/GIL_annualreport_2003_04

Annual Report 2003-2004

GODREJ INDUSTRIES LIMITED DIRECTORS

Chairman

A.B. Godrej J.N. Godrej

Managing Director

N.B. Godrej S.A. Ahmadullah V.M. Crishna K.K. Dastur V.N. Gogate K.N. Petigara F.P. Sarkari V.F. Banaji

Executive Director (Group Corporate Affairs)

T.A. Dubash

Director (Marketing)

M. Eipe

Executive Director & President (Chemicals)

M.P. Pusalkar

Executive Director & President (Foods Div.)

COMPANY SECRETARY S.K. Bhatt

AUDITORS Kalyaniwalla & Mistry, Chartered Accountants

1

Industries Limited REGISTERED OFFICE

FACTORIES

:

:

Vikhroli

Pirojshanagar, Eastern Express Highway, Vikhroli, Mumbai 400 079.

Phone : 022 - 2518 8010, 2518 8020, 2518 8030 Fax : 022 - 2518 8068/2518 8074 Burjorjinagar, Plot No. 3, Village Kanerao, Taluka - Valia, District Bharuch, Gujarat 393 135.

Phone : 02643 - 270756 to 270760 Fax : 02643 - 270018 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 Plot No. 5, New Industrial Area No. 1 Mandideep, District Raisen, Bhopal - 462 046, MP Phone : 07480 - 233405-6 Fax : 07480 - 233409

Valia

Wadala

Mandideep

CONTENTS

Page Nos.

Financial Highlights ...............................................

03

Notice .....................................................................

04

Directors’ Report along with Management Discussion and Analysis Report ............................

10

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

18

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

21

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

23

Accounts .................................................................

26

Consolidated Accounts ...........................................

45

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

59

BRANCHES

:

Delhi

Laxmi Insurance Building, 2/2-A, Asaf Ali Road, New Delhi 110 002.

Phone : 011 - 2323 3775, 2323 3777, 2323 6776 Fax : 011 - 2323 3778 Block GN, Sector-V, Salt Lake City, Kolkata 700 091.

Phone : 033 - 2357 3556, 2357 3555 Fax : 033 - 2357 3945 New No. 102, (Old No. 81), Chamiers Road, Chennai 600 028.

Phone : 044 - 2431 5721/2431 5722 Fax : 044 - 2431 5723 284A, Chase Road, Southgate, London N14 - 6HF., UK Phone : (004420) - 88860145 Fax : (004420) - 88869424

Kolkata

Chennai

London

SUBSIDIARIES

2

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

60

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

69

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

75

Godrej Tea Limited ................................................

77

Godrej Properties & Investments Limited .............

82

Girikandra Holiday Homes & Resorts Ltd. ..........

88

Godrej Remote Services Limited ..........................

90

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

93

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

96

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

100

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

102

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

BANKERS

:

Central Bank of India State Bank of India Bank of India HDFC Bank Ltd. Citibank N.A.

REGISTRARS

:

Computech Sharecap Ltd. 147, Mahatma Gandhi Road, Opp. Jehangir Art Gallery, Fort, Mumbai 400 023.

Phone : 022 - 2267 1824-26 Fax : 022 - 2267 0380 E-Mail : helpdesk@computechsharecap.com

Annual Report 2003-2004 GODREJ INDUSTRIES LIMITED – FINANCIAL HIGHLIGHTS (Rs. lac) 2003-04

2002-03

2001-02

2000-01

1999-00

2919 26197

2919 21511

3699 21030

5979 27559

5979 25679

16814 4235 2972 53137

14815 7432 3466 50143

15051 13456 1347 54583

16701 9547 – 59786

22375 11881 – 65914

25656 26533 739 209

28130 18646 2944 423

29099 14619 9987 878

33799 17075 8076 836

32815 19043 12666 1390

53137

50143

54583

59786

65914

73355 64243

67780 57737

53465 43408

79786 65935

71620 57218

Profit before Interest, Depreciation and Tax Interest (net)

9112 580

10043 2024

10057 3218

13851 3711

14402 4774

Profit before Depreciation and Tax Depreciation

8532 2150

8019 2211

6839 2154

10140 2531

9628 2342

Profit before Tax and exceptional items Exceptional items - expense Provision for Current Tax

6382 — 365

5808 — 421

4685 624 150

7609 3194 350

7286 547 641

Net Profit after Tax Provision for Deferred Tax

6017 (494)

5387 2119

3911 923

4065 —

6098 ––

(57)

(153)

(121)

(25)

(90)

6568

3421

3109

4090

6188

BALANCE SHEET SOURCES OF FUNDS : Shareholders’ Funds Share Capital Reserves & Surplus Loan Funds Secured Loans Unsecured Loans Deferred Tax Liability APPLICATION OF FUNDS : Fixed Assets Investments Net Working Capital Miscellaneous Expenditure INCOME AND PROFIT FIGURES Total Income Expenditure other than Interest and Depreciation

Adjustment in respect of prior years -(Income) Net Profit after taxes and adjustments

Note : The figures for FY 2002-03 are not comparable with those of the previous years in view of the schemes of arrangement with Godrej Consumer Products Limited and Godrej Foods Limited, in FY 2001-02.

Total Income 2003-2004

Total Expenditure 2003-2004

Break-up of Total Income Rs. Lac Chemicals

46075

Foods

18415

Break-up of Total Expenditure Rs. Lac Materials

46616

Staff Costs

6526

Medical Diagnostics 936 Income from Mfg. & Other Business Operations 619 Income from Financial operations 1359 330 Others

Depreciation

2150

Other Operating Expenses

11101

Total

Total

66973

Estate Management

2071

Processing Charges

3550

73355

Interest

580

3

Industries Limited NOTICE TO SHAREHOLDERS NOTICE is hereby given that the SIXTEENTH ANNUAL GENERAL MEETING of the members of GODREJ INDUSTRIES LIMITED will be held on Monday, July 26, 2004 at 4.00 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, 2004, the Balance Sheet as at that date, the Auditors’ Report and the Directors’ Report thereon.

2. To declare dividend for the financial year ended March 31, 2004.

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

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

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

6. To appoint a Director in place of Mr. F.P. Sarkari, who retires by rotation and being eligible, offers himself for re-appointment.

7. To appoint Auditors to hold office from the conclusion of this Annual General Meeting till the conclusion of the next Annual General Meeting, and to authorise 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, 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 of Mr. N.B. Godrej as Managing Director of the Company for a period of 3 years from April 1, 2005 to March 31, 2008, on the terms and conditions as contained in the Agreement to be entered into between the Company and Mr. N.B. Godrej, 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, the following resolution as a SPECIAL RESOLUTION : RESOLVED THAT subject to the provisions of Sections 314 and other applicable provisions, if any, of the Companies Act, 1956, approval of the Company be and is hereby accorded to the appointment of Mr. Pirojsha A. Godrej, son of Mr. A.B. Godrej, Chairman of the Company, as an employee of the Company, with effect from June 1, 2004, on the following terms and conditions : 1. Basic Salary Basic Salary in the scale of Rs. 13500 - 5000 - 7500 - Rs. 50000.

The Basic Salary on appointment will be Rs. 13,500/- per month.

2. Performance Linked Variable Remuneration (PLVR) Performance Linked Variable Remuneration according to the Scheme of the Company for each of the Financial years as may be decided by the Board of Directors of the Company, subject to maximum of 24 months' basic salary.

3. Allowances a. House Rent Allowance If Company’s House – not exceeding 40% of basic salary p.m.

OR If own house – not exceeding 55% of basic salary p.m. b. Conveyance Provision for use of Company's car with driver or conveyance allowance as per the Scheme of the Company.

At present, the conveyance allowance is Rs. 10000/- p.m.

4

c. Education Allowance As per the Scheme of the Company, applicable to the cadre in which he is appointed.

At present, the amount payable is Rs. 2000/- p.m. d. Joining Allowance - Rs. 12000/4. Other Benefits a. Leave Travel Allowance Maximum of 10% of basic salary per annum. b. Company’s contribution to Provident Fund Company’s contribution towards Provident Fund, Superannuation Fund or Annuity Fund as per the Rules framed under the Company’s relevant Scheme. c. Gratuity Gratuity not exceeding 50% of average basic salary drawn in last year of service for each completed year of service. Such gratuity shall be payable according to the rules of the Company. d. Reimbursement of Medical Expenses/Hospitalisation Expenses As per the Scheme of the Company, applicable to the cadre in which he is appointed. e. Leave/Leave encashment Earned/privilege leave, on full pay and allowance, not exceeding 30 days in a financial year. Encashment of leave will be permissible in accordance with Rules specified by the Company. Casual/sick leave as per 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 cars 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.

5. The appointment is terminable by giving three months’ notice in writing on either side.

10. To consider and if thought fit, to pass with or without modification, the following resolution as a SPECIAL RESOLUTION : RESOLVED THAT pursuant to Section 372A and all other applicable provisions, if any, of the Companies Act, 1956 (including any statutory modification or re-enactment thereof for the time being in force and as may be enacted from time to time) (hereinafter referred to as ‘the Act’), and subject to any other approvals, as may be required, the Company be and is hereby authorised to further invest upto Rs.50 crore (Rupees Fifty Crore only) in addition to the amounts already authorised to be invested, by way of subscription, purchase or otherwise in securities of Godrej Consumer Products Limited, notwithstanding that the aggregate of the loans and investments so far made in or to be made in, and the guarantees so far given or to be given to all bodies corporate, exceeds the limits laid down by the Act. RESOLVED FURTHER THAT the Board of Directors of the Company be and is hereby authorised to take from time to time all decisions and steps necessary or expedient or proper in respect of the above investment including the timing, the type, the amount and other terms and conditions of such investment and varying the same through transfer, sale, disinvestment or otherwise, either in part or in full, as it may, in its absolute discretion, deem appropriate.

Annual Report 2003-2004 11. To consider and if thought fit, to pass with or without modification, the following resolution as a SPECIAL RESOLUTION : RESOLVED THAT pursuant to Section 372A and all other applicable provisions, if any, of the Companies Act, 1956 (including any statutory modification or re-enactment thereof for the time being in force and as may be enacted from time to time) (hereinafter referred to as ‘the Act’), and subject to any other approvals, as may be required, the Company be and is hereby authorised to further invest upto Rs. 2 crore (Rupees Two Crore only) in addition to the amounts already invested, by way of subscription, purchase or otherwise in securities of Godrej Agrovet Limited, notwithstanding that the aggregate of the loans and investments so far made in or to be made in, and the guarantees so far given or to be given to all bodies corporate, exceeds the limits laid down by the Act. RESOLVED FURTHER THAT the Board of Directors of the Company be and is hereby authorised to take from time to time all decisions and steps necessary or expedient or proper in respect of the above investment including the timing, the type, the amount and other terms and conditions of such investment and varying the same through transfer, sale, disinvestment or otherwise, either in part or in full, as it may, in its absolute discretion, deem appropriate.

12. To consider and if thought fit, to pass with or without modification, the following resolution as a SPECIAL RESOLUTION : RESOLVED THAT pursuant to Section 372A and all other applicable provisions, if any, of the Companies Act, 1956 (including any statutory modification or re-enactment thereof for the time being in force and as may be enacted from time to time) (hereinafter referred to as ‘the Act’), and subject to any other approvals, as may be required, the Company be and is hereby authorised to further invest upto Rs.2 crore (Rupees Two Crore only) in addition to the amounts already invested, by way of subscription, purchase or otherwise in securities of Godrej Properties & Investments Limited, notwithstanding that the aggregate of the loans and investments so far made in or to be made in, and the guarantees so far given or to be given to all bodies corporate, exceeds the limits laid down by the Act. RESOLVED FURTHER THAT the Board of Directors of the Company be and is hereby authorised to take from time to time all decisions and steps necessary or expedient or proper in respect of the above investment including the timing, the type, the amount and other terms and conditions of such investment and varying the same through transfer, sale, disinvestment or otherwise, either in part or in full, as it may, in its absolute discretion, deem appropriate.

13. To consider and if thought fit, to pass with or without modification, the following resolution as a SPECIAL RESOLUTION : RESOLVED THAT pursuant to Section 372A and all other applicable provisions, if any, of the Companies Act, 1956 (including any statutory modification or re-enactment thereof for the time being in force and as may be enacted from time to time) (hereinafter referred to as ‘the Act’), and subject to any other approvals, as may be required, the Company be and is hereby authorised to invest upto Rs. 4.5 crore (Rupees four crore fifty lac only) by way of subscription, purchase or otherwise in securities of Avestha Gengraine Technologies Pvt. Ltd., notwithstanding that the aggregate of the loans and investments so far made in or to be made in, and the guarantees so far given or to be given to all bodies corporate, exceeds the limits laid down by the Act. RESOLVED FURTHER THAT the Board of Directors of the Company be and is hereby authorised to take from time to time all decisions and steps necessary or expedient or proper in respect of the above investment including the timing, the type, the amount and other terms and conditions of such investment and varying the same through transfer, sale, disinvestment or otherwise, either in part or in full, as it may, in its absolute discretion, deem appropriate.

14. To consider and if thought fit, to pass with or without modification, the following resolution as a SPECIAL RESOLUTION : RESOLVED THAT pursuant to Section 372A and all other applicable provisions, if any, of the Companies Act, 1956 (including any statutory modification or re-enactment thereof for the time being in force and as may be enacted from time to time) (hereinafter referred to as ‘the Act’), and subject to any other approvals, as may be required, the Company be and is hereby authorised to invest upto US$ 300,000 (USDollar Three hundred thousand only) by way of subscription,

purchase or otherwise in the securities of Ingenero (Mauritius) Limited, notwithstanding that the aggregate of the loans and investments so far made in or to be made in, and the guarantees so far given or to be given to all bodies corporate, exceeds the limits laid down by the Act. RESOLVED FURTHER THAT the Board of Directors of the Company be and is hereby authorised to take from time to time all decisions and steps necessary or expedient or proper in respect of the above investment including the timing, the type, the amount and other terms and conditions of such investment and varying the same through transfer, sale, disinvestment or otherwise, either in part or in full, as it may, in its absolute discretion, deem appropriate.

By Order of the Board of Directors S. K. BHATT General Manager (Corporate Services)` & Company Secretary Mumbai, May 28, 2004 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 14 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 6, 2004 to July 26, 2004 (both days inclusive) for ascertaining the names of the shareholders to whom the dividend which shall be 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 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 31.03.1997 31.03.1998 31.03.2000 31.03.2001 31.03.2002 31.03.2003

Due date for transfer 15.09.2004 26.09.2005 01.07.2007 28.07.2008 14.08.2009 25.08.2010

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.

5

Industries Limited EXPLANATORY STATEMENT PURSUANT TO SECTION 173(2) OF THE COMPANIES ACT, 1956 Item No. 8 Mr. N.B. Godrej was appointed as the Managing Director vide resolution passed at the Annual General Meeting held on July 28, 2001 for the period from April 1, 2002 to March 31, 2005. It is now proposed to seek approval of shareholders for re-appointment and remuneration of Mr. N.B. Godrej (hereinafter referred to as “the Managing Director”) for a further period of three years from April 1, 2005 to March 31, 2008 on the remuneration, terms and conditions as given below :I. Basic Salary : In the scale of Rs. 280,000 to Rs. 500,000 per month. The Remuneration Committee/Board of Directors will determine the amount of Basic Salary payable from time to time depending on the performance of the Managing Director, profitability of the Company and other relevant factors.

The Basic Salary approved by the Remuneration Committee for 200405 is Rs. 280,000 per month.

II. Performance Linked Variable Remuneration : Performance Linked Variable Remuneration according to the Scheme of the Company for each of the Financial year as may be decided by the Remuneration Committee/Board of Directors of the Company.

III. Perquisites : Classified into four categories A, B, C and D as detailed below : Category A (1) Housing : Furnished residential accommodation, the perquisite value for which, shall be calculated in accordance with the Income-tax Rules, 1962.

The perquisite value of provision of, or reimbursement of expenditure incurred on, gas, electricity, water and furnishings, which shall be valued in accordance with the Income-tax Rules, 1962.

OR House rent allowance equivalent to 60% of basic salary.

(2) Medical Benefits : a) Payments/Reimbursement of domicilary medical expenses incurred/insurance premium for the Managing Director and his family (excluding hospitalisation, nursing home and surgical charges) subject to a ceiling of one month’s average basic salary in a financial year. b) Reimbursement of hospitalisation, nursing home and surgical charges for the Managing Director and his family subject to a limit of one month’s average basic salary in a financial year which can be accumulated according to the Company’s Rules.

(3) Leave Travel Concession : Leave Travel Concession for the Managing Director and his family once in a financial year incurred in accordance with the Rules specified by the Company subject to a ceiling of one month’s average basic salary in a financial year.

(4) Club Fees : Payments/Reimbursement of fees of a maximum of two Clubs, subject to a ceiling of Rs. 1 lac (excluding entrance fees/life membership fees) in a financial year.

For the purposes of medical benefits and leave travel concession under Category A, ‘family’ means the spouse and dependent children of the Managing Director.

Category B (1) Company’s contributions towards Provident Fund, Superannuation Fund or Annuity Fund as per the Rules framed under the Company’s relevant Scheme.

(2) Gratuity according to the Rules of the Company. If the Managing Director is re-appointed, gratuity will be paid at the end of the tenure of the Managing Director with the Company.

(3) 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.

(4) Casual/Sick leave as per the rules of the Company.

6

Category C The following shall not be included in the computation of perquisites : (1) Provision for use of Company’s cars with driver for official use.

(2) Provision of free telephone facilities or reimbursement of telephone expenses at residence including payment of local calls and long distance official calls.

Category D Granting of housing loans according to Company’s Scheme subject to Central Government’s approval, if any.

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. 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 may in its absolute discretion pay to the Managing Director from time to time, shall not exceed the limits prescribed from time to time under Sections 198, 309 and all 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, except with the approval of Central Government.

III. The limits specified above are the maximum limits and the Board/ Remuneration Committee may in its absolute discretion pay to the Managing Director 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.

A draft of the agreement to be entered into with the Managing Director 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.

The above constitutes 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 Statement containing information as required under Schedule XIII of the Companies Act, 1956 is enclosed.

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

Mr. N.B. Godrej may be deemed to be interested in the resolution.

Mr. A.B. Godrej, being his relative, may be deemed to be interested in the resolution. None of the other Directors of the Company are concerned or interested in the resolution.

Item No.9 Mr. Pirojsha A. Godrej is the son of Mr. Adi B. Godrej, Chairman of the Company, and brother of Ms. Tanya Dubash, Director (Marketing). It is proposed to appoint Mr. Pirojsha A. Godrej as an employee of the Company w.e.f. June 1, 2004 for which the approval of members is being sought under Section 314 of the Companies Act, 1956.

Mr. Priojsha A. Godrej is a Bachelor of Science in Economics from Wharton School, University of Pennsylvania. He obtained his Masters in International Affairs from the School of International and Public Affairs, Columbia University, New York.

The details of the remuneration payable to Mr. Pirojsha A. Godrej is laid down in the text of the resolution which is self explanatory. For the sake of brevity, the particulars of the remuneration, perquisites and benefits are not being set out again in the Explanatory Statement and the members are requested to refer to the resolution.

The Board recommends the passing of the resolution.

Mr. A.B. Godrej and Ms. T.A. Dubash being relatives of Mr. Pirojsha A. Godrej may be interested in the resolution. None of the other Directors are interested in the resolution.

Annual Report 2003-2004 Item No. 10 to 14 Particulars of the Company where investment is proposed to be made: Name of the Company & address of Regd. Office

Amount of investment

Principal business of the Company

Purpose of investment

Source of funds

Nature of concern or interest of Directors in the resolution

Godrej Consumer Products Limited Pirojshanagar, Eastern Express Highway, Vikhroli, Mumbai-400 079

Rs. 50 crore

Manufacturing and marketing of fast moving consumer products such as soaps, detergents, toiletries, personal care products, etc.

A good investment opportunity

Internal generation of funds/borrowings.

Except Mr. V. F. Banaji, all the other directors may be deemed to be interested in this resolution on account of their being Directors and/or shareholders in Godrej Consumer Products Ltd.

Godrej Agrovet Ltd. Pirojshanagar, Eastern Express Highway, Vikhroli, Mumbai-400 079

Rs. 2 crore

Manufacturing and marketing of Animal Feeds, Agricultural Products, Poultry, Oil Palm Plantations, Micro propagation of Tissue Culture.

A good investment opportunity

Internal generation of funds/borrowings

Mr. A.B. Godrej, Mr. N.B. Godrej, Mr. J.N. Godrej, Mr. V.M. Crishna, Mr. K.N. Petigara and Ms. T.A. Dubash may deemed to be interested in this resolution on account of their being Directors in Godrej Agrovet Ltd. None of the other Directors of the Company are concerned or interested.

Godrej Properties & Investments Ltd. Pirojshanagar, Eastern Express Highway, Vikhroli, Mumbai-400 079

Rs. 2 crore

Real Estate Development

A good investment opportunity

Internal generation of funds/borrowings

Mr. A.B. Godrej, Mr. N.B. Godrej, Mr. J.N. Godrej, and Ms.T.A. Dubash may deemed to be interested in this resolution on account of their being Directors/shareholders in Godrej Properties & Investments Ltd. None of the other Directors of the Company are concerned or interested.

Avestha Gengraine Technologies Pvt. Ltd. ‘Discoverer’ 9th Floor, International Technology Park, Whitefield Road, Bangalore-86.

Rs. 4.5 crore Biotechnology

A good investment opportunity

Internal generation of funds/borrowings

None of the Directors are concerned or interested.

Ingenero (Mauritius) Limited 10, Frere Felix De Valois Street, Port Louis, Mauritius.

US$300,000

A good investment opportunity

Internal generation of funds/borrowings

None of the Directors are concerned or interested.

Provision of remote Manufacturing Technical Support services to the global chemical process industry.

The Board of Directors of the Company recommends the passing of the resolutions as set out at Items No. 10 to 14 of the Notice.

By Order of the Board of Directors S. K. BHATT General Manager (Corporate Services) & Company Secretary Mumbai, May 28, 2004 Registered Office : Pirojshanagar, Eastern Express Highway, Vikhroli (East), Mumbai-400 079.

7

Industries Limited Statement in Terms of Schedule XIII of the Companies Act, 1956 relating to Remuneration Payable to the Managing Director I. General Information 1. Nature of Industry – Chemicals, Edible oils, Fats, and Processed Foods.

2. Date or expected date of commencement of commercial production – The Company was incorporated on March 7, 1988 as a Public Limited Company.

3. Financial performance based on given indicators – as per the audited financial results for the year ended March 31, 2004.

(Rs. lac) Sales of products and services 71666 Other Income 1689 Total income

73355

Total expenditure other than interest & depreciation

64243

Profit Before Depreciation, Interest and Tax

9112

Depreciation

2150

Profit Before Interest and Tax

6962

Interest and financial charges (net) Profit Before Tax Provision for Current Tax

Performance Linked Variable Remuneration HRA

580 365 6017

Provision for Deferred Tax Adjustments in respect of prior years – net income

(494) (57)

Profit After Tax

6568

4. Export performance and net foreign exchange earned for the year ended March 31, 2004.

Rs. lac Exports of goods 13279 Interest income 12 Dividend Income 48 5. Foreign investments as on March 31, 2004.

Rs. lac 960.83 124.55

II. Information about the appointee 1. Background details : Mr. N.B. Godrej has a B.S. degree in Chemical Engineering from the Massachusetts Institute of Technology and a M.S. in Chemical Engineering from Stanford University. He did his M.B.A at Harvard Business School in 1976. He has been very active in developing the chemicals business of the Company.

2. Past Remuneration : The remuneration paid during the year ended March 31, 2004 is as under : Rs. Salary 7685066 Perquisites 1435614 Total 9120680 3. Job profile and suitability : Mr. N.B. Godrej is well qualified being an Engineer from MIT, USA, MS in Chemical Engineering from Stanford University and an MBA from Harvard Business School. He has a career spanning

8

Description Basic salary range p.m.

6382

Profit after Current Tax

In shares of Godrej International Ltd., the Company’s wholly owned subsidiary In equity shares of Compass Connections Ltd.

27 years in Godrej group as a Board Member/Managing Director of Godrej Soaps Limited, Gujarat-Godrej Innovative Chemicals Ltd. and Godrej Industries Ltd. He has been very active in developing the chemicals business of the Company. He has demonstrated outstanding leadership skills in diverse business areas.

4. Remuneration proposed : Details of the proposed remuneration of Mr. N.B. Godrej are given in the Explanatory Statement to the resolution.

Brief particulars of the remuneration are given below:

Perquisites

Limits In the range of Rs. 2,80,000 to Rs. 5,00,000 p.m.

The present monthly basic salary is Rs. 2,80,000 p.m.

Based on performance, as per the Company’s Scheme.

