCHEDULE 9 : PROVISIONS Dividend 28,475 23,492 1,521,655 1,255,045 Tax on Dividend 3,994 3,295 20 Less: Shared Expenses recovered (26,400) (26,400) Gratuity 1,439 416 TOTAL 1,495,255 1,228,645 Leave Encashment 14,431 12,338 SCHEDULE 15 : INTEREST AND FINANCIAL CHARGES TOTAL 48,339 39,541 (a) Interest paid on fixed loans - Banks 36,505 18,885 SCHEDULE 10 : MISCELLANEOUS EXPENDITURE (b) Interest paid on other loans (To the extent not written off) i) Banks 3,012 1,394 Front end Fee on Term Loans – 224 ii) Others 2,157 4,796 TOTAL – 224 5,169 6,190 (c) Other Financial Charges 10,212 7,289 SCHEDULE 11 : INCOME FROM OPERATIONS Net Sales 5,955,461 5,627,822 TOTAL 51,885 32,364 Other Business Operations Claims & Compensations 32,167 851 SCHEDULE 16 : NOTES TO ACCOUNTS Rent and Storage Charges – 390 1. SIGNIFICANT ACCOUNTING POLICIES 32,167 1,241 a) The accounts have been prepared on historical cost convention. The Company follows mercantile Financial Operations system of accounting and recognises income and expenditure on accrual basis. Dividend on Investments (Gross) 35,609 30,000 b) Fixed assets have been stated at cost and include incidental and/or installation/development Interest (Gross) (Tax at Source Rs.114 thousand; expenses incurred in putting the asset to use and interest on borrowing incurred during construction Previous year Rs.144 thousand) 4,349 4,696 period. Pre-operative expenses for major projects are also capitalised, where appropriate. Profit on sale of Investments – 8,074 c) Carrying amount of cash generating units/assets are reviewed at balance sheet date to determine 39,958 42,770 whether there is any indication of impairment. If such indication exists, the recoverable amount is TOTAL 6,027,586 5,671,833 estimated as the net selling price or value in use, whichever is higher. Impairment loss, if any, is recognized whenever carrying amount exceeds the recoverable amount. SCHEDULE 12 : OTHER INCOME Profit/(Loss) on sale of Fixed Assets (Net) 1,273 (431) d) Depreciation /Amortisation has been provided for as under : Provision for Doubtful Debts and Advances no longer required 2,175 1,420 (a) The Company has grouped additions and disposals in appropriate time periods of a Miscellaneous Income 24,556 12,359 month/quarter for the purpose of charging pro rata depreciation in respect of additions TOTAL 28,004 13,348 and disposals of its assets keeping in view the materiality of the items involved. SCHEDULE 13 : MATERIALS (b) 1) Building, Plant & Machinery, Computers and Research Centre: On Straight Line a) RAW MATERIALS CONSUMED Method basis at the rates prescribed by Schedule XIV to the Companies Act, 1956. Opening stock 316,869 256,523 2) Other assets: On Written Down Value basis at the rates prescribed by Schedule Add : Purchases during the year 3,910,803 3,852,505 XIV to the Companies Act, 1956. 4,227,671 4,109,028 3) Amortizations Less : Sales during the year 54,881 35,322 Asset type Period 4,172,789 4,073,706 (i) Leasehold Land, improvements and equipments Primary lease period Less : Closing Stocks 351,305 316,869 (ii) Tress Development cost 15 years 3,821,484 3,756,837 (iii) Nursery/Greenhouse building 10 years b) PURCHASE FOR RESALE 648,921 429,398 (iv) Technical Kno-whow of a capital nature 6 years c) INVENTORY CHANGE (v) Poultry Equipments 3 years Opening Stock e) Grants/Subsidies : Finished Goods 108,490 105,297 (i) Investment Subsidy under the Central/State investment incentive scheme is credited to Work-in-progress – 124 Capital Investment Subsidy Reserve and treated as a part of the shareholders’ funds. Stock under cultivation 18,370 5,714 Poultry Stock 93,941 86,978 (ii) Grants/Subsidies related to specific fixed assets are shown as a deduction from the gross 220,801 198,113 value of the asset concerned in arriving at its book value. Less : Closing Stock (iii) Grants/Subsidies related to revenue are presented as a credit to the profit and loss Finished Goods 201,993 108,490 statement or are deducted in reporting the related expense. Work-in-progress – – f) Long Term investments are carried at cost. Provision for diminution, if any, in the value of each Stock under cultivation 24,454 18,370 long term investment is made to recognise a decline, other than of a temporary nature. Poultry Stock 106,282 93,941 Current investments are stated at lower of cost and net realizable value. 332,729 220,801 g) Raw materials and Poultry Stock are valued at weighted average cost. (111,928) (22,688) Finished goods and work-in-progress are valued at lower of cost and net realisable value. These costs include cost of conversion and other costs incurred in bringing the inventories to TOTAL 4,358,477 4,163,547 their present location and condition. Stores and spares are valued at cost using the First-In- SCHEDULE 14 : EXPENSES First-Out method 1 Salaries, Wages, Bonus, Gratuity and Allowances 274,449 243,118 h) Retirement benefits to employees comprise payments under defined contribution plans like 2 Contribution to Provident Fund and provident fund and family pension. Payments under defined contribution plans are charged to the Other Funds and Administration Charges 15,852 11,458 profit and loss account. The liability in respect of defined benefit schemes like gratuity and leave 3 Employee Welfare Expenses 28,220 22,532 encashment benefit on retirement is provided on the basis of acturial valuation at the end of each 4 Processing charges 266,225 228,804 year. The liability for retirement gratuity is funded through a trust created for the purpose. 5 Consumable Stores 55,783 49,453 i) Miscellaneous expenditure : 6 Power and Fuel 141,032 118,999 i) Non-Compete fee is amortised over a period of five years or the period of the agreement 7 Rent 25,870 11,803 (wherever applicable). 8 Rates and Taxes 9,596 7,193 9 Repairs & Maintenance ii) Front-end fee paid on loans raised from financial institutions is amortised over the period Building 2,815 1,189 of the loan. Plant & Machinery 10,014 9,683 iii) Expenditure incurred on study of business is amortised over the period for which the Other Assets 5,086 1,635 business plan is evolved. 17,914 12,507 iv) Expenditure incurred on glow-sign board is amortised over a period of two accounting years. 73 Godrej Agrovet Limited
SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006 j) Revenue is recognised when goods are despatched to external customers. Sales are inclusive of 6. INFORMATION IN RESPECT OF JOINT VENTURE (JOINTLY CONTROLLED ENTITY) realised exchange fluctuations on export receivables but net of returns, sales tax, rebates,etc. Name Country of Incorporation Percentage Holding k) Revenue expenditure on Research and Development is charged to Profit and Loss Account of the This Year Previous Year year in which it is incurred. Capital Expenditure incurred during the year on Research and ACI Godrej Agrovet Private Limited Bangladesh 50% 50% Development is shown as an addition to Fixed Assets under the head “Research Centre”. ACI Godrej Agrovet Private Limited has started its operations in the fields of Animal Feed, l) Interest and commitment charges incurred in connection with borrowing of funds, which are directly attributable to the acquisition, construction or production of an asset that necessarily takes substantial Poultry businesses etc. period of time to get ready for its intended use, upto the time the said asset is put to use are Interest in Assets, Liablities, Income and Expense with respect of jointly controlled entity capitalised, as a part of the cost of that asset. Other borrowing costs are recognised as an expense in Assets 78,899 43,827 the period in which they are incurred. Liablities 78,899 16,151 m) Transactions in foreign currency are recorded at the exchange rates prevailing on the date of the transaction. Assets and liabilities related to foreign currency transactions, remaining unsettled at the Income 15,612 – year end, are translated at the year end exchange rates. Forward exchange contracts, remaining Expense 19,758 – unsetteled at the year end, backed by underlying assets or liabilities are also translated at year end exchange rates.The premium payable on foreign exchange contracts is amortised over the period of Al Rahaba Trading International LLC Abu Dhabi 70% – the contract. Exchange gains / losses are recognised in the Profit and Loss Account except in respect The company has a 45% share in the Equity capital of Al Rahaba International LLC but a 70% share of liabilities incurred to acquire fixed assets in which case, they are adjusted to the carrying amount in the profits and in future investments. of such fixed assets. Al Rahaba Trading International LLC is in the Poultry business n) Deferred tax is recognised on timing differences, being the differences between the taxable income Assets 40,227 and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets, subject to consideration of prudence, are recognised and Liablities 40,227 carried forward only to the extent that there is a reasonable certainty that sufficient future taxable Income 24,114 income will be available against which such deferred tax assets can be realised. The tax effect is calculated on the accumulated timing difference at the year-end, based on the tax rates and laws Expense 39,883 enacted or substantially enacted on the balance sheet date. This Year Previous Year o) The basic earnings per share is computed using the weighted average number of common shares Rs.’000 Rs.’000 outstanding during the period. Diluted earnings per share is computed using the weighted average 7. CURRENT ASSETS, LOANS AND ADVANCES number of common and dilutive common equivalent shares outstanding during the period, except (a) Loans and Advances include due from Companies where the results would be anti-dilutive. under the same management p) Provisions are recognized in the accounts in respect of present probable obligations, the amount of Golden Feed Products Limited 40,393 5 which can be reliably estimated. Maximum balance during the year 45,000 5 Contingent liabilities are disclosed in respect of possible obligations that arise from past events but Krithika Agro Farm Chemicals and Engineering their existence is confirmed by the occurrence or non-occurrence of one or more uncertain future Industries Private Limited 4,205 – events not wholly within the control of the Company. Maximum balance during the year 4,205 This Year Previous Year Rs.’000 Rs.’000 Al Rahba International Trading Limited Liablity Company 33,075 – 2. CONTINGENT LIABILITY Maximum balance during the year 33,075 In respect of : (b) Sundry Debtors include due from Companies (a) Income Tax Matters 6,119 14,010 under the same management The Income Tax Department has filed an appeal against the Goldmohur Foods and Feeds Limited 18,219 7,841 order of CIT (A), for A.Y. 1998-99, 1999-2000, 2000-2001 Godrej Consumer Products Limited – 15 and has raised a demand for A.Y.2003-04 Godrej Industries Limited – 55 (b) Sales Tax Matters 30,317 40,085 ACI Godrej Agrovet Private Limited 13 – The Company has filed Appeal with the Sales Tax tribunal in Tamilnadu for F.Y. 1993-94 to 1995-96, for classifying branch 8. It is the opinion of the management that the following are parties which can be classified as Small transfer as sales. (Against the above the Company has paid Scale Industrial Undertakings to whom the Company owes sums which is outstanding for more than advance of Rs. 800 thousand) The Company has filed an appeal 30 days. The Auditors have accepted the representations of the management in this matter. in Mumbai High Court in connection with Agricultural Produce Name of the party Rs.’000 Name of the party Rs.’000 Market Committee(APMC) in respect of poultry business. The Wardhaman Trading Company 28 Pharmline Industries 5 Company has preffered an appeal with the Commissioner of Commercial Taxes, Karnataka against the order of the Joint Shivshant Industries 56 Laxmi Solvent (P) Ltd. 422 Commissioner of Commercial Taxes, Karnataka, for classifying Yashoraj Industries 171 chicken sold in crimp pack as chicken sold in sealed container. (Against the above the Company has paid advance of Rs. 14,300 9. Deferred Tax : thousand) The Company has filed writ petition in Andhra Pradesh The tax effects of significant temporary differences that resulted in deferred tax assets and liabilities are : High Court, seeking direction to the CTO, to accept the “C” This Year Previous Year forms and waive the differential liability Rs.’000 Rs.’000 (c) Guarantee issued to a Bank on behalf of the subsidiary company 858,459 590,000 Depreciation on Fixed Assets (82,407) (74,200) (d) Guarantees issued by the Banks and counter guaranteed by 47,815 41,387 Provision for Impairment of Fixed Assets 7,310 7,310 the company (other than those mentioned in (c) above) Rs.3,182 thousand (Previous year Rs. 672 thousand) have been Provision for Doubtful Debts 8,368 8,983 secured by deposit with bank Carry Forward unabsorbed depreciation 17,576 – (e) Case / Claim filed by Processors for claiming various expenses 24,764 – Others (1,403) 6,122 3. CAPITAL COMMITMENTS Deferred Tax Liability (50,556) (51,785) The estimated value of contracts remaining to be executed on 55,462 4,601 Capital Account to the extent not provided for This Year Previous Year 4. SECURED LOANS / UNSECURED LOANS Unit Quantity Value Quantity Value Rs. ‘000 Rs. ‘000 a) Term Loans from Banks are secured by an equitable mortgage of specified immovable properties and hypothecation of specified movable assets of the Company. 10. SALES TURNOVER b) Cash Credit and other facilities from banks are secured by hypothecation of stocks and book Animal Feeds MT 467,343 3,689,176 470,227 3,790,036 debts of the Company (both present and future). Agro Inputs – 924,208 – 659,175 c) Sales Tax Deferment includes Rs. 2,780/- thousand which has been disputed by Sales Tax Integrated Poultry Business – 884,002 – 778,887 authorities. The Company has filed an appeal with the Andhra Pradesh High Court on this count. Oil Palm Plantation – 323,862 – 298,361 5. FIXED ASSETS Others – 134,213 – 101,363 Legal formalities relating to the transfer of title of immovable assets situated at Chennai (acquired as TOTAL 5,955,461 5,627,822 a part of the take over of Agrovet business from Godrej Industries Limited), Hyderabad (as part of the merger of Godrej Plant Biotech Limited) and at Coimbatore are being complied with. Stamp duty Note: Sales Turnover includes sale of items processed by third parties, and items purchased by the payable thereon is not presently determinable. Company for resale.
74 Annual Report 2005-2006
SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006
11. FINISHED GOODS INVENTORIES (b) MANAGERIAL REMUNERATION Animal Feeds MT 7,258 62,699 4,978 44,451 a) Salaries 6,339 4,751 (4,978) (44,451) (4,851) (34,411) b) Contribution to Provident fund 341 235 Agro Inputs Synthetic pesticides KL 168 35,848 151 19,153 c) Estimated monetary value of perquisites 28 101 (151) (19,153) (79) (13,880) 6,708 5,086 Natural pesticides MT 4 480 22 3,477 (22) (3,477) (5) (753)) d) Directors’ Sitting Fees 72 72 Processed Chicken 40,360 8,612 6,780 5,158 (8,612) (32,522) Others 62,606 32,797 Note: (a) All the above items have been included under respective heads under “Expenses” in Schedule 14 (32,797) (23,731) (b) Salaries include performance linked variable remuneration on provisional basis TOTAL 201,993 108,490 (c) The remuneration paid to the Managing Director is in excess of the remuneration prescribed (108,490) (105,297) under Section 198 read with Schedule XIII to the Companies Act, 1956 by Rs.3056 thousands. The company is in the process of making necessary application to the Central Government for Note : Figures in bracket pertain to the Previous Year(34,332) approval of the remuneration in excess of the prescribed limits. 12. PURCHASES FOR RESALE 17. COMMON EXPENSES SHARED BY THE COMPANIES : Animal Feeds MT 5,220 69,987 2,379 25,848 a) Expenses (Schedule 14) include Rs 16,602 thousand (Previous Year Rs 10,846 thousand) charged Agro Inputs by Godrej Industries Limited, the Holding Company Plant Growth Promoter b) During the year, the Company shared the services of some of it’s employees and facilities with Spray KL 285 21,407 293 22,395 its subsidairy Company. Consequently the value of share of costs attributable to that Company Granules MT 5,713 65,185 5,749 65,647 calculated in accordance with the service agreement has been recovered, amounting to Urea coating agent MT 13 2,621 45 3,149 Rs. 26,400 thousands (Previous year Rs. 26,400 thousands) Synthetic pesticides KL 1,298 143,591 1,100 128,486 18. AUDITORS’ REMUNERATION Others 346,130 183,873 Audit fees 1,122 880 TOTAL 648,921 429,398 Audit under Other Statutes 337 220 13. RAW MATERIALS CONSUMED Tax representation before Authorities 196 217 Cakes & Brans MT 122,403 697,964 112,066 582,799 Management Consultancy 73 44 Extractions MT 262,515 1,276,327 265,412 1,378,058 Certification 172 187 Others 1,847,193 1,795,980 Reimbursement of Expenses 29 127 TOTAL 3,821,484 3,756,837 TOTAL 1,929 1,675 14. DISCLOSURE IN RESPECT OF LEASES: This Year Previous Year The Company’s leasing arrangements are in respect of operating leases for premises occupied by Rs.’000 Rs.’000 the Company. These leasing arrangements are cancellable, and are renewable on a periodic basis 19. VALUE OF IMPORTS ON CIF BASIS by mutual consent on mutually acceptable terms. (INCLUDES DIRECT IMPORTS ONLY ) a. The total of future minimum lease payments under non - cancelable operating leases for each Raw Materials 103,040 60,234 of the following periods : Spares 1,129 762 This Year Previous Year Rs.’000 Rs.’000 Capital Goods 29,990 – i. Not later than one year 1,115 1,373 134,159 60,996 ii. Later than one year and not later than five years 2,230 2,746 20. EXPENDITURE IN FOREIGN CURRENCY iii. Later than five years –– Travelling Expenses 2,523 1,852 b. Lease payments recognised in the statement of Profit & Loss for the period : Others 21,567 5,929 Minimum lease payments 1,115 1,373 24,089 7,780 15. LICENSED & INSTALLED CAPACITY AND ACTUAL PRODUCTION 21. EARNINGS IN FOREIGN EXCHANGE Capacity Per Annum Actual Third Party Item For the year Registered Installed Production Production F.O.B value of goods exported 10,803 5,534 Ended MT MT MT MT Others 1,837 334 a) Animal Feeds 31.3.2006 Not Applicable 306,645 185,938 338,577 (Non-Scheduled) 31.3.2005 Not Applicable 306,645 188,156 279,819 12,641 5,868 b) Processed Chicken 31.3.2006 Not Applicable 15,566 12,298 – (Non-Scheduled) 31.3.2005 Not Applicable 13,336 9,422 – 22. VALUE OF CONSUMPTION OF RAW MATERIALS, SPARES & TOOLS c) Palm Oil 31.3.2006 Not Applicable 11,490 7,112 – (INCLUDING CANALIZED ITEMS ) (Non-Scheduled) 31.3.2005 Not Applicable 11,490 7,638 – This Year Previous Year Million Million Million Rs. ’000 % Rs. ’000 % Plants Plants Plants RAW MATERIALS : d) Tissue Culture Plants 31.3.2006 4.25 5.00 4.21 – (Non-Scheduled) 31.3.2005 4.25 5.00 4.21 – Imported items (including duty content) 43,946 1 47,085 1 16. (a) Computation of Profit for the purpose of mangerial remuneration Indigenous 3,777,538 99 3,709,752 99 This Year Previous Year TOTAL 3,821,484 100 3,756,837 100 Rs.’000 Rs.’000 SPARES & TOOLS : Profit after tax as per Profit and Loss account 68,253 141,718 Imported items 750 1 599 1 Add : Depreciation as per accounts 73,626 65,575 Indigenous 55,033 99 48,854 99 Managerial Remuneration 6,708 5,086 TOTAL 55,783 100 49,453 100 Provision for Doubtful Debts / Advances (2,175) (1,420) Profit / (Loss) on sale of fixed assets referred to in Proviso 23. Research & Development Expenditure of revenue nature charged to the Profit and Loss Account to Sec. 349 (3)(d) of the Companies Act, 1956 1,273 (431) amounts to Rs.9,031 thousand (previous year Rs.10,620 thousand). Provision for Tax (including Deffered tax) 7,870 53,245 24. The amount of exchange difference included in the Profit and Loss Account, under the related heads of expenses / income, is Rs. 1,742 thousand (Previous year expense Rs.1,598 thousand). The amount 87,302 122,054 of exchange difference in respect of forward exchange contracts to be recognised in the profit and Less : Depreciation as per Section 350 of the loss account of subsequent accounting periods Rs. Nil (previous year Rs. 940 thousand) Companies Act, 1956 73,626 65,575 25. EARNINGS PER SHARE Provision for Dimunition in value of investments This Year Previous Year written back – – Profit after tax and prior period expenses (Rs.’000) 68,253 141,718 Profit / (Loss) on sale of Fixed assets (net) 1,273 (431) Weighted average number of equity shares outstanding 7,118,752 7,118,752 74,899 65,144 Basic earnings per share 9.59 19.91 Profit for the purpose of Directors remuneration 80,656 198,629 Diluted earnings per share 9.59 19.91 Nominal value of shares 10.00 10.00 5% thereof 4,033 9,931 75 Godrej Agrovet Limited
SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2005
26. RELATED PARTY DISCLOSURES 2. The following transactions were carried out with the related parties in the ordinary course of business : Related party disclosures as required by AS - 18, “Related Party Disclosures”, are given below “ (i) Details relating to parties referred to in items 1(i), (ii), (iii), (iv) and (v) above Rs.’000 1. Relationships : Nature of Tansactions Holding Subsi- Fellow Joint Assoc- Other Comp- diaries Subsi- Ventures iates related (i) Holding Companies : anies diaries Parties (i) (ii) (iii) (iv) (v) (vi) Godrej Industries Limited (GIL) holds 57.69% in the Company. GIL is the subsidiary of Godrej & Boyce Mfg. Co. Limited, the ultimate Holding Company. 1 Purchase/Transfer of fixed assets 3,594 – 797 –– – 4,483 – 30 – – – (ii) Subsidiary companies 2 Sales/Transfer of fixed Assets – 47 – 5,667 –– 3 Sale of Investments – – – – – Goldmohur Foods and Feeds Limited – 4,000 – – – – 4 Investment in share capital – 886 –––– Golden Feed Products Limited –––––– Krithika Agro Farm Chemicals and Engineering Industries 4 Advances given during the year – 79,230 – 34,511 –– 5 Intercorporate deposits (iii) Fellow Subsidaries : placed during the year –––––– 1,166 – – – – – Godrej Consumer Products Limited 6 Intercorporate deposits Godrej Infotech Limited taken during the year –––––– –––––– Godrej Tea Limited 7 Sale of materials/finished goods – 216,412 – 5,667 –– 181,579 ––– Godrej Properties & Investments Limited 8 Purchase of materials/finished goods 82 122,745 1,107 – 10,553 122,374 Godrej Hicare Limited 59 137,378 1,865 ––152,898 9 Expenses charged to other (iv) Joint Ventures companies – 26,592 – 1,287 –– 12 27,210 – 847 –50 ACI Godrej Agrovet Private Limited 10 Expenses charged by other Al Rahaba Trading International LLC companies 16,470 1,307 3,403 –– – 11,166 2,102 587 – – 168 (v) Associates 11 Interest income on loan given – 1,787 –––– –––––– Creamline Dairy Products Limited 12 Interest expense on intercorporate deposits taken –––––– Creamline Nutrients Limited – – –––– Polchem Hygiene Laboratories Private Limited 13 Dividend Income – 31,000 33 – 4,576 – – 30,000 ––– – (v) Other related parties where persons mentioned in (vii) below exercise significant influence 14 Dividend paid 13,573 ––––– 22,621 ––––– Bahar Agrochem & Feeds Private Limited 15 Outstanding receivables, (vi) Key management personnel net of (payables) 8 35,552 – (13) (1,173) (1,373) 4,754 5,966 77 847 (11,019) Mr. C.K.Vaidya 16 Guarantees issued in favour of – 145,000 – 123,459 –– – 590,000 ––– (vii) Individuals exercising control or significant influence (and their relatives) (ii) Details relating to persons referred to in items 1 (vi) & (vii) above Mr. A.B. Godrej Current Previous Year Year Mr. N.B. Godrej 1 Remuneration 5,724 5,419 2 Interest income on loans given – – 3 Dividend paid 1,935 3,226 3. Significant Related Party Transactions : (Rs.'000) Nature of Transactions Holding Company Amount Subsidiaries Amount Fellow subsidiaries Amount (i) (ii) (iii) 1 Purchase/Transfer of fixed assets Godrej Industries Ltd 3,594 – – Godrej Tea Ltd. 3,558 – 30 Godrej & Boyce Mfg. Co. Ltd. 654 –––– 925 2 Sale of Investments – – Goldmohur Foods & Feeds Ltd. – – – – 40,000 3 Investment in share capital – – Kritika Agro Farm Chemical & – – Engineering Industries Pvt. Ltd. 76 –– ––– 4 Advances given during the year Godrej Industries Ltd. Kritika Agro Farm Chemical & 4,205 Godrej Properties & Investments Ltd. – Engineering Industries Pvt. Ltd. 1,166 – Golden Feeds Products Ltd. 40,393 5 Intercorporate deposits taken during the year Godrej Industries Ltd. – – – – – –– – 6 Sale of materials/finished goods Godrej Industries Ltd. – Goldmohur Foods & Feeds Ltd. 215,661 –– – 181,579 – Kritika Agro Farm Chemical & 458 Engineering Industries Pvt. Ltd. 7 Purchase of materials / finished goods Godrej Industries Ltd. – Goldmohur Foods & Feeds Ltd. 111,120 Godrej Consumer Products Ltd. – 59 137,378 1,865 8 Expenses charged to other companies Godrej & Boyce Mfg. Co. Ltd. – Goldmohur Foods & Feeds Ltd. 26,592 –– 12 27,210 – 9 Expenses charged by other companies Godrej Industries Ltd. 16,470 Goldmohur Foods & Feeds Ltd. 1,307 Godrej Consumer Products Ltd. 495 10,846 2,102 563 – – Godrej Tea Ltd. – – 708 10 Interest income on loan given – – Kritika Agro Farm Chemical & Engineering Industries Pvt. Ltd. 230 –– Golden Feeds Products Ltd. 1,557 – – 11 Interest expense on intercorporate deposits taken Godrej Industries Ltd. – – – – – – 12 Dividend Income – – Goldmohur Foods & Feeds Ltd. 31,000 –– 30,000 – 13 Dividend paid Godrej Industries Ltd. 13,573 –– 22,621 – 14 Outstanding receivables, net of (payables) Godrej Industries Ltd. – Goldmohur Foods & Feeds Ltd. 18,219 Godrej Consumer Products Ltd. 4,754 5,917 (10) Golden Feeds Products Ltd. 16,468 Kritika Agro Farm Chemical & Engineering Industries Pvt. Ltd. 865 15 Guarantees issued in favour of – – Goldmohur Foods & Feeds Ltd 70,000 590,000 Golden Feed Products Ltd. 75,000
76 Annual Report 2005-2006
SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2005
3. Significant Related Party Transactions : (Contd.) (Rs.'000) Joint Amount Associates Amount Nature of Transactions Ventures (iv) (v) 1. Investment in share capital Al Rahaba Trading International LLC 810 2. Sales /Transfer of fixed Assets ACI Godrej Agrovet Private Ltd. 5,667 3. Advances given during the year Al Rahaba Trading International LLC 33,075 – 4. Intercorporate deposits taken during the year – – – 5. Sale of materials/finished goods ACI Godrej Agrovet Private Ltd. – – 6. Dividend Income – – Creamline dairy Products Ltd. 3,776 – Creamline Nutrients Ltd. 527 7. Guarantees issued in favour of Al Rahaba Trading International LLC 60,683 ACI Godrej Agrovet Private Ltd. 62,776
27. SEGMENT INFORMATION FOR THE YEAR ENDED MARCH 31, 2006 (i) Information about Primary Business Segments
For the year ended 31st March, 2006 Rs. ’000 For the year ended 31st March, 2005 Rs. ’000 Animal Agri Integrated Oil Other Unallocated Total Animal Agri Integrated Oil Other Unallocated Total Revenue Feeds Inputs Poultry Palm Business Feeds Inputs Poultry Palm Business Business Plantations Business Plantations
Total Sales 3,991,907 936,825 887,978 328,882 33,759 – 6,179,352 3,945,941 659,175 783,111 299,160 101,363 5,788,750 Less : Inter-segment (209,921) (16,335) (12,003) 14,369 – – (223,890) (155,905) – (4,224) (798) – (160,927) External Sales 3,781,986 920,490 875,975 343,251 33,759 – 5,955,461 3,790,036 659,175 778,887 298,362 101,363 – 5,627,822 Result Segment Result 105,267 65,551 (46,806) 87,613 (1,539) – 210,086 173,630 43,982 (63,532) 75,916 25 230,021 Unallocated expenditure net of unallocated income (122,034) (122,034) (37,390) (37,390) Interest expenses (51,887) (51,887) (32,364) (32,364) Interest Income 4,349 4,349 4,696 4,696 Dividend Income and Profit on sale of Investments 35,609 35,609 30,000 30,000 Profit before taxation and exceptional items 105,267 65,551 (46,806) 87,613 (1,539) (133,963) 76,123 173,630 43,982 (63,532) 75,916 25 (35,058) 194,963 Provision for taxation 7,870 7,870 53,245 53,245 Profit after taxation and before exceptional items 105,267 65,551 (46,806) 87,613 (1,539) (141,833) 68,253 173,630 43,982 (63,532) 75,916 25 (88,303) 141,718 Exceptional Items Prior years adjustments –– –– Net profit 105,267 65,551 (46,806) 87,613 (1,539) (141,833) 68,253 173,630 43,982 (63,532) 75,916 25 (88,303) 141,718 Other Information Segment assets 956,282 389,216 628,642 194,537 29,646 1,164,386 3,362,709 910,212 257,831 459,865 187,679 27,486 377,338 2,220,412 Segment liabilities 847,930 66,230 171,650 27,983 602 1,580,794 2,695,188 869,451 82,517 178,566 27,383 5,357 466,915 1,630,188 Capital expenditure 32,056 24,102 138,396 3,429 415 124,793 323,191 26,386 2,228 36,976 5,299 1,230 70,872 142,990 Depreciation 27,030 2,202 20,121 10,731 1,413 12,128 73,626 25,457 1,188 20,009 10,748 1,214 6,960 65,575 Impairment loss 19,890 19,890 – – 19,890 Non-cash expenses other than depreciation 87 87
(ii) Information about Secondary business Segments Rs. ’000 Rs. ’000 Revenue by Geographical segments India Outside Total India Outside Total India India Total Sales 6,166,711 12,641 6,179,352 5,782,882 5,868 5,788,750 Less : Inter-segment (223,890) – (223,890) (160,928) – (160,928) External Sales 5,942,821 12,641 5,955,461 5,621,954 5,868 5,627,822
Carrying amount of segment assets 3,362,709 – 3,362,709 2,220,412 – 2,220,412 Additions to fixed assets 323,191 – 323,191 142,991 – 142,991
Notes : (i) The Company is organized into four main business segments, namely (a) Animal Feeds - comprising of compound feed for cattle, poultry, aqua etc. (b) Agri business - comprising of plant growth promoters, pesticides vegetables etc. (c) Integrated Poultry business (d) Oil Palm Plantation business Segments have been identified and reported taking into account, the nature of products and services, the differing risks and returns, the organisation structure, and the internal financing reporting systems. (ii) The Segment revenue in each of the above business segments consists of sales (net of returns, sales tax, rebates etc.) (iii) The Segment revenue in the geographical segments considered for disclosure are as follows : (a) Revenue within India includes sales to customers located within India (b) Revenue outside India includes sales to customers located outside India (iv) Segment Revenue,Results,Assets and liabilities include the respective amounts identifiable to each of the segments and amounts allocated on a reasonable basis.
77 Godrej Agrovet Limited
28. INFORMATION REQUIRED TO BE FURNISHED UNDER PART IV OF SCHEDULE VI OF THE CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006 COMPANIES ACT, 1956 Current Year Previous Year i) Registration Details Application of Funds Rs. ’000 Rs. ’000 Rs. ’000 Registration No. 16655 Net Fixed Assets 901,784 A. Cash Flow from Operating Activities : State Code 04 Investments 515,868 Net Profit Before Taxes 76,123 194,963 Adjustment for: Balance Sheet Date 31/3/2006 Net Current Assets 593,699 Depreciation 73,626 65,575 ii) Capital raised during the year Misc. Expenditure Nil Loss/(Profit) on sale of fixed assets (1,273) 431 (Rupees ‘000) Accumulated Losses Nil Profit on sale of Investments – (8,074) Dividend income (35,609) (30,000) Public Issue Nil iv) Performance of Company Interest income (4,349) (4,696) Rights Issue Nil (Rupees ‘000) Interest expenses 51,885 32,364 Miscellaneous expenditure written off 224 87 Bonus Issue Nil Turnover 6,055,590 Expenditure in respect of prior years – – Private Placement Nil Total Expenditure 5,979,467 Investments Written off – – iii) Position of mobilisation and deployment of funds Profit before tax 76,123 Promotion expenses 84,504 55,687 (Rupees ‘000) Profit after tax 68,253 Operating Profit Before Working Capital Changes 160,627 250,649 Total Liabilities 3,362,710 Earning Per Share in Rs. 9.59 Total Assets 3,362,710 Dividend rate 79% Adjustments for: Inventories (149,113) (84,781) Sources of Funds Debtors and Other Receivables (361,105) (48,400) Paid-up Capital 71,188 v) Generic Names of three principal Creditors and Other Payables 87,117 247,209 Reserves & Surplus 554,821 products services of Company (423,101) 114,028 Secured Loans 1,259 Item Code No. 23099010 Cash Generated from Operations (262,474) 364,678 Direct Taxes paid (net of refund received) (33,489) (19,731) Unsecured Loans 1,333,526 Product Description Animal Feeds Net Cash Flow from Operating Activities (295,963) 344,947 B. Cash Flow from Investing Activities : Capital subsidy received – 2,500 Acquisition of fixed assets (323,191) (142,991) Proceeds from sale of fixed assets 8,363 10,708 Purchase of Investments (180,904) (150,894) STATEMENT REGARDING SUBSIDIARY COMPANIES PURSUANT TO SECTION 212 Proceeds from sale/maturity of investments 40,001 OF THE COMPANIES ACT, 1956. Interest Received 4,361 4,691 Dividend Received 35,609 30,000 1. Name of the Subsidiary Goldmohur Foods Golden Feed Kritika Agro Farm (455,762) and Feeds Ltd. Products Ltd. Chemicals & Net Cash used in Investing Activities (455,762) (205,985) Engineering C. Cash Flow from Financing Activites : Industries Pvt. Ltd. Proceeds from Borrowings 1,153,283 4,997 Repayment of Borrowings (115,598) (80,932) 2. Date on which it became a Subsidiary January 1, 2001 July 14, 2003 April 27, 2006 Increase/(Decrease) in Cash Credit/WCDL (22,741) 24,000 3. Financial Year ending March 31, 2004 March 31, 2004 Interest Paid (51,885) (32,364) 4. The Company’s interest in the Subsidiary Dividend Paid (23,492) (39,153) as on 31.3.2005 Dividend Tax Paid (3,295) (5,117) a) Number of fully paid Equity Shares held 2,158,170 50,000 7,600 Net Cash used in Financing Activities 936,273 (128,570) b) Face Value Rs. 10 Rs. 10 Rs. 10 c) Extent of holding 100% 100% 76% Net increase in Cash and Cash equivalents 184,548 10,392 5. Net aggregate Profit/(Loss)of the subsidiary (Rs.’000) (Rs.’000) (Rs.’000) Company so far as it concerns the members Cash and Cash equivalents (Opening balance) 82,864 72,471 of the Company : A) For the Financial Year ended on Cash and Cash equivalents (Closing balance) 267,412 82,864 March 31, 2005 : i) Not dealt with in the Books of Notes: Account of the Company 18,519 – – 1. The Cash Flow Statement has been prepared under the “Indirect Method” as set out in the Accounting ii) Dealt with in the Books of Standard (AS) 3 on “CashFlow Statements”, and presents cash flows by operating, investing and Account of the Company 47,500 – – financing activities. B) For the subsidiary company’s 2. Figures in brackets are outflows/deductions. previous Financial Years since it 3. Figures for the previous year have been regrouped/restated wherever necessary to conform to this became a subsidiary year’s classification. i) Not dealt with in the Books of 40,590 N.A. N.A. Account of the Company For and on behalf of ii) Dealt with in the Books of Account of the 81,801 N.A. N.A. KALYANIWALLA & MISTRY A.B. GODREJ Director Company Chartered Accountants V.V. CHAUBAL C.K. VAIDYA Managing Director V.V. CHAUBAL A.B. GODREJ C.K. VAIDYA K.M. ELAVIA Company Secretary Company Secretary Director Managing Director Partner Membership No. 12737 Mumbai, May 25, 2006 Mumbai, May 25, 2006.
78 Annual Report 2005-2006
Goldmohur Foods & Feeds Limited DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED ON MARCH 31, 2006
To The Shareholders a) that in the preparation of the annual accounts, the applicable Accounting Standards have been followed Your Directors have pleasure in submitting their Report along with the audited Accounts for the financial year and no material departures have been made from the same; ended on 31st March, 2006. b) that they have selected such Accounting Policies and applied them consistently and made judgements FINANCIAL RESULTS and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that period; Your Company’s performance during the year as compared with that during the previous year is summarised below: c) that they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company for preventing and Rs. Lac detecting fraud and other irregularities; For the For the year ended year ended d) that they have prepared the annual accounts on a going concern basis. 31.3.2006 31.3.2005 HUMAN RESOURCES Total Income 29587.69 30860.71 During the year, the Human Resource Organisation was considerably strengthened by induction of Managers Profit before Taxation (PBT) 618.00 515.37 with varied experience. The Industrial Relations at all units continued to be cordial. Less: Provision for Taxation 80.00 170.00 Profit after Taxation 538.00 345.37 Balance Brought Forward from previous year 96.10 124.48 For and on behalf of the Board of Directors TOTAL 634.10 469.85 C. K. Vaidya V. Srinivasan Appropriations : Director Director Interim Dividend 310.00 300.00 Mumbai, May 22, 2006. Final Dividend – – Tax on Dividend 43.48 39.21 General Reserve 53.80 34.54 Balance Carried Forward to Balance Sheet 226.82 96.10 TOTAL 634.10 469.85 REVIEW OF OPERATIONS The year 2005-06 was a challenging year for your Company. The prolonged monsoon had its impact on key raw materials like de-oiled rice bran, maize, etc. resulting in cost pressure for your Company. However, the Company got some respite in view of favourable prices for certain raw materials like soya etc. The detection of Avian influenza in certain pockets of the country impacted the Poultry feed sales of your Company. The Company’s Aqua Feed Business suffered a setback due to postponement of the shrimp farming season. DIVIDEND Your Directors have paid an interim dividend of Rs. 16.86 per (on 18,38,170 shares) share for the year 2005- ANNEXURE ‘A’ 06 (previous year Rs. 13.89 per share on 21,58,170 shares). Your directors do not recommend any final ANNEXURE FORMING PART OF THE DIRECTORS’ REPORT dividend. INFORMATION PURSUANT TO SECTION 217(1)(e) OF THE COMPANIES ACT, 1956, READ WITH THE DIRECTORS COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES, Mr. A.R. Subbarao and Mr. V. Srinivasan, Directors, retire by rotation at the ensuing Annual General Meeting 1988 IN RESPECT OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN in accordance with the provisions of the Companies Act, 1956 and being eligible, offer themselves for re- EXCHANGE EARNINGS AND OUTGO : appointment. A. Conservation of Energy AUDITORS Your Company is constantly endeavouring to conserve and optimize the use of energy through new and You are requested to appoint Auditors for the current year and fix their remuneration. The retiring Auditors improved methods. M/s. Kalyaniwalla & Mistry, Chartered Accountants, Mumbai are eligible for re-appointment and a certificate B. Technology absorption, adaptation and innovation as required u/s 224 (1-B) of the Companies Act, 1956 has been received from them. I. Your Company has also been making constant efforts for upgradation of technology and also ADDITIONAL INFORMATION carries out in-house Research & Development activities in relation to maintenance of efficacy and The additional information required to be given under the Companies Act, 1956, has been laid out in the quality of products manufacture. Schedules attached to and forming part of the Accounts. The Notes to the Accounts referred to in the Auditors’ II. The benefits derived as a result of the above efforts are: Report are self-explanatory and therefore do not call for any further explanation. a) Reduction in per ton cost of manufacture. STATUTORY INFORMATION b) Improved quality of products through new formulation. A) Conservation of Energy, Technology absorption and Foreign Exchange earnings and outgo c) Savings in raw material and process costs. The information in respect of these matters, required under Section 217 (1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, C. Foreign Exchange earnings and outgo 1988 and forming part of the Directors’ Report is given in the Annexure ‘A’ to this report. Your Company did not have any foreign exchange earnings. Foreign Exchange expenditure during the B) Particulars of Employees year under consideration was Rs.2267.26 lac (Previous year Rs. 3709.71 lac). None of the employees is covered under the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) (Amendment) Rules, 2002. For and on behalf of the Board of Directors C) Directors’ Responsibility Statement C. K. Vaidya V. Srinivasan Pursuant to the provisions contained in Section 217(2AA) of the Companies Act, 1956, the Directors of Director Director your Company confirm :- Mumbai, May 22, 2006.
79 Goldmohur Foods & Feeds Limited
REPORT OF THE AUDITORS TO THE MEMBERS OF ANNEXURE TO THE AUDITORS’ REPORT GOLDMOHUR FOODS & FEEDS LIMITED Referred to in paragraph (3) of our report of even date.