Furnished residential accommodation Or House Rent Allowance equivalent to 60% of basic salary As per rules of the Company

5. Comparative remuneration profile with respect to industry, size of the Company, profile of the position and person : Taking into consideration the size of the Company, the profile of the Appointee, the responsibilities shouldered by him and the industry benchmarks, the aforesaid remuneration is commensurate with the remuneration package paid to similar senior level appointees in other companies.

6. Pecuniary relationship directly or indirectly with the Company, or relationship with the managerial personnel, if any : Besides the remuneration proposed, the Managing Director does not have any other pecuniary relationship with the Company and its managerial personnel.

III. Other information Reasons of loss or inadequate profits, Steps taken or proposed to be taken for improvement and Expected increase in productivity and profits in measurable terms : The Company has adequate profits as required under Section 198, 269 and 309 read with Schedule XIII of the Companies Act, 1956. This disclosure could be applicable only in case of any shortfall in the limit laid down in Companies Act, 1956, for payment of managerial remuneration in any financial years during the currency of the proposed agreement with Mr. N.B. Godrej, i.e. Financial Years 2005-06, 2006-07 and 2007-08.

By Order of the Board of Directors S. K. BHATT General Manager (Corporate Services) & Company Secretary Mumbai, May 28, 2004.

Registered Office : Pirojshanagar, Eastern Express Highway, Vikhroli (East), Mumbai-400 079.

Annual Report 2003-2004 Details of the Directors seeking appointment/reappointment in the forthcoming Annual General Meeting (In pursuance of Clause 49 of the Listing Agreement) Mr. A.B. Godrej (62) : Mr A.B. Godrej is B.S., M.S. from Massachusetts Institute of Technology, U.S.A. and is a Director since 1988.

Directorship in other Companies: Chairman & Managing Director, Godrej Consumer Products Ltd., Chairman: Swadeshi Detergents Ltd., Godrej Tea Ltd., Godrej Investments Pvt. Ltd., Godrej Foods Ltd., Hicare India Ltd., Godrej Sara Lee Ltd., Vora Soaps Ltd., Godrej Properties & Investments Ltd. Director: Godrej & Boyce Mfg. Co. Ltd., Godrej Agrovet Ltd., Godrej International Ltd., Godrej Global Mid East FZE, Godrej Upstream Ltd.

Committee position held in companies : Chairman, Audit Committee – Godrej Properties & investments Ltd. Chairman, Remuneration Committee – Godrej Foods Ltd. Chairman, Audit Committee – Godrej Sara Lee Ltd. Chairman, Shareholders’ Committee – Godrej Industries Ltd. Member, Shareholders’ Committee and Human Resources Committee – Godrej Consumer Products Ltd. Mr. S.A. Ahmadullah (64) : Mr. S.A. Ahmadullah is B. A. (Cantab.). He is a Director of the Company since 1995.

Directorship in other Companies : Director : Lawkim Ltd., Globe Theatres Pvt. Ltd., Nadir Company Private Limited and Motor Sports Association of India.

Committee position held in companies : Chairman, Remuneration Committee, Godrej Industries Limited Member : Audit Committee, Godrej Industries Ltd. Mr. V.N. Gogate (71) : Mr. V.N. Gogate is a Chartered Accountant and a qualified Company Secretary by profession. Mr. Gogate was heading the finance function of the former Godrej Soaps Ltd. before retiring in 1994. He is a Director of the Company since 1995.

Committee position held in companies : Member: Remuneration Committee – Godrej Industries Ltd. Member: Audit Committee – Godrej Industries Ltd.

Mr. F.P. Sarkari (72) : Mr. F.P. Sarkari is a Practising Chartered Accountant. He was appointed as a Director of the Company from January 30, 2002.

Directorship in other Companies : Director : Godrej & Boyce Mfg. Co. Ltd. and Tropicana Enterprise Pvt. Ltd.

Committee position held in companies : Chairman : Audit Committee - Godrej Industries Ltd., Godrej & Boyce Mfg. Co. Ltd. Member: Remuneration Committee – Godrej & Boyce Mfg. Co. Ltd. Mr. N.B. Godrej (52) : Mr. N.B. Godrej has a B.S. degree in Chemical Engineering from the Massachusetts Institute of Technology and a M.S. in Chemical Engineering from Stanford University. He did his M.B.A at Harvard Business School in 1976. He is a Director of the Company since 1988.

Directorship in other companies: Chairman : Godrej Agrovet Limited, Goldmohur Foods & Feeds Ltd., Godrej Global Solutions Ltd. Director : Godrej Industries Ltd., Godrej & Boyce Mfg. Co. Ltd., Godrej Consumer Products Ltd. Godrej Foods Ltd., Godrej Properties & Investments Ltd., Unicorn Agrotech Ltd., Mahindra & Mahindra Ltd., Godrej Tea Limited, Godrej Sara Lee Ltd., KarROX Technologies Ltd., Unicorn Seeds Ltd., Godrej International Ltd., Godrej Global Mid East FZE, Compass Connections Ltd., UK, CBay Systems Ltd., USA, Rasa Agrotech Pvt. Ltd., Godrej Upstream Ltd.

Committee position held in companies: Chairman, Audit Committee – Godrej Tea Ltd. and Godrej Agrovet Ltd. Member, Audit Committee and Shareholders Committee - Godrej Consumer Products Ltd. Member, Audit Committee – Godrej Sara Lee Ltd., Godrej Foods Ltd. and Godrej Properties & Investments Ltd. Member, Remuneration Committee – Godrej Industries Ltd. Member, Audit Committee and Remuneration Committee – Mahindra & Mahindra Ltd.

9

Industries Limited DIRECTORS’ REPORT FOR THE YEAR ENDED MARCH 31, 2004 To the Shareholders, Your Directors have pleasure in submitting the Annual Report along with the Audited Accounts for the year ended March 31, 2004.

REVIEW OF OPERATIONS Your Company’s performance during the year as compared with that during the previous year is summarized below.

(Rs. lac) Year ended March 31, 2004 2003 Sales of products and services Other Income Total Income Total Expenditure other than Interest and Depreciation

71666

65250

1689

2530

73355

67780

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

Godrej Agrovet Limited (GAVL) performed well during the year with its total income increasing to Rs. 49494 lac as compared to Rs. 47639 lac in the previous year and Profit After Tax growing from Rs. 887 Lac to Rs. 896 Lac during this year. GAVL declared two interim dividends of 45% and 30% respectively in the current year, as compared to interim dividend of 63% and final dividend of 16% in the previous year.

Goldmohur Foods and Feeds Ltd., a wholly owned subsidiary of GAVL recorded turnover of Rs. 30021 lac during the year as compared to Rs. 31693 lac during the previous year. During the year, GAVL formed a wholly owned subsidiary, viz. Golden Feed Products Limited (GFPL) to carry on the business of animal feeds.

64243

57737

Profit before Interest, Depreciation and Taxation Depreciation

9112 2150

10043 2211

Profit before Interest and Taxation Interest and Financial Charges (net)

6962 580

7832 2024

Profit before Taxation Provision for Current Tax

6382 365

5808 421

Profit after Current Tax Provision for Deferred Tax

6017 (494)

5387 2119

Profit after Current and Deferred Taxation Adjustments in respect of prior years – net income Surplus brought forward

6511 58 11215

3268 153 9234

Profit after Tax available for appropriation

17784

12655

Godrej Remote Services Limited (GRSL), which is in the medical transcription business, improved its revenue to Rs. 245 lac this year, from Rs.135 lac in the previous year. However, the loss for the year increased to Rs.181 lac as against Rs. 121 lac in the previous year.

Dividend on Equity Shares Tax on distributed profits Transfer to General Reserve Surplus Carried Forward

1459 187 657 15481

973 125 342 11215

Godrej Tea Ltd., which had commenced operations in the previous year, earned Total Income of Rs. 3614 lac as compared to Rs. 1174 lac in the previous year. GTL recorded loss of Rs. 844 lac as compared to Rs. 502 lac in the previous year.

Total Appropriation

17784

12655

Appropriation Your Directors recommend appropriation as under:

The total income grew by over 8% from Rs. 67780 lac to Rs. 73355 lac and the PBT rose to Rs.6382 lac from Rs. 5808 lac, in the previous year, an increase of 9.9%.

DIVIDEND The Board of Directors of your Company recommends a final dividend of Rs 3/- per equity share of Rs 6/- each, aggregating to Rs.1459 lac, as against final dividend of Rs 2/- per equity share of Rs 6/- each aggregating to Rs 973 lac in the previous year.

MANAGEMENT DISCUSSION & ANALYSIS There is a separate section on Management Discussion and Analysis in this Annual Report, which, inter alia, covers the following : • • • • • •

Industry Structure and Development Opportunities and Threats Risks and Concerns Internal Control Systems and their adequacy Human Resources and Industrial Relations Discussion on financial performance with respect to operational performance • Segment - wise performance • Outlook The same is appended as Annexure A to the Directors’ Report.

10

Godrej Properties & Investments Ltd. (GPIL) recorded increase in Profit After Tax from Rs. 130 lac in the previous year to Rs. 282 lac during the current year. However, its Total Income declined to Rs. 2924 lac from Rs. 4205 lac in the previous year. GPIL has declared final dividend of 31.03% as compared to interim dividend of 15.52% in the previous year.

Godrej International Limited (GINL) has posted a net profit of US$ 414799 as compared to US$ 219771 in the previous year. GINL has proposed a final ordinary dividend of 9 US cents per ordinary share of £1 aggregating to US$ 135450 as against a final ordinary dividend of 7 US cents aggregating to US$ 105350, the previous year. Godrej Global MidEast FZE (GGME), a 100% subsidiary of GINL has earned Net Profit of AED 196838 as compared to a loss of AED 2480513 in the previous year.

During the year, your Company invested Rs. 2474 lac in Godrej Global Solutions Limited, which is in the Business Process Outsourcing (BPO) and back office support areas. While GGSL is yet to start its own commercial operations, it has initiated its growth by investing in other companies/ ventures engaged in similar areas.

Godrej Sara Lee Limited (GSLL) has continued its dominant position in the Household Insecticide market. GSLL is the market leader in India in three categories of Household insecticide market, viz. mats, coils and aerosols. “Goodknight” brand was adjudged the No.1 “Household Care” brand by Economic Times in their brand equity study during the year.

Your Company’s joint venture with Photo-Me International Plc for photobooth/ photographic business in India, was terminated after the close of the year, and a substantial part of the shareholding by the foreign partner in the joint venture company, viz. Hicare India Limited (HIL), (formerly Godrej Photo-Me Limited) was bought over by your Company. HIL has forayed into business of pest management services during the year.

FINANCIAL POSITION The financial position of your Company continues to be sound. The loan funds as at the end of the year reduced to Rs.21049 lac as compared to Rs. 22248 lac as at the end of the previous year. This reduction was possible mainly on account of operating profits and reduction in working capital. Your Company continues to hold the topmost rating of A1+ from ICRA for its commercial paper programme. The rating indicates that the prospect of timely repayment of debt/obligation is the best.

Annual Report 2003-2004 MANUFACTURING FACILITIES During the year, the factories of the Chemicals Division at Vikhroli and Valia recorded increase in throughput, productivity as well as plant reliability. Both the factories are already ISO 9001:2000 certified for their quality management systems. Both, Vikhroli and Valia factories have been certified to be ISO 14001 compliant by BVQI for their environment management system. Vikhroli factory has also been certified for OHSAS 18001 standards by BVQI. During the year both the factories had taken various initiatives for de-bottlenecking, reducing energy consumption and cost and quality improvement. Total Productive Maintenance (TPM) systems being implemented in these factories have greatly helped in this regard.

Foods Division has two manufacturing facilities; viz Wadala (Mumbai), and Mandideep near Bhopal. The Division had a factory in Mysore, which, as a part of operational restructuring to improve capacity utilisation and reduce operating costs, was sold during the year to further improve operational efficiencies. The factory at Mandideep has been certified for ISO-14001.This factory has also qualified for the third award of National Productivity Council, New Delhi, for the year 1999-2000, in the category of ‘Fruits and Vegetables Processing Industries’.

RESEARCH AND DEVELOPMENT During the year under review, the R&D efforts of your Company focused on understanding the customer needs and bringing in process innovation to ensure business continuity. This was done by visiting select customers, understanding their needs & working towards renovation of these products, as a part of the Product Application Group (PAG). PAG is a Group comprising people from Marketing and R&D Departments, formed with the objective of translating R&D knowledge into new value added products and applications. Efforts were also made in working on new products in new categories in partnership with potential customers, again as part of PAG. R&D was also successful in development of a “treatment” process which enabled use of cheaper raw materials for premium products.

INFORMATION SYSTEMS Your Company has successfully implemented a ‘best in class’ e-CRM application for its valued customers in India. This platform works as a dedicated and personalized online channel for customers. The usage and feedback regarding this service has been quite encouraging, and has prompted us to extend this service for international customers as well.

Your Company’s leadership role in the information systems area has won external recognition such as ‘IT Security Strategist’ for year 2003 award

by Secure synergy and ABCI award for its Employee portal for ‘Internal digital communication.’

Your Company’s usage of IT for internal customers has also been increasing with many critical business work flows being migrated to ‘on-line’ version resulting in overall time and cost savings and operational efficiency.

VOLUNTARY DELISTING OF THE COMPANY’S EQUITY SHARES FROM CERTAIN STOCK EXCHANGES Your Company had obtained approval of shareholders in the Annual General Meeting held on August 25, 2003 for voluntarily delisting the equity shares of the Company from the Stock Exchange, Ahmedabad (ASE), The Delhi Stock Exchange Association Limited (DSE), Madras Stock Exchange Limited (MSE) and Calcutta Stock Exchange Association Limited (CSE) pursuant to the Securities and Exchange Board of India (Delisting of Securities) Guidelines, 2003. This was done with the objective of saving listing fees and other administrative costs, but without affecting the convenience to shareholders, since the shares of the Company would continue to be listed on the Stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE).

Pursuant to the above, your Company’s shares have been delisted from ASE, DSE and MSE with effect from March 8, 2004, February 11, 2004

and February 19, 2004 respectively. Your Company is awaiting the permission for delisting from CSE. "GROUP" FOR INTERSE TRANSFER OF SHARES As required under Clause 3(e) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, 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 the aforesaid SEBI Regulations are given in Annexure C attached herewith and the said Annexure C forms part of this Annual Report.

ENVIRONMENT AND SOCIAL CONCERN Your Company continues its efforts for the betterment of the environment.

To prevent pollution of environment, efforts are made to convert waste from the factories into an environment-friendly product and then dispose of the same safely. Your Company has entered into an arrangement with Trans Thane Creek Waste Management Association (TTCWMA) for the treatment of solid waste being generated at the Company’s factories at Vikhroli and Wadala. TTCWMA has set up an Integrated Hazardous Solid Waste Management Facility at Mahape, Navi Mumbai for treatment of solid wastes generated by various industries. By improving the design of vent chambers in Fat Splitting Plant in Vikhroli, and recovering the process heat, the fatty acid vapours escaping to the atmosphere are minimised thereby resulting in a cleaner environment.

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

FIXED DEPOSITS Your Company has stopped accepting Fixed Deposits from the public.

Public Deposits of an aggregate amount of Rs. 1411 lac which have matured during the year have been paid.

DEPOSITORY SYSTEM Your Company’s equity shares have been made available for dematerialisation through National Securities Depository Limited & Central Depository Services (India) Limited. As of March 31, 2004, 98.91% of the equity shares of your Company were held in demat form.

DIRECTORS In accordance with Article 127 of the Articles of association of the Company, Mr. A.B. Godrej, Mr. S.A. Ahmadullah, Mr. V.N. Gogate and Mr. F.P. Sarkari retire by rotation at the ensuing Annual General Meeting.

They are eligible and offer themselves for re-appointment.

Mr. K.N. Naoroji, former director of your Company, passed away on December 17, 2003. He was on the Board of the Company from 1995.

The Board of Directors would like to place on record its appreciation of the valuable contribution made by Mr.Naoroji during his association with the Company.

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

Pursuant to directions from the Department of Company Affairs, P.M. Nanabhoy & Co., Cost Accountants, have been appointed as Cost Auditors for the year 2003-04. They are required to submit their report to the Central Government within 180 days from the end of the accounting year.

AUDIT COMMITTEE The Audit Committee, which was constituted pursuant to the provisions of Section 292A of the Companies Act, 1956 and the listing agreement, has reviewed the Accounts for the year ended March 31, 2004.

11

Industries Limited DIRECTORS’ RESPONSIBILITY STATEMENT Pursuant to the provisions contained in Section 217(2AA) of the Companies Act, 1956, the Directors of your Company confirm: a. that in the preparation of the annual accounts, the applicable accounting standards have been followed and no material departures have been made from the same; b. that such accounting policies have been selected and applied consistently, and such judgments and estimates have been made 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. c. that proper and sufficient care has been taken 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 detecting fraud and other irregularities; d. that the annual accounts have been prepared on a going concern basis.

CORPORATE GOVERNANCE As required by the existing clause 49 of the Listing Agreements with the Stock Exchanges, a detailed report on Corporate Governance is included in the Annual Report. The Auditors have certified the Company’s compliance of the requirements of Corporate Governance in terms of Clause 49 of the Listing Agreement and the same is annexed to the Report on Corporate Governance.

ADDITIONAL INFORMATION Annexure B to this Report gives 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 Companies (Disclosure of Particulars in the Report of the 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 with the Companies (Particular of Employees) Rules, 1975 forms part of this Report. As per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to the Shareholders of the Company, excluding the statement of particulars of employees under section 217(2A) of the Companies Act, 1956. Any shareholder interested in obtaining a copy of the same statement may write to the Company Secretary at the Registered Office of the Company.

The Note to the Accounts referred to in the Auditors’ Report is selfexplanatory and therefore does not call for any further explanation.

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

For and on behalf of the Board of Directors A.B. Godrej Chairman

Mumbai, May 28, 2004.

ANNEXURE "A" FORMING PART OF DIRECTORS’ REPORT MANAGEMENT DISCUSSION AND ANALYSIS INDUSTRY STRUCTURE AND DEVELOPMENTS The economy witnessed a series of positive trends aided by a good monsoon-backed agricultural growth, growth in manufacturing and service sectors, etc. in financial year 2003-04, aiding a general feel good factor. The Index of Industrial Production for the manufacturing sector rose to 7.2% during the period April 2003-February 2004 as compared to 6% for the corresponding period in the previous year.

The overall performance of your Company too has been quite satisfactory.

Your Company focused on increasing sales as well as profitability. Your Company largely operates in the Oleo-Chemicals, edible oils, fats and processed food industries. The division-wise performance and outlook have been covered separately in this report.

The operational performance of the various businesses of your Company is discussed in the following section of this report.

SEGMENTAL PERFORMANCE The segment-wise break-up of Revenue, PBIT (including prior period income) and capital employed for the year under review is as follows: (Amounts in Rs.lac) 1.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE The highlights of overall performance are as follows :

2.

(Amount in Rs. lac) Particulars Sales Total Income Profit Before Taxation Profit After Current and Deferred Taxation Earnings per Equity Share (Rs.)

2003-04

2002-03

71666 73355 6382 6511 13.50

65250 67780 5808 3268 5.87

12.71% 8.91% 9.09% 14.47% 22.52% 13.50

15.39% 8.90% 5.01% 15.88% 13.61% 5.87

0.73 12.00

0.93 3.87

The Financial risk ratios are as follows: Debt/Equity Interest coverage

12

49369 19358 2087 2466

44882 17590 2177 2864

Total

73280

67513

7312 (1489) 1497 1336

5649 87 1537 1798

Profit Before Interest and Tax

8656

9071

Less: Interest (Net) Unallocated expenses (Net), Prior period items

(580)

(2024)

(1637)

(1086)

6439

5961

Chemicals Foods Estate Others

17255 3752 3185 28922

20618 4340 3100 21920

Total

53114

49978

Segment Results (Profit/(Loss) before interest & tax)

Profit Before Tax 3.

2002-03

Chemicals Foods Estate Management Others

Chemicals Foods Estate Others

Profitability ratios are as follows : PBDIT/Sales PBT/Sales PAT/Sales Return on Capital Employed Return on Net Worth Basic EPS (Rs.)

Segment Revenue (Income from Operations) 2003-04

Segment Capital Employed

Annual Report 2003-2004 CHEMICALS DIVISION The Chemicals Division operates in the oleo-chemical and surfactants industry. The strength of this Division is its strong manufacturing base, which delivers international quality products at competitive prices and its integrated systems which ensure quick delivery of products at competitive costs. The Division continued its position of leadership in the Indian market. The Division has a balanced blend of domestic and international operations. Sales of the Division grew 10% in value and 2% in volume. The export business grew by a good 37% and domestic business by 3%.

The important drivers of performance during the year have been favorable raw material prices, coupled with efficient sourcing and coverage, exploiting capacity of the manufacturing facilities to their fullest level, well-managed and low interest cost and efficient management of foreign exchange exposure. Chemicals Division won the prestigious Best Business award for the year 2003-04 within the Godrej Group of Companies. The Division has won the award for the second time in three years. It had earlier won the award in 2001-02, in the Godrej awards inaugural year.

Product category-wise performance is reviewed below: Fatty Alcohol Fatty Alcohol has been a steadily growing category and has contributed 41% to the turnover of this Division. The growth in this category was 28% in value and 25% in volume over previous year. Fatty Alcohols are mainly used in laundry and personal care applications in the domestic market, and for cosmetics and industrial applications in the international market. Significant growth in exports this year has helped improve the revenue and contribution of this category. Your Company exports fatty alcohol to more than 50 countries all over the world. Growth in the domestic market has also been good during the year.

Glycerin Glycerin accounted for 9% of the turnover of this Division.

During the year, sales in this category increased 5% in volume. The Company continued to maintain its leadership position in this product category in the domestic market.

Alpha Olefin Sulphonate (AOS) Your Company is the pioneer as well as the market leader in the production and marketing of AOS in India. AOS contributed 15% to the turnover of this Division. AOS has grown 10% in volume and 7% in value as compared to the previous year. Godrej AOS is incorporated in a number of well-known detergent and shampoo brands in the country.

The product form and delivery is customized to suit the convenience of the end-users. This has helped in improving its usage as a cost effective alternative surfactant. Your Company continues to grow well in this segment on the strength of consistent quality and service.

Fatty Acids Fatty acids, comprising Stearic Acids, Oleic Acids, and other speciality Fatty Acids accounted for 35% of the turnover of this Division. Stearic Acid, the major component of Fatty Acid portfolio, showed an

improvement of 16% in volume, with continuous cost reduction and new market development initiatives. However, the Sales in this category declined 12% in volume and 3% in value, as compared to previous year, on account of increased availability and competition from small players. The Company is taking steps to counter competition and further strengthen its position in this category.

Your Company had entered into a Processing Agreement with Godrej Consumer Products Limited (GCPL) for manufacturing of soaps. The Agreement was terminated by GCPL with effect from April 1, 2004 since GCPL has expanded its own manufacturing facilities. However, your Company is utilizing the available capacities for making soap noodles. eCRM The Chemicals Division has deployed a comprehensive eCRM (electronic Customer Relationship Management) solution as part of its continuing endeavor to build a closer and more transparent relationship with its valuable customers. This initiative leverages the best of information technology to fulfill the varied needs of customers. The basic design of this solution has been defined by the aforesaid principle.

With the eCRM application in place, your Company is now capable of sharing diverse but relevant information with its customers in a personalised manner. The facilities which are available online include order management, monitoring delivery schedule, access to complete dispatch details with certificate of analysis, transaction history, financial details, new product inquiry and registration and resolution of complaints.

FOODS DIVISION The Foods Division recorded sales of Rs.18756 lac during the year under review as compared to Rs.16519 lac in the previous year. The Foods Division produces and markets edible oils, vanaspati, fruit drinks, fruit nectar and bakery fats. The long pending litigation with Mumbai Port Trust was finally decided by the Honourable Supreme Court vide its order dated January 13, 2004, in terms of which, the liability on lease rent from 1990 till the date of the order is estimated at Rs.1008 lac, and provided for in the Accounts.

The prices of edible oils showed a rising trend in spite of a bumper indigenous crop and a good monsoon. Intense competition in the category prevented rise in selling prices. Excise duty on refined edible oil and vanaspati category impacted the margins in the business adversely.

The Processed Foods Category saw the carbonated soft drink industry becoming very aggressive by launching lower priced packs. In spite of a good mango crop, higher prices of pulp led to lower offtake and a pressure on margins.

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

Edible Fats The turnover during the year under review was Rs. 16042 lac as compared to Rs.14091 lac in the previous year. Intense competition from local players impacted the majority in this business. The Division continued to focus on increasing margins and selling only in profitable areas.

13

Industries Limited This Division launched a new brand of Sunflower oil “Sunshakti” during the year to offer competitively priced edible oil to the consumer in South. For the health conscious consumer, the Division launched a blended version of Sunflower oil & Ricebran oil called “Sunrice”.

Processed Foods The total turnover of products in this category was Rs. 2714 lac as compared to Rs. 2428 lac in the previous year .

The Division handles Tetrapak fruit drinks and sale of fruit pulp. The fruit drinks category has shown a de-growth on account of intense competitive pressures from the carbonated soft drinks categories. In this scenario, the Division focused on the institutional sales segment to improve the sale of “Jumpin” fruit drink which grew by 31% in volume.

The Division introduced “Xs” range of fruit juices. “Xs” juices are positioned on the ‘Live Life in Excess’ platform wherein the brand attempts to verbalize the benefits of “Excess Fruit … Excess Taste”. Targeted towards the new age consumers, Xs range of fruit juices are meant for the discerning consumer who looks for the best in everything that life has to offer.

Further, the Division entered the health beverages market with the launch of ‘Sofit’, a combination of Soy milk and natural fruit juices. Positioned as “The New Taste of Health”, the uniqueness of ‘Godrej Sofit’ soymilk lies in offering the consumer a combination of health and taste, by using Soymilk with real fruit juice. ‘Godrej Sofit’ is the only brand from India that received the ‘Taste 03’ Award, at ANUGA, World’s Largest Food Fair, held at Cologne, Germany in October 2003. The award was for the most innovative and trend setting product offering.

plans to give more focus on Customer Loyalty Programs as a part of customer relationship management.

FINANCE Dividend income for the year was at Rs. 1253 lac (previous year Rs. 1898 lac). During the year, your Company has made strategic investments in its subsidiaries and associate companies. Your Company has invested Rs. 38 crore for acquisition of equity shares of Godrej Consumer Products Limited (GCPL). Your Company now holds 8.60% of the equity capital of GCPL. Further, your Company has invested in equity shares of its subsidiaries, viz. Godrej Global Solutions Limited, Godrej Remote Services Limited and Godrej Tea Limited to the extent of Rs. 2474 lac, Rs. 292 lac and Rs. 836 lac respectively, to fund their business requirements. Your Company has also invested Rs. 455 lac for acquisition of preferred stock of CBay Systems, USA. HUMAN RESOURCES, INDUSTRIAL RELATIONS The emphasis for this year was to engage management attention with the task of identifying and building the leadership talent and organisational capability that your Company needs for business excellence through the process of ‘Total Talent Management’.

In the area of recruitment, your Company formalized policies governing Employee Referrals and Internal Recruitment. A well-defined process has also been instituted to assess employees before moving them from the Executive to the Managerial Cadre.

In training, there was a thrust on equipping employees in functional skills.

The sale of mango pulp was impacted due to high mango prices and consequent pressure on margins.

An ongoing programme has also been launched to strengthen the communication between the employees and the organization through a structured process.

The Division successfully commissioned the 125 ml Tetrawedge machines set up for Hindustan Coca-Cola Beverage Pvt. Ltd.

Industrial Relations at all locations were cordial. The total number of persons employed in your Company as on March 31, 2004 was 2152.

Over all, the focus of the Division continued to be predominantly on improving profitability in both the above categories during the year.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

ESTATE MANAGEMENT The total income from this business was Rs. 2088 lac as compared to Rs. 2177 lac in the previous year.

Your Company continues to effectively utilize the available space by giving the unutilized space on Leave & Licence basis to other reputed corporates. Availability of space in central and western parts of the city will keep the pressure on the revenue generated from this operation.

MEDICAL DIAGNOSTICS The Medical Diagnostics Division is in the business of distribution of diagnostic equipment and consumables to the medical community. This Division achieved a turnover of Rs. 942 lac for the year, recording a growth of 39% in value terms over the last year. Sales to Government Institutions were higher compared to the previous year. Sales in the segment of cell counters were remarkably higher. The focus of the Division was on implementation of rigorous sales and operation planning (S&OP) process. The Division plans to increase its product portfolio by introduction of ESR and impedance cell counters. The Division also

14

Your Company has a proper and adequate system of internal controls to ensure that all assets are safeguarded and protected against loss from unauthorised use or disposition, and that transactions are authorised, recorded and reported correctly.

The Corporate Audit & Assurance Dept. issues well documented Operating Procedures and Authorisations, with adequate built-in controls, at the beginning of any activity or any time there is any major change.

Your company’s ERP System, (viz. MFG/PRO), provides adequate level of system-based checks and controls. Your Company has also developed and adopted a formal Information Technology Policy (including IT Security), which is periodically reviewed.

The internal control is supplemented by documented policies, guidelines and procedures and an extensive programme of internal and external audit and periodic review by management. The system is designed to ensure that financial and other records are reliable for preparing financial information and other data and for maintaining accountability for assets.

In the course of the year, an initiative on Business Continuity/Disaster Recovery was launched with the help of Corporate Audit & Assurance

Annual Report 2003-2004 Dept. Major risks affecting business continuity have been identified and documentation for preventive/mitigation measures has been completed with the active support and help from business managers.

OPPORTUNITIES AND THREATS Increased global demand and your Company’s reputation for its consistent supply and quality suited to the needs of the customers, provide good opportunity for growth and expansion for the Chemicals Division. At the same time, new capacity addition in the industry is likely to increase competition from the supply side. The Product Application Group (mentioned elsewhere in this report) is expected to open up new opportunities for customer partnerships and value added products.

In the Edible Oils category, blended oils have shown good opportunity for growth and the Foods Division shall continue to exploit this by launching new variants. In order to counter the pressure on margins, your Company is looking at third party outsourcing of its products, for reducing costs but with a strict check on quality.

In the Processed Foods Division, there is a good opportunity for the export of fruit pulp. Unutilised capacity in Tetrapak fruit drink manufacture due to seasonality of the products, continues to remain a concern for the Division.

In the Medical Diagnostics Division, the opportunity is the large growing middle class medically aware consumer and the increasing focus on medical insurance. Threat could be obsolescence of technology/products which are more than 10 years old.

RISKS AND CONCERNS The commodity based businesses (Chemicals and Foods Divisions) are likely to be affected by vagaries of the weather, demand for edible oil, oilseed production, etc. The Chemicals business growth will also depend on the growth of end user industries like polymer, detergent, cosmetics and personal care.

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

OUTLOOK FOR 2004-05 The outlook for the various product categories of the Chemicals Division remains positive. The expansion of international markets, coupled with tightness in the supply position of some of the finished products augurs well for the business and also opens up opportunities for growth in niche markets.

The major focus area of the Foods Division would be to increase capacity utilization in both the categories. In Edible Fats category, the focus would be on expanding edible oil volume through either third party manufacturing or running innovation promotion scheme to increase sales volume. In Processed Foods category, the focus would be on expanding Xs range of fruit juices by introducing new variants, and on building volumes in sales of “Sofit” through focused launch as a health drink. The Division shall also explore the possibility of new business in both the categories of Foods Division.

The prospects for Medical Diagnostics Division look good. The in-vitro diagnostic industry in India is growing at 12% per year and the same growth rate is expected for 2004-05. The key drivers for this industry will be increasing automation and accreditation of pathology labs by DST, Govt of India.

CAUTIONARY STATEMENT Some of the statements in this management discussion and analysis describing the Company’s objectives, projections, estimates and expectations may be ‘forward looking statements’ within the meaning of applicable laws and regulations. Actual results might differ substantially or materially from those expressed or implied. Important developments that could affect the Company’s operations include a downtrend in domestic industry, significant changes in political and economic environment in India, tax laws, import duties, litigation and labour relations.

15

Industries Limited ANNEXURE "B" FORMING PART OF THE DIRECTORS’ REPORT INFORMATION PURSUANT TO SECTION 217(1)(e) OF THE COMPANIES ACT, 1956, READ WITH THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES, 1988 IN RESPECT OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO A. Conservation of Energy I.

(A) Energy Conservation measures undertaken: •

• • • • •

• • • •

• • • • •

Installation of Plate Heat Exchanger in dirty water services with dedicated pumping arrangement to enable saving of power and for cleaner environment.

Conversion of DG set to LDO-Natural Gas Application to enable saving in fuel cost and for cleaner environment.

Installation of Waste heat boiler to generate hot water from exhaust of D.G set.

Automation of HP boiler to increase its efficiency and for saving power.

Installation of separate cooling towers for Plants for saving power and for reduction of shut down time.

Installation of Variable Frequency Drive (VFD) on fluid transfer pumps in AOS and Soap Plant to save power and improve quality of products.

Installation of Variable Frequency Drive (VFD) for Boiler and Blower Motor.

Installation of energy-efficient tube lights resulting in saving of power.

Installation of Twilight Switch for street lighting.

Changed over from LSHS/ FO to piped Natural Gas in LP and HP Boilers to reduce the fuel cost and improve stack emissions in the atmosphere.

Substitution of light diesel oil by furnace oil as fuel to reduce cost of production.

Installation of heat Exchangers in Fat Splitting Plant to recover heat from fat splitting process.

Use of Fatty acid pitch and Ginol as fuel.

Installation of Energy conservation unit for lighting circuit.

Replacement of ‘V’ belts with flat belts for chillers and compressers.

(B) Proposed energy conservation measures • • • • • • • • • • • II.

Installation of Steam Turbine to utilize pressure energy to full extent and save cost .

Installation of Steam Generator in Stearic Acid Plant to utilize heat of evaporation and save cooling water.

Installation of Steam Generator in Alpha Olefin Sulphonation Plant to extract heat from exhaust air.

Installation of bigger capacity pumps in place of two pumps in Crude Alcohol Plant and thereby save power.

Increasing the speed of Hydrogen Compressor to enable operation of Plant at 130% capacity.

Introduction of water injection in reformer outlet gas to save steam.

Installation of energy-efficient transformer.

Installation of energy-efficient tube-lights in Plants.

Installation of Variable Frequency Drive (VFD) for Boilers.

Installation of energy-efficient motors in Plants.

Up-gradation of instrumentation in Hydrogenation Plant.

Impact of measures on reduction of energy consumption and consequent impact on the cost of production of goods:Saving in energy costs during the period under consideration.

16

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

Power and Fuel consumption This Year Previous Year

Electricity i) Purchased Units (kWh in lac) Total Amount (Rs. in lac) Rate per Unit (Rs.) ii) Own generated through D.G. Sets Units (kWh in lac) Cost (Rs. in lac) Rate per unit (Rs.) iii) Own generated through Steam Turbine Generator Co-generation Units (KWh in lac) Cost (Rs. in lac) Rate per Unit (Rs.) Fuel Oil (LSHS, FO, SKO and LDO) Total Quantity (KL) Total Amount (Rs. in lac) Rate per unit (Rs. per litre) Natural Gas Total Quantity (SM3 lac) Total Amount (Rs. in lac) Rate per unit (Rs. per SM3) Pitches Total Quantity (MT) Total Cost (Rs. in lac) Rate per unit (Rs. per MT) b)

147.29 707.59 4.80

139.07 731.58 5.26

53.38 236.15 4.42

6.48 42.46 6.55

315.73 1091.66 3.46

344.37 1249.28 3.63

6385.15 679.41 9.40

12475.32 1423.40 11.41

245.50 2001.37 8.15

98.50 979.20 9.94

1149.00 74.53 6486.51

1736.00 91.43 5266.49

Consumption per unit of production Natural Gas 3 (SM /MT) 2003-04 2002-03

Fatty Acid Fatty Alcohol Alpha Olefin Sulphonate Fruit Juice/ Pulp Oils/Vanaspati Glycerin

Electricity (kWh/MT) 2003-04 2002-03

Furnace Oil (Litre/MT) 2003-04 2002-03

Pitches 2003-04 2002-03

57.37 74.48

31.92 87.72

85.50 362.77

91.37 427.88

16.99 4.38

48.13 21.47

17.51 –

26.00 –

44.26 – –

97.78 – –

92.50 144.08 147.21

127.00 138.35 199.06

7.16 28.62 84.80

16.47 27.06 121.75

1.54 – –

2.00 – –

461.80

820.8

618.86

624.86

82.28

214.64

55.21

96.00

B.

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

1.

Specific areas in which R&D carried out by the Company- During the year under review, Research & Development efforts in the following areas strengthened the Company’s operations through technology absorption, adaptation and innovation :

2.

a.

Oils & Fatty Acids

b.

Fatty Alcohols

c.

Surfactants

d.

Glycerin

e.

Product Application Group

f.

Fruit Juices/Soyamilk

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

Development of a “ treatment” process which enabled use of cheaper Raw materials for premium products.

Annual Report 2003-2004 b.

c. d.

e.

f. g.

3.

4.

Visiting a Japanese customer & understanding their needs visa-vis quality, leading to customer delight. This also enabled the Company to modify its process to cater to their needs.

Understanding customer compromise & bringing in process innovation to ensure business continuity.

Visiting select customers, understanding their needs & working towards renovation of these products as part of the Product Application Group.

Working on new products in new categories in partnership with potential customers, again as part of Product Application Group.

Development of new product, viz. Soya Milk (SOFIT) in various flavours viz. plain, malt, apple, mango.

Development of orange flavour in X’s Fruit drink.

This Year Previous Year Rs. Lac Rs. lac (a) (b) (c) (d) C.

Capital 1.95 Recurring 115.03 Total 116.98 Total R & D expenditure as a percentage 0.16% of total sales turnover

Nil 94.79 94.79 0.16%

Foreign Exchange earnings and outgo

The Chemicals Division’s exports improved from Rs.10490 lac in the previous year (including deemed exports Rs.770 lac) to Rs.13991 lac in the current year (including deemed exports of Rs.742 lac). The Company continues to export refined glycerin, fatty alcohol and other chemicals to over 50 countries including U.S.A., U.A.E., Japan, South Africa, Germany, U.K., France, Malaysia, China, Australia, Mexico, Singapore and Srilanka.

This Year Previous Year Rs. Lac Rs. lac

Future Plan of Action a. b. c. d.

Expenditure on R&D

Strengthening the activities of Product Application Group.

Look for opportunities for contract R&D. Strengthen Analytical capabilities.

Focus on products/categories for business growth.

Foreign exchange used Foreign exchange earned

No technology has been imported during the year.

22486 13339

19625 9746

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(e) of the said Regulations : 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

Godrej & Boyce Mfg. Co. Ltd. Ensemble Holding & Finance Ltd. Godrej Consumer Products Ltd. Godrej Agrovet Ltd. Goldmohur Foods & Feeds Ltd. Golden Feed Products Ltd. Godrej Properties & Investments Ltd. Girikandra Holiday Homes & Resorts Ltd. Godrej Tea Ltd. Godrej Remote Services Ltd. Godrej Global Solutions Ltd. Godrej International Ltd. Godrej Global Mid East FZE Swadeshi Detergents Ltd. Vora Soaps Ltd. Godrej Foods Ltd. Tahir Properties Ltd. Godrej Global Mid East FZE Godrej Holdings Pvt. Ltd. Godrej Investments Pvt. Ltd. Godrej Infotech Ltd. Godrej (Malaysia) Sdn Bhd Godrej (Singapore) Pte Ltd. Godrej Appliances Ltd. Lawkim Ltd. Godrej Upstream Ltd. Prashant Metal Forming Industries Pvt. Ltd.

28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55

Hicare India Limited Sentinel Foods Pvt. Ltd. Cartini India Ltd. Godrej (Vietnam) Co. Ltd. J T Dragon Pte Ltd. Mr Adi B. Godrej Mrs Parmeshwar A. Godrej Ms Nisa A. Godrej Mr Pirojsha A. Godrej Mr Arvind Darab Dubash Mrs Tanya A. Dubash Mst. Aaryan A. Dubash Mst. Azaar A. Dubash Mr Jamshyd N. Godrej Mrs Pheroza J. Godrej Ms Raika J. Godrej Mr Navroze J. Godrej Mr Nadir B. Godrej Mrs Rati N. Godrej Mst. Burjis N. Godrej Mst. Sohrab N. Godrej Mst. Hormuzd N. Godrej Mr Vijay M. Crishna Mrs Smita V. Crishna Ms Freyan V. Crishna Ms Nyrika V. Crishna Mrs Dosibai K. Naoroji Mr Rishad K. Naoroji

17

Industries Limited REPORT ON CORPORATE GOVERNANCE Clause 49 of the listing agreement with the Indian Stock Exchanges stipulates the norms and disclosure standards that have to be followed on the corporate governance front by listed Indian companies.

c)

Among others, this includes: • Annual operating plans and budgets, capital budgets, and any updates thereon, • Quarterly results of the Company, • Minutes of meetings of audit committee and other committees, • Information on recruitment and remuneration of senior officers just below the Board level, • Materially important show cause, demand, prosecution and penalty notices, • Fatal or serious accidents or dangerous occurrences, • Any materially significant effluent or pollution problems, • Any materially relevant default in financial obligations to and by the Company or substantial non-payment for goods sold by the Company, • Any issue which involves possible public or product liability claims of a substantial nature, • Details of any joint venture or collaboration agreement, • Transactions that involve substantial payment towards goodwill, brand equity or intellectual property, • Significant labour problems and their proposed solutions, • Significant development in the human resources and industrial relations front, • Sale of material nature, of investments, subsidiaries, assets, which is not in the normal course of business, • Quarterly details of foreign exchange exposure and the steps taken by management to limit the risks of adverse exchange rate movement, • Risk assessment and minimization procedures, and • Non-compliance of any regulatory, statutory nature or listing requirements as well as shareholder services such as nonpayment of dividend and delays in share transfer.

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

The Company is a part of the Godrej Group which has established a reputation for honesty and integrity. The Company’s philosophy of corporate governance is to achieve business excellence by enhancing the long term welfare of all its stakeholders. We believe that corporate governance is much more than Rules, Boards, Committees. It is about creating outperforming organisations, i.e. organizations that consistently succeed in the marketplace against competition and thereby enhance the value of all its stakeholders.

BOARD OF DIRECTORS a)

Board Structure The Board of Directors of the Company comprises thirteen Directors, which include one Managing Director and four Whole-Time Executive Directors. The remaining eight are Non-Executive Directors, with five of them being Independent Directors. The details are given in Table 1.

b)

Board meetings held & Directors’ attendance record The Board meets at least once in a quarter to consider among other business, quarterly performance of the Company and financial results.

To enable the Board to discharge its responsibilities effectively and take informed decisions, the necessary information is made available to the Board. During the year four Board meetings were held on May 28, 2003, July 28, 2003, October 30, 2003 and January 28, 2004. The details are given in Table 1.

Table 1: Details about GIL’s Board of Directors & meetings attended by the Directors during the year Name of Director

Category

Board meetings held during the year

Board meetings attended during the year

Whether Directorattended ships last AGM held in public companies incorporated in India as at year end

Number of Chairmanship/ membership in other Board Committees as at the year end ChairmMemanship bership

A.B. Godrej J.N. Godrej N.B. Godrej

Chairman - Non-Executive Non-Executive Managing Director S.A. Ahmadullah Non-Executive Independent V.M. Crishna Non-Executive K.K. Dastur Non-Executive Independent N.C. Gawankar Non-Executive [See Note 3] Independent V.N. Gogate Non-Executive Independent K.N. Naoroji Non-Executive [See Note 3] K.N. Petigara Non-Executive Independent F.P. Sarkari Non-Executive Independent V.F. Banaji Whole-time T.A. Dubash Whole-time M. Eipe Whole-time M.P. Pusalkar

Whole-time

Directors with materially significant related party transactions, pecuniary or business relationship with the company

4 3 2

Yes Yes Yes

12(3) 13 (5) 15 (4)

4 2 3

2 4 7

4 4

4 2

Yes No

1(1) 8(3)

1 Nil

1 Nil

4

4

Yes

5(1)

Nil

Nil

2

2

No

N.A.

N.A.

N.A.

4 2

4 Nil

Yes No

1(1) N.A.

Nil N.A.

2 N.A.

The details of remuneration package of Directors and their relationships with each other are given in Table 2.

4

3

Yes

5(1)

Nil

3

4 4 4 4

4 3 2 3

Yes Yes Yes Yes

2(1) 1(1) 6(1) 3(1)

2 Nil Nil Nil

1 1 1 1

Table 2: Remuneration in Rupees paid or payable to Directors for the year ended March 31, 2004

4

4

Yes

2(2)

1

2

Figures in ( ) denote listed companies.

Board Meetings held during the year represents the no. of meetings held during the tenure of that director.

3) Mr. K.N. Naoroji and Mr. N.C. Gawankar retired at the Annual General Meeting held on August 25, 2003.

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

18

d)

4 4 4

Notes: 1) 2)

Information supplied to the Board

Except for drawing remuneration, none of the Directors have any other materially significant related party transactions, pecuniary or business relationship with the Company. e)

Remuneration of Directors: sitting fees, salary, perquisites and commissions

Name of Director Relationship with Directors A B Godrej J N Godrej N B Godrej S A Ahmadullah V M Crishna K K Dastur N C Gawankar V N Gogate K N Naoroji K N Petigara V.F. Banaji F P Sarkari T A Dubash M Eipe M P Pusalkar

Sitting Commission fees on profits

Brother of N.B.Godrej 67000 None Nil Brother of A.B.Godrej Nil None 57000 None 16000 None 39000 None 10000 None 57000 None Nil None 34000 None Nil None 55000 Daughter of A.B.Godrej Nil None Nil None Nil

Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil

Salary Perquisites Provident Fund Nil Nil 7685066 Nil Nil Nil Nil Nil Nil Nil 6392406 Nil 5489066 6100959 2220943

Nil Nil 1435614 Nil Nil Nil Nil Nil Nil Nil 340912 Nil 1212322 1089416 395688

Total

67000 Nil 360000 9480680 57000 16000 39000 10000 57000 Nil 34000 201600 6934918 55000 201600 6902988 244800 7435175 161280 2777911

Annual Report 2003-2004 Notes: Salary to Mr. N.B. Godrej, Mr. V.F. Banaji, Ms. T.A. Dubash, Mr. M. Eipe and Mr. M.P. Pusalkar includes a performance linked bonus of Rs. 28,85,066, Rs. 42,08,406, Rs. 28,85,066, Rs. 34,48,959 and Rs. 3,53,743 respectively for the year ended March 31, 2004 payable in 2004-05.

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

•

Discussing with internal auditors any significant findings and following it up.

•

Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or failure of internal control systems of a material nature and reporting the matter to the Board.

•

Discussing with external auditors before the audit commences, nature and scope of audit as well as conducting post-audit discussion to ascertain any area of concern.

•

Reviewing the Company’s financial and risk management policies.

•

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

Committees of the Board Audit Committee GIL’s audit committee comprises of three Independent & NonExecutive Directors. They are Mr. F.P. Sarkari (Chairman), Mr. S.A. Ahmadullah and Mr. V.N. Gogate. Mr. V.N. Gogate who had been the Chairman stepped down as Chairman on January 28, 2004 and now functions as a Member. Mr. F.P. Sarkari was elected as Chairman on January 28, 2004 in place of Mr. Gogate. Mr. Sarkari is a qualified Chartered Accountant and is knowledgeable in finance, accounts and Company Law. All the members of the committee are eminent professionals and draw upon their experience and expertise across a wide spectrum of functional areas such as finance and corporate strategy. Minutes of each of the audit committee meetings are placed before the Board meetings. The Company Secretary acts as secretary to the audit committee. The audit committee met four times during the year. Table 3 gives the attendance record.

Table 3: Attendance record of audit committee members Name of Director

No. of meetings held

Meetings attended

Mr. F.P. Sarkari

4

4

Mr. S.A. Ahmadullah

4

4

Mr. V.N. Gogate

4

4

The Audit Committee of GIL performs the following functions : •

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

•

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

•

Reviewing with management the annual financial statements before submission to the board, focusing primarily on

Remuneration Committee Setting up of a remuneration committee for determining a company’s policy on remuneration packages for Executive Directors constitutes a non-mandatory provision of Clause 49. GIL set up its remuneration committee on February 22, 2002 to review the human resources policies and practices of the Company and, in particular, policies regarding remuneration of Whole-Time Directors. The committee discusses human resources policies such as compensation and performance management.

GIL’s remuneration committee consists of the following directors: Mr. S.A. Ahmadullah (Chairman and Independent Director); Mr. N.B. Godrej (Managing Director); Mr. V.N. Gogate (Independent Director) and Mr. K.N. Petigara (Independent Director). During the year ended March 31, 2004, the committee met once on May 27, 2003, where all the members of the Committee attended, for fixing of basic salary and performance linked variable remuneration (PLVR) to Managing Director and Whole-Time Directors. Further resolutions were passed by the Committee in circulation on February 12, 2004 for fixing the maximum Basic Salaries and PLVR payable to Managing Director and Whole-Time Directors in the year 2004-05.

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

Shareholders Committee

Ø

Any changes in accounting policies and practices.

Ø

Major accounting entries based on exercise of judgement by the management.

Ø

Qualifications in draft audit report.