1. We have audited the attached Balance Sheet of Goldmohur Foods & Feeds Limited, as at 31st March, 1. a) The Company is maintaining proper records showing full particulars, including quantitative details 2006 and also the Profit and Loss Account and the Cash Flow Statement of the Company for the year and situation of fixed assets. ended on that date annexed thereto. These financial statements are the responsibility of the Company’s b) As explained to us, the Company has a program for physical verification of fixed assets at periodic management. Our responsibility is to express an opinion on these financial statements based on our intervals. In our opinion, the period of verification is reasonable having regard to the size of the audit. Company and the nature of its assets. No material discrepancies have been reported on such 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those verification. Standards require that we plan and perform the audit to obtain reasonable assurance about whether the c) In our opinion, the disposal of fixed assets during the year does not affect the going concern financial statements are free of material misstatement. An audit includes examining, on a test basis, assumption. evidence supporting the amounts and disclosures in the financial statements. An audit also includes 2. a) The Management has conducted physical verification of inventory at reasonable intervals. assessing the accounting principles used and significant estimates made by management, as well as b) In our opinion, the procedures of physical verification of inventory followed by the management evaluating the overall financial statement presentation. We believe that our audit provides a reasonable are reasonable and adequate in relation to the size of the Company and the nature of its business. basis for our opinion. c) The Company is maintaining proper records of inventory and no material discrepancies were 3. As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Government in noticed on physical verification. terms of Section 227 (4A) of the Companies Act, 1956, we annex hereto a statement on the matters 3. a) The Company has not granted any loans, secured or unsecured to companies, firms or other specified in paragraphs 4 and 5 of the said Order. parties covered in the register maintained under Section 301 of the Companies Act, 1956. 4. Further to our comments in the Annexure referred to in paragraph (3) above, we report that: b) Consequently, the question of commenting on the rates of interest and the other terms and conditions a) We have obtained all the information and explanations, which to the best of our knowledge and of the loans granted being prejudicial to the interests of the Company, receipt of regular principal belief were necessary for the purposes of our audit. and interest and reasonable steps taken for recovery of principal and interest does not arise. b) In our opinion, proper books of account as required by law have been kept by the Company so far c) The Company has not taken any loans, secured or unsecured from companies, firms or other as appears from our examination of these books. parties covered in the register maintained under Section 301 of the Act. c) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this d) Consequently, the question of commenting on the rates of interest and the other terms and conditions report are in agreement with the books of account. of the loans taken being prejudicial to the interests of the Company and payment of regular d) In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt principal and interest does not arise. with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 4. In our opinion and according to the information and explanations given to us, there are adequate internal 211 of the Companies Act, 1956. control procedures commensurate with the size of the Company and the nature of its business, for the e) Without qualifying our opinion, we draw attention to Note 4 of Schedule 12 – Notes to Accounts, purchases of inventory, fixed assets and for the sale of goods and services. During the course of our audit, in respect of amortization of Trademarks. The same are amortized over a period of 15 years as no major weakness has been noticed in the internal controls. compared to the recommended period of 10 years mentioned in Accounting Standard 26 – 5. a) Based on the audit procedures applied by us and according to the information and explanations Intangible Assets since, in the opinion of the management, the Trademarks will have a useful life provided by the management, we are of the opinion that the particulars of contracts and matching the amortization period. Being a technical matter, we have relied upon the management’s arrangements referred to in Section 301 of the Companies Act, 1956 have been entered into the estimates stated in Note 4, which forms the basis of this assumption. register required to be maintained under that section. f) In our opinion and to the best of our information and according to the explanations given to us, the b) The transactions made in pursuance of such contracts or arrangements, were made at prices said financial statements read with the notes thereon, give the information required by the Companies which are reasonable having regard to prevailing market prices at the relevant time, except for Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting service transactions for which, there are no similar services received from other parties and principles generally accepted in India: hence the prices are not comparable. i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2006; 6. In our opinion and according to the information and explanations given to us, the Company has not and accepted any deposits from the public and hence the provisions of Section 58A, 58AA or any other ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date. provision of the Companies Act, 1956, read with the rules framed thereunder are not applicable. iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended 7. In our opinion and according to the information and explanations given to us, the internal audit system on that date. is commensurate with the size of the Company and nature of its business. 5. On the basis of the written representations received from the Directors as on 31st March, 2006, and 8. According to the information and explanation given to us, the maintenance of cost records has not been taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on prescribed by the Central Government, under Section 209(1)(d) of the Companies Act, 1956 for any of 31st March, 2006 from being appointed as a Director in terms of clause (g) of sub-section (1) of Section the Company’s products. 274 of the Companies Act, 1956. 9. a) According to the information and explanations given to us and on the basis of our examination of the books of account, during the year, the Company has been generally regular in depositing undisputed For and on behalf of statutory dues including Provident Fund, Investor Education and Protection Fund, Employees’ State KALYANIWALLA & MISTRY Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, cess and other Chartered Accountants statutory dues applicable to it with the appropriate authorities. According to the information and explanations given to us, there are no undisputed dues payable in respect of above as at 31st March K. M. ELAVIA 2006 for a period of more than six months from the date they became payable. Partner b) According to the information and explanations given to us, there are no dues outstanding of Sales Tax, Membership No. 12737 Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty or cess on account of any dispute. Place : Mumbai 10. The Company does not have accumulated losses at the end of the financial year and it has not incurred Dated : May 22, 2006 any cash losses in the current and immediately preceding financial year. 11. According to the information and explanations given to us and based on the documents and records produced to us, the Company has not defaulted in repayment of dues to banks. There are no dues to financial institutions or debenture holders. 12. According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. 13. In our opinion and according to the information and explanations given to us, the nature of activities of the Company does not attract any special statute applicable to chit fund and nidhi/mutual benefit fund/ societies. 14. The Company does not deal in shares, securities, debentures and other investments. 15. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks and financial institutions. 16. The Company has not taken any term loan during the year. 17. According to the information and explanations given to us and on an overall examination of the Balance Sheet and Cash Flows of the Company, we report that the Company has utilized funds raised on short- term basis for long term investment. 18. The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under Section 301 of the Companies Act, 1956. 19. The Company did not issue any debentures during the year. 20. The Company has not raised any money through a public issue during the year. 21. Based on the audit procedures performed and information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the year. For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants
K. M. ELAVIA Partner Membership No. 12737 Place : Mumbai Dated : May 22, 2006
80 Annual Report 2005-2006
BALANCE SHEET AS AT MARCH 31, 2006 PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006 Schedule As at As at As at Schedule For the year For the year For the year March 31, March 31, March 31, 31/03/2006 31/03/2006 31/03/2005 2006 2006 2005 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 SOURCES OF FUNDS INCOME Shareholders' Funds Sales 2,944,439 3,068,916 Share Capital 1 18,382 18,382 Other Income 8 14,330 17,155 Reserves and Surplus 2 189,181 170,729 2,958,769 3,086,071 207,563 189,111 Loan Funds EXPENDITURE Secured Loans 3 8,440 – Materials 9 2,484,063 2,635,134 Unsecured Loans 4 100,000 – Expenses 10 377,453 367,235 108,440 – Interest and Financial Charges 11 7,155 7,629 Deferred Tax Liability 54,900 49,000 Depreciation/Amortisation 28,298 24,536 TOTAL 370,903 238,111 Miscellaneous Expenditure – – APPLICATION OF FUNDS Written Off Fixed Assets 5 2,896,969 3,034,534 Gross block 460,282 391,938 PROFIT BEFORE TAXATION 61,800 51,537 Less : Depreciation 123,968 95,864 Provision for Taxation Net Block 336,314 296,074 Current 5,300 10,000 Fixed Assets Held for Disposal at Net Realisable Value 7 7 Minimum Alternate (5,300) – – 10,000 336,321 296,081 Current Assets, Loans Fringe Benefit 2,100 – and Advances 6 Deferred 5,900 7,000 Inventories 323,619 251,202 8,000 17,000 Sundry Debtors 191,830 252,257 Cash and Bank Balances 8,410 11,611 PROFIT AFTER TAXATION 53,800 34,537 Loans and Advances 46,910 28,955 Profit Brought Forward 9,610 12,448 570,769 544,025 AMOUNT AVAILABLE FOR APPROPRIATION 63,410 46,985 LESS : Current Liabilities and Provisions 7 APPROPRIATION Liabilities 529,525 592,530 Interim Dividend 31,000 30,000 Provisions 6,662 9,465 Tax on Dividend 4,348 3,921 536,187 601,995 Transfer to General Reserve 5,380 3,454 Net Current Assets 34,582 (57,970) Surplus Carried Forward 22,682 9,610 TOTAL 370,903 238,111 TOTAL 63,410 46,985 0 Notes to Accounts 12 Earnings per share (Basic/Diluted) in Rs. (Refer Note 21) 29.27 16.02
Notes to Accounts 12
The Schedules referred to above form an integral part of the Balance Sheet. The Schedules referred to above form an integral part of the Profit and Loss Account. Signatures to Balance Sheet and Schedules 1 to 7 and 12 Signatures to Profit and Loss Account and Schedules 8 to 12 As per our Report attached As per our Report attached For and on behalf of For and on behalf of KALYANIWALLA & MISTRY KALYANIWALLA & MISTRY Chartered Accountants C. K. Vaidya Director Chartered Accountants C. K. Vaidya Director
K.M. Elavia S.P. Karmarkar K.M. Elavia S.P. Karmarkar Partner Company Secretary V. Srinivasan Director Partner Company Secretary V. Srinivasan Director Membership No. 12737 Membership No. 12737 Mumbai, May 22, 2006. Mumbai, May 22, 2006. SCHEDULES TO THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006 As at As at As at As at As at March 31, March 31, March 31, March 31, March 31, 2006 2006 2005 2006 2005 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 SCHEDULE 1 : SHARE CAPITAL Authorised SCHEDULE 3 : SECURED LOANS 5,000,000 Equity Shares of Rs .10 each 50,000 50,000 FROM BANKS Issued, Subscribed and Paid-up Cash Credit 8,440 – 1,838,170 (Previous Year) 2,158,170 Equity Shares of 18,382 21,582 Rs.10 each fully paid Less : 320,000 Equity Shares bought TOTAL 8,440 – back and extinguished as at the year end in accordance with Section 77A of the Companies Act, 1956 – 3,200 Security : Refer Note (3) 18,382 18,382 All the above shares are held by Godrej Agrovet Ltd. SCHEDULE 4 : UNSECURED LOANS (Holding Company) & its nominees 558,170 shares Short Term Loans from Banks 100,000 – have been issued pursuant to a contract without payment being received in cash TOTAL 100,000 – SCHEDULE 2 : RESERVES AND SURPLUS SECURITY PREMIUM ACCOUNT As per last Balance Sheet 136,233 173,033 Less : Utilised in accordance with Section 77A of the Companies Act, 1956 (Refer note 2) – 36,800 136,233 136,233 GENERAL RESERVE ACCOUNT As per last Balance Sheet 24,886 21,432 Add : Transfer from Profit & Loss Account 5,380 3,454 30,266 24,886 PROFIT AND LOSS ACCOUNT 22,682 9,610 TOTAL 189,181 170,729
81 Goldmohur Foods & Feeds Limited
SCHEDULES TO THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006 SCHEDULE 5 : FIXED ASSETS (Rs. '000) ASSETS GROSS BLOCK DEPRECIATION NET BLOCK
As at Additions Deductions As at As at For the On As at As at As at April 1, March 31, April 1, period Deductions March 31, March 31, March 31, 2005 2006 2005 2006 2006 2005 Trade Marks 236,789 – 236,789 67,090 15,786 – 82,876 153,913 169,699 Land-Freehold 4,191 1,000 – 5,191 –– – – 5,191 4,191 Leasehold improvements 2,563 – – 2,563 1,651 70 – 1,721 842 912 Buildings 6,105 – – 6,105 1,261 162 – 1,423 4,682 4,844 Plant & Machinery 62,316 1,832 – 64,148 16,675 4,338 – 21,013 43,135 45,641 Power Generating Wind Mill 60,525 62,643 – 123,168 122 5,328 – 5,450 117,718 60,403 Furniture, Fittings & Fixtures 4,599 244 133 4,710 1,757 420 89 2,088 2,622 2,842 Computers 9,798 1,218 – 11,016 5,932 1,613 – 7,545 3,471 3,866 Motor Vehicles 5,052 1,766 226 6,592 1,376 581 105 1,852 4,740 3,676 TOTAL 391,938 68,703 359 460,282 95,864 28,298 194 123,968 336,314 296,074 Previous Year 340,908 68,590 17,560 391,938 82,550 24,536 11,222 95,864 296,074 – Assets Held for Disposal at Net Realisable Value 7 – – 7 – – – – 7 7 336,321 296,081
As at March 31, As at March 31, As at March 31, For the year ended For the year ended For the year ended 2006 2006 2005 March 31, 2006 March 31, 2006 March 31, 2005 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 SCHEDULE 6 : CURRENT ASSETS , LOANS SCHEDULE 8 : OTHER INCOME AND ADVANCES Interest Income 52 51 Income from wind mill 8,222 16 A) INVENTORIES : Insurance Claim Received 2 12,871 Raw Materials and Packing Material 247,215 166,336 Miscellaneous Income (Tax Deducted at source Stores & Spares 527 281 Rs .30 thousand; 6,054 4,217 Finished Goods 65,076 68,564 Previous year Rs. 38 thousand) Raw Material in Transit 10,801 16,021 14,330 17,155 323,619 251,202 B) SUNDRY DEBTORS : SCHEDULE 9 : MATERIALS (Unsecured and considered good RAW MATERIALS CONSUMED unless otherwise stated) Opening Stock 166,336 181,499 Debts outstanding for a period Add : Purchases during the year 2,440,295 2,483,407 exceeding six months 15,982 22,717 2,606,631 2,664,906 Other Debts 175,848 229,540 Less : Sales during the year 27,946 26,422 191,830 252,257 2,578,685 2,638,484 [Debts amounting to Rs.135,409 thousands Less : Closing stocks 247,215 166,336 (Previous Year Rs.125,498 thousands) are secured 2,331,470 2,472,148 against Bank Guarantees/Security Deposit] PURCHASE FOR RESALE 149,105 157,446 C) CASH AND BANK BALANCES : STOCK DESTROYED WRITTEN OFF – 12,697 Cash and cheque on hand 5,606 3,223 INVENTORY CHANGE Balances with Scheduled Banks Opening Stock of Finished Goods 68,564 61,407 In Current Accounts 2,804 8,388 Less : Closing Stock of Finished Goods 65,076 68,564 8,410 11,611 3,488 (7,157) D) LOANS AND ADVANCES : TOTAL 2,484,063 2,635,134 (Unsecured and considered good unless otherwise stated) SCHEDULE 10 : EXPENSES Loans and Advances recoverable in cash or in 1. Salaries, Wages, Bonus 78,124 64,977 kind or for value to be received : 2. Provident and other funds 2,962 5,703 Considered Good 38,706 21,234 3. Workmen and staff welfare expenses 6,927 6,194 Considered Doubtful 715 715 4. Processing charges 88,889 88,365 39,421 21,949 5. Power, light, fuel and water 35,283 27,472 Less : Provision for Doubtful Advances 715 715 6. Rent 12,994 14,621 7. Rates and taxes 3,799 14,141 38,706 21,234 8. Repairs and maintenance – Buildings 279 247 Deposits 8,204 7,721 – Plant 5,627 6,389 46,910 28,955 – Other Assets 1,771 1,973 TOTAL 570,769 544,025 7,677 8,609 9. Insurance 1,417 1,060 SCHEDULE 7 : CURRENT LIABILITIES AND PROVISIONS 10. Postage, telephone and stationery 8,488 8,682 A) CURRENT LIABILITIES 11. Auditors’ Remuneration 1,447 1,134 Acceptances 111,272 187,817 12. Legal and Professional charges 1,478 1,732 Sundry Creditors (Note 5) 416,080 402,051 13. Carriage and freight 58,074 41,631 Deposits 2,091 2,662 14. Advertisement and Sales Promotion 3,422 4,928 Interest accrued but not due on loans 82 – 15. Travelling and motor car expenses 25,494 21,373 529,525 592,530 16. Provision for Advances – 415 B) PROVISIONS 17. Bad Debts Written Off 22,500 29,005 Provision for Taxation 18. Loss on Sale of Fixed Assets (Net) 41 544 (Net of Advance Tax Rs. 50,708 thousand; 19. Fixed Assets Destroyed Written Off – 682 Previous Year (2,291) 1,540 20. Provision for Assets Held for Disposal 3,804 Rs. 44,778 thousand) 21. Miscellaneous Expenses 18,437 22,163 For Gratuity 7,192 6,810 TOTAL 377,453 367,235 For Leave Encashment 1,761 1,115 6,662 9,465 SCHEDULE 11 : INTEREST AND FINANCIAL CHARGES TOTAL 536,187 601,995 (a) Interest paid on fixed loans i) Banks 5,149 – (b) Interest paid on other loans – Banks – 3,642 (c) Other Financial Charges 2,006 3,987 TOTAL 7,155 7,629
82 Annual Report 2005-2006
SCHEDULES TO THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006 SCHEDULE 12 : NOTES TO ACCOUNTS For the Year For the Year 1. SIGNIFICANT ACCOUNTING POLICIES 31/03/06 31/03/05 a) The accounts have been prepared on historical cost convention. The Company follows mercantile Unit Quantity Value Quantity Value system of accounting and recognises income and expenditure on accrual basis. Rs. ‘000 Rs. ‘000 b) Fixed assets have been stated at cost and include incidental and/or installation/development expenses 6 SALES TURNOVER MT incurred in putting the asset to use and interest on borrowing incurred during construction period. Aqua Feed 11,217 320,624 11,206 372,700 Pre-operative expenses for major projects are also capitalised, where appropriate. Cattle Feed 35,579 216,282 44,068 305,877 c) Carrying amount of cash generating units/assets are reviewed at balance sheet date to determine Poultry Feed 228,196 2,396,162 222,855 2,388,017 whether there is any indication of impairment. If such indication exists, the recoverable amount Lab Feeds 474 3,815 218 2,322 is estimated as the net selling price or value in use, whichever is higher. Impairment loss, if any, Others – 7,556 –– is recognized whenever carrying amount exceeds the recoverable amount. d) Depreciation/Amortisation has been provided for as under : TOTAL 275,466 2,944,439 278,347 3,068,916 (a) Depreciation has been provided on Straight Line Method at rates specified in Schedule XIV 7 FINISHED GOODS INVENTORIESMT of the Companies Act ,1956. The Company has grouped additions and disposals in appropriate Aqua Feed 1,007 32,236 1,280 41,419 time periods of a month/quarter for the purpose of charging prorata depreciation in respect Cattle Feed 1,024 5,785 896 5,066 of additions and disposals of its assets keeping in view the materiality of the items involved. Poultry Feed 3,088 25,834 2,700 21,722 (b) 1) Leasehold Improvements: At a rate which will reduce the principal value of each asset Lab Feeds 46 377 30 357 to “Nil” over the primary lease period. Others – 844 – 2) Trademarks are amortised over the period of 15 years. e) Long Term investments are carried at cost. Provision for diminution, if any, in the value of each long TOTAL 5,165 65,076 4,906 68,563 term investment is made to recognise a decline, other than of a temporary nature. Current 8 PURCHASE FOR RESALE MT investments are stated at lower of cost and net realizable value. Aqua Feed 86 1,314 904 9,937 f) Raw materials are valued at moving weighted average cost. Cattle Feed 19,874 113,731 21,581 125,437 Finished goods are valued at lower of cost and net realisable value after providing for cost of Poultry Feed 3,054 28,958 2,307 22,071 obsolescence and other anticipated losses, wherever considered necessary. Cost is computed on Lab Feeds –––– weighted average basis. Finished goods include cost of conversion and other costs incurred in Others 5,101 bringing the inventories to their present location and condition. Stores and spares are valued at cost using the First-In-First-Out method. TOTAL 23,014 149,104 24,792 157,446 g) The liability in respect of future payments of gratuity and leave encashment payable to employees 9 RAW MATERIALS CONSUMED MT on retirement is provided based on actuarial valuation. DLM 421 64,937 701 109,150 h) Revenue is recognised on despatch of goods to external customers. Sales are net of returns, trade Maize 92,126 605,050 75,792 463,255 discounts, rebates and sales tax. Rice Bran Extraction 22,189 71,032 23,325 58,026 i) Revenue expenditure on Research and Development is charged to Profit and Loss Account of the Rice Bran 10,361 61,019 13,117 72,362 year in which it is incurred. Capital Expenditure incurred during the year on Research and Soya 64,700 619,358 55,093 685,329 Development is shown as an addition to Fixed Assets. Others – 910,074 – 1,084,025 j) Interest & Commitment Charges incurred in connection with borrowings of funds which are directly attributable to the acquisition, construction or production of an asset that necessarily takes TOTAL 189,797 2,331,470 168,028 2,472,148 substantial period of time to get ready for its intended use, upto the time the said asset is put to use are capitalised, as a part of the cost of that asset. Other borrowing cost are recognised as an 10. LICENSED AND INSTALLED CAPACITY AND ACTUAL PRODUCTION expense in the period in which they are incurred. k) Transactions in foreign currency are recorded at the exchange rates prevailing on the date of the Item For the Capacity Per Annum Actual Capacity Per Annum transaction. Assets and liabilities related to foreign currency transactions, remaining unsettled at Year Registered Installed Production* Registered the year-end, are stated at the contracted rates, when covered under forward foreign exchange MT MT MT MT contracts and at year-end rates in other cases.The premium payable on forward foreign exchange Aqua, Cattle 31.03.06 Not 232,000 252,710 Not contracts is amortized over the period of the contract. Exchange gains/losses are recognised in the and Poultry Feed Applicable Applicable Profit and Loss Account except in respect of liabilities incurred to acquire fixed assets in which case, they are adjusted to the carrying amount of such fixed assets. Aqua, Cattle and 31.03.05 Not 232,000 253,620 Not l) Deferred tax is recognised on timing differences, being the differences between the taxable Poultry Feed Applicable Applicable income and the accounting income that originate in one period and are capable of reversal in one * Actual production includes production at third party processing locations. or more subsequent periods. Deferred Tax assets, subject to consideration of prudence, are recognised and carried forward only to the extent that there is a reasonable certainty that sufficent 11. COMMON EXPENSES ALLOCATED BY THE HOLDING COMPANY : For the Year For the Year future taxable income will be available against which such deferred tax assets can be realised. The 31/03/06 31/03/05 tax effect is calculated on the accumulated timing difference at the year-end, based on the tax rates Rs. ‘000s Rs. ‘000s and laws enacted or substantially enacted on the balance sheet date. Expenses (Schedule 12) include amounts charged by m) The basic earnings per share is computed using the weighted average number of common share Godrej Agrovet Limited, the Holding Company 26,400 26,400 outstanding during the period. Diluted earning per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period, expect 12. AUDITORS’ REMUNERATION where the results would be anti-dilutive. For the Year For the Year n) Miscellaneous Expenditure: 31/03/06 31/03/05 Front-end fee paid on loans raised is amortised over the period of loan. Rs. ‘000s Rs. ‘000s o) Provisions and Contingent Liabilities. Statutory Audit 898 702 Provisions are recognized in the accounts in respect of present probable obligations, the amount Audit under other statutes 393 270 of which can be reliably estimated. Certification 44 38 Contingent liabilities are disclosed in respect of possible obligations that arise from past events but Taxation Representation Before Authorities 112 124 their existence is confirmed by the occurrence or non-occurrence of one or more uncertain future TOTAL 1,447 1,134 events not wholly within the control of the Company. 2. BUY BACK OF SHARES 13. Revenue expenditure on scientific research debited to respective expense heads Rs. 2,594 thousands The Company has utilised securities premium account Nil (Previous Year Rs. 36,800/- thousand) for (Previous Year Rs.2,902 thousands). adjusting the difference between the buy-back price and face value of equity shares bought back. 14. VALUES OF IMPORTS ON CIF BASIS 3. SECURED LOANS Raw Materials 246,138 258,833 Working Capital Demand Loans and Cash Credit from Banks are secured by way of hypothecation of the entire Inventory, Book Debts Receivables (Present & Future) ranking on a pari passu basis and also TOTAL 246,138 258,833 by Corporate Guarantee from the Holding Company, Godrej Agrovet Limited. 4. TRADEMARKS 15. EXPENDITURE IN FOREIGN CURRENCY Travelling Expenses 618 124 The Trademarks of the Company have a huge market potential, strong market position and Research & Bank Charges 1,017 1,143 Development set-up, which constantly refurbishes the products to avoid technoloical obsolecence. The Interest – – management is of the opinion that the useful life of the brands is much beyond 15 years. On a conservative basis the management has decided to amortise the brand acquisition cost over a 15 years period. TOTAL 1,635 1,267 5. SSI CREDITORS In spite of the absence of a data-base identifying creditors as Small Scale Industrial Undertakings, it is 16. VALUE OF CONSUMPTION OF RAW MATERIALS the opinion of the management that there are no parties which can be classified as Small Scale Industrial For the Year For the Year 31/03/06 31/03/05 Undertakings to whom the Company owes any sum. The Auditors have accepted the representations of % Value % Value the management in this matter. Rs. ‘000 Rs. ‘000 Raw Materials : Imported Items (Including Duty Content) 10 225,141 15 369,704 Indigenous 90 2,106,329 85 2,104,748 TOTAL 100 2,331,470 100 2,474,452
83 Goldmohur Foods & Feeds Limited
SCHEDULES TO THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006 17. The amount of exchange difference included in the Profit and Loss Account under the related heads of 25. INFORMATION REQUIRED TO BE FURNISHED UNDER THE PART IV OF SCHEDULE VI OF THE income/expense is Rs. 740 thousands (net expense) (Previous Year Rs. 264 thousands, net income). The COMPANIES ACT, 1956 amount of exchange difference in respect of forward exchange contracts to be recognised in the Profit Balance Sheet Abstract and Company’s General Business Profile. or Loss of subsequent accounting periods is Rs. 12 thousands (Previous Year - Rs. 10 thousands ). i) Registration Details Registration No. 17887 18. SEGMENT REPORTING State Code 11 The Company is primarily engaged in the business of manufacturing and distribution of Animal Feeds, Balance Sheet 31st March, 2006 like Aqua Feed, Poultry Feed, Cattle Feed, Lab Feed, etc. Accordingly, in the opinion of the management, ii) Capital raised during the period (Rupees ‘000) it has only one primary segment and no further disclosure is deemed necessary pursuant to Accounting Public Issue Nil Standard 17 on Segment Reporting, issued by the Institute of Chartered Accountants of India. Rights Issue Nil 19. DEFERRED TAX Bonus Issue Nil In accordance with the Accounting Standard 22 on Accounting for Taxes on Income, the Company has Private Placement Nil made adjustments in its accounts for deferred tax liabilities/assets. iii) Position of mobilisation and deployment of funds (Rupees ‘000) The tax effects of significant temporary differences that resulted in deferred tax assets and liabilities are : Total Liabilities 370,903 For the Year For the Year Total Assets 370,903 31/03/06 31/03/05 Source of Funds Rs. ‘ 000 Rs. ‘ 000 Paid up Capital 18,382 Reserve & Surplus 189,181 Depreciation on Fixed Assets (61,732) (51,809) Secured Loans 8,440 Carried forward loss 3619 241 Unsecured Loans 1000,000 Provision for Doubtful Debts 241 – Deferred Tax Liability 54,900 Others 2972 2,568 Application of Funds 54900 (49,000) Net Fixed Assets 336,321 Investments – 20. RELATED PARTY DISCLOSURE Net Current Assets 34,582 Related party disclousere as required by AS-18 “Related Party Disclosure” are given below : Misc. Expenditure – 1. Relationships : iv) Performance of the Company (Rupees ‘000) Holding Company Turnover 2,958,769 Godrej Agrovet Limited (GAVL) holds 100% in the Company. GAVL is the subsidiary of Godrej Total Expenditure 2,896,969 Industries Limited (GIL). GIL is the subsidiary of Godrej & Boyce Mfg. Co. Limited, the ultimate Profit Before Tax 61,800 Holding Company. Profit After Tax 53,800 2. The following transactions were carried out with the related parties in the ordinary course of Earnings Per Share in Rs. 29.27 business : Dividend Rate 169% (i) Details relating to parties referred to in 1 above v) Generic Names of three Principal Products/Services of the Company Rs. ‘000s Item Code No. 23099001 Holding Product Description Animal Feeds Company S.P. Karmarkar C.K. Vaidya V. Srinivasan 1 Sale of Materials/Finished Goods 111,120 Company Secretary Director Director 137,378 Place : Mumbai 2 Purchase of Materials/Finished Goods 215,661 Date : May 22, 2006 181,579 CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006 3 Expenses charged to other companies 1,307 For the For the (Inclusive of sale of services) 2,102 Year Ended Year Ended 4 Expenses charged by other companies 26,592 31-03-2006 31-03-2005 27,210 Rs. '000 Rs. '000 Rs. '000 5 Dividend paid 31,000 A. Cash Flow from Operating Activities: 30,000 Profit before Tax and Operational Items 61,800 51,537 Adjustment for: 6 Outstanding payables, net of receivables 18,219 Depreciation 28,298 24,536 5,922 Loss/(Profit) on sale of Fixed Assets 41 544 7 Guarantees taken 70,000 Exchange Difference (8,876) (5,816) 590,000 Interest Income (52) (51) 8 Amount paid for Buy Back of Equity Share Capital – Interest Expense 7,155 7,629 40,000 Provision for Fixed Assets Held for Disposal – 3,804 Note : Figures in italics pertains to the previous year. Fixed Assets written off – 682 26,566 31,328 3. Significant Related Party Transactions Operating Profit before Working Capital Changes 88,366 82,865 All the transactions mentioned above are with Godrej Agrovet Limited. Adjustments for : Inventories (72,417) 8,776 21. EARNINGS PER SHARE Debtors and Other receivables 42,472 18,936 For the Year For the Year Creditors and Other payables (53,183) 68,572 31/03/06 31/03/05 (83,128) 96,284 Cash Generated from Operations 5,237 179,149 Profit after tax as per Profit & Loss Account (Rs. ‘000) 53,800 34,537 Direct taxes Paid (5,930) (16,897) Weighted average number of equity shares outstanding 1,838,200 2,155,540 Net Cash Generated from Operating Activities (693) 162,252 B. Cash from Investing Activities: Basic earnings per share 29.27 16.02 Acquisition of Fixed Assets (68,703) (68,534) Diluted earnings per share 29.27 16.02 Proceeds from sales of Fixed Assets 124 1,308 Interest Income 52 50 Nominal value of shares 10.00 10.00 Net Cash used in Investing Activities (68,527) (67,176) 22. DISCLOSURES IN RESPECT OF LEASES C. Cash from Financing Activities: The Company’s leasing arrangements are in respect of operating leases for premises occupied by the Proceeds from Borrowings 100,000 – Company. These leasing arrangements are cancellable, and are renewable on a perodic basis by mutual (Decrease)/Increase in Cash Credit/ consent on mutually acceptable terms. WCDL from Banks (net) 8,440 (41,144) The aggregate lease rental payable by the Company and charged to Profit and Loss Account Short Term Loans Paid – (17,000) (Schedule 10) is as follows : Interest Paid (5,067) (3,814) Amount Paid for Buy-Back of Equity Share Capital – (40,000) For the Year Dividend Paid (31,000) (30,000) Particulars 31/03/06 Tax on distributed profits (4,348) (3,921) Rs. ‘ 000 Other Financial Charges (2,006) (3,987) Lease rental paid during the year 13,262 Net Cash used in Financing Activities 66,019 (139,866) Future Lease Obligations Net Increase/(Decrease) in Cash and Cash Equivalents (3,201) (44,790) Due within one year of balance sheet date 4,387 Cash and Cash equivalents (Opening Balance) 11,611 56,401 Due after one year and with in five years of balance sheet date – Cash and Cash equivalents (Closing Balance) 8,410 11,611 Due after five years of balance sheet date – As per our Report attached 23. Information required under Schedule VI to the Companies Act, 1956 has been given to the extent For and on behalf of applicable. KALYANIWALLA & MISTRY Chartered Accountants C. K. Vaidya Director 24. Figures for the previous financial year have been regrouped wherever necessary. K.M. Elavia S.P. Karmarkar Partner Company Secretary V. Srinivasan Director Membership No. 12737 Mumbai, May 22, 2006. 84 Annual Report 2005-2006
Golden Feed Products Limited DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED ON MARCH 31, 2006
To The Shareholders a “Going Concern” as the finance will continue to be available to the company for its working capital requirements Your Directors have pleasure in submitting their Report along with the audited Accounts for the financial year from its holding company Godrej Agrovet Limited. ended on 31st March, 2006. ADDITIONAL INFORMATION FINANCIAL RESULTS The additional information required to be given under the Companies Act, 1956, has been laid out in the As the company has commenced operations in the current year, no previous year figures have been given: Schedules attached to and forming part of the Accounts. The Notes to the Accounts referred to in the Auditors’ Rs. Lac Report are self-explanatory and therefore do not call for any further explanation. For the year ended STATUTORY INFORMATION 31/3/2006 A) Conservation of Energy, Technology absorption and Foreign Exchange earnings and outgo Total Income 345.00 The information in respect of these matters, required under Section 217 (1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 Loss before Taxation 140.06 and forming part of the Directors’ Report is given in the Annexure “A” to this report. Add: Provision for Taxation NIL B) Particulars of Employees Loss after Taxation 140.06 None of the employees is covered under the provisions of Section 217 (2A) of the Companies Act, 1956, Balance Brought Forward from previous year Nil read with the Companies (Particulars of Employees) (Amendment) Rules, 2002. Balance Carried Forward to Balance Sheet 140.06 C) Directors’ Responsibility Statement REVIEW OF OPERATIONS Pursuant to the provisions contained in Section 217(2AA) of the Companies Act, 1956, the Directors of In the current year, your company has acquired Shrimp Feed Marketing Business of Higashimaru Feeds India your Company confirm :- Limited (HFIL) effective 31st October, 2005. HFIL were the pioneer in the aqua feed sector. HFIL commenced a) that in the preparation of the annual accounts, the applicable Accounting Standards have been commercial production from 1992, in technical and financial collabration with Higashimaru Foods Inc. of followed and no material departures have been made from the same ; Japan. This acquisition is expected to consolidate the presence in the shrimp feed segment of your company b) that they have selected such Accounting Policies and applied them consistently and made judgements alongwith other Godrej group companies engaged in the shrimp feed business. Your company alongwith other and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of Godrej group companies engaged in similar businesses are also expected to benefit through better market the Company at the end of the financial year and of the profit or loss of the Company for that period ; penetration available through the distribution network of HFIL and joint sourcing of critical raw materials. c) that they have taken proper and sufficient care for the maintenance of adequate accounting The Company’s business suffered a setback due to delay in the shrimp farming season. records in accordance with the provisions of this Act for safeguarding the assets of the Company DIRECTORS for preventing and detecting fraud and other irregularities ; Dr. S.S. Sindhu, Director, retires by rotation at the ensuing Annual General Meeting in accordance with the d) that they have prepared the annual accounts on a going concern basis. provisions of the Companies Act, 1956 and being eligible, offers himself for re-appointment. HUMAN RESOURCES AUDITORS The Board would like to place on record its sincere appreciation of the dedicated performance turned in by You are requested to appoint Auditors for the current year and fix their remuneration. The retiring Auditors M/ the employees of your Company. s. Kalyaniwalla & Mistry, Chartered Accountants, Mumbai are eligible for re-appointment and a certificate as required u/s 224 (1-B) of the Companies Act, 1956 has been received from them. For and on behalf of the Board of Directors QUALIFICATIONS BY AUDITORS C.K. Vaidya Dr. P.N. Narkhede The auditors have qualified in the Auditors report that the accumulated losses as at Director Director March 31, 2006 exceeds its paid up capital, resulting in the erosion of its net worth. Your company still remains Mumbai, May 22, 2006.
ANNEXURE ‘A’ ANNEXURE FORMING PART OF THE DIRECTORS’ REPORT
INFORMATION PURSUANT TO SECTION 217(1)(e) OF THE COMPANIES ACT, 1956, C. Foreign Exchange earnings and outgo READ WITH THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF Your Company had no foreign exchange earning as well as outgo. THE BOARD OF DIRECTORS) RULES, 1988 IN RESPECT OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO : A. Conservation of Energy For and on behalf of the Board of Directors The Company has not established any manufacturing facility this year. C.K. Vaidya Dr. P.N. Narkhede B. Technology absorption, adaptation and innovation Director Director Not Applicable since the Company does not have any manufacturing facility at Mumbai, May 22, 2006. present.
REPORT OF THE AUDITORS TO THE MEMBERS OF GOLDEN FEED PRODUCTS LIMITED
1. We have audited the attached Balance Sheet of Golden Feed Products Limited, as at 31st March 2006 and e) In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt also the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that with by this report comply with the Accounting Standards referred to in sub-section (3C) of section date annexed thereto. These financial statements are the responsibility of the Company’s management. 211 of the Companies Act, 1956. Our responsibility is to express an opinion on these financial statements based on our audit. f) In our opinion and to the best of our information and according to the explanations given to us, the 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those said financial statements read with the notes thereon, subject to para (a) above, give the information Standards require that we plan and perform the audit to obtain reasonable assurance about whether the required by the Companies Act, 1956, in the manner so required and give a true and fair view in financial statements are free of material misstatement. An audit includes examining, on a test basis, conformity with the accounting principles generally accepted in India: evidence supporting the amounts and disclosures in the financial statements. An audit also includes i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2006; and 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 ii) in the case of the Profit and Loss Account, of the loss for the year ended on that date. basis for our opinion. iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended 3. As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Government in on that date. terms of Section 227 (4A) of the Companies Act, 1956, we annex hereto a statement on the matters 5. On the basis of the written representations received from the Directors as on 31st March, 2006, and taken specified in paragraphs 4 and 5 of the said Order. on record by the Board of Directors, we report that, none of the Directors is disqualified as on 31st March, 4. Further to our comments in the Annexure referred to in paragraph (3) above, we report that: 2006 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the a) The accumulated losses of the Company as at March 31, 2006 exceeds its paid up capital resulting Companies Act, 1956. in the erosion of its net worth. The accounts for the year have been prepared on the ‘Going Concern’ For and on behalf of basis on the understanding that finance will continue to be available to the Company for working KALYANIWALLA & MISTRY capital requirements. Chartered Accountants b) 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. K. M. ELAVIA c) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of these books. Partner d) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this Membership No. 12737 report are in agreement with the books of account. Place : Mumbai Dated : May 22, 2006 85 Golden Feed Products Limited
ANNEXURE TO THE AUDITORS’ REPORT Referred to in paragraph (3) of our report of even date. undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, 1) (a) The Company has maintained proper records showing full particulars, including quantitative Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise details and situation of fixed assets. Duty, cess and other statutory dues applicable to it with the appropriate authorities. According to the information and explanations given to us, there are no undisputed dues payable in respect of (b) As explained to us, the Company has a program for physical verification of fixed assets at periodic above as at 31st March 2006 for a period of more than six months from the date they became intervals. In our opinion, the period of verification is reasonable having regard to the size of the payable. Company and the nature of its assets. No material discrepancies have been reported on such verification. (b) According to the information and explanations given to us, there are no dues outstanding of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty or cess on account of any (c) In our opinion, the disposal of fixed assets during the year does not affect the going concern dispute. assumption. 10) The Company has accumulated losses at the end of the financial year and it has incurred cash losses in 2) (a) The Management has conducted physical verification of inventory at reasonable intervals. the current financial year. There were no operations in the immediately preceding year. (b) In our opinion, the procedures of physical verification of inventory followed by the management 11) According to the information and explanations given to us and based on the documents and records are reasonable and adequate in relation to the size of the Company and the nature of its business. produced to us, the Company has not defaulted in repayment of dues to banks. There are no dues to (c) The Company is maintaining proper records of inventory and no material discrepancies were financial institutions or debenture holders. noticed on physical verification. 12) According to the information and explanations given to us and based on the documents and records 3) (a) The Company has not granted any loans, secured or unsecured to companies, firms or parties produced to us, the Company has not granted loans and advances on the basis of security by way of pledge covered in the register maintained under section 301 of the Companies Act, 1956. of shares, debentures and other securities. (b) Consequently, the question of commenting whether the rates of interest and other terms and 13) In our opinion and according to the information and explanations given to us, the nature of activities of conditions are not prejudicial to the interests of the Company does not arise. the Company does not attract any special statute applicable to chit fund and nidhi/ mutual benefit fund/ (c) The Company has taken an unsecured loan, from a company covered in the register maintained societies. under Section 301 of the Act. 14) The Company does not deal in shares, securities, debentures and other investments. (d) The rate of interest and the other terms and conditions of the loan taken is not prejudicial to the 15) According to the information and explanations given to us, the Company has not given any guarantee. interests of the Company. 16) According to the information and explanations given to us, term loans were applied for the purpose for 4) In our opinion and according to the information and explanations given to us, there are adequate internal which the loans were obtained. control procedures commensurate with the size of the Company and the nature of its business, for the 17) According to the information and explanations given to us and on an overall examination of the Balance purchases of inventory, fixed assets and for the sale of goods and services. During the course of our audit, Sheet and Cash Flows of the Company, we report that the Company has utilized funds raised on short- we have not observed a continuing failure to correct major weaknesses in internal controls. term basis for long term investment. 5) (a) Based on the audit procedures applied by us and according to the information and explanations 18) The Company has not made any preferential allotment of shares to parties or companies covered in the provided by the management, we are of the opinion that the particulars of contracts and arrangements register maintained under section 301 of the Companies Act, 1956. referred to in section 301 of the Companies Act, 1956 have been entered into the register required to be maintained under that section. 19) The Company did not issue any debentures during the year. (b) The transactions made in pursuance of such contracts or arrangements, were made at prices 20) The Company has not raised any money through a public issue during the year. which are reasonable having regard to prevailing market prices at the relevant time, except for 21) Based on the audit procedures performed and information and explanations given by the management, certain transactions for which, there are no similar services rendered to other parties or have been we report that no fraud on or by the Company has been noticed or reported during the year. entered into on a reciprocal basis and hence the prices are not comparable. For and on behalf of 6) In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public and hence the provisions of section 58A, 58AA or any other KALYANIWALLA & MISTRY provision of the Companies Act, 1956, read with the rules framed thereunder are not applicable. Chartered Accountants 7) In our opinion and according to the information and explanations given to us, the Company is in the process of setting up an internal audit system. K. M. ELAVIA Partner 8) The Central Government has not prescribed maintenance of cost records under section 209(1)(d) of the Companies Act, 1956, for any of the products of the Company. Membership No. 12737 Place : Mumbai 9) (a) According to the information and explanations given to us and on the basis of our examination of the books of account, during the year, the Company has been generally regular in depositing Dated : May 22, 2006
86 Annual Report 2005-2006
BALANCE SHEET AS AT MARCH 31, 2006 PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ON This Year This Year Previous Year MARCH 31, 2006 Schedule Rs. Rs. Rs. SOURCES OF FUNDS This Year This Year Previous Year SHAREHOLDERS’ FUNDS Schedule Rs. Rs. Rs. Share Capital 1 500,000 500,000 500,000 500,000 INCOME LOAN FUNDS From Operations 34,550,891 – Unsecured Loans 2 70,393,120 – 70,393,120 – Other income 48,940 – TOTAL 70,893,120 500,000 34,599,831 – APPLICATION OF FUNDS EXPENDITURE FIXED ASSETS 3 Gross Block 45,046,967 – Materials 9 22,980,279 – Less: Depreciation 1,875,000 – Expenses 10 21,606,761 – Net Block 43,171,967 – Capital work-in-progress/advances – – Interest and financial charges 11 2,080,190 – 43,171,967 – Depreciation 1,875,000 – INVESTMENTS 4 25,000 – CURRENT ASSETS,LOANS Miscellaneous Expenditure written off 64,508 AND ADVANCES 5 48,606,738 – Inventories 27,832,117 – LOSS BEFORE TAXATION (14,006,907) – Sundry debtors 30,671,000 – Cash and Bank Balances 2,604,347 487,187 Provision for Taxation – – Other current assets 166,999 – LOSS AFTER TAXATION (14,006,907) – 61,274,462 487,187 Surplus/Deficit Brought Forward – LESS : CURRENT LIABILITIES AND PROVISIONS Deficit carried forward (14,006,907) Liabilities 6 47,335,216 51,695 TOTAL (14,006,907) – Provisions 7 250,000 – Earnings per share (Basic/Diluted) in Rs. 47,585,216 51,695 (Refer Note 12) (280) – NET CURRENT ASSETS 13,689,246 435,492 MISCELLANEOUS EXPENDITURE 8 – 64,508 NOTES TO ACCOUNTS 12 (to the extent not written off or adjusted) PROFIT & LOSS ACOUNT 14,006,907 – TOTAL 70,893,120 500,000 NOTES TO ACCOUNTS 12
The Schedules referred to above form an integral part of the Balance Sheet The Schedules referred to above form an integral part of the Profit and Loss Account As per our Report attached Signatures to Balance Sheet and As per our Report attached Signatures to Profit and Loss Account Schedules 1 to 8 and 12 Schedules 9 to 12 For and on behalf of For and on behalf of KALYANIWALLA & MISTRY KALYANIWALLA & MISTRY Chartered Accountants C.K. VAIDYA Director Chartered Accountants C.K. VAIDYA Director DR. P.N. NARKHEDE Director DR. P.N. NARKHEDE Director K. M. ELAVIA K. M. ELAVIA Partner Partner Membership No. 12737 Membership No. 12737 Place : Mumbai Place : Mumbai Date : May 22, 2006. Date : May 22, 2006.
SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006 This Year Previous Year This Year This Year Previous Year Rs. Rs. Rs. Rs. Rs. SCHEDULE 1 : SHARE CAPITAL SCHEDULE 4 : INVESTMENTS Authorised LONG TERM 1,00,000 Equity Shares of Rs.10 each 1,000,000 1,000,000 UNQUOTED (AT COST) IN GOVERNMENT SECURITIES *(Previous year 1,00,000) (All the Securities have been deposited with Issued, Subscribed and Paid up various Government Authorities) 50000 Equity Shares of Rs.10 each fully paid 500,000 500,000 (a ) National Savings Certificates (Face value *(Previous year 50,000) Rs. 25,000 ; Previous year NIL) 25,000 – The entire share capital is held by Godrej Agrovet TOTAL 25,000 – Limited, the Holding Company (and its nominees) SCHEDULE 5 : CURRENT ASSETS, LOANS & ADVANCES SCHEDULE 2 : UNSECURED LOANS (A) INVENTORIES : From Banks Raw Materials 25,444,477 – Term Loans 30,000,000 – Finished Products 2,387,638 – (amount due within a year Rs. 3,00,00,000, Previous year NIL) 27,832,115 – From Godrej Agrovet Ltd.(including interest accured 40,393,120 – (B) SUNDRY DEBTORS *(Refer note 2) Rs. 15,57,118, Previous year Rs. Nil.) Debts outstanding for a period exceeding six months TOTAL 70,393,120 – Considered Good 9,825,161 Considered Doubtful – 9,825,161 – Other Debts 20,845,839 – Total 30,671,000 – Less: Provision for doubtful debts – – 30,671,000 – SCHEDULE 3 : FIXED ASSETS (Rs.) GROSS BLOCK DEPRECIATION NET BLOCK ASSETS As at Additions Deductions As at Upto For the On Prior Period Upto As at As at 1.4.2005 31.3.2006 1.4.2005 Year Deductions Adjustments 31.3.2006 31.3.2006 31.3.2005 Intellectual property, Technical Know-how etc. – 45,000,000 – 45,000,000 – 1,875,000 – – 1,875,000 43,125,000 – *(Refer note 2) Plant & Machinery – 46,967 – 46,967 – – – – – 46,967 – TOTAL – 45,046,967 – 45,046,967 – 1,875,000 – – 1,875,000 43,171,967 – Previous Year – – –––– ––-–
87 Golden Feed Products Limited
SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006 This Year This Year Previous Year c) Carrying amount of cash generating units /assets are reviewed at balance sheet date to determine Rs. Rs. Rs. whether there is any indication of impairment. If such indication exists, the recoverable amount SCHEDULE 5 : INVESTMENTS (Contd.) is estimated as the net selling price or value in use, whichever is higher. Impairment loss, if any, (C) CASH AND BANK BALANCES : is recognized whenever carrying amount exceeds the recoverable amount. Cash and Cheques on hand 53,072 – d) Intellectual property, Technical Know-how etc. are amortised over a period of 10 years. Balances with Scheduled Banks in current account 2,551,275 487,187 e) Raw materials are valued at weighted average cost. 2,604,347 487,187 Finished goods and work-in-progress are valued at lower of cost and net realisable value. (D) OTHER CURRENT ASSETS : 166,999 – These costs include cost of conversion and other costs incurred in bringing the inventories to their TOTAL 61,274,462 487,187 present location and condition. SCHEDULE 6 : LIABILITIES f) Retirement benefits to employees comprise payments under defined contribution plans like Sundry Creditors 37,637,147 51,695 provident fund and family pension. Payments under defined contribution plans are charged to the Advances from Customers 9,698,069 - profit and loss account. The liability in respect of defined benefit schemes like gratuity and leave TOTAL 47,335,216 51,695 encashment benefit on retirement is provided on the actual basis. SCHEDULE 7 : PROVISIONS g) Revenue is recognised when goods are despatched to external customers. Gratuity 200,000 – h) Deferred tax is recognised on timing differences, being the differences between the taxable income Leave Encashment 50,000 – and the accounting income that originate in one period and are capable of reversal in one or more TOTAL 250,000 – subsequent periods. Deferred tax assets, subject to consideration of prudence, are recognised and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable SCHEDULE 8 : MISCELLANEOUS EXPENDITURE income will be available against which such Deferred tax liability is recognised, if material. Deferred (To the extent not written off) tax assets can be realised. The tax effect is calculated on the accumulated timing difference at the Preliminary expenses – 64,508 year- end, based on the tax rates and laws enacted or substantially enacted on the balance sheet date. TOTAL – 64,508 i) The basic earnings per share is computed using the weighted average number of common shares SCHEDULE 9 : MATERIALS outstanding during the period. Diluted earnings per share is computed using the weighted average a) RAW MATERIALS CONSUMED number of common and dilutive common equivalent shares outstanding during the period, except Opening stock ––where the results would be anti-dilutive. Add : Purchases during the year 41,177,837 – j) Provisions are recognized in the accounts in respect of present probable obligations, the amount 41,177,837 – of which can be reliably estimated. Less : Sales during the year 89,554 – 41,088,281 – 2. ACQUISITION OF SHRIMP FEED BUSINESS Less : Closing Stocks 25,444,477 – During the year, the Company has acquired the shrimp feed Marketing Business of Higashimaru Feeds 15,643,804 on a slump sale basis,effective from 31st October, 2005. b) PURCHASE FOR RESALE 8,049,679 – The break-up of consideration is: c) INVENTORY CHANGE Rs. Opening Stock – Intellectual property, Technical Know-how etc. 45,000,000 Finished Goods taken over 1,674,434 – Debtors taken over 37,900,000 *(Note 2) Inventory taken over 1,600,000 Less : Closing Stock Less: Deposits taken over (9,500,000) Finished Goods 2,387,638 – (713,204) – Total consideration 75,000,000 TOTAL 22,980,279 – This Year Previous Year SCHEDULE 10: EXPENSES Unit Quantity Value Quantity Value Rs. Rs. 1 Salaries, Wages, Bonus, Gratuity and Allowances 2,365,840 – 2 Contribution to Provident Fund and 3. SALES TURNOVER Other Funds and Administration Charges 191,663 – Aqua Feed MT 1,228 34,550,891 3 Employee Welfare Expenses 61,477 – Note: Sales Turnover includes sale of items processed by third parties, and items purchased by the Company for resale. 4 Processing charges 12,058,653 – 4. FINISHED GOODS INVENTORIES Aqua Feeds MT 92 2,387,638 –– 5 Consumable Stores – – 5. PURCHASES FOR RESALE 6 Power and Fuel 252 – Aqua Feed MT 365 8,049,679 –– 7 Rent 40,700 – 6. RAW MATERIALS CONSUMED 8 Rates and Taxes 19,142 – Animal Proteins MT 445 10,217,648 9 Repairs & Maintenance Others 5,426,156 Building 1,933 – TOTAL 15,643,804 –– Plant & Machinery – – 7. LICENSED & INSTALLED CAPACITY AND ACTUAL PRODUCTION Other assets 2,327 – 4,260 – Registered Installed Actual Third Party 10 Insurance 22,575 – Item For the year Production Production Production Production 11 Postage, telephony and stationery 116,827 – Ended MT MT MT MT 12 Auditor’s Remuneration 112,240 – Aqua Feeds 31.03.2006 – – – 1,189.5 13 Legal & Professional fees 2,765,733 – 31.03.2005 – ––– 11 Freight, Coolie and Cartage 1,153,010 – This Year This Year Previous Year 12 Discount, Commission and Selling expenses 1,556,745 – Rs. Rs. Rs. 13 Advertisement and publicity 64,979 – 8. AUDITORS’ REMUNERATION 14 Travelling expenses 1,062,483 – Audit fees 84,180 6,612 15 Bad Debts/Advances written off – – Audit under Other Statutes 28,060 – 16 General Expenses 10,182 – TOTAL 112,240 6,612 21,606,761 – SCHEDULE 11 : INTEREST AND FINANCIAL CHARGES 9. VALUE OF CONSUMPTION OF RAW MATERIALS, SPARES & TOOLS (a) Interest paid on fixed loans - This Year Previous Year From:- Rs. % Rs. % i ) Banks 4,808 – RAW MATERIALS : ii ) Others 1,954,936 – Indigenous 15,643,804 100 0 1,959,744 – TOTAL 15,643,804 100 00 (b) Other Financial Charges 120,446 – TOTAL 2,080,190 – 10. SEGMENT INFORMATION The Company is in the business of manufacturing and distribution of Aqua Feed, which is its single SCHEDULE 12 : NOTES TO ACCOUNTS primary business segment. All its operations are located in India & so no secondary segment disclosures are required under AS - 17 segment Reporting 1. SIGNIFICANT ACCOUNTING POLICIES 11. RELATED PARTY DISCLOSURES a) The accounts have been prepared on historical cost convention. The Company follows mercantile Related party disclosures as required by AS - 18, “Related Party Disclosures”, are given below “ system of accounting and recognises income and expenditure on accrual basis. 1. Relationships : b) Fixed assets have been stated at cost and include incidental and/or installation/development expenses (i) Holding Companies : incurred in putting the asset to use and interest on borrowing incurred during construction period. Godrej Agrovet Limited (GAVL) holds 100% in the Company. GAVL is the subsidiary of Pre-operative expenses for major projects are also capitalised, where appropriate. Godrej Industries Limited(GIL). GIL is the subsidiary of Godrej & Boyce Mfg. Co. Limited, the ultimate holding company.
88 Annual Report 2005-2006
2. The following transactions were carried out with the related parties in the ordinary course of CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006 business : Current Previous Rs. Year Year Holding Rs. Rs. Rs. Nature of Transactions Company * A. Cash Flow from Operating Activities : (i) Net Profit Before Taxes (14,006,907) (14,968) 1 Sale of materials / finished goods 1,072,000 Adjustment for: 2 Purchase of Fixed Assets 46,987 Depreciation 1,875,000 3 Purchase of materials / finished goods 293,000 Loss / (Profit) on sale of fixed assets – 4 Loan taken 40,393,120 Profit on sale of Investments – 5 Interest expense on loan taken 1,557,118 Dividend income – 6 Outstanding payables, net of (receivables) 16,467,562 Interest income – 7 Guarantees issued by 75,000,000 Interest expenses 2,080,190 * All transaction are with Godrej Agrovet Limited. Miscellaneous expenditure written off 64,508 Expenditure in respect of prior years – 12. EARNINGS PER SHARE Investments Written off – This Year Previous Year 4,019,698 – Rs. Rs. Operating Profit Before Working Capital Changes (9,987,209) (14,968) Profit after tax and prior period expenses (14,006,907) – Adjustments for: Weighted average number of equity shares outstanding 50,000 50,000 Inventories (27,832,115) Basic earnings per share (280) – Debtors and Other Receivables (30,837,998) Diluted earnings per share (280) – Creditors and Other Payables 47,533,521 2,755 Nominal value of shares 10.00 10.00 (11,136,592) 2,755 Cash Generated from Operations (21,123,801) (12,213) Direct Taxes paid (net of refund received) Net Cash Flow from Operating Activities (21,123,801) (12,213) INFORMATION REQUIRED TO BE FURNISHED UNDER THE PART IV B. Cash Flow from Investing Activities : OF SCHEDULE VI OF THE COMPANIES ACT, 1956 Capital subsidy received – Acquisition of fixed assets (45,046,967) Balance Sheet Abstract and Company’s General Business Profile Proceeds from sale of fixed assets – Purchase of Investments (25,000) i) Registration Details Proceeds from sale/maturity of investments Interest Received – Registration No 140599 Dividend Received – State Code 11 (45,071,967) Balance Sheet 31/3/2006 Net Cash used in Investing Activities (45,071,967) – ii) Capital raised during the period (Rupees) C. Cash Flow from Financing Activites : Public Issue Nil Proceeds from Borrowings 70,393,120 Rights Issue Nil Repayment of Borrowings – Bonus Issue Nil Increase/(Decrease) in Cash Credit/WCDL – Private Placement Nil Interest Paid (2,080,190) Dividend Paid – iii) Position of mobilisation and deployment of funds (Rupees) Dividend Tax Paid – Total Liabilities 118,478,336 Net Cash used in Financing Activities 68,312,930 – Total Assets 118,478,336 Source of Funds Net increase in Cash and Cash equivalents 2,117,160 (12,213) Paid up Capital 500,000 Cash and Cash equivalents (Opening balance) 487,187 499,400 Reserve & Surplus – Secured Loans – Cash and Cash equivalents (Closing balance) 2,604,347 487,187 Unsecured Loans 70,393,120 Notes: 0- Application of funds 1. The Cash Flow Statement has been prepared under the “Indirect Method” as set out in the Accounting Net Fixed Assets 43,171,967 Standard (AS) 3 on “Cash Flow Statements”, and presents cash flows by operating, investing and financ- Investments 25,000 ing activities. Net Current Assets 13,689,246 2. Figures in brackets are outflows/deductions. Misc Expenditure Nil 3. Figures for the previous year have been regrouped/restated wherever necessary to conform to this year’s iv) Performance of the Company (Rupees) classification. Turnover 34,599,831 Total Expenditure 48,606,738 For and on behalf of Profit Before Tax -14,006,907 KALYANIWALLA & MISTRY Profit After Tax -14,006,907 Chartered Accountants C.K. VAIDYA Director Earnings Per Share in Rs. -280.14 DR. P.N. NARKHEDE Director K. M. ELAVIA Dividend Rate Partner v) Generic Names of three Principal Membership No. 12737 products services of the company Place : Mumbai Item Code No 23099010 Date : May 22, 2006. Product Description Animal Feeds
Place : Mumbai C.K.Vaidya DR. P.N. NARKHEDE Date : May 22, 2006 Director Director
89 Krithika Agro Farm Chemicals and Engineering Industries Private Limited
DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED ON MARCH 31, 2006
To The Shareholders Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report Your Directors have pleasure in submitting their Report along with the audited Accounts of the Board of Directors) Rules, 1988 and forming part of the Directors’ Report is given for the financial year ended on 31st March, 2006. in the Annexure “A” to this report. FINANCIAL RESULTS B) Particulars of Employees As the company’s activities are in the developmental stage, hence no income has been None of the employees is covered under the provisions of Section 217 (2A) of the earned in the current year. The revenue expenditure (loss) incurred in the current year Companies Act, 1956, read with the Companies (Particulars of Employees) (Amendment) is Rs. 7,63,956 (including Fringe Benefit Tax of Rs. 13,555). Rules, 2002. AUDITORS C) Directors’ Responsibility Statement You are requested to appoint Auditors for the current year and fix their remuneration. Pursuant to the provisions contained in Section 217(2AA) of the Companies Act, 1956, The retiring Auditors M/s. Kalyaniwalla Mistry & Associates, Chartered Accountants, the Directors of your Company confirm :- Mumbai are eligible for re-appointment and a certificate as required u/s 224 (1-B) of a) that in the preparation of the annual accounts, the applicable Accounting Standards the Companies Act, 1956 has been received from them. have been followed and no material departures have been made from the same; QUALIFICATIONS BY AUDITORS b) that they have selected such Accounting Policies and applied them consistently The auditors have qualified in the Auditors' Report that the accumulated losses as at and made judgements and estimates that are reasonable and prudent so as to give March 31, 2006 exceeds its paid up capital, resulting in the erosion of its net worth. Your Company a true and fair view of the state of affairs of the Company at the end of the financial still remains a “Going Concern” as the finance will continue to be available to the company for year and of the profit or loss of the Company for that period; its working capital requirements from its holding company Godrej Agrovet Limited. c) that they have taken proper and sufficient care for the maintenance of adequate Also, the auditors have qualified that the Company’s Capital Work in Progress of Rs. 1.99 Crores accounting records in accordance with the provisions of this Act for safeguarding the is overstated and the accumulated deficit of the Profit and Loss Account is understated by assets of the Company for preventing and detecting fraud and other Rs. 1.99 Crores. Your Directors are of the opinion that as this is the expenditure incurred on the irregularities; Oil mill project and the interest thereon, it has been correctly capitalized. d) that they have prepared the annual accounts on a going concern basis. ADDITIONAL INFORMATION HUMAN RESOURCES The additional information required to be given under the Companies Act, 1956, has been laid The Board would like to place on record its sincere appreciation of the dedicated performance out in the Schedules attached to and forming part of the Accounts. The Notes to the Accounts turned in by the employees of your Company. referred to in the Auditors’ Report are self-explanatory and therefore do not call for any further explanation. STATUTORY INFORMATION For and on behalf of the Board of Directors A) Conservation of Energy, Technology absorption and Foreign Exchange earnings and outgo R.S. Vijan S. Varadaraj The information in respect of these matters, required under Section 217 (1)(e) of the Director Director Mumbai, May 22, 2006. ANNEXURE ‘A’ ANNEXURE FORMING PART OF THE DIRECTORS’ REPORT
INFORMATION PURSUANT TO SECTION 217(1)(e) OF THE COMPANIES ACT, 1956, READ C. Foreign Exchange earnings and outgo WITH THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE Your Company had no foreign exchange earning as well as outgo. BOARD OF DIRECTORS) RULES, 1988 IN RESPECT OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO : A. Conservation of Energy For and on behalf of the Board of Directors The Company has not established any manufacturing facility this year. B. Technology absorption, adaptation and innovation R.S. Vijan S. Varadaraj Director Director Not Applicable since the Company does not have any manufacturing facility at present. Mumbai, May 22, 2006.
REPORT OF THE AUDITORS TO THE MEMBERS OF KRITHIKA AGRO FARM CHEMICALS AND ENGINEERING INDUSTRIES PRIVATE LIMITED
1. We have audited the attached Balance Sheet of Krithika Agro Farm Chemicals and Engineering Industries Accounting Standard 10 – Fixed Assets nor comply with the definition of a qualifying asset under Private Limited, as at 31st March 2006 and also the Profit and Loss Account and the Cash Flow Statement Accounting Standard 16 – Borrowing Costs on which interest can be allocated. Consequently, in our of the Company for the year ended on that date annexed thereto. These financial statements are the opinion, the Capital Work in Progress is overstated and the accumulated deficit of the Profit and Loss responsibility of the Company’s management. Our responsibility is to express an opinion on these Account is understated by Rs. 1,99,99,000/-. financial statements based on our audit. f) In our opinion, subject to para (e) above, the Balance Sheet, the Profit and Loss Account and the Cash 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub- Standards require that we plan and perform the audit to obtain reasonable assurance about whether the section (3C) of section 211 of the Companies Act, 1956. 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 g) In our opinion and to the best of our information and according to the explanations given to us, the assessing the accounting principles used and significant estimates made by management, as well as said financial statements read with the notes thereon, subject to (a) and (e) above, give the information evaluating the overall financial statement presentation. We believe that our audit provides a reasonable required by the Companies Act, 1956, in the manner so required and give a true and fair view in basis for our opinion. conformity with the accounting principles generally accepted in India: 3. This report does not include a statement on the matters specified in paragraph 4 of the Companies i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2006; and (Auditor’s Report) Order, 2003, issued by the Department of Company Affairs, in terms of section 227(4A) ii) in the case of the Profit and Loss Account, of the loss for the year ended on that date. of the Companies Act, 1956, since in our opinion and according to the information and explanations given iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended to us, the said Order is not applicable to the Company. on that date. 4. Further we report that: 5. On the basis of the written representations received from the Directors as on 31st March, 2006, and taken a) The accumulated losses of the Company as at March 31, 2006 exceed its paid up capital resulting on record by the Board of Directors, we report that, none of the Directors is disqualified as on 31st March, in the erosion of its net worth. The accounts have been prepared on ‘Going Concern’ basis on the 2006 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the understanding that finance will continue to be available to the Company for Working Capital Companies Act, 1956. requirements from the promoters. For and on behalf of b) We have obtained all the information and explanations, which to the best of our knowledge and KALYANIWALLA MISTRY & ASSOCIATES belief were necessary for the purposes of our audit. Chartered Accountants c) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of these books. B.S. DASTOOR d) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this Partner report are in agreement with the books of account. Membership No. 48936 e) The Company’s Capital Work in Progress of Rs. 1,99,99,000/- comprise of revenue expenses and interest allocated on the same. These revenue expenses are neither fixed assets as defined under Mumbai; Dated : May 22, 2006 90 Annual Report 2005-2006
BALANCE SHEET AS AT MARCH 31, 2006 PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ON This Year This Year Previous Year MARCH 31, 2006 Schedule Rs. Rs. Rs. This Year This Year Previous Year SOURCES OF FUNDS Rs. Rs. Rs. Shareholders Funds INCOME Share Capital 1 100,000 25,000 EXPENDITURE Loan Funds Salaries, Wages, Bonus, Gratuity and Allowances 75,423 – Unsecured Loans 2 20,205,849 19,975,000 Travelling expenses 237,852 – Seminar / Training expenses 61,174 – TOTAL 20,305,849 20,000,000 Interest and financial charges 229,849 – APPLICATION OF FUNDS Auditor’s Remuneration 22,848 – FIXED ASSETS 3 Advertisement & Publicity 18,702 – Gross Block 29,789 – Rent 28,750 – Less: Depreciation 14,422 – Communication expenses 26,787 – Net Block 15,367 – General Charges 34,594 – Capital Work-in-progress/advances 19,999,000 19,999,000 Depreciation 14,422 – 750,401 – 20,014,367 19,999,000 PROFIT/(LOSS) BEFORE TAXATION (750,401) – Current Assets, Loans and Advances 4 PROVISION FOR TAXATION Inventories 457,687 – FRINGE BENEFIT TAX 13,555 Cash and Bank Balances 1,105 1,000 DEFFERRED – 13,555 – Other current assets 10,000 – PROFIT AFTER TAXATION (763,956) 468,792 1,000 Balance Brought Forward – – Advance payment of taxes (net of provison of taxation 13555; BALANCE CARRIED FORWARD (763,956) – Previous year NIL) –– Earning per share (Basic/Diluted) in Rs. (Refer Note 4) (81) – Less : Current Liabilities and Provisions 5 Liabilities 941,266 Net Current Assets (472,474) – Profit and loss account 763,956 – 20,305,849 20,000,000 Notes to Accounts 6
The Schedules referred to above form an integral part of the Balance Sheet The Schedules referred to above form an integral part of the Profit and Loss Account As per our Report attached Signatures to Balance Sheet and As per our Report attached Schedules 1 to 6 For and on behalf of For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants R. S. VIJAN Director Chartered Accountants R. S. VIJAN Director S. VARADARAJ Director S. VARADARAJ Director B. S. DASTOOR B. S. DASTOOR Partner Partner Membership No. 48936 Membership No. 48936 Place : Mumbai Place : Mumbai Date : May 22, 2006. Date : May 22, 2006.
SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006 This Year This Year Previous Year This Year This Year Previous Year Rs. Rs. Rs. Rs. Rs. Rs. SCHEDULE 1 : SHARE CAPITAL SCHEDULE 4 : CURRENT ASSETS, Authorised LOANS & ADVANCES 10,000 Equity Shares of Rs.10 each 100,000 25,000 (A) INVENTORIES Issued, Subscribed and Paid up Stock under cultivation 457,687 – 10,000 Equity Shares of Rs.10 each 100,000 25,000 (B) CASH AND BANK BALANCES 7,600 Shares are held by Godrej Agrovet Ltd. CASH IN HAND 105 (Previous year NIL) Balances with scheduled banks in current account 1,000 1,105 1,000 SCHEDULE 2 : UNSECURED LOANS (C) ADVANCE RECEIVED IN CASH/ From holding company 4,204,849 500,000 KIND - DEPOSITS 10,000 – From others 16,001,000 19,475,000 468,792 1,000 TOTAL 20,205,849 19,975,000 SCHEDULE 5 : LIABILITIES Sundry creditors 864,449 – Other liabilities 76,817 TOTAL 941,266 –
SCHEDULE 3 : FIXED ASSETS (Rs.) GROSS BLOCK DEPRECIATION NET BLOCK ASSETS As at Additions Deductions As at Upto For the On Prior Period Upto As at As at 1.4.2005 31.3.2006 1.4.2005 Year Deductions Adjustments 31.3.2006 31.3.2006 31.3.2005 Furniture & Fixtures – 28,589 – 28589 – 13,222 – – 13,222 15,367 – Office & Other Equipments – 1,200 – 1200 – 1,200 – – 1,200 – – TOTAL – 29,789 – 29789 – 14,422 ––14,422 15,367 – Previous Year ––– – – – ––––– Capital Work-In-Progress /Advances 19,999,000 19,999,000 TOTAL 20,014,368 19,999,000
91 Krithika Agro Farm Chemicals and Engineering Industries Private Limited
SCHEDULE 6 : NOTES TO ACCOUNTS 7. Balance Sheet Abstract and Company's General Business Profile 1. SIGNIFICANT ACCOUNTING POLICIES i) Registration Details a) The accounts have been prepared on historical cost convention. The Company follows mercantile Registration No. 016679 system of accounting and recognises income and expenditure on accrual basis. State Code 18 Balance Sheet Date 31/3/2006 b) Fixed assets have been stated at cost and include incidental and / or installation/development ii) Capital raised during the year expenses incurred in putting the asset to use and interest on borrowing incurred during construction (Rupees ) period. Pre-operative expenses for major projects are also capitalised, where appropriate. Public Issue Nil c) The basic earnings per share is computed using the weighted average number of common shares Rights Issue Nil outstanding during the period. Diluted earnings per share is computed using the weighted average Bonus Issue Nil number of common and dilutive common equivalent shares outstanding during the period, except Private Placement 75,000 where the results would be anti-dilutive. iii) Position of mobilisation and deployment of funds (Rupees ) d) Provisions are recognized in the accounts in respect of present probable obligations, the amount Total Liabilities 20,305,849 of which can be reliably estimated. Total Assets 20,305,849 e) Interest and commitment charges incurred in connection with borrowing of funds, which are Sources of Funds directly attributable to the acquisition, construction or production of an asset that necessarily takes Paid-up Capital 100,000 substantial period of time to get ready for its intended use, upto the time the said asset is put to use Reserves & Surplus – are capitalised, as a part of the cost of that asset. Other borrowing costs are recognised as an Secured Loans – expense in the period in which they are incurred. Unsecured Loans 20,205,849 2. The Company has not commenced operations. Application of Funds Net Fixed Assets 20,014,367 3. AUDITORS’ REMUNERATION Investments – Audit fees 22,848 6,612 Net Current Assets (472,474) 4. EARNINGS PER SHARE Misc. Expenditure This year Previous year Accumulated Losses 763,956 Profit after tax and prior period expenses (Rs.) (763,956) – iv) Performance of Company Weighted average number of equity shares outstanding 9,375 2,500 Turnover – Basic earnings per share (81) – Total Expenditure 750,401 Diluted earnings per share (81) – Profit before tax -750,401 Profit after tax -763,956 Nominal value of shares 10.00 10.00 Earning Per Share in Rs. -81.49 5. RELATED PARTY DISCLOSURES Dividend rate – Related party disclosures as required by AS - 18, “Related Party Disclosures”, are given below : v) Generic Names of three principal products services of Company 1. Relationships : Item Code No. 23099010 (i) Holding Companies : Product Description Oil palm plantation Godrej Agrovet Limited (GAVL) holds 76% in the Company. GAVL is the subsidiary of Godrej R.S. Vijan S. Varadaraj Industries Limited (GIL). GIL is the subsidiary of Godrej & Boyce Mfg. Co. Limited, the Director Director ultimated holding company. Mumbai, May 22, 2006. 2. The following transactions were carried out with the related parties in the ordinary course of business : CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006 Rs. Current year Previous year Holding Rs. Rs. Rs. Nature of Transactions Companies A. Cash Flow from Operating Activities : (i) Net Profit Before Taxes (750,401) – Adjustment for: 1 Purchase of materials / finished goods 457,687 Depreciation 14,422 – – Interest expenses 229,849 244,271 – 2 Loan taken 4,204,849 – Operating Profit Before Working Capital Changes (506,130) – 3 Interest expense on loan taken 229,849 Adjustments for: – Inventories (457,687) Debtors and Other Receivables (10,000) 4 Outstanding payables, net of (receivables) 864,449 Creditors and Other Payables 941,266 – 5 Share Capital invested by 76,000 473,579 – 6. Prior period financial statements have been audited by a firm of Chartered Accountants other than Cash Generated from Operations (32,551) – Kalayaniwala Mistry & Associates. Direct Taxes paid (net of refund received) (13,555) – The opening balances are being taken as per the last year accounts, which have been regrouped and re- Net Cash Flow from Operating Activities (46,106) – classified wherever necessary to conform to current year’s classification. B. Cash Flow from Investing Activities : Acquisition of fixed assets (29,789) (7,147,035) (29,789) Net Cash used in Investing Activities (29,789) (7,147,035) C. Cash Flow from Financing Activities : Proceeds from issuance of share capital 75,000 – Proceeds from Borrowings 3,630,849 7,148,035 Repayment of Borrowings (3,400,000) – Interest Paid (229,849) Net Cash used in Financing Activities 76,000 7,148,035 Net increase in Cash and Cash equivalents 105 1,000 Cash and Cash equivalents (Opening balance) 1,000 – Cash and Cash equivalents (Closing balance) 1,105 1,000 Notes : - - 1 The Cash Flow Statement has been prepared under the “Indirect Method” as set out in the Accounting Standard (AS) 3 on “Cash Flow Statements”, and presents cash flows by operating, investing and financing activities. 2 Figures in brackets are outflows/deductions. 3 Figures for the previous year have been regrouped/restated wherever necessary to conform to this year’s classification.