Among other functions, this committee looks into redressal of shareholder complaints regarding transfer of shares, non-receipt of balance sheet and non-receipt of declared dividends, as required in clause 49 of the Listing Agreement. The committee consists of the following members: Mr. A.B. Godrej (Chairman), Mr. N.B. Godrej, Mr. V.F. Banaji, Ms. T.A. Dubash, Mr. M. Eipe and Mr. M.P. Pusalkar. During the year, 12 meetings of the Committee were held.

Ø

Significant adjustments arising out of audit.

Name and designation of Compliance Officer

Ø

The going concern assumption.

Mr. S. K. Bhatt, General Manager (Corporate Services) & Company Secretary.

Ø

Compliance with accounting standards.

Number of complaints regarding shares for the year ended March 31, 2004

Ø

Compliance with stock exchanges and legal requirements concerning financial statements.

Ø

Any related party transactions, i.e. transactions of the Company of material nature, with promoters or the management, their subsidiaries or relatives, etc. that may have potential conflict with the interests of Company at large.

•

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

•

Reviewing the adequacy of internal audit function including the structure of internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit.

Complaints outstanding as on April 1, 2003

11

Complaints received during the year ended March 31, 2004

428

Complaints resolved during the year ended March 31, 2004

439

Complaints outstanding as on March 31, 2004

Nil

There are no pending share transfers as on March 31, 2004.

MANAGEMENT a)

Management discussion and analysis This annual report has a detailed chapter on management discussion and analysis.

19

Industries Limited b)

Disclosures by management to the Board All details relating to financial and commercial transactions where Directors may have a potential interest are provided to the Board, and the interested Directors neither participate in the discussion, nor do they vote on such matters.

complaints. Mr. S.K. Bhatt, General Manager (Corporate Services) & Company Secretary is the compliance officer. d)

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

SHAREHOLDERS a)

Disclosures regarding appointment or reappointment of Directors According to the Articles of Association of GIL, at every annual general meeting of the Company one-third of the Directors are liable to retire by rotation. Thus, Mr. A.B. Godrej, Mr. S.A. Ahmadullah, Mr. V.N. Gogate and Mr. F.P. Sarkari shall retire at this Annual General Meeting of the Company and being eligible, offer themselves for re-election.

Share transfer

e)

Details of non-compliance There has been no instance of GIL not complying with any matter related to capital markets.

f)

General Body Meetings Year

Venue

Date

Time

2000-01

Udayachal Primary School Hall, Pirojshanagar, Vikhroli (East), Mumbai 400 079.

-do-

July 28, 2001

3.30 P.M.

Information about the Directors who are being appointed/reappointed is given as an annexure to the Notice of the AGM. b)

Communication to shareholders All vital information relating to the Company and its performance, including quarterly results, official press releases are posted on the web-site of the Company. The Company’s web-site address is www.godrejinds.com. The quarterly and annual results of the Company’s performance are published in leading English dailies like Business Standard/Financial Express.

c)

Investor grievances

2001-02 2002-03

g)

Y.B. Chavan Centre, Nariman Point, Mumbai 400 021.

September 28, 3.00 P.M. 2002 August 25, 2003 3.00 P.M.

Postal Ballot No resolutions were moved for passing through postal ballot during the year.

As mentioned before, the Company has constituted a Shareholders Committee to look into and redress Shareholders and investor

Auditors’ Certificate on Corporate Governance To the Members of, Godrej Industries Limited, Mumbai.

We have reviewed the relevant records of Godrej Industries Limited (the Company) for the year ended on March 31, 2004 relating to compliance with the requirements of Corporate Governance as stipulated in Clause 49 of the Listing Agreement of the said Company with the Stock Exchanges.

The compliance of the conditions of Corporate Governance is the responsibility of the management. Our review was limited to the 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.

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

We state that as per the report given by the Registrars and Share Transfer Agents of the Company and presented to the Shareholders/Investor Grievance Committee, no investor grievances received during the year ended March 31, 2004 were remaining unattended/pending against the Company for a period exceeding thirty days.

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

For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants

Mumbai, May 28, 2004.

20

V. R. Mehta Partner M. No. 32083

Annual Report 2003-2004 SHAREHOLDERS’ INFORMATION Annual General Meeting Date : July 26, 2004 Time : 4.00 P.M. Venue : Y. B. Chavan Centre, General Jagannath Bhonsle Marg, Nariman Point, Mumbai 400 021.

Financial Calendar Financial year: April 1 to March 31 For the year ended March 31, 2004, results were announced on: • July 28, 2003 : First quarter • October 30, 2003 : Half year • January 28, 2004 : Third quarter • May 28, 2004 : Fourth quarter and annual Record Date/Book Closure A dividend of Rs.3/- per share of Rs 6/- each has been recommended by the Board of Directors of the Company. For payment of dividend, the book closure is from July 6, 2004 to July 26, 2004.

Listing information The Company’s equity shares are listed and traded on the stock exchanges at Mumbai, the National Stock Exchange and Calcutta Stock Exchange.

Name of the Stock Exchange Stock code Stock Exchange, Mumbai 500164 National Stock Exchange GODREJIND Calcutta Stock Exchange 17038 (for physical) 10017038 (for demat) The ISIN Number of GIL on both NSDL and CDSL is INE233A01027.

The Company made applications to Ahmedabad Stock Exchange (ASE), Delhi Stock Exchange (DSE), Madras Stock Exchange (MSE) and Calcutta Stock Exchange (CSE) for voluntary delisting of equity shares under the Securities and Exchange Board of India (Delisting of Securities) Guidelines, 2003. The Company’s equity shares were delisted from ASE, DSE, and MSE with effect from March 8, 2004, February 11, 2004 and February 19, 2004. The Company is awaiting permission for delisting from CSE. Stock Data Tables 1 and 2 respectively give the monthly high and low prices and volumes of equity shares of GIL at The Stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE) for the year ended March 31, 2004. 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, 2004 Month

High (Rs.)

Low (Rs.)

Volume (No. of Shares)

April-03 May-03 June-03 July-03 August-03 September-03 October-03 November-03 December-03 January-04 February-04 March-04

16.00 26.85 33.65 35.00 39.40 47.00 59.00 58.50 76.95 70.90 59.95 52.65

13.50 15.00 25.05 30.00 31.60 35.00 45.75 51.80 55.50 49.10 49.15 40.00

101106 477458 5109508 308694 2840829 351580 440409 198961 2669277 158665 67743 192890

Note: High and low are in rupees per traded share. Volume is the total monthly volume of trade (in numbers) in equity shares of GIL on the BSE. Table 2: Monthly high and low prices and trading volumes of equity shares of GIL at NSE for the year ended March 31, 2004 Month

High (Rs.)

Low (Rs.)

Volume (No. of Shares)

April-03 May-03 June-03 July-03 August-03 September-03 October-03 November-03 December-03 January-04 February-04 March-04

15.65 26.75 35.00 33.45 40.75 46.00 64.00 58.50 77.00 69.00 60.00 56.75

13.25 15.20 22.80 29.00 30.50 32.15 44.85 51.25 56.00 48.00 46.50 39.75

114673 891027 917409 474933 579534 453243 364511 214505 552542 212703 124634 196842

Note High and low are in rupees per traded share. Volume is the total monthly volume of trade (in numbers) in equity shares of GIL on the NSE. Chart A - GIL share performance compared to the BSE Sensex for FY 03-04 GIL Share Performance compared to the BSE Sensex for FY 03-04 6800

80

6300

70

5800 5300

60 GIL Share Price

50

4800 4300

40

BSE Sensex

30

3800

20

3300 2800

GIL Share Price

BSE Sensex

10

Distribution of shareholding Tables 3 and 4 give the distribution pattern of shareholding of GIL by size class and ownership respectively as on March 31, 2004.

Table 3: Distribution of shareholding by size class as on March 31, 2004 Number of shares 1 - 500

Number of Shareholders Number of Shareholding shareholders % shares held % 12998

93.07%

1209954

2.49%

501 - 1000

446

3.19%

360700

0.74%

1001 - 2000

225

1.61%

343389

0.71%

2001 - 3000

76

0.54%

200279

0.41%

3001 - 4000

34

0.24%

123991

0.25%

4001 - 5000

41

0.29%

196087

0.40%

5001 - 10000

61

0.44%

457696

0.94%

10001 & above

85

0.61%

45749846

94.05%

13966

100.00%

48641942

100.00%

Total

21

Industries Limited Table 4: Distribution of shareholding by ownership as on March 31, 2004 Category (as being reported to stock exchanges)

Shares hold % of holding (Nos.)

Promoter’s holding Promoters Persons deemed to act in concert with promoters

43099770

88.61 %

0

0.00 %

Banks, financial institutions & insurance companies Foreign institutional investors

607

0.00 %

475205

0.98 %

1000

0.00 %

Others Private corporate bodies Indian public NRI/OCBs Total

22

As on March 31,2004, 98.91 per cent of GIL’s shares were held in dematerialised form and the remaining 1.09 per cent in physical form.

The break up is listed below: No. of Folios No. of Folios No. of Shares No. of in Physical in Demat in Physical shares Mode Mode Mode in Demat Mode 6415

Institutional investors Mutual funds & UTI

Shares held in physical and dematerialised form

832575

1.71 %

4107176

8.44 %

125609

0.26 %

48641942

100.00 %

7551

529984

48111958

Total Folios

Total Shares

13966

48641942

Share Transfer Share transfers and related operations for GIL are conducted by Computech Sharecap Ltd, which is registered with the SEBI as a Category 1 Registrar.

Investor correspondence should be addressed to: Computech Sharecap Ltd 147, M.G. Road, Opp. Jehangir Art Gallery Mumbai 400023 Tel: 022-22671824/22671825 Email: helpdesk@computechsharecap.com Fax: 022-22670380

Annual Report 2003-2004 REPORT OF THE AUDITORS TO THE MEMBERS OF GODREJ INDUSTRIES LIMITED 1.

2.

3.

4.

We have audited the attached Balance Sheet of GODREJ INDUSTRIES LIMITED, as at March 31, 2004, and also the Profit and Loss Account and Cash Flow Statement of the Company for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material mis-statement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

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

We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit.

b)

In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of such books and proper returns adequate for the purpose of our audit have been received from the branches not visited by us. The Branch Auditor’s Report has been forwarded to us and has been appropriately dealt with.

c)

The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the books of account and with the audited returns from the branches.

In our opinion, the Balance Sheet and Profit and Loss Account dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956.

e)

Reference is invited to note 8 (b) of Schedule 22- Notes to Accounts, regarding the recoverability of advances given to certain individuals amounting to Rs. 1033 lac being contingent upon the transfer and/or disposal of the shares pledged against the loan. The impact thereof on the profit for the year could not be ascertained.

f)

In our opinion and to the best of our information and according to the explanations given to us, the said accounts subject to paragraph (e) above, and read with the notes thereon, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: i)

in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2004;

ii)

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

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

Further to our comments in the Annexure referred to in paragraph 3 above, we report that: a)

d)

5.

On the basis of the written representations received from the directors as on March 31, 2004, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 2004, from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

For and on behalf of Kalyaniwalla & Mistry Chartered Accountants

Mumbai, May 28, 2004

V.R. Mehta Partner M. No.: 32083

23

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 31st March, 2004.

1)

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

5)

(b) The Company has a program for physical verification of fixed assets at periodic intervals. In our opinion, the period of verification is reasonable having regard to the size of the Company and the nature of its assets. The discrepancies reported on such verification have been properly dealt with in the books of accounts.

(b) In our opinion and according to the information and explanations given to us, having regard to the explanation that many of the items are of a special nature and their prices cannot be compared with alternative quotations, the transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 and exceeding the value of five lakh rupees in respect of any party during the year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(c) In our opinion, the disposal of fixed assets during the year does not affect the going concern assumption.

2)

(a) The Management has conducted physical verification of inventory at reasonable intervals. (b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. (c) The Company is maintaining proper records of inventory. The discrepancies noticed on verification between physical inventories and book records were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account.

3)

(a) The Company had granted unsecured loans to five companies listed in the register maintained under Section 301 of the Companies Act, 1956, of which three loans aggregating Rs. 345.78 lakhs were outstanding at the year end. The maximum amount of loans granted to the said companies during the year was Rs. 1,559.38 lakhs. The Company has not taken any loans, secured or unsecured, from companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956. (b) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions of loans given are prima facie not prejudicial to the interest of the Company, except for the waiver of interest amounting to Rs. 11.36 lakhs from a company which has expressed its inability to pay the same. (c) The loans outstanding at the year end are at call and have not been recalled during the year. Except for the above interest which was waived, the other companies are generally regular in payment of interest. (d) There are no overdue amounts exceeding Rs. 1 lakh.

4)

24

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 purchase of inventory and fixed assets and for the sale of goods. During the course of our audit no major weakness has been noticed in the internal controls.

(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 the transactions that need to be entered into the register in pursuance of Section 301 of the Act have been so entered.

6)

In our opinion and according to the information and explanations given to us, the Company has complied with the directives issued by the Reserve Bank of India and the provisions of section 58A and 58AA of the Companies Act, 1956 and the rules framed there under in respect of the deposits accepted from the public.

7)

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

8)

We have broadly reviewed the books of account maintained by the Company in respect of the manufacture of vanaspati pursuant to the order passed by the Central Government for maintenance of cost records under Section 209(1) (d) of the Companies Act, 1956, and are of the opinion that prima facie the prescribed accounts and records have been maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete. To the best of our knowledge and according to the information given to us, the Central Government has not prescribed maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956 for any other products of the Company.

9)

(a) According to the records examined by us, the Company is generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees’ State Insurance, Income Tax, Wealth Tax, Customs Duty, Excise Duty, cess and other statutory dues applicable to it with the appropriate authorities. According to the information and explanations given to us, no undisputed amounts payable in respect of Income tax, Wealth Tax, Customs Duty and Excise Duty were outstanding, at the year end for a period of more than six months from the date they became payable. (b) According to the information and explanations given to us, there are no dues of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Excise Duty or cess outstanding on account of any dispute, other than those stated hereunder:

Annual Report 2003-2004 Name of statute Central Excise Act, 1944

Customs Act, 1962

Central Sales Tax Act 1956 Sales Tax

Amount Rs. in lac

Period to which the amount relates

Forum where dispute is pending

4.79

2003 - 2004

Assistant Commissioner Commissioner (Appeals)

97.94

1987 - 2001

1,294.66

1986 - 2000

CESTAT

239.90

1978 - 1988

High Courts

114.48

1991 - 1994

High Courts

966.40

1982 -1999

29.36

1978 - 1985

208.65

1982 -1993

High Court

580.24

1995 -1998

High Court

0.16

1997-1998

35.15

2000 - 2004

Sales Tax Officer

31.43

1994 - 1995

Dy. Commissioner (Appeals)

106.80

1997 - 2001

Dy. Commissioner (Appeals)

4.00

2003

53.51

1990 - 1991

Sales Tax Tribunal

47.63

1994 - 1998

Sales Tax Tribunal

The Supreme Court of India Commissioner of Customs

Dy. Commissioner, Kolkata

Commissoner

Others Land Revenue

182.22

2000

Municipal Taxes

628.87

1984 - 1995

3.63

1997 - 1998

Dy. Commissioner

14.52

1997 - 1998

Jt. Commissioner, Appeals

U.P. Trade Tax Act, 1948

Controlling Revenue Authority The Bombay High Court

4,644.34 10) The Company does not have accumulated losses as at the end of the financial year and it has not incurred any cash losses in the current and immediately preceding financial years.

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 a financial institution, bank or debenture holders.

12) The Company has maintained adequate documents and records in respect of loans and advances granted on the basis of security by way of pledge of shares and other securities, except that the shares in question have not been transferred in the name of the Company as stated in note 8(b).

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) In our opinion, the Company has maintained proper records of the transactions and contracts in respect of investments purchased and sold during the year and timely entries have been made therein.

The investments made by the Company are held in its own name except for the shares referred to in note (a) of Schedule 6.

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

16) According to the information and explanations given to us and the records examined by us, the term loans have been applied for the purpose for which the loans were obtained.

17) On the basis on an overall examination of the balance sheet and cash flows of the Company and the information and explanations given to us, we report that the Company has not utilized the funds raised on short-term basis for long term investment and vice-versa.

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

Mumbai, May 28, 2004

V.R. Mehta Partner M. No.: 32083

25

Industries Limited BALANCE SHEET AS AT MARCH 31, 2004 Schedule SOURCES OF FUNDS 1. Shareholders’ Funds (a) Share capital (b) Reserves & surplus 2. Loan Funds (a) Secured loans (b) Unsecured loans 3.

1 2

3 4

Rs. lac

5. Investments 6. Current Assets, Loans and Advances (a) Inventories (b) Sundry debtors (c) Cash and bank balances (d) Accrued interest (e) Loans and advances Less : Current Liabilities and Provisions (a) Liabilities (b) Provisions Net Current Assets 7. Miscellaneous Expenditure (To the extent not written off or adjusted) TOTAL NOTES TO ACCOUNTS

Previous Year Rs. lac

29115.62

2918.52 21510.77 24429.29

21049.40 2972.00 53137.02

14815.48 7432.16 22247.64 3466.00 50142.93

25655.58 26533.28

49699.03 21974.28 27724.75 404.75 28129.50 18646.01

2918.52 26197.10

16813.64 4235.76

Deferred Tax Liability TOTAL

APPLICATION OF FUNDS 4. Fixed Assets (a) Gross block (b) Less : Depreciation (c) Net block (d) Capital work-in-progress

This Year Rs. lac

5 48949.68 23608.03 25341.65 313.93 6 7 8 9 10

11 12

10944.35 7102.27 558.37 6.28 4650.32 23261.59

10879.01 7660.12 1877.20 10.49 3146.36 23573.18

18499.25 4022.81 22522.06

17372.06 3256.61 20628.67

13

739.53 208.63

2944.51 422.91

53137.02

50142.93

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 and 21

For and on behalf of Kalyaniwalla & Mistry Chartered Accountants

V. R. Mehta Partner Mumbai, May 28, 2004

26

A. B. Godrej Chairman

S. K. Bhatt Company Secretary

N. B. Godrej Managing Director

Annual Report 2003-2004 PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ON MARCH 31, 2004 Schedule

This Year Rs. lac

Previous Year Rs. lac

Sale of Products & Services

14

71665.91

65250.60

Other Income

15

1689.36

2529.64

73355.27

67780.24

16

46236.15

42387.22

INCOME

EXPENDITURE Materials consumed and purchase of goods Expenses

17

17627.35

16870.83

Inventory change

18

379.64

(1520.83)

Interest and financial charges (net)

19

580.18

2024.26

2149.87

2210.98

66973.19

61972.46

6382.08

5807.78

365.00

421.00

(494.00)

2119.00

(129.00)

2540.00

6511.08

3267.78

Depreciation (Net of transfer from Revaluation Reserve Rs. 235.89 lac, Previous year Rs. 235.58 lac) Profit Before Tax Provision for taxation —

Current Tax

—

Deferred Tax

Profit for the year after taxation Prior Period adjustments (net)

20

57.37

152.85

6568.45

3420.63

Surplus brought forward

11215.25

9234.20

Profit After Tax Available For Appropriation

17783.70

12654.83

1459.26

972.84

186.97

124.64

APPROPRIATIONS Proposed Dividend Tax on distributed profits Transfer to General Reserve Surplus carried forward TOTAL Basic & Diluted Earnings per share (Face Value Rs. 6 per share) NOTES TO ACCOUNTS

656.80

342.10

15480.67

11215.25

17783.70

12654.83

13.50

5.87

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 Kalyaniwalla & Mistry Chartered Accountants

V. R. Mehta Partner Mumbai, May 28, 2004

A. B. Godrej Chairman

N. B. Godrej Managing Director

S. K. Bhatt Company Secretary

27

Industries Limited CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2004 A.

This Year Rs. lac

Previous Year Rs. lac

6382.08

5807.78

Depreciation

2149.87

2210.98

Foreign exchange

(909.85)

(27.82)

Loss/(Profit) on sale of investments

51.02

(39.26)

Loss/(Profit) on sale of fixed assets

(16.14)

(1.27)

(1253.32)

(1897.65)

Interest income

(211.29)

(444.41)

Interest expense

1336.59

1800.46

expenses deferred

(27.96)

(27.31)

Deferred expenditure written off

242.24

482.24

(148.91)

(65.90)

Cash Flow from Operating Activities : Profit before tax Adjustments for :

Dividend income

Voluntary retirement compensation and other

Provision for doubtful debts and sundry balances written back (net) Others Operating profit before working capital changes

39.75

8.15

7634.08

7805.99

(65.34)

(2814.98)

Adjustments for : Inventories Trade and other receivables

(953.83)

835.98

Trade payables

1364.19

7597.55

Cash generated from operations

7979.10

13424.54

Direct taxes paid

(429.03)

(499.00)

21.97

828.38

7572.04

13753.92

Purchase of fixed assets

(964.73)

(1869.88)

Proceeds from sale of fixed assets

1072.20

139.74

(40348.51)

(4158.05)

Proceeds from sale of investments

32828.29

172.02

Intercorporate deposits/Loans (net)

(38.88)

611.24

Interest received

204.63

476.98

1253.32

1897.65

(5993.68)

(2730.30)

Direct taxes refund received Net Cash from Operating Activities B.

Cash Flow from Investing Activities :

Purchase of investments

Dividend received Net Cash used in Investing Activities

28

Annual Report 2003-2004 This Year Rs. lac C.

Previous Year Rs. lac

Cash Flow from Financing Activities : Purchase of shares under a scheme of arrangement

–

(2340.14)

Proceeds from borrowings

19845.01

14023.28

Repayments of borrowings

(20570.09)

(19021.26)

416.11

(1028.76)

–

(1.47)

(1477.41)

(1957.16)

(986.19)

(364.23)

Bank overdrafts (net) Repayment of finance lease liabilities Interest paid Dividend paid Tax on distributed profits

(124.62)

–

Net Cash used in financing activities

(2897.19)

(10689.74)

Net increase/(decrease) in cash and cash equivalents

(1318.83)

333.88

1877.20

1543.32

558.37

1877.20

Cash and Cash equivalents Cash on hand and balances with banks Effect of exchange rate changes

559.36 (0.99)

1877.53 (0.33)

Cash and cash equivalents

558.37

1877.20

Cash and cash equivalents (Opening Balance) Cash and cash equivalents (Closing Balance) Notes : 1.

2.

3.

Repayments of borrowings are net of Intercorporate borrowings aggregating Rs. Nil (Previous Year Rs. 2375.00 lac).

To finance working capital requirements, the Company’s Bankers have sanctioned a total fund-based limit of Rs. 5800 lac. Of this, limits utilised as on March 31, 2004 is Rs. 3494.01 lac.

As per our Report attached

Signatures to Cash Flow Statement

For and on behalf of

A. B. Godrej

N. B. Godrej

Kalyaniwalla & Mistry

Chairman

Managing Director

Chartered Accountants

V. R. Mehta

S. K. Bhatt

Partner

Company Secretary

Mumbai, May 28, 2004

29

Industries Limited SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2004 This Year Rs. lac

Previous Year Rs. lac

8000.00

8000.00

10000.00

10000.00

18000.00

18000.00

2918.52

2918.52

2918.52

2918.52

SCHEDULE 1 : SHARE CAPITAL AUTHORISED : 13,33,33,333 Equity Shares of Rs. 6 each 10,00,00,000 Unclassified Shares of Rs.10 each ISSUED, SUBSCRIBED AND PAID-UP : 4,86,41,942 Equity Shares of Rs. 6 each fully paid

Of the above : (i)

4,01,02,008 shares are held by Godrej & Boyce Mfg. Co. Limited, the holding Company

(ii)

2,59,24,636 shares are allotted for consideration other than cash pursuant to schemes of amalgamation/arrangement.

(iii) 1,59,50,953 shares are allotted as fully paid bonus shares by way of capitalisation of Securities premium account.

Rs. lac

This Year Rs. lac

Previous Year Rs. lac

SCHEDULE 2 : RESERVES AND SURPLUS Securities Premium Account As per last balance sheet

8.51

469.90

—

(469.90)

—

8.51

Less : Premium paid on shares purchased and cancelled as per scheme of arrangement Add : Premium received during the year

8.51

8.51

25.00

25.00

Capital Investment Subsidy Reserve As per last balance sheet Revaluation Reserve As per last balance sheet

3,492.48

3,775.17

(235.89)

(282.69)

Less : Depreciation on revalued component and deduction due to sale/discard of fixed assets

3,256.59

3,492.48

3,125.00

3,125.00

Capital Redemption Reserve As per last balance sheet General Reserve As per last balance sheet Add : Transferred from Profit & Loss Account

3,644.53

4,400.71

656.80

342.10

Less : Premium paid on shares purchased and cancelled as per scheme of arrangement Profit & Loss Account

30

—

(1,098.28) 4,301.33

3,644.53

15,480.67

11,215.25

26,197.10

21,510.77

Annual Report 2003-2004 This Year Rs. lac

Previous Year Rs. lac

13319.63

11619.20

3494.01

3196.28

16813.64

14815.48

3315.12

4726.05

—

500.00

920.64

2206.11

4235.76

7432.16

4221.16

4089.52

SCHEDULE 3 : SECURED LOANS Term loans from banks Bank overdrafts Particulars of securities (refer note 5) SCHEDULE 4 : UNSECURED LOANS Fixed deposits Intercorporate deposits Short term loans from banks

Amount repayable within one year SCHEDULE 5 : FIXED ASSETS

(Rs. lac) ASSETS

GROSS BLOCK

As on 01.04.2003 LAND BUILDINGS PLANT & MACHINERY RESEARCH CENTRE FURNITURE & FIXTURES

Additions

DEPRECIATION

NET BLOCK

Deductions/

As on

Upto

Deductions/

For the

Upto

Adjustments

31.3.2004

31.03.2003

Adjustments

Year

31.3.2004

As on

As on

31.3.2004 31.03.2003

259.01

–

6.11

252.90

18.20

–

1.64

19.84

233.06

240.81

8945.06

206.36

273.44

8877.98

1882.28

42.68

235.90

2075.50

6802.48

7062.78

36800.92

506.58

1344.40

35963.10

18618.56

618.50

1830.87

19830.93

16132.17

18182.36

114.69

1.95

–

116.64

39.04

–

3.44

42.48

74.16

75.65

1130.46

47.30

44.77

1132.99

585.04

24.45

69.68

630.27

502.72

545.42

OFFICE & OTHER EQUIPMENTS

915.30

59.23

31.51

943.02

400.54

15.27

49.75

435.02

508.00

514.76

VEHICLES

725.39

66.68

124.91

667.16

264.16

51.11

62.75

275.80

391.36

461.23

TRADEMARKS

754.00

–

–

754.00

163.37

–

75.40

238.77

515.23

590.63

Assets Acquired Under Finance Lease VEHICLES TOTAL - This Year - Previous Year CAPITAL WORK-IN-PROGRESS TOTAL

54.20

190.56

2.87

241.89

3.09

–

56.33

59.42

182.47

51.11

49699.03

1078.66

1828.01

48949.68

21974.28

752.01

2385.76

23608.03

25341.65

27724.75

48611.88

1534.43

447.28

49699.03

19770.26

242.54

2446.56

21974.28

–

–

313.93

404.75

25655.58

28129.50

NOTES : 1. Land includes leasehold land of Rs.137.82 lac (Previous Year Rs.139.46 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 include Rs. 235.89 lac (Previous Year Rs. 235.58 lac) being depreciation on revalued component of the fixed assets.

4. Gross block, deductions/adjustments includes Rs. Nil (Previous Year Rs. 47.11 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 includes Rs. 2651.08 lac (Previous year Rs. 2651.08 lac) being the cost of equity shares in Tahir Properties Ltd., representing the right of the Company to five flats in the property.

31

Industries Limited SCHEDULE 6 : INVESTMENTS

Investee Company/Institutions

Face Value (Rs.)

Qty. as on 01.04.03

Acquired during Year

Number Sold during Year

Qty. as on 31.03.04

22,00,000

27,00,000

–

49,00,000

13,692 114 66,29,437 13,86,496 9,71,100

– – – 83,63,500 –

– – – –

13,692 114 66,29,437 97,49,996 9,71,100

25,000 2,09,370 25

– – –

25,000 – –

– 2,09,370 25

(b)

50,00,000

–

–

25

–

–

–

Notes

Amount As on As on 31.03.04 31.03.03 Rs. lac Rs. lac

LONG TERM INVESTMENTS - At Cost A.

TRADE INVESTMENTS Quoted : Equity Shares : Fully Paid Godrej Consumer Products Ltd. 4 Unquoted : Equity Shares : Fully Paid Compass Connections Ltd. £0.25 Gharda Chemicals Ltd. 100 Godrej Sara Lee Ltd 4 Godrej Tea Ltd. 10 Hicare India Ltd. 10 (formerly Godrej Photo-Me Ltd.) Hybrigene Biotechnology Ltd. 10 Swadeshi Detergents Ltd. 10 Tahir Properties Ltd. (Partly Paid) 100 Preference Shares : Partly Paid Godrej Foods Ltd. 10 (8% 10 year Redeemable Cumulative Preference Shares) Tahir Properties Ltd. (Class-A) 100 Optionally Convertible Subordinated Notes C Bay Systems Ltd. $800,000 (converted into 3,07,693 Prefered Stock-E series) Preferred Stock - Series E : C Bay Systems Ltd. $0.01 INVESTMENT IN SUBSIDIARY COMPANIES : Unquoted : Equity Shares: Fully Paid Ensemble Holdings & Finance Ltd. Godrej Agrovet Ltd. Godrej Global Solutions Ltd. Godrej International Ltd. Godrej Properties & Investments Ltd. Godrej Remote Services Ltd.

B.

10 10 10 £1 10 10

OTHER INVESTMENTS : Equity Shares : Fully Paid Quoted : Gesco Corporation Ltd. 10 Tata Engineering & Locomotive Co. Ltd. 10 The Great Eastern Shipping Co. Ltd. 10 Unquoted : Bharuch Eco-Aqua Infrastructure Ltd. 10 Government Securities Unquoted : Kisan Vikas Patra 31,600 National Plan Certificate 1,500 Units of Mutual Funds Unquoted : Unit Trust of India - Unit Scheme 1964 10 (Converted into 6.75% Tax Free US-64 Bonds) Bonds of Unit Trust of India : Unquoted 6.75% Tax Free US-64 Bonds 100 Shares in Co-operative Societies - Fully Paid Unquoted : The Saraswat Co-op. Bank Ltd. 10 Less : Provision for diminution in value of Investments

32

6214.03

2404.11

124.55 11.57 5881.63 975.00 97.11

124.55 11.57 5881.63 138.65 97.11

(c)

– 191.33 0.01

2.50 191.33 0.01

50,00,000

(d)

450.00

425.00

–

25

(e)

0.02

0.02

–

–

–

(f)

–

390.50

8,91,394

–

8,91,394

845.70

–

37,70,160 – 41,06,956 – 6,00,000 2,43,50,000 15,05,000 – 50,73,965 – 47,95,648 29,16,994

– – – – – –

37,70,160 41,06,956 2,49,50,000 15,05,000 50,73,965 77,12,642

1318.14 3367.11 2495.00 960.83 3836.46 771.25

1318.14 3367.11 20.70 960.83 3836.46 479.56

(a)

9 9,376 86

– – –

9 9,376 86

– – –

– – –

– 30.00 0.01

4,40,000

–

–

4,40,000

44.00

17.60

– –

– –

– –

– –

0.32 0.02

0.32 0.02

25,20,939

–

25,20,939

–

–

383.00

–

2,52,193

–

2,52,193

252.20

–

1,000

–

–

1,000

0.10

0.10

27836.38

20080.83

(1303.10)

(1434.82)

26533.28

18646.01

Annual Report 2003-2004

Investee Company/Institutions

Face Value (Rs.)

Qty. as on 01.04.03

Acquired during Year

Number Sold during Year

Qty. as on 31.03.04

Notes

Amount As on As on 31.03.04 31.03.03 Rs. lac Rs. lac

Aggregate Book Value of Investments Quoted Unquoted

6214.03

2434.12

20319.25

16211.89

26533.28

18646.01

8018.85

2310.33

Market Value of Quoted Investments

NOTES : (a) (b) (c) (d) (e) (f)

The said shares have been refused for registration by the investee company.

Hybrigene Biotechnology Ltd. has been dissolved as per the provision of Sec 560 of the Companies Act, 1956.

Rs. 80/- per share is payable in one or more calls on these shares.

Re. 1/- per share is payable in one or more calls on these shares.

Rs. 30/- per share is payable in one or more calls on these shares.

Optionally Convertible Subordinated Notes are converted into 307693 8% Series E Cumulative Redeemable Preferred Stock of US $ 0.01 par value at the conversion price of US $ 2.60 per share in July 2003.

SCHEDULE 7 : INVENTORIES (at lower of cost and net realisable value) Stores and spares Raw materials Work-in-progress Finished goods SCHEDULE 8 : SUNDRY DEBTORS (Unsecured) Debts outstanding over six months Considered good Considered doubtful Other debts, considered good Less : Provision for doubtful debts SCHEDULE 9 : CASH AND BANK BALANCES Cash and cheques on hand Balances with scheduled banks – on current accounts – on deposit accounts (refer note 7 ) SCHEDULE 10 : LOANS AND ADVANCES (Unsecured and considered good unless otherwise stated) Loans and Advances (refer note 8 ) Advances recoverable in cash or in kind or for value to be received (net of provision for doubtful advances Rs. 668.18 lac, Previous year Rs. 594.31 lac) Intercorporate deposits – Subsidiary companies – Others Deposits and balances with – Customs & excise authorities – Others Advance payment of taxes (Net of provision for tax of Rs. 1013.93 lac)

This Year Rs. lac

Previous Year Rs. lac

697.73 6096.76 1036.35 3113.51 10944.35

488.27 5861.21 1180.36 3349.14 10879.01

39.10 234.44 273.54 7063.17 7336.71 234.44 7102.27

66.50 296.29 362.79 7593.62 7956.41 296.29 7660.12

25.55

25.64

504.57 28.25 558.37

1070.58 780.98 1877.20

1372.42

1418.16

1118.18

510.82

244.50 101.28

232.50 89.40

1180.44 610.06 23.44

172.14 723.34 –

4650.32

3146.36

33

Industries Limited SCHEDULE 11 : CURRENT LIABILITIES Acceptances Sundry creditors – due to small scale industrial undertakings – others

Rs. lac

* There is no amount due and outstanding to be credited to the Investor Education and Protection Fund. (Previous year Rs. 3.73 lac).

SCHEDULE 12 : PROVISIONS Proposed dividend Provision for tax on distributed profits Provision for Taxation (Previous year net of advance tax Rs. 1045.42 lac) Provision for retirement benefits

SCHEDULE 14 : SALE OF PRODUCTS AND SERVICES Sales (gross) Less : Excise duty Sales (net) Processing charges Export incentives Licence fees and service charges SCHEDULE 15 : OTHER INCOME Interest : – Government Securities – Income tax refund Dividend – from subsidiary companies – from long term trade investments Miscellaneous income Profit on sale of fixed assets (Net) Profit/(loss) on sale of long term investments Provision for depletion in value of investments written back

34

Previous Year Rs. lac –

13790.24 479.09 958.62

80.38 14205.06 14285.44 31.08 1114.70

65.93 – 92.50 147.61 50.90 2543.17 51.64 18499.25

79.28 3.43 122.46 133.60 66.60 1343.01 192.46 17372.06

1459.26 186.97 –

972.84 124.64 36.52

2376.58 4022.81

2122.61 3256.61

–

51.00 (40.00) 11.00

208.63

599.76 27.31 (215.16) 411.91

– 208.63

227.08 227.08 – 422.91

70868.47 5211.91 65656.56 3550.34 388.36 2070.65 71665.91

63714.28 4791.81 58922.47 3914.09 242.42 2171.62 65250.60

24.71 75.08

36.00 266.62

421.99 831.33 239.41 16.14 (51.02) 131.72 1689.36

534.30 1363.35 286.58 1.27 39.26 2.26 2529.64

74.60 13715.64

Advances from customers Sundry deposits Investor Education & Protection Fund * – Unclaimed dividend – Unpaid Application Money – Unpaid Matured Deposits – Unpaid Matured Debentures – Interest accrued on above Other liabilities Interest accrued but not due

SCHEDULE 13 : MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted) Deferred revenue expenditure – Gratuity Balance at the beginning of the year Less : Amortised during the year Balance at the end of the year – Voluntary retirement compensation Balance at the beginning of the year Add : Deferred during the year Less : Amortised during the year Balance at the end of the year – Deferred Revenue Expenditure Balance at the beginning of the year Less : Amortised during the year Balance at the end of the year

This Year Rs. lac 319.55

11.00 (11.00) 411.91 27.96 (231.24) – –

Annual Report 2003-2004 Rs. Lac SCHEDULE 16 : MATERIALS CONSUMED AND PURCHASE OF GOODS Raw materials consumed : Stocks at the commencement of the year Add : Purchases (net) Less : Stocks as at the close of the year Raw Materials consumed during the year Purchase of goods for resale SCHEDULE 17: EXPENSES Salaries, wages and allowances Contribution to provident fund and other funds Employee welfare expenses Stores and spares consumed Power and fuel Processing charges Rent (Including lease rent of Rs. 1,008 lac, an exceptional item Refer note 15 (c) of Schedule 21) Rates and taxes Repairs and maintenence – Machinery – Buildings – Other assets Insurance Freight Commission Discount Advertisement and publicity Sales promotion Selling and distribution expenses Bad debts written off Provision for doubtful debts and advances written off/(back) Miscellaneous expenses Less : Expenses recovered for shared services SCHEDULE 18 : INVENTORY CHANGE Stocks at the commencement of the year Finished goods Work-in-progress Less : Stocks at the close of the year : Finished goods Work-in-progress

Less : Interest received – on loans & deposits – on Customer balances, etc.

Net Interest Brokerage and other financial charges Foreign exchange (gain)/loss SCHEDULE 20 : PRIOR PERIOD ADJUSTMENTS Excess provision for Income-tax

Previous Year Rs. lac

5861.24 38387.28 44248.52 6096.76 38151.76 8084.39 46236.15

4656.23 39439.35 44095.58 5861.24 38234.34 4152.88 42387.22

5698.38 343.78 483.43 914.20 3618.98 48.42 1159.82

5460.20 337.32 453.39 865.96 4021.28 34.91 128.99

526.69

432.33

583.08 235.54 28.09 120.91 1387.06 419.55 183.81 81.94 337.76 569.24 16.81 31.06 1586.04 (747.24) 17627.35

761.03 260.07 27.48 118.56 1166.41 357.01 158.50 174.04 300.22 494.84 45.90 (35.60) 2043.96 (735.97) 16870.83

4529.50

1914.24 1094.43 3008.67

4149.86 379.64

3349.14 1180.36 4529.50 (1520.83)

1057.79

1280.22 212.05 39.18 1531.45

111.50 946.29 278.80 (644.91) 580.18

95.22 46.57 141.79 1389.66 269.01 365.59 2024.26

57.37 57.37

152.85 152.85

3349.14 1180.36 3113.51 1036.35

(Increase)/Decrease in Inventory SCHEDULE 19 : INTEREST AND FINANCIAL CHARGES (Net) Interest paid – on fixed loans – on bank overdrafts – other interest

This Year Rs. lac

839.87 94.89 123.03 77.86 33.64

35

Industries Limited SCHEDULE 21 : NOTES TO ACCOUNTS 1. Background The Company was incorporated under the Companies Act, 1956 on March 7, 1988 under the name of Gujarat-Godrej Innovative Chemicals Limited. The business and undertaking of the erstwhile Godrej Soaps Limited was transferred to the Company under a scheme of amalgamation with effect from April 1, 1994 and the Company’s name was changed to Godrej Soaps Ltd. Subsequently, under a scheme of arrangement the Consumer Products division of the Company was demerged with effect from April 1, 2001 into a separate company, Godrej Consumer Products Limited (GCPL) and the vegetable oils and processed foods manufacturing business of Godrej Foods Ltd was transferred to the Company with effect from June 30, 2001. The Company’s name was changed to Godrej Industries Limited on April 2, 2001.

f)

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 year end, are stated at the contracted rates, when covered under forward foreign exchange contracts and at year-end rates in other cases. The premium payable on forward foreign exchange contracts is amortised over the period of the contract.

Exchange gains and losses are recognised in the 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. g) Revenue Recognition Sales are recognised when goods are supplied and are recorded net of returns, trade discounts, rebates, sales taxes and excise duties.

The Company is engaged in the businesses of manufacture and marketing of chemicals, vegetable oils and processed foods, trading in medical diagnostic products and estate management.

Income from processing operations is recognised on completion of production/dispatch of the goods, as per the terms of contract.

2. Significant Accounting Policies

Export incentives are accounted on accrual basis and include the estimated value of duty free import entitlement under the Advance Licence Benefit Scheme and export incentives receivable under the Duty Entitlement Pass Book Scheme and the Duty Drawback Scheme.

a) Accounting Convention The financial statements are prepared under the historical cost convention, on the accrual basis of accounting, in accordance with the generally accepted accounting principles in India, and the Accounting Standards issued by the Institute of Chartered Accountants of India.

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

b) Fixed Assets Fixed Assets are stated at cost or as revalued as the case may be, less accumulated depreciation. Cost includes expenses related to acquisition and installation of the concerned assets. Exchange differences arising on account of repayment and year end translation of foreign currency liabilities relating to acquisition of fixed assets is adjusted to the carrying cost of the respective assets.

Fixed Assets acquired under finance lease are capitalised at the lower of their face value and present value of the minimum lease payments.

Interest income is recognised on a time proportion basis.

Income on assets given on operating lease is recognised on a straight line basis over the lease term. h) Research and Development Expenditure Revenue expenditure on Research & Development is charged to the Profit and Loss Account of the year in which it is incurred.

Capital expenditure incurred during the year on Research & Development is shown as addition to fixed assets. i)

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

Trademarks are amortised over a period of ten years.

Depreciation is provided on the straight line method at the rates specified in Schedule XIV to the Companies Act, 1956, except for computer hardware. Computer hardware is depreciated over its estimated useful life of 4 years.

d) Investments Long term investments are carried at cost. Provision for diminution, if any, in the value of each long term investment is made to recognise a decline, other than of a temporary nature.

The fair value of a long term investment is ascertained with reference to its market value, the investee’s assets and results and the expected cash flows from the investment.

Depreciation on assets acquired during the year is provided for the full accounting year and no depreciation is charged on the assets sold/discarded during the year, except in case of major additions and deductions exceeding rupees one crore in which case, proportionate depreciation is provided.

Depreciation on the revalued component is provided on the straight line method based on the balance useful life of the assets as certified by the valuers. Such depreciation is withdrawn from Revaluation Reserve and credited to Profit and Loss Account.

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

36

Depreciation Leasehold land is amortised equally over the lease period.

Leasehold improvements are amortised over five years.

c) Borrowing Costs

Inventories are valued at lower of cost and net realisable value.

Cost is computed on weighted average basis and is net of modvat.

Finished goods and work-in-progress include cost of conversion and other costs incurred in bringing the inventories to their present location and condition. Provision is made for the cost of obsolescence and other anticipated losses, wherever considered necessary.

Foreign Exchange Transactions

j)

Retirement Benefits Retirement benefits to employees comprise payments under approved provident fund plans, leave encashment and gratuity to eligible employees. Payments under approved provident fund plans are charged to revenue. The liability in respect of future

Annual Report 2003-2004 Schedule 21 : Notes to Accounts (contd.) payment of gratuity to retiring employees and leave encashment benefit on retirement is provided on the basis of an actuarial valuation at the end of each financial year.

3. Contingent Liabilities This Year Previous Year Rs. lac Rs. lac a)

k) Incentive Plans The Company has a scheme of Performance Linked Variable Remuneration (PLVR) which rewards its employees based on Economic Value Addition (EVA). The PLVR amount is related to actual improvement made in EVA over the previous year when compared with expected improvements. The EVA awards flow through a notional bank whereby only the prescribed portion of the bank is distributed each year and the balance is carried forward. The amount distributed out of the notional bank is charged to Profit & Loss Account. The notional bank is held at risk and charged to EVA of future years and is payable at that time, if future performance so warrants. l)

Hedging Import of crude palm oil by the Company is being hedged by futures contract on offshore Commodities Exchange. Gains or losses on settled contracts is recognised in the Profit and Loss Account and is included in the cost of materials consumed. Futures contracts not settled as on the Balance Sheet date are marked to market and losses, if any, are recognised in the Profit and Loss Account, whereas, the unrealized profit is ignored.

m) Deferred Revenue Expenditure The compensation payable under the Voluntary Retirement Schemes, the benefit of which is expected to accrue in future is deferred over its pay back period. The compensation is generally amortised over three to five years depending on the pay back period. n) Taxes on Income Current tax is the amount of tax payable on the taxable income for the year determined in accordance with the provisions of the Income Tax Act, 1961.

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 subsequent periods. Deferred tax assets subject to the consideration of prudence are recognised 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 and based on the tax rate and laws enacted or substantially enacted on the balance sheet date.

b)

c)

d)

Claims for excise duties, taxes and other matters not acknowledged by the Company : i) excise duty - Rs. 2718.25 lac (Previous Year Rs. 3736.80 lac) - net of tax : ii) lease rent claimed by Mumbai Port Trust in respect of land leased to the Foods division. Rs. Nil (Previous Year Rs. 1150.00 lac) – net of tax : iii) other matters - Rs. 3374.86 lac (Previous Year Rs. 3861.50 lac) – net of tax : Guarantees issued by banks, excluding guarantees issued in respect of matters reported in (a) above Guarantees given by the Company in respect of credit/guarantee limits sanctioned by banks to subsidiary and other companies.

2363.53

Nil

727.38

2346.65

2676.27

1389.96

590.79

3666.00

3560.00

50.03

140.73

Uncalled liability on partly paid shares/debentures

4. Capital Commitments This year Previous Year Rs. lac Rs. lac Estimated value of contracts remaining to be executed on capital account, to the extent not provided

80.58

51.60

5. Secured Loans a) Term loans from banks are secured by : -

first charge by way of equitable mortgage of the immovable properties at Vikhroli factory,

-

hypothecation of specified movable assets of the Company at Vikhroli and Valia factories,

-

first charge by way of equitable mortgage of the immovable properties at Valia factory.

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

6. Sundry Debtors This Year Previous Year Rs. lac Rs. lac

o) Segment Reporting The Accounting Policies adopted for segment reporting are in line with the Accounting Policies of the Company. Segment assets include all operating assets used by the business segments and consist principally of fixed assets, debtors and inventories. Segment liabilities include the operating liabilities that result from the operating activities of the business segment assets and liabilities that cannot be allocated between the segments are shown as part of unallocated corporate assets and liabilities respectively. Income/ Expenses relating to the enterprise as a whole and not allocable on a reasonable basis to business segments are reflected as unallocated corporate income/expenses.

1743.08

Sundry Debtors include amount due from a Company under the same management : Godrej Consumer Products Ltd.

95.52

195.80

18.34

17.11

7. Cash and Bank Balances Balances with Scheduled Banks in Deposit Accounts include deposits held by bank as security against guarantees issued on behalf of suppliers of the Company

37

Industries Limited Schedule 21 : Notes to Accounts (contd.)

Mutual Funds - Short Term Funds - Growth Plan

8. Loans and Advances a) Loans and Advances include an amount of Rs. 5.61 lac (Previous Year Rs. 6.69 lac) due from directors and Rs. Nil (Previous Year Rs. 0.20 lac) from an Officer of the Company under the contingency and housing loan scheme of the Company. Maximum balance during the year Rs. 6.89 lac (Previous Year Rs. 14.60 lac). b) Loans and Advances include Rs. 1033 lac (Previous Year Rs. 1033 lac) advanced by the Company to certain individuals against pledge, by way of deposit, of equity share of Gharda Chemicals Ltd. The Company is in the process of enforcing the security and getting the shares transferred in its name. Interest on the aforesaid loans and advances amounting to Rs. 315 lac was accrued upto March 31, 2000 and has been fully provided for, no interest is being accrued thereafter. The recoverability of the advance is contingent upon the transfer and/or disposal of said shares. In the opinion of the management, the value of the said shares is greater than the amount of the loans and advances. c) Loans and Advances to subsidiary companies Maximum balance Balance at year end during the year This Year Previous Year Rs. lac Rs. lac Rs. lac i)

Ensemble Holdings & Finance Ltd. ii) Godrej Properties & Investments Ltd. iii) Godrej Agrovet Ltd.

244.50

244.50

232.50

585.00 600.00

Nil Nil

Nil Nil

d) Loans & Advances to associate companies i) Swadeshi Detergents Ltd. 94.40 ii) Hicare India Ltd. 107.48

65.80 107.48

89.40 –

e) Ensemble Holdings & Finance Ltd., to whom Godrej Industries Ltd. have given a loan, has made investments in Godrej Industries Ltd. and its subsidiaries. i) Godrej Industries Ltd. (shares received pursuant to scheme of arrangement with Godrej Foods Ltd.) ii) Godrej Global Solutions Ltd. iii) Hicare India Ltd. (earlier known as Godrej Photo-me Ltd.) iv) Godrej Remote Services Ltd. v) Godrej Properties & Investments Ltd. f)

Loans and Advances where there is no repayment schedule or repayment is beyond seven years : This Year Previous Year Rs. lac Rs. lac i) D. Kavasmanek and Others (refer (b) above).