For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants R. S. VIJAN Director S. VARADARAJ Director B. S. DASTOOR Partner Membership No. 48936 Place : Mumbai Date : May 22, 2006.
92 Annual Report 2005-2006
Godrej Beverages & Foods Limited (Formerly Godrej Tea Limited) DIRECTORS’ REPORT FOR THE YEAR ENDED ON MARCH 31, 2006
To The Shareholder, DIRECTORS Your Directors have pleasure in submitting their Report along with the Audited Accounts for the year ended Mr. A.B. Godrej retires by rotation at the ensuing Annual General Meeting in accordance with the provisions March 31, 2006. of the Companies Act, 1956 and being eligible, offers himself for re-appointment. During the year under review, Mr. Pranab Barua resigned from the Board of the Company w.e.f. 14th March, FINANCIAL RESULTS 2006. The Board wishes to record its appreciation of his efforts during his tenure with the Company. Your Company’s performance during the year 2005-06 as compared with that during the previous year is In the Board Meeting held on March 27, 2006, Mr. Rahul Shah was appointed as an Additional Director who summarized below. is the nominee director of IL&FS Investment Managers Limited and he holds office as such upto the forthcoming This Year Last Year Annual General Meeting. Rs. ‘000 Rs. ‘000 HUMAN RESOURCES AND INDUSTRIAL RELATIONS The relations with the employees were cordial. As mentioned above, as per the acquisition of the foods Sale of Tea 77,729 156,563 business, 232 experienced employees were added by smooth transition taking the total employees strength Other Income 621 1,350 of your Company at 246 as on 31st March, 2006. Total Income 78,350 157,913 AUDITORS Total expenditure other than Interest and Depreciation 210,144 342,525 The Auditors, M/s. Kalyaniwalla & Mistry, Chartered Accountants, retire at the ensuing Annual General Profit / (Loss) before Interest, Depreciation and Taxation (131,794) (184,612) Meeting and are eligible for re-appointment for which they have given their consent. Depreciation 3,004 3,254 AUDIT COMMITTEE Profit / (Loss) before Interest and Taxation (134,798) (187,866) The Audit Committee, which was appointed pursuant to the provisions of Section 292A of the Companies Act, Interest and financial charges 47,985 39,292 1956 has reviewed the Accounts for the year ended 31st March, 2006. Profit / (Loss) before Taxation (182,783) (227,158) DIRECTORS’ RESPONSIBILITY STATEMENT Provision for Current Tax (481) – Pursuant to the provisions contained in Section 217(2AA) of the Companies Act, 1956, the Directors of your Provision for Deferred Tax 11,572 12,900 Company confirm: a) that in the preparation of the annual accounts, the applicable accounting standards have been followed Profit / (Loss) for the year after Taxation (171,692) (214,258) and no material departures have been made from the same; Surplus brought forward (348,858) (134,600) b) that they have selected such accounting policies and applied them consistently and made judgements Profit / (Loss) After Tax carried forward (520,549) (348,858) and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that period; REVIEW OF OPERATIONS c) that they have taken proper and sufficient care for the maintenance of adequate accounting records in The Total Income for the year under review was Rs. 7.83 Crore compared to Rs.15.79 Crore in the previous accordance with the provisions of this Act for safeguarding the assets of the Company for preventing and year. The total expenses reduced was Rs. 21 Crore as compared to Rs. 34.25 Crore in the previous year mainly detecting fraud and other irregularities; due to the active steps taken towards control of the fixed expenses. As a restructuring strategy, the Company d) that they have prepared the annual accounts on a going concern basis. has taken a one time additional write off amount to Rs.1.28 Crore of its deferred expenses and hence to that extent loss is higher. ADDITIONAL INFORMATION The year under review was quite eventful for your Company in many respects. The Company has entered into 1. INFORMATION PURSUANT TO SECTION 217(1)(E) OF THE COMPANIES ACT, 1956, READ WITH a distribution agreement with Jyothy Laboratories Ltd. for distribution of tea products and the performance is THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF satisfactory. Towards the end of the year, your Company has restructured its business and is also leveraging DIRECTORS) RULES, 1988 IN RESPECT OF CONSERVATION OF ENERGY, TECHNOLOGY its products under the ‘Godrej’ brand. ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO RESTRUCTURING (A) The additional information required to be given under the Companies Act, 1956 in respect of Your Company’s long-term plan is to be a significant player in the FMCG sector through organic as well as Conservation of Energy, Technology Absorption as per Section 217(1)(e), read with the Companies inorganic growth. Business strategies have been developed in consonance with the growth objective, focusing (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 has not been given, on the three key elements – partnership, acquisition & innovation. In this effort IL&FS Investment Managers since such requirement is not applicable to the Company. Limited has decided to be a Strategic Investor by participating in equity capital of the Company. (B) With a view to achieve the above goal, the Board of Directors of your Company had on 14th March, 2006, Rs.’000 Rs.’000 signed a slump sale agreement for the acquisition of Foods Division (except the Wadala factory) of Godrej Foreign exchange used Nil Nil Industries Ltd. w.e.f. the close of working hours on 31st March, 2006 for a total consideration of Rs.70 Crore Foreign exchange earned Nil Nil of which Rs. 40 Crore was paid in cash and Rs.30 Crore in the form of equity shares. To facilitate the above deal, IL&FS Investment Managers Ltd. invested Rs.60 Crore in the equity capital of the company. This will help 2. STATEMENT UNDER SECTION 217(2A) READ WITH THE COMPANIES (PARTICULARS OF in improving both the top and bottom line of your Company. EMPLOYEES) RULES, 1975 The major brands acquired by the Company under the terms of the above referred slump sale agreement (A) Persons employed for a part of the financial year under review and each of whom was in receipt include brands like Jumpin, Xs, Sofit, Cooklite, Sunshakti and Sunrice. Xs & Jumpin operate in Rs. 440 Crore of remuneration for that part which, in the aggregate, was not less than Rs. 2,00,000 per month. Tetrapack fruit drinks and nectar category. The brand Xs operates in high growth nectar segment with an exotic range of flavours like Berry Blast, Triple Tickle, Litchi Leap, Santra Swing, Kiwi Kraze and 100% natural juices Sr. Name Designation Gross Qualification Age Particulars of of Orange and Apple. Jumpin caters to popular and economy segment of the market with Mango, Apple and No. Remuneration (years) Previous Pineapple drinks in tetrapak and PET bottle. With health consciousness among consumers gaining importance, (Rs.’000) Employment Soymilk brand Sofit is positioned as “the New Taste of Health” and promises “Wellness for Now and Health 1 Mr. Zozden Chief 4,331 B.Tech, MMS 54 Godrej Sara Lee, Forever”. Godrej Tomato Puree is another major player that operates in the nascent category of tomato puree. Lobo Operating 4 years The edible oils are marketed under the brands Godrej Sunflower Oil, Godrej Groundnut Oil, and Vanaspati Officer (Hydrogenated Vegetable Oil) under “Godrej Vanaspati”. Mandideep factory, acquired as part of the deal, is one of the major aseptic packaging facilities in India. The For and on behalf of the Board of Directors factory is ISO 9000: 2001 and HACCP certified and has been the winner of “National Productivity Award certificate 2003-04”. A.B. Godrej DIVIDEND Chairman Since the profits of the Company are insufficient, your Directors do not recommend payment of equity dividend. Mumbai, May 19, 2006
REPORT OF THE AUDITORS TO THE MEMBERS OF GODREJ BEVERAGES & FOODS LIMITED (Formerly Godrej Tea Limited)
1. We have audited the attached Balance Sheet of Godrej Beverages & Foods Limited (formerly known e) During the current year, the Company changed its accounting policy with respect to amortization on as Godrej Tea Limited), as at 31st March, 2006 and the Profit and Loss Account of the Company for the promotion of products, publicity and brand building from 36 months to 30 months. Had there been no year ended on that date annexed thereto. These financial statements are the responsibility of the change in the period of amortization, the charge for the year would have been lower by Rs. 12,848 Company’s management. Our responsibility is to express an opinion on these financial statements thousands. Consequently the losses for the year and accumulated losses are higher by Rs. 12,848 thousands. based on our audit. f) In our opinion, the Balance Sheet and the Profit and Loss Account dealt with by this report comply with 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956. Standards require that we plan and perform the audit to obtain reasonable assurance about whether g) In our opinion and to the best of our information and according to the explanations given to us, subject the financial statements are free of material misstatement. An audit includes examining, on a test basis, to para (a) above, the said financial statements read with the notes thereon, give the information evidence supporting the amounts and disclosures in the financial statements. An audit also includes required by the Companies Act, 1956, in the manner so required and give a true and fair view in assessing the accounting principles used and significant estimates made by management, as well as conformity with the accounting principles generally accepted in India: evaluating the overall financial statement presentation. We believe that our audit provides a reasonable i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2006; and basis for our opinion. ii) in the case of the Profit and Loss Account, of the loss for the year ended on that date. 3. As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Government in iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on terms of Section 227 (4A) of the Companies Act, 1956, we annex hereto a statement on the matters that date. specified in paragraphs 4 and 5 of the said Order. 5. On the basis of the written representations received from the Directors as on 31st March, 2006, and 4. Further to our comments in the Annexure referred to in para (3) above, we report that: taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on a) The accumulated losses of the Company along with miscellaneous expenditure (to the extent not 31st March, 2006 from being appointed as a Director in terms of clause (g) of sub-section (1) of section written off or adjusted) as at March 31, 2006 exceed its paid up capital resulting in the erosion of its net 274 of the Companies Act, 1956. worth. The accounts for the year have been prepared on the ‘Going Concern’ basis on the understanding For and on behalf of that finance will continue to be available to the Company for working capital requirements. KALYANIWALLA & MISTRY b) We have obtained all the information and explanations, which to the best of our knowledge and belief Chartered Accountants were necessary for the purposes of our audit. K. M. ELAVIA c) In our opinion, proper books of account as required by law have been kept by the Company so far as Partner appears from our examination of these books. Membership No. 12737 d) The Balance Sheet and the Profit and Loss Account dealt with by this report are in agreement with the books of account. Mumbai, May 19, 2006 93 Godrej Beverages & Foods Limited (Formerly Godrej Tea Limited)
ANNEXURE TO THE AUDITORS’ REPORT
Referred to in paragraph (3) of our report of even date. statutory dues including Provident Fund, Investor Education and Protection Fund, Employees’ State 1) (a) The Company has maintained proper records showing full particulars, including quantitative Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, cess and other details and situation of fixed assets. statutory dues applicable to it with the appropriate authorities. According to the information and (b) As explained to us, the Company has a program for physical verification of fixed assets at periodic explanations given to us, there are no undisputed dues payable in respect of above as at 31st March intervals. In our opinion, the period of verification is reasonable having regard to the size of the 2006 for a period of more than six months from the date they became payable Company and the nature of its assets. No material discrepancies have been reported on such (b) According to the information and explanations given to us, there are no dues outstanding of Sales verification. Tax, Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty or cess on account of any (c) In our opinion, the disposal of fixed assets during the year does not affect the going concern assumption. dispute, other than the following: 2) (a) The Management has conducted physical verification of inventory at reasonable intervals. Name of the Statute Amount (Rs.’000) Forum where dispute is pending (b) In our opinion, the procedures of physical verification of inventory followed by the management Sales Tax Act 121 West Bengal Sales Tax Authority are reasonable and adequate in relation to the size of the Company and the nature of its business. Sales Tax Act 16 Appellate Tribunal (c) The Company is maintaining proper records of inventory and no material discrepancies were Sales Tax Act 70 Assistant Commissioner noticed on physical verification. 10) The Company’s accumulated losses at the end of the financial year are in excess of fifty percent of its net 3) (a) The Company has not granted any loans, secured or unsecured to companies, firms or other parties worth and it has incurred cash losses in the current as well as the immediately preceding financial year. covered in the register maintained under Section 301 of the Companies Act, 1956. 11) According to the information and explanations given to us and based on the documents and records (b) Consequently, the question of commenting on the rates of interest and the other terms and conditions produced to us, the Company has not defaulted in repayment of dues to banks. There are no dues to of the loans granted being prejudicial to the interests of the Company, receipt of regular principal financial institutions or debenture holders. and interest and reasonable steps taken for recovery of principal and interest does not arise. 12) According to the information and explanations given to us and based on the documents and records (c) The Company has not taken any loans, secured or unsecured from companies, firms or other produced to us, the Company has not granted loans and advances on the basis of security by way of parties covered in the register maintained under Section 301 of the Act. pledge of shares, debentures and other securities. (d) Consequently, the question of commenting on the rates of interest and the other terms and conditions 13) In our opinion and according to the information and explanations given to us, the nature of activities of the of the loans taken being prejudicial to the interests of the Company and payment of regular Company does not attract any special statute applicable to chit fund and nidhi/mutual benefit fund/societies. principal and interest does not arise. 14) The Company does not deal in shares, securities, debentures and other investments. 4) In our opinion and according to the information and explanations given to us, there are adequate internal 15) According to the information and explanations given to us, the Company has not given any guarantee control procedures commensurate with the size of the Company and the nature of its business, for the for loans taken by others from banks and financial institutions. purchases of inventory, fixed assets and for the sale of goods. There are no sales of services. During the course 16) According to the information and explanations given to us, the term loans were applied for the purpose of our audit, we have not observed a continuing failure to correct major weaknesses in internal controls. for which the loans were obtained. 5) (a) Based on the audit procedures applied by us and according to the information and explanations 17) According to the information and explanations given to us and on an overall examination of the Balance provided by the management, we are of the opinion that the particulars of contracts and Sheet and Cash Flows of the Company, we report that the Company has not utilized funds raised on short- arrangements referred to in Section 301 of the Companies Act, 1956 have been entered into the term basis for long-term investment. register required to be maintained under that section. 18) The Company has not made any preferential allotment of shares to parties or companies covered in the (b) The transactions made in pursuance of such contracts or arrangements, were made at prices register maintained under Section 301 of the Companies Act, 1956. which are reasonable having regard to prevailing market prices at the relevant time. 19) The Company did not issue any debentures during the year. 6) In our opinion and according to the information and explanations given to us, the Company has not 20) The Company has not raised any money through a public issue during the year. accepted any deposits from the public and hence the provisions of Section 58A, 58AA or any other 21) Based on the audit procedures performed and information and explanations given by the management, provision of the Companies Act, 1956, read with the rules framed there under are not applicable. we report that no fraud on or by the Company has been noticed or reported during the year. 7) In our opinion and according to the information and explanations given to us, the internal audit system For and on behalf of is commensurate with the size of the Company and nature of its business. KALYANIWALLA & MISTRY 8) We have broadly reviewed the cost records maintained by the Company pursuant to the order made Chartered Accountants by the Central Government for maintenance of cost records prescribed under Section 209(1)(d) of the Companies Act, 1956, and are of the opinion that prima facie, the prescribed accounts and records have K.M. ELAVIA been made and maintained. We have not however, made a detailed examination of the records with Partner a view to determining whether they are accurate or complete. Membership No. 12737 9) (a) According to the information and explanations given to us and on the basis of our examination of the books of account, during the year, the Company has been generally regular in depositing undisputed Mumbai, May 19, 2006 BALANCE SHEET AS AT MARCH 31, 2006 PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED This Year Previous Year Schedule Rs. ’000 Rs. ’000 Rs. ’000 MARCH 31, 2006 SOURCES OF FUNDS Shareholders’ Funds Share Capital 1 137,500 137,500 This Year Previous Year Reserves & Surplus – – Schedule Rs. ’000 Rs. ’000 137,500 137,500 Share Application Money 600,000 – INCOME Loan Funds Sale of Tea 77,729 156,563 Secured Loans 2 340,090 193,833 Other Income 9 621 1,350 Unsecured Loans 3 150,000 300,000 490,090 493,833 78,350 157,913 TOTAL 1,227,590 631,333 EXPENDITURE APPLICATION OF FUNDS Fixed Assets 4 Materials 10 46,052 85,050 Gross Block 596,749 25,957 Processing and Handling Charges 2,589 23,075 Less : Depreciation 10,585 7,609 Expenses 11 163,159 206,536 Net Block 586,164 18,348 Interest and Financial Charges 12 47,986 39,292 Capital Work in Progress 1,500 41 Inventory Change 13 (1,657) 27,864 587,664 18,389 Deferred Tax Asset 99,272 87,700 Depreciation 3,005 3,254 Investments – – 261,134 385,071 Current Assets, Loans and Advances 5 Inventories 246,053 73,147 LOSS BEFORE TAX (182,783) (227,158) Sundry Debtors 128,690 27,758 Cash & Bank Balances 130,406 30,510 Provision for taxation Loans & Advances 31,922 5,572 Current Tax (481) – 537,071 136,987 Deferred Tax 11,572 12,900 Less : Current Liabilities and Provisions Liabilities 6 210,187 26,181 LOSS AFTER TAXATION (171,692) (214,258) Purchase consideration payable Deficit brought forward (348,858) (134,600) (Refer Note No. 2) 300,000 – Provisions 7 13,117 919 Deficit carried forward (520,549) (348,858) 523,305 27,100 Basic/Diluted Earnings per share Rs. (12.49) (15.58) Net Current Assets 13,767 109,887 Miscellaneous Expenditure 8 6,338 66,498 (To the extent not written off or adjusted) NOTES TO ACCOUNTS 14 Profit and Loss Account 520,549 348,858 TOTAL 1,227,590 631,333 NOTES TO ACCOUNTS 14 The Schedules referred to above form an integral part of the Balance Sheet The Schedules referred to above form an integral part of the Profit & Loss Account As per our Report Attached Signatures to Balance Sheet and Schedules 1 to 8 & 14 As per our Report Attached Signatures to Profit & Loss Account and Schedules 9 to 14 For and on behalf of For and on behalf of KALYANIWALLA & MISTRY KALYANIWALLA & MISTRY Chartered Accountants Chartered Accountants K.M. ELAVIA A.B. GODREJ A. MAHENDRAN K.M. ELAVIA A.B. GODREJ A. MAHENDRAN Partner Chairman Director Partner Chairman Director Mumbai, May 19, 2006 Mumbai, May 19, 2006
94 Annual Report 2005-2006
This Year Previous Year SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE Rs. ’000 Rs. ’000 YEAR ENDED MARCH 31, 2006 SCHEDULE 2 : SECURED LOANS From a Finance Company From Banks This Year Previous Year Foreign Currency Term Loan – 145,616 Rs. ’000 Rs. ’000 Foreign Currency Working Capital Demand Loan – 48,217 SCHEDULE 1 : SHARE CAPITAL Medium Term Loans 330,000 – AUTHORISED : Cash Credit 10,090 – 5,00,00,000 Equity Shares of Rs. 10 each 340,090 193,833 (Previous year, 1,50,00,000 Equity Shares of Rs. 10 Each) 500,000 150,000 Amounts due within a year (other than cash credit) 43,750 193,833 ISSUED, SUBSCRIBED AND PAID-UP : Refer Note 3 1,37,50,000 Equity Shares of Rs. 10 each fully paid 137,500 137,500 SCHEDULE 3 : UNSECURED LOANS 137,500 137,500 From Banks Of the above : Short Term Loans 100,000 60,000 Intercoporate deposits 50,000 240,000 97,49,996 shares (Previous year 68,86,496) are held by Godrej Industries Ltd. (GIL) the Holding Company 150,000 300,000 Amounts due within a year 150,000 300,000
SCHEDULE 4 : FIXED ASSETS Sr. Particulars GROSS BLOCK DEPRECIATION NET BLOCK No. Balance Additions On Deductions Balance Balance For the On Balance Balance Balance as on acquisition of as on as on year deductions as on as on as on 1/4/2005 Foods division 31/3/2006 1/4/2005 31/3/2006 31/3/2006 1/4/2005 1 Land – – 18,500 – 18,500 – – – – 18,500 – 2 Building – – 103,400 – 103,400 – – – – 103,400 – 3 Trade marks 10 – 158,470 – 158,480 5 2 – 7 158,474 5 4 Plant & Machinery 5,622 – 286,850 – 292,472 1,064 630 – 1,695 290,777 4,558 5 Office Equipment 3,500 30 – – 3,530 914 131 – 1,045 2,485 2,586 6 Furniture 4,031 58 1,146 – 5,235 659 249 – 908 4,327 3,372 7 Computer 12,079 16 2,150 84 14,161 4,818 1,982 29 6,771 7,390 7,261 8 Lab Equpiment 190 – – – 190 106 4 – 110 80 84 9 Electrical Installation 525 – – – 525 42 8 – 50 475 483 10 Leased Assets Vehicle – – 256 – 256 – – – – 256 – TOTAL This Year 25,957 104 570,772 84 596,749 7,608 3,006 29 10,585 586,164 18,349 Previous Year 22,789 3,498 – 329 25,957 4,436 3,254 81 7,609 18,390 18,353 Capital Work-in-progress – 1,500 – – 1500 –– – –1,500 41 TOTAL 598,249 587,664 18,389 1. Assets purchased vide slump agreement dated 14th March, 2006 has been taken in books on the basis of a Valuation Report submitted by a professional valuer. 2. Land includes leasehold land of Rs.4,250 thousands which is being amortised over the period of lease. This Year Previous Year This Year Previous Year Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 SCHEDULE 5 : CURRENT ASSETS, SCHEDULE 6 : CURRENT LIABILITIES LOANS AND ADVANCES Sundry creditors (Refer Note No. 7) 95,180 9,111 (A) INVENTORIES : Other liabilities 94,829 10,549 Raw materials 103,069 12,997 Advances from customers 18,720 2,167 Work-in-progress 29,572 19,972 Sundry deposits 699 1,620 Finished goods 95,775 24,417 Sales Tax & Other Taxes 759 1,285 Packing Material 12,722 10,599 Interest accrued but not due – 1,449 Stores and Spares 2,218 – Promotional Items 2,696 5,163 210,187 26,181 246,053 73,147 SCHEDULE 7 : PROVISIONS (B) SUNDRY DEBTORS (Refer Note No. 2) Leave Encashment 6,177 637 Debts outstanding over six months Gratuity 6,940 282 Considered good 20,313 14,854 Considered doubtful 7,011 – 13,117 919 27,324 14,854 SCHEDULE 8 : MISCELLANEOUS EXPENDITURE Other Debts (To the extent not written off or adjusted) Considered good 108,377 12,904 135,701 27,758 Deferred revenue expenditure Less: Provision for doubtful debts 7,011 – Brand Promotion Expenses – 57,184 128,690 27,758 Pre operative Expenses – 806 (Debts amounting to Rs. 296 thousand ERP Implementation 6,338 8,508 (Previous Year Rs. 7,091 thousand) 6,338 66,498 are secured against Bank Guarantees / Security Deposits) SCHEDULE 9 : OTHER INCOME (C ) CASH AND BANK BALANCES Interest on Bank Deposits (Gross) 435 451 Cash and cheques on hand 774 1,226 (Tax at source Rs.42 thousand, Previous year Rs.72 thousand) Balances with scheduled banks : Miscellaneous income 186 899 – on current accounts 15,840 6,119 621 1,350 – remittance in transit 10,326 – on deposit accounts 103,466 23,165 SCHEDULE 10 : MATERIALS CONSUMED (Of this, Rs.1,265 thousand Raw Materials consumed (Previous Year Rs.1,165 thousand) is 130,406 30,510 Stocks at the commencement of the year 12,997 105,048 Pledged with sales tax authorities Add : Purchases 56,131 10,664 (D) LOANS AND ADVANCES On Acquisition 73,801 – (Unsecured and considered good) Loans and Advances recoverable in cash 142,929 115,712 or in kind or for value to be received Less : Sale of Raw Material – 29,201 Considered good 15,227 4,403 Less : Stocks as at the close of the year 103,069 12,997 Considered doubtful 13,910 – 39,860 73,515 29,137 4,403 Packing Material Consumed 6,192 11,535 Less: Provision for doubtful advances 13,910 – 15,227 4,403 Stores consumed Deposits with Others 16,588 1,104 On Acquisition 2218 – Advance payment of taxes 107 65 Less : Stocks as at the close of the year 2,218 – 31,922 5,572 46,052 85,050 537,071 136,988 95 Godrej Beverages & Foods Limited (Formerly Godrej Tea Limited)
This Year Previous Year d. Provisions & Contingencies: Rs. ’000 Rs. ’000 Rs. ’000 Provisions are recognized in the accounts in respect of present probable obligations, the amount SCHEDULE 11 : EXPENSES of which can be reliably estimated. Salaries wages and allowances 19,882 37,557 Contingent liabilities are disclosed in respect of possible obligations that arise from past events but Contribution to provident fund and other funds 684 1,249 their existence is confirmed by the occurrence or non-occurrence of one or more uncertain future Employee welfare expenses 70 295 events not wholly within the control of the Company. Rent 5,805 8,991 e. Foreign Exchange Transactions: Rates and Taxes 1,138 3,099 Transactions in foreign currency are recorded at the exchange rates prevailing on the date of the Repairs and maintenance 299 259 transaction. Assets and liabilities related to foreign currency transactions, remaining unsettled at Insurance 876 793 the year-end, are translated at the year end exchange rates. Forward exchange contracts, remain- Electricity Charges 566 786 ing unsettled at the year end, backed by underlying assets or liabilities are also translated at year Professional Fees 9,269 2,230 end exchange rates. The premium payable on foreign exchange contracts is amortised over the Audit Fees 362 430 period of the contract. Exchange gains / losses are recognised in the Profit and Loss Account except Conveyance & Travelling 3,609 8,491 in respect of liabilities incurred to acquire fixed assets in which case, they are adjusted to the Freight 6,693 4,402 carrying amount of such fixed assets. Discount and Commission 4,393 17,748 Advertisement and publicity 11,261 39,006 f. Revenue Recognition: Sales promotion 25,591 17,927 Revenue is recognized when goods are dispatched to external customers. Sales are recorded net Bad Debts written off 679 – of returns, trade discounts, rebates, sales taxes. Provision for doubtful debts 2,691 – Provision for doubtful advances 300 – g. Depreciation: Clearing and Forwarding Agent Expenses 3,145 4,685 Depreciation is provided on the straight line method at the rates specified in Schedule XIV to the Consumables 228 565 Companies Act, 1956 except for Trademarks which are amortized over a period of five years. Telephone & Telex Charges 654 1,123 The Company has grouped additions and disposals in the appropriate time period of a month for Recruitment Cost 55 120 the purpose of charging pro rata depreciation in respect of additions and disposals of its assets Royalty 605 634 keeping in view the materiality of the items involved. Other Expenses 4,086 3,055 Loss on disposal of Asset 58 82 h. Retirement Benefits: Deferred Revenue Expenses written off Retirement benefits in the form of gratuity and leave encashment are provided for on actuarial Media Amortisation 57,184 48,318 valuation basis. Launch Conference – 587 Pre-operative Expenses 806 1,934 i. Miscellaneous expenditure: ERP Implementation 2,170 2,170 i) Expenditure incurred on implementation of software package is deferred over a period of six 60,159 53,009 years. ii) Expenditure incurred prior to commencement of commercial operations is deferred over 163,159 206,536 a period of three years. SCHEDULE 12 : INTEREST AND FINANCIAL CHARGES j. Leases of assets under which all the risks and rewards of ownership are effectively retained by the (a) Interest Paid on fixed loans lessor are classified as operating leases. Lease payments under operating leases are recognized (i) Banks 26,036 18,592 as an expense on a straight-line basis over the lease term. (ii) Inter Corporate Deposits 14,663 10,677 k. Deferred tax assets and liabilities are based on temporary differences between the values of assets 40,699 29,269 and liabilities recorded in the financial statements and those used for the tax purpose. Tax rates (b) Interest paid on other loans applicable to future periods are used to calculate year-end deferred income tax amounts. Banks 167 1,784 A valuation allowance is recorded against deferred tax assets resulting from net operating losses (c) Other financial charges 7,120 8,239 and deductible temporary differences when their future realization is not likely. 47,986 39,292 l. The basic earning per share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average SCHEDULE 13 : INVENTORY CHANGE number of common and dilutive common equivalent shares outstanding during the period, except Stocks at the beginning of the year where the results would be anti-dilutive. Finished goods 24,417 47,681 m. The Company is engaged in the business of manufactures of tea, which is its only primary business Work-in-progress 19,972 24,572 segment. The Company operates in economic environments which are subject to same risks and 44,389 72,253 returns and hence no disclosure is required under AS 17- Accounting Standard on Segment Report- Add : Taken over on acquisition 79,301 – ing. Stocks at the close of the year : 2. The Company has acquired the Foods division of Godrej Industries Limited (excluding the Wadala Finished goods 95,775 24,417 Factory) as a going concern on a slump sale basis for net consideration of Rs.700,000 thousands by taking Work-in-progress 29,572 19,972 over the following assets and liabilities 125,347 44,389 Particulars Rs.’000 (1,657) 27,864 Assets: Fixed Assets 570,772 (1,657) 27,864 Stocks 155,320 Debtors (Net) 81,415 SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE Cash & Bank 13,592 Remittance-in-transit 10,326 YEAR ENDED MARCH 31, 2006 Loans & Advances (Net) 27,520 Total 858,945 SCHEDULE 14 : NOTES FORMING PART OF THE ACCOUNTS Less: Liabilities 1. SIGNIFICANT ACCOUNTING POLICIES Creditors 79,968 Other Liabilities 66,732 a. Accounting Convention: Provision for Gratuity 6,683 The financial statements are prepared under the historical cost convention, on accrual basis, in Provision for Leave Encashment 5,562 accordance with the generally accepted accounting principles in India, the Accounting Standards Net Consideration 700,000 issued by the Institute of Chartered Accountants of India and the provisions of the Companies Act, Less: Amount paid 400,000 1956. Consideration to be paid in kind 300,000 b. Fixed Assets: 3. CONTINGENT LIABILITIES NOT PROVIDED FOR Fixed Assets are stated at cost, less accumulated depreciation. Cost includes all expenses related a) Guarantees given by the Company’s Bankers against counter guarantees given by the Company to acquisition and installation of the concerned assets. Rs.1,325 thousands (as on 31-3-2005 Rs.205 thousands). Carrying amount of cash generating units/assets are reviewed at balance sheet date to determine b) Sales Tax demand pending with Commissionerate / Tribunal and disputed by the Company Rs.207 whether there is any indication of impairment. If such indication exists, the recoverable amount thousands (as on 31-3-2005 Rs.Nil). is estimated as the net selling price or value in use, whichever is higher. Impairment loss, if any 4. During the current year, the company changed its accounting policy with respect to amortization on is recognized whenever carrying amount exceeds the recoverable amount. promotion of products, publicity & brand from 3 years to 2 years. Had there been no change in the period c. Inventories: of amortization, the charge for the year would have been lower by Rs.12,848 thousands. Consequently Raw materials and Packing materials are valued at weighted average cost. the losses for the year and accumulated losses are higher by Rs.12,848 thousand. Promotional items are valued at cost. Finished goods and work-in-progress are valued at lower 5. SECURED LOANS of cost and net realizable value. These costs include cost of conversion and other costs incurred Foreign currency term loan, foreign currency working capital demand loan and cash credit from a bank in bringing the inventories to their present location and condition. is secured by hypothecation by way of a first charge on all tangible and moveable fixed assets, stock and book debts, both present and future. 96 Annual Report 2005-2006
SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006
6. SUNDRY DEBTORS 12. RELATED PARTY DISCLOSURES This Year Previous Year Related Party disclosure as required by AS - 18 “Related Party Disclosures” are given below: Rs.’000 Rs. ‘000 1. Relationships Sundry Debtors include amount due from Companies under the same management: (i) Shareholders ( the Godrej Group shareholding) in the company: Godrej Consumer Products Ltd. 108 76 Godrej Industries Limited hold 70.91% Maximum balance during the year 679 964 Godrej Industries Limited is a subsidary of Godrej & Boyce (Mfg) Co.Limited, the ultimate Godrej & Boyce Mfg Co. Ltd. 280 228 holding company. Maximum balance during the year 307 228 (ii) Other related parties in the Godrej Group where common control exist. Godrej Industries Ltd. 2,437 10,657 1. Godrej Consumer Products Limited Maximum balance during the year 11,788 10,657 2. Godrej Agrovet Limited Godrej Sara Lee Ltd. 1,280 1,633 3. Godrej Properties Limited Maximum balance during the year 1,842 1,633 4. Godrej Industries Limited 7. It is the opinion of the management that there are no parties, which can be classified as Small Scale 5. Geometric Software Solutions Company Limited industrial Undertakings to whom the Company owes any sum. The Auditors have accepted the (iii) Key Management Personnel: representation of the management in this matter. 1. Mr. A.Mahendran 8. DEFERRED TAX (iv) Enterprises over which key management personnel exercise significant influence The tax effect of significant temporary differences that resulted in deferred tax assets and liabilities are: 1. Godrej Sara Lee Limited This Year Previous Year 2. Godrej Hi Care Limited Rs.’000 Rs. ‘000 (v) Individuals excercing significant influence Assets 1. Mr. A.B.Godrej Losses carried forward 1,12,350 1,12,350 2. Mr. N.B.Godrej Others 12,445 300 3. Mr. J.N. Godrej 1,24,795 1,12,650 4. Mr. A.Mahendran Liabilities 2. The following transactions were carried out with the related parties in the ordinary course of Depreciation on Fixed Assets (23,390) (2,600) business: Deferred Revenue Expenditure (2,134) (22,350) (i) The details relating to parties referred to in item 1(i) and (ii) above. (Rs.’000) 99,272 87,700 Sr Particulars Godrej Group Other Related parties Deferred tax assets on carried forward tax losses have been recognized and carried forward on the No. Shareholders in the Godrej Group ground that there is virtual certainty that sufficient taxable income will arise in future. The Company has 1 Issue of Share Capital Nil Nil considered certain expenditure which is not expected to arise in the future, increase in business income (Nil) (Nil) due to formalization of distribution arrangements and the acquisition and amalgamation of highly prof- 2 Inter corporate deposit taken during the year Nil 20,000 itable company as factor on the basis of which it has concluded that it is virtually certain that sufficient (Nil) (20,000) taxable income will arise in future against which the deferred tax assets will be realized. 3 Sale of Fixed Assets Nil 58 (Nil) (Nil) 9. The amount of exchange difference included in the Profit and Loss Account, under the related heads of 4 Sale of goods & Other Income 726 26 expenses, is Rs. 1,018 thousand (Previous year Rs. 3,107 thousand). The amount of exchange difference (18,382) (Nil) in respect of forward exchange contracts to be recognized in the profit and loss account of subsequent 5 Credit note issued for Sales Returns 7,097 Nil accounting periods is Rs. Nil (Previous year Rs. 1,018 thousand). (Nil) (Nil) 10. LEASE 6 Purchase of goods 2,073 Nil Disclosure relating to Operating Lease as required by AS – 19 “Leases”, is given below : (1,862) (Nil) 7 Expenses charged by other Companies 5,713 653 a. The total of future minimum lease payments under non - cancelable operating leases for each of (9,330) (24) the following periods: 8 Expenses charged to other Companies 284 167 This Year Previous Year (348) (79) Rs.’000 Rs. ‘000 9 Interest on Inter Corporate Deposit Nil 418 i. Not later than one year 2,938 4,241 (Nil) (Nil) ii. Later than one year and not later than five years 2,546 5,648 10 Sundry Deposit with Other Companies Nil Nil iii. Later than five years Nil Nil (398) (Nil) b. Lease payments recognized in the statement of 11 Consideration payable on acquisition 300,000 Nil Profit & Loss for the period : (Nil) (Nil) Minimum Lease payments 5,013 7,944 12 Outstanding (Payables) net of Receivables 2,717 452 11. EARNINGS PER SHARE (8,672) (375) Figures in italics are for the previous year. This Year Previous Year Rs.’000 Rs. ‘000 (ii) Details relating to persons referred to in items 1(iii),(iv) and (v) above. Number of shares (nominal value Rs.10/- each) 13,750,000 13,750,000 This Year Previous Year (Loss) after tax (171,692) (214,258) Rs.’000 Rs. ‘000 1. Expenses charged by other companies and Basic/Diluted EPS: Reimbursement made to other companies 1,413 414 Weighted Average number of shares 13,750,000 13,750,000 2. Expenses charged to other companies 2,532 2,826 Earnings per share in Rs. (12.49) (15.58) 3. Sales & Other Income 6 Nil Note: 4. Advances 15 Nil No effect has been given for Share Application Money pending allotment in the diluted EPS as the results 5. Outstanding (Payables) net of Receivables 1,410 1,895 would be anti-dilutive.
97 Godrej Beverages & Foods Limited (Formerly Godrej Tea Limited)
3. Significant Related Party Transaction: Rs. ’ 000
Nature of Transaction Godrej Group Shareholders Amount Other Related parties in the Godrej Group Amount
1 Issue of Share Capital – – – – 2 Inter Corporate Deposits taken during the year – – Geometric Software Solutions Company Limited 20,000 20,000 3 Sale of Fixed Assets – – Godrej Agrovet Limited 58 4 Sales of Goods & Other Income Godrej & Boyce Limited 309 Godrej Agrovet Limited 26 Godrej Industries Ltd. 415 18,382 5 Credit note Issued for Sales Returns Godrej Industries Ltd. 7,097 – – 6 Purchase of goods Godrej Industries Ltd. 2,073 – – 1,862 7 Expenses charged by other Godrej Industries Ltd. 5,532 Godrej Agrovet Limited 653 Companies 9,113 Godrej & Boyce Limited 181 Godrej Consumers Products Ltd. 24 217 8 Expenses charged to other Godrej Industries Ltd. 284 Godrej Consumers Products Ltd. 39 Companies 343 49 Godrej & Boyce Limited 5 Godrej Agrovet Limited 128 30 9 Sundry Deposit with Other Godrej Industries Ltd. 356 – – Companies Godrej & Boyce Limited 42 10 Interest expense on other – – Geometric Software Solutions Company Limited 418 inter coporate deposit taken 11 Consideration Payable on acquisition Godrej Industries Ltd. 300,000 12 Outstanding (Payable), net of receivables Godrej Industries Ltd. 2,437 Godrej Consumers Products Ltd. 108 8,693 76 Godrej Agrovet Limited 45 Godrej & Boyce Limited 280 Godrej Properties Limited 299 299 (ii) Details relating to person referred to in item 1(iii) , (iv) and (v) above: 1 Issue of Share Capital – – – – 2 Remuneration – – – – 3 Expenses charged by other – – Godrej Sara Lee Limited 1413 Companies & reimbursement made 355 to other Companies Godrej Hi Care Limited 59 4 Expenses charged to other – – Godrej Sara Lee Limited 1075 Companies 2564 Godrej Hi Care Limited 1457 262 5 Sales & Other Income – – Godrej Hi Care Limited 6 6 Advances – – Godrej Sara Lee Limited 15 7 Outstanding (Payable), net of receivables – Godrej Sara Lee Limited 1280 1633 Godrej Hi Care Limited 130 262
13. MANAGERIAL REMUNERATION 17. INVENTORIES – FINISHED GOODS This Year Previous Year Unit This Year Previous Year Rs.’000 Rs. ‘000 Quantity Value Quantity Value Salaries & Allowances Nil 2,61 Rs. ‘000 Rs. ‘000 Contribution to Provident Fund Nil Nil Manufactured Estimated monetary value of perquisites Nil 14 Packet Tea MT 263 16,421 262 23,752 Total Nil 2,75 Traded 14. AUDITOR’S REMUNERATION Fruit Drinks/ FB 161 53 3700 665 Trays/Juices This Year Previous Year Fruits Beverages KL 804 30,728 Nil Nil Rs.’000 Rs. ‘000 Puree/Pulp/Juices KL 676 17,678 Nil Nil Audit Fees 224 110 Refind Oil/Vanaspati MT 512 24,201 Nil Nil Audit under other statutes 84 33 Soya & Cereals MT 70 2,048 Nil Nil Out of pocket expenses 20 8 Trading MT 65 3,084 Nil Nil Total 328 151 Oils Soya & Cereals 1,562 Nil Nil 15. VALUE OF CONSUMPTION OF RAW MATERIAL 95,775 24,417 This Year Previous Year 18. RAW MATERIAL CONSUMED Rs. ‘000 % Rs. ‘000 % Unit This Year Previous Year Imported Items Nil – Nil – Quantity Value Quantity Value Indigenous Item 39,860 100 73,515 100 Rs. ‘000 Rs. ‘000 Total 39,860 100 73,515 100 Tea MT 855 39,860 905 73,515 16. SALES 19. ACTUAL PRODUCTION Unit This Year Previous Year Unit This Year Previous Year Quantity Value Quantity Value Quantity Quantity Rs. ‘000 Rs. ‘000 Packet Tea MT 702 830 Packet Tea MT 701 77,729 1,126 147,488 Note: Actual Production represents production at third party processing locations. Blended Tea MT Nil Nil 175 9,075 20. Information required under Schedule VI to the Companies Act, 1956 have been given to the extent 701 77,729 1,256 156,563 applicable. 21. The previous year’s figures have been regrouped and reclassified wherever necessary to conform to the current year’s presentation.
98 Annual Report 2005-2006
ADDITIONAL INFORMATION AS REQUIRED UNDER PART IV OF SCHEDULE VI OF CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006 THE COMPANIES ACT, 1956 Current Year Previous Year Rs. ‘000 Rs. ‘000 i) Registration Details A. Cash Flow from Operating Activities : Loss before tax (182,783) (227,158) Registration No. 105714 Adjustments for : State Code 11 Depreciation 3,005 3,254 Balance Sheet 31-Mar-06 Loss on Disposal of Asset 58 82 Expenses incurred during the year deferred – – ii) Capital raised during the year (Amount in Rs. '000) Deferred Revenue expenditure written off 60,159 53,009 Public Issue Nil Interest income (435) (451) Rights Issue Nil Interest expense 47,986 39,292 Bonus Issue Nil Operating Loss before working capital changes (72,010) (131,973) Private Placement Nil Adjustments for : Inventories (172,905) 126,842 iii) Position of mobilisation and deployment of funds (Amount in Rs. '000) Trade & Other receivables (127,239) 5,932 Total Liabilities 1,227,590 Trade & Other payables 497,173 (29,138) Total Assets 1,227,590 197,028 103,636 Direct Taxes paid (42) 126 Source of Funds Net Cash used in operating activities 124,976 (28,212) Paid up Capital 137,500 B. Cash Flow from Investing Activities : Reserve & Surplus / (Accumulated Losses) (520,549) Purchase of fixed Assets (572,376) (3,538) Secured Loans 340,090 Sale of fixed assets 38 166 Unsecured Loans 150,000 Interest received 435 451 Net Cash used in investing activities (571,903) (2,922) Application of Funds C. Cash Flow from Financing Activities : Net Fixed Assets 587,664 Share Application Money 600,000 – Net Current Assets 13,767 Changes in Cash Credit/Working Capital Demand Loans (38,127) (92,009) Deferred Tax Asset 99,272 Term Loans/Inter Corporate Deposits taken (150,000) 177,000 Term Loans repaid 184,385 – Misc. Expenditure 6,338 Interest paid (49,435) (38,687) iv) Performance of Company (Amount in Rs. '000) Net Cash from financing activities 546,823 46,304 Turnover 78,350 Net Increase in Cash and Cash Equivalents 99,895 15,171 Total Expenditure 261,134 Add : Cash & Cash equivalents (Opening Balance) 30,510 15,339 Loss before Tax (182,783) Cash & Cash equivalents (Closing Balance) 130,406 30,510 Loss after Tax (171,692) Earning per Share in Rs. (12.49) For and on behalf of Dividend Rate % – KALYANIWALLA & MISTRY Chartered Accountants v) Generic Names of the three principal products/ services of Company K.M. ELAVIA A.B. GODREJ A. MAHENDRAN Partner Chairman Director Item Code No. 9023000 Mumbai, May 19, 2006 Product Description Packet Tea
99 Godrej Properties Limited
BOARD OF DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST MARCH, 2006
To The Shareholders Redeemable Optionally Convertible Debentures of Rs.10/- each to your Company during the year. Your Directors have pleasure in submitting their Report alongwith the audited Accounts for the year ended During the year your Company was allotted 40,000 equity shares of Rs.10/- each fully paid-up in Godrej 31st March, 2006. Waterside Properties Private Limited and holds the entire paid up share capital of that company. The audited Balance Sheet as at 31st March, 2006 and Profit & Loss Account ended on that date together 1. OPERATING RESULTS : with the Reports of Directors and Auditors thereon of our Subsidiary Companies namely Girikandra Your Company’s performance during the year as compared to the previous period is summarised Holiday Homes & Resorts Limited, Godrej Realty Pvt. Ltd. and Godrej Waterside Properties Pvt. Ltd. below: alongwith Statement as required under Section 212 of the Companies Act, 1956, is annexed herewith. 6. LOAN TO SUBSIDIARY : 2005-2006 2004-2005 The Company has granted an interest free loan of Rs. 28,267,717/- to Girikandra Holiday Homes & (Rs. in lacs) (Rs. in lacs) Resorts Limited (GHHRL) the wholly owned subsidiary company. The auditors have mentioned this in their Auditors Report. The said loan was given to GHHRL for promoting the company to carry on the Profit before Taxation 1785.84 879.67 project at Moho near Panvel. Provision for Taxation (445.32) (300.35) 7. FIXED DEPOSITS : Provision for Fringe Benefit Tax (4.88) — The Company has accepted Fixed Deposits to the extent of Rs. 1,740,000/- during the year. Provision for Deferred Tax 3.29 4.00 8. ADDITIONAL INFORMATION : Profit after Taxation 1338.93 583.32 (a) The information required to be furnished under the provision of Section 217 (2A) of the Companies Add: Surplus brought forward 772.20 559.20 Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 and forming part of Director’s Prior year tax adjustments (6.87) 1.97 Report is annexed hereto. AMOUNT AVAILABLE FOR APPROPRIATION 2104.26 1144.49 (b) Information in respect of Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo, required under Section 217(1)(e) of the Companies Act, 1956 read with the Appropriations: Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is provided Your Directors recommend appropriations as under: hereunder: Interim Dividend _ 255.00 Proposed Dividend 620.00 _ (i) Conservation of Energy : Dividend Distribution Tax 86.96 58.95 Expenses on account of Energy are negligible. Transfer to General Reserve 133.90 58.34 (ii) Technology Absorption: Surplus carried forward 1263.40 772.20 It is an on going process. (iii) Foreign Exchange Earnings & Outgo : TOTAL APPROPRIATIONS 2104.26 1144.49 During 2005-06, expenditure in foreign currencies amounted to Rs. 755,506/- on account of 2. DIVIDEND : traveling and expenses incurred for business promotion. Your Directors had announced during the year an Interim Dividend of 96.20 54% for the year ended The company has not earned any Foreign Exchange during the year. 31st March, 2006. The same is recommended as the Final Dividend for the year. 9. DIRECTORS : 3. REVIEW OF OPERATIONS : In accordance with the provision of the Articles of Association of the Company, Mr. J. N. Godrej, Mr. R.K. Your Company has had a good financial year, posting total income of Rs. 7045.78 lacs during the year Naoroji and Ms. P. A. Godrej retire by rotation and being eligible, offer themselves for re-appointment. ended 31st March 2006. Both commercial projects Godrej Eternia C and Godrej Castlemaine at Pune Mr. Milind Korde, Managing Director of the Company was appointed as the Managing Director of the were completely sold out. The office spaces in first phase of the commercial project in Godrej Coliseum, Company on 1st April, 2005. His tenure as Managing Director expires on 31st March, 2006, the Company Mumbai have also been sold out and the construction of Phase 2 is in full swing and it should be completed has proposed to re-appoint him w.e.f. 1st April, 2006 for a period of 3 years. by end of 2006. In the residential segment, our project Godrej Woodsman Estate Bangalore, has been 10. DIRECTORS’ RESPONSIBILITY STATEMENT: well received by the market. The construction work of Godrej Regency Park Tower B, Thane and Godrej Your Directors confirm: Hill , Kalyan is going on as per schedule. (i) that in the preparation of the annual accounts, the applicable accounting standards have been 4. FUTURE PROSPECTS AND OUTLOOK OF THE COMPANY : followed; The Real Estate Industry continues to flourish and your Company is on the threshold of major developments. (ii) that the Directors have selected such accounting policies and applied them consistently and made Your Company has scaled up operations and increased its geographical footprints. The plan is to achieve judgments and estimates that are reasonable and prudent so as to give a true and fair view of the good geographical and product balance. The company is doing bigger projects like the IT Parks in state of affairs of the Company at the end of the financial year ended 31st March, 2006 and of the Kolkata, mixed development at Bavdhan, near Pune and residential development at Bangalore. The profit of the Company for that year; Company is also diversifying the portfolio and doing projects like the Retail Mall in Kolkata and exploring (iii) that the Directors had taken proper and sufficient care for the maintenance of adequate accounting new locations like Cochin, Chennai and Hyderabad. records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets 5. SUBSIDIARY COMPANIES : of the Company and for preventing and detecting fraud and other irregularities; During the year your Company acquired two Private Limited Companies viz., Godrej Waterside Properties (iv) that the Directors have prepared the annual accounts on a going concern basis. Private Limited and Godrej Realty Private Limited. These two companies will be subsidiaries of your 11. APPOINTMENT OF AUDITORS: Company. The project Godrej Waterside – Kolkata will be developed exclusively by the Godrej Waterside M/s. Kalyaniwalla Mistry and Associates, Chartered Accountants retire at the ensuing Annual General Properties Private Limited and the project at Bavdhan, Pune will be developed exclusively by Godrej Meeting and are eligible for re-appointment for which they have given their consent. Realty Private Limited. 12. ACKNOWLEDGEMENT: Godrej Realty Private Limited allotted 4,90,000 equity shares of Rs.10/- each fully paid-up to HDFC Your Directors take this opportunity to thank all the employees and associates for their co-operation. Venture Trustee Company Limited a trustee of HDFC Property Fund, and 5,00,000 equity shares of Rs.10/- each fully paid-up to your Company during the year. As such your Company holds in aggregate For and on behalf of the Board of Directors 5,10,000 Equity Shares and holds 51% of the paid up share capital of Godrej Realty Private Limited. Further, Godrej Realty Private Limited issued 56,35,000 , 10% Secured Redeemable Optionally Convertible A. B. GODREJ Debentures of Rs.10/- each to HDFC Venture Trustee Company Limited and 58,65,000, 10% Secured Mumbai, May 10, 2006 Chairman
ANNEXURE TO DIRECTORS’ REPORT
Information as per Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 and forming part of the Directors’ Report for the year ended March 31, 2006.
SR. NAME AGE QUALIFICATION DATE OF DESIGNATION REMUNERATION EXPERIENCE LAST EMPLOYMENT NO. EMPLOYMENT (RS.) (YEARS) DESIGNATION COMPANY
1. Mr. Milind S. Korde 42 B.Sc., L.L.B., A.C.S. 03.12.1990 Managing Director 62,10,465 19 Commercial Officer Tata Housing Development Co. Ltd.
NOTES : 1. NATURE OF EMPLOYMENT WHETHER CONTRACTUAL OR OTHERWISE: a) The appointment of the Managing Director from 1st April, 2006 is contractual and terminable by three months notice on either side. b) The appointments of the other employees are non-contractual and are terminable by three months notice on either side. 2. OTHER TERMS AND CONDITIONS: a) In case of the Managing Director, gross remuneration as shown above includes salary, House Rent Allowance (wherever applicable), Commission (wherever applicable), Company’s contribution to Provident Fund and monetary value of perquisites as per Income Tax Rules which are given in terms of the Agreement entered into with him. b) The Designation represent the nature of duties performed by the Employee. d) The age shown is as of last Birthday and the particulars of previous employment pertain to the immediate past employment. 3. RELATIVES OF DIRECTORS: The Managing Director is not related to any of the other Directors of the Company.