1033.00 1033.00

9. Investments The Company has acquired and sold the following investments during the year : Mutual Funds - Liquid Funds - Growth Plan This Year Previous Year No. of Purchase No. of Purchase Units Cost Units Cost Rs. lac Rs. lac Birla Cash Plus Liquid Prudential ICICI Liquid KMMF Liquid Templeton India Liquid JMMF Liquid

38

4,16,02,898 1,93,22,924 6,02,12,581 1,93,22,924 52,01,696

6980.00 2940.00 7506.00 10030.00 545.00

Nil Nil Nil Nil Nil

Nil Nil Nil Nil Nil

This Year Previous Year No. of Purchase No. of Purchase Units Cost Units Cost Rs. lac Rs. lac Birla Bond Plus 1,07,92,062 Prudential ICICI Short Term Fund 1,43,92,412 KMMF K Bond Short Term Fund 60,80,618 Templeton India Short Term Income Plan 28,158 Deutsche Short Maturity Fund 82,35,631

1220.00

Nil

Nil

1660.00

Nil

Nil

665.00

Nil

Nil

315.00

Nil

Nil

855.00

Nil

Nil

10. Liabilities a) The liability for future payment of Voluntary Retirement Compensation aggregating Rs. 5.66 lac (Previous Year Rs. 3.77 lac) will be accounted in subsequent years as and when the same accrues and becomes due to the workmen. This compensation is payable in future and is over and above the compensation already paid under other schemes and included in deferred revenue expenditure. b) No amount has been claimed from the Company under the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993. c) The names of small scale industrial undertakings to whom an amount is outstanding for more than 30 days are as under : Akshay Inorganics Jaynam Packers Alguj Chemical Industries Kandoi Fabrics Pvt. Ltd. Ambica Chemicals Industries Mahawar Packaging Industries Amelon Synthetics Corpn.

Mevada Engineering Works Anupam Enterprise N. R. Packaging Industries Asian Electronics Ltd. Neo Fab Conserve Watercare Pvt. Ltd. Sanjoo Printers Conserve Watercare System Shanti Industries Dhanvantri Eng. Pvt. Ltd. Shree Diamond Silicates Co. General Foundries Shree Satyanarayan Plastics HRP Industries Sungrace Agro Process Pvt. Ltd. Jalaram Box Makers (P) Ltd. United Paper Industries Jay Gaskets Pvt. Ltd. Vraj Packaging Pvt. Ltd. Jayant Packing Industry Yash Polychem Pvt. Ltd. d) The above information regarding small scale industrial undertakings has been determined to the extent such parties have been identified on the basis of information available with the Company, and has been relied upon by the Auditors.

11. Incentive Plans The amount carried forward in notional bank as on March 31, 2004, after distribution of PLVR for the FY 2003-04 is Rs. 760.04 lac (Previous Year Rs. 253.49 lac). The said amount is not provided in the books of account and is payable in future if performance so warrants.

12. Leases a) The Company has entered into leave and licence agreements in respect of its commercial and residential premises. These are not non-cancelable and range between 11 months to 35 months and are renewable by mutual consent on mutually acceptable terms.

Leave and licence arrangements being similar in substance to operating leases, the particulars of the premises under leave and licence arrangement are as under :

Annual Report 2003-2004 Schedule 21 : Notes to Accounts (contd.)

This Year Previous Year Rs. lac Rs. lac Gross carrying amount of premises

3944.29

3732.82

Accumulated depreciation

876.16

743.52

Depreciation for the period

132.63

90.59

b) Finance Leases : The Company has acquired vehicles under Finance Lease.

Liability for minimum lease payment is secured by hypothecation of the vehicles acquired under the lease. The minimum lease payments outstanding as on March 31, 2004, in respect of vehicles acquired under lease are as under : Period

Total minimum lease payments outstanding Un-matured as on March 31, 2004 Interest Rs. Lac Rs. Lac

Within one year Later than one year and not later than five years

Present value of minimum lease payments Rs. Lac

70.08

12.63

66.36

141.55

11.12

121.58

211.63

23.75

187.94

13. Deferred Tax a.

Major components of deferred tax arising on account of timing differences as on March 31, 2004 are : Assets Business Losses Provision for retirement benefits Provision for doubtful debts/advances Others

This Year Previous Year Rs. lac Rs. lac 319 733 324 33

1481 586 317 40

1409

2424

4338 43 — 4381

5751 134 5 5890

2972

3466

Liabilities Depreciation VRS Expenses Deferred Revenue Expenditure

Net Deferred Tax Liability

b. Provision for deferred tax for the year includes the effect of increase in deferred tax assets of Rs. 457 lac and reversal of

deferred tax liability amounting to Rs. 1420 lac due to the increase in brought forward losses pursuant to finalisation of appellate proceedings and revised depreciation claim of earlier years respectively.

14. Hedging Reserve Bank of India has permitted the Company to hedge its exposure on Crude Palm Oil on offshore exchanges to the extent of its imports. Accordingly, the Company is hedging import of crude palm oil on the Malaysian Commodities Exchange by way of futures contracts. The particulars of the futures contracts for the year are as under: Details

This Year Previous Year Purchase Sale Purchase Sale

Total number of contracts entered during the year 33 28 Number of units (25 MT per unit) under above contracts 1,401 1,281 Future contracts not settled as on March 31, 2004 – – Number of units under above contracts – –

56

66

206

326

– –

10 120

15. Profit & Loss Account a) The amount of exchange loss on account of fluctuation of the rupee against foreign currencies and the net charges for forward foreign exchange contracts added to the carrying amount of fixed assets during the year is Rs. 14.77 lac (Previous Year Rs. 85.62 lac). The exchange difference included in the Profit & Loss Account is a profit of Rs. 1,129.12 lac (Previous Year loss of Rs. 370.36 lac). The exchange difference in respect of forward exchange contracts to be recognised in subsequent accounting periods is Rs. 44.33 lac (Previous Year Rs. 29.20 lac). b) Research & Development Expenditure of revenue nature charged to the Profit & Loss Account amounts to Rs. 115.04 lac (Previous Year Rs. 94.79 lac). c) Rent includes an amount of Rs. 1,008 lac on account of lease rent payable to Mumbai Port Trust, which has crystallised during the year, pursuant to finalisation of litigation proceedings as per the order of the Honourable Supreme Court of India dated 13 January, 2004 – an exceptional item.

39

Industries Limited Schedule 21 : Notes to Accounts (contd.)

16.

Segment Information Information about Primary Business Segments Chemicals This Year Previous Year

Revenue External Sales

Rs. lac

Foods

Estate

Others

Total

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

This Year Previous Year

49368.60

44882.04 19358.07

17590.02 2087.88

2177.39 2465.64

2864.17 73280.19

7312.58

5649.28 (1489.30)

87.17 1497.36

1536.84 1335.60

1798.08

67513.62

Results Segment result before interest and tax Unallocated expenses net of unallocated income

8656.24

9071.37

(1636.62)

(1086.48)

Interest Expense (net)

(580.18)

(2024.26)

Profit before tax

6439.44

5960.63

129.00

(2540.00)

6568.44

3420.63

21990.18 75643.33 23.44 75666.77

70771.60 — 70771.60

70.18 22529.76 24021.40 46551.16

20792.77 25549.54 46342.31

Taxes Profit after taxes Segment Assets Unallocated Assets Total Assets

34687.52

36476.81

7631.34

8326.34 3970.98

3978.27 29353.49

Segment Liabilities Unallocated Liabilities Total Liabilities

17432.62

15858.42

3879.45

3986.08

786.08

878.09

431.61

Total Cost incurred during the year to acquire segment assets 741.29 Segment depreciation 1727.52

1102.62 1778.46

136.79 256.06

183.00 300.00

200.58 132.85

248.81 98.95

– 33.45

– 33.57

1078.66 2149.88

1534.43 2210.98

India

59940.50

57766.99

Outside India

13339.69

9746.63

Total

73280.19

67513.62

75666.77

70771.60

–

–

75666.77

70771.60

Information about Secondary Business Segments Revenue by Geographical markets

Carrying Amount of Segment assets India Outside India Total 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. The Chemicals segment includes Oleo Chemicals such as Fatty Alcohols, Fatty Acids, Alfa Olefin Sulphonates and Refined Glycerin.

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

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

Others includes medical diagnostics business and finance operations.

3. The geographical segments are as follows :

40

–

Sales in India represent sales to customers located in India.

–

Sales outside India represent sales to customers located outside India.

Annual Report 2003-2004 Schedule 21 : Notes to Accounts (contd.)

17.

Related Party Disclosures a) Related Parties with whom transactions have taken place during the year, with the name and description of relationship.

Parties where control exists : Godrej & Boyce Mfg Co. Ltd., the holding company.

Subsidiary companies : Ensemble Holdings & Finance Ltd. Godrej Agrovet Ltd. Godrej Global Solutions Ltd. Godrej International Ltd. Godrej Properties & Investments Ltd. Godrej Remote Services Ltd. Godrej Tea Ltd. Fellow Subsidiaries : Godrej Appliances Ltd. Godrej Consumer Products Ltd. b)

Godrej Foods Ltd. Godrej Infotech Ltd. Associate/Joint Venture Companies : Tahir Properties Ltd. Hicare India Ltd. (earlier known as Godrej Photo-Me Ltd.) Godrej SaraLee Ltd. Swadeshi Detergents Ltd. Key Management Personnel : Mr. N.B. Godrej Ms. T.A. Dubash Mr. Mathew Eipe Mr. V. Banaji Mr. M.P. Pusalkar Enterprises over which key management personnel exercise significant influence Bahar Agrochem & Feeds Pvt. Ltd.

Transactions with Related Parties Rs. lac

Nature of Transaction

Sale of Goods Previous Year Sale of Fixed Assets Previous Year Purchase of goods & equipment Previous Year Processing charges received Previous Year Commission received Previous Year Recovery of establishment & other expenses Previous Year Establishment & other expenses paid Previous Year Refund of Deposit Previous Year Interest received Previous Year Interest paid Previous Year Finance provided including loans & equity contributions Previous Year Finance received during the year Previous Year Finance repaid during the year Previous Year Guarantees & collaterals given Previous Year Dividend income Previous Year Dividend paid Previous Year Remuneration Previous Year Write-back of Provisions Previous Year Balance Outstanding as on March 31, 2004 Receivables Previous Year Payables Previous Year

Relative Associate/ Key of Key Joint Venture Management Management Companies Personnel Personnel

Enterprises over which Key Management Personnel exercise significant influence

Total

Holding Company

Subsidiary Companies

Fellow Subsidiaries

17.53 17.95 – – 38.61 56.86 – – – –

– 0.47 1.34 – 98.83 6.24 – – – –

2539.42 2930.84 153.07 – 708.26 1173.27 2845.71 1931.99 19.62 33.00

3.88 3.25 – – 14.44 43.24 – – – –

– – – – – – – – – –

– – – – – – – – – –

– 0.44 – – – – – – – –

2560.83 2952.95 154.41 – 860.14 1279.61 2845.71 1931.99 19.62 33.00

10.46 4.49 169.17 151.34 – – – – – –

395.47 244.70 42.34 211.32 3410.75 12.71 40.42 18.05 – –

1011.19 1121.73 65.30 55.60 – 2.00 – 24.39 – 4.16

237.09 229.35 1.90 1.82 38.55 23.20 – – – –

– – – – – – – 0.35 0.28 –

– – – – – – – – – –

0.04 0.06 – – – – – – – –

1654.25 1600.33 278.71 420.08 3449.30 37.91 40.42 42.79 0.28 4.16

– 23.02 – – – – – – – – 716.51 246.36 – – – –

7010.35 1149.09 – 0.70 11.00 – 3666.00 3500.00 421.99 534.30 1.98 0.59 – – – –

25.00 3029.00 – 200.00 – 500.00 – – 284.00 88.00 – – – – 0.18 –

112.48 429.58 – – 28.60 – – 60.00 546.93 1275.33 – – – – 0.11 –

– – – 1.98 – – – – – – 8.58 3.25 338.66 255.28 – –

– – – – – – – – – – – – – 6.40 – –

– – – – – – – – – – – – – – – –

7147.83 4630.69 – 202.68 39.60 500.00 3666.00 3560.00 1252.92 1897.63 727.07 250.20 338.66 261.68 0.29 –

69.93 1.94 0.36 1.23

289.82 279.31 148.90 73.53

191.30 195.80 195.52 85.36

106.04 105.02 206.28 4.65

– – – –

– – – –

0.02 0.02 0.11 0.11

657.11 582.09 551.17 164.88

41

Industries Limited Schedule 21 : Notes to Accounts (contd.)

18.

Earnings per Share a.

b. c.

19.

Calculation of weighted average number of equity shares Number of shares at the beginning of the year Shares bought back pursuant to the scheme of arrangement for buy back Number of equity shares outstanding at the end of the year Weighted average number of equity shares outstanding during the year Net profit after tax available for equity shareholders Basic and diluted earnings per share of Rs. 6 each

This Year

Previous Year

4,86,41,942 – 4,86,41,942 4,86,41,942 6568.45 13.50

6,17,10,218 1,30,68,276 4,86,41,942 5,82,37,279 3420.63 5.87

This Year Rs. lac

Previous Year Rs. lac

6511.07 2149.88 338.66

3267.78 2210.98 311.37

34.79

38.66

(100.66) (129.00)

(37.86) 2540.00 5063.15 8330.93 8210.79

Nos. Nos. Nos. Nos. Rs. lac Rupees

Computation of Profits under Section 349 of the Companies Act, 1956 Rs. lac Profit for the year after tax as per Profit & Loss Account Add : Depreciation as per accounts Managerial Remuneration Profit on sale of assets under Section 349 Provision for doubtful debts/advances and depletion in value of investments Provision for Tax

2293.67 8804.74 Less :

Losses of the earlier year Depreciation under Section 350 of the Companies Act, 1956 Profit on sale of assets as per books Profit/(loss) on sale of investments

2117.65 2099.66 16.14 (51.02)

Net Profit/(Loss) for the purpose of Directors’ Remuneration Managerial remuneration to Managing and Executive Directors @ 10% of the net profits Managerial remuneration paid/payable 20. Managerial Remuneration

Salaries and allowances

Previous Year Rs. lac

278.88

268.62

Contribution to Provident Fund

11.69

10.43

Estimated Monetary value of perquisites

44.74

28.50

Directors’ Fees TOTAL

22.

21.

This Year Rs. lac

3.35

3.82

338.66

311.37

462.23 338.66

— 311.37

Auditors’ Remuneration

Audit fees (including Rs. 0.96 lac to branch auditors, Previous Year Rs. 0.75 lac) Tax audit fees Certification and other services Tax Consultation and representation Consultation and management services Out of pocket expenses Service Tax TOTAL

This Year Rs. lac

Previous Year Rs. lac

27.96 4.50 6.98 13.85 4.76 1.76 4.20 64.01

21.55 3.75 11.28 4.92 3.80 0.62 2.23 48.15

Sales This Year Item Fatty Acids Glycerin Alpha Olefin and its precursors and derivatives Oils & Vanaspati Fruit & Vegetable Puree, Pulp & Juices Fruit beverages and fruit based products Medical Diagnostic Products Others TOTAL

42

4,182.43 4622.31

2197.26 1.27 39.26 10448.58 (2117.65)

Previous Year Quantity Value Rs. lac

Unit

Quantity

Value Rs. lac

MT MT

47241 8338

15096.48 4262.86

53591 7955

15744.58 4306.97

MT MT MT KL

68959 34663 2482 7063

26327.26 15900.63 691.52 1823.29 935.91 618.61 65656.56

58603 30286 2843 5487

21206.52 14091.43 945.25 1483.14 714.11 430.47 58922.47

Annual Report 2003-2004 Schedule 21 : Notes to Accounts (contd.)

23.

Inventories - Finished Goods Item Fatty Acids Glycerin Alpha Olefin and its precursors and derivatives Oils & Vanaspati Fruit & Vegetable Puree, Pulp & Juices Fruit beverages and fruit based products Medical Diagnostic Products Others TOTAL

24.

Unit MT MT MT MT MT KL

March 31, 2004 Quantity Value Rs. lac 2245 878.39 121 63.46 1867 1098 1576 650

723.39 575.99 343.99 153.89 307.60 74.50 3121.21

March 31, 2003 Quantity Value Rs. lac 1959 731.61 309 180.19 3256 786 1751 944

1190.39 396.00 388.07 262.10 177.60 23.18 3349.14

Oils & Fats Chemicals and Catalysts Fruit Pulp & Concentrates Packing Materials, etc.

Unit

Quantity

732.63 455.15 52.00 149.00 187.27 – 1914.24

MT MT KL

124477 17217 5658

TOTAL Note : Raw materials consumption includes consumption for production of captively consumed items.

Purchase of Goods

Value Rs. lac 27546.15 4319.94 457.21 5828.46

Previous Year Quantity Value Rs. lac 138129 30145.40 13500 3799.78 10496 947.97 3341.19

38151.76

38234.34

This Year Fatty Acids Oils & Vanaspati Medical Diagnostic Products Others TOTAL 26.

2066 1127 220 652

Raw Materials Consumed This Year

25.

March 31, 2002 Quantity Value Rs. lac 949 318.65 37 19.54

Unit

Quantity

MT MT

65 18497

Value Rs. lac 20.48 7190.64 579.02 164.17 7954.31

Previous Year Quantity Value Rs. lac 191 55.00 8872 3454.93 531.55 111.40 4152.88

Licensed, Installed and Utilised Capacity Item

Unit

Licensed Capacity

Installed Capacity This Year

Previous Year

Actual Production This Previous Year Year

SCHEDULED Fatty Acids MT } 32000 32000 39815 49201 Glycerin MT } 8280 8280 8316 8139 Alpha Olefin and its precursors } and derivatives MT } 35000 35000 74714 63579 Soaps MT } 26381 26381 19864 20729 Cosmetics MT } 1200 1200 – – Fruit Beverages & Fruit } based products KL } 30000 30000 6887 5834 Fruit & Vegetable Puree, } N.A Pulp & Juices.

MT } 5000 5000 2616 4860 Refined Oils & Vanaspati MT } 38700 38700 15648 20358 Dietetic & Geriatric foods MT } 250 250 21 41 U.H.T./Sweetend Flavoured } Milk KL } 1800 1800 117 – Instant Tea/Coffee Plant MT } 3000 – – – Synthetic Detergents MT } 11250 11250 13506 13384 Hydrogen (Captive } 3 } 1224000 1224000 448570 569748 consumption) NM Oxygen (By-Product) NM3 } 612000 612000 224285 284874 Notes : a. The Licensed capacities are not applicable in view of the exemption from licensing granted under Notification SO 477(E) dated 25th July 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.

43

Industries Limited Schedule 21 : Notes to Accounts (contd.)

This Year Previous Year Rs. lac Rs. lac 27. Value of Imports on CIF Basis (includes only Imports directly made) Raw materials Goods for resale Stores & spares Capital goods TOTAL 28. Expenditure in Foreign Currency Interest Travelling expenditure Other expenditure Expenses for Foreign Branch : – Salaries and allowance – Rent – Others TOTAL

20247.20 1224.94 140.23 19.00 21631.37

18372.53 163.72 119.50 51.12 18706.87

529.91 85.76 185.42

509.21 76.08 206.18

77.42 22.77 31.49 932.77

80.24 20.14 26.14 917.99

This Year Rs. lac 29. Value of Consumption of Raw Materials & Spares Raw Materials Imported (including duty content) Indigenous

Previous Year Rs. lac %

23954.60 14197.16 38151.76

63 37 100

24552.99 13681.35 38234.34

64 36 100

116.78 797.42 914.20

13 87 100

335.50 530.46 865.96

37 58 95

Spares Imported (including duty content) Indigenous 30. Dividends Remitted in Foreign Currency (subject to deduction of tax, as applicable) Final Dividend for Financial Year 2002-03 to 3 shareholders on 180 shares TOTAL

– –

31. Earnings in Foreign Exchange Export of goods ( F.O.B. : this year Rs. 12670.02 lac 13279.26 Previous Year Rs. 9202.81 lac) Dividend 48.26 Interest 12.17 TOTAL 13339.69 32. Interest in Joint Ventures The Company’s interests, as a venturer, in jointly are: Name Countries Principal of activities Incorporation Godrej SaraLee Ltd.

India

Hi Care India Ltd. India

%

0.05 0.05

9719.01 – 27.62 9746.63 controlled entities Percentage of Ownership interest as at 31st March, 2004

Household 25.96% Insectisides Pest Control 40.66%

The Company’s interests in Joint Venture are reported as Long Term Investments (Schedule “6”) and stated at cost less provision, if any, for permanent diminution in value of such investments. The Company’s share of each of the assets, liabilities, income and expenses, etc. (each without elimination of the effect of transactions between the Company and the Joint Ventures) related to its interests in these joint ventures are :

44

This year Previous year Rs. lac Rs. lac I.

ASSETS 1. Fixed Assets 1275.03 1312.47 2. Investments – 45.33 3. Current Assets, Loans and Advances a) Inventories 1278.71 1356.89 b) Sundry Debtors 374.07 535.65 c) Cash and Bank Balances 944.14 257.25 d) Other Current Assets 0.73 0.75 e) Loans and Advances 360.62 360.33 II. LIABILITIES 1. Loan Funds a) Secured Loans 148.61 – b) Unsecured Loans 438.55 424.13 2. Current Liabilities and Provisions a) Liabilities 1878.01 2282.54 b) Provisions 101.64 51.69 3. Deferred Tax- Net 44.35 39.28 III. INCOME 1. Sales and Income from operations 10654.76 9790.97 2. Other Income 122.01 37.14 IV. EXPENSES 1. Materials consumed and purchase of goods 4774.40 5064.66 2. Expenses 4368.12 3712.71 3. Inventory change 74.66 (281.11) 4. Depreciation 171.52 135.74 5. Interest 22.52 58.42 6. Provision for Taxation 83.88 78.30 V. OTHER MATTERS 1. Contingent Liabilities 299.64 296.88 2. Capital Commitments 11.16 – 33. Figures for the previous year have been regrouped wherever necessary.

34. 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 : 31/3/2004 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 : 53137.02 Total Assets : 53137.02 Sources of Funds Paid-up Capital : 2918.52 Reserves & Surplus : 26197.10 Secured Loans : 16813.64 Unsecured Loans : 4235.76 Defered Tax Liability : 2972.00 Application of Funds Net Fixed assets : 25655.58 Investments : 26533.28 Net Current Assets : 739.53 Misc. Expenditure : 208.63 Accumulated Losses : – 4. Performance of Company (Amount in Rs. lac) Turnover (Income from Operations) : 71665.91 Total Expenditure (Net of Other Income) : 65283.84 Profit/(Loss) before tax : 6382.08 Profit/(Loss) after tax : 6568.45 Earning per Share in Rs. (on an annualised basis) : 13.50 Dividend rate % : 50.00% 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)

Industries Limited – Consolidated Accounts

Annual Report 2003-2004

CONSOLIDATED ACCOUNTS REPORT OF THE AUDITORS TO THE BOARD OF DIRECTORS OF GODREJ INDUSTRIES LIMITED 1.

2.

3.

4.

We have examined the attached Consolidated Balance Sheet of Godrej Industries Limited, its subsidiaries, joint ventures and associates as at March 31, 2004, and the Consolidated Profit and Loss Account and Consolidated Cash Flow Statement for the year ended on that date annexed thereto. These consolidated financial statements are the responsibility of the management of Godrej Industries Limited. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards in India. These Standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are prepared, in all material aspects, in accordance with an identified financial reporting framework and are free of material misstatements. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

We did not audit the financial statements of certain subsidiaries, joint ventures and associates, whose financial statements reflect total assets of Rs. 26,262.76 lakh as at March 31, 2004, total revenues of Rs. 60,788.49 lakh and net profit of Rs. 4,389.51 lakh for the year then ended. These financial statements have been audited by other auditors whose report has been furnished to us and our opinion, insofar as it relates to the amounts included in respect of the subsidiaries, joint ventures and associates is based solely on the report of the other auditors. The financial statements of two associates, which reflects net loss for the year of Rs. 312.65 lakh were not audited as on the date of this report. The Company’s share of loss thereof amounting to Rs. 134.72 lakh has been included in the consolidated financial statements on the basis of unaudited management accounts.

We report that the consolidated financial statements have been prepared by the Company in accordance with the requirements of Accounting Standard (AS) 21 - Consolidated Financial Statements, Accounting Standard (AS) 23 - Accounting for Investments in Associates in Consolidated Financial Statements and Accounting

Standard (AS) 27 – Financial Reporting of Interests in Joint Ventures, issued by the Institute of Chartered Accountants of India and on the basis of the separate audited financial statements of Godrej Industries Limited, its subsidiaries, joint ventures and associates included in the consolidated financial statements.

5.

Reference is invited to note 6 of Schedule 21- Notes to Accounts, regarding the recoverability of advances given to certain individuals amounting to Rs. 1033 lac being contingent upon the transfer and/ or disposal of the shares pledged against the loan. The impact thereof on the profit for the year could not be ascertained.

6.

On the basis of the information and explanation given to us and on the consideration of the separate audit reports on the individual audited financial statements of Godrej Industries Limited and its aforesaid subsidiaries, joint ventures and associates, in our opinion, the consolidated financial statements, subject to paragraph 5 above, give a true and fair view in conformity with the accounting principles generally accepted in India: a)

in case of the Consolidated Balance Sheet, of the consolidated state of affairs of Godrej Industries Limited, its subsidiaries and its interests in joint ventures and associates as at March 31, 2004;

b)

in case of the Consolidated Profit and Loss Account, of the consolidated results of operations of Godrej Industries Limited, its subsidiaries and its interests in joint ventures and associates for the year then ended; and

c)

in case of the Consolidated Cash Flow Statement, of the consolidated cash flows of Godrej Industries Limited, its subsidiaries and its interests in joint ventures and associates for the year then ended.

For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants V. R. MEHTA Partner

Mumbai: May 28, 2004.

M. No.: 32083

45

Industries Limited – Consolidated Accounts CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2004 Schedule SOURCES OF FUNDS 1. Shareholders’ Funds (a) Share capital (b) Reserves & surplus

1 2

2. Minority Interest 3. Loan Funds (a) Secured loans (b) Unsecured loans

3 4

Rs. lac

This Year Rs. lac

Previous Year Rs. lac

31382.77 2798.28

2912.58 24988.62 27901.20 4753.64

38308.66 3208.13

26791.60 13770.42 40562.02 3841.67

75697.84

77058.53

36433.03 11264.45 9647.34

65620.45 26590.31 39030.14 481.65 39511.79 11602.23 4085.71

2912.58 28470.19

26835.31 11473.35

4. Deferred Tax Liability TOTAL APPLICATION OF FUNDS 5. Fixed Assets (a) Gross block (b) Less: Depreciation (c) Net block (d) Capital work-in-progress

5 65238.97 29137.21 36101.76 331.27

6. Goodwill (on Consolidation) 7. Investments 8. Current Assets, Loans and Advances (a) Inventories (b) Sundry debtors (c) Cash and bank balances (d) Other Current Assets (e) Loans and advances

6 7 8 9 10

Less : Current Liabilities and Provisions (a) Liabilities (b) Provisions

11 12

Net Current Assets 9. Miscellaneous Expenditure (To the extent not written off or adjusted)

13

TOTAL Notes to Accounts

23268.27 15988.46 3725.58 8.02 17006.50 59996.83

24148.25 15192.34 3764.71 12.15 13428.88 56546.33

37527.58 4360.15 41887.73 18109.10 243.92

32303.71 3702.14 36005.85 20540.48 1318.31

75697.84

77058.53

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 and 21

For and on behalf of Kalyaniwalla & Mistry Chartered Accountants

V. R. Mehta Partner Mumbai, May 28, 2004 46

A. B. Godrej Chairman

S. K. Bhatt Company Secretary

N. B. Godrej Managing Director

Annual Report 2003-2004 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2004 This Year Rs. lac

Previous Year Rs. lac

14 15

182292.59 1071.86 183364.45

166163.18 2405.52 168568.70

16 17 18 19

131696.96 40160.47 273.79 1654.76 3277.19

122919.46 34705.01 (2693.55) 3525.35 3249.55

Schedule INCOME Sale of Products & Services Other Income EXPENDITURE Materials consumed and purchase of goods Expenses Inventory change Interest and financial charges (net) Depreciation (including share in jointly controlled entities Rs. 171.52 lac, Previous year Rs. 135.74 lac) (Net of transfer from Revaluation Reserve Rs. 235.89 lac, Previous year Rs. 235.58 lac) Amount transferred to project in progress

–

(9.02)

177063.17

161696.80

6301.28

6871.90

952.02 (633.54)

772.38 1902.59

5982.79 112.69

4196.93 82.13

Share of Loss in Associates

6095.48 (201.47)

4279.06 (125.45)

Profit before Minority Interest Share of Minority Interest

5894.01 (43.05)

4153.61 (744.14)

Profit After Minority Interest Surplus brought forward Adjustment for subsidiaries added/deleted Share in jointly controlled entities

5850.96 12223.03 316.39 –

3409.47 10606.04 1276.35 (209.68)

Profit After Tax Available For Appropriation

18390.38

15082.18

APPROPRIATIONS: Dividend on Equity Shares - Interim - Final Tax on distributed profits Transfer to General Reserve Surplus carried forward

225.90 1493.56 447.90 905.85 15317.17

1091.57 1021.03 139.23 607.32 12223.03

18390.38

15082.18

12.05

5.86

Profit Before Tax Provision for taxation - Current Tax (including share in jointly controlled entities Rs. 78.81 lac) - Deferred Tax (including share in jointly controlled entities Rs. 5.07 lac) Profit For The Year After Taxation Prior Period adjustments (net)

20

TOTAL Basic & Diluted EPS of Rs. 6 per share 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 Kalyaniwalla & Mistry Chartered Accountants

V. R. Mehta Partner Mumbai, May 28, 2004

A. B. Godrej Chairman

N. B. Godrej Managing Director

S. K. Bhatt Company Secretary 47

Industries Limited – Consolidated Accounts CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2004 A.

B.

C.

Cash Flow from operating activities : Profit before tax Adjustments for : Depreciation Foreign exchange Loss/(Profit) on sale of investments Loss/(Profit) on sale of fixed assets Dividend income Interest income Interest expense Voluntary retirement compensation and other expenses deferred Deferred expenditure written off Provision for doubtful debts and sundry balances written off (net) Others Operating profit before working capital changes Adjustments for : Inventories Trade and other receivables Trade payables Cash generated from operations Direct taxes paid Direct taxes refund received Net Cash from operating activities Cash Flow from investing activities : Purchase of fixed assets Proceeds from sale of fixed assets Purchase of investments Proceeds from sale of investments Intercorporate deposits / Loans (net) Interest received Dividend received Net Cash used in investing activities Cash Flow from financing activities : Purchase of shares under a scheme of arrangement Proceeds from share capital Proceeds from borrowings Repayments of borrowings Bank overdrafts (net) Repayment of finance lease liabilities Interest paid Dividend paid Tax on distributed profits Net Cash used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents (Opening Balance) Add : Share in opening cash & cash equivalents of jointly controlled entities

Cash and cash equivalents (Closing Balance) (including share in jointly controlled entities - Rs. 944.14 lac) Notes : 1.

Cash and Cash equivalents.

Cash on hand and balances with banks Effect of exchange rate changes Cash and cash equivalents 2.

The above cashflow statement includes share of cashflows from jointly controlled entities as under: a.

Net cash from operating activities b.

Net cash used in investing activities c.

Net cash used in financing activities Signatures to Cash Flow Statement

For and on behalf of Kalyaniwalla & Mistry Chartered Accountants

A. B. Godrej Chairman

Mumbai, May 28, 2004

48

S. K. Bhatt Company Secretary

Previous Year Rs. lac

6301.28

6871.91

3277.19 (959.66) 51.00 (30.37) (286.39) (682.04) 2816.96 (394.08) 1435.17 (125.14) 5.95 11409.87

3249.55 (25.42) (23.71) (12.90) (1363.38) (1094.88) 4222.15 (880.64) 581.91 (83.78) (55.91) 11384.90

708.49 (3310.87) 5112.77 13920.26 (1332.40) 22.22 12610.08

(2955.08) 2483.37 5736.57 16649.76 (1061.13) 964.83 16553.46

(2083.53) 1228.76 (39578.13) 32828.63 (18.88) 675.33 286.40 (6661.42)

(3123.57) 312.09 (3691.49) 180.16 799.74 1696.27 1363.38 (2463.42)

– 25.00 22750.31 (25451.31) 1107.60 – (2951.36) (1144.06) (323.97) (5987.79) (39.13) 3764.71 – 3764.71 3725.58

(2,341.40) 376.25 21971.69 (25915.14) (1473.66) (1.47) (5015.21) (1844.93) (51.28) (14295.15) (205.11) 3271.77 698.05 3969.82 3764.71

3725.70 (0.12) 3725.58

3765.74 (1.03) 3764.71

1287.95 (80.28) (520.81)

As per our Report attached

V. R. Mehta Partner

This Year Rs. lac

N. B. Godrej Managing Director

Annual Report 2003-2004 SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2004 SCHEDULE 1 : SHARE CAPITAL Authorised: 13,33,33,333 Equity shares of Rs.6 each 10,00,00,000 Unclassified Shares of Rs.10 each Issued, Subscribed and Paid Up: 4,85,42,952 Equity shares of Rs. 6 each fully paid Of the above, (i) 4,01,02,008 Shares are held by Godrej & Boyce Mfg. Co. Limited, the holding company SCHEDULE 2 : RESERVES AND SURPLUS Capital Reserves Securities Premium Account Capital Investment Subsidy Reserve Revaluation Reserve Capital Redemption Reserve Share in jointly controlled entities Total Capital Reserve Revenue Reserves General Reserve Profit and Loss Account Share in jointly controlled entities Total Revenue Reserves Total Reserves

SCHEDULE 3 : SECURED LOANS Term loans from financial institutions Term loans from banks Bank overdrafts Share in jointly controlled entities

This Year Rs. lac

Previous Year Rs. lac

1448.92 19360.40 5877.38 148.61

950.00 19364.91 6476.69 —

26835.31

26791.60

This Year Rs. lac

Previous Year Rs. lac

8000.00 10000.00 18000.00

8000.00 10000.00 18000.00

2912.58 2912.58

2912.58 2912.58

1099.16 65.97 3256.59 3125.00 228.89 7775.61

1099.16 51.55 3492.48 3125.00 228.89 7997.08

4899.43 15317.17 477.98 20694.58 28470.19

4420.35 12223.01 348.18 16991.54 24988.62 This Year Previous Year Rs. lac Rs. lac

SCHEDULE 4 : UNSECURED LOANS Fixed deposits Intercorporate deposits Commercial paper Short term loans from banks Loan from financial institutions Sales tax deferment facility Share in jointly controlled entities

3751.20 1780.00 – 5237.14 – 266.46 438.55 11473.35

SCHEDULE 5 : FIXED ASSETS ASSETS LAND BUILDINGS PLANT & MACHINERY RESEARCH CENTRE FURNITURE & FIXTURES OFFICE & OTHER EQUIPMENTS VEHICLES TREES DEVELOPMENT COST TECHNICAL KNOWHOW FEES TRADEMARKS Assets Acquired Under Finance Lease VEHICLES Share in jointly controlled entities TOTAL - This Year - Previous Year CAPITAL WORK-IN-PROGRESS TOTAL

5518.74 1436.83 1000.00 800.00 4331.11 259.61 424.13 13770.42 (Rs. lac)

As on 01.04.2003 1464.48 11540.64 42083.44 150.34 1491.45 1233.57 1369.82 464.09 200.00 3121.99 54.20 2,446.43 65620.45 62272.70

GROSS BLOCK Deductions/ Additions Adjustments 13.16 6.26 508.03 725.05 1027.86 1539.69 2.87 0.00 117.02 133.65 235.61 100.38 188.92 261.79 0.00 9.40 0.00 0.00 – – 190.56 138.32 2422.35 4150.06

2.87 24.73 2803.82 802.31

As on 31.3.2004 1471.38 11323.62 41571.61 153.21 1474.82 1368.80 1296.95 454.69 200.00 3121.99

Upto 31.03.2003 45.49 2284.13 20309.67 51.39 783.16 618.22 565.06 148.56 129.03 518.56

241.89 2560.01 65238.97 65620.45

3.09 1,133.96 26590.32 23612.61

DEPRECIATION Deductions/ For the Adjustments Year 0.15 9.23 (31.44) 319.14 697.22 2230.80 0.00 5.18 92.41 118.92 61.24 154.14 133.24 157.36 0.00 30.33 0.00 33.33 – 233.28 0.00 19.85 972.67 507.09

56.33 171.52 3519.56 3484.79

Upto 31.3.2004 54.57 2634.71 21843.25 56.57 809.66 711.12 589.18 178.89 162.36 751.84 59.42 1285.64 29137.21 26590.31

NET BLOCK As on As on 31.3.2004 31.03.2003 1416.81 1418.99 8688.91 9256.51 19728.36 21773.77 96.64 98.95 665.16 708.29 657.68 615.35 707.77 804.76 275.80 315.53 37.64 70.97 2370.15 2603.43 182.47 1274.37 36101.76

51.11 1312.47 39030.13

331.27 36433.03

481.65 39511.78

1. Land includes leasehold land of Rs.236.93 lac (Previous Year Rs.240.87 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.235.89 lac (Previous Year Rs.235.24 lac) being depreciation on revalued component of the fixed assets.

4. Gross block, deductions / adjustments includes Rs. Nil lac (Previous Year Rs. 47.11 lac) being the revalued component of assets sold/discarded during the year.

5. Buildings includes Rs.0.01 lac (previous year Rs.0.01 lac) being the value of investment in shares of Co-operative Housing Society.

6. Buildings includes Rs. 2651.08 lacs (previous year Nil ) being the cost of equity shares in Tahir Properties Ltd., representing the right of the Company to five flats in the property.

49

Industries Limited – Consolidated Accounts SCHEDULES FORMING PART OF THE CONSOLIDATED .. (contd.)

This Year Rs. lac

Previous Year Rs. lac

1326.16

426.16

(326.94)

(125.47)

999.22

300.69

Equity Shares (Quoted)

6227.98

2448.14

Equity Shares (Unquoted)

1777.47

129.67

450.02

425.02

–

314.52

1311.00

465.30

Government Securities (Unquoted)

1.24

1.32

Units of Mutual Funds (Unquoted)

252.20

383.00

0.22

0.22

–

45.33

11019.35

4513.21

(1372.01)

(427.50)

9647.34

4085.71

SCHEDULE 6 : INVESTMENTS LONG TERM INVESTMENTS At cost less diminution in value A. IN ASSOCIATES Equity Shares (Unquoted) Cost of Investment (including Rs. 295.01 lac of goodwill on acquisition, previous year Rs. 251.52 lac) Less : Share of post acquisition losses B.

OTHERS

Perference Shares (Unquoted - partly paid) Optionally Convertible Subordinated Notes Preferred Stock (Unquoted)

Shares in Co-operative societies Share in jointly controlled entities

Less : Provision for diminution in value of investments

SCHEDULE 7 : INVENTORIES (at lower of cost and net realisable value) Stores and spares Raw materials Work-in-progress Finished goods Stock-in-trade Projects-in-progress Share in jointly controlled entities

SCHEDULE 8 : SUNDRY DEBTORS (Unsecured) Debts outstanding over six months Considered good Considered doubtful

50

This Year Rs. lac

Previous Year Rs. lac

801.59 11924.42 1340.45 6208.03 462.16 1252.91 1278.71

611.18 12142.98 1525.41 6110.49 1437.86 963.44 1356.89

23268.27

24148.25

1218.59 509.81

1232.49 961.51

1728.40

2194.00

This Year Rs. lac

Previous Year Rs. lac

Other debts, considered good

14395.80

13424.20

Less: Provision for doubtful debts

16124.20 (509.81)

15618.20 (961.51)

Share in jointly controlled entities

15614.39 374.07

14656.69 535.65

15988.46

15192.34

148.88

147.97

2085.48 547.09 944.13

2363.05 996.44 257.25

3725.58

3764.71

SCHEDULE 9 : CASH AND BANK BALANCES Cash and cheques on hand Balances with scheduled banks – on current accounts – on deposit accounts Share in jointly controlled entities

Annual Report 2003-2004 SCHEDULES FORMING PART OF THE CONSOLIDATED .. (contd.)

This Year Previous Year Rs. lac Rs. lac SCHEDULE 10 : LOANS AND ADVANCES (Unsecured and considered good unless otherwise stated) Loans and Advances (refer note 6 ) Advances recoverable in cash or in kind or for value to be received (net of provision for doubtful advances Rs. 917.66 lac, previous year Rs. 830.63 lac) Intercorporate deposits – Associate companies – Others Deposits and balances with – Customs & excise authorities – Others Advance payment of taxes (Net of provision for tax of Rs. 2147.55 lac, previous year Rs. 4586.34 lac) Share in jointly controlled entities

SCHEDULE 11 : CURRENT LIABILITIES Acceptances Sundry creditors Advances from customers Sundry deposits Investor Education & Protection Fund* - Unclaimed dividend - Unpaid Application Money - Unpaid Matured Deposits - Unpaid Matured Debentures - Interest accrued on above Other liabilities Interest accrued but not due Share in jointly controlled entities

2713.57

2468.47

11598.96

8865.54

– 424.01

89.40 239.10

1180.44 694.07 34.83

185.60 1109.54 110.90

360.62

360.33

17006.50

13428.88

3323.64 25193.61 1283.47 2073.01

686.49 23600.65 421.74 2275.88

65.93 – 139.20 147.61 50.90 3303.18 69.02 1878.01

79.28 3.43 122.46 133.60 66.60 2408.51 222.53 2282.54

37527.58

32303.71

1493.56 186.97 2577.98 101.64

1021.03 139.23 2490.19 51.69

4360.15

3702.14

SCHEDULE 13 : MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted) Deferred revenue expenditure - Gratuity – - Voluntary retirement compensation 208.63 - Preliminary Expenses 28.77 - Brand Promotion Expenses – - Software Development Expenses – - Others 6.52 Share in jointly controlled entities –

11.00 411.91 104.07 620.56 121.75 39.05 9.97

243.92

1318.31

SCHEDULE 12 : PROVISIONS Proposed final dividend Provision for tax on distributed profits Provision for retirement benefits Share in jointly controlled entities

This Year Previous Year Rs. lac Rs. lac SCHEDULE 14 : SALE OF PRODUCTS AND SERVICES Sales (gross) Less: Excise duty Sales (net) Processing charges Storage charges Export incentives Licence fees and service charges Project / Development Management Fees Share in jointly controlled entities

169991.86 5262.04 164729.82 3550.34 – 388.36 1829.95 1139.37 10654.76

154144.30 4791.81 149352.49 3914.09 12.18 242.42 2054.56 796.47 9790.97

182292.59

166163.18

24.71 75.09 54.61

36.00 277.91 69.75

92.43 286.39 434.03 33.59 (51.00) 122.01

2.26 1,363.38 583.72 11.65 23.71 37.14

1071.86

2405.52

SCHEDULE 16 : MATERIALS CONSUMED AND PURCHASE OF GOODS Raw materials consumed : Stocks at the commencement of the year 14293.76 Add : Purchases (net) 114352.71 128646.47 Less : Stocks as at the close of the year 13698.21 Raw Materials consumed during the year 114948.26 Purchase of goods for resale 11974.30 Share in jointly controlled entities 4774.40

13472.31 110129.43 123601.74 14041.97 109559.77 8295.03 5064.66

131696.96

122919.46

9082.29 561.67 797.92 1320.50 5064.45 3154.94 1409.91 778.58

8170.86 498.23 762.64 1217.51 5211.13 2809.83 422.56 506.40

816.20 254.02 81.67 179.36 2506.71 2702.62

878.03 286.03 50.87 172.77 2282.35 2024.20

SCHEDULE 15 : OTHER INCOME Interest : - Government Securities - Income tax refund - Others Provision for depletion in value of long term investments written back Dividend Miscellaneous income Profit on sale of fixed assets (Net) Profit on sale of long term investments Share in jointly controlled entities

SCHEDULE 17 : EXPENSES Salaries, wages and allowances Contribution to provident fund and other funds Employee welfare expenses Stores and spares consumed Power and fuel Processing charges Rent Rates and taxes Repairs and maintenence - Machinery - Buildings - Other assets Insurance Freight Commission

51

Industries Limited – Consolidated Accounts SCHEDULES FORMING PART OF THE CONSOLIDATED .. (contd.)

This Year Previous Year Rs. lac Rs. lac Discount Advertisement and publicity Sales promotion Selling and distribution expenses Bad debts written off Provision for doubtful debts and advances written back Provision for depletion in value of long term investments Cost of Project Management Miscellaneous expenses Share in jointly controlled entities SCHEDULE 18 : INVENTORY CHANGE Stocks at the commencement of the year Finished goods Work-in-progress Share in jointly controlled entities Less: Stocks at the close of the year : Finished goods Work-in-progress Share in jointly controlled entities (Increase)/Decrease in Inventory

217.97 2056.32 558.24 596.70 784.09

163.78 680.90 434.34 520.12 45.90

(345.63)

273.85

– 6.86 3206.96 4368.12

0.59 5.99 3573.42 3712.71

40160.47

34705.01

6386.29 1280.43 950.28

4055.92 1198.36 663.76

8617.00

5918.04

6127.14 1340.45 875.62

6044.91 1621.81 944.87

8343.21

8611.59

273.79

(2693.55)

SCHEDULE 19 : INTEREST AND FINANCIAL CHARGES (Net) Interest paid - on debentures and fixed loans 1126.28 1293.10 - on bank overdrafts 700.30 1292.64 - to Financial Institutions 55.32 289.72 - on Inter Corporate Deposits 169.55 331.93 - other interest 242.74 160.83 Less: Interest received - on loans & deposits - on Customer balances, etc - projects and landlords - others

2294.19

3368.22

37.67 35.29 438.68 5.65

86.13 46.99 549.14 14.55

517.29

696.81

1776.90 500.25 (644.91) 22.52

2671.41 429.93 365.59 58.42

1654.76

3525.35

SCHEDULE 20 : PRIOR PERIOD ADJUSTMENTS Excess provision for Income-tax 122.63 Depreciation (6.39) Excess provision for expenses (net) (3.55) Share in jointly controlled entities –

136.94 – (55.89) 1.08

112.69

82.13

Net Interest Brokerage and other financial charges Foreign exchange (gain) / loss Share in jointly controlled entities

52

SCHEDULE 21 : NOTES TO ACCOUNTS 1.

Significant Accounting Policies: a) Accounting Convention The financial statements are prepared under the historical cost convention, on the accrual basis of accounting, in accordance with the generally accepted accounting principles in India and the Accounting Standards issued by the Institute of Chartered Accountants of India. b) Principles of Consolidation The consolidated financial statements relate to Godrej Industries Limited, the holding company, its majority owned subsidiaries, Joint ventures and Associates (collectively referred to as Group).

The consolidation of accounts of the Company with its subsidiaries has been prepared in accordance with Accounting Standard (AS) 21 ‘Consolidated Financial Statements’. The financial statements of the parent and its subsidiaries are combined on a line by line basis and intra group balances, intra group transactions and unrealized profits or losses are fully eliminated.

In the consolidated financial statements, ‘Goodwill’ represents the excess of the cost to the Company of its investment in the subsidiaries and/or joint ventures over its share of equity, at the respective dates on which the investments are made.

Alternatively, where the share of equity as on the date of investment is in excess of cost of investment, it is recognised as ‘Capital Reserve’ in the consolidated financial statements.

Minority interest in the net assets of consolidated subsidiaries consists of the amount of equity attributable to the minority shareholders at the respective dates on which investments are made by the Company in the subsidiary companies and further movements in their share in the equity, subsequent to the dates of investment as stated above.

Investments in Joint Ventures are dealt with in accordance with Accounting Standard (AS) 27 ‘Financial Reporting of Interests in Joint Ventures’. The Company’s interest in jointly controlled entities are reported using proportionate consolidation, whereby the Company’s share of jointly controlled assets and liabilities and the share of income and expenses of the jointly controlled entities are reported as separate line items.

Investments in Associates are dealt with in accordance with Accounting Standard (AS) 23 ‘Accounting for Investments in Associates in Consolidated Financial Statements’ issued by the Institute of Chartered Accountants of India. Effect has been given to the carrying amount of investments in associates using the ‘Equity method’. The Company’s share of the post acquisition profits or losses is included in the carrying cost of investments.

The financial statements of the subsidiaries, joint ventures and associates used in the consolidation are drawn upto the same reporting date as of the Company i.e. year ended March 31, 2004. c) Information on subsidiaries, joint ventures and associates (i) The subsidiary companies considered in the consolidated financial statements are: S. No. Name of the company Country of Percentage of Holding Incorporation This Previous Year Year 1.

2.

3.

Godrej Agrovet Ltd. India Goldmohur Foods & Feeds Ltd. India (100% subsidiary of Godrej Agrovet Ltd.) Golden Feed Products Ltd. India (100% subsidiary of Godrej Agrovet Ltd.)

57.69% 57.69%

57.69% 57.69%

57.69%

–

Annual Report 2003-2004 SCHEDULES FORMING PART OF THE CONSOLIDATED .. (contd.)