100 Annual Report 2005-2006
REPORT OF THE AUDITORS TO THE MEMBERS OF GODREJ PROPERTIES LIMITED 1. We have audited the attached Balance Sheet of GODREJ PROPERTIES LIMITED, as at 31st March e) Without qualifying our opinion, we draw attention to the fact that as referred to in Note 1(f) of 2006 and also the Profit and Loss Account and the Cash Flow Statement of the Company for the year Schedule 19-Notes to Accounts, in respect of projects under long term contracts undertaken and/ ended on that date annexed thereto. These financial statements are the responsibility of the Company’s or financed by the Company, we have relied upon the management’s estimates of the percentage management. Our responsibility is to express an opinion on these financial statements based on our of completion, costs to completion and on the projections of revenues expected from projects audit. owing to the technical nature of such estimates, on the basis of which profits/losses have been accounted, interest income accrued and realizability of the construction work in progress and 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those project advances determined. Standards require that we plan and perform the audit to obtain reasonable assurance about whether the f) In our opinion and to the best of our information and according to the explanations given to us, the financial statements are free of material misstatement. An audit includes examining, on a test basis, said accounts read with the notes thereon, give the information required by the Companies Act, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 1956, in the manner so required and give a true and fair view in conformity with the accounting examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. principles generally accepted in India: An audit also includes assessing the accounting principles used and significant estimates made by i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2006; management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. ii) in the case of the Profit and Loss Account, of the profit of the Company for the year ended on that date and 3. As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Government in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we annex hereto a statement on iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended the matters specified in paragraphs 4 and 5 of the said Order. on that date. 4. Further to our comments in the Annexure referred to in paragraph (3) above, we report that: 5. On the basis of the written representations received from the directors as on 31st March, 2006, and taken on record by the Board of Directors, we report that, none of the directors is disqualified as on 31st March, a) We have obtained all the information and explanations, which to the best of our knowledge and 2006 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the belief were necessary for the purposes of our audit. Companies Act, 1956. b) In our opinion, proper books of account as required by law have been kept by the Company so far For and on behalf of as appears from our examination of such books. KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants c) The Balance Sheet, Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account. Bahadur S. Dastoor Partner d) In our opinion, the Balance Sheet, Profit and Loss Account and the Cash Flow Statement dealt with Membership No. 48936 by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 Place : Mumbai of the Companies Act, 1956. Date : May 10, 2006
ANNEXURE TO THE AUDITORS' REPORT Referred to in paragraph (3) of our report of even date. 9. (a) According to the information and explanations given to us and on the basis of our examination of 1. (a) The Company is maintaining proper records showing full particulars, including quantitative details books of accounts, during the year, the Company has been generally regular in depositing undisputed and situation of fixed assets. 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 (b) As explained to us, the Company has a program for physical verification of fixed assets at periodicals other statutory dues applicable to it with the appropriate authorities. According to the information intervals. In our opinion, the period of verification is reasonable having regard to the size of the and explanations given to us, there are no undisputed dues, payable in respect of above as at Company and the nature of its assets. 31st March, 2006 for a period of more than six months from the date they became payable. (c) In our opinion, the disposal of fixed assets during the year does not affect the going concern (b) According to the information and explanations given to us, there are no dues outstanding of Sales assumption. Tax, Income Tax, Customs duty, Wealth Tax, Service tax, Excise Duty or Cess on account of any 2. (a) The Management has conducted physical verification of inventory at reasonable intervals. dispute. (b) In our opinion, the procedures of physical verification of inventory followed by the management 10. The Company does not have accumulated losses at the end of the financial year and it has not incurred are reasonable and adequate in relation to the size of the Company and the nature of its business. any cash losses in the current and immediately preceding financial year. (c) The Company is maintaining proper records of inventory and no material discrepancies were 11. According to the information and explanations given to us and based on the documents and records noticed on physical verification. produced to us, the Company has not defaulted in repayment of dues to banks. There are no dues to financial institutions or debenture holders. 3. (a) The Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. 12. According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge (b) Consequently, the question of commenting on the rates of interest and others terms and conditions of shares, debentures and other securities. of the loans granted being prejudicial to the interests of the Company, receipt of regular principal and the interest and reasonable steps taken for recovery of principal and interest does not arise. 13. In our opinion and according to the information and explanations given to us, the nature of activities of the Company does not attract any special statute applicable to chit fund and nidhi/ mutual benefit fund/ (c) The Company has not taken any loan, secured or unsecured from companies, firms or other parties societies. covered in the Register maintained under Section 301 of the Companies Act, 1956. 14. The Company does not deal in shares, securities, debentures and other investments. (d) Consequently, the question of commenting on the rates of interest and others terms and conditions of the loans taken being prejudicial to the interests of the Company, payment of regular principal 15. According to the information and explanations given to us, the Company has given guarantee for loans and the interest does not arise. taken by others from banks. The terms and conditions are not prima-facie prejudicial to the interest of the Company. 4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business, for the 16. According to the information and explanations given to us the Company has utilized the term loan for purchases of inventory, fixed assets and for the sale of goods. There are no sales of service. During the the purpose it was taken. course of our audit, we have not observed a continuing failure to correct major weaknesses in internal 17. According to the information and explanations given to us and on an overall examination of the Balance controls. Sheet and cash flows of the Company, we report that the Company has not utilized funds raised on short- 5. (a) Based on the audit procedures applied by us and according to the information and explanations term basis for long-term investment. provided by the management, we are of the opinion that the particular of contracts and arrangement 18. The Company has not made any preferential allotment of shares to parties or companies covered in the referred to in Section 301 of the Companies Act, 1956 have been entered into the register required register maintained under Section 301 of the Companies Act, 1956. to be maintained under that section. 19. The Company did not issue any debentures during the year. (b) The transactions made in pursuance of such contracts or arrangements, were made at prices which are reasonable having regard to prevailing marketing prices at the relevant time, where 20. The Company has not raised any money through a public issue during the year. comparable market price exist. 21. Based on the audit procedures performed and information and explanations given by the management, 6. In our opinion and according to the information and explanations given to us, the Company has complied we report that no fraud on or by the Company has been noticed or reported during the year. with directives issued by the Reserve Bank of India and the provisions of Section 58A and 58AA of the For and on behalf of Companies Act, 1956, and the rules framed there under. KALYANIWALLA MISTRY & ASSOCIATES 7. In our opinion and according to the information and explanations given to us, the internal audit system Chartered Accountants is commensurate with the size of the Company and nature of its business. Bahadur S. Dastoor 8. The maintenance of cost records has not been prescribed by the Central Government under Section Partner 209(1)(d) of the Companies Act, 1956, in respect of the activities carried on by the Company. Membership No. 48936 Place : Mumbai Date : May 10, 2006
101 Godrej Properties Limited
BALANCE SHEET AS AT 31ST MARCH, 2006 PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED
Schedule This Year Previous Year MARCH 31, 2006 Rupees Rupees SOURCES OF FUNDS This Year Previous Year Shareholders’ Funds Schedule Rupees Rupees Share Capital 1 64,445,450 64,445,450 INCOME Reserves & Surplus 2 413,988,398 351,477,988 Sales - Own Projects 441,634,459 185,429,148 Loan Funds - Development Projects 126,076,106 152,398,186 Secured Loans 3 15,553,290 187,255,573 Income from Development Projects 76,737,391 51,495,835 Unsecured Loans 4 60,859,000 254,473,000 Operating Income 13 53,142,859 26,998,677 Other Income 14 6,987,239 2,157,094 554,846,138 857,652,011 TOTAL INCOME 704,578,054 418,478,940 APPLICATION OF FUNDS 55.48 85.77 EXPENDITURE Fixed Assets 5 Cost of sales - Own Projects 15 363,211,528 175,997,648 Gross Block 36,381,750 27,746,336 - Development Projects 62,040,000 85,358,564 Less: Depreciation 14,673,620 14,299,093 Employee Remuneration & Benefits 16 22,925,238 18,534,877 21,708,130 13,447,243 Administration Expenses 17 19,766,499 11,699,691 Interest & Finance Charges (Net) 18 52,976,531 35,601,852 Investments 6 64,264,447 24,036 Depreciation 5,074,007 3,319,210 Current Assets, Loans & Advances 525,993,804 330,511,841 Inventories 7 204,751,391 182,130,830 Sundry Debtors 8 543,247,709 277,163,500 Profit for the year 178,584,250 87,967,099 Cash & Bank Balances 9 149,863,239 41,776,280 Provision for Current Taxes - (44,532,000) (30,034,500) Loans & Advances 10 809,055,939 948,351,137 for fringe benefit tax (487,699) – for deferred tax 329,000 400,000 1,706,918,278 1,449,421,746 Profit After Tax 133,893,551 58,332,599 Less: Current Liabilities & Provisions Prior years tax adjustments (687,642) 196,641 Current Liabilities 11 1,045,877,540 521,522,751 Surplus brought forward 77,220,108 55,919,900 Provisions 12 194,753,178 85,975,263 1,240,630,718 607,498,014 Amount Available for Appropriation 210,426,018 114,449,140 Less : Net Current Assets 466,287,561 841,923,732 Interim Dividend – 25,500,000 Deferred Tax Asset 2,586,000 2,257,000 Proposed Dividend 62,000,000 – Dividend Distribution Tax 8,695,500 5,895,032 Miscellaneous Expenditure Transfer to General Reserve 13,390,000 5,834,000 (to the extent not written off or adjusted) Deferred Revenue Expenditure – – Surplus carried forward to Balance Sheet 126,340,518 77,220,108
554,846,138 857,652,011 Earnings per share (basic/diluted) in Rs. (Refer Note 9) 20.67 9.08 (0) 1 NOTES TO ACCOUNTS & NOTES TO ACCOUNTS & ACCOUNTING POLICIES 19 ACCOUNTING POLICIES 19
The Schedules referred to above form an integral part of the Balance Sheet. The Schedules referred to above form an integral part of the Profit and Loss Account.
As per our Report of even date. Signatures to Balance Sheet and As per our Report of even date. Signatures to Profit and Loss Account and Schedules 1 to 12 and 19 Schedules 10, 13 to 19 For and on behalf of For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants A. B. GODREJ Chairman Chartered Accountants A. B. GODREJ Chairman M. KORDE Managing Director M. KORDE Managing Director B. S. DASTOOR S. KEMBHAVI B. S. DASTOOR S. KEMBHAVI Partner Company Secretary Partner Company Secretary Mumbai, May 10, 2006 Mumbai, May 10, 2006
SCHEDULES FORMING PART OF THE ACCOUNTS
This Year Previous Year This Year Previous Year Rupees Rupees Rupees Rupees SCHEDULE 1 : SHARE CAPITAL SCHEDULE 3 : SECURED LOANS AUTHORISED 1) Cash Credit / Working Capital Demand Loan 15,303,290 165,170,657 10,000,000 Equity Shares of Rs. 10/- each 100,000,000 100,000,000 (Secured by equitable mortgage of immovable property 100,000,000 100,000,000 of the Company’s Project at Juhu- Mumbai & ISSUED, SUBSCRIBED & PAID UP Godrej Hill - Kalyan) 6,444,545 Equity Shares of Rs. 10/- each fully paid up. 64,445,450 64,445,450 2) Term Loan from Banks 250,000 22,084,916 (Out of above 5,264,645 (Previous year 5,073,965) shares are held by (Secured by way of equitable mortgage of immovable Godrej Industries Ltd., the Holding Company) property of the projects undertaken by the Company as 64,445,450 64,445,450 Project Manager at Godrej Castlemaine - Pune) 15,553,290 187,255,573 Of the above, SCHEDULE 2 : RESERVES & SURPLUS Repayable within a year 15,553,290 178,751,582 Share Premium As per last Balance Sheet 245,172,265 245,172,265
245,172,265 245,172,265 SCHEDULE 4 : UNSECURED LOANS General Reserve - as per last Balance Sheet 29,085,615 23,251,615 Banks 45,000,000 215,000,000 Add : Transfer from Profit & Loss Account 13,390,000 5,834,000 Companies – 2,500,000 42,475,615 29,085,615 Fixed Deposits 15,859,000 36,973,000 Profit and Loss Account 126,340,518 77,220,108 60,859,000 254,473,000 413,988,398 351,477,988 Of the above, Repayable within a year 60,859,000 250,074,000
102 Annual Report 2005-2006
SCHEDULE 5 : FIXED ASSETS
ASSETS GROSS BLOCK DEPRECIATION NET BLOCK As at Additions Deductions As at As at Additions Deductions As at As at As at 1st April, for the year for the year 31st March, 1st April, for the year for the year 31st March, 31st March, 31st March, 2005 2005-2006 2005-2006 2006 2005 2005-2006 2005-2006 2006 2006 2005 Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Land - Leasehold 2,007,976 222,740 2,230,716 – 1,405,578 36,669 1,442,247 ––602,398 Building 1,477,796 11,500 1,489,296 – 757,802 6,012 763,814 ––719,994 Leasehold Improvement 4,731,182 4,027,759 604,551 8,154,390 951,344 1,424,403 235,103 2,140,644 6,013,746 3,779,838 Motor Vehicle 4,736,275 1,210,309 382,501 5,564,083 3,153,568 661,195 282,417 3,532,346 2,031,737 1,582,707 Furniture & Fixtures 3,615,082 3,773,763 45,300 7,343,545 1,256,091 959,985 28,569 2,187,507 5,156,038 2,358,991 Office Equipment 2,907,329 2,331,315 202,240 5,036,404 820,468 546,284 143,129 1,223,623 3,812,781 2,086,861 Computer 4,902,371 4,127,342 818,505 8,211,208 3,687,980 1,288,005 708,040 4,267,945 3,943,263 1,214,391 Site Equipments 3,368,325 – 1,296,205 2,072,120 2,266,262 151,454 1,096,161 1,321,555 750,565 1,102,063 Total 27,746,336 15,704,728 7,069,314 36,381,750 14,299,093 5,074,007 4,699,480 14,673,620 21,708,130 13,447,243 Previous Year 27,964,734 3,359,562 3,577,959 27,746,336 13,967,328 3,319,210 2,987,444 14,299,093 13,447,243 This Year Previous Year This Year Previous Year SCHEDULE 6 : INVESTMENTS Rupees Rupees Rupees Rupees Long Term (At Cost) SCHEDULE 11 : CURRENT LIABILITIES Quoted Investments (Note 3) Acceptances – 5,679,738 100 Equity Shares of Rs.10/- each of 742 742 Sundry Creditors (Note 7) 28,029,216 37,298,013 Alacrity Housing Limited Investor Education and Protection Fund – – 100 Equity Shares of Rs.10/- each of 616 616 Advances received against sale of flats / TDRs 764,446,554 295,568,286 Deposits 24,652,770 23,940,797 Alsa Construction & Housing Limited Unclaimed Fixed Deposits 4,035,000 3,607,000 100 Equity Shares of Rs.10/- each of 1,066 1,066 Other liabilities 224,713,999 155,411,161 Ansal Buildwell Limited Interest accrued but not due on Loans – 17,755 100 Equity Shares of Rs.10/- each of 1,366 1,366 1,045,877,540 521,522,751 Ansal Properties & Construction Limited 100 Equity Shares of Rs.10/- each of 3,081 3,081 SCHEDULE 12 : PROVISIONS Ansal Properties & Industries Limited Gratuity 2,755,825 2,223,511 100 Equity Shares of Rs.10/- each of 1,241 1,241 Leave Encashment 2,634,878 2,435,438 Proposed Dividend 62,000,000 – Lok Housing & Construction Limited Tax on Dividend 8,695,500 – 100 Equity Shares of Rs.10/- each of 1,641 1,641 For Taxation 118,666,975 81,316,314 Mantri Housing & Construction Limited 194,753,178 85,975,263 100 Equity Shares of Rs.10/- each of 1,516 1,516 Premier Hsg. & Industrial Ent. Limited SCHEDULE 13 : OPERATING INCOME (GROSS) 100 Equity Shares of Rs.10/- each of 891 891 Project Management fees 2,564 6,216 D.S. Kulkarni Developers Other Income from Customers – 1,405,630 100 Equity Shares of Rs.10/- each of 6,366 6,366 Lease Rent 53,128,295 25,574,830 Unitech Limited Licence Fees 12,000 12,000 100 Equity Shares of Rs.10/- each of 3,106 3,106 53,142,859 26,998,677 The Great Eastern Shipping Company Limited Tax Deducted at source 11,877,497 5,488,087 100 Equity Shares of Rs.10/- each of 266 266 SCHEDULE 14 : OTHER INCOME Radhe Developers Limited Dividends 3,330 660 23700 Equity Shares of Rs.10/- each of 2,370 2,370 Provision for diminution in value of investments written back – 4,049 United Textiles Limited Profit on sale of Fixed Assets (net) 5,376,611 – 25000 Equity Shares of Rs.10/- each of 2,500 2,500 Miscellaneous Income 1,607,298 2,152,385 Amitabh Bachchan Corporation Limited 6,987,239 2,157,094 26,768 26,768 SCHEDULE 15 : COST OF SALES Less : Provision for Diminution in Value 22,321 12,732 Opening Stock: 182,130,830 230,138,294 Add : Expenditure/Transfers from Advances during the year 4,447 14,036 Stock-In-Trade Acquired on Area Sharing – 34,402,940 Unquoted Investments Development Rights 190,000,000 – 1000 Equity Shares of Rs.10/- each of 10,000 10,000 Construction 99,960,010 4,083,214 Saraswat Co-operative Bank Limited Infrastructure 27,543 25,036,931 Investments In Subsidiary Companies Architect Fees 9,116,217 5,670,259 Godrej Realty Pvt. Ltd. Advertisement Expenses 11,069,565 10,909,564 510,000 Equity Shares of Rs.10/- each of 5,100,000 – Overheads / Interest 75,658,756 47,887,275 10% Secured redeemable optionally convertible debentures 58,650,000 – 385,832,091 127,990,183 Less : Closing Stock (204,751,392) (182,130,830) Godrej Waterside Properties Pvt. Ltd. 363,211,528 175,997,648 50000 Equity Shares of Rs.10/- each of 500,000 – SCHEDULE 16 : EMPLOYEE REMUNERATION & BENEFITS 64,264,447 24,036 Salaries, Bonus, Gratuity & Allowances 19,862,794 15,957,776 1. Cost of Quoted Investments 26,768 26,768 Contribution to Provident & other funds 2,023,505 1,425,718 2. Market Value of Quoted Investments 148,408 61,874 Other Employee Benefits 1,038,939 1,151,383 22,925,238 18,534,877 SCHEDULE 7 : INVENTORIES SCHEDULE 17 : ADMINISTRATION EXPENSES Stock in trade (Note 4) 69,281,566 61,584,415 Cost of Project Management 168,360 260,345 Construction Work in progress 135,469,825 120,546,415 Consultancy Charges 4,372,846 1,307,704 204,751,391 182,130,830 Service Charges / Licence Fees 2,328,656 2,616,469 Marketing Expenses – 370,441 SCHEDULE 8 : SUNDRY DEBTORS Compensation Claims – 791,765 (UNSECURED, CONSIDERED GOOD) Loss on sale of Fixed Assets (Net) – 175,569 Exceeding 6 months – – Other Operating Expenses 12,819,182 6,109,533 Others 543,247,709 277,163,500 Deferred Revenue Expenditure written off 67,866 67,866 543,247,709 277,163,500 Provision for diminution in value of investments 9,589 – SCHEDULE 9 : CASH & BANK BALANCES 19,766,499 11,699,691 SCHEDULE 18 : INTEREST AND FINANCE CHARGES (NET) Cash & Cheques on Hand 87,142 6,275 Interest Paid Balance with Scheduled Banks - on Current Accounts 10,453,555 3,640,625 - Banks 14,630,446 38,895,784 - on Fixed Deposit Accounts 139,322,542 38,129,380 - Inter Corporate Deposits 3,525,045 8,249,217 (Refer Note 5) 149,863,239 41,776,280 - Projects and landlords 42,082,239 – SCHEDULE 10 : LOANS & ADVANCES - Others 15,550,516 20,373,981 (UNSECURED, CONSIDERED GOOD) Total Interest Paid 75,788,246 67,518,982 Loans & Advances recoverable in cash or in kind Add : Brokerage & other Financial charges 1,941,802 1,978,807 or for value to be received (Note 3) 62,307,989 32,758,140 Total Interest/Finance Charges Paid 77,730,048 69,497,789 Development Manager Fees Accrued but not due 232,218,224 249,630,941 Less: Interest Received (Gross) Due on Management Projects (Including Work-in-progress) 386,020,789 553,161,532 - Customers – 3,450 Less: Transfer to Cost of Sales - Development Projects (62,040,000) (85,358,565) - Projects and landlords 22,523,303 33,576,966 323,980,789 467,802,967 - Others 2,230,214 315,522 Deposits 75,744,559 112,438,437 Less: Interest Received (Gross) 24,753,517 33,895,938 Advance Tax & Tax deducted at source 114,804,377 85,720,650 NET INTEREST 52,976,531 35,601,852 809,055,939 948,351,136 Tax Deducted at source 5,980,919 3,034,602 103 Godrej Properties Limited
SCHEDULE 19 : NOTES TO ACCOUNTS & ACCOUNTING POLICIES 2) CONTINGENT LIABILITIES: 1) ACCOUNTING POLICIES As at As at Matters 31st March 2006 31st March 2005 a) GENERAL Rupees Rupees The financial statements are prepared under the historical cost convention in accordance with Generally Accepted Accounting Principles in India, the Accounting Standards issued by The Institute of Chartered a) Uncalled amount of Rs. 80/- & Rs. 30/- Accountants of India and the provisions of the Companies Act, 1956. on 70 & 75 partly paid shares respectively of b) FIXED ASSETS Tahir Properties Limited 7,850/- 7,850/- Fixed assets are stated at cost of acquisition or construction less accumulated depreciation. Cost includes b) Consideration payable for acquisition of shares in all incidental expenses related to acquisition and installation, other pre-operation expenses and interest Girikandra Holiday Homes & Resorts Limited in case of construction. (a subsidiary company) for purchase of land. 9,473,750/- 9,473,750/- Carrying amount of cash generating units /assets are reviewed at balance sheet date to determine c) Claims against the company not acknowledged whether there is any indication of impairment. If such indication exists, the recoverable amount is as debts represents cases filed by parties in the estimated as the net selling price or value in use, whichever is higher. Impairment loss, if any, is recognized Consumer forum and High Court and disputed whenever carrying amount exceeds the recoverable amount. by the Company as advised by our advocates. c) DEPRECIATION / AMORTIZATION In the opinion of the management the claim is Depreciation has been provided on Written Down Value basis, at the rates specified in Schedule XIV of not sustainable. 9,427,512/- 5,621,273/- the Companies Act, 1956. d) Guarantee given on behalf of project owner Assets acquired on lease are depreciated over the period of the lease. (Simplex Mills Company Limited). The Company is Leasehold improvements are amortized over a period of five years. entitled to create a corresponding mortgage against d) INVESTMENTS project assets as considered necessary. 360,000,000/- 360,000,000/- Investments are classified into long term and current investments. Long-term investments are carried at cost. Provision for diminution, if any, in the value of each long-term 3) INVENTORIES, CURRENT ASSETS, LOANS AND ADVANCES: investment is made to recognize a decline, other than of a temporary nature. a) Construction Work in Progress and Due on Management projects represents materials at site and Current investments are carried individually at lower of cost and fair value and the resultant decline, if unbilled cost on the projects. Based on projections and estimates by the Company of the expected any, is charged to revenue. revenues and costs to completion. In the opinion of the management, the net realisable value of the e) INVENTORIES construction work in progress will not be lower than the costs so included. Inventories are valued as under : b) The company has been entering into Development Agreements with landlords. Development a) Completed Flats – At lower of Cost or Market value Manager Fees amounting to Rs.232,218,224/- (Previous Year Rs. 249,630,941/-) accrued as per b) Construction Work-in-Progress – At cost terms of the Agreement are receivable by the Company based upon progress milestones specified Construction Work-in-Progress includes cost of land, premium for development rights, construction in the respective Agreements and have been disclosed as Development Manager Fees accrued costs, allocated interest and expenses incidental to the projects undertaken by the Company. but not due in Schedule 10. f) REVENUE RECOGNITION 4) INVENTORIES The Company is following the “Percentage of Completion Method” of accounting. As per this method, Stock-in-Trade includes shares in the following Companies - at cost or market value (whichever is revenue in Profit & Loss Account at the end of the accounting year is recognized in proportion to the actual cost incurred as against the total estimated cost of projects under execution with the Company. lower): Determination of revenues under the percentage of completion method necessarily involves making Current Year Previous Year estimates by the Company, some of which are of a technical nature, concerning, where relevant, the Rupees Rupees percentages of completion, costs to completion, the expected revenues from the project /activity and the Tahir Properties Limited foreseeable losses to completion. Such estimates have been relied upon by the auditors. a) 32,597 Equity shares of Rs. 100/- each, Income from operation of commercial complexes is recognized over the tenure of the lease/service fully paid up 49,993,350 42,296,198 agreement. b) 70 Equity shares of Rs. 100/- each, Interest income is accounted on an accrual basis at contracted rates. Rs. 20/- paid up 1,400 1,400 Dividend income is recognized when the right to receive the same is established. c) 75 Redeemable Preference Class A shares of g) DEVELOPMENT MANAGER FEES Rs.100/- each, Rs.70/- paid 5,250 5,250 The Company has been entering into Development & Project Management agreements with landlords. Girikandra Holiday Homes & Resorts Limited Accounting for income from such projects is done on accrual basis on percentage of completion or as (a subsidiary company) per the terms of the agreement. 498 Equity shares of Rs.1,000/- each, fully paid up 17,880,000 17,880,000 h) RETIREMENT BENEFITS 5) CASH & BANK BALANCES Retirement benefits to employees comprise payments under defined contribution plans like provident Balances with scheduled banks on deposit accounts include Rs. 33,829,379/- (Previous year fund and family pension. Payments under defined contribution plans are charged to the profit and loss account. The liability in respect of defined benefit schemes like gratuity and leave encashment benefit Rs. 33,829,379/-) received from flat buyers and held in trust on their behalf in a corpus fund. on retirement is provided on the basis of actuarial valuation at the end of each year. 6) LOANS AND ADVANCES i) BORROWING COST a) Amounts due from companies under the same management. (Amount in Rupees) Interest and commitment charges incurred in connection with borrowing of funds, which are incurred Particulars Balance as Maximum Balance as Maximum for the development of long term projects are transferred to Construction Work in Progress / Due on on March Debit on March Debit Management Project, as a part of the cost of the projects at weighted average of the borrowing cost / rates 31, 2006 Balance 31, 2005 Balance as per Agreements respectively. during the during Other borrowing costs are recognized as an expense in the period in which they are incurred. year previous j) EARNINGS PER SHARE year The basic earnings per share is computed using the weighted average number of common shares Godrej Industries Ltd. outstanding during the period. Diluted earnings per share is computed using the weighted average - Advances 19,736 28,089 64,920 4,027,560 number of common and dilutive common equivalent shares outstanding during the period, except - Deposits 410,000 410,000 385,000 385,000 where the results would be anti-dilutive. Girikandra Holiday Homes & Resorts Ltd. k) PROVISION FOR TAXATION - Advances 28,267,717 28,267,717 28,048,667 28,048,667 Tax expense comprises both current and deferred tax. Current tax is measured at the amount expected to be paid to the tax authorities, using the applicable tax b) Amount due from Directors of the Company towards Housing Loan / Consumer Durable Loan / rates and tax laws. Contingency loan under the Company’s Scheme Rs. NIL (Maximum debit balance during the year Deferred tax is recognized on timing differences, being the differences between the taxable income and Rs.21,189/-) (Previous year Rs. 21,189/- Maximum debit balance Rs. 42,403/-) the accounting income that originate in one period and are capable of reversal in one or more subsequent c) Due on Management Projects include a sum of Rs.20,056,962/- (Previous Year Rs.19,986,141/-) on periods. Deferred tax assets, subject to consideration of prudence, are recognized and carried forward account of a project, where the matter is sub-judice with arbitrators. only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. The tax effect is calculated on the accumulated 7) SUNDRY CREDITORS AND PROVISIONS timing difference at the year-end based on the tax rates and laws enacted or substantially enacted on the There are no parties within the definition of Small Scale Industrial Undertakings to whom the Company balance sheet date. owes any dues. The auditors have accepted the representation of the management in this matter in the l) FOREIGN CURRENCY TRANSACTIONS absence of a database identifying the creditors, which are small scale industrial undertakings. Transactions in foreign currency are recorded at the exchange rates prevailing on the date of the 8) LEASES transaction. Assets and liabilities related to foreign currency transactions, remaining unsettled at the year a) The Company’s significant leasing arrangements are in respect of operating leases for Residential end, are transalated at the year end exchange rates. Forward exchange contracts, remaining unsetteled premises. Lease income from operating leases is recognized on a straight-line basis over the at the year end, backed by underlying assets or liabilities are also translated at year end exchange period of lease. The particulars of the premises given under operating leases are as under: rates.The premium payable on foreign exchange contracts is amortised over the period of the contract. Current Year Previous Year Exchange gains / losses are recognised in the Profit and Loss Account except in respect of liabilities Rupees Rupees incurred to acquire fixed assets in which case, they are adjusted to the carrying amount of such fixed Gross Carrying Amount of Assets NIL 1,477,796 assets. Accumulated Depreciation NIL 757,803 m) ALLOCATION OF EXPENSES Depreciation for the period NIL 37,894 Corporate Employee Remuneration and Administration expenses are allocated to various projects on Stock–in–trade (Refer note below) 50,000,000 42,302,848 a reasonable basis as estimated by the management. n) PROVISIONS AND CONTINGENT LIABILITIES Future minimum lease receipts under Provisions are recognized in the accounts in respect of present probable obligations, the amount of which non-cancelable operating leases can be reliably estimated. Not later than 1 year 2,976,120 2,006,676 Contingent liabilities are disclosed in respect of possible obligations that arise from past events but their Later than 1 year and not later than 5 years 132,000 132,000 existence is confirmed by the occurrence or non-occurrence of one or more uncertain future events not Note : The available-for-sale asset, given on lease, has been classified by the Company under wholly within the control of the Company. Stock-in-trade. 104 Annual Report 2005-2006 b) The Company’s significant leasing arrangements are in respect of operating leases for Commercial 2. The following transactions were carried out with the related parties in the ordinary course of business. premises. Lease expenditure for operating leases is recognized on a straight-line basis over the period (i) Details relating to parties referred to in items 1 (i), (ii) and (iii) above of lease. The particulars of the premises taken on operating leases are as under: Sr. Godrej & Godrej Other Related Parties Current Year Previous Year No. Description Boyce Industries in Godrej Group Rupees Rupees Mfg. Co. Ltd. Ltd. GAL+VSL+GHCL Future minimum lease payments under +GSLL+GRL+GWPL+ non-cancelable operating leases GHHRL+BAFPL+EHFL Ø Not later than 1 year 6,400,000 4,800,000 +GCPL+GAVL Ø Later than 1 year and not later than 5 years 5,775,000 2,200,000 1. Investment in equity share capital – – 5,600,000 9) Earnings per share Profit after tax and prior years tax adjustments as per 2. Investment in debentures – – 58,650,000 Profit & Loss Account 133,205,909 58,529,240 3. Purchase of fixed assets 3,424,267 – 635,461 Weighted average no. of equity shares outstanding 6,444,545 6,444,545 837,177 – 87,180 Basic/Diluted earnings per share 20.67 9.08 4. Sale of fixed assets – – 100,083 Nominal value of shares 10 10 5. Loans & Advances given – – 219,050 10) The amount of exchange difference included in the Profit and Loss Account, under the related heads of 6. Deposits – 350,000 – expenses is Rs.1,93,933/- (Previous Year Rs.2,052,134/-). The amount of exchange difference in respect 7. Expenses charged to 7,709 1,711,896 15,600,959 of forward exchange contracts to be recognized in the profit and loss account of subsequent periods Rs. other companies – 65,413 NIL (Previous year Rs. 391,673/-). 11) Expenditure in Foreign Currency :- 8. Expenses charged by other 26,475,136 2,628,243 117,401 Travelling Expenses 286,952 141,244 companies (net) 32,227,595 1,218,973 148,111 Other Expenditure 468,554 3,126,049 9. Interest expense on ICD’s taken – – TOTAL 755,506 3,267,293 2,304,793 12) Computation of Net Profit under Section 349 of the Companies Act, 1956. 10. ICD’s taken during the year – – Profit before Tax as per Profit and Loss Account 178,597,185 87,967,099 130,000,000 Add :- 11. Outstanding receivables, 830,409 309,739 29,439,825 Managerial Remuneration 6,210,495 4,265,465 net of (payables) – (3,170,080) 28,048,667 Depreciation 5,074,007 3,319,210 12. Dividend Paid / Payable 50,648,726 2,103,531 Less :- 20,076,841 1,619,651 Profit on sale of asset as per accounts 5,376,611 12,397 (ii) Details relating to persons referred Depreciation 5,074,007 3,319,210 to in items 1 (iv) & (v) above Net Profit for the purpose of Directors Remuneration 179,431,069 92,220,167 Current Previous (a) 5% of Net Profits as computed above 8,971,554 4,611,008 Year Year (b) Maximum remuneration permissible under the Act Key Management Personnel : (computed on the basis of inadequacy of profits) 3,600,000 3,600,000 1. Remuneration 6,210,495 4,265465 (a) or (b) whichever is greater 8,971,554 4,611,008 2. Interest income on loans given 516 1,610 Managerial Remuneration: 3. Reimbursement of travel expenses A Salaries 3,648,408 2,171,400 Individuals exercising significant B Contribution to Provident Fund 240,000 165,000 Influence (and their relatives) 317,489 21,189 C Estimated Monetary Value of Perquisites 265,633 417,004 4. Dividend paid – Mr. N.B.Godrej 1,849,549 760,701 D Performance Linked Variable Remuneration 2,056,454 1,512,061 Figures in italics are for previous year 6,210,495 4,265,465 3. Significant Related Party Transactions. Notes : Nature of Transactions Other Related Parties Amount In case of the Managing Director - Performance Linked Variable Remuneration of Rs.2,056,454/- (Previous in the Godrej Group Rupees Year Rs.1,512,061/-) is on the basis of provision made in the accounts. Investment in equity share capital Godrej Realty Limited 5,100,000 13) Deferred Tax The tax effect of significant temporary differences that resulted in deferred tax assets are: - Investment in debentures Godrej Realty Limited 58,650,000 Depreciation on Fixed Asset 771,000 552,000 Purchase in fixed assets Godrej Agrovet Limited 635,461 Others 1,815,000 1,705,000 Godrej Agrovet Limited 87,180 Deferred Tax Asset 2,586,000 2,257,000 Sale of fixed assets Godrej Realty Limited 100,083 Loans & Advances given Girikandra Holiday Homes 14) Segment Information : As the company has only one business segment, disclosure under Accounting & Resorts Ltd 219,050 Standard 17 on “Segment Reporting” issued by the Institute of Chartered Accountants of India is not Expenses charged to other cos. Godrej Realty Limited 15,600,959 applicable. Expenses charged by other cos. (net) Godrej Agovet Limited 22,811 15) Amounts paid to Auditors : Godrej Sara Lee Limited 13,400 a. Audit Fees 1,369,328 1,190,160 Godrej Hicare India Limited 70,300 b. Audit under Other Statutes 404,064 352,640 Godrej Infotech Limited 30,000 c. Certification 35,815 182,990 Godrej Hicare India Limited 96,000 d. Reimbursement of Expenses 7,368 4,373 Outstanding receivables, Girikandra Holiday Homes 16) Revised Accounting Standard 7 – Construction Contracts. net of (payables) & Resorts Limited 28,267,717 The revised Accounting Standard 7 on Construction Contracts is now applicable only to contractors and Girikandra Holiday Homes not to developers. Accordingly the income from projects entered into after 1st April 2003, where the & Resorts Limited 28,048,667 company is a developer will be recognized in consonance with the principles laid down by Accounting Dividend Paid / Payable Bahar Agrochem & Feeds Standard 9 for Revenue Recognition. Private Limited 1,331,675 17) Related Party Disclosures Ensemble Holdings & Finance Limited 738,184 Related party disclosures as required by AS - 18, “ Related Party Disclosures”, are given below: Bahar Agrochem & Feeds 1. Relationships: Private Limited 547,705 (i) Shareholders (the Godrej Group Shareholding ) in the Company Ensemble Holdings & Finance Limited 1,056,198 Godrej Industries Limited (GIL) holds 81.69% in the Company. GIL is the subsidiary of Godrej Figures in italics are for previous year & Boyce Mfg. Co. Limited, the Ultimate Holding Company. (ii) Subsidiaries : 18) Information in respect of Joint Ventures. Girikandra Holiday Homes & Resorts Limited (99%) (GHHRL) Jointly Controlled Operations - Development of the following Residential / Commercial Projects: Godrej Realty Private Limited (51%) (GRL) Coliseum, Mumbai Godrej Waterside Properties Private Limited (100%) (GWPL) Woodsman Estate, Bangalore (iii) Other Related Parties in Godrej Group, where common control exists : Waterside I T Park, Kolkata Vora Soaps Limited (VSL) Planet Godrej, Mumbai Bahar Agrochem & Feeds P. Limited (BAFPL) La Vista, Mumbai Ensemble Holdings & Finance Limited (EHFL) Waldorf, Mumbai Godrej Appliances Limited (GAL) Glenelg, Mumbai Godrej Agrovet Limited (GAVL) Edenwoods, Mumbai Godrej Consumer Products Limited (GCPL) Shivajinagar, Pune Godrej Saralee Limited (GSLL) NLM, Kalyan Godrej Hicare Limited (GHCL) GVD, Kalyan (iv) Key Management Personnel : RSM/HKB, Kalyan Mr. Milind Surendra Korde Grenville Park, Mumbai Walkeshwar, Mumbai (v) Individuals excercising Significant Influence (and their relatives) : Mr. A. B. Godrej 19) Additional information as required under Part IV of Schedule VI of the Companies Act, 1956 to the extent Mr. N. B. Godrej not applicable has not been given. 105 Godrej Properties Limited
20) STATEMENT PURSUANT TO PART IV OF SCHEDULE VI OF THE COMPANIES ACT, 1956 Cash Flow Statement for the year ended March 31, 2006 Balance Sheet Abstract for the Year Ended 31st March 2006 And Company’s General Particulars Current Year Previous Year Business Profile Rupees Rupees Rupees a) Registration Details Cash from Operating Activities Registration No. : 35308 Net Profit before tax & extraordinary items 178,584,250 87,967,099 State Code : 11 Add : Non-cash / non-operating Expenses Balance Sheet Date : 31st March, 2006 Depreciation 5,074,007 3,319,210 Interest Paid 77,730,048 69,392,361 b) Capital raised during the year (Amount in Rs. thousands) Loss on sale of Fixed Asset – 175,569 Public Issue : Nil Provision for Diminution in value of Investment 9,589 Rights Issue : Nil Deferred Revenue Expenditure 67,866 82,881,510 67,866 Bonus Issue : Nil 261,465,760 160,922,105 Private Placement : Nil Less :Non-cash / non-operating Income c) Position of mobilisation and deployment of funds (Amount in Rs. thousands) Provision for Diminution in value of Total Liabilities : 1,795,477 Investment w/back – 4,049 Total Assets : 1,795,477 Profit on Sale of Fixed Assets 5,376,611 – Interest Income 24,753,517 33,895,938 Sources of Funds Dividend Received 3,330 30,133,458 660 Paid-up Capital : 64,446 231,332,302 127,021,458 Reserves and Surplus : 413,988 Add : Secured Loans : 155,532 Change in Inventory (22,620,561) 48,007,465 Unsecured Loans : 608,590 Change in Sundry Debtors (266,084,209) 128,408,437 Application of Funds Change in Loans & Advances 168,311,061 41,954,202 Net Fixed Assets : 21,708 Change in Current Liabilities / Provisions 525,086,544 7,489,049 Investments : 64,264 636,025,137 352,880,611 Net Current Assets : 466,288 Less :Taxes Paid (Net) 37,440,410 40,308,297 Misc. Expenditure : Nil 598,584,727 312,572,314 Deferred Tax Asset : 2,586 Cash from Investing Activities Accumulated Losses : Nil Purchase of Fixed Assets (15,704,728) (3,359,562) d) Performance of Company (Amount in Rs. thousands) Sale of Fixed Assets 7,746,445 414,947 Turnover : 704,578 Purchase of Investments (64,250,000) – Total Expenditure (Net of other income) : 525,994 Interest Received 24,753,517 33,895,938 Profit/(loss) before tax : 178,584 Dividend Received 3,330 660 Profit/(loss) after tax : 133,894 (47,451,436) 30,951,983 Earning per Share in Rs. Cash from Financing Activities (on an annualized basis) : 20.67 Change in Cash Credit (149,867,367) (32,023,717) Dividend rate % : 96.2054% Change in Term Loan (21,834,916) (157,790,886) e) Generic Name of three principal Change in Unsecured Loan from Bank (170,000,000) (25,000,000) products/services of Company : N.A. Change in Inter Compnay Deposit (2,500,000) (102,500,000) Change in Fixed Deposits (21,114,000) (6,635,000) STATEMENT REGARDING SUBSIDIARY COMPANY PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956. Interest Paid (77,730,048) (69,392,361) 1. Name of the Company : Girikandra Holiday Homes & Resorts Ltd. Payment of Dividend – (45,500,000) 2. Financial Year ending : 31st March, 2006 Tax on Distrubuted Profits – (5,895,032) 3. The Company’s interest in the : 500 Equity Shares of Rs. 1,000/- each, fully paid- (443,046,331) (444,736,996) subsidiary as on above date. up (representing 100% of the Share Capital) Cash & Cash Equivalent 108,086,959 (101,212,699) 4. Net Profit / (Loss) of the subsidiary : (Rs. 2,500/-) Add : Cash & Bank Balance as on 31.3.2005 41,776,280 142,988,979 company (Not dealt with in the accounts of the Company) Cash & Bank Balance as on 31.3.2006 149,863,239 41,776,280 Notes : S. KEMBHAVI A. B. GODREJ MILIND KORDE 1. The cash flow statement has been prepared under the ‘Indirect Method’ as set out in the Accounting Company Secretary Chairman Managing Director Standard (AS) 3 on ‘Cash Flow Statement’, and presents cash flows by operating, investing and Mumbai, May 10, 2006 financing activities. 2. Figures in brackets are outflows / deductions. STATEMENT REGARDING SUBSIDIARY COMPANY PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956. 3. Figures for the previous year have been regrouped / restated wherever necessary to conform to this year’s classification. 1. Name of the Company : Godrej Realty Private Limited 2. Financial Year ending : 31st March, 2006 For and on behalf of 3. The Company’s interest in the : 510,000 Equity Shares of Rs. 10/- each, fully paid- KALYANIWALLA MISTRY & ASSOCIATES subsidiary as on above date. up (representing 51% of the Share Capital) Chartered Accountants A. B. GODREJ Chairman 4. Net Profit / (Loss) of the subsidiary : Nil M. KORDE Managing Director B. S. DASTOOR S. KEMBHAVI company (Not dealt with in the accounts Partner Company Secretary of the Company) Mumbai, May 10, 2006 S. KEMBHAVI A. B. GODREJ MILIND KORDE Company Secretary Chairman Managing Director Mumbai, May 10, 2006
STATEMENT REGARDING SUBSIDIARY COMPANY PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956. 1. Name of the Company : Godrej Waterside Properties Private Limited 2. Financial Year ending : 31st March, 2006 3. The Company’s interest in the : 50,000 Equity Shares of Rs. 10/- each, fully paid- subsidiary as on above date. up (representing 100% of the Share Capital) 4. Net Profit / (Loss) of the subsidiary : Nil company (Not dealt with in the accounts of the Company) S. KEMBHAVI A. B. GODREJ MILIND KORDE Company Secretary Chairman Managing Director Mumbai, May 10, 2006
106 Annual Report 2005-2006
Girikandra Holiday Homes & Resorts Limited BOARD OF DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST MARCH, 2006
To The Shareholders, (iv) that the Directors have prepared the annual accounts on a going concern basis. Your Directors have pleasure in submitting their Report alongwith the audited Accounts for the year ended 6. APPOINTMENT OF AUDITORS : 31st March, 2006. M/s. Kalyaniwalla Mistry and Associates retire at the ensuing Annual General Meeting and are 1. FINANCIAL HIGHLIGHTS : eligible for re-appointment for which they have given their consent. The accounting results for the year ended 31st March, 2006 reveal that there is a deficit at the end of the year. 7. ADDITIONAL INFORMATION : 2. REVIEW OF OPERATIONS : (a) Since the Company has no employees, the particulars of the employees to be disclosed u/s 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, The Company has not commenced any activities during the year. are not given. 3. DIVIDEND : (b) Information in respect of Conservation of Energy, Technology Absorption and Foreign Exchange The Directors regret that no dividend can be recommended. Earnings and Outgo, required under Section 217(1)(e) of the Companies Act, 1956 read with 4. DIRECTORS : the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is In accordance with the provision of the Articles of Association of the Company, Mr. V. Srinivasan provided hereunder: retires by rotation and being eligible offers himself for reappointment. (i) Conservation of Energy : 5. DIRECTORS’ RESPONSIBILITY STATEMENT : Expenses on account of Energy are negligible. Your Directors confirm : (ii) Technology Absorption : (i) that in the preparation of the annual accounts, the applicable accounting standards have been It is an on going process. followed; (iii) Foreign Exchange Earning & Outgo : (ii) that the Directors have selected such accounting policies and applied them consistently and The Company has not earned any Foreign Exchange nor incurred any Foreign Exchange made judgments and estimates that are reasonable and prudent so as to give a true and fair Expenditure during the year. view of the state of affairs of the Company at the end of the financial year ended 31st March, 2006 and of the profit of the Company for that year; For and on behalf of the Board of Directors (iii) that the Directors had taken proper and sufficient care for the maintenance of adequate TANYA A. DUBASH MILIND S. KORDE accounting records in accordance with the provisions of the Companies Act, 1956, for Directors safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; Mumbai, May 10, 2006 AUDITORS’ REPORT To the Members of Girikandra Holiday Homes and Resorts Limited d) In our opinion, the Balance Sheet and Profit and Loss Account and the Cash flow statement 1. We have audited the attached Balance Sheet of GIRIKANDRA HOLIDAY HOMES AND RESORTS dealt with by this report comply with the accounting standards referred to in sub-section (3C) of LIMITED, as at 31st March, 2006 and also the Profit and Loss Account and Cash Flow Statement of Section 211 of the Companies Act, 1956. the Company for the year ended on that date anexed thereto. These financial statements are the e) In our opinion and to the best of our information and according to the explanations given to us, responsibility of the Company’s management. Our responsibility is to express an opinion on these the said accounts read with the notes thereon, give the information required by the Companies financial statements based on our audit. Act, 1956, in the manner so required and give a true and fair view in conformity with the 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those accounting principles generally accepted in India: Standards require that we plan and perform the audit to obtain reasonable assurance about whether i) in the case of the Balance Sheet, the state of affairs of the Company as at 31st March, the financial statements are free of material misstatement. An audit includes examining, on a test 2006; and basis, evidence supporting the amounts and disclosures in the financial statements. An audit also ii) in the case of the Profit and Loss Account, of the loss of the Company for the year ended includes assessing the accounting principles used and significant estimates made by management, on that date. as well as evaluating the overall financial statement presentation. We believe that our audit provides 5. On the basis of the written representations received from the Directors as on 31st March, 2006, and a reasonable basis for our opinion. taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on 3. As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Government in 31st March, 2005 from being appointed as a Director in terms of clause (g) of sub-section (1) of terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we annex hereto a statement section 274 of the Companies Act, 1956. on the matters specified in paragraphs 4 and 5 of the said Order. For and on behalf of 4. Further to our comments in the Annexure referred to in paragraph (3) above, we report that: a) We have obtained all the information and explanations, which to the best of our knowledge KALYANIWALLA MISTRY AND ASSOCIATES and belief were necessary for the purposes of our audit. Chartered Accountants b) In our opinion, proper books of account as required by law have been kept by the Company so BAHADUR S. DASTOOR far as appears from our examination of such books. Partner c) The Balance Sheet and Profit and Loss Account & Cash flow Statement dealt with by this report are in agreement with the books of account. Mumbai, May 10, 2006 Membership No. 48936 ANNEXURE TO THE AUDITORS’ REPORT undisputed dues payable in respect of above as at 31st March, 2005 for a period of more than Referred to in paragraph (3) of our report of even date. six months from the date they became payable. 1. The Company does not have any fixed assets. (b) According to the information and explanations given to us, there are no dues outstanding of Sales Tax, 2. The Company does not have any inventories. Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty or cess on account of any dispute. 3. (a) The Company has not granted any loans, secured or unsecured to companies, firms or other 10. The Company’s accumulated losses at the end of the financial year are more than fifty percent of its net parties covered in the register maintained under Section 301 of the Companies Act, 1956. worth. However, it has incurred cash losses in the current and immediately preceding financial year. (b) Consequently, the question of commenting on the rates of interest and conditions of the loans 11. According to the information and explanations given to us and based on the documents and records granted being prejudicial to the interests of the Company, receipt of regular principal and produced to us, the Company does not have dues to banks, financial institutions or debenture holders. interest and reasonable steps taken for recovery of principal and interest does not arise. 12. According to the information and explanations given to us and based on the documents and records (c) The Company has not taken any loans, secured or unsecured from companies, firms or other produced to us, the Company has not granted loans and advances on the basis of security by way of parties covered in the register maintained under Section 301 of the Companies Act, 1956. pledge of shares, debentures and other securities. (d) Consequently, the question of commenting on the rates of interest and conditions of the loans 13. In our opinion and according to the information and explanations given to us, the nature of activities of the taken being prejudicial to the interests of the Company and payment of regular principal and Company does not attract any special statute applicable to chit fund and nidhi/mutual benefit fund/societies. interest does not arise. 14. The Company does not deal in shares, securities, debentures and other investments. 4. As there are no inventories and assets, nor are there any sales during the year, the question of 15. According to the information and explanations given to us, the Company has not given any guarantee adequate internal control procedures commensurate with the size of the Company and the nature of for loans taken by others from banks or financial Institutions. its business, for the purchases of inventory, fixed assets and for the sale of goods and services does 16. The Company did not have any term loans during the year. not arise. During the course of our audit, we have not observed a continuing failure to correct major 17. According to the information and explanations given to us and on an overall examination of the weaknesses in internal controls. Balance Sheet and Cash Flows of the Company, we report that the Company has not utilized funds 5. Based on the audit procedures applied by us and according to the information and explanations raised on short-term basis for long-term investments. provided by the management, we are of the opinion that there are no transactions that need to be 18. The Company has not made any preferential allotment of shares to parties or companies covered in entered into the register maintained under Section 301 of the Companies Act, 1956. the register maintained under Section 301 of the Companies Act, 1956. 6. In our opinion and according to the information and explanations given to us, the Company has not 19. The Company did not issue any debentures outstanding during the year. accepted any deposits from the public and hence the provisions of Sections 58A, 58AA or any other 20. The Company has not raised any money through a public issue during the year. provisions of the Companies Act, 1956 are not applicable. 21. Based on the audit procedures performed and information and explanations given by the management, 7. In our opinion and according to the information and explanations given to us, the internal audit system is commensurate with the size of the Company and nature of its business. we report that no fraud on or by the Company has been noticed or reported during the year. 8. The maintenance of cost records has not been prescribed by the Central Government under Section For and on behalf of 209(1)(d) of the Companies Act, 1956, for any of the Company's products. KALYANIWALLA MISTRY AND ASSOCIATES 9. (a) According to the information and explanations given to us and on the basis of our examination Chartered Accountants of the books of accounts, during the year, the Company has no statutory dues including Provident Fund, Investor Education and Protection Fund, Employees’ State Insurance, Income Tax, Sales BAHADUR S. DASTOOR Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, cess and other statutory dues incurred Partner during the year. According to the information and explanations given to us, there are no Mumbai, May 10, 2006 Membership No. 48936 107 Girikandra Holiday Homes & Resorts Limited
BALANCE SHEET AS AT MARCH 31, 2006 PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED This Year Previous Year MARCH 31, 2006 Schedule Rupees Rupees SOURCES OF FUNDS This Year Previous Year Shareholders’ Funds Schedule Rupees Rupees Share Capital 1 500,000 500,000 Reserves & Surplus – – INCOME Loan Funds Sundry Balances written back (Net) – – Unsecured Loans 28,267,717 28,048,667 – – TOTAL 28,767,717 28,548,667 EXPENDITURE APPLICATION OF FUNDS Fixed Assets – – Administration Expenses 4 219,542 182,071 Investments – – Current Assets, Loans and Advances Preliminary Expenses written off 2,500 2,500 Projects in Progress 2 28,796,852 28,577,310 222,042 184,571 Cash Balance – – Less : Amount Transferred to Project Advance Income tax A Y 2004-2005 4,239 4,239 in Progress (219,542) (182,071) 28,801,091 28,581,549 Less : Current Liabilities and Provisions (Deficit)/Surplus for the year (2,500) (2,500) Current Liabilities 3 53,448 52,956 Deficit brought forward 7,574 5,074 53,448 52,956 Deficit carried forward to Balance Sheet 10,074 7,574 Net Current Assets 28,747,643 28,528,593 Miscellaneous Expenditure Earning per share (basic/diluted ) in Rs. (5.00) (5.00) (to the extent not written off or adjusted) Preliminary Expenditure 10,000 12,500 Profit and Loss Account 10,074 7,574 TOTAL 28,767,717 28,548,667 NOTES TO ACCOUNTS & ACCOUNTING POLICIES 5 NOTES TO ACCOUNTS & ACCOUNTING POLICIES 5
The Schedules referred to above form an integral part of the Balance Sheet. The Schedules referred to above form an integral part of the Profit and Loss Account. As per our Report of even date. Signatures to the Balance Sheet and As per our Report of even date. Signatures to the Profit and Loss Account Schedules 1 to 3 and 5 and Schedules 4 and 5 For and on behalf of For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants Chartered Accountants B. S. DASTOOR T. A. DUBASH M. S. KORDE B. S. DASTOOR T. A. DUBASH M. S. KORDE Partner Directors Directors Partner Directors Directors Mumbai, Dated : May 10, 2006 Mumbai, Dated : May 10, 2006
SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006
This Year Previous Year SCHEDULE 5 : NOTES TO ACCOUNTS AND ACCOUNTING POLICIES SCHEDULE 1 : SHARE CAPITAL Rupees Rupees ACCOUNTING POLICIES AUTHORISED 1000 Equity Shares of Rs.1000/- each 1,000,000 1,000,000 1) GENERAL 1,000,000 1,000,000 The accounts are prepared under the Historical Cost Convention, using the accrual method of accounting. ISSUED & SUBSCRIBED 500 Equity Shares of Rs.1000/- each 500,000 500,000 2) MISCELLANEOUS EXPENDITURE 500,000 500,000 Miscellaneous expenditure is amortised over a period of 10 years. PAID UP 3) The basic earnings per share is computed using the weighted average number of common shares 500 Equity Shares of Rs.1000/- each fully paid-up 500,000 500,000 outstanding during the period. Diluted earnings per share is computed using the weighted average [The entire share capital is held by Godrej Properties Limited number of common and dilutive common equivalent shares outstanding during the period, except the Holding Company & its nominees] where the results would be anti-dilutive. 500,000 500,000 NOTES TO ACCOUNTS : SCHEDULE 2 : PROJECT IN PROGRESS 1. There are no parties within the definition of Small Scale Industrial Undertakings to whom the Project Payments 28,577,310 28,395,239 Company owes any sum. Add : Expenses transferred from Profit & Loss Account 219,542 182,071 2. Additional information required to be given under Schedule VI, Part II of the Companies Act, 1956 to 28,796,852 28,577,310 the extent not applicable is not given. 3. Earnings per share This Year Previous Year SCHEDULE 3 : CURRENT LIABILITIES Profit after transfer to project in Progress as per Sundry Creditors (Note 1) Profit & Loss Account Rs. (2500) Rs. (2,500) For Expenses 53,448 52,956 Weighted average no. of equity shares outstanding 500 500 Investors Education & Protection Fund – – Basic/Diluted earnings per share Rs. (5) Rs. (5) 53,448 52,956 Nominal value of shares Rs. 1,000 Rs. 1,000 SCHEDULE 4 : ADMINISTRATION EXPENSES 4. AS 18 – RELATED PARTY DISCLOSURE Rent, Rates & Taxes 36,002 – Related party disclosures as required by AS-18, “Related Party Disclosures”, are given below: Payment to Auditors - Audit Fees 28,060 27,550 1. Relationships: Other Operating Expenses 155,480 154,521 (i) Shareholders (the Godrej Group Shareholding) in the Company Godrej Properties Limited (GPL) holds 100% in the Company. GPL is the Subsidiary of Godrej Industries Limited 219,542 182,071 (GIL). GIL is subsidiary of Godrej & Boyce Manufacturing Company Limited (G&B), the ultimate holding company. (ii) Key Management Personnel : Mr. Milind Surendra Korde 2. The following transactions were carried out with the related parties in the ordinary course of the business: Sr. No. G&B GIL GPL 1 Expenses charged by other Companies – – 219,050 2 Outstanding net of (payables) – – 28,267,717 28,048,667 Figures in italics are for previous year
108 Annual Report 2005-2006
5. STATEMENT PURSUANT TO PART IV OF SCHEDULE VI TO THE COMPANIES ACT, 1956. Cash Flow Statement for the year ended March 31, 2006 BALANCE SHEET ABSTRACT FOR THE YEAR ENDED 31ST MARCH, 2006 AND COMPANY’S Particulars Current Year Previous Year GENERAL BUSINESS PROFILE Rs. Rs. Rs. 1. Registration Details Cash from Operating Activities Registration No. : 11-91582 Net Profit Before Tax (2,500) (2,500) State Code : 11 Add : Non-cash / Non-operating Expenses Balance Sheet Date : March 31, 2006 Deferred Revenue Expenditure 2,500 2,500 2. Capital raised during the year (Amount in Rs. Thousands) Less :Non-cash / Non-operating Income – – Public Issue : Nil Add : Rights Issue : Nil Change in Inventory (219,542) (182,071) Bonus Issue : Nil Change in Loans and Advances – (4,239) Private Placement- Capital : Nil Change in Current Liabilities 492 1,059 - Premium : Nil (219,050) (185,251) 3. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands) Less :Taxes Paid – (219,050) – Total Liabilities : 28,821 (185,251) Total Assets : 28,821 Cash from Investing Activities – Sources of Funds : Cash from Financing Activities Paid-up Capital : 500 Increase in Unsecured Loan 219,050 219,050 185,251 Reserves & Surplus : – Secured Loans : – Cash & Cash Equivalent – – Unsecured Loans : 28,268 Add : Cash & Bank Balance as on 31.3.2005 – – Application of Funds : – Cash & Bank Balance as on 31.3.2006 – – Net Fixed Assets : – Investments : – Notes: Net Current Assets : 28,748 Misc. Expenditure : 10 1) The Cash Flow Statement has been prepared under the “Indirect Method” as set out in the Accounting Accumulated Losses : 10 Standard (AS) 3 on “Cash Flow Statements”, and presents cash flows by operating, investing and financing activities. 4. Performance of the Company (Amount in Rs. Thousands) 2) Figures in brackets are outflows/deductions. Turnover : – Total Expenditure : 222 3) Figures for the previous year have been regrouped/restated wherever necessary to conform to this Profit/(Loss) before tax : (3) year’s classification. Profit/(Loss) after tax : (3) Earning per Share in Rs. : (5) For and on behalf of Dividend Rate % : – KALYANIWALLA MISTRY & ASSOCIATES 5. Generic Names of Three Principal Chartered Accountants Products/Services of Company : N.A. B. S. DASTOOR T. A. DUBASH M. S. KORDE Partner Directors Directors Mumbai, Dated : May 10, 2006
109 Godrej Realty Private Limited (Formerly Casablanca Properties Private Limited)
DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED ON MARCH 31, 2006 To The Shareholders 7. CHANGE OF REGISTERED OFFICE OF THE COMPANY : Your Directors have pleasure in submitting their Report alongwith the audited Accounts for the year ended The Company changed the address of its Registered Office from 5/40, C.C.I. Colony, Unnat Nagar – 4, 31st March, 2006. M.G. Road, Goregaon (West), Mumbai – 400 062 to Godrej Bhavan, 4th Floor, 4A, Home Street, Fort, 1. FINANCIAL HIGHLIGHTS : Mumbai – 400 001 with effect from 30th January, 2006. The accounting results for the year ended 31st March, 2006 reveal that there is no surplus/deficit at the 8. APPOINTMENT OF AUDITORS : end of the year. M/s. Kalyaniwalla Mistry and Associates, Chartered Accountants retire at the ensuing Annual General 2. REVIEW OF OPERATIONS : Meeting and are eligible for re-appointment for which they have given their consent. During the year the Company was taken over by Godrej Properties Limited. 9. DIRECTORS’ RESPONSIBILITY STATEMENT: Further during the year the Company allotted 4,90,000 Nos. of equity shares of Rs.10/- each fully paid- Your Directors confirm: up to HDFC Venture Trustee Company Limited a trustee of HDFC Property Fund, and 5,00,000 Nos. of (i) that in the preparation of the annual accounts, the applicable accounting standards have been followed; equity shares of Rs.10/- each fully paid-up to Godrej Properties Limited. As such Godrej Properties Ltd. (ii) that the Directors have selected such accounting policies and applied them consistently and made holds in aggregate 5,10,000 Nos. of equity shares of the Company and holds 51% of the paid up share judgments and estimates that are reasonable and prudent so as to give a true and fair view of the capital of the Company. Further, the Company issued 56,35,000 Nos. of 10% Secured Redeemable state of affairs of the Company at the end of the financial year ended 31st March, 2006 and of the Optionally Convertible Debentures of Rs.10/- each fully paid-up to HDFC Venture Trustee Company profit of the Company for that year; Limited and 58,65,000 Nos. of 10% Secured Redeemable Optionally Convertible Debentures of (iii) that the Directors had taken proper and sufficient care for the maintenance of adequate accounting Rs.10/- each to Godrej Properties Ltd. records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets 3. DIVIDEND : of the Company and for preventing and detecting fraud and other irregularities; As there are no profits, the Directors regret that no dividend can be recommended. (iv) that the Directors have prepared the annual accounts on a going concern basis. 4. DIRECTORS : 10. ADDITIONAL INFORMATION : Mr. Pirojsha A. Godrej was appointed as Additional Director of the Company with effect from (a) Since the company has no employees, the particulars of the employees to be disclosed u/s 217 (2A) of 30th January, 2006. He holds office till the ensuing Annual General Meeting. the Companies Act, 1956 read with Companies (particulars of employees) Rules, 1975, are not given. Mr. Milind Korde was appointed as Additional Director of the Company with effect from 30th January, (b) Information in respect of Conservation of Energy, Technology Absorption and Foreign Exchange Earnings 2006. He holds office till the ensuing Annual General Meeting. and Outgo, required under Section 217(1)(e) of the Companies Act, 1956 read with the Companies Mr. Naresh Nadkarni was appointed as Additional Director of the Company with effect from 16th March, (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is provided hereunder: 2006. He holds office till the ensuing Annual General Meeting. (i) Conservation of Energy : Mr. Rakesh Desai, Director of the Company resigned on 31st January, 2006. The Board desires to place on Expenses on account of Energy are negligible. record the valuable services rendered by Mr. Rakesh Desai during his tenure as a Director of the Company. (ii) Technology Absorption : Mr. Sanjay Desai, Director of the Company resigned on 31st January, 2006. The Board desires to place It is an on going process. on record the valuable services rendered by Mr. Sanjay Desai during his tenure as a Director of the (iii) Foreign Exchange Earning & Outgo : Company The Company has not earned any Foreign Exchange nor incurred any Foreign Exchange 5. CHANGE OF AUTHORISED CAPITAL : Expenditure during the year. The Company has increased its Authorised Capital from Rs.1 Lac to Rs. 1 Crore during the year. For and on behalf of the Board of Directors 6. CHANGE OF NAME OF THE COMPANY : Pirojsha A. Godrej Milind Korde The name of the Company was changed from Casablanca Properties Private Limited to Godrej Realty Director Director Private Limited with effect from 25th January, 2006. The Registrar of Companies has accordingly issued the new Incorporation Certificate. Mumbai, May 10, 2006 REPORT OF THE AUDITORS TO THE MEMBERS OF GODREJ REALTY PRIVATE LIMITED (Formerly Casablanca Properties Private Limited) 1. We have audited the attached Balance Sheet of GODREJ REALTY PRIVATE LIMITED, as at d) In our opinion, the Balance Sheet and Profit and Loss Account dealt with by this report comply with 31st March, 2006 and also the Profit and Loss Account of the Company for the period ended 27th June the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956. 2005 to 31st March, 2006. These financial statements are the responsibility of the Company’s management. e) In our opinion and to the best of our information and according to the explanations given to us, the Our responsibility is to express an opinion on these financial statements based on our audit. said accounts read with the notes thereon, give the information required by the Companies Act, 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those 1956, in the manner so required and give a true and fair view in conformity with the accounting Standards require that we plan and perform the audit to obtain reasonable assurance about whether the principles generally accepted in India: financial statements are free of material misstatement. An audit includes examining, on a test basis, i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2006; and evidence supporting the amounts and disclosures in the financial statements. An audit also includes ii) in the case of the Profit and Loss Account, of the performance Company for the period ended assessing the accounting principles used and significant estimates made by management, as well as on that date. evaluating the overall financial statement presentation. We believe that our audit provides a reasonable iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the period ended basis for our opinion. on that date. 3. As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Government in 5. On the basis of the written representations received from the directors as on 31st March, 2006, and taken terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we annex hereto a statement on on record by the Board of Directors, we report that, none of the directors is disqualified as on 31st March, the matters specified in paragraphs 4 and 5 of the said Order. 2006 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the 4. Further to our comments in the Annexure referred to in paragraph (3) above, we report that: Companies Act, 1956. a) We have obtained all the information and explanations, which to the best of our knowledge and For and on behalf of belief were necessary for the purposes of our audit. KALYANIWALLA MISTRY & ASSOCIATES b) In our opinion, proper books of account as required by law have been kept by the Company so far Chartered Accountants as appears from our examination of such books. B. S. Dastoor c) The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the Place : Mumbai Partner books of account. Date : May 10, 2006 Membership No. 48936 ANNEXURE TO THE AUDITORS' REPORT Referred to in paragraph (3) of our report of even date. 9) (a) According to the information and explanations given to us and on the basis of our examination of books 1) (a) The Company is maintaining proper records showing full particulars, including quantitative details of accounts, during the year, the Company has no statutory dues including Provident Fund, Investor and situation of fixed assets. Education and Protection Fund, Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, Service (b) As explained to us, the Company has a program for physical verification of fixed assets at periodical Tax, Customs Duty, Excise Duty, Cess and other statutory dues incurred during the year. According to intervals. In our opinion, the period of verification is reasonable having regard to the size of the Company the information and explanations given to us, there are no undisputed dues, payable in respect of above (c) In our opinion, the disposal of fixed assets during the year does not affect the going concern as at 31st March 2006 for a period of more than six months from the date they became payable. assumption. (b) According to the information and explanations given to us, there are no dues outstanding of Sales 2) (a) The management has conducted physical verification of inventory at reasonable intervals. Tax, Income Tax, Wealth Tax, Excise Duty, cess on account of any dispute. (b) In our opinion, the procedures of physical verification of inventory followed by the management 10) The Company does not have accumulated losses at the end of the financial year and it has not incurred are reasonable and adequate in relation to the size of the company and the nature of its business. any cash losses in the current and immediately preceding financial year. (c) The company is maintaining proper records of inventory and no material discrepancies were 11) According to the information and explanations given to us and on the based on documents and records noticed on physical verification. produced to us, the Company has not defaulted in dues to debenture holders. There are no dues to banks 3) (a) The Company has not granted any loans, secured or unsecured to companies, firms or other parties and financial institutions. 12) According to the information and explanations given to us and based on the documents and records covered in the register maintained under Section 301 of the Companies Act, 1956. produced to us, the Company has not granted loans and advances on the basis of security by way of pledge (b) Consequently, the question of commenting on the rates of interest and conditions of the loans of shares, debentures and other securities. granted being prejudicial to the interests of the Company, receipt of regular principal and the 13) In our opinion and according to the information and explanations given to us, the nature of activities of the interest and reasonable steps for recovery of principal and interest does not arise. Company does not attract any special statute applicable to chit fund and nidhi/mutual benefit fund/societies. (c) The Company has not taken any loan, secured or unsecured from companies, firms or other parties 14) The Company does not deal in shares, securities, debentures and other investments. covered in the register maintained under Section 301 of the Companies Act, 1956. 15) According to the information and explanations given to us, the Company has not given any guarantee (d) Consequently, the question of commenting on the rates of interest and others terms and conditions for loans taken by others from banks or financial institutions. of the loans taken being prejudicial to the interests of the Company, payment of regular principal 16) The Company did not have any term loans during the year. and the interest does not arise. 17) According to the information and explanations given to us and an overall examination of the Balance 4) In our opinion and according to the information and explanations given to us, there are adequate internal Sheet and Cash Flow of the Company, we report that the Company has not utilized funds raised on short control procedures commensurate with the size of the Company and the nature of its business, for the term basis for long term investments. purchases of inventory, fixed assets and for the sale of goods. There are no sales of service. During the course 18) The Company has not made any preferential allotment of shares to parties or companies covered in the of our audit, we have not observed a continuing failure to correct major weaknesses in internal controls. register maintained under Section 301 of the Companies Act, 1956. 5) (a) Based on the audit procedures applied by us and according to the information and explanations 19) According to the information and explanations given to us, during the current perod, the Company had provided by the management, we are of the opinion that the particulars of contracts and arrangement issued 1,15,00,000 debentures of Rs. 10 each. The Company is in process of creating securities for the same. referred to in Section 301 of the Companies Act, 1956 have been entered into the register required 20) The Company has not raised any money through a public issue during the year. to be maintained under that section. 21) Based on the audit procedures performed and information and explanations given by the management, (b) The transactions made in pursuance of such contracts or arrangements, were made at prices we report that no fraud on or by the Company has been noticed or reported during the year. which are reasonable having regard to prevailing marketing prices at the relevant time. For and on behalf of 6) In our opinion and according to the information and explanations given to us, the Company has not KALYANIWALLA MISTRY & ASSOCIATES accepted any deposits from the public hence the provisions of Section 58A and 58AA or any other Chartered Accountants provisions of the Companies Act, 1956, are not applicable. B. S. Dastoor 7) In our opinion and according to the information and explanations given to us, the internal audit system Partner is commensurate with the size of the Company and nature of its business. Membership No. 48936 8) The maintenance of cost records has not been prescribed by the Central Government under Section 209(1)(d) of the Companies Act, 1956, for any of the Company’s products. Place : Mumbai Date : May 10, 2006. 110 Annual Report 2005-2006
BALANCE SHEET AS AT MARCH 31, 2006 PROFIT AND LOSS ACCOUNT FOR THE PERIOD JUNE 27TH, 2005 Schedule As at TO MARCH 31, 2006 31.03.06 Schedule For the Rupees period ended SOURCES OF FUNDS 31.03.06 Shareholders’ Funds INCOME – Share Capital 1 10,000,000 EXPENDITURE Loan Funds Administration Expenses 8 13,271,680 Secured Loans 2 115,446,417 Interest & Finance Charges 9 2,667,104 125,446,417 APPLICATION OF FUNDS Depreciation 2,769 Fixed Assets 15,941,552 Gross Block 3 100,083 Less : Depreciation 2,769 Less : Amount Transferred to Project in Progress 15,941,552 Net Block 97,314 Earning per share (basic/diluted ) in Rs. (refer note no. 3) 0.00 Investments – Current Assets, Loans & Advances Notes to Accounts & Accounting Policies 10 Projects in Progress 4 15,941,552 Cash Balance 5 34,689,427 Loans & Advances 6 76,248,733 The Schedules referred to above form an integral part of the Profit and Loss Account As per our Report of even date. Signatures to Profit and Loss Account 126,879,712 and Schedules 8 to 10 Less : Current Liabilities & Provisions For and on behalf of Current Liabilities 7 1,530,610 KALYANIWALLA MISTRY & ASSOCIATES Provisions – Chartered Accountants PIROJSHA GODREJ Director 1,530,610 MILIND KORDE Director Net Current Assets 125,349,102 BAHADUR S. DASTOOR Partner 125,446,417 0.0 Place : Mumbai Notes to Accounts & Accounting Policies 10 Date : May 10, 2006
The Schedules referred to above form an integral part of the Balance Sheet As per our Report of even date. Signatures to Balance Sheet and Schedules 1 to 7 and 10 For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants PIROJSHA GODREJ Director MILIND KORDE Director BAHADUR S. DASTOOR Partner Place : Mumbai Date : May 10, 2006 SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006 As at As at 31-03-2006 31-03-2006 Rupees Rupees SCHEDULE 1 : SHARE CAPITAL SCHEDULE 2 : SECURED LOANS Authorised 10% Secured redeemable optionally convertible debentures @Rs. 10/- each 115,000,000 1000000 Equity Shares of Rs.10 each 10,000,000 Interest Accrued & Due 446,417 10,000,000 (The Company is in process of creating securities for the same) Issued, Subscribed and Paid up 115,446,417 1,000,000 Equity Shares of Rs.10 each 10,000,000 (out of which 510,000 equity shares are held by the holding company, Godrej Properties Ltd.) 10,000,000 SCHEDULE 3 : FIXED ASSETS (Rs. ’000) GROSS BLOCK DEPRECIATION NET BLOCK ASSETS As at Additions Deductions As at As at For the As at As at 1.4.2005 31.3.2006 1.4.2005 Year 31.3.2006 31.3.2006 Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Motor Vehicle – 100,083 – 100,083 – 2,769 2,769 97,314 TOTAL – 100,083 – 100,083 – 2,769 2,769 97,314 Previous Year – – – – – – – As at As at 31-03-2006 31-03-2006 Rupees Rupees SCHEDULE 4 : PROJECT IN PROGRESS SCHEDULE 8 : ADMINISTRATION EXPENSES Opening Balance – Payment to Auditors - Audit Fees 101,016 Add : Expenses transferred from Profit & Loss Account 15,941,552 Consultancy Charges 7,380,371 15,941,552 Other Operating Expenses 5,790,293 SCHEDULE 5 : CASH & BANK BALANCE 13,271,680 Current account with Scheduled Bank 4,624,681 SCHEDULE 9 : INTEREST AND FINANCE CHARGES (NET) Fixed Deposits 30,064,746 Interest Paid 34,689,427 Companies 2,246,473 SCHEDULE 6 : LOANS & ADVANCES Others 504,110 Advances recoverable in cash or kind or for value to be received 76,248,733 Total Interest paid 2,750,583 76,248,733 Less : Interest received (Gross) SCHEDULE 7 : CURRENT LIABILITIES Others 83,479 Sundry Creditors (Note 2) For Expenses 925,485 Total Interest received 83,479 Others 605,125 NET INTEREST 2,667,104 1,530,610
111 Godrej Realty Private Limited (Formerly Casablanca Properties Private Limited)
SCHEDULE 10 : NOTES TO ACCOUNTS AND ACCOUNTING POLICIES h) PROVISION FOR TAXATION Tax expense comprises both current and deferred tax. 1) ACCOUNTING POLICIES a) GENERAL Current tax is measured at the amount expected to be paid to the tax authorities, using the applicable The financial statements are prepared under the historical cost convention in accordance with tax rates and tax laws. Generally Accepted Accounting Principles in India, the Accounting Standards issued by The Institute Deferred tax is recognized on timing differences, being the differences between the taxable of Chartered Accountants of India and the provisions of the Companies Act, 1956. income and the accounting income that originate in one period and are capable of reversal in one b) FIXED ASSETS or more subsequent periods. Deferred tax assets, subject to consideration of prudence, are Fixed assets are stated at cost of acquisition or construction less accumulated depreciation. Cost recognized and carried forward only to the extent that there is a reasonable certainty that sufficient includes all incidental expenses related to acquisition and installation, other pre-operation expenses future taxable income will be available against which such deferred tax assets can be realized. The and interest in case of construction. tax effect is calculated on the accumulated timing difference at the year-end based on the tax rates Carrying amount of cash generating units / assets are reviewed at balance sheet date to determine and laws enacted or substantially enacted on the balance sheet date. whether there is any indication of impairment. If such indication exists, the recoverable amount i) PROVISIONS AND CONTIGENT LIABILITIES is estimated as the net selling price or value in use, whichever is higher. Impairment loss, if any, Provisions are recognized in the accounts in respect of present probable obligations, the amount is recognized whenever carrying amount exceeds the recoverable amount. of which can be reliably estimated. c) DEPRECIATION/AMORTIZATION Contingent liabilities are disclosed in respect of possible obligations that arise from the past events Depreciation has been provided on Written Down Value basis, at the rates specified in Schedule but their existence is confirmed by the occurrence or non-occurrence of one or more uncertain XIV of the Companies Act, 1956. future events not wholly within the control of the Company. d) INVENTORIES 2) There are no parties within the definition of Small Scale Industrial Undertakings to whom the Company Inventories are valued as under : owes any sum. a) Completed Flats – At lower of Cost or Market value 3) Earnings per share b) Construction Work-in-Progress – At cost This Year (Rs.) Profit after transfer to Project in Progress as per Profit & Loss Account NIL Construction Work-in-Progress includes cost of land, premium for development rights, construction Weighted average no. of equity shares outstanding 1000000 costs, allocated interest and expenses incidental to the projects undertaken by the Company. Basic/Diluted earnings per share NIL e) REVENUE RECOGNITION Nominal value of shares 10000000 The Company is following the “Percentage of Completion Method” of accounting. As per this 4) Amounts paid to Auditors: Current Year (Rs.) method, revenue in Profit & Loss Account at the end of the accounting year is recognized in Audit Fees 78,568 proportion to the actual cost incurred as against the total estimated cost of projects under execution Audit under other Statutes 22,448 with the Company. Total 101016 Determination of revenues under the percentage of completion method necessarily involves making estimates by the Company, some of which are of a technical nature, concerning, where 5) SEGMENT INFORMATION relevant, the percentages of completion, costs to completion, the expected revenues from the As the Company has only one business segment, disclosure under Accounting Standard 17 on “ Segment project/activity and the foreseeable losses to completion. Such estimates have been relied upon Reporting” issued by the Institute of Chartered Accountants of India is not applicable. by the auditors. 6) AS 18 – RELATED PARTY DISCLOSURE Income from operation of commercial complexes is recognized over the tenure of the lease/ 1. Relationships: service agreement. (i) Shareholders (the Godrej Group Shareholding) in the Company Godrej Properties Limited Interest income is accounted on an accrual basis at contracted rates. (GPL) holds 51% in the Company. GPL is the Subsidiary of Godrej Industries Limited (GIL). GIL is subsidiary of Godrej & Boyce Manufacturing Company Limited (G&B), the ultimate Dividend income is recognized when the right to receive the same is established. holding company. f) BORROWING COST (ii) Key Management Personnel : Interest and commitment charges incurred in connection with borrowing of funds, which are Mr. Milind Surendra Korde incurred for the development of long term projects are transferred to Construction Work-in- 2. The following transactions were carried out with the related parties in the ordinary course of the business: Progress/Due on Management Project, as a part of the cost of the projects at weighted average of the borrowing cost/rates as per Agreements respectively. Sr. No. G&B GIL GPL 1 Issue of equity share capital – – 5,100,000 Other borrowing costs are recognized as an expense in the period in which they are incurred. 2 Issue of debentures – – 58,650,000 g) EARNINGS PER SHARE 3 Purchase of Fixed Assets – – 100,083 The basic earnings per share is computed using the weighted average number of common shares 4 Expenses Charged by other Companies (net) – – 15,600,959 outstanding during the period. Diluted earnings per share is computed using the weighted average 5 Outstanding net of (payables) – – 911,655 number of common and dilutive common equivalent shares outstanding during the period, except where the results would be anti-dilutive. 7) This being the first year of operations of the Company, the question of previous years figures does not arise.
ADDITIONAL INFORMATION AS REQUIRED PART IV Cash Flow Statement for the period June 27, 2005 to March 31st, 2006. OF THE SCHEDULE VI OF THE COMPANIES ACT, 1956 Particulars Rupees Rupees Balance Sheet Abstract and Company’s General Business Profile Cash from Operating Activities Net Profit before Tax – i) Registration Details Add : Non-cash / non-operating Expenses Registration No 11-154268 Depreciation 2,769 State Code 11 Interest Income (83,479) Balance Sheet 31/3/2006 Interest Paid 2,750,583 Loss on sale of Fixed assets – ii) Capital raised during the year (Rupees ‘000) Tax Provision – Public Issue Nil Deferred Revenue Expenditure – Rights Issue Nil 2,669,873 Bonus Issue Nil Less :Non-cash / non-operating Income – Private Placement - Capital Nil 2,669,873 - Premium Nil Add : iii) Position of mobilisation and deployment of funds (Rupees ‘000) Change in Inventory (15,941,552) Change in Loans & Advances (76,248,733) Total Liabilities 126,977 Change in Current Liabilities / Provisions 1,530,610 Total Assets 126,977 Sources of Funds (87,989,803) Paid up Capital 1,000 Less : Taxes Paid (Net) – (87,989,803) Reserve & Surplus Nil Cash from Investing Activities Secured Loans 115,446 Purchase of Fixed Assets (100,083) Unsecured Loans Nil Interest Received 83,479 (16,604) Application of Funds Cash from Financing Activities Net Fixed Assets 97 Issue of Share Capital 10,000,000 Investments Nil Issue of Debentures 115,446,417 Net Current Assets 125,349 Interest Paid (2,750,583) 122,695,835 Misc Expenditure Accumulated Losses Nil Cash and Cash Equivalent 34,689,427 Cash and Bank Balance as on 31.3.2006 34,689,427 iv) Performance of the Company (Rupees ‘000) Turnover Nil Notes : Total Expenditure 15,942 1. The cash flow statement has been prepared under the ‘Indirect Method’ as set out in the Accounting Standard (AS) 3 on ‘Cash Flow Statement’, and presents cash flows by operating, investing and Profit/ (Loss) Before Tax Nil financing activities. Profit/(Loss) After Tax Nil 2. Figures in brackets are outflows / deductions. Earnings Per Share in Rs. Nil Dividend Rate Nil For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES v) Generic Names of three Principal N.A. Chartered Accountants PIROJSHA GODREJ Director products/services of the company MILIND KORDE Director BAHADUR S. DASTOOR Partner Place : Mumbai Date : May 10, 2006 112 Annual Report 2005-2006
Godrej Waterside Properties Private Limited (Formerly Bridgestone Properties Private Limited) DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED ON MARCH 31, 2006
TO THE SHAREHOLDERS 8. APPOINTMENT OF AUDITORS : Your Directors have pleasure in submitting their Report alongwith the audited Accounts for the year ended 31st M/s. Kalyaniwalla Mistry and Associates, Chartered Accountants retire at the ensuing Annual General March, 2006. Meeting and are eligible for re-appointment for which they have given their consent. 1. FINANCIAL HIGHLIGHTS : 9. DIRECTORS’ RESPONSIBILITY STATEMENT: The accounting results for the year ended 31st March, 2006 reveal that there is no surplus/deficit at the Your Directors confirm: end of the year. (i) that in the preparation of the annual accounts, the applicable accounting standards have been 2. REVIEW OF OPERATIONS : followed; The Company was taken over by Godrej Properties Limited during the financial year. (ii) that the Directors have selected such accounting policies and applied them consistently and made During the year Godrej Properties Limited was allotted 40,000 nos of equity shares of Rs.10/- each fully judgements and estimates that are reasonable and prudent so as to give a true and fair view of the paid-up of the Company and they hold the entire paid up share capital of the Company. state of affairs of the Company at the end of the financial year ended 31st March, 2006 and of the 3. DIVIDEND : profit of the Company for that year; As there are no profits, the Directors regret that no dividend can be recommended. (iii) that the Directors had taken proper and sufficient care for the maintenance of adequate accounting 4. DIRECTORS : records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets Mr. Pirojsha A. Godrej was appointed as Additional Director of the Company with effect from 30th of the Company and for preventing and detecting fraud and other irregularities; January, 2006. He holds office till the ensuing Annual General Meeting. A notice has been received from (iv) that the Directors have prepared the annual accounts on a going concern basis. a shareholder proposing the candidature of Mr. Pirojsha A. Godrej for the office of Director. 10. ADDITIONAL INFORMATION : Mr. Milind Korde was appointed as Additional Director of the Company with effect from 30th January, (a) Since the company has no employees, the particulars of the employees to be disclosed u/s 217 (2A) 2006. He holds office till the ensuing Annual General Meeting. A notice has been received from a of the Companies Act, 1956 read with Companies (particulars of employees) Rules, 1975, are not shareholder proposing the candidature of Mr. Milind Korde for the office of Director. given. Mr. Rakesh Desai, Director of the Company has resigned on 31st January, 2006. The Board desires to (b) Information in respect of Conservation of Energy, Technology Absorption and Foreign Exchange place on record the valuable services rendered by Mr. Rakesh Desai during his tenure as a Director of Earnings and Outgo, required under section 217(1)(e) of the Companies Act, 1956 read with the the Company. Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is Mr. Sanjay Desai, Director of the Company has resigned on 31st January, 2006. The Board desires to place provided hereunder: on record the valuable services rendered by Mr. Sanjay Desai during his tenure as a Director of the (i) Conservation of Energy : Company. Expenses on account of Energy are negligible. 5. CHANGE OF AUTHORISED CAPITAL : (ii) Technology Absorption : During the year the Company has increased its Authorised Capital from Rs.1 Lac to Rs. 5 Lacs. It is an on going process. 6. CHANGE OF NAME OF THE COMPANY : (iii) Foreign Exchange Earning & Outgo : The name of the Company was changed from Bridgestone Properties Private Limited to Godrej Waterside The Company has not earned any Foreign Exchange nor incurred any Foreign Exchange Properties Private Limited with effect from 25th January, 2006. The Registrar of Companies has accordingly Expenditure during the year. issued the new Incorporation Certificate. For and on behalf of the Board of Directors 7. CHANGE OF REGISTERED OFFICE OF THE COMPANY : The Company changed the address of its Registered Office from 5/40, C.C.I. Colony, Unnat Nagar – 4, Pirojsha Godrej Milind Korde M.G. Road, Goregaon (West), Mumbai – 400 062 to Godrej Bhavan, 4th Floor, 4A, Home Street, Fort, Director Director Mumbai – 400 001 with effect from 30th January, 2006. Mumbai, May 10, 2006
REPORT OF THE AUDITORS TO THE MEMBERS OF GODREJ WATERSIDE PROPERTIES PRIVATE LIMITED (Formerly Bridgestone Properties Private Limited)
1. We have audited the attached Balance Sheet of GODREJ WATERSIDE PROPERTIES PRIVATE LIMITED, e) In our opinion, the Balance Sheet and the Cash Flow Statement dealt with by this report comply with as at 31st March 2006 and also the Cash Flow statement of the Company for the period 27th June, 2005 the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956. to 31st March, 2006. These financial Statements are the responsibility of the Company’s management. f) In our opinion and to the best of our information and according to the explanations given to us, the Our responsibility is to express an opinion on these financial statements based on our audit. said accounts read with the notes thereon, give the information required by the Companies Act, 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those 1956, in the manner so required and give a true and fair view in conformity with the accounting Standards require that we plan and perform the audit to obtain reasonable assurance about whether the principles generally accepted in India: financial statements are free of material misstatement. An audit includes examining, on a test basis, i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2006; evidence supporting the amounts and disclosures in the financial statements. An audit also includes and 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 ii) in the case of Cash Flow Statement, of the cash flows of the Company for the year ended on basis for our opinion. that date. 3. This report does not include a statement on the matters specified in paragraph 4 of the Companies 5. On the basis of the written representations received from the directors as on 31st March, 2006, and taken (Auditor’s Report) Order, 2003, issued by the Department of Company Affairs, in terms of Section on record by the Board of Directors, we report that, none of the directors is disqualified as on 31st March, 227(4A) of the Companies Act, 1956, since in our opinion and according to the information and explanations 2006 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the given to us, the said Order is not applicable to the Company. Companies Act, 1956. 4. Further to our comments in the Annexure referred to in paragraph (3) above, we report that: For and on behalf of a) We have obtained all the information and explanations, which to the best of our knowledge and KALYANIWALLA MISTRY & ASSOCIATES belief were necessary for the purposes of our audit. Chartered Accountants B.S. Dastoor b) In our opinion, proper books of account as required by law have been kept by the Company so far Partner as appears from our examination of such books. Membership No. 48936 c) No Profit and Loss Account has been prepared as the Company is yet to commence operations. Place : Mumbai d) The Balance Sheet and the Cash Flow Statement dealt with by this report are in agreement with Date : May 10, 2006 the books of account.
113 Godrej Waterside Properties Private Limited (Formerly Bridgestone Properties Private Limited)
BALANCE SHEET AS AT MARCH 31, 2006 INFORMATION REQUIRED TO BE FURNISHED UNDER THE PART IV OF SCHEDULE VI OF THE COMPANIES ACT, 1956 Schedule As at Balance Sheet Abstract and Company’s General Business Profile 31.03.06 Rupees i) Registration Details SOURCES OF FUNDS Registration No 11-154255 Shareholders’ Funds State Code 11 Share Capital 1 500,000 Balance Sheet 31/3/2006 Loan Funds – ii) Capital raised during the year (Rupees ‘000) 500,000 Public Issue Nil Application Of Funds Rights Issue Nil Fixed Assets – Bonus Issue Nil – Private Placement - Capital Nil Investments – - Premium Nil Current Assets, Loans and Advances iii) Position of mobilisation and deployment of funds (Rupees ‘000) Cash Balance 2 500,000 Total Liabilities 500 500,000 Total Assets 500 Less : Current Liabilities and Provisions – Source of Funds Paid up Capital 500 Net Current Assets 500,000 Reserve & Surplus Nil Secured Loans Nil 500,000 Unsecured Loans Nil Notes To Accounts and Accounting Policies 3 Application of funds Net Fixed Assets Nil The Schedules referred to above form an integral part of the Balance Sheet Investments Nil As per our Report of even date. Signatures to Balance Sheet and Net Current Assets 500 Schedules 1, 2, and 3 Misc Expenditure Nil For and on behalf of Accumulated Losses Nil KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants PIROJSHA GODREJ Director iv) Performance of the Company (Rupees ‘000) MILIND KORDE Director Turnover Nil BAHADUR S. DASTOOR Total Expenditure Nil Partner Profit/ (Loss) Before Tax Nil Profit/(Loss) After Tax Nil Place : Mumbai Earnings Per Share in Rs. Nil Date : May 10, 2006 Dividend Rate v) Generic Names of three Principal N.A. SCHEDULES ATTACHED TO AND FORMING PART OF THE products/services of the company ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006 As at 31.03.06 Cash Flow Statement for the period June 27, 2005 to March 31, 2006 Rupees Particulars Rs. Rs. SCHEDULE 1 : SHARE CAPITAL Cash from Operating Activities Authorised 50000 Equity shares of Rs.10/- each 500,000 Net Profit Before Tax – 500,000 Cash from Investing Activities – Issued and Subscribed and Paid Up Cash from Financing Activities 50000 Equity Shares of Rs.10/- each 500,000 (50000 equity shares are held by the holding company, Increase in Share Capital 500,000 500,000 Godrej Properties Ltd) Cash and Cash Equivalent 500,000 500,000 Cash and Bank Balance as on 31.3.2006 500,000 SCHEDULE 2 : CASH & BANK BALANCE Current account with Scheduled Bank 500,000 Notes: 500,000 1) The Cash Flow Statement has been prepared under the “Indirect Method” as set out in the Accounting Standard (AS) 3 on “Cash Flow Statements”, and presents cash flows by operating, investing and financing SCHEDULE 3 - NOTES TO ACCOUNTS AND ACCOUNTING POLICIES activities. ACCOUNTING POLICIES 2) Figures in brackets are outflows/deductions. 1) GENERAL For and on behalf of The accounts are prepared under the Historical Cost Convention, using the accrual method of accounting. KALYANIWALLA MISTRY & ASSOCIATES NOTES TO ACCOUNTS Chartered Accountants PIROJSHA GODREJ Director a) As there are no operations, no Profit & Loss Account has been prepared. MILIND KORDE Director b) Additional information required to be given under Schedule VI, Part II of the Companies Act, 1956 to the BAHADUR S. DASTOOR Partner extent not applicable is not given. Place : Mumbai 2) AS 18 – RELATED PARTY DISCLOSURE Date : May 10, 2006 Related party disclosures as required by AS-18, “Related Party Disclosures’, are given below: 1. Relationships: (i) Shareholders (the Godrej Group Shareholding) in the Company Godrej Properties Limited (GPL) holds 100% in the Company. GPL is the Subsidiary of Godrej Industries Limited (GIL). GIL is subsidiary of Godrej & Boyce Manufacturing Company Limited (G&B), the ultimate holding company. (ii) Key Management Personnel : Mr. Milind Surendra Korde 2. The following transactions were carried out with the related parties in the ordinary course of the business: Sr. No G&B GIL GPL 1 Issue of equity share capital – – 500,000 3) This being the first year of operations of the Company, the question of previous years figures does not arise.
114 Annual Report 2005-2006
Godrej Hicare Limited DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED ON MARCH 31, 2006
To The Members of GODREJ HICARE LIMITED Repayment of Loans from Group Companies (Note 3(e) of Annexure to Auditors report) Your Directors submit their Report along with the Audited Accounts of your Company for the year ended Due to the accumulated losses, the repayment of the loans of the group companies are not being made. March 31, 2006. Your Company is regular in repayment of loans taken from other corporates in form of Inter Corporate Operating Results Deposits. Your Company’s performance during the year as compared with the previous year is summarized below: Directors Responsibility Statement: March 31, 2006 March 31, 2005 Pursuant to the provisions contained in Section 217(2AA) of the Companies Act, 1956, the Directors of your (Rs. Lac) (Rs.Lac) Total Income 2112.19 1205.84 Company confirm: Profit/(Loss) for the year 104.34 (113.04) a) that in the preparation of the annual accounts, the applicable accounting standards have been Before Extraordinary Items (After tax) followed and no material departures have been made from the same; Profit/(Loss) After Extraordinary Items 104.34 (113.04) b) that they have selected such accounting policies and applied them consistently and made judgements Add: Balance brought Forward (1444.94) (1331.90) and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of Deficit Carried Forward (1340.60) (1444.94) the Company at the end of the financial year and of the profit or loss of the Company for that period. Operations Review c) that they have taken proper and sufficient care for the maintenance of adequate accounting records Your Company has recorded impressive growth of 75%. Total Income grew from Rs. 1206 lac in the in accordance with the provisions of this Act for safeguarding the assets of the Company for preventing previous year to Rs. 2112 lac in the current year. The Company has been delivering profits for last 14 and detecting fraud and other irregularities; months in a row and recorded a Profit after Tax of Rs. 103 lac as compared to loss of Rs.113 lac in the previous year. d) that they have prepared the annual accounts on a going concern basis. During the year the Company acquired reticulation technology (for pre-construction anti-termite treatment) Conservation of Energy, Technology Absorption: from Termguard, Australia and Thermal imaging camera for termite detection from FLIR, Sweden. The information in respect of Conservation of Energy, Technology Absorption and Foreign Exchange earnings Your Company also undertook a major quality initiative called “SMILE” to improve internal processes and and outgo, required under Section 217(1)(e) of the Companies Act,1956, read with the Company’s ( Disclosure to enhance service delivery to customers. of Particulars in the Report of the Board of Directors) Rules, 1988 has not been given, since such requirement Your Company has planned aggressive geographical expansion in next year while continuing to grow in is not applicable to the Company. current markets by increasing service centers. Particulars of Employees: Dividend: None of the employees fall under the provisions of Sec 217(2A) of the Companies Act, 1956. Hence, the In view of the accumulated losses, your Directors do not recommend any dividend for the year. particulars required under Section 217(2A) of the Companies Act, 1956 read with the Company’s (Particulars Directors: There are no changes in the Directorship in the Company. of Employees) Rules, 1975 are not given. In accordance with Article 150 of the Articles of Association of your Company, one of the Directors of the Foreign Exchange earnings and Outgo: Company, Mr. A.B.Godrej by rotation in the ensuing Annual General Meeting and being eligible, offers Expenditure in Foreign Currency himself for reappointment. Current Year Previous Year Auditors: March 31, 2006 March 31, 2005 You are requested to appoint Auditors for the current year and fix their remuneration. The retiring Auditors, (Rs. Lacs) (Rs. Lacs) M/s. Kalyaniwalla Mistry & Associates (KMA), Chartered Accountants, are eligible for re-appointment. License Fees 8.75 Nil Audit Committee: Training Expenses 2.28 Nil The Audit Committee which was appointed pursuant to the provision of Sec 292A of the Companies Act, 1956 has reviewed the accounts for the year ended March 31st 2006. Travelling Expenses 0.53 0.26 Note on Auditors Report: Additional Information Erosion of Networth (Note 4(i) of Auditors report and note 10 of Annexure to Auditors report) The additional information as required to be given under the Companies Act, 1956 has been laid out in the Though the accumulated losses of the Company exceeds its paid up capital, the shareholders are very schedules attached to and forming part of the Balance Sheet and Profit and Loss Account , including the supportive of the Pest management business and are committed to infuse funds as and when required to Notes to Accounts which are self explanatory for working capital and other requirements. Acknowledgement Change in Amortisation policy for Software (Note 4(iii) of Auditors report) Your Board wishes to thank all its Members, Bankers, Franchisees, Employees, Suppliers and Customers The change in the amortization policy for computer software from 3 years to 6 years has been done to for their continued support and help for the growth of the Company. reflect more appropriate value of the asset in the Balance Sheet of the Company considering the useful life of the computer softwares. For and on behalf of the Board of Directors Fixed Assets Register (Note 1 (a) and (b) of Annexure to Auditors report) A. B. Godrej Your Company is in process of updating the same. Physical verifications will be carried out after the Mumbai , May 8, 2006 Chairman records and updated.
REPORT OF THE AUDITORS TO THE MEMBERS OF GODREJ HICARE LIMITED 1. We have audited the attached Balance Sheet of GODREJ HICARE LIMITED as at 31 March, 2006 iv) In our opinion, proper books of account, as required by law, have been kept by the Company and also the Profit and Loss Account of the Company for the year ended on that date annexed so far as appears from our examination of such books. thereto. These financial statements are the responsibility of the Company’s management. Our v) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this responsibility is to express an opinion on these financial statements based on our audit. report are in agreement with the books of account. 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those vi) In our opinion, the Balance Sheet and the Profit and Loss Account dealt with by this report standards require that we plan and perform the audit to obtain reasonable assurance about whether comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the the financial statements are free of material misstatement. An audit includes examining, on test Companies Act, 1956. basis, evidence supporting the amounts and disclosures in the financial statements. An audit also vii) In our opinion and to the best of our information and according to the explanations given to us, includes assessing the accounting principles used and significant estimates made by the management, subject to paragraph (i) above, give the information required by the Companies Act, 1956, in as well as evaluating the overall financial statement presentation. We believe that our audit provides the manner so required and give a true and fair view: a reasonable basis for our opinion. i) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31 , 2006; 3. As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Government in ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and terms of Section 227 (4A) of the Companies Act, 1956, we annex hereto a statement on the matters iii) in the case of the Cash Flow Statement, of the cash flows of the company for the year specified in paragraphs 4 and 5 of the said Order. ended on that date. 4. Further to our comments in the Annexure referred to in para (3) above, we report that: 5. On the basis of the written representations received from the Directors as on March 31, 2006, and i) The accumulated losses of the Company as at March 31, 2006 exceed its paid up capital taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on resulting in the erosion of its net worth. The accounts for the year have been prepared on the March 31, 2006 from being appointed as a Director in terms of clause (g) of sub-section (1) of ‘Going Concern’ basis on the understanding that finance will continue to be available to the section 274 of the Companies Act, 1956. Company for working capital requirements from the promoters. For and on behalf of ii) We have obtained all the information and explanations, which to the best of our knowledge KALYANIWALLA MISTRY AND ASSOCIATES and belief were necessary for the purposes of our audit. Chartered Accountants iii) In current year the Company has changed the amortization policy of software development B. S. Dastoor from 3 years to 6 years. Had there been no change in the rate of depreciation, the charge for Partner current year would have been higher by Rs. 115,786. Consequently accumulated losses and Membership No. 48936 written down value of asset as at year end are lower by Rs. 183,415. Mumbai, May 8, 2006
ANNEXURE TO THE AUDITORS’ REPORT Referred to in paragraph (3) of our report of even date. 3. (a) The Company has not granted any loans, secured or unsecured to Companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956. 1. (a) As per the information and explanations given to us, the Company is in the process of updating (b) Consequently, the question of commenting on the rates of interest and the other terms and its records showing full particulars, including quantitative details and situation of fixed assets. conditions of the loans granted being prejudicial to the interests of the Company, receipt of (b) The Company has not conducted a physical verification of fixed assets during the year, in view regular principal and interest and reasonable steps taken for recovery of principal and interest of which we are unable to comment on discrepancies, if any. due does not arise (c) The disposal of fixed assets during the year does not affect the going concern assumption. (c) The Company has taken unsecured loans of Rs. 104,310,000/- from six Companies listed in the 2. (a) The Management has conducted physical verification of inventory at reasonable intervals. Register maintained under Section 301 of the Companies Act, 1956. (b) In our opinion, the procedures of physical verification of inventory followed by the management (d) In case of these loans, Interest has been waived by the respective companies. In our opinion, are reasonable and adequate in relation to the size of the Company and the nature of its the rate of interest and other terms and conditions of these loans are not prima facie prejudicial business. to the interests of the Company. (e) The payment of principal for above amounts has not been regular. The payment of interest has (c) The Company is maintaining proper records of inventory and no material discrepancies were been regular wherever the same has not been waived. noticed on physical verification. 115 Godrej Hicare Limited
ANNEXURE TO THE AUDITORS’ REPORT (Contd.)
4. In our opinion and according to the information and explanations given to us, there are adequate 11. According to the information and explanations given to us and based on the documents and records internal control procedures commensurate with the size of the Company and the nature of its produced to us, there are no dues to banks, financial institutions or debenture holders. business, for the purchases of inventory, fixed assets and for the sale of goods. During the course of 12. According to the information and explanations given to us and based on the documents and records our audit, no major weakness has been noticed in the internal controls. produced to us, the Company has not granted loans and advances on the basis of security by way of 5. (a) Based on the audit procedures applied by us and according to the information and explanations pledge of shares, debentures and other securities. provided by the management, we are of the opinion that the particulars of contracts and 13. In our opinion and according to the information and explanations given to us, the nature of activities of the arrangements referred to in Section 301 of the Companies Act, 1956 have been entered into Company does not attract any special statute applicable to chit fund and nidhi/ mutual benefit fund/ societies. the register required to be maintained under that section. 14. The Company does not deal in shares, securities, debentures and other investments. (b) These transactions made in pursuance of such contracts or arrangements, were made at prices 15. According to the information and explanations given to us, the Company has not given any guarantee which are reasonable having regard to the prevailing market prices at the relevant time. for loans taken by others from banks and financial institutions. 6. In our opinion and according to the information and explanations given to us, the Company has not 16. The Company did not have any term loans during the year. accepted any deposits from public and the provisions of Section 58A, 58AA or any other provision of 17. According to the information and explanations given to us and on an overall examination of the the Companies Act, 1956, read with the rules framed there under are not applicable. Balance Sheet and Cash Flows of the Company, we report that the Company has not utilized funds 7. In our opinion and according to the information and explanations given to us, the internal audit raised on short-term basis for long-term investment. system is commensurate with the size of the Company and nature of its business. 18. The Company has made preferential allotment of shares during the year to parties covered in the 8. The maintenance of cost records has not been prescribed by the Central Government under Section register maintained under Section 301 of the Companies Act, 1956. In our opinion and based on the 209(1)(d) of the Companies Act, 1956, in respect of the Company’s products. information and explanations given to us, the price at which the shares are issued is not prima-facie 9. (a) According to the information and explanations given to us and on the basis of our examination prejudicial to the interest of the Company. of the books of account, during the year, the Company has been generally regular in depositing 19. The Company did not issue any debentures during the year. undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, 20. The Company has not raised any money through a public issue during the year. Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, Customs Duty, Excise Duty, 21. Based on the audit procedures performed and information and explanations given by the management, Service Tax, Cess and other statutory dues applicable to it with the appropriate authorities. we report that no fraud on or by the Company has been noticed or reported during the year. According to the information and explanations given to us, there are no undisputed dues payable in respect of above as at March 31, 2006 for a period of more than six months from For and on behalf of the date they became payable KALYANIWALLA MISTRY AND ASSOCIATES (b) According to the information and explanations given to us, there are no dues outstanding of Chartered Accountants Sales Tax, Income Tax, Customs Duty, Service tax, Wealth Tax, Excise Duty or Cess on account B. S. Dastoor of any dispute. Partner 10. The Company’s accumulated losses at the end of the financial year are in excess of fifty percent of its Membership No. 48936 net worth. Though it has incurred cash losses in the immediately preceding financial year, there are no cash losses in the current financial year. Mumbai, May 8, 2006
BALANCE SHEET AS AT MARCH 31, 2006 PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ON MARCH 31, 2005 This Year Previous Year Schedule Rupees Rupees This Year Previous Year SOURCES OF FUNDS : Schedule Rupees Rupees SHAREHOLDERS’ FUNDS Share Capital 1 56,200,000 36,000,000 INCOME : LOAN FUNDS Secured Loans – – Gross Sales 44,484,712 32,467,955 Unsecured Loans 2 139,310,000 127,358,000 Less : Excise Duty 1,321,380 – DEFERRED TAX LIABILITY 401,000 – Net Sales 43,163,332 32,467,955 195,911,000 163,358,000 Service Income 163,155,659 86,735,748 Other Income 11 4,899,732 1,380,239 APPLICATION OF FUNDS : FIXED ASSETS 3 211,218,723 120,583,942 Gross Block 17,353,167 14,223,379 Less : Depreciation 6,011,084 4,694,077 EXPENDITURE: Raw Materials Consumed 12 53,190,753 17,451,768 Net Block 11,342,083 9,529,302 Purchase of Traded Goods 7,404,457 22,990,205 INVESTMENTS 4 68,905 68,905 Inventory Change 13 (1,900,192) (2,198,413) CURRENT ASSETS, LOANS Expenses 14 136,573,253 90,656,366 AND ADVANCES Interest and Finance Expense 15 2,317,918 1,784,373 Inventory 5 22,276,952 20,111,010 Depreciation 3 1,324,008 1,203,817 Sundry Debtors 6 45,098,800 44,523,041 Cash and Bank Balances 7 17,917,076 2,253,597 198,910,197 131,888,116 Loans and Advances 8 31,802,401 4,236,709 117,095,229 67,124,357 Profit/(Loss) for the Year 12,308,526 (11,304,174) LESS : CURRENT LIABILITIES Less : Fringe Benefit Tax 668,980 – AND PROVISIONS Current Tax 805,000 – Current liabilities 9 64,451,387 57,040,119 Deferred Tax 401,000 – Provisions 10 2,204,243 818,404 Profit/(Loss) for the Year after Tax 10,433,546 (11,304,174) 66,655,630 57,858,523 Add : Balance Brought Forward (144,493,959) (133,189,785) NET CURRENT ASSETS 50,439,599 9,265,834 Deficit Carried Forward (134,060,413) (144,493,959) PROFIT & LOSS ACCOUNT 134,060,413 144,493,959 Basic/Diluted Earnings per Share 2.29 (3.29) 195,911,000 163,358,000 (Refer Note 9)
NOTES TO ACCOUNTS 16 NOTES TO ACCOUNTS 16
The Schedules referred to above form an integral part of the Balance Sheet. The Schedules referred to above form an integral part of the Profit and Loss Account
As per our Report of even date Signatures to Balance Sheet and As per our Report attached Signatures to Profit and Loss Account and Schedules 1 to 10 and 16 Schedules 11 to 16 For and on behalf of For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES A.B. GODREJ Chairman KALYANIWALLA MISTRY AND ASSOCIATES A.B. GODREJ Chairman Chartered Accountants Chartered Accountants D.U. MENON A. MAHENDRAN Managing Director D.U. MENON A. MAHENDRAN Managing Director BAHADUR S. DASTOOR Company Secretary BAHADUR S. DASTOOR Company Secretary Partner Partner Mumbai, May 8, 2006 Mumbai, May 8, 2006 116 Annual Report 2005-2006
SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2006
This Year Previous Year Rupees Rupees SCHEDULE 1 : SHARE CAPITAL Authorised: 8,000,000 Equity Shares of Rs.10/- each (Previous year 7,500,000 Equity Shares of Rs.10 each) 80,000,000 75,000,000 Issued & Subscribed 7,900,000 (Previous year 3,600,000) Equity Shares of Rs 10/- each 79,000,000 36,000,000 Paid-up 4,100,000 (Previous year 3,600,000) Equity Shares of Rs 10/- each fully paid 41,000,000 36,000,000 3,800,000 (Previous year Nil) Equity Shares of Rs 10/- each, Rs 4/- paid. 15,200,000 – 56,200,000 36,000,000 Of the above: 6,647,100 (Previous year 3,107,100) shares are held by Godrej Industries Ltd. (GIL), the Holding Company SCHEDULE 2 UNSECURED LOANS Intercorporate deposits (due within a year, or at call) 139,310,000 127,358,000 139,310,000 127,358,000
SCHEDULE 3 : FIXED ASSETS (Amount in Rs.)
GROSS BLOCK DEPRECIATION NET BLOCK ASSETS As at Additions Deductions As at Up to For the year Deductions Up to As at As at 01/04/2005 31/03/2006 01/04/2005 31/03/2006 31/03/2006 31/03/2005 Intangibles Trademarks 9,000,000 – – 9,000,000 1,070,137 900,000 – 1,970,137 7,029,863 7,929,863 Computer Software 540,000 1,274,392 – 1,814,392 135,110 48,306 – 183,416 1,630,976 404,890 Total (A) 9,540,000 1,274,392 – 10,814,392 1,205,247 948,306 – 2,153,553 8,660,839 8,334,753 Tangibles Factory Building 82,400 – – 82,400 8,281 7,412 – 15,693 66,707 74,119 Plant & Machinery 4,407,529 1,211,234 74,675 5,544,088 3,381,774 200,196 7,001 3,574,969 1,969,119 1,025,755 Office Equipment 46,863 26,052 – 72,915 13,182 11,485 – 24,667 48,248 33,681 Furniture & Fixture 48,638 – 48,638 11,567 6,710 – 18,277 30,361 37,071 Spray and Service Kit 59,000 – – 59,000 35,077 23,923 – 59,000 – 23,923 Vehicles 38,949 – – 38,949 38,949 – – 38,949 – – Computer Hardware – 692,785 692,785 – 125,976 – 125,976 566,809 – Total (B) 4,683,379 1,930,071 74,675 6,538,775 3,488,830 375,702 7,001 3,857,531 2,681,244 1,194,549 TOTAL(A+B) 14,223,379 3,204,463 74,675 17,353,167 4,694,077 1,324,008 7,001 6,011,084 11,342,083 9,529,302 Previous Year Total 12,979,858 1,243,521 – 14,223,379 3,490,260 1,203,817 – 4,694,077 9,529,302 This Year Previous Year This Year Previous Year Rupees Rupees Rupees Rupees SCHEDULE 4 : INVESTMENTS : LONG TERM SCHEDULE 9 : CURRENT LIABILITIES In Mutual Funds, Quoted Current Liabilities: Templeton India Treasury Management Account Sundry Creditors (Refer Note 4) 12,057,968 15,631,800 Regular Plan - Growth 68,905 68,905 Security Deposits 8,620,334 7,899,449 No. of units 43.19 (Previous year 43.19) Advance from Customers 24,870,848 14,083,253 68,905 68,905 Other Liabilities 17,945,805 19,416,028 Market Value 75,728 68,905 Interest accrued but not due 956,432 9,589 64,451,387 57,040,119 SCHEDULE 5 : INVENTORY Raw material 3,922,887 3,635,957 SCHEDULE 10 : PROVISIONS Packing Material 930,122 785,956 Leave Encashment 1,399,243 818,404 Finished Goods 4,356,905 2,429,913 Taxation 805,000 – Service Stock 12,252,981 12,418,328 2,204,243 818,404 Photographic equipment 814,057 840,856 22,276,952 20,111,010 SCHEDULES FORMING PART OF THE PROFIT & LOSS ACCOUNT SCHEDULE 6 : SUNDRY DEBTORS FOR THE YEAR ENDED MARCH 31, 2006 (Unsecured and considered good unless otherwise stated) Due for more than six months SCHEDULE 11 : OTHER INCOME Considered good 8,409,492 12,247,885 Miscellaneous income 4,123,113 1,232,534 Considered doubtful 379,601 379,601 Sundry Credit balances written back 776,619 147,705 8,789,093 12,627,486 4,899,732 1,380,239 Other debts SCHEDULE 12 : MATERIALS Considered good 36,689,308 28,275,156 a) Raw Material and Packing Material Consumed Considered doubtful – – Opening stock 4,421,913 69,856 45,478,401 40,902,642 Add : Purchases during the year 24,028,993 4,975,000 Less : Provision for doubtful debts 379,601 379,601 28,450,906 5,044,856 45,098,800 40,523,041 Less : Closing stocks 4,853,009 4,421,913 SCHEDULE 7 : CASH AND BANK BALANCES 23,597,897 622,943 Cash on hand 47,281 1,034 b) Service Stock Consumed 29,592,856 16,828,825 Balances with scheduled banks in current accounts 9,303,535 1,622,216 53,190,753 17,451,768 in fixed deposit account 7,323,200 – SCHEDULE 13 : INVENTORY CHANGE in margin deposit account 1,243,060 630,347 Opening stock 17,917,076 2,253,597 Photographic equipments 840,857 840,857 Finished goods 2,429,913 231,500 SCHEDULE 8 : LOANS AND ADVANCES (Unsecured and considered good unless otherwise stated) 3,270,770 1,072,357 Loans and advances recoverable in cash or in Less: Closing Stock kind or for value to be received : 22,453,920 941,023 Photographic equipments 814,057 840,857 Advance to Suppliers 4,938,556 728,090 Finished goods 4,356,905 2,429,913 Deposits 2,715,931 2,564,536 5,170,962 3,270,770 Advance Tax and Tax Deducted at Source 1,693,994 3,060 (1,900,192) (2,198,413) 31,802,401 4,236,709
117 Godrej Hicare Limited
SCHEDULES FORMING PART OF THE PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006
This Year Previous Year i) Foreign Exchange Transactions : Rupees Rupees Transactions in foreign currency are recorded at the exchange rates prevailing on the date of SCHEDULE 14 : EXPENSES the transaction. Assets and liabilities related to foreign currency transactions, remaining unsettled Salaries, Bonus & Allowances 16,448,123 12,936,622 at the year end, are translated at the year end exchange rates. Forward exchange contracts, Contribution to Provident Fund and Other Funds 770,279 1,338,763 remaining unsettled at the year end, backed by underlying assets or liabilities are also translated Staff Welfare Expenses 759,757 237,237 at year end exchange rates.The premium payable on foreign exchange contracts is amortised Processing Charges 1,677,141 1,090,572 over the period of the contract. Exchange gains / losses are recognised in the Profit and Loss Electricity Expenses 359,073 287,683 Account except in respect of liabilities incurred to acquire fixed assets in which case, they are Rent 2,261,717 1,512,787 adjusted to the carrying amount of such fixed assets. Rates & Taxes 2,586,662 43,073 Repairs & Maintenance : j) Earnings per Share : Machinery & Equipment 7,802 8,494 The basic earning per share is computed using the weighted average number of common Others 274,713 46,778 shares outstanding during the period. Diluted earning per share is computed using the weighted 282,515 55,272 average number of the common and dilutive common equivalent shares outstanding during Insurance 104,398 171,020 the period except where the results would be anti dilutive. Freight & Transportation Expenses 2,709,778 648,439 2. CONTINGENT LIABILITIES : Service Center Expenses 35,717,165 19,657,815 Advertising, Publicity & Sales Promotion Expenses 52,907,561 40,361,448 1) Claims against company not acknowledged as debts amounts to Rs. 14,500,000 (Previous year Discount 1,062,414 – Rs. 13,718,000) Travelling & Conveyance 4,333,627 3,351,709 2) Bank Guarantee given by the company amounting to Rs.1,243,060 (Previous year Rs. 630,347) Legal & Professional Charges 3,836,943 4,213,557 3. Capital Commitments Bad debts and advances written off 5,111,522 120,175 IT Expenses 587,943 1,223,142 The estimated value of contracts remaining to be executed on capital account to the extent not General Expenses 5,056,635 3,407,052 provided for is Rs. Nil (Previous Year Rs. Nil.) 136,573,253 90,656,366 4. SSI CREDITORS SCHEDULE 15 : INTEREST AND FINANCE EXPENSES In the absence of a database identifying creditors as Small Scale Industrial Undertakings, it is the Interest on intercorporate deposits 919,610 658,203 opinion of the management that there are no parties, which can be classified as Small Scale Other Interest & financial charges 1,799,886 1,126,170 Industrial Undertakings to whom the company owes any sum. The auditors have accepted the representations of the management in this matter. 2,719,496 1,784,373 Less : Interest Income 401,578 – 5. The Company has not provided for interest for the year on certain Inter Corporate Deposits received, as the same has been waived by the concerned companies in view of the financial position of the 2,317,918 1,784,373 Company. SCHEDULE 16 : NOTES TO ACCOUNTS 6. During the current year, the Company changed its accounting policy with respect to amortization of 1. SIGNIFICANT ACCOUNTING POLICIES Computer Software from 3 years to 6 years. Had there been no change in the rate of depreciation, a) Accounting Conventions : the charge for current year would have been higher by Rs. 115,786. Consequently accumulated losses and written down value of asset as at year end are lower by Rs.183,415. The accounts have been prepared on historical cost convention. The Company follows mercantile system of accounting and recognizes income and expenditure on accrual basis 7. Expenditure in Foreign Currency b) Fixed Assets : This Year This Year Fixed assets have been stated at cost and include incidental and / or installation/development License Fees 875,400 Nil expenses incurred in putting the asset to use and interest on borrowing incurred during Training Expenses 227,978 Nil construction period. Pre-operative expenses for major projects are also capitalized, where Travelling Expenses 53,389 26,720 appropriate. 8. ACCOUNTING FOR LEASES c) Depreciation/Amortization : The lease rentals in respect of office and factory space charged during the period and maximum 1) Spray and service kits and Vehicles: On Straight Line Method basis at the rates prescribed obligations on non-cancellable operating leases payable as per the rentals stated in the lease by Schedule XIV to the Companies Act, 1956. agreement are given in accordance with the Accounting Standard (AS-19) on “Leases” issued by the Institute of Chartered Accountants of India. 2) Computer Hardware and Other Assets: On Written Down Value basis at the rates prescribed by Schedule XIV to the Companies Act, 1956. (Amounts in Rupees) 3) Following assets are Amortized as follow: This Year This Year Asset Type Period 1. Lease Rentals paid during the year 1,136,209 318,000 (a) Trademarks 10 years 2. Future Lease Obligations (b) Computer Software 6 years – Due within one year of the Balance Sheet date 1,204,132 318,000 d) Impairment : – Due between one year and five years 2,255,473 631,000 Carrying amount of cash generating units / assets are reviewed at balance sheet date to – Due after five years – – determine whether there is any indication of impairment. If such indication exists, the recoverable amount is estimated as the net selling price or value in use, whichever is higher. Current Year Previous Year Impairment loss, if any, is recognized whenever carrying amount exceeds the recoverable amount. Item Units Quantity Value Quantity Value (Rs.) (Rs.) e) Inventories : 9. INVENTORIES OF FINISHED GOODS Raw materials and Service Stock are valued at weighted average cost. Traded goods Print Leader Nos 3 352,286 3 352,286 Finished goods are valued at lower of cost and net realisable value.These costs include cost of Imager Nos 5 461,771 6 488,571 conversion and other costs incurred in bringing the inventories to their present location and condition. 814,057 840,857 Insecticides Ltrs 1,767 306,864 2215 515,041 Stores and spares are valued at weighted average cost. 1,120,921 1,355,898 f) Retirement Benefits : Manufactured goods Retirement benefits to employees comprise payments under defined contribution plans like Insecticides Ltrs 9,352 4,050,041 7101 1,914,872 provident fund and family pension. Payments under defined contribution plans are charged to the profit and loss account. The liability in respect of defined benefit schemes like gratuity and 4,050,041 1,914,872 leave encashment benefit on retirement is provided on the basis of actuarial valuation at the Total 5,170,962 3,270,770 end of each year. The liability for retirement gratuity is funded through a trust created for the purpose. 10. SALES (NET OF EXCISE DUTY) Item Units Quantity Value Quantity Value g) Research & Development : (Rs.) (Rs.) Revenue expenditure on Research and Development is charged to Profit and Loss Account of Traded goods the year in which it is incurred. Capital expenditure incurred during the year on Research and Spares & Consumables –– 92,596 Development is shown as addition to Fixed Assets. Insecticides Ltrs. 29,920 11,672,717 32,825 21,513,196 Manufactured goods h) Revenue Recognition : Insecticides Ltrs. 82,932 31,490,615 28,846 11,877,036 Revenue from Pest Management services is recognized as and when the services are rendered. Total 43,163,332 33,482,828 Sales are net of returns, rebates, sales tax, etc.
118 Annual Report 2005-2006
2. The following transactions were carried out with the related parties in the ordinary course SCHEDULE 16 : NOTES TO ACCOUNTS (Contd..) of business: Current Year Previous Year Details relating to parties referred to in item 1(i) and (ii) above: Item Units Quantity Value Quantity Value (Rs.) (Rs.) Sr. Particulars Godrej Group Other Related 11. PURCHASES FOR RESALE No. Shareholders parties in the Godrej Insecticides 29,472 7,404,457 35,240 22,983,950 Ultimate Holding Co. Group Spares & Consumables –– – 6,255 Holding Co. (i) (i) (ii) Total 7,404,457 22,990,205 1. Issue of Share Capital Nil 17,160,000 Nil 12. RAW MATERIAL CONSUMED (Nil) (2,400,000) (Nil) Basic Chemicals Kgs 127,522 22,862,147 5,523 622,943 2. Sale of Fixed Assets Nil Nil 74,675 Service Stock – 29,592,856 – 16,828,825 (Nil) (Nil) (Nil) 3. Purchase of Fixed Asset Nil Nil Nil Others 735,750 – (Nil) (Nil) (74,675) Total 53,190,753 17,451,768 4. Sales & Other Income Nil Nil 4,066,038 (Nil) (Nil) (1,014,862) 13. VALUE OF CONSUMPTION OF RAW MATERIALS, 5. Purchases (net of returns) Nil Nil (454,918) SPARES AND CONSUMABLES (Nil) (17,000) (14,312,784) Item Value Value 6. Expenses charged by other Companies Nil 1,475,254 2,065,638 % (Rs.) % (Rs.) (2,975) (1,301,911) (3,203,865) 7. Expenses charged to other Companies Nil 5,650 1,733,582 Raw Materials (Nil) (Nil) (Nil) Indigenous 80 42,305,906 100 17,451,768 8. Interest on Inter Corporate Deposit Nil 88,457 Nil Imported (including custom duty) 20 10,884,847 –– (Nil) (111,000) (Nil) Total 53,190,753 17,451,768 9. Sundry Deposit with Other Companies 351,450 Nil Nil (Nil) (350,000) (Nil) 14. INSTALLED CAPACITY AND ACTUAL PRODUCTION 10. Sundry Deposits refunded 350,000 Nil Nil (Nil) (Nil) (Nil) Units Installed Capacity Production 11. Outstanding Receivables (net) of Payables Nil (357,800) 3,004,913 Current Year Previous Year Current Year Previous Year (Nil) (-21,286) (49,008)
Insecticides Ltrs. 240,000 240,000 51,215 35,484 (ii) Details relating to person referred to in item1(iii) above Processed Outside – – 33,968 – Current year Previous year 240,000 240,000 51,215 35,484 1 Issue of share capital 3,040,000 2,400,000
15. CIF VALUE OF IMPORTS 3. Significant Related Party Transactions Item Units Quantity Value Quantity Value 1. Sale of Fixed Assets Godrej Sara Lee Limited 74,675 (Rs.) (Rs.) – (Nil) 2. Purchase of Fixed Assets – Nil Insecticide Kgs. 58,660 12,016,607 2,500 2,540,309 Godrej Sara Lee Limited (74,675) Total 12,016,607 2,540,309 3. Sales & Other Income Godrej Sara Lee Limited 3,044,295 Godrej Properties Limited 991,250 16. EARNING PER SHARE Godrej Sara Lee Limited (1,014,862) Current Year Previous Year 4. Purchases(net of returns) Godrej Sara Lee Limited (454,918) Godrej Sara Lee Limited (14,312,784) Profit/ (Loss) after Tax as per profit & loss account Rs. 10,433,546 (11,304,174) 5. Expenses charged by other Godrej Tea Limited 1,337,917 Weighted average number of equity shares of Rs. 10 each 4,557,425 3,435,616 Companies Godrej Sara Lee Limited 727,720 Basic/Diluted Earnings Per Share Rs. 2.29 (3.29) Godrej Tea Limited (1,016,303) Godrej Sara Lee Limited (2,187,562) 17. RELATED PARTY DISCLOSURE AS REQUIRED BY AS - 18 “RELATED PARTY DISCLOSURES” 6. Expenses charged to other Godrej Sara Lee Limited 1,724,082 ARE GIVEN BELOW: Companies – (Nil) 7. Outstanding Receivables, net 1. Relationships of Payables Godrej Tea Limited 2,018,551 (i) Shareholders (the Godrej Group shareholding) in the company: Godrej Sara Lee Limited 991,250 Godrej Industries Limited hold 84.1% Godrej Tea Limited (-262,147) GIL is a subsidiary of Godrej & Boyce (Mfg.) Co. Limited, the ultimate holding co. Godrej Sara Lee Limited (311,155) (ii) Other related parties in the Godrej Group where common control exists. 18. Deferred Tax 1. Godrej Tea Limited The Tax effects of significant temporary differences that resulted in deferred tax assets and liabilities are : 2. Godrej Agrovet Limited Current Year Previous Year 3. Godrej Properties Limited Rs. Rs. 4. Godrej Sara Lee Limited Depreciation on Fixed Assets (1,163,000) – Others 762,000 – (iii) Key Management Personnel Deferred Tax Liability (401,000) – Mr. A. Mahendran (Managing Director) 19. Auditors Remuneration Statutory Audit 134,688 82,650 Audit under other Statutes 33,672 27,550 Total 168,360 110,200
20. The amount of exchange difference included in the Profit and Loss Account, under the related heads of expenses / income, is Rs.9,856 (Previous year expense Rs.). 21. The Company is engaged in the business of rendering pest management services, which is its only primary business segment. The Company operates in economic environments which are subject to same risks and returns and hence no disclosure is required under AS 17- Accounting Standard on Segment Reporting. 22. Information required under Schedule VI to the Companies Act ,1956, have been given to the extent applicable.
119 Godrej Hicare Limited
BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006 1. Registration details Registration No. : 72222 Current Year Previous Year State Code : 11 Rs. ‘000 Rs. ‘000 Balance Sheet Date : March 31, 2006 A. Cash Flow from Operating Activities : 2. Capital raised during the year Profit/(Loss) before tax 12,308,526 (11,304,174) Public Issue : – Adjustments for : Depreciation 1,324,008 1,203,817 Rights Issue : 20,200,000 Interest expense 2,317,918 1,784,373 Bonus Issue : – Private Placement : – Operating Loss before working capital changes 15,950,452 (8,315,984) 3. Position of mobilisation and deployment of funds Adjustments for : Total Liabilities : 262,566,630 Inventories (2,165,942) (17,862,984) Total Assets : 262,566,630 Trade & Other receivables (30,447,457) (45,733,188) Sources of funds Trade & Other payables 7,035,675 49,045,856 Paid up Capital : 56,200,000 (9,627,272) (22,866,300) Reserves & Surplus : – Direct taxes paid (1,693,994) (3,060) Secured Loans : – Fringe Benefit tax Paid (668,980) – Unsecured Loans : – B. Cash Flow from Investing Activities : Deferred Tax Liability : 401,000 Purchase of Assets (3,136,789) (1,083,521) Application of funds Investments – (68,905) Net Fixed Assets : 11,342,083 Net Cash used in investing activities (3,136,789) (1,152,426) Investments : 68,905 C. Cash Flow from Financing Activities : Net Current Assets : 50,439,599 Term Loans/Inter Corporate Deposits taken 11,952,000 19,500,000 Miscellaneous Expenditure : – Issue of Share Capital 20,200,000 4,800,000 Accumulated Losses : 134,060,413 Interest paid (1,361,486) (1,774,786) 4. Performance of Company Turnover (Total Income) : 211,218,723 Net Cash from financing activities 30,790,514 22,525,214 Total Expenditure : 198,910,197 Net Increase in Cash and Cash Equivalents 15,663,479 (1,496,572) Profit / (Loss) before tax : 12,308,526 Add : Cash & Cash equivalents (Opening Balance) 2,253,597 3,750,169 Profit / (Loss) after tax : 10,433,546 Earnings per share in Rs. : 2.29 Cash & Cash equivalents (Closing Balance) 17,917,076 2,253,597 Dividend rate (%) : – Notes 5 Generic names of three principal products / services of the Company Item Code No. Nil 1. Cash flow statement has been prepared under the Indirect method as set out in the accounting standards AS-3 on Cash Flow Statement as present cash flows by operating, investing and financing Product Description Pest Control Services activities Item Code No. 3808.1* Product Description Insecticides 2. Figures in brackets are outflows/deductions. Item Code No. 90.10 * 3. Previous year figures are regrouped/restated whereever necessary to confirm to this year’s Product Description Photographic Equipment & Spares classification.
For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES A.B. GODREJ Chairman Chartered Accountants D.U. MENON A. MAHENDRAN Managing Director BAHADUR S. DASTOOR Company Secretary Partner Mumbai, May 8, 2006
120 Annual Report 2005-2006
Ensemble Holdings & Finance Limited DIRECTORS’ REPORT FOR THE YEAR ENDED ON MARCH 31, 2006
To The Shareholders, Auditors Your Directors submit their Report along with the audited Accounts for the year ended on March 31, 2006. You are requested to appoint Auditors for the current year and fix their remuneration. The retiring auditors, M/ Review of operations s Kalyaniwalla Mistry & Associates, Chartered Accountants are eligible for reappointment Your Company’s performance during the year as compared with that during the previous year is summarised Directors’ Responsibility Statement below :- Pursuant to the provisions contained in Section 217 (2AA) of the Companies Act, 1956, the Directors of your This Year Previous Year Company confirm : (Rs.’000) (Rs.’000) a) that in the preparation of the annual accounts, the applicable accounting standards have been followed Gross Revenue earned 57,332 3,039 and no material departures have been made from the same; b) that they have selected such accounting policies and applied them consistently and made judgements Profit/(Loss) for the year 57,185 2,053 and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of Provision for Taxation 520 – the Company at the end of the financial year and of the loss of the Company for that period; Adjustment in respect of prior years 5 – c) that they have taken proper and sufficient care for the maintenance of adequate accounting records in Loss brought forward (80,575) (82,628) accordance with the provisions of this Act for safeguard of the assets of the Company and for preventing Loss carried forward (80,521) (80,575) and detecting fraud and other irregularities; d) that they have prepared the annual accounts on a going concern basis. Dividend The Board of Directors have declared and paid two interim dividends for year 2005-06 aggregating to Rs.8.13 Additional Information per share. The Directors recommend a final dividend of Rs.0.97 per share. Taken together these work out to The additional information required to be given under the Companies Act, 1956, has been laid out in the Rs.9.11 per share (previous year Rs. Nil). Accounts to the extent applicable. The notes to the Accounts referred to in the Auditors’ Report are self- Compliance with guidelines issued by the Reserve Bank of India explanatory and therefore do not call for any further explanation. Your Company has been granted a Certificate of Registration by Reserve Bank of India to carry on the business The information in respect of Conservation of energy, Technology Absorption and Foreign Exchange earnings as Non-Banking Financial Institution. and outgo, required under Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure Your Company has not accepted any public deposits during the year under review, nor does it propose to accept of Particulars in the Report of the Board of Directors) Rules, 1988 has not been given, since such requirement the same. As such, pursuant to Non-Banking Financial Companies (Reserve Bank) Directions, 1998, issued by is not applicable to the Company. Reserve Bank of India vide notification No.DFC.114/DG (SPT) dated January 2, 1998, your Company is not The particulars, required under Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars required to obtain rating from a rating agency in this regard. Hence, rating for Fixed Deposit obtained from of Employees) Rules, 1975, have not been given, since the Company did not employ any person during the year CRISIL in 1996-97 has not been renewed. under review. In view of the above, there are no overdue or unclaimed deposits. Directors For and on behalf of the Board of Directors In accordance with Article 124 of the Articles of Association of your Company, Ms. T. A. Dubash retires by rotation and being eligible offers herself for re-appointment. Mr. Hoshedar K. Press was appointed as Executive Director with M. EIPE C.K. VAIDYA effect from November 16, 2005. Notice under Section 257 of the Companies Act, 1956 has been received from a Director Director member signifying intention to propose his appointment as Director in the forthcoming Annual General Meeting. Mumbai, May 26, 2006
REPORT OF THE AUDITORS c) All parties except for Godrej Hicare Limited have repaid the principal amounts as stipulated and have been regular in the payment of interest. To The Members of ENSEMBLE HOLDINGS & FINANCE LIMITED d) In our opinion, the Company has taken reasonable steps for the recovery of principal and interest in respect of overdue balance of Rs. 23,110,000/- due from Godrej Hicare Limited. 1. We have audited the attached Balance Sheet of Ensemble Holdings and Finance Limited as at e) The Company had taken unsecured loans from a company covered in the register maintained March 31, 2006 and also the Profit and Loss Account and Cash Flow Statement for the year ended on that under Section 301 of the Companies Act, 1956. The amount involved during the year was date annexed thereto. These financial statements are the responsibility of the Company’s management. Rs. 58,00,000/-. Our responsibility is to express an opinion on these financial statements based on our audit. f) According to information and explanations given to us, we are of the opinion that the rate of interest 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those and other terms and conditions on which loans have been taken from the company covered in the Standards require that we plan and perform the audit to obtain reasonable assurance about whether the register maintained under Section 301 of the Companies Act, 1956 are not, prima facie, prejudicial financial statements are free of material misstatement. An audit includes examining, on a test basis, to the interest of the Company. evidence supporting the amounts and disclosures in the financial statements. An audit also includes g) The Company is regular in repaying the principal amounts as stipulated and has been regular in assessing the accounting principles used and significant estimates made by management, as well as the payment of interest. evaluating the overall financial statement presentation. We believe that our audit provides a reasonable 2. a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that all transactions that need to be entered basis for our opinion. into the register in pursuance of Section 301 of the Companies Act, 1956, have been so entered. 3. As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Government in terms b) These transactions have been made at reasonable prices having regard to the prevailing market of Section 227 (4A) of the Companies Act, 1956, we annex hereto a statement on the matters specified prices at the relevant time. in paragraphs 4 and 5 of the said Order. 3. In our opinion and according to the information and explanations given to us, the Company has not 4. Further to our comments in the Annexure referred to above, we report that: accepted any deposits from the public within the meaning of Sections 58A and 58AA or any other relevant a) We have obtained all the information and explanations which to the best of our knowledge and provisions of the Companies Act, 1956, and the rules framed thereunder. belief were necessary for the purpose of our audit; 4. The Company has an internal audit system, which in our opinion, is commensurate with the size and b) In our opinion, proper books of account as required by law have been kept by the Company so far nature of its business. as appears from our examination of such books; 5. a) According to the records examined by us, the Company is generally regular in depositing undis- c) The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the puted statutory dues including income tax with appropriate authorities. books of account; b) According to the information and explanation given to us there are no dues of sales tax, income d) In our opinion, the Profit and Loss Account and Balance Sheet dealt with by this report comply with tax, wealth tax, service tax, excise duty or cess, which have not been deposited on account of any dispute. the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956; 6. The accumulated losses of the Company as at end of the financial year are more than fifty percent of its e) In our opinion and to the best of our information and according to the explanations given to us, the net worth. The company has not incurred cash losses during the current financial year and in the said accounts, read with the notes thereon, give the information required by the Companies Act, immediately preceding financial year. 1956, in the manner so required and give a true and fair view in conformity with the accounting 7. According to the information and explanations given to us and the records examined by us, we observed principles generally accepted in India: that the Company has not borrowed any money from financial institutions or banks or debenture holders. (i) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2006, 8. According to the information and explanations given to us the Company has not granted loans and (ii) in the case of the Profit and Loss Account, of the Profit of the Company for the year ended on advances on the basis of security by way of pledge of shares and other securities. that date; 9. In our opinion and according to the information and explanation given to us, the nature of the activities of the (iii) in the case of Cash Flow Statement, of the cash flow for the year ended on that date. Company does not attract any special statute applicable to chit fund and nidhi/mutual benefit fund/ societies. 5. On the basis of the written representations received from the Directors as on March 31, 2006, and taken 10. In our opinion, the Company has maintained proper records of the transactions and contracts of the on record by the Board of Directors, we report that none of the Directors is disqualified as on March 31, investments dealt in by the Company and timely entries have been made therein. The investments made 2006, from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the by the Company are held in its own name. Companies Act, 1956. 11. According to the information and explanations given to us and the records examined by us, the Company has not given any guarantees for loans taken by others from banks or financial institutions. For and on behalf of 12. According to the information and explanations given to us and the records examined by us we observed KALYANIWALLA MISTRY AND ASSOCIATES that the Company has not taken any term loan. Chartered Accountants 13. On the basis of an overall examination of the balance sheet and cash flows of the Company and the V. M. PADWAL information and explanation given to us, we report that the Company has not utilised any funds raised Partner on short-term basis for long-term investments. Mumbai, May 26, 2006 Membership No.: 49639 14. The Company has not made any preferential allotment of shares to parties or companies covered under Section 301 of the Companies Act, 1956. 15. The Company did not issue any debentures during the financial year. ANNEXURE TO THE AUDITORS’ REPORT 16. The Company has not raised any money through a public issue during the year. Referred to in Paragraph 3 of our report of even date on the accounts of Ensemble Holdings & Finance Limited 17. Based upon the audit procedures performed and the information and explanation given by the management, for the year ended March 31, 2006: we report that no fraud on or by the Company has been noticed or reported during the year. 1. a) The Company has granted unsecured loans to two companies covered in the register maintained 18. In our opinion, clauses (i), (ii), (iv) and (viii) of paragraph 4 of the Companies (Auditor’s Report) Order, 2003 under Section 301 of the Companies Act, 1956 and the amount involved in the said transactions was are not applicable. Rs. Nil. The outstanding amount receivable towards loans from such companies amount to Rs. For and on behalf of 2,31,81,117/-. KALYANIWALLA MISTRY AND ASSOCIATES b) In our opinion and according to information and explanations given to us, the rate of interest and Chartered Accountants other terms and conditions of unsecured loans given by the Company, are prima facie not prejudicial V. M. PADWAL to the interest of the Company except for unsecured loan given to Godrej Hicare Limited which Partner has been adequately provided for. Mumbai, May 26,2006 Membership No.: 49639
121 Ensemble Holdings & Finance Limited
BALANCE SHEET AS AT MARCH 31, 2006 PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006 This Year Previous Year This Year Previous Year Schedule Rupees Rupees Schedule Rupees Rupees
SOURCE OF FUNDS INCOME 1 Shareholders’ Funds Interest Income 9 457,070 842,572 Dividend 397,935 2,181,632 (a) Share Capital 1 37,741,600 37,741,600 Profit on sale of investments (Net) 19,750,323 34 (b) Reserves & Surplus 2 102,357,370 84,945,040 Provision for diminution in value of Long term investments written back 36,488,750 – 140,098,970 122,686,640 Profit on sale of Mutual Funds 237,935 14,595 2 Loan Funds 57,332,013 3,038,833 Unsecured Loans 3 – 1,100,000 EXPENDITURE Total 140,098,970 123,786,640 Expenses 10 127,137 54,329 Interest 11 19,554 931,130 APPLICATION OF FUNDS 146,691 985,459 1 Investments 4 44,027,576 35,578,755 PROFIT / (LOSS) BEFORE TAX 57,185,322 2,053,374 2 Current Assets, Loans Provision for Taxation 520,000 – and Advances PROFIT / (LOSS) AFTER TAX 56,665,322 2,053,374 (a) Sundry Debtors 453,350 – Adjustments for Income tax of prior years 5,779 – (b) Cash & Bank Balances 5 504,958 7,207,669 PROFIT AVAILABLE FOR APPROPRIATION 56,671,101 2,053,374 (c) Other Current Assets 6 804 8,600 APPROPRIATION Dividend (d) Loans and Advances 7 18,893,472 502,273 Interim 30,700,000 19,852,584 7,718,542 Final (Proposed) 3,682,599 34,382,599 –
Less : Current Liabilities and Dividend Distribution Tax 4,822,160 – Transfer to Special Reserve Fund u/s 45IC of RBI Act, 1934 11,745,220 – Provisions 8 Transfer to General Reserves 5,667,110 – Current Liabilities 103,199 85,762 Provisions 4,199,084 – 56,617,089 – Balance available for set off against b/f deficit in P&L A/c 54,012 – 4,302,283 85,762 Loss brought forward (80,575,105) (82,628,479) Net Current Assets 15,550,301 7,632,780 Loss Carried Forward (80,521,093) (80,575,105)
3 Profit and Loss Account 80,521,093 80,575,105 Earnings Per Share 12 (6) 15.02 0.54 Total 140,098,970 123,786,640 NOTES TO ACCOUNTS 12 NOTES TO ACCOUNTS 12
The Schedules referred to above form an integral part of the Balance Sheet. The Schedules referred to above form an integral part of the Profit & Loss Account.
As per our Report of even date attached. Signatures to Balance Sheet and As per our Report of even date attached. Signatures to Profit & Loss Account Schedules 1 to 8 and 12 and Schedules 9 to 12 For and on behalf of For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants M. EIPE Director Chartered Accountants M. EIPE Director C.K. VAIDYA Director C.K. VAIDYA Director V.M. PADWAL S. SRINIVASAN V.M. PADWAL S. SRINIVASAN Partner Company Secretary Partner Company Secretary Mumbai, May 26, 2006 Mumbai, May 26, 2006
SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006
This Year Previous Year This Year Previous Year Rupees Rupees Rupees Rupees SCHEDULE 1 : SHARE CAPITAL SCHEDULE 2 : RESERVES & SURPLUS AUTHORISED SHARE PREMIUM 5,000,000 Equity Shares of Rs. 10/- each 50,000,000 50,000,000 As per last Balance Sheet 84,945,040 84,945,040 ISSUED, SUBSCRIBED AND PAID UP Special Reserves u/s 45IC of RBI Act, 1934 3,774,160 Equity Shares of Rs. 10/- each fully paid up. 37,741,600 37,741,600 Opening Balance – – Add : Transfer during the year for FY 2004-05 411,000 – 37,741,600 37,741,600 Add : Transfer during the year for FY 2005-06 11,334,220 – 11,745,220 (Out of the above, 3,770,160 shares are held by General Reserve Godrej Industries Ltd., the Holding Company) Opening Balance – Transfer during the year for FY 2005-06 5,667,110 5,667,110 – 102,357,370 84,945,040 SCHEDULE 3 : UNSECURED LOANS Inter Corporate Borrowings – 1,100,000 – 1,100,000
(Inter Corporate Borrowings are from the Holding Company; and are due for repayment within on call.)
122 Annual Report 2005-2006
SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006
SCHEDULE 4 : INVESTMENTS Quantity Amount Investee Company / Institution Face Quantity as Acquired Sold Quantity as As on As on Value on 01.04.05 during during on 31.03.06 31.03.06 31.03.05 the year the year Rupees Rupees Long Term Investments (At Cost) Equity shares - Quoted Companies under same management Godrej Industries Ltd. 6 98,990 – 98,990 – – 40,992,795 Godrej Foods Ltd. 1 1,484,864 – 1,484,864 – – 1,363,885 Other Companies Agro Tech Foods Ltd. 10 1 – – 1 53 53 Colgate Palmolive India Ltd. 10 1 – – 1 151 151 Dabur India Ltd. 1 1 1 – 2 59 59 (Bonus received during the year) Henkel Spic India Ltd. 10 1 – – 1 31 31 Hindustan Lever Ltd. 1 751 – – 751 90,589 90,589 Gillette India Ltd. 10 1 – – 1 400 400 Marico Industries Ltd. 10 4 – – 4 271 271 Nirma Ltd. 10 1 – – 1 255 255 Procter & Gamble Hygiene & Health Care Ltd. 10 1 – – 1 490 490 Venkys India Ltd. 10 1 – – 1 37 37 Unquoted Companies under the Same Management : Godrej Properties Ltd. 10 267,410 65 190,680 76,795 5,488,590 18,957,460 Godrej Agrovet Ltd. 10 – 2,000 – 2,000 560,000 – Godrej Remote Services Ltd. 10 10,883 – 10,883 – – 109,384 Godrej Hicare Ltd. 10 4,800 – – 4,800 48,000 48,000 Godrej Global Solutions Ltd. (Reduction of 10 49,940 – 8,689 41,251 499,400 499,400 Share Capital during the year under a scheme of arrangement) Other Companies : karROX Technologies Ltd. 10 250,000 – – 250,000 10,050,000 10,050,000 Personalitree Academy Ltd. 10 389,269 – – 389,269 11,027,991 11,027,991 Reckitt Benckiser (India) Ltd. 10 10 – 10 – – 2,433 Avestha Gengraine Technologies Pvt. Ltd. 10 – 55,500 – 55,500 25,037,438 – Current Investments Mutual Funds - Unquoted Magnum Institutional Income fund– Savings Growth 2,300,000 – 55,103,755 83,143,684 Less : Provision for diminution in value of Investments 11,076,179 47,564,929 44,027,576 35,578,755 Aggregate Book Value of Investments : Quoted Investments 92,336 5,960,076 Unquoted Investments 43,935,240 29,618,677 44,027,576 35,578,753 Market Value of quoted investments 210,151 24,993,109
This Year Previous Year SCHEDULE 12 : NOTES TO ACCOUNTS Rupees Rupees 1. Significant Accounting Policies SCHEDULE 5 : CASH AND BANK BALANCES a. Accounting Convention Cash on hand 1,736 1,792 The financial statements are prepared under the historical cost convention, on accrual basis in Balances with Scheduled Banks accordance with the generally accepted accounting principles in India, the Accounting Standards in Current Accounts 503,222 1,205,877 issued by the Institute of Chartered Accountants of India and the provisions of the Companies Act,1956. in Fixed Deposits with Bank – 6,000,000 b. Income recognition 504,958 7,207,669 (i) Dividend income is recognised when the right to receive the same is established. (ii) Interest income is recognised on time proportion basis. SCHEDULE 6 : OTHER CURRENT ASSETS (iii) Profit/loss on sale of investments is accounted on the trade dates. Accrued Interest 804 8,600 c. Investments 804 8,600 Long term investments are carried at cost. Provision for diminution, if any, in the value of each long term investment is made to recognise decline, other than that of a temporary nature. The fair value SCHEDULE 7 : LOANS AND ADVANCES (Unsecured, considered good, unless stated otherwise) of a long term investment is ascertained with reference to its market value, the investee’s assets Loans 71,117 139,440 and results and the expected cash flows from the investments. ESOP Loans 18,550,000 – d. Taxes on Income Current Tax is the amount of tax payable on the taxable income for the year determined in accordance Share Application Money (considered doubful) 300,000 300,000 with the provisions of the Income Tax Act, 1961. Intercorporate Deposits (considered doubtful) 23,110,000 23,110,000 Deferred tax is recognised on timing differences, being the differences between the taxable income and accounting income that originate in one period and are capable of reversal in one or more 23,410,000 23,410,000 subsequent periods. Deferred tax assets subject to the consideration of prudence are recognised Less : Provision for Doubtful Loans and Advances (23,410,000) (23,410,000) and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. The tax – – effect is calculated on the accumulated timing differences at the year end based on the tax rate and Advance Payment of Taxes 272,355 362,833 laws enacted or substantially enacted on the Balance Sheet date. (Net of provision for tax Rs.5,20,000, previous year Nil) 2. Investments The Company has acquired and sold the following investments during the year : 18,893,472 502,273 This year Previous year SCHEDULE 8 : CURRENT LIABILITIES & PROVISIONS Current Liabilities No. of units/ Purchase No. of units/ Purchase Sundry Creditors 103,199 85,762 Share (Rs.) Cost (Rs.) Share (Rs.) Cost (Rs.) Provisions : JM Mutual Fund ––1,895,393 20,000,000 Proposed Dividend 3,682,599 – Avestha Gengraine Technology Pvt. Ltd. ––50,000 20,000,000 Tax on Distributed Profits 516,485 – SBI-Magnum Inst. Income Fund 4,967,729 54,503,966 Nil Nil 4,199,084 85,762 SBI- Insta Cash Fund 120,882 1,850,000 Nil Nil Kotak -Liquid Inst Premium Fund 1,379,441 18,700,000 Nil Nil SCHEDULE 9 : INTEREST INCOME (Gross) 3. Loans given by the Company to the ex-employees of Godrej Industries Limited and Lawkim Limited On Loans (TDS Rs. 85,400/-, previous year Rs. Nil) 405,846 35,848 are covered by an undertaking from the respective companies to repay the instalments on due dates On Intercorporate Deposits – 805,562 from the voluntary retirement compensation falling due to the said ex-employees. (TDS Rs. Nil, previous year Rs. 1,68,443/-) 4. Amount due from a Company under the same management On Income tax Refund 26,690 52 This year Previous Year On Fixed Deposits with Bank (TDS Rs. 5,505, previous year Rs. Nil) 24,534 1,110 Rupees Rupees 457,070 842,572 Godrej Industries Ltd. 71,921 140,971 SCHEDULE 10 : EXPENSES Godrej Hicare Ltd. 23,110,000 23,110,000 Salary 22,500 – Godrej Remote Services Ltd. – 7,534 Profession Tax 2,500 2,500 23,181,921 23,258,505 Directors’ sitting fees 4,000 2,000 5. Auditors’ Remuneration : Auditors’ Remuneration 44,896 27,550 (includes service tax wherever applicable) Professional Charges 25,510 20,000 Audit Fees 28,060 27,550 Miscellaneous Expenses 27,731 2,279 Tax Audit Fees 16,836 – Total 127,137 54,329 44,896 27,550 SCHEDULE 11 : INTEREST 6. Earnings per share On Inter Corporate Borrowings 19,554 931,130 a. Net Profit/(Loss) after Tax available for shareholders 56,671,101 2,053,373 b. Weighted Average Number of Equity Shares 3,774,160 3,774,160 Total 19,554 931,130 c. Basic and Diluted Earnings per Share of Rs.10 each 15.02 0.54 123 Ensemble Holdings & Finance Limited
SCHEDULES ANNEXED TO AND FORMING PART OF ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006 7. Related Party Disclosures 10. ADDITIONAL INFORMATION AS REQUIRED UNDER PART IV OF SCHEDULE VI TO THE a) Related Parties with whom transactions have taken place during the year, with the name and description of relationship. COMPANIES ACT, 1956 Parties where control exists. BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE Godrej Industries Limited, the Holding Company 1. Registration details Godrej & Boyce Mfg. Co. Ltd., the ultimate Holding Company Related Parties with whom transactions have taken place during the year Registration No. : 11-65457 Holding Company State Code : 11 Godrej Industries Limited Balance Sheet Date : 31.03.2006 Fellow Subsidiaries Godrej Properties Limited 2. Capital raised during the year (Amount in Rs. Thousands) Godrej Remote Services Limited Public Issue : – Individual exercising significant influence over the enterprise Rights Issue : – Ms. T. A. Dubash Mr. M. Eipe Bonus Issue : – Mr. C. K. Vaidya Mr. H. K. Press b) Transactions with Related Parties Private Placement : – (Rs. in lac) 3. Position of mobilisation and deployment of funds (Amount in Rs .Thousands) Sr. Nature of Transaction Holding Subsidiary Fellow Associate/ Key Mang. Relatives of Total Total Liabilities : 140,099 No. Company Company Subsidiary Joint Personnel Key Mang. Venture Personnel Total Assets : 140,099 i) Acceptance of ICB 57.00 – – – – – 57.00 Sources of funds : Previous Year 25.00 – – – – – 25.00 Paid up Capital : 37,742 ii) Refund of ICB 68.00 – – – – – 68.00 Previous Year 258.50 – – – – – 258.50 Reserves & Surplus : 102,357 iii) Interest paid on ICB 0.19 – – – – – 0.19 Secured Loans : – Previous Year 9.31 – – – – – 9.31 iv) Intercorporate Unsecured Loans : – Deposits placed – – – – – – – Previous Year – – 105.00 – – – 105.00 Application of funds : v) ICD Refund received – – – – – – – Net Fixed Assets : – Previous Year – – 105.00 – – – 105.00 vi) Interest Received Investments : 44,028 on ICD – – – – – – – Net Current Assets : 15,550 Previous Year – – 8.06 – – – 8.06 Miscellaneous Expenditure : – vii) Dividend Received 3.96 – – – – – 3.96 Previous Year 2.97 – 18.84 – – – 21.81 Accumulated Losses : 80,521 viii) Refund of VRS Loan 0.68 – – – – – 0.68 Previous Year 0.58 – – – – – 0.58 4. Performance of Company (Amount in Rs. Thousands) ix) Interest Received Turnover (Total Income) : 57,332 on VRS Loan 0.26 – – – – – 0.26 Total Expenditure : 147 Previous Year 0.36 – – – – – 0.36 x) Sale of Investments 190.68 – – – – – 190.68 Profit before tax : 57,185 Previous Year 200.00 – – – – – 200.00 Profit after tax : 56,665 xi) Dividend Paid 306.67 – 0.32 – – – 307.00 Previous Year – – – – – – – Earnings per share in Rs. : Rs. 15.02 xii) Remuneration – – – – 0.23 – 0.23 Dividend rate (%) : 91.10% Previous Year – – – – – – – xiii) Balance Outstanding 5. Generic names of three principal The Company is a Loan as on 31.3.06 – – – – – – – products/services of the Company : and Investment Company Payable Previous Year 11.00 – – – – – 11.00 Receivable 0.72 – – – – – 0.72 Previous Year 1.41 – 0.08 – – – 1.49 CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006 This Year Previous Year c) The significant Related Party Transactions are as under Rupees Rupees (Rs. in lac) Nature of Transaction Amount Cash flow from Operating Activities Profit before tax 57,185,322 2,053,374 Acceptance of ICB Adjustments for : Godrej Industries Limited 57.00 Profit on sale of long term investments (19,750,323) (34) Refund of ICB Profit on sale of Mutual Fund (237,936) (14,595) Godrej Industries Limited 68.00 Provision for Dimunition in value of long term Investments (36,488,750) – Interest Expense - GIL 19,554 931,130 Interest paid on ICB Godrej Industries Limited 0.19 Operating Profit before working capital changes 727,867 2,969,875 Dividend Received Adjustments for : Godrej Industries Limited 3.96 Accrued Interest 7,796 (6,453) Sundry Debtors (453,350) 28,635,000 Refund of VRS Loan Trade Payables 17,437 641 Godrej Industries Limited 0.68 Cash generated from operations 299,750 31,599,063 Interest Received on VRS Loan Direct Taxes paid (590,905) (168,443) Godrej Industries Limited 0.26 Direct Taxes refund received 167,161 1,274 Sale of Investments Net Cash from operating activities (123,994) 31,431,894 Godrej Industries Limited 190.68 Cash flow from Investing Activities Dividend Paid Proceeds from sale of investments 151,018,592 14,629 Godrej Industries Limited 306.67 New investments made (102,990,404) (138,364) Godrej Agrovet Limited 0.32 Loans (18,481,677) 57,862 Remuneration Net cash generated/(used) from investing activities 29,546,511 (65,873) Mr. H. K. Press 0.23 Cash flow from Financing Activities Balance Receivable Outstanding Intercorporate Borrowings (Net) (1,100,000) (23,350,000) Godrej Industries Limited 0.72 Interest Paid on Borrowings (19,554) (931,130) 8. Additional information required under Schedule VI, Part II of the Companies Act, 1956 to the extent not Dividend Paid (30,700,000) – applicable has not been given. Tax on Distributed Profits (4,305,675) – 9. Previous year’s figures have been regrouped/reclassified wherever necessary. Net cash generated/(used) from financing activities (36,125,229) (24,281,130) Net increase/(decrease) in cash and cash equivalents (6,702,712) 7,084,891 Cash in and cash equivalents (opening balance) 7,207,669 122,778 Cash in and cash equivalents (closing balance) 504,957 7,207,669
As per our Report attached. Signatures to Cash Flow Statement
For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants M. EIPE Director C.K. VAIDYA Director V.M. PADWAL S. SRINIVASAN Partner Company Secretary Mumbai, May 26, 2006
124 Annual Report 2005-2006
SCHEDULE TO BALANCE SHEET OF A NON-BANKING FINANCIAL COMPANY Long Term investments : (as required in terms of Paragraph 9BB of 1. Quoted : Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998 (i) Share : (a) Equity 0.92 (b) Preference — (Rs. in lakhs) (ii) Debentures and Bonds Nil Particulars (iii) Units of mutual funds Nil LIABILITIES SIDE : (iv) Government Securities Nil (v) Others (Please specify) Nil 1. Loans and advances availed by the NBFCs inclusive Amount Amount 2. Unquoted : of interest accrued thereon but not paid: outstanding overdue (i) Shares : (a) Equity 527.11 (a) Debentures : Secured Nil Nil (b) Preference — : Unsecured Nil Nil (ii) Debentures and Bonds Nil (other than falling within the (iii) Units of mutual funds Nil meaning of public deposits*) (iv) Government Securities Nil (b) Deferred Credits Nil Nil (v) Others (Please specify) Nil (c) Term Loans Nil Nil 6. Borrower group-wise classification of all leased assets, stock-on-hire and loans and advances : (d) Inter-corporate loans and borrowing Nil Nil Please see Note 2 below (e) Commercial Paper Nil Nil Category Amount net of provisions (f) Public Deposits* Nil Nil Secured Unsecured Total (g) Other Loans (specify nature) Nil Nil 1. Related Parties ** (a) Subsidiaries Nil Nil Nil * Please see Note 1 below (b) Companies in the same group : 2. Break-up of (1)(f) above (Outstanding public deposits Loans Godrej Industries Ltd. Nil 0.71 0.71 inclusive of interest accrued thereon but not paid) : (c) Other related parties (a) In the form of Unsecured debentures Nil Nil Inter Corporate Deposits - (b) In the form of partly secured debentures i.e. debentures Nil Nil Godrej Photo-Me Ltd. Nil — — where there is a shortfall in the value of security 2. Other than related parties (c) Other public deposits Nil Nil a) Advance Tax Payment Nil 2.72 2.72 * Please see Note 1 below Total 3.43 3.43 ASSETS SIDE : 7. Investor group-wise classification of all investments (current and long term) in shares and securities (both quoted and unquoted): 3. Break-up of Loans and Advances including bills Amount outstanding Please see note 3 below receivables [other than those included in (4) below] : Category Market Value / Break up Book Value (Net (a) Secured Nil or fair value or NAV of Provisions) (b) Unsecured 1. Related Parties ** i) Loans/Advances 189.21 (a) Subsidiaries Nil Nil ii) Intercorporate Deposit 231.10 (b) Companies in the same group : iii) Advance Payment of Taxes 2.72 Quoted Nil Nil 4. Break up of Leased Assets and stock on hire and Unquoted 329.26 65.48 hypothecation loans counting towards EL/HP activities (c) Other related parties NIL NIL (i) Lease assets including lease rentals under sundry debtors : 2. Other than related parties (a) Financial lease Nil Quoted : 2.10 0.92 (b) Operating lease Nil Unquoted : 519.03 373.88 (ii) Stock on hire including hire charges under sundry debtors : Total 850.39 440.28 (a) Assets on hire Nil (b) Repossessed Assets Nil ** As per Accounting Standard of ICAI (Please see Note 3) (iii) Hypothecation loans counting towards EL/HP activities # Start up Company hence fair value considered at face value. (a) Loans where assets have been repossessed Nil 8. Other information (b) Loans other than (a) above Nil Particulars Amount (i) Gross Non-Performing Assets 5. Break-up of Investments : (a) Related parties Nil Current Investments : (b) Other than related parties Nil 1. Quoted : (ii) Net Non-Performing Assets (i) Shares : (a) Equity Nil (a) Related parties Nil (b) Preference Nil (b) Other than related parties Nil (ii) Debentures and Bonds Nil (iii) Assets acquired in satisfaction of debt Nil (iii) Units of mutual funds Nil Notes : (iv) Government Securities Nil 1. As defined in Paragraph 2(1)(xii) of the Non-Banking Financial Companies Acceptance of Public Deposits (v) Others (please specify) Nil (Reserve Bank) Directions, 1998. 2. Unquoted : 2. Provisioning norms shall be applicable as prescribed in the Non-Banking Financial Companies Prudential (i) Shares : (a) Equity Nil Norms (Reserve Bank) Directions, 1998. (b) Preference Nil 3. All Accounting Standards and Guidance Notes issued by ICAI are applicable including for valuation of (ii) Debentures and Bonds Nil investments and other assets as also assets acquired in satisfaction of debt. However, market value in (iii) Units of mutual funds 23 respect of quoted investments and break up/fair value/NAV in respect of unquoted investments should be (iv) Government Securities Nil disclosed irrespective of whether they are classified as long term or current in column (5) above. (v) Others (Please specify) Nil
125 Godrej International Limited
DIRECTORS’ REPORT
The Directors present their report and accounts for the year ended 31st March, 2006 Political and charitable donations Principal activities and review of the business The company made no political or charitable contributions during the year. The company's principal activity during the year continued to be trading in vegetable oils. The company's Directors’ responsibilities working capital was augmented during the year by means of a Rights Issue of 1,100,000 shares of £1 each, Company law requires the directors to prepare accounts for each financial year which give a true and fair taken up entirely by the parent company. Prices of vegetable oil remained flat for most of the year and view of the state of affairs of the company and of the profit or loss for that period. In preparing those made trading conditions difficult. The Company managed to increase it's turnover by 30 percent as a accounts, the directors are required to: result of better availability of workinag capital. However, margins were under severe pressure due to those flat market conditions for most of the year. The strength in energy prices and the prospect of usage of - select suitable accounting policies and then apply them consistently; vegetable oils in bio-diesel are expected to lead to greater market volatility and more trading opportunity - make judgements and estimates that are reasonable and prudent; and in the coming year. - prepare the accounts on the going concern basis unless it is inappropriate to presume that the Results and dividends company will continue in business. Profit for the year declined slightly to USD382,566. The directors recommend a dividend for the year at 6 The directors are responsible for maintaining proper accounting records which disclose with reasonable cents for each £ 1 share on the entire increased share capital, amounting to USD156,300 in total. accuracy at any time the financial position of the company and to enable them to ensure that the accounts Directors comply with the Companies Acts 1931 to 2004. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other The directors who served during the year and their interests in the share capital of the Company were as follows: irregularities. £1 Ordinary shares Auditors 2006 2005 A resolution to reappoint Graham Moore as auditors will be put the members at the Annual General Adi B Godrej (Indian) 1 1 Meeting. Nadir B Godrej (Indian) – – This report was approved by the board on 12 May 2006. Aspi K Bardy (Indian) – – Dorab E Mistry (British) – – Homeric Limited Sharon Lancaster (British) (resigned 13 October 2005) – – Secretary Philip Collins (British) (Appointed 13 October 2005, Resigned 11 May 2006) – – Marion Hodgson (British) (Appointed 11 May 2006) – –
INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF GODREJ INTERNATIONAL LIMITED We have audited the accounts of Godrej International Limited for the year ended 31 March 2006. These BASIS OF AUDIT OPINION accounts have been prepared under the historical cost convention and the accounting policies set out We conducted our audit in accordance with United Kingdom Auditing Standards issued by the Auditing therein. Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS disclosures in the accounts. It also includes an assessment of the significant estimates and judgements As described in the Statement of Directors’ Responsibilities the company’s directors are responsible for the made by the directors in the preparation of the accounts, and of whether the accounting policies are preparation of the accounts in accordance with applicable law. In the absence of comparable accounting appropriate to the company’s circumstances, consistently applied and adequately disclosed. standards in the Isle of Man, the Directors have chosen to apply United Kingdom Accounting Standards We planned and performed our audit so as to obtain all the information and explanations which we considered where they do not conflict with Isle of Man Statute. necessary in order to provide us with sufficient evidence to give reasonable assurance that the accounts are Our responsibility is to audit the accounts in accordance with relevant legal and regulatory requirements free from material misstatement, whether caused by fraud or other irregularity or error. In forming our together with our own professional ethical guidance. opinion we also evaluated the overall adequacy of the presentation of information in the accounts. We report to you our opinion as to whether the accounts give a true and fair view and are properly OPINION prepared in accordance with the Companies Acts 1931 to 2004. We also report to you if, in our opinion, In our opinion the accounts give a true and fair view of the state of the company’s affairs as at 31 March the Directors’ Report is not consistent with the accounts, if the company has not kept proper accounting 2006 and of its profit for the year then ended and have been properly prepared in accordance with the records, if we have not received all the information and explanations we require for our audit, or if Companies Acts 1931 to 2004. information specified by law regarding directors’ remuneration and transactions with the company is not Graham Moore disclosed. Chartered Accountants We read the Directors’ Report and consider the implications for our report if we become aware of any 14 Douglas Street apparent misstatements within it. Peel Isle of Man May 12, 2006
BALANCE SHEET AS AT MARCH 31, 2006 PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED Notes 2006 2005 31 MARCH 2006 $ Rs. Lac $ Rs. Lac Fixed assets Investments 5 4,312,060 1,924 4,312,060 1,888 Notes 2006 2005 Current assets $ Rs. Lac $ Rs. Lac Debtors 6 2,389,343 1,066 1,718,086 752 Turnover 2 50,724,030 22,633 39,031,709 17,092 Cash at bank and in hand 1,193,349 532 386,598 169 Cost of sales (50,239,122) (22,417) (38,491,244) (16,855) 3,582,692 1,598 2,104,684 922 Gross profit 484,908 216 540,465 237 Creditors: amounts falling due within one year 7 (177,876) (79) (844,314) (370) Administrative expenses (72,417) (32) (131,660) (58) Other operating income ––12,000 5 Net current assets 3,404,816 1,519 1,260,370 552 Total assets less Operating profit 412,491 184 420,805 184 current liabilities 7,716,876 3,443 5,572,430 2,440 Interest receivable 22,158 10 7,206 3 Creditors: amounts Interest payable 3 (52,083) (23) (28,749) (13) falling due after more than one year 8 (1,169,000) (521) (1,169,000) (512) Profit on ordinary activities before taxation 382,566 171 399,262 175 Tax on profit on ordinary activities –––– 6,547,876 2,922 4,403,430 1,928 Profit for the financial year 382,566 171 399,262 175 Capital and reserves Called up share capital 9 4,209,327 1,878 2,291,147 1,003 Dividends: Profit and loss account 10 2,338,549 1,044 2,112,283 925 ordinary dividend on equity shares 4 (156,300) (70) (150,500) (66) Shareholders’ funds: Retained profit for the financial year 10 226,266 101 248,762 109 Equity 6,547,876 2,922 4,403,430 1,928 Continuing operations 11 6,547,876 2,922 4,403,430 1,928 None of the Company's activities were acquired or discontinued during the above two financial years. Note: The Rupee equivalents of US $ have been given at the closing exchange rates has on March 31, Note: The Rupee equivalents of US $ have been given at the closing exchange rates has on March 31, 2006 (US $1.00 = Rs. 44.62) and March 31, 2005 (US $ 1.00 = Rs. 43.79) 2006 (US $1.00 = Rs. 44.62) and March 31, 2005 (US $ 1.00 = Rs. 43.79) M Hodgson D E Mistry Director Director Approved by the board on 12 May 2006 126 Annual Report 2005-2006
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 8. Creditors: amounts falling due after one year 2006 2005 $ Rs. Lac $ Rs. Lac FOR THE YEAR ENDED 31 MARCH 2006 Bank loans 1,169,000 521 1,169,000 512 Notes 2006 2005 9. Share capital $ Rs. Lac $ Rs. Lac Authorised: Profit for the financial year 382,566 171 399,262 175 Ordinary shares of £1 each 4,000,000 1,785 2,000,000 876 Total recognised gains and losses related to the year 382,566 171 399,262 175 2006 2005 2005 2006 2005 2005 No. No. $ Rs. Lac $ Rs. Lac Allotted, called up NOTES TO THE ACCOUNTS FOR THE YEAR ENDED and fully paid: Ordinary shares MARCH 31, 2006 of £1 each 2,605,000 1,505,000 4,209,327 1,878 2,291,147 1,003
1. Accounting policies 10. Profit and loss account Accounting convention At 1 April 2,112,283 943 1,863,521 816 The accounts have been prepared under the historical cost convention and in accordance with Retained profit 226,266 101 2,112,283 109 applicable accounting standards. At 31 March 2,338,549 1,044 2,112,281 925 Foreign currencies 11. Reconciliation of movement in shareholders’ funds Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. At 1 April 4,403,430 1,965 4,154,668 1819 Monetary assets and liabilities denominated in foreign currencies are translated at the rate of Retained Profit 382,566 171 399,262 175 exchange ruling at the balance sheet date. All differences are taken to the profit and loss account. Dividends (156,300) (70) (150,500) (66) 2. Turnover Shares issued 1,918,180 856 –– Turnover represents the invoiced value of goods supplied by the Company, net of value added tax and trade discounts. At 31 March 6,547,876 2,922 4,403,430 1,928 Turnover is attributable to one continuing activity, the trading of vegetable oils. 12. Gross cash flows 3. Interest payable 2006 2006 2005 2005 Returns on investments and servicing of finance $ Rs. Lac $ Rs. Lac Interest received 22,158 10 7,206 3 Bank loans and overdrafts 37,633 17 –– Interest paid (52,083) (23) (28,749) (13) Other loans 14,450 6 28,749 13 (29,925) (13) (21,543) (9) 52,083 23 28,749 13 Capital expenditure 4. Equity dividends Receipts from sales of tangible fixed assets – – 767,014 336 Equity dividends on ordinary shares - final proposed 156,300 70 150,500 66 Financing 5. Investments Issue of share capital 1,918,180 856 – – Investments in Other investments Total subsidiary undertakings 13. Analysis of changes in net debt $ Rs. Lac $ Rs. Lac $ Rs. Lac At 1 Apr 2005 Cash flows Non-cash changes At 31 Mar 2006 Cost $ Rs. Lac $ Rs. Lac $ Rs. Lac $ Rs. Lac Cash at bank and At 1 April 2005 1,257,060 550 3,055,000 1,338 4,312,060 1,888 in hand 386,598 169 806,751 360 – – 1,193,349 532 At 31 March 2006 1,257,060 561 3,055,000 1,363 4,312,060 1,924 Debt due after On 11 December 1997 the Company acquired the entire issued share capital (US$507060) of 1 year (1,169,000) (512) – – – – (1,169,000) (521) Godrej Global ME, a Company incorporated in the United Arab Emirates on 1 November 1997. On Total (782,402) (343) 806,751 360 – – 24,349 11 10 March 2003 the Company invested a further sum of US$750,000 in the equity share capital of GGME. 14. Ultimate Parent Company Other investments 2006 2006 2005 2005 In April 2001 Godrej Soaps Limited, the owner of all the company's share capital, was demerged $ Rs. Lac $ Rs. Lac into two separate entities: Godrej Consumer Products Limited and Godrej Industries Limited. The assets and liabilities of Godrej Soaps Limited were divided between the two new companies. The Unlisted investments 3,055,000 1,363 3,055,000 1,338 entire share capital of Godrej International Limited is now held by Godfej Industries Limited. On 4 April 2001, the Company invested US$1million in 495,000 C Bay Systems Ltd. (C Bay) 8% Godrej Industries Limited is currently listed on the Mumbai Stock Exchange. Series E Cumulative Convertible Redeemable Preferred Stock of US$ 0.1 per share at a price of US$ The financial statements of Godrej Industries Limited are available from : The Secretary, Godrej 0.2 per share. This represents approximately 6% of the issued share capital of C Bay. Industries Limited, Eastern Express Highway, Vikroli, Mumbai 400 079, India. CB ay is incorporated in Delaware, USA. On 8 March 2004, the Company invested US$2,055,000 in equity shares of Newmarket Limited, a CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006 Company incorporated in the lisle of Man. This represents approximately 18% of the issued share capital of Newmarket Limited. Notes 2006 2006 2005 2005 6. Debtors 2006 2006 2005 2005 $ Rs. Lac $ Rs. Lac $ Rs. Lac $ Rs. Lac Reconciliation of operating profit to net cash inflow from operating activities Trade debtors 577,578 258 315,072 138 Operating profit 412,491 184 420,805 184 Amounts owned by group undertakings Increase in debtors (671,257) (299) (1,050,190) (460) and undertakings in which the company 113,764 51 113,764 50 Decrease in creditors (672,238) (300) (186,772) (82) has a participating interest Other debtors 1,689,614 754 1,283,837 562 Net cash outflow from operating activities (931,004) (415) (816,157) (357) Prepayments and accrued income 8,387 3 5,412 2 Net cash outflow from operating activities (931,004) (415) (816,157) (357) 2,389,343 1,066 1,718,086 752 Returns on investments and servicing of finance 12 (29,925) (13) (21,543) (9) 7. Creditors: amounts falling due within one year Capital expenditure 12 ––767,014 336 Amounts owed to group undertakings and undertakings in which the Company has a (960,929) (429) (70,686) (31) participating interest ––650,000 285 Equity dividends paid (150,500) (67) (135,450) (59) Other creditors 235 – 235 – (1,111,429) (496) (206,136) (90) Accruals and deferred income 21,341 9 43,579 19 Proposed dividend 156,300 70 150,500 66 Financing 12 1,918,180 856 –– 177,876 79 844,314 370 Increase/(decrease) in cash 806,751 360 (206,136) (90) Reconciliation of net cash flow to movement in net debt Increase/(decrease) in cash in the period 806,751 360 (206,136) (90) Change in net debt 13 806,751 360 (206,136) (90) Net debt at 1 April (782,402) (349) (576,266) (252) Net funds/(net debt) at 31 March 24,349 11 (782,402) (343)
Note: The Rupee equivalents of US $ have been given at the closing exchange rates has on March 31, 2006 (US $1.00 = Rs. 44.62) and March 31, 2005 (US $ 1.00 = Rs. 43.79)
127 Godrej Global Mid East FZE
DIRECTORS’ REPORT
Your Company’s performance for the year under review is summarized below: FUTURE OUTLOOK 2005-06 2004-05 Your Company is planning to launch Cinthol soaps in Syria. Cinthol soaps manufactured in the UAE has duty AED Mio. AED Mio. rebates in the Arab league countries. Sales 7.56 6.21 Your Company is working towards launch of newly acquired Cuticura and Erasmic brands in the GCC. Cost of Sales 5.23 4.25 Bottom line improvement is envisaged through lower cost raw material suppliers which includes GIL for supply of soap noodles. Gross Profit 2.33 1.96 AUDITORS Expenses 2.14 1.83 You are required to appoint Auditors for the current year. The Auditors, M/s. Pannell Kerr Forster, Chartered Other Income – 0.06 Accountants Co. being eligible, offer themselves for reappointment. Profit Before Tax 0.19 0.19 PARTNERS IN PROGRESS Tax – – Your company wishes to thank the Sharjah Airport International Free Zone, HSBC Bank Middle East, Alseer Trading Agencies , Khimji Ramdas, A. Latiff Al Aujan Food International, Gulf Trading Corporation, Zahem & Profit after Tax 0.19 0.19 Malhotra, Nasser Bin Khalid Trading Company, Godrej Consumer Products Ltd. and Godrej Industries Limited, REVIEW OF OPERATIONS who through their continued support and co-operation, have been partners in your Company’s progress. Your Company has achieved breakthrough in exports to Sudan, Yemen. Your Company hopes to open up the Pakistan market through initial launch of Powder Haircolour sachets and On behalf of the Board of directors later consolidate their position through launch of other range. Since the net assets of your Company are below 75 percent of the share capital, the Auditors have qualified A.B.GODREJ in their report. Remedial measure of providing sufficient funds will have to be taken by the parent company Director in due course in accordance with the implementation procedures of Sharjah Airport Free Zone. Date : May 15, 2006
AUDITORS’ REPORT TO THE SHAREHOLDERS OF GODREJ GLOBAL MIDEAST FZE
We have audited the accompanying financial statements of GODREJ GLOBAL MIDEAST FZE for the year Opinion ended 31 March 2006 set out on pages 2 to 15. In our opinion, the financial statements give a true and fair view of the financial position of GODREJ GLOBAL Respective responsibilities of the management and the auditors MIDEAST FZE as of 31 March 2006 and of the results of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards and comply with Implementation Procedures These financial statements are the responsibility of the establishment’s management. Our responsibility is to issued by the Sharjah Airport Free Zone Authority pursuant to Law No. 2 of 1995. express an opinion on these financial statements based on our audit. As required by the Sharjah Airport Free Zone Authority pursuant to Law No. 2 of 1995, we further confirm that Basis of opinion we have obtained all the information and explanations necessary for our audit, proper books of account and We conducted our audit in accordance with International Standards on Auditing. Those Standards require that other records have been maintained in accordance with the said regulation. 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 Sharjah Pannell Kerr Forster significant estimates made by management, as well as evaluating the overall financial statement presentation. United Arab Emirates We believe that our audit provides a reasonable basis for our opinion. 15 May 2006
BALANCE SHEET AS AT MARCH 31, 2006 INCOME STATEMENT FOR THE YEAR ENDED MARCH 31, 2006 Notes 2006 2005 Notes 2006 2005 AED Rs. AED Rs. AED Rs. AED Rs. NON-CURRENT ASSETS REVENUE 7,562,467 9,1883,974 6,213,663 74,066,863 Property, plant and equipment 3 21,863 265,636 35,861 427,463 Intangible assets 4 ——10,344 123,300 Cost of sales 14 (5,233,800) (63,590,670) (4,253,630) (50,703,270) 21,863 2,65,636 46,205 550,764 CURRENT ASSETS GROSS PROFIT 2,328,667 28,293,304 1,960,033 23,363,593 Inventories 5 719,232 8,738,669 845,697 10,080,708 Trade and other receivables 6 2,220,868 26,983,546 1,691,775 20,165,958 Other operating income 2,074 25,199 60,783 724,533 Amounts due from related parties 7 2,755 33,473 1,755 20,920 Cash and cash equivalents 8 191,120 2,322,108 286,881 3,419,621 Staff costs 15 (479,832) (5,829,959) (429,688) (5,121,881) 3,133,975 38,077,796 2,826,108 33,687,207 TOTAL ASSETS 3,155,838 38,343,432 2,872,313 34,237,971 Depreciation 3 (18,196) (221,081) (18,402) (219,352) CURRENT LIABILITIES Amortisation 4 (10,344) (125,680) (10,344) (123,300) Bank borrowings 9 714,674 8,683,289 1,151,394 13,724,616 Trade and other payables 10 1,840,403 22,360,896 1,332,953 15,888,800 Other operating expenses 16 (1,438,059) (17,472,417) (1,235,313) (14,724,931) Loan from the parent company 11 418,030 5,079,065 418,030 4,982,918 2,973,107 36,123,250 2,902,377 34,596,334 PROFIT FROM OPERATING ACTIVITIES 384,310 4,669,366 327,069 3,898,662 NON-CURRENT LIABILITY Staff end-of-service gratuity 12 92,300 1,121,445 70,672 842,410 Interest income on bank call deposits 2,310 28,067 762 9,083
SHAREHOLDER’S FUNDS Finance costs 17 (195,453) 2,374,754 (137,452) (1,638,428) Share capital 13 4,586,250 55,722,938 4,586,250 54,668,100 Accumulated losses (4,495,819) (54,624,201) (4,686,986) (55,868,873) PROFIT FOR THE YEAR 191,167 2,322,679 190,379 2,269,318 90,431 10,98,737 (100,736) (1,200,773) TOTAL EQUITY AND LIABILITIES 3,155,838 38,343,432 2,872,313 34,237,971
The Rupee equivalents of AED have been given at the closing exchange rates as on March 31, 2006. The Rupee equivalents of AED have been given at the closing exchange rates as on March 31, 2006. (1 AED (1 AED = Rs. 12.15) and as on March 31, 2005 (1 AED = Rs.11.92) = Rs. 12.15) and as on March 31, 2005 (1 AED = Rs.11.92)
The accompanying notes form an integral part of these financial statements. The accompanying notes form an integral part of these financial statements. The report of the auditor is set forth as given above The report of the auditor is set forth as given above We confirm that we are responsible for these financial statements, including selecting the accounting policies We confirm that we are responsible for these financial statements, including selecting the accounting policies and making the judgements underlying them. We confirm that we have made available all relevant accounting and making the judgements underlying them. We confirm that we have made available all relevant accounting records and information for their compilation. records and information for their compilation.