S. No. Name of the company

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

Country of Percentage of Holding Incorporation This Previous Year Year

Godrej Properties & Investments Ltd. India Girikandra Holiday Homes & Resorts Ltd. India (100% subsidiary of Godrej Properties & Investments Ltd.) Tahir Properties Ltd. India Godrej Remote Services Ltd. India Ensemble Holdings & Finance Ltd. India Sahyadri Aerosols Ltd. India Godrej International Ltd. U.K. Godrej Global Mid-East FZE U.A.E. (100% subsidiary of Godrej International Ltd.) Godrej Tea Ltd. India Godrej Global Solutions Ltd. India Hybrigene Biotechnology Ltd. India

82.85%

82.85%

82.85%

82.85%

– 99.99%

62.86% 99.99%

99.95% – 100.00% 100.00%

99.95% 100.00% 100.00% 100.00%

70.91% 100.00% –

53.08% 99.98% 99.92%

Notes: 1. Tahir Properties Ltd. has been excluded from the consolidated financial statements as the Group’s percentage of holding has reduced to 50.08% and is intended to be further reduced on conversion of the remaining preference shares of a minority shareholder into equity. Moreover, the shareholding in the Company represents certain rights in the property and does not necessarily represent control over the Company.

2. Sahyadri Aerosols Ltd. was voluntarily wound up on March 10, 2003 and thus stands excluded from the consolidated financial statements.

3.

The break-up of Investment in Associates is as under : Rs. In Lac Swadeshi Detergents Ltd. (i) Cost of Acquisition 191.34 (ii) Goodwill included in cost of acquisition 91.48 (iii) Share in profits/(loss) of associates post acquisition (b) (142.84) (iv) Provision for diminution in the value of investments – Carrying cost of Investments 48.50 d)

Percentage of Ownership Interest This Previous Year Year

i)

Godrej SaraLee Ltd.

India

25.96%

25.96%

ii)

Hicare India Ltd. (earlier known as Godrej Photo-Me Ltd.)

India

40.46%

40.46%

iii)

e)

Country of Percentage of Holding Incorporation This Previous Year Year

i)

Swadeshi Detergents Ltd.

India

41.08%

41.08%

ii)

Godrej Upstream Ltd. (held by Godrej Global Solutions Ltd.)

India

42.33%

–

iii)

Compass Connections Ltd.

U.K.

21.16%

21.16%

iv)

Personalitree Academy Ltd. (held by Ensemble Holdings & Finance Ltd.)

India

26.00%

26.00%

110.28

95.27

79.66

42.84

(125.14)

(16.92)

(42.04)

–

–

68.24

774.86

107.62

Nil

Fixed Assets

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

f)

Investments Long term investments are carried at cost. Provision for diminution, if any, in the value of each long term investment is made to recognise a decline, other than of a temporary nature.

The fair value of a long term investment is ascertained with reference to its market value, the investee’s assets and results and the expected cash flows from the investment.

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

g)

Investments in Associates:

S. No. Name of the company

124.54

Fixed Assets acquired under finance lease are capitalised at the lower of their face value and present value of the minimum lease payments.

(ii) Interests in Joint Ventures: Country of Incorporation

900.00

Fixed Assets are stated at cost or as revalued as the case may be, less accumulated depreciation. Cost includes all expenses related to acquisition and installation, of the concerned asset.

Exchange differences arising on account of repayment and year end translation of foreign currency liabilities relating to acquisition of fixed assets are adjusted to the carrying cost of the respective assets.

Hybrigene Biotechnology Ltd. has ceased to be a subsidiary and the company stands dissolved from March 12, 2004 as per the provisions of Section 560 of the Companies Act, 1956.

S. No. Name of the company

Godrej Compass Personalitree Upstream Connections Academy Ltd. Ltd. Ltd.

Inventories Inventories are valued at lower of cost and net realisable value.

Cost is computed on weighted average basis and is net of modvat. Finished goods and work-in-progress include cost of conversion and other costs incurred in bringing the inventories to their present location and condition. Obsolescence and other anticipated losses are provided for wherever considered necessary.

Construction work-in-progress is valued at cost. Construction work-in-progress includes cost of land, premium for development rights, construction costs, allocated interest and expenses incidental to the projects undertaken by the Company.

53

Industries Limited – Consolidated Accounts SCHEDULES FORMING PART OF THE CONSOLIDATED .. (contd.) h)

Foreign Exchange Transactions 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 year end, are stated at the contracted rates, when covered under forward foreign exchange contracts and at year-end rates in other cases. The premium payable on forward foreign exchange contracts is amortised over the period of the contract. Exchange gains/losses are recognised in the Profit and Loss Account except in respect of liabilities incurred to acquire fixed assets in which case they are adjusted to the carrying amount of such fixed assets.

i)

Depreciation on the revalued component is provided on the straight line method based on the balance useful life of the assets as certified by the valuers. Such depreciation is withdrawn from Revaluation Reserve and credited to Profit and Loss Account. k)

Revenue Recognition Sales are recognised where goods are supplied and are recorded net of returns, trade discounts, rebates, sales taxes and excise duty.

l)

Preliminary Expenses and Share issue expenses are amortised in ten equal instalments. m) Hedging Import of crude palm oil by the Company are being hedged by futures contract on offshore Commodities Exchange. Gains or losses on settled contracts is recognized in the profit and loss account and is included in the cost of materials consumed.

Futures contracts not settled as on the Balance Sheet date are marked to market and losses, if any, are recognized in the profit and loss account, whereas, the unrealized profit is ignored.

Revenue from construction activity is recognized on “Percentage of Completion Method� of accounting. As per this method, revenue in Profit & Loss Account at the end of the accounting year is recognized in proportion to the actual cost incurred as against the total estimated cost of projects under execution with the Company.

Determination of revenues under the percentage of completion method necessarily involves making estimates by the Company, some of which are of a technical nature, concerning, where relevant, the percentages of completion, costs to completion, the expected revenues from the project/ activity and the foreseeable losses to completion. Such estimates have been relied upon by the auditors.

n)

Deferred tax is recognized 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 subsequent periods. Deferred tax assets subject to the consideration of prudence are realized 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 realized. The tax effect is calculated on the accumulated timing differences at the year end and based on the tax rate and laws enacted or substantially enacted on the balance sheet date.

Interest income is recognised on a time proportion basis.

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

Depreciation Leasehold land is amortised equally over the lease period.

Leasehold improvements are amortised over five years.

Trademarks are amortised over a period of four to fifteen years depending on the expected utilisation.

Depreciation is provided on the straight line method at the rates specified in Schedule XIV to the Companies Act, 1956, except in some subsidiary companies, where depreciation has been provided on the written down value method. The impact of the differing method of depreciation has not been ascertained but is not likely to be material. Computer hardware is depreciated over its estimated useful life of 4 years.

Depreciation on assets acquired during the year is provided for the full accounting year and no depreciation is charged on the assets sold/discarded during the year, except in case of major additions and deductions exceeding rupees one crore in which case, proportionate depreciation is provided.

54

Taxes on Income Current tax is the amount of tax payable on the taxable income for the year determined in accordance with the provisions of the Income Tax Act, 1961.

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

j)

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

Income from processing operations is recognised on completion of production/dispatch of the goods, as per the terms of contract.

Export incentives are accounted on accrual basis and include the estimated value of duty free import entitlement under the Advance Licence Benefit Scheme and export incentives receivable under the Duty Entitlement Pass Book Scheme and the Duty Drawback Scheme.

Retirement Benefits Retirement benefits to employees comprise payments under approved provident fund plans, leave encashment and gratuity to eligible employees. Payments under approved provident fund plans are charged to revenue. The liability in respect of future payment of gratuity to retiring employees and leave encashment benefit on retirement is provided on the basis of an actuarial valuation at the end of each financial year.

o)

Segment Reporting The Accounting Policies adopted for segment reporting are in line with the Accounting Policies of the Company. Segment assets include all operating assets used by the business segments and consist principally of fixed assets, debtors and inventories.

Segment liabilities include the operating liabilities that result from the operating activities of the business segment. Assets and Liabilities that cannot be allocated between the segments are shown as part of unallocated corporate assets and liabilities respectively. Income/Expenses relating to the enterprise as a whole and not allocable on a reasonable basis to business segments are reflected as unallocated corporate income/ expenses.

Annual Report 2003-2004 SCHEDULES FORMING PART OF THE CONSOLIDATED .. (contd.)

2.

Contingent Liabilities

a)

This Year Rs. lac

Claims for excise duties, taxes and other matters not acknowledged by the Company: i)

ii)

6.

excise duty - Rs. 2941.10 lac (Previous Year Rs. 3742.80 lac) - net of tax:

c)

3.

Guarantees issued by banks, excluding guarantees issued in respect of matters reported in (a) above Guarantees given by the Company in respect of credit/guarantee limits sanctioned by banks to subsidiary and other companies.

2367.33

–

727.38

2413.28

2990.85

1516.40

a)

b) 12166.00

9260.00

Uncalled liability on partly paid shares/debentures

126.11

140.81

e)

Share in Jointly Controlled Entities

299.64

296.88

181.96

81.98

11.16

– c)

Major components of Deferred Tax arising on account of timing differences as at March 31, 2004 are:

Business Losses Provision for retirement benefits Provision for doubtful debts/advances Others Share in Jointly Controlled Entities Liabilities Depreciation VRS Expenses Deferred Revenue Expenditure Share in Jointly Controlled Entities Net Deferred Tax Liability

Previous Year Rs. Lac

1515.80 733.00 428.31 164.26 57.81

2069.40 586.00 562.44 198.80 80.47

2899.18

3497.11

5533.45 43.00 428.70 102.16

6791.17 134.00 293.86 119.74

6107.31

7338.77

3208.13

3841.67

Loans & Advances: Loans and Advances include Rs. 1033 lac (Previous Year Rs. 1033 lac) advanced by the Company to certain individuals against pledge, by way of deposit, of equity shares of Gharda Chemicals Ltd. The Company is in the process of enforcing the security and getting the shares transferred in its name. Interest on the aforesaid loans and

3732.82

883.36

743.52

Depreciation for the period

133.03

90.59

The total of future minimum lease payments under noncancelable operating leases for each of the following periods: Minimum future lease rentals Rs. Lac

Jointly controlled entities Rs. Lac

Within one year

153.06

50.29

Later than one year and not later than five years

194.63

33.19

Later than five years

Deferred Tax:

This Year Rs. lac

3959.07

Accumulated depreciation

Period

Capital Commitments

Assets

The group has entered into leave and licence agreements in respect of its commercial and residential premises. These are not non-cancelable and range between 11 months to 35 months and are renewable by mutual consent on mutually acceptable terms. Leave and licence arrangements being similar in substance to operating leases, the particulars of the premises under leave and licence arrangement are as under: This Year Previous Year Rs. lac Rs. Lac

716.61

d)

Share in Jointly Controlled Entities

5.

Leases:

Gross carrying amount of premises

Estimated value of contracts remaining to be executed on capital account, to the extent not provided 4.

1886.10

lease rent claimed by Mumbai Port Trust in respect of land leased to the Foods division. Rs. Nil (Previous Year Rs. 1150.00 lac)

iii) other matters - Rs. 3478.77 lac (Previous Year Rs. 4096.78 lac) - net of tax: b)

advances amounting to Rs. 315 lac was accrued upto March 31, 2000 and has been fully provided for, no interest is being accrued thereafter. The recoverability of the advance is contingent upon the transfer and/ or disposal of said shares. In the opinion of the management, the value of the said shares is greater than the amount of the loans and advances.

Previous Year Rs. lac

75.96

–

Total

423.65

83.48

Amount recognized during the year

130.25

75.68

Finance Leases The group has acquired assets under Finance Lease. Liability for minimum lease payment is secured by hypothecation of the vehicles acquired under the lease. The minimum lease payments outstanding as on March 31, 2004, in respect of vehicles acquired under lease are as under :

Period

Within one year Later than one year and not later than five years 7.

Total minimum lease payments outstanding as on March 31, 2004 Rs. Lac

Un-matured Present value Interest of minimum lease payments Rs. Lac Rs. Lac

70.08

12.63

66.36

141.55

11.12

121.58

211.63

23.75

187.94

Hedging Reserve Bank of India has permitted the Company to hedge its exposure on Crude Palm Oil on offshore exchanges to the extent of its imports. Accordingly, the Company is hedging import of crude palm oil on the Malaysian Commodities Exchange by way of futures contracts. The particulars of the futures contracts for the year are as under:

55

Industries Limited – Consolidated Accounts SCHEDULES FORMING PART OF THE CONSOLIDATED .. (contd.)

This Year Details

Purchase

Total number of contracts entered during the year Number of units (25 MT per unit) under above contracts Future contracts not settled as on March 31, 2004 Number of units under above contracts 8.

Sale

Purchase

Sale

b)

9.

Related Party Disclosures : a)

Parties where control exists Godrej & Boyce Mfg Co. Ltd, the holding company.

33

28

56

66

b)

Related Parties with whom transactions have taken place during the year.

Fellow Subsidiaries:

1,401

1,281

206

326

Godrej Consumer Products Ltd. Godrej Infotech Ltd.

–

–

–

10

Godrej Appliances Ltd. Godrej Foods Ltd.

–

–

–

120

Profit & Loss Account a)

56

Previous Year

The amount of exchange loss on account of fluctuation of the rupee against foreign currencies and the net charges for forward foreign exchange contracts added to the carrying amount of fixed assets during the year is Rs. 14.77 lac (Previous year Rs. 85.62 lac). The exchange difference included in the Profit & Loss Account is a profit of Rs. 989.33 lac (Previous year loss of Rs. 413.73 lac). The exchange difference in respect of forward exchange contracts to be recognised in subsequent accounting periods is Rs. 86.23 lac (Previous year Rs. 208.34 lac).

Rent includes a provision of Rs. 1,008 lac on account of lease rent payable to Mumbai Port Trust pursuant to finalization of litigation proceedings as per the order of the Honourable Supreme Court of India dated 13 January 2004 – an exceptional item.

Associate / Joint Venture Companies Godrej SaraLee Ltd. Hicare India Ltd. (earlier known as Godrej Photo-Me Ltd.) Swadeshi Detergents Ltd. Personalitree Academy Ltd. Key Management Personnel Mr. N. B. Godrej Mr. V. F. Banaji Ms. T. A. Dubash Mr. Mathew Eipe Mr. M. P. Pusalkar Enterprises over which key management personnel excerise significant influence Bahar Agrochem & Feeds Pvt. Ltd. Vora Soaps Ltd.

Annual Report 2003-2004 c)

Transactions with Related Parties

Nature of Transaction

Holding Company

Sale of Goods Previous Year Sales of Fixed Assets Previous Year Purchase of goods & equipment Previous Year Processing charges received Previous Year Commission received Previous Year Recovery of establishment & Other Expenses Previous Year Establishment & other exps paid Previous Year Refund of Deposit Previous Year Interest received Previous Year Interest paid Previous Year Finance provided including loans & equity contributions Previous Year Finance received during the year Previous Year Finance repaid during the year Previous Year Guarantees & collaterals given Previous Year Dividend income Previous Year Dividend paid Previous Year Remuneration Previous Year Write-back of Provisions Previous Year Provisions for doubtful advances/investments Previous Year Balance Outstanding as on March 31, 2004 Receivables Previous Year Payables Previous Year

Rs. Lac Fellow Subsidiaries

Associate/ Joint Venture Companies

Key Relative of Key Enterprises Management Management over which Key Personnel Personnel Mangement Personnel exercise significant influence

Total

23.20 17.95 – – 92.12 65.79 – – – –

2606.48 2940.15 153.07 – 713.37 1342.13 2845.71 1931.99 19.62 33.00

25.73 3.25 – – 14.44 43.24 – – – –

– – – – – – – – – –

– – – – – – – – – –

0.88 0.44 – – 696.26 – – – – –

2656.29 2961.79 153.07 – 1567.19 1451.16 2845.71 1931.99 19.62 33.00

10.46 4.49 395.48 155.99 – – – – – –

1012.13 1121.73 86.60 78.59 – 2.00 – 24.58 – 4.64

237.09 229.35 18.95 25.04 46.55 23.20 0.06 – – –

– – – – – – – 0.35 0.28 –

– – – – – – – – – –

0.04 0.06 – – – – – 0.03 – –

1259.72 1355.63 501.03 259.62 46.55 25.20 0.06 24.96 0.28 4.64

8.00 23.02 – – – – – – – – 716.51 246.36 – – – – – –

25.00 3066.00 – 300.00 – 500.00 – – 284.00 88.00 – – – – 0.18 – – –

115.48 448.68 – – 28.60 – – 60.00 546.93 1275.33 – – – – 0.11 – 113.28 –

– – – 1.98 – – – – – – 14.55 6.23 338.66 255.28 – – – –

– – – – – – – – – – – – – 6.40 – – – –

– 8.00 – – – – – – – – 4.46 2.18 – – – – – –

148.48 3545.70 – 301.98 28.60 500.00 – 60.00 830.93 1363.33 735.52 254.77 338.66 261.68 0.29 – 113.28 –

70.24 23.83 0.51 1.23

200.94 204.34 195.60 85.45

337.49 8.93 206.28 4.74

– 6.69 – –

– – – –

0.02 89.42 0.11 0.11

608.69 335.21 402.50 91.53

10. Earnings Per Share a.

b. c.

Calculation of weighted average number of equity shares Number of shares at the beginning of the year Shares bought back pursuant to the scheme of arrangement Number of equity shares outstanding at the end of the year Weighted average number of equity shares outstanding during the year Net profit after tax available for equity shareholders Basic and diluted earnings per share of Rs.6 each

This Year

Previous Year

Nos. Nos. Nos.

4,85,42,952 – 4,85,42,952

6,16,11,228 1,30,68,276 4,85,42,952

Nos. Rs. Lac Rupees

4,85,42,952 5850.96 12.05

5,81,38,289 3409.47 5.86

57

58

11.

Segment Information

Information about primary business segments

(Rs. lac) Chemicals

Animal Feed

Foods

Estate & Property Development

Household Insecticides

Tea

Others

Total

Previous Year

This Year

Previous Year

This Year

Previous Year

This Year

Previous Year

This Year

Previous Year

This Year

Previous Year

This Year

Previous Year

This Year

Previous Year

External Sales Intersegment Sales

49364.25 4.15

44877.54 4.50

65549.07 –

66627.19 1534.03

19358.07 –

17590.02 –

4763.57 247.24

6204.45 177.80

10776.77 –

9805.98 –

3507.11 104.76

1171.08 –

29759.54 996.86

21626.74 576.98

183078.38 1353.01

167903.00 2293.31

Total Sales Less: Intersegment Sales Total Revenue

49368.40 (4.15) 49364.25

44882.04 (4.50) 44877.54

65549.07 – 65549.07

68161.22 (1534.03) 66627.19

19358.07 – 19358.07

17590.02 – 17590.02

5010.81 (247.24) 4763.57

6382.25 (177.80) 6204.45

10776.77 – 10776.77

9805.98 – 9805.98

3611.87 (104.76) 3507.11

1171.08 – 1171.08

30756.40 (996.86) 29759.54

22203.72 (576.98) 21626.74

184431.39 (1353.01) 183078.38

170196.31 (2293.31) 167903.00

7311.51

5644.78

2916.73

2853.67

(1391.41)

87.18

1886.72

1761.43

1388.27

1190.92

(2200.34)

(665.76)

149.92

914.93

10061.40 –

11787.15 –

(1992.65) (1654.77) 6413.97

(1307.76) (3525.35) 6954.04

(318.49) 6095.48 (201.47) 5894.01

(2674.98) 4279.06 (125.45) 4153.61

Share of Minority Interest

(43.05)

(744.14)

Net Profit after Minority Interest

5850.96

3409.47

117549.85

113022.81

35.72 117585.57

41.59 113064.40

57243.11 28959.69

42680.64 42482.54

86202.80

85163.18

(A) Revenue

(B) Results Segment result before interest, exceptional items and tax Exceptional items Unallocated expenses net of unallocated income Interest Expense (net) Profit before tax (including prior period adjustments) Taxes Profit after taxes Share of loss in associates Profit before Minority Interest

Segment Assets

34687.52

36476.81

16833.19

15010.35

7623.64

8326.34

16886.69

19182.24

4232.40

9190.10

2744.05

4662.84

34542.36

20174.13

Unallocated Assets Total Assets Segment Liabilities Unallocated Liabilities Total Liabilities Total Cost incurred during the year to acquire segment assets

17432.62

15858.42

12649.47

8063.92

3871.75

3986.08

10169.59

3968.56

2566.81

2313.47

4312.46

4800.65

6240.41

3689.54

747.04

1102.62

302.65

299.77

136.79

183.00

288.51

1679.41

138.32

106.23

57.25

172.77

751.79

606.26

2422.35

4150.06

1727.52

1778.46

489.56

479.06

256.06

300.00

160.09

126.81

171.52

133.60

27.06

17.57

445.38

414.05

3277.19

3249.55

India Outside India

151798.27 31280.11

148384.76 19518.24

Total

183078.38

167903.00

India Outside India

115005.68 2579.89

111384.11 1680.29

Total

117585.57

113064.40

Segment depreciation Information about Secondary Business Segments Revenue by Geographical markets

Carrying Amount of Segment assets

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 the business of Oleochemicals such as Fatty Acids, Fatty Alcohols and Alfa Olefin Sulphonates and Refined Glycerin. Animal Feed segment includes the business of compound feed for cattle, poultry, acquatic animals. Foods segment includes the business of refined vegetable oils and vanaspati, fruit and vegetable puree, pulp, juices and fruit beverages. Estate segment comprises the business of developing commercial & residential property and giving premises on leave and licence basis.

Household Insecticides segment includes the business of household & environmental pest control solutions. Others includes Medical Diagnostics, Agri Inputs, Medical Transcription and Finance.

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.

Industries Limited – Consolidated Accounts

This Year

Annual Report 2003-2004 STATEMENT REGARDING SUBSIDIARY COMPANIES PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956 1.

Name of the Company

2.

The Company’s interest in the subsidiaries as on March 31, 2004

3.

a.

Number of Equity Shares Total Number of Shares

b.

Face Value

c.

Extent of Holding

Net aggregate profit/(Loss) of the subsidiary company so far it concerns the members of the Company A.

B.

Godrej Agrovet Limited

Godrej Properties & Investments Limited

Godrej Remote Services Limited

Ensemble Holdings & Finance Limited

Godrej International Limited

Godrej Global Solutions Limited

Godrej Tea Limited

Golden Feed Products Limited

Godrej Global MidEast FZE

Goldmohur Foods & Feeds Limited

Girikandra Holiday Homes & Resorts Limited

4106956 7118752

5073965 6444545

7712642 7723525

3770160 3774160

1505000 1505000

24950000 25000000

9749996 13750000

(See note 4 below)

(See note 5 below)

(see note 6 below)

(see note 7 below)

10

10

10

10

10

57.69%

78.73%

99.86%

99.89%

10 £1 (US$1.52) 100%

99.80%

70.91%

Rs. lac

Rs. lac

Rs. lac

Rs. lac

US$

Rs. lac

Rs. lac

_

_

_

_

For the financial year ended on March 31, 2004 i.

Not dealt with in the books of Account of the Company

260.82

192.99

(180.88)

(102.29)

414,799

(173.38)

(598.52)

_

_

_

_

ii.

Dealt with in the books of Account of the Company

308.02

Nil

Nil

Nil

Nil

Nil

Nil

_

_

_

_

For the subsidiary company’s previous financial years since it became a subsidiary i.

Not dealt with in the books of Account of the Company

1,489.33

576.60

(302.07)

(659.88)

1,554,943

Nil

Nil

_

_

_

_

ii.

Dealt with in the books of Account of the Company

1,549.51

847.53

Nil

Nil

841,955

Nil

Nil

_

_

_

_

Notes: 1.

The Financial Year of all subsidiary companies has ended on March 31, 2004.

2.

2,66,930 Equity Shares of Rs. 10 each fully paid up in Godrej Properties & Investments Ltd are held by Ensemble Holdings & Finance Ltd., a subsidiary of the Company.

3.

4,000 Equity Shares of Rs.10 each in Ensemble Holdings & Finance Ltd., are held by Godrej Agrovet Ltd., a subsidiary of the Company.

4.

50,000 Equity Shares of Rs. 10 each fully paid up in Golden Feed Products Ltd. (representing 100% of the Share Capital) are held by Godrej Agrovet Ltd., a subsidiary of the Company.

5.

5 Ordinary Shares of US$ 2,50,000 each fully paid up in Godrej Global MidEast FZE. (representing 100% of the Share Capital) are held by Godrej International Ltd., a subsidiary of the Company.

6.

21,58,170 equity shares of Rs.10 each fully paid up in Goldmohur Foods & Feeds Ltd. (representing 100% of the share capital) are held by Godrej Agrovet Ltd, a subsidiary of the Company.

7.

500 equity shares of the face value of Rs.1000 each fully paid up in Girikandra Holiday Homes and Resorts Ltd. (representing 100% of the share capital) are held by Godrej Properties & Investments Ltd., a subsidiary of the Company.

8.

10,883 Equity Shares of Rs.10 each fully paid up in Godrej Remote Services Ltd. are held by Ensemble Holdings & Finance Ltd., a subsidiary of the Company.

Mumbai, May 28, 2004

A.B. GODREJ

Chairman

N.B. GODREJ

Managing Director

S.K. BHATT Company Secretary

59