Approved by the directors on 15 May 2006. Approved by the directors on 15 May 2006. For GODREJ GLOBAL MIDEAST FZE For GODREJ GLOBAL MIDEAST FZE A.B.GODREJ A.B.GODREJ Director Director 128 Annual Report 2005-2006
STATEMENT OF CHANGES IN EQUITY CASH FLOW STATEMENT YEAR ENDED MARCH 31, 2006 YEAR ENDED MARCH 31, 2006 Notes 2006 2005 AED Rs. AED Rs. Share capital Accumulated losses Total REVENUE AED Rs. AED Rs. AED Rs. Cash flows from operating activities As at 31.03.2004 4,586,250 54,438,788 (4,877,365) (57,894,323) (291,115) (3,455,535) Cash generated from/(used in) operations 18 512,572 6,227,750 (144,279) (1,719,806) Interest paid (169,725) (2,062,159) (137,452) (1,638,428) Profit for the year — — 190,379 2,269,318 190,379 2,269,318 Net cash from/(used in) operating activities (A) 342,847 4,165,591 (281,731) (3,358,234) As at 31.03.2005 4,586,250 54,668,100 (4,686,986) (55,868,873) (100,736) (1,200,773) Cash flows from investing activities Profit for the year — — 191,167 2,322,679 191,167 2,322,679 Purchase of property, plant and equipment (4,198) (51,006) (1,600) (19,072) As at 31.03.2006 4,586,250 55,722,938 (4,495,819) (54,624,201) 90,431 1,098,737 Interest received 2,310 28,067 762 9,083 Net cash used in investing activities (B) (1,888) (22,939) (838) (9,989) Cash flows from financing activities Receipt of loan from the parent company ——25,725 306,642 (Payment of)/proceeds from clean import loans (401,267) (4,875,394) 365,052 4,351,420 Payment of bank overdraft (net) (35,453) (430,754) (206,135) (2,457,129) Net cash (used in)/from financing activities (C) (436,720) (5,306,148) 184,642 2,200,933 Net decrease in cash and cash equivalents (A+B+C) (95,761) (1,163,496) (97,927) (1,167,290) Cash and cash equivalents at beginning of year 286,881 3,485,604 384,808 4,586,911 Cash and cash equivalents at end of year 8 191,120 2,322,108 286,881 3,419,622
The Rupee equivalents of AED have been given at the closing exchange rates as on March 31, 2006. (1 AED The Rupee equivalents of AED have been given at the closing exchange rates as on March 31, 2006. (1 AED = Rs. 12.15) and as on March 31, 2005 (1 AED = Rs.11.92) = Rs. 12.15) and as on March 31, 2005 (1 AED = Rs.11.92)
The accompanying notes form an integral part of these financial statements. The accompanying notes form an integral part of these financial statements. The report of the auditor is set forth as given above The report of the auditor is set forth as given above
Approved by the directors on 15 May 2006. Approved by the directors on 15 May 2006. For GODREJ GLOBAL MIDEAST FZE For GODREJ GLOBAL MIDEAST FZE A.B.GODREJ A.B.GODREJ Director Director
NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED Gains or losses resulting from foreign currency transactions are taken to the income statement. MARCH 31, 2006 g) Cash and cash equivalents Cash and cash equivalents comprise cash, bank current accounts, bank deposits free of encumbrance 1. LEGAL STATUS AND BUSINESS ACTIVITY with a maturity date of three months or less from the date of deposit and highly liquid investments a) GODREJ GLOBAL MIDEAST FZE was incorporated on 1 November 1997 in the Sharjah Airport with a maturity date of three months or less from the date of investment. Free Zone, Sharjah, UAE as a Free Zone Establishment pursuant to Law No. 2 of 1995 of H.H. h) Financial instruments Sheikh Sultan Bin Mohammed Al Qassimi, The Ruler of Sharjah. The registered office is P. O. Box Financial assets and financial liabilities are recognised when, and only when, the establishment 7966, Sharjah, United Arab Emirates. becomes a party to the contractual provisions of the instrument. b) The establishment’s principal activity consists of trading in soaps and toiletries in the United Arab Financial assets are de-recognised when, and only when, the contractual rights to receive cash Emirates and other AGCC countries. flows expire or when substantially all the risks and rewards of ownership have been transferred. c) The establishment is a wholly owned subsidiary of Godrej International Limited, a company Financial liabilities are de-recognised when, and only when, they are extinguished, cancelled or incorporated in the Isle of Man. Godrej International Limited is a wholly owned subsidiary of Godrej expired. Industries Limited, a company incorporated in India and which is a subsidiary of the ultimate parent company Godrej & Boyce Mfg. Co. Ltd., India. Current financial assets that have fixed or determinable payments and for which there is no active market, which comprise trade and other receivables and related party receivables, are classified 2. SIGNIFICANT ACCOUNTING POLICIES, JUDGEMENTS AND KEY ASSUMPTIONS as receivables and stated at cost or, if the impact is material, at amortised cost using the effective The financial statements are prepared under the historical cost convention and in accordance with interest method, less any write down for impairment losses plus reversals of impairment losses. International Financial Reporting Standards issued or adopted by the International Accounting Standards Impairment losses and reversals thereof are recognised in the income statement. Board (IASB) and which are effective for accounting periods beginning on or after 1 January 2005, and Current financial liabilities, which comprise current bank borrowings, trade and other payables, the laws of Sharjah Airport Free Zone Authority. The significant accounting policies adopted, and that related party payables are measured at cost or, if the impact is material, at amortised cost using have been consistently applied, are as follows: the effective interest method. a) Property, plant and equipment i) Significant judgments and key assumptions Property, plant and equipment are stated at cost less accumulated depreciation and impairment The significant judgments made in applying accounting policies that have the most significant losses. The cost less estimated residual value, where material, is depreciated using the straight-line effect on the amounts recognised in the financial statements are as follows: method over the estimated useful lives of five years. Impairment An assessment of residual values is undertaken at each balance sheet date and, where material, if there is a change in estimate, an appropriate adjustment is made to the depreciation charge. At each balance sheet date, management conducts an assessment of property, plant, equipment and all financial assets to determine whether there are any indications that they may be b) Intangible assets impaired. In the absence of such indications, no further action is taken. If such indications do Intangible assets are stated at cost less accumulated amortisation and impairment losses. Product exist, an analysis of each asset is undertaken to determine its net recoverable amount and, development expenses are amortised over their estimated useful life of five years. if this is below its carrying amount, a provision is made. c) Inventories Key assumptions made concerning the future and other key sources of estimation uncertainty Inventories are stated at the lower of cost and net realizable value. Cost is arrived at using the First- at the balance sheet date, that have a significant risk of causing a material adjustment to the In First-Out (FIFO) method and comprises invoice value plus applicable landing charges. Net carrying amounts of assets and liabilities within the next financial year, are as follows: realizable value is based on estimated selling price less any estimated cost of disposal. Carrying values of property, plant and equipment d) Staff end-of-service gratuity Residual values are assumed to be zero unless a reliable estimate of the current value can Provision is made for end-of-service gratuity payable to the staff at the balance sheet date in be obtained for similar assets of ages and conditions that are reasonably expected to exist at accordance with the local labour laws. the end of the assets’ estimated useful lives. e) Revenue Inventory provisions Revenue represents the net amount invoiced for goods delivered during the year. Management regularly undertakes a review of the establishment’s inventory, stated at AED 590,000 (previous year AED 876,690) in order to assess the likely realisation proceeds, taking f) Foreign currency transactions into account purchase and replacement prices, technological changes, age, likely Transactions in foreign currencies are translated into UAE Dirhams at the rate of exchange ruling obsolescence, the rate at which goods are being sold and the physical damage. Based on the on the date of the transactions. assessment assumptions are made as to the level of provisioning required. Monetary assets and liabilities expressed in foreign currencies are translated into UAE Dirhams Doubtful debt provisions at the rate of exchange ruling at the balance sheet date. Management regularly undertakes a review of the amounts of loans and receivables owed to the establishment either from third parties, (see note 6) or from related parties (see note
129 Godrej Global Mid East FZE
NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2006 7) and assesses the likelihood of non-recovery. Such assessment is based upon the age of the 7. RELATED PARTIES debts, historic recovery rates and assessed creditworthiness of the debtor. Based on the assessment assumptions are made as to the level of provisioning required. The establishment enters into transactions with entities that fall within the definition of a related party as contained in International Accounting Standard 24. The directors consider such transactions to be Impairment in the normal course of business. Assessments of net recoverable amounts of property, plant, equipment and all financial assets Related parties comprise the parent companies, companies under common ownership and/or other than loans and receivables (see above) are based on assumptions regarding future cash common management control. flows expected to be received from the related assets. Staff end-of-service gratuity At the balance sheet date significant balances with related parties were as follows: The establishment computes the provision for the liability to staff end-of-service gratuity 2006 2005 stated at AED 92,300 (previous year AED 70,672), assuming that all employees were to leave AED Rs. AED Rs. as of the balance sheet date. The management is of the opinion that no significant difference Trade and other payables would have arisen had the liability been calculated on an actuarial basis as salary inflation to other related parties 589,632 7,164,029 190,333 2275921 and discount rates are likely to have approximately equal and opposite affects. Due from other related parties 2,755 33,473 1,755 20920 j) Adoption of revised and new International Financial Reporting Standards Loan from the parent company 418,030 5,079,065 418,030 4982918 The adoption of revised International Financial Reporting Standards effective for accounting periods beginning on or after 1 January 2005 has impacted only on presentation and disclosures. Guarantee received 1,400,000 17,010,000 1,400,000 16,688,000 The following International Financial Reporting Standards, amendments thereto and Interpretations All balances other than loan from a parent company are unsecured and are expected to be settled in that are assessed by management as likely to have an impact on the financial statements, have cash. Other terms are set out in note 11 and 19. been issued by the IASB prior to 31 March 2006 but have not been applied in these financial Significant transactions with related parties during the year were as follows: statements as their effective dates of adoption are for future accounting periods, as referred to below. It is anticipated that their adoption in the relevant accounting periods will have an impact Sales 712,358 8,655,150 684,980 8,164,962 only on disclosures within the financial statements: Purchases 1,894,517 23,018,382 2,284,240 27,228,141 Amendment to IAS39: Cash Flow Accounting of Forecast Intragroup Transactions (1 January Interest expenses 39,724 482,647 39,730 473,582 2006) 8. CASH AND CASH EQUIVALENTS Amendment to IAS1: Capital Disclosures (1 January, 2007) 3. PROPERTY, PLANT AND EQUIPMENT Cash on hand 5,625 68,344 1,459 17,391 Furniture, fixtures, computers and equipment Bank call deposits accounts 185,495 2,253,764 285,422 3,402,231 AED Rs. 191,120 2,322,108 286,881 3,419,622 Net book values 9. BANK BORROWINGS As at 31.03.2005 Overdraft 124,914 1,517,705 160,367 1,911,574 Cost 178,121 2,123,202 Clean import loans 589,760 7,165,584 991,027 11,813,042 Accumulated depreciation (142,260) (1,695,739) Net book value 35,861 427,463 714,674 8,683,289 1,151,394 13,724,616 As at 31.03.2006 An analysis by bank of amounts Cost 182,319 2,215,176 outstanding is as follows: Accumulated depreciation (160,456) (1,949,540) HSBC Bank Middle East Limited 714,674 8,683,289 1,151,394 13,724,616 Net book value 21,863 265,636 Bank borrowings are secured by assignment of insurance policies covering inventories and assets, Reconciliation of net book values corporate guarantee from a parent company, letter of awareness and comfort from the parent companies As at 1.4.2004 52,663 625,110 and assignment of dues from one of the customers. Additions 1,600 19,072 Depreciation for the year (18,402) (219,352) The bank borrowings are subject to certain financial covenants including non withdrawal of profits. As at 31.03.2005 35,861 427,463 10. TRADE AND OTHER PAYABLES Additions 4,198 51,006 Trade payables 1,385,735 16,836,680 961,013 11,455,275 Depreciation for the year (18,196) (221,081) Accruals 454,668 5,524,216 371,940 4,433,525 As at 31.03.2006 21,863 265,636 1,840,403 22,360,896 1,332,953 15,888,800 4. INTANGIBLE ASSETS 11. LOAN FROM THE PARENT COMPANY Product development expenses This represents a short term loan, secured by a first floating charge on property, plant and equipment, Net book values inventories and book debts. Interest is paid @ 7% (previous year 7% per annum). As at 31.03.2005 2006 2005 Cost 51,720 616,502 AED Rs. AED Rs. Accumulated amortisation (41,376) (493,202) Net book value 10,344 123,300 12 PROVISION FOR STAFF END-OF-SERVICE GRATUITY As at 31.03.2006 Opening balance 70,672 858,665 61,628 734,605 Cost 51,720 628,398 Provision for the year 21,628 262,780 20,802 247,960 Accumulated amortisation (51,720) (628,398) Paid during the year ––(11,758) (140,155) Net book value — — Reconciliation of net book values Closing balance 92,300 1,121,445 70,672 842,410 As at 1.4.2004 20,688 251,360 13. SHARE CAPITAL Amortisation for the year (10,344) (125,680) Authorised, issued and paid-up: As at 31.03.2005 10,344 125,680 5 ordinary shares of US$ 250,000 each 4,586,250 55,722,938 4,586,250 54,668,100 Amortisation for the year (10,344) (125,680) [2 shares converted @ 1 US$ = AED 3.66] As at 31.03.2006 — — [3 shares converted @ 1 US$ = AED 3.675] 2006 2005 AED Rs. AED Rs. 14. COST OF SALES 5. INVENTORIES Inventory, beginning of the year 876,690 10,651,784 673,846 8,032,244 Goods held for sale 590,000 7,168,500 876,690 10,450,145 Add: Purchases (including direct expenses) 4,947,110 60,107,386 4,456,474 53,121,170 Less: Provision for slow moving inventories — — (66,690) (794,945) Less: Inventory, end of the year (590,000) (7,168,500) (876,690) (10,450,145) 590,000 7,168,500 810,000 9,655,200 5,233,800 63,590,670 4,253,630 50,703,270 Goods in transit 129,232 1,570,169 35,697 425,508 15. STAFF COSTS 719,232 8,738,669 845,697 10,080,708 Staff salaries and benefits 458,204 5,567,179 408,886 4,873,921 6. TRADE AND OTHER RECEIVABLES Staff end-of-service gratuity 21,628 262,780 20,802 247,960 Trade receivables 2,182,058 26,512,005 1,650,234 19,670,789 479,832 5,829,959 429,688 5,121,881 Prepayments 10,510 127,697 9,741 116,113 Deposits 28,300 343,845 31,800 379,056 2,220,868 26,983,547 1,691,775 20,165,958
130 Annual Report 2005-2006
NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2006
2006 2005 The establishment buys and sells goods and services in foreign currencies. Exposure is minimised where AED Rs. AED Rs. possible by denominating such transactions in US dollars to which the UAE Dirham is pegged. 16. OTHER OPERATING EXPENSES Management continuously monitors its cash flows to determine its cash requirements and makes comparison with its funded and un-funded facilities with banks in order to manage exposure to liquidity Rent 80,000 972,000 80,002 953,624 risk. Advertisement and promotion expenses 991,625 12,048,244 901,321 10,743,746 Borrowing facilities are regularly reviewed to ensure that the establishment obtains the best available Bad debts written off 5,839 70,944 ——pricing, terms and conditions on it borrowings. Other expenses 360,595 4,381,229 253,990 3,027,561 Exposures to the aforementioned risks are detailed below: 1,438,059 17,472,417 1,235,313 14,724,931 Credit risk 17. FINANCE COSTS Financial assets that potentially expose the establishment to concentrations of credit risk comprise On other bank short term loans and overdraft 106,106 1,289,188 72,947 869,528 principally bank accounts, trade and other receivables and amounts due from related parties. On loan from the parent company 25,728 312,595 25,725 306,642 The establishment’s bank accounts are placed with high credit quality financial institutions. On related party guarantees 13,996 170,051 14,005 166,940 Amounts due from related parties, trade and other receivables are stated net of the allowance for doubtful recoveries. The establishment’s trade receivables mainly comprise of duly appointed distributors in the On supplier’s delayed payments 49,623 602,920 24,775 295,318 UAE and other Middle East countries. 195,453 2,374,754 137,452 1,638,428 At the balance sheet date, the establishment’s maximum exposure to credit risk from trade receivables situated outside the UAE amounts to AED 1,484,223 due from distributors/customers in other Middle East 18. CASH GENERATED FROM/(USED IN) OPERATIONS countries (Previous year AED 933,586). Profit for the year 191,167 2,322,679 190,379 2,269,318 At the balance sheet date 61% of trade receivables was due from two distributors (Previous year 69 % Adjustments for: due from three distributors). Depreciation of property, plant and equipment 18,196 221,081 18,402 219,352 There are no significant concentrations of credit risk outside the industry in which the establishment operates. Amortisation 10,344 125,680 10,344 123,300 Interest rate risk Finance costs 195,453 2,374,754 137,452 1,638,428 Call and fixed deposit accounts, amounts due to related parties and suppliers are subject to fixed interest Interest income (2,310) (28,067) (762) (9,083) rates at levels generally obtained in the UAE and are therefore exposed to fair value interest rate risk. Operating profit before changes in All other bank borrowings are subject to floating interest rates at levels generally obtained in the UAE operating assets and liabilities 412,850 5,016,128 355,815 4,241,315 and are therefore exposed to cash flow interest rate risk. Exchange rate risk Decrease/(increase) in inventories 126,465 1,536,550 (164,217) (1,957,467) There are no significant exchange rate risks as substantially all financial assets and financial liabilities Increase in trade and other receivables (529,093) (6,428,480) (521,739) (6,219,129) are denominated in UAE Dirhams or US Dollars to which the Dirham is fixed. Increase in trade and other payables 481,722 5,852,922 176,534 2,104,285 Fair values Increase in staff gratuity provision 21,628 262,780 9,044 107,804 The fair value of a financial instrument is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. The fair values of the (Increase)/decrease in amounts due establishment’s financial assets and financial liabilities which are required to be stated at cost or at from related parties (1,000) (12,150) 284 3,385 amortised cost, approximate to their carrying values. 512,572 6,227,750 (144,279) (1,719,806) 19. FINANCIAL INSTRUMENTS The management conducts and operates the business in a prudent manner, taking into account the significant risks to which the business is or could be exposed. For GODREJ GLOBAL MIDEAST FZE The primary risks to which the business is exposed comprise credit, currency, liquidity and cash flow A.B.GODREJ interest rate risks. Director Credit risk is managed by assessing the creditworthiness of potential distributors/customers and the potential for exposure to the market in which they operate, combined with regular monitoring and follow-up.
131 Godrej Global Solutions Limited
DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST MARCH, 2006.
To, During the year under review, the Company has earned Rs. 8,22,65,686/- in foreign currency. The Members of However, it has spent Rs. 13,75,844/- in foreign currency, the details of which are available in points GODREJ GLOBAL SOLUTIONS LIMITED 3 and 4 of the Notes to the Accounts (Schedule 18) for the year. Further, the Company has not Your Directors present their Forth Annual Report together with the Audited Accounts of the Company for imported any foreign technology and hence the requisite particulars in this regard are not applicable. the year ended 31st March, 2006. b. Particulars of Employees: FINANCIAL RESULTS The particulars required under Section 217(2A) of the Companies Act, 1956 read with the Companies Particulars Year ended Period ended (Particulars of Employees) Rules 1975 : 31.3.06 31.3.05 (Rupees) (Rupees) Name Designation Gross Qualification Experie- Date of Age Particulars remu- nce (yrs.) commen- of previous Income from Services 82,265,686 1,667,018 neration cement employment Other Income 14,364,895 27,390,126 (Rs.) of employ- Total Income 96,630,581 29,057,144 ment Less: Total Expenditure 97,286,753 28,023,912 * Sanjay Wholetime 43,44,492 B.Com., ACA 22 1-09-2004 41 Godrej Profit / [Loss] Before Tax (656,172) 1,033,233 Tipnis Director Remote Less: Fringe Benefit Tax (250,381) — Services Ltd. Income Tax - Deferred 288,313 — c. Audit Committee : Profit [Loss] After Tax (618,240) 1,033,233 As required under Section 292A of the Companies Act, 1956, the Audit Committee of Directors of the Profit /(Loss) brought forward (14,244,299) (15,277,532) Company consisted of Mr. N.B. Godrej, Mr. F.P. Sarkari and Mr. K.N. Petigara. The said Committee Loss written off in Capital Reorganisation 14,244,299 — met Four times during the year and has performed the functions as prescribed under the said Section Profit/(Loss) carried forward (618,240) (14,244,299) and its terms of reference. DIVIDEND d. Fixed Deposits : In view of the loss sustained by the Company, your Directors do not recommend any dividend for the year The Company has not accepted any deposits from the public during the year under review. under review. e. Directors’ Responsibility Statement : OPERATIONS & FUTURE OUTLOOK In accordance with the requirement under Section 217(2AA) of the Companies Act, 1956, the Directors Your Company is focused on providing transaction processing services. During the year under review hereby confirm : your Company acquired, through its US subsidiary, Godrej Global Solutions Inc., the business of Outsource Offshore Inc., a US based healthcare forms processing service provider. Your Company successfully 1. that in the preparation of the accounts for the financial year ended 31st March, 2006, the completed the acquisition of the Data Conversion Business of Softpage Data Conversion Services Private applicable accounting standards have been followed along with proper explanation relating to Ltd., Navi Mumbai during the year. Your Company also successfully set up state-of-art service delivery material departures; capabilities at Chennai and Navi Mumbai which can support customers in areas of healthcare such as 2. that the Directors have selected such accounting policies and applied them consistently and medical transcription, medical billing, claims processing and document management services. made judgements and estimates that were reasonable and prudent, so as to give a true and fair INVESTMENTS IN SUBSIDIARIES AND ASSOCIATE COMPANIES view of the state of affairs of the Company at the end of the financial year under review and To enable your Company to facilitate business development and manage the customer relationships, your also of the loss of the Company for that period; company set-up an US subsidiary, Godrej Global Solutions, Inc. The US entity is held through a holding 3. that the Directors have taken proper and sufficient care for the maintenance of adequate company in Cyprus, viz. Godrej Global Solutions (Cyprus) Limited. accounting records in accordance with the provisions of the Companies Act, 1956 for Your Company has investments in The View Group LP, an US based private equity group and Godrej safeguarding the assets of the Company and for preventing and detecting fraud and other Upstream Limited, a travel focused customer care and service company. During the year your company irregularities; also made investments in Verseon LLC, a Delaware based Limited Liability company engaged in the business 4. that the Directors have prepared the accounts for the financial year ended 31st March, 2006 on of development and exploitation of technology relating to pharmaceutical research and development. To a going concern basis. enable your company to focus on its core BPO business, your Company proposes to divest these investments in the coming year. Your company has already initiated necessary action in this regard. INSURANCE All the assets of the Company are adequately insured. CAPITAL RESTRUCTURING Pursuant to demerger of Data Conversion business of Softpage Data Conversion Services Private Limited AUDITORS (Softpage) into the Company during the year, the Equity Share Capital of the Company was restructured The present Auditors of the Company, M/s. Kalyaniwalla Mistry and Associates, Chartered Accountants, which presently stands at Rs.46,22,26,090 divided into 4,27,42,609 Equity Shares of Rs.10/-each fully paid-up Mumbai, holds their office until the conclusion of the ensuing Annual General Meeting. The Company has and 49,71,429 Equity Shares of Rs.10/- each, Rs.7/- each paid-up respectively. During the year the Company received an eligibility Certificate from them pursuant to Section 224(IB) of the Companies Act, 1956. issued and allotted 18,000 Redeemable Preference Shares of Rs.10/- each at par to shareholders of Softpage. Your Directors recommend their re-appointment at the ensuing Annual General Meeting for your approval. DIRECTORS ACKNOWLEDGEMENTS In accordance with the provisions of the Companies Act, 1956, read with the Articles of Association of the Your Directors place on record their sincere thanks to all the Government Departments concerned with Company, Mr. Sanjay S. Tipnis and Mr. K. N. Petigara will retire by rotation at the ensuing Annual General the operations of the Company, the Bankers and employees of the Company, and to Godrej Industries Meeting. However, being eligible, they have offered themselves for re-appointment. Your Directors Limited, for their continued support and co-operation. recommend their re-appointment for your approval. STATUTORY INFORMATION a. Conservation of Energy, Foreign Exchange Earnings & Outgo and Technology Absorption: For and on behalf of the Board As required under Section 217[1][e] of the Companies Act, 1956, the necessary details are given hereunder: The activities of the Company being service oriented, the particulars required to be furnished in S.S. Tipnis C.K. Vaidya respect of conservation of energy are not applicable. However, all efforts are being made by the Director Director Company to conserve energy at all the stages of its activities. Mumbai, May 5, 2006 REPORT OF THE AUDITORS TO THE MEMBERS OF GODREJ GLOBAL SOLUTIONS LIMITED d. In our opinion, the Profit and Loss Account and Balance Sheet dealt with by this report comply 1. We have audited the attached Balance Sheet of Godrej Global Solutions Limited as at March 31, with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies 2006 and the Profit and Loss Account for the year ended on that date annexed thereto. These financial Act, 1956; statements are the responsibility of the Company’s management. Our responsibility is to express an e. In our opinion and to the best of our information and according to the explanations given to us, opinion on these financial statements based on our audit. the said accounts, read with the notes thereon, give the information required by the Companies 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Act, 1956, in the manner so required and give a true and fair view in conformity with the Standards require that we plan and perform the audit to obtain reasonable assurance about whether accounting principles generally accepted in India: the financial statements are free of material misstatement. An audit includes examining, on a test (i) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, basis, evidence supporting the amounts and disclosures in the financial statements. An audit also 2006; and includes assessing the accounting principles used and significant estimates made by management, (ii) in the case of the Profit and Loss Account, of the profit of the Company for the year ended as well as evaluating the overall financial statement presentation. We believe that our audit provides on that date. a reasonable basis for our opinion. (iii) in the case of cash flow statement, of the cash flow for the year ended on that date. 3. As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Government in 5. On the basis of the written representations received from the Directors as on March 31, 2006, and terms of Section 227 (4A) of the Companies Act, 1956, we annex hereto a statement on the matters taken on record by the Board of Directors, we report that none of the Directors is disqualified as on specified in paragraphs 4 and 5 of the said Order. March 31, 2006, from being appointed as a Director in terms of clause (g) of sub-section (1) of 4. Further to our comments in the Annexure referred to above, we report that: Section 274 of the Companies Act, 1956. a. We have obtained all the information and explanations which to the best of our knowledge and For and on behalf of belief were necessary for the purpose of our audit; KALYANIWALLA MISTRY AND ASSOCIATES b. In our opinion, proper books of account as required by law have been kept by the Company so Chartered Accountants far as appears from our examination of such books; V. M. PADWAL c. The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with Partner the books of account; Membership No.: 49639 Mumbai, May 5, 2006. 132 Annual Report 2005-2006
ANNEXURE TO THE AUDITORS’ REPORT Referred to in Paragraph 3 of our report of even date on the accounts of Godrej Global Solutions Limited for as at the last date of the financial year concerned for a period of more than six months from the date the period ended March 31, 2006: they became payable. 1. a) The Company is maintaining proper records showing full particulars, including quantitative details b) According to the information and explanations given to us and the records examined by us, there and situation of fixed assets. are no dues of Income tax or Cess outstanding on account of any dispute. b) The Company has a program for physical verification of fixed assets at periodic intervals. In our 8. The Company’s accumulated losses at the end of the financial year do not exceed fifty percent of its net opinion, the frequency of verification is reasonable having regard to the size of the Company and worth and it has not incurred any cash losses in the immediately preceding financial year. the nature of its assets. The discrepancies reported on such verification were not material and have 9. According to the information and explanations given to us and records examined by us, we observed that the been properly dealt with in the books of account. Company has not has not defaulted in repayment of dues to a financial institution or bank or debenture holders. 2. a) The Company has granted unsecured loans to a company listed in the register maintained under 10. According to the information and explanations given to us the Company has not granted loans and Section 301 of the Companies Act, 1956 and the said loan has been repaid during the year. The total advances on the basis of security by way of pledge of shares and other securities. amount of loan granted during the year was Rs. 100 lac and the total amount of loan repaid during 11. In our opinion and according to the information and explanations given to us, the nature of the activities of the the year was Rs. 2192 lac. Company does not attract any special statute applicable to chit fund and nidhi/mutual benefit fund /societies. b) In our opinion and according to the information and explanations given to us, the rate of interest and 12. In our opinion, the Company has maintained proper records of the transactions and contracts in respect other terms and conditions of loan given are prima facie not prejudicial to the interest of the company. of the investments purchased and sold during the year and timely entries have been made therein. The c) In our opinion and according to the information and explanation given to us the company is investments made by the Company have been held in its own name. generally regular in repayment of principal amount and interest. 13. According to information and explanations given to us and records examined by us, on overall basis, the d) There are no overdue amount of principal and interest. term loans were applied for the purpose for which they were obtained. e) The Company has not taken any loans, secured or unsecured, from companies, firms or other 14. According to the information and explanations given to us and the records examined by us, the Company parties listed in the register maintained under section 301 of the Companies Act, 1956. has not given any guarantees for loans taken by others from banks or financial institutions, the terms and 3. In our opinion and according to the information and explanations given to us, there is an adequate internal conditions whereof are prima facie prejudicial to the interest of the Company. control system commensurate with the size of the Company and the nature of its business, for the 15. On the basis of an overall examination of the balance sheet of the Company and the information and purchase of fixed assets and sale of services. During the course of our audit no major weakness have been explanations given to us, we report that the Company has not utilised any funds raised on short-term basis observed in the internal controls. for long-term investments. 4. a) Based on the audit procedures applied by us and according to the information and explanation 16. The Company has not made any preferential allotment of shares to parties or companies covered under provided by the management, the particulars of contracts or arrangements referred to in Section Section 301 of the Act. 301 of the Act have been entered in the register required to be maintained under that section. 17. According to the information and explanations given to us and the records examined by us, no debentures b) In our opinion and according to the information and explanations given to us, having regard to the have been issued by the Company. explanation that many of the items are of a special nature and their prices cannot be compared with 18. The Company has not raised any money through a public issue during the period. alternative quotations, the transactions made in pursuance of contracts or arrangements entered 19. Based upon the audit procedures performed and the information and explanation given by the management, in the register maintained under Section 301 of the Companies Act, 1956 in respect of any party we report that no fraud on or by the Company has been noticed or reported during the year. during the period have been made at prices which are reasonable having regard to the prevailing 20. In our opinion, clauses (ii) and (viii) of paragraph 4 of the companies (Auditors Report) Order, 2003 are market prices at the relevant time. not applicable. 5. In our opinion and according to the information and explanations given to us, the Company has not For and on behalf of accepted any deposits from the public within the meaning of Section 58A, 58AA or any other relevant KALYANIWALLA MISTRY AND ASSOCIATES provisions of the Companies Act, 1956 and the rules framed there under. Chartered Accountants 6. The Company has an internal audit system, which in our opinion, is commensurate with the size and V. M. PADWAL nature of its business. Partner 7. a) According to the records examined by us the Company is generally regular in depositing the undisputed statutory dues including Provident Fund, Employees State Insurance, Income tax, Cess Membership No.: 49639 and other statutory dues with the appropriate authorities and there is no arrears of outstanding dues Mumbai, May 5, 2006.
BALANCE SHEET AS AT MARCH 31, 2006 PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006 March 31, 2006 March 31, 2005 Year Ended Year Ended Schedule (Amount Rs.) (Amount Rs.) March 31, 2006 March 31, 2005 SOURCE OF FUNDS Schedule (Amount Rs.) (Amount Rs.) 1 SHAREHOLDERS’ FUNDS (a) Share Capital 1 462,406,093 538,465,000 INCOME (b) Reserves & Surplus 2 51,374,134 – Income from Services 82,265,686 1,667,018 Other Income 13 14,364,895 27,390,126 513,780,227 538,465,000 2 BORROWED FUNDS 96,630,581 29,057,144 (a) Secured Loans 3 17,300,244 – EXPENDITURE (b) Unsecured Loan 4 22,654,141 – Staff Expenses 14 38,846,547 4,655,619 39,954,385 – Establishment Expenses 15 27,369,723 6,510,716 553,734,612 538,465,000 Other Operating Expenses 16 19,945,861 13,692,634 Interest & Finance Charges 17 2,864,457 – APPLICATION OF FUNDS 1 FIXED ASSETS 5 Amortizations – 556,671 (a) Gross Block 37,589,595 7,813,568 Depreciation 8,260,166 2,608,271 (b) Less : Accumulated Depreciation 11,900,449 3,691,261 97,286,753 28,023,911 (c) Net Block 25,689,146 4,122,307 PROFIT / (LOSS) FOR THE YEAR -Before Tax (656,172) 1,033,233 2 INVESTMENTS 6 455,394,643 193,332,114 Fringe Benefit Tax (250,381) – 3 DEFERRED TAX ASSET 288,313 – Income Tax - Current – – 4 CURRENT ASSETS, LOANS AND ADVANCES Income Tax - Deferred 288,313 – (a) Cash & Bank Balances 7 32,800,201 105,830,447 PROFIT / (LOSS) FOR THE YEAR -After Tax (618,240) 1,033,233 (b) Debtors 8 26,950,942 150,132 (c) Loans and Advances 9 22,626,693 221,759,874 Profit / (Loss) brought forward (14,244,299) (15,277,532) 82,377,836 327,740,453 Loss written off in Capital Regorganisation 14,244,299 – LESS : CURRENT LIABILITIES AND (Refer Note number 3 in Schedule 18) PROVISIONS Profit / (Loss) carried forward (618,240) (14,244,299) Current Liabilities 10 9,818,433 2,756,895 Basic Earning Per Share (Face value of Rs 10 per share) (0.01) 0.02 Provisions 11 815,132 468,066 10,633,565 3,224,961 NET CURRENT ASSETS 71,744,271 324,515,492 5 MISCELLANEOUS EXPENDITURE 12 – 2,250,789 (To the extent not written off or adjusted) 6 PROFIT AND LOSS ACCOUNT 618,240 14,244,299 553,734,612 538,465,000 NOTES TO ACCOUNTS 18 NOTES TO ACCOUNTS 18
The Schedules referred to above form an integral part of the Balance Sheet. The Schedules referred to above form an integral part of the Profit & Loss Account.
As per our Report attached. For and on behalf of the Board As per our Report attached. For and on behaof of the
For and on behalf of For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants Chartered Accountants
S. S. Tipnis Whole time Director S. S. Tipnis Whole time Director V. M. Padwal C. K. Vaidya Director V. M. Padwal C. K. Vaidya Director Partner A.K. Singla Company Secretary Partner A.K. Singla Company Secretary Mumbai, May 5, 2006 Mumbai, May 5, 2005 133 Godrej Global Solutions Limited
SCHEDULES ANNEXED TO AND FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2006
March 31, 2006 March 31, 2005 March 31, 2006 March 31, 2005 (Amount Rs.) (Amount Rs.) (Amount Rs.) (Amount Rs.) SCHEDULE 1 : SHARE CAPITAL SCHEDULE 2 : RESERVES & SURPLUS AUTHORISED Capital Reserve 59,900,000 (Previous Year 60,000,000) Equity Shares 599,000,000 600,000,000 Opening Balance – of Rs.10/- each Add : Additions during the year 1,554,134 1,554,134 – 100,000 (Previous Year Nil) Preference Shares 1,000,000 – (Refer note 3, Schedule 18) of Rs.10/- each 600,000,000 600,000,000 Securities Premium Account Opening Balance – ISSUED AND SUBSCRIBED Add : Additions during the year 49,820,000 49,820,000 – 47,714,038 (Previous Year 57,746,500) Equity Shares of Rs.10/- each. 477,140,380 577,465,000 51,374,134 – 18,000 (Previous Year NIL) Preference Shares of Rs.10/- each. 180,000 – SCHEDULE 3 : SECURED LOANS 477,320,380 577,465,000 Term Loan from bank 17,300,244 – PAID UP 17,300,244 – 42,742,609 (Previous Year 51,746,500) Equity Shares of Rs.10/- each fully paid up 427,426,090 517,465,000 SCHEDULE 4 : UNSECURED LOANS 4,971,429 (Previous Year 6,000,000) Equity Shares of of Rs.10/- Demand Loan from bank 22,654,141 – each Rs. 7.00 each paid up (P.Y. Rs 3.50) 34,800,003 21,000,000 (Repayable within one year) 18,000 (Previous Year NIL ) Preference Shares of Rs.10/- each. 180,000 – 22,654,141 – 462,406,093 538,465,000 Of the above 4,76,72,739 (Previous Year 5,22,96,500) equity shares are held by Godrej Industries Limited, the Holding Company. 18,000 Preference shares of Rs. 10/- each were issued for consideration other than cash. Refer Note Number 3 in Schedule 18.
SCHEDULE 5 : FIXED ASSETS
ASSETS GROSS BLOCK DEPRECIATION NET BLOCK As on Additions Deletions As on As on For the Reductions As on As on As on 01.04.2005 31.03.2006 01.04.2005 Year 31.03.2006 31.03.2006 31.03.2005 Leasehold Improvements 3,457,993 2,957,260 – 6,415,253 1,440,299 1,625,317 – 3,065,616 3,349,637 2,017,694 Computers 3,176,990 21,494,567 – 24,671,557 1,878,452 5,889,972 – 7,768,424 16,903,133 1,298,538 Office Equipments 169,825 5,006,757 190,065 4,986,517 73,638 535,254 50,978 557,914 4,428,603 96,187 Furniture & Fixtures 633,400 507,508 – 1,140,908 223,800 134,551 – 358,351 782,557 409,600 Vehicle 375,360 – – 375,360 75,072 75,072 – 150,144 225,216 300,288 Total 7,813,568 29,966,092 190,065 37,589,595 3,691,261 8,260,166 50,978 11,900,449 25,689,146 4,122,307 Previous Year 6,142,511 1,671,057 – 7,813,568 1,082,990 2,608,271 – 3,691,261 4,122,307 5,059,521
SCHEDULE 6 : INVESTMENTS Investee Face Value Quantity Acquired Sold Quantity Amount (Rs.) Amount (Rs.) Company/Institutions As on during during As on As on As on (Rs.) 1/04/05 Year Year 31/3/2006 31/3/2006 31/3/2005 LONG TERM INVESTMENTS Unquoted Equity Shares-Fully Paid Godrej Upstream Limited 10 9,000,000 – – 9,000,000 90,000,000 90,000,000 Verseon LLC - Class A preferred units (US$)** 1.90** – 1,315,789 1,315,789 114,233,750 – Investment in Subsidiary Company Equity Shares in Godrej Global Solutions (Cyprus) Ltd face value of US$ 1.00 each 26,240,229 – 26,240,229 26,240,229 – Preference Shares in Godrej Global Solutions (Cyprus) Ltd face value of US$ 1.00 each – 65,600,571 – 65,600,571 65,600,571 – Investment in the capital of Partnership firm View Group LP ––––– 136,801,078 80,243,788 CURRENT INVESTMENTS Unquoted Units of Mutual Fund Templeton India Treasury Management 1,000 13,264 50,195 52,904 10,555 15,959,680 20,055,234 Prudential ICICI Liquid Plan Institutional Plus 10 – 4,236,307 4,218,875 17,432 206,590 – Kotak Liquid Scheme 10 303,094 10,109,650 9,787,072 625,672 6,352,745 3,033,092 TOTAL 455,394,643 193,332,114
March 31, 2006 March 31, 2005 March 31, 2006 March 31, 2005 (Amount Rs.) (Amount Rs.) (Amount Rs.) (Amount Rs.) SCHEDULE 7 : CASH AND BANK BALANCES SCHEDULE 10 : CURRENT LIABILITIES Cash on hand 97,371 34,804 Sundry creditors 3,076,823 1,451,295 Balances with Scheduled Bank (Due to SSI Undertakings Rs: Nil / Prev. Year Rs : Nil ) In Current Account 32,536,330 5,726,644 Other Liabilities 6,741,610 – In Fixed Deposit 166,500 100,069,000 Advance from Customers – 1,305,600 32,800,201 105,830,447 9,818,433 2,756,895 SCHEDULE 8 : DEBTORS SCHEDULE 11 : PROVISIONS Unsecured and Considered Good Provision for employee retirement benefit 815,132 468,067 Outstanding for more than six months 1,293,710 – 815,132 468,067 Outstanding for less than six months 25,657,232 150,132 SCHEDULE 12 : MISCELLANEOUS EXPENDITURE 26,950,942 150,132 [To the extent not written off or adjusted] SCHEDULE 9 : LOANS AND ADVANCES Preliminary Expenses 929,240 1,045,395 Advances recoverable in cash or in kind Less : Adjusted during the year (929,240) – or for value to be received 723,721 398,820 Less : written off during the year – (116,155) Intercorporate deposits – 214,868,647 – 929,240 Security Deposits 13,357,804 1,720,272 Accrued Interest – 331,644 Pre-operative Expenses 1,321,549 1,762,065 Staff Loan 78,500 21,000 Less : Adjusted during the year (1,321,549) – Advance Payment of Taxes 8,466,668 4,419,491 Less : written off during the year – (440,516) 22,626,693 221,759,874 – 1,321,549 – 2,250,789 134 Annual Report 2004-2005
SCHEDULES ANNEXED TO AND FORMING PART OF THE PROFIT AND LOSS ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006
March 31, 2006 March 31, 2005 i) Taxes on Income (Amount Rs.) (Amount Rs.) Provision for current tax is ascertained on the basis of the taxable income for the year determined SCHEDULE 13 : OTHER INCOME in accordance with the provision of Income Tax Act, 1961. Interest (Gross) Deferred tax is recognised on timing differences; being the difference between the taxable – Bank - (TDS : C.Y : Rs. 7,687/-, P.Y: Rs. 354,340/-) 52,363 2,042,707 incomes and accounting income that originate in one period and are capable of reversal in – Companies - (TDS : C.Y : Rs. 2,781,773/- P.Y. : Rs. 4,054,506/-) 12,396,488 25,132,315 one or more accounting periods. Deferred tax assets subject to the consideration of prudence Dividend 1,910,349 116,391 are recognised and carried forward only to the extent that there is reasonable certainly that Miscellaneous Income 5,696 98,713 sufficient future taxable income will be realised. The tax effect is calculated on the accumulated 14,364,895 27,390,126 timing difference at the year-end and based on the tax rate and laws enacted on substantially enacted on the balance sheet date. SCHEDULE 14 : STAFF EXPENSES j) Foreign Currency Transactions Salary, bonus, exgratia 34,990,456 4,097,232 Transactions in foreign currency are recorded at the exchange rates prevailing on the date of Contribution to Providend Fund and other funds 2,617,899 61,820 the transaction. Monetary assets and Liabilities denominated in foreign currency are translated Staff Welfare 1,238,192 496,567 at the period end exchange rates. Exchange gain/losses are recognised in the profit and loss 38,846,547 4,655,619 account except for exchange differences related to fixed assets, which are adjusted in the cost of the assets. Non Monetary foreign currency items like investments in foreign subsidiaries are SCHEDULE 15 : ESTABLISHMENT EXPENSES carried at cost and expressed in Indian currency at the rate of exchange prevailing at the time Rent 11,251,006 1,170,071 of making the original investment. Office Maintenance 5,785,814 3,510,296 3. Scheme of Arrangement Electricity 5,409,147 993,315 The scheme of arrangement under Sections 391 and 394 of the Companies Act, 1956 between the Communication expenses 4,406,888 837,034 Company, Softpage Data Conversion Services Private Limited and their respective Shareholders for Repairs and Maintenance - Plant and Machinery 516,868 – vesting the Data Conversion business of the Company was approved by the Honorable High Court of 27,369,723 6,510,716 Mumbai on November 9, 2005. Accordingly all the Assets and Liabilities pertaining to the Data SCHEDULE 16 : OTHER OPERATING EXPENSES Conversion Business of Softpage Data Conversion Services Private Limited were transferred to and Legal & Professional Expenses 9,532,816 7,611,612 vested in the company with retrospective effect from April 1, 2005, the appointed date. The scheme Insurance 183,094 71,970 has accordingly been given effect to in these accounts. Conveyance and Travelling 2,916,553 2,774,267 Pursuant to the scheme, all the assets and liabilities of data Conversion Business of Softpage Data Recruitment & Training 1,415,302 1,508,896 Conversion Services Private Limited as at April 1, 2005 have been taken over at their book value Outsourcing expenses 2,690,130 – and accounted for under the “Pooling of Interest Method”. The assets and liabilities taken over consist Loss on Sale of Assets 82,837 – of fixed assets Rs. 5.98 lac, current assets Rs. 3.87 lac, bank loan Rs. 1.69 lac. Exchange Difference – Loss 287,282 – Pursuant to the scheme, consideration for vesting of the Data Conversion Business of Softpage Data General Expenses 2,837,848 1,725,889 Conversion Services Private limited was discharged by payment of Rs. 300 lac in cash and issue of 18,000 redeemable preference shares of the face value of Rs. 10/- each issued at a premium of 19,945,861 13,692,634 Rs. 498.20 lac to be redeemed as under: SCHEDULE 17 : INTEREST & FINANCE CHARGES a. 4,000 preference shares of Rs. 10/- each on January 31, 2006 Interest on Bank Loan 2,392,882 – b. 10,000 preference shares of Rs .10 each on May 31, 2006 Finance Commission 471,575 – c. 4,000 preference shares of Rs. 10 each on May 31, 2007 The maximum premium payable on redemption of these shares is Rs. 498.20 lac subject to 2,864,457 – achievement of predetermined performance on the date of redemption. Pursuant to the scheme, equity share capital of the company is reduced by Rs. 972.39 lac and the SCHEDULES ANNEXED TO AND FORMING PART OF THE said amount is credited to capital reorganization account. The difference of aggregate of value of ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006 Redeemable Preference Shares (i.e. face value and the maximum premium payable) allotted and cash over the value of net assets of Data cConversion Business of Softpage Data Conversion Services SCHEDULE 18 : NOTES TO ACCOUNTS Private Limited amounting to Rs. 791.83 lac is debited to capital reorganization account. The debit 1. Background balance in profit and loss account of Rs. 142 lac and the balance in miscellaneous expenditure Godrej Global Solutions Limited (“the Company”) was incorporated on February 28, 2003 as a account of Rs. 23 lac as on April 1, 2005 is also debited to capital reorganization account. The limited liability company. The main business of the company is to carry out IT enabled services and balance lying in capital reorganization account after the above adjustment is transferred to capital back office support functions. reserve account. 2. Significant Accounting Policies As per the scheme of arrangement, the company has taken over all the employees of the Data a) Accounting Convention The financial statements are prepared under the historical cost convention, on accrual basis in accordance Conversion Business of Softpage Data Conversion Services Private Limited. with the generally accepted accounting principles in India, the Accounting Standards issued by the 4. Redemption of Preference Shares Institute of Chartered Accountants of India and the provisions of the Companies Act, 1956. The Company has not redeemed 4,000 preference shares of Rs 10/- each at par on January 31, 2006 b) Fixed Asset due to inadequacy of divisible profits. Fixed Assets are stated at cost less accumulated depreciation. Cost includes all expenses 5. Secured Loan related to acquisition and installation of the concerned asset. Term loan from bank are secured by c) Asset Impairment - Charge by way of hypothecation of assets on movable fixed assets of the Company The Company reviews the carrying values of tangible and intangible assets for any possible - Hypothecation of the entire current assets of the Company. impairment at each balance sheet date. An Impairment loss is recognised when the carrying - Irrevocable and unconditional Corporate Guarantee from Godrej Industries Limited. amount of an asset exceeds its recoverable amount. In assessing the recoverable amount, the 6. Investments estimated future cash flows are discounted to their present value at appropriate discount rate. The Company is in the process of disposing off the investment made in the equity shares of Godrej d) Investments Upstream Limited and in the capital of view Group LP, a partnership firm formed under the laws of Long-term investments are carried at cost. Provision for diminution, if any, in the value of each the state of Delaware, USA and does not expect to incur any loss on such sale. long-term investment is made to recognize a decline, other than that of a temporary nature. 7. Operating Lease The fair value of a long-term investment is ascertained with reference to its market value, the The Company’s significant leasing agreements are in respect of operating lease for office premises. investee’s assets and results and the expected cash flows from the investments. These leasing agreements are cancelable and renewable by mutual consent on mutually acceptable Current investments are carried at lower of cost and fair value. terms. The aggregate lease rentals payable by the company are charged to profit and loss account as e) Provisions and Contingent Liabilities a rent amounting to Rs. 101.34 Lacs. (Previous year. Rs. 11.70 Lacs). The future minimum lease Provisions are recognized in the accounts in respect of present probable obligations, the amount payments under non-cancelable operating leases due within a period of one year are estimated at of which can be reliably estimated. Rs. 103.92 Lacs (Previous year. Rs. 11.23 Lacs) and due within a period of one year but less than five Contingent Liabilities are disclosed in respect of possible obligations that arise from past events years are estimated at Rs. 126.58 Lacs. (Previous year. Rs. 6.55 Lacs) but their existence is confirmed by the occurrence or non-occurrence of one or more uncertain 8. Related Party Disclosures future events not wholly within the control of the company. f) Revenue Recognition a) Related Parties with whom transactions have taken place during the year, with the name and Income from services is recognized on completion of service as per terms of the contract. description of relationship. Interest income is recognized on a time proportion basis. Dividend income is recognised when Parties with whom control exists : the right to receive the same is established. Godrej Industries Limited (GIL); the Holding company. g) Depreciation Godrej & Boyce Manufacturing Co. Ltd (GBMCL); the Ultimate Holding Company Leasehold Improvements are amortized equally over the lease period. Depreciation is provided pro-rata to the period of use on the Straight Line Method over the Associate Companies : estimated useful life of assets which is as under: Godrej Upstream Limited (GUL) Computers 3 Years Fellow Subsidiaries : Office Equipment 5 Years Godrej Remote Services Limited (GRSL) Furniture & Fixture 5 Years Motor Vehicle 5 Years Wholly Owned Subsidiaries : h) Retirement Benefits Godrej Global Solutions Inc. (GGSI) Retirement Benefits to employees comprises payment under approved provident fund plans, Godrej Global Solutions (Cyprus) Ltd. (GGSCL) leave encashment and gratuity to eligible employees. Payments under approved provident Key Management Personnel fund plans are charged to revenue. The liability in respect of future payment of gratuity to Mr. N.B. Godrej (NBG) retiring employees and leave encashment benefit on retirement is provided on the basis of an actuarial valuation at the end of each financial year. Mr. Sanjay Tipnis (SST) 135 Godrej Global Solutions Limited
SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006 b) Transactions with Related Parties – Parent and Fellow Subsidiaries (Amount Rs.) Disclosure as required vide Part IV of Schedule VI of the Companies Act, 1956. Nature of Transaction Ultimate Holding Fellow Total Balance Sheet Abstract and Company’s General Business Profile Holding Co. Company Subsidiaries Amount in Rs. Thousands (GBMCL) (GIL) (GRSL) I. Registration Details Leave & Licence – 1,123,440 – 1,123,440 Registration No. 11-139431 Previous Year – 1,011,700 – 1,011,700 State Code 11 Service Charges – 2,808,000 – 2,808,000 Balance Sheet date March 31, 2006 Previous Year – 2,529,250 – 2,529,250 II. Capital raised during the year Other Expenses – 571,604 – 571,604 Public Issue – Previous Year – 153,799 – 153,799 Rights Issue – Issue of Equity Shares – – – – Bonus Issue – Previous Year – 288,465,000 – 288,465,000 Private Placement Call Money Received – 21,000,000 – 21,000,000 III. Position of mobilisation and deployment of funds Previous Year –––– Total Liabilities 553,734 Purchase of Fixed Assets 12,240 – – 12,240 Total Assets 553,734 Previous Year ––375,360 375,360 Sources of Funds Balance Outstanding as of 31-3-2005 Paid-up Capital 462,406 Payables – 17,447 – – Reserves and surplus 51,374 Secured Loans 17,300 c) Transactions with Related Parties – Subsidiaries and Others Unsecured Loans 22,654 (Amount Rs) Application of Funds Nature of Transaction Wholly Wholly Associate Key Total Net Fixed Assets 25,689 Owned Owned Company Management Investments 455,395 Subsidiary Subsidiary Personnel Deferred Tax Asset 288 Company Company Net Current Assets 71,744 (GGSI) (GGSCL) (GUL) (SST) Miscellaneous Expenditure – Investment in Preference Shares – 65,600,571 ––65,600,571 Accumulated Losses 618 Previous Year – – – – – IV. Performance of the Company Investment in Equity Shares – 26,240,229 – – 26,240,229 Total Income 96,631 Previous Year – – – – – Total Expenditure 97,287 Export of Services 54,733,608 – – – 54,733,608 Profit / (loss) before Tax (656) Previous Year – – – – – Profit / (loss) after Tax (618) Interest Income – – 12,396,488 – 12,396,488 Earning per share (in Rs.) 0.01 Previous Year ––25,132,315 – 25,132,315 Dividend Rate % – Inter Corporate Deposit - V. Generic names of principle products / services of company (as per monetary terms) Given– – – 10,000,000 – 10,000,000 Item Code N.A. Previous Year ––335,000,000 – 335,000,000 Product Description IT Service Inter Corporate Deposit CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006 Repaid – – 219,200,000 – 219,200,000 Particulars March 31, 2006 March 31, 2005 Previous Year ––135,000,000 – 135,000,000 (Amount Rs) (Amount Rs) Managerial Remuneration – – – 4,344,492 4,344,492 Cash Flow from Operating Activities Previous Year –– – 1,605,206 1,605,206 Net Loss Before Tax (656,172) 1,033,233 9. Computation of Profits under Section 349 of Companies Act, 1956 Adjustment for: Depreciation 8,260,166 2,608,271 Particulars Current Year Previous Year Interest Paid 2,864,457 – Profit for the year as per Profit and Loss Account (618,240) 1,033,233 Deferred Revenue Expenditure written off – 556,671 Add : (Profit)/Loss on Fixed Assets Scrapped / Sold 84,122 – Depreciation as per Accounts 8,260,166 2,608,271 (Profit)/Loss on Investments Sold (5,696) – Managerial Remuneration 4,344,492 1,645,206 Dividend Income (1,910,349) (116,391) 11,986,418 4,253,447 Interest Income (12,448,851) (27,175,022) Less : Operating Profit before Working Capital Changes (3,812,322) (23,093,238) Depreciation u/s 350 (4,922,868) (1,733,139) Adjustment for: Net Profit / (Loss) 7,063,550 2,520,338 Trade and Other Receivables (38,101,714) (155,192,413) Trade Payables 7,408,603 2,656,405 10. Management Remuneration Cash Generated from Operations (34,505,433) (175,629,246) Salaries and allowances 4,118,460 1,501,720 Direct Taxes Paid -FBT (250,381) – Contribution to Provident Fund and other fund 226,032 103,486 Direct Taxes Paid (4,047,177) – Sitting Fees – 40,000 Total Cash Generated from Operating Activites (38,802,991) (175,629,246) Total 4,344,492 1,645,206 Net Cash from/(used) in Operating Activities (38,802,991) (175,629,246) Cash Flow from Investing Activities 11. Auditors Remuneration included in General Expenses Purchase of Fixed Assets (29,375,208) (1,671,057) (Excluding service tax) Sale of Fixed Assets 56,250 – Audit Fees 9,00,000 75,000 Acquisitions of Data Conversion Business (80,000,000) – Tax Audit Fees 1,00,000 25,000 Purchase of Long Term Investments (262,631,840) (11,094,000) Total 10,00,000 1,00,000 Purchase of Current Investments (277,318,150) (43,147,045) 12. Earning in Foreign Currency Sale of Current Investments 277,893,157 20,058,719 Income from services 82,265,686 1,667,018 Recovery of Inter Corporate Deposits 214,868,647 – 13. Expenditure in Foreign Currency Interest Income 12,448,851 27,175,022 Marketing Expenses 3,209 86,250 Dividend Income 1,910,349 116,391 Travelling Expenses 106,389 875,538 Net Cash from/(used) in Investing Activities (142,147,944) (8,561,970) Books & Periodicals 18,849 Nil Cash Flow from Financing Activities Technical Services Nil 36,171 Proceeds from Issue of Share Capital 71,000,000 288,465,000 Professional Fees Nil 788,357 Proceeds from Long Term Borrowings 48,190,146 – Training 1,176,955 1,093,500 Repayment of Long Term Borrowing (8,405,000) – Liability Insurance 26,581 Nil Interest Paid (2,864,457) – Net Cash from Financing Activities 107,920,689 288,465,000 Software Development & Maintenance 43,861 Nil Net Increase in Cash and Cash Equivalents (73,030,246) 104,273,785 14. Earning Per Share Cash and Cash Equivalents as at beginning of the year 105,830,447 1,556,662 Net profit / (loss) after tax available to shareholders (618,240) 1,033,233 Cash and Cash Equivalents as at end of the year 32,800,201 105,830,447 Number of Equity Shares: Note: To finance working capital requirements, the Company’s Bankers have sanctione a total fund based limit As at commencement of the year 57,746,500 25,000,000 of Rs 450 lac. Of this, limits utilized as on March 31, 2006 is Rs Nil. As at the end of the year 47,714,038 57,746,500 Weighted Average Number of Equity Shares 52,952,098 46,038,992 As per our Report attached. For and on behalf of the board For and on behalf of Basic Earning per Share of Rs. 10/- each (0.01) 0.02 KALYANIWALLA MISTRY AND ASSOCIATES 15. Additional information required under Schedule VI Part II of the Companies Act, 1956, to the extent CHARTERED ACCOUNTANTS not applicable has not been given. V M Padwal S. S. Tipnis C. K. Vaidya 16. Figures of the previous year have been regrouped wherever necessary. Partner Whole Time Director Director Mumbai, May 5, 2006 A.K.Singla Company Secretary 136 Annual Report 2005-2006
Godrej Global Solutions (Cyprus) Limited DIRECTORS’ REPORT
For the period from January 19, 2005 to December 31, 2005 Company’s results The Directors have pleasure in enclosing the Company’s first set of financial statements for the period from 19.01.2005- 31.12.2005 January 19, 2005 to December 31, 2005. US$ Profit for the period 32.962 Principal activities Balance carried forward 32.962 The Company’s principal activity during the period under review was that of holding of investments and Dividends financing. The Directors recommend no dividend to be paid for the period ended December 31, 2005. Directors Auditors The Directors of the Company during the period were the following : A resolution will be put forward to the Annual General Meeting to reappoint PKF Savvides & Co Limited as Stelios Savvides auditors for the next year. Eva Agathangelou By order of the Board For Godrej Global Solution (Cyprus) Limited Rohinton Homi Khajotia Dorab Erach Mistry Secretary Sanjay Tipnis Limassol : April 13, 2006 AUDITORS’ REPORT TO THE MEMBERS OF GODREJ GLOBAL SOLUTIONS (CYPRUS) LIMITED
1. We have audited the financial statements of Godrej Global Solutions (Cyprus) Limited which comprise Solutions (Cyprus) Limited for the period from January 19, 2005 to December 31, 2005 and of its financial the balance sheet as at December 31, 2005 and the income statement, statement of changes in equity performance and its cash flows for the period then ended in accordance with International Financial and cash flow statement for the period from January 19, 2005 to December 31, 2005 and the related Reporting Standards and the requirements of Cyprus Companies Law, Cap. 113. notes. These financial statements are the responsibility of the Company’s Board of Directors. Our respon- Report on other legal requirements sibility is to express an opinion on these financial statements based on our audit. This report is made solely Pursuant to the requirements of the Companies Law, Cap. 113, we report the following : to the Company’s members, as a body, in accordance with Section 156 of the Companies Law, Cap. 113. We have obtained all the information and explanations we considered necessary for the purposes of our Our audit work has been undertaken so that we might state to the Company’s members those matters audit. we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent In our opinion, proper books of account have been kept by the Company. permitted by law, we do not accept or assume responsibility to anyone other than the Company and the The Company’s financial statements are in agreement with the books of account. Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. In our opinion and to the best of our information and according to the explanations given to us, the 2. We conducted our audit in accordance with International Standards on Auditing. Those Standards financial statements give the information required by the Companies Law, Cap. 113, in the manner so require that we plan and perform the audit to obtain reasonable assurance about whether the financial required. statements are free of material misstatement. An audit includes examining, on a test basis, evidence In our opinion, the information given in the report of the Board of Directors on page 1 is consistent with supporting the amounts and disclosures in the financial statements. An audit also includes assessing the the financial statements. accounting principles used and significant estimates made by the Board of Directors, as well as Certified Public Accountants evaluating the overall financial statement presentation. We believe that our audit provides a reasonable Limassol: April 13, 2006 basis for our opinion. 3. In our opinion, the financial statements give a true and fair view of the financial position of Godrej Global
BALANCE SHEET AS AT DECEMBER 31, 2005 INCOME STATEMENT For the year ended from January 19, 2005 to December 31, 2005 Note US$ Rs. Lac Assets Non-current Assets Note Investments 6 1,000,000 450.70 Particulars US$ Rs. Lac Loan receivable 7 1,055,000 475.49 Interest receivable 49,844 22.46 Current Assets Administration expenses (9,850) (4.44) Interest receivabe 49,844 22.46 (Loss)/profit from operations 3 39,994 18.03 Cash at Bank 35,428 15.97 Financial (expenses)/income-net 4 (1,449) (0.65) Incorporation expenses writen off (5,583) (2.52) 85,272 38.43 (Loss)/profit for the period before taxation 32,962 14.86 Total Assets 2,140,272 964.62 Taxation 5 – – Equity and Liabilities (Loss)/profit for the period after taxation 32,962 14.86 Capital and reserves Share capital 8 2,245 1.01 Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on December 31, Equity to be issued 2,097,755 945.46 2005 (US$ 1.00 = Rs. 45.07). Reserves 9 32,962 14.86
2,132,962 961.33 By order of the Board Current liabilities – For Godrej Global Solution (Cyprus) Limited Creditors and accruals 10 7,310 3.29 – Secretary Total equity and liabilities 2,140,272 964.62 Limassol: April 13, 2006 Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on December 31, 2005 (US$ 1.00 = Rs. 45.07). By order of the Board For Godrej Global Solution (Cyprus) Limited Limassol: April 13, 2006 Secretary
STATEMENT OF CHANGES IN EQUITY For the Period from January 19, 2005 to December 31, 2005
Share Share Equity Equity Profit & Loss Profit & Loss capital capital to be issued to be issued Reserve Reserve Total Total US$ Rs. Lac US$ Rs. Lac US$ Rs. Lac US$ Rs. Lac
Issue of share capital 2,245 1.01 – – – – 2,245 1.01 Funds received – – 2,097,755 945.46 – – 2,097,755 945.46 Profit for the period – – – - 32,962 14.86 32,962 14.86 At December 31, 2005 2,245 1.01 2,097,755 945.46 32,962 14.86 2,132,962 961.33
Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on December 31, 2005 (US$ 1.00 = Rs. 45.07). 137 Godrej Global Solutions (Cyprus) Limited
7. Loan receivable NOTES TO THE FINANCIAL STATEMENTS 2005 DECEMBER 31, 2005 US$ Godrej Global Solutions Inc. 1. Introduction (Subsidiary company registered in USA) 1,055,000 The Company was incorporated in Cyprus on January 19, 2005 as a private limited liability company in accordance with the provisions of the Cyprus Companies Law Cap. 113. The Company’s principal activity The above loan carries interest at the rate of 7% per annum on the outstanding amount and it is receivable during the period was that of holding of in investments and financing. by the end of March 31, 2010. The interest receivable is accounted for on an accruals basis. The interest 2. Principal accounting policies expense for the period ended December 31, 2005 was US$ 49.844. The following is a summary of the most important accounting policies used by the Company : 8. Share capital a) Basis of accounting 2005 The financial statements have been prepared under the historical cost convention and in accordance £C US$ with the International Financial Reporting Standards and the Companies Law. Authorised, issued and fully paid b) Foreign exchange 1.000 ordinary shares of £C1 each 1,000 2,245 The financial statements are expressed in US Dollars. 9. Reserves Current assets and liabilities of the Company other than in US Dollars are translated at the rate of As at 31 December, 2005 the reserves available for distribution amounted to US$32.962. exchange ruling at the balance sheet date. 10. Creditors and accruals Transactions during the period other than in US Dollars are converted at the rate of exchange ruling 2005 on the dates when they occur. US$ Differences on exchange are included in the income statement. Accruals 7,310 c) Taxation The above amounts are payable within one year. Tax is calculated as follows : 11. Capital commitments At the balance sheet date there were no capital commitments. The current and deferred taxation are recognised as income or expense for the period. 12. Contingent liabilities The provision for income tax and defence contribution for the period is calculated in accordance At the balance sheet date there were no contingent liabilities. with the Income Tax Laws. Deferred taxation is calculated on the basis of the rates ruling at 13. Fair value of assets and liabilities the balance sheet date. The fair value of an asset or liability represents the replacement cost or an obligation to be settled at an The debit balances of the deferred taxation arriving from deductible temporary differences arms length transaction. The fair value of all the assets and liabilities of the Company approaches their are recognised to the extent of the anticipated taxable profits. accounting value as stated in the financial statements. d) Investments Investments in subsidiaries are stated at cost unless there is an impairment of value. Any such impairment is recognised in the income statement. Investments held for trading are classified as current assets and are stated at fair value, with any resultant gain or loss recognised in the income Cash Flow Statement for the Period from January 19, 2005 to December 31, 2005 statement. When the Company has the positive intent and ability to hold bonds to maturity, these are stated at amortised cost less impairment losses. Other investments held by the Company are Particulars US$ Rs. Lac Cash flows from operating activities classified as being available-for-sale and are stated at fair value, with any resultant gain or loss (Loss)/profit for the period before taxation 32,962 14.86 recognised directly to equity. When an investment is sold collected or otherwise disposed of or Operating (loss)/profit before working when the carrying amount of the investment is impaired, the cumulative gain or loss recognised capital changes 32,962 14.86 in equity is transferred to the income statement. Increase in creditors and accruals 7,310 3.29 The fair value of investments held for trading and investments available-for-sale is their quoted price, excluding disposal costs, at the balance sheet date. Where a quoted price is not available and Net cash from operating activities 40,272 18.15 other methods of determining fair value are inappropriate, the investment is stated at cost. Cash flows from investing actinities Any sale of investment is recognised when the actual transfer of shares from the registrar takes Purchase of investments (1,000,000) (450.70) place. Interest receivable (49,844) (22.46) e) Provisions Net cash used in investing activities (1,049,844) (473.16) Provisions are recognised when the Company has a present obligation as a result of a past event, Cash flows from financing activities which it is probable will result in an outflow of economic benefits that can be reasonably estimated. Issuance of share capital 2,245 1.01 f) Contingent liabilities Equity to be issued 2,097,755 945.46 Contingent liabilities are disclosed as expenditure and liability if the confirmation of the expense Loan receivable (1,055,000) (475.49) or loss is considered possible from future events. Net cash generated from financing activities 1,045,000 470.98 g) Post balance sheet events Current assets and liabilities of the Company are adjusted to reflect any post balance sheet events (Decrease)/increase in cash and cash equivalents 35,428 15.97 and include additional information for amounts calculated on the basis ruling at the balance sheet Cash and cash equivalents at beginning of period – – date. Cash and cash equivalents at end of period 35,428 15.97 3. Profit from operations Cash and cash equivalents are as follows : Profit from operations is arrived at after charging the following : Cash at bank 35,428 15.97 19.1.2005-31.12.2005 US$ Auditors’ remuneration 5,066 4. Financial expenses Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on December 31, 19.01.2005-31.12.2005 2005 (US$ 1.00 = Rs. 45.07). US$ Bank charges 1,449 5. Taxation The Company is liable to income tax at the rate of 10% on its taxable profits. Defence contribution is charged on interest receivable at the rate of 10% per annum. By order of the Board 6. Investments For Godrej Global Solution (Cyprus) Limited Country of Class of Incorporation/ shares Holding 2005 Secretary Registration held % US$ Godrej Global Solutions Inc. USA Ordinary 100 1,000,000 Limassol: April 13, 2006
138 Annual Report 2005-2006
DIRECTORS’ REPORT
For the period from January 1, 2006 to March 31, 2006 Company’s results 1.1.2006–31.3.2006 The Directors have pleasure in enclosing the Company’s set of financial statements for the period from US$ 1 January, 2006 to March 31, 2006. Balance brought forward 32,962 Loss for the period (7,260) Principal activities Balance carried forward 25,702 The Company’s principal activity during the period under review was that of holding of investments and Dividends financing. The Directors recommend no dividend to be paid for the period ended March 31, 2006. Directors Auditors The Directors of the Company during the period were the following : A resolution will be put forward to the Annual General Meeting to reappoint PKF Savvides & Co. Limited as Stelios Savvides auditors for the next year. By order of the Board Eva Agathangelou For Godrej Global Solution (Cyprus) Limited Rohinton Homi Khajotia Dorab Erach Mistry Secretary Sanjay Tipnis Limassol : April 13, 2006
AUDITORS’ REPORT TO THE MEMBERS OF GODREJ GLOBAL SOLUTIONS (CYPRUS) LIMITED
1. We have audited the financial statements of Godrej Global Solutions (Cyprus) Limited on which comprise 3. In our opinion, the financial statements give a true and fair view of the financial position of Godrej Global the balance sheet as at March 31, 2006 and the income statement, statement of changes in equity and Solutions (Cyprus) Limited for the period from January 1, 2006 to March 31, 2006 and of its financial cash flow statement for the period from January 1, 2006 to March 31, 2006 and the related notes. These performance and its cash flows for the period then ended in accordance with International Financial financial statements are the responsibility of the Company’s Board of Directors. Our responsibility is to Reporting Standards and the requirements of Cyprus Companies Law, Cap. 113. express an opinion on these financial statements based on our audit. This report is made solely to the Report on other legal requirements Company’s members, as a body, in accordance with Section 156 of the Companies Law, Cap. 113. Our Pursuant to the requirements of the Companies Law, Cap. 113, we report the following : audit work has been undertaken so that we might state to the Company’s members those matters we are We have obtained all the information and explanations we considered necessary for the purposes of our required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted audit. by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s In our opinion, proper books of account have been kept by the Company. members as a body, for our audit work, for this report, or for the opinions we have formed. The Company’s financial statements are in agreement with the books of account. 2. We conducted our audit in accordance with International Standards on Auditing. Those Standards require In our opinion and to the best of our information and according to the explanations given to us, the that we plan and perform the audit to obtain reasonable assurance about whether the financial statements financial statements give the information required by the Companies Law, Cap. 113, in the manner so are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the required. amounts and disclosures in the financial statements. An audit also includes assessing the accounting In our opinion, the information given in the report of the Board of Directors on page 1 is consistent with principles used and significant estimates made by the Board of Directors, as well as evaluating the the financial statements. overall financial statement presentation. We believe that our audit provides a reasonable basis for our Certified Public Accountants opinion. Limassol : April 13, 2006
BALANCE SHEET AS AT MARCH 31, 2006 INCOME STATEMENT FOR THE YEAR ENDED January 1, 2006 to March 31, 2006 Note 31.3.2006 31.12.2005 1.1.2006 to 19.1.2005 to US$ Rs. Lac US$ Rs. Lac Note 31.3.2006 31.12.2005 Assets Particulars US$ Rs. Lac US$ Rs. Lac Non-current Assets Investments 6 1,000,000 446.10 1,000,000 450.70 Interest receivable 18,210 8.12 49,844 22.46 Loan receivable 7 1,055,000 470.64 1,055,000 475.49 Administration expenses (25,363) (11.31) (9,850) (4.44) Current Assets (Loss)/profit from operations 3 (7,153) (3.19) 39,994 18.03 Interest receivabe 68,054 30.36 49,844 22.46 Cash at bank 27,718 12.36 35,428 15.97 Financial (expenses)/income-net 4 (107) (0.05) (1,449) (0.65) Incorporation expenses writen off – – (5,583) (2.52) 95,772 42.72 85,272 38.43 (Loss)/profit for the period Total Assets 2,150,772 959.46 2,140,272 964.62 before taxation (7,260) (3.24) 32,962 14.86 Equity and Liabilities Taxation 5 – – – – Capital and reserves Share capital 8 2,100,000 936.81 2,245 1.01 (Loss)/profit for the period after taxation (7,260) (3.24) 32,962 14.86 Equity to be issued ––2,097,755 945.46 Reserves 9 25,702 11.47 32,962 14.86 Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on March 31, 2006 2,125,702 948.28 2,132,962 961.33 (US$ 1.00 = Rs. 44.61). Current Liabilities Creditors and accruals 10 25,070 11.18 7,310 3.29 Total equity and liabilities 2,150,772 959.46 2,140,272 964.62
Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on March 31, 2006 (US$ 1.00 = Rs. 44.61). By order of the Board By order of the Board For Godrej Global Solution (Cyprus) Limited For Godrej Global Solution (Cyprus) Limited
Secretary Secretary
Limassol : 13 April, 2006 Limassol : April 13, 2006
STATEMENT OF CHANGES IN EQUITY For the Period from January 1, 2006 to March 31, 2006
Share Share Equity Equity Profit & Loss Profit & Loss capital capital tobe issued to be issued Reserve Reserve Total Total US$ Rs. Lac US$ Rs. Lac US$ Rs. Lac US$ Rs. Lac
Issue of share capital 2,245 1.01 ––––2,245 1.01 Funds received – – 2,097,755 945.46 – – 2,097,755 945.46 Profit for the period – – – – 32,962 14.86 32,962 14.86 At December 31, 2005 2,245 1.01 2,097,755 945.46 32,962 14.86 2,132,962 961.33 Issue of share capital 2,097,755 935.81 (2,097,755) (935.81) – – – – Loss for the period – – – – (7,260) (3.24) (7,260) (3.24) At March 31, 2006 2,100,000 936.81 – – 25,702 11.47 2,125,702 948.28
Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on December 31, 2005 (US$ 1.00 = Rs. 45.07).
139 Godrej Global Solutions (Cyprus) Limited
7. Loan receivable NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31.3.2006 31.12.2005 US$ US$ MARCH 31, 2006 Godrej Global Solutions Inc. 1. Introduction (Subsidiary company registered in USA) 1,055,000 1,055,000 The Company was incorporated in Cyprus on January 19, 2005 as a private limited liability company in The above loan carries interest at the rate of 7% per annum on the outstanding amount and it is receivable accordance with the provisions of the Cyprus Companies Law Cap. 113. The Company’s principal activity by the end of March 31, 2010. The interest receivable is accounted for on an accruals basis. The interest during the period was that of holding of in investments and financing. expense for the period ended March 31, 2006 was US$ 18,210 2. Principal accounting policies 8. Share capital The following is a summary of the most important accounting policies used by the Company : 31.3.2006 a) Basis of accounting US$ £C US$ The financial statements have been prepared under the historical cost convention and in accordance with the International Financial Reporting Standards and the Companies Law. Authorised, issued and fully paid b) Foreign exchange 1.000 ordinary shares of £C1 each 1,000 2,245 The financial statements are expressed in US Dollars. Authorised, issued and fully paid Current assets and liabilities of the Company other than in US Dollars are translated at the rate of 600.000 ordinary shares of US$ 1 each 600,000 exchange ruling at the balance sheet date. 1.500.100 preference shares of US$ 1 each 1,500,000 Transactions during the period other than in US Dollars are converted at the rate of exchange ruling 2,100,000 on the dates when they occur. 9. Reserves Differences on exchange are included in the income statement. As at March 31, 2006 the reserves available for distribution amounted to US$ 25,702. c) Taxation 10. Creditors and accruals Tax is calculated as follows: 31.3.2006 31.12.2005 The current and deferred taxation are recognised as income or expense for the period. US$ US$ The provision for income tax and defence contribution for the period is calculated in accordance Accruals 25,070 7,310 with the Income Tax Laws. Deferred taxation is calculated on the basis of the rates ruling at the The above amounts are payable within one year. balance sheet date. 11. Capital commitments At the balance sheet date there were no capital commitments. The debit balances of the deferred taxation arriving from deductible temporary differences are 12. Contingent liabilities recognised to the extent of the anticipated taxable profits. At the balance sheet date there were no contingent liabilities. d) Investments 13. Fair value of assets and liabilities Investments in subsidiaries are stated at cost unless there is an impairment of value. Any such The fair value of an asset or liability represents the replacement cost or an obligation to be settled at an arms impairment is recognised in the income statement. Investments held for trading are classified as length transaction. The fair value of all the assets and liabilities of the Company approaches their accounting current assets and are stated at fair value, with any resultant gain or loss recognised in the income value as stated in the financial statements. statement. When the Company has the positive intent and ability to hold bonds to maturity, these are stated at amortised cost less impairment losses. Other investments held by the Company are classified as being available-for-sale and are stated at fair value, with any resultant gain or loss recognised Cash Flow Statement for the period from January 1, 2006 to March 31, 2006 directly to equity. When an investment is sold collected or otherwise disposed of or when the carrying amount of the investment is impaired, the cumulative gain or loss recognised in equity is transferred 1.1.2006- 1.1.2006- 19.1.2005- 19.1.2005- to the income statement. 31.3.2006 31.3.2006 31.12.2005 31.12.2005 The fair value of investments held for trading and investments available-for-sale is their quoted price, Particulars US$ Rs. Lac US$ Rs. Lac excluding disposal costs, at the balance sheet date. Where a quoted price is not available and other Cash flows from operating activities methods of determining fair value are inappropriate, the investment is stated at cost. Any sale of investment is recognised when the actual transfer of shares from the registrar takes place. (Loss)/profit for the period before taxation (7,260) (3.24) 32,962 14.70 e) Provisions Operating (loss)/profit before working Provisions are recognised when the Company has a present obligation as a result of a past event, capital changes (7,260) (3.24) 32,962 14.70 which it is probable will result in an outflow of economic benefits that can be reasonably estimated. Increase in creditors and accruals 17,760 7.92 7,310 3.26 f) Contingent liabilities Net cash from operating activities 10,500 4.68 40,272 17.97 Contingent liabilities are disclosed as expenditure and liability if the confirmation of the expense or Cash flows from investing actinities loss is considered possible from future events. g) Post balance sheet events Purchase of investments – – (1,000,000) (446.10) Current assets and liabilities of the Company are adjusted to reflect any post balance sheet events and Interest receivable (18,210) (8.12) (49,844) (22.24) include additional information for amounts calculated on the basis ruling at the balance sheet date. Net cash used in investing activities (18,210) (8.12) (1,049,844) (468.34) 3. (Loss)/profit from operations Cash flows from financing activities (Loss)/profit from operations is arrived at after charging the following: Issuance of share capital 2,097,755 935.81 2,245 1.00 1.1.2006- 19.01.2005- 31.3.2006 31.12.2005 Equity to be issued (2,097,755) (935.81) 2,097,755 935.81 US$ US$ Loan receivable – – (1,055,000) (470.64) Auditors’ remuneration 1.826 5.066 Net cash generated from financing activities – – 1,045,000 466.17 4. Financial (expenses)/income - net (Decrease)/increase in cash and cash equivalents (7,710) (3.44) 35,428 15.80 1.1.2006- 19.01.2005- 31.3.2006 31.12.2005 Cash and cash equivalents at beginning of period 35,428 15.80 – – US$ US$ Cash and cash equivalents at end of period 27,718 12.36 35,428 15.80 Bank charges (146) (1.449) Cash and cash equivalents are as follows : Exchange differences – gain 39 – Cash at bank 27,718 12.36 35,428 15.80 (107) (1.449) 5. Taxation The Company is liable to income tax at the rate of 10% on its taxable profits. Defence contribution is charged Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on March 31, 2006 on interest receivable at the rate of 10% per annum. (US$ 1.00 = Rs. 44.61). 6. Investments Country of Class of Incorporation/ shares Holding 31.3.2006 31.12.2005 By order of the Board For Godrej Global Solution (Cyprus) Limited Registration held % US$ US$ Limassol : April 13, 2006 Secretary Godrej Global Solutions Inc. USA Ordinary 100 1.000.000 1.000.000
140 Annual Report 2005-2006
Godrej Global Solutions, Inc. DIRECTORS’ REPORT
We are pleased to submit the report for the period from April 8, 2005 to December 31, 2005. Events Since Balance Sheet Date Principal activities There have been no events since the balance sheet date which affect the company’s results or performance. The Company’s principal activity during the period under review was that of providing Healthcare - related Political or Charitable Contributions Business Process Outsourcing Services. The company acquired the business of Outsource Offshore Inc, during The company made no political or charitable contributions during the year. this period. Company’s results For Godrej Global Solutions, Inc. Net loss for the period : $ 10,970 Sanjay Tipnis Retained deficit as of December 31, 2005 : $ 10,970 Director Dividends No dividend is recommended to be paid for the period ended December 31, 2005 March 6, 2006
AUDITORS’ REPORT TO THE MEMBERS OF GODREJ GLOBAL SOLUTIONS, INC.
To the Board of Directors' and Stockholder basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes Godrej Global Solutions, Inc. 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 Boston, Massachusetts opinion. We have audited the accompanying balance sheet of Godrej Global Solutions, Inc. ( a Delaware corporation) In our opinion, the financial statement referred to above present fairly, in all material respects, the financial as of December 31, 2005, and the related statements of operations and retained earnings (deficit) and cash flow position of Godrej Global solutions, Inc. as of December 31, 2005, and the results of its operations and its cash for the period of April 8, 2005 (inception of operations) to December 31, 2005. These financial statements are flow for the period then ended in conformity with accounting principles generally accepted in the United States the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial of America. statements based on our audit. Braver PC We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about Accountants & Advisors whether the financial statements are free of material misstatement. An audit includes examining, on a test March 6, 2006
BALANCE SHEET AS AT DECEMER 31, 2005 STATEMENT OF OPERATIONS AND RETAINED EARNINGS (ACCUMULATED DEFICIT) US$ Rs. Lac For the period April 8, 2005 (Inception of Operations) to Assets Current Assets December 31, 2005 Cash and cash equivalents 553,414 249.42 Accounts receivable - trade, net of allowance for Particulars US$ Rs. Lac doubtful accounts of $0 345,253 155.61 Sales 1,534,150 691.44 Deferred tax asset 8,275 3.73 Cost of goods sold 1,077,669 485.71 Total current assets 906,942 408.76 Gross Profit 456,481 205.71 Intangible assets, net of accumulated amortization of $168,723 482,112 217.29 Operating expenses 259,651 117.02 Goodwill 1,580,093 712.15 Operating income 196,830 88.71 Total non-current assets 2,062,205 929.44 Other income (expense) Total assets 2,969,147 1,338.19 Interest income 2,492 1.12 Amortization (168,723) (76.04) Liabilities and stockholder’s equity Interest expense (49,844) (22.46) Current liabilities Accounts payable 741,927 334.39 (216,075) (97.39) Note payable 112,346 50.63 Net loss before income tax benefit (19,245) (8.67) Accrued expenses 70,844 31.93 Income tax benefit 8,275 3.73 Total current liabilities 925,117 416.95 Net loss (10,970) (4.94) Note payable 1,055,000 475.49 Retained earnings, (deficit) April 8, 2005 – – Retained earnings, (deficit) December 31, 2005 (10,970) (4.94) Stockholder’s equity Common stock, .01 par value, 1,000 shares authorized, The accompanying notes are an integral part of these financial statements issued and outstanding 10 0 Additional paid in capital 999,990 451 Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on December 31, Retained earnings (deficit) (10,970) (5) 2005 (US$ 1.00 = Rs. 45.07). Total stockholder’s equity 989,030 446 Total liabilities and stockholder’s equity 2,969,147 1,338
The accompanying notes are an integral part of these financial statements
Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on December 31, 2005 (US$ 1.00 = Rs. 45.07).
For Godrej Global Solutions, Inc. For Godrej Global Solutions, Inc. Sanjay Tipnis Sanjay Tipnis Director Director
March 6, 2006 March 6, 2006
141 Godrej Global Solutions, Inc
NOTES TO THE FINANCIAL STATEMENTS
For the Period April 8, 2005 (Inception of Operations) to December 31, 2005 Note 7 – Income Taxes Deferred tax assets consist of the following at December 31, 2005 : Note 1 – Nature of the Business Federal net operating loss $ 6,543 Godrej Global Solutions, Inc. (the “Company” or “GGSI”) was incorporated on January 21, 2005 under the State net operating loss 1,732 laws of the state of Delaware; however, the Company did not begin its operations until April 8, 2005 when it acquired the assets of another company (Note 9). The Company’s principal activity is to provide information $ 8,275 technology services consisting of business process outsourcing services. Presently, the principal areas of Management determined a valuation allowance was not applicable. For the period ended industry it services are claims processing for insurance companies and healthcare third party administrators. December 31, 2005, the income tax benefit consisted of the following : Note 2 – Summary of Significant Accounting Policies Deferred taxes $ (8,275) Fair Value of Financial Instruments The carrying amounts of the Company’s financial instruments, which include accounts receivable, accounts At December 31, 2005, the Company has net tax operating loss carryforwards of approximately $1,000 payable and other accrued expenses approximate their fair values due to their short maturities. available to reduce future taxable income which begin to expire in December 31, 2006 through 2025. Use of Estimates Note 8 – Employee Benefit Plans The preparation of financial statements in conformity with accounting principles generally accepted in the The Company sponsors a defined contributions plan (individual retirement account) covering substantially all United States of America requires management to make estimates and assumptions that affect the reported its employees. Company contributions are at the discretion of the board of directors. Defined contribution amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial pension expenses for the Company was $37,500 for the period ended December 31, 2005. statements and the reported amounts of revenue and expenses during the reporting period. Although these Note 9 – Acquisitions estimates are based upon management’s best knowledge of current events and actions, actual results could During the current year, the Company acquired the assets, liabilities and the business of Outsource Offshore differ from those estimates. Inc. (OOI), a Minnesota Corporation, for an initial cash consideration of $1.68 million. The rights and obligations Cash and Cash Equivalents as agreed between OOI and its customers have been assumed by the Company. The stockholders of OOI are The Company considers all highly liquid investment with maturity of three months or less at the date of also to receive two earn-out payments (see Note 5) on May 31, 2006 and 2007. The Company has calculated the earn-out payment to be $112,346 as of December 31, 2005. The Company has also paid to a former vendor purchase to be cash equivalents. Cash equivalents are stated at cost plus accrued interest, which approximates of date-entry services, consideration of approximately $439,000 as set up and termination fees. Data entry and fair value. At December 31, 2005, cash equivalents consist of bank deposits of $553,414. related services were thereafter provided by an affiliate company, Godrej Global Solutions Limited for servicing Accounts Receivable its US Clients. As of December 31, 2005 the total acquisition cost is approximately, $2,231,000. Accounts receivable are stated at the amount the Company expects to collect from outstanding balances. An Note 10 – Related Party Transactions allowance for doubtful accounts is provided for that potion of accounts receivable considered to be uncollectible, The Company’s data entry and related services are provided by Godrej Global Solutions Limited, an affiliate, based upon historical experience and management’s evaluation of outstanding accounts receivable at the end of the for servicing the Company’s clients. During the period ended December 31, 2005, the Company's expenses year. Bad debts expense was $0 as of December 31, 2005. Bad debts are written off against the allowance when include $741,165 to Godrej Global Solution Limited for these services. As of December 31, 2005 the amount identified. Management has determined that any uncollectible amounts at December 31, 2005 are not material. in accounts payable due to Godrej Global Solutions Limited is $741,165. Impairment of Long-Lived Assets Note 11 – Commitment and Contingencies The Company reviews long-lived assets for impairment whenever an event or change in circumstances Certain conditions may exist as of the date of the financial statements are issued, which may result in a loss indicate that the carrying amount of such assets may not be recoverable. The carrying values of long-lived to the Company but which will only be resolved when one or more future events occur or fail to occur. The assets are assessed for recoverability by reference to the estimated future undiscounted cash flows associated Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently with them. Where this assessment indicates a deficit, the assets are written down to market value. For assets involves an exercise of judgment. In assessing loss contingencies related to legal proceedings or unasserted which do not have a readily determinable market value, the assets are written down to their estimated market claims as well as perceived merits of the amount of relief sought or expected be sought therein. value calculated by reference to the estimated future discounted cash flows. Assets to be disposed are reported If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the at the lower of the written down value or the fair value, less the cost to sell. amount of the liability can be estimated, than the estimated liability would be accrued in the Company’s Goodwill financial statements. If assessment indicates that a potentially material loss contingency is not probable, but The Company evaluates the carrying value of goodwill each year. When evaluating whether goodwill is is reasonably possible, or is probable but can not be estimated, the nature of the contingent liability, together impaired, the Company compares the fair value of the reporting unit to which the goodwill is assigned to with an estimate of the range of possible loss if determined material, would be disclosed. reporting unit’s carrying amount, including goodwill. If the carrying amount exceeds its fair value, then the Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which amount of the impairment loss is measured and recorded. At December 31, 2005, the Company has not case the nature of the guarantee would be disclosed. identified any impairment related goodwill. In connection with the Company’s purchase of assets of OOI, the Company must pay earn out payments on May Revenue Recognition 31, 2006 and 2007. These earn out payments are calculated based on a percentage of revenues and net income Revenues generated from providing services to customer are recognized at the time the services are being for the previous fiscal year. Amounts paid for earn out payments will increase the Company’s purchase price. provided. Revenue earned from fixed-price engagements is recognized on a monthly basis during the period Note 12 – Intangible Assets when services are being provided. In connection with acquisition of Outsource Offshore Inc., (see Note 9) the assets acquired included $650,835 Income Taxes of intangible assets other than goodwill. All of the $650,835 of intangible assets is attributable to value of the Deferred tax assets and liabilities are determined based on the future effect on the temporary differences between contracts purchased from Outsource Offshore Inc. The Company estimates the useful lives of the contracts the carrying amounts for financial statement purposes and the income tax basis of assets and liabilities and are remaining at December 31, 2005 to extend over a period of up to three years. Amortization in amount of measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. $168,723 was recorded in 2005. The future effect on deferred taxes of change in tax rates or laws are adjusted for on the date of the enactment. Amortization expense for the next three years would be as follows : Deferred tax assets are recognized, net of any valuation allowance, for the estimated future tax effects of the 2006 213,569 deductible temporary differences and tax credit carryforwards. A valuation allowance against deferred tax 2007 162,265 assets is recorded when and if, based upon available evidence, it is more likely than not that some or all 2008 106,278 deferred tax assets will not be realized. Concentration of Credit Risk Note 13 – Subsequent Events Financial instruments which potentially expose the Company to concentrations of credit risk consist primarily Following the period ended December 31, 2005, the Company has changed its fiscal year end to March 31st. of accounts receivable. To minimize customer credit risk, ongoing credit evaluations of customer’ financial condition are performed, although collateral generally is not required. Statement of cash flows For the period april 8, 2005 (inception of operations) to december 31, 2005 The Company maintains its cash in bank deposit accounts which, at times, may exceed the federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $100,000. At Particulars US$ Rs. Lac December 31, 2005. The Company has approximately $447,939 in excesss of the FDIC insured limites. The Cash flows from operating activities Company has not experienced any losses in such accounts. Net loss (10,970) (4.94) Adjustments to reconcile net loss to net cash During 2005, the Company provided services to three customers that constituted approximately 83% of sales provided by operating activities for the period ending December 31, 2005. The Company anticipates the growth of the business will overcome Amortization 168,723 76.04 any loss of future revenue from these customers. Changes in operating assets and liabilities The Company currently uses only one vendor, an affiliate, for the outsourcing of date processing. Management Accounts receivable (345,253) (155.61) believes the vendor can be replaced with other outsourcing vendors, if necessary. Deferred tax asset (8,275) (3.73) Note 3 – Goodwill Accounts payable 741,927 334.39 The total amount the Company paid for the acquisition (see Note 9) as of December 31, 2005 is $2,230,928 of Accrued expenses 70,844 31.93 which $650,835 has been allocated to intangible assets as the value of the contracts. The remaining amount Net cash provided by operating activities 616,996 278.08 of $1,580,093 has been identified as goodwill. Cash flows from investing activities Goodwill is comprised of the following at December 31, 2005 : Purchase of intangible asset (650,835) (293.33) Expertise of employees $ 158,009 Purchase of goodwill (1,467,747) (661.51) Customer list 474,028 Net cash used in investing activities (2,118,582) (954.84) Entry into U.S. markets 948,056 Cash flows from financing activities Proceeds from note payable 1,055,000 475.49 Total Goodwill $ 1,580,093 Proceeds from stock issuance 1,000,000 450.70 Note 4 – Stockholder’s Equity Net cash provided by financing activities 2,055,000 926.19 Common Shares Net increase in cash and cash equivalents 553,414 249.42 In April 2005, the Company issued 1,000 Common Shares of $0.01 par for $1,000,000 to Godrej Global Solutions Cash and cash equivalents April 8, 2005 – – (Cyprus) Limited. Each share of common stock is entitled to one vote. The holders of common stock are entitled Cash and cash equivalents at December 31, 2005 553,414 249.42 to receive dividends whenever funds are legally available and when declared by the Board of Directors. Supplemental disclosure of non-cash investing and finansing activities : Note 5 – Note Payable (Current) Investment in Goodwill financed by a note payable 112,346 50.63 As part of the Company’s acquisition (see Note 9) the Company must pay earn out payments to the stockholders Supplemental disclosure of cash flow information of the acquired company. These earn-out payments are calculated based on a percentage of revenues and net Cash paid during the period for interest – – income for the previous year April 1st to March 31st. There is one payment due on May 31, 2006 calculated The accompanying notes are an integral part of these financial statements on the 2005 year’s operations and another payment due May 31, 2007 calculated on the 2006 operations. The amount of the note payable as an earn out payment as of December 31, 2005 is $112,346. Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on December 31, Note 6 – Note Payable (Non-current) 2005 (US$ 1.00 = Rs. 45.07). In April 2005, the Company issued an unsecured Note, in favor of Godrej Global Solutions (Cyprus) Limited, For Godrej Global Solutions, Inc. (GGSC), its stockholder, in exchange for installments totaling $1,055,000. The note bears interest at the rate of Sanjay Tipnis 7% per annum. The entire amount of principal is payable at maturity on March 31, 2010, while interest is Director payable every March 31st. Interest expense was $49,844 for the period ended December 31, 2005. March 6, 2006 142 Annual Report 2005-2006
DIRECTORS’ REPORT
We are pleased to submit the report for the period January 1, 2006 to March 31, 2006 Political Or Charitable Contributions Principal activities The Company made no political or charitable contributions during the year. The Company’s principal activity during the period under review was that of providing Healthcare related Business Process Outsourcing Services.
Companys’ Results For Godrej Global Solutions, Inc. Net income for the period : $ 27,845 Retained deficit as of March 31, 2006 : $ 16,875 Dividends Sanjay Tipnis No dividend is recommended to be paid for the period ended March 31, 2006 Director Events Since Balance Sheet Date There have been no events since the balance sheet date which affect the company’s results or performance. April 14, 2006
AUDITORS’ REPORT TO THE MEMBERS OF GODREJ GLOBAL SOLUTIONS, INC.
To the Board of Directors' and Stockholder assessing the accounting principles used and significant estimates made by management, as well as evaluating Godrej Global Solutions, Inc. the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Boston, Massachusetts In our opinion, the financial statement referred to above present fairly, in all material respects, the financial We have audited the accompanying balance sheet of Godrej Global Solutions, Inc. ( a Delaware corporation) position of Godrej Global solutions, Inc. as of March 31, 2006, and the results of its operations and its cash flow as of March 31, 2006, and the related statements of operations and retained earnings (accumulated deficit) and for the three month then ended in conformity with accounting principles generally accepted in the United cash flow for the three months then ended. These financial statements are the responsibility of the Company’s States of America. management. Our responsibility is to express an opinion on these financial statements based on our audit. Braver PC We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 Accountants & Advisors basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes April 14, 2006 BALANCE SHEET AS AT MARCH 31, 2006 STATEMENT OF OPERATIONS AND RETAINED EARNINGS (ACCUMULATED DEFICIT) US$ Rs. Lac For the period January 1, 2006 to March 31, 2006 Assets Current Assets Cash and cash equivalents 342,281 152.69 Accounts receivable - trade, net of allowance for Particulars US$ Rs. Lac doubtful accounts of $0 378,862 169.01 Sales 706,995 315 .39 Total current assets 721,143 321.70 Cost of goods sold 488,137 217.76 Intangible assets, net of accumulated amortization of $224,964 425,871 189.98 Gross Profit 218,858 218,858.00 Goodwill 1,891,721 843.90 Operating expenses 84,490 37.69 Total non-current assets 2,317,592 1,033.88 Operating income 134,368 59.94 Other income (expense) Total assets 3,038,735 1,355.58 Interest income 3,452 1.54 Liabilities and stockholder’s equity Amortization of intangible assets (56,241) (25.09) Current liabilities Interest expense (18,210) (8.12) Note payable 423,974 189.13 (70,999) (31.67) Accounts payable 488,137 217.76 Income taxes payable 27,249 12.16 Net income before provision for income taxes 63,369 28.27 Accrued expenses 27,500 12.27 Provision for income taxes 35,524 15.85 Total current liabilities 966,860 431.32 Net income 27,845 12.42 Accumulated deficit - January 1, 2006 (10,970) (4.89) Note payable 1,055,000 470.64 Retained earnings - March 31, 2006 16,875 7.53 Stockholder’s equity Common stock, .01 par value, 1,000 shares authorized, The accompanying notes are an integral part of these financial statements issued and outstanding 10 – Additional paid in capital 999,990 446.10 Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on March 31, 2006 Retained earnings 16,875 7.53 (US$ 1.00 = Rs. 44.61). Total stockholder’s equity 1,016,875 453.63 Total liabilities and stockholder’s equity 3,038,735 1,355.58
The accompanying notes are an integral part of these financial statements
Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on March 31, 2006 (US$ 1.00 = Rs. 44.61).
For Godrej Global Solutions, Inc. For Godrej Global Solutions, Inc
Sanjay Tipnis Sanjay Tipnis Director Director
April 14, 2006 April 14, 2006
143 Godrej Global Solutions, Inc
NOTES TO THE FINANCIAL STATEMENTS
For the Period January 1, 2006 to March 31, 2006 Note 5 – Note payable (Current) Note 1 – Nature of the Business As part of the Company’s acquisition (see Note 9) the Company must pay earn out payment to the Godrej Global Solutions, Inc. (the “Company” or “GGSI”) was incorporated on January 21, 2005 under the stockholders of the acquired company. These earn-out payments are calculated based on a percentage laws of the state of Delaware; however, the Company did not begin its operations until April 8, 2005 when it of revenues and net income for the previous fiscal year ended March 31st. There is one payment due on acquired the assets of another company (Note 9). The Company’s principal activity is to provide information May 31, 2006 calculated on the 2005 year’s operations and another payment due May 31, 2007 calculated technology services consisting of business process outsourcing services. Presently, the principal areas of on the 2006 operations. The amount of the note payable as an earn-out payment as of March 31, 2006 is industry it services are claims processing for insurance companies and healthcare third party administrators. approximately $424,000. Note 2 – Summary of Significant Accounting Policies Note 6 – Note Payable (Non-current) Fair Value of Financial Instruments In April 2005, the Company issued an unsecured Note, in favor of Godrej Global Solutions (Cyprus) Limited, The carrying amounts of the Company’s financial instruments, which include accounts receivable, accounts (GGSC), its stockholder, in exchange for installments totaling $1,055,000. The note bears interest at the rate of payable and other accrued expenses approximate their fair values due to their short maturities. 7% per annum. The entire amount of principal is payable at maturity on March 31, 2010, while interest is Use of Estimates payable every March 31st. Interest expense was $18,210 for the period ended March 31, 2006. The preparation of financial statements in conformity with accounting principles generally accepted in the Note 7 – Income Taxes United States of America requires management to make estimates and assumptions that affect the reported Provision for income taxes for the three months ended March 31, 2006, is $35,524. A net operating loss was amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial available in the amount of $8,275. The balance of $27,249 is in income tax payable. statements and the reported amounts of revenue and expenses during the reporting period. Although these Note 8 – Employee Benefit Plans estimates are based upon management’s best knowledge of current events and actions, actual results could The Company sponsors a defined contributions plan (individual retirement account) covering substantially all differ from those estimates. its employees. Company contributions are at the discretion of the board of directors. Defined contribution Cash and Cash Equivalents pension expenses for the Company was $12,500 for the period ended March 31, 2006. The Company considers all highly liquid investment with maturity of three months or less at the date of Note 9 – Acquisitions purchase to be cash equivalents. Cash equivalents are stated at cost plus accrued interest, which approximates The Company acquired the assets, liabilities and the business of Outsource Offshore Inc. (OOI), a Minnesota fair value. At March 31, 2006, cash equivalents consist of bank deposits of $342,281. Corporation, for an initial cash consideration of $1.68 million. The rights and obligations as agreed between Accounts Receivable OOI and its customers have been assumed by the Company. The stockholders of OOI are also to receive two Accounts receivable are stated at the amount the Company expects to collect from outstanding balances. An earn-out payments (see Note 5) on May 31, 2006 and 2007. The Company has calculated the first earn-out allowance for doubtful accounts is provided for that potion of accounts receivable considered to be uncollectible, payment to be $423,974 as of March 31, 2006. The Company has also paid to a former vendor of date-entry based upon historical experience and management’s evaluation of outstanding accounts receivable at the end services, consideration of approximately $439,000 as set up and termination fees. Data entry and related of the year. The allowance is $0 as of March 31, 2006. Bad debts are written off against the allowance when services were thereafter provided by an affiliate company, Godrej Global Solutions Limited for servicing its identified. Management has determined that any uncollectible amounts at March 31, 2006 are not material. US Clients. As of March 31, 2006 the total acquisition cost is approximately, $2,542,556. Impairment of Long-Lived Assets Note 10 – Related Party Transactions The Company reviews long-lived assets for impairment whenever an event or change in circumstances The Company’s data entry and related services are provided by Godrej Global Solutions Limited, an affiliate, indicate that the carrying amount of such assets may not be recoverable. The carrying values of long-lived for servicing the Company’s clients. During the period ended March 31, 2006, the Company's expenses include assets are assessed for recoverability by reference to the estimated future undiscounted cash flows associated $488,137 to Godrej Global Solution Limited for these services. As of March 31, 2006 the amount in accounts with them. Where this assessment indicates a deficit, the assets are written down to market value. For assets payable due to Godrej Global Solutions Limited is $488,137. which do not have a readily determinable market value, the assets are written down to their estimated market Note 11 – Commitment and Contingencies value calculated by reference to the estimated future discounted cash flows. Assets to be disposed are reported In connection with the Company’s purchase of assets of OOI, the Company must pay earn-out payments on at the lower of the written down value or the fair value, less the cost to sell. May 31, 2006 and 2007. These earn-out payments are calculated based on a percentage of revenues and net Goodwill income for the previous fiscal year. Amounts paid for earn out payments will increase the Company’s purchase The Company evaluates the carrying value of goodwill each year. When evaluating whether goodwill is price. impaired, the Company compares the fair value of the reporting unit to which the goodwill is assigned to Note 12 – Intangible Assets reporting unit’s carrying amount, including goodwill. If the carrying amount exceeds its fair value, then the In connection with acquisition of Outsource Offshore Inc., (see Note 9) the assets acquired included $650,835 amount of the impairment loss is measured and recorded. At March 31, 2006, the Company has not identified of intangible assets other than goodwill. All of the $650,835 of intangible assets is attributable to value of the any impairment related goodwill. contracts purchased from Outsource Offshore Inc. The Company estimates the useful lives of the contracts Revenue Recognition remaining at March 31, 2006 to extend over a period of up to three years. Amortization in amount of $56,241 Revenues generated from providing services to customer are recognized at the time the services are being was recorded in the period January 1, 2006 to March 31, 2006. provided. Revenue earned from fixed-price engagements is recognized on a monthly basis during the period Amortization expense for the next three fiscal years ending March 31would be as follows: when services are being provided. 2007 $ 198,191 Income Taxes 2008 161,757 Deferred tax assets and liabilities are determined based on the future effect on the temporary differences 2009 65,923 between the carrying amounts for financial statement purposes and the income tax basis of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. The future effect on deferred taxes of change in tax rates or laws are adjusted for on the date of the Statement of Cash Flows for the period January 1, 2006 To March 31,2006 enactment. Deferred tax assets are recognized, net of nay valuation allowance, for the estimated future tax effects of the Particulars US$ Rs. Lac deductible temporary differences and tax credit carryforwards. A valuation allowance against deferred tax Cash flows from operating activities assets is recorded when and if, based upon available evidence, it is more likely than not that some or all Net income 27,845 12.42 deferred tax assets will not be realized. Adjustments to reconcile net income to net cash Concentration of Credit Risk provided by operating activities Financial instruments which potentially expose the Company to concentrations of credit risk consist primarily Amortization of intangible assets 56,241 25.09 of accounts receivable. To minimize customer credit risk, ongoing credit evaluations of customer’ financial Changes in operating assets and liabilities condition are performed, although collateral generally is not required. Accounts receivable (33,609) (14.99) The Company maintains its cash in bank deposit accounts which, at times, may exceed the federally insured Deferred tax asset 8,275 3.69 limits. The balances are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $100,000. At Accounts payable (253,790) (113.22) March 31, 2006, the Company has approximately $131,000 in excess of the FDIC insured limits. The Company Income taxes payable 27,249 12.16 has not experienced any losses in such accounts. Accrued expenses (43,344) (19.34) During the period January to March 2006, the Company provided services to three customers that constituted Net cash used in operating activities (211,133) (94.19) approximately 93% of sales for the period ending March 31, 2006. The Company anticipates the growth of the Cash and cash equivalents - January 1, 2006 553,414 246.88 business will overcome any loss of future revenue from these customers. Cash and cash equivalents - March 31, 2006 342,281 152.69 The Company currently uses only one vendor, an affiliate, for the outsourcing of data processing. Management Supplemental disclosure of non-cash investing and finansing activities believes the vendor can be replaced with other outsourcing vendors, if necessary. Increse in note payable (current) 311,628 139.02 Note 3 – Goodwill Supplemental disclosure of cash flow information The total amount the Company paid for the acquisition (see Note 9) as of March 31, 2006 is $2,542,556; of which Cash paid during the period for interest 68,054 30.36 $650,835 has been allocated to intangible assets as the value of the contracts. The remaining amount of $1,891,721 has been identified as goodwill. The accompanying notes are an integral part of these financial statements Goodwill is comprised of the following at March 31, 2006 : Expertise of employees $ 189,172 Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on March 31, 2006 Customer list 567,516 (US$ 1.00 = Rs. 44.61). Entry into U.S. markets 1,135,033 Total Goodwill $ 1,891,721 For Godrej Global Solutions, Inc. Note 4 – Stockholder’s Equity Common Shares Sanjay Tipnis In April 2005, the Company issued 1,000 Common Shares of $0.01 par for $1,000,000 to Godrej Global Director Solutions (Cyprus) Limited. Each share of common stock is entitled to one vote. The holders of common stock are entitled to receive dividends whenever funds are legally available and when declared by the Board of Directors. April 14, 2006
